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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3 TO
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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This Amendment No. 3 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9, as previously amended (the "Schedule 14D-9") of
Loctite Corporation, a Delaware corporation (the "Company"), filed with the
Securities and Exchange Commission on November 18, 1996 with respect to the
tender offer made 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").
Capitalized terms used herein and not defined herein shall have the
meanings ascribed to such terms in the Schedule 14D-9.
ITEM 2. TENDER OFFER OF HENKEL.
Item 2 of the Schedule 14D-9 is hereby amended and supplemented as follows:
On December 5, 1996, the Company and the Henkel Group entered into an
Agreement and Plan of Merger (the "Merger Agreement"), a copy of which is filed
as Exhibit 99.10 and is incorporated by reference. The Merger Agreement provides
that the Offer will be amended (as so amended, the "Amended Offer") to (i)
increase the consideration offered to $61.00 per Share, net to the seller in
cash, (ii) change the expiration date to December 20, 1996 and (iii) modify the
conditions to consummation of the Offer. The Merger Agreement further provides
that, at the Effective Time (as defined below), a wholly owned subsidiary of HCI
will be merged with and into the Company (the "Merger") and the Company will be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation"). In the Merger, each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held in the Company's
treasury or owned by Henkel KGaA, HCI or any other wholly owned subsidiary of
Henkel KGaA or the Company which will be canceled without any payment therefor
or Shares that are held by stockholders exercising appraisal rights pursuant to
Section 262 of the Delaware General Corporation Law (the "DGCL")) will, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into the right to receive, without interest, an amount in cash
equal to $61.00 or such greater amount as may be paid pursuant to the Amended
Offer. The Merger Agreement is summarized in Item 3 of this Statement.
ITEM 3. IDENTITY AND BACKGROUND.
Item 3(b) of the Schedule 14D-9 is hereby amended and supplemented as
follows:
The following is a summary of the Merger Agreement. Defined terms used
below and not defined herein have the respective meanings assigned to those
terms in the Merger Agreement. In this summary, Henkel KGaA is referred to as
"Parent" and HCI is referred to as "Parent Sub".
The Merger Agreement provides that, upon the terms and subject to the
conditions set forth in the Merger Agreement and in accordance with applicable
laws, at the Effective Time, a newly formed, direct, wholly owned subsidiary of
Parent Sub ("Merger Sub") will be merged with and into the Company. The Company
will be the Surviving Corporation in the Merger.
Effective Time
The Merger will become effective at the time of filing of the Certificate
of Merger with the Secretary of State of the State of Delaware or at such later
time which the parties to the Merger Agreement may agree upon (the "Effective
Time").
The Amended Offer
In the Merger Agreement, Parent and Parent Sub have agreed, subject to
certain conditions, to amend the Initial Offer to provide (i) for a purchase
price per Share of $61.00, (ii) for the period the Amended Offer is to remain
open to be shortened to provide for the expiration of the Amended Offer at 12:00
midnight on Friday, December 20, 1996 and (iii) for the consummation of the
Amended Offer to be subject only to certain
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conditions described under "Certain Conditions of the Amended Offer" below (the
"Offer Conditions"). Without the prior written consent of the Company, neither
Parent nor Parent Sub will (i) change or waive the Minimum Condition (as defined
in "Certain Conditions of the Amended Offer" below), (ii) reduce the number of
Shares subject to the Amended Offer, (iii) reduce the price per Share to be paid
pursuant to the Amended Offer, (iv) extend the Amended Offer if all of the Offer
Conditions are satisfied or waived, (v) change the form of consideration payable
in the Amended Offer, (vi) amend, modify, or add to the Offer Conditions or
(vii) amend any other term of the Amended Offer in a manner adverse to the
holders of the Shares. Subject to the terms and conditions of the Amended Offer,
Parent Sub will promptly pay for all Shares tendered and not withdrawn pursuant
to the Amended Offer as soon as practicable after the expiration of the Amended
Offer. The obligation of Parent Sub to accept for payment and pay for Shares
tendered pursuant to the Amended Offer will be subject only to the satisfaction
or waiver of the Offer Conditions. As soon as practicable after the date of the
Merger Agreement, (i) Parent and Parent Sub will file with the SEC an amendment
to the Henkel Tender Offer Statement which reflects the terms of the Amended
Offer and (ii) the Company will file with the SEC an amendment to the Schedule
14D-9 in which it recommends acceptance of the Amended Offer. Notwithstanding
the foregoing, Parent and Parent Sub may, without the consent of the Company,
(A) extend the Amended Offer, if at the scheduled expiration date of the Amended
Offer any of the Offer Conditions shall not have been satisfied or waived, until
such time as such conditions are satisfied or waived, (B) extend the Amended
Offer for any period required by any statute, rule, regulation, interpretation
or position of the SEC or any other governmental authority or agency (domestic,
foreign or supranational) applicable to the Amended Offer, and (C) extend the
Amended Offer for any reason on one or more occasions for an aggregate of not
more than 15 business days beyond the latest expiration date that would
otherwise be permitted under clauses (A) and (B) of this sentence; and, if at
any scheduled expiration date of the Amended Offer any of the Offer Conditions
have not been satisfied or waived by Parent or Parent Sub but are capable of
being satisfied in the reasonable opinion of Parent and Parent Sub, on the
written request of the Company, Parent Sub will from time to time extend the
Amended Offer for up to twenty business days in the aggregate from the
originally scheduled expiration date thereof.
Corporate Organization and Governance
The Certificate of Incorporation and the By-laws of Merger Sub in effect
immediately prior to the Effective Time will be the Certificate of Incorporation
and the By-laws of the Surviving Corporation, until duly amended in accordance
with applicable law. The directors of Merger Sub immediately prior to the
Effective Time will be the directors of the Surviving Corporation as of the
Effective Time. The officers of the Company immediately prior to the Effective
Time will be the officers of the Surviving Corporation as of the Effective Time.
If, immediately following the consummation of the Amended Offer, Parent Sub and
Merger Sub are unable to cause the Merger to be effected pursuant to Section 253
of the DGCL, promptly upon the purchase by Parent Sub pursuant to the Offer of
such number of Shares which, when added to Shares currently owned by Parent Sub,
represent at least a majority of the outstanding Shares, and from time to time
thereafter, Parent Sub will be entitled to designate such number of directors,
rounded up to the next whole number, on the Company's Board of Directors as will
give Parent Sub representation on the Company's Board of Directors equal to the
product of the number of directors on the Company's Board of Directors and the
percentage that the number of Shares held by Parent Sub bears to the number of
Shares outstanding, and the Company will, upon request by Parent Sub, promptly
increase the size of the Board of Directors of the Company or use its best
efforts to secure the resignations of such number of directors as is necessary
to provide Parent Sub with such level of representation and will cause Parent
Sub's designees to be so elected.
Consideration to Be Received in the Merger
At the Effective Time, (a) each share of the Common Stock, $.01 par value,
of Merger Sub outstanding immediately prior to the Effective Time will be
converted into and become one fully paid and non-assessable Share; (b) each
Share issued and outstanding immediately prior to the Effective Time (other than
Shares held in the Company's treasury or owned by Parent, Parent Sub or any
other wholly owned subsidiary of Parent or the Company which will be canceled
without any payment therefor or Shares which are held by stockholders exercising
appraisal rights pursuant to Section 262 of the DGCL) will, by virtue of the
Merger
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and without any action on the part of the holder thereof, be converted into the
right to receive, without interest, an amount in cash equal to $61.00 or such
greater amount which may be paid pursuant to the Amended Offer (the "Merger
Consideration"); all such Shares, by virtue of the Merger and without any action
on the part of the holders thereof, will no longer be outstanding and will be
canceled and retired and will cease to exist, and each holder of a certificate
representing any such Shares will thereafter cease to have any rights with
respect to such Shares, except the right to receive the Merger Consideration for
such Shares upon the surrender of such certificate; and (c) each option (an
"Option") which has been granted under the Loctite Corporation 1993 Stock Option
Plan and the Loctite Corporation 1976 Stock Option Plan, as amended through
October 23, 1987 (the "Company Stock Option Plans") and is outstanding at the
Effective Time, whether or not then exerciseable, will be exchanged for, and the
holder of each Option will be entitled to receive upon surrender of the Option
for cancellation, cash equal to the product of the following: (i) the positive
difference, if any, obtained by subtracting the exercise price of each Option
from the Merger Consideration times (ii) the number of Shares covered by the
Option.
Payment for Shares
As of the Effective Time, Parent will deposit with a bank or trust company
selected by Parent, which must be reasonably satisfactory to the Company (the
"Paying Agent"), for the benefit of the holders of Shares, for exchange in
accordance with the Merger Agreement, the funds necessary to make the payments
contemplated by "Consideration to Be Received in the Merger" above (the "Payment
Fund") to holders of Shares issued and outstanding immediately prior to the
Effective Time. Promptly after the Effective Time, the Paying Agent will mail to
each holder of record, as of the Effective Time, of a certificate or
certificates which immediately prior to the Effective Time represented Shares
("Certificates") (other than to holders of shares of the Company Common Stock
issued and held in the Company's treasury, or held by Parent, Parent Sub or any
other wholly owned subsidiary of Parent or the Company) (i) a letter of
transmittal specifying the terms of exchange and (ii) instructions for
surrendering the Certificates in exchange for payment. Upon surrender of a
Certificate for cancellation to the Paying Agent together with a duly executed
letter of transmittal, the Surviving Corporation will promptly cause to be
delivered to the holder of the Certificate a check representing an amount equal
to the product of the number of Shares represented by the Certificate multiplied
by the Merger Consideration less any required withholding tax. If payment is to
be made to a person other than the registered holder of the Certificate
surrendered, it will be a condition of such payment that the Certificate so
surrendered will be properly endorsed or otherwise in proper form for transfer
and that the person requesting such payment will pay any transfer or other taxes
required by reason of the payment to a person other than the registered holder
of the Certificate surrendered or establish to the satisfaction of the Surviving
Corporation or the Paying Agent that such tax has been paid or is not
applicable.
Representations and Warranties
The Merger Agreement contains customary representations and warranties by
the Company, including without limitation relating to the Company's existence,
good standing, corporate authority; authorization, validity and effect of
agreements; capitalization; subsidiaries; compliance with law; no conflict with
organizational documents or other agreements, required filings or consents;
litigation; absence of changes; accuracy of documents filed with the SEC; taxes;
employee benefit plans; environmental matters; labor matters; no brokers fees;
and opinion of financial advisor.
The Merger Agreement also contains certain representations and warranties
by Parent and Parent Sub relating to their respective existence, good standing,
corporate authority; authorization, validity and effect of agreements;
operations of Parent Sub; no conflict with organizational documents or other
agreements, sufficiency of funds and brokers fees.
Covenants of the Company, Parent and Parent Sub
Acquisition Proposals. In the Merger Agreement, the Company has covenanted
and agreed that (a) neither it nor any of its subsidiaries will, and each of
them will not knowingly permit any of its officers, directors, employees, agents
and representatives (including, without limitation, any investment banker,
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attorney or accountant retained by it or any of its subsidiaries) to, solicit or
encourage, directly or indirectly, any inquiries, any proposal or offer with
respect to any Acquisition Transaction (as defined below) (any such proposal or
offer being hereinafter referred to as an "Acquisition Proposal") or engage in
any negotiations concerning an Acquisition Proposal; and (b) it will immediately
cease and cause to be terminated any existing negotiations with any parties
conducted with respect to any of the foregoing; provided, that nothing contained
in the Merger Agreement will prevent the Company or its Board of Directors from
(A) complying with Rule 14e-2 promulgated under the Exchange Act with regard to
an Acquisition Proposal that involves an Acquisition Transaction; or (B)
providing information to or engaging in any negotiations or discussions with any
person or entity who has made an unsolicited bona fide Acquisition Proposal that
the Board of Directors of the Company in good faith determines, with the
assistance of its financial advisors, represents a superior transaction for the
stockholders of the Company when compared to the Amended Offer and the Merger,
if and only to the extent that the Board of Directors of the Company reasonably
determines that the failure to do so would be inconsistent with its fiduciary
obligations. The Company is required to promptly notify Parent and Parent Sub if
any such information is requested from it or any such negotiations or
discussions are sought to be initiated with the Company and will promptly
communicate to Parent and Parent Sub the terms of any proposal or inquiry and
the identity of the party making such proposal or inquiry which it may receive
in respect of any such transaction.
"Acquisition Transaction" means any tender offer or exchange offer, any
merger, consolidation, liquidation, dissolution, recapitalization,
reorganization or other business combination, any acquisition, sale or other
disposition of all or a substantial portion of the assets or securities of the
Company or any other similar transaction involving the Company, its securities
or any of its significant subsidiaries or divisions.
Conduct of Businesses. The Company has also agreed that prior to the
Effective Time, except as specified in the Merger Agreement, unless Parent has
consented in writing thereto, the Company: (a) will, and will cause its
subsidiaries to, conduct its operations according to their usual, regular and
ordinary course in substantially the same manner as before; (b) will use its
reasonable efforts, and will cause each of its subsidiaries to use its
reasonable efforts, to preserve intact its business organizations and goodwill,
keep available the services of its respective officers and employees and
maintain satisfactory relationships with those persons having business
relationships with it; (c) will confer on a regular basis with Parent to report
operational matters of materiality and any proposals to engage in material
transactions; (d) will not amend its Certificate of Incorporation or By-laws;
(e) will promptly make available to Parent true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of the
Merger Agreement; (f) will not and will not permit its subsidiaries (i) except
pursuant to the exercise of options, warrants, conversion rights and other
contractual rights existing on the date of the Merger Agreement and disclosed
pursuant to the Merger Agreement, issue any shares of its capital stock, effect
any stock split or otherwise change its capitalization as it existed on the date
of the Merger Agreement, (ii) grant, confer or award any option, warrant,
conversion right or other right not existing on the date of the Merger Agreement
to acquire any shares of its capital stock, other than employee stock options,
stock benefits and stock purchases under any stock option, stock benefit or
stock purchase plan existing on the date of the Merger Agreement, provided that
the aggregate amount of employee stock options granted pursuant to such employee
stock option plans will not exceed the number granted during such period in the
prior year, (iii) increase any compensation or enter into or amend any
employment agreement with any of its employees, officers or directors, except
for normal increases consistent with past practice and the payment of cash
bonuses to officers pursuant to and consistent with existing plans or programs,
or (iv) adopt any new employee benefit plan (including any stock option, stock
benefit or stock purchase plan) or amend any existing employee benefit plan in
any material respect, except for changes which are less favorable to
participants in such plans; (g) will not (i) declare, set aside or pay any
dividend or make any other distribution or payment with respect to any shares of
its capital stock or (ii) redeem, purchase or otherwise acquire any shares of
its capital stock or capital stock of any of its subsidiaries, or make any
commitment for any such action; (h) will not, and will not permit any of its
subsidiaries to, sell, lease or otherwise dispose of any of its assets
(including capital stock of subsidiaries) which are material, individually or in
the aggregate, except in the ordinary course of business; (i) will not, and will
not permit any of its subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any
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business or any corporation, partnership, association or other business
organization division thereof or otherwise acquire or agree to acquire any
assets or securities in each case which are material, individually or in the
aggregate; (j) will not, and will not permit any of its subsidiaries to, incur
or become contingently liable with respect to any material indebtedness for
borrowed money or guarantee any such indebtedness; and (k) except as may be
required as a result of a change in law or in generally accepted accounting
principals, change any of the accounting principles or practices used by it.
Stockholders Meeting. Unless the Merger is consummated in accordance with
Section 253 of the DGCL, and subject to applicable law, the Company will (i)
prepare and file with the SEC, subject to the prior approval of Parent (which
approval will not be unreasonably withheld), as soon as practicable after the
consummation of the Amended Offer, a preliminary proxy or information statement
(the "Preliminary Proxy Statement") relating to the Merger as required by the
Exchange Act and the rules and regulations thereunder with respect to the
transactions contemplated hereby, (ii) obtain and furnish the information
required to be included in the Preliminary Proxy Statement, (iii) after
consultation with Parent, Parent Sub and Merger Sub, respond promptly to any
comments made by the SEC with respect to the Preliminary Proxy Statement, (iv)
cause the definitive proxy or information statement (together with all
supplements or amendments thereto, the "Proxy Statement") to be mailed to the
Company s stockholders at the earliest practicable date and (v) in accordance
with applicable law, duly call, give notice of, convene and hold a special
meeting (the "Special Meeting") of its stockholders as soon as practicable
following the consummation of the Amended Offer for the purpose of adopting the
agreement of merger (within the meaning of Section 251 of the DGCL) set forth in
the Merger Agreement; and include in the Proxy Statement the recommendation of
the Company's Board of Directors that stockholders of the Company vote in favor
of the adoption of the plan of merger set forth in the Merger Agreement.
Notwithstanding the foregoing, the Board of Directors of the Company may at any
time prior to the Effective Time withdraw, modify, or change any recommendation
and declaration regarding the Merger Agreement or the Merger, or recommend and
declare advisable any other offer or proposal, if in the opinion of the Board of
Directors after consultation with, and taking into account the advice of,
outside legal counsel, the failure to so withdraw, modify, or change its
recommendation and declaration would be inconsistent with its fiduciary
obligations. At any such meeting, the Merger Agreement requires Parent, Parent
Sub and their affiliates to vote all Shares owned by them in favor of approval
and adoption of the Merger Agreement and the transactions contemplated by the
Merger Agreement.
The Merger Agreement also provides that if Parent Sub acquires at least 90
percent of the outstanding Shares, each of Parent, Parent Sub, Merger Sub and
the Company will take all necessary and appropriate action to cause the Merger
to become effective, as soon as practicable in January 1997 after the
consummation of the Amended Offer, without a meeting of stockholders of the
Company, in accordance with Section 253 of the DGCL.
Filings; Other Action. The Company and Parent have agreed to (a) use all
reasonable efforts to cooperate with one another in (i) determining which
filings are required to be made prior to the Effective Time with, and which
consents, approvals, permits or authorizations are required to be obtained prior
to the Effective Time from, governmental or regulatory authorities of the United
States, the several states and foreign jurisdictions in connection with the
execution and delivery of the Merger Agreement and the consummation of the
transactions contemplated by the Merger Agreement and (ii) timely making all
such filings and timely seeking all such consents, approvals, permits or
authorizations; and (b) use all reasonable efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things necessary,
proper or appropriate to consummate and make effective the transactions
contemplated by the Merger Agreement including, without limitation, the sale of
assets or modification of contracts by either party so long as such sales of
assets or modification of contracts would not have a Company Material Adverse
Effect or Parent Material Adverse Effect (each as defined below), as the case
may be.
Under the Merger Agreement, "Company Material Adverse Effect" means any
material adverse effect on the business, results of operations, financial
condition, assets or liabilities of the Company and its subsidiaries taken as a
whole or that materially impairs or delays, or is reasonably likely to impair or
delay, the ability of the parties to consummate the Amended Offer or the Merger
other than any adverse effect relating to general economic, market wide or
general industry conditions, and "Parent Material Adverse Effect" means
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a material adverse effect on the ability of Parent, Parent Sub or Merger Sub to
consummate the Amended Offer or the Merger.
Publicity. The parties have also agreed to consult with each other to
mutually agree upon any press releases or public announcements pertaining to the
Merger Agreement, the Amended Offer or the Merger and not to issue any such
press releases or make any such public announcements prior to such consultation
and agreement, except as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities exchange, in
which case the party proposing to issue such press release or make such public
announcement will use its reasonable efforts to consult in good faith with the
other party before issuing any such press releases or making any such public
announcements.
Expenses. The Merger Agreement provides that whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated by the Merger Agreement will be paid
by the party incurring such expenses.
Indemnification and Insurance. Parent has agreed that all rights to
indemnification existing in favor of the present or former directors, officers,
employees, fiduciaries and agents (individually, an "Indemnified Party" and
collectively, the "Indemnified Parties") of the Company or any of its
subsidiaries or divisions as provided in the Company's Certificate of
Incorporation or By-laws or pursuant to other agreements, or the articles of
incorporation, by-laws or similar documents of any of the Company's subsidiaries
as in effect as of the date of the Merger Agreement with respect to matters
prior to the Effective Time and including, without limitation, liability arising
under the Securities Act, the Exchange Act and state corporation laws in
connection with the Merger will survive the Merger and will continue in full
force and effect for a period of not less than the statutes of limitations
applicable to such matters, and that payment thereof will be guaranteed by
Parent.
The Merger Agreement provides that Parent will cause the Surviving
Corporation to keep in effect provisions in its Certificate of Incorporation and
By-laws providing for exculpation of director and officer liability and
indemnification of the Indemnified Parties to the same extent as are currently
contained in the Certificate of Incorporation and By-laws of the Company, which
provisions will not be amended except as required by applicable law or except to
make changes permitted by law that would enlarge the Indemnified Parties' right
of indemnification.
Under the Merger Agreement, for a period of three years after the Effective
Time, Parent will cause the Surviving Corporation to maintain officers' and
directors' liability insurance covering the Indemnified Parties who are
currently covered, in their capacities as officers and directors, by the
Company's existing officers' and directors' liability insurance policies on
terms substantially no less advantageous to the Indemnified Parties than such
existing insurance; provided, however, that the Surviving Corporation will not
be required in order to maintain or procure such coverage to pay an annual
premium in excess of two times the current annual premium paid by the Company
for its existing coverage (the "Cap"); and provided further, that if equivalent
coverage cannot be obtained, or can be obtained only by paying an annual premium
in excess of the Cap, the Surviving Corporation will only be required to obtain
as much coverage as can be obtained by paying an annual premium equal to the
Cap.
Corporate Headquarters. The corporate headquarters of the Company will be
the corporate headquarters of the Surviving Corporation for a period of at least
two years following the Effective Time.
Certain Benefits. From and after the Effective Time, subject to applicable
law, and except as contemplated by the Merger Agreement with respect to the
Company Stock Option Plans, Parent and its subsidiaries will honor in accordance
with their terms, the Executive Retention Agreements (as described in the
Company Reports) between the Company or its subsidiaries and certain employees
thereof, and all the Company Benefit Plans; provided, however, that nothing will
preclude any change effected on a prospective basis in any Company Benefit Plan
that is permitted pursuant to the following sentence. For a period of not less
than one year following the Effective Time, subject to applicable law, Parent
and its subsidiaries will provide benefits or cash compensation in lieu thereof
(with the exception of stock based plans) to the employees of the Company and
its subsidiaries which will, in the aggregate, be no less favorable than those
provided by the Company and its subsidiaries to their employees immediately
prior to the Effective Time.
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With respect to the benefit plans of Parent and the Surviving Corporation
("Parent Benefit Plans"), Parent and the Surviving Corporation will grant all
the Company employees from and after the Effective Time credit for all service
with the Company and its affiliates and predecessors prior to the Effective Time
for all purposes for which such service was recognized by the Company. To the
extent Parent Benefit Plans provide medical or dental welfare benefits after the
Effective Time, such plans will waive any pre-existing conditions and will
provide that any expenses incurred on or before the Effective Time will be taken
into account under Parent Benefit Plans for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions.
Parent has agreed to employ or cause to be employed at the Effective Time
all employees of the Company and its subsidiaries who are employed at the
Effective Time on terms consistent with the Company's current employment
practices and at comparable levels of compensation and positions; provided, that
nothing in this sentence will limit or restrict Parent from causing or
permitting the employment to be terminated, or such terms and conditions to be
changed, following the Effective Time. For a period of three years following the
Effective Time, any reductions in workforce in respect of employees of Parent
and the Surviving Corporation will be made on a fair and equitable basis,
without regard to whether employment was with Parent or the Company or their
respective subsidiaries, and any employee whose employment is terminated or job
is eliminated by Parent or any of its subsidiaries during such period will be
entitled to participate on a fair and equitable basis in the job opportunity and
employment placement programs offered by Parent or any of its subsidiaries.
Rights Agreement. The Company will maintain in effect all actions
previously taken, and take any additional actions (including, if necessary,
amending or terminating the Rights Agreement) necessary, to (i) render the
Rights Agreement inapplicable with respect to the Amended Offer, the Merger,
this Agreement and the other transactions contemplated hereby and (ii) ensure
that (x) none of Parent, Parent Sub or Merger Sub or any of their Affiliates or
Associates (each as defined in the Rights Agreement) is or will be considered to
be an Acquiring Person (as defined in the Rights Agreement) and (y) none of a
Distribution Date, Triggering Event or Shares Acquisition Date (each as defined
in the Rights Agreement) occurs or will occur by reason of the announcement or
consummation of the Amended Offer, the Merger or the execution or delivery of
the Merger Agreement or the consummation of any of the other transactions
contemplated hereby.
Conditions to Merger
The respective obligation of each party to effect the Merger will be
subject to the fulfillment at or prior to the Effective Time of the following
conditions: (a) if such approval of the Merger Agreement is required by
applicable law, the Merger and the transactions contemplated thereby will have
been approved by the holders of the issued and outstanding Shares in the manner
required by the Company's Certificate of Incorporation and By-laws and by
applicable law; provided that Parent and Parent Sub will vote all of their
Shares in favor of the Merger, (b) the waiting period applicable to the
consummation of the Merger under the HSR Act or any other law (domestic or
foreign) applicable to the Merger will have expired or been terminated and all
consents, authorizations, orders and approvals of (or filings or registrations
with) any governmental commission, board or other regulatory body which are set
forth on an exhibit to the Merger Agreement, will have been obtained or made,
(c) neither of the parties to the Merger Agreement will be subject to any
statute, rule, regulation, executive order, judgment, decree or injunction
enacted, entered, issued, promulgated or enforced by any court of competent
jurisdiction or governmental authority which prohibits or restricts the
consummation of the transactions contemplated by the Merger Agreement or makes
such consummation illegal; provided, however, that prior to invoking this
condition each party agrees to use its reasonable efforts to have any such
decree, order or injunction lifted or vacated, and (d) Parent Sub will have
purchased Shares pursuant to the Amended Offer.
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Termination
The Merger Agreement may be terminated and the Amended Offer and the Merger
may be abandoned:
(i) by the mutual consent of Parent and the Company;
(ii) at any time prior to the Effective Time, before or after the
approval of the Merger Agreement by the holders of Shares, by action of the
Board of Directors of Parent or of the Company if (a) the Merger will not
have been consummated by June 30, 1997, or (b) any court of competent
jurisdiction or any other governmental, regulatory or administrative
agency, body or commission will have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement and such
order, decree, ruling or other action will have become final and
non-appealable; provided, however, that the party seeking to terminate the
Merger Agreement pursuant to this clause (b) will have used all reasonable
efforts to remove such injunction, order or decree; provided, further, the
right to terminate the Merger Agreement pursuant to clause (a), will not be
available to any party whose failure to perform or observe in any material
respect any of its obligations under the Merger Agreement in any manner
will have been the cause of, or resulted in, the failure of the Merger to
occur on or before such date;
(iii) at any time prior to the Effective Time, before or after the
approval of the Merger Agreement by the holders of Shares, by action of the
Board of Directors of the Company if (a) the Board of Directors determines
that proceeding with the transactions contemplated by the Merger Agreement
would be inconsistent with its fiduciary obligations by reason of an
Acquisition Proposal for the Company, or (b) Parent or Parent Sub will have
terminated or withdrawn the Amended Offer or amended the Amended Offer in
any manner not expressly permitted by the Merger Agreement, or (c) there
has been a breach by Parent or Parent Sub of any representation or warranty
contained in the Merger Agreement which breach (x) is not curable, or, if
curable, is not cured within 30 days after written notice of said breach is
given by the Company to Parent and (y) would have a Parent Material Adverse
Effect, or (d) there has been a material breach of any of the covenants or
agreements set forth in the Merger Agreement on the part of Parent or
Parent Sub, which breach is not curable or, if curable, is not cured within
30 days after written notice of such breach is given by the Company to
Parent; provided, however, that the right to terminate the Merger Agreement
pursuant to clause (c) or (d) will not be available to the Company if it,
at such time, is in material breach of any representation, warranty,
covenant or agreement set forth in the Merger Agreement; and
(iv) until any Shares have been purchased pursuant to the Amended
Offer, if (a) there has been a breach by the Company of any representation
or warranty contained in the Merger Agreement which breach (x) is not
curable, or, if curable, is not cured within 30 days after written notice
of said breach is given by Parent to the Company and (y) would have a
Company Material Adverse Effect, or (b) there has been a material breach of
any of the covenants or agreements set forth in the Merger Agreement on the
part of the Company, which breach is not curable or, if curable, is not
cured within 30 days after written notice of such breach is given by Parent
to the Company, or (c) the Board of Directors of the Company or the Special
Committee will have withdrawn or modified in a manner adverse to Parent or
Parent Sub its authorization, approval or recommendation of the
transactions contemplated by the Merger Agreement or recommended another
Acquisition Proposal for the Company; provided, however, that the right to
terminate the Merger Agreement pursuant to clause (a) or (b) will not be
available to Parent if it, at such time, is in material breach of any
representation, warranty, covenant or agreement set forth in the Merger
Agreement.
In the event that the Merger Agreement is terminated (A) pursuant to clause
(iii)(a), (iv)(c) or (iv)(d) of the preceding paragraph or (B) pursuant to any
provision of clause (i) or (ii)(a) or any other provision of clause (iii)(b) or
(iv) of the preceding paragraph (regardless of whether such termination is by
Parent or the Company) and (in the case of (B) only) either (y) prior to such
termination an Acquisition Proposal has been received by the Company or (z)
prior to such termination the Offer has expired without the purchase of any
Shares by Parent Sub pursuant thereto and within twelve months from the date of
such expiration an Acquisition Event (as such term is defined below) other than
with Parent or Parent Sub or any
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of their affiliates has occurred, then the Company will pay to Parent a fee of
$40,000,000.00 (the "Termination Fee").
"Acquisition Event" means the consummation of any (i) Acquisition
Transaction or (ii) series of transactions that results in any person, entity or
"group" (other than Parent or Parent Sub or any of their affiliates) acquiring
more than 50% of the outstanding Shares or assets of the Company (through any
open market purchases, merger, consolidation, recapitalization, reorganization
or other business combination).
In the event of termination of the Merger Agreement and the abandonment of
the Merger pursuant to the provisions of the Merger Agreement, all obligations
of the parties will terminate, except for certain specified obligations,
including the obligation to pay the Termination Fee. If Parent accepts a
Termination Fee it will not (i) assert or pursue in any manner, directly or
indirectly, any claim or cause of action based in whole or in part upon alleged
tortious or other interference with rights under the Merger Agreement against
any entity or person submitting an Acquisition Proposal with respect to the
Company or (ii) assert or pursue in any manner, directly or indirectly, any
claim or cause of action against the Company or any of its officers or directors
based in whole or in part upon its or their receipt, consideration,
recommendation, or approval of an Acquisition Proposal or the exercise by the
Company of its right of termination under clause (iii)(a) of the third preceding
paragraph.
The Merger Agreement provides that at any time prior to the Effective Time,
each party may by action taken by its Board of Directors, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties to the Merger Agreement, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant to the Merger Agreement and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained therein. Any agreement on the part of a party to the Merger
Agreement to any such extension or waiver will be valid only if set forth in an
instrument in writing signed on behalf of such party.
Amendments
The Merger Agreement may be amended by the parties thereto, by action taken
by their Boards of Directors, at any time before or after approval of matters
presented in connection with the Merger by the holders of Shares, but after any
such approval, no amendment will be made which by law requires the further
approval of holders of Shares without obtaining such further approval. The
Merger Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties thereto.
Certain Conditions of the Amended Offer
Notwithstanding any other term or provision of the Amended Offer, Parent
Sub will not be required to accept for payment, purchase or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Parent Sub's obligation to pay for or return tendered
Shares promptly after termination or withdrawal of the Amended Offer), pay for
and may delay the acceptance for payment of or, subject to the restriction
referred to above, the payment for any tendered Shares and may terminate the
Amended Offer as to any Shares not then paid for, if (1) there are not validly
tendered (and not withdrawn) prior to the expiration date of the Amended Offer
that number of Shares that would, when aggregated with the Shares already owned
by Parent Sub, represent a majority of all outstanding Shares on a fully diluted
basis on the date of purchase (the "Minimum Condition"), or (2) at any time on
or after the date of the Offer to Purchase, and prior to the time of acceptance
for payment of or payment for any such Shares, any of the following events or
conditions exist:
(a) there shall be instituted or pending any action, proceeding,
application or counterclaim by any government or governmental, regulatory
or administrative authority, agency or instrumentality, domestic, foreign
or supranational (each, a "Governmental Entity"), or by any other person,
domestic or foreign, before any court or Governmental Entity, (i)(A) or
which is reasonably likely to make illegal, delay or otherwise directly or
indirectly restrain or prohibit, or which is reasonably likely to, impose
price or other requirements, in addition to those required by the Federal
securities laws (as in effect on the date of the Offer to Purchase), in
connection with, the making of the Offer, the acceptance for payment of, or
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<PAGE> 11
payment for, some of or all the Shares by Parent Sub, Parent or any other
affiliate of Parent, or the consummation by Parent Sub or any other
affiliate of Parent of the Merger or other similar business combination
with the Company or (B) which is reasonably likely to result in material
damages, (ii) which is reasonably likely to impose limitations on the
ability of Parent Sub, Parent or any other affiliate of Parent effectively
to exercise full rights of ownership of the Shares, including, without
limitation, the right to vote any Shares acquired or owned by Parent Sub,
Parent or any other affiliate of Parent on all matters properly presented
to the Company's stockholders, (iii) which is reasonably likely to require
divestiture by Parent Sub, Parent or any other affiliate of Parent of any
Shares, (iv) which is reasonably likely to result in any material
diminution in the benefits expected to be derived by Parent Sub, Parent or
any other affiliate of Parent as a result of the transactions contemplated
by the Amended Offer, the Merger or other similar business combination, or
(v) materially adversely affecting the business, assets, liabilities,
financial condition or results of operations of the Company and its
subsidiaries taken as a whole;
(b) there shall be any action taken or any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended, issued or deemed applicable to (i)
Parent Sub, Parent or any other affiliate of Parent or the Company or any
of its subsidiaries or (ii) the Amended Offer, the Merger, or other similar
business combination by Parent Sub or any affiliate of Parent with the
Company, by any government, legislative body or court, domestic, foreign or
supranational, or Governmental Entity, to the Amended Offer that is
reasonably likely, directly or indirectly, to result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) any change shall have occurred or been threatened (or any
condition, event or development shall have occurred or been threatened
involving a prospective change) in the business, assets, liabilities,
financial condition or results of operations of the Company and its
subsidiaries taken as a whole that is reasonably likely to be materially
adverse to the Company and its subsidiaries taken as a whole;
(d) there shall have occurred or been threatened (i) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market in the
United States, (ii) a decline of at least 15% in either the Dow Jones
Average of Industrial Stocks or the Standard & Poor's 500 Index from that
existing at the close of business on December 5, 1996, (iii) any change in
the general political, market, economic or financial conditions in the
United States or abroad that is reasonably likely to have a material
adverse effect upon the business, assets, liabilities, financial condition
or results of operations of the Company and its subsidiaries taken as a
whole, (iv) any material change in currency exchange rates that is
reasonably likely to have a material adverse effect on the business,
assets, liabilities, financial condition or results of operations of the
Company and its subsidiaries taken as a whole, (v) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (vi) any limitation (whether or not mandatory) by any
government, domestic, foreign or supranational, or Governmental Entity on,
or other event that is reasonably likely to have a material adverse affect
on, the extension of credit by banks or other lending institutions, which
is reasonably likely to have a material adverse effect on the business,
assets, liabilities, financial condition or results of operations of the
Company and its subsidiaries taken as a whole, (vii) a commencement of a
war involving the United States or (viii) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof;
(e) it shall have been publicly disclosed or Parent Sub shall have
learned that (i) any person or "group" (as defined in Section 13(d)(3) of
the Exchange Act) shall have acquired or proposed to acquire more than 50%
of any class or series of capital stock of the Company (including the
Shares) or shall have been granted any option or right to acquire more than
50% of any class or series of capital stock of the Company (including the
Shares) or (ii) any person or group shall have entered into a definitive
agreement or an agreement in principle with respect to a tender offer or
exchange offer or a merger, share exchange, consolidation or other business
combination or a sale of assets (other than in the ordinary course of
business) with the Company or any of its subsidiaries;
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<PAGE> 12
(f) Parent Sub, Parent or another affiliate of Parent and the Company
shall have entered into an agreement that the Offer be terminated or
amended;
(g) the Company shall have breached or failed to comply in any
material respect with any of its obligations under the Merger Agreement or
any representations and warranties of the Company contained therein shall
have been inaccurate when made or at any time thereafter in any respect
that is reasonably likely to have a material adverse effect on the
business, assets, liabilities, financial condition or results of operations
of the Company and its subsidiaries taken as a whole; or
(h) the Board of Directors of the Company shall have modified or
amended in any manner adverse to Parent Sub or shall have withdrawn its
recommendation of the Offer or the Merger;
which, regardless of the circumstances (including any action or inaction by
Parent Sub or any affiliate of Parent Sub) giving rise to any such condition,
makes it inadvisable, in the reasonable good faith judgment of Parent Sub, to
proceed with the Offer and/or with such acceptance for payment or payment.
The Merger Agreement provides that the foregoing conditions are for the
sole benefit of Parent Sub and may be asserted by Parent Sub regardless of the
circumstances giving rise to any such condition or may be waived by Parent Sub
in whole or in part at any time and from time to time in its sole discretion.
The failure by Parent Sub at any time to exercise any of the foregoing rights
will not be deemed a waiver of any such right, and the waiver of any such right
with respect to particular facts and circumstances will not be deemed a waiver
with respect to any other facts and circumstances and each such right will be
deemed an ongoing right that may be asserted at any time and from time to time.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
Item 4(a) of the Schedule 14D-9 is hereby amended and supplemented as
follows:
On November 18, 1996, the Special Committee filed the Schedule 14D-9, in
which it unanimously recommended that the Company's stockholders reject the
Offer and not tender their Shares pursuant to the Offer.
After the Special Committee determined that the Offer was inadequate,
Dillon Read contacted potential bidders and continued its contacts with third
parties with whom it had previously had communications regarding a business
combination with the Company. In all, Dillon Read had communications regarding a
business combination with the Company with approximately 40 parties in the
United States, Europe and Japan. Dillon Read distributed publicly available
information relating to the Company to approximately 20 parties. Approximately
seven parties executed confidentiality agreements and received additional non-
public information relating to the Company. At each of the Special Committee
meetings held during November, Dillon Read reviewed with the Special Committee
third-party interest with respect to a business combination with the Company.
On November 20, 1996, representatives of one potential bidder (other than
the Henkel Group) (the "Second Bidder") had a telephone conversation with the
financial and legal advisors of the Company and Robert W. Fiondella, Chairman of
the Special Committee, to discuss circumstances under which the Second Bidder
might be prepared to submit an acquisition proposal for the Company. The Second
Bidder had previously executed a confidentiality agreement with respect to the
Company on November 13, 1996 and thereafter began a due diligence investigation
of the Company.
On November 22, 1996, the Special Committee met to discuss the status of
the Offer and interest of potential bidders. The Special Committee also
discussed the implementation of bidding procedures to ensure that the sale
process for the Company was conducted in a fair and orderly manner. In addition,
on November 22, the Special Committee created a negotiating subcommittee
consisting of Robert W. Fiondella, Robert E. Ix and Indra K. Nooyi (the
"Subcommittee").
On November 22, 1996, David Freeman telephoned a representative of the
Henkel Group and invited the Henkel Group to conduct a due diligence
investigation of the Company.
On November 22, in light of the fact that the Second Bidder was considering
a stock-for-stock merger transaction, the Company executed a Confidentiality
Agreement with respect to the Second Bidder and on
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November 25, 1996, the Company and its advisors began their due diligence
investigation of the Second Bidder.
On November 25, 1996, the Subcommittee met to discuss bidding procedures,
the status of the Offer and the interest of potential bidders.
On November 26, 1996, representatives of the Henkel Group began their due
diligence review of the Company.
On November 27, 1996, the Special Committee met to discuss bidding
procedures, the status of the Offer and the interest of potential bidders. The
Special Committee authorized the payment of certain expenses of the Second
Bidder, in an amount not to exceed $750,000, if the Second Bidder made a bona
fide written acquisition proposal for the Company with a value per Share in
excess of $57.75.
On November 27, 1996, Dillon Read, on behalf of the Special Committee,
distributed a letter to potential bidders setting forth certain procedures
established by the Special Committee to ensure that the sale process for the
Company was conducted in a fair and orderly manner that would best serve the
interests of the Company's stockholders. Under these procedures, "best and
final" proposals from potential bidders were due no later than 4:30 p.m. (New
York City time) on Wednesday, December 4, 1996. Furthermore, the procedures
reflected that the Special Committee would enter into inducements with the
bidder selected by the Committee.
During the period from November 27, 1996 through December 4, 1996, the
Company and the Second Bidder continued their respective due diligence reviews.
On December 2, 1996, Mr. Fiondella and a representative of Dillon Read met with
the Chief Executive Officer of the Second Bidder to discuss certain terms of a
possible transaction. In addition, advisors to the Special Committee entered
into discussions with the Second Bidder's advisors regarding the terms of a
merger agreement in connection with the possible transaction.
On the morning of December 4, 1996, the Subcommittee met to discuss the
status of the bidding process. On the evening of December 4, 1996, following the
deadline for submission of proposals, the Special Committee and its advisors met
to review the acquisition proposals received for the Company. The Henkel Group
submitted a proposal that reflected the Amended Offer and the Merger. The Second
Bidder submitted a proposal for a merger in which stockholders of the Company
would receive publicly traded common stock of the Second Bidder with a nominal
value of $64.16 per Share, based on the closing price for the Second Bidder's
common stock on December 4, 1996. This proposal was subject, among other things,
to the condition that the transaction qualify for pooling of interests
accounting treatment. At the meeting, Dillon Read, Fried Frank and Price
Waterhouse LLP gave presentations relating to their due diligence review of the
Second Bidder. Dillon Read delivered its oral opinion to the effect that, as of
such date, the consideration being offered to the stockholders of the Company
(other than the Henkel Group and its affiliates) pursuant to the Amended Offer
and the Merger was fair to such stockholders from a financial point of view. The
Special Committee determined that the Amended Offer and the Merger represented
the best proposal submitted to acquire the Company, based on certainty of value
and the likelihood of consummation, and was in the best interests of the Company
and its stockholders. The Special Committee unanimously recommended approval of
the Merger Agreement and the Merger to the Company's Board.
On December 5, 1996, Dillon Read delivered its written opinion and the
Board approved the Merger (with the Henkel Designees abstaining). The Merger
Agreement was executed by the Henkel Group and the Company immediately
thereafter.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY (WITH THE HENKEL
DESIGNEES ABSTAINING) RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE
AMENDED OFFER AND TENDER THEIR SHARES PURSUANT TO THE AMENDED OFFER.
A copy of a letter to stockholders communicating the Board's recommendation
and a form of jointly issued press release announcing the execution of the
Merger Agreement are filed as Exhibits 99.11 and 99.12, respectively, and are
incorporated by reference.
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Item 4(b) of the Schedule 14D-9 is hereby amended and supplemented as
follows:
In reaching its determination to recommend the Amended Offer and the Merger
to the Board of Directors, the Special Committee, which consists of all of the
members of the Board who voted on the Amended Offer and the Merger, considered a
number of factors including:
- The Special Committee's belief that the Amended Offer and the Merger
constitute the best proposal submitted to acquire the Company, based
on certainty of value and the likelihood of consummation.
- The enhanced certainty of the likelihood of consummation of the
Amended Offer and the Merger as compared to the uncertainty of the
likelihood of consummation of the Second Bidder's proposal, in light
of the significant ownership position of the Henkel Group and the
condition that the Second Bidder's proposal qualify for pooling of
interests accounting treatment. In order for a transaction with the
Second Bidder to qualify for pooling of interests treatment either (i)
the Henkel Group would have to agree not to dispose of Shares for a
specified period of time before the transaction and not to dispose of
common stock of the Second Bidder for a specified period of time after
the transaction, or (ii) a determination would have to be made that
the Henkel Group is not an affiliate of the Company.
- The fact that the consideration in the Amended Offer and the Merger is
all cash and that the Amended Offer and the Merger are not subject to
financing contingencies. The value of the Second Bidder's proposal,
which offered consideration consisting of publicly traded securities
with a current nominal value greater than the per Share consideration
in the Amended Offer and the Merger, was subject to uncertainties
inherent in the ownership of equity securities and did not contain
protection for the Company's stockholders against a possible price
decline.
- The opinion of Dillon Read that, as of December 4, 1996, the
consideration being offered to the Company's stockholders (other than
the Henkel Group and its affiliates) pursuant to the Amended Offer and
the Merger was fair from a financial point of view.
- The extensive process of exploring third-party interest in the Company
by the Special Committee and its advisors and the bidding procedures
adopted by the Special Committee, which were designed to produce the
"best and final" proposal from each prospective bidder.
- The fact that the Merger Agreement permits the Board, in the exercise
of its fiduciary duties, to engage in negotiations with or to furnish
information to third parties in response to unsolicited takeover
proposals and to terminate the Merger Agreement in connection with an
alternative acquisition proposal upon payment of a $40 million
Termination Fee.
The Special Committee did not assign relative weights to the above factors.
The Special Committee based its determination on the totality of the information
presented to and considered by it. In addition, 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.
On October 29, 1996, the Special Committee retained Dillon Read to act as
its financial advisor in connection with the Henkel Group's proposal to acquire
the Company and certain other possible transactions. On December 4, 1996, Dillon
Read rendered its oral opinion, which was confirmed by its written opinion dated
as of December 5, 1996, to the Board of Directors to the effect that, based upon
and subject to certain matters stated therein, as of the date of such opinion,
the consideration being offered in the Amended Offer and the Merger to the
holders of Shares (other than the Henkel Group and its affiliates) was fair to
such holders from a financial point of view.
THE FULL TEXT OF DILLON READ'S OPINION DATED DECEMBER 5, 1996, WHICH SETS
FORTH A DESCRIPTION OF THE ASSUMPTIONS MADE, GENERAL PROCEDURES FOLLOWED,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO.
DILLON READ'S OPINION IS DIRECTED TO THE BOARD OF DIRECTORS AND TO THE FAIRNESS
OF THE CONSIDERATION BEING OFFERED TO THE HOLDERS OF SHARES (OTHER THAN THE
HENKEL GROUP AND ITS AFFILIATES) IN THE AMENDED OFFER AND THE MERGER FROM A
FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER
OF SHARES AS TO WHETHER SUCH STOCKHOLDER SHOULD TENDER ITS SHARES IN THE AMENDED
OFFER. HOLDERS OF SHARES ARE URGED TO READ THE OPINION CAREFULLY IN ITS
ENTIRETY, ESPECIALLY WITH REGARD TO THE
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ASSUMPTIONS MADE AND MATTERS CONSIDERED BY DILLON READ. THE SUMMARY OF THE
OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION.
In arriving at its opinion, Dillon Read, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to the Company, (ii) reviewed certain internal financial information
and other data provided to Dillon Read by the Company relating to the business
and prospects of the Company, including financial projections prepared by the
management of the Company, (iii) held discussions with members of the senior
management of the Company, (iv) reviewed the historical price and trading data
for the Shares, (v) reviewed publicly available financial and securities market
data with respect to certain other companies which Dillon Read deemed comparable
in certain respects to the Company, (vi) reviewed the financial terms, to the
extent publicly available, of certain acquisition transactions Dillon Read
considered relevant, (vii) reviewed the form of Merger Agreement, (viii)
contacted third parties to solicit indications of interest in a possible
acquisition of the Company and held discussions with certain of these parties
prior to the date of the opinion, and (ix) conducted such other financial
studies, analyses and investigations, and considered such other information, as
Dillon Read deemed necessary or appropriate.
In connection with its review, Dillon Read did not assume any
responsibility for independent verification of any of the foregoing information
and, with the Company's consent, relied on such information as being complete
and accurate in all material respects. In addition, Dillon Read did not make any
independent evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of the Company, nor was Dillon Read furnished with any
such evaluation or appraisal. With respect to the financial projections referred
to above, Dillon Read assumed, with the Company's consent, that they were
reasonably prepared on bases reflecting the best currently available estimates
and judgment of the Company's management as to the future financial performance
of the Company. No other limits were placed on Dillon Read with respect to the
investigations made or procedures followed by Dillon Read in rendering its
opinion. Dillon Read's opinion is necessarily based on financial, economic,
market and other conditions existing on the date thereof.
The summary of Dillon Read's analyses set forth below does not purport to
be a complete description of the analyses underlying Dillon Read's opinion or
presentation to the Special Committee. The preparation of a fairness opinion is
a complex analytical process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. In arriving at its opinion,
Dillon Read did not assign any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments based on its experience
in rendering such opinions and on then existing economic, monetary and market
conditions as to the significance and relevance of each analysis and factor.
Accordingly, Dillon Read believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered,
without considering all analyses and factors, could create a misleading or
incomplete view of the processes underlying such analyses and its opinion. In
its analyses, Dillon Read made numerous assumptions with respect to the Company,
industry performance, general business and economic conditions and other
matters, many of which are beyond the Company's control. Any estimates contained
in Dillon Read's analyses are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than those set forth therein. In addition, analyses relating to the
value of a business or securities do not purport to be appraisals or to reflect
the actual prices at which businesses or securities actually might be sold.
The following paragraphs summarize the material analyses performed by
Dillon Read in arriving at the opinion dated December 5, 1996 and presented to
the Special Committee on December 4, 1996.
Analysis of Recent Acquisition Transactions. Using publicly available
information, Dillon Read reviewed the purchase prices and multiples paid in
selected mergers and acquisitions involving chemical companies which Dillon Read
deemed relevant in evaluating the Amended Offer. Dillon Read reviewed the
acquisition of Uniroyal Chemical Corporation by Crompton and Knowles
Corporation; the acquisition of Sterling Chemicals, Inc. by an Investor Group;
the acquisition of the Dearborn business unit of W.R. Grace & Company by Betz
Laboratories, Inc., the acquisition of INDSPEC Chemical Corporation by
Occidental Petroleum Corporation; the acquisition of OSi Specialties Holding
Company by Witco Corporation; the
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acquisition of The Kelco Division of Merck & Co., Inc. by The Monsanto Company;
the acquisition of Kay Chemical Company by Ecolab, Inc.; the acquisition of
Rust-Oleum Corporation by RPM, Inc.; the acquisition of EniChem Synthesis S.p.A.
by Great Lakes Chemical Corporation; the acquisition of Nobel Industrier AB by
Akzo NV; the acquisition of Quantum Chemical Corporation by Hanson plc; and the
acquisition of Merck & Co., Inc.'s Calgon Specialty Chemicals Business by
English China Clays plc.
Multiples of the unlevered value of the transactions (consideration offered
for the equity plus the book value of debt, preferred stock and minority
interest less cash and cash equivalents) to the sales of the acquired businesses
for the latest twelve month period prior to closing for which public information
was available averaged 1.6x and ranged from 1.0x to 3.5x. The multiples of
earnings before interest, taxes, depreciation and amortization ("EBITDA") for
the latest twelve month period prior to closing for which public information was
available averaged 8.8x and ranged from 5.5x to 12.9x. The multiples of earnings
before interest and taxes ("EBIT") for the latest twelve month period prior to
closing for which public information was available averaged 13.1x and ranged
from 9.6x to 20.3x. Multiples of levered value of the transactions
(consideration offered for the equity) to the net income of the acquired
businesses for the latest twelve month period prior to closing for which public
information was available averaged 22.6x and ranged from 13.1x to 37.7x. The
multiples of book equity for the latest period prior to closing for which public
information was available averaged 3.2x and ranged from 2.0x to 5.5x. Dillon
Read noted that the implied unlevered value for the Company based upon the
Amended Offer represented 2.7x sales, 13.3x EBITDA, and 16.8x EBIT, and the
implied levered value represented 22.2x net income, and 5.7x book equity.
In addition, Dillon Read reviewed the premiums paid over the
pre-announcement stock price by the acquiror where the target was a publicly
traded chemical company. The following transactions were reviewed: Quantum
Chemical Corporation's purchase by Hanson plc; ChemDesign Corporation's purchase
by Bayer AG; Grow Group, Inc.'s purchase by Imperial Chemical Industries plc;
Pratt & Lambert United, Inc.'s purchase by Sherwin-Williams Company; Sterling
Chemical, Inc.'s purchase by an Investor Group; and Uniroyal Chemical
Corporation's purchase by Crompton & Knowles Corporation. Dillon Read calculated
the average premium over the target's 52-week high stock price prior to the
announcement to be 15.6% and ranged from (7.7%) to 44.3%. The average premium
over the stock price one month prior to the announcement was 45.6% and ranged
from 28.3% to 55.8%. For the one day prior to the announcement, the average
premium was 30.9% and ranged from (7.7%) to 68.7%. Dillon Read noted that, based
on the Amended Offer, the implied premium to the Company's 52-week high stock
price (prior to announcement of the Henkel Group's initial acquisition proposal
for the Company on October 28, 1996) was 13.5%, the implied premium to the stock
price one month prior to the announcement of the initial acquisition proposal
was 33.7%, and the implied premium to the stock price one day prior to the
announcement of the initial acquisition proposal was 31.9%.
Again using stock market data, Dillon Read reviewed the premiums paid over
the pre-announcement stock price where the publicly traded target company
received an unsolicited bid. The following unsolicited transactions were
reviewed: the acquisition of American Cynamid Company by American Home Products
Corporation; the acquisition of Reliance Electric Company by Rockwell
International Corporation; the acquisition of Magma Power Company, Inc. by CA
Energy; the acquisition of US Shoe Corporation by Luxottica Group S.p.A.; the
acquisition of Clark Equipment Company by Ingersoll-Rand Company; the
acquisition of Moorco International, Inc. by FMC Corporation; the acquisition of
Lotus Development Corporation by International Business Machines Corporation;
the acquisition of First Interstate Bancorp by Wells Fargo & Company; the
acquisition of Cordis Corporation by Johnson & Johnson; and the acquisition of
CBI Industries, Inc. by Praxair, Inc. Dillon Read calculated the average premium
over the target's 52-week high prior to the announcement to be 28.4% and ranged
from (1.3%) to 73.6%. The premium over the stock price one month prior to the
announcement averaged 55.1% and ranged from 24.0% to 101.6%. For the one day
prior to the announcement, the average premium was 57.1% and ranged from 26.5%
to 105.5%. Dillon Read noted that, based on the Amended Offer, the implied
premium to the Company's 52-week high stock price prior to the announcement of
the Henkel Group's initial acquisition proposal was 13.5%, the implied premium
to the stock price one month prior to the announcement of the initial
acquisition proposal was 33.7%,
15
<PAGE> 17
and the implied premium to the stock price one day prior to the announcement of
the initial acquisition proposal was 31.9%.
Dillon Read also reviewed the premiums paid by companies already owning
between 15% and 45% of the target company. The following transactions were
reviewed: the acquisition of Revlon Group, Inc. by MacAndrews & Forbes Holdings,
Inc.; the acquisition of United Cable Television Corporation by United Artists
Communications, Inc.; the acquisition of Lyphomed Inc. by Fujisawa
Pharmaceutical Company Ltd.; the acquisition of QVC, Inc. by an Investor Group;
the acquisition of National Gypsum Company by Delcor, Inc.; the acquisition of
Dr Pepper/Seven-Up Companies, Inc. by Cadbury Schweppes plc; the acquisition of
Chicago and North Western Holdings Corporation by Union Pacific Corporation; the
acquisition of Turner Broadcasting System, Inc. by Time Warner, Inc.; the
acquisition of New World Communications Group, Inc. by News Corporation Ltd.;
and the acquisition of Vons Companies, Inc. by Safeway, Inc. Dillon Read
calculated the average premium over the target's 52-week high prior to the
announcement to be 25.2% and ranged from (35.7%) to 76.7%. The average premium
over the stock price one month prior to the announcement was 48.1% and ranged
from (2.1%) to 66.6%. For the one day prior to the announcement, the average
premium was 39.5% and ranged from (2.8%) to 76.7%. Dillon Read noted that, based
on the Amended Offer, the implied premium to the Company's 52-week high stock
price prior to the announcement of Henkel's initial acquisition proposal was
13.5%, the implied premium to the stock price one month prior to the
announcement of the initial acquisition proposal was 33.7%, and the implied
premium to the stock price one day prior to the announcement of the initial
acquisition proposal was 31.9%.
Analysis of Selected Publicly Traded Comparable Companies in the Adhesives
and Specialty Chemical Industries. Using publicly available information, Dillon
Read reviewed the stock prices and market multiples of the common stock of the
following companies in the adhesives industry: Avery Dennison Corporation; H.B.
Fuller Company; and Morton International, Inc. Dillon Read believes these
companies are engaged in lines of business that are generally similar to those
of the Company. Dillon Read determined the equity value (defined as shares
outstanding multiplied by the current share price) and derived an unlevered
value (defined as equity value plus the book value of debt, preferred stock and
minority interest less cash and cash equivalents) for each of these comparable
companies. Dillon Read calculated a range of such unlevered values as a multiple
of the latest twelve months' sales, EBITDA, EBIT, and equity value as a multiple
of 1997 net income as estimated by Institutional Brokers Estimate System
("I/B/E/S"). Unlevered value as a multiple of the latest twelve months sales
averaged 1.2x and ranged from 0.7x to 1.6x for these comparable companies.
Unlevered value as a multiple of the latest twelve months EBITDA averaged 8.7x
and ranged from 7.6x to 10.2x. Unlevered value as a multiple of the latest
twelve months EBIT averaged 12.6x and ranged from 11.0x to 14.2x. Equity value
as a multiple of estimated 1997 net income averaged 16.7x and ranged from 14.5x
to 18.8x. Dillon Read noted that, based on the Amended Offer, the implied
unlevered value for the Company represented 2.7x sales, 13.3x EBITDA, and 16.8x
EBIT. Based on the Amended Offer, the implied equity value for the Company
represented 18.8x estimated 1997 net income.
Again using publicly available information, Dillon Read reviewed the stock
prices and market multiples of the common stock of the following companies in
the specialty chemicals industry: M.A. Hanna Company; International Flavors &
Fragrances, Inc.; Lawter International, Inc.; Mallinckrodt, Inc.; Nalco Chemical
Company; PPG Industries, Inc.; Rohm & Haas Company; and Witco Corporation.
Dillon Read determined the equity value and derived an unlevered value for each
of these comparable companies. Dillon Read calculated a range of such unlevered
values as a multiple of the latest twelve months sales, EBITDA and EBIT.
Unlevered value as a multiple of the latest twelve months sales averaged 2.0x
and ranged from 0.6x to 3.4x for these comparable companies. Unlevered value as
a multiple of the latest twelve months EBITDA averaged 9.8x and ranged from 7.2x
to 16.8x. Unlevered value as a multiple of the latest twelve months EBIT
averaged 13.2x and ranged from 9.6x to 19.6x. Dillon Read noted that, based on
the Amended Offer, the implied unlevered value for the Company represented 2.7x
sales, 13.3x EBITDA and 16.8x EBIT. Dillon Read also determined the equity value
of the comparable companies as a multiple of 1997 net income as estimated by
I/B/E/S. For estimated 1997 estimated net income, the multiples averaged 16.2x
and ranged from 13.3x to 19.8x. Dillon Read noted that, based on the Amended
Offer, the implied equity value for the Company represented 18.8x 1997 estimated
net income.
16
<PAGE> 18
No company, transaction or business used in the analyses described under
"Analysis of Recent Acquisition Transactions" and "Analysis of Selected Publicly
Traded Comparable Companies in the Adhesives and Specialty Chemical Industries"
is identical to the Company, or the Amended Offer. Accordingly, an analysis of
the results thereof necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics and other
factors that could affect the transaction or the public trading or other values
of the company or companies to which they are being compared. Mathematical
analysis (such as determining the average or median) is not in itself a
meaningful method of using comparable acquisition or company data.
Discounted Cash Flow Analysis. Dillon Read performed a discounted cash
flow analysis of the Company on a stand alone basis using a set of underlying
operating projections which were based upon the financial projections provided
by management of the Company ("Loctite Projections"). Utilizing the Loctite
Projections, Dillon Read calculated the theoretical unlevered discounted present
value for the Company by adding together the present value of (i) the projected
stream of unlevered free cash flow through the year 2006 for the Company and
(ii) the projected value of the Company at the end of the year 2006 (the
"Loctite Terminal Value"). The Loctite Terminal Value was calculated based on
perpetuity growth rates ranging from 3.0% to 5.0%. The unlevered after-tax
discount rates utilized in the discounted cash flow analyses ranged from 11.0%
to 12.5%. The theoretical value of the Company based on the Loctite Projections
produced a range of value per share of Loctite Common Stock of $49.14 to $75.05.
Dividend Discount Analysis. Dillon Read performed a dividend discount
analysis of the Company on a stand alone basis using a set of underlying
operating projections which were based upon the Loctite Projections. Utilizing
the Loctite Projections, Dillon Read calculated the theoretical discounted
present value for the Company by adding together the present value of (i) the
projected stream of dividends and (ii) the terminal value. The terminal value
was calculated based upon a price to earnings ratio ranging from 13.0x to 17.0x.
The equity discount rates utilized in the dividend discount analyses ranged from
13.5% to 15.0%. The theoretical value of the Company based on the Loctite
Projections produced a range of value per share of Loctite Common Stock of
$47.37 to $66.33.
Dillon Read is an internationally recognized investment banking firm which,
as a part of its investment banking business, regularly is engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. The Special Committee
selected Dillon Read on the basis of its experience and independence. In the
past, Dillon Read has provided investment banking services to the Company and
has received customary compensation for the rendering of such services. In the
ordinary course of its business, Dillon Read may trade the securities of the
Company and the Henkel Group for its own account and the accounts of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
Item 6(b) is amended and supplemented as follows:
To the best of the Company's knowledge, all of its executive officers,
directors (other than as described below), affiliates and subsidiaries currently
intend to tender, pursuant to the Amended Offer, all Shares beneficially owned
by them. Roman Dohr, a Henkel Designee, has advised the Company that he does not
intend to tender his Shares in light of the potential application of the profit
recapture provision of Section 16(b) of the Exchange Act. The foregoing does not
include any Shares on 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.
17
<PAGE> 19
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS.
Item 7(a) is amended and supplemented as follows:
Under the terms and subject to the conditions of the Merger Agreement, the
Company has terminated all existing activities, discussions and negotiations
with third parties with respect to an acquisition of the Company.
Nevertheless, as described in Item 3(a) above, under the Merger Agreement
the Company's Board of Directors may provide information to or engage in
negotiations or discussions with any person who has made an unsolicited bona
fide Acquisition Proposal that involves an Acquisition Transaction that the
Board of Directors of the Company in good faith determines, with the assistance
of its financial advisor, represents a superior transaction for the stockholders
of the Company when compared to the Amended Offer and the Merger, if and only to
the extent that Company's Board of Directors reasonably determines, after
consultation with, and taking into account the advice of, outside counsel, that
the failure to do so would be inconsistent with its fiduciary obligations.
Except as set forth in this Item 7(a) and in Item 3(b), the Company is not
engaged in any negotiation in response to the Amended 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 assets by the Company or any
of its subsidiaries, (iii) a tender offer for or other acquisition of securities
by or of the Company, or (iv) any material change in the present capitalization
or dividend policy of the Company.
Item 7(b) is hereby amended and supplemented as follows:
Except as set forth in Items 3(b), 4(a), 4(b) and 7(a), there are no
transactions, board resolutions, agreements in principle or signed contracts in
response to the Amended Offer which relate to or would result in any of the
matters referred to in paragraph (a) of this Item 7.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 99.10 Agreement and Plan of Merger, dated as of December 5, 1996, between Loctite
Corporation, Henkel HGaA and HCI.
Exhibit 99.11* Letter to Stockholders of Loctite Corporation, dated December 5, 1996.
Exhibit 99.12 Text of Press Release, dated December 5, 1996, issued by Loctite
Corporation and Henkel HGaA.
Exhibit 99.13* Opinion, dated December 5, 1996, of Dillon, Read & Co. Inc.
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
18
<PAGE> 20
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: December 5, 1996
19
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
Exhibit 99.10 Agreement and Plan of Merger, dated as of December 5, 1996,
between Loctite Corporation, Henkel HGaA and HCI. .............
Exhibit 99.11* Letter to Stockholders of Loctite Corporation, dated December
5, 1996. ......................................................
Exhibit 99.12 Text of Press Release, dated December 5, 1996, issued by
Loctite Corporation and Henkel HGaA. ..........................
Exhibit 99.13* Opinion, dated December 5, 1996, of Dillon, Read & Co. Inc. ...
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
20
<PAGE> 1
EXHIBIT 99.10
================================================================================
AGREEMENT AND PLAN OF MERGER
between
HENKEL KGaA,
HC INVESTMENTS, INC.
and
LOCTITE CORPORATION
Dated as of December 5, 1996
================================================================================
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of December
5, 1996 between Henkel KGaA, a Kommanditgesellschaft auf Aktien (a partnership
limited by shares) organized under the laws of the Federal Republic of Germany
("Parent"), HC Investments, Inc., a Delaware corporation and a wholly owned
subsidiary of Parent ("Parent Sub"), and Loctite Corporation, a Delaware
corporation (the "Company").
RECITALS
WHEREAS, on November 6, 1996, Parent and Parent Sub commenced a tender
offer to purchase all outstanding shares of Common Stock, par value $0.01 per
share (the "Shares") of the Company, including 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, for a purchase price of $57.75
per Share, net to the seller in cash, without interest thereon, upon the terms
and subject to the conditions set forth in the Offer to Purchase dated November
6, 1996 (the "Offer to Purchase") of Parent Sub and the related Letter of
Transmittal (collectively, the "Initial Offer") which are filed as exhibits to
the Tender Offer Statement on Schedule 14D-1 filed by Parent and Parent Sub
(together with all supplements or amendments thereto, the "Schedule 14D-1") in
respect of the Initial Offer with the Securities and Exchange Commission (the
"SEC") on November 6, 1996.
WHEREAS, on November 18, 1996, the Special Committee (the "Special
Committee") of the Board of Directors of the Company (the "Company Board") filed
a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
supplements or amendments thereto, the "Schedule 14D-9") in which it recommended
the Company's stockholders reject the Initial Offer.
WHEREAS, the Boards of Directors of Parent, Parent Sub and the Company
each have determined that it is in the best interests of their respective
companies and stockholders for Parent to acquire the Company upon the terms and
conditions set forth herein.
WHEREAS, promptly following the execution hereof Parent and Parent Sub
will file with the SEC an amendment to the Schedule 14D-1 which reflects the
Amendments (as defined in Section 1.1) and the Company Board will file an
amendment
<PAGE> 3
to the Schedule 14D-9 in which it recommends to the Company's stockholders that
they accept the Offer (as defined in Section 1.1).
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
1. The Tender Offer.
1.1. Tender Offer.
(a) As promptly as practicable following the execution hereof,
Parent and Parent Sub will amend the Initial Offer (the Initial Offer as
amended, the "Offer") to provide (i) for a purchase price per Share (including
the associated Rights) of $61.00 (the "Per Share Price"), (ii) for the period
the Offer is to remain open to be shortened to provide for the expiration of the
Offer at 12:00 midnight on Friday, December 20, 1996 and (iii) for the
consummation of the Offer to be subject only to the conditions (the "Offer
Conditions") set forth on Annex A hereto (collectively, the "Amendments").
Without the prior written consent of the Company, neither Parent nor Parent Sub
shall (i) change or waive the Minimum Condition (as defined in Annex A), (ii)
reduce the number of Shares subject to the Offer, (iii) reduce the price per
Share to be paid pursuant to the Offer, (iv) extend the Offer if all of the
Offer Conditions have been satisfied or waived, (v) change the form of
consideration payable in the Offer, (vi) amend, modify, or add to the Offer
Conditions (provided, that Parent or Parent Sub in its sole discretion may waive
any such conditions other than the Minimum Condition) or (vii) amend any other
term of the Offer in a manner adverse to the holders of the Shares.
Notwithstanding the foregoing, Parent and Parent Sub may, without the consent of
the Company, (A) extend the Offer, if at the scheduled expiration date of the
Offer any of the Offer Conditions shall not have been satisfied or waived, until
such time as such conditions are satisfied or waived, (B) extend the Offer for
any period required by any statute, rule, regulation, interpretation or position
of the SEC or any other governmental authority or agency (domestic, foreign or
supranational) applicable to the Offer, and (C) extend the Offer for any reason
on one or more occasions for an aggregate of not more than 15 business days
beyond the latest expiration date that would otherwise be permitted under
clauses (A) and (B) of this sentence; and, if at any scheduled expiration date
of the Offer any of the Offer Conditions have not been satisfied or waived by
Parent or Parent Sub but are capable of being satisfied in the reasonable
opinion of Parent and Parent Sub, on the written request of the Company, Parent
Sub shall from time to time extend the Offer for up to twenty business days in
the aggregate from the originally scheduled expiration date thereof. Subject to
the terms and conditions of the Offer, Parent Sub will
2
<PAGE> 4
promptly pay for all Shares tendered and not withdrawn pursuant to the Offer as
soon as practicable after the expiration of the Offer. The obligation of Parent
Sub to accept for payment and pay for Shares tendered pursuant to the Offer
shall be subject only to the satisfaction or waiver of the Offer Conditions.
(b) The Company hereby consents to the Offer and the Merger (as
defined in Section 2.1 hereof) and represents and warrants that (A) the Company
Board (except for Roman Dohr, Christoph Henkel and Jochen Krautter (the
"Henkel-Nominated Directors"), who abstained), at a meeting duly called and
held, has (i) duly approved the adoption of this Agreement and the consummation
of the transactions contemplated hereby, including, without limitation, the
making of the Offer, (ii) by unanimous vote, (w) determined that the Offer and
the Merger are in the best interests of the stockholders of the Company, (x)
resolved to recommend acceptance of the Offer and approval and adoption of the
agreement of merger (as such term is used in Section 251 of the General
Corporation Law of the State of Delaware (the "DGCL")) contained in this
Agreement by such stockholders of the Company, (y) taken all necessary steps to
render Section 203 of the DGCL inapplicable to the Merger and the acquisition of
Shares pursuant to the Offer and (z) taken any action necessary (1) to render
the Rights Agreement inapplicable with respect to the Offer, the Merger, this
Agreement and the other transactions contemplated hereby, (2) to ensure that
none of Parent, Parent Sub or Merger Sub (as defined in Section 2.1) or any of
their Affiliates or Associates (each as defined in the Rights Agreement) is or
will be considered to be an Acquiring Person (as defined in the Rights
Agreement) and (3) to ensure that none of a Distribution Date, Triggering Event
or Shares Acquisition Date (each as defined in the Rights Agreement) occurs or
shall occur by reason of the announcement or consummation of the Offer, the
Merger or the execution or delivery of this Agreement or the consummation of any
of the other transactions contemplated hereby and (B) Dillon, Read & Co. Inc.,
the Company's independent financial advisor, has advised the Company Board that,
in its opinion, the consideration to be paid to the Company's stockholders
(other than Parent, Parent Sub, Merger Sub or any of their affiliates) in the
Offer and the Merger is fair, from a financial point of view, to such
stockholders.
(c) As soon as practicable after the date hereof, Parent and Parent
Sub will file with the SEC an amendment to the Schedule14D-1 which reflects the
Amendments. As soon as practicable after the date hereof, the Company Board
shall file with the SEC an amendment to the Schedule 14D-9 which contains the
recommendations described in Section 1.1(b)(ii)(x) and the Company hereby
consents to the inclusion of such recommendations in the Offer Documents (as
defined in Section 1.1(d)) and to the inclusion of a copy of the Schedule 14D-9
with the Offer Documents mailed or furnished to the Company's stockholders.
Notwithstanding anything to the contrary in this Agreement, the Company Board
may withdraw, modify or amend its recommendation if in the reasonable opinion of
the Company Board, after consultation with counsel, such
3
<PAGE> 5
recommendation would be inconsistent with its fiduciary duties to the Company's
stockholders under applicable law. Any such withdrawal, modification or
amendment shall not constitute a breach of this Agreement.
(d) Parent and Parent Sub agree, as to the Schedule 14D-1, the offer
to purchase and related letter of transmittal (collectively, the "Offer
Documents"), and the Company agrees, as to the Schedule 14D-9, that such
documents shall, in all material respects, comply with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations thereunder and other applicable laws. Parent, Parent Sub and the
Company each agree that none of the information supplied by them in writing for
inclusion in the Offer Documents and the Schedule 14D-9 will, at the respective
times that the Offer Documents and the Schedule 14D-9 or any amendments or
supplements thereto are filed with the SEC and are first published or sent or
given to holder of Shares, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made not misleading. Parent, Parent Sub and the Company further agree
to promptly correct any information provided by them for use in the Offer
Documents or the Schedule 14D-9 if and to the extent that it shall have become
false or misleading in any material respect and Parent and Parent Sub agree, as
to the Offer Documents, and the Company agrees, as to the Schedule 14D-9, to
take all steps necessary to cause such documents as so corrected to be filed
with the SEC and to be disseminated to holders of Shares, in each case, as and
to the extent required by applicable laws. The Company and its counsel, as to
the Offer Documents, and Parent and Parent Sub and its counsel, as to the
Schedule 14D-9, shall be given an opportunity to review and comment upon such
documents prior to their being filed with the SEC.
(e) In connection with the Offer, the Company will cause its transfer
agent to furnish promptly to Parent Sub a list, as of a recent date, of the
record holders of Shares and their addresses, as well as mailing labels
containing the names and addresses of all record holders of Shares and lists of
security positions of Shares held in stock depositories. The Company will
furnish Parent Sub with such additional information (including, but not limited
to, updated lists of holders of Shares and their addresses, mailing labels and
lists of security positions) and such other assistance as Parent or Parent Sub
or their agents may reasonably request in communicating the Offer to the record
and beneficial holders of Shares.
1.2. Directors. If, immediately following the consummation of the
Offer, Parent Sub and Merger Sub are unable to cause the Merger to be effected
pursuant to Section 253 of the DGCL, promptly upon the purchase by Parent Sub
pursuant to the Offer of such number of Shares which, when added to Shares
currently owned by Parent Sub, represent at least a majority of the outstanding
Shares, and from time to time
4
<PAGE> 6
thereafter, Parent Sub shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board as will give Parent
Sub representation on the Company Board equal to the product of the number of
directors on the Company Board and the percentage that the number of Shares held
by Parent Sub bears to the number of Shares outstanding, and the Company shall,
upon request by Parent Sub, promptly increase the size of the Company Board or
use its best efforts to secure the resignations of such number of directors as
is necessary to provide Parent Sub with such level of representation and shall
cause Parent Sub's designees to be so elected. The Company's obligations to
appoint designees to the Company Board shall be subject to Section 14(f) of the
Exchange Act. At the request of Parent Sub and subject to applicable law, the
Company shall take, at its expense, all action necessary to effect any such
election or appointment of Parent Sub's designees, including mailing to its
stockholders the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder. Parent and Parent Sub will supply to the
Company all information with respect to themselves and their respective
officers, directors and affiliates required by such Section and Rule.
ARTICLE 2
2. The Merger.
2.1. The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 2.3), a newly formed, direct,
wholly owned subsidiary of Parent Sub ("Merger Sub") shall be merged with and
into the Company in accordance with this Agreement and the separate corporate
existence of Merger Sub shall thereupon cease (the "Merger"). The Company shall
be the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation") and shall continue as a wholly owned subsidiary of
Parent Sub under the name "Loctite Corporation." The Merger shall have the
effects specified in the DGCL.
2.2. The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place (a) at the
offices of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York, at 9:00 a.m., local time, on the first business day immediately
following the day on which the last to be fulfilled or waived of the conditions
set forth in Article 8 shall be fulfilled or waived in accordance herewith or
(b) at such other time, date or place as Parent and the Company may agree. The
date on which the Closing occurs is hereinafter referred to as the "Closing
Date."
2.3. Effective Time. If all the conditions to the Merger set forth in
Article 8 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 9, the parties
hereto shall cause a
5
<PAGE> 7
Certificate of Merger meeting the requirements of Section 251 of the DGCL to be
properly executed and filed in accordance with such Section on the Closing Date.
The Merger shall become effective at the time of filing of the Certificate of
Merger with the Secretary of State of the State of Delaware in accordance with
the DGCL or at such later time which the parties hereto shall have agreed upon
and designated in such filing as the effective time of the Merger (the
"Effective Time").
ARTICLE 3
3. Surviving Corporation.
3.1. Certificate of Incorporation. The Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended in
accordance with applicable law.
3.2. Bylaws. The Bylaws of Merger Sub in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
3.3. Directors. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time.
3.4. Officers. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time.
ARTICLE 4
4. Conversion or Cancellation of Shares in the Merger.
4.1. Conversion or Cancellation of Shares in the Merger.
(a) At the Effective Time, each share of the Common Stock,
$.01 par value, of Merger Sub outstanding immediately prior to the Effective
Time shall be converted into and become one fully paid and non-assessable Share.
(b) At the Effective Time, each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held in the Company's
treasury or owned by Parent, Parent Sub, Merger Sub or any other wholly owned
Subsidiary of Parent or the Company or Shares which are held by stockholders
("Dissenting Stockholders") exercising appraisal rights pursuant to Section 262
of the
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DGCL) shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into the right to receive, without interest, an
amount in cash equal to $61.00 or such greater amount which may be paid pursuant
to the Offer (the "Merger Consideration"). All such Shares, by virtue of the
Merger and without any action on the part of the holders thereof, shall no
longer be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such Shares shall
thereafter cease to have any rights with respect to such Shares, except the
right to receive the Merger Consideration for such Shares upon the surrender of
such certificate in accordance with Section 4.2.
(c) Each Share issued and held in the Company's treasury, and
each Share owned by Parent, Parent Sub, Merger Sub or any other wholly owned
Subsidiary (as hereinafter defined) of Parent or the Company, shall, at the
Effective Time and, by virtue of the Merger, cease to be outstanding and shall,
be canceled and retired without payment of any consideration therefor.
4.2. Payment for Shares.
(a) As of the Effective Time, Parent shall deposit, or shall
cause to be deposited, with a bank or trust company selected by Parent, which
shall be reasonably satisfactory to Company (the "Paying Agent"), for the
benefit of the holders of Shares, for exchange in accordance with this Article
4, the funds necessary to make the payments contemplated by Section 4.1 (the
"Payment Fund") to holders of Shares issued and outstanding immediately prior to
the Effective Time.
(b) Promptly after the Effective Time, Parent shall cause the
Paying Agent to mail to each holder of record, as of the Effective Time, of a
certificate or certificates which immediately prior to the Effective Time
represented Shares ("Certificates") (other than to holders of Shares referred to
in Section 4.1(c)) (i) a letter of transmittal which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Paying Agent and shall be
in such form and have such other provisions as Parent and the Company may
reasonably specify and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for payment therefor. Upon surrender of a
Certificate for cancellation to the Paying Agent together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, the Surviving Corporation shall promptly cause to be delivered to the
holder of such Certificate a check representing an amount equal to the product
of the number of Shares represented by such Certificate multiplied by the Merger
Consideration, less any required withholding tax, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash payable upon surrender of the Certificates. If payment is to be made to
a person other than the registered holder of the Certificate surrendered, it
shall be a
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condition of such payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such payment shall pay any transfer or other taxes required by reason of the
payment to a person other than the registered holder of the Certificate
surrendered or establish to the satisfaction of the Surviving Corporation or the
Paying Agent that such tax has been paid or is not applicable. From and after
the Effective Time and until surrendered in accordance with the provisions of
this Section 4.2, each Certificate (other than Certificates representing Shares
owned by Parent or Parent Sub or any of their respective Subsidiaries and
Certificates held by Dissenting Stockholders) shall represent for all purposes
solely the right to receive the Merger Consideration in cash multiplied by the
number of Shares evidenced by such Certificate, without any interest thereon.
(c) At or after the Effective Time, there shall be no transfers
of Shares on the stock transfer books of the Company. If, after the Effective
Time, a Certificate is presented to the Surviving Corporation, it shall be
canceled and the Surviving Corporation shall promptly cause to be delivered to
the person entitled thereto a check representing an amount equal to the product
of the number of Shares represented by such Certificate multiplied by the Merger
Consideration, less any required withholding tax, and the Certificate so
surrendered shall forthwith be canceled, subject to applicable law in the case
of Shares held by Dissenting Stockholders.
(d) Any portion of the Payment Fund that remains unclaimed by
the former stockholders of the Company one year after the Effective Time shall
be delivered to Parent Sub. Any former stockholders of the Company who have not
theretofore complied with this Article 4 shall thereafter look only to Parent
Sub for payment of their claim for the Merger Consideration with respect to
their Shares.
(e) None of Parent, Parent Sub, the Company, the Paying Agent or
any other person shall be liable to any former holder of Shares for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Company, the posting by such person of a bond in such reasonable amount as the
Company may direct as indemnity against any claim that may be made against it
with respect to such Certificate, the Paying Agent will issue in exchange for
such lost, stolen or destroyed Certificate the amount to which such persons are
entitled pursuant to this Agreement.
4.3. Dissenters' Rights. Notwithstanding anything in this Agreement to
the contrary, if any Dissenting Stockholder shall be entitled to be paid the
"fair value" of
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his or her Shares, as provided in Section 262 of the DGCL, the Company shall
give Parent notice thereof and Parent shall have the right, at its own expense,
to direct all negotiations and proceedings with respect to any such demands.
Neither the Company nor the Surviving Corporation shall, except with the prior
written consent of Parent, which consent shall not be unreasonably withheld,
voluntarily make any payment with respect to, or settle or offer to settle, any
such demand for payment. If any Dissenting Stockholder shall fail to perfect or
shall have effectively withdrawn or lost the right to dissent, the Shares held
by such Dissenting Stockholder shall thereupon be treated as though such Shares
had been converted into the Merger Consideration pursuant to Section 4.1.
4.4. Stock Options. After the Effective Time (or at such earlier time
as Merger Sub shall designate), each option (an "Option") which has been granted
under the Loctite Corporation 1993 Stock Option Plan and the Loctite Corporation
1976 Stock Option Plan, as amended through October 23, 1987 (the "Company Stock
Option Plans") and is outstanding at the Effective Time, whether or not then
exerciseable, will be exchanged for, and the holder of each such Option will be
entitled to receive upon surrender of the Option for cancellation, cash equal to
the product of the following: (i) the positive difference, if any, obtained by
subtracting the exercise price of each such Option from the Merger Consideration
times (ii) the number of Shares covered by such Option, less any required
withholding tax (the "Option Consideration"). The surrender of an Option in
exchange for the Option Consideration shall be deemed a release of any and all
rights the holder had or may have had in respect of such Option. Prior to the
Effective Time, the Company shall use its best efforts to obtain all necessary
consents or releases from holders of Options and take all such other action as
may be reasonably necessary to give effect to the transactions contemplated by
this Section 4.4. Except as otherwise agreed to by the parties, (i) the Company
Stock Option Plans shall terminate as of the Effective Time and, except with
respect to the right to receive the Option Consideration under this Section 4.4,
any and all rights under any provisions in any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company or any subsidiary thereof shall be canceled
as of the Effective Time, and (ii) the Company shall take all reasonable action
necessary to ensure that no person shall have any right under any Company Stock
Option Plan (or any Option granted thereunder) or other plan, program or
arrangement with respect to, including any right to acquire, equity securities
of the Company, the Surviving Corporation, Parent, Parent Sub or any subsidiary
of any of the foregoing following the Effective Time.
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ARTICLE 5
5. Representations and Warranties of the Company.
Except as set forth in the disclosure letter delivered to Parent prior
to the execution hereof (the "Company Disclosure Letter") or as disclosed with
reasonable specificity in public filings made by the Company with the SEC prior
to the date hereof, the Company represents and warrants to Parent as of the date
of this Agreement as follows:
5.1. Existence; Good Standing; Corporate Authority. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware. The Company is duly licensed or qualified to do
business as a foreign corporation and is in good standing under the laws of any
other state of the United States or any other jurisdiction in which the
character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where the
failure to be so qualified would not be reasonably likely to have a material
adverse effect on the business, results of operations, financial condition,
assets or liabilities of the Company and its Subsidiaries (as defined in Section
10.15) taken as a whole or that materially impairs or delays, or is reasonably
likely to impair or delay, the ability of the parties to consummate the Offer or
the Merger other than any such adverse effect relating to general economic,
market wide or general industry conditions (a "Company Material Adverse
Effect"). The Company has all requisite corporate power and authority to own,
operate and lease its properties and carry on its business as now conducted. The
copies of the Company's Certificate of Incorporation and Bylaws previously made
available to Parent are true and correct.
5.2. Authorization, Validity and Effect of Agreements. The Company has
the requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby. Subject only to
the approval of this Agreement and the transactions contemplated hereby by the
Company's stockholders to the extent required by applicable law, the
consummation by the Company of the transactions contemplated hereby has been
duly authorized by all requisite corporate action (including for purposes of
Section 203 of the DGCL) and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement constitutes, and all agreements and
documents contemplated hereby (when executed and delivered pursuant hereto) will
constitute, the valid and legally binding obligation of the Company, enforceable
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
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5.3. Capitalization. The authorized capital stock of the Company
consists of 300,000,000 shares of Company Common Stock and, as of October 31,
1996, there were 32,041,559 shares of Company Common Stock issued and
outstanding and 611,206 shares reserved for issuance upon exercise of presently
outstanding employee stock options. All such issued and outstanding shares of
Company Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Since October 31, 1996, the Company
has not (i) issued any Shares other than upon the exercise of Options
outstanding on such date, (ii) granted any options, warrants or rights or
entered into other agreements or commitments to issue Shares (under the Company
Stock Option Plans or otherwise) or (iii) split, combined or reclassified any of
its shares of capital stock. Other than as contemplated by this Agreement and
except for the Rights, there are not at the date of this Agreement any existing
options, warrants, calls, subscriptions, convertible securities, or other
rights, agreements or commitments which obligate the Company or any of its
Subsidiaries to issue, transfer or sell any shares of capital stock of the
Company or any of its Subsidiaries. The Company has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter.
5.4. Subsidiaries; Other Interests. Each of the Company's Subsidiaries
is a corporation or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate or partnership power and authority to own its properties and
to carry on its business as it is now being conducted, and is duly qualified to
do business and is in good standing in each jurisdiction in which the ownership
of its property or the conduct of its business requires such qualification,
except for jurisdictions in which such failure to be so qualified or to be in
good standing would not have a Company Material Adverse Effect. All of the
outstanding shares of capital stock, or other ownership interests in, each of
the Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and is owned, directly or indirectly, by the Company free and
clear of all liens, pledges, security interests, claims or other encumbrances
other than liens imposed by local law which are not material. Except for
interests in its Subsidiaries, neither the Company nor any of its Subsidiaries
owns directly or indirectly any equity interest or equity investment in any
corporation, partnership, joint venture, business, trust or entity.
5.5. Compliance with Law. Neither the Company nor any of its
Subsidiaries is in violation of any order of any court, governmental authority
or arbitration board or tribunal, or any law, ordinance, governmental rule or
regulation (domestic or foreign) to which the Company or any of its Subsidiaries
or any of their respective properties or assets is subject, where such violation
could reasonably be expected to have a Company Material Adverse Effect.
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5.6. No Violation. Neither the execution and delivery by the Company of
this Agreement nor the consummation by the Company of the transactions
contemplated hereby in accordance with the terms hereof, will: (i) conflict with
or result in a breach of any provisions of the Certificate of Incorporation or
Bylaws of the Company; (ii) violate, or conflict with, or result in a breach of
any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties of the
Company or its Subsidiaries under, or result in being declared void, voidable,
or without further binding effect, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust or any material license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which the Company or any of its Subsidiaries is a party, or by
which the Company or any of its Subsidiaries or any of their properties is bound
or affected, except for any of the foregoing matters which could not reasonably
be expected to have a Company Material Adverse Effect; or (iii) other than the
filings provided for in Article 1, certain federal, state and local regulatory
filings, filings required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"), the Exchange Act, the Securities Act of 1933, as
amended (the "Securities Act"), or applicable state securities and "Blue Sky"
laws or similar laws or regulations of jurisdictions outside the United States
or filings in connection with the maintenance of qualification to do business in
other jurisdictions (collectively, the "Regulatory Filings"), require any
material consent, approval or authorization of, or declaration, filing or
registration with, any domestic governmental or regulatory authority, the
failure to obtain or make which could reasonably be expected to have a Company
Material Adverse Effect.
5.7. SEC Documents. The Company has made available to Parent each
registration statement, report, proxy statement or information statement
prepared by it since December 31, 1994, each in the form (including exhibits and
any amendments thereto) filed with the SEC (collectively, the "Company
Reports"). Since December 31, 1994, the Company has not failed to make any
required filing with the SEC on a timely basis. As of their respective dates,
the Company Reports (i) were prepared in all material respects in accordance
with the applicable requirements of the Securities Act, the Exchange Act, and
the rules and regulations thereunder and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading except for such
statements, if any, as have been modified by subsequent filings prior to the
date hereof. Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company Reports (including the related
notes and schedules) fairly presents the consolidated
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financial position of the Company and its Subsidiaries as of its date and each
of the consolidated statements of income, retained earnings and cash flows of
the Company included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents the results of
operations, retained earnings or cash flows, as the case may be, of the Company
and its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments which would not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein. Except as and to the extent set forth on the
consolidated balance sheet of the Company and its Subsidiaries at December 31,
1995, including all notes thereto, or as set forth in the Company Reports,
neither the Company nor any of its Subsidiaries has any material liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on, or reserved against in, a balance
sheet of the Company or in the notes thereto, prepared in accordance with United
States generally accepted accounting principles consistently applied, except
liabilities arising in the ordinary course of business since such date.
5.8. Litigation. Except as disclosed in the Company Reports filed with
the SEC prior to the date hereof, there are no actions, suits or proceedings
pending against the Company or any of its Subsidiaries or, to the Company's
knowledge, threatened against the Company or any of its Subsidiaries, at law or
in equity, or before or by any federal, state, local, foreign or supranational
commission, board, bureau, agency or instrumentality, that are reasonably likely
to have a Company Material Adverse Effect.
5.9. Absence of Certain Changes. Except as disclosed in the Company
Reports filed with the SEC prior to the date hereof, since December 31, 1995,
the Company has conducted its business only in the ordinary course of such
business and there has not been any Company Material Adverse Effect.
5.10. Taxes. Each of the Company and its Subsidiaries has timely filed
all material federal, state, foreign, and other tax returns required to be filed
by it, and each such tax return was true, correct, and complete in all material
respects. All taxes shown to be due on each such tax return, or claimed or
asserted by any taxing authority to be due by the Company or any of its
Subsidiaries, have been paid except for those taxes being contested in good
faith and for which adequate reserves have been provided in accordance with
United States generally accepted accounting principles. Each of the Company and
its Subsidiaries has withheld and paid all taxes required to have been withheld
and paid in connection with amounts paid to any employee, independent
contractor, creditor, stockholder, or other third party.
5.11. Employee Benefit Plans. All employee benefit plans and other
benefit arrangements covering employees of the Company and its Subsidiaries (the
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"Company Benefit Plans") are listed in the Company Reports, except the Company
Benefit Plans which are not material. True and complete copies of the Company
Benefit Plans have been made available to Parent. To the extent applicable, the
Company Benefit Plans comply, in all material respects, with the requirements of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
the Code, and any Company Benefit Plan intended to be qualified under Section
401(a) of the Code has been determined by the Internal Revenue Service (the
"IRS") to be so qualified and, to the Company's knowledge, nothing has occurred
that could reasonably be expected to adversely affect such qualification. To the
Company's knowledge, there are no pending or anticipated material claims against
or otherwise involving any Company Benefit Plans or relating to the employment
or potential employment of any person and no suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of the Company
Benefit Plan activities) has been brought against or with respect to any such
Company Benefit Plan or relating to the employment or potential employment of
any person, except for any of the foregoing which would not have a Company
Material Adverse Effect. All material contributions required to be made as of
the date hereof to the Company Benefit Plans have been made or provided for. No
event has occurred, and no condition exists, that could reasonably be expected
to result in liability of the Company or its Subsidiaries under Title IV of
ERISA that would have a Company Material Adverse Effect. Except as disclosed in
the Company Reports, the execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) constitute an event under any benefit plan,
policy, arrangement or agreement or any trust or loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligations to
fund benefits with respect to any employee.
5.12. Labor Matters. Neither the Company nor any of its Subsidiaries is
a party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. To the
Company's knowledge, there are no organizational efforts with respect to the
formation of a collective bargaining unit presently being made or threatened
involving employees of the Company or any of its Subsidiaries.
5.13. No Brokers. The Company has not entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of the Company, Parent or any of their respective Subsidiaries to pay
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby, except that the Company has retained
Dillon, Read & Co. Inc. as its financial advisor, the arrangements with which
have been disclosed in writing to Parent prior to the date hereof. Other than
the foregoing arrangements, the Company is not
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aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.
5.14. Opinion of Financial Advisor. The Company has received the
opinion of Dillon, Read & Co. Inc., to the effect that, as of the date hereof,
the $61.00 in cash to be received by the holders of Shares in the Offer and the
Merger, is fair, from a financial point of view, to the holders of Shares.
5.15. Environmental Matters.
(a) There are no past or present conditions or circumstances
that are reasonably likely to interfere materially with the conduct of the
business of the Company and each of its Subsidiaries in the manner now conducted
or which would interfere materially with compliance with any order of any court,
governmental authority or arbitration board or tribunal, or any law, ordinance,
governmental rule or regulation related to human health or the environment
("Environmental Law").
(b) There are no past or present conditions or circumstances at,
or arising out of, any current or former businesses, assets or properties of the
Company or any Subsidiary of the Company, including but not limited to on-site
or off-site disposal or release of any chemical substance, product or waste,
which may give rise to: (i) liabilities or obligations for any cleanup,
remediation or corrective action under any Environmental Law, or (ii) claims
arising for personal injury, property damage, or damage to natural resources
that, in the case of (i) and (ii), would have a Company Material Adverse Effect.
5.16. Required Vote of Company Stockholders. Unless the Merger is
consummated in accordance with Section 253 of the DGCL, the only vote of the
stockholders of the Company required to adopt the plan of merger contained in
this Agreement and approve the Merger is the affirmative vote of the holders of
not less than a majority of the outstanding Shares. No other vote of the
stockholders of the Company is required by law, the Certificate of Incorporation
or Bylaws of the Company as currently in effect or otherwise to adopt the plan
of merger contained in this Agreement and approve the Merger. Parent Sub will
have full voting power with respect to any Shares purchased pursuant to the
Offer.
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ARTICLE 6
6. Representations and Warranties of Parent and Parent Sub. Except as
set forth in the disclosure letter delivered to the Company concurrently with
the execution hereof (the "Parent Disclosure Letter") or as disclosed with
reasonable specificity in public filings made by Parent with the SEC prior to
the date hereof, Parent and Parent Sub, jointly and severally, represent and
warrant to the Company as of the date of this Agreement as follows:
6.1. Existence; Good Standing; Corporate Authority. Each of Parent and
Parent Sub is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization. Parent is duly licensed or qualified
to do business as a foreign corporation and is in good standing under the laws
of any state of the United States or any other jurisdiction in which the
character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where the
failure to be so qualified could not reasonably be expected to have a material
adverse effect on the ability of Parent, Parent Sub or Merger Sub to consummate
the Offer or the Merger (a "Parent Material Adverse Effect"). Parent has all
requisite corporate power and authority to own, operate and lease its properties
and carry on its business as now conducted.
6.2. Authorization, Validity and Effect of Agreements. Each of Parent
and Parent Sub has the requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents contemplated hereby. The
consummation by Parent and Parent Sub of the transactions contemplated hereby
has been duly authorized by all requisite corporate action. This Agreement
constitutes, and all agreements and documents contemplated hereby (when executed
and delivered pursuant hereto) will constitute, the valid and legally binding
obligations of Parent and Parent Sub, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
6.3. Operations of Merger Sub. Merger Sub is or will be formed solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted and will conduct its
operations only as contemplated hereby.
6.4. No Violation. Neither the execution and delivery by Parent and
Parent Sub of this Agreement, nor the consummation by Parent and Parent Sub of
the transactions contemplated hereby in accordance with the terms hereof, will:
(i) conflict with or result in a breach of any provisions of the Certificate of
Incorporation or Bylaws (or similar corporate documents) of Parent or Parent
Sub; (ii) violate, or conflict with, or
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result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination or in a right of termination or cancellation of, or
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the material properties of
Parent or its Subsidiaries under, or result in being declared void, voidable, or
without further binding effect, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust or any material license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which Parent or any of its Subsidiaries is a party, or by which
Parent or any of its Subsidiaries or any of their properties is bound or
affected, except for any of the foregoing matters which would not have a Parent
Material Adverse Effect; or (iii) other than the Regulatory Filings, require any
material consent, approval or authorization of, or declaration, filing or
registration with, any domestic governmental or regulatory authority, the
failure to obtain or make which would have a Parent Material Adverse Effect.
6.5. Financing. At the expiration of the Offer and at the Effective
Time, Parent and Parent Sub will have sufficient funds to consummate the Offer
and the Merger and to pay all fees and expenses related to the transactions
contemplated by this Agreement.
6.6. No Brokers. Parent has not entered into any contract, arrangement
or understanding with any person or firm which may result in the obligation of
the Company or Parent or any of their respective Subsidiaries to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby, except that Parent has retained
Rothschild Inc. as its financial advisor, the arrangements with which have been
disclosed in writing to the Company prior to the date hereof. Other than the
foregoing arrangements, Parent is not aware of any claim for payment of any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
ARTICLE 7
7. Covenants.
7.1. Acquisition Proposals. The Company agrees that, prior to the
Effective Time, (a) neither it nor any of its Subsidiaries shall, and each of
them shall not knowingly permit any of its officers, directors, employees,
agents and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) to,
solicit or encourage, directly or indirectly, any inquiries,
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any proposal or offer with respect to any Acquisition Transaction (as defined
below) (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal") or engage in any negotiations concerning an Acquisition
Proposal; and (b) it will immediately cease and cause to be terminated any
existing negotiations with any parties conducted heretofore with respect to any
of the foregoing; provided, that nothing contained in this Agreement shall
prevent the Company or its Board of Directors from (A) complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal; or
(B) providing information to or engaging in any negotiations or discussions with
any person or entity who has made an unsolicited bona fide Acquisition Proposal
that involves an Acquisition Transaction that the Company Board in good faith
determines, with the assistance of its financial advisor, represents a superior
transaction for the stockholders of the Company when compared to the Offer and
the Merger, if and only to the extent that the Company Board reasonably
determines, after consultation with, and taking into account the advice of,
outside legal counsel, that the failure to do so would be inconsistent with its
fiduciary obligations. The Company will promptly notify Parent and Parent Sub if
any such information is requested from it or any such negotiations or
discussions are sought to be initiated with the Company and will promptly
communicate to Parent and Parent Sub the terms of any proposal or inquiry and
the identity of the party making such proposal or inquiry which it may receive
in respect of any such transaction. Except to the extent that the Company Board
reasonably determines, after consultation with, and taking into account the
advice of, outside legal counsel, that the failure to take such action would be
inconsistent with the compliance by the Company Board with its fiduciary duties
to the stockholders of the Company, the Company agrees not to release any third
party from any confidentiality or standstill agreement to which the Company is a
party without Parent's prior written consent and to take all steps deemed
necessary or appropriate by Parent to enforce to the fullest extent possible all
such agreements.
For purposes of this Agreement, "Acquisition Transaction" shall mean
any tender offer or exchange offer, any merger, consolidation, liquidation,
dissolution, recapitalization, reorganization or other business combination,
any acquisition, sale or other disposition of all or a substantial portion of
the assets or securities of the Company or any other similar transaction
involving the Company, its securities or any of its Significant Subsidiaries
(as defined in Section 10.15) or divisions.
7.2. Conduct of Businesses. Prior to the Effective Time, except as set
forth in the Company Disclosure Letter or as contemplated by any other provision
of this Agreement, unless Parent has consented in writing thereto, the Company:
(a) shall, and shall cause its Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
(b) shall use its reasonable efforts, and shall cause each of
its Subsidiaries to use its reasonable efforts, to preserve intact its business
organizations and goodwill, keep available the services of its respective
officers and employees and maintain satisfactory relationships with those
persons having business relationships with it;
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(c) shall confer on a regular basis with Parent to report
operational matters of materiality and any proposals to engage in material
transactions;
(d) shall not amend its Certificate of Incorporation or Bylaws;
(e) shall promptly make available to Parent true and correct
copies of any report, statement or schedule filed with the SEC subsequent to the
date of this Agreement;
(f) shall not and shall not permit any of its Subsidiaries to
(i) except pursuant to the exercise of options, warrants, conversion rights and
other contractual rights existing on the date hereof and disclosed pursuant to
this Agreement, issue any shares of its capital stock, effect any stock split or
otherwise change its capitalization as it existed on the date hereof, (ii)
grant, confer or award any option, warrant, conversion right or other right not
existing on the date hereof to acquire any shares of its capital stock, other
than employee stock options, stock benefits and stock purchases under any stock
option, stock benefit or stock purchase plan existing on the date hereof,
provided that the aggregate amount of employee stock options granted pursuant to
such employee stock option plans shall not exceed the number granted during such
period in the prior year, (iii) increase any compensation or enter into or amend
any employment agreement with any of its present or future employees, officers
or directors, except for normal increases consistent with past practice and the
payment of cash bonuses to officers pursuant to and consistent with existing
plans or programs, or (iv) adopt any new employee benefit plan (including any
stock option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan in any material respect, except for changes which are less
favorable to participants in such plans;
(g) shall not (i) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its capital
stock or (ii) redeem, purchase or otherwise acquire any shares of its capital
stock or capital stock of any of its Subsidiaries, or make any commitment for
any such action;
(h) shall not, and shall not permit any of its Subsidiaries to,
sell, lease or otherwise dispose of any of its assets (including capital stock
of Subsidiaries) which are material, individually or in the aggregate, except in
the ordinary course of business;
(i) shall not, and shall not permit any of its Subsidiaries to,
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership, association or
other business
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organization division thereof or otherwise acquire or agree to acquire any
assets or securities in each case which are material, individually or in the
aggregate;
(j) shall not, and shall not permit any of its Subsidiaries to,
incur or become contingently liable with respect to any material indebtedness
for borrowed money or guarantee any such indebtedness; and
(k) except as may be required as a result of a change in law or
in generally accepted accounting principals, change any of the accounting
principles or practices used by it.
7.3. Meeting of the Company's Stockholders.
(a) Unless the Merger is consummated in accordance with Section
253 of the DGCL as contemplated by Section 7.3(b), and subject to applicable
law, the Company shall (i) prepare and file with the SEC, subject to the prior
approval of Parent (which approval shall not be unreasonably withheld), as soon
as practicable after the consummation of the Offer, a preliminary proxy or
information statement (the "Preliminary Proxy Statement") relating to the Merger
as required by the Exchange Act and the rules and regulations thereunder with
respect to the transactions contemplated hereby, (ii) obtain and furnish the
information required to be included in the Preliminary Proxy Statement, (iii)
after consultation with Parent, Parent Sub and Merger Sub, respond promptly to
any comments made by the SEC with respect to the Preliminary Proxy Statement,
(iv) cause the definitive proxy or information statement (together with all
supplements or amendments thereto the "Proxy Statement") to be mailed to the
Company's stockholders at the earliest practicable date and (v) in accordance
with applicable law, duly call, give notice of, convene and hold a special
meeting (the "Special Meeting") of its stockholders as soon as practicable
following the consummation of the Offer for the purpose of adopting the
agreement of merger (within the meaning of Section 251 of the DGCL) set forth in
this Agreement; and include in the Proxy Statement the recommendation of the
Company Board that stockholders of the Company vote in favor of the adoption of
the plan of merger set forth in this Agreement. Notwithstanding the foregoing,
the Company Board may at any time prior to the Effective Time withdraw, modify,
or change any recommendation and declaration regarding this Agreement or the
Merger, or recommend and declare advisable any other offer or proposal, if in
the opinion of such Board of Directors after consultation with, and taking into
account the advice of, outside legal counsel the failure to so withdraw, modify,
or change its recommendation and declaration would be inconsistent with its
fiduciary obligations.
(b) If Parent Sub shall acquire at least 90 percent of the
outstanding Shares, each of Parent, Parent Sub, Merger Sub and the Company shall
take all necessary and appropriate action to cause the Merger to become
effective, as soon as
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practicable in January of 1997, without a meeting of stockholders of the
Company, in accordance with Section 253 of the DGCL.
(c) The Company agrees that the Proxy Statement, and each
amendment or supplement thereto, will (i) in all material respects, comply with
the requirements of the Exchange Act and all applicable laws and (ii) at the
time of mailing thereof and at the time of the meeting of stockholders of the
Company, not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply to the extent
that any such untrue statement of a material fact or omission to state a
material fact was made by the Company in reliance upon and in conformity with
written information concerning Parent, Parent Sub and its nominees, directors
and affiliates furnished to the Company by Parent or Parent Sub specifically for
use in the Proxy Statement. Parent and Parent Sub agree that information
provided by them for inclusion in the Proxy Statement and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
respective meetings of stockholders of the Company will not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d) At the Special Meeting, if any, Parent, Parent Sub and their
affiliates will vote all Shares owned by them in favor of approval and adoption
of this Agreement and the transactions contemplated hereby.
7.4. Filings; Other Action. Subject to the terms and conditions herein
provided, the Company and Parent shall: (a) use all reasonable efforts to
cooperate with one another in (i) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several states
and foreign jurisdictions in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and (ii)
timely making all such filings and timely seeking all such consents, approvals,
permits or authorizations; and (b) use all reasonable efforts to take, or cause
to be taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement including, without limitation, the
sale of assets or modification of contracts by either party so long as such
sales of assets or modification of contracts would not have a Company Material
Adverse Effect or Parent Material Adverse Effect, as the case may be, using
reasonable efforts to lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby and using reasonable efforts to defend any
litigation seeking to enjoin, prevent or
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delay the consummation of the ransactions contemplated hereby or seeking
material damages.
7.5. Inspection of Records. From the date hereof to the Effective Time,
the Company shall allow all designated officers, attorneys, accountants and
other representatives of Parent access at all reasonable times to the records
and files, correspondence, audits and properties, as well as to all information
relating to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs, of the Company and its Subsidiaries;
provided that no investigation pursuant to this Section shall affect any
representation or warranty given by the Company hereunder, and provided further
that notwithstanding the provision of information or investigation by any party,
the Company shall not be deemed to make any representation or warranty except as
expressly set forth in this Agreement. Notwithstanding the foregoing, the
Company shall not be required to provide any information which it reasonably
believes it may not provide by reason of applicable law, rules or regulations,
which constitutes information protected by attorney/client privilege, or which
it is required to keep confidential by reason of contract or agreement with
third parties. The Company will make appropriate substitute disclosure
arrangements under circumstances in which the restrictions of the preceding
sentence apply.
7.6. Publicity. The parties will consult with each other and will
mutually agree upon any press releases or public announcements pertaining to
this Agreement, the Offer or the Merger and shall not issue any such press
releases or make any such public announcements prior to such consultation and
agreement, except as may be required by applicable law or by obligations
pursuant to any listing agreement with any national securities exchange, in
which case the party proposing to issue such press release or make such public
announcement shall use its reasonable efforts to consult in good faith with the
other party before issuing any such press releases or making any such public
announcements.
7.7. Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
7.8. Indemnification and Insurance.
(a) Parent agrees that all rights to indemnification existing in
favor of the present or former directors, officers, employees, fiduciaries and
agents (individually, an "Indemnified Party" and collectively, the "Indemnified
Parties") of the Company or any of its Subsidiaries or divisions as provided in
the Company's Certificate of Incorporation or Bylaws or pursuant to other
agreements, or the articles of incorporation, by-laws or similar documents of
any of the Company's Subsidiaries as in
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effect as of the date hereof with respect to matters prior to the Effective Time
and including, without limitation, liability arising under the Securities Act,
the Exchange Act and state corporation laws in connection with the Merger shall
survive the Merger and shall continue in full force and effect for a period of
not less than the statutes of limitations applicable to such matters, and that
payment thereof will be guaranteed by Parent. In the event of any such claim,
action, suit, proceeding or investigation (an "Action"), (i) any Indemnified
Party entitled to indemnification under this Section 7.8(a) shall notify the
Surviving Corporation in writing promptly after such Indemnified Party receives
notice of such Action, (ii) the Surviving Corporation shall be entitled to
assume the defense thereof and, after notice from the Surviving Corporation to
the Indemnified Parties that it so chooses, the Surviving Corporation shall not
be liable to the Indemnified Parties for any legal fees or expenses subsequently
incurred by any Indemnified Party in connection with the defense thereof
(provided, however, that if (x) the Surviving Corporation does not elect to
assume the defense thereof, (y) the Surviving Corporation otherwise authorizes
the Indemnified Party to retain counsel for the defense thereof or (z) the
assumption of the defense thereof by the Surviving Corporation would present
counsel selected by the Surviving Corporation with a conflict of interest or if
such counsel's representation of the Indemnified Parties would otherwise be
inappropriate under the applicable standards of professional conduct, then
Parent shall cause the Surviving Corporation to pay the reasonable fees and
expenses of counsel selected by the Indemnified Party, which counsel shall be
reasonably acceptable to Parent, in advance of the final disposition of any such
action to the full extent permitted by applicable law, upon receipt of any
undertaking required by applicable law), and (iii) the Surviving Corporation
will cooperate in the defense of any such matter; provided, however, that the
Surviving Corporation shall not be liable for any settlement effected without
its prior written consent (which consent shall not be unreasonably withheld),
and provided further, that the Surviving Corporation shall not be obligated
pursuant to this Section to pay the fees and disbursements of more than one
counsel for all Indemnified Parties in any single Action except to the extent
that, in the reasonable opinion of counsel for the Indemnified Parties, two or
more of such Indemnified Parties have conflicting interests in the outcome of
such action.
(b) Parent shall cause the Surviving Corporation to keep in
effect provisions in its Certificate of Incorporation and Bylaws providing for
exculpation of director and officer liability and indemnification of the
Indemnified Parties to the same extent as are currently contained in the
Certificate of Incorporation and Bylaws of the Company, which provisions shall
not be amended except as required by applicable law or except to make changes
permitted by law that would enlarge the Indemnified Parties' right of
indemnification.
(c) For a period of three years after the Effective Time, Parent
shall cause the Surviving Corporation to maintain officers' and directors'
liability
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insurance covering the Indemnified Parties who are currently covered, in their
capacities as officers and directors, by the Company's existing officers' and
directors' liability insurance policies on terms substantially no less
advantageous to the Indemnified Parties than such existing insurance; provided,
however, that the Surviving Corporation shall not be required in order to
maintain or procure such coverage to pay an annual premium in excess of two
times the current annual premium paid by the Company for its existing coverage
(the "Cap"); and provided further, that if equivalent coverage cannot be
obtained, or can be obtained only by paying an annual premium in excess of the
Cap, the Surviving Corporation shall only be required to obtain as much coverage
as can be obtained by paying an annual premium equal to the Cap.
(d) The Surviving Corporation shall pay all reasonable expenses,
including attorneys' fees, that may be incurred by any Indemnified Parties in
enforcing the indemnity and other obligations provided for in this Section 7.8.
(e) The rights of each Indemnified Party hereunder shall be in
addition to any other rights such Indemnified Party may have under the
Certificate of Incorporation or Bylaws of the Company, under the DGCL or
otherwise. The provisions of this Section shall survive the consummation of the
Merger and expressly are intended to benefit each of the Indemnified Parties.
(f) In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity in such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in either such case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations set forth in this Section 7.8.
7.9. Notification of Certain Matters. Each party shall give prompt
notice to the other parties of (i) the occurrence of failure to occur of any
event, which occurrence or failure would be likely to cause any representation
or warranty on its part contained in this Agreement to be untrue or inaccurate
at any time from the date hereof to the Effective Time, and (ii) any material
failure of the party, or any officer, director, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder.
7.10. Governance. [Reserved]
7.11. Corporate Headquarters. The corporate headquarters of the Company
shall be the corporate headquarters of the Surviving Corporation for a period of
at least two years following the Effective Date.
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7.12. Certain Benefits
(a) From and after the Effective Time, subject to applicable
law, and except as contemplated hereby with respect to the Company Stock Option
Plans, Parent and its Subsidiaries will honor in accordance with their terms,
the Executive Retention Agreements (as described in the Company Reports) between
the Company or its Subsidiaries and certain employees thereof, and all the
Company Benefit Plans; provided, however, that nothing herein shall preclude any
change effected on a prospective basis in any the Company Benefit Plan that is
permitted pursuant to the following sentence of this Section 7.12. For a period
of not less than one year following the Effective Time, subject to applicable
law, Parent and its Subsidiaries will provide benefits or cash compensation in
lieu thereof (with the exception of stock based plans) to the employees of the
Company and its Subsidiaries which will, in the aggregate, be no less favorable
than those provided by the Company and its Subsidiaries to their employees
immediately prior to the Effective Time. With respect to the benefit plans of
Parent and the Surviving Corporation ("Parent Benefit Plans"), Parent and the
Surviving Corporation shall grant all the Company employees from and after the
Effective Time credit for all service with the Company and its affiliates and
predecessors prior to the Effective Time for all purposes for which such service
was recognized by the Company. To the extent Parent Benefit Plans provide
medical or dental welfare benefits after the Effective Time, such plans shall
waive any pre-existing conditions and shall provide that any expenses incurred
on or before the Effective Time shall be taken into account under Parent Benefit
Plans for purposes of satisfying applicable deductible, coinsurance and maximum
out-of-pocket provisions.
(b) Parent agrees to employ or cause to be employed at the
Effective Time all employees of the Company and its Subsidiaries who are
employed on the Closing Date on terms consistent with the Company's current
employment practices and at comparable levels of compensation and positions;
provided, that nothing in this sentence shall limit or restrict Parent from
causing or permitting the employment to be terminated, or such terms and
conditions to be changed, following the Effective Time. For a period of three
years following the Effective Time, any reductions in workforce in respect of
employees of Parent and the Surviving Corporation shall be made on a fair and
equitable basis, without regard to whether employment was with Parent or the
Company or their respective Subsidiaries, and any employee whose employment is
terminated or job is eliminated by Parent or any of its Subsidiaries during such
period shall be entitled to participate on a fair and equitable basis in the job
opportunity and employment placement programs offered by Parent or any of its
Subsidiaries.
(c) For purposes of this Section 7.12, the term "employees"
shall mean all current employees of the Company and its Subsidiaries (including
those on lay-off, disability or leave of absence, paid or unpaid).
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7.13. Rights Agreement. The Company shall maintain in effect
all actions previously taken, and take any additional actions (including, if
necessary, amending or terminating the Rights Agreement) necessary, to (i)
render the Rights Agreement inapplicable with respect to the Offer, the Merger,
this Agreement and the other transactions contemplated hereby and (ii) ensure
that (x) none of Parent, Parent Sub or Merger Sub or any of their Affiliates or
Associates (each as defined in the Rights Agreement) is or will be considered to
be an Acquiring Person (as defined in the Rights Agreement) and (y) none of a
Distribution Date, Triggering Event or Shares Acquisition Date (each as defined
in the Rights Agreement) occurs or shall occur by reason of the announcement or
consummation of the Offer, the Merger or the execution or delivery of this
Agreement or the consummation of any of the other transactions contemplated
hereby.
ARTICLE 8
8. Conditions.
8.1. Conditions to Each Party's Obligation to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) If such approval of the Merger is required by applicable
law, this Agreement and the transactions contemplated hereby shall have been
approved by the holders of the issued and outstanding Shares in the manner
required by the Company's Certificate of Incorporation and By-laws and by
applicable law; provided that Parent and Parent Sub shall vote all of their
Shares in favor of the Merger.
(b) The waiting period applicable to the consummation of the
Merger under the HSR Act or any other law (domestic or foreign) applicable to
the Merger shall have expired or been terminated and all consents,
authorizations, orders and approvals of (or filings or registrations with) any
governmental commission, board or other regulatory body which are set forth on
Exhibit 8.1 hereto, shall have been obtained or made.
(c) Neither of the parties hereto shall be subject to any
statute, rule, regulation, executive order, judgment, decree or injunction
enacted, entered, issued, promulgated or enforced by any court of competent
jurisdiction or governmental authority which prohibits or restricts the
consummation of the transactions contemplated by this Agreement or makes such
consummation illegal; provided, however, that prior to invoking this condition
each party agrees to use its reasonable efforts to have any such decree, order
or injunction lifted or vacated.
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(d) Parent Sub shall have purchased Shares pursuant to the
Offer.
ARTICLE 9
9. Termination.
9.1. Termination by Mutual Consent. This Agreement may be
terminated and the Offer and the Merger may be abandoned at any time prior to
the Effective Time, before or after the approval of this Agreement by the
holders of Shares referred to in Section 8.1(a), by the mutual consent of Parent
and the Company.
9.2. Termination by Either Parent or the Company. This
Agreement may be terminated and the Offer and the Merger may be abandoned at any
time prior to the Effective Time, before or after the approval of this Agreement
by the holders of Shares referred to in Section 8.1(a), by action of the Board
of Directors of Parent or of the Company if (a) the Merger shall not have been
consummated by June 30, 1997, or (b) any court of competent jurisdiction or any
other governmental, regulatory or administrative agency, body or commission
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable; provided, however, that the party
seeking to terminate this Agreement pursuant to this clause (b) shall have used
all reasonable efforts to remove such injunction, order or decree; provided,
further, the right to terminate this Agreement pursuant to clause (a) above,
shall not be available to any party whose failure to perform or observe in any
material respect any of its obligations under this Agreement in any manner shall
have been the cause of, or resulted in, the failure of the Merger to occur on or
before such date.
9.3. Termination by the Company. This Agreement may be
terminated and the Offer and the Merger may be abandoned at any time prior to
the Effective Time, before or after the adoption and approval by the holders of
Shares referred to in Section 8.1(a), by action of the Company Board if (a) the
Company Board reasonably determines, after consultation with, and taking into
account the advice of, outside legal counsel, that proceeding with the
transactions contemplated hereby would be inconsistent with its fiduciary
obligations by reason of an Acquisition Proposal for the Company, or (b) Parent
or Parent Sub shall have terminated or withdrawn the Offer or amended the Offer
in any manner not expressly permitted by this Agreement, or (c) there has been a
breach by Parent or Parent Sub of any representation or warranty contained in
this Agreement which breach (i) is not curable, or, if curable, is not cured
within 30 days after written notice of said breach is given by the Company to
Parent and (ii) would have a Parent Material Adverse Effect, or (d) there has
been a material breach of any of the covenants or
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agreements set forth in the Agreement on the part of Parent or Parent Sub, which
breach is not curable or, if curable, is not cured within 30 days after written
notice of such breach is given by the Company to Parent; provided, however, that
the right to terminate this Agreement pursuant to Section 9.3(c) or (d) shall
not be available to the Company if it, at such time, is in material breach of
any representation, warranty, covenant or agreement set forth in this Agreement.
9.4. Termination by Parent. Until any Shares have been
purchased pursuant to the Offer, this Agreement may be terminated and the Offer
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval by the holders of Shares referred to in Section 8.1(a), by
action of the Board of Directors of Parent if (a) there has been a breach by the
Company of any representation or warranty contained in this Agreement which
breach (i) is not curable, or, if curable, is not cured within 30 days after
written notice of said breach is given by Parent to the Company and (ii) would
have a Company Material Adverse Effect, or (b) there has been a material breach
of any of the covenants or agreements set forth in the Agreement on the part of
the Company, which breach is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by Parent to the Company, or
(c) the Company Board or the Special Committee shall have withdrawn or modified
in a manner adverse to Parent or Parent Sub its authorization, approval or
recommendation of the transactions contemplated by this Agreement or recommended
another Acquisition Proposal for the Company or shall have resolved to do any of
the foregoing or (d) if the Company or any of its Subsidiaries (or the Company
Board or any committee thereof) shall have approved, recommended authorized,
proposed, publicly announced its intention to enter into an Acquisition
Transaction (other than the Offer and the Merger) or filed a Schedule 14D-9 not
opposing any tender offer made by a party other than Parent or Parent Sub or any
of their affiliates; provided, however, that the right to terminate this
Agreement pursuant to Section 9.4(a) or (b) shall not be available to Parent if
it, at such time, is in material breach of any representation, warranty,
covenant or agreement set forth in this Agreement.
9.5. Effect of Termination and Abandonment.
(a) In the event that this Agreement is terminated (i) pursuant
to Section 9.3(a) or Section 9.4(c) or 9.4(d) or (ii) pursuant to any provision
of Section 9.1 or 9.2(a) or any other provision of Section 9.3(b) or 9.4
(regardless of whether such termination is by Parent or the Company) and (in the
case of clause (ii) only) either (y) an Acquisition Proposal shall have been
received by the Company after the date hereof and prior to such termination or
(z) prior to such termination the Offer shall have expired without the purchase
of any Shares by Parent Sub pursuant thereto and within twelve months from the
date of such expiration an Acquisition Event (as such term is defined below)
other than with Parent or Parent Sub or any of their affiliates has occurred,
then
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the Company shall pay to Parent a fee of $40,000,000.00 (the "Termination Fee").
The Termination Fee shall be payable in immediately available funds at the time
of termination if such fee becomes payable pursuant to clause (i) or clause
(ii)(y) above, or on the second business day following the occurrence of the
Acquisition Event if such fee becomes payable in the circumstances described in
clause (ii)(z) above.
As used herein, "Acquisition Event" shall mean the consummation
of any (i) Acquisition Transaction or (ii) series of transactions that results
in any person, entity or "group" (other than Parent or Parent Sub or any of
their affiliates) acquiring more than 50% of the outstanding Shares or assets of
the Company (through any open market purchases, merger, consolidation,
recapitalization reorganization or other business combination).
(b) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article 9, all obligations of the
parties hereto shall terminate, except the obligations of the parties pursuant
to this Section 9.5 and Section 7.7 and except for the provisions of Sections
10.3, 10.4, 10.6, 10.8, 10.9, 10.12, 10.13 and 10.14. Moreover, in the event of
termination of this Agreement pursuant to Section 9.2(a), 9.3 or 9.4, nothing
herein shall prejudice the ability of the non-breaching party from seeking
damages from any wilful other party for any breach of this Agreement, including,
without limitation, attorneys' fees and the right to pursue any remedy at law or
in equity. In the event Parent accepts any fee pursuant to Section 9.5(a) it
shall not (i) assert or pursue in any manner, directly or indirectly, any claim
or cause of action based in whole or in part upon alleged tortious or other
interference with rights under this Agreement against any entity or person
submitting an Acquisition Proposal with respect to the Company or (ii) assert or
pursue in any manner, directly or indirectly, any claim or cause of action
against the Company or any of its officers or directors based in whole or in
part upon its or their receipt, consideration, recommendation, or approval of an
Acquisition Proposal or the exercise by the Company of its right of termination
under Section 9.3(a).
9.6. Extension; Waiver. At any time prior to the Effective
Time, each party may by action taken by its Board of Directors, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
29
<PAGE> 31
ARTICLE 10
10. General Provisions.
10.1. Nonsurvival of Representations, Warranties and Agreements.
All representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger,
provided, however, that the agreements contained in Article 4 and in Sections
7.7, 7.8, 7.11, and 7.12 and this Article 10 shall survive the Merger.
10.2. Notices. Any notice required to be given hereunder shall
be sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
If to Parent or Parent Sub: If to the Company:
Henkel KGaA Robert W. Fiondella
Henkelstrasse 67 Chairman of the Special Committee
D-40191 Dusseldorf of the Board of Directors of
Germany Loctite Corporation
Attention: Karl Gruter Hartford Square North
Ten Columbus Boulevard
Hartford, Connecticut 06106
Facsimile: 49-211-798-6660 Facsimile: (860) 403-5543
With a copy to: With a copy to:
HC Investments, Inc. Arthur Fleischer, Jr., Esq.
2200 Renaissance Boulevard, Suite 200 Fried, Frank, Harris,
Gulph Mills, PA 19406 Shriver & Jacobson
Attention: Ernest G. Szoke One New York Plaza
Facsimile: (610)-270-8219 New York, NY 10004
Facsimile: (212) 859-4000
and to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: William A. Groll, Esq.
Facsimile: (212)-225-3999
30
<PAGE> 32
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
10.3. Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Article 4 and Section 7.8 (collectively, the "Third Party Provisions"),
nothing in this Agreement, expressed or implied, is intended to confer on any
person other than the parties hereto or their respective heirs, successors,
executors, administrators and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement. The Third Party Provisions may
be enforced by the beneficiaries thereof.
10.4. Entire Agreement. This Agreement, the Exhibits, the
Company Disclosure Letter, the Parent Disclosure Letter, and any documents
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
10.5. Amendment. This Agreement may be amended by the parties
hereto, by action taken by their Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the holders
of Shares, but after any such approval, no amendment shall be made which by law
requires the further approval of holders of Shares without obtaining such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
10.6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
its rules of conflict of laws. Each of the Company and Parent hereby irrevocably
and unconditionally consents to submit to the exclusive jurisdiction of the
courts of the State of Delaware and of the United States of America located in
the State of Delaware (the "Delaware Courts") 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),
waives any objection to the laying of venue of any such
31
<PAGE> 33
litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in an
inconvenient forum.
10.7. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto.
10.8. Headings. Headings of the Articles and Sections of this
Agreement are for the convenience of the parties only, and shall be given no
substantive or interpretative effect whatsoever.
10.9. Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa. In this agreement, the phrase (i) "to the knowledge of" and
similar phrases relating to knowledge of the Company or Parent, as the case may
be, shall mean the actual knowledge of its executive officers and (ii)
"transactions contemplated by this Agreement" and similar phrases shall include
the Offer and the Merger.
10.10. Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any other
provision hereunder.
10.11. Incorporation of Exhibits. The Company Disclosure
Letter, the Parent Disclosure Letter, Annex A and all Exhibits attached hereto
and referred to herein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
10.12. Severability. Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
32
<PAGE> 34
10.13. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Delaware Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
10.14. Obligation of Parent. Whenever this Agreement requires
Parent Sub to take any action, such requirement shall be deemed to include an
undertaking on the part of Parent to cause Parent Sub to take such action and a
guarantee of the performance thereof.
10.15. Subsidiaries. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any corporation or other
organization, whether incorporated or unincorporated, of which such party
directly or indirectly owns or controls at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions with respect to
such corporation or other organization, or any organization of which such party
is a general partner. When a reference is made in this Agreement to Significant
Subsidiaries, the words "Significant Subsidiaries" shall refer to Subsidiaries
(as defined above) which constitute "significant subsidiaries" under Rule 405
promulgated by the SEC under the Securities Act.
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
HENKEL KGaA
By: /s/ Hans-Dietrich Winkhaus
_____________________________
Name: Hans-Dietrich Winkhaus
Title: CEO
By: /s/ Karl Gruter
_____________________________
Name: Karl Gruter
Title: General Counsel
33
<PAGE> 35
HC INVESTMENTS, INC.
By: /s/ Karl Gruter
___________________________
Name: Karl Gruter
Title: Chairman of the Board
LOCTITE CORPORATION
By: /s/ David Freeman
___________________________
Name: David Freeman
Title: CEO
34
<PAGE> 36
ANNEX A
CONDITIONS TO THE OFFER
Capitalized terms used in this Annex A and not otherwise defined
herein shall have the meanings assigned to them in the Agreement to which it is
attached (the "Merger Agreement").
Notwithstanding any other term or provision of the Offer, Parent Sub
will not be required to accept for payment, purchase or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Parent Sub's obligation to pay for or return tendered
Shares promptly after termination or withdrawal of the Offer), pay for and may
delay the acceptance for payment of or, subject to the restriction referred to
above, the payment for any tendered Shares and may terminate the Offer as to any
Shares not then paid for, if (1) there are not 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 Parent Sub, represent a
majority of all outstanding Shares on a fully diluted basis on the date of
purchase (the "Minimum Condition"), or (2) at any time on or after the date of
the Offer to Purchase, and prior to the time of acceptance for payment of or
payment for any such Shares, any of the following events or conditions exist:
(a) there shall be instituted or pending any action,
proceeding, application or counterclaim by any government or
governmental, regulatory or administrative authority, agency or
instrumentality, domestic, foreign or supranational (each, a
"Governmental Entity"), or by any other person, domestic or foreign,
before any court or Governmental Entity, (i)(A) which is reasonably
likely to make illegal, delay or otherwise directly or indirectly
restrain or prohibit, or which is reasonably likely to impose price or
other requirements, in addition to those required by the Federal
securities laws (as in effect on the date of the Offer to Purchase), in
connection with, the making of the Offer, the acceptance for payment
of, or payment for, some of or all the Shares by Parent Sub, Parent or
any other affiliate of Parent, or the consummation by Parent Sub or any
other affiliate of Parent of the Merger or other similar business
combination with the Company or (B) which is reasonably likely to
result in material damages, (ii) which is reasonably likely to impose
limitations on the ability of Parent Sub, Parent or any other affiliate
of Parent effectively to exercise full rights of ownership of the
Shares, including, without limitation, the right to vote any Shares
acquired or owned by Parent Sub, Parent or any other affiliate of
Parent on all matters properly presented to the Company's stockholders,
(iii) which is reasonably likely to require divestiture by Parent Sub,
Parent or any other affiliate of Parent of any Shares, (iv) which is
reasonably likely to result in any material diminution in the benefits
A-1
<PAGE> 37
expected to be derived by Parent Sub, Parent or any other affiliate of
Parent as a result of the transactions contemplated by the Offer, the
Merger or other similar business combination, or (v) materially
adversely affecting the business, assets, liabilities, financial
condition or results of operations of the Company and its Subsidiaries
taken as a whole;
(b) there shall be any action taken or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
proposed, enacted, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent Sub, Parent or any other affiliate of Parent
or the Company or any of its Subsidiaries or (ii) the Offer, the
Merger, or other similar business combination by Parent Sub or any
affiliate of Parent with the Company, by any government, legislative
body or court, domestic, foreign or supranational, or Governmental
Entity, that is reasonably likely, directly or indirectly, to result in
any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above;
(c) any change shall have occurred or been threatened (or any
condition, event or development shall have occurred or been threatened
involving a prospective change) in the business, assets, liabilities,
financial condition or results of operations of the Company and its
Subsidiaries taken as a whole that is reasonably likely to be
materially adverse to the Company and its Subsidiaries taken as a
whole;
(d) there shall have occurred or been threatened (i) any
general suspension of trading in, or limitation on prices for,
securities on any national securities exchange or in the
over-the-counter market in the United States, (ii) a decline of at
least 15% in either the Dow Jones Average of Industrial Stocks or the
Standard & Poor's 500 Index from that existing at the close of business
on December 5, 1996, (iii) any change in the general political, market,
economic or financial conditions in the United States or abroad that
is reasonably likely to have a material adverse effect upon the
business, assets, liabilities, financial condition or results of
operations of the Company and its Subsidiaries taken as a whole, (iv)
any material change in currency exchange rates that is reasonably
likely to have a material adverse effect on the business, assets,
liabilities, financial condition or results of operations of the
Company and its Subsidiaries taken as a whole, (v) a declaration of a
banking moratorium or any suspension of payments in respect of banks in
the United States, (vi) any limitation (whether or not mandatory) by
any government, domestic, foreign or supranational, or Governmental
Entity on, or other event that is reasonably likely to have a material
adverse affect on, the extension of credit by banks or other lending
institutions, which is reasonably likely to have a material adverse
effect on the business, assets, liabilities, financial
A-2
<PAGE> 38
condition or results of operations of the Company and its Subsidiaries
taken as a whole, (vii) a commencement of a war involving the United
States or (viii) in the case of any of the foregoing existing at the
time of the commencement of the Offer, a material acceleration or
worsening thereof;
(e) it shall have been publicly disclosed or Parent Sub shall
have learned that (i) any person or "group" (as defined in Section
13(d)(3) of the Exchange Act) shall have acquired or proposed to
acquire more than 50% of any class or series of capital stock of the
Company (including the Shares) or shall have been granted any option or
right to acquire more than 50% of any class or series of capital stock
of the Company (including the Shares) or (ii) any person or group shall
have entered into a definitive agreement or an agreement in principle
with respect to a tender offer or exchange offer or a merger, share
exchange, consolidation or other business combination or a sale of
assets (other than in the ordinary course of business) with the Company
or any of its Subsidiaries;
(f) Parent Sub, Parent or another affiliate of Parent and the
Company shall have entered into an agreement that the Offer be
terminated or amended;
(g) the Company shall have breached or failed to comply in any
material respect with any of its obligations under the Merger Agreement
or any representations and warranties of the Company contained therein
shall have been inaccurate when made or at any time thereafter in any
material respect that is reasonably likely to have an adverse effect on
the business, assets, liabilities, financial condition or results of
operations of the Company and its Subsidiaries taken as a whole; or
(h) the Company Board shall have modified or amended in any
manner adverse to Parent Sub or shall have withdrawn its
recommendation of the Offer or the Merger
which, regardless of the circumstances (including any action or inaction by
Parent Sub or any affiliate of Parent Sub) giving rise to any such condition,
makes it inadvisable, in the reasonable good faith judgment of Parent Sub, to
proceed with the Offer and/or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent Sub and
may be asserted by Parent Sub regardless of the circumstances giving rise to any
such condition or may be waived by Parent Sub in whole or in part at any time
and from time to time in its sole discretion. The failure by Parent Sub at any
time to exercise any of the foregoing rights will not be deemed a waiver of any
such right, and the waiver of any such right
A-3
<PAGE> 39
with respect to particular facts and circumstances will not be deemed a waiver
with respect to any other facts and circumstances and each such right will be
deemed an ongoing right that may be asserted at any time and from time to time.
A-4
<PAGE> 1
LOCTITE LETTERHEAD
December 5, 1996
Dear Stockholder:
I am pleased to inform you that on December 5, 1996, Loctite Corporation
(the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Henkel KGaA and HC Investments, Inc., an indirect wholly owned
subsidiary of Henkel KGaA (collectively, the "Henkel Group"), which provides for
stockholders of the Company to receive $61.00 in cash per share of Common Stock
of the Company. Under the terms of the Merger Agreement, the Henkel Group will
amend its outstanding tender offer (as so amended, the "Amended Offer") to
increase the consideration offered to $61.00 per share, net to the seller in
cash, change the expiration date of the offer to December 20, 1996 and modify
certain conditions to consummation of the offer. The Henkel Group has agreed
that the second-step merger to acquire any shares not tendered in the Amended
Offer (the "Merger") will be consummated as soon as practicable in 1997.
The Special Committee of the Board of Directors unanimously recommended
approval of the Merger Agreement to the Board, after determining that the
Amended Offer and the Merger constitute the best proposal submitted to acquire
the Company, based on certainty of value and the likelihood of consummation.
Dillon, Read & Co., Inc., has given to the Board of Directors its opinion that,
as of today, the consideration being offered to stockholders of the Company
(other than the Henkel Group and its affiliates) pursuant to the Amended Offer
and the Merger is fair to such stockholders from a financial point of view.
THE BOARD OF DIRECTORS UNANIMOUSLY (WITH THE HENKEL GROUP'S DESIGNEES
ABSTAINING) RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE AMENDED OFFER
AND TENDER THEIR SHARES PURSUANT TO THE AMENDED OFFER.
The attached amendment to the Company's Schedule 14D-9 describes our
decision to recommend the Amended Offer and the Merger and contains other
important information. Also enclosed is the supplement to the Henkel Group's
Offer to Purchase, together with related materials relating to the Amended
Offer. We urge you to read all these materials carefully.
The Special Committee and I greatly appreciate your continued support
during this process. We trust you will agree that the Amended Offer and the
Merger provide a favorable outcome for the Company's stockholders.
Very truly yours,
FIONDELLA SIGNATURE
Robert W. Fiondella
Chairman of the Special Committee
of the Board of Directors
<PAGE> 1
CONTACTS: THOMAS DAVIES
TODD FOGARTY
KEKST & COMPANY
212-593-2655
FOR IMMEDIATE RELEASE
HENKEL AND LOCTITE TO MERGE
AGREEMENT CALLS FOR $61.00 PER SHARE CASH
DUSSELDORF, GERMANY, December 5, 1996 -- HENKEL KGaA and Loctite
Corporation announced today that they had signed a definitive merger agreement
in which Henkel agreed to increase its offer price to $61.00 per share and under
which Loctite will merge with a newly formed subsidiary of Henkel. In addition,
Henkel has dropped all conditions to its offer related to potential divestitures
of businesses under any antitrust laws and has agreed to a revised set of
conditions to its offer that eliminate certain other conditions contained in
Henkel's initial offer. With Loctite's consent, Henkel will shorten the period
its tender offer is to remain open to provide for the expiration of the offer on
December 20, 1996. Henkel intends to disseminate a Supplement to its Offer to
Purchase, dated November 6, 1996, as soon as possible. Henkel also agreed that
the second-step merger to acquire any Shares not tendered will be effective as
soon as practicable in 1997.
At a meeting held earlier today, the Loctite Board of Directors unanimously
(with the Henkel-Nominated Directors abstaining) approved the agreement. The
Loctite Board determined that the offer is in the shareholders' best interests
and will recommend that shareholders tender their shares.
Dieter Winkhaus, President and Chief Executive Officer of Henkel, said
"Henkel is delighted to have reached an agreement with Loctite. We have always
placed great emphasis on the cooperative nature of our relationship with Loctite
and we believe that this combination will result in a company that will have the
competitive, financial and managerial strengths to reach our goal of being a
leader in each of our key market segments. We see a continuing role of
importance for the management and employees of Loctite in the ongoing, combined
business. Moreover, we expect the Hartford office to remain an important center
for the operation of our combined adhesives business going forward."
Robert W. Fiondella, Chairman of the Special Committee of Loctite's Board
of Directors, said "Henkel's increased offer represents excellent value for our
shareholders. The proposal comes at the end of a process designed to produce the
best transaction."
Dr. Winkhaus added "Henkel is also satisfied with the process and is
pleased that it has come to an end. Henkel does not anticipate that any other
bidder will attempt to interfere with the agreed-upon transaction."
The agreement calls for Henkel to receive a termination fee of $40 million
in the event the merger agreement is terminated under certain circumstances.
HC Investments, Inc. is hereby amending its tender offer to increase the
price to $61.00 per share from the previous offer of $57.75 and to shorten the
period the tender offer is to remain open to provide for the expiration of the
offer at midnight, New York City time, on Friday, December 20, 1996.
###
<PAGE> 1
[Dillon Read Letterhead]
December 5, 1996
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 issued pursuant to the Rights Agreement dated as of
April 14, 1994, between the Company and The First National Bank of Boston, as
Rights Agent, 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 and in
the related Letter of Transmittal (collectively, the "Initial Offer"). The
Company, Henkel and HC Investments intend to enter into an Agreement and Plan of
Merger, dated as of December 5, 1996 (the "Merger Agreement"), which provides,
among other things (i) that the Initial Offer shall be amended (the Initial
Offer as amended, the "Offer") (a) to provide for a purchase price per Share of
$61.00 and (b) to provide that the Offer shall be subject only to those
conditions specified in the Merger Agreement; and (ii) following the purchase by
HC Investments of Shares pursuant to the Offer, HC Investments shall be merged
(the "Merger") with and into the Company, subject to the terms and conditions of
the Merger Agreement, and each outstanding Share (other than shares held in the
Company's treasury or owned by Henkel, HC Investments or any other wholly owned
subsidiary of Henkel or the Company, and Shares held by dissenting stockholders)
shall be converted into the right to receive $61.00 or such greater amount which
may be paid pursuant to the Offer.
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of Shares other than Henkel and its affiliates of the
consideration being offered to such holders pursuant to the Offer and the
Merger.
In arriving at our opinion, we have, among other things: (i) reviewed the
form of Merger Agreement, (ii) reviewed certain publicly available business and
historical financial information relating to the Company, (iii) reviewed the
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 projections
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) contacted third parties to solicit
indications of interest in a possible acquisition of the Company and held
discussions with certain of these parties prior to the date hereof and (ix)
conducted such other financial studies, analyses and investigations, and
considered such other information, as we deemed necessary or appropriate.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied
upon it being complete and accurate in all material respects. We have not made
any 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 projections provided to or otherwise
reviewed by or discussed with us, we have assumed that such projections
<PAGE> 2
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 Offer and the Merger 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 and the Board
of Directors in their evaluation of the Offer and the Merger, and our opinion is
not intended to be and does not constitute a recommendation as to whether or not
any stockholder 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 relating 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 and the Merger is fair, from a
financial point of view, to such holders.
Very truly yours,
DILLON, READ & CO. INC.
