<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 30, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
MACDERMID, INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
CONNECTICUT
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)
06-0435750
(I.R.S. EMPLOYER IDENTIFICATION NO.)
2890
(PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
245 FREIGHT STREET
WATERBURY, CT 06702-0671
(203) 575-5700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
<TABLE>
<S> <C>
DANIEL H. LEEVER COPIES TO:
CHIEF EXECUTIVE OFFICER MICHAEL E. MOONEY, ESQ.
MACDERMID, INCORPORATED MICHAEL K. KREBS, ESQ.
245 FREIGHT STREET NUTTER, MCCLENNEN & FISH, LLP
WATERBURY, CT 06702-0671 ONE INTERNATIONAL PLACE
(203) 575-5700 BOSTON, MA 02110-2699
(617) 439-2000
</TABLE>
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are being offered pursuant
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, no par value.................. 7,827,000 $13,862,000 $3,853.64
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In accordance with Rule 457(f)(2), the underlying value of the transaction
has been computed using the aggregate book value of the equity capital of
the company to be acquired, all of which will be exchanged for shares of the
registrant. Such book value ($13,862,000) was calculated in accordance with
generally accepted accounting principles as of June 30, 1999, the latest
practicable date prior to filing this registration statement.
(2) Fee previously paid pursuant to Exchange Act Rules 14a-6(i)(4) and 0-11 in
connection with Schedule 14A filed on March 22, 1999 and an amendment to the
Schedule 14A filed on August 18, 1999: $3,344.62 and $509.02.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
MACDERMID, INCORPORATED
CROSS REFERENCE SHEET
ITEM NUMBER IN FORM S-4 LOCATION IN JOINT PROXY STATEMENT
PROSPECTUS
A. INFORMATION ABOUT
THE TRANSACTION
1. Forepart of Registration Facing Page of the Registration
Statement and Outside Front Statement; Outside Front Cover Page of
Cover Page of Prospectus Joint Proxy Statement/Prospectus
2. Inside Front and Outside Back Table of Contents; Selected Historical
Cover Pages of Prospectus and Pro Forma Comparative Per Share Data;
Where You Can Find More Information
3. Risk Factors, Ratio of Outside Front Cover Page of Prospectus;
Earnings to Fixed Charges and Summary; Interests of Related Persons in
Other Information the Merger; MacDermid Selected Financial
Data; PTI Selected Financial Data; The
Merger; Merger Transaction; The
Companies; Exchange Ratio Assumptions
4. Terms of the Transaction Outside Front Cover Page of Prospectus;
Summary; The Merger; Merger Transaction;
Merger Agreement; MacDermid Special
Meeting; PTI Special Meeting; Legal
Matters
5. Pro Forma Financial Unaudited Pro Forma Combined Condensed
Information Financial Statements; Notes to Unaudited
Pro Forma Condensed Combined Financial
Statements; Selected Historical and Pro
Forma Comparative Per Share Data
6. Material Contacts with the Summary; The Merger; Merger Transaction;
Company Being Acquired Merger Agreement
7. Additional Information *
Required for Reoffering by
Persons and Parties Deemed
to be Underwriters
8. Interests of Named Experts *
and Counsel
9. Disclosure of Commission *
Position on Indemnification for
Securities Act Liabilities
B. INFORMATION ABOUT
THE REGISTRANT
10. Information with Respect to Summary; the Merger; Merger Transaction;
S-3 Registrants The Companies; Where You Can Find More
Information
<PAGE> 3
11. Incorporation of Certain Description of MacDermid Capital Stock;
Information by Reference Where You Can Find More Information
12. Information with Respect to *
S-2 and S-3 Registrants
13. Incorporation of Certain *
Information by Reference
14. Information with Respect to *
Registrants Other Than S-3 or
S-2 Registrants
C. INFORMATION ABOUT
THE COMPANY BEING
ACQUIRED
15. Information with Respect to *
S-3 Companies
16. Information with Respect to *
S-2 or S-3 Companies
17. Information with Respect to Summary; The Merger; Merger Transaction;
Companies Other Than S-2 or The Companies; Where You Can Find More
S-3 Companies Information
D. VOTING AND
MANAGEMENT
INFORMATION
18. Information if Proxies, Consents Outside Front Cover Page of Joint Proxy
or Authorizations are to be Statement/Prospectus; Summary; Interests
Solicited of Related Persons in the Merger; Merger
Agreement; MacDermid Special Meeting; PTI
Special Meeting; Legal Matters; Where You
Can Find More Information
19. Information if Proxies, Consents *
or Authorizations are not to be
Solicited or in an Exchange
Offer
- -------------------------
* Omitted because the Item is inapplicable or the answer is negative.
<PAGE> 4
JOINT PROXY STATEMENT
FOR
SPECIAL MEETINGS OF SHAREHOLDERS
AND
PROSPECTUS
MACDERMID INC. LOGO
POLYFIBRON TECH. LOGO
To the Shareholders of MacDermid and PTI:
The Boards of Directors of MacDermid, Incorporated and PTI, Inc. have
approved a merger agreement which provides for MacDermid's acquisition of PTI.
If the merger is completed, MacDermid will issue shares of its common stock
to the holders of PTI securities in exchange for all of the issued and
outstanding securities of PTI. The number of MacDermid shares issued in the
merger will range from a minimum of 7,573,000 to a maximum of 7,827,000 shares.
MacDermid common stock is traded on the NYSE under the trading symbol "MRD."
We cannot complete the merger unless MacDermid shareholders and holders of
PTI Class A common stock approve it. Please take the time to vote on the
proposal to approve the merger agreement by completing and mailing the enclosed
proxy card to us.
HOLDERS OF PTI COMMON STOCK WILL NOT KNOW, AT THE TIME THEY VOTE, THE
NUMBER OR VALUE OF THE MACDERMID SHARES THEY WILL RECEIVE FOR EACH SHARE OF PTI
COMMON STOCK. PTI SHAREHOLDERS MAY MAKE INQUIRIES AS TO THE ESTIMATED EXCHANGE
RATIO OF MACDERMID SHARES FOR SHARES OF PTI COMMON STOCK ON ANY GIVEN DATE PRIOR
TO THE PTI SPECIAL MEETING BY CONTACTING THOMAS C. WEAVER, CORPORATE SECRETARY
OF PTI, INC., AT (978) 439-2110.
The dates, times and places of the special meetings are:
FOR MACDERMID SHAREHOLDERS:
Thursday, September 30, 1999
10:00 A.M. EDT
Leever Building
245 Freight Street
Waterbury, Connecticut 06702-0671
DANIEL H. LEEVER
Chief Executive Officer
MacDermid, Incorporated
FOR PTI SHAREHOLDERS:
Thursday, September 30, 1999
9:00 A.M. EDT
900 Middlesex Turnpike
Billerica, Massachusetts 01821-3946
DAVID R. BECKERMAN
President and Chief Executive Officer
PTI, Inc.
Joint Proxy Statement -- Prospectus dated August 30, 1999, and first mailed
to shareholders on or about September 1, 1999.
SHAREHOLDERS ARE URGED TO READ THE DETAILED INFORMATION ABOUT THE MERGER
CONTAINED IN THIS JOINT PROXY STATEMENT -- PROSPECTUS INCLUDING THOSE MATTERS
DISCUSSED IN "RISK FACTORS" BEGINNING ON PAGE 19 OF THIS JOINT PROXY
STATEMENT -- PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE SHARES TO BE ISSUED IN THE MERGER AND
DESCRIBED IN THIS JOINT PROXY STATEMENT -- PROSPECTUS OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS JOINT PROXY STATEMENT -- PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 5
MACDERMID INCORPORATED
245 FREIGHT STREET
WATERBURY, CONNECTICUT 06702-0671
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 30, 1999
A Special Meeting of Shareholders of MacDermid, Incorporated will be held
at the Leever Building, 245 Freight Street, Waterbury, Connecticut 06702 on
Thursday, September 30, 1999 at 10:00 A.M. EDT.
The special meeting will be held for the following purpose: to consider and
act upon a proposal to approve the Plan and Agreement of Merger, dated as of
February 18, 1999 and amended as of July 27, 1999, among MacDermid, PTI, Inc.,
Citicorp Venture Capital, Ltd., a PTI shareholder, and MCD Acquisition Corp., a
wholly owned subsidiary of MacDermid. The agreement provides for MacDermid to
acquire PTI by exchanging shares of MacDermid common stock for all of the
outstanding shares of PTI common stock and preferred stock, all as more fully
described in the attached joint proxy statement -- prospectus. A copy of the
merger agreement and the first amendment to the merger agreement are included in
the joint proxy statement -- prospectus as Appendix A and Appendix B.
Approval of the merger agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of MacDermid common stock. Only
shareholders of record as of the close of business on August 6, 1999 will be
entitled to notice of and to vote at the special meeting.
YOUR PROXY VOTE IS VERY IMPORTANT. You are requested to vote, date and sign
the enclosed proxy and promptly return it in the enclosed postage-paid envelope
at your earliest convenience prior to the special meeting. Because it is
impractical to eliminate duplication, separate proxies are mailed to persons
whose names are shown in more than one way on MacDermid's stock records.
Therefore, you may receive more than one proxy. Please vote, date, sign and
return all proxies received.
If you are an employee participating in the MacDermid, Incorporated
Employees Profit Sharing and Employee Stock Ownership Plan or the MacDermid,
Incorporated Employee Pension Plan, you will receive separate instructions
covering shares held for your account in such plan or plans.
THE MACDERMID BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
By Order of the Board of Directors,
John L. Cordani
Corporate Secretary
Waterbury, Connecticut
August 30, 1999
- --------------------------------------------------------------------------------
IN ORDER TO AVOID UNNECESSARY EXPENSE, WE URGE YOU TO INDICATE VOTING
INSTRUCTIONS ON THE ENCLOSED PROXY AND DATE, SIGN AND RETURN IT PROMPTLY PRIOR
TO THE SPECIAL MEETING IN THE ENVELOPE PROVIDED, NO MATTER HOW LARGE OR SMALL
YOUR HOLDINGS MAY BE.
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<PAGE> 6
PTI, INC.
900 MIDDLESEX TURNPIKE
BILLERICA, MASSACHUSETTS 01821-3946
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 30, 1999
A Special Meeting of Shareholders of PTI, Inc. will be held at 900
Middlesex Turnpike, Billerica, Massachusetts 01821 on Thursday, September 30,
1999 at 9:00 A.M. EDT.
The special meeting will be held for the following purpose: to consider and
act upon a proposal to approve and adopt the Plan and Agreement of Merger, dated
as of February 18, 1999 and amended as of July 27, 1999, among PTI, MacDermid,
Incorporated, Citicorp Venture Capital, Ltd., which is a PTI shareholder, and
MCD Acquisition Corp., a wholly owned subsidiary of MacDermid. MacDermid
proposes to acquire PTI by exchanging shares of MacDermid common stock for all
of the outstanding shares of PTI common stock and preferred stock, all as more
fully described in the attached joint proxy statement -- prospectus. A copy of
the merger agreement and the first amendment to the merger agreement are
included in the joint proxy statement -- prospectus as Appendix A and Appendix
B.
Approval of the merger agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of PTI Class A common stock. The
PTI Board of Directors has fixed the close of business on August 6, 1999 as the
record date for the determination of PTI shareholders who will be entitled to
notice of and to vote at the special meeting.
YOUR PROXY VOTE IS VERY IMPORTANT. You are requested to vote, date and sign
the enclosed proxy and promptly return it in the enclosed postage-paid envelope
at your earliest convenience prior to the special meeting.
THE PTI BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
By Order of the Board of Directors,
Thomas C. Weaver
Corporate Secretary
Billerica, Massachusetts
August 30, 1999
- --------------------------------------------------------------------------------
NOTICE OF APPRAISAL RIGHTS. If the merger agreement is approved by the PTI
shareholders at the PTI special meeting and the merger is completed, any PTI
shareholder who (1) files with PTI a written objection to the merger before the
taking of the vote to approve the merger agreement by the PTI shareholders and
who states in that objection that he or she intends to demand payment for his or
her shares if the merger is concluded and (2) does not vote those shares in
favor of the approval of the merger agreement will be entitled to demand payment
for his or her shares and an appraisal of the value of those shares, in
accordance with the provisions of Section 262 of the Delaware General
Corporation Law, a copy of which is attached as Appendix C to the accompanying
joint proxy statement -- prospectus. See "Merger Transaction -- Appraisal
Rights" in the joint proxy statement -- prospectus for more information
concerning appraisal rights of dissenting PTI shareholders.
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<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Answers to Frequently Asked
Questions about the Merger..... i
Summary.......................... 1
The Companies.................. 1
Merger Transaction............. 1
What PTI Security Holders Will
Receive..................... 1
Escrowed Shares................ 3
Indemnification................ 3
Listing of MacDermid Common
Stock and Restrictions on
Transfer.................... 4
Material Federal Income Tax
Consequences of the
Merger...................... 4
Appraisal Rights............... 4
Ownership of MacDermid After
the Merger.................. 5
Executive Officers and
Directors of MacDermid After
the Merger.................. 5
Reasons for the Merger......... 5
Recommendations to
Shareholders................ 5
Vote Required to Approve the
Merger Agreement............ 5
Risk Factors................... 5
Required Regulatory
Approvals................... 6
Interests of Related Persons in
the Merger.................. 6
Accounting Treatment........... 6
Termination of the Merger
Agreement................... 7
MacDermid Selected Financial
Data........................ 8
PTI Selected Financial Data.... 10
Exchange Ratio Assumptions..... 12
Unaudited Pro Forma Combined
Condensed Selected Financial
Data........................ 13
Selected Historical and Pro
Forma Comparative Per Share
Data........................ 15
Market Price Information....... 17
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors..................... 19
Cautionary Statement Regarding
Forward-Looking Information.... 22
MacDermid Special Meeting........ 23
Date, Time and Place........... 23
Record Date and Voting
Rights...................... 23
Quorum and Voting of Proxies... 23
Shareholder Vote Required...... 24
Recommendation of the MacDermid
Board....................... 24
Appraisal Rights............... 24
PTI Special Meeting.............. 25
Date, Time and Place........... 25
Record Date and Voting
Rights...................... 25
Quorum and Voting of Proxies... 25
Shareholder Vote Required...... 26
Recommendation of PTI Board.... 26
Appraisal Rights............... 26
The Companies.................... 27
MacDermid...................... 27
PTI............................ 27
Merger Transaction............... 28
MacDermid Background and
Reasons for the Merger...... 28
PTI Background and Reasons for
the Merger.................. 31
The Merger..................... 33
What PTI Security Holders Will
Receive in the Merger....... 33
Escrowed Shares................ 35
Indemnification................ 36
Listing of MacDermid Common
Stock and Restrictions on
Transfer.................... 37
Ownership of MacDermid After
the Merger.................. 38
Executive Officers and
Directors of MacDermid After
the Merger.................. 39
Required Regulatory
Approvals................... 40
Closing Date................... 41
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Interests of Related Persons in
the Merger.................. 41
Accounting Treatment........... 43
Material Federal Income Tax
Consequences of the Merger
to MacDermid Shareholders... 43
Material Federal Income Tax
Consequences of the Merger
to PTI Shareholders......... 44
How to Surrender and Receive
MacDermid Common Stock In
Exchange for PTI Stock...... 46
Appraisal Rights............... 47
Merger Agreement................. 51
Representations and
Warranties.................. 51
Conditions to the Merger....... 51
Conduct Pending Merger......... 54
Amendment and Waiver........... 57
Termination of Merger
Agreement................... 58
Expenses....................... 58
Unaudited Pro Forma Combined
Condensed Financial
Information.................... 59
Trading Price of MacDermid Common
Stock.......................... 70
Beneficial Ownership of
MacDermid...................... 71
Description of MacDermid Capital
Stock.......................... 75
Comparison of the Rights of
Holders of MacDermid Common
Stock and Holders of PTI
Stock.......................... 76
Introduction................... 76
Filing Vacancies on the Board
of Directors................ 76
Special Meetings of
Shareholders; Shareholder
Action by Written Consent... 77
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Amendment of Bylaws............ 77
Dissenters' Rights............. 77
Business Combinations and
Reorganizations............. 78
PTI Management's Discussion and
Analysis of Financial Condition
and Results of Operations...... 80
General........................ 80
Net Sales and Operating
Profits..................... 80
Sales.......................... 80
Costs and Expenses............. 81
Acquisitions................... 82
Income Taxes................... 85
Liquidity and Capital
Spending.................... 85
Year 2000 Readiness............ 85
Beneficial Ownership of PTI...... 88
Legal Matters.................... 91
Experts.......................... 91
Other Matters.................... 91
Proposals for Next Annual
MacDermid Meeting.............. 91
Where You Can Find More
Information.................... 91
Index to Financial Statements.... F-1
APPENDIX
- -- Plan and Agreement of
Merger......................... A-1
- -- First Amendment to Plan and
Agreement of Merger......... B-1
- -- DGCL sec.262.................. C-1
- -- Form of Escrow Agreement...... D-1
- -- Form of Agency Agreement and
Waiver and Release.......... E-1
</TABLE>
<PAGE> 9
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ANSWERS TO FREQUENTLY ASKED QUESTIONS ABOUT THE MERGER
Q: WHAT DO I NEED TO DO NOW?
A: Just mail your completed and signed proxy card in the enclosed return
envelope as soon as possible, so that your shares may be represented at your
special meeting. To assure that your vote is obtained, please give your
proxy as instructed on your proxy card even if you currently plan to attend
a meeting in person.
Q: WHAT SHOULD I DO TO CHANGE MY VOTE?
A: Just send in a later-dated, signed proxy card to your company's Corporate
Secretary before your special meeting or attend your special meeting in
person and vote. Please note, however, that attendance at your special
meeting will not alone constitute a revocation of your proxy. You may revoke
your proxy by sending a notice of revocation to your company's Corporate
Secretary at the address designated in the Summary following these Questions
and Answers.
Q: MY SHARES ARE HELD IN MY BROKER'S NAME. WILL MY BROKER VOTE MY SHARES FOR
ME?
A: A broker generally can't exercise authority to vote on the merger agreement
on your behalf, unless you have a special arrangement.
If your shares are held in the name of your broker, the broker is the record
holder but you retain voting control of the stock as the beneficial owner.
Therefore, your broker will receive proxy materials with instructions to
transmit those materials to you. Upon receipt, you should mail your
completed and signed proxy card in the enclosed return envelope so that your
shares may be represented at your special meeting.
Q: WHAT WILL HAPPEN IF I DON'T VOTE?
A: The failure to vote has the same effect as a vote against the approval of
the merger agreement.
Q: WILL I NEED TO SEND IN MY STOCK CERTIFICATES AFTER THE MERGER?
A: No. If the merger is completed, we will send PTI shareholders written
instructions for exchanging their share certificates. MacDermid shareholders
will keep their existing certificates.
- --------------------------------------------------------------------------------
i
<PAGE> 10
- --------------------------------------------------------------------------------
IF YOU ARE A MACDERMID SHAREHOLDER,
WHO CAN HELP ANSWER YOUR QUESTIONS?
If you have questions about the merger, you should contact:
MacDermid, Incorporated
245 Freight Street
Waterbury, Connecticut 06702
Attention: John L. Cordani, Corporate Secretary
Telephone: (203) 575-5646
IF YOU ARE A PTI SHAREHOLDER,
WHO CAN HELP ANSWER YOUR QUESTIONS?
If you have questions about the merger, you should contact:
PTI, Inc.
900 Middlesex Turnpike
Billerica, Massachusetts 01821-3946
Attention: Thomas C. Weaver, Corporate Secretary
Telephone: (978) 439-2110
- --------------------------------------------------------------------------------
ii
<PAGE> 11
- --------------------------------------------------------------------------------
SUMMARY
This summary highlights information contained elsewhere in this joint proxy
statement -- prospectus. This summary may not contain all the information that
is important to you. For a more complete understanding of the proposed merger,
you should read carefully this entire joint proxy statement -- prospectus as
well as the other documents to which we refer. See "Where You Can Find More
Information" on page 91.
THE COMPANIES (SEE PAGE 27)
MacDermid, Incorporated
245 Freight Street
Waterbury, Connecticut 06702
(203) 575-5700
MacDermid develops, produces and markets a broad line of specialty chemical
products which are used primarily in the metal and plastic finishing,
electronics and graphic arts industries. MacDermid has manufacturing facilities
and sales offices in North America, Europe and Asia.
MacDermid, founded in 1922, is incorporated in Connecticut.
PTI, Inc.
900 Middlesex Turnpike
Billerica, Massachusetts 01821
(978) 439-2000
PTI is the parent company of Polyfibron Technologies, Inc. Polyfibron
Technologies develops, produces and markets specialty chemicals that are used in
the printing industry. Specifically, Polyfibron sells printing plates and
printing blankets, both of which are used to transfer ink and thus form images
on surfaces such as paper, cardboard or plastic film used for packaging. PTI's
subsidiaries have manufacturing facilities located in the United States, France
and Australia.
PTI is incorporated in Delaware and was founded in 1994 when it acquired
Polyfibron Technologies and other assets and liabilities from W.R. Grace & Co.
MERGER TRANSACTION (SEE PAGE 28)
The merger agreement provides that MacDermid will acquire PTI and all of the
outstanding PTI capital securities consisting of common stock, preferred stock
and a common stock warrant in exchange for shares of MacDermid common stock and
warrants to purchase shares of MacDermid common stock. The acquisition will be
accomplished through the merger of a MacDermid subsidiary into PTI. Upon
completion of that merger, PTI will become a wholly owned subsidiary of
MacDermid and shareholders of PTI will become shareholders of MacDermid.
The merger agreement and the first amendment to the merger agreement are
attached to this joint proxy statement -- prospectus as Appendix A and Appendix
B. We encourage you to read the merger agreement as it is the legal document
that governs the merger.
The merger agreement also obligates MacDermid to refinance PTI's financial
indebtedness upon completion of the merger. Accordingly, MacDermid has entered
into an amended secured credit facility under which it will borrow the funds
necessary to refinance the PTI debt. As of June 30, 1999, the amount of debt to
be refinanced totaled $164.3 million.
WHAT PTI SECURITY HOLDERS WILL RECEIVE (SEE PAGE 33)
MacDermid will deliver 7,573,000 shares of MacDermid common stock to PTI
shareholders upon the completion of the merger. Those shares will be allocated
first to the holders of PTI preferred stock to satisfy the liquidation
preference of that stock, and the balance of the MacDermid common stock will be
allocated proportionately to holders of PTI common stock interests. The
aggregate value of the 7,573,000 MacDermid shares received by PTI shareholders
upon completion of the
- --------------------------------------------------------------------------------
1
<PAGE> 12
merger will be approximately $260.4 million, assuming the market value of
MacDermid stock is equal to $34.38, the reported closing price of MacDermid
common stock on the NYSE on August 27, 1999.
What Holders of PTI Preferred Stock Will Receive
As a result of the merger, each share of PTI preferred stock will be converted
into a number of shares of MacDermid common stock having a market value equal to
the liquidation preference of that share of PTI preferred stock ($1,000) plus
any owed dividends. The merger agreement specifies that the market value of
MacDermid common stock will be based upon a 30-day trading average referred to
in the merger agreement and this joint proxy statement -- prospectus as the
"Current Market Price." See "Exchange Ratio Assumptions" on page 12 for a more
detailed definition of Current Market Price. As of August 6, 1999, 9,175 shares
of PTI preferred stock were outstanding.
The holders of PTI preferred stock will receive in the merger shares of
MacDermid common stock having an aggregate value of approximately $11.2 million,
assuming approximately $439,437 of dividends are owed on the preferred stock,
representing 105 days of unpaid dividends since the last dividend payment date
on June 15, 1999. See "Exchange Ratio Assumptions" on page 12. PTI owes more
dividends on some shares of preferred stock than others. Therefore, the number
of shares of common stock that MacDermid will issue for any particular share of
PTI preferred stock will vary ranging from a low of 28.268 shares to a high of
51.724 shares, based upon the assumptions described on page 12.
What Holders of PTI Common Stock Will Receive
After the PTI preferred stock liquidation preference is satisfied, the balance
of the 7,573,000 MacDermid shares will be allocated among the holders of PTI
common stock in proportion to their ownership of PTI common stock.
As of August 6, 1999, there were 855,000 outstanding shares of PTI common stock.
In addition, 150,000 shares of PTI common stock are issuable upon the exercise
of a warrant held by Citicorp Mezzanine Partners, L.P. Under the terms of that
PTI warrant, Citicorp Mezzanine Partners may purchase PTI common stock at an
exercise price of approximately $.01 per share.
For purposes of allocating the MacDermid common stock among holders of PTI
common stock, the PTI warrant held by Citicorp Mezzanine Partners will be
treated as if it had been exercised in full. MacDermid will issue a substitute
common stock warrant to Citicorp Mezzanine Partners on equivalent terms. The
description of MacDermid shares exchanged in the merger treats the PTI warrant
as if excercised in full prior to the completion of the merger.
The amount and value of MacDermid stock that any holder of PTI common stock will
receive upon the completion of the merger will depend on the Current Market
Price of MacDermid common stock and the amount of dividends owed on PTI
preferred stock. See "Exchange Ratio Assumptions." ACCORDINGLY, HOLDERS OF PTI
COMMON STOCK WILL NOT KNOW AT THE TIME THAT THEY VOTE THE NUMBER OR VALUE OF THE
MACDERMID SHARES THEY WILL RECEIVE. PTI SHAREHOLDERS MAY MAKE INQUIRIES AS TO
THE ESTIMATED EXCHANGE RATIO OF MACDERMID SHARES FOR SHARES OF PTI COMMON STOCK
BASED UPON THE TRADING PRICE OF MACDERMID STOCK AT THAT TIME BY CALLING THOMAS
C. WEAVER, PTI'S CORPORATE SECRETARY AT (978) 439-2110.
2
<PAGE> 13
Hypothetical Exchange Ratios and Assumptions
The following table illustrates the number of MacDermid shares that would be
exchanged for each share of PTI common stock as of the completion of the merger
at three hypothetical Current Market Prices of $34, $40 and $46 per share.
MacDermid and PTI believe the range of hypothetical Current Market Prices
reasonably reflects the trading prices of MacDermid common stock after the
merger was announced. The hypothetical exchange ratios also assume in each case
$439,437 of dividends are owed on PTI preferred stock. See "Exchange Ratio
Assumptions."
<TABLE>
<CAPTION>
NUMBER OF
ASSUMED MACDERMID SHARES
"CURRENT MARKET EXCHANGED FOR
PRICE" OF EACH SHARE OF PTI
MACDERMID STOCK COMMON STOCK
- --------------- -----------------
<S> <C>
$34.00 7.208
$40.00 7.257
$46.00 7.293
</TABLE>
Escrow Fund
Holders of PTI common stock and Citicorp Mezzanine Partners will also receive as
of the completion of the merger an interest in an escrow fund that may entitle
them to receive additional MacDermid shares a year or more after the merger is
completed.
ESCROWED SHARES (SEE PAGE 35)
The escrow fund that will be established as of the completion of the merger will
be used to satisfy any indemnification claim MacDermid is entitled to bring
under the merger agreement. As of the completion of the merger, the escrow fund
will consist of a total of 127,000 shares of MacDermid common stock and common
stock equivalents. Those 127,000 MacDermid shares are sometimes referred to in
this joint proxy statement -- prospectus as the "escrowed shares." Holders of
PTI common stock and Citicorp Mezzanine Partners will be entitled to sell all or
any portion of the MacDermid stock, or in the case of Citicorp Mezzanine
Partners the MacDermid warrant, held in escrow for that investor's benefit. The
proceeds of any sale, however, would remain in escrow until the termination of
the escrow agreement.
INDEMNIFICATION (SEE PAGE 36)
MacDermid, on the one hand, and the PTI shareholders and Citicorp Mezzanine
Partners, collectively, on the other hand, will be entitled to indemnification
for a breach of the merger agreement. No party will be entitled to
indemnification for a claim brought more than 12 months after the merger is
completed. Further, neither MacDermid, on the one hand, nor the PTI shareholders
and Citicorp Mezzanine Partners, collectively, on the other hand, will be
entitled to indemnification until their damages exceed $2 million and then only
to the extent of the excess.
MacDermid's sole source of recourse for indemnification will be to the escrow
assets. If the PTI shareholders and Citicorp Mezzanine Partners are entitled to
indemnification, MacDermid will pay the damages solely in MacDermid shares and
not in cash. In no event will the maximum indemnification payment by MacDermid
on the one hand or PTI shareholders on the other hand exceed the Current Market
Price of the escrowed shares as of the completion of the merger.
Citicorp Venture Capital will act on behalf of the PTI shareholders and Citicorp
Mezzanine Partners in all matters relating to the indemnification provisions of
the merger agreement. The escrow will terminate and the remaining escrow assets,
if any, will be distributed to the former holders of PTI common stock and
Citicorp Mezzanine Partners upon the later of (a) 12 months after the completion
of the merger or (b) the resolution of all MacDermid indemnification claims.
3
<PAGE> 14
LISTING OF MACDERMID COMMON STOCK AND RESTRICTIONS ON TRANSFER (SEE PAGE 37)
The shares of MacDermid common stock issued in connection with the merger will
be listed on the NYSE under the ticker symbol "MRD."
Transfer restrictions imposed by the Federal securities laws will apply to
directors, executive officers and principal shareholders of PTI. MacDermid will
provide Citicorp Venture Capital, Citicorp Mezzanine Partners and other PTI
affiliates with registration rights allowing them to publicly resell their
MacDermid shares. MacDermid stock issued to PTI shareholders who are, at the
time the merger is completed, subject to contractual limitations on the resale
of their PTI stock will be subject to those same contractual limitations.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE 43)
MacDermid and PTI have received opinions from tax counsel, as of the date of
this joint proxy statement -- prospectus, that the merger will be treated as a
tax-free reorganization for U.S. federal income tax purposes, assuming the
merger is completed on substantially the terms described in this joint proxy
statement -- prospectus. The material tax consequences to MacDermid and PTI
shareholders of the merger qualifying as a tax-free reorganization are:
- - MacDermid shareholders will not have a taxable gain as a result of the merger;
- - no gain or loss will be recognized by MacDermid or PTI as a result of the
merger;
- - PTI shareholders will not have taxable gain or loss on the exchange of PTI
stock for MacDermid stock in the merger, except with respect to any cash
received instead of a fractional share of MacDermid stock or as a consequence
of the exercise of appraisal rights;
- - the tax basis of MacDermid stock received by a PTI shareholder in the merger
will be the same as the tax basis of the PTI stock exchanged in the merger,
reduced by any amount allocable to a fractional share interest for which cash
is received; and
- - the holding period of the MacDermid stock that a PTI shareholder receives in
the merger generally will include the holding period of the PTI stock
exchanged for the MacDermid stock.
Neither MacDermid nor PTI will proceed with the merger without resoliciting its
shareholders unless it obtains, as of the date the merger is completed, an
opinion from tax counsel confirming that the merger will be treated as a
tax-free reorganization for U.S. federal income tax purposes. Those legal
opinions will not bind the IRS, which could take a contrary position.
APPRAISAL RIGHTS (SEE PAGE 47)
PTI shareholders, but not MacDermid shareholders, are entitled under law to
appraisal rights in connection with the merger. To exercise appraisal rights, a
PTI shareholder must satisfy the following criteria:
- - vote against approval of the merger agreement or abstain from voting;
- - provide written notice of his or her intention to exercise appraisal rights to
PTI on or before the date of the special meeting, even if the PTI shareholder
is not entitled to vote at the PTI special meeting; and
- - comply with other procedures as are required by Section 262 et seq. of the
Delaware General Corporation Law. A copy of those sections of the Delaware law
are attached to this joint proxy statement -- prospectus as Appendix C.
4
<PAGE> 15
OWNERSHIP OF MACDERMID AFTER THE MERGER (SEE PAGE 38)
On a pro forma basis, the shares of MacDermid common stock issued in the merger
will range from 23.1% of the pro forma MacDermid shares outstanding if no
escrowed shares are released to former PTI security holders to 23.4% if all
escrowed shares are released. In each case this assumes that the MacDermid
warrants issued to Citicorp Mezzanine Partners in the merger have been exercised
in full and there is no change in the number of shares of MacDermid stock
outstanding before the merger.
On a pro forma basis, the shares of MacDermid common stock issued in the merger
to Citicorp Venture Capital, one of PTI's principal shareholders, will range
from approximately 12.5% of the pro forma MacDermid shares outstanding if no
escrowed shares are released to former PTI security holders to approximately
12.6% if all escrowed shares are released.
EXECUTIVE OFFICERS AND DIRECTORS OF MACDERMID AFTER THE MERGER (SEE PAGE 39)
The only change in the executive officers and directors of MacDermid as a
consequence of the merger is that a designee of Citicorp Venture Capital will
become a MacDermid director. The MacDermid Board of Directors has approved an
increase in the size of the Board to seven from six, effective as of the
completion of the merger, and has elected Joseph M. Silvestri, an officer of
Citicorp Venture Capital, to fill that vacancy. See page 39 for biographical
information regarding Mr. Silvestri and information regarding Citicorp Venture
Capital's right to designate a MacDermid director.
REASONS FOR THE MERGER (SEE PAGES 28 AND 31)
We believe that the merger of PTI and MacDermid will:
- - create a combined company that will be a substantial global competitor in the
supply of chemicals and related materials to the graphic arts industry;
- - improve the diversity of the combined company's overall sources of revenue,
both by product line and geography; and
- - allow the combined company to participate in a much broader section of the
graphic arts industry.
Of course, these benefits depend on our ability to integrate the businesses of
MacDermid and PTI successfully after the merger, and on other uncertainties
described in "Risk Factors" beginning on page 19.
RECOMMENDATIONS TO SHAREHOLDERS
To MacDermid Shareholders:
The MacDermid Board believes that the merger agreement is fair to you and in
your best interests and recommends that you vote FOR the merger agreement.
To PTI Shareholders:
The PTI Board believes that the merger agreement is fair to you and is in your
best interests and recommends that you vote FOR the merger agreement.
VOTE REQUIRED TO APPROVE THE MERGER AGREEMENT
MacDermid Shareholders
Approval of the merger agreement requires the affirmative vote of the holders of
a majority of the outstanding shares of MacDermid common stock.
PTI Shareholders
Approval of the merger agreement requires the affirmative vote of the holders of
a majority of the outstanding shares of PTI Class A common stock.
RISK FACTORS (SEE PAGE 19)
You are encouraged to consider the risk factors described elsewhere in this
joint proxy statement -- prospectus in deciding whether to vote in favor of the
proposal to
5
<PAGE> 16
- --------------------------------------------------------------------------------
approve the merger agreement. Those risks include the following:
- - The number of MacDermid shares issued in the merger will not increase or
decrease if the market price of MacDermid stock changes before the merger is
completed. Accordingly, the market value of the MacDermid stock that a PTI
shareholder may receive in the merger may be less than or greater than the
market value of MacDermid stock that the shareholder would have received if
the merger had been completed as of the date of this joint proxy
statement -- prospectus.
- - Neither MacDermid nor PTI engaged a financial advisor to evaluate the fairness
to its shareholders, from a financial point of view, of the number of
MacDermid shares to be exchanged in the merger for all of the outstanding PTI
capital securities. Therefore, when deciding whether or not to approve the
merger agreement, you will not have the benefit of a financial advisor's
opinion and analysis that otherwise would be included in this joint proxy
statement -- prospectus.
REQUIRED REGULATORY APPROVALS (SEE PAGE 40)
The Hart-Scott-Rodino Act prohibits MacDermid and PTI from completing the merger
until we have furnished information to the Federal Trade Commission and a
required waiting period has expired or been terminated. We have provided
information to the Federal Trade Commission on February 26, 1999 and from time
to time thereafter. The Federal Trade Commission has asserted, however, that our
submissions have not satisfied all applicable requirements. Without agreeing
with the Federal Trade Commission's assertion, MacDermid and PTI have
represented to the Commission that we will not complete the merger without
giving the Commission at least 35 days prior notice. As of the date of this
joint proxy statement -- prospectus, we have not given that notice to the
Federal Trade Commission.
The Federal Trade Commission may seek to delay further the completion of the
merger, or attempt to challenge the merger on antitrust grounds or negotiate a
settlement that would likely involve the divestiture of a portion of the
combined company's assets.
INTERESTS OF RELATED PERSONS IN THE MERGER (SEE PAGE 41)
Shareholders should be aware that a number of PTI officers are parties to
severance agreements and other arrangements that provide them with interests in
the merger that are different from, or in addition to, the interests of PTI
shareholders as a whole. More specifically, four executive officers of PTI have
severance and change of control agreements which generally provide these
officers with up to 18 months of salary if they are terminated without cause or
voluntarily leave the employ of PTI within a specified period after the merger
is completed. PTI is also obligated to make cash payments in the aggregate of up
to a maximum of $950,200 to 22 other employees under various severance and stay-
bonus arrangements.
ACCOUNTING TREATMENT (SEE PAGE 43)
We expect the merger to be treated as a pooling of interests, which means that
for accounting and financial reporting purposes, MacDermid will treat MacDermid
and PTI as if they had always been combined. It is a condition to MacDermid's
obligation to complete the merger that MacDermid receive a letter from its
accountants stating that in their opinion the merger will appropriately be
treated as a pooling of interests.
- --------------------------------------------------------------------------------
6
<PAGE> 17
- --------------------------------------------------------------------------------
TERMINATION OF MERGER AGREEMENT (SEE PAGE 58)
Either MacDermid or PTI can terminate the merger agreement and not proceed with
the merger if:
- - the other party materially breaches the merger agreement; or
- - the merger is not completed by September 30, 1999, other than because the
terminating party breached the merger agreement.
MacDermid may also terminate the merger agreement and not proceed with the
merger if more than 385,000 MacDermid shares that may potentially be issued in
the merger are not issued because one or more PTI shareholders have reserved
their appraisal rights.
The termination of the merger agreement and the abandonment of the merger may
occur before or after the merger agreement is approved by either or both
MacDermid and PTI shareholders. If MacDermid or PTI terminates the merger
agreement because of the failure of the PTI shareholders to approve the merger
agreement, PTI must pay MacDermid a $5.0 million termination fee.
- --------------------------------------------------------------------------------
7
<PAGE> 18
MACDERMID SELECTED FINANCIAL DATA
You should read this selected financial data with MacDermid's Annual Report
on Form 10-K for the year ended March 31, 1999 and MacDermid's Quarterly Report
on Form 10-Q for the three months ended June 30, 1999. The selected historical
financial data as of and for the five years ended March 31, 1999 are derived
from MacDermid's consolidated financial statements, which have been audited by
independent public accountants. Share and per share data have been restated to
reflect the effects of three-for-one stock splits effective February 6, 1998 and
November 15, 1996.
The selected historical data as of and for the three months ended June 30,
1999 and June 30, 1998 have not been audited but, in the opinion of MacDermid's
management, contain all adjustments, consisting solely of those of a normal
recurring nature, necessary to present fairly the financial position and results
of operations of MacDermid as of these dates and for these periods. The results
of operations for the three months ended June 30, 1999 are not necessarily
indicative of the results of operations that may be expected for the year ending
March 31, 2000, or for any future period.
EBITDA, as used in the table below, means earnings from operations before
interest, taxes, depreciation and amortization. Although EBITDA is not defined
by generally accepted accounting principles, MacDermid believes it to be
beneficial to gaining an understanding of MacDermid's financial performance.
However, EBITDA is not intended to represent cash flow from operations as
defined by generally accepted accounting principles and should not be used as an
alternative to net income as an indicator of operating performance or to cash
flows as a measure of liquidity.
You should also be aware that acquisitions MacDermid has completed since
April 1, 1994 may adversely affect your ability to compare the information
reflected in the following table, and consequently, the information may be of
limited use in evaluating MacDermid's historical performance or predicting its
future operating results. See "Risk Factors."
8
<PAGE> 19
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AND FOR
THREE MONTHS ENDED
JUNE 30, AS OF AND FOR THE YEAR ENDED MARCH 31,
------------------------- -------------------------------------------------------------------
1999 1998 1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales....................... 119,067 81,070 $ 382,648 $ 314,058 $ 293,720 $ 235,891 $ 182,100
Income (loss) from continuing
operations.................... 9,999 8,093 36,283 30,797 23,846 13,795 11,142
Net earnings available for
common shareholders (before
accounting change)(1)......... 9,999 8,093 36,283 30,488 22,010 13,195 11,142
Diluted earnings per common
share(1)...................... 0.39 0.32 1.43 1.20 0.85 0.50 0.39
FINANCIAL POSITION AT YEAR END
Working capital................. 68,944 50,279 63,248 50,814 46,883 59,714 34,711
Current ratio(2)................ 1.5 1.6 1.5 1.6 1.7 2.0 1.7
Capital expenditure............. 1,378 1,394 5,442 8,342 6,914 4,303 3,990
Total assets.................... 529,992 319,541 506,279 300,260 260,978 264,756 123,305
Long-term debt (includes
short-term portion)........... 260,670 138,350 258,668 116,425 82,981 112,254 22,642
Percent of total capitalization
(excluding preferred stock)... 62.7 55.5 64.6 52.5 50.9 63.0 29.7
Redeemable preferred stock...... -- -- -- -- 32,436 30,600 --
OTHER DATA
Return on sales available for
common shareholders (%)(1).... 8.4 10.0 9.5 9.7 7.5 5.6 6.1
Return on average common equity
(%)(3)........................ 24.6 27.1 29.3 32.9 30.2 22.1 18.3
Cash provided by operations..... 2,230 3,098 53,540 35,335 37,437 17,493 19,854
Cash provided by (used in)
investing activities.......... (9,502) (16,558) (171,016) (32,807) (5,406) (107,773) (9,740)
Cash provided by (used in)
financing activities.......... 1,250 15,315 129,851 (5,000) (33,969) 91,568 (9,322)
EBITDA.......................... 25,503 17,433 80,157 66,451 55,579 38,758 26,516
SHARE DATA
Common shareholders' equity..... 154,911 110,894 $ 142,039 $ 105,545 $ 80,058 $ 65,817 $ 53,654
Book value per common share..... 6.16 4.41 5.65 4.21 3.26 2.62 2.17
Cash dividends per common
share......................... 0.02 0.02 0.08 0.07 0.0667 0.0667 0.0667
Common shares outstanding
Diluted average during
period.................... 25,430,215 25,475,820 25,427,288 25,483,844 25,912,677 26,383,844 28,372,599
Outstanding at period end... 25,157,299 25,138,068 25,145,343 25,095,906 24,561,459 25,148,079 24,682,797
</TABLE>
- -------------------------
(1) Before cumulative effect of accounting change as a result of implementation
of SFAS No. 112, "Employers Accounting for Postretirement Benefits," which
resulted in one-time after tax charges of $371 ($0.01/common share) in 1995.
(2) Current assets divided by current liabilities.
(3) Return on Average Common Equity for the three months ended June 30, 1999 and
1998 is annualized so as to be comparative to the years ended March 31. This
calculation is not necessarily indicative of the result which will occur at
year end.
- --------------------------------------------------------------------------------
9
<PAGE> 20
PTI SELECTED FINANCIAL DATA
You should read this selected financial data with PTI's audited
consolidated financial statements for the year ended December 31, 1998 and PTI's
unaudited consolidated financial statements as of and for the six months ended
June 30, 1999, all of which are included elsewhere in this joint proxy
statement -- prospectus. PTI began business on December 29, 1994. The selected
historical financial data as of and for the four years ended December 31, 1998
are derived from PTI's consolidated financial statements, which have been
audited by independent public accountants.
The selected historical financial data for the period January 1, 1994 to
December 28, 1994, and as of December 28, 1994, were obtained from PTI's
"predecessor company" consisting of parts of former W.R. Grace & Co. divisions
that PTI acquired on December 29, 1994. The amounts have not been audited and
contain no pro forma adjustment to give effect to PTI's acquisition of the Grace
assets, including related financing. In connection with that acquisition, PTI
elected to sell the non-printing product businesses whose operations were
previously combined with those Grace assets. The net assets of those businesses
were valued in the opening balance sheet at their actual net sales proceeds,
less an allocation of interest expense on the incremental debt used to finance
the businesses, plus the cash flows generated from the businesses during the
holding period. In October 1995 and December 1995, respectively, the businesses
were sold resulting in no change to the allocation of the original purchase
price. For the period December 29, 1994 through the respective dates of
disposal, the businesses generated profits of approximately $844,000 which have
been excluded from PTI's consolidated statement of operations. Imputed interest
expense during the period December 29, 1994 through the respective disposal
dates of approximately $978,000 was allocated to the carrying value of the
assets held for sale at the acquisition date and has not been included in the
consolidated statement of operations for the period.
The selected historical data as of and for the six months ended June 30,
1999 and June 30, 1998 have not been audited but, in the opinion of PTI's
management, contain all adjustments, consisting solely of those of a normal
recurring nature, necessary to present fairly the financial position and results
of operations of PTI as of these dates and for these periods. The results of
operations for the six months ended June 30, 1999 are not necessarily indicative
of the results of operations that may be expected for the year ending December
31, 1999, or for any future period.
EBITDA, as used in the table below, means earnings from operations before
interest, taxes, depreciation and amortization. Although EBITDA is not defined
by generally accepted accounting principles, PTI believes it to be beneficial to
gaining an understanding of PTI's financial performance. However, EBITDA is not
intended to represent cash flow from operations as defined by generally accepted
accounting principles and should not be used as an alternative to net income as
an indicator of operating performance or to cash flows as a measure of
liquidity.
10
<PAGE> 21
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
W.R. GRACE
PRINTING PRODUCTS
(PREDECESSOR CO.)
AS OF AND FOR AS OF
SIX MONTHS ENDED 28-DEC-94 AND
JUNE 30, AS OF AND FOR THE YEAR ENDED DECEMBER 31, FOR THE PERIOD
--------------------- --------------------------------------------- 1-JAN-94 TO
1999 1998 1998 1997 1996 1995 28-DEC-94(3)
--------- --------- --------- --------- --------- --------- ------------------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA AND RATIOS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales............................ $ 120,177 $ 113,494 $ 227,956 $ 214,509 $ 146,577 $ 147,439 $ 149,508(4)
Income (loss) from continuing
operations(2)...................... 7,519 8,880 19,343 592 4,752 (1,412) 9,584(4)
Net earnings available for common
shareholders(2).................... 6,773 8,193 17,912 (780) 3,302 (2,984) 9,584
Diluted earnings per common
share(2)........................... 6.74 8.15 17.82 (0.93) 3.30 (3.51) --
FINANCIAL POSITION AT YEAR END
Working capital...................... 62,584 53,955 54,395 48,285 25,078 27,994 20,678
Current ratio (1).................... 2.0 2.2 1.9 2.1 1.7 1.7 1.5
Capital expenditure.................. 6,158 3,814 14,594 5,816 4,755 3,670 5,800
Total assets......................... 245,327 205,880 231,011 197,935 139,145 151,862 148,998(5)
Long-term debt (includes short-term
portion)........................... 160,659 146,715 147,714 147,142 102,395 101,998 23,893
Percent of total capitalization
(excluding preferred stock)........ 91.8 99.6 92.3 105.9 100.9 99.0 18.6
Redeemable preferred stock........... 9,751 9,167 8,944 8,406 7,964 12,781 --
OTHER DATA
Return on sales available for common
shareholders(%)(2)................. 5.6 7.2 7.9 (0.4) 2.3 (2.0) 6.4
Return on average common
equity(%)(2)(6).................... 101.7 430.2 854.2 (17.1) 5,413.1 (283.7) 9.2
Cash provided by (used in)
operations......................... (406) 3,511 26,916 20,275 11,650 19,231 15,061
Cash provided by (used in) investing
activities......................... (15,594) (3,984) (24,681) (61,474) (4,755) (7,930) (5,800)
Cash provided by (used in) financing
activities......................... 15,077 (347) 117 44,255 (7,393) (28,548) --
EBITDA............................... 25,908 27,899 55,801 37,986 29,113 21,763 24,824
SHARE DATA
Common shareholders' equity.......... $ 14,265 $ 556 $ 12,367 $ (8,173) $ (930) $ 1,052 $ 104,378
Book value per common share.......... 16.68 0.65 14.46 (9.56) (1.09) 1.24 --
Cash dividends per common share...... -- -- -- -- -- --
Common shares outstanding
Diluted average during period.... 1,005,000 1,005,000 1,005,000 1,001,250 1,000,000 1,000,000 --
Outstanding at period end........ 855,000 855,000 855,000 855,000 850,000 850,000 --
</TABLE>
- -------------------------
(1) Current assets divided by current liabilities.
(2) Earnings available to common shareholders and diluted earnings per share are
before extraordinary loss of $1,322 ($1.55 per share) in 1997.
(3) Operating results for the period January 1, 1994 to December 28, 1994 and as
of December 28, 1994 were obtained from the predecessor company consisting
of portions of various divisions of W.R. Grace & Co. that PTI acquired on
December 29, 1994.
(4) 1994 results include sales of approximately $11.2 million and a net loss of
approximately $1.3 million for non-printing products businesses which were
sold by PTI in 1995.
(5) Total assets include assets related to non-printing products businesses
valued by PTI at $11.6 million on December 29, 1994 and sold in 1995.
(6) Return on Average Common Equity for the six months ended June 30, 1999 and
1998 is annualized so as to be comparative to the years ended December 31.
This calculation is not necessarily indicative of the result which will
occur at year end.
- --------------------------------------------------------------------------------
11
<PAGE> 22
EXCHANGE RATIO ASSUMPTIONS
This joint proxy statement -- prospectus presents pro forma share and per
share data in various sections, including those titled "Unaudited Pro Forma
Combined Condensed Selected Financial Data," "Selected Historical and Pro Forma
Comparative Per Share Data" and "Beneficial Ownership of PTI." Unless otherwise
stated, all pro forma share and per share data presented in this joint proxy
statement -- prospectus assume the ratio of the number of shares of MacDermid
common stock exchanged for each share of PTI common stock in the merger (the
"exchange ratio") is equal to 7.233, which would have been the exchange ratio
under the following assumptions:
- the merger had been completed on August 27, 1999, the latest practicable
date prior to the printing of this joint proxy statement -- prospectus,
- only 7,573,000 shares of MacDermid common stock are issued in the merger,
with none of the 127,000 escrowed shares being released to former holders
of PTI common stock and the PTI warrant, and
- a total of approximately $439,437 of dividends is owed on PTI preferred
stock as of the completion of the merger, representing 105 days of unpaid
dividends on the preferred stock, which dividends are paid semi-annually
on June 15 and December 15.
THE ACTUAL EXCHANGE RATIO WILL LIKELY BE DIFFERENT. As described in more
detail elsewhere in this joint proxy statement -- prospectus, there is neither a
minimum nor maximum exchange ratio. Instead, the merger agreement fixes the
minimum and maximum number of shares of MacDermid common stock that will be
issued in the merger. The minimum number of shares is fixed at 7,573,000, which
would be the number of shares issued in the merger assuming no escrowed shares
are released. The maximum number of shares is fixed at 7,827,000, which would be
the number of shares issued in the merger assuming all of the escrowed shares
are released and assuming MacDermid is liable to indemnify the PTI shareholders
to the maximum extent provided in the merger agreement by issuing an additional
127,000 shares of MacDermid common stock. See "Merger Transaction."
The actual exchange ratio will depend both on the "Current Market Price" of
MacDermid common stock as of the completion of the merger and on the amount of
dividends owed on the PTI preferred stock at that time. "Current Market Price"
means the average of the daily closing price for MacDermid common stock on the
NYSE for the 30 consecutive trading days preceding the completion of the merger,
ignoring the highest and lowest closing prices during that period. The Current
Market Price would have been $36.82 if the merger was completed on August 27,
1999. If the Current Market Price as of the completion of the merger is greater
than the Current Market Price as of August 27, 1999, the exchange ratio would be
greater than the assumed exchange ratio as of August 27, 1999. Conversely, if
the Current Market Price as of the completion of the merger is less than the
Current Market Price as of August 27, 1999, the exchange ratio would be less
than the assumed exchange ratio as of August 27, 1999. See "Merger Transaction"
for a table showing the exchange ratio at hypothetical Current Market Prices of
$34, $40 and $46.
The pro forma share and per share also assume the full exercise of the
MacDermid warrant issued to Citicorp Mezzanine Partners upon completion of the
Merger. The MacDermid warrant will have a nominal exercise price per share. See
"Merger Transaction."
12
<PAGE> 23
- --------------------------------------------------------------------------------
UNAUDITED PRO FORMA COMBINED CONDENSED
SELECTED FINANCIAL DATA
The following table is a summary of selected unaudited combined financial
information from the section of this joint proxy statement -- prospectus titled
"Unaudited Pro Forma Combined Condensed Financial Information." The combined
financial information of MacDermid and PTI gives effect to the merger as a
pooling of interests, as if the merger had been completed as of April 1, 1996,
and MacDermid's acquisition of W. Canning plc as of April 1, 1998 that MacDermid
accounted for using the purchase method of accounting. The pro forma combined
condensed financial information for the year ended March 31 adds the fiscal year
ended March 31 for MacDermid to the previous fiscal year ended December 31 for
PTI. The proforma combined condensed financial information for the three months
ended June 30, 1999 and 1998 adds three months ended June 30, for each of
MacDermid and PTI. Share and per share data have been restated to reflect the
effects of MacDermid's three-for-one stock split effective February 6, 1998.
You should read the following summary with the "Unaudited Pro Forma
Combined Condensed Financial Information" and the related notes and the
financial information of MacDermid and PTI that are incorporated by reference or
presented in this joint proxy statement -- prospectus. The Unaudited Pro Forma
Combined Summary Financial Data is presented for illustrative purposes only.
This information is not necessarily indicative of the operating results or
financial position that would have occurred if the merger had been completed on
the dates indicated. Further, this information is not necessarily indicative of
MacDermid's future operating results or financial condition.
<TABLE>
<CAPTION>
AS OF AND FOR
THREE MONTHS ENDED
JUNE 30, AS OF AND FOR THE YEAR ENDED MARCH 31,
------------------------- ---------------------------------------
1999 1998 1999 1998 1997
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net sales...................................... $ 182,066 $ 138,308 $ 702,507 $ 528,064 $ 440,297
Income (loss) from continuing operations....... 14,260 12,141 56,035 31,389 28,598
Net earnings available for common
shareholders................................. 14,260 12,141 56,035 31,080 26,762
Diluted earnings per common share (1).......... 0.43 0.37 1.70 0.94 0.80
FINANCIAL POSITION AT YEAR END
Working capital................................ 131,528 104,234 117,643 99,099 71,961
Current ratio (2).............................. 1.7 1.8 1.6 1.8 1.7
Capital expenditures........................... 4,441 5,208 20,036 14,158 11,669
Total assets................................... 775,319 525,421 737,290 498,195 400,123
Long-term debt (includes short-term portion)... 425,982 285,065 406,382 263,567 185,376
Percent of total capitalization (excluding
MacDermid preferred stock)................... 70.4 70.3 71.3 71.4 68.0
Redeemable preferred stock..................... -- -- -- -- 32,436
OTHER DATA
Return on sales available for common
shareholders (%)............................. 7.8 8.8 8.0 5.9 6.1
Return on average common equity (%) (3)(4)..... 29.7 37.2 41.6 32.2 32.1
Cash provided by operations.................... 5,816 9,282 80,456 55,610 49,087
Cash provided by (used in) investing
activities................................... (11,993) (18,936) (195,697) (94,281) (10,161)
Cash provided by (used in) financing
activities................................... 162 10,610 129,968 39,255 (41,362)
EBITDA......................................... 39,548 31,384 135,958 104,437 84,692
</TABLE>
(See footnotes on following page)
- --------------------------------------------------------------------------------
13
<PAGE> 24
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AND FOR
THREE MONTHS ENDED
JUNE 30, AS OF AND FOR THE YEAR ENDED MARCH 31,
------------------------- ---------------------------------------
1999 1998 1999 1998 1997
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C>
SHARE DATA
Common shareholders' equity (3)................ $ 178,927 $ 120,617 $ 163,350 $ 105,778 $ 87,092
Book value per common share (1)................ 5.65 3.81 5.16 3.35 2.80
Cash dividends per common share (1)............ 0.0159 0.0159 0.0636 0.0555 0.0529
Common shares outstanding (1)
Diluted average during period.............. 33,003,215 33,048,820 33,000,288 33,056,844 33,485,677
Outstanding at period end.................. 31,645,406 31,626,175 31,633,450 31,584,013 31,049,566
</TABLE>
- -------------------------
(1) The pro forma per share net income, cash dividends and book value are based
upon an assumption that the ratio of shares of MacDermid common stock
exchanged for each share of PTI common stock in the merger is equal to
7.233. THE ACTUAL EXCHANGE RATIO WILL LIKELY BE DIFFERENT. See "Exchange
Ratio Assumptions" and "Merger Transaction -- What PTI Security Holders Will
Receive in the Merger." As described in more detail elsewhere in this joint
proxy statement -- prospectus, a total of 127,000 shares of MacDermid common
stock will be released from escrow to PTI security holders if MacDermid
makes no claim against the escrowed shares. In that scenario, MacDermid's
pro forma diluted shares outstanding would increase by approximately 0.3%,
which would decrease pro forma diluted earnings per common shares by less
than $.01 per share in each of the periods presented. A total of 254,000
additional shares of MacDermid common stock may be issued to PTI security
holders if all of the 127,000 escrow shares are released to PTI security
holders and if MacDermid is liable to indemnify PTI security holders to the
maximum extent provided in the merger agreement by issuing an additional
127,000 outstanding shares of MacDermid common stock. In that scenario
MacDermid's pro forma diluted shares outstanding would increase by
approximately 0.6%, which would decrease pro forma diluted earnings per
common share by less than $.01 per share in each of the periods presented.
See "Exchange Ratio Assumptions" and "Merger Transaction -- Escrowed Shares
and Indemnification."
(2) Current assets divided by current liabilities.
(3) Includes preferred share amounts for PTI as these would be redeemed in the
merger in exchange for shares of MacDermid common stock.
(4) Return on Average Common Equity for the three months ended June 30, 1999 and
1998 is annualized so as to be comparative to the years ended March 31. This
calculation is not necessarily indicative of the result which will occur at
year end.
- --------------------------------------------------------------------------------
14
<PAGE> 25
SELECTED HISTORICAL AND PRO FORMA COMPARATIVE PER SHARE DATA
The following table shows unaudited comparative per share data for
MacDermid and PTI, using the pooling of interests method of accounting. The
information should be read in conjunction with the consolidated historical
financial statements and related notes of MacDermid and PTI that are
incorporated by reference or presented in this joint proxy
statement -- prospectus, and the unaudited pro forma combined condensed
financial information, including related notes, which appear elsewhere in this
joint proxy statement -- prospectus. See "Unaudited Pro Forma Combined Condensed
Financial Information."
The pro forma data is presented for comparative purposes only and is not
necessarily indicative of the combined financial position or results of
operations which would have been realized had the merger been completed during
the periods or as of the dates for which the pro forma data is presented.
The pro forma per share net income, cash dividends and book value shown in
the following table are based upon an assumption that the ratio of shares of
MacDermid common stock exchanged for each share of PTI common stock in the
merger is equal to 7.233. THE ACTUAL EXCHANGE RATIO WILL LIKELY BE DIFFERENT.
See "Exchange Ratio Assumptions." The pro forma data per basic share of McDermid
common stock will increase if the exchange ratio is less than 7.233 and decrease
if the exchange ratio is greater than 7.233, reflecting a decrease or increase
in the number of shares allocated to the warrant to be issued to Citicorp
Mezzanine Partners. The pro forma data per diluted share of MacDermid common
stock will not change, however, if the actual exchange ratio is greater or less
than 7.233. Conversely, the pro forma data per share of PTI common stock, both
basic and diluted, will increase if the actual exchange ratio is greater than
7.233 and will decrease if the actual exchange ratio is less. See "Merger
Transaction -- What PTI Security Holders Will Receive in the Merger" for a table
illustrating the exchange ratios at hypothetical Current Market Prices of $34,
$40 and $46.
<TABLE>
<CAPTION>
AS OF AND FOR
THREE MONTHS ENDED
JUNE 30, YEARS ENDED MARCH 31,
----------------------- ------------------------------------
1999 1998 1999 1998 1997
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OF MACDERMID COMMON STOCK(1):
Income from continuing operations:
Historical:
Basic net income per share......................... $ 0.40 $ 0.32 $ 1.44 $ 1.22 $ 0.89
Diluted net income (loss) per share................ 0.39 0.32 1.43 1.20 0.85
Pro forma:
Basic net income per share......................... 0.45 0.39 1.77 0.99 0.86
Diluted net income per share....................... 0.43 0.37 1.70 0.94 0.80
Shares used for earnings calculation:
Historical (basic)................................... 25,145,343 25,149,149 25,136,712 24,976,931 24,735,191
Historical (diluted)................................. 25,430,215 25,475,820 25,427,288 25,483,844 25,912,677
Pro forma (basic).................................... 31,633,450 31,637,256 31,624,819 31,465,038 31,223,298
Pro forma (diluted).................................. 33,003,215 33,048,820 33,000,288 33,056,844 33,485,677
Cash dividends declared per share:
Historical......................................... .02 .02 .08 .07 .0667
MacDermid/PTI pro forma............................ .0159 .0159 .0636 .0555 .0529
Book value (as of period end):
Historical........................................... 6.16 4.41 5.65 4.21 3.26
Pro forma............................................ 5.65 3.81 5.16 3.35 2.80
</TABLE>
(See footnotes on following page.)
15
<PAGE> 26
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS OF AND FOR
THREE MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
----------------------- ------------------------------------
1999 1998 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OF PTI COMMON STOCK(2):
Income (loss) from continuing operations:
Historical:
Basic net income (loss) per share (3).............. $ 4.55 $ 4.73 $ 20.95 $ (0.92) $ 3.88
Diluted net income (loss) per share (3)............ 3.87 4.03 17.82 (0.92) 3.30
Equivalent pro forma:
Basic net income per share......................... 3.25 2.82 12.80 7.16 6.22
Diluted net income per share....................... 3.11 2.68 12.30 6.80 5.79
Cash dividends declared per share:
Historical......................................... -- -- -- -- --
MacDermid/PTI pro forma............................ .1150 .1150 .4600 .4014 .3826
Book value (as of period end):
Historical........................................... 16.68 0.65 14.46 (9.56) (1.09)
Equivalent pro forma................................. 40.87 27.56 37.32 24.23 20.25
</TABLE>
- ---------------
(1) The pro forma data per share of MacDermid common stock shown in the table
will decrease for each escrowed share released to former holders of PTI
common stock and the PTI warrant. See "Merger Transaction -- Escrowed Shares
and Indemnification."
(2) The pro forma data per share of PTI common stock shown in the table will
increase for each escrowed share released to former holders of PTI common
stock and the PTI warrant. See "Merger Transaction -- Escrowed Shares and
Indemnification."
(3) Earnings per share are before extraordinary loss of $1,322 ($1.55 per share)
in 1997.
- --------------------------------------------------------------------------------
16
<PAGE> 27
MARKET PRICE INFORMATION
MacDermid common stock is listed and traded principally on the New York
Stock Exchange under the symbol "MRD." There is no established trading market
for PTI common stock.
The following table provides, for the periods indicated, the high and low
sale prices per share for MacDermid common stock as reported on the NYSE.
<TABLE>
<CAPTION>
YEAR LOW HIGH
- ---- ------ ------
<S> <C> <C>
Fiscal year ended March 31, 1999:
First quarter............................................. $28.25 $42.38
Second quarter............................................ 23.38 40.50
Third quarter............................................. 29.88 39.13
Fourth quarter............................................ 32.75 41.94
Fiscal year ending March 31, 2000
First quarter............................................. 32.00 46.50
Second quarter (through August 27, 1999).................. 33.00 46.75
</TABLE>
MacDermid common stock traded at the following highs and lows during the
past several months, as reported by the NYSE.
<TABLE>
<CAPTION>
AUGUST
MARCH APRIL MAY JUNE JULY (THROUGH AUGUST 27, 1999)
------ ------ ------ ------ ------ -------------------------
<S> <C> <C> <C> <C> <C> <C>
High................. $38.00 $43.25 $46.50 $46.50 $46.75 $38.00
Low.................. $32.81 $32.00 $39.31 $40.13 $35.00 $33.00
</TABLE>
All shareholders are advised to obtain current market quotations for
MacDermid common stock. We cannot predict what the market price of MacDermid
common stock will be at or after the completion of the merger. The market price
of MacDermid common stock will fluctuate between the date of this joint proxy
statement -- prospectus, the date of the MacDermid and PTI special meetings and
the date on which the merger is completed and afterwards. We cannot guarantee
when or if the various closing conditions, including the receipt of the approval
of the Federal Trade Commission, will be satisfied. See "Merger Agreement --
Termination of Merger Agreement" for a discussion of the right MacDermid and PTI
each will have to terminate the merger agreement at any time after September 30,
1999, even if the shareholders approve the merger.
AS DESCRIBED IN MORE DETAIL ELSEWHERE IN THIS JOINT PROXY
STATEMENT -- PROSPECTUS, THE NUMBER OF SHARES OF MACDERMID COMMON STOCK TO BE
EXCHANGED FOR EACH SHARE OF PTI COMMON STOCK WILL DEPEND BOTH ON THE "CURRENT
MARKET PRICE" OF MACDERMID COMMON STOCK AS OF THE COMPLETION OF THE MERGER AND
ON THE AMOUNT OF DIVIDENDS OWED ON THE PTI PREFERRED STOCK AT THAT TIME.
"Current Market Price" means the average of the daily closing price for
MacDermid common stock on the New York Stock Exchange for the 30 consecutive
trading days preceding the completion of the merger, ignoring the highest and
lowest closing prices during that period. See "Exchange Ratio Assumption" and
"Merger Transaction."
17
<PAGE> 28
The following table provides the closing sales price of MacDermid common
stock as reported on the NYSE and the equivalent per share price of PTI common
stock giving effect to the merger on February 18, 1999, which was the last
business day preceding the announcement of the merger, and on August 27, 1999,
which was the last practicable date prior to the mailing of this joint proxy
statement -- prospectus.
<TABLE>
<CAPTION>
CLOSING PRO FORMA
MARKET VALUE PER SHARE: SALES PRICE EQUIVALENT PER SHARE
- ----------------------- ----------- --------------------
<S> <C> <C>
February 18, 1999.......................................... $38.88 $281.80
August 27, 1999............................................ $34.38 $248.67
</TABLE>
The pro forma equivalent market values of PTI common stock shown in the
preceding table have been calculated assuming an exchange ratio of 7.248 as of
February 18, 1999 and an exchange ratio of 7.233 as of August 27, 1999. Those
exchange ratios were determined using a Current Market Price of $38.73 as of
February 18, 1999 and a Current Market Price of $36.82 as of August 27, 1999,
which would have been the Current Market Prices had the merger been completed as
of those dates, together with the other assumptions described in this joint
proxy statement -- prospectus. See "Exchange Ratio Assumptions."
THE ACTUAL EQUIVALENT MARKET VALUE OF PTI COMMON STOCK IN THE MERGER WILL
LIKELY BE DIFFERENT. If the actual Current Market Price as of the completion of
the merger is greater than the Current Market Price as of August 27, 1999, the
exchange ratio and the pro forma equivalent value of the PTI common stock would
be greater than the assumed exchange ratio and pro forma equivalent value shown
in the preceding table. Conversely, if the actual Current Market Price as of the
completion of the merger is less than the Current Market Price as of August 27,
1999, the exchange ratio and the pro forma equivalent value of the PTI common
stock would be less than the assumed exchange ratio and pro forma equivalent
value shown in the preceding table.
18
<PAGE> 29
RISK FACTORS
The following risks should be considered by the MacDermid and PTI
shareholders in deciding whether to vote in favor of approval of the merger
agreement. In addition, we strongly urge you to consider the items disclosed
elsewhere in this joint proxy statement -- prospectus, including under the
caption "Cautionary Statement Concerning Forward-Looking Statements" and in the
documents incorporated by reference in this joint proxy statement -- prospectus.
THERE IS NO GUARANTEE THAT THE HOLDERS OF PTI COMMON STOCK WILL RECEIVE ANY
PARTICULAR VALUE FOR THEIR SHARES OF PTI COMMON STOCK.
Holders of PTI common stock will not know, at the time they vote, the ratio
of the number of shares of MacDermid common stock to be exchanged for each share
of PTI common stock. That ratio will depend on the market value of MacDermid
stock during the 30 trading days prior to the completion of the merger and on
the amount of dividends owed on the PTI preferred stock. There is no minimum or
maximum exchange ratio. See "Exchange Ratio Assumptions."
IN ASSESSING THE FINANCIAL TERMS OF THE MERGER PRIOR TO APPROVING THE MERGER
AGREEMENT, NEITHER THE MANAGEMENT NOR THE BOARDS OF DIRECTORS OF MACDERMID AND
PTI HAD THE BENEFIT OF AN OPINION FROM A FINANCIAL ADVISOR REGARDING THE
FAIRNESS OF THOSE TERMS TO THE MACDERMID AND PTI SHAREHOLDERS.
Neither MacDermid nor PTI engaged a financial advisor to evaluate the
fairness, from a financial point of view, of the amount of MacDermid stock to be
exchanged in the merger for all of the outstanding shares of PTI common stock
and preferred stock and the PTI warrant.
Instead, MacDermid and PTI relied on the experience of their management and
directors in evaluating the transaction. Other members of the investment
community, including analysts who periodically assess MacDermid's performance,
may conclude that MacDermid has materially over-valued or under-valued PTI. Such
a determination could materially affect the price at which shares of MacDermid
common stock trade before and after the merger is completed.
MACDERMID AND PTI SHAREHOLDERS WILL HAVE LIMITED INDEMNIFICATION FOR DAMAGES FOR
ANY MISREPRESENTATION OR OTHER BREACH OF THE MERGER AGREEMENT.
MacDermid and the PTI shareholders as a group will not be indemnified by
the other under the merger agreement if damages are $2.0 million or less. In
addition, the amount of damages for which MacDermid and the PTI shareholders may
be indemnified will not exceed the Current Market Price of the 127,000 escrowed
shares as of the completion of the merger. Therefore, neither MacDermid nor the
PTI shareholders will be indemnified for the first $2.0 million of damages and
any damages exceeding the value of the escrowed shares.
Further, any claim for indemnification must be asserted within 12 months
after the merger is completed. It is possible, therefore, that the party
entitled to indemnification may not become aware of a breach of the merger
agreement until after the deadline for asserting an indemnification claim.
ANTITRUST REVIEW MAY PREVENT OR DELAY THE MERGER OR REQUIRE THE DIVESTITURE OF A
PORTION OF THE COMBINED COMPANY'S ASSETS.
MacDermid and PTI have made several submissions to the Federal Trade
Commission under the Hart-Scott-Rodino Act beginning on February 26, 1999. The
Commission has asserted, however, that those submissions did not satisfy all
applicable requirements. Without agreeing with the Federal Trade Commission's
assertion, MacDermid and PTI have represented to the Commission that they will
not
19
<PAGE> 30
complete the merger without giving the Commission at least 35 days prior notice.
The Federal Trade Commission may take one or more of several actions
including the following:
- - seek to prevent the merger by initiating a lawsuit alleging the merger will
violate federal antitrust laws;
- - allow the merger to proceed; or
- - seek to negotiate a settlement which would likely involve a divestiture of a
portion of the combined company's assets.
In particular, you should note that if the Federal Trade Commission
commences a lawsuit to challenge the merger on antitrust grounds, we would not
be able to proceed with the merger unless the court specifically rules against
the Federal Trade Commission's request to delay the merger. We also cannot
guarantee that we would be able to negotiate a divestiture that would be
acceptable to us and the Federal Trade Commission. See "Merger
Transaction -- Required Regulatory Approvals."
MACDERMID'S PROFITABILITY COULD BE ADVERSELY AFFECTED IF IT IS UNABLE TO
INTEGRATE PTI'S OPERATIONS EFFECTIVELY.
The merger involves the integration of two companies that have previously
operated independently. MacDermid may not be able to integrate the operations of
PTI without encountering difficulties. These difficulties could include
interruptions and dislocations associated with the integration of different
business strategies and disparate business backgrounds and operating cultures of
the two companies. In addition, after the merger, the combined resources of the
two companies may not be adequate to handle the needs of the combined companies.
MacDermid's inability to integrate PTI's business efficiently could adversely
affect MacDermid's profitability in a variety of ways. Examples include the
following:
- - difficulty integrating PTI could adversely affect MacDermid's revenue from
existing operations by diverting management's attention;
- - integration problems could adversely affect MacDermid's ability to retain or
expand PTI's customer base; and
- - delays in integration could increase MacDermid's expenses by requiring
MacDermid to incur greater personnel and consulting expenses and could defer
or preclude MacDermid's ability to realize cost reductions for the combined
company.
MACDERMID'S INCREASED FINANCIAL LEVERAGE AS A RESULT OF THE MERGER COULD
ADVERSELY AFFECT ITS LIQUIDITY AND FINANCIAL CONDITION.
MacDermid's increased leverage could adversely affect its liquidity, as a
substantial portion of available cash from operations will have to be applied to
meet debt service requirements. In the event of a cash shortfall, MacDermid
could be forced to reduce other expenditures and forego potential acquisitions
to be able to meet its debt service obligations. MacDermid's increased leverage
could also adversely affect its ability to obtain additional financing for
working capital, acquisitions or other purposes and could make MacDermid more
vulnerable to economic downturns and competitive pressures.
MacDermid expects to incur between $155 million and $165 million of
additional senior debt in connection with the merger in order to refinance PTI's
outstanding financial indebtedness. In addition, PTI's ratio of shareholders'
equity to assets of 5.8% as of June 30, 1999 is relatively low compared to
MacDermid's ratio of 29.2% as of that date. As a consequence of both those
factors, MacDermid's pro forma ratio of long-term debt as a percentage of total
capitalization will increase materially upon completion of the merger. Moreover,
the
20
<PAGE> 31
increase in MacDermid's long-term debt as a percentage of its capitalization as
a consequence of the merger will follow the increase in its leverage that
resulted from MacDermid's December 1998 acquisition of W. Canning plc. The
following table illustrates the pro forma impact of the merger and the Canning
acquisition on MacDermid's ratio of long-term debt to capitalization.
<TABLE>
<CAPTION>
ACTUAL AT ACTUAL AT JUNE 30, 1999
JUNE 30, JUNE 30, PRO FORMA
1998 1999 FOR PTI MERGER
--------- --------- ---------------
<S> <C> <C> <C>
MacDermid ratio of
long-term debt to
equity capital..... 55.5% 62.7% 71.4%
</TABLE>
Similarly, MacDermid's debt in relation to its cash flow and EBITDA
increased materially as a result of the Canning acquisition and will further
increase as a result of the merger, as illustrated by the following table:
<TABLE>
<CAPTION>
ACTUAL ACTUAL PRO FORMA
AS OF AND AS OF AND FOR PTI MERGER
FOR YEAR ENDED FOR YEAR ENDED AS OF AND
MARCH 31, MARCH 31, FOR YEAR ENDED
1998 1999 MARCH 31, 1999
--------------- --------------- ------------------
<S> <C> <C> <C>
MacDermid ratio of
long-term debt to
cash provided by
operations.......... 3.3x 4.8x 5.1x
MacDermid ratio of
long-term debt to
EBITDA.............. 1.8x 3.2x 3.0x
</TABLE>
See "MacDermid Selected Financial Data" and "Unaudited Pro Forma Combined
Condensed Selected Financial Data."
MACDERMID'S HISTORICAL OPERATING RESULTS MAY BE OF LIMITED USE IN EVALUATING ITS
HISTORICAL PERFORMANCE AND PREDICTING ITS FUTURE RESULTS BECAUSE OF THE
ACCOUNTING FOR RECENT ACQUISITIONS.
Since March 31, 1995, MacDermid has acquired a number of businesses with a
total of approximately $337.6 million in assets, including the December 1998
acquisition of W. Canning plc. for approximately $148.2 million and the December
1995 acquisition of the electronics and printing division of Hercules
Incorporated for approximately $139.0 million.
MacDermid used the purchase method of accounting for each of its previous
acquisitions, and therefore, the operating results of each acquired company are
included in MacDermid's financial statements only from the date of its
acquisition. Because of MacDermid's recent acquisitions and its use of the
purchase method of accounting, MacDermid's historical operating results may be
of limited relevance in evaluating the historical financial performance of the
combined company and predicting its future operating results.
MACDERMID'S FAILURE TO MANAGE ITS GROWTH STRATEGY EFFECTIVELY MAY HAVE A
MATERIAL ADVERSE EFFECT ON MACDERMID'S RESULTS OF OPERATIONS AND FINANCIAL
CONDITION.
An important element of MacDermid's business strategy continues to involve
active and substantial efforts to acquire or combine with other companies that
would complement MacDermid's existing businesses. No assurance can be given,
however, that MacDermid will be able to identify additional suitable acquisition
targets or consummate any other acquisitions.
If MacDermid is able to identify and complete future acquisitions, its
ability to manage future growth will depend primarily upon its ability to do the
following:
- - monitor operations;
- - control costs;
- - maintain positive customer relations;
- - maintain regulatory compliance; and
- - attract, assimilate and retain additional qualified personnel.
MacDermid's failure to achieve any of those objectives in an efficient and
timely manner may cause interruptions and dislocations in its business. These
problems may have a negative effect on
21
<PAGE> 32
MacDermid's existing operations, as well as its ability to retain the customers
of the acquired businesses, operate the businesses profitably or otherwise
implement its growth strategy.
Also, the presence of one or more material liabilities of an acquired
company that are unknown to MacDermid at the time of acquisition may have a
material adverse effect on MacDermid.
VOTING CONTROL OF MACDERMID HELD BY ITS DIRECTORS, EXECUTIVE OFFICERS AND
PRINCIPAL SHAREHOLDERS MAY PERMIT THESE SHAREHOLDERS TO EXERCISE EFFECTIVE
CONTROL OVER THE OUTCOME OF CORPORATE ACTIONS REQUIRING SHAREHOLDER APPROVAL.
MacDermid's directors and executive officers and the MacDermid Employees
Profit Sharing and Employees Stock Ownership Plan and pension plan will
beneficially own, in the aggregate, approximately 29.0% of the MacDermid stock
outstanding immediately after the merger.
Citicorp Venture Capital will beneficially own, in the aggregate,
approximately 12.5% of the MacDermid stock outstanding immediately after the
merger.
As a result, if these shareholders take a common position, they could
exercise effective control over the outcome of corporate actions requiring
shareholder approval, including the election of directors and the approval of
significant corporate transactions, such as a merger or sale of all or
substantially all of MacDermid's assets. The investment objectives of these
shareholders may not be the same as yours or as those of MacDermid's other
shareholders.
- --------------------------------------------------------------------------------
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
THIS JOINT PROXY STATEMENT -- PROSPECTUS, AS WELL AS THE OTHER
DOCUMENTS TO WHICH WE REFER IN THIS JOINT PROXY STATEMENT -- PROSPECTUS,
DESCRIBE MANY OF THE POSITIVE FACTORS AFFECTING MACDERMID'S FUTURE
BUSINESS PROSPECTS. SHAREHOLDERS SHOULD ALSO BE AWARE OF FACTORS THAT
COULD HAVE A NEGATIVE IMPACT ON THOSE PROSPECTS. THOSE FACTORS INCLUDE
POLITICAL, ECONOMIC OR OTHER CONDITIONS SUCH AS CURRENCY EXCHANGE RATES,
INFLATION RATES, RECESSIONARY OR EXPANSIONARY TRENDS, TAXES AND
REGULATIONS AND LAWS AFFECTING MACDERMID'S BUSINESS; COMPETITIVE PRODUCTS,
ADVERTISING, PROMOTIONAL AND PRICING ACTIVITY; THE DEGREE OF ACCEPTANCE OF
NEW PRODUCT INTRODUCTIONS IN THE MARKETPLACE; TECHNICAL DIFFICULTIES THAT
MAY ARISE WITH NEW PRODUCT INTRODUCTIONS; AND THE DIFFICULTY OF
FORECASTING SALES AT VARIOUS TIMES IN VARIOUS MARKETS.
- --------------------------------------------------------------------------------
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MACDERMID SPECIAL MEETING
This joint proxy statement -- prospectus is being furnished to MacDermid
shareholders in connection with the solicitation of proxies by the MacDermid
Board of Directors for use at the MacDermid special meeting. At the MacDermid
special meeting, MacDermid shareholders will be asked to consider and vote upon
a proposal to approve the merger agreement under which shares of MacDermid
common stock will be exchanged for all of the outstanding shares of PTI common
stock and preferred stock, all as summarized in this joint proxy
statement -- prospectus and as more fully described in the merger agreement.
Attached as Appendix A and Appendix B to this joint proxy
statement -- prospectus are the merger agreement and the first amendment to the
merger agreement.
DATE, TIME AND PLACE
The MacDermid special meeting will be held at the Leever Building, 245
Freight Street, Waterbury, Connecticut 06702 on Thursday, September 30, 1999, at
10:00 A.M. EDT.
RECORD DATE AND VOTING RIGHTS
The MacDermid Board fixed August 6, 1999 as the record date for the
determination of shareholders entitled to notice of and to vote at the MacDermid
special meeting. As of the record date, there were 25,157,299 shares of
MacDermid common stock outstanding, held by approximately 1,420 holders of
record. Each holder of record of shares of MacDermid common stock on the record
date is entitled to cast one vote per share, in person or by proxy, at the
MacDermid special meeting.
As of August 6, 1999, directors and executive officers of MacDermid and
their affiliates had the right to vote 5,043,160 shares, or approximately 20.0%
of the outstanding shares of MacDermid common stock. The directors and executive
officers of MacDermid have advised MacDermid that they intend to vote their
shares of MacDermid common stock "FOR" approval of the merger agreement. See
"Beneficial Ownership of MacDermid."
QUORUM AND VOTING OF PROXIES
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of MacDermid common stock entitled to vote is necessary to
constitute a quorum at the MacDermid special meeting. Shareholders voting or
abstaining from voting will be counted as present for purposes of constituting a
quorum. Under the NYSE rules, brokers who hold shares in street name for
customers will not have authority to vote these shares on the proposal to
approve the merger agreement unless they have received written instructions from
beneficial owners. Shares not voted on the proposal and abstentions will have
the same effect as votes against the proposal.
All shares which are entitled to vote and are represented at the MacDermid
special meeting by properly executed proxies received before or at the MacDermid
special meeting, and not revoked, will be voted at the MacDermid special meeting
in accordance with the instructions indicated on the proxies. IF NO INSTRUCTIONS
ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT.
The MacDermid Board knows of no matter to be presented at the MacDermid
special meeting other than the proposal to vote on the approval of the merger
agreement. If any other matter is properly presented at the MacDermid special
meeting for consideration, such as consideration of a motion to adjourn the
MacDermid special meeting to another time and/or place, including for the
purpose of soliciting additional proxies, the persons appointed as proxies will
have discretion to vote on these matters in accordance with their
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best judgment, except that shares represented by proxies which have been voted
"AGAINST" approval of the merger agreement will not be voted in respect of any
motion made for adjournment of the MacDermid special meeting for purposes of
soliciting additional votes to approve the merger agreement.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked or superseded
by any of the following actions:
- filing a written notice of revocation bearing a later date than the
proxy with the Corporate Secretary of MacDermid (John L. Cordani) at or
before the taking of the vote at the MacDermid special meeting;
- duly executing a later dated proxy relating to the same shares and
delivering it to the Corporate Secretary of MacDermid (John L. Cordani)
before the taking of the vote at the MacDermid special meeting; or
- attending the MacDermid special meeting and voting in person. MacDermid
shareholders should note, however, that merely attending the MacDermid
special meeting in person without casting a vote at the meeting will not
constitute a revocation of a proxy.
MacDermid will pay all expenses of this solicitation, including the cost of
preparing and mailing this joint proxy statement -- prospectus to MacDermid
shareholders. Directors, officers and employees of MacDermid will also solicit
proxies in person or by telephone, telegram, facsimile transmission or other
means of communication. MacDermid will not pay these individuals for their
solicitation activity but will reimburse them for their reasonable out-of-pocket
expenses. Arrangements will also be made with custodians, nominees and
fiduciaries for forwarding of proxy solicitation materials to beneficial owners
of shares held of record by the custodians, nominees and fiduciaries, and
MacDermid will reimburse the custodians, nominees and fiduciaries for reasonable
expenses. MacDermid also has retained D.F. King & Co., Inc. of New York, New
York to assist it in distributing the joint proxy statement -- prospectus to and
soliciting proxies from shareholders. The fee paid by MacDermid for King's
services will be approximately $4,000, plus reimbursement of out-of-pocket
costs.
SHAREHOLDER VOTE REQUIRED
Under the rules of the NYSE, the approval of the merger agreement requires
the affirmative vote of the holders of a majority of the shares of MacDermid
common stock outstanding as of the record date for the MacDermid special
meeting.
RECOMMENDATION OF MACDERMID BOARD
The MacDermid Board of Directors believes the merger agreement is in the
best interests of MacDermid's shareholders and has unanimously approved the
merger agreement. THE BOARD OF DIRECTORS OF MACDERMID UNANIMOUSLY RECOMMENDS
THAT THE MACDERMID SHAREHOLDERS VOTE "FOR" THE PROPOSAL TO APPROVE THE MERGER
AGREEMENT.
APPRAISAL RIGHTS
The MacDermid shareholders who elect to dissent from the approval of the
merger agreement will not be entitled to have their shares appraised and
purchased in accordance with the Connecticut Business Corporation Act if the
merger is completed.
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PTI SPECIAL MEETING
This joint proxy statement -- prospectus is being furnished to shareholders
of PTI in connection with the solicitation of proxies by the Board of Directors
of PTI for use at the PTI special meeting. At the PTI special meeting,
shareholders of PTI will be asked to consider and vote upon a proposal to
approve the merger agreement under which shares of MacDermid common stock will
be exchanged for all of the outstanding shares of PTI common stock and preferred
stock, all as summarized in this joint proxy statement -- prospectus and as more
fully described in the merger agreement. Attached as Appendix A and Appendix B
to this joint proxy statement -- prospectus are the merger agreement and the
first amendment to the merger agreement.
DATE, TIME AND PLACE
The PTI special meeting will be held at 900 Middlesex Turnpike, Billerica,
Massachusetts 01821, on Thursday, September 30, 1999, at 9:00 A.M. EDT.
RECORD DATE AND VOTING RIGHTS
The PTI Board fixed August 6, 1999 as the record date for the determination
of shareholders entitled to notice of and to vote at the PTI special meeting.
Only the holders of PTI Class A common stock are entitled to vote at the PTI
special meeting. As of the record date, there were 100.002 shares of PTI Class A
common stock outstanding, held by approximately 19 holders of record. Each
holder of record of shares of PTI Class A common stock on the record date is
entitled to cast one vote per share, in person or by proxy, at the PTI special
meeting.
As of August 6, 1999, PTI directors and executive officers and their
affiliates had the right to vote 51.518 shares of PTI Class A common stock or
approximately 51.518% of the shares of PTI Class A common stock outstanding as
of that date. See "Beneficial Ownership of PTI."
QUORUM AND VOTING OF PROXIES
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of PTI Class A common stock entitled to vote is necessary to
constitute a quorum at the PTI special meeting. Shareholders voting or
abstaining from voting on any issue will be counted as present for purposes of
constituting a quorum. Shares not voted on the proposal and abstentions will
have the same effect as votes against the proposal.
All shares which are entitled to vote and are represented at the PTI
special meeting by properly executed proxies received before or at the PTI
special meeting, and not revoked, will be voted at the PTI special meeting in
accordance with the instructions indicated on the proxies. IF NO INSTRUCTIONS
ARE INDICATED, SUCH PROXIES WILL BE VOTED FOR APPROVAL OF THE MERGER AGREEMENT.
The PTI Board knows of no matter to be presented at the PTI special meeting
other than the proposal to vote on the approval of the merger agreement. If any
other matter is properly presented at the PTI special meeting for consideration,
such as consideration of a motion to adjourn the PTI special meeting to another
time and/or place, including for the purpose of soliciting additional proxies,
the persons appointed as proxy will have discretion to vote on these matters in
accordance with their best judgment. Shares represented by proxies which have
been voted "AGAINST" approval of the merger agreement will not be voted in
respect of any motion made for adjournment of the PTI special meeting for
purposes of soliciting additional votes to approve the merger agreement.
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Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked or superseded
by any of the following actions:
- filing a written notice of revocation bearing a later date than the
proxy with the Corporate Secretary of PTI (Thomas C. Weaver) at or
before the taking of the vote at the PTI special meeting;
- duly executing a later dated proxy relating to the same shares and
delivering it to the Corporate Secretary of PTI (Thomas C. Weaver)
before the taking of the vote at the PTI special meeting; or
- attending the PTI special meeting and voting in person. PTI shareholders
should note, however, that merely attending the PTI special meeting in
person without casting a vote at the meeting will not alone constitute a
revocation of a proxy.
PTI will pay all expenses of this solicitation, including the cost of
mailing this joint proxy statement -- prospectus to PTI shareholders. Directors,
officers and employees of PTI will also solicit proxies in person or by
telephone, telegram, facsimile transmission or other means of communication. PTI
will not pay these individuals for their solicitation activity but will
reimburse them for their reasonable out-of-pocket expenses.
SHAREHOLDER VOTE REQUIRED
Under PTI's Certificate of Incorporation and the Delaware General
Corporation Law, the approval of the merger agreement requires the affirmative
vote of the holders of a majority of the shares of PTI Class A common stock, the
only class of PTI stock entitled to vote at the PTI special meeting.
RECOMMENDATION OF PTI BOARD
The PTI Board believes that the merger agreement is in the best interests
of PTI's shareholders and has unanimously approved the merger agreement. THE
BOARD OF DIRECTORS OF PTI UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF PTI
VOTE "FOR" THE PROPOSAL TO APPROVE THE MERGER AGREEMENT. SEE "MERGER
TRANSACTION -- INTERESTS OF RELATED PERSONS IN THE MERGER."
APPRAISAL RIGHTS
If the merger is completed, holders of PTI common stock who previously
elected to dissent from the approval of the merger agreement and holders of
non-voting PTI common stock and PTI preferred stock may be entitled to have
their shares appraised and purchased in accordance with Section 262 of the
Delaware General Corporation Law.
IN ORDER FOR A PTI SHAREHOLDER TO EXERCISE APPRAISAL RIGHTS, A NOTICE OF
THAT SHAREHOLDER'S INTENTION TO EXERCISE HIS OR HER APPRAISAL RIGHTS AS PROVIDED
UNDER DELAWARE LAW MUST BE SENT BY THAT SHAREHOLDER AND RECEIVED BY PTI BEFORE
THE PTI SPECIAL MEETING, AND THAT SHAREHOLDER MUST VOTE, IF ENTITLED TO DO SO,
AGAINST THE APPROVAL OF THE MERGER AGREEMENT, OR ABSTAIN FROM VOTING, AND COMPLY
WITH THOSE PROCEDURES REQUIRED BY DELAWARE LAW, AS MORE FULLY DESCRIBED IN
"MERGER TRANSACTION -- RIGHTS OF APPRAISAL." FAILURE TO SEND NOTICE, TO VOTE
AGAINST THE APPROVAL OF THE MERGER AGREEMENT OR TO FOLLOW THE OTHER PROCEDURES
WILL CONSTITUTE A WAIVER OF THE SHAREHOLDER'S APPRAISAL RIGHTS. SEE APPENDIX C
TO THIS JOINT PROXY STATEMENT -- PROSPECTUS FOR A DISCUSSION OF APPRAISAL RIGHTS
AND A DESCRIPTION OF THE PROCEDURES THAT MUST BE FOLLOWED TO PERFECT APPRAISAL
RIGHTS.
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THE COMPANIES
MACDERMID
MacDermid is a leading global manufacturer of speciality chemicals and
processes. MacDermid's main product offerings encompass three broad businesses
and processes: (a) electronics/printed circuits, (b) industrial finishing of
metals and plastics and (c) graphic arts. MacDermid has manufacturing facilities
and sales offices located in 19 countries in North America, Europe and Asia.
MacDermid's graphic arts products generally consist of liquid photopolymers
for use in the manufacture of printing plates. Photopolymers used in the graphic
arts industry generally harden when exposed to light. In making printing plates,
the photopolymer sheet is selectively contacted with light so that hardened
raised areas, corresponding to the image to be printed, are created when the
unexposed (i.e., soft) photopolymer is removed.
MacDermid is a Connecticut corporation that was founded in 1922.
MacDermid's principal executive office is located at 245 Freight Street,
Waterbury, Connecticut 06702. MacDermid's telephone number is (203) 575-5700.
In December 1998, MacDermid acquired W. Canning plc. for approximately
$148.2 million. The acquisition, which was financed primarily through borrowings
under a senior credit facility, was accounted for using the purchase method of
accounting for business transactions. Canning, an international specialty
chemical organization based in Birmingham, England, has operations predominantly
in Europe and North America and, to a lessor extent, in Asia. Canning operates
in four principal product groupings: surface finishing with emphasis in plating
technologies, synthetic lubricants and fluids for the offshore oil industry,
sealants and adhesives used by component manufacturers and additives for fuel,
water and waste treatment facilities.
See "Where You Can Find More Information" for a description of various
documents incorporated by reference into this joint proxy
statement -- prospectus that contain more information on MacDermid.
PTI
PTI is the parent company of Polyfibron Technologies, Inc, NAPP Systems,
Inc. and Rollin S.A. Through its subsidiaries, PTI develops, produces and
markets specialty chemicals and related materials, including printing plates,
used primarily in the printing industry to transfer images to surfaces such as
paper, cardboard or film. PTI's subsidiaries have manufacturing facilities
located in the United States, France and Australia.
PTI's principal product lines include solid sheet photopolymer printing
plates for use by the flexographic printing industry. In solid sheet
flexographic printing, a flexible substance (such as rubber or photopolymers) is
used to create printing plates in order to selectively transfer ink onto a
surface, thereby creating an image.
PTI, a Delaware corporation, was founded in 1994, when it acquired
Polyfibron Technologies, Rollin and other assets and liabilities from W.R. Grace
& Co. PTI's principal executive office is located at 900 Middlesex Turnpike,
Billerica, Massachusetts 01821. PTI's telephone number is (978) 439-2000.
PTI has completed several acquisitions since 1994, the largest of which
occurred in January 1997 when it acquired NAPP Systems for approximately $56.8
million in a transaction that was accounted for using the purchase method of
accounting. NAPP Systems develops, manufactures and markets proprietary
expendable products and processing equipment for imaging systems primarily for
use in the newspaper industry. In addition, NAPP Systems distributes expendable
products and processing equipment to the commercial printing industry.
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MERGER TRANSACTION
We believe that this summary together with the section of this joint proxy
statement -- prospectus entitled "Merger Agreement" describes all material terms
of the merger and the merger agreement. However, we recommend that you read
carefully the complete text of the merger agreement and other information that
may be important to you. The merger agreement and the first amendment to the
merger agreement are attached to this joint proxy statement -- prospectus as
Appendix A and Appendix B and are incorporated by reference into this joint
proxy statement -- prospectus.
MACDERMID BACKGROUND AND REASONS FOR THE MERGER
Since MacDermid's acquisition of its existing graphic arts business from
Hercules Incorporated in December 1995, MacDermid has investigated a number of
strategies for expanding its product offerings to the graphic arts industry and
for expanding the geographic scope of this business line. MacDermid's existing
graphic arts business, located primarily in North America, consists of the sale
of liquid photopolymers and related materials for use in the manufacture of
flexographic printing plates. Liquid photopolymers, while economical to use,
present technological limitations in that they can be used only with water-based
inks, thus limiting their market potential. Solid sheet photopolymers, on the
other hand, are capable of use with both water-based and solvent-based inks, and
are thus suitable for a wider variety of uses. MacDermid believes that
increasing its graphic arts product line to include solid sheet photopolymer
printing plates and related products will enable MacDermid to utilize more
completely the marketing and manufacturing expertise it has developed in the
graphic arts sector. In addition, MacDermid believes the diversification will be
important if, as MacDermid expects, customer demand for solid sheet photopolymer
products increases as compared to demand for liquid photopolymer products.
Similarly, MacDermid expects that by penetrating the graphic arts industry
outside of North America, which represents a much larger potential market,
MacDermid will be able to increase its revenue and net income from the graphic
arts industry more quickly than it could if it continued to compete solely in
North America. MacDermid also believes a more geographically diverse revenue
base will mitigate, at least in part, the adverse impact on MacDermid of a
deterioration in business conditions in any particular region.
Following the 1995 Hercules acquisition, MacDermid was involved in
discussions with five other companies, including PTI, in an effort to expand
MacDermid's printing business and to enable MacDermid to supply solid sheet
photopolymer printing plates and related printing products to the graphic arts
industry. MacDermid's discussions with those companies were extensive and
included consideration of acquisitions, joint ventures, licensing arrangements
and distribution arrangements.
Between the completion of the Hercules acquisition and the fall of 1997,
MacDermid discussed a licensing and distribution arrangement for solid sheet
photopolymers with a large multi-national chemical company based in Asia. Those
discussions were inconclusive, and MacDermid's evaluation of that business
opportunity led it to believe that MacDermid could achieve its strategic
objectives in the graphic arts industry more effectively by acquiring an
existing business rather than beginning a new distribution program for solid
sheet photopolymer products.
MacDermid began to examine the possibility of acquiring PTI in the fall of
1997. After a thorough investigation was made, MacDermid concluded that the
acquisition of PTI would provide the most desirable opportunity for MacDermid to
increase its
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participation in the printing market, to further the geographic diversification
of its business, and to add a significant business to MacDermid that could be
expected to be accretive to MacDermid's earnings on a per share basis.
MacDermid's negotiations with PTI at that time were unsuccessful, primarily
because the parties were unable to agree upon the valuation of PTI. MacDermid
valued PTI's capital stock at approximately $240 million to $260 million while
PTI sought a value of approximately $280 million to $300 million. In addition,
PTI wanted the merger agreement to provide for a floating exchange ratio that
would increase or decrease within a specified range if the market price of
MacDermid common stock decreased or increased between the date of the merger
agreement and the completion of the merger; however, a floating exchange ratio
was unacceptable to MacDermid. MacDermid and PTI terminated negotiations in
January 1998.
MacDermid thereafter resumed its examination of other ways to achieve its
strategic objectives in the graphic arts sector. In one case, MacDermid
unsuccessfully explored a joint venture with a large multi-national chemical
company based primarily in Europe. MacDermid also considered the acquisition of
a subsidiary or division of two other companies. In each of those cases,
preliminary due diligence revealed that the product lines and customer bases
that MacDermid would acquire were not broad enough to satisfy MacDermid's
objectives. MacDermid was successful, however, in negotiating a licensing and
distribution arrangement for solid sheet photopolymers with the multi-national
chemical company based in Asia with which it had previous discussions. MacDermid
continued to believe, however, that it could better achieve its strategic
objectives by acquiring an existing business such as PTI rather than beginning a
new distribution program for solid sheet photopolymer products.
In December 1998, negotiations for the acquisition of PTI started anew when
PTI indicated to MacDermid that PTI was willing to accept a fixed exchange ratio
and a valuation of PTI that was generally consistent with the value PTI sought
in late 1997 and early 1998. In response to PTI's overture, MacDermid initially
offered to issue 7,000,000 shares of MacDermid common stock. Based upon the
average trading price for MacDermid common stock in the fourth quarter of
calendar 1998 of $35.64, MacDermid's proposal valued PTI's capital stock at
approximately $265 million. PTI countered by seeking a total of 9,000,000
million shares of MacDermid common stock for PTI shareholders, valuing PTI at
approximately $321 million. After further negotiations, MacDermid and PTI
ultimately agreed in January 1999 that MacDermid would issue a minimum of
7,573,000 shares of MacDermid common stock as of the completion of the merger
and would place 127,000 shares of MacDermid common stock in escrow to satisfy
any indemnification payment MacDermid would be entitled to receive under the
merger agreement. Based upon the average trading price for MacDermid common
stock in January 1999 of $38.72, the minimum value for PTI's capital stock was
approximately $293 million, assuming no escrowed shares are released to PTI
shareholders.
After reaching an agreement in principle on those basic terms, MacDermid
and PTI then evaluated the other party's financial condition and recent
operating results, developed its own internal assessment of the other party's
future financial prospects, and negotiated the terms of the merger agreement.
MacDermid and PTI entered into the merger agreement on February 18, 1999.
MacDermid and PTI entered into the first amendment to the merger agreement
on July 27, 1999. The primary purpose of the first amendment is to extend the
termination date of the merger agreement to September 30, 1999 from July 31,
1999, in order to provide more time for MacDermid and PTI to prepare this joint
proxy statement -- prospectus and to seek the Federal Trade Commission's
approval to proceed with the
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merger. The first amendment also sets forth the parameters within which
MacDermid and PTI would be willing to negotiate a settlement with the Federal
Trade Commission if necessary to obtain the Commission's approval. See
"-- Required Regulatory Approvals" below. In addition, in order to permit PTI to
negotiate and complete any sale of assets that might be required as part of a
settlement with the Federal Trade Commission, the first amendment modified the
restrictions under the merger agreement on PTI's sale of assets during the term
of that agreement. See "Merger Agreement -- Conduct Pending the Merger."
MacDermid believes that PTI is among one of the top three competitors
worldwide in each of its two principal product lines based upon 1998 sales data.
In one product line, PTI had 18% of worldwide sales compared to approximately
30% achieved by E.I. DuPont de Nemours. In the second product line, PTI had 14%
of worldwide sales compared to approximately 30% achieved by Day International.
E.I. DuPont de Nemours & Co. and Day International were the leading competitors
in those product lines in 1998. Thus, MacDermid believes that the acquisition of
PTI will immediately establish MacDermid as one of the leading global suppliers
of specialty chemicals and related materials to the graphic arts industry, as
well as provide MacDermid with a fully integrated array of product offerings to
this industry.
As a result of MacDermid's diligence efforts, MacDermid has become familiar
with PTI's operations and the potential that those operations represent for
MacDermid. MacDermid's management believes that the PTI acquisition is
strategically desirable primarily for the following reasons:
- The PTI acquisition will improve significantly MacDermid's position as a
supplier to the graphic arts industry. MacDermid estimates that it
currently has the fifth greatest market share among suppliers of
specialty chemicals and related materials to the graphic arts industry.
MacDermid hopes that the acquisition of PTI and its solid sheet
photopolymer business will improve MacDermid's status as a global
competitor in the supply of specialty chemicals and related materials to
the graphic arts industry.
- The PTI acquisition will increase the diversity of MacDermid's overall
sources of revenue, both by product line and geography. MacDermid hopes
that this further diversification will increase the stability of
MacDermid's cash flow by providing MacDermid with three essentially
equivalent businesses in electronics, industrial finishing of metals and
plastics and graphic arts. In addition, MacDermid expects that the PTI
acquisition will further balance MacDermid's overall geographic
diversification.
- The PTI acquisition will allow MacDermid to participate in a much broader
section of the graphic arts industry by providing MacDermid the ability
to offer solid sheet photopolymers, newspaper plates, printing blankets,
printing rollers and printing sleeves. In addition, the acquisition will
provide MacDermid with the ability to expand its graphic arts business
beyond North America.
- The PTI acquisition will add an additional business base to MacDermid
which is expected to be accretive to MacDermid's per share earnings in
the first full fiscal year and to be further accretive in subsequent
years.
- The PTI acquisition will add a management team and employee base with
significant experience in the specialty chemical/graphic arts industry.
PTI's management team has, on average, 15 years of experience in the
specialty
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chemicals and/or graphic arts business. Although none of PTI's officers
will become executive officers of MacDermid upon the completion of the
merger, MacDermid and PTI expect that several of PTI's senior officers,
including David R. Beckerman who has 40 years of experience in the
speciality chemical/graphic arts industry, will have substantial
responsibility in the combined company's graphic arts business.
MacDermid also considered the following challenges or potential
disadvantages of the proposed acquisition:
- PTI's business will represent a significant portion of the combined
company's operations, and therefore MacDermid's future net income per
share and its market capitalization would depend significantly on PTI's
operating results;
- the sale by both MacDermid and PTI of liquid flexographic photopolymer
products could cause the Federal Trade Commission to scrutinize whether
the proposed merger would have an impermissible anticompetitive effect,
which scrutiny likely would increase the cost and uncertainty of the
proposed transaction (see "-- Required Regulatory Approvals," below); and
- The challenges of and risks associated with integrating PTI's operations
with those of MacDermid would be greater than any prior acquisition
MacDermid had undertaken because of PTI's size and the geographic scope
of its operations.
Although MacDermid has acquired and integrated four significant business lines
during the past five years without any material disruption in the acquired
businesses, there can be no assurance that the strategic goals of the PTI merger
will be achieved. See "Risk Factors" and "Cautionary Statement Regarding
Forward-Looking Information."
PTI BACKGROUND AND REASONS FOR THE MERGER
Polyfibron Technologies' historic predecessor, Dewey & Almy, began to
produce specialty chemicals and related materials used to transfer images to
surfaces such as paper or cardboard in 1946 in Adams, Massachusetts. Dewey &
Almy was acquired by W.R. Grace & Co. in 1954. Since then, their presence in the
graphic arts industry was expanded by (a) implementing new product lines, (b)
geographical growth, and (c) acquisitions. When this portion of W.R. Grace &
Co.'s specialty chemicals division was bought out by its management and PTI was
formed, this growth continued.
PTI continually explores opportunities to expand its participation in the
graphic arts industry, both domestically and around the world, although none of
those strategic transactions was considered an alternative to the merger with
MacDermid. Several opportunities have come to fruition, including the
acquisitions of NAPP Systems in 1997, Jager Jeune SA and Axcyl SA in 1998 and
Supratech and International Composites in 1999.
PTI began to examine the possibility of merging with MacDermid in the fall
of 1997. During late 1996 and early 1997, PTI's board of directors was contacted
by several investment banks with the suggestion that a business combination of
some sort with MacDermid could provide significant strategic benefits to both
companies. MacDermid had recently acquired the Hercules business and was
believed to be very interested in growing its graphic arts segment. There were
no valuation discussions with any of these investment banks regarding a possible
combination with MacDermid. However, PTI was also discussing a potential initial
public offering of its common stock with several major investment banking firms.
The indications of PTI's value provided by those firms in connection with the
offering came in a very broad range. Moreover, there was significant
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uncertainty as to whether a public offering could be completed in then
prevailing market conditions and how the market ultimately would value PTI in an
offering. The initial MacDermid proposal described above valued PTI within the
range which might be achievable in a public offering. Accordingly, it was the
opinion of PTI's management and board of directors that the MacDermid offer
represented a good opportunity for PTI shareholders and that they were unlikely
to achieve greater value in a public equity offering.
After MacDermid approached PTI in late 1997 regarding a possible business
combination, PTI undertook a thorough investigation of MacDermid and commenced
negotiations regarding the terms of a possible transaction. The negotiations
terminated, however, in January 1998 for the reasons described above.
After PTI and MacDermid terminated discussions in early 1998, a third party
contacted PTI's chief executive officer regarding the possible acquisition of
PTI. Preliminary discussions were held between PTI's chief executive officer and
executives of the third party during the spring of 1998. Those discussions did
not lead to the third party making an offer to acquire PTI, for reasons which
PTI believes were primarily related to the third party's interest in acquiring
only PTI's printing plate business and not its printing blanket business. Since
the third party declined to make an offer, the possible transaction never became
of sufficient substance to be considered by PTI's board of directors as an
alternative to the proposed merger with MacDermid.
In December 1998, negotiations for the merger with MacDermid started anew
for the reasons described above and led to the execution of a merger agreement
on February 18, 1999. Also for the reasons described above, PTI and MacDermid
entered into the first amendment to the merger agreement on July 27, 1999. See
"-- MacDermid's Background and Reasons for the Merger," above.
As a result of PTI's discussions with MacDermid, PTI has become familiar
with MacDermid's operations and the potential that those operations represent
for PTI. PTI's management believes that the combination with MacDermid is
strategically desirable for the following reasons:
- PTI will be provided with an opportunity to combine its company with
MacDermid, a company that has achieved significant growth and
profitability in recent years.
- The PTI shareholders will be provided with MacDermid common stock, which
has outperformed broad stock market indices for each of the last five
years.
- PTI's management believes that the combination of PTI and MacDermid will
create a more substantial global competitor in the supply of chemicals
and related materials to the graphic arts industry.
- PTI's management believes that the combination of PTI and MacDermid will
improve the diversity of the combined company's overall sources of
revenue, both by product line and geography.
There can be no assurance that these goals will be achieved, however. In
particular, the past performance of MacDermid common stock is not necessarily
indicative of future performance. See "Risk Factors," "Cautionary Statement
Regarding Forward-Looking Information," and "Trading Price of MacDermid Common
Stock."
The PTI board of directors considered the following negative factors
associated with the terms and potential consequences of the proposed merger:
- the terms of the merger subjected the PTI shareholders to some
uncertainty as to the value of the consideration they would be receiving
upon completion of the
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<PAGE> 43
merger, because the merger agreement provided no protection against
volatility in the MacDermid stock price;
- PTI management was concerned that PTI would suffer a significant loss of
independence and autonomy as a consequence of the merger by becoming a
division of the combined, MacDermid controlled, entity; and
- PTI management was also concerned as to what opportunities there would be
for PTI employees within the new group and how PTI employees would be
treated generally within that group.
THE MERGER
The merger agreement provides that MacDermid will acquire PTI and all of
the outstanding PTI capital securities consisting of common stock, preferred
stock and a common stock warrant in exchange for shares of MacDermid common
stock and warrants to purchase shares of MacDermid common stock. The acquisition
will be accomplished through the merger of MCD Acquisition Corp., a wholly owned
MacDermid subsidiary, into PTI. The merger agreement also obligates MacDermid to
refinance PTI's financial indebtedness upon completion of the merger.
Accordingly, MacDermid has entered into an amended secured credit facility under
which it will borrow the funds necessary to refinance the PTI debt. As of June
30, 1999, the amount of debt to be refinanced totaled $164.3 million. Expenses
related to the merger are anticipated to aggregate approximately $11.7 million.
This amount consists primarily of charges resulting from anticipated debt
refinancing, and professional fees.
The merger agreement and the first amendment to the merger agreement are
attached to this joint proxy statement -- prospectus as Appendix A and Appendix
B and are described in more detail in the section of this joint proxy
statement -- prospectus titled "Merger Agreement." We encourage you to read the
merger agreement as it is the legal document that governs the merger. We also
encourage you to review the section of this joint proxy statement -- prospectus
titled "Comparison of the Rights of Holders of MacDermid Common Stock and
Holders of PTI Stock." After the merger, the rights of former PTI shareholders
will be governed by Connecticut law and MacDermid's charter and bylaws rather
than Delaware law and PTI's charter and bylaws.
WHAT PTI SECURITY HOLDERS WILL RECEIVE IN THE MERGER
If the merger is completed, each PTI shareholder will receive a portion of
7,573,000 shares of MacDermid common stock. As described in more detail below
and elsewhere in this joint proxy statement -- prospectus, the number of
MacDermid shares received by any PTI shareholder will depend primarily on the
following:
- the market value of MacDermid common stock during the 30 trading days
preceding the completion of the merger; and
- the number of shares of PTI common stock and preferred stock owned by the
shareholder.
In addition, holders of PTI common stock and the holder of a warrant to purchase
PTI common stock will also receive upon the completion of the merger an interest
in an escrow fund that may entitle them to receive additional MacDermid shares a
year or more after the merger is completed.
As of August 6, 1999, there were 9,175 outstanding shares of PTI preferred
stock and 855,000 outstanding shares of PTI common stock. In addition, 150,000
shares of PTI
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<PAGE> 44
common stock are issuable upon the exercise of a warrant held by Citicorp
Mezzanine Partners, L.P. Under the terms of the PTI warrant, Citicorp Mezzanine
Partners may purchase PTI common stock at an exercise price of approximately
$.01 per share.
The 7,573,000 shares of MacDermid common stock delivered upon the
completion of the merger will be allocated first to the holders of PTI preferred
stock to satisfy the liquidation preference of that stock. As a result of the
merger, each share of PTI preferred stock will be converted into a number of
shares of MacDermid common stock having a value equal to the liquidation
preference of that share of preferred stock ($1,000) plus any owed dividends.
For purposes of that allocation, the MacDermid stock will be valued at the
"Current Market Price."
After the PTI preferred stock liquidation preference is satisfied, the
balance of the 7,573,000 MacDermid shares will be allocated among the holders of
PTI common stock in proportion to their ownership of PTI common stock. For
purposes of that allocation, the PTI warrant held by Citicorp Mezzanine Partners
will be treated as if it had been exercised in full. MacDermid will issue a
substitute common stock warrant to Citicorp Mezzanine Partners on equivalent
terms. Except as otherwise specified in this joint proxy
statement -- prospectus, the description of MacDermid shares exchanged in the
merger treats the PTI warrant as if exercised in full prior to the completion of
the merger.
The amount and value of MacDermid stock that any holder of PTI common stock
will receive upon the completion of the merger will depend on the then Current
Market Price of MacDermid common stock and the amount of dividends owed on PTI
preferred stock. See "Exchange Ratio Assumptions" on page 12. ACCORDINGLY,
HOLDERS OF PTI COMMON STOCK WILL NOT KNOW AT THE TIME THAT THEY VOTE THE NUMBER
OR VALUE OF THE MACDERMID SHARES THEY WILL RECEIVE. PTI SHAREHOLDERS MAY MAKE
INQUIRIES AS TO THE ESTIMATED EXCHANGE RATIO OF MACDERMID SHARES FOR SHARES OF
PTI COMMON STOCK BASED UPON THE TRADING PRICE OF MACDERMID STOCK AT THAT TIME BY
CALLING THOMAS C. WEAVER, PTI'S CORPORATE SECRETARY AT (978) 439-2110.
The following table illustrates the number of MacDermid shares that would
be exchanged for each share of PTI common stock upon the completion of the
merger at three hypothetical Current Market Prices of $34, $40 and $46 per
share. MacDermid and PTI believe the range of hypothetical Current Market Prices
shown in the table reasonably reflects the trading prices of MacDermid common
stock after the merger was announced. The hypothetical exchange ratios also
assume in each case approximately $439,437 of dividends are owed on the
preferred stock, representing 105 days of unpaid dividends since the last
dividend payment date on June 15, 1999. See "Exchange Ratio Assumptions."
<TABLE>
<CAPTION>
NUMBER OF MACDERMID
SHARES EXCHANGED FOR
ASSUMED "CURRENT MARKET EACH SHARE OF PTI
PRICE" OF MACDERMID STOCK COMMON STOCK
------------------------- --------------------
<S> <C>
$34.00........................ 7.208
$40.00........................ 7.257
$46.00........................ 7.293
</TABLE>
The following table provides the last reported sales prices per share of
MacDermid stock traded on the NYSE on February 18, 1999, the last trading day
before announcement of the merger agreement, and on August 27, 1999, the latest
practicable date before the printing of the joint proxy statement -- prospectus:
<TABLE>
<S> <C>
February 18, 1999...................... $38.88
August 27, 1999........................ $34.38
</TABLE>
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<PAGE> 45
If only 7,573,000 MacDermid shares are issued in the merger, the aggregate
value of the consideration received by PTI shareholders will be approximately
$260.4 million, assuming the value of MacDermid stock is equal to its closing
price on the NYSE on August 27, 1999. No assurance can be given as to the market
price of MacDermid stock upon the completion of the merger. Shareholders are
advised to obtain current market quotations of the MacDermid common stock. See
"Trading Price of MacDermid Common Stock" for the high and low prices at which
MacDermid common stock traded during the past several months, as reported by the
NYSE.
The holders of PTI preferred stock will receive in the merger shares of
MacDermid common stock having an aggregate value of approximately $11.2 million,
based upon the assumptions used elsewhere in this joint proxy
statement -- prospectus. PTI owes more dividends on some shares of preferred
stock than others. Therefore, the number of shares of common stock that
MacDermid will issue for any particular share of PTI preferred stock will vary
ranging from a low of 28.268 shares to a high of 51.724 shares. In general,
based upon the assumptions described on page 12 of this joint proxy
statement--prospectus, the distribution of shares of MacDermid common stock
among the holders of the three series of PTI preferred stock will be as follows:
- a majority of the holders of PTI Series 2 preferred stock will receive
28.268 shares of MacDermid common stock for each share of Series 2
preferred stock;
- a majority of the holders of PTI Series 3 preferred stock will receive
51.724 shares of MacDermid common stock for each share of Series 3
preferred stock;
- a majority of the holders of PTI Series 4 preferred stock will receive
35.810 shares of MacDermid common stock for each share of Series 4
preferred stock.
ESCROWED SHARES
The holders of PTI common stock and Citicorp Mezzanine Partners will also
receive an interest in an escrow fund that will be established upon the
completion of the merger. The escrow fund will be used to satisfy any
indemnification claim MacDermid is entitled to bring under the merger agreement.
Upon the completion of the merger, the escrow fund will consist of shares of
MacDermid common stock and a MacDermid warrant issued for Citicorp Mezzanine
Partners. Assuming the warrant held by Citicorp Mezzanine Partners to purchase
shares of PTI common stock has not been exercised in whole or part prior to the
completion of the merger, the escrow fund will consist of 108,045 shares of
MacDermid common stock and the MacDermid warrant entitling the holder to
purchase 18,955 shares of MacDermid common stock at a nominal exercise price of
approximately $.01 per share. The issued and outstanding shares of MacDermid
common stock in escrow and the shares of MacDermid common stock purchasable upon
exercise of the warrant are sometimes collectively referred to in this joint
proxy statement -- prospectus as the "escrowed shares."
The escrow agent will maintain a separate subaccount for each former holder
of PTI common stock and Citicorp Mezzanine Partners. Subject to complying with
any applicable legal or contractual transfer restrictions, each of those
investors will be entitled to sell all or any portion of the MacDermid stock, or
the MacDermid warrant in the case of Citicorp Mezzanine Partners, held in escrow
for that investor's benefit. The proceeds of any sale would remain in escrow
until the termination of the escrow agreement, however, and would be required to
be invested in cash or cash equivalent investments, including short-term U.S.
treasury securities. Holders of PTI common stock, other than Citicorp Mezzanine
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<PAGE> 46
Partners and its transferees, will not be entitled to a distribution of all or
any portion of the shares of MacDermid common stock underlying the warrant. The
material terms of the escrow and related indemnification provisions are
described below. We also recommend that you read carefully the complete text of
the escrow agreement for the precise legal terms of the escrow. The form of
escrow agreement is attached to this joint proxy statement -- prospectus as
Appendix D and is incorporated by reference into this joint proxy
statement -- prospectus.
INDEMNIFICATION
Subject to several limitations, summarized below, MacDermid, on the one
hand, and the PTI shareholders and Citicorp Mezzanine Partners, collectively, on
the other hand, are entitled under the merger agreement to indemnification for
damages, as defined in the merger agreement, arising out of the inaccuracy of
any representation in the merger agreement or the breach of any warranty,
covenant or other obligation in the merger agreement. No party will be entitled
to indemnification for a claim brought more than 12 months after the merger is
completed. Further, neither MacDermid, on the one hand, nor the PTI shareholders
and Citicorp Mezzanine Partners, collectively, on the other hand, will be
entitled to indemnification until their damages exceed $2 million and then only
to the extent of the excess.
If MacDermid is entitled to indemnification under the merger agreement,
MacDermid's sole source of recourse will be to the assets contained in the
escrow. MacDermid's claims against the escrow will be allocated proportionately
against each subaccount based on the number of escrowed shares held in that
subaccount immediately after the closing of the merger and will be payable from
each subaccount first in escrowed shares and second in other assets, if any,
held in escrow. In the case of Citicorp Mezzanine Partners, if shares of
MacDermid common stock are not then held in the Citicorp Mezzanine Partners'
subaccount, the portion of any indemnification claim allocable to its subaccount
will be paid by reducing the number of shares purchasable under the MacDermid
warrant. In no event will the PTI shareholders or Citicorp Mezzanine Partners be
liable for damages in excess of the value of the escrowed shares held in their
escrow subaccount immediately after the completion of the merger. The value of
the escrowed shares will be the "Current Market Price" of MacDermid stock at the
time the merger is completed.
If the PTI shareholders and Citicorp Mezzanine Partners are entitled to
indemnification, MacDermid will pay the damages solely in MacDermid shares and
not in cash. MacDermid will not be required to issue more than 127,000 shares of
MacDermid common stock in the aggregate to PTI security holders in payment of
all indemnification claims under the merger agreement. The value of the escrowed
shares will be the "Current Market Price" of MacDermid stock at the time the
merger is completed. Further, as a condition to MacDermid's obligation to
complete the merger each PTI shareholder and Citicorp Mezzanine Partners must
sign an agency agreement, which, among other things, waives, to the fullest
extent permitted by law, its, his or her rights and remedies for damages arising
from the merger except for the rights to indemnification specifically provided
in the merger agreement. We recommend that you read carefully the complete text
of the agency agreement for the precise legal terms of the waiver of damages.
The form of agency agreement is attached to this joint proxy
statement -- prospectus as Appendix E and is incorporated by reference into this
joint proxy statement -- prospectus.
The agency agreement also provides for the appointment of Citicorp Venture
Capital as attorney-in-fact to act on behalf of the PTI shareholders and
Citicorp Mezzanine Partners in all matters relating to the indemnification
provisions of the merger agreement,
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<PAGE> 47
including when to bring and pay an indemnification claim. This appointment does
not grant Citicorp Venture Capital any beneficial rights in the escrowed shares.
Any disputes between MacDermid, on the one hand, and Citicorp Venture Capital,
on the other hand, regarding a claim for indemnification will be resolved by
arbitration. We recommend that you read carefully the complete text of the
agency agreement for the precise legal terms of Citicorp Venture Capital's
authority.
The escrow will terminate and the remaining escrow assets, if any, will be
distributed to the former holders of PTI common stock and Citicorp Mezzanine
Partners upon the later of (a) 12 months after the completion of the merger or
(b) the resolution of all MacDermid indemnification claims.
LISTING OF MACDERMID COMMON STOCK AND RESTRICTIONS ON TRANSFER
The shares of MacDermid common stock issued in connection with the merger
will be listed on the NYSE under the ticker symbol "MRD." See "Merger
Agreement -- Conditions to Merger."
After the completion of the merger, the sale or other transfer of MacDermid
common stock by any PTI affiliate will be subject to several restrictions, some
of which will also apply to MacDermid affiliates. Under the Securities Act of
1933, an affiliate is defined generally as a person -- considered to include,
but not necessarily be limited to, executive officers, directors and holders of
10% or more of the company's stock -- who controls, is controlled by, or is
under common control with a constituent corporation at the time a business
combination has been authorized or, after the completion of the business
combination, the surviving corporation.
SEC guidelines with respect to the qualification of the merger for pooling
of interests accounting treatment limit sales of shares of the acquiring and
acquired companies by affiliates of either company in a business combination.
SEC guidelines indicate further that the pooling of interests method of
accounting generally will not be challenged on the basis of sales by affiliates
of the acquiring or acquired company if they do not dispose of any of the shares
of either the acquiring or acquired company, including shares they receive in
connection with a merger, during the period beginning 30 days before the merger
and ending when financial results covering at least 30 days of post-merger
operations of the combined entity have been published. It is a condition to
MacDermid's obligation to complete the merger that it receive from each PTI
affiliate an agreement not to sell, transfer or otherwise dispose of, or reduce
the risk of ownership with respect to, any shares of PTI stock or any shares of
MacDermid common stock held by that affiliate in violation of these guidelines.
See "Accounting Treatment."
SEC Rule 145 restricts the sale of MacDermid common stock received in the
merger by former PTI affiliates and their family members and related interests.
Generally speaking, during the first year following the completion of the
merger, PTI affiliates may publicly resell the MacDermid common stock received
by them in the merger, provided that those sales comply with Rule 145
limitations as to the amount of MacDermid common stock sold in any three-month
period and as to the manner of sale. The applicable volume limitations provide
that each former PTI affiliate will not be able to sell, during any three-month
period, more than the greater of the following:
- one percent of the shares of MacDermid common stock outstanding, as most
recently reported by MacDermid; or
- the average weekly reported volume of trading in MacDermid common stock
during a four-calendar week period before the sale, as reported by the
NYSE.
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<PAGE> 48
After the one-year period, former PTI affiliates who are not then, and
during the preceding three month period have not been, MacDermid affiliates may
resell their shares without any restriction.
Former PTI affiliates who are MacDermid affiliates after the completion of
the merger generally will remain subject to limitations and restrictions under
SEC Rule 144 with respect to shares they received in connection with the merger,
so long as they continue to be MacDermid affiliates.
In addition, PTI affiliates will be permitted to resell MacDermid common
stock received in the merger without any restrictions if the sale is covered by
an effective registration statement filed with the SEC under the Securities Act
or is exempt from the Securities Act registration requirements. This joint proxy
statement -- prospectus may not be used, however, to effect any resale of
MacDermid common stock received by any person who may be deemed to be an
affiliate of MacDermid or PTI.
It is a condition to PTI's obligations to complete the merger that
MacDermid enter into a registration rights agreement with Citicorp Venture
Capital, on behalf of itself and as agent for Citicorp Mezzanine Partners, and
other PTI affiliates. The registration rights agreement will entitle Citicorp
Venture Capital to cause MacDermid to register under the Securities Act the
resale of shares of MacDermid common stock issued in the merger to Citicorp
Venture Capital, Citicorp Mezzanine Partners and other PTI affiliates. The
registration rights agreement generally will entitle Citicorp Venture Capital to
require MacDermid to effect up to three registrations under the Securities Act
or to permit Citicorp Venture Capital, Citicorp Mezzanine Partners and the PTI
affiliates to include in registrations initiated by MacDermid any or all of
their shares of MacDermid common stock received in the merger. MacDermid will
also agree in the registration rights agreement not to effect a public sale or
distribution of MacDermid common stock during the seven days prior to and the
sixty days following the effective date of a registration required by Citicorp
Venture Capital. Similarly, each of Citicorp Venture Capital and Citicorp
Mezzanine Partners will agree not to effect a public sale or distribution of
MacDermid common stock received in the merger during the comparable 67-day
period whenever MacDermid effects a registration on its own initiative, other
than Citicorp Venture Capital and Citicorp Mezzanine Partners shares permitted
to be included in that registration.
MacDermid will generally be obligated to bear all fees and expenses
incurred by it in connection with any registration effected at Citicorp Venture
Capital's request but will not be obligated to pay any fees or expenses of any
participating shareholder. MacDermid will also agreed to indemnify the
participating shareholders against liabilities, designated in the registration
rights agreement, in connection with any registration of MacDermid common stock,
including liabilities under the Securities Act.
Despite the availability of registration rights, to the extent a PTI
shareholder holds PTI stock that is subject to contractual limitations on
resale, the shares of MacDermid common stock received in the merger in exchange
for those restricted shares will be subject to those same contractual
limitations.
OWNERSHIP OF MACDERMID AFTER THE MERGER
On a pro forma basis, the shares of MacDermid common stock issued in the
merger will range from 23.1% of the pro forma MacDermid shares outstanding if no
escrowed shares are released to former PTI security holders to 23.4% if all
escrowed shares are released.
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<PAGE> 49
On a pro forma basis, the shares of MacDermid common stock issued in the
merger to Citicorp Venture Capital will range from 4,077,898 shares of MacDermid
common stock outstanding, or 12.5%, if no escrowed shares are released to former
PTI security holders to 4,145,594 shares, or 12.6%, if all escrowed shares are
released. Citicorp Venture Capital will not beneficially own any of the escrow
shares other than those escrow shares held in the subaccount maintained for its
benefit. The allocation of shares of MacDermid common stock to Citicorp Venture
Capital under the merger agreement will be calculated in the same manner as for
any other holder of a PTI equity security. Citicorp Venture Capital will receive
approximately 95.5% of its ownership interest in MacDermid as a result of its
ownership of PTI non-voting common stock and approximately 4.5% as a result of
its ownership of PTI preferred stock. See "Beneficial Ownership of PTI" for
information regarding the amount and percentage of each class or series of PTI
capital stock held by Citicorp Venture Capital.
In calculating the percentages in this section, the following assumptions
were made: (a) the MacDermid warrants issued to Citicorp Mezzanine Partners in
the merger have been exercised in full; and (b) there is no change in the number
of shares of MacDermid common stock outstanding before the merger.
For more information on MacDermid common stock and existing and pro forma
ownership of MacDermid common stock see "MacDermid Capital Stock" and
"Beneficial Ownership of MacDermid."
EXECUTIVE OFFICERS AND DIRECTORS OF MACDERMID AFTER THE MERGER
The only change in the executive officers and directors of MacDermid as a
consequence of the merger is that a designee of Citicorp Venture Capital will
become a MacDermid director. The merger agreement provides that Citicorp Venture
Capital may continue to designate a director of MacDermid, so long as each of
the following conditions is satisfied:
- Citicorp Venture Capital owns shares of MacDermid stock constituting
40.0% or more of the total number of shares of MacDermid common stock
issued to Citicorp Venture Capital in the merger; and
- Citicorp Venture Capital owns shares of MacDermid common stock
constituting 2.0% or more of the shares of MacDermid common stock
outstanding from time to time.
The MacDermid Board of Directors has approved an increase in the size of
the Board to seven from six, effective upon the completion of the merger, and
has elected Joseph M. Silvestri, an officer of Citicorp Venture Capital, to fill
that vacancy. Mr. Silvestri, age 37, has been Vice President of Citicorp Venture
Capital for the last five years. Mr. Silvestri is a limited partner in CCT
Partners I, L.P., a PTI shareholder, and is a director of Triumph Group, Inc.,
Euramax, ISG Resources, Inc., Glenoit Corporation and The GNI Group, Inc.
On a pro forma basis, the shares of MacDermid stock issued in the merger to
Mr. Silvestri, a PTI shareholder, will range from 43,012 shares of MacDermid
common stock if no escrowed shares are released to former PTI security holders
to 43,750 if all of the escrowed shares are released. In each case, Mr.
Silvestri will own beneficially less than 1.0% of the shares of the MacDermid
common stock outstanding immediately after the merger. As of August 6, 1999, Mr.
Silvestri holds .414 shares (.4%) of PTI voting common stock and 5,746.469
shares (.57%) of PTI non-voting common stock.
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<PAGE> 50
REQUIRED REGULATORY APPROVALS
The Hart-Scott Rodino Act prohibits MacDermid and PTI from completing the
merger until they have furnished information to the Federal Trade Commission and
a required waiting period has expired or been terminated without further action
by the Federal Trade Commission. In general, the Federal Trade Commission will
examine the impact of the merger on competition in various product and
geographic markets in which MacDermid and PTI have sales. Under the merger
agreement, MacDermid and PTI have agreed to use all commercially reasonable
efforts to make the required filings with the Federal Trade Commission and to
seek an early termination of the applicable waiting period.
On February 26, 1999, MacDermid and PTI made our initial filings with the
Federal Trade Commission, and on March 26, 1999, the Commission requested that
we provide additional information. As a result of that request for additional
information, we may not complete the merger until each of us complies with the
request and a 20-day waiting period has expired without further action by the
Federal Trade Commission. We submitted information in response to that request
on May 28, 1999 and from time to time thereafter. The Federal Trade Commission
has asserted, however, that our initial and subsequent submissions have not
satisfied all applicable requirements. Without agreeing with the Federal Trade
Commission assertion, MacDermid and PTI have represented to the Commission that
we will not complete the merger without giving the Commission at least 35 days
prior notice. As of the date of this joint proxy statement -- prospectus, we
have not given that notice to the Federal Trade Commission.
The Federal Trade Commission may
- seek to delay further the completion of the merger by agreement or by
requesting additional information,
- seek to prevent the merger by initiating a lawsuit alleging the merger
will violate federal antitrust laws,
- terminate the waiting period or allow the waiting period to expire,
either of which would allow the merger to proceed, or
- seek to negotiate a settlement with MacDermid, which settlements
typically involve a divestiture of a portion of the combined company's
assets and liabilities.
In particular, you should note that if the Federal Trade Commission
commences a lawsuit to challenge the merger on antitrust grounds, we would not
be able to proceed with the merger unless the court specifically rules against
the Federal Trade Commission's request to delay the merger.
Based upon discussions that MacDermid and PTI have had with the staff of
the Federal Trade Commission, we believe the Federal Trade Commission is
focusing on determining whether or not the merger would have an impermissible
anticompetitive effect by increasing the concentration among sellers of
materials used for fabricating printing plates, including liquid and solid
photopolymer and other flexographic printing plates. Sales of liquid and solid
photopolymer and other flexographic printing products represented 34.7% of PTI's
1998 U.S. sales. In contrast, MacDermid and PTI have taken the position with the
Federal Trade Commission that the merger would not result in an impermissible
anticompetitive effect because of the existence of other substantial existing
and potential competitors in the sale of liquid and solid flexographic
photopolymer printing plates, as well as other competitive materials used for
fabricating printing plates. If the Federal Trade Commission ultimately
disagrees with our position, we expect that the Commission will assert that
MacDermid and PTI must alleviate the anticompetitive effect of the merger by
divesting all or part of PTI's liquid flexographic photopolymer products and by
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<PAGE> 51
taking steps that will be designed to make it more likely that other companies
will compete in the sale of solid sheet flexographic photopolymer products. In
total, liquid flexographic photoploymer products accounted for 3.7% of PTI's
1998 U.S. sales. We cannot guarantee, however, that we would be able to
negotiate a divestiture or other remedy that would be acceptable to us and the
Federal Trade Commission.
There can be no assurance of when or if the requisite regulatory approvals
will be obtained or that, if obtained, such approvals would not include
conditions that would be of a type that would relieve MacDermid of its
obligation to complete the merger. Specifically, the merger agreement provides
that MacDermid may choose not to complete the merger if the Federal Trade
Commission's approval of the merger imposes a condition or requirement, such as
a mandatory divestiture, that in the reasonable opinion of MacDermid would so
materially adversely affect the economic or business benefits to MacDermid of
the merger as to render the completion of the merger inadvisable. MacDermid has
agreed with PTI, however, that MacDermid would not abandon the merger solely
because Federal Trade Commission approval of the merger is conditioned upon
PTI's prior divestiture of its U.S. liquid flexographic photopolymer business
for commercial packaging applications. The merger agreement also provides that
if the merger has not been completed by September 30, 1999 either MacDermid or
PTI may terminate the merger agreement subject to the conditions described
below. See "-- Closing Date" below and "Merger Agreement."
Each of MacDermid and PTI intends to resolicit shareholder approval of the
merger as a consequence of a divestiture required by the Federal Trade
Commission only if its board of directors is unable to conclude that the
divestiture could not reasonably be expected to have a material adverse effect
on the pro forma revenue or net income of the combined company. If the Federal
Trade Commission requires MacDermid and PTI to divest only PTI's liquid
flexographic photopolymer business for commercial packaging applications,
MacDermid and PTI will not resolicit shareholder approval because MacDermid and
PTI believe that such a divestiture could not reasonably be expected to have a
material adverse effect on the pro forma financial information presented in this
joint proxy statement -- prospectus. If the board of directors of either
MacDermid or PTI decides to resolicit shareholder approval of the merger as a
consequence of a material divestiture, MacDermid and PTI will provide
shareholders with a supplement to this joint proxy statement -- prospectus
describing the proposed divestiture.
CLOSING DATE
Unless MacDermid and PTI mutually select another date, the closing of the
merger will take place on the date that is two business days following the
satisfaction or waiver of all conditions to the obligations of the parties to
complete the merger.
Either party may have the right to terminate the merger agreement at any
time after September 30, 1999, even if the shareholders approve the merger. A
party seeking to terminate the merger agreement because the closing has not
occurred by September 30, 1999 must have observed all of its covenants and
agreements contained in the merger agreement. See "Merger
Agreement -- Termination of Merger Agreement."
INTERESTS OF RELATED PERSONS IN THE MERGER
When considering the PTI Board's recommendations that the PTI shareholders
vote in favor of the merger agreement, PTI shareholders should be aware that a
number of PTI employees have severance agreements and other arrangements that
provide them with
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interests in the merger that are different from, or in addition to, the
interests of PTI shareholders as a whole.
Severance and Change in Control Agreements. Print Tech International,
Inc., the predecessor of PTI, has severance and change in control agreements
with the following executives: David R. Beckerman, Edward T. Murphy and Thomas
C. Weaver. The agreements provide, among other things, that if PTI terminates an
executive's employment other than for cause, or if the executive voluntarily
resigns from PTI with good reason within six months of a change in control as
defined in the agreement, PTI will be obligated to pay the executive one and
one-half year's salary, provided that no bonus payments or other related
payments will be due to the executive. At present, under the terms of their
agreements, Mr. Beckerman would be entitled to a payment of $405,000, Mr. Murphy
would be entitled to a payment of $234,000 and Mr. Weaver would be entitled to a
payment of $247,500. PTI has a similar severance and change in control agreement
with John R. Rastetter, except that, pursuant to his agreement, Mr. Rastetter is
entitled to severance for only one year's salary which is presently equal to
$125,000. The merger will constitute a change in control within the meaning of
these agreements. As of August 6, 1999, Mr. Beckerman holds 51.0% of PTI's
voting common stock and 3.0% of PTI's non-voting common stock, and Mr. Weaver
owns 1.6% of PTI's non-voting common stock. Mr. Murphy and Mr. Rastetter each
hold 1.0% of PTI's non-voting common stock as of that date. As of the date of
this joint proxy statement -- prospectus, MacDermid has no reason to believe
that Messrs. Beckerman, Weaver, Murphy and Rastetter will not remain employed by
the company after the merger is completed.
Severance and Stay Bonus Agreements. PTI has stay bonus agreements with
six employees with technical training and expertise in the area of SAP systems.
None of these employees is a director or executive officer of PTI. The
agreements provide for cash payments in the aggregate of no more than $240,000.
If the employee stays with PTI at least through January 1, 2002, the minimum
payment to any one employee will be $30,000 and the maximum to any one employee
will be $50,000. In addition, PTI has stay bonus agreements with thirteen key
employees of which one is an officer of PTI. None of these employees is a
director or executive officer of PTI. The agreements provide for cash payments
in the aggregate of no more than $185,500. The minimum payment to any one
employee will be $8,500 and the maximum to any one employee will be $19,000. The
payments will be made if the employee stays with PTI for at least one year from
the date of the merger or if the employee is severed for any reason.
Severance Agreements. PTI has a severance agreement with Kai Wenk-Wolff. A
severance payment would be paid should NAPP Systems, Inc. (a wholly owned
subsidiary of PTI) or PTI elect to terminate Mr. Wenk-Wolff's employment, other
than for cause. In this event, Mr. Wenk-Wolff is entitled to severance for
eighteen months of salary (which is equal to $288,000).
PTI has severance agreements with two NAPP Systems executives. These
agreements provide for severance payments in the aggregate of no more than
$236,700.
Discretionary Severance Payments. PTI may become obligated to pay to
twelve employees with special technical knowledge (none of whom owns PTI stock)
up to twelve weeks of severance payment (in addition to any general severance
payment), to be determined at the time of termination, if the employee is
severed for any reason within the one-year period starting at the date of the
merger.
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ACCOUNTING TREATMENT
The obligations of MacDermid and PTI to complete the merger are conditioned
upon the receipt of the following accountants' letters. PTI must have received a
letter in form and substance acceptable to it from its accountants,
PricewaterhouseCoopers LLP, dated the date of the merger, substantially to the
effect that in that firm's unqualified opinion, PTI is eligible to participate
in a transaction accounted for as a pooling of interests under generally
accepted accounting principles. MacDermid must have received a letter, in form
and substance acceptable to it, from its accountants, KPMG LLP, dated the date
of the merger, substantially to the effect that, on the basis of the
PricewaterhouseCoopers LLP letter and a review of the merger agreement and the
merger contemplated thereby, in KPMG's unqualified opinion, the merger will be
accounted for as a pooling of interests under generally accepted accounting
principles. MacDermid and PTI do not intend to request these letters until
immediately prior to the completion of the merger.
Under the pooling of interests method of accounting, the recorded amounts
of the assets and liabilities of MacDermid and PTI will be carried forward at
their previously recorded amounts and no goodwill will be created. Revenues and
expenses will be retroactively presented as if MacDermid and PTI were combined
for the entire fiscal period in which the merger occurs and for all periods
prior to the merger at previously recorded amounts. MacDermid and PTI have
agreed to use their best efforts to cause the merger to qualify for pooling of
interests accounting treatment. See "Merger Agreement -- Conditions to Merger."
To assure the applicability of pooling of interests accounting treatment,
there are certain conditions relating to the exchange of PTI stock for MacDermid
common stock by affiliates of PTI. In addition, the transferability of the
MacDermid common stock to be received by the affiliates will be restricted. See
"Listing of MacDermid Common Stock and Restrictions on Transfer."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO MACDERMID SHAREHOLDERS
The following discussion summarizes the opinion of MacDermid's tax counsel,
Nutter, McClennen & Fish, LLP, as of the date of this joint proxy
statement -- prospectus, regarding the material U.S. Federal income tax
consequences of the merger described in this joint proxy statement -- prospectus
to MacDermid and existing MacDermid shareholders. We have filed that opinion
with the SEC as an exhibit to the registration statement related to this joint
proxy statement -- prospectus. See "Where You Can Find More Information" on page
91. The merger will qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, assuming the merger is
completed on substantially the terms described in this joint proxy
statement -- prospectus, and therefore:
- no gain or loss will be recognized by MacDermid or PTI as a result of
the merger; and
- there will be no Federal income tax consequences arising from the merger
due solely to status as a MacDermid shareholder prior to the merger.
This summary is based on the continued accuracy of the representations made
by PTI, Citicorp Venture Capital and MacDermid with respect to the merger,
including representations regarding the intended actions of PTI, MacDermid and
the PTI shareholders following the merger. If any of those representations is
inaccurate, the tax consequences of the merger could differ from those described
in this summary.
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It is a condition to MacDermid's obligation to complete the merger that
MacDermid receive an opinion from its tax counsel, Nutter, McClennen & Fish,
LLP, or other counsel acceptable to MacDermid, concluding that the merger
qualifies as a tax-free reorganization within the meaning of Section 368(a) of
the Internal Revenue Code. MacDermid shareholders should be aware that the
opinions of tax counsel represent the best judgment of each counsel, but are not
binding on the IRS or the courts. If MacDermid is unable to obtain an opinion,
dated as of the closing of the merger, from Nutter, McClennen & Fish, LLP or
another nationally recognized tax counsel to the effect that the merger
qualifies as a tax-free reorganization within the meaning of Section 368(a) of
the Internal Revenue Code, MacDermid will not complete the merger without first
resoliciting MacDermid shareholders.
Subject to the assumptions discussed above, there will be no Federal income
tax consequences of the merger due solely to ownership of MacDermid stock prior
to the merger.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO PTI SHAREHOLDERS
Tax-Free Reorganization. The following discussion summarizes the opinion
of PTI's tax counsel, Kirkland & Ellis, as of the date of this joint proxy
statement -- prospectus, regarding the material U.S. Federal income tax
consequences of the merger described in this joint proxy statement -- prospectus
to PTI shareholders. We have filed that opinion with the SEC as an exhibit to
the registration statement related to this joint proxy statement -- prospectus.
This discussion is intended to provide a summary only. This discussion does not
address all aspects of Federal income taxation that may be important to a
shareholder in light of the shareholder's particular circumstances. It also does
not apply to those shareholders subject to special rules, such as shareholders
who are not citizens or residents of the United States, financial institutions,
tax-exempt organizations, insurance companies, dealers in securities,
shareholders who acquired their common stock pursuant to the exercise of options
or similar derivative securities or otherwise as compensation or shareholders
who hold their shares as part of a straddle or conversion transaction. This
discussion does not address any aspect of state, local or foreign tax laws or
any federal tax laws other than those pertaining to income tax. PTI shareholders
who are individuals should be aware that the Federal income tax rate on
long-term capital gains of individuals is significantly lower than the tax rate
that may apply to ordinary income or short-term capital gains of individuals,
and that the amount of long-term capital gain, short-term capital gain or
ordinary income that may be realized by a particular PTI shareholder as a result
of the merger may vary depending on the shareholder's particular circumstances.
Each PTI shareholder is advised to consult a tax advisor concerning the specific
tax consequences of the merger to that shareholder.
For U.S. Federal income tax purposes, the merger will qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, assuming the merger is completed on substantially the terms described in
this joint proxy statement -- prospectus, and therefore:
- no gain or loss will be recognized by MacDermid or PTI as a result of the
merger;
- PTI shareholders will not have taxable gain or loss on the exchange of
PTI stock for MacDermid common stock in the merger, except with respect
to any cash received instead of a fractional share of MacDermid common
stock or as a consequence of the exercise of appraisal rights;
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- the tax basis of MacDermid common stock received by a PTI shareholder in
the merger will be the same as the tax basis of the PTI stock exchanged
in the merger reduced by an amount allocable to a fractional share
interest for which cash is received; and
- the holding period of the MacDermid common stock that a PTI shareholder
receives in the merger generally will include the holding period of PTI
stock exchanged therefor.
This summary is based on the continued accuracy of the representations made
by PTI, Citicorp Venture Capital and MacDermid with respect to the merger,
including representations regarding the intended actions of PTI, MacDermid and
the PTI shareholders following the merger and including representations and
covenants contained in certificates of officers of PTI and MacDermid. If any of
those representations is inaccurate, the tax consequences of the merger could
differ from those described in this summary.
It is a condition to PTI's obligation to complete the merger that PTI
receive an opinion from Kirkland & Ellis, or other tax counsel acceptable to
PTI, concluding that the merger qualifies as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code. PTI shareholders
should be aware that the opinions of tax counsel represent the best judgment of
each counsel, but are not binding on the IRS or the courts. If PTI is unable to
obtain an opinion, dated as of the closing of the merger, from Kirkland & Ellis
or another nationally recognized tax counsel to the effect that the merger
qualifies as a tax-free reorganization within the meaning of Section 368(a) of
the Internal Revenue Code, PTI will not complete the merger without first
resoliciting PTI shareholders.
Subject to the assumptions discussed above, the Federal income tax
consequences of the merger to a PTI shareholder are as follows:
Receipt of MacDermid Common Stock in Exchange for PTI Stock. A PTI
shareholder who receives shares of MacDermid common stock in exchange for all
that shareholder's shares of PTI stock will recognize no gain or loss as a
result of the merger. A shareholder may recognize gain or loss, however, to the
extent cash is received instead of a fractional share of MacDermid common stock,
as discussed below. The basis of the shares of MacDermid common stock received
by that shareholder will be the same as the basis of the shares of PTI stock
exchanged therefor, and the holding period of the shares of MacDermid common
stock will include the holding period of the shares of PTI stock surrendered in
the exchange, provided the PTI stock was held by the shareholder as a capital
asset at the completion of the merger.
Cash Received Instead of a Fractional Share of MacDermid Common
Stock. Cash received instead of a fractional share of MacDermid common stock
will generally be treated as received in redemption of a fractional share.
Accordingly, a PTI shareholder who receives cash instead of a fractional share
will recognize gain or loss equal to the difference between the amount of cash
received and the portion of the basis of the shares allocable to the fractional
share. If the shares of PTI are held as capital assets, any gain (or loss)
generally will constitute capital gain (or loss), and will generally be either
long-term or short-term capital gain (or loss) depending on the holding period
for the shares.
Federal Income Tax Treatment of Shareholders Exercising Appraisal
Rights. The receipt of a cash payment in respect of dissenting shares by a
dissenting PTI shareholder will be a taxable event for Federal income tax
purposes, and any dissenting shareholder should consult with that shareholder's
tax advisor with respect to the impact of a cash payment in that shareholder's
individual situation. Based on the current ruling position of
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the IRS, any PTI shareholder who effectively exercises appraisal rights and who
receives cash for that shareholder's shares will be treated as receiving a
distribution in redemption of that shareholder's PTI stock. In general, a
distribution in redemption of stock will be treated as a payment in exchange for
the shares. Each PTI shareholder who receives cash upon exercise of the
shareholder's appraisal rights will recognize gain (or loss) for Federal income
tax purposes equal to the difference between the cash received for the
shareholder's shares and the shareholder's tax basis for the shares. The amount
of that gain (or loss), if any, will be treated as ordinary income (or loss) or
long-term or short-term capital gain (or loss) depending on the length of time
the shares were held by the dissenter and whether the shares were held as a
capital asset. See "-- Appraisal Rights," below.
Information Reporting and Back-Up Withholding. Shareholders of PTI will be
required to provide their social security numbers or their taxpayer
identification numbers or, in some circumstances, other information in order to
avoid the "backup withholding" requirements that might otherwise apply under the
Internal Revenue Code. If a PTI shareholder is subject to backup withholding,
tax will be withheld at the rate of 31% on any cash consideration received by
that shareholder in the merger (e.g., payment instead of fractional shares or
payment upon exercise of appraisal rights). Provided the required information is
furnished to the IRS, any amount paid as backup withholding will be credited
against the shareholder's Federal income tax liability. PTI shareholders who
receive MacDermid common stock must also comply with the information reporting
requirements of the Treasury Regulations under Section 368 of the Internal
Revenue Code.
The foregoing discussion of the expected U.S. Federal income tax
consequences of the merger is based on the Internal Revenue Code, the
regulations thereunder, and the related judicial and administrative
interpretations, all as in effect on the date of this joint proxy
statement -- prospectus. There can be no assurance that subsequent legislative,
regulatory, administrative or judicial decisions may not be forthcoming that
would significantly change these expected consequences. Any changes may or may
not be retroactive with respect to transactions prior to the date of those
changes.
AS NOTED ABOVE, ANY PTI SHAREHOLDER THAT IS SUBJECT TO SPECIAL
RULES -- INCLUDING THOSE SHAREHOLDERS WHO ARE NOT CITIZENS OR RESIDENTS OF THE
UNITED STATES, FINANCIAL INSTITUTIONS, TAX-EXEMPT ORGANIZATIONS, INSURANCE
COMPANIES, DEALERS IN SECURITIES, SHAREHOLDERS WHO ACQUIRED THEIR COMMON STOCK
PURSUANT TO THE EXERCISE OF OPTIONS OR SIMILAR DERIVATIVE SECURITIES OR
OTHERWISE AS COMPENSATION OR SHAREHOLDERS WHO HOLD THEIR SHARES AS PART OF A
STRADDLE OR CONVERSION TRANSACTION -- SHOULD CONSULT WITH A TAX ADVISOR AS TO
THE SPECIFIC TAX CONSEQUENCES OF THE MERGER APPLICABLE TO THAT SHAREHOLDER,
INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
HOW TO SURRENDER AND RECEIVE MACDERMID COMMON STOCK IN EXCHANGE
FOR PTI STOCK
At or before the completion of the merger, MacDermid and PTI will provide
for a mechanism for exchanging certificates representing PTI stock for one or
more certificates representing shares of MacDermid common stock. Upon the proper
surrender of a stock certificate(s), together with a properly completed and duly
executed letter of transmittal, the holder of that stock certificate(s) will be
entitled to receive, in exchange, a certificate representing that number of
shares of MacDermid common stock determined as of the completion of the merger
as well as consideration in the form of a check for any fractional
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share interest which the holder possesses. Any PTI stock certificate(s) so
surrendered will be canceled. No interest will be paid or accrued on the cash
delivered in the place of any fractional share.
PTI SHAREHOLDERS ARE REQUESTED NOT TO SURRENDER THEIR STOCK CERTIFICATE(S)
FOR EXCHANGE UNTIL THEY HAVE RECEIVED INSTRUCTIONS AND A LETTER OF TRANSMITTAL
AND HAVE COMPLETED THAT LETTER OF TRANSMITTAL.
In the event of a transfer of ownership of any shares of PTI stock that has
not been registered in the transfer records of PTI prior to the completion of
the merger, a certificate for MacDermid common stock may be issued to the
transferee if the stock certificate(s) representing shares of PTI stock is
presented accompanied by documents sufficient, in the reasonable discretion of
MacDermid, to evidence and effect the transfer and to evidence that all
applicable stock transfer taxes have been paid.
From and after the completion of the merger, there will be no transfers on
the stock transfer records of PTI of any shares of PTI stock that were
outstanding immediately prior to the completion of the merger. If, after the
completion of the merger, any stock certificate(s) representing shares is
presented, the stock certificate(s) will be canceled and exchanged for the
MacDermid common stock deliverable in respect thereof in accordance with the
procedures described in the merger agreement.
None of MacDermid, PTI or any other person will be liable to any former
holder of PTI stock for any amount delivered to a public official pursuant to
applicable abandoned property laws.
If a certificate representing shares of PTI stock has been lost, stolen or
destroyed, the holder of that certificate must make an affidavit of that fact
and, if required by MacDermid, an indemnity against any claim that may be made
against MacDermid with respect to that certificate(s). The holder will then be
issued a certificate representing the number of shares of MacDermid common stock
determined as of the completion of the merger and consideration in the form of a
check for any fractional share interest.
APPRAISAL RIGHTS
No MacDermid shareholders will be entitled to have their shares appraised
and purchased in accordance with the Connecticut Business Corporation Act, if
the merger agreement is approved by the MacDermid shareholders.
If the merger is completed, dissenting holders of PTI stock, including
holders of PTI Class B common stock and PTI preferred stock, will be entitled to
have the "fair value" of their shares at the time the merger is completed
judicially determined and paid to them by complying with the provisions of
Section 262 of the Delaware General Corporation Law. The fair market value of
the dissenting shares will be exclusive of any element of value arising from the
accomplishment or expectation of the merger. MacDermid has the right to
terminate the merger agreement and not proceed with the merger if more than
385,000 shares of MacDermid common stock that may potentially be issued in the
merger are not issued because one or more PTI shareholders have reserved the
right to seek appraisal rights.
The following is a summary of Section 262, which sets forth the procedures
for dissenting from the merger and demanding statutory appraisal rights, the
full text of which is attached as Appendix C. Failure to follow the provisions
of Section 262 exactly could result in the loss of appraisal rights. See
"Material Income Tax Consequences of the
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Merger to PTI Shareholders" for a discussion of the tax consequences of
exercising appraisal rights.
PTI shareholders who desire to exercise their appraisal rights must satisfy
each of the conditions of Section 262. A written demand for appraisal must be
filed with PTI before the taking of the vote on the proposal relating to the
merger agreement. This written demand for appraisal must be in addition to and
separate from any proxy vote abstaining from or voting against the merger
agreement. Voting against, abstaining from voting or failing to vote with
respect to the merger agreement will not constitute a demand for appraisal for
purposes of Section 262.
PTI shareholders electing to exercise their appraisal rights under Section
262 must not vote, if entitled to do so, for approval of the proposal relating
to the merger agreement. If a shareholder returns a signed proxy but does not
specify a vote against approval of the merger agreement or a direction to
abstain, the proxy will be voted FOR the merger agreement, which will have the
effect of waiving that shareholder's appraisal rights.
A demand for appraisal must reasonably inform PTI of the identity of the
PTI shareholder and that the PTI shareholder intends to demand the appraisal of
his, her or its shares. Accordingly, a demand for appraisal must be executed by
or for the PTI shareholder of record, fully and correctly, as that shareholder's
name appears on the certificate evidencing the dissenting shares. If the
dissenting shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, the demand must be executed by or for the
fiduciary. If the dissenting shares are owned of record by or for more than one
person, as in a joint tenancy or tenancy in common, the demand must be executed
by or for all joint owners. An authorizing agent, including an agent for two or
more joint owners, may execute the demand for appraisal for a shareholder of
record; however, the agent must identify the record owner and expressly disclose
the fact that, in exercising the demand, he or she is acting as agent for the
record owner.
A PTI shareholder who elects to exercise appraisal rights should deliver
his, her or its written demand to Thomas C. Weaver, Corporate Secretary, PTI,
Inc., 900 Middlesex Turnpike, Billerica, Massachusetts 01821 no later than one
business day before PTI's special meeting. The written demand for appraisal
should specify the shareholder's name and mailing address, and that the PTI
shareholder is demanding appraisal of his, her or its shares of PTI stock.
Within ten days after the completion of the merger, PTI must provide notice of
the completion of the merger to all PTI shareholders who have complied with
Section 262 and have not voted for the merger agreement.
Within 120 days after the completion of the merger, any PTI shareholder who
has satisfied the requirements of Section 262 may deliver to PTI a written
demand for a statement listing the aggregate number of dissenting shares not
voted in favor of the merger agreement and with respect to which demands for
appraisal have been received and the aggregate number of holders of those
dissenting shares.
Within 120 days after the completion of the merger, either PTI or any PTI
shareholder who has complied with the required conditions of Section 262 may
file a petition in the Delaware Chancery Court demanding a determination of the
fair value of the dissenting shares. PTI has no present intention to file this
petition if demand for appraisal is made.
Upon the filing of an appraisal petition by a PTI shareholder, service of a
copy thereof must be made upon PTI. Within 20 days after service, PTI must file
in the office of the Register of Chancery in which the petition was filed a duly
verified list containing the names and addresses of all PTI shareholders who
have demanded payment for their
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dissenting shares and with whom agreements as to the value of their dissenting
shares have not been reached. The Register of Chancery, if so ordered by the
Chancery Court, will give notice of the time and place fixed for the hearing of
the petition by registered or certified mail to PTI and to the PTI shareholders
shown upon the list at the address therein stated, and notice will also be given
by publishing a notice at least one week before the day of the hearing in a
newspaper of general circulation published in the City of Wilmington, Delaware
or such publication as the Chancery Court deems advisable.
If a petition for an appraisal is filed in a timely fashion, after a
hearing on the petition, the Chancery Court will determine which PTI
shareholders are entitled to appraisal rights and will appraise the dissenting
shares owned by those PTI shareholders, determining the fair value of those
dissenting shares, exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest to be paid, if any, upon the amount determined to be the fair value. In
determining fair value, the Chancery Court is to take into account all relevant
factors.
In Weinberger v. UOP, Inc., the Delaware Supreme Court stated that "proof
of value by any techniques or methods which are generally considered acceptable
in the financial community and otherwise admissible in court" should be
considered, and that "[f]air value price obviously requires consideration of all
relevant factors involving the value of a company." The Delaware Supreme Court
stated that in making this determination of fair value the Chancery Court must
consider "market value, asset value, dividends, earnings prospects, the nature
of the enterprise and any other facts which could be ascertained as of the date
of the merger which throw any light on future prospects of the merged
corporation." Section 262 provides that fair value is to be determined
"exclusive of any element of value arising from the accomplishment or
expectation of the merger." In Weinberger, the Delaware Supreme Court held that
the "elements of future value, including the nature of the enterprise, which are
known or susceptible of proof as of the date of the merger and not the product
of speculation, may be considered."
PTI shareholders considering seeking appraisal of their shares of PTI stock
should note that the fair value of their shares determined under Section 262
could be more, the same as, or less than the value of MacDermid common stock
that they would receive in the merger if they did not seek appraisal of their
shares. The costs of the appraisal proceeding may be determined by the Chancery
Court and assessed against the parties as the Chancery Court deems equitable in
the circumstances. Upon application of a dissenting shareholder, the Chancery
Court may order that all or a portion of the expenses incurred by any dissenting
shareholder in connection with the appraisal proceeding including, reasonable
attorneys' fees and the fees and expenses of experts, be charged pro rata
against the value of all shares entitled to appraisal. In the absence of a
determination or assessment, each party bears his, her or its own expenses.
Any PTI shareholder who has duly demanded appraisal in compliance with
Section 262 will not be entitled after the completion of the merger to vote for
any purpose the dissenting shares subject to demand or to receive payment or
dividends or other distributions on dissenting shares, except for dividends or
distributions payable to PTI shareholders of record at a date prior to the
completion of the merger. Dissenting shares will have only the rights afforded
by Section 262, including the right to receive the MacDermid common stock upon
withdrawal of the demand for appraisal as described below.
At any time within 60 days after the completion of the merger, any PTI
shareholder will have the right to withdraw that shareholder's demand for
appraisal and to accept the terms offered in the merger agreement. After this
period, the PTI shareholder may
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withdraw a demand for appraisal and receive payment for his, her or its shares
as provided in the merger agreement only with the consent of PTI. If no petition
for appraisal is filed with the Chancery Court within 120 days after the
completion of the merger, the shareholders' rights to appraisal will cease and
holders of dissenting shares will be entitled to receive the shares of MacDermid
common stock, as provided for in the merger agreement. Inasmuch as PTI has no
obligation to file a petition, any shareholder who desires a petition to be
filed is advised to file it on a timely basis. No petition timely filed in the
Chancery Court demanding appraisal will be dismissed as to any shareholder
without the approval of the Court, and that approval may be conditional upon
terms the Chancery Court deems just.
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MERGER AGREEMENT
We believe that this summary together with the section of this joint proxy
statement -- prospectus titled "Merger Transaction" describes all material terms
of the merger agreement and the merger. However, we recommend that you read
carefully the complete text of the merger agreement for the precise legal terms
of the merger agreement and other information that may be important to you. The
merger agreement and the first amendment to the merger agreement are attached to
this joint proxy statement -- prospectus as Appendix A and Appendix B and are
incorporated by reference into this joint proxy statement -- prospectus.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains substantially reciprocal representations and
warranties made by MacDermid, on the one hand, and PTI and Citicorp Venture
Capital, on the other hand, to each other. The most significant of these relate
to:
- corporate authorization to enter into the contemplated transaction;
- the shareholder votes required to approve the contemplated transaction;
- governmental approvals required in connection with the contemplated
transaction;
- absence of any breach of organizational documents, law or material
agreements as a result of the contemplated transaction;
- capitalization;
- ownership of subsidiaries;
- filings with the SEC;
- information provided by it for inclusion in this joint proxy
statement -- prospectus;
- financial statements;
- absence of material changes since a specified balance sheet date;
- absence of undisclosed material liabilities;
- litigation;
- tax matters;
- employee benefits matters;
- compliance with laws;
- environmental matters;
- absence of circumstances inconsistent with the intended accounting
treatment of the merger; and
- receipt of accountants' letters regarding accounting treatment of the
merger.
CONDITIONS TO THE MERGER
The obligations of MacDermid and PTI to complete the merger are subject to
the satisfaction of various conditions. Several of those conditions, such as
stockholder and regulatory approval, may not be waived by MacDermid, PTI or
Citicorp Venture Capital. Other conditions may be waived jointly by MacDermid,
PTI and Citicorp Venture Capital or separately by MacDermid or by PTI and
Citicorp Venture Capital. Summarized below are the material terms of those
conditions. See the copy of the merger agreement and the first amendment to the
merger agreement attached to this joint proxy statement -- prospectus as
Appendix A and Appendix B for a complete listing of all closing conditions.
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Joint Conditions to Obligations of MacDermid, PTI and Citicorp Venture
Capital. The obligations of MacDermid, PTI and Citicorp Venture Capital to
complete the merger are subject to various conditions including the following:
- the approval of the merger agreement by the holders of a majority of the
outstanding shares of MacDermid common stock;
- the approval of the merger agreement by the holders of a majority of the
outstanding shares of PTI Class A common stock;
- all necessary regulatory and governmental approvals must have been
obtained and must remain in full force and effect; all statutory or other
required waiting periods in respect thereof must have expired; and no
approval of any governmental entity will have imposed any condition or
requirement which, in the reasonable opinion of MacDermid, would
materially adversely affect the economic or business benefits to
MacDermid of the merger so as to render the merger inadvisable;
- the MacDermid common stock that will be issued to the PTI shareholders
upon the completion of the merger, and the MacDermid common stock that
will be issued upon the exercise of the MacDermid warrants, will have
been authorized for listing on the NYSE subject to official notice of
listing; and
- there is no claim, action, suit, investigation or other proceeding
pending or overtly threatened before any court or other governmental
entity wherein an unfavorable judgment, order, decree, ruling, charge or
injunction has been issued, or reasonably could be expected to be issued,
which would (a) prevent the completion of any of the transactions
contemplated by the merger agreement to be rescinded following the
completion of the merger, or (b) present a substantial risk that PTI or
MacDermid or their respective officers or directors will be liable for
material damages.
Conditions to the Obligations of MacDermid. The obligations of MacDermid
to complete the merger are subject to additional conditions, including the
following:
- the representations and warranties of PTI and Citicorp Venture Capital
set forth in the merger agreement must be true and correct in all
material respects as of the completion of the merger;
- PTI must have performed and complied with all of its obligations as set
forth in the merger agreement through the completion of the merger;
- no event has occurred since the date of the merger agreement that has had
or could reasonably be expected to have a material adverse effect on PTI;
- MacDermid must have obtained the proceeds from debt financing in an
amount not less than the amount required to refinance the financial
indebtedness of PTI and its subsidiaries, consisting of a senior credit
facility, which totaled $94.8 million as of June 30, 1999, $40.4 million
of subordinated debt obligations and PIK promissory notes issued to W.R.
Grace & Co., which totaled $29.1 million as of June 30, 1999, and to
provide for the ordinary working capital requirements of PTI and its
subsidiaries;
- the total number of shares of MacDermid common stock that potentially may
not be issued in the merger as a consequence of one or more PTI
shareholders having the right, on the completion of the merger, to
exercise appraisal rights under Delaware law must not exceed 385,000;
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<PAGE> 63
- MacDermid must have received a letter from PricewaterhouseCoopers LLP,
dated the date the merger is completed, substantially to the effect that
in its unqualified opinion PTI is eligible to participate in a
transaction to be accounted for as a pooling of interests under generally
accepted accounting principles (see "Merger Transaction -- Accounting
Treatment");
- MacDermid must have received a letter from KPMG LLP, dated the date the
merger is completed, substantially to the effect that, on the basis of a
review of the merger agreement and the proposed merger and relying in
part on the opinion of PricewaterhouseCoopers LLP referred to in the
immediately preceding paragraph, in KPMG's unqualified opinion the merger
may be accounted for as a pooling of interests under generally accepted
accounting principles (see "Merger Transaction -- Accounting Treatment");
- MacDermid must have received an opinion, dated the date the merger is
completed, from its counsel substantially to the effect that, on the
basis of the facts and representations in the merger agreement and on the
basis of representations and covenants contained in certificates of
officers of PTI and MacDermid for Federal income tax purposes the merger
constitutes a tax-free reorganization within the meaning of Section
368(a) of the Internal Revenue Code (see "Merger Transaction -- Material
Federal Income Tax Consequences of the Merger to MacDermid Shareholders"
and "Merger Transaction -- Material Federal Income Tax Consequences of
the Merger to PTI Shareholders.");
- Citicorp Venture Capital, all other PTI shareholders, other than PTI
shareholders who have perfected their appraisal rights, and Citicorp
Mezzanine Partners must have entered into the agency agreement and
Citicorp Venture Capital and David R. Beckerman, in their individual
capacities and as agents for the holders of PTI stock and Citicorp
Mezzanine Partners, must have entered into the escrow agreement with
MacDermid and the escrow agent (see "Merger Transaction --
Indemnification");
- each PTI affiliate must have executed and delivered to MacDermid a seller
affiliate agreement with reference to the limitations in SEC Rule 145
(see "Merger Transaction -- Listing of MacDermid Common Stock and
Restrictions on Transfer"); and
- there must not be, as of the completion of the merger, any contract of
any character to which PTI or any of its subsidiaries is a party or
subject representing an option, warrant, right, call or similar right to
receive or acquire any capital stock of PTI or any of its subsidiaries,
other than the PTI warrant held by Citicorp Mezzanine Partners, and there
must not be, upon the completion of the merger, any pending or threatened
claim or demand for, a direct or indirect equity interest in PTI or any
subsidiary, including, without limitation, any option, warrant, right or
call or any stock appreciation, phantom stock, profit participation or
similar rights.
Conditions to Obligations of PTI and Citicorp Venture Capital. The
obligations of PTI and Citicorp Venture Capital to complete the merger are
subject to additional conditions, including:
- the representations and warranties of MacDermid in the merger agreement
must be true and correct in all material respects as of the date the
merger is completed;
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<PAGE> 64
- MacDermid must have performed and complied with all its obligations under
the merger agreement through the completion of the merger;
- PTI must have received a letter from PricewaterhouseCoopers LLP, dated
the date the merger is completed, substantially to the effect that in its
unqualified opinion PTI is eligible to participate in a transaction to be
accounted for as a pooling of interests under generally accepted
accounting principles (see "Merger Transaction -- Accounting Treatment");
- PTI must have received an opinion, dated the date the merger is
completed, from its counsel, substantially to the effect that, on the
basis of facts and representations in the merger agreement and on the
basis of representations and covenants contained in certificates of
officers of PTI and MacDermid for Federal income tax purposes the merger
constitutes a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code (see "Merger Transaction -- Material Federal Income
Tax Consequences of the Merger to the MacDermid Shareholders" and "Merger
Transaction -- Material Federal Income Tax Consequences of the Merger to
the PTI Shareholders");
- MacDermid must have taken all steps necessary to cause to be elected to
its Board of Directors, effective not later than the date the merger is
completed, the person designated by Citicorp Venture Capital under the
merger agreement (see "Merger Transaction -- Executive Officers and
Directors of MacDermid After the Merger");
- MacDermid must have obtained the proceeds from debt financing in an
amount not less than the amount required to refinance the financial
indebtedness of PTI and its subsidiaries, consisting of a senior credit
facility, which totaled $94.8 million as of June 30, 1999, $40.4 million
of subordinated debt obligations and PIK promissory notes issued to W.R.
Grace & Co., which totaled $29.1 million as of June 30, 1999, and to
provide for the ordinary working capital requirements of PTI and its
subsidiaries;
- MacDermid must have executed and delivered to Citicorp Venture Capital
and Citicorp Mezzanine Partners the registration rights agreement (see
"Merger Transaction -- Listing of MacDermid Common Stock and Restriction
on Transfer").
CONDUCT PENDING MERGER
The merger agreement obligates PTI and, to a lesser extent, MacDermid and
Citicorp Venture Capital to take various actions, and to refrain from taking
other actions, prior to the completion of the merger. Summarized below are the
material terms of those provisions. See the copy of the merger agreement and the
first amendment to that agreement attached to this joint proxy
statement -- prospectus as Appendix A and Appendix B for a complete listing of
all these undertakings. MacDermid and PTI have agreed, however, that none of
those provisions will be deemed to prevent PTI from negotiating and entering
into an agreement for the sale of PTI's U.S. liquid flexographic photopolymer
business for commercial packaging applications, if PTI is required to divest
that business in order to obtain Federal Trade Commission approval of the
merger. See "Merger Transaction -- Required Regulatory Approvals."
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Conduct of PTI. Between the date of the merger agreement and the date the
merger is completed, PTI has, among other things, agreed to:
- not enter into or permit any of its subsidiaries to enter into any
contract or take any other action which, if entered into or taken prior
to the date of the merger agreement, would cause any representation or
warranty of PTI to be untrue in any respect or be required to be
disclosed on any schedule to the merger agreement; or take any action
that is intended or may reasonably be expected to result in any of the
conditions to the merger specified in the merger agreement not being
satisfied or in a violation of the merger agreement; or take or omit to
take any action which reasonably could be expected to have a material
adverse effect on PTI;
- except as contemplated by the merger agreement, operate its business only
in the ordinary course;
- use all commercially reasonable efforts to keep in full force and effect
its corporate existence and all material rights, franchises, proprietary
rights and goodwill relating to its business;
- use reasonable efforts to retain its employees and preserve its present
relationships with customers, suppliers, contractors, distributors and
employees;
- perform in all material respects all of its obligations under all
contracts to which it is a party or by which it or its properties or
assets may be bound and not enter into, assume, create, renew, amend or
terminate, or give notice of a proposed renewal, amendment or termination
of any contract, with limited exceptions;
- not make any single capital or series of capital expenditures outside the
ordinary course of its business without MacDermid's prior written
consent, which consent may not be unreasonably withheld, conditioned or
delayed;
- not enter into any new line of business without MacDermid's consent,
which consent may not be unreasonably withheld, conditioned or delayed
and will be deemed to be given if MacDermid does not respond to PTI
within 10 business days after receiving a written request from PTI;
- not enter into, renew or amend any agreement relating to the provision of
or payment for personal services; not agree to any payment that would be
payable by MacDermid or its affiliates, including PTI, after the
completion of the merger; not make any pension or retirement payment not
required by plans or agreements existing at the date of the merger
agreement, with certain limited exceptions; not pay any bonus or increase
any direct or indirect benefits to any officer, director or employee;
- deliver to MacDermid, within 15 business days of each month end from the
date of the merger agreement through the date of the completion of the
merger, PTI's consolidated unaudited balance sheets, income statements
and cash flow statements as of and for the immediately preceding month,
all consistent with the applicable requirements of the merger agreement;
- not declare, set aside or pay any dividends on, or make any other
distributions, whether in cash, stock or property, in respect of, any of
its outstanding capital stock, except for cash dividends in the ordinary
course of business on the PTI preferred stock in accordance with the
terms of PTI's Certificate of Incorporation;
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<PAGE> 66
- not issue, sell, grant, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any shares, voting
securities or convertible securities, or take any action that would make
the representations and warranties specified in the merger agreement as
applicable not true and correct in all material respects;
- not amend its Certificate of Incorporation or By-laws or other comparable
charter or organizational documents;
- not acquire 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, joint venture, association or
other business organization or division thereof, or any interest therein,
or form any subsidiary or solicit or negotiate any proposal to acquire
PTI with respect to any other person;
- not change its accounting policies in any material respect, except as
required by generally accepted accounting principles; and
- not authorize or enter into any agreement or commitment to take any
action inconsistent with any of the foregoing.
Conduct of Citicorp Venture Capital. Between the date of the merger
agreement and the date the merger is completed, Citicorp Venture Capital has,
among other things, agreed to:
- not to enter into and not permit any of its affiliates to enter into any
contract or take any other action which, if entered into or taken prior
to the date of the merger agreement, would have caused any representation
or warranty of PTI or Citicorp Venture Capital in the merger agreement to
be untrue; or take any action that is intended or may reasonably be
expected to result in any of the conditions to the merger not being
satisfied or in a violation of the merger agreement; or take or omit to
take any action which reasonably could be expected to have a material
adverse effect on PTI;
- use its best efforts to cause PTI to obtain the approval of the PTI
shareholders and to cause the waiver of appraisal rights; vote or cause
to be voted all of its shares of PTI Class A common stock for the
approval of the merger agreement; and vote, or cause to be voted, all its
shares of PTI Class A common stock against the approval of any merger,
acquisition, consolidation, sale of a material amount of assets or other
business combination of PTI or any of its subsidiaries with any person
other than MacDermid;
- not sell, assign, transfer or otherwise dispose of, including by the
creation of a security interest, or permit to be sold, assigned,
transferred or otherwise disposed of, any of its shares of PTI stock,
whether the shares are held on the date of the merger agreement or are
subsequently acquired, whether pursuant to the exercise of stock options
or otherwise, except (a) transfers by operation of law and (b) as
MacDermid may otherwise agree in its sole discretion; and
- cease and refrain from, and instruct each of its representatives and
affiliates to cease and refrain from, any and all activities,
discussions, negotiations, providing any information with respect to, or
other actions with any person other than MacDermid or any of their
respective representatives with respect to any acquisition proposal other
than the merger.
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Conduct of MacDermid. Between the date of the merger agreement and the
date the merger is completed, MacDermid has, among other things, agreed to:
- not to enter into, or permit any of its subsidiaries to enter into, any
contract or take any other action which, if entered into or taken prior
to the date of the merger agreement, would have caused any representation
or warranty of MacDermid to be untrue in any respect or be required to be
disclosed on any schedule to the merger agreement, or take any action
that is intended or may reasonably be expected to result in any of the
conditions to the merger not being satisfied or in a violation of the
merger agreement;
- not take any action that is intended or may reasonably be expected to
result in any of its representations and warranties specified in the
merger agreement being or becoming untrue in any material respect, or in
any of the conditions to the merger specified in the merger agreement not
being satisfied or in a violation of any provision of the merger
agreement, except, in every case, as may be required by applicable law;
- not take any other action that would materially impede the ability of
MacDermid to obtain the requisite regulatory approvals or otherwise
materially adversely affect MacDermid's ability to complete the
transactions contemplated by the merger agreement;
- not declare or pay any dividend on, or make any other distributions in
respect of MacDermid common stock, except for cash dividends in the
ordinary course and dividends or distributions in MacDermid common stock;
- not issue any shares of MacDermid common stock in connection with
MacDermid acquiring directly or indirectly the stock or assets of any
other person, except with the prior consent of PTI, which consent may not
be unreasonably withheld, conditioned or delayed;
- not consolidate with or merge into any other person or convey, transfer
or lease its properties and assets substantially as an entirety to any
person unless that person shall expressly assume the obligations of
MacDermid hereunder; and
- not authorize or enter into any agreement or commitment to take any
action inconsistent with any of the foregoing.
AMENDMENT AND WAIVER
Either MacDermid or PTI may waive compliance with any provision of the
merger agreement at any time prior to the completion of the merger. In addition,
MacDermid and PTI may mutually amend any provision of the merger agreement at
any time prior to the completion of the merger with the prior authorization of
their boards of directors, except that under Delaware law PTI may not amend the
merger agreement subsequent to the adoption of the agreement by the PTI
shareholders if the amendment would alter or change the amount or kind of shares
of MacDermid common stock to be received by a PTI shareholder in exchange for
shares of PTI capital stock.
Except with respect to the failure to obtain an opinion of tax counsel
discussed above (see "Merger Transaction -- Material Federal Income Tax
Consequences of the Merger"), neither MacDermid nor PTI intends to resolicit
shareholder approval of the merger as a consequence of a waiver or amendment of
any provision of the merger agreement if its board of directors (a) receives an
opinion of counsel that shareholder approval of the
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waiver or amendment is not specifically required by the Connecticut Business
Corporation Act or by the Delaware General Corporation Law, as applicable, and
(b) determines that the waiver or amendment could not reasonably be expected to
have a material adverse effect on the combined company or the shareholders of
either MacDermid or PTI or to otherwise require resolicitation of shareholder
approval under applicable law.
TERMINATION OF THE MERGER AGREEMENT
MacDermid and PTI may terminate the merger agreement by mutual written
consent at any time prior to the date the merger is completed.
Either MacDermid or PTI may terminate the merger agreement by giving
written notice to the other party prior to the date the merger is completed:
- if the merger has not occurred on or before September 30, 1999 by reason
of the failure of any condition to the completion of the merger unless
the failure to complete the merger by September 30, 1999 is due to the
failure of the party seeking to terminate the merger agreement to perform
its obligations under the merger agreement;
- if any other party has breached any material representation, warranty or
covenant contained in the merger agreement and has not cured the breach,
if capable of cure, within ten business days of receiving notice thereof
from the other party, provided that the party seeking to terminate the
merger agreement on this basis is not then in breach of any material
representation, warranty or covenant contained in the merger agreement.
Upon a termination of the merger agreement, all prospective obligations of
the parties will terminate without any liability of any party to any other
party, except with respect to a breach of the covenant regarding confidential
information, and for PTI's liability to pay a termination fee, as defined in the
following paragraph.
If MacDermid terminates the merger agreement because of PTI's failure to
obtain the requisite shareholder approval, PTI must, within three business days
after notice of the termination is given, pay to MacDermid a termination fee of
$5.0 million.
If PTI terminates the merger agreement because of its failure to obtain the
requisite shareholder approval, PTI must, prior to and as a precondition of the
effectiveness of the termination, pay to MacDermid a termination fee of $5.0
million.
EXPENSES
Each of MacDermid and PTI is responsible for its own costs and expenses
incurred in connection with the merger, and PTI is responsible for Citicorp
Venture Capital's costs and expenses incurred in connection with the merger.
Through July 31, 1999, merger related expenses totaled approximately $800,000
for MacDermid and approximately $740,000 for PTI.
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MACDERMID, INCORPORATED
W. CANNING PLC
PTI, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
On December 2, 1998, MacDermid closed a cash tender offer whereby it
acquired approximately 95% of the outstanding stock of W. Canning plc. MacDermid
acquired the remaining shares through a statutory compulsory procedure completed
on February 5, 1999. The total purchase price, including related costs, was
$164.4 million. The Canning acquisition has been accounted for using the
purchase method of accounting for business combinations.
As of February 18, 1999, MacDermid, PTI, Citicorp Venture Capital and MCD
Acquisition Corp. entered into the merger agreement summarized below and
described in more detail in this joint proxy statement -- prospectus. MacDermid
will account for the transaction using the pooling of interests method of
accounting for business combinations.
The following Unaudited Pro Forma Combined Condensed Financial Information
combines the historical Consolidated Condensed Financial Statements of
MacDermid, Canning and PTI giving effect to the Canning acquisition and the
merger as if each had been effective as of June 30, 1999 with respect to the Pro
Forma Condensed Combined Balance Sheet. The Unaudited Pro Forma Condensed
Combined Statements of Earnings for the years ended March 31, 1999, 1998 and
1997, and the three months ended June 30, 1999, combine the historical Condensed
Consolidated Statements of Earnings for MacDermid and PTI as if the merger had
been completed on April 1, 1996 and MacDermid's acquisition of Canning had been
completed as of April 1, 1998. Canning historical financial statements are
stated on the basis of accounting principles generally accepted in the UK (UK
GAAP). Pro forma adjustments have been included to adjust these statements to
U.S. GAAP. The Canning historical column represents eight months of activity for
Canning prior to its acquisition by MacDermid. Activity of Canning is included
in the MacDermid historical statement of earnings since the date of acquisition.
This information should be read in conjunction with the historical Consolidated
Financial Statements of MacDermid, Canning and PTI, including their applicable
notes, and in conjunction with the condensed historical selected financial data
of MacDermid and PTI and other pro forma combined condensed financial
information, including the applicable notes, appearing elsewhere or incorporated
by reference in this joint proxy statement -- prospectus. The historical
Consolidated Financial Statements of MacDermid and Canning are incorporated by
reference in this joint proxy statement -- prospectus. See "Where You Can Find
More Information."
Expenses related to the merger are anticipated to aggregate approximately
$11.7 million, of which $600,000 is included for expected stay bonuses and the
remaining $11.1 million consists primarily of anticipated debt refinancing costs
and professional fees. Since merger and reorganization costs are nonrecurring,
they have not been reflected in the Unaudited Pro Forma Combined Condensed
Statement of Earnings. The Unaudited Pro Forma Combined Condensed Financial
Information does not give effect to any anticipated operating efficiencies of
the Canning acquisition or the merger. The Unaudited Pro Forma Combined
Condensed Statements of Earnings are not necessarily indicative of the results
that would have occurred had the Canning acquisition or the merger been
completed as of the assumed dates or that may be achieved in the future. Future
results of operations will differ, perhaps significantly, from the pro forma
amounts reflected herein because of a variety of factors. For information
regarding the uncertainty of assumptions, estimates and
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expectations reflected herein, see "Summary -- Cautionary Statement Regarding
Forward-looking Information" and "Risk Factors."
The merger agreement between MacDermid and PTI provides that MacDermid will
acquire PTI and all of the outstanding PTI capital securities consisting of
common stock, preferred stock and a common stock warrant in exchange for shares
of MacDermid common stock and warrants to purchase shares of MacDermid common
stock. If the merger is completed, each holder of those PTI securities will
receive at a minimum a portion of 7,573,000 shares of MacDermid common stock.
The 7,573,000 shares of MacDermid common stock delivered upon the
completion of the merger will be allocated first to the holders of PTI preferred
stock to satisfy the liquidation preference of that stock. Each share of PTI
preferred stock will be exchanged for a number of MacDermid shares having an
aggregate value equal to the liquidation preference of that PTI share ($1,000)
plus dividends owed on that share. For purposes of that allocation, the
MacDermid stock will be valued at the "Current Market Price" which is defined in
the merger agreement to mean the average of the daily closing price for
MacDermid stock on the NYSE for the 30 consecutive trading days preceding the
completion of the merger, ignoring the highest and lowest closing prices during
that period. After the PTI preferred stock liquidation preference is satisfied,
the balance of the 7,573,000 MacDermid shares will be allocated among the
holders of PTI common stock in proportion to their ownership of PTI common
stock. For the purposes of that allocation, the PTI warrant held by Citicorp
Mezzanine Partners, which has an exercise price of $.01 per share, will be
treated as if it had been exercised in full. MacDermid will issue a substitute
common stock warrant to Citicorp Mezzanine Partners on equivalent terms. The
accompanying pro forma financial statements, however, treat the PTI warrant as
if exercised in full for purposes of presenting diluted earnings per share and
unexercised for purposes of presenting basic earnings per share and shares
outstanding as of the end of each period presented. THE ALLOCATION OF SHARES
AMONG THE HOLDERS OF PTI PREFERRED STOCK, ON THE ONE HAND, AND THE HOLDERS OF
PTI COMMON STOCK AND THE PTI WARRANT, ON THE OTHER HAND, WILL NOT HAVE ANY
EFFECT ON MACDERMID'S PRO FORMA DILUTED PER SHARE FINANCIAL DATA.
The holders of PTI common stock and the PTI warrant will also receive in
the merger an ownership interest in an escrow fund that will be established as
of the completion of the merger. The escrow fund will be used to satisfy any
indemnification claim MacDermid is entitled to bring under the merger agreement.
Upon completion of the merger, the escrow fund will consist of shares of
MacDermid common stock and a MacDermid warrant for Citicorp Mezzanine Partners.
If that warrant were exercised in full immediately after the merger, a total of
127,000 shares of MacDermid common stock would comprise the escrow fund at that
time. If MacDermid is entitled to indemnification, MacDermid's sole source of
recourse will be to the assets contained in the escrow. MacDermid's claims
against the escrow will be payable first in MacDermid shares and second in other
assets, if any, held in escrow. In no event will the former holders of PTI
common stock or the PTI warrant be liable for damages in excess of the value of
the escrowed shares. The value of the escrowed shares will be the "Current
Market Price" of MacDermid stock at the time the merger is completed. Claims
against the escrow must be asserted within 12 months after the merger is
completed. MacDermid will be entitled to indemnification only if its damages
exceed $2 million and then only to the extent of the excess. The escrow will
terminate and the remaining escrow assets, if any, will be distributed to the
former holders of PTI common stock and Citicorp Mezzanine Partners upon the
later of (a) 12 months after the completion of the merger or (b) the resolution
of all MacDermid indemnification claims.
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MACDERMID, INCORPORATED
PTI, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA PRO FORMA
MACDERMID PTI ADJUSTMENTS(E) COMBINED
--------- -------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... $ 9,153 $ 2,148 $ -- $ 11,301
Available for sale securities........... 1,122 -- -- 1,122
Accounts and notes
Receivable (net of allowance for
doubtful receivables of $5,996,
$3,690 and $9,686)................... 121,672 54,046 -- 175,718
Inventories.................................. 59,628 56,935 -- 116,563
Prepaid expenses and other current assets.... 4,645 6,724 -- 11,369
Deferred income tax.......................... 6,038 2,613 -- 8,651
-------- -------- --------
Total current assets......................... 202,258 122,466 -- 324,724
Property, plant and equipment (net of
accumulated depreciation and amortization
of $51,576, $45,965 and $97,541)........... 62,229 90,126 -- 152,355
Goodwill (net of accumulated amortization of
$16,646, $1,577 and $18,223)............... 179,038 16,906 -- 195,944
Patents, trademarks and other intangibles,
net of accumulated amortization of $7,041,
$15,535 and $22,576........................ 52,648 6,796 -- 59,444
Other assets, net............................ 33,819 9,033 -- 42,852
-------- -------- --------
Total assets................................. $529,992 $245,327 $ -- $775,319
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable and current installments of
long-term obligations...................... $ 28,724 $ 11,834 $ -- $ 40,558
Accounts and dividends payable............... 48,606 21,053 -- 69,659
Accrued expenses............................. 40,545 17,306 -- 57,851
Income taxes................................. 15,439 9,689 -- 25,128
-------- -------- ------- --------
Total current liabilities.................... 133,314 59,882 -- 193,196
Long-term obligations........................ 236,599 148,825 -- 385,424
Accrued postretirement and postemployment
benefits................................... 4,453 2,493 -- 6,946
Deferred income taxes........................ 614 10,111 -- 10,725
Minority interest in subsidiaries............ 101 -- -- 101
Preferred stock.............................. -- 9,751 (9,751) --
Shareholders' equity
Common stock stated $1 per share............. 39,413 9 6,479 45,901
Additional paid-in capital................... 5,483 879 3,272 9,634
</TABLE>
61
<PAGE> 72
MACDERMID, INCORPORATED
PTI, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1999 -- (CONTINUED)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA PRO FORMA
MACDERMID PTI ADJUSTMENTS(E) COMBINED
--------- -------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Retained earnings............................ 167,811 20,137 -- 187,948
Accumulated other comprehensive income
Cumulative foreign currency translation...... 393 (6,760) -- (6,367)
Available for sale securities holding loss... (78) -- -- (78)
Less cost of 14,267,816 common shares in
treasury................................... (58,111) (58,111)
-------- -------- ------- --------
Total shareholders' equity................... 154,911 14,265 9,751 178,927
-------- -------- ------- --------
Total liabilities and shareholders' equity... $529,992 $245,327 $ -- $775,319
======== ======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
62
<PAGE> 73
MACDERMID, INCORPORATED
PTI, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
HISTORICAL AGGREGATE
------------------------ PRO FORMA PRO FORMA
MACDERMID PTI ADJUSTMENTS COMBINED
----------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales................ $ 119,067 $ 63,091 (92)(D) $ 182,066
Cost of sales, ST&A
expenses and
amortization........... 98,911 52,889 (92)(D) 151,708
Interest expense......... 5,497 3,664 -- 9,161
Other (income) expenses
(net).................. (606) (340) -- (946)
----------- --------- --------- -----------
Earnings before income
taxes.................. 15,265 6,878 -- 22,143
Income taxes............. 5,266 2,617 7,883
----------- --------- --------- -----------
Net earnings before
extraordinary item..... 9,999 4,261 -- 14,260
Preferred dividends...... -- (373) 373(E) --
----------- --------- --------- -----------
Net earnings -- available
for common
shareholders........... 9,999 3,888 373 14,260
=========== ========= ========= ===========
Average common shares
outstanding:
Basic.................... 25,145,343 855,000 6,488,107(F) 31,633,450
Diluted.................. 25,430,215 1,005,000 7,573,000(F) 33,003,215
Net Earnings per common
share:
Basic.................... 0.40 4.55 0.45
Diluted.................. 0.39 3.87 0.43
Cash dividends per common
share.................. 0.02 -- .0159
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
63
<PAGE> 74
MACDERMID, INCORPORATED
W. CANNING PLC
PTI, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
FOR THE YEAR ENDED MARCH 31, 1999 FOR MACDERMID
(INCLUDES 4 MONTHS CANNING SINCE ACQUISITION IN DECEMBER 1998)
FOR THE EIGHT MONTHS ENDED NOVEMBER 30, 1998 FOR CANNING
FOR THE YEAR ENDED DECEMBER 31, 1998 FOR PTI
<TABLE>
<CAPTION>
HISTORICAL AGGREGATE
----------------------- PRO FORMA HISTORICAL PRO FORMA PRO FORMA
MACDERMID CANNING(5) ADJUSTMENT SUBTOTAL PTI ADJUSTMENT COMBINED
---------- ---------- ----------- -------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............. $ 382,648 $92,332 -- $474,980 $ 227,956 (429)(D) $ 702,507
Cost of sales, ST&A
expenses and
amortization........ 318,697 82,868 2,706(A) 404,271 185,489 (429)(D) 589,331
Interest expense...... 13,721 43 6,500(B) 20,264 14,139 -- 34,403
Other expenses
(net)............... (3,833) (404) -- (4,237) (1,076) -- (5,313)
---------- ------- --------- -------- ---------- ---------- ----------
Earnings before income
taxes............... 54,063 9,825 (9,206) 54,682 29,404 -- 84,086
Income taxes.......... 17,780 3,077 (2,867)(C) 17,990 10,061 -- 28,051
---------- ------- --------- -------- ---------- ---------- ----------
Net earnings.......... 36,283 6,748 (6,339) 36,692 19,343 56,035
Preferred dividends... -- -- -- -- 1,431 (1,431)(E) --
---------- ------- --------- -------- ---------- ---------- ----------
Net
earnings -- available
for common
shareholders........ 36,283 6,748 (6,339) 36,692 17,912 1,431 56,035
========== ======= ========= ======== ========== ========== ==========
Average common shares
outstanding:
Basic................. 25,136,712 855,000 6,488,107(F) 31,624,819
Diluted............... 25,427,288 1,005,000 7,573,000(F) 33,000,288
Net earnings per
common share:
Basic................. 1.44 20.95 1.77
Diluted............... 1.43 17.82 1.70
Cash dividends per
common share........ .08 -- .0636
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
64
<PAGE> 75
MACDERMID, INCORPORATED
W. CANNING PLC
PTI, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
FOR THE YEAR ENDED MARCH 31, 1998 FOR MACDERMID
FOR THE YEAR ENDED DECEMBER 31, 1997 FOR PTI
<TABLE>
<CAPTION>
HISTORICAL AGGREGATE
------------------------ PRO FORMA PRO FORMA
MACDERMID PTI ADJUSTMENTS COMBINED
----------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net sales................ $ 314,058 $ 214,509 (503)(D) $ 528,064
Cost of sales, ST&A
expenses and
amortization........... 258,453 187,829 (503)(D) 445,779
Interest expense......... 7,758 15,134 -- 22,892
Other (income) expenses
(net).................. (259) 343 -- 84
----------- --------- --------- -----------
Earnings before income
taxes.................. 48,106 11,203 -- 59,309
Income taxes............. 17,309 10,611 -- 27,920
----------- --------- --------- -----------
Net earnings before
extraordinary item..... 30,797 592 -- 31,389
Preferred dividends...... (309) (1,372) 1,372(E) (309)
----------- --------- --------- -----------
Net earnings -- available
for common
shareholders........... 30,488 (780) 1,372 31,080
=========== ========= ========= ===========
Average common shares
outstanding:
Basic.................... 24,976,931 851,250 6,488,107(F) 31,465,038
Diluted.................. 25,483,844 1,001,250 7,573,000(F) 33,056,844
Net Earnings per common
share:
Basic.................... 1.22 (.92) 0.99
Diluted.................. 1.20 (.92) 0.94
Cash dividends per common
share.................. 0.07 -- .0555
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
65
<PAGE> 76
MACDERMID, INCORPORATED
PTI, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
FOR THE YEAR ENDED MARCH 31, 1997 FOR MACDERMID
FOR THE YEAR ENDED DECEMBER 31, 1996 FOR PTI
<TABLE>
<CAPTION>
HISTORICAL
------------------------ PRO FORMA PRO FORMA
MACDERMID PTI ADJUSTMENTS COMBINED
----------- --------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C>
Net Sales................ $ 293,720 $ 146,577 -- $ 440,297
Cost of sales, ST&A
expenses and
amortization........... 247,009 128,060 -- 375,069
Interest expense......... 7,277 11,425 -- 18,702
Other expenses (net)..... 717 (1,108) -- (391)
----------- --------- -----------
Earnings before income
taxes.................. 38,717 8,200 -- 46,917
Income taxes............. 14,871 3,448 -- 18,319
----------- --------- -----------
Net earnings............. 23,846 4,752 -- 28,598
Preferred dividends...... (1,836) (1,450) 1,450(E) (1,836)
----------- --------- --------- -----------
Net earnings -- available
for common
shareholders........... 22,010 3,302 1,450 26,762
=========== ========= ========= ===========
Average common shares
outstanding:
Basic.................... 24,735,191 850,000 6,488,107(F) 31,223,298
Diluted.................. 25,912,677 1,000,000 7,573,000(F) 33,485,677
Net Earnings per common
share:
Basic.................... .89 3.88 0.86
Diluted.................. .85 3.30 0.80
Cash dividends per common
share.................. .0667 -- .0529
</TABLE>
See accompanying notes to unaudited pro forma condensed financial information.
66
<PAGE> 77
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION
(1) The Canning acquisition has been accounted for in accordance with the
purchase method of accounting for business combinations. Under the purchase
method of accounting, the purchase cost is allocated to acquired assets and
liabilities based on their relative fair values as of the closing date with
the excess of the purchase cost over fair value allocated to goodwill. The
actual results of Canning's business has been consolidated with MacDermid's
operations since the date of acquisition (December 2, 1998).
(2) The PTI merger will be accounted for using the pooling of interests method
of accounting for business combinations. Under generally accepted accounting
principles, the assets and liabilities of PTI will be combined with those of
MacDermid at book value. In addition, PTI's statements of earnings will be
combined with MacDermid's statements of earnings as of the earliest period
presented.
(3) In the ordinary course of business, MacDermid has not sold products to or
purchased products from Canning or PTI. Amounts that have been eliminated
from the pro forma combined condensed financial information are a result of
a temporary toll manufacturing agreement between PTI and MacDermid.
(4) Canning is organized under the laws of the United Kingdom. For purposes of
combining Canning's historical Condensed Consolidated Financial Statements
with those of MacDermid, the foreign currency rate of exchange of Pounds
1.6713 : $1.00 was applied to effect the pro formas.
(5) The accounts of Canning have historically been kept on the basis of UK GAAP.
The reconciliation of UK GAAP to US GAAP is as follows:
<TABLE>
<CAPTION>
CANNING US GAAP CANNING
UK GAAP ADJUSTMENT HISTORICAL
------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales......................... $92,332 $92,332
Cost of sales, ST&A expenses and
amortization...................... 83,233 (20)(a) 82,868
(345)(b)
Interest expense.................. 43 43
Other expenses (net).............. (404) (404)
------- ----- -------
Earnings before income taxes...... 9,460 365 9,825
Income taxes...................... 3,077 3,077
------- ----- -------
Net earnings...................... 6,383 365 6,748
======= ===== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1999
--------------
(IN
THOUSANDS)
<S> <C> <C>
(a) Depreciation Expense................................ $ (20)
</TABLE>
To reverse the periodic revaluation of certain property allowed for UK GAAP and
to reflect the historical cost depreciation of fixed assets under US GAAP.
67
<PAGE> 78
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1999
--------------
(IN THOUSANDS)
<S> <C> <C>
(b) Pension Expense..................................... $ (345)
</TABLE>
To adjust Canning pension expense to U.S. GAAP.
(6) MacDermid operates on a March 31 fiscal year. Canning had historically
operated on a December 31 fiscal year. The unaudited pro forma combined
condensed statements of earnings for the year ended March 31, 1999 assume
MacDermid completed the Canning acquisition as of April 1, 1998 and the
merger as of April 1, 1996. The pro forma adjustments to the historical
financial statements for the Canning acquisition (Notes(A) through (C)) and
for the merger (Notes (D) through (F)) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1999
--------------
(IN THOUSANDS)
<S> <C> <C>
(A) Amortization Expense................................ $ 2,706
</TABLE>
To record the amortization of goodwill allocated from the purchase price over 40
years.
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1999
--------------
(IN THOUSANDS)
<S> <C> <C>
(B) Interest Expense.................................... $ 6,500
</TABLE>
To record additional interest expense at the present interest rate of 6.59% for
the term loan borrowings. The long-term debt repayment schedule under the credit
facility was applied as if the borrowings began on April 1, 1998.
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1999
--------------
(IN THOUSANDS)
<S> <C> <C>
(C) Income Tax Provision................................ $(2,867)
</TABLE>
To provide for Federal and state income taxes on the above adjustments and
adjust at MacDermid's prevailing effective tax rate arising from the combination
of the operating results in each of the periods.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
THREE MONTHS ENDED --------------------
JUNE 30, 1999 1999 1998
------------------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
(D) Sales....................... $ 92 $ 429 $ 503
Cost of Sales............... (92) (429) (503)
</TABLE>
To eliminate activity related to the toll manufacturing agreement between
MacDermid and PTI.
(E) To eliminate effect of dividends on PTI preferred stock and to
reclassify as common stock the shares of PTI preferred stock redeemed to effect
the merger.
68
<PAGE> 79
(F) To adjust the historical average common shares outstanding for
6,488,107 shares of MacDermid capital stock (7,573,000 shares for diluted) which
will be issued to effect the merger. Net earnings per common share is calculated
based on the resulting pro forma total amount for all columns presented. A total
of 254,000 additional shares of MacDermid common stock may be issued to PTI
security holders if all of the 127,000 escrow shares are released to PTI
security holders and if MacDermid is liable to indemnify PTI security holders to
the maximum extent provided in the merger agreement by issuing an additional
127,000 shares of MacDermid common stock. If only 127,000 additional shares are
issued, those shares would represent 0.3% of the diluted shares presented. If
all 254,000 additional shares are issued those shares would represent 0.6% of
the diluted shares presented. The effect to EPS, in either instance, is
immaterial as the same EPS figure as presented would result from the calculation
using these additional shares.
69
<PAGE> 80
TRADING PRICE OF MACDERMID COMMON STOCK
Shares of MacDermid common stock are currently traded on the NYSE under the
Symbol "MRD". As of August 6, 1999, the record date for the MacDermid special
meeting, there were approximately 1,420 MacDermid shareholders. PTI common stock
has never been listed on any exchange or traded on the Nasdaq Market System or
the OTC Market. There are 40 holders of record of PTI Class A and Class B common
stock. PTI has never paid a dividend on its common stock.
The following table provides the last reported sales prices per share of
MacDermid common stock traded on the NYSE on February 18, 1999, the last trading
day before announcement of the merger agreement, and on August 27, 1999, the
latest practicable date before the printing of this joint proxy
statement -- prospectus:
<TABLE>
<S> <C>
February 18, 1999........................................... $38.88
August 27, 1999............................................. $34.38
</TABLE>
The following table provides the high and low sales prices for MacDermid
common stock as quoted by NYSE and dividends declared for the periods indicated,
as adjusted for a three-for-one stock split on February 6, 1998.
<TABLE>
<CAPTION>
DIVIDEND
YEAR LOW HIGH DECLARED
---- ------ ------ --------
<S> <C> <C> <C>
Fiscal year ended March 31, 1998:
First quarter.................................... $11.58 $14.83 $ 0.017
Second quarter................................... 15.33 34.00 0.017
Third quarter.................................... 20.67 29.21 0.017
Fourth quarter................................... 23.33 37.00 0.02
Fiscal year ended March 31, 1999:
First quarter.................................... $28.25 $42.38 $ 0.02
Second quarter................................... 23.38 40.50 0.02
Third quarter.................................... 29.88 39.13 0.02
Fourth quarter................................... 32.75 41.94 0.02
Fiscal year ending March 31, 2000:
First quarter.................................... $32.00 $46.50 $ 0.02
Second quarter (through August 27, 1999)......... 33.00 46.75 $ 0.02
</TABLE>
Shareholders are advised to obtain current market quotations of MacDermid
common stock. We cannot predict what the market price of MacDermid common stock
will be at or after the completion of the merger. The market price of MacDermid
common stock will fluctuate between the date of this joint proxy
statement -- prospectus, the date of the MacDermid and PTI special meetings and
the date in which the merger is completed and afterwards. MacDermid common stock
traded at the following highs and lows during the past several months, as
reported by the NYSE.
<TABLE>
<CAPTION>
AUGUST
MARCH APRIL MAY JUNE JULY (THROUGH AUGUST 27, 1999)
------ ------ ------ ------ ------ -------------------------
<S> <C> <C> <C> <C> <C> <C>
High..... $38.00 $43.25 $46.50 $46.50 $46.75 $38.00
Low...... $32.81 $32.00 $39.31 $40.13 $35.00 $33.00
</TABLE>
70
<PAGE> 81
BENEFICIAL OWNERSHIP OF MACDERMID
The following table shows information as of August 6, 1999 (except as
otherwise noted), with respect to ownership of common stock by (a) any person
known to MacDermid to be a beneficial owner of more than 5% of its common stock,
(b) MacDermid's directors, (c) MacDermid's CEO and four other most highly
compensated executive officers, and (d) all MacDermid directors and executive
officers as a group. Unless otherwise noted, each person has sole voting and
disposition power with respect to that person's shares. The total of shares of
common stock beneficially owned by the officers includes the right to acquire
ownership through exercise of stock options that are exercisable within 60 days.
The pro forma presentation assumes only 7,573,000 shares of MacDermid
common stock are issued in the merger, with none of the 127,000 escrowed shares
being released to former holders of PTI common stock and the PTI warrant. The
pro forma percentages also assume the full exercise of the MacDermid warrant
issued to Citicorp Mezzanine Partners upon completion of the merger. The
MacDermid warrant will have a nominal exercise price per share. See "Merger
Transaction."
<TABLE>
<CAPTION>
PERCENT OF
CLASS
---------------------------
COMMON STOCK PRO FORMA
BENEFICIALLY AS OF FOR
OWNED AUGUST 6, 1999 THE MERGER
------------ -------------- ----------
<S> <C> <C> <C>
PRINCIPAL SHAREHOLDERS
MacDermid, Incorporated Employees Profit
Sharing and Employee Stock Ownership Plan
and MacDermid, Incorporated Employees'
Pension Plan................................ 3,639,055 14.5% 11.1%
245 Freight Street
Waterbury, CT 06702(1)
Daniel H. Leever............................ 2,578,541 9.9% 7.7%
133 Railtree Hill Road
Woodbury, CT 06798(2)
BankBoston Corporation...................... 2,112,426 8.4% 6.5%
100 Federal Street
Boston, Massachusetts 02110(3)
Thomas W. Smith and Prescott Investors...... 1,655,980 6.6% 5.1%
323 Railroad Avenue
Greenwich, Connecticut 06830(4)
Harold Leever............................... 1,687,836 6.7% 5.2%
366 Guilds Hollow Road
Bethlehem, Connecticut(5)
Vanguard/PRIMECAP Fund, Inc................. 1,701,000 6.8% 5.2%
P.O. Box 2600
Valley Forge, PA 19482(6)
FMR Corp.................................... 1,608,700 6.4% 4.9%
82 Devonshire Street
Boston, MA 02109-3614(7)
Thomas M. Leever............................ 1,329,325 5.3% 4.1%
R.R. Box 230
Perkinsville, VT 05151(8)
</TABLE>
71
<PAGE> 82
<TABLE>
<CAPTION>
PERCENT OF
CLASS
---------------------------
COMMON STOCK PRO FORMA
BENEFICIALLY AS OF FOR
OWNED AUGUST 6, 1999 THE MERGER
------------ -------------- ----------
<S> <C> <C> <C>
DIRECTORS
R. Nelson Griebel(9)........................ 122,060 * *
Daniel H. Leever(2)......................... 2,578,541 9.9% 7.7%
Harold Leever(5)............................ 1,687,836 6.7% 5.2%
Donald G. Ogilvie........................... 8,767 * *
James C. Smith.............................. 11,395 * *
Thomas W. Smith(4).......................... 1,655,980 6.6 5.1%
NAMED EXECUTIVE OFFICERS
Daniel H. Leever, Chairman and 2,578,541 9.9% 7.7%
Chief Executive Officer(2)..................
R. Nelson Griebel, President and Chief 122,060 * *
Operating Officer(9)........................
Stephen Largan, Vice President 41,430 * *
Finance(10).................................
Gregory M. Bolingbroke, Controller(11)...... 38,598 * *
John L. Cordani, Corporate Secretary and 35,018 * *
General Counsel(12).........................
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A 6,179,625 24.6% 18.9%
GROUP (9 PERSONS). (2),(4), (5), (9)-(12)...
</TABLE>
- -------------------------
* Less than 1% of shares outstanding
(1) 3,245,800 shares in the MacDermid, Incorporated Profit Sharing and Employee
Stock Ownership Plan (the "Defined Contribution Plan") are beneficially
owned by the Trustee of the Defined Contribution Plan, Fleet Bank, One
Federal Street, Boston, MA 02211, and 393,255 shares in the MacDermid,
Incorporated Employee Pension Plan (the "Pension Plan") are beneficially
owned by the Trustee of the Pension Plan, Investors Bank & Trust Company,
24 Federal Street, Boston, MA 02110. Under the terms of the Defined
Contribution Plan, participants have the right to vote the shares credited
to their accounts; however, the Trustee may, in its discretion, vote any
shares, including unallocated shares, not voted by the participants. The
trustee of the Pension Plan may vote all the shares beneficially owned
thereunder.
(2) Includes 90,813 shares held by the Defined Contribution Plan (as of March
31, 1999), 90,000 shares which are subject to restrictions on transfer
until June 14, 2000 and 67,000 shares which are subject to restrictions on
transfer until April 19, 2002, under the terms of the MacDermid Special
Stock Purchase Plan and 462,065 shares which may be acquired upon exercise
of options granted under the Special Stock Purchase Plan. Includes an
option to purchase 500,000 shares of MacDermid common stock that was
granted to Mr. Leever on July 6, 1998 in accordance with the terms of the
MacDermid, Incorporated Stock Option Plan, dated July 6, 1998. Also
includes 39,582, 29,583, 40,488 and 10,202 shares which are subject to
restrictions on transfer until August 1, 1999, May 14, 2000, May 14, 2001
and May 14, 2002, respectively, under the terms of the MacDermid 1995
Equity Incentive Plan. Includes 74,703 shares held in trust by Mr. Leever
for his sons and 3,390 shares owned by his spouse, as to all of which Mr.
Leever disclaims beneficial
72
<PAGE> 83
interest. Also includes 1,114,401 shares held by trusts established by Mr.
Harold Leever, of which Mr. Daniel Leever is co-trustee.
(3) The information for BankBoston Corporation N.A. is derived from its
Schedule 13G dated February 14, 1997. Through its subsidiary, BankBoston,
N.A., BankBoston has sole voting power with respect to 826,290 shares,
shared voting power with respect to 1,286,136 shares and sole dispositive
power with respect to 1,488,417. Amounts have been revised to reflect for
the three-for-one split which occurred on February 6, 1998.
(4) Includes 1,574,108 shares held by partnerships of which Mr. Smith is a
general partner and 30,000 shares held by Prescott Investors' Employee
Profit Sharing Plan, as to all of which Mr. Smith shares voting and
investment power and 51,872 shares held by Mr. Smith personally. A portion
of the information for Prescott Investors is taken from its amended
Schedule 13G dated February 12, 1999.
(5) Includes 265,089 shares owned by his wife, Ruth Ann Leever, as to all of
which shares Mr. Leever disclaims any beneficial interest, and 44,286
shares held by the Defined Contribution Plan. BankBoston, N.A., Mr. Daniel
Leever and Mr. Thomas Leever, as co-trustees of various trusts, may have or
succeed to the rights to vote 1,114,401 shares. A portion of the
information for Mr. Leever was obtained from his amended Schedule 13G dated
January 12, 1998. MacDermid has entered into an agreement with Mr. Leever
that up to the greater of $522,988 or the then face amount of a life
insurance policy held by MacDermid on Mr. Leever's life will be used to
purchase a portion of his MacDermid shares upon his death. The total
purchases to be made are not to exceed the total of the state and Federal
estate taxes and funeral and administration expenses of Mr. Leever's
estate. The price per share of this purchase is to be the market price at
the time of death.
(6) The information for Vanguard PRIMECAP Fund, Inc. is taken solely from its
Schedule 13G dated February 10, 1999.
(7) The information for FMR Corp. is taken solely from its Schedule 13G dated
February 10, 1999. Fidelity Management & Research Company, a wholly owned
subsidiary of FMR and a registered investment adviser, is the beneficial
owner of 1,298,400 shares or approximately 5.2% of MacDermid common stock.
FMR, through control of Fidelity, has sole power to dispose of those
1,298,400 shares of MacDermid common stock. Neither FMR nor Edward C.
Johnson 3rd, the Chairman of FMR, has the sole power to vote or direct the
voting of the shares owned directly by the Fidelity funds, which power
resides with the funds' Board of Trustees. Fidelity carries out the voting
of the shares under written guidelines established by the funds' Boards of
Trustees. Fidelity Management Trust Company, a wholly owned subsidiary of
FMR and a bank as defined under the Securities Exchange Act of 1934 is the
beneficial owner of 308,400 shares of MacDermid common stock or
approximately 1.3% of the MacDermid common stock outstanding as a result of
its serving as investment manager of the institutional account(s). Each of
Mr. Johnson and FMR, through control of Fidelity Management Trust, has sole
dispositive power over those 308,400 shares and sole power to vote or to
direct the voting of 302,100 shares and no power to vote or to direct the
voting of 6,300 shares of MacDermid common stock owned by institutional
account(s). The Johnson family, through their ownership of voting stock and
a stockholders agreement, are a control group with respect to FMR. Fidelity
International Limited is the beneficial owner of 1,900 shares of MacDermid
common stock or less than 1.0% of the MacDermid common stock outstanding.
Fidelity International has sole power to vote and the sole power to dispose
of 1,900 shares of MacDermid common stock. A
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partnership controlled by Mr. Johnson and members of his family control
39.89% of the total votes which may be cast by all holders of Fidelity
International voting stock. FMR and Fidelity International are of the view
that they are not acting as a "group" for the purposes of Section 13(d)
under the Securities Exchange Act.
(8) Includes 1,114,401 shares held by trusts established by Mr. Harold Leever,
of which Mr. Thomas Leever is co-trustee.
(9) Includes 60 shares held in the Defined Contribution Plan (as of March 31,
1999), as well as 15,000 shares which are subject to restrictions under the
terms of the MacDermid, Incorporated 1995 Equity Incentive Plan. Includes
an option to purchase 100,000 shares of MacDermid common stock that was
granted to Mr. Griebel on February 1, 1999 in accordance with the terms of
the MacDermid, Incorporated Stock Option Plan, dated July 6, 1998.
(10) Includes 230 shares held in the Defined Contribution Plan (as of March 31,
1999). Includes an option to purchase 40,000 shares of MacDermid common
stock that was granted to Mr. Largan on February 1, 1999 in accordance with
the terms of the MacDermid, Incorporated Stock Option Plan, dated July 6,
1998.
(11) Includes 9,950 shares held in the Defined Contribution Plan (as of March
31, 1999), as well as 7,868 shares which are subject to restrictions under
the terms of the MacDermid, Incorporated 1995 Equity Incentive Plan.
Includes an option to purchase 17,200 shares of MacDermid common stock that
was granted to Mr. Bolingbroke on February 1, 1999 in accordance with the
terms of the MacDermid, Incorporated Stock Option Plan, dated July 6, 1998.
(12) Includes 9,950 shares held in the Defined Contribution Plan (as of March
31, 1999), as well as 7,868 shares which are subject to restrictions under
the terms of the MacDermid, Incorporated 1995 Equity Incentive Plan.
Includes an option to purchase 17,200 shares of MacDermid common stock that
was granted to Mr. Cordani on February 1, 1999 in accordance with the terms
of the MacDermid, Incorporated Stock Option Plan, dated July 6, 1998.
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DESCRIPTION OF MACDERMID CAPITAL STOCK
MacDermid has authorized 75,000,000 shares of common stock, no par value,
and 2,000,000 shares of preferred stock, no par value per share. As of August 6,
1999, the record date for the MacDermid meeting, 25,157,299 shares of MacDermid
common stock were issued and outstanding and no shares of MacDermid preferred
stock were issued and outstanding.
The MacDermid Board of Directors has the authority, without further action
by MacDermid shareholders, to determine the principal rights, preferences and
privileges of the unissued MacDermid preferred stock.
Subject to the preferential rights of any series of MacDermid preferred
stock that may be outstanding, all shares of MacDermid common stock participate
equally in any dividends declared by the Board of Directors and in the net
assets of MacDermid on liquidation. Holders of shares of MacDermid common stock
are entitled to one vote for each share held of record and have no conversion,
exchange, preemptive or cumulative voting rights. All outstanding shares of
MacDermid common stock are fully paid and nonassessable.
In connection with the merger, MacDermid will issue MacDermid warrants to
Citicorp Mezzanine Partners with an exercise price of approximately $.01 per
share. The common stock warrants will expire December 29, 2004. The exercise
price and the number of shares obtainable under the warrant agreement will be
subject to adjustment in the event MacDermid sells, or is deemed to have sold,
additional shares of MacDermid common stock in the future, other than in
connection with a permitted issuance, as defined in the warrant instrument.
The transfer agent and registrar for the MacDermid common stock is Harris
Trust Company of New York.
See "Merger Transaction" for further description of securities issued in
connection with the merger.
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COMPARISON OF THE RIGHTS OF HOLDERS OF MACDERMID
COMMON STOCK AND HOLDERS OF PTI STOCK
INTRODUCTION
MacDermid is a business corporation incorporated under the laws of the
State of Connecticut in accordance with the provisions of the Connecticut
Business Corporation Act. PTI is a business corporation organized under Delaware
General Corporation Law. Upon completion of the merger, those PTI shareholders
receiving MacDermid common stock will become shareholders of an issuer
(MacDermid) organized under Connecticut law.
Differences between Connecticut law and Delaware law, and between the
charters and bylaws of PTI and MacDermid, will result in several changes in the
rights of the PTI shareholders if the merger is completed. The following summary
describes all the material differences between the rights of shareholders under
Connecticut law and MacDermid's charter and bylaws as compared with the rights
of the shareholders of PTI under Delaware law and PTI's charter and bylaws. The
summary is qualified in its entirety by reference to Delaware law and
Connecticut law and the governing corporate instruments of MacDermid and PTI, to
which PTI and MacDermid shareholders are referred. Copies of the charter and
bylaws of PTI and MacDermid may be obtained from PTI and MacDermid upon request.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under Connecticut law, unless otherwise provided in the charter, vacancies
on the board of directors may be filled by approval of the shareholders or the
Board. The MacDermid charter contains no provision to the contrary. In addition,
if the directors remaining in office constitute fewer than a quorum of the
Board, they may fill the vacancy by the affirmative vote of a majority of the
directors remaining in office.
Under Delaware law, vacancies and newly-created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office. PTI's bylaws provide that vacancies
and newly created directorships resulting from an increase in the authorized
number of directors may be filled by a majority vote of the holders of the
outstanding stock entitled to vote. In addition, the bylaws provide that in the
event any of the PTI shareholders have entered into an agreement which provides
for the manner in which directors are elected, a director so elected may be
removed from the Board only in accordance with that agreement.
PTI has entered into a stockholders agreement with Citicorp Venture
Capital, Citicorp Mezzanine Partners, the executives and directors of PTI who
hold shares of PTI stock and other individual shareholders which provides that
they will vote their shares so as to maintain the structure of the PTI Board as
of December 29, 1994. The shares must be voted so that:
- the authorized number of directors remains at seven;
- two members of the Board are Citicorp Venture Capital delegates;
- one member is a Citicorp Mezzanine Partners delegate;
- one member is PTI's president; and
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- three members are designated by the holders of a majority of the shares
of PTI Class A voting common stock.
The merger agreement provides that the stockholders agreement will be
terminated prior to the merger.
SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDER ACTION BY WRITTEN CONSENT
Under Connecticut law, a special meeting of shareholders may be called by
the Board, the persons authorized to do so by the charter or the bylaws or the
holders of shares entitled to cast not less than 10% of the votes at the
meeting. MacDermid's bylaws permit its president to call a special meeting.
Under Delaware law, a special meeting may be called by the Board or any
other persons as may be authorized by the charter or bylaws. The PTI bylaws
provide that a special meeting may also be called by two or more members of the
Board, the president, or the holders of shares entitled to cast a majority of
the votes at the special meeting or the holders of 50% or more of the
outstanding shares of any series or class of PTI's capital stock entitled to
vote.
Under Connecticut law, any action which may be taken at a meeting of
shareholders may also be taken by unanimous written consent or, if the charter
so provides, the written consent of the holders of at least the same proportion
of outstanding shares as would be necessary to take that action at a meeting at
which all shares entitled to vote were present and voted, except that the
election of directors by written consent requires the unanimous consent of all
shares entitled to vote. MacDermid's charter provides that any action may be
taken with the written consent of the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take that action at a meeting, if the minimum number of votes also constitutes a
majority of the shares.
Under Delaware law, unless otherwise provided in the charter, any action
which is required to be taken or may be taken at a meeting of shareholders,
including the election of directors, may be taken by a written consent signed by
the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to take that action at a meeting. PTI's charter
contains no provision to the contrary.
AMENDMENT OF BYLAWS
Under Connecticut law, the bylaws may be amended or repealed by the Board,
unless the charter reserves the power exclusively to shareholders, or the
shareholders in amending a bylaw provide expressly that the Board may not amend
or repeal that bylaw. Neither MacDermid's charter nor bylaws reserves these
powers for the shareholders.
Under Delaware law, the power to adopt, amend or repeal bylaws is vested in
the shareholders unless the charter confers the power to adopt, amend or repeal
bylaws upon the Board as well. PTI's charter and bylaws confer these powers on
the Board.
DISSENTERS' RIGHTS
Under Connecticut law, a shareholder is entitled to dissent from, and
obtain payment of the fair value of that shareholder's shares, in the event of
any of the following corporate actions:
- completion of a plan of merger to which the corporation is a party if
shareholder approval is required for the merger under Connecticut law or
the certificate of
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incorporation and the shareholder is entitled to vote on the merger or if
the corporation is a subsidiary that is merged with its parent;
- completion of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
- completion of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange;
- amendment to the certificate of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it
(a) alters or abolishes a preferential right of the shares, (b) creates,
alters or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of
the shares, (c) alters or abolishes a preemptive right of the holder of
the shares to acquire shares or other securities, (d) excludes or limits
the right of the shares to vote on any matter, or to cumulate votes,
other than a limitation by dilution through issuance of shares or other
securities with similar voting rights, or (e) reduces the number of
shares owned by the shareholder to a fraction of a share if the
fractional share so created is to be acquired for cash; or
- any corporate action taken pursuant to a shareholder vote to the extent
the certificate of incorporation, bylaws or a resolution of the Board
provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares (as of the date of this joint proxy
statement -- prospectus, neither MacDermid's charter nor bylaws contained
any provisions of this nature).
Under Delaware law, appraisal rights are generally available for the shares
of any class or series of stock of a corporation in a merger or consolidation,
except that no appraisal rights are available for the shares of any class or
series of stock which, at the record date for the meeting held to approve those
transactions, were either:
- listed on a national securities exchange; or
- held of record by more than 2,000 shareholders.
Furthermore, no appraisal rights are available to shareholders of the
surviving corporation or, in limited circumstances, to shareholders of the
non-surviving corporation if the merger is between a parent and its subsidiary
if the merger did not require shareholder approval. Notwithstanding the
foregoing, appraisal rights are available, for any class or series if the
holders thereof receive in the merger or consolidation anything except:
- shares of stock of the corporation surviving or resulting from a merger
or consolidation;
- shares of stock of any other corporation which at the effective date of
the merger or consolidation is either listed on a national securities
exchange or held of record by more than 2,000 shareholders;
- cash in lieu of fractional shares; or
- any combination of the foregoing.
BUSINESS COMBINATIONS AND REORGANIZATIONS
Under Connecticut law, a corporation may not engage in any business
combination, as defined under Connecticut law, with any interested shareholder
(defined below) for a period of five years following that interested
shareholder's stock acquisition date unless the business combination or the
purchase of stock made by the interested shareholder or the
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interested shareholder's stock acquisition date is approved by the Board and by
a majority of the nonemployee directors of which there must be at least two,
prior to that interested shareholder's stock acquisition date. An interested
shareholder is defined as a person beneficially owning 10% or more of the voting
power of the outstanding shares of voting stock, or an affiliate who, within a
two-year period immediately prior to the date in question, owned 10% or more of
the voting power of the outstanding shares of voting stock.
MacDermid's charter requires, for the approval of any merger or
consolidation or other business reorganization or combination of MacDermid with
or into a person who is a significant stockholder (as defined below), an
affirmative vote of at least 80% of the number of votes at the time entitled to
be cast by shareholders of MacDermid generally in the election of directors,
including at least 66 2/3% of the number of votes at the time so entitled to be
cast by shareholders of MacDermid other than by a significant stockholder to or
with whom the business transaction is proposed to be effected. The voting
requirements set forth above do not apply to any business transaction with a
significant stockholder if that transaction is approved by a majority of the
Board of Directors, but only if a majority of the members of the Board of
Directors acting on the matter were directors prior to the date on which that
person became a significant stockholder. A "significant stockholder" means any
person owning beneficially, directly or indirectly, 15% or more of the shares of
capital stock of MacDermid entitled to be cast generally in the election of
directors by all of the outstanding shares of all classes of capital stock,
voting as one class.
PTI's charter provides that PTI will not be governed by the provisions of
Delaware law which would prevent an interested stockholder (as defined below)
from engaging in a business combination, as defined under Delaware law, with a
corporation for three years following the date that person became an interested
stockholder unless:
- before that person became an interested stockholder, the Board of the
corporation approved the transaction in which the interested stockholder
became an interested stockholder;
- upon completion of the transaction which resulted in the interested
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced excluding stock held by
directors who are also officers and employee stock ownership plans that
do not provide for confidential voting by plan participants; or
- following the transaction in which the person became an interested
stockholder, the business combination is both approved by the board of
directors of that corporation and authorized at a meeting of shareholders
by the affirmative vote of the holders of at least two-thirds of the
outstanding voting stock of that corporation not owned by the interested
stockholder.
For the purpose of these provisions an interested stockholder is defined as
a person beneficially owning 15% or more of a corporation's common stock.
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PTI MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis of PTI's consolidated financial
condition and consolidated results of operations should be read in conjunction
with "PTI Selected Financial Data," "PTI's Audited Consolidated Financial
Statements" and related notes for the year ended December 31, 1998 and PTI's
Unaudited Consolidated Financial Statements for the six months ended June 30,
1999, each included elsewhere in this joint proxy statement -- prospectus. This
discussion contains forward-looking statements which involve risks and
uncertainties. PTI's actual results could differ materially from the results
expressed in, or implied by, these financial statements. See
"Summary -- Cautionary Statement Concerning Forward-looking Information."
NET SALES AND OPERATING PROFITS
For the six months ended June 30, 1999, PTI's worldwide sales increased to
$120.2 million, a 6% increase over the same period in 1998. Excluding businesses
acquired since June 30, 1998, PTI's worldwide sales declined 4% in the first
half of 1999 versus 1998. This decline reflects weakness in end-user demand for
printing plates as well as reduced sales to advertising printers.
After giving effect to preferred stock dividend requirements of $746,000,
net earnings for the six-month period ended June 30, 1999 of $6.8 million or
$6.74 per common share were down from the $8.2 million or $8.15 per common share
recorded in the same period last year. Excluding an after-tax gain on sale of
assets of $0.9 million, net earnings for the six months ended June 30, 1999 were
$5.9 million. This decline reflects: (1) unusually low sales volume due to
distributor inventory reductions; (2) a decline in sales to advertising
publishing customers; and (3) higher than normal expenses in Europe.
The year ended December 31, 1998 was the third consecutive record year for
net sales. PTI worldwide net sales in 1998 were $228 million, a 6% increase
compared to 1997. This continued growth is reflective of new business in all
geographic regions except Asia/ Pacific, where the recent economic turmoil and a
stronger U.S. dollar led to an 8% decline in sales. Sales increased by 1% for
the year in Asia/Pacific excluding the negative of the stronger U.S. dollar on
translated sales.
After giving effect to preferred stock dividend requirements, fiscal year
1998 net earnings were $17.9 million, or $17.82 per common share, as compared to
a loss recorded in fiscal year 1997. The loss in 1997 is attributable to
purchase accounting associated with the acquisition of NAPP Systems in January
1997. See "Acquisitions."
SALES
SIX MONTHS ENDED JUNE 30, 1999 VERSUS SIX MONTHS ENDED JUNE 30, 1998
In North America, net sales decreased 7% in the six months ended June 30,
1999 versus the same period in 1998. This decline reflects a decrease in sales
to advertising printers as well as the consequences of PTI's two largest
distributors building inventory during the first half of 1998 and conversely
reducing inventory during the first half of 1999. In Europe, excluding companies
acquired in 1998, net sales increased 1%. Foreign currency translation changes
had virtually no impact on Europe's first half 1999 sales versus the same period
in 1998. In the rest of the world, net sales increased 12% in the first half of
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1999, reflecting continued gains in Latin America and a somewhat improved
business climate in Asia.
1998 VERSUS 1997
In North America, net sales increased 4% in fiscal year 1998 compared to
fiscal year 1997 and in Latin America net sales increased 34% due to increased
business resulting from a stronger economic climate. Additionally, some of PTI's
newer image transfer products experienced growing market acceptance. In Europe,
sales increased 14%, reflecting the strong economic climate and the continued
success of several new image transfer products.
1997 VERSUS 1996
Worldwide sales increased $67.9 million or 46% in fiscal year 1997 compared
to fiscal year 1996, principally as a result of the NAPP Systems acquisition in
January 1997. Excluding the effect of the NAPP Systems acquisition, net sales
increased 5% worldwide. Foreign currencies devalued versus the U.S. dollar,
which caused an $8.3 million unfavorable variance in fiscal year 1997 versus
fiscal year 1996. On a constant U.S. dollar basis, worldwide net sales,
excluding NAPP Systems, increased by 10% in 1997 compared to 1996.
In North America, net sales increased $67.6 million, principally as a
result of the NAPP Systems acquisition. Excluding NAPP Systems, North America
sales increased 9%. In Europe, sales declined 4%, including a $7.0 million
unfavorable exchange variance. On a constant U.S. dollar basis, Europe net sales
increased 9% in fiscal 1997 versus 1996.
COSTS AND EXPENSES
SIX MONTHS ENDED JUNE 30, 1999 VERSUS SIX MONTHS ENDED JUNE 30, 1998
Cost of sales increased as a percentage of sales in the first half of 1999
versus the same period in 1998 primarily due to increased factory expenses as
well as expenses associated with acquired companies without a commensurate
increase in sales. Similarly, selling, technical and administrative expenses
increased as a percentage of sales. In percentage terms, the overall sales
increase of 6% was not sufficient to offset the addition of acquired companies'
expenses, even though operating expenses declined 2% excluding the impact of
acquisitions. The pretax gain on the sale of assets in 1999 reflects two items:
(1) a pretax gain on the sale of EEC assets in the first quarter of $854,000;
and (2) a pretax gain on the sale of textile equipment in the second quarter of
$572,000.
1998 VERSUS 1997
Cost of sales decreased as a percentage of sales for the third consecutive
year in fiscal year 1998. PTI's capital investments continued to improve
manufacturing efficiencies. Selling, technical and administrative expenses
declined as a percentage of sales for the third consecutive year. Excluding the
one-time write-off of $10.5 million, actual costs increased 3%, primarily
reflecting PTI's ongoing cost awareness philosophy, which allows for additional
costs only as necessary to support sales growth and for research programs which
increased 5%.
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1997 VERSUS 1996
Cost of sales, excluding the effect of the flow-through of a non-recurring
purchased inventory write-up associated with the NAPP Systems acquisition of
$1.7 million, decreased as a percentage of sales, reflecting worldwide cost
savings in factory expenses, particularly evident in Europe where a cost
reduction effort was implemented. During 1996, PTI streamlined many of its
overhead functions in Europe and consequently reduced its fixed overhead by
approximately $1.0 million annually. This streamlining involved reducing
personnel by approximately 20 persons with termination benefit costs totaling
approximately $633,000 which were paid as incurred. Excluding a one-time
write-off of $10.5 million associated with the NAPP Systems acquisition,
selling, technical and administrative expenses decreased from 28% of sales in
fiscal year 1996 to 25% of sales in fiscal year 1997. This decrease is
principally a reflection of the acquisition of NAPP Systems in fiscal year 1997
which carries historically lower selling, technical and administration expenses
as a percent of sales and the reorganization in Europe which reduced expenses.
Interest expense increased significantly in fiscal year 1997 versus fiscal
year 1996 as a result of borrowing to finance the NAPP Systems acquisition in
January 1997.
ACQUISITIONS
PTI actively pursues acquisitions to complement its existing graphic arts
business. The following table summarizes PTI's acquisitions, all of which were
stock acquisitions for cash accounted for under the purchase method of
accounting:
<TABLE>
<CAPTION>
DATE ACQUISITION CASH PAID
---- ----------- ---------
<S> <C> <C>
January 1997 NAPP Systems (California) $56,777,000
April 1998 Axcyl S.A. (France) $ 1,000,000
December 1998 Jager Jeune S.A. (France) $11,258,000
February 1999 Supratech, Inc. (North Carolina) $ 5,600,000
March 1999 International Composites Corporation $ 6,000,000
(Washington)
</TABLE>
In March 1999, PTI acquired all of the outstanding stock of International
Composites Corporation, Inc., located in Vancouver, Washington. International
Composites Corporation has been renamed Axcyl, Inc. Axcyl manufactures sleeve
systems which are complementary to the products manufactured by Axcyl S.A. in
France.
In February 1999, PTI acquired all of the outstanding stock of Supratech,
Inc., a Delaware corporation, from Nippon Paint (USA) Inc. and Nippon Paint Co.,
Ltd for $5.6 million. Supratech, Inc. produces and markets waterwash,
flexographic plate material.
In January 1999, PTI sold EEC, a business owned by its French subsidiary.
PTI received $1.6 million for a portion of the net assets of EEC and recorded an
after-tax gain on the sale of $0.5 million. In June 1999, PTI sold textile
blanket splicing equipment and recorded an after-tax gain on the sale of $0.3
million. Neither the sale of the EEC business nor the textile equipment is
expected to have a material impact on PTI's future operations.
In April 1998, PTI acquired all of the outstanding stock of Axcyl
Composite, S.A., a French company, which manufactures sleeve systems made of
advanced composite materials for use in flexographic printing applications. In
December 1998, PTI acquired all
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of the outstanding stock of Jager Jeune, S.A., a French company, engaged in the
conversion and distribution of offset printing blankets. On a combined basis,
the acquisitions were less than 10% of PTI's consolidated total assets and
pretax earnings in 1998.
In January 1997, PTI acquired all of the outstanding stock of NAPP Systems,
a leading supplier of relief printing plates to the advertising printing
industry. Total assets acquired of $75.5 million were allocated to: accounts
receivable $9.6 million; inventories $12.9 million; other current assets $2.7
million; net fixed assets $22.7 million; goodwill $12.4 million; in-process
research and development $10.5 million; and other long term assets $4.7 million.
Total liabilities assumed of $18.8 million were allocated to: accounts payable
and other current liabilities $8.3 million; deferred income taxes $9.0 million;
and other long term liabilities $1.5 million. The acquisition, which was
accounted for using the purchase method of accounting, resulted in the following
one time charges in 1997:
<TABLE>
<CAPTION>
DOLLARS IN
THOUSANDS
----------
<C> <S>
$ 2,128 write-off deferred financing fees
10,495 write-off in process R&D Expenses
-------
$12,623 Total
=======
</TABLE>
To accomplish the acquisition, PTI negotiated a new credit agreement and
paid off amounts due under the original 1994 agreement. Consequently, the
remainder of deferred financing fees of $2,128,000 pretax ($1,322,000 after tax)
associated with the original credit agreement were written off as an after tax
extraordinary item. The fees associated with the new credit agreement were
capitalized. The $10,495,000 in-process research and development expense
write-off represents the following three purchased projects:
<TABLE>
<CAPTION>
$ IN THOUSANDS
------------------------------------------------------------------
ESTIMATE OF
FAIR VALUE
ON 17-JAN-97 PROJECTED SIGNIFICANT
USING % OF ESTIMATED R & D $ MANAGEMENT TOTAL REVENUE ASSUMED
COMPLETION COMPLETION SPENT THRU ESTIMATE DEVELOPMENT % COMPLETE COMMENCEMENT DISCOUNT
METHOD DATE 17-JAN-97 TO COMPLETE COST ON 17-JAN-97 DATE RATE
------------ ---------- ---------- ----------- ----------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Laser Direct......... 9,261 Jun-99 900 518 1,418 63% Late 1999 20%
High-Speed Plate..... 958 Jun-97 60 86 146 41% Mid 1998 25%
Water-based Polymer.. 276 Jun-99 380 932 1,362 28% Late 1999 30%
------- ------ ------ ------
Total................ $10,495 $1,340 $1,536 $2,926
======= ====== ====== ======
</TABLE>
- The development of Laser Direct technology, used to etch images
directly on the printing plate was started in November 1993 and was
63% complete with costs incurred to the date of acquisition of
$900,000. The $9,261,000 valuation of this technology is based on
the Income Forecast Method by analyzing the discounted present
values of the estimated cash flow to be generated and adjusting for
the specific stage of completion of the project. The estimated cost
to complete the development of a commercially acceptable product
between January 17, 1997 and June 1999 is $518,000.
The $9.3 million valuation of the laser direct technology was based
on a forecast of net cash inflows starting in late 1998 and
continuing through 2005. Since the laser direct project envisions an
entirely new plate processor and printing plate system, there is no
historical data on which to base a revenue and cost of sales
forecast. Consequently, management estimated sales volume, selling
prices and margins based on its knowledge of the market and
potential
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customers. Management estimated selling and general and
administrative operating expenses for the laser direct products at
approximately 13% of sales, which is slightly lower than NAPP's
existing expense structure of approximately 14% of sales. Management
anticipates that, as a percentage of sales, selling expenses
associated with laser direct products will be somewhat lower than
NAPP's existing business. On average, laser direct plate customers
will be the larger, higher volume users. Compared to NAPP's existing
business, the laser direct business is expected to generate higher
revenues per customer. Thus, the same selling effort will result in
larger average order sizes and a slightly lower selling cost as a
percentage of revenues.
- The development of a High Speed Printing Plate that will expose
faster, provide better print quality, and be more durable than the
existing NAPPflex technology, started in June, 1996, was 41%
complete with costs incurred to the date of acquisition of $60,000.
The $958,000 valuation of this technology is based on the Income
Forecast Method by analyzing the discounted present values of the
estimated cash flow to be generated and adjusting for the specific
stage of completion of the project. The estimated costs to complete
this development between January 17, 1997 and June 1997 was $86,000.
- The development of the Water Based Polymer technology, targeted at
reducing NAPP System's cost of raw materials, was 28% complete with
costs incurred to the date of acquisition of $380,000. The $276,000
valuation of this technology is based on the Income Forecast Method
by analyzing the estimated discounted present values of the cash
flow to be generated from cost savings and adjusting for the
specific stage of completion of the project. The estimated costs to
complete this development between January 17, 1997 and June 1999 is
$982,000.
An adjustment to the valuation of the projects listed has been applied
based on the stage of completion method. The stage of completion percentage was
calculated using the costs incurred to date at the time of the acquisition as a
percent of total estimated costs of completion at the time of the valuation. In
addition, a core technology charge of 33% of cash flows was allocated to
capitalized technology thus reducing the purchased research and development
charge. Management is primarily responsible for estimating the fair value of
purchased in-process research and development.
The estimated completion dates for both the laser direct and water based
polymer projects have been delayed by approximately three months. These delays
are expected to cause an increase in total development costs of no more than
$100,000. The high-speed plate project was completed in June 1997 and
significant progress has been made in completing both the laser direct and water
based polymer technology; however, no assurance can be given that the remaining
two projects can be completed successfully. If not successful, the ongoing
charges to income associated with these projects will not have any future
benefit to profitability.
In connection with the NAPP acquisition, PTI wrote-up acquired inventory by
$1.7 million in accordance with generally accepted accounting principles. PTI
then charged this amount to the Statement of Income through cost of goods sold
as the inventory was sold to customers during the remainder of 1997.
Excluding the $10.5 million write off of in-process research and
development expense, pretax income in fiscal year 1997 would have been $21.7
million.
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INCOME TAXES
For the year ended December 31, 1998, PTI's effective tax rate was 34.2%
This reflects a determination that tax benefits including research and
experimental and foreign tax credits of $1.4 million are available to PTI. Until
the fourth quarter of 1998, the value of these tax benefits had not been
confirmed and therefore, PTI had accrued taxes based on historical rates. The
increase in the effective tax rate in 1997 is primarily attributable to
permanent items deducted in the financial statements in 1997 including
in-process research and development costs, non-creditable foreign taxes, an
increase in tax reserves, and the amortization of goodwill. These items were not
deductible for tax purposes and, therefore, caused an increase in the effective
tax rate.
LIQUIDITY AND CAPITAL SPENDING
Cash flows from operations are used to fund preferred stock dividends,
which were $1 million cash dividends in each of fiscal years 1998, 1997 and
1996, other working capital requirements and capital projects. PTI has never
paid a cash dividend on common stock. From time to time, PTI utilizes its
existing revolving credit facility to fund overall needs.
For the year ended December 31, 1998, cash flows provided by operations
were $26.9 million an increase of $6.6 million over 1997 primarily reflecting an
increase in net income after adjusting for non-cash purchase accounting entries.
New capital spending during 1998 of approximately $14.6 million as compared
to $5.8 million in fiscal year 1997 included a significant expansion of PTI's
printing plate manufacturing facilities in Morristown, Tennessee.
Other than satisfaction of existing debt obligations, all of which will be
refinanced upon completion of the merger, PTI has no long-range commitments
which would have a significant impact upon results of operations, financial
condition or liquidity. At December 31, 1998, PTI had a committed revolving
credit line of $35 million against which $13.5 million was borrowed. PTI is in
compliance with all covenants related to its bank financing, Senior Subordinated
Debt Agreement and all classes of preferred stock.
YEAR 2000 READINESS
Introduction: Computer programs which recognize only two digits, rather
than four digits, to define the applicable year will be at risk for possible
miscalculations, classifications, errors or system failures. This risk is often
referred to as the "Year 2000" issue.
PTI considers the Year 2000 issue a critical business issue. PTI has
implemented a worldwide plan for evaluating and minimizing the risks associated
with the Year 2000 issue. The program includes investigation, remediation and
follow-up under the direction of the Director of Administration working through
plant management, engineering and information technology personnel. The
objective is to identify specific issues and implement corrective action in each
specific case while instituting a series of management processes that coordinate
and manage this overall process across business boundaries. The process includes
corporate oversight with periodic reports to our directors.
The program involves investigation and remediation when necessary in three
distinct areas: (1) business computer systems and software; (2) manufacturing
and operational systems that utilize micro processors, including manufacturing
and testing equipment, utilities and communication systems; and (3) suppliers
and customers. The objective is to become Year 2000 compliant, but more
importantly, to use the resources applied to this
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<PAGE> 96
project to achieve better service and value to our customers through improved
communications and information.
Business Computer Systems and Software: PTI has completed the installation
of a leading Year 2000 compliant integrated business software system and related
hardware in most major worldwide locations. The effort to convert information
systems for Year 2000 compliance was started in October 1997 and, with the
exceptions discussed below, completed as planned in December 1998. It is our
intention that all locations will be Year 2000 compliance prior to the end of
1999.
The principal U.S. manufacturing and office locations in Morristown,
Tennessee, Atlanta, Georgia, and Adams, Massachusetts, and the corporate office
in Billerica, Massachusetts are fully operational on the new system. The NAPP
Systems business in San Marcos, California is now converting to the new system,
which conversion is expected to be completed in November 1999.
Internationally, Rollin, SA, PTI's principal European subsidiary performing
manufacturing and administrative functions for Europe is also operational on the
same Year 2000 compliant business software system as the U.S. The PTI operations
in Japan, Hong Kong and Australia are using recently acquired Year 2000
compliant PC based systems for light manufacturing and sale/marketing
activities.
Three recently acquired businesses are operating on a combination of
manual, spreadsheet and self developed/purchased software. Corporate information
technology personnel along with local management are currently addressing
corrections. The cost of bringing all currently noncomplying locations into
compliance during 1999 is estimated at $250,000.
Manufacturing and Facilities: Engineering departments and location
management worldwide are reviewing machinery and equipment, including production
equipment, phone systems and utility equipment at all PTI manufacturing
locations for Year 2000 compliance. Investigation efforts include making calls
to manufacturers of equipment and reviewing operating documentation. In some
cases, outside technical consultants have been engaged. This portion of the
project is nearing completion and all reports so far indicate most equipment
does not use date dependent information that would expose PTI to a significant
Year 2000 risk. In the few cases where equipment is not Year 2000 complaint,
replacement equipment is on order or the existing equipment will be modified.
Suppliers and Customers: Starting in August 1998, suppliers and vendors
were contacted to determine their Year 2000 compliance status and their ability
to continue to supply PTI operations without disruption. Third parties who
responded to requests for information took the requests seriously and in most
cases had programs in place to address their internal business critical systems
as well as their external suppliers. PTI is working to qualify alternative
suppliers for materials for the less than 10% of suppliers whose responses
revealed that a potential for supply disruption exists.
Seventy-three percent of third parties contacted have responded to our
inquiry. Those who have yet to respond represent less than 10% of our suppliers
by value. Those not responding to our Y2K inquiry have been sent second requests
and if no answer is received personal calls will be made. PTI hopes to complete
the confirmation process by September 1999.
Reasonably likely worst-case Year 2000 scenario: The most reasonably likely
worst-case Year 2000 scenario would involve a failure of PTI's mission critical
computer systems together with the contemporaneous failure of one or more of
PTI's suppliers. With respect to a PTI systems failure, PTI is in the process of
formulating a contingency plan with the
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<PAGE> 97
input of operating managers. The plan includes PTI's ISO 9002 certification as
the outline for manufacturing controls and will be completed by October 1999.
PTI is conducting ongoing planning and testing in order to reduce the need for,
and the incremental cost of, contingency arrangements. With respect to supplier
failure, PTI is single sourced as to very few materials. As a result, alternate
suppliers are generally available.
While PTI believes its actions for Year 2000 modification and remediation
will allow it to continue normal operations, there can be no guarantee or
assurance that PTI will not be adversely affected by Year 2000 problems.
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<PAGE> 98
BENEFICIAL OWNERSHIP OF PTI
The following table provides information as of August 6, 1999, regarding
the ownership of PTI Class A voting common stock by (a) each person known by PTI
to be a beneficial owner of more than 5% of its voting stock, (b) PTI's
directors, (c) its CEO and four other most highly compensated executive officers
and (d) its directors and executive officers as a group. PTI Class A common
stock is PTI's only class of voting securities. The footnotes to the table
provide information regarding the number and percentage of shares of PTI
non-voting common stock and preferred stock owned by the named shareholders.
Unless otherwise noted, each person has sole voting and disposition power with
respect to that person's shares.
The table also presents the pro forma shares of MacDermid common stock that
the named shareholders will receive in the merger assuming the exchange ratio is
equal to 7.233 . THE ACTUAL EXCHANGE RATIO AND, THEREFORE, THE PERCENTAGE OF
MACDERMID COMMON STOCK RECEIVED BY THE NAMED SHAREHOLDERS WILL LIKELY BE
DIFFERENT. See "Exchange Ratio Assumptions." The pro forma percentages also
assume that the warrant to purchase shares of MacDermid common stock that will
be issued to Citicorp Mezzanine Partners upon the completion of the merger has
been exercised in full. The MacDermid warrant will have a nominal exercise price
per share. See "Merger Transaction."
<TABLE>
<CAPTION>
PRO FORMA
PTI VOTING OWNERSHIP OF
COMMON STOCK MACDERMID STOCK(1)
----------------- ---------------------
SHARES % SHARES %
------ - ------ -
<S> <C> <C> <C> <C>
PRINCIPAL SHAREHOLDERS
David R. Beckerman(1)(2).............. 51.000 51.0 224,690 *
Citicorp Venture Capital,
Ltd.(3)(4).......................... 39.180 39.2 4,083,724 12.5
DIRECTORS
David R. Beckerman(1)................. 51.000 51.0 224,690 *
David L. Kolb(5)...................... -- * 23,462 *
Richard E. Mayberry, Jr.(6)........... .104 * 10,965 *
Robert N. Pokelwaldt(7)............... -- * 1,764 *
Joseph M. Silvestri(8)................ .414 * 43,799 *
James W. Stevens(9)................... -- * 23,462 *
NAMED EXECUTIVE OFFICERS
David R. Beckerman, President and
CEO(1).............................. 51.000 51.0 224,690 *
Gerald Loeb(10)....................... -- * 150,083 *
Thomas C. Weaver, Secretary(11)....... -- * 118,002 *
Thomas O. Gavin(12)................... -- * 74,268 *
Kai Wenk-Wolff(13).................... -- * 36,162 *
All Directors and Officers as a Group
(10 persons)(14).................... 51.518 51.5 706,657 2.2
</TABLE>
- -------------------------
* Less than 1%.
(1) Pro forma presentation also includes shares of MacDermid common stock
received in exchange for (a) 149.101 shares of Series 3 preferred stock,
which represent 19.7% of the shares of Series 3 preferred stock outstanding
and (b) 29,949 shares of non-voting PTI Class B common stock, which
represent 3.0% of the shares of Class B common stock outstanding.
88
<PAGE> 99
(2) Mr. Beckerman's business address is 900 Middlesex Turnpike, Billerica, MA
01821-3946.
(3) Pro forma presentation also includes shares of MacDermid common stock
received in exchange for (a) 3,875.554 shares of Series 2 preferred stock,
which represent 78.8% of the shares of Series 2 preferred stock
outstanding, (b) 17.831 shares of Series 3 preferred stock, which represent
2.4% of the shares of Series 3 preferred stock outstanding, (c) 2,757.279
shares of Series 4 preferred stock, which represent 78.8% of the shares of
Series 4 preferred stock outstanding and (d) 535,659.920 shares of
non-voting PTI Class B common stock, which represent 53.3% of the shares of
Class B common stock outstanding.
(4) Citicorp Venture Capital's address is 399 Park Avenue, New York, NY 10022.
(5) Pro forma presentation also includes shares of MacDermid common stock
received in exchange for (a) 21.700 shares of Series 2 preferred stock,
which represent less than 1% of the shares of Series 2 preferred stock
outstanding, (b) 15.440 shares of Series 4 preferred stock, which represent
less than 1% of the shares of Series 4 preferred stock outstanding and (c)
3,000.000 of non-voting PTI Class B common stock, which represent less than
1% of the shares of Class B common stock outstanding.
(6) Pro forma presentation also includes shares of MacDermid common stock
received in exchange for (a) 10.409 shares of Series 2 preferred stock,
which represent less than 1% of the shares of Series 2 preferred stock
outstanding, (b) 7.405 shares of Series 4 preferred stock, which represent
less than 1% of the shares of Series 4 preferred stock outstanding and (c)
1,438.629 of non-voting PTI Class B common stock, which represent less than
1% of the shares of Class B common stock outstanding.
(7) Pro forma presentation also includes shares of MacDermid common stock
received in exchange for (a) 21.700 shares of Series 2 preferred stock,
which represent less than 1% of the shares of Series 2 preferred stock
outstanding and (b) 15.440 shares of Series 4 preferred stock, which
represent less than 1% of the shares of Series 4 preferred stock
outstanding.
(8) Pro forma presentation also includes shares of MacDermid common stock
received in exchange for (a) 41.576 shares of Series 2 preferred stock,
which represent less than 1% of the shares of Series 2 preferred stock
outstanding, (b) 29.580 shares of Series 4 preferred stock, which represent
less than 1% of the shares of Series 4 preferred stock outstanding and (c)
5,746.469 of non-voting PTI Class B common stock, which represent less than
1% of the shares of Class B common stock outstanding.
(9) Pro forma presentation also includes shares of MacDermid common stock
received in exchange for (a) 21.7000 shares of Series 2 preferred stock,
which represent less than 1% of the shares of Series 2 preferred stock
outstanding, (b) 15.440 shares of Series 4 preferred stock, which represent
less than 1% of the shares of Series 4 preferred stock outstanding and (c)
3,000.000 shares of non-voting PTI Class B common stock, which represent
less than 1% of the shares of Class B common stock outstanding.
(10) Pro forma presentation also includes shares of MacDermid common stock
received in exchange for (a) 105.000 shares of Series 3 preferred stock,
which represent 13.9% of the shares of Series 3 preferred stock outstanding
and (b) 20,000.000 of non-voting PTI Class B common stock, which represent
2.0% of the shares of Class B common stock outstanding.
89
<PAGE> 100
(11) Pro forma presentation also includes shares of MacDermid common stock
received in exchange for (a) 44.101 shares of Series 3 preferred stock,
which represent 5.8% of the shares of Series 3 preferred stock outstanding
and (b) 16,000.000 of non-voting PTI Class B common stock, which represent
1.6% of the shares of Class B common stock outstanding.
(12) Pro forma presentation also includes shares of MacDermid common stock
received in exchange for (a) 52.500 shares of Series 3 preferred stock,
which represent 6.9% of the shares of Series 3 preferred stock outstanding
and (b) 10,000.000 of non-voting PTI Class B common stock, which represent
1.0% of the shares of Class B common stock outstanding.
(13) Pro forma presentation also includes shares of MacDermid common stock
received in exchange for 5,000 shares of non-voting PTI Class B common
stock, which represent less than 1% of the shares of Class B common stock
outstanding.
(14) Pro forma presentation also includes shares of MacDermid common stock
received in exchange of (a) 117.085 shares of Series 2 preferred stock,
which represent 2.4% of the shares of Series 2 preferred stock outstanding,
(b) 350.702 shares of Series 3 preferred stock, which represent 46.4% of
the shares of Series 3 preferred stock outstanding, (c) 83.305 shares of
Series 4 preferred stock, which represent 2.4% of the shares of Series 4
preferred stock outstanding and (d) 94,134.098 shares of non-voting PTI
Class B common stock, which represent 9.4% of the shares of Class B common
stock outstanding.
90
<PAGE> 101
LEGAL MATTERS
The validity of the shares of MacDermid common stock to be issued in
connection with the merger has been passed upon by Nutter, McClennen & Fish,
LLP, of Boston, Massachusetts. Tax matters have been passed on for MacDermid by
Nutter, McClennen & Fish, LLP and for PTI by Kirkland & Ellis of New York, New
York.
EXPERTS
The Consolidated Financial Statements of MacDermid, incorporated by
reference in this joint proxy statement -- prospectus, have been audited by KPMG
LLP, independent auditors, for the periods indicated in their report included
therein. A representative of KPMG LLP will be at the MacDermid special meeting
to answer questions from MacDermid shareholders and will be given an opportunity
to make a statement, if so desired.
The Consolidated Financial Statements of W. Canning plc, incorporated by
reference in this joint proxy statement -- prospectus, have been audited by
PricewaterhouseCoopers, independent auditors, for the periods indicated in their
reports included therein.
The Consolidated Financial Statements of PTI included in this proxy
statement -- prospectus have been audited by PricewaterhouseCoopers LLP,
independent auditors, for the periods indicated in their report included in this
joint proxy statement -- prospectus. A representative of PricewaterhouseCoopers
will be at the PTI special meeting to answer questions from PTI shareholders and
will be given an opportunity to make a statement, if so desired.
OTHER MATTERS
The MacDermid Board is not aware of any other matters to be presented at
the MacDermid special meeting. If any additional matters are properly presented,
the persons named in the proxy will have discretion to vote in accordance with
their own judgment on these matters.
The PTI Board is not aware of any other matters to be presented at the PTI
Special Meeting. If any additional matters are properly presented, the persons
named in the proxy will have discretion to vote in accordance with their own
judgment on these matters.
PROPOSALS FOR NEXT ANNUAL MACDERMID MEETING
Any shareholder of MacDermid who intends to submit a proposal for inclusion
in the proxy materials for the 2000 annual meeting of shareholders of MacDermid
must submit that proposal to the Secretary of MacDermid, to which that proposal
relates by March 21, 2000.
The rules of the SEC include standards as to what shareholder proposals are
required to be included in a proxy statement for an annual meeting.
WHERE YOU CAN FIND MORE INFORMATION
MacDermid files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information we file at the SEC's public reference rooms in Washington,
D.C., New York,
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<PAGE> 102
New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. Our SEC filings are also
available to the public from commercial document retrieval services and at the
web site maintained by the SEC at "http://www.sec.gov." In addition, MacDermid
common stock is listed on the NYSE and similar information concerning MacDermid
can be inspected and copied at the offices of the New York Stock Exchange, Inc.,
20 Broad Street, New York, NY 10005.
MacDermid has filed a registration statement on Form S-4 to register with
the SEC the MacDermid common stock to be issued to the PTI shareholders in the
merger. This joint proxy statement -- prospectus is a part of that registration
statement and constitutes a prospectus of MacDermid in addition to being a proxy
statement of MacDermid and PTI for the shareholder meetings. As allowed by SEC
rules, this joint proxy statement -- prospectus does not contain all the
information you can find in the registration statement or the exhibits to the
registration statement.
The SEC allows us to "incorporate by reference" information into this joint
proxy statement -- prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
joint proxy statement -- prospectus, except for any information superseded by
information in this joint proxy statement -- prospectus. This joint proxy
statement -- prospectus incorporates by reference the documents named below that
we have previously filed with the SEC. These documents contain important
information about MacDermid's business, financial condition and operating
results.
<TABLE>
<CAPTION>
MACDERMID SEC FILINGS PERIOD
- --------------------- -------------------------------
<S> <C>
Annual Report on Form 10-K..................... Filed on June 22, 1999, as
amended by Form 10-K/A filed on
August 12, 1999
Quarterly Report on Form 10-Q.................. Filed on August 16, 1999, as
amended by Form 10-Q/A filed on
August 30, 1999
Proxy Statement................................ Filed on June 21, 1999
Current Report on Form 8-K..................... Filed on December 18, 1998, as
amended by Form 8-K/A filed on
February 16, 1999, by Form
8-K/A filed on March 19, 1999
and by Form 8-K/A filed on June
9, 1999
Current Report on Form 8-K..................... Filed on February 24, 1999
Registration Statement on Form S-3............. Filed on December 8, 1998
</TABLE>
We are also incorporating by reference additional documents that we file
with the SEC between the date of this Proxy Statement and the dates of the
meetings of our shareholders.
MacDermid has supplied all information contained or incorporated by
reference in this joint proxy statement -- prospectus relating to MacDermid, and
PTI has supplied all information contained in this joint proxy
statement -- prospectus relating to PTI.
If you are a MacDermid shareholder, we may have sent you some of the
documents incorporated by reference, but you can obtain any of them through us
or the SEC. Documents incorporated by reference are available from us without
charge, excluding all exhibits unless we have specifically incorporated by
reference an exhibit in this joint proxy
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<PAGE> 103
statement -- prospectus. Shareholders may obtain documents incorporated by
reference in this joint proxy statement -- prospectus by requesting them in
writing or by telephone from MacDermid as follows:
MacDermid, Incorporated
245 Freight Street
Waterbury, CT 06702-0671
Attention: John L. Cordani, Corporate Secretary
Telephone: (203) 575-5646
If you would like to request documents from us, please do so by September
16, 1999 to receive them before the shareholder meetings.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT -- PROSPECTUS TO VOTE ON THE PROPOSAL TO
APPROVE THE MERGER AGREEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS JOINT PROXY
STATEMENT -- PROSPECTUS. THIS JOINT PROXY STATEMENT -- PROSPECTUS IS DATED
AUGUST 30, 1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
JOINT PROXY STATEMENT -- PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THIS
DATE, AND NEITHER THE MAILING OF THIS JOINT PROXY STATEMENT -- PROSPECTUS TO
SHAREHOLDERS NOR THE ISSUANCE OF MACDERMID COMMON STOCK IN THE MERGER SHALL
CREATE ANY IMPLICATION TO THE CONTRARY.
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<PAGE> 104
INDEX TO FINANCIAL STATEMENTS
PTI INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-3
Consolidated Statements of Income and Comprehensive Income
for the Years Ended December 31, 1998, 1997 and 1996...... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1998, 1997 and 1996.............. F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996.......................... F-6
Notes to Financial Statements............................... F-7 - F-25
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 1999 and December
31, 1998.................................................. F-26
Consolidated Statements of Income and Comprehensive Income
for the Six Months Ended June 30, 1999 and 1998........... F-27
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998.............................. F-28
Notes to Unaudited Financial Statements..................... F-29 - F-32
</TABLE>
F-1
<PAGE> 105
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
PTI, Inc.:
In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of income and comprehensive income, stockholders' equity
and cash flows present fairly, in all material respects, the financial position
of PTI, Inc. and its subsidiaries (the "Company") at December 31, 1998 and 1997,
and the results of their operations, changes in stockholders' equity and their
cash flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of the financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Boston, MA
March 19, 1999
F-2
<PAGE> 106
PTI, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................ $ 3,950 $ 1,244
Accounts receivable, net of allowance for doubtful
accounts of $3,806 and $3,158 at December 31, 1998 and
1997 respectively...................................... 51,379 42,409
Inventories.............................................. 48,403 39,751
Deferred income taxes.................................... 2,734 2,891
Other current assets..................................... 7,378 4,339
-------- --------
Total current assets........................... 113,844 90,634
Property, plant and equipment, net....................... 87,234 75,046
Intangible assets, net................................... 21,586 23,658
Other assets............................................. 8,347 8,597
-------- --------
Total assets................................... $231,011 $197,935
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt........................ 10,620 5,417
Accounts payable......................................... 23,774 15,446
Salaries and related benefits............................ 7,578 7,205
Income taxes payable..................................... 8,641 4,807
Accrued liabilities...................................... 8,836 9,474
-------- --------
Total current liabilities...................... 59,449 42,349
Long-term debt........................................... 137,094 141,725
Deferred income taxes.................................... 10,523 12,171
Other liabilities........................................ 2,634 1,457
-------- --------
Total liabilities.............................. 209,700 197,702
-------- --------
Commitments and contingencies (see Note 9)
Redeemable preferred stock at liquidation value:
14% Series 2 junior exchangeable preferred stock....... 4,986 4,973
14% Series 3 junior exchangeable preferred stock....... 1,264 1,104
14% Series 4 junior exchangeable preferred stock, net
of unamortized discount of $1,642 and $1,750 at
December 31, 1998 and 1997, respectively............ 2,694 2,329
-------- --------
Total redeemable preferred stock............... 8,944 8,406
-------- --------
Stockholders' equity:
Class A common stock, $.01 par value, 1,005,000 shares
authorized, 100 shares issued and outstanding
Class B common stock, $.01 par value, 1,004,900
shares authorized, 854,900 shares issued and
outstanding....................................... 9 9
Capital in excess of par value......................... 879 879
Retained earnings (deficit).............................. 13,425 (4,379)
Accumulated other comprehensive income:
Cumulative translation adjustment...................... (1,946) (4,682)
-------- --------
Total stockholders' equity..................... 12,367 (8,173)
-------- --------
Total liabilities and stockholders' equity..... $231,011 $197,935
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 107
PTI, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net sales.............................................. $227,956 $214,509 $146,577
Less:
Cost of goods sold (Note 1).......................... 124,707 118,417 83,069
-------- -------- --------
Gross profit........................................... 103,249 96,092 63,508
Selling expenses....................................... 25,953 25,505 19,882
General and administrative expenses.................... 17,346 17,139 12,172
Research and development expenses...................... 8,977 8,590 5,887
Purchased research and development (see Note 1)........ -- 10,495 --
Amortization expense................................... 4,825 4,589 3,990
Customer support and technical services expenses....... 3,681 3,094 3,060
-------- -------- --------
Total operating expenses..................... 60,782 69,412 44,991
-------- -------- --------
Income from operations................................. 42,467 26,680 18,517
-------- -------- --------
Other (income) expenses:
Interest expense..................................... 14,139 15,134 11,425
Other (income) expenses, net......................... (1,076) 343 (1,108)
-------- -------- --------
Total other expenses......................... 13,063 15,477 10,317
-------- -------- --------
Income before income taxes and extraordinary item...... 29,404 11,203 8,200
Provision for income taxes............................. 10,061 10,611 3,448
-------- -------- --------
Net income before extraordinary item................... 19,343 592 4,752
Extraordinary charge for early retirement of debt, net
of tax benefit of $806............................... -- (1,322) --
-------- -------- --------
Net income (loss)...................................... 19,343 (730) 4,752
Other comprehensive income (loss):
Foreign currency translation adjustment, net of
tax............................................... 1,834 (3,323) (1,979)
-------- -------- --------
Comprehensive income (loss)............................ $ 21,177 $ (4,053) $ 2,773
======== ======== ========
Earnings per share:
Basic:
Earnings (loss) per share before extraordinary
item.............................................. $ 20.95 $ (.92) $ 3.88
Extraordinary item per share......................... -- (1.55) --
Basic earnings (loss) per share...................... $ 20.95 $ (2.47) $ 3.88
Diluted:
Earnings (loss) per share before extraordinary
item.............................................. $ 17.82 $ (.92) $ 3.30
Extraordinary item per share......................... -- (1.55) --
Diluted earnings (loss) per share.................... $ 17.82 $ (2.47) $ 3.30
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 108
PTI, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(AMOUNTS IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
CAPITAL IN
COMMON STOCK EXCESS OF RETAINED CUMULATIVE TOTAL
-------------------- PAR EARNINGS TRANSLATION STOCKHOLDERS'
SHARES PAR VALUE VALUE (DEFICIT) ADJUSTMENT EQUITY
------ --------- ---------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995........... 850,000 $ 9 $ 815 $(3,246) $ 3,474 $ 1,052
Other comprehensive income, net........ (3,044) (3,044)
Conversion of Series 1 senior
exchangeable preferred stock to a 10%
PIK subordinated note................ (1,931) (1,931)
Redeemable preferred stock dividends
paid................................. (1,000) (1,000)
Redeemable preferred stock dividends
accrued but not paid and other (Note
7)................................... (759) (759)
Net income............................. 4,752 4,752
------- ------- ------- ------- ------- --------
Balance at December 31, 1996........... 850,000 9 815 (2,184) 430 (930)
Other comprehensive income, net........ (5,112) (5,112)
Issuance of common stock............... 5,000 64 64
Redeemable preferred stock dividends
paid................................. (1,023) (1,023)
Redeemable preferred stock dividends
accrued but not paid and other (Note
7)................................... (442) (442)
Net loss............................... (730) (730)
------- ------- ------- ------- ------- --------
Balance at December 31, 1997........... 855,000 9 879 (4,379) (4,682) (8,173)
Other comprehensive income, net........ 2,736 2,736
Redeemable preferred stock dividends
paid................................. (1,000) (1,000)
Redeemable preferred stock dividends
accrued but not paid and other (Note
7)................................... (539) (539)
Net income............................. 19,343 19,343
------- ------- ------- ------- ------- --------
Balance at December 31, 1998........... 855,000 $ 9 $ 879 $13,425 $(1,946) $ 12,367
======= ======= ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 109
PTI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................... $19,343 $ (730) $ 4,752
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization..................... 12,258 11,649 9,488
Deferred income taxes............................. 470 (1,350) (115)
Write-off of purchased research and development... -- 10,495 --
Write-off of inventory step-up.................... -- 1,707 --
Write-off of deferred financing fees.............. -- 2,138 --
Provision for doubtful accounts receivable........ 124 148 598
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable...... (3,716) (5,291) 919
(Increase) decrease in inventories.............. (3,074) (6,055) 1,735
(Increase) in other current assets.............. (4,414) (1,347) (224)
(Increase) decrease in other long-term assets... (282) 754 (868)
(Decrease) increase in other long-term
liabilities.................................. 125 1,940 (1,754)
(Decrease) increase in accounts payable and
other current liabilities.................... 6,082 6,217 (2,881)
------- -------- --------
Net cash provided by operating activities.............. 26,916 20,275 11,650
------- -------- --------
Cash flows from investing activities:
Cash paid for acquisitions, net of cash acquired..... (10,087) (55,658) --
Investments in long-term assets...................... (14,594) (5,816) (4,755)
------- -------- --------
Net cash used in investing activities.................. (24,681) (61,474) (4,755)
------- -------- --------
Cash flows from financing activities:
Repayments of debt................................... (96,011) (55,348) (45,083)
Borrowings from line of credit....................... 93,024 96,777 36,403
Bank overdraft and other............................. 3,104 2,826 1,287
------- -------- --------
Net cash (used in) provided by financing activities.... 117 44,255 (7,393)
------- -------- --------
Net effect of exchange rate changes on cash and cash
equivalents.......................................... 354 (3,059) (1,041)
------- -------- --------
Net increase (decrease) in cash and cash equivalents... 2,706 (3) (1,539)
Cash and cash equivalents, beginning of year........... 1,244 1,247 2,786
------- -------- --------
Cash and cash equivalents, end of year................. $ 3,950 $ 1,244 $ 1,247
======= ======== ========
Supplemental disclosure of cash flow information:
Interest paid........................................ $11,251 $ 12,524 $ 11,425
Income taxes paid.................................... $ 8,771 $ 9,337 $ 4,103
See Note 7 for disclosure of noncash transactions
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 110
PTI, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS, FORMATION AND ACQUISITIONS:
NATURE OF BUSINESS
The Company is a designer, manufacturer and supplier of offset blankets,
printing plates, textile blankets and rubber-based covers for industrial rollers
used in the printing industry. The Company has manufacturing facilities in
Morristown, Tennessee; Atlanta, Georgia; Adams, Massachusetts; Cernay, France
and Steinbach, France. The Company also maintains other operations, primarily
sales offices, in the Asia/Pacific, European, and Latin America regions. The
Company's corporate headquarters and certain research and development facilities
are located in Billerica, Massachusetts. The Cernay and Steinbach manufacturing
facilities comprise Rollin S.A.
NAPP Systems, Inc. and subsidiaries ("NAPP") was acquired by Polyfibron
Technologies, Inc. ("Polyfibron"), a wholly-owned subsidiary of the Company, on
January 17, 1997 (see "NAPP Acquisition"). NAPP is engaged in the development,
manufacture, and marketing of proprietary expendable products and processing
equipment for imaging systems primarily for use in the newspaper industry and
distributes expendable products and processing equipment to the commercial
printing industry. NAPP's manufacturing facility is located in San Marcos,
California. NAPP also maintains a warehouse in Davenport, Iowa, and a sales
office in Oberursel, Germany.
FORMATION
On October 14, 1994, the Company and Polyfibron entered into a Worldwide
Purchase and Sale Agreement with W.R. Grace & Co. ("WRG"); W.R. Grace & Co.-
Conn. ("Grace"), a wholly-owned subsidiary of WRG; Grace S.A. ("Grace France"),
a subsidiary of Grace, and certain other subsidiaries of Grace pursuant to
which, on December 29, 1994, Polyfibron agreed to purchase certain assets and
liabilities (the "Grace Acquisition") related to Grace's Printing Products
Business and the capital stock of Rollin S.A. ("Rollin"), a subsidiary of Grace
France.
NAPP ACQUISITION
On January 17, 1997, Polyfibron acquired all of the outstanding common
stock (the "NAPP Acquisition") of NAPP for $56,777,000. The acquisition has been
accounted for using the purchase method of accounting, and accordingly, the
purchase price has been allocated to the assets purchased and the liabilities
assumed based on the fair values at the date of acquisition. Total assets
acquired of $75.5 million were allocated to: accounts receivable $9.6 million;
inventories $12.9 million; other current assets $2.7 million; net fixed assets
$22.7 million; goodwill $12.4 million; in-process research and development $10.5
million; and other long term assets $4.7 million. Total liabilities assumed of
$18.8 million were allocated to: accounts payable and other current liabilities
$8.3 million; deferred income taxes $9.0 million; and other long term
liabilities $1.5 million.
In connection with the NAPP acquisition, PTI wrote-up acquired inventory by
$1,707,000 in accordance with the requirements of APB No. 16. PTI then charged
this amount to the Statement of Income through cost of goods sold as the
inventory was sold to customers during the remainder of 1997.
The purchase price exceeded the fair value of the identifiable net assets
acquired by $12,449,000 and was recorded as goodwill. The goodwill is being
amortized over 20 years.
F-7
<PAGE> 111
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Included in the assets acquired was $10,495,000 of purchased research and
development costs which were charged to operations during the year ended
December 31, 1997. Management is primarily responsible for estimating the fair
value of purchased in-process research and development.
An adjustment to the valuation of the projects listed has been applied
based on the stage of completion method. The stage of completion percentage was
calculated using the costs incurred to date at the time of the acquisition as a
percent of total estimated costs of completion at the time of the valuation.
In addition, a core technology charge of 33% ($5,169,000) of cash flows was
allocated to capitalized technology thus reducing the purchased research and
development charge. This amount is included in goodwill and is being amortized
over 20 years.
The $10,495,000 represents three purchased projects.
1. The development of Laser Direct technology, started in November
1993, used to etch images directly on the printing plate was
sixty-three percent complete with costs incurred to the date of
acquisition of $900,000. The $9,261,000 valuation of this
technology is based on the Income Forecast Method by analyzing the
discounted present values of the cash flow generated. The estimated
cost to complete the development of a commercially acceptable
product between January 17, 1997 and June 1999 is $518,000.
The $9.3 million valuation of the laser direct technology was
based on a forecast of net cash inflows starting in late 1998 and
continuing through 2005. Since the laser direct project envisions
an entirely new plate processor and printing plate system, there
is no historical data on which to base a revenue and cost of
sales forecast. Consequently, management estimated sales volume,
selling prices and margins based on its knowledge of the market
and potential customers. Management estimated selling and general
and administrative operating expenses for the laser direct
products at approximately 13% of sales, which is slightly lower
than NAPP's existing expense structure of approximately 14% of
sales. Management anticipates that, as a percentage of sales,
selling expenses associated with laser direct products will be
somewhat lower than NAPP's existing business. On average, laser
direct plate customers will be the larger, higher volume users.
Compared to NAPP's existing business, the laser direct business
is expected to generate higher revenues per customer. Thus, the
same selling effort will result in larger average order sizes and
a slightly lower selling cost as a percentage of revenues.
2. The development of a High Speed Printing Plate that will expose
faster, provide better print quality, and be more durable than the
existing NAPPflex technology, started in June, 1996, was forty-one
percent complete with costs incurred to the date of acquisition of
$60,000. The $958,000 valuation of this technology is based on the
Income Forecast Method by analyzing the discounted present values
of the cash flow generated. The estimated costs to complete this
development between January 17, 1997 and June 1997 was $86,000.
3. The development of the Water Based Polymer technology, targeted at
reducing NAPP's cost of raw materials, was twenty-eight percent
complete with costs incurred to the date of acquisition of
$380,000. The $276,000
F-8
<PAGE> 112
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
valuation of this technology is based on the Income Forecast Method
by analyzing the discounted present values of the cash flow generated
from cost savings. The estimated costs to complete this development
between January 17, 1997 and June 1999 is $982,000.
The period in which material net cash inflows from significant projects
were expected to commence varied from 1998 to late 1999. With regard to the
high-speed plate and waterbased polymer projects, there are no material changes
from historical pricing, margins and incremental expense levels as they directly
relate to the future profitability of each project. For the laser direct
project, which envisions an entirely new plate processor and printing plate
system, there is no historical data. Therefore, for laser direct, management
estimated selling prices and margins based on its knowledge of the market and
potential customers as well as NAPP's existing expense structure as a basis for
estimating incremental operating expenses.
The discount rate applied to the various projects was based upon the
relative risks of the product lines that incorporate the acquired technologies.
Based on analysis, the weighted average cost of capital for Polyfibron and NAPP
was estimated to be approximately 15%. In estimating the appropriate discount
rate for the in-process research and development projects, it is assumed that
their cash flows are more risky than the company's overall cost of capital.
Accordingly, a risk premium was added to the weighted average cost capital to
estimate the appropriate discount rate for the in-process research and
development based upon the relative stage of completion for each project. The
application of a discount rate involved considerations such as stage of
completion, remaining development milestones, technological uncertainties, and
projected costs to complete.
AXCYL ACQUISITION
During 1998, Polyfibron acquired all of the outstanding common stock of
Axcyl Composite for $1,000,000. The acquisition has been accounted for using the
purchase method of accounting, based on the fair values at the date of
acquisition. Goodwill of $697,000 has been recognized from this transaction, and
will be amortized over 20 years. Axcyl, based in Mirambeau, France, manufactures
sleeve systems made of advanced composite materials for use in flexographic
printing applications.
JAGER JEUNE ACQUISITION
On December 24, 1998, Polyfibron acquired all of the outstanding common
stock of Jager Jeune S.A. for $11,258,000. The acquisition has been accounted
for using the purchase method of accounting, based on the fair values at the
date of acquisition. Goodwill of $1,470,000 has been recognized from this
transaction, and will be amortized over 20 years. Polyfibron may have to pay
certain contingent amounts to the previous owner based on future results of
operations. The maximum amount may be $1,800,000 ultimately due in August 2000.
These amounts will be recorded as goodwill in the year known.
The operating results of the 1998 acquisitions have been included in the
consolidated statements of operations from the date of acquisition. The
following unaudited proforma
F-9
<PAGE> 113
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
information has been prepared assuming the acquisition occurred at the beginning
of the respective periods:
<TABLE>
<CAPTION>
(UNAUDITED) 1998 1997
- ----------- -------- --------
<S> <C> <C>
Net sales.................... $246,871 $231,999
Cost of goods sold........... 138,856 130,746
Net income before
extraordinary item......... 19,393 1,799
Net income................... 19,393 477
Earnings per share:
Basic...................... $ 21.00 $ (1.05)
Diluted.................... $ 17.87 $ (1.05)
</TABLE>
The pro forma information is not necessarily indicative of the operating
results that would have occurred had the 1998 acquisitions been consummated as
of the above dates, nor are they necessarily indicative of future operating
results.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries.
All material intercompany transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist primarily of cash and investments in
highly liquid debt instruments with maturities at acquisition of three months or
less.
Under the Company's cash management system, checks issued but not presented
to banks occasionally result in overdraft balances for accounting purposes and
are included in accounts payable. The overdraft balance amounted to $2,481,011
and $1,261,000 at December 31, 1998 and 1997, respectively.
FINANCIAL INSTRUMENTS
At December 31, 1998 and 1997, the carrying value of financial instruments,
such as cash, trade accounts receivable and accounts payable approximate fair
value, based on the short-term maturities of those instruments. The fair value
of the Company's debt, which approximates its carrying value, is based upon
interest rates that are currently available to the Company for debt with similar
terms and remaining maturities.
REVENUE RECOGNITION
Sales and the related cost of sales are recognized upon shipment of
products.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially expose the Company to
concentrations of credit risk consist primarily of trade accounts receivable. To
minimize this risk, ongoing credit evaluations of customers' financial condition
are performed, although collateral is not required. In addition, the Company
maintains allowances for potential credit losses.
F-10
<PAGE> 114
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market, using the first-in,
first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment acquired in the normal course of business is
stated at cost. Betterments and major renewals which extend the useful lives of
the respective assets are capitalized. Maintenance, repairs and renewals which
do not extend the useful lives of the respective assets are charged to expense
in the period incurred.
Fully depreciated assets are retained in property, plant and equipment and
the related accumulated depreciation accounts until they are removed from
service.
Depreciation is computed using the straight-line method based on the
following estimated useful lives:
<TABLE>
<CAPTION>
USEFUL LIVES
CATEGORY (YEARS)
- -------- ------------
<S> <C>
Buildings............................................... 30
Machinery and equipment................................. 3-10
</TABLE>
In accordance with Statement of Position 98-1, "Accounting for Costs of
Computer Software Developed or Obtained for Internal Use," costs associated with
the application development stage are capitalized, such as, direct external
costs, directly related internal payroll and payroll related costs and interest
costs.
Interest costs for the construction of certain long-term assets are
capitalized and amortized over the related assets' estimated useful lives. The
Company did not capitalize any interest costs in 1998, 1997 or 1996.
INTANGIBLE ASSETS
In accordance with APB No. 16, intangible assets acquired as part of
acquisitions are recorded at fair market value. Intangible assets acquired in
the normal course of business are stated at cost. Intangible assets consist
primarily of goodwill, deferred financing costs, trademarks, licenses and
proprietary technology. Amortization of intangible assets is computed using the
straight-line method based on their estimated useful lives, which range from 3
to 20 years.
The Company continually monitors the useful lives of its long-lived assets
to ensure that no change is warranted. The Company reviews its intangible and
other long-lived assets whenever adverse events occur or circumstances indicate
that the carrying amount of an asset may be impaired. The Company performs this
review on an asset by asset basis whenever prudent. In performing the review,
the Company estimates the future net cash flows (undiscounted and without
interest) expected to result from the use of the asset and its eventual
disposition. If the sum of the expected future cash flows is less than the
carrying amount of the asset, an impairment is recognized. The amount of the
impairment is determined based on the extent to which the sum of estimated
future undiscounted cash flows of the long-lived asset is not sufficient to
recover the carrying value of that asset, so that the carrying value of that
long-lived asset is adjusted to its then fair value.
F-11
<PAGE> 115
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Company's foreign operations were translated
into U.S. dollars using year-end exchange rates, and the related statements of
operations were translated at average exchange rates for the year. The Company
recorded approximately $(424,000), $(525,000), and $107,000 of net pretax
foreign currency transaction gains/(losses) for the years ended December 31,
1998, 1997 and 1996, respectively.
The three most significant exchange rates are as follows as of:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
French franc......................... 5.598 6.014 5.190
Japanese yen......................... 113.450 130.570 115.850
Australian dollar.................... 1.633 1.538 1.258
</TABLE>
INCOME TAXES
The Company uses the liability method of accounting for income taxes as set
forth in Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109). SFAS 109 is an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for differences
in the bases of assets and liabilities recognized in the Company's financial
statements compared to tax returns. In estimating future tax consequences, SFAS
109 generally considers all expected future events other than future enactments
of changes in the tax law or rates. Deferred tax assets are recognized, net of
any valuation allowance, for deductible temporary differences and operating loss
and credit carryforwards. Tax credits are deducted from the provision using the
flow-through method. Deferred tax expense represents the change in the deferred
tax assets and liabilities.
NET INCOME PER COMMON SHARE
Net Income per basic common share is computed by dividing income available
to common stockholders by the weighted-average number of common shares
outstanding for the period. Net income per diluted common shares is computed
based on the weighted-average number of common and dilutive common equivalent
shares outstanding during each period. Common equivalent shares consist of stock
options calculated in accordance with SFAS No. 128, "Earnings per Share."
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been
reclassified to conform to current year presentation.
F-12
<PAGE> 116
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," in 1998. This Statement establishes standards
for reporting and displaying comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. This Statement requires the classification of items of comprehensive
income by their nature in a financial statement and the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the balance sheet.
In June, 1997, the Financial Accounting Standards Board issued Statement
No. 131 ("SFAS" 131), "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131, which supersedes Statement No. 14, "Financial Reporting
for Segments of a Business Enterprise," changes the way public companies report
information about segments. SFAS 131, which is based on the management approach
to segment reporting, includes requirements to report segment information
quarterly and entity-wide disclosures about products and services, major
customers, and the material countries in which the entity holds assets and
reports revenues. SFAS 131 is effective for fiscal years beginning after
December 15, 1997. Restatement for earlier years is required for comparative
purposes unless impracticable. In addition, SFAS 131 need not be applied to
interim periods in the initial year; however, in subsequent years, interim
period information must be presented on a comparative basis. The Company adopted
SFAS 131 for fiscal year ended December 31, 1998.
3. INVENTORIES:
Inventories by major classification consisted of the following at:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Raw and packaging materials.............................. $16,317 $12,472
Work in process.......................................... 7,014 5,081
Finished goods........................................... 25,072 22,198
------- -------
$48,403 $39,751
======= =======
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consisted of the following at:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Land..................................................... $ 5,705 $ 4,378
Buildings................................................ 39,731 34,709
Machinery and equipment.................................. 76,433 67,989
Construction in progress................................. 12,756 4,224
-------- --------
134,625 111,300
Accumulated depreciation................................. 47,391 36,254
-------- --------
$ 87,234 $ 75,046
======== ========
</TABLE>
F-13
<PAGE> 117
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Included in machinery and equipment are capitalized software costs of
$767,660 and $566,088 for the years ended December 31, 1998 and 1997,
respectively. Related accumulated depreciation amounted to $305,100 and $66,000,
respectively.
Amounts included in construction in progress that relate to software were
$1,373,000 and $261,000 as of December 31, 1998 and 1997, respectively.
Depreciation expense for the years ended December 31, 1998, 1997 and 1996
was $7,433,000, $7,060,000, $5,498,000 respectively.
Depreciation expense for capitalized software costs, included in these
amounts for the respective period was $239,100, $66,000 and $0.
5. INTANGIBLE ASSETS:
Intangible assets consisted of the following at:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Trademarks............................................... $ 9,337 $ 9,337
Licenses................................................. 1,436 1,436
Goodwill................................................. 14,616 12,449
Other.................................................... 11,068 11,426
-------- --------
36,457 34,648
Accumulated amortization................................. (14,871) (10,990)
-------- --------
$ 21,586 $ 23,658
======== ========
</TABLE>
Amortization expense for the years ended December 31, 1998, 1997 and 1996
was $4,825,000, $4,589,000 and $3,990,000 respectively, not including
$1,000,000, $719,000 and $439,000 for the same periods, related to depreciable
machines included as a component of other assets in the consolidated financial
statements. Depreciable machines are amortized over their useful lives of three
to five years.
6. LONG-TERM DEBT:
Long-term debt consisted of the following at:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------
DECEMBER 31, DECEMBER 31,
1998 1997
------------ --------------
<S> <C> <C>
Credit agreement:
Tranche A Term Loan.................................... $ 23,143 $ 25,952
French Franc Term Loan................................. 7,410 7,748
Yen Term Loan.......................................... 3,719 3,630
-------- --------
34,272 37,330
Tranche B Term Loan.................................... 34,591 38,191
Revolving Credit Note.................................. 13,469 9,123
Capitalized Lease Obligation............................. 1,367 1,280
Senior Subordinated Credit Note.......................... 40,000 40,000
10% PIK Subordinated Notes (net of unamortized discounts
of $4,714 and $5,027 at December 31,1998 and 1997
respectively).......................................... 22,981 20,095
Accrued interest......................................... 1,034 1,123
-------- --------
Total.......................................... 147,714 147,142
Less: current portion.................................... 10,620 5,417
-------- --------
$137,094 $141,725
======== ========
</TABLE>
F-14
<PAGE> 118
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
CREDIT AGREEMENT
In connection with the Grace Acquisition, the Company entered into an
agreement (the "Credit Agreement") with Banque Paribas and several other lenders
on December 29, 1994 which provided for revolving credit advances of up to
$25,000,000 at any one time and term loans of $70,000,000. The term loans
consist of a Tranche A term loan, a Tranche B term loan, a French Franc term
loan, and a Yen term loan. On January 17, 1997, in connection with the NAPP
Acquisition, the Company amended and restated the Credit Agreement and provided
for revolving credit advances of up to $35,000,000 at any one time and term
loans of $90,000,000. On December 31, 1997, the Company amended and restated the
Credit Agreement to provide for lower interest rates in future periods. The
Credit Agreement extends through December 28, 2003. In connection with the new
credit agreement the Company capitalized the fees paid in 1997 and wrote off
$2,128,000 related to the old agreement. The financial statements have been
reclassified to disclose this amount as an extraordinary item. This amount was
previously disclosed as other expense.
The interest rates under the Credit Agreement are determined, at the
election of the Company, at either (a) a base rate (the higher of (i) the rate
of interest announced publicly by the Chase Manhattan Bank as its prime
commercial lending rate or (ii) the federal funds rate plus 0.5%) plus a
variable margin based on the Company's debt to EBITDA ratio which ranges from
.25% to 1.25% in the case of the Tranche A term loan, the French Franc term
loan, the Yen term loan, and the Revolving Credit Note, and 1% to 1.75% in the
case of the Tranche B term loan or (b) LIBOR, as adjusted by the terms of the
Credit Agreement, plus a variable margin based on the Company's debt to EBITDA
ratio which ranges from 1.25% to 2.25% in the case of the Tranche A term loan,
the French Franc term loan, and the Yen term loan, and 2% to 2.75% in the case
of the Tranche B term loan. At December 31, 1998 the weighted-average interest
rates on the Tranche A term loan, Tranche B term loan, French Franc term loan,
Yen term loan, and the Revolving Credit Note were 7.0%, 7.5%, 5.1%, 2.2%, and
8.8%, respectively.
Borrowings under the Credit Agreement are guaranteed by the Company and
each of its direct and indirect wholly-owned subsidiaries, and such borrowings
are collateralized by security interests in (a) all the common stock of the
Company and each of its U.S. subsidiaries and 65% of the common stock of each
foreign subsidiary and (b) all assets (subject to certain limitations) owned by
the Company and its subsidiaries.
The Credit Agreement contains certain covenants which limit the Company
with respect to certain matters including, among other things, the ability to
incur additional debt, pay dividends, make acquisitions, merge, grant or incur
liens, guarantee obligations, make investments or loans, make capital
expenditures, create subsidiaries or change its line of business. The Company is
also required to satisfy certain financial covenants which require the Company
to maintain specified financial ratios and comply with certain financial tests
including a maximum leverage ratio; a minimum fixed charge coverage ratio; a
minimum interest coverage ratio; and minimum levels of earnings before interest,
taxes, depreciation and amortization. Prepayments of debt under the Credit
Agreement may be made by the Company at any time provided certain conditions are
met with respect to proper notice to the Lenders and minimum prepayment amounts.
F-15
<PAGE> 119
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On January 17, 1997, in connection with the NAPP Acquisition, the Company
borrowed $31,800,000 under the Tranche A term loan, $42,500,000 under the
Tranche B term loan, $10,700,000 under the French Franc term loan, and
$5,000,000 under the Yen term loan. The Tranche A term loan, the French Franc
term loan and the Yen term loan are payable in quarterly installments commencing
March 31, 1997 with the last installment payable on December 29, 2001. The
Tranche B term loan is payable in quarterly installments commencing March 31,
1997 with the last installment payable on December 28, 2003. All principal
payments under each of the term loans are accompanied by the accrued interest on
the principal being repaid to the date of payment.
The Company is required to prepay the term loan obligations (a) in the
event the Company receives asset sale proceeds, as defined, in excess of levels
set forth in the Credit Agreement, (b) within 100 days after the end of the
fiscal year in an amount equal to 50% of excess cash flow, as defined, for the
preceding fiscal year, and (c) in the event the Company receives proceeds from
the termination of any defined benefit plan.
Under the Revolving Credit Note, the Company has a borrowing limit equal to
the lesser of $35,000,000 or the Borrowing Base (the sum of 85% of eligible
receivables plus 50% of eligible inventory, as defined in the Credit Agreement),
which amounted to $35,000,000 at December 31, 1998. The Company pays a
commitment fee on the average daily unused portion of the Revolving Credit Note
at the rate of 0.5% per annum.
SENIOR SUBORDINATED CREDIT NOTE
In connection with the Grace Acquisition, the Company, through its
wholly-owned subsidiary, Polyfibron, entered into a Senior Subordinated Credit
Agreement (the "Subordinated Credit Agreement") with Citicorp Mezzanine
Partners, L.P. ("CMP") whereby the Company issued to CMP a $40,000,000 note
bearing interest at a rate of 13%, payable semiannually. The entire outstanding
note amount is due in full on December 31, 2004. The Company may prepay the note
in whole or in part any time after the first anniversary date, subject to
minimum prepayment amounts at premiums which range from 105% of principal
through December 31, 1996 to 101% of principal through December 31, 2000. No
prepayments may be made against the note, however, unless (i) there are no
amounts outstanding under the Credit Agreement discussed above and all
commitments under the Credit Agreement have been terminated or (ii) the Credit
Agreement expressly permits such payments or the required Banks thereunder have
consented to such payment. Mandatory prepayments are required to be made, to the
extent not used to prepay amounts under the Credit Agreement, in the event (a)
the Company receives asset sale proceeds, as defined, in excess of levels set
forth in the Subordinated Credit Agreement; (b) of a public offering of the
Company's stock; or (c) the Company receives proceeds from the termination of
any defined benefit pension plan. The payment of the principal and interest on
the Senior Subordinate Note are subordinate and subject in right of payment to
the prior payment in full of all obligations under the Credit Agreement.
Borrowings under the Senior Subordinated Credit Note are guaranteed by the
Company and each of its direct and indirect wholly-owned subsidiaries, and such
borrowings are collateralized by security interests in (a) all common stock of
the Company and each of its U.S. subsidiaries and 65% of the common stock of
each foreign subsidiary
F-16
<PAGE> 120
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and (b) all assets (subject to certain limitations) owned by the Company and its
subsidiaries, after satisfaction of the Credit Agreement discussed above.
The Subordinated Credit Agreement contains certain covenants which limit
the Company with respect to certain matters including, among other things, the
ability to incur additional debt, pay dividends, make acquisitions, merge, grant
or incur liens, guarantee obligations, make investments or loans, make capital
expenditures, create subsidiaries or change its line of business. The Company is
also required to satisfy certain financial covenants which require the Company
to maintain specified financial ratios and comply with certain financial tests
including a minimum fixed charge coverage ratio and minimum levels of earnings
before interest, taxes, depreciation and amortization.
On December 29, 1994, the Company also entered into a Stock Purchase
Warrant Agreement (the "Warrant Agreement") with CMP which grants to CMP, or its
transferees or assigns, the right to purchase from the Company up to 150,000
shares of its Class B common stock at a price of $.01 per share. These warrants
are exercisable from the date of the Warrant Agreement through December 29,
2004. The exercise price and the number of shares obtainable under the Warrant
Agreement are subject to adjustment in the event the Company sells, or is deemed
to have sold, additional shares of its common stock in the future, other than in
connection with a permitted issuance, as defined in the Warrant Agreement.
10% PIK SUBORDINATED NOTES
In connection with the Grace Acquisition, the Company issued to Grace a
$9,500,000 PIK Subordinated Note bearing interest at a rate of 10%, payable
semiannually. The Note may be prepaid at any time at the option of the Company
(subject to the subordination provisions contained in the Note Agreement)
through its maturity date on December 29, 2006, at which time the entire
principal becomes due.
On March 15, 1996, the Company elected to exchange all of its 7.5% Series 1
Senior Preferred Stock held by Grace for a 10% PIK Subordinated Note in the
aggregate principal amount of $10,390,400.
Both PIK Notes are uncollateralized, subordinated obligations of the
Company and rank (a) junior in right of payment to all existing and future
Senior Debt (as defined for purposes of the Note), including obligations of the
Company under the Credit Agreement and (b) senior in right of payment to or
equal in right of payment with all existing and future subordinated
indebtedness. Beginning June 15, 2000, these PIK notes require cash payment of
interest.
CAPITALIZED LEASE OBLIGATION
The capitalized lease obligation represents the present value due in future
years for a warehouse under a noncancelable lease agreement. The Company has
discontinued the use of the warehouse and the related asset was written off. The
liability is payable in quarterly installments through December 2009. The net
present value of future lease payments was $1,367,000 at December 31, 1998, of
which $159,000 will be due within the next twelve months.
F-17
<PAGE> 121
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
LONG-TERM DEBT
Aggregate principal payments of long-term debt for the next five years and
thereafter subsequent to December 31, 1998 are as follows (in thousands):
<TABLE>
<S> <C>
1999..................................................... $ 10,620
2000..................................................... 11,548
2001..................................................... 12,931
2002..................................................... 13,341
2003..................................................... 21,250
Thereafter............................................... 78,024
--------
147,714
Less amounts representing accrued interest............... 1,034
--------
$146,680
========
</TABLE>
7. CAPITAL TRANSACTIONS:
COMMON STOCK
The holder or holders of a majority of the outstanding shares of Class B
common stock shall be entitled at any time to convert any or all of the Class B
to Class A common stock. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Class A common stock,
solely for the purpose of issuance upon the conversion of the Class B common
stock, such number of shares of Class A common stock issuable upon conversion of
all outstanding shares of Class B common stock.
The Company has authorized the issue and sale of up to 150,000 warrants
with an exercise price of $.01 per share, each of which may be exercised
immediately for one share of Class B common stock at a purchase price of $.01
per share. The warrants expire December 29, 2004. The Company shall at all times
reserve and keep available out of its authorized but unissued shares, solely for
the purpose of issuance upon exercise of these warrants, the maximum number of
shares issuable upon the exercise of these warrants.
In addition, on December 29, 1994, the Company entered into a Registration
Rights Agreement with a majority of its Class A and Class B shareholders whereby
at any time the holders of a majority of the Investor Registrable Securities, as
defined in the Registration Rights Agreement, and at any time after the fifth
anniversary of the Registration Rights Agreement, the holders of the majority of
the CMP Registrable Securities, as defined, may request registration, under the
Securities Act of 1933 (the "Securities Act"), of all or part of their
Registrable Securities, subject to certain conditions. The Registration Rights
Agreement also grants to the parties certain rights in the event the Company
proposes to register any of its stock under the Securities Act.
REDEEMABLE PREFERRED STOCK
Also pursuant to the above-mentioned agreements, the Company authorized the
issue and sale of up to 9,500 shares of its 7.5% Series 1 Senior Exchangeable
Preferred Stock ("Senior Preferred Stock"), $1.00 par value, for a purchase
price of $1,000 per share; up to 4,920 shares of its 14% Series 2 Junior
Exchangeable Preferred Stock ("Series 2 Junior Preferred Stock"), $1.00 par
value, for a purchase price of $1,000 per share; up to 756 shares of its 14%
Series 3 Junior Exchangeable Preferred Stock ("Series 3 Junior
F-18
<PAGE> 122
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Preferred Stock"), $1.00 par value, for a purchase price of $1,000 per share;
and up to 3,500 shares of its 14% Series 4 Junior Exchangeable Preferred Stock
("Series 4 Junior Preferred Stock"), $1.00 par value, for a purchase price of
$428.57 per share.
Each share of the Senior Preferred Stock entitles its holder to receive an
annual dividend of 7.5% of the liquidation value ($1,000 per share plus any and
all accumulated and unpaid dividends), compounded semiannually. Each share of
the Series 2, Series 3, and Series 4 Junior Preferred Stock entitles the holder
to receive an annual dividend of 14% of the liquidation value, compounded
semiannually. Such dividends accrue whether or not they have been declared and
whether or not there are profits, surpluses, or other funds of the Company
legally available for the payment of dividends. At the time the Company elects
to pay dividends in cash, the payments will be distributed first among the
holders of the Senior Preferred Stock based on the aggregate accrued but unpaid
dividends on the shares, except that the Company may pay cash dividends of up to
$1,000,000 per year on the Series 2 and Series 4 Junior Preferred Stock before
paying cash dividends on any other stock. If the Company pays the full amount of
dividends accrued with the respect to the Senior Preferred Stock, then the
Company may elect to pay all or any portion of the dividends accrued with
respect to the Series 2 Junior Preferred Stock. If the Company pays the full
amount of dividends accrued with respect to the Series 2 Junior Preferred Stock,
then the Company may elect to pay all or any portion of the dividends accrued
with respect to the Series 3 Junior Preferred Stock. If the Company pays the
full amount o dividends accrued with respect to the Series 3 Junior Preferred
Stock then the Company may elect to pay all or any portion of the dividends
accrued with respect to Series 4 Junior Preferred Stock.
Upon any liquidation, dissolution, or winding up of the Company, the order
of payments in cash equal to the aggregate liquidation value of each series of
preferred stock is as follows: Series 1 Senior Preferred Stock, then Series 2
Junior Preferred Stock, then Series 3 Junior Preferred Stock, then Series 4
Junior Preferred Stock, and then the Company's other equity securities.
On December 29, 2006, the Company must redeem all issued and outstanding
shares of its Preferred Stock, if any, at a price per share equal to the
liquidation value. Also, subject to certain conditions contained within the debt
agreements entered into in connection with the Acquisition, the Company may at
any time redeem (i) first, all or any portion of the Senior Preferred Stock
outstanding, (ii) second, all or any portion of the Series 2 Junior Preferred
Stock outstanding, (iii) third, all or any portion of the Series 3 Junior
Preferred Stock outstanding, and (iv) fourth, all or any portion of the Series 4
Junior Preferred Stock outstanding, each at a price per share equal to the
liquidation value thereof. Also, if a Change of Control has occurred at the
Company, the holders of a majority of each Series of Preferred Stock may require
the Company to redeem all or any portion of such series of Preferred Stock at a
price per share equal to the liquidation value thereof.
On March 15, 1996, the Company elected to exchange all of its 7.5% Series 1
Senior Preferred Stock held by Grace for a 10% PIK Subordinated Note in the
aggregate principal amount of $10,390,400. At any time after the exchange of all
Senior Preferred Stock into PIK Subordinated Notes, the Series 2 Junior
Preferred Stock, the Series 3 Junior Preferred Stock, and the Series 4 Junior
Preferred Stock are exchangeable,
F-19
<PAGE> 123
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
respectively, into Series 2 Junior Notes, Series 3 Junior Notes, and Series 4
Junior Notes, at the option of the Company. Also, at any time after December 29,
1999, each holder of the Senior Preferred Stock, Series 2 Junior Preferred
Stock, Series 3 Junior Preferred Stock, or Series 4 Junior Preferred Stock may
elect to exchange all such holder's Preferred Stock for a PIK Subordinated Note
of the same value.
Net proceeds from the sales of preferred stock under the above-mentioned
agreements yielded $16,675,500, in exchange for the issuance of 9,500 shares of
Senior Preferred Stock, 4,919.5 shares of Series 2 Junior Preferred Stock, 756
shares of Series 3 Junior Preferred Stock, and 3,500 shares of Series 4 Junior
Preferred Stock. In 1998, dividends of $1,431,000 accumulated on the Preferred
Stock, of which $1,000,000 were paid in 1998.
Components of Preferred Stock are as follows:
<TABLE>
<CAPTION>
SERIES 1 SERIES 2 SERIES 3 SERIES 4 TOTAL
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
12/31/95 balance................... $ 5,430 $4,978 $ 866 $1,507 $12,781
Accrue Dividends................... 160 663 126 501 1,450
Cash Dividends Paid................ -- (680) -- (320) (1,000)
Amortize Discount.................. -- -- -- 323 323
Convert to PIK Note................ (5,590)(a) -- -- -- (5,590)
------- ------ ------ ------ -------
12/31/96 balance................... -- 4,961 992 2,011 7,964
Accrue Dividends................... -- 692 136 544 1,372
Cash Dividends Paid................ -- (680) (24) (319) (1,023)
Amortize Discount.................. -- -- -- 93 93
------- ------ ------ ------ -------
12/31/97 balance................... -- 4,973 1,104 2,329 8,406
Accrue Dividends................... -- 693 160 578 1,431
Cash Dividends Paid................ -- (680) -- (320) (1,000)
Amortize Discount.................. -- -- -- 107 107
------- ------ ------ ------ -------
12/31/98 balance................... $ -- $4,986 $1,264 $2,694 $ 8,944
======= ====== ====== ====== =======
</TABLE>
- ---------------
(a) Series 1 converted to PIK note on March 31, 1996.
Net Income Per Common Share
In accordance with SFAS No. 128, "Earnings per Share," the Company presents
basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. A reconciliation of basic
EPS to diluted EPS and dual presentation on the face of the statement of income
are also required.
F-20
<PAGE> 124
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Calculation of per share earnings is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE FIGURES)
<S> <C> <C> <C>
BASIC:
Net income (loss)................................ $ 19,343 $ (730) $ 4,752
Less: preferred stock dividends.................. 1,431 1,372 1,450
---------- ---------- ----------
Income (loss) available to common shareholders... 17,912 (2,102) 3,302
Weighted average common shares outstanding....... 855,000 851,250 850,000
Net income (loss) per share before extraordinary
item, basic.................................... $ 20.95 $ (.92) $ 3.88
Extraordinary item............................... -- (1.55) --
Net income (loss) per share, basic............... 20.95 (2.47) 3.88
DILUTED:
Net income (loss)................................ $ 19,343 $ (730) $ (4,752)
Less: preferred stock dividends.................. 1,431 1,372 1,450
---------- ---------- ----------
Income (loss) available to common shareholders... 17,912 (2,102) 3,302
Weighted average common shares outstanding....... 855,000 851,250 850,000
Common stock equivalents......................... 150,000 150,000
---------- ---------- ----------
Total weighted average shares.................... 1,005,000 851,250 1,000,000
Net income (loss) per share before extraordinary
item, diluted.................................. $ 17.82 $ (.92) $ 3.30
---------- ---------- ----------
Extraordinary item............................... -- (1.55) --
Net income (loss) per share, diluted............. $ 17.82 $ (2.47) $ 3.30
</TABLE>
In 1997, common share equivalents are not included in the calculation of
diluted earnings per share as they are anti-dilutive.
8. INCOME TAXES:
The income tax provision for the years ended December 31, 1998, 1997 and
1996 consists of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current income taxes:
Federal..................................... $ 7,800 $10,031 $2,380
State....................................... 1,628 1,174 420
Foreign..................................... 2,211 1,039 850
------- ------- ------
11,639 12,244 3,650
------- ------- ------
Deferred income taxes:
Federal..................................... (2,313) (1,587) 187
State....................................... (415) (181) 5
Foreign..................................... 1,150 135 (394)
------- ------- ------
(1,578) (1,633) (202)
------- ------- ------
$10,061 $10,611 $3,448
======= ======= ======
</TABLE>
The domestic and foreign components of income before income tax expense are
as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Domestic....................................... $23,764 $7,830 $6,585
Foreign........................................ 5,640 3,373 1,615
------- ------ ------
Total.......................................... 29,404 11,203 8,200
</TABLE>
F-21
<PAGE> 125
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The components of deferred taxes included in the balance sheet as of
December 31, 1998 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Accounts receivable................................ $ 447 $ 310
Accrued pension and other benefits................. 824 716
Miscellaneous accruals............................. 1,509 2,210
Assets held for sale reserve....................... 696 783
Intercompany and inventory-related transactions.... 2,634 1,266
Intangible assets.................................. 4,413 3,322
Net operating loss and credit carryforwards........ -- 261
Foreign tax credit................................. -- 853
------- -------
10,523 9,721
------- -------
Valuation allowance................................ -- (853)
------- -------
Tax assets......................................... 10,523 8,868
------- -------
Deferred tax liabilities:
Fixed assets....................................... $(8,573) (7,642)
Other.............................................. (2,052) (1,248)
Discount on notes.................................. (1,746) (1,922)
Purchase accounting reserves and tax basis
differences..................................... (5,941) (7,336)
------- -------
(18,312) (18,148)
------- -------
Net deferred tax liabilities....................... $(7,789) $(9,280)
======= =======
</TABLE>
The United States federal corporate tax rate reconciles to the effective
tax rate as follows for the years ended December 31, 1998, 1997 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal tax at statutory rate................... $10,193 $ 4,061 $2,692
State taxes, net of federal benefit............. 788 791 281
Foreign taxes................................... 769 (120) 257
Research and development write-off.............. -- 3,976 --
Reduction of valuation allowance and increased
tax credits.................................. (1,107) -- --
Research and experimental tax credits........... (259) -- --
Other........................................... (323) 1,903 218
------- ------- ------
$10,061 $10,611 $3,448
======= ======= ======
</TABLE>
9. COMMITMENTS AND CONTINGENCIES:
The Company leases a variety of assets for use in its operations, including
its corporate offices. Minimum rental payments under operating leases that have
noncancelable lease terms in excess of twelve months are as follows (in
thousands):
<TABLE>
<S> <C>
1999....................................................... $1,521
2000....................................................... 924
2001....................................................... 789
2002....................................................... 601
2003....................................................... 601
------
Minimum lease payments..................................... $4,436
======
</TABLE>
F-22
<PAGE> 126
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Rental expense under operating leases was $1,962,000, $1,101,000, and
$1,080,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
The Company is subjected to lawsuits and claims arising out of the conduct
of its business. Management and its counsel believe that these matters are
without merit or will not have a material impact on the financial position or
results of operations of the Company.
10. RETIREMENT BENEFIT PLANS:
The Company maintains three retirement benefit plans covering substantially
all United States employees as follows:
CONTRIBUTORY BENEFIT PLAN
The Company sponsors a qualified defined contribution plan covering
substantially all full-time employees. The Company matches 50% of a
participant's voluntary contributions up to a maximum of 3% of a
participant's annual compensation. The Company can also make an additional
contribution to the plan at the discretion of the Board of Directors. The
Company's contribution expense for the years ended December 31, 1998, 1997
and 1996 was $722,600, $649,020, and $760,900, respectively.
NONCONTRIBUTORY BENEFIT PLAN
Retirement benefits for all nonunion employees are also provided
through a noncontributory defined contribution plan. Under the terms of the
Plan, the Company contributes 5% of each covered employee's salary. For the
years ended December 31, 1997, 1996 and 1995 the cost of the plan charged
to operations was $1,567,860, $1,041,720, and $803,070, respectively.
DEFINED BENEFIT PLAN
The Company maintains a pension plan designed to provide guaranteed
minimum retirement benefits to all union employees at the Adams plant. It
is the Company's policy to fund retirement costs to meet the minimum
funding requirements as outlined by ERISA. Plan benefits are calculated
using a combination of years of service, final average earnings and age.
The minimum funding requirement for the year ended December 31, 1998 was
$93,972. Due to the immaterial nature of this plan and the few number of
employees covered, disclosures required by SFAS No. 132 have been omitted.
In addition, at December 31, 1998 unfunded indemnity obligations of
$1,040,600 have been recorded to accrue the present value of future indemnity
obligations for eligible, active Rollin employees.
SEGMENT REPORTING
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information" (SFAS 131). SFAS 131 establishes
standards for reporting information regarding operating segments and related
disclosures about products and services, geographic areas and major customers.
The Company is active in one business segment: designing, manufacturing and
marketing products for the printing industry. The Company maintains sales and
marketing operations in North America, Europe, Asia/Pacific and Latin America.
F-23
<PAGE> 127
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
GEOGRAPHIC SEGMENT DATA
Geographic information as of and for the years ended December 31, 1998,
1997 and 1996 is presented as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Net Sales:
North America...................................... 142,784 137,820 70,197
Europe............................................. 56,911 49,951 52,139
Asia/Pacific....................................... 16,858 18,242 17,915
Latin America...................................... 11,403 8,496 6,326
------- ------- -------
227,956 214,509 146,577
======= ======= =======
Net Income (Loss):
North America...................................... 14,428 (4,074) 2,686
Europe............................................. 3,189 1,711 397
Asia/Pacific....................................... (456) (6) 405
Latin America...................................... 2,182 1,639 1,264
------- ------- -------
19,343 (730) 4,752
======= ======= =======
Total Assets:
North America...................................... 130,870 124,774 62,090
Europe............................................. 81,635 59,864 64,958
Asia/Pacific....................................... 14,713 11,227 10,370
Latin America...................................... 3,793 2,070 1,727
------- ------- -------
231,011 197,935 139,145
======= ======= =======
</TABLE>
12. SUBSEQUENT EVENTS:
The Company announced on January 22, 1999 that it signed a Definitive
Agreement with Nippon Paint (USA), Inc. to acquire the stock of Supratech
Systems, Inc. (SSI), a producer and marketer of waterwash flexographic plate
material, located in Charlotte, North Carolina.
On January 27, 1999, Polyfibron sold EEC, a business owned by the Company's
French subsidiary. The Company received $1,569,000 for a portion of the net
assets of EEC.
The Company announced on February 19, 1999 that it signed a definitive
agreement to be acquired by MacDermid Incorporated, headquartered in Waterbury,
Connecticut. MacDermid is a company that supplies specialty chemicals and
systems for the chemical treatment, surface preparation and electroplating of
metal, plastic and other materials. This transaction is expected to be accounted
for by a pooling of interests. The definitive agreement provides for MacDermid
to issue a minimum of 7,573,000 and a maximum of 7,827,000 shares of common
stock.
F-24
<PAGE> 128
PTI, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
PTI, INC.
SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
1998 BY QUARTERS ($ IN THOUSANDS EXCEPT PER SHARE DATA)
--------------------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER TOTAL
-------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales......................... $56,258 $57,236 $54,692 $59,770 $227,956
Gross profit...................... 25,572 26,696 24,172 26,809 103,249
Net earnings available to common
shareholders.................... 4,145 4,048 3,065 6,654 17,912
Diluted earnings per share........ 4.12 4.03 3.05 6.62 17.82
</TABLE>
<TABLE>
<CAPTION>
1997 BY QUARTERS ($ IN THOUSANDS EXCEPT PER SHARE DATA)
--------------------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER TOTAL
-------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales......................... $49,732 $55,330 $51,933 $57,514 $214,509
Gross profit...................... 21,058 23,809 23,480 27,745 96,092
Net income/(loss) before
extraordinary item.............. (7,900) 1,585 2,847 4,060 592
Net earnings/(loss) available to
common shareholders............. (9,560) 1,246 2,500 3,712 (2,102)
Earnings/(loss) per share before
extraordinary item.............. (9.69) 1.25 2.50 3.69 (.92)
Diluted earnings/(loss) per
share........................... (11.25) 1.25 2.50 3.69 (2.47)
</TABLE>
F-25
<PAGE> 129
PTI, INC.
CONSOLIDATED BALANCE SHEETS
UNAUDITED
JUNE 30, 1999 AND DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DEC. 31,
1999 1998
-------- --------
<S> <C> <C>
Cash and cash equivalents................................... $ 2,148 $ 3,950
Accounts receivable, net of allowance for doubtful accounts
of $3,690 and $3,806 at June 30, 1999 and December 31,
1998, respectively........................................ 54,046 51,379
Inventories (Note 2)........................................ 56,935 48,403
Deferred income taxes....................................... 2,613 2,734
Other current assets........................................ 6,724 7,378
-------- --------
Total current assets.............................. 122,466 113,844
Property, plant and equipment, net (Note 2)................. 90,126 87,234
Goodwill (net of accumulated amortization of $1,577 and
$1,192 at June 30, 1999 and December 31, 1998,
respectively)............................................. 16,906 13,424
Intangible assets (net of accumulated amortization of
$15,690 and $13,679 at June 30, 1999 and December 31,
1998, respectively)....................................... 6,796 8,162
Other assets................................................ 9,033 8,347
-------- --------
Total assets...................................... $245,327 $231,011
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt........................... $ 11,834 $ 10,620
Accounts payable............................................ 21,053 23,774
Salaries and related benefits............................... 6,419 7,578
Income taxes payable........................................ 9,689 8,641
Accrued liabilities......................................... 10,887 8,836
-------- --------
Total current liabilities......................... 59,882 59,449
Long-term debt.............................................. 148,825 137,094
Deferred income taxes....................................... 10,111 10,523
Other liabilities........................................... 2,493 2,634
-------- --------
Total liabilities................................. 221,311 209,700
Commitments and Contingencies (Note 5)
Redeemable preferred stock at liquidation value:
14% Series 2 junior exchangeable preferred stock....... 5,333 4,986
14% Series 3 junior exchangeable preferred stock....... 1,355 1,264
14% Series 4 junior exchangeable preferred stock, net
of unamortized discount of $1,581 and $1,642 at June
30, 1999 and December 31, 1998, respectively.......... 3,063 2,694
-------- --------
Total redeemable preferred stock.................. 9,751 8,944
Stockholders' equity:
Class A common stock, $.01 par value, 1,005,000 shares
authorized, 100 shares issued and outstanding......... -- --
Class B common stock, $.01 par value, 1,004,900 shares
authorized, 854,900 shares issued and outstanding..... 9 9
Capital in excess of par value......................... 879 879
Retained earnings/(deficit)............................ 20,137 13,425
Accumulated other comprehensive income:
Cumulative translation adjustment................. (6,760) (1,946)
-------- --------
Total stockholders' equity........................ 14,265 12,367
-------- --------
Total liabilities and stockholders' equity........ $245,327 $231,011
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE> 130
PTI, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Net sales............................................. $ 120,177 $ 113,494
Cost of goods sold.................................... 68,953 61,226
---------- ----------
Gross profit.......................................... 51,224 52,268
Selling and customer technical support expenses....... 17,537 14,681
General and administrative expenses................... 9,311 9,336
Research and development expenses..................... 3,807 4,500
Amortization expense.................................. 2,498 2,410
---------- ----------
Total operating expenses.................... 33,153 30,927
Income from operations................................ 18,071 21,341
Other (income)/expense, net:
Interest expense................................. 6,955 6,997
(Gain) on sale of assets (Note 4)................ (1,426) --
Other (income)/expense, net...................... 414 (397)
---------- ----------
Total other (income)/expense................ 5,943 6,600
Income before taxes................................... 12,128 14,741
Provision for income taxes............................ 4,609 5,861
---------- ----------
Net income............................................ 7,519 8,880
Other comprehensive income/(loss):
Foreign currency translation, net of tax......... (3,130) 424
---------- ----------
Comprehensive income.................................. 4,389 9,304
Preferred stock dividends............................. 746 687
---------- ----------
Net income available to common shareholders........... 6,773 8,193
========== ==========
Weighted average outstanding common shares:
Basic............................................ 855,000 855,000
Diluted.......................................... 1,005,000 1,005,000
Net earnings per common share:
Basic............................................ 7.92 9.58
Diluted.......................................... $ 6.74 $ 8.15
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE> 131
PTI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................. $ 7,519 $ 8,880
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.......................... 6,825 6,161
(Gain) on sale of assets............................... (855) --
Deferred income taxes.................................. (196) (401)
Provision for doubtful accounts receivable............. 128 17
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable........ (4,492) (3,405)
(Increase) decrease in inventories................ (9,716) (3,248)
(Increase) decrease in other current assets....... 665 (2,355)
(Increase) decrease in other long-term assets..... (253) (1,709)
Increase (decrease) in other long-term
liabilities.................................... (55) (468)
Increase (decrease) in accounts payable and other
current liabilities............................ 24 39
-------- --------
Net cash provided by (used in) operating activities......... (406) 3,511
Cash flows from investing activities:
Net investment in acquisitions......................... (11,667) --
Proceeds from sale of assets........................... 2,141 --
Investment in long-term assets......................... (6,068) (3,984)
-------- --------
Net cash used in investing activities....................... (15,594) (3,984)
Cash flows from financing activities:
Repayments of debt..................................... (28,368) (33,667)
Borrowings from line of credit......................... 44,920 33,563
Bank overdraft and other............................... (1,475) (243)
-------- --------
Net cash provided by (used in) financing activities......... 15,077 (347)
Net effect of exchange rate changes on cash and cash
equivalents............................................... (879) 936
-------- --------
Net increase (decrease) in cash and cash equivalents........ (1,802) 116
Cash and cash equivalents, beginning of year................ 3,950 1,244
-------- --------
Cash and cash equivalents, end of year...................... $ 2,148 $ 1,360
======== ========
Supplemental disclosure of cash flow information:
Interest paid.......................................... $ 5,357 $ 5,553
Income taxes paid...................................... $ 3,985 $ 6,741
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE> 132
PTI, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
1. The information furnished has been prepared from the accounts without
audit. In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments necessary, consisting only of those of a
normal recurring nature, to present fairly its consolidated financial position
as of June 30, 1999 and the consolidated results of its operations and cash
flows for the six months ended June 30, 1999 and 1998.
While the Company believes that the disclosures presented are adequate to
make the information not misleading, these statements should be read in
conjunction with the consolidated financial statements and the related notes
included in the Company's financial statements, included elsewhere herein, for
the year ended December 31, 1998.
The results of operations for the six-month period ended June 30, 1999 are
not necessarily indicative of the results expected for the full year.
2. Details of certain balance sheet captions are as follows (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, DEC. 31,
1999 1998
-------- --------
<S> <C> <C>
Inventories:
Raw and packaging materials..................... 15,707 16,317
Work in process................................. 8,072 7,014
Finished goods.................................. 33,156 25,072
-------- --------
$ 56,935 $ 48,403
======== ========
Property and equipment:
Land............................................ 5,756 5,705
Buildings....................................... 41,237 39,731
Machinery and equipment......................... 80,731 76,433
Construction in progress........................ 9,411 12,756
-------- --------
137,135 134,625
Accumulated depreciation........................ (46,455) (47,391)
-------- --------
$ 90,680 $ 87,234
======== ========
</TABLE>
F-29
<PAGE> 133
NOTES TO UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
3. The calculation of per share earnings is as follows (amounts in
thousands except per share):
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, JUNE 30, JUNE 30,
----------------------- ----------------------- -----------------------
1999 1998 1999 1998 1999 1998
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BASIC:
Net income............. $ 3,258 $ 4,488 $ 4,261 $ 4,392 $ 7,519 $ 8,880
Less: preferred stock
dividends............ 373 343 373 344 746 687
---------- ---------- ---------- ---------- ---------- ----------
Net income available to
common
shareholders......... 2,885 4,145 3,888 4,048 6,773 8,193
Weighted average common
shares outstanding... 855,000 855,000 855,000 855,000 855,000 855,000
Net income per share,
basic................ $ 3.37 $ 4.85 $ 4.55 $ 4.73 $ 7.92 $ 9.58
========== ========== ========== ========== ========== ==========
DILUTED:
Net income............. $ 3,258 $ 4,488 $ 4,261 $ 4,392 $ 7,519 $ 8,880
Less: preferred stock
dividends............ 373 343 373 344 746 687
---------- ---------- ---------- ---------- ---------- ----------
Net income available to
common
shareholders......... 2,885 4,145 3,888 4,048 6,773 8,193
Weighted average common
shares outstanding... 855,000 855,000 855,000 855,000 855,000 855,000
Common stock
equivalents.......... 150,000 150,000 150,000 150,000 150,000 150,000
---------- ---------- ---------- ---------- ---------- ----------
Total weighted average
shares............... 1,005,000 1,005,000 1,005,000 1,005,000 1,005,000 1,005,000
Net income per share,
diluted.............. $ 2.87 $ 4.12 $ 3.87 $ 4.03 $ 6.74 $ 8.15
========== ========== ========== ========== ========== ==========
</TABLE>
4. Acquisitions and Dispositions:
In March 1999, PTI acquired all of the outstanding stock of International
Composites Corporation, Inc., located in Vancouver, Washington for $6.0 million.
This transaction is being accounted for as a purchase business combination. The
excess of the purchase price over the fair value of identifiable net assets
amounted to $3.6 million. PTI will amortize this goodwill using the straight
line method over its estimated useful life of twenty years. International
Composites Corporation has been renamed Axcyl, Inc. Axcyl manufactures sleeve
systems which are complementary to the products manufactured by Axcyl S.A. in
France.
In February 1999, PTI acquired all of the outstanding stock of Supratech,
Inc., a Delaware corporation, from Nippon Paint (USA) Inc. and Nippon Paint Co.,
Ltd. for $5.6 million. The transaction is being accounted for as a purchase
business combination. The excess of the purchase price over the fair value of
identifiable assets amounted to $0.4 million. PTI will amortize this goodwill
using the straight line method over its estimated useful life of twenty years.
Supratech produces and markets waterwash, flexographic plate material.
In January 1999, PTI sold EEC, a business owned by its French subsidiary.
PTI received $1.6 million for a portion of the net assets of EEC and recorded an
after-tax gain
F-30
<PAGE> 134
NOTES TO UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
of $0.5 million. In June 1999, PTI sold textile blanket splicing equipment and
recorded an after tax gain on the sale of $0.3 million. Neither the sale of the
EEC business nor the textile equipment is not expected to have a material impact
on PTI's future operations.
In December 1998, PTI acquired all of the outstanding stock of Jager Jeune,
S.A., a French company, primarily engaged in the conversion and distribution of
offset printing blankets.
In April 1998, PTI acquired all of the outstanding stock of Axcyl
Composite, S.A., a French company, which manufactures sleeve systems made of
advanced composite materials for use in flexographic printing applications.
The operating results of the above acquisitions, all of which were
accounted for under the purchase method of accounting, have been included in the
consolidated statements of operations from the date of acquisition. The
following unaudited pro forma information has been prepared assuming all
acquisitions occurred at the beginning of the respective periods (dollars in
thousands except per share):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Net sales........................................ $121,894 $126,636
Cost of goods sold............................... 69,963 70,354
Net income....................................... 7,532 8,954
Earnings per share:
Basic.......................................... 7.94 9.67
Diluted........................................ 6.75 8.23
</TABLE>
5. Selected Quarterly Financial Data ($ in thousands except per share):
<TABLE>
<CAPTION>
1999 BY QUARTERS
----------------------------
MARCH JUNE JUNE YTD
------- ------- --------
<S> <C> <C> <C>
Net sales................................... $57,086 $63,091 $120,177
Gross profit................................ 24,020 27,204 51,224
Net income.................................. 3,258 4,261 7,519
Net earnings available to common
shareholders.............................. 2,885 3,888 6,773
Diluted earnings per share.................. 2.87 3.87 6.74
</TABLE>
<TABLE>
<CAPTION>
1998 BY QUARTERS
----------------------------
MARCH JUNE TOTAL
------- ------- --------
<S> <C> <C> <C>
Net sales................................... $56,258 $57,236 $113,494
Gross profit................................ 25,572 26,696 52,268
Net income.................................. 4,488 4,392 8,880
Net earnings available to common
shareholders.............................. 4,145 4,048 8,193
Diluted earnings per share.................. 4.12 4.03 8.15
</TABLE>
F-31
<PAGE> 135
NOTES TO UNAUDITED FINANCIAL STATEMENTS -- (CONTINUED)
6. Commitments and Contingencies:
The Company leases a variety of assets for use in its operations, including
its corporate offices. Minimum rental payments under operating leases that have
noncancelable lease terms in excess of twelve months are as follows (in
thousands):
<TABLE>
<S> <C>
1999................................................... $1,521
2000................................................... 924
2001................................................... 789
2002................................................... 601
2003................................................... 601
------
Minimum lease payments................................. $4,436
======
</TABLE>
The Company is subjected to lawsuits and claims arising out of the conduct
of its business. Management believes that these matters are without merit or
will not have a material impact on the financial position or results of
operations of the Company.
F-32
<PAGE> 136
APPENDIX A
PLAN AND AGREEMENT OF MERGER
A-1
<PAGE> 137
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. Definitions................................................. A-6
SECTION 2. Merger...................................................... A-12
2.1 General..................................................... A-12
2.2 Closing..................................................... A-12
2.3 Actions at Closing.......................................... A-12
2.4 Effect of Merger............................................ A-13
2.5 Buyer Warrants.............................................. A-15
2.6 Anti-Dilution............................................... A-15
SECTION 3. Representations and Warranties of Seller.................... A-16
3.1 Organization, Qualification, and Corporate Power............ A-16
3.2 Authorization of Merger..................................... A-16
3.3 Noncontravention............................................ A-16
3.4 Capitalization of Seller and its Subsidiaries............... A-16
3.5 Subsidiaries................................................ A-17
3.6 Financial Statements........................................ A-17
3.7 Litigation.................................................. A-18
3.8 Absence of Certain Developments............................. A-18
3.9 Taxes....................................................... A-19
3.10 Environmental, Health, and Safety Matters................... A-21
3.11 Employee Benefit Plans...................................... A-21
3.12 Proprietary Rights.......................................... A-23
3.13 Year 2000................................................... A-24
3.14 Inventories................................................. A-25
3.15 Accounts Receivable......................................... A-25
3.16 Tangible Property........................................... A-25
3.17 Books and Records........................................... A-26
3.18 Brokers' Fees............................................... A-26
3.19 Tax-Free Reorganization Representations..................... A-26
3.20 Pooling of Interest Treatment............................... A-27
3.21 Certain Contracts........................................... A-27
3.22 Absence of Improper Payments................................ A-28
3.23 Insurance................................................... A-28
3.24 Employees................................................... A-28
3.25 Disclosure.................................................. A-28
SECTION 4. CVC Representations and Warranties.......................... A-28
4.1 Organization and Corporate Power............................ A-28
4.2 Authorization of Merger..................................... A-28
4.3 Noncontravention............................................ A-29
4.4 Agency Agreement............................................ A-29
4.5 CVC Shares.................................................. A-29
4.6 Securities Law Issues....................................... A-29
4.7 Tax-Free Reorganization..................................... A-30
4.8 Pooling of Interest Treatment............................... A-30
4.9 Disclosure.................................................. A-30
</TABLE>
A-2
<PAGE> 138
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 5. Representations and Warranties of Buyer and Merger Sub...... A-30
5.1 Organization, Qualification, and Corporate Power............ A-30
5.2 Authorization of Merger..................................... A-30
5.3 Noncontravention............................................ A-30
5.4 Capitalization.............................................. A-31
5.5 SEC Filings................................................. A-31
5.6 Financial Statements........................................ A-31
5.7 Litigation.................................................. A-32
5.8 Absence of Certain Developments............................. A-32
5.9 Taxes....................................................... A-32
5.10 Environmental, Health, and Safety Matters................... A-33
5.11 Employee Benefit Plans...................................... A-33
5.12 Broker's Fee................................................ A-34
5.13 Tax-Free Reorganization Representations..................... A-34
5.14 Pooling of Interest Treatment............................... A-35
5.15 Disclosure.................................................. A-35
SECTION 6. Covenants................................................... A-35
6.1 General..................................................... A-35
6.2 Joint Proxy Statement -- Prospectus and S-4 Registration
Statement; Stockholder Approval; NYSE Listing............... A-35
6.3 Other Regulatory Matters and Approvals...................... A-38
6.4 Seller's Interim Operation of Business...................... A-38
6.5 Covenants of Buyer.......................................... A-40
6.6 Access...................................................... A-41
6.7 Notice of Developments...................................... A-42
6.8 Acquisition Proposals....................................... A-42
6.9 Board of Directors.......................................... A-42
6.10 Financing................................................... A-43
6.11 Press Releases and Public Announcements..................... A-43
6.12 Covenants of CVC............................................ A-43
SECTION 7. Conditions to Closing....................................... A-44
7.1 Joint Conditions to Obligations of Buyer, Merger Sub and
Seller...................................................... A-44
7.2 Conditions to Obligations of Buyer and Merger Sub........... A-45
7.3 Conditions to Obligations of Seller......................... A-46
SECTION 8. Indemnification............................................. A-47
8.1 Agreements to Indemnify..................................... A-47
8.2 Limitations on Indemnification.............................. A-48
8.3 Method of Asserting and Resolving Claims.................... A-49
SECTION 9. Termination and Its Consequences............................ A-51
9.1 Termination of Agreement.................................... A-51
9.2 Effect of Termination....................................... A-51
9.3 Termination Fee............................................. A-51
SECTION 10. Miscellaneous............................................... A-52
10.1 Representations and Survival................................ A-52
10.2 No Third Party Beneficiaries................................ A-52
10.3 Entire Agreement............................................ A-52
10.4 Succession and Assignment................................... A-52
10.5 Counterparts and Delivery................................... A-52
</TABLE>
A-3
<PAGE> 139
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
10.6 Notices..................................................... A-52
10.7 Governing Law............................................... A-53
10.8 Consent to Jurisdiction..................................... A-53
10.9 Waiver of Jury Trial........................................ A-54
10.10 Amendments and Waivers...................................... A-54
10.11 Construction................................................ A-54
10.12 Time is of the Essence; Computation of Time................. A-54
10.13 Specific Performance........................................ A-54
</TABLE>
A-4
<PAGE> 140
SCHEDULES
Seller Schedules
<TABLE>
<S> <C>
2.4(e) Distribution of Buyer Shares Among Seller Stockholders
3.1 Organization, Qualification and Corporate Power
3.3 Seller Noncontravention
3.4 Capitalization of Seller and Subsidiaries
3.5 Subsidiaries
3.6 Financial Statements
3.7 Litigation
3.8 Absence of Certain Developments
3.9(a) Tax Returns of Seller Subject to IRS Audit
Tax Indemnification, Tax Allocation and Tax Sharing
3.9(b) Agreements
3.10(a) Non-Compliance with Environmental, Health and Safety Matters
Environmental Investigations, Studies, Reviews, Audits,
3.10(b) Tests and Other Analyses
3.11 Employee Benefit Plans
3.12 Proprietary Rights
3.14 Inventories
3.16 Real Property
3.17 Books and Records
3.20 Seller Affiliates
3.21(a) Contracts
3.23 Insurance
3.24 Employees
Buyer's Schedules
5.3 Buyer Noncontravention
5.4 Capitalization
5.6 Financial Statements
5.8 Absence of Certain Developments
5.9(a) Tax Returns of Buyer Subject to IRS Audit
Tax Indemnification, Tax Allocation and Tax Sharing
5.9(b) Agreements
5.10 Environmental, Health and Safety Matters
Other Schedules
1 Seller Stockholders
6.4(g) Increases in Compensation or Fringe Benefits; Bonuses
EXHIBITS
EXHIBIT A Form of Agency Agreement
EXHIBIT B Form of Escrow Agreement
EXHIBIT C Form of Registration Rights Agreement
EXHIBIT D Form of Seller Affiliate Agreement
</TABLE>
A-5
<PAGE> 141
PLAN AND AGREEMENT OF MERGER
This Plan and Agreement of Merger is entered into as of February 18, 1999,
by and among MacDermid, Incorporated, a Connecticut corporation ("Buyer"), MCD
Acquisition Corp., a Delaware corporation ("Merger Sub") and wholly owned
subsidiary of Buyer, PTI, Inc., a Delaware corporation ("Seller"), and Citicorp
Venture Capital, Ltd., a New York corporation ("CVC"). Buyer, Merger Sub,
Seller, and CVC are referred to collectively herein as the "Parties."
RECITALS
The respective boards of directors of Buyer and Seller have approved this
agreement and declared its advisability, having determined that it would be
consistent with and in furtherance of the long-term business strategy of Buyer
and Seller, as applicable, and that it would be fair to and in the best
interests of Buyer, Seller and their respective stockholders, to engage in a
transaction whereby Seller and the Merger Sub will merge on the terms described
herein (the "Merger").
For federal income tax purposes, it is intended that the Merger qualify as
a reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and that as a consequence each Seller Stockholder will not
recognize income or loss for federal income tax purposes except to the extent
they receive cash in lieu of fractional shares or as a holder of Dissenting
Shares (as defined herein).
Therefore, in consideration of the premises and the mutual promises herein
made, and in consideration of the representations, warranties, and covenants
herein contained, the Parties agree as follows.
SECTION 1. Definitions.
In this Agreement:
"AAA Rules" has the meaning given to that term in Section 8.3.
"Agency Agreement" means that certain agreement, to be dated as of the
Closing Date, among CVC, the Management Representative, all other Seller
Stockholders (other than Seller Stockholders who have perfected dissenters
rights) and CMP, which agreement shall be in substantially the form of Exhibit A
hereto.
"Acquisition Proposal" means, with respect to any Person, any proposal
(other than any proposal with respect to the Merger) regarding (i) any merger,
consolidation, share exchange, business combination or other similar transaction
or series of related transactions involving that Person or any Subsidiary of
that Person; (ii) any sale, lease, exchange, transfer or other disposition of
the assets of that Person or any of its Subsidiaries; and (iii) any offer to
purchase, tender offer, exchange offer or any similar transaction or series of
related transactions made by any other Person involving the outstanding shares
of any class of capital stock of that Person or the filing of any Statement on
Schedule 14D-1 with the SEC in connection therewith.
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. As used in
this definition, "control" (including, with its correlative meanings,
"controlled by" and "under common control with") means the possession, directly
or indirectly, of power to direct or cause the direction of the management and
policies of a Person whether through the ownership of voting securities, by
contract or otherwise.
A-6
<PAGE> 142
"Arbitration Notice" has the meaning given to that term in Section 8.3.
"Benefit Plan" has the meaning given to that term in Section 3.11.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday or Friday
that banks located in New York, New York are not required or permitted by law to
be closed.
"Buyer Affiliate" has the meaning given to that term in Section 6.2(i).
"Buyer Board of Directors" means the board of directors of Buyer as
constituted from time to time.
"Buyer Common Stock" means Buyer Common Stock, no par value per share.
"Buyer Share" means a share of Buyer Common Stock issued in the Merger.
"Buyer Special Meeting" means a meeting of holders of Buyer Common Stock at
which such holders will vote on a proposal to approve this Agreement.
"Buyer Stockholder Approval" means the affirmative vote of the holders of a
majority of the outstanding shares of Buyer Common Stock in favor of the
approval of the Merger Agreement in accordance with the certificate of
incorporation and bylaws of Buyer and the NYSE Rule.
"Buyer Warrants" means the Escrow Warrant and the Closing Warrant to
purchase Buyer Shares issued pursuant to Section 2.5 in substitution for the CMP
Warrant.
"Certificate of Merger" has the meaning given to that term in Section 2.3.
"Claim Notice" has the meaning given to that term in Section 8.3.
"Closing" and "Closing Date" have the meanings given to those terms in
Section 2.2.
"Closing Warrant" means the warrant to purchase Buyer Shares as defined in
Section 2.5(c).
"CMP" means Citicorp Mezzanine Partners, L.P.
"CMP Warrant" means the warrant to purchase 150,000 shares of Seller Class
B Common Stock at an exercise price of $.01 per share issued to CMP as of
December 29, 1994.
"Code" means the Internal Revenue Code of 1986, as amended.
"Computer Systems" means computer software, computer firmware, computer
hardware (whether general or special purpose), and other similar or related
items of automated, computerized, and/or software system(s), including but not
limited to microprocessors that control telecommunication systems, elevators,
diagnostic equipment, HVAC systems, automated assembly lines or other operating
systems of Seller or any of its Subsidiaries.
"Confidential Information" has the meaning given to that term in Section
6.6.
"Contract" means any loan or credit agreement, note, bond, indenture,
mortgage, deed of trust, lease, franchise, permit, authorization, license,
contract, instrument, benefit plan or practice or other agreement, arrangement,
obligation, instrument or commitment of any nature, whether written or oral.
"Credit Agreement" means (i) a certain Amended and Restated Credit
Agreement dated January 17, 1997 with Banque Paribas as Agent and (ii) a certain
Senior Subordinated Credit Agreement, as amended, dated December 29, 1994 with
CMP.
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"Current Market Price" means the price per share of Buyer Common Stock,
with respect to any specific date, as determined by taking the average of the
daily closing prices per share of Buyer Common Stock as traded on the NYSE for
the thirty (30) consecutive trading days ending immediately prior to such date,
rounded to the nearest cent, and ignoring the highest and lowest daily closing
prices during such period.
"CVC Shares" has the meaning given to that term in Section 4.5.
"DGCL" means the General Corporation Law of the State of Delaware, as
amended from time to time.
"DOJ" has the meaning given to that term in Section 6.3.
"Damages" has the meaning given to that term in Section 8.1.
"Dissenting Shares" means all Seller Shares whose holders have perfected
dissenters' rights under Section 262 of the DGCL.
"Effective Time" has the meaning given to that term in Section 2.4(a).
"Escrow Agent" means State Street Bank and Trust Company, a Massachusetts
trust company, or a successor Escrow Agent under the terms of the Escrow
Agreement.
"Escrow Agreement" means the agreement by and among the Escrow Agent,
Buyer, CVC and the Management Representative and substantially in the form of
Exhibit B attached hereto, with such changes as the Escrow Agent may reasonably
request.
"Escrow Ratio" has the meaning given to that term in Section 2.4(h).
"Escrow Shares" means the Buyer Shares deposited with the Escrow Agent as
of the Closing in accordance with the terms of Section 2.4(h) and the Escrow
Agreement.
"Escrow Warrant" means the warrant to purchase Buyer Shares as defined in
Section 2.5(b).
"Environmental, Health, and Safety Requirements" means all federal, state,
local and foreign statutes, regulations ordinances and other provisions having
the force or effect of law, each as amended, all judicial and administrative
orders and determinations, and all common law concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any Hazardous Materials or noise.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and the regulations and formal interpretations issued thereunder.
"ERISA Affiliate" means any Person who, together with Seller, could be
treated as a single employer under Sections 414(b), 414(c), 414(m) or 414(o) of
the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Statements" has the meaning given to that term in Section 3.6.
"FTC" has the meaning given to that term in Section 6.3.
"GAAP" means, at any time, the United States generally accepted accounting
principles as in effect at that time.
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"Grace Agreement" means that certain Grace Printing Products Restated
Worldwide Purchase and Sale Agreement, dated as of October 14, 1994, among
Seller, Print Tech International, Inc., W. R. Grace & Co., W. R. Grace &
Co. -- Conn., Grace S. A. and the other parties named therein.
"Governmental Entity" means any administrative agency, commission, court or
other governmental authority or instrumentality, domestic or foreign, including
any government-sponsored corporation having regulatory authority under law.
"Hazardous Material" means any pollutant, contaminant, hazardous material,
hazardous waste, toxic substance or hazardous substance as defined under the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
sec.sec.9601 et seq., or the Resource Conversation and Recovery Act., 42 U.S.C.
sec.sec.6901 et seq., the Clean Water Act, 33 U.S.C. sec.1251, et seq., the
Toxic Substance Control Act, 15 U.S.C. sec.sec.2601, et seq. or any other
federal, state or local law relating to safety, health, or environmental
protection or any regulations promulgated under any of the foregoing, and
specifically includes oil and any other petroleum derived products, asbestos,
polychlorinated biphenyls (PCBs) and radiation.
"HSRA" means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended from time to time.
"Indemnified Party" has the meaning given to that term in Section 8.1.
"Indemnifying Party" has the meaning given to that term in Section 8.1.
"Indemnity Threshold" shall have the meaning set forth in Section 8.2(c).
"IRS" means the Internal Revenue Service.
"Joint Proxy Statement -- Prospectus" means the Joint Proxy Statement --
Prospectus which will be a part of the S-4 Registration Statement and by which
(i) Buyer will solicit proxies from the holders of Buyer Common Stock to vote in
favor of the approval of this Agreement at the Buyer Special Meeting and (ii)
Seller will either solicit proxies or written consents from the holders of
Seller Voting Shares to approve this Agreement.
"Liability" means any liability (whether known or unknown, whether asserted
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"Loss Contingency" means an existing condition, situation, or set of
circumstances involving uncertainty as to possible Liability to an enterprise
that will ultimately be resolved when one or more future events occur or fail to
occur.
"Management Representative" means the Seller Stockholder designated in the
Agency Agreement as the agent of those Seller Stockholders who are identified in
such agreement as "Management Stockholders."
"Material Adverse Effect" means, with respect to any Person, any change in
or effect on the business of that Person or any of its Subsidiaries that, in the
aggregate, is or reasonably could be expected to be materially adverse to the
business, operations (including the income statement), properties (including
intangible properties), condition (financial or otherwise), assets, liabilities,
regulatory status or prospects of that Person and its Subsidiaries taken as a
whole.
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"Merger Sub" means MCD Acquisition Corp., a Delaware corporation
wholly-owned by Buyer and formed solely for the purpose of consummating the
Merger.
"NYSE" means the New York Stock Exchange.
"NYSE Rule" means the rule of the NYSE requiring that proxies be solicited
from the shareholders of any listed corporation which issues stock in an amount
exceeding 20% of its then-existing capital stock.
"Ordinary Course" means with respect to any Person, in the ordinary course
of that Person's business consistent with past custom and practice, including as
to the quantity, quality and frequency.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a Governmental Entity (or any
department, agency, or political subdivision thereof).
"Preferred Exchange Shares" means the Buyer Shares issued in the Merger to
the holders of Seller Preferred Shares pursuant to Section 2.4(e).
"Proprietary Rights" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Recapitalization" has the meaning given to that term in Section 2.6.
"Registration Rights Agreement" means that certain Registration Rights
Agreement by and among Buyer, CVC and CMP that shall be executed and delivered
as of the Closing in substantially the form of Exhibit C hereto.
"Representatives" means each of the applicable Person's directors,
officers, employees, agents, representatives and advisors.
"Response Notice" has the meaning given to that term in Section 8.3.
"S-4 Registration Statement" shall mean the registration statement
referenced in Section 6.2(a) that includes the Joint Proxy
Statement -- Prospectus, or such other registration statement as the SEC may
require in connection with the Merger.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
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"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, equity or other encumbrance, other than (a)
statutory liens for current taxes or other governmental charges, (b) mechanics
and similar statutory liens arising or incurred in the ordinary course of
business, (c) zoning, entitlement, building and other land use regulations
imposed by governments or agencies which are not violated by any current or
presently proposed use or operation, (d) covenants, conditions, restrictions,
easements and other similar matters of record affecting title to any real
property which do not materially impair the current occupancy, use or value of
that Property and which have been disclosed in Schedule 3.16, (e) liens for
Taxes not yet due and payable or for taxes that the taxpayer is contesting in
good faith through appropriate proceedings, (f) purchase money liens and liens
securing rental payments under capital lease arrangements, and (g) other liens
arising in the Ordinary Course and not incurred in connection with the borrowing
of money.
"Seller Affiliate" means a Person listed on Schedule 3.20.
"Seller Affiliate Agreement" means the agreement referenced in Section
6.2(h), which agreement shall be in the form of Exhibit D attached hereto.
"Seller Common Ratio" means with respect to any holder of Seller Common
Shares, the number of Seller Common Shares held by that Person immediately prior
to the Closing divided by the total number of Seller Common Shares outstanding
at that time on a pro forma basis assuming the purchase of all Seller Common
Shares then purchasable upon the exercise of the CMP Warrant.
"Seller Common Share" means a share of Seller Class A Common Stock, par
value $.01 per share, or Seller Class B Common Stock, par value $.01 per share.
"Seller Board of Directors" means the board of directors of Seller as
constituted from time to time.
"Seller Inventory" has the meaning given to that term in Section 3.14.
"Seller Preferred Share" means a share of Series 2 Junior Exchangeable
14.0% Preferred Stock, $1.00 par value per share, or Series 3 Junior
Exchangeable 14.0% Preferred Stock, par value $1.00 per share, or Series 4
Junior Exchangeable 14.0% Preferred Stock, par value $1.00 per share.
"Seller Share" means any issued and outstanding share of Seller's capital
stock.
"Seller Stockholder" means a holder of any Seller Share immediately prior
to the Closing.
"Seller Stockholder Agreement" means that certain agreement dated as of
December 29, 1994 by and among Seller, CVC, CMP, David R. Beckerman, Thomas C.
Weaver and the other Persons specified on Schedule 1 hereto.
"Seller Stockholder Approval" means the affirmative vote in favor of a
proposal to approve this Agreement, at a meeting or by written consent, of the
holders of a majority of each class of Seller Voting Shares entitled to vote
thereon in accordance with the certificate of incorporation and bylaws of Seller
and Section 251(c) of the DGCL.
"Seller Voting Share" means a Seller Share entitled to vote on the Merger.
"Senior Subordinated Credit Notes" means those promissory notes issued in
connection with the Credit Agreements.
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"Subsidiary" means any corporation, partnership, limited liability company
or other organization, whether or not incorporated, with respect to which a
specified Person owns (directly or indirectly through one or more Subsidiaries
thereof) at least twenty-five percent (25%) of the voting securities or equity
interests or has the power to vote or direct the voting of sufficient securities
to elect a majority of the directors.
"Surviving Corporation" means Seller as in existence after the Effective
Time.
"Tax" means any federal, state, local or foreign income, gross receipts,
franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer,
real property gains, registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profits, environmental
(including without limitation under Section 59A of the Code), customs, duties,
real property, personal property, capital stock, intangibles, social security
(or similar), unemployment, disability, payroll, license, employee or other
withholding, or other tax, of any kind whatsoever, including any interest,
penalties or additions to tax or similar items in respect of the foregoing
(whether disputed or not).
"Tax Affiliate" means a Subsidiary of Seller and any affiliated, combined,
or unitary group of which Seller or any Subsidiary is or was a member.
"Tax Return" means any return, report, declaration, claim for refund,
information return or other document (including any related or supporting
schedule, statement or information) filed or required to be filed in connection
with the determination, assessment or collection of any Tax of any party or the
administration of any laws, regulations or administrative requirements relating
to any Tax (including any amendment or other modification thereof).
"10% PIK Subordinated Notes" means those certain promissory notes dated
December 29, 1994 and March 15, 1996, the holder of which is W.R. Graced.
"Termination Fee" shall have the meaning given to that term in Section 9.2
"Warrant Shares" has the meaning set forth in Section 2.5(a).
"Year 2000 Compliant" has the meaning given to that term in Section 3.13.
SECTION 2. Merger.
2.1 General. On and subject to the terms and conditions of this
Agreement, the Merger will take place at the Effective Time. The structure of
the Merger will be a reverse merger of Merger Sub with and into Seller, with
Seller being the Surviving Corporation. The Parties will take all steps
necessary to cause the Merger to comply with applicable requirements of the DGCL
regarding corporate mergers.
2.2 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Nutter, McClennen &
Fish, LLP in Boston, Massachusetts, commencing at 10:00 a.m. local time on the
second Business Day following the satisfaction or waiver of all conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
will take at or after the Closing itself) or such other date as the Parties may
mutually determine) (the "Closing Date").
2.3 Actions at Closing. At the Closing, (i) Seller and, as applicable,
the Seller Stockholders will deliver to Merger Sub and Buyer the various
certificates, instruments, and documents referred to in Section 7.2, (ii) Merger
Sub and Buyer will deliver to Seller the various certificates, instruments, and
documents referred to in Section 7.3, (iii) Seller and Merger Sub will file with
the Secretary of State of Delaware a certificate of merger in
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due and proper form (the "Certificate of Merger"), (iv) Buyer will deliver to
CVC, as agent for the Seller Stockholders, the certificates evidencing the Buyer
Shares (other than the Escrow Shares) issued in the Merger in exchange for all
of the certificates representing the Seller Shares, together with checks
representing amounts of cash payable in lieu of fractional shares, if any, which
each Seller Stockholder is entitled to receive, (v) Buyer will deliver to CVC,
as agent for CMP, the Closing Warrant, and (vi) Buyer will deliver to the Escrow
Agent, the certificates evidencing the Escrow Shares and the Escrow Warrant.
2.4 Effect of Merger.
(a) General. The Merger shall become effective at the time (the "Effective
Time") the Certificate of Merger is accepted for filing by the Secretary of
State of Delaware. The Merger shall have the effect set forth under relevant
provisions of the DGCL. The Surviving Corporation may, at any time after the
Effective Time, take any action (including executing and delivering any
document) in the name and on behalf of the Merger Sub in order to fully carry
out and effectuate the Merger.
(b) Certificate of Incorporation. The Certificate of Incorporation of
Merger Sub as in effect immediately prior to the Effective Time will, pursuant
to the terms of the Certificate of Merger, become the Certificate of
Incorporation of the Surviving Corporation.
(c) By-laws. The By-laws of Merger Sub as in effect immediately prior to
the Effective Time will remain unchanged by the Merger and be the By-laws of the
Surviving Corporation.
(d) Directors and Officers. The directors and officers of Merger Sub in
office immediately prior to the Effective Time will be the directors and
officers of the Surviving Corporation.
(e) Conversion of Seller Shares. Subject to the provisions of Section
2.4(h), at and as of the Effective Time, (i) each holder of Seller Preferred
Shares then outstanding shall by virtue of the Merger be entitled to receive
that number of Buyer Shares, rounded to the nearest thousandth, equal to the
quotient obtained by dividing (X) the aggregate liquidation value of the
Preferred Shares held by such holder plus any and all accumulated and unpaid
dividends thereon to but not including the Effective Time by (Y) the Current
Market Price as of the Closing Date (the Buyer Shares delivered pursuant to this
Section 2.4(e)(i) to all holders of Seller Preferred Shares being collectively
referred to as the "Preferred Exchange Shares"); and (ii) each holder of Seller
Common Shares then outstanding, other than any holder of Dissenting Shares,
shall by virtue of the Merger be entitled to receive that number of Buyer
Shares, rounded to the nearest thousandth, which is equal to the product of (X)
the Seller Common Ratio applicable to such holder of Seller Common Shares
multiplied by (Y) Seven Million Seven Hundred Thousand (7,700,000) minus the
aggregate number of the Preferred Exchange Shares. After the Closing, there
shall be no transfers on the stock transfer books of Seller Shares which were
issued and outstanding at the Effective Time and converted pursuant to the
provisions of this Section 2.4(e). After the Effective Time, holders of
certificates of Seller Shares shall cease to be, and shall have no rights as,
stockholders of Seller, other than to receive Buyer Shares into which such
Seller Shares have been converted and, if applicable, fractional share payments
pursuant to the provisions hereof. Schedule 2.4(e) to this Agreement illustrates
the distribution pursuant to this Agreement of the Buyer Shares and the Buyer
Warrants (including the Escrow Shares and the Escrow Warrant) among,
respectively, the
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Seller Stockholders and holder of the CMP Warrant (which is the only option,
warrant or similar right to acquire Seller Shares that is outstanding as of the
date of this Agreement), assuming solely for purposes of that presentation that
(i) there are no Dissenting Shares, (ii) there are no accrued and unpaid
dividends on the Seller Preferred Shares as of the Closing Date, and (iii) the
Current Market Price as of the Closing Date is equal to $38.875.
(f) Lost Certificates. In the event any certificate representing one or
more Seller Shares shall have been lost, stolen or destroyed, upon receipt of
appropriate evidence as to such loss, theft or destruction and to the ownership
of such certificate by the Person claiming such certificate to be lost, stolen
or destroyed, and the receipt by Buyer of an appropriate and customary
indemnity, Buyer will issue, in exchange for such lost, stolen or destroyed
certificate, one or more certificates representing Buyer Shares and the
fractional share payment, if any, deliverable with respect thereof, as
determined in accordance with this Section 2.4.
(g) Fractional Shares. In lieu of the issuance of fractional Buyer Shares
pursuant to Section 2.4(e), cash adjustments, without interest, will be paid to
the holders of Seller Shares in respect of any fractional share that would
otherwise be issuable pursuant to Section 2.4(e) after combining for each Seller
Stockholder the number of Buyer Shares, if any, issued in exchange for Seller
Preferred Shares with the number of Buyer Shares issued in exchange for Seller
Common Shares, and the amount of such cash adjustment shall be determined by
multiplying such holder's fractional interest by the Current Market Price as of
the Closing Date.
(h) Escrow Shares. At the Closing, CVC and the Escrow Agent shall enter
into the Escrow Agreement, which Escrow Agreement is intended to serve as an
adjustment to the aggregate amount of consideration payable to the holders of
Seller Common Shares and the CMP Warrant in connection with the Merger. At the
Closing, there shall be withheld from each holder of Seller Common Shares a
number of Buyer Shares (collectively, the "Escrow Shares") equal to the product,
rounded to the nearest whole share, of (X) the number of Buyer Shares such
holder would have otherwise received pursuant to Section 2.4(e) multiplied by
(Y) the Escrow Ratio. The "Escrow Ratio" shall be the quotient obtained by
dividing (X) One Hundred Twenty-Seven Thousand (127,000) by (Y) the arithmetic
difference between Seven Million Seven Hundred Thousand (7,700,000) and the
aggregate number of the Preferred Exchange Shares. At the Closing, Buyer shall
deposit with the Escrow Agent one or more stock certificates representing the
Escrow Shares.
(i) Restricted Shares. To the extent that any Seller Share is subject to
restrictions on transfer and/or forfeiture provisions pursuant to any agreement
between the holder and Seller, the Buyer Shares delivered in exchange therefor
shall be subject to the same restrictions if in the reasonable opinion of
Buyer's legal and accounting advisors the continuation of such restrictions are
necessary in order for the Merger to qualify for "pooling of interests"
accounting treatment under Accounting Principles Board Opinion No. 16.
(j) Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, Dissenting Shares shall not be converted into the right to receive, or
be exchangeable for, the Merger consideration provided for in Section 2.4(e),
but, instead, each holder of Dissenting Shares shall be entitled to payment by
the Surviving Corporation of the value of such Dissenting Shares as agreed upon
or determined in accordance with the provisions of Section 262 of DGCL.
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2.5 Buyer Warrants. At the Closing, Buyer shall deliver the Buyer
Warrants in exchange for the CMP Warrant.
(a) Warrant Shares. As used in this Agreement, the term "Warrant
Shares" means that number, rounded up to the nearest whole integer, which
is equal to the product of (X) the Seller Common Ratio applicable to the
CMP Warrant, treating CMP as a holder of Seller Common Shares, multiplied
by (Y) Seven Million Seven Hundred Thousand (7,700,000) minus the aggregate
number of the Preferred Exchange Shares.
(b) Escrow Warrant. Buyer shall deliver at the Closing to the Escrow
Agent a warrant (the "Escrow Warrant") entitling CMP or any successor
holder thereof to purchase Buyer Shares. The Escrow Warrant shall be
identical in all material respects to the CMP Warrant, except that (i) the
number of Buyer Shares purchasable immediately after the Closing upon the
full exercise of the Escrow Warrant shall be that number, rounded to the
nearest whole share, which is equal to the product of (X) the total number
of Warrant Shares multiplied by (Y) the Escrow Ratio, and (ii) the exercise
price per Buyer Share of the Escrow Warrant shall be that price, rounded to
the nearest tenth of a cent ($.001), which is equal to the quotient of (X)
$1,500 divided by (Y) the total number of Warrant Shares.
(c) Closing Warrant. Buyer shall deliver at the Closing to CVC, as
agent for CMP, a warrant (the "Closing Warrant") entitling CMP or any
successor holder thereof to purchase Buyer Shares. The exercise price per
Buyer Share of the Closing Warrant shall be the same as the exercise price
per Buyer Share of the Escrow Warrant, and the Closing Warrant shall
otherwise be identical in all material respects to the Escrow Warrant,
except that the number of Buyer Shares purchasable immediately after the
Closing upon the full exercise of the Closing Warrant shall be equal to the
arithmetic difference between (X) the total number of Warrant Shares and
(Y) the number of Buyer Shares purchasable immediately after the Closing
upon the full exercise of the Escrow Warrant.
(d) If the CMP Warrant is exercised in part prior to the Closing,
there will be an appropriate adjustment to the number of Warrant Shares and
the exercise price of the Buyer Warrants. If the CMP Warrant is exercised
in full prior to the Closing, none of the Buyer Warrants will be issued in
the Merger.
2.6 Anti-Dilution. In the event that, subsequent to the date of this
Agreement but prior to the Effective Time, the outstanding shares of Buyer
Common Stock shall have been increased, decreased, changed into or exchanged for
a different number of shares or securities through a split, reverse stock split,
or other like changes in Buyer's capitalization, other than pursuant to this
Agreement, as the case may be (a "Recapitalization"), then an appropriate and
proportionate adjustment shall be made to the number of Buyer Shares so that
each Seller Stockholder shall receive under Section 2.4, or upon exercise of the
Buyer Warrants, the number of Buyer Shares (except for fractional shares) that
such stockholder would have held immediately after the Recapitalization if the
Merger had occurred immediately prior to the Recapitalization or the record date
therefor, as applicable. For purposes of this Section 2.6 and by way of
illustration and not limitation, a "Recapitalization" will in no event include
the (i) issuance of shares or securities by Buyer pursuant to any existing or
hereafter established or granted stock option or equity award or other
compensation plan or arrangement to, or for the benefit of, one or more
employees, officers, directors or contractors of Buyer or any of its
Subsidiaries or (ii) in connection with Buyer acquiring directly or indirectly
the stock or assets of any other Person.
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SECTION 3. Representations and Warranties of Seller.
Seller represents and warrants to Buyer and the Merger Sub that the
statements contained in this Section 3 are correct and complete as of the date
of this Agreement. The representations and warranties which follow are deemed to
be repeated on the Closing Date.
3.1 Organization, Qualification, and Corporate Power. Each of Seller and
its Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation. Each of Seller and
its Subsidiaries is duly authorized to conduct business and is in good standing
under the laws of each jurisdiction where the absence of such qualification
would have a Material Adverse Effect on Seller. Schedule 3.1 lists each of the
jurisdictions in which Seller or any of its Subsidiaries possess any foreign
qualification or license and lists such license held in such jurisdiction. Each
of Seller and its Subsidiaries has the corporate power and authority necessary
to carry on the businesses in which each is engaged and to own, lease and use
the respective properties owned, leased and/or used by each. Seller has
delivered to Buyer a true and complete copy of its certificate of incorporation
and by-laws as in effect on the date hereof.
3.2 Authorization of Merger. Seller has full corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement has been duly authorized by the board of directors of
Seller, has been duly executed and delivered on behalf of Seller, and
constitutes the valid and legally binding obligation of Seller, enforceable in
accordance with its terms and conditions. The only vote of Seller Stockholders
necessary to approve this Agreement or the consummation of the Merger is the
affirmative vote of the holders of a majority of the outstanding shares of Class
A Common Stock entitled to vote thereon approving this Agreement, and the Seller
Board of Directors has directed the officers of Seller to submit this Agreement
to the holders of Seller Voting Shares for Seller Stockholder Approval. No other
corporate proceedings on the part of Seller not heretofore taken are necessary
to approve this Agreement or to consummate the Merger.
3.3 Noncontravention. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby, will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller or any of its Subsidiaries is
subject or any provision of the certificate of incorporation or charter or
bylaws of Seller or any of its Subsidiaries or (ii) conflict with, result in a
breach of, constitute a default (or any event which, with notice or lapse of
time, or both, would constitute a default) under, result in the acceleration of,
create in any party a put right or repurchase obligation or the right to
accelerate, terminate, modify or cancel, create any Security Interest or require
any notice, under any material Contract to which Seller or any of its
Subsidiaries is a party or by which any is bound or to which any of its assets
is subject, including, without limitation, the Grace Agreement, except for any
such matters identified on Schedule 3.3. Other than in connection with the
provisions of the HSRA and the DGCL, none of Seller or any of its Subsidiaries
needs to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency or other Person in
order to consummate the Merger.
3.4 Capitalization of Seller and its Subsidiaries. Seller's authorized
capital stock consists of 2,019,076 authorized shares of capital stock, which
shares are fully described on and held of record by the persons and in the
amounts set forth on Schedule 3.4. Except as set forth on Schedule 3.4, neither
Seller nor any of its Subsidiaries has (i) any shares of
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common stock or preferred stock issued or reserved for issuance, or (ii) any
Contract of any character to which Seller or any of its Subsidiaries or, to
Seller's knowledge, any Affiliate of Seller is a party or subject relating to
its capital stock or otherwise representing a right to receive any of its
capital stock, nor are there any pending or, to Seller's knowledge, threatened
claims or demands for, a direct or indirect equity interest in Seller or any
Subsidiary, including, without limitation, any option, warrant, right or call or
any stock appreciation, phantom stock, profit participation or similar rights.
All of the issued and outstanding shares of capital stock of Seller have been
duly authorized and validly issued, and are fully paid and are nonassessable.
Except as set forth on Schedule 3.4, there are no voting trusts, proxies or any
other agreements or understandings with respect to the voting of the capital
stock of Seller or any of its Subsidiaries.
3.5 Subsidiaries. All Subsidiaries of Seller are listed on Schedule 3.5.
Except as otherwise disclosed in Schedule 3.5, neither Seller nor any Subsidiary
owns any shares of stock of any corporation or any equity interest in a
partnership, joint venture or other business entity, and neither Seller nor any
of its Subsidiaries controls any other corporation, partnership, joint venture
or other business entity by means of ownership, management contract or
otherwise. Except for nominal qualifying shares held by residents of certain
foreign jurisdictions but which are beneficially owned by Seller or its
Subsidiaries, all of the outstanding capital stock of, or other ownership
interests in, each Subsidiary of Seller is owned beneficially and of record by
Seller, directly or indirectly, is validly issued, fully paid and nonassessable
and free and clear of any preemptive rights, restrictions on transfer, Taxes or
Security Interests, except as provided under the Securities Act or state
securities laws.
3.6 Financial Statements. Schedule 3.6 includes the following: (A)
Seller's audited consolidated balance sheet for the fiscal year ended December
31, 1997 and the statements of income, cash-flow and shareholders' equity for
each of the three years in the period ended December 31, 1997; and (B) Seller's
unaudited consolidated balance sheet and statements of income, cash-flow and
shareholders' equity as of and for the three-month and twelve-month periods
ended December 31, 1998 (all such items mentioned previously in this Section,
the "Financial Statements"). The Financial Statements (i) are correct and
complete in all material respects, (ii) are consistent with the books and
records of the Company and its Subsidiaries (which books and records are correct
and complete, and are maintained in accordance with applicable regulations),
(iii) have been prepared in conformity with GAAP applied on a consistent basis
and present fairly the financial position of the respective entities as at the
dates indicated and the results of their operations for the periods specified,
and (iv) comply in all material respects, except as may be reflected in the
notes to the Financial Statements, as to form with the accounting requirements
of the Securities Act, the Securities Act regulations, including, without
limitation, Regulation S-X, and the Exchange Act, except as may be described on
Schedule 3.6. Except as set forth in the Financial Statements or described on
Schedule 3.6, neither Seller nor any of its Subsidiaries has (i) any Loss
Contingency which is not required by GAAP to be accrued and which if resolved
adversely to Seller or any of its Subsidiaries could have an Material Adverse
Effect on Seller or (ii) any other Liability material to Seller and its
Subsidiaries on a consolidated basis that is not required by GAAP to be accrued.
The financial statements to be delivered pursuant to Section 6.4(i) will be
derived from the accounting books and records of Seller, will provide adequate
disclosure of material changes to the accounts or business of Seller and its
Subsidiaries and will be prepared in accordance with GAAP and otherwise on the
same basis as the
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Financial Statements, subject to normal year-end adjustments in the case of
monthly financial statements.
3.7 Litigation. Except as set forth in Schedule 3.7, there are no
judgments, decrees, lawsuits, actions, proceedings, claims, complaints,
injunctions, orders or investigations by or before any Governmental Entity
pending or, to Seller's knowledge, threatened against Seller or its Subsidiaries
(i) which could be reasonably expected to have a Material Adverse Effect on
Seller if adversely determined, or (ii) seeking to enjoin any aspect of the
Merger. To Seller's knowledge, there are no existing facts or circumstances
which give any reason to believe that any such action, suit, proceeding, hearing
or investigation may be brought or threatened against Seller or any of its
Subsidiaries.
3.8 Absence of Certain Developments. Except as disclosed in Schedule 3.8,
since December 31, 1997 no event has occurred which has had or reasonably could
be expected to have a Material Adverse Effect on Seller. Except as disclosed in
the Financial Statements, and except for this Agreement and the Merger, since
December 31, 1997, each of Seller and its Subsidiaries has been operated in the
Ordinary Course. Without limiting the generality of the foregoing, except as
disclosed on Schedule 3.8, since December 31, 1997:
(i) no party (including Seller or any of its Subsidiaries) has
accelerated, terminated, modified or canceled any Contract (or series of
related Contracts) involving more than $250,000 to which Seller or any of
its Subsidiaries is a party or by which any of them is bound;
(ii) neither Seller nor any of its Subsidiaries has imposed any
Security Interest upon any of its assets, tangible or intangible, except in
the Ordinary Course;
(iii) neither Seller nor any of its Subsidiaries has made any capital
investment in, any loan to, or any acquisition of the securities or assets
of, any other Person (or series of related capital investments, loans, and
acquisitions) either involving more than $500,000 or that is outside the
Ordinary Course;
(iv) neither Seller nor any of its Subsidiaries has issued any note,
bond, or other debt security or created, incurred, assumed, or guaranteed
any indebtedness for borrowed money or capitalized lease obligation either
involving more than $100,000 singly or $200,000 in the aggregate;
(v) neither Seller nor any of its Subsidiaries has delayed or
postponed the payment of accounts payable and other liabilities outside the
Ordinary Course;
(vi) neither Seller nor any of its Subsidiaries has granted any
license or sublicense of any rights under or with respect to any
Proprietary Rights either involving more than $100,000 or outside the
Ordinary Course;
(vii) there has been no change made or authorized in the charter or
bylaws of Seller or any of its Subsidiaries;
(viii) neither Seller nor any of its Subsidiaries has issued, sold or
otherwise disposed of any of its capital stock, or granted or entered into
any option, warrant or other Contract to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock;
(ix) neither Seller nor any of its Subsidiaries has declared, set
aside or paid any dividend or made any distribution with respect to its
capital stock (whether in cash or in kind) or redeemed, purchased or
otherwise acquired any of its capital stock other
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than dividends payable in cash in the Ordinary Course on Seller Preferred
Shares in accordance with the terms of Seller's Certificate of
Incorporation;
(x) neither Seller nor any of its Subsidiaries has entered into a
Contract or any other transaction with any of its Affiliates;
(xi) neither Seller nor any of its Subsidiaries has entered into any
employment Contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such Contract or agreement;
(xii) neither Seller nor any of its Subsidiaries has granted any
increase in the base compensation of any of its employees other than in the
Ordinary Course;
(xiii) neither Seller nor any of its Subsidiaries has adopted,
amended, modified, or terminated any bonus, profit-sharing, incentive,
severance or other plan or contract for the benefit of any of its
directors, officers and employees (or taken any such action with respect to
any other Benefit Plan (as hereinafter defined);
(xiv) neither Seller nor any of its Subsidiaries has made any other
change in employment terms for any of its officers or employees outside the
Ordinary Course;
(xv) there has not been any other occurrence, event, incident, action,
failure to act or transaction outside the Ordinary Course involving Seller
or any of its Subsidiaries; and
(xvi) neither Seller nor any of its Subsidiaries has committed to do
any of the foregoing.
3.9 Taxes.
(a) All Tax Returns of Seller or any Tax Affiliate now subject to audit by
the IRS or other applicable governmental authority or in respect of which an
audit has been formally proposed are listed on Schedule 3.9(a), and Seller has
provided to Buyer correct and complete copies of each such Tax Return. Seller
and each of its Tax Affiliates has duly and timely filed all material Tax
Returns required to be filed by it, all such Tax Returns have been prepared in
compliance with all applicable laws and regulations and are true, correct and
complete in all material respects. All Taxes owed by Seller and each of its Tax
Affiliates, whether or not shown on any Tax Return, have been timely paid or are
not yet due and payable. Seller has made available to Buyer correct and complete
copies of its federal and state income Tax returns for the 1995, 1996 and 1997
taxable years and the corresponding balance sheets of Seller as of the end of
each such year.
(b) Except as set forth on Schedule 3.9(b):
(i) each taxable period of Seller and each of its Tax Affiliates
either (A) has been audited by the relevant taxing authority or (B) has
closed, so that no further assessment or collection of Tax may occur and
such taxable period is not subject to review by any relevant taxing
authority;
(ii) neither Seller nor any of its Tax Affiliates is the subject of a
Tax audit or examination, in which any Tax may be assessed or collected by
any taxing authority;
(iii) neither Seller nor any of its Tax Affiliates has received from
any taxing authority any written notice of proposed adjustment, deficiency,
underpayment of Taxes or any other such written notice which has not been
satisfied by payment or been withdrawn, and no claims have been asserted in
writing relating to such Taxes against Seller or any such Tax Affiliate;
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(iv) neither Seller nor any of its Subsidiaries (A) is or has been a
member of an affiliated group filing a consolidated federal income Tax
Return (other than a group the common parent of which was Seller) or (B)
has any Liability for the Taxes of any Person (other than Seller and its
Subsidiaries) under Treas. Reg. sec.1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract,
or otherwise.
(v) Seller and each of its Tax Affiliates has complied with all
applicable laws, rules and regulations relating to the payment and
withholding of Taxes and has timely and properly withheld from employee
wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under all applicable laws;
(vi) neither Seller nor any of its Tax Affiliates (A) has filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by Seller
or any of its Tax Affiliates, (B) is required to include in income any
adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by Seller or any of its Tax
Affiliates, or has proposed any such adjustment or change in accounting
method, or (C) is required, as a result of any excess loss account
described in Treas. Reg. sec.1.1502-19 or Treas. Reg. sec.1.1502-32 (or any
corresponding or similar provision or administrative rule of any federal,
state, local or foreign income tax law), to include any item in income for
any taxable period (or any portion thereof ending after the Closing Date);
(vii) there are no liens for Taxes on any assets of Seller or any of
its Tax Affiliates except liens for Taxes not yet due. No deficiency for
any Tax has been proposed, asserted or assessed against Seller or any of
its Tax Affiliates which has not been resolved and paid in full, and there
are no outstanding waivers or consents given by Seller or any of its Tax
Affiliates regarding the application of the statute of limitations with
respect to any Taxes or the period for filing any Returns;
(viii) neither Seller nor any of its Tax Affiliates is a party to or
bound by any Tax indemnification, Tax allocation or Tax sharing agreement
with any Person or has any current or potential contractual obligation to
indemnify any other Person with respect to Taxes; and
(ix) neither Seller nor any of its Subsidiaries has made or is
affected by any election under Code Sections 108(b)(5), 338(g), or 565.
(c) Seller and each of its Subsidiaries has established and until the
Effective Time will maintain on its books and records reserves adequate to pay
all Taxes accrued but not yet due and payable in accordance with GAAP, and such
reserves are reflected on the Financial Statements to the extent required. All
transactions that could give rise to an understatement of federal income tax
within the meaning of Section 6662 of the Code have been adequately disclosed in
accordance with Section 6662 of the Code. Neither Seller nor any of its
Subsidiaries is a party to any agreement, contract or arrangement that would
result, separately or in the aggregate, in the payment of any "excess parachute
payment" within the meaning of Section 280G of the Code or in the payment of
compensation that is not fully deductible pursuant to Section 162(m) of the
Code.
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3.10 Environmental, Health, and Safety Matters.
(a) Except as set forth on Schedule 3.10(a), (i) Seller and each of its
Subsidiaries have complied with, and are in compliance with, the Environmental,
Health, and Safety Requirements, in all material respects, (ii) without limiting
the generality of the foregoing, Seller and each of its Subsidiaries have
obtained and complied with, and are in compliance with, in all material
respects, all permits, licenses and other authorizations that are required
pursuant to the Environmental, Health, and Safety Requirements for the
occupation of their facilities and the operation of their business, (iii)
neither Seller nor any of its Subsidiaries has received any notice regarding any
actual or alleged material violation of Environmental, Health, and Safety
Requirements, or any material Liability or Loss Contingency arising under the
Environmental, Health, and Safety Requirements (including any investigatory,
remedial or corrective obligations) (iv) neither Seller nor any of its
Subsidiaries has treated, stored, disposed of, arranged for or permitted the
disposal of, transported, handled, or released any Hazardous Material or owned
or operated any property or facility (and no such property or facility is
contaminated by any Hazardous Material) in a manner that has given or reasonably
could be expected to give rise to any material Liability, including Liability
for response costs, corrective action costs, personal injury, property damage,
natural resources damages or attorney fees, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Solid Waste Disposal Act, as amended, or any other Environmental, Health, and
Safety Requirements, and (vi) neither Seller nor any of its Subsidiaries has,
either expressly or by operation of law, assumed, undertaken or otherwise become
subject to any material Liability of any other Person relating to Environmental,
Health, and Safety Requirements.
(b) There are no environmental investigations, studies, reviews, audits,
tests or other analyses of environmental conditions conducted by or which are in
the possession, custody or control of Seller or any of its Subsidiaries relating
to the operation of Seller's business or any facility owned, leased or operated
by Seller or any of its Subsidiaries, except as listed on Schedule 3.10(b),
copies of which have been made available to Buyer, except for those identified
as privileged on Schedule 3.10(b).
3.11 Employee Benefit Plans.
(a) Schedule 3.11(a) lists all bonus, compensation, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock and stock option plans, all
employment or severance contracts, health and medical plans, life insurance and
disability plans, vacation and other employee benefit plans, policies,
contracts, agreements or arrangements, which at any time during the 24 month
period ending on the Closing Date cover (or covered) any employee(s) or former
employee(s) of Seller, any of its Subsidiaries, any ERISA Affiliate and/or any
such employees' beneficiaries or with respect to which Seller or any of its
Subsidiaries or any ERISA Affiliate had, or has, any actual or potential
Liability, including, but not limited to, all "employee benefit plans" within
the meaning of Section 3(3) of ERISA (the "Benefit Plans"); provided, however,
that with reference to "employee benefit plans" within the meaning of Section
3(3) of ERISA, the 24 month period referenced above shall be lengthened to a 60
month period. Except, as set forth on Schedule 3.11(a), no Benefit Plan is or
was established, maintained or contributed to including any Benefit Plan to
which there is (or was) an obligation to contribute to pursuant to an agreement
with an employee organization (within the meaning of Section 3(4) of ERISA).
Except as set forth on Schedule 3.11(a), no Benefit Plan has terms requiring
assumption by Buyer or the
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Merger Sub. No Benefit Plan is a multiemployer plan (as defined in Section
4001(a)(3) of ERISA), neither Seller nor any of its Subsidiaries nor any of its
ERISA Affiliates has incurred any withdrawal liability with respect to any
multiemployer plan (and the transactions contemplated by this Agreement shall
not give rise to any such withdrawal liability) or any Liability in connection
with the termination or reorganization of any multiemployer plan and no Benefit
Plan provides health or other welfare benefits to former employees extending
beyond their retirement or other termination of service, other than coverage
mandated by Part 6 of Title I of ERISA or death benefits or retirement benefits
under any Benefit Plan that is an "employee pension plan," as that term is
defined in Section 3(2) of ERISA. All contributions or other amounts payable by
Seller or any of its Subsidiaries or any ERISA Affiliate as of the Effective
Time with respect to each Benefit Plan in respect of current or prior plan years
have been paid or accrued in accordance with GAAP, Section 302 of ERISA and
Section 412 of the Code, and there is no accumulated funding deficiency with
respect to any Benefit Plan. The present value of accrued benefits under each
Benefit Plan which is an employee pension benefit plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such Benefit Plan's actuary with respect to such Benefit Plan, did
not, as of its latest valuation date, exceed the then current value of the
assets of such Benefit Plan allocable to such accrued benefits.
(b) Neither Seller, nor any of its Subsidiaries, nor any ERISA Affiliate
contributes or has contributed to any "multiemployer plan" as such term is
defined in Section 3(37) of ERISA. Neither Seller nor any of its Subsidiaries
nor any ERISA Affiliate is or was a substantial employer (within the meaning of
Section 4001(a)(2) of ERISA) for any single employer plan that is (or was)
subject to Section 4063 of ERISA.
(c) To the extent applicable, each Benefit Plan (and its related trust) is
maintained and administered in compliance in all respects with the applicable
provisions of ERISA, the Code and any other laws. Each Benefit Plan (and its
related trust) which is maintained, administered, reported or contributed to as
if qualified under Sections 401(a) or 501(a) of the Code is so qualified and has
received a favorable determination letter from the Internal Revenue Service that
it is so qualified. Except as specified in Schedule 3.11(c), each Benefit Plan
that is an employee benefit plan within the meaning of Section 3(3) of ERISA
(and its related trust) may, by its terms, be amended or terminated, in whole or
in part, at any time and from time to time by Seller (or, as applicable, any of
its Subsidiaries or any ERISA Affiliate) without penalty or cost (other than
out-of-pocket costs customary payable in the Ordinary Course in connection with
the preparation and filing of any such amendment or termination, including
reasonable fees and expenses of counsel).
(d) No Liability to the Pension Benefit Guaranty Corporation (the "PBGC")
(except for routine payment of premiums) has been incurred with respect to any
Benefit Plan that is subject to Title IV of ERISA (and no fact or circumstance
exists which could give rise to any such liability), no reportable event within
the meaning of Section 4043 of ERISA has occurred with respect to any such
Benefit Plan, the PBGC has not commenced proceedings for the termination of any
Benefit Plan or the appointment of a trustee with respect to any Benefit Plan,
and no fact or circumstance exists which can reasonably be expected to cause the
PBGC to commence any proceedings under Title IV of ERISA with respect to any
Benefit Plan. None of the assets of Seller or any of its Subsidiaries or any
ERISA Affiliate is the subject of any Security Interest arising under Section
302 of ERISA or Section 412 of the Code, and no facts or circumstances exist
which could give rise to such Security Interest. Neither Seller nor any of its
Subsidiaries nor any ERISA
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Affiliate has been required to post any security under Section 307 of ERISA or
Section 401(a) of the Code, and no facts or circumstances exist which could give
rise to such posting of security.
(e) With respect to each Benefit Plan, Seller has provided to Buyer true,
complete and correct copies, to the extent applicable, of (i) all documents
pursuant to which such Benefit Plans are maintained, funded and administered,
(ii) the two most recent annual report (Form 5500 series), (iii) the two most
recent actuarial and financial statements, and (iv) all governmental rulings,
determinations and opinions (and any pending requests), including the most
recent favorable determination letter issued by the IRS with respect to each
such plan, or a written statement that no such determination exists or is
required.
(f) Neither Seller nor any of its Subsidiaries nor any ERISA Affiliate has
engaged in a transaction in connection with which Seller, any of its
Subsidiaries or any ERISA Affiliate, or any other Person or entity, could be
subject to a Liability under ERISA, or the Code, including, without limitation,
liability under Section 409 of ERISA or a civil penalty assessable pursuant to
Section 502 of ERISA or a tax imposed pursuant to Section 4975 of the Code, and
no event has occurred and no condition exists with respect to any Benefit Plan
that could subject Seller or any of its Subsidiaries or any ERISA Affiliate to
any tax, fine or penalty imposed by the Code or ERISA.
(g) Except as provided in Schedule 3.11(g), neither the execution and
delivery of this Agreement nor the consummation of the Merger will (i) result in
any payment (including, without limitation, deferred compensation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
director, employee, contractor, consultant or other service provider of Seller
or any of its Subsidiaries or any ERISA Affiliate from Seller or any of its
Subsidiaries or any ERISA Affiliate under any Benefit Plan or otherwise, (ii)
increase any benefits otherwise payable under any Benefit Plan or otherwise,
(iii) result in any acceleration of the time of payment or vesting of any such
benefits, or (iv) result in any increase in or acceleration of the contribution
or funding obligation, if any, of Seller or any of its Subsidiaries or any ERISA
Affiliate.
(h) No Benefit Plan will be amended or terminated on or prior to the
Closing Date without the prior written approval of Buyer. The Seller has made
all contributions and payments required to each Benefit Plan through the
Effective Time, inclusive, or provided for such contributions and payments in
accordance with GAAP.
3.12 Proprietary Rights. Except as set forth in Schedule 3.12, Seller and
its Subsidiaries own and possess all right, title and interest in, free and
clear of all Security Interests, or have a license or other right to use, all
Proprietary Rights which are used in, or held for use in, the operation of the
business of Seller and its Subsidiaries as presently conducted or as presently
proposed to be conducted and which are material to such presently conducted or
proposed business. Each of Seller and its Subsidiaries has taken all
commercially reasonable action to maintain and protect each item of Proprietary
Rights owned by Seller or any of its Subsidiaries. No item of the Proprietary
Rights set forth in Schedule 3.12 has been adjudicated to be invalid or
unenforceable and, to the knowledge of Seller and its Subsidiaries, no third
party has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any of such Proprietary Rights. Notwithstanding any other
provision of this Section, Schedule 3.12 lists all of the following items: all
patented and registered Proprietary Rights owned by Seller or any of its
Subsidiaries; all pending patent applications and applications for the
registration of other Proprietary Rights filed by or on behalf of Seller or any
of its Subsidiaries; all trade and corporate names owned or used by Seller or
any of its Subsidiaries; and all joint
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development agreements to which Seller or any of its Subsidiaries is a party
that assign or limit any Proprietary Rights owned or used by Seller or any of
its Subsidiaries. Schedule 3.12 lists all licenses or other written contracts
between Seller or any of its Subsidiaries and any third party regarding any of
the Proprietary Rights (other than computer software) listed on Schedule 3.12.
Neither Seller nor any of its Subsidiaries has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Proprietary Right of
any third party as could reasonably be expected to have a Material Adverse
Effect on Seller, and to the knowledge of Seller, neither Seller nor any of its
Subsidiaries will interfere with, infringe upon, misappropriate, or otherwise
come into conflict with any Proprietary Right of any third party as a result of
the continued operation of its businesses as presently conducted and as
presently proposed to be conducted as could reasonably be expected to have a
Material Adverse Effect on Seller. Except as set forth on Schedule 3.12, each
item of Proprietary Rights listed on Schedule 3.12 will be owned or available
for use by Buyer or its Subsidiaries on identical terms and conditions
immediately subsequent to the Effective Time.
3.13 Year 2000.
(a) The Seller and the Subsidiaries have conducted an inventory and
assessment (written summaries of which, to the extent prepared, have been
provided to Buyer) of the computer software, computer firmware or computer
hardware (whether general or special purpose) of Seller and each of its
Subsidiaries in order to determine the extent to which such software, firmware
or hardware is not Year 2000 Compliant (as defined below) and to estimate the
cost of rendering such software, firmware or hardware Year 2000 Compliant prior
to January 1, 2000 or such earlier date on which such software, firmware or
hardware may shut down or may produce incorrect calculations or otherwise
malfunction in any material respect. Any failure of the Computer Systems to be
Year 2000 Compliant will not have a Material Adverse Effect on the Seller. The
aggregate amount to be expended by Seller and its Subsidiaries, on a
consolidated basis, during the 12-month period ending December 31, 1999 to
render the Computer Systems Year 2000 Compliant, and to test whether any
Computer System is Year 2000 Compliant, will not have a Material Adverse Effect
on the Seller. For the purposes of this Agreement "Year 2000 Compliant" means
that none of the Computer Systems or Benefit Plan Computer Systems (as defined
below) of a particular Person will, in any material respect, malfunction, cease
to function, generate incorrect data, or produce incorrect results when
processing, receiving, calculating, writing and/or providing (i) date-related
data into and between the twentieth and twenty-first centuries and (ii)
date-related data in connection with any valid date in the twentieth and
twenty-first centuries.
(b) Seller has made available to Buyer copies of all material in-house
correspondence and memoranda and all material correspondence between the Seller
or any of its Subsidiaries with any customers, insurance company, vendor,
supplier or service provider of Seller and its Subsidiaries concerning whether
such Persons (including Seller or any of its Subsidiaries) are or expect to be
Year 2000 Compliant or whether such Persons expect to be adversely affected by
the failure of any other Person to be Year 2000 Compliant.
(c) To the knowledge of Seller, no customer, supplier, contractor,
distributor, insurance company, or other vendor or service provider with which
Seller or any of its Subsidiaries transacts business can reasonably be expected
not to be Year 2000 Compliant in any respect that could reasonably be expected
to have a Material Adverse Effect on Seller.
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(d) To the knowledge of Seller (which for purposes of this Section 3.13(c)
shall include, without limitation, the knowledge of each employee or consultant
of Seller or any of its Subsidiaries that in the ordinary course is engaged in
the administration or operation of any Benefit Plan), the Benefits Plans and
each of the sponsors of and fiduciaries with respect to each Benefit Plan have
conducted an inventory and assessment of the Computer Systems that are material
to the administration or management of any Benefit Plan (including the
management, investment and disposition of Benefit Plan assets, maintained under
a trust or otherwise), including, without limitation, the Computer Systems of
each Benefit Plan, the sponsor(s) of each such Benefit Plan, and third-party
service providers to each such Benefit Plan, and each of the Computer Systems
that are material to the investment of the assets of any of the Benefit Plans
(the "Benefit Plan Computer Systems") in order to determine which parts of the
Benefit Plan Computer Systems are not Year 2000 Compliant. The failure,
individually or in the aggregate, of Benefit Plan Computer Systems to be Year
2000 Complaint will not result in any sponsor or fiduciary of any Benefit Plan
incurring any liability or expense that will have a Material Adverse Effect on
Seller.
(e) Each Benefit Plan has made available to Buyer copies of all material
in-house correspondence and memoranda and all material correspondence between
such Benefit Plan (including its sponsor(s) and fiduciaries) and its agents,
insurance companies, vendors, suppliers, service providers, participants and
beneficiaries concerning whether such Persons are or expect to be Year 2000
Compliant or whether such Persons expect to be adversely affected by the failure
of any other Person to be Year 2000 Compliant.
(f) To the knowledge of Seller, no Benefit Plan (including its sponsor(s)
and fiduciaries), and no agent, insurance company, supplier, vendor or service
provider with which such Benefit Plan transacts business, can reasonably be
expected not to be Year 2000 Compliant in any respect that could reasonably be
expected to have a Material Adverse Effect on any Benefit Plan.
3.14 Inventories. Except as set forth on Schedule 3.14 and subject to
applicable reserves reflected on Seller's unaudited consolidated balance sheet
as of December 31, 1998, and except for obsolete items and items of
below-standard quality, all of which have been written-off or written-down to
net realizable value on Seller's unaudited consolidated balance sheet as of
December 31, 1998, all items of finished goods reflected on the books of Seller
and its Subsidiaries, or thereafter acquired (the "Seller Inventory") consist of
items of a quality and quantity usable and saleable in the Ordinary Course.
3.15 Accounts Receivable. All accounts receivable reflected in the books
of Seller and its Subsidiaries consist of accounts that are good and collectible
in the Ordinary Course except for those which Seller and its Subsidiaries know
to be invalid, past due or uncollectible and for which Seller and its
Subsidiaries has created an applicable reserve for bad debts on Seller's
unaudited consolidated balance sheet as of December 31, 1998.
3.16 Tangible Property.
(a) Seller or one or more of its Subsidiaries own or lease all buildings,
equipment, and other tangible assets necessary for the conduct of their
businesses as presently conducted and as presently proposed to be conducted.
Schedule 3.16 sets forth a true and complete list of all owned U.S. real
property and owned foreign real property used by Seller or any of its
Subsidiaries. Except as set forth in Schedule 3.16, the identified owner has
good and marketable title to the parcel of real property, free and clear of any
Security Interests, and there are no parties (other than Seller or its
Subsidiaries) in possession of
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such parcel of real property. Schedule 3.16 also sets forth a list of all of the
leased and subleased parcels of real property subject to leases and subleases in
favor of Seller or one or more of its Subsidiaries which evidence leasehold or
subleasehold interests of Seller or its Subsidiaries in such properties and
designates those leases which require consent of a lessor or sublessor in
connection with the Merger.
(b) Except as set forth in Schedule 3.16, Seller has all easements,
certificates of occupancy, permits, approvals, franchises, authorizations and
other such rights, including but not limited to easements for all utilities
(including without limitation all power lines, water lines and sewers) and
roadways necessary to conduct the business conducted on such properties.
3.17 Books and Records. Except as set forth in Schedule 3.17 attached
hereto, the books and records of Seller and each of its Subsidiaries are
accurate and complete in all material respects, have been maintained in
accordance with GAAP consistently applied, and accurately reflect in all
material respects the ownership, use, and operations of Seller and each of its
Subsidiaries.
3.18 Brokers' Fees. None of Seller and its Subsidiaries has any Liability
or obligation to pay any fees or commissions to any broker, finder, or similar
agent with respect to the transactions contemplated by this Agreement.
3.19 Tax-Free Reorganization Representations. To Seller's knowledge, it
has not taken any action that would or reasonably could be expected to cause the
Merger to fail to qualify as a "reorganization" within the meaning of Section
368 of the Code. Without limiting the generality of the immediately preceding
sentence:
(a) There is no intercorporate indebtedness existing between Seller
and Buyer that was issued, acquired or will be settled at a discount.
(b) Seller is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(c) The Merger will be effected for a bona fide business purpose.
(d) None of the Buyer Shares received by any stockholder/employee of
Seller pursuant to the Merger are, or will be, separate consideration for,
or allocable to, any employment, consulting or similar arrangement. The
compensation paid to any stockholder/employee of Seller pursuant to any
such employment, consulting or similar arrangement (including any covenant
not to compete) is or will be for services actually rendered and performed
(or not competing), and will be commensurate with amounts paid to third
parties bargaining at arms length for similar services.
(e) As at the Effective Time, Seller will hold at least ninety percent
(90%) of the fair market value of its net assets and at least seventy
percent (70%) of the fair market value of its gross assets held immediately
prior to the Effective Time. For purposes of this representation, amounts
paid or expected to be paid by Seller or the Surviving Corporation to
dissenters, amounts paid by Seller to shareholders who receive cash or
other property, amounts used or expected to be used by Seller or the
Surviving Corporation to pay Seller's or any Seller Stockholder's
reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends) made by Seller, will be included as assets of
Seller immediately prior to the Merger.
(f) In the Merger, Seller Shares representing control of Seller, as
defined in Section 368(c) of the Code, will be exchanged for Buyer Shares.
For purposes of this
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representation, Seller Shares exchanged for cash from Buyer will be treated
as outstanding Seller Shares at the Effective Time.
(g) Immediately after the Effective Time, Seller will not have
outstanding any warrants, options, convertible securities, or any other
type of right pursuant to which any Person could acquire stock in Seller
that, if exercised or converted, would affect Buyer's acquisition or
retention of control of Seller, as defined in Section 368(c) of the Code.
(h) Immediately after the Effective Time, the fair market value of the
assets of Seller will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
(i) Seller will not redeem any Seller Shares, or make an extraordinary
distribution with respect to any Seller Shares prior to, or in connection
with, the Merger within the meaning of Temporary Regulation sec.1.368-1T.
3.20 Pooling of Interest Treatment. To Seller's knowledge, it has not
taken any action that would or reasonably could be expected to cause the Merger
to fail to qualify for "pooling of interests" accounting treatment under
Accounting Principles Board Opinion No. 16. Each of the Affiliates of Seller,
within the meaning of SEC Accounting Staff Releases Nos. 130 and 135, is listed
on Schedule 3.20.
3.21 Certain Contracts.
(a) Schedule 3.21(a) lists the following contracts to which Seller or any
of its Subsidiaries is a party: (i) any Contract concerning noncompetition, (ii)
any Contract between Seller and any of its Affiliates or Subsidiaries, (iii) any
profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other plan or arrangement for the benefit of its
current or former directors, officers, and employees, (iv) any powers of
attorney executed on behalf of Seller or any of its Subsidiaries, (v) any
Contract under which any of them has advanced or loaned any amount to any of its
directors, officers, and employees outside the Ordinary Course, (vi) any
Contract under which the consequences of a default or termination reasonably
could be expected to have a Material Adverse Effect on Seller; (vii) any
instrument or Contract whereby Seller or any of its Subsidiaries indemnifies or
guarantees any loss or Liability which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Seller; (viii) any
Contract under which Seller or any of its Subsidiaries could have Liabilities or
obligations in the future relating to the acquisition or disposition of material
assets by way of merger, consolidation, purchase, sale or otherwise, or granting
to any Person a right at such person's option to purchase or acquire any
material asset or property of Seller or any interest therein (not including
dispositions of inventory in the Ordinary Course); and (ix) any other Contract
(or group of related contracts) the performance of which involves consideration
in excess of $250,000.
(b) To Seller's knowledge, the Grace Agreement is the valid and legally
binding obligation of the parties thereto, is enforceable in accordance with its
terms and conditions, and has not been amended or modified in any manner that
would affect the rights of Seller or any of its Subsidiaries under Sections
14.05 thereof. To Seller's knowledge, there are no existing facts or
circumstances which give Seller any reason to believe that the Selling Companies
(as defined in the Grace Agreement) would not satisfy their obligation to
indemnify Seller and the other members of the Buyer Group (as defined in the
Grace Agreement) in accordance with the terms of Section 14.05 of the Grace
Agreement.
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(c) To Seller's knowledge, the Seller Stockholder Agreement is the valid
and legally binding obligation of the parties thereto, is enforceable in
accordance with its terms and conditions, and has not been amended or modified
in any manner that would affect the rights of Seller or CVC thereunder.
3.22 Absence of Improper Payments. Neither Seller nor any of its
Subsidiaries (a) has made any contributions, payments or gifts of its property
to or for the private use of any governmental official, employee or agent where
either the payment or the purpose of such contribution, payments or gift is
illegal under the laws of the United States, any state thereof or any other
jurisdiction (foreign or domestic); (b) has established or maintained any
unrecorded fund or asset for any purpose, or has made any false or artificial
entries on its books or records for any reason; (c) has made any payments to any
Person with the intention or understanding that any part of such payment was to
be used for any other purpose other than that described in the documents
supporting the payment; or (d) has made any contribution, or has reimbursed any
political gift or contribution made by any other Person, to candidates for
public office, whether Federal, state or local, where such contribution would be
in violation of applicable law.
3.23 Insurance. Seller and its Subsidiaries maintain insurance policies,
self-insurance programs and other forms of insurance in such amounts, with such
deductibles and retained amounts, and against such risks and losses, as are
reasonable for the conduct of the business of Seller and its Subsidiaries in the
Ordinary Course as conducted on the date hereof. Schedule 3.23 lists all such
insurance policies, self-insurance programs and other forms of insurance
maintained on the date hereof by or on behalf of Seller or any of its
Subsidiaries.
3.24 Employees. To Seller's knowledge, no executive officer, or group of
employees, has any plans to terminate employment with Seller or any of its
Subsidiaries. Except as disclosed on Schedule 3.24, neither Seller nor any of
its Subsidiaries: (i) is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strikes, grievances, claims of
unfair labor practices, or other collective bargaining disputes; or (ii) has
committed any unfair labor practice.
3.25 Disclosure. No representation or warranty of Seller contained in
this Agreement or any schedule, attachment or exhibit hereto, and no statement
contained herein or in any certificate or document furnished to Buyer pursuant
to the transactions contemplated hereby, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading.
SECTION 4. CVC Representations and Warranties.
CVC represents and warrants to Buyer and Merger Sub that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement. The representations and warranties which follow are deemed to be
repeated on the Closing Date.
4.1 Organization and Corporate Power. CVC is duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
organization, and has the power and authority necessary to enter into and
perform its obligations under this Agreement.
4.2 Authorization of Merger. This Agreement has been duly authorized,
executed and delivered by CVC and constitutes the valid and legally binding
obligation of CVC, enforceable in accordance with its terms and conditions.
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4.3 Noncontravention. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby, will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which CVC is subject or any provision of the
charter or bylaws of CVC or (ii) conflict with, result in a breach of,
constitute a default (or any event which, with notice or lapse of time, or both,
would constitute a default) under, result in the acceleration of, create in any
party a put right or repurchase obligation or the right to accelerate,
terminate, modify or cancel, create any Security Interest or require any notice,
under any Contract to which CVC is a party or by which it is bound or to which
any of its assets is subject. Other than in connection with the provisions of
the HSRA, CVC is not required to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency or other Person in order for Seller to consummate the Merger.
4.4 Agency Agreement. The Agency Agreement has been duly authorized by
CVC, and as of the Closing, will have been duly executed and delivered by CVC,
and will constitute the valid and legally binding obligation of CVC and each
other Seller Stockholder, enforceable in accordance with its terms and
conditions.
4.5 CVC Shares. CVC beneficially owns and has the sole and unrestricted
voting power with respect to the number of Seller Shares indicated opposite
CVC's name on Schedule 3.4 (together with any other Seller Shares of which CVC
acquires beneficial ownership and sole voting power during the term of this
Agreement, the "CVC Shares"), it being understood that the Class B Seller Common
Shares are generally non-voting. CVC owns the CVC Shares free and clear of any
liens, claims, charges or other encumbrances or restrictions of any kind
whatsoever, other than pursuant to the Securities Act, the Exchange Act, or the
Seller Stockholder Agreement.
4.6 Securities Law Issues.
(a) CVC has received and had an opportunity to review Buyer's 1998 Annual
Report to Stockholders, Buyer's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998 and Buyer's definitive proxy statement for its 1998 Annual
Meeting of Stockholders, and CVC is aware of and has access to all other Buyer
Public Reports and other filings by Buyer with the SEC since March 31, 1998.
(b) CVC is familiar with Rule 145 of the Securities Act and understands and
agrees that (i) the resale limitations imposed thereby will be applicable to all
Seller Affiliates, including CVC, and (ii) any stock certificate evidencing the
Buyer Shares issued to a Seller Affiliate may have the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT (I) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), (II) IN CONFORMITY WITH THE VOLUME AND OTHER
LIMITATIONS OF RULE 145 OF THE ACT, EVIDENCED BY A LETTER OF
REPRESENTATION IN A FORM REASONABLY SATISFACTORY TO THE CORPORATION, OR
(III) IN A TRANSACTION WHICH, IN THE OPINION OF INDEPENDENT COUNSEL
REASONABLY SATISFACTORY TO THE CORPORATION OR AS DESCRIBED IN A "NO
ACTION" OR INTERPRETIVE LETTER FROM THE STAFF
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OF THE SECURITIES AND EXCHANGE COMMISSION, IS NOT REQUIRED TO BE
REGISTERED UNDER THE ACT.
4.7 Tax-Free Reorganization. CVC has not taken, to its knowledge, any
action that would or reasonably could be expected to cause the Merger to fail to
qualify as a "reorganization" within the meaning of Section 368 of the Code.
4.8 Pooling of Interest Treatment. CVC has not taken, to its knowledge,
any action that would or reasonably could be expected to cause the Merger to
fail to qualify for "pooling of interests" accounting treatment under Accounting
Principles Board Opinion No. 16.
4.9 Disclosure. No representation or warranty of CVC contained in this
Agreement or any schedule, attachment or exhibit hereto, and no statement
contained herein or in any certificate or document furnished to Buyer pursuant
to the transactions contemplated hereby, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading.
SECTION 5. Representations and Warranties of Buyer and Merger Sub.
Each of Buyer and Merger Sub represents and warrants to Seller and each
Seller Stockholder that the statements contained in this Section 5 are correct
and complete as of the date of this Agreement. The representations and
warranties which follow are deemed to be repeated on the Closing Date.
5.1 Organization, Qualification, and Corporate Power. Each of Buyer and
its Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of its jurisdiction of incorporation. Each of Buyer and
its Subsidiaries is duly authorized to conduct business and is in good standing
under the laws of each jurisdiction where the absence of such qualification
would have a Material Adverse Effect on Buyer and its Subsidiaries. Each of
Buyer and its Subsidiaries has the corporate power and authority necessary to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it. Buyer has delivered to Seller a true and complete copy of
its certificate of incorporation and by-laws as in effect on the date hereof.
5.2 Authorization of Merger. Each of Buyer and Merger Sub has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder subject to Buyer Stockholder Approval. This
Agreement has been duly executed and delivered on behalf of each of Buyer and
Merger Sub, and constitutes the valid and legally binding obligation of Buyer
and Merger Sub, enforceable and in effect in accordance with its terms and
conditions. The only further corporate action of Buyer required to consummate
the Merger is Buyer Stockholder Approval.
5.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which either Buyer or its Subsidiaries is
subject or any provision of the charter or bylaws of either Buyer or any of its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
(or any event which, with notice or lapse of time, or both, would constitute a
default) under, result in the acceleration of, create in any party a put right
or repurchase obligation or the right to accelerate, terminate, modify or
cancel, create any Security Interest or require any notice under, any material
Contract to which either of Buyer or any of its Subsidiaries is a
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party or by which it is bound or to which any of its material assets is subject,
except for any such matters identified on Schedule 5.3. Other than in connection
with the provisions of the HSRA, the federal and state securities laws and the
NYSE Rule, neither Buyer nor any of its Subsidiaries needs to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency or other Person in order for the Parties
to consummate the Merger, except as set forth on Schedule 5.3.
5.4 Capitalization. The authorized capital stock of Buyer consists of
77,000,000 shares of capital stock, consisting of 75,000,000 of common stock, no
par value per share, of which 25,136,349 shares are issued and outstanding as of
the date of this Agreement, and 2,000,000 shares of serial preferred stock, none
of which is outstanding. Except as set forth on Schedule 5.4, neither Buyer nor
any of its Subsidiaries has (i) any shares of common stock or preferred stock
reserved for issuance, or (ii) any Contract to which Buyer or any of its
Subsidiaries or, to Buyer's knowledge, any Affiliate of Buyer is a party or
subject relating to its capital stock or otherwise representing a right to
receive any of its capital stock, nor are there any pending or, to Buyer's
knowledge, threatened claims or demands for, a direct or indirect equity
interest in Buyer or any Subsidiary, including, without limitation, stock
appreciation, phantom stock, profit participation or similar rights. All of the
issued and outstanding shares of Buyer Common Stock have been duly authorized,
validly issued, are fully paid and are nonassessable. All Buyer Shares have been
duly authorized and, upon consummation of the Merger, will be validly issued,
fully paid and nonassessable. Notwithstanding the foregoing, Seller acknowledges
that, after the date hereof and prior to the Effective Time, Buyer may issue
additional shares of Buyer Common Stock. The authorized capital stock of the
Merger Sub is owned in its entirety by Buyer.
5.5 SEC Filings. Buyer has made all filings with the SEC that it has been
required to make since December 31, 1995 under the Securities Act and the
Exchange Act (including any exhibits and amendments thereto). Each such filing
complied with the Securities Act and the Securities Exchange Act in all material
respects when filed. No such filing, when filed, contained any untrue statement
of a material fact or omitted to state a material fact necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
5.6 Financial Statements. Buyer has filed an Annual Report on Form 10-K
for the fiscal year ended March 31, 1998 and a Quarterly Report on Form 10-Q for
each of the fiscal quarters ended June 30, 1998 and September 30, 1998 (together
the "Buyer Public Reports"). The financial statements included in Buyer Public
Reports have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby unless noted therein, present fairly the
financial condition of Buyer and its Subsidiaries as of the indicated dates and
the results of operations of Buyer and its Subsidiaries for the indicated
periods, are consistent with the books and records of Buyer and its
Subsidiaries, and comply in all material respects with the provisions of
Regulations S-K and S-X of the Securities Act. Attached as Schedule 5.6 are the
unaudited consolidated balance sheet, income statement and cash-flow statement
of Buyer and its Subsidiaries as of and for the three and nine-month periods
ended December 31, 1998, which have been prepared in accordance with GAAP on a
basis consistent with Buyer Public Reports with the exception of footnotes,
present fairly the financial condition of Buyer and its Subsidiaries as of the
indicated dates and the results of operations of Buyer and its Subsidiaries for
the indicated periods, and are consistent with the books and records of Buyer
and its Subsidiaries.
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5.7 Litigation. There are no judgments, decrees, lawsuits, actions,
proceedings, claims, complaints, injunctions, orders or investigations by or
before any Governmental Entity pending or, to Buyer's knowledge, threatened
against Buyer or its Subsidiaries seeking to enjoin any aspect of the Merger. To
Buyer's knowledge, there are no existing facts or circumstances which give any
reason to believe that any such action, suit, proceeding, hearing or
investigation may be brought or threatened against Buyer or any of its
Subsidiaries.
5.8 Absence of Certain Developments.
(a) Except as disclosed in Schedule 5.8(a), since March 31, 1998 no event
has occurred which has had or reasonably could be expected to have a Material
Adverse Effect on Buyer.
(b) Except as disclosed in Schedule 5.8(b) or the Financial Statements, and
except for this Agreement and the Merger, since March 31, 1998, each of Buyer
and its Subsidiaries has been operated in the Ordinary Course.
5.9 Taxes.
(a) Except as set forth on Schedule 5.9(a), all Taxes owed by Buyer and
each of its Tax Affiliates, whether or not shown on any Tax Return, have been
timely paid or are not yet due and payable.
(b) Except as set forth on Schedule 5.9(b):
(i) neither Buyer nor any of its Subsidiaries (A) is or has been a
member of an affiliated group filing a consolidated federal income Tax
Return (other than a group of the common parent of which was Buyer) or (B)
has any Liability for the Taxes of any Person (other than Buyer and its
Subsidiaries) under Treas. Reg. sec.1.1502-6 (or any similar provision of
state, local or foreign law), as a transferee or successor, by contract, or
otherwise;
(ii) Buyer and each of its Tax Affiliates has complied with all
applicable laws, rules and regulations relating to the payment and
withholding of Taxes and has timely and properly withheld from employee
wages and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under all applicable laws;
(iii) there are no liens for Taxes on any assets of Buyer or any of
its Tax Affiliates except liens for Taxes not yet due.
(iv) neither Buyer nor any of its Tax Affiliates is a party to or
bound by any Tax indemnification, Tax allocation or Tax sharing agreement
with any Person or has any current or potential contractual obligation to
indemnify any other Person with respect to Taxes; and
(v) Buyer and each of its Subsidiaries has established and until the
Effective Time will maintain on its books and records reserves adequate to
pay all Taxes accrued but not yet due and payable in accordance with GAAP,
and such reserves are reflected on the Financial Statements to the extent
required. Neither Buyer nor any of its Subsidiaries is a party to any
agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payment" within the
meaning of Section 280G of the Code, or in the payment of compensation that
is not fully deductible pursuant to Section 162(m) of the Code, as a result
of the Merger.
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5.10 Environmental, Health, and Safety Matters. Except as set forth on
Schedule 5.10, (i) Buyer has complied with, and is in compliance with, the
Environmental, Health, and Safety Requirements, in all material respects, (ii)
without limiting the generality of the foregoing, Buyer has obtained and
complied with, and is in compliance with, in all material respects, all permits,
licenses and other authorizations that are required pursuant to the
Environmental, Health, and Safety Requirements for the occupation of their
facilities and the operation of their business, (iii) Buyer has not received any
notice regarding any actual or alleged material violation of Environmental,
Health, and Safety Requirements, or any material Liability or potential
Liability arising under the Environmental, Health, and Safety Requirements
(including any investigatory, remedial or corrective obligations) (iv) Buyer has
not treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any Hazardous Material or owned or operated
any property or facility (and no such property or facility is contaminated by
any Hazardous Material) in a manner that has given or reasonably could be
expected to give rise to any material Liability, including Liability for
response costs, corrective action costs, personal injury, property damage,
natural resources damages or attorney fees, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Solid Waste Disposal Act, as amended, or any other Environmental, Health, and
Safety Requirements, and (v) Buyer has not, either expressly or by operation of
law, assumed, undertaken or otherwise become subject to any material Liability
of any other Person relating to Environmental, Health, and Safety Requirements.
5.11 Employee Benefit Plans.
(a) All contributions or other amounts payable by Buyer or any ERISA
Affiliate as of the Effective Time with respect to each Benefit Plan in respect
of current or prior plan years have been paid or accrued in accordance with
GAAP, Section 302 of ERISA and Section 412 of the Code, and there is no
accumulated funding deficiency with respect to any Benefit Plan. The present
value of accrued benefits under each Benefit Plan which is an employee pension
benefit plan, based upon the actuarial assumptions used for funding purposes in
the most recent actuarial report prepared by such Benefit Plan's actuary with
respect to such Benefit Plan, did not, as of its latest valuation date, exceed
the then current value of the assets of such Benefit Plan allocable to such
accrued benefits.
(b) To the extent applicable, each Benefit Plan (and its related trust) is
maintained and administered in material compliance in all respects with the
applicable provisions of ERISA, the Code and any other laws. Each Benefit Plan
(and its related trust) which is maintained, administered, reported or
contributed to as if qualified under Sections 401(a) or 501(a) of the Code is so
qualified and has received a favorable determination letter from the Internal
Revenue Service that it is so qualified. Each Benefit Plan (and its related
trust) may, by its terms, be amended or terminated, in whole or in part, at any
time and from time to time by Buyer (or, as applicable, any ERISA Affiliate)
without penalty or cost.
(c) No Liability to the Pension Benefit Guaranty Corporation (the "PBGC")
(except for routine payment of premiums) has been incurred with respect to any
Benefit Plan that is subject to Title IV of ERISA (and no fact or circumstance
exists which could give rise to any such liability), no reportable event within
the meaning of Section 4043 of ERISA has occurred with respect to any such
Benefit Plan, the PBGC has not commenced proceedings for the termination of any
Benefit Plan or the appointment of a trustee with respect to any Benefit Plan,
and no fact or circumstance exists which can be expected to
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cause the PBGC to commence any proceedings under Title IV of ERISA or otherwise
with respect to any Benefit Plan. None of the assets of Seller or any ERISA
Affiliate is the subject of any Security Interest arising under Section 302 of
ERISA or Section 412 of the Code, and no facts or circumstances exist which
could give rise to such Security Interest. Neither Buyer nor any ERISA Affiliate
has been required to post any security under Section 307 of ERISA or Section
401(a) of the Code, and no facts or circumstances exist which could give rise to
such posting of security.
(d) Neither Buyer nor any ERISA Affiliate has engaged in a transaction in
connection with which Buyer or any ERISA Affiliate, or any other Person or
entity, could be subject to a material Liability under ERISA, or the Code,
including, without limitation, liability under Section 409 of ERISA or a civil
penalty assessable pursuant to Section 502 of ERISA or a tax imposed pursuant to
Section 4975 of the Code, and no event has occurred and no condition exists with
respect to any Benefit Plan that could subject Buyer or any ERISA Affiliate to
any tax, fine or penalty imposed by the Code or ERISA.
5.12 Broker's Fee. None of Buyer and its Subsidiaries has any Liability
or obligation to pay any fees or commissions to any broker, finder, or similar
agent with respect to the transactions contemplated by this Agreement.
5.13 Tax-Free Reorganization Representations. To Buyer's knowledge, it
has not taken any action that would or reasonably could be expected to cause the
Merger to fail to qualify as a "reorganization" within the meaning of Section
368 of the Code, and does not intend to take any such action. Without limiting
the generality of the immediately preceding sentence:
(a) Except with respect to the payment of cash in lieu of fractional
share interests pursuant to Section 2.4(g), neither Buyer nor any related
Person (within the meaning of Treas. Reg. sec.1.368-1(e)(3)) has any plan
or intention to reacquire any of the Buyer Shares that will be issued in
the Merger pursuant to either Buyer Warrant.
(b) There is no intercorporate indebtedness existing between Buyer and
Seller that was issued, acquired or will be settled at a discount.
(c) Neither Buyer nor Merger Sub is an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(d) Merger Sub will have no liabilities that will be assumed by or
transferred to Seller in the Merger.
(e) Prior to and through the Effective Time of the Merger, Buyer will
be in control of Merger Sub within the meaning of Section 368(c) of the
Code.
(f) Buyer has no plan or intention to: (i) liquidate the Surviving
Corporation, (ii) merge the Surviving Corporation with and into another
corporation other than Merger Sub, (iii) sell or otherwise dispose of the
Seller Shares, or (iv) cause the Surviving Corporation to sell or otherwise
dispose of any of its assets, except for dispositions made in the ordinary
course of business or transfers described in Section 368(a)(2)(C) of the
Code.
(g) Neither Buyer nor any related Person (within the meaning of Treas.
Reg. sec.1.368-1(e)(3)) has acquired or will acquire any Seller Shares in
anticipation of the Merger.
(h) Buyer does not own, and has not owned during the past five years,
any Seller Shares.
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(i) The Merger will be effected for a bona fide business purpose.
(j) None of the Buyer Shares received by any stockholder/employee of
Seller pursuant to the Merger are, or will be, separate consideration for,
or allocable to, any employment, consulting or similar arrangement. The
compensation paid to any stockholder/employee of Seller pursuant to any
such employment, consulting or similar arrangement (including any covenant
not to compete) is or will be for services actually rendered and performed
(or not competing), and will be commensurate with amounts paid to third
parties bargaining at arms length for similar services.
(k) Buyer has no plan or intention to cause the Surviving Corporation
to issue Seller Shares after the Merger that would result in Buyer losing
control of the Surviving Corporation within the meaning of Section 368(c)
of the Code.
(l) Buyer presently intends that after the Merger it will cause the
Surviving Corporation to continue the historic business of Seller and/or to
use a significant portion of Seller's business assets in a business.
5.14 Pooling of Interest Treatment. To Buyer's knowledge, it has not
taken any action that would or reasonably could be expected to cause the Merger
to fail to qualify for "pooling of interests" accounting treatment under
Accounting Principles Board Opinion No. 16.
5.15 Disclosure. No representation or warranty of Buyer contained in this
Agreement or any schedule, attachment or exhibit hereto, and no statement
contained herein or in any certificate or document furnished to Buyer pursuant
to the transactions contemplated hereby, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances in which
they were made, not misleading.
SECTION 6. Covenants.
The Parties agree as follows with respect to the period from and after the
execution of this Agreement.
6.1 General. Each of the Parties will use all commercially reasonable
efforts to take all action and to do all things necessary, proper, and advisable
in order to consummate and make effective the Merger as soon as practicable
after the date of this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in Section 7). Each party will give any notices for
which it is responsible by law or under this or any other contract (and will
cause each of its Subsidiaries to give any notices) to any third parties, and
will use all commercially reasonable efforts to obtain (and will cause each of
its Subsidiaries to use all commercially reasonable efforts to obtain) any third
party consents, necessary to the consummation of the Merger, including any
consents, waivers, amendment or other action.
6.2 Joint Proxy Statement -- Prospectus and S-4 Registration Statement;
Stockholder Approval; NYSE Listing.
(a) Buyer shall promptly prepare and file with the SEC the Joint Proxy
Statement -- Prospectus (including the preliminary form thereof), and shall
thereafter prepare and file with the SEC a registration statement on Form S-4
(the "S-4 Registration Statement"), in which the Joint Proxy
Statement -- Prospectus will be included as a prospectus. Buyer and Seller shall
use all commercially reasonable efforts to file the preliminary form of the
Joint Proxy Statement -- Prospectus with the SEC within twenty (20) Business
Days after the date of this Agreement. Buyer's Representatives shall have
principal responsibility for
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preparing the Joint Proxy Statement -- Prospectus. Each of Buyer and Seller
shall use all commercially reasonable efforts to have the S-4 Registration
Statement declared effective under the Securities Act as promptly as practicable
after the initial filing of the preliminary form of Joint Proxy
Statement -- Prospectus. Buyer shall use all commercially reasonable efforts to
obtain all necessary state securities law or "Blue Sky" permits and approvals
required for Buyer and Seller to carry out the transactions contemplated by this
Agreement and Seller shall furnish all information concerning Seller and the
holders of Seller Shares as may be reasonably requested in connection with any
such action. Buyer shall promptly notify Seller and CVC of the receipt by it of
any comments of the SEC or state securities laws regulators and will promptly
supply Seller and CVC with copies of all correspondence between it or its
Representatives, on the one hand, and the SEC or state securities law
regulators, on the other hand, regarding the Joint Proxy Statement --
Prospectus, the S-4 Registration Statement or such "Blue Sky" permits and
approvals.
(b) Each Party shall, promptly upon request, furnish each other Party with
all information concerning itself, its Subsidiaries, Representatives,
stockholders, Affiliates and such other matters as may be reasonably necessary
or advisable in connection with the Joint Proxy Statement -- Prospectus, the S-4
Registration Statement or any other statement, filing, notice or application
made by or on behalf of Buyer, Seller or any of their respective subsidiaries to
any Governmental Entity in connection with the Joint Proxy
Statement -- Prospectus, the S-4 Registration Statement or the "Blue Sky"
permits and approvals. Seller shall use all commercially reasonable efforts to
cause the following items to be delivered to Buyer within ten (10) Business Days
after the date of this Agreement: (x) Seller's audited consolidated balance
sheets as of December 31, 1998 and 1997 and its audited statements of income,
cash-flow and shareholders' equity for each of the years in the three-year
period ended December 31, 1998, and the report of PricewaterhouseCoopers, LLP
with respect thereto, and (y) Seller's discussion and analysis of Seller's
financial condition as of December 31, 1998 and 1997 and its results of
operations for fiscal 1998 and 1997 prepared in accordance with the requirements
of Item 303 of SEC Regulation S-K.
(c) Except as expressly provided in the immediately following sentence, the
Joint Proxy Statement -- Prospectus shall contain a recommendation by each of
the Buyer Board of Directors and the Seller Board of Directors in favor of the
approval of this Agreement. Notwithstanding the immediately preceding sentence,
nothing in this Section 6.2 shall be construed to require any director of Buyer
to take any action or permit any event otherwise required under this Section 6.2
to the extent that the Buyer Board of Directors or such director shall conclude
in good faith, based upon the written advice of counsel, that such action is
prohibited or inadvisable in order for the Buyer Board of Directors or such
director to act in a manner that is consistent with its or his fiduciary
obligations under applicable laws.
(d) Buyer and Seller shall cause the Joint Proxy Statement -- Prospectus to
be mailed to their respective stockholders as promptly as practicable after the
S-4 Registration Statement is declared effective under the Securities Act, and
in any event Seller shall cause the Joint Proxy Statement -- Prospectus to be
mailed to the Seller Stockholders no later than the third (3rd) Business Day
after the Joint Proxy Statement -- Prospectus is mailed to Buyer stockholders.
Notwithstanding any other provision in this Agreement, Seller shall use its best
efforts to obtain Seller Stockholder Approval not later than the first Business
Day that is at least twenty (20) calendar days after the Joint Proxy
Statement -- Prospectus is mailed to the Seller Stockholders.
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(e) Seller represents and warrants to Buyer that, as of the date the Joint
Proxy Statement -- Prospectus is issued and as of the date of each of Seller
Stockholder Approval and the Buyer Special Meeting, the Joint Proxy
Statement -- Prospectus will not contain any untrue statement of a material fact
regarding Seller or any of its Subsidiaries or omit to state any material fact
regarding Seller or any of its Subsidiaries necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading, it being understood that Seller is making no representation or
warranty with respect to information set forth in the Joint Proxy
Statement -- Prospectus concerning Buyer or the Buyer Special Meeting. Seller
will promptly advise Buyer in writing if, at any time prior to the date of
Seller Stockholder Approval or the date of the Buyer Special Meeting, it shall
obtain knowledge of any facts that might make it necessary or appropriate to
amend or supplement the Joint Proxy Statement -- Prospectus in order to make the
statements regarding Seller or any of its Subsidiaries contained therein not
misleading or to comply with applicable law and agrees to correct any statements
that are or have become misleading.
(f) Buyer represents and warrants to Seller that as of the date the Joint
Proxy Statement -- Prospectus is issued and as of the date of each of Seller
Stockholder Approval and the Buyer Special Meeting, the S-4 Registration
Statement and the Joint Proxy Statement -- Prospectus will comply as to form in
all material respects with the requirements of the Securities Act and the
Exchange Act, as applicable, and the rules and regulations of the SEC
thereunder, and will not at any such time contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading, except that no representation or warranty is made with respect
to information set forth in the Joint Proxy Statement -- Prospectus concerning
Seller or the terms of Seller Stockholder Approval. Buyer will promptly advise
Seller in writing if, at any time prior to the Seller Stockholder Approval,
Buyer shall obtain knowledge of any facts that might make it necessary or
appropriate to amend or supplement the S-4 Registration Statement or the Joint
Proxy Statement -- Prospectus in order to make the statements contained or
incorporated by reference therein not misleading or to comply with applicable
law and agrees to correct any statements that are or have become misleading.
(g) Seller shall use all commercially reasonable efforts to cause to be
delivered to Buyer letters from its independent accountants dated the date on
which the S-4 Registration Statement or last amendment thereto shall become
effective, and dated the Closing Date, and addressed to Buyer and Seller, with
respect to Seller's consolidated financial position and the results of
operations, which letters shall be based on SAS 72 and certain agreed-upon
procedures, which procedures shall be consistent with applicable professional
standards for letters delivered by independent accountants in connection with
comparable transactions, and each in form and substance which is reasonably
satisfactory to Buyer.
(h) Seller and CVC shall use all commercially reasonable efforts to cause
each Seller Affiliate to deliver to Buyer within fifteen (15) Business Days
after the date of this Agreement an executed copy of the Seller Affiliate
Agreement in the form of Exhibit D. Within sixty (60) days after the end of the
first fiscal quarter of Buyer ending at least thirty (30) days after the
Effective Time, Buyer shall publish results including at least thirty (30) days
of combined operations of Buyer and Seller as referred to in Seller Affiliates
Agreement as contemplated by and in accordance with SEC Accounting Series
Release No. 135.
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(i) Buyer shall identify, after consultation with counsel, all persons who,
at the time of the Buyer Special Meeting, it believes may be deemed to be
"affiliates" of Buyer, as that term is defined for purposes of paragraphs (c)
and (d) of Rule 145 under the Securities Act and/or as used in and for purposes
of Accounting Series Releases 130 and 135, as amended, of the SEC (the "Buyer
Affiliates"). Buyer shall use all commercially reasonable efforts to provide to
each Buyer Affiliate, at least forty (40) days prior to the Effective Time,
written notice regarding the applicable restrictions in Rule 145 and the
ramifications of the SEC interpretative positions in Accounting Series Releases
130 and 135, as amended.
(j) Buyer shall use all commercially reasonable efforts to cause the Buyer
Shares that will be issued to the Seller Stockholders upon consummation of the
Merger, and the Warrant Shares that will be issued upon the exercise of the
Buyer Warrants, to be authorized for listing on the NYSE, subject to official
notice of listing, prior to the Closing.
6.3 Other Regulatory Matters and Approvals. Each of the Parties will (and
will cause each of its Subsidiaries to) give any notices to, make any filings
with, and use all commercially reasonable efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Sections 3.3 and 5.3. Without limiting the scope
of the immediately preceding sentence, Buyer and Seller will as promptly as
practicable, but in no event later than fifteen (15) Business Days following the
date of this Agreement, each file any Notification and Report Forms or other
form or report and related material that the Parties may be required to file
with the Federal Trade Commission ("FTC") and the Antitrust Division of the
United States Department of Justice ("DOJ") under the HSRA or with any other
Governmental Entity under the laws of any foreign jurisdiction. Any such
notification and report form and supplemental information will be in substantial
compliance with the requirements of the HSRA. Each of Buyer and Seller shall
furnish to the other such necessary information and reasonable assistance as the
other may request in connection with its preparation of any filing or submission
which is necessary under the HSRA. Buyer and Seller shall keep each other
apprised of the status of any communications with, and inquiries or requests for
additional information from, the FTC and the DOJ and shall respond promptly with
any such inquiry or request. Buyer and Seller will use all commercially
reasonable efforts to obtain an early termination of any applicable waiting
period, and will make any further filings pursuant thereto that may be
necessary, proper, or advisable.
6.4 Seller's Interim Operation of Business. Prior to the Closing, except
as otherwise expressly provided herein, Seller shall, and shall cause its
Subsidiaries to:
(a) except as contemplated by this Agreement, operate only in the
Ordinary Course;
(b) use all commercially reasonable efforts to keep in full force and
effect its corporate existence and all material rights, franchises,
Proprietary Rights and goodwill relating or obtaining to its business;
(c) use reasonable efforts to retain its employees and preserve its
present relationships with customers, suppliers, contractors, distributors
and such employees;
(d) perform in all material respects all of its obligations under all
Contracts to which it is a party or by which it or its properties or assets
may be bound and not enter into, assume, create, renew, amend or terminate,
or give notice of a proposed renewal, amendment or termination of, (i) any
Contract for goods, services or office
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space to which Seller or any of its Subsidiaries is (or would thereby be) a
party or by which Seller or any of its Subsidiaries or any of their
properties are (or would thereby be) bound, excepting only Contracts made
in the Ordinary Course or under which the aggregate payments by either
party over the term of the Contract do not exceed $100,000, (ii) any
Contract the benefits of which (to either party) will accrue or be
increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of the Merger (either alone or upon the occurrence of any
additional acts or events) or the value of any of the benefits under which
will be calculated on the basis of the Merger or any portion or aspect of
either (including any so-called retention or similar bonuses), (iii) any
Contract relating to non-competition, or (iv) any Contract that materially
restricts the conduct of any line of business by Seller or any of its
Subsidiaries;
(e) not make any single capital expenditure exceeding $2,000,000 or
any capital expenditures exceeding $3,000,000 in the aggregate; provided,
however, that with Buyer's prior written consent, which consent may not be
unreasonably withheld, conditioned or delayed, Seller's aggregate capital
expenditures during the term of this Agreement may exceed $3,000,000 but
not more than $7,000,000;
(f) not enter into any new line of business;
(g) not enter into, renew or amend any agreement relating to
employment, salary continuation, severance, consulting, collective
bargaining or otherwise relating to the provision of personal services or
payment therefor; not institute, amend or terminate any Benefit Plan; not
terminate any group health plan that covers, as of the date of this
Agreement, current or former employees of Seller, any of its Subsidiaries
or any ERISA Affiliate or their beneficiaries; not enter into, renew or
amend any agreement that, upon the consummation of the Merger, will result
in any payment (whether of severance pay or otherwise) becoming due from
Buyer, the Surviving Corporation, or any of their Subsidiaries, to any
officer or employee of Seller or any of its Subsidiaries; not pay any
pension or retirement allowance to any Person not required by an existing
plan or agreement; not increase in any manner the compensation or fringe
benefits of, or pay any bonus to, any officer, director or employee except
(i) as set forth on Schedule 6.4(g) or (ii) customary annual (or less
frequent) increases in the wages or salaries of employees and customary
annual (or less frequent) bonuses to employees, in each case substantially
consistent with past practice and which on an annualized basis do not
increase the aggregate personnel costs for all employees by more than six
percent (6.0%) over the levels in effect as of December 31, 1998; or not
increase any other direct or indirect compensation or employee benefit for
or to any of its officers, directors or employees;
(h) prepare and file, on a timely basis, all Tax Returns and other Tax
reports, filings and amendments thereto required to be filed by it;
(i) deliver to Buyer, within fifteen (15) days of each month end from
the date hereof through the Closing Date, Seller's consolidated unaudited
balance sheets, income statements and cash flow statements as of and for
the immediately preceding month, all consistent with the applicable
requirements of Section 3.6;
(j) not declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of
its outstanding capital stock, except for cash dividends in the Ordinary
Course on the Seller Preferred Shares in accordance with the terms of
Seller's Certificate of Incorporation;
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(k) not issue, sell, grant, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or option to acquire, any such
shares, voting securities or convertible securities, or take any action
that would make the representations and warranties set forth in Section 3.4
as applicable not true and correct in all material respects;
(l) not amend its Certificate of Incorporation or By-laws or other
comparable charter or organizational documents;
(m) not acquire 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, joint venture, association or other
business organization or division thereof (or any interest therein), or
form any subsidiary or solicit or negotiate any Acquisition Proposal with
respect to any other Person;
(n) not change its accounting policies in any material respect, except
as required by GAAP;
(o) pay their own expenses in connection with the Merger and, at
Seller's discretion, pay any expense CVC reasonably incurs in connection
with the Merger; and
(p) not authorize or enter into any agreement or commitment to take
any action inconsistent with any of the foregoing.
Further, prior to the Closing, without the prior written consent of Buyer or as
otherwise expressly provided herein, Seller will not, and will not permit any of
its Subsidiaries, to enter into any Contract or take any other action which, if
entered into or taken prior to the date of this Agreement, would cause any
representation or warranty of Seller to be untrue in any respect or be required
to be disclosed on any Schedule; or take any action that is intended or may
reasonably be expected to result in any of the conditions to the Merger as set
forth in Section 7 not being satisfied or in a violation of this Agreement; or
take or omit to be taken any action which reasonably could be expected to have a
Material Adverse Effect on Seller.
6.5 Covenants of Buyer. Prior to the Closing, except as otherwise
expressly provided for herein, Buyer shall, and shall cause its Subsidiaries to:
(a) not take any action that is intended or may reasonably be expected
to result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect, or in any of
the conditions to the Merger set forth in Sections 7.2 not being satisfied
or in a violation of any provision of this Agreement, except, in every
case, as may be required by applicable law;
(b) not take any other action that would materially impede the ability
of Buyer to obtain the requisite regulatory approvals or otherwise
materially adversely affect Buyer's ability to consummate the transactions
contemplated by this Agreement;
(c) not declare or pay any dividend on, or make any other
distributions in respect of, Buyer Common Stock except for dividends in the
Ordinary Course and dividends or distributions in Buyer Common Stock;
(d) not issue any shares of Buyer Common Stock in connection with
Buyer acquiring directly or indirectly the stock or assets of any other
Person, except with the prior consent of Seller, which consent may not be
unreasonably withheld, conditioned or delayed;
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(e) not consolidate with or merge into any other Person or convey,
transfer or lease its properties and assets substantially as an entirety to
any Person unless such Person shall expressly assume the obligations of
Buyer hereunder;
(f) pay their own expenses in connection with the Merger; and
(g) not authorize or enter into any agreement or commitment to take
any action inconsistent with any of the foregoing.
Further, prior to the Closing, without the prior written consent of Seller or as
otherwise expressly provided for herein, Buyer will not, and will not permit any
of its Subsidiaries, to enter into any Contract or take any other action which,
if entered into or taken prior to the date of this Agreement, would cause any
representation or warranty of Buyer to be untrue in any respect or be required
to be disclosed on any Schedule; or take any action that is intended or may
reasonably be expected to result in any of the conditions to the Merger as set
forth in Section 7 or in a violation of this Agreement.
6.6 Access. (a) Seller shall make available to Buyer all information
regarding Seller that Buyer reasonably may request and shall authorize all
reasonable visits to Seller's premises to make such investigations of the
business, properties, books and records of Seller and its Subsidiaries
(including without limitation Phase I and Phase II environmental assessments and
other environmental due diligence) as Buyer reasonably may request. Buyer agrees
to coordinate closely all such activities with Seller's President or Chief
Financial Officer and to conduct any such inquiries with appropriate discretion
and sensitivity to Seller's relationships with its employees, customers and
suppliers.
(b) Upon reasonable notice, Buyer shall, within a reasonable period of time
prior to the Closing, afford Seller and its officers, employees, counsel,
accountants and other authorized Representatives, such access as is reasonably
necessary to confirm that the representations and warranties of Buyer made
herein are true and correct in all material respects. Buyer shall furnish
promptly to Seller a copy of each application, report, schedule, correspondence
and other document filed by Buyer with or received by Buyer from any
Governmental Entity in connection with the transactions contemplated hereunder,
and Buyer agrees to notify Seller by telephone within twenty-four (24) hours of
receipt of any adverse oral communication from any Governmental Entity regarding
the outcome of any regulatory applications required in connection with the
Merger.
(c) Nothing in this Section 6.6 shall require any Party or any of its
Subsidiaries to provide access to or to disclose information where such access
or disclosure would jeopardize the attorney-client privilege of the Person in
possession or control of such information or would contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The Parties will make appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the immediately preceding sentence apply.
(d) Each Party acknowledges that certain of the information made available
to it pursuant to this Section 6.6 and otherwise in connection with the Merger
may be confidential, proprietary or otherwise nonpublic, and each Party agrees,
for itself and for each of its Representatives, that it (i) shall hold in
confidence all confidential information received by it from or with regard to
the other Party ("Confidential Information") subject to the terms of this
Section 6.6, (ii) shall disclose such Confidential Information only to those of
its Representatives and, in the case of Buyer, its current or prospective
lenders, and other sources of capital, in each case having a need to know the
same for purposes of evaluating, negotiating or implementing financing for
Buyer, and (iii) shall inform each
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Representative or current or prospective lender or investor to whom Confidential
Information is disclosed that such information is confidential and direct such
Representative or current or prospective lender or investor not to disclose the
same. Each Party shall remain responsible for any disclosure of Confidential
Information by any of its Representatives or current or prospective lender or
investors. Each Party further agrees that, upon the request of the other Party
given following the termination of this Agreement for any reason, the receiving
Party and each of its Representatives either shall return to the requesting
Party all Confidential Information received by the receiving Party and its
Representatives (including all compilations, analyses or other documents
prepared by it that contain Confidential Information) or shall certify that the
same has been destroyed. As used herein, Confidential Information shall not
include (i) information that is or becomes generally available to the public
other than as a result of a breach of this Agreement, (ii) information that the
receiving Party demonstrates was known to it on a non-confidential basis prior
to receiving such information from the other Party, (iii) information that the
receiving Party develops independently without relying on Confidential
Information, and (iv) information that becomes available to the receiving Party
on a non-confidential basis from another source if the source was not known to
or not reasonably believed by the receiving Party to be subject to any
prohibition against disclosing such information.
6.7 Notice of Developments. Each Party shall promptly advise the other
Party of any change or event having a Material Adverse Effect on it or its
ability to perform its obligations under this Agreement or which it believes
would or may be reasonably likely to cause or constitute a material breach of
any of its representations, warranties or covenants contained herein or to
preclude the satisfaction of one or more of the conditions set forth in Section
7; provided, however, that any such disclosure shall not have any effect for the
purpose of determining the accuracy of any representation or warranty when made,
for determining satisfaction of the conditions set forth in Section 7, or for
determining the compliance by Seller with any other provision of this Agreement.
6.8 Acquisition Proposals. Seller shall not, and it shall not authorize
or permit any of its Subsidiaries, officers, directors, employees, Affiliates,
stockholders or any Representative retained by Seller or its Subsidiaries,
directly or indirectly, to (i) solicit, initiate or knowingly encourage or
induce the making of any Acquisition Proposal, (ii) negotiate with any third
party with respect to any Acquisition Proposal, (iii) endorse or recommend the
Acquisition Proposal of any Person other than the Buyer or any of its
Subsidiaries or (iv) enter into any Contract with any third party with the
intent to effect any Acquisition Proposal.
6.9 Board of Directors. CVC shall have the right to designate one (1)
director to serve on Buyer's Board of Directors from and after the Effective
Time, and Buyer's Board of Directors shall take all such action reasonably
necessary to cause and maintain such designation, so long as at all times from
and after the Effective Time each of the following conditions is satisfied: (i)
CVC owns shares of Buyer Common Stock constituting forty percent (40.0%) or more
of the total number of Buyer Shares issued to CVC in the Merger (as adjusted for
any Recapitalization) and (ii) CVC owns shares of Buyer Common Stock
constituting two percent (2.0%) or more of the shares of Buyer Common Stock
outstanding from time to time. A condition to the election of the CVC designee
is the agreement of such designee to resign at the request of Buyer's Board of
Directors if the either of the conditions set forth in the immediately preceding
sentence is not satisfied. Buyer shall use all commercially reasonable efforts
to maintain directors' and officers' liability insurance covering the CVC
director designee, and in no event shall such
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directors' and officers' liability insurance applicable to the CVC director
designee be less favorable than the directors' and officers' liability insurance
covering Buyer's directors generally. Buyer shall reimburse such designee for
any reasonable out-of-pocket expenses incurred in connection with his or her
position on the Board of Directors in accordance with Buyer's customary
practices and shall pay such designees any fees or other compensation comparable
to other non-executive directors of Buyer.
6.10 Financing. Buyer shall use all commercially reasonable efforts to
obtain, on terms satisfactory to Buyer, debt financing on or prior to the
Closing Date in an amount not less than the amount required to refinance all
financial indebtedness of Seller and its Subsidiaries under the Credit
Agreements, the Senior Credit Notes and the 10% PIK Subordinated Notes and to
provide for the ordinary working capital needs of Seller and its Subsidiaries.
Buyer shall deliver to Seller true and correct copies of the fully executed and
delivered definitive financing agreements with respect thereto on or before the
Closing Date. Buyer shall use all commercially reasonable efforts to cause it
and its Subsidiaries to satisfy on or before the Closing Date all requirements
of the definitive financing agreements which are conditions to closing the
transactions constituting the financing and to drawing the cash proceeds
thereunder. Seller and its Subsidiaries shall use all commercially reasonable
efforts to cooperate with Buyer to facilitate such financing.
6.11 Press Releases and Public Announcements. Other than required by this
Agreement, no Party shall issue any press release or make any public
announcement (including filings with the SEC or NYSE) prior to the Effective
Time and relating to the subject matter of this Agreement without the prior
written approval of the other Parties; provided, however, that any Party may
make any public disclosure it believes in good faith is required by applicable
law or any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use all commercially
reasonable efforts to advise the other Parties prior to making the disclosure).
6.12 Covenants of CVC.
(a) Prior to the Closing, without the prior written consent of Buyer or as
otherwise expressly provided herein, CVC will not, and will not permit any of
its Affiliates to, enter into any Contract or take any other action which, if
entered into or taken prior to the date of this Agreement, would cause any
representation or warranty of Seller or CVC in Article 3 or Article 4 to be
untrue in any respect or be required to be disclosed on any Schedule; or take
any action that is intended or may reasonably be expected to result in any of
the conditions to the Merger as set forth in Section 7 not being satisfied or in
a violation of this Agreement; or take or omit to be taken any action which
reasonably could be expected to have a Material Adverse Effect on Seller.
(b) CVC shall use its best efforts to cause Seller to obtain Seller
Shareholder Approval and to cause the condition set forth in Section 7.2(g) to
be satisfied, including, with respect to Section 7.2(g), enforcing to the extent
necessary the waiver of dissenter's rights provided in the Seller Stockholder
Agreement. Without limiting the scope of the immediately preceding sentence, so
long as this Agreement has not been terminated in accordance with the terms CVC
shall vote or cause to be voted all of the CVC Shares that are Seller Voting
Shares and that are owned by CVC as of the record date for Seller Stockholder
Approval, for the approval of this Agreement, and shall vote, or cause to be
voted, all such CVC Shares against the approval of any Acquisition Proposal
providing for a merger, acquisition, consolidation, sale of a material amount of
assets or other business combination of Seller or any of its Subsidiaries with
any Person other than Buyer or any of its Subsidiaries.
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(c) So long as this Agreement has not been terminated in accordance with
the terms hereof, CVC will not sell, assign, transfer or otherwise dispose of
(including, without limitation, by the creation of a Security Interest), or
permit to be sold, assigned, transferred or otherwise disposed of, any of the
CVC Shares, whether such CVC Shares are held on the date of this Agreement or
are subsequently acquired, whether pursuant to the exercise of stock options or
otherwise, except (i) transfers by operation of law (in which case this
Agreement shall bind the transferee), and (ii) as Buyer may otherwise agree in
its sole discretion.
(d) CVC agrees that, so long as this Agreement has not been terminated in
accordance with the terms hereof, CVC shall, and shall instruct each of its
Representatives and Affiliates to, cease and refrain from any and all
activities, discussions, negotiations, providing any information with respect
to, or other actions with any Person other than Buyer or any of its Subsidiaries
or any of their respective Representatives with respect to any Acquisition
Proposal other than the Merger.
(e) From the date that is thirty (30) days prior to the Effective Time, CVC
will not sell, transfer or otherwise dispose of, or reduce the risk of ownership
with respect to, any CVC Share and will not sell, transfer or otherwise dispose
of, or reduce the risk of ownership with respect to, any Buyer Shares received
by CVC in the Merger or other shares of Buyer Common Stock until after such time
as results covering at least thirty (30) days of combined operations of Buyer
and Seller have been published by Buyer, in the form of a quarterly earnings
report, an effective registration statement filed with the Commission, a report
to the Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes the results of at least thirty (30) days of combined
operations as contemplated by and in accordance with SEC Accounting Series
Release No. 135.
SECTION 7. Conditions to Closing.
7.1 Joint Conditions to Obligations of Buyer, Merger Sub and Seller. The
obligations of Buyer and Seller to consummate the Merger are subject to the
satisfaction of each of the following conditions:
(a) Buyer Stockholder Approval and Seller Stockholder Approval shall
have been obtained.
(b) All necessary approvals of any Governmental Entity required for
the consummation of the Merger shall have been obtained and shall remain in
full force and effect; all statutory or other required waiting periods in
respect thereof shall have expired; and no approval of any Governmental
Entity shall have imposed any condition or requirement which, in the
reasonable opinion of Buyer, would so materially adversely affect the
economic or business benefits to Buyer of the Merger so as to render
inadvisable the consummation thereof.
(c) The S-4 Registration Statement shall have become effective under
the Securities Act, no stop order suspending its effectiveness shall have
been issued, and no proceedings for that purpose shall have been initiated
or shall be threatened by the SEC.
(d) The Buyer Shares that will be issued to the Seller Stockholders
upon consummation of the Merger, and the Warrant Shares that will be issued
upon the exercise of the Buyer Warrants, shall have been authorized for
listing on the NYSE subject to official notice of listing.
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(e) There shall be no claim, action, suit, investigation or other
proceeding pending or overtly threatened before any court or other
Governmental Entity wherein an unfavorable judgment, order, decree, ruling,
charge or injunction has been issued, or reasonably could be expected to be
issued, which would (i) prevent consummation of any of the transactions
contemplated by this Agreement, (ii) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation, or
(iii) present a substantial risk of the obtaining of material damages from
Seller or Buyer or their respective officers or directors in connection
therewith.
7.2 Conditions to Obligations of Buyer and Merger Sub. The obligations of
Buyer and the Merger Sub to consummate the transactions to be performed by them
in connection with the Closing are subject to satisfaction of the following
conditions.
(a) the representations and warranties set forth in Section 3 and
Section 4 shall be true and correct in all material respects as of the date
of this Agreement and as of the Closing Date;
(b) Seller shall have performed and complied with all of its
agreements and covenants hereunder through the Closing;
(c) there shall have been no event having a Material Adverse Effect on
Seller;
(d) Seller shall have delivered to Buyer and Merger Sub a certificate
signed by its Chief Executive Officer and its Chief Financial Officer to
the effect that each of the conditions specified above in Section 7.1 and
7.2 (a)-(c) is satisfied in all respects, provided, that such certificate
need not address Section 4 of this Agreement;
(e) CVC shall have delivered to Buyer and Merger Sub a certificate to
the effect that the representations and warranties in Section 4 are true
and correct in all material respects as of the date of this Agreement and
as of the Closing Date; that CVC has complied with the agreements and
covenants applicable to it; and that the condition in Section 7.1(e) has
been satisfied as it pertains to CVC;
(f) Buyer shall have obtained the proceeds of the financing necessary
to provide debt financing of an amount not less than the amount required to
refinance all financial indebtedness of Seller and its Subsidiaries under
the Credit Agreement, the Senior Subordinated Credit Note and the 10% PIK
Subordinated Notes and to provide for the ordinary working capital needs of
Seller and its Subsidiaries, in each case on terms and conditions
reasonably satisfactory to Buyer, and Buyer shall have received in form and
substance reasonably satisfactory to it such releases, discharges and other
similar instruments as it may reasonably request to confirm that all
creditors under such lending arrangements have released all Security
Interests encumbering or otherwise affecting the assets of Seller or any of
its Subsidiaries.
(g) The total number of Buyer Shares that potentially may not be
issued in the Merger as a consequence of one or more Seller Stockholders
having the right, as of the Closing, to exercise dissenter's rights under
the DGCL shall not exceed Three Hundred Eighty-Five Thousand (385,000).
(h) Buyer shall have received letters, in form and substance
acceptable to it, from KPMG Peat Marwick LLP and PricewaterhouseCoopers,
LLP, dated the Closing Date, substantially to the effect that, on the basis
of a review of the Agreement and the Merger contemplated hereby, in such
accountants' unqualified opinion, Accounting Principles Board Opinion No.
16 provides that the Merger may be accounted for as a pooling of interests.
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(i) Buyer shall have received an opinion, dated as of the Closing
Date, from its counsel, Nutter, McClennen & Fish, LLP or other counsel
acceptable to Buyer, substantially to the effect that, on the basis of
facts and representations set forth therein, or set forth in writing
elsewhere and referred to therein, for federal income tax purposes the
Merger constitutes a reorganization within the meaning of Section 368(a) of
the Code.
(j) each of Buyer and the Merger Sub shall have received from counsel
to Seller opinions as to corporate matters dated as of the Closing Date and
addressed to, and in form and substance reasonably satisfactory to, each of
Buyer and the Merger Sub;
(k) Seller and each Seller Affiliate shall have terminated, to the
extent requested by Buyer, the Seller Stockholder Agreement and any and all
other similar agreements or arrangements, to which Seller or any Seller
Affiliate is a party;
(l) CVC, the Management Representative, all other Seller Stockholders
(other than Seller Stockholders who have perfected dissenter's rights) and
the holder of the CMP Warrant shall have entered into the Agency Agreement;
(m) CVC and the Management Representative, in their individual
capacities and as agents for the holders of Seller Common Shares and the
CMP Warrant, shall have entered into an Escrow Agreement with Buyer and
Escrow Agent;
(n) Each Seller Affiliate shall have executed and delivered to Buyer
the Seller Affiliate Agreement;
(o) Each of David R. Beckerman and any other Seller employee who owns
a stock or other ownership interest in any Subsidiary of Seller shall have
executed and delivered to Buyer an instrument in form and substance
reasonably acceptable to Buyer whereby such Person will transfer or agree
to transfer, to any Person reasonably designated by Buyer, any and all
stock or other ownership interest he or she may have in any Subsidiary of
Seller; and
(p) Without limiting the scope of any other provision of this Section
7.2 and except for the CMP Warrant, there shall be, as of the Closing, no
Contract of any character to which Seller or any of its Subsidiaries is a
party or subject representing an option, warrant, right call or similar
right to receive or acquire any capital stock of Seller or any of its
Subsidiaries, nor shall there be, as of the Closing, any pending or, to
Seller's knowledge, threatened any claim or demand for, a direct or
indirect equity interest in Seller or any Subsidiary, including, without
limitation, any option, warrant, right or call or any stock appreciation,
phantom stock, profit participation or similar rights.
7.3 Conditions to Obligations of Seller. The obligation of Seller and
Seller Stockholders to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions.
(a) the representations and warranties set forth in Section 5 shall be
true and correct in all material respects as of the date of this Agreement
and as of the Closing Date;
(b) each of Buyer and the Merger Sub shall have performed and complied
with all of its covenants hereunder through the Closing;
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(c) each of Buyer and the Merger Sub shall have delivered to Seller a
certificate to the effect that each of the conditions specified in Section
7.1 and 7.3(a)-(b) is satisfied in all respects;
(d) Seller shall have received a letter, in form and substance
acceptable to it, from PricewaterhouseCoopers, LLP, dated the Closing Date,
substantially to the effect that, on the basis of a review of the Agreement
and the Merger contemplated hereby, in such accountants' unqualified
opinion, Accounting Principles Board Opinion No. 16 provides that the
Merger may be accounted for as a pooling of interests.
(e) Seller shall have received from counsel to Buyer and the Merger
Sub opinions as to corporate matters dated as of the Closing Date and
addressed to, and in form and substance reasonably satisfactory to, Seller;
(f) Seller shall have received an opinion, dated as of the Closing
Date, from its counsel, Kirkland & Ellis or other counsel acceptable to
Seller, substantially to the effect that, on the basis of facts and
representations set forth therein, or set forth in writing elsewhere and
referred to therein, for federal income tax purposes the Merger constitutes
a reorganization within the meaning of Section 368(a) of the Code.
(g) Buyer shall have taken all steps necessary to cause to be elected,
effective not later than the Effective Time, the Person designated by CVC
pursuant to Section 6.9;
(h) Buyer shall have refinanced not later than the Effective Time all
financial indebtedness of Seller and its Subsidiaries under the Credit
Agreement, the Senior Subordinated Credit Note and the 10% PIK Subordinated
Notes; and
(i) Buyer shall have executed and delivered to CVC the Registration
Rights Agreement.
SECTION 8. Indemnification.
8.1 Agreements to Indemnify.
(a) As used in this Section 8:
(i) "Damages" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs and attorneys' fees and
expenses, and including costs of environmental investigations and/or
cleanups ordered by federal, state, local, or foreign governments (or any
agencies thereof).
(ii) "Indemnifying Party" means the party obligated to provide
indemnification under Sections 8.1(b), (c) or (d).
(iii) "Indemnified Party" shall mean a party entitled to
indemnification under Sections 8.1(b), (c), or (d).
(b) On the terms and subject to the limitations set forth in this Section 8
and the Escrow Agreement, the Escrow Agent, solely on behalf of the Persons
receiving Buyer Shares in connection with the Merger and the holder of the
Escrow Warrant, and not individually, shall indemnify, defend and hold harmless
Buyer and its Subsidiaries and their Representatives from and against any and
all Damages incurred in connection with or arising out of or resulting from or
incident to (i) any breach of any warranty, or the
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inaccuracy of any representation made by Seller in or pursuant to this
Agreement, or (ii) any breach of any other covenant or agreement made by Seller
in or pursuant to this Agreement.
(c) On the terms and subject to the limitations set forth in this Section
8, Buyer shall indemnify, defend and hold harmless Seller and the Seller
Stockholders and their respective Subsidiaries and Representatives from and
against any and all Damages incurred in connection with or arising out of or
resulting from or incident to (i) any breach of any or warranty, or the
inaccuracy of any representation, made by Buyer in or pursuant to this
Agreement, or (ii) the breach of any other covenant or agreement made by Buyer
in or pursuant to this Agreement.
(d) On the terms and subject to the limitations set forth in this Section 8
and the Escrow Agreement, the Escrow Agent, solely on behalf of CVC, and not
individually, shall indemnify, defend and hold harmless Buyer and its
Subsidiaries and their respective Representatives from and against any and all
Damages incurred in connection with or arising out of or resulting from or
incident to (i) any breach of any or warranty, or the inaccuracy of any
representation, made by CVC in or pursuant to this Agreement, or (ii) the breach
of any other covenant or agreement made by CVC in or pursuant to this Agreement.
(e) Any payment made by the Escrow Agent on behalf of CVC or any other
Seller Stockholder pursuant to the indemnification obligations provided for in
this Section 8 shall constitute a reduction in the consideration paid by Buyer
in the Merger. Any payment made by Buyer pursuant to the indemnification
obligations provided for in this Section 8 shall constitute an addition to the
consideration paid by Buyer.
8.2 Limitations on Indemnification.
(a) None of the parties hereto shall be liable to the other pursuant to the
indemnification provisions of Sections 8.1(b), (c) or (d) unless it receives
notice from the other party of its claim for indemnification hereunder within
twelve (12) months after the Closing Date; or in the case of the representations
of Seller set forth in Sections 3.6 and 3.9 and of Buyer under Sections 5.6 and
5.9 as to which the notice must be received by the later of (x) twelve (12)
months after the Closing Date or (y) by April 30, 2000 or such later date as the
audit of Buyer's financial statements for the year ended March 31, 2000 is
complete.
(b) Indemnification payments due under Sections 8.1 shall be reduced by (i)
any insurance proceeds received by the Indemnified Party with respect to those
Damages which relate to the indemnity claim and which proceeds are received
under an insurance policy of Seller or any of its Subsidiaries in effect as of
the date of this Agreement; provided that this Section 8.2(b) shall not obligate
Buyer or any of its Subsidiaries to obtain any insurance coverage or, if already
obtained, to maintain the effectiveness of such insurance or to make any claim
thereunder; and (ii) the amount of any Tax savings realized by the indemnified
party with respect to those Damages which relate to the indemnity claim (net of
any increased Tax Liability which may result from the receipt of an indemnity
payment under Sections 8.1(b), 8.1(c) or 8.1(d)); provided that future Tax
deductions and Tax Liability will be discounted at the prime rate of interest
reported in the Wall Street Journal at the time the indemnification payment
pursuant to this Section 8 is made.
(c) Pursuant to claims for indemnification of the type referred to in
Sections 8.1(b), 8.1(c) or 8.1(d), an Indemnifying Party shall only be liable to
an Indemnified Party to the
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extent the aggregate amount of such claims by the Indemnified Party for
indemnification exceeds Two Million Dollars ($2,000,000) in the aggregate (the
"Indemnity Threshold"), whereupon only the amount of such claims in excess of
the Indemnity Threshold shall be recoverable in accordance with the terms
hereof. For purposes of the applying the Indemnity Threshold to Seller
Stockholder claims under Section 8.1(c), all Seller Stockholders shall be
treated as a single Indemnified Party.
(d) If the Merger has occurred, (i) the aggregate liability of the Seller
Stockholders for any and all Damages arising from indemnification claims under
Section 8.1(b) shall not exceed the value of the Escrow Fund (as defined in the
Escrow Agreement), (ii) the aggregate liability of Buyer for any and all Damages
arising from indemnification claims under Section 8.1(c) shall not exceed the
aggregate Current Market Price of the Escrow Shares as of the Closing Date, and
(iii) the liability of CVC for any and all Damages arising from indemnification
claims under Section 8.1(b) or Section 8.1(d), in the aggregate, shall not
exceed the value of Escrow Account (as defined in the Escrow Agreement) of CVC
and each Escrow Account Beneficiary, if any, who is a successor or assignee of
CVC under the Escrow Agreement.
(e) If the Merger has occurred, any indemnification payment owed by Buyer
pursuant to Section 8.1(c) shall be payable solely in additional shares of Buyer
Common Stock with the value of such shares being deemed to be equal to the
Current Market Price of Buyer Common Stock as of the Closing Date.
(f) The indemnification provided for in this Section 8 shall be the sole
and exclusive remedy of Buyer, Merger Sub, Seller, the Seller Stockholders and
CMP, for any and all Damages incurred in connection with or arising out of or
resulting from or incident to any breach of any warranty, or the inaccuracy of
any representation made any Party in or pursuant to this Agreement, or any
breach of any other covenant or agreement made by any Party in or pursuant to
this Agreement or otherwise related to or arising out of the Merger. Without
limiting the scope of the immediately preceding sentence, except as expressly
set forth in this Section 8 and subject only to the occurrence of the Effective
Time, each Party does hereby irrevocably and absolutely waive and release, to
the fullest extent permitted under law, any and all claims, demands, damages,
debts, liabilities, accounts, reckonings, obligations, costs, expenses, liens,
actions and causes of action of every kind and nature whatsoever, which it/he
now has, own or holds, or at any time heretofore ever had, owned or held, or
could, shall or may hereafter have, own or hold, whether now known or unknown,
suspected or unsuspected, against any other Party or other Seller Stockholder
incurred in connection with or arising out of or resulting from or incident to
any breach of any warranty or the inaccuracy of any Party in or pursuant to this
Agreement or any breach of any other covenant or agreement made by any Party in
or pursuant to this Agreement or otherwise related to or arising out of this
Agreement or the Merger.
8.3 Method of Asserting and Resolving Claims.
(a) All claims for indemnification by Buyer pursuant to Section 8.1(b)
shall be made and resolved in accordance with the provisions of the Escrow
Agreement.
(b) Any claim for indemnification pursuant to Section 8.1(c) or (d), shall
be made and resolved in accordance with this Section 8.3. A Person seeking
indemnification shall, prior to the Termination Date, give written notice of
such claim (a "Claim Notice") to the proposed Indemnifying Party. In the case of
Claim Notice seeking indemnification pursuant to Section 8.1(c), the Claim
Notice shall be given by CVC. Each Claim Notice
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shall state the amount of claimed Damages and the basis for such claim. Within
thirty (30) days after delivery of a Claim Notice, the proposed Indemnifying
Party shall provide a written response (the "Response Notice") to the Person who
gave the Claim Notice. If no Response Notice is delivered within such thirty
(30) day period, the proposed Indemnifying Party shall be deemed to have waived
its right to dispute such claim for indemnification. Buyer, on the one hand, and
Seller or CVC, on the other hand, shall use good faith efforts to resolve any
disputed indemnification claim. If the matter is not resolved within fifteen
(15) days of the delivery of the Response Notice, either Party shall have the
right, by delivery of written notice to the other (the "Arbitration Notice"), to
submit the matter to binding arbitration in Stamford, Connecticut. Such matter
shall then be settled by three arbitrators in accordance with the Commercial
Arbitration Rules then in effect of the American Arbitration Association (the
"AAA Rules"). CVC and Buyer shall each designate one arbitrator within fifteen
(15) days of the delivery of the Arbitration Notice. CVC and Buyer shall cause
such designated arbitrators mutually to agree upon and shall designate a third
arbitrator; provided, however, that (i) failing such agreement within forty-five
(45) days of delivery of the Arbitration Notice, the third arbitrator shall be
appointed in accordance with the AAA Rules and (ii) if either CVC or Buyer fails
to timely designate an arbitrator, the dispute shall be resolved by the one
arbitrator timely designated. CVC and Buyer shall pay the fees and expenses of
their respectively designated arbitrators and shall bear equally the fees and
expenses of the third arbitrator. CVC and Buyer shall cause the arbitrators to
decide the matter to be arbitrated pursuant hereto within sixty (60) days after
the appointment of the last arbitrator. The arbitrators' decision shall relate
solely to whether the proposed Indemnified Party is entitled to receive the
claimed Damages (or a portion thereof) pursuant to the applicable terms of this
Agreement. The final decision of the majority of the arbitrators shall be
furnished to Seller or CVC, as applicable, and Buyer in writing and shall
constitute a conclusive, final and nonappealable determination of the issue in
question, binding upon Seller or CVC, as applicable, Buyer and all Seller
Stockholders, as applicable, and their successors and assigns. Such decision may
be used in a court of law only for the purpose of seeking enforcement of the
arbitrators' award.
(c) The Indemnified Party shall give prompt written notification to the
Indemnifying Party of the commencement of any action, suit or proceeding
relating to a third party claim for which indemnification pursuant to this
Section 8 may be sought. Within twenty (20) Business Days after delivery of such
notification, the Indemnifying Party (which for purposes of this Section 8.3(c)
shall mean Seller or, if the merger has occurred, CVC, as agent for the Seller
Stockholders, in the case of a claim pursuant to Section 8.1(c)) may, upon
written notice thereof to the Indemnified Party, assume control of the defense
of such action, suit or proceeding with counsel reasonably satisfactory to the
Indemnified Party, provided the Indemnifying Party acknowledges in writing to
the Indemnified Party that any Damages that may be assessed against the
Indemnified Party in connection with such action, suit or proceeding constitute
Damages for which the Indemnified Party shall be entitled to indemnification
pursuant to this Section 8. If the Indemnifying Party does not so assume control
of such defense, the Indemnified Party shall control such defense. The Person
not controlling such defense may participate therein at its own expense. The
Person controlling such defense shall keep the other Person (i.e., the
Indemnified Party or the Indemnifying Party, as the case may be) advised of the
status of such action, suit or proceeding and the defense thereof and shall
consider in good faith recommendations made by the other Party with respect
thereto. The Indemnified Party shall not agree to any settlement of such action,
suit or proceeding without the prior written consent of the Indemnifying Party,
which shall not be unreasonably withheld. The Indemnifying Party
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shall not agree to any settlement of such action, suit or proceeding without the
prior written consent of the Indemnified Party, which consent shall not be
unreasonably withheld.
SECTION 9. Termination and Its Consequences.
9.1 Termination of Agreement.
(a) Buyer and Seller may terminate this Agreement by mutual written consent
at any time prior to the Effective Time.
(b) Either Buyer or Seller may terminate this Agreement by giving written
notice to the other Party at any time prior to the Effective Time, if the
Closing has not occurred on or before July 31, 1999 by reason of the failure of
any condition precedent under Section 7.1, 7.2 or 7.3 hereof, unless the failure
of the Closing to occur by such date shall be due to the failure of the Party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such Party set forth herein.
(c) Either Buyer or Seller may terminate this Agreement by giving written
notice to the other Party at any time prior to the Effective Time if any other
Party has breached any material representation, warranty, covenant or agreement
contained in this Agreement, which breach has not been cured within ten (10)
Business Days of receiving notice thereof from the other Party or which breach,
by its nature, cannot be cured prior to July 31, 1999, provided, however, that a
Party may not terminate this Agreement pursuant to this Section 9.1(c) if such
Party is then in breach of any material representation, warranty, covenant or
agreement contained in this Agreement.
(d) Buyer may terminate this Agreement at any time after Buyer Stockholder
Approval is obtained if (i) Seller Stockholder Approval has not been obtained as
of the effective date of such termination and (ii) each other condition
precedent under Section 7.1 and 7.3 has been, or it is probable will be,
satisfied on or before July 31, 1999.
9.2 Effect of Termination. In the event of termination of this Agreement
by either Buyer or Seller as provided in Section 9.1, all rights and obligations
of the Parties hereunder will terminate without any liability of any Party to
any other Party, except (i) Sections 6.6(d) and 9.2 and the liability to pay the
Termination Fee in accordance with Section 9.3, if applicable, will survive any
termination of this Agreement and (ii) notwithstanding anything to the contrary
contained in this Agreement, any termination of this Agreement will not relieve
or release any Party from any liability or damages arising out of its breach of
any provision of this Agreement.
9.3 Termination Fee.
(a) If Buyer terminates this Agreement either
(i) pursuant to Section 9.1(c) after the deadline for Seller
Stockholder Approval specified in Section 6.2(d), if either Seller or CVC
materially breached its covenant to use its best efforts to obtain Seller
Stockholder Approval and as of the effective date of such termination
Seller Stockholder Approval has not been obtained, or
(ii) pursuant to Section 9.1(d),
Seller shall, within three (3) Business Days after the effectiveness of such
termination, pay to Buyer the Termination Fee in immediately available funds.
(b) If Seller terminates this Agreement because of the failure to obtain
Seller Stockholder Approval on or before July 31, 1999, Seller shall, prior to
and as a
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precondition of the effectiveness of such termination, pay to Buyer the
Termination Fee in immediately available funds.
(c) The "Termination Fee" shall be equal to Five Million Dollars
($5,000,000).
SECTION 10. Miscellaneous.
10.1 Representations and Survival. The Parties make no other
representations or warranties to each other except as expressly set forth in
this Agreement. Except as expressly provided in Section 8, none of the
representations, warranties, and covenants of the Parties will survive the
Effective Time.
10.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns, except as expressly provided in Section 8 with
respect to Buyer's obligation to indemnify the Seller Stockholders as
represented through CVC.
10.3 Entire Agreement. This Agreement (including the Schedules) and other
documents referenced herein as exhibits hereto constitute the entire agreement
between the Parties and supersedes any prior understanding, agreement, or
representation by or between the Parties, written or oral, to the extent they
relate in any way to the subject matter, including without limitation those
certain confidentiality agreements entered into prior to the date of this
Agreement.
10.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
10.5 Counterparts and Delivery. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. The delivery of a
signature page of this Agreement by one Party to the each of the other Parties
via facsimile transmission shall constitute the execution and delivery of this
Agreement by the transmitting Party.
10.6 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given two Business Days
after it is sent either by certified mail or FedEx or similar overnight courier
service, and addressed to the intended recipient as set forth below:
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<TABLE>
<S> <C>
If to Seller: Copy to (which shall not constitute notice):
PTI, Inc. Kirkland & Ellis
c/o Polyfibron Technologies, Inc. Citicorp Center
900 Middlesex Turnpike 153 East 53rd Street
Billerica, MA 01821-3946 New York, NY 10022-4675
Fax: (508) 439-2105 Fax: (212) 446-4900
Attention: David R. Beckerman Attention: Kirk A. Radke, Esq.
Chief Executive Officer
If to Buyer or the Merger Sub: Copy to (which shall not constitute notice):
MacDermid, Incorporated Nutter, McClennen & Fish, LLP
245 Freight Street One International Place
Waterbury, CT 06702 Boston, MA 02110-2699
Fax: (203) 575-5630 Fax: (617) 973-9748
Attention: John L. Cordani, Esq. Attention: Michael E. Mooney, Esq.
General Counsel and Secretary and Michael K. Krebs, Esq.
If to CVC: Copy to (which shall not constitute notice):
Citicorp Venture Capital, Ltd. Kirkland & Ellis
399 Park Avenue Citicorp Center
New York, NY 10022 153 East 53rd Street
Fax: (212) 888-2940 New York, NY 10022-4675
Attention: Joseph Silvestri Fax: (212) 446-4900
Attention: Kirk A. Radke, Esq.
</TABLE>
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice of the change in the manner herein set forth.
10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Connecticut without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Connecticut or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Connecticut.
10.8 Consent to Jurisdiction. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO
THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS SITTING IN THE STATE
OF CONNECTICUT IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE AGENCY AGREEMENT, THE ESCROW AGREEMENT, THE REGISTRATION RIGHTS
AGREEMENT, THE SELLER AFFILIATE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY
ANY OF THE FOREGOING. EACH PARTY HEREBY IRREVOCABLY AGREES, ON BEHALF OF ITSELF
AND ON BEHALF OF SUCH PARTY'S SUCCESSORS AND PERMITTED ASSIGNS, THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING SHALL BE HEARD AND DETERMINED IN ANY
SUCH
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COURT AND IRREVOCABLY WAIVES ANY OBJECTION SUCH PERSON MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
10.9 Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT
THEY MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE AGENCY AGREEMENT, THE
ESCROW AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SELLER AFFILIATE
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY ANY OF THE FOREGOING.
10.10 Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors. No amendment or
other modification of any provision of this Agreement and no waiver of any
provision hereof or any right or benefit hereunder shall be valid unless the
same shall be in writing and signed by each of the Parties. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
10.11 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation. The terms "herein",
"hereunder", and terms of similar import refer to this Agreement as a whole and
not to the specific Section or Article in which they are used. The phrase "to
the knowledge" of a Party (and phrases of similar import) shall mean to the
actual knowledge, after reasonable inquiry, of the executive officers of the
Party, as applicable. The Exhibits and Schedule identified in this Agreement are
incorporated herein by reference and made a part hereof. The section headings
contained in this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this Agreement.
10.12 Time is of the Essence; Computation of Time. Time is of the essence
for each and every provision of this Agreement. Whenever the last day for the
exercise of any privilege or the discharge of any duty hereunder shall fall upon
a Saturday, Sunday, or any date on which banks in New York, New York are
authorized to be closed, the party having such privilege or duty may exercise
such privilege or discharge such duty on the next succeeding day which is a
Business Day.
10.13 Specific Performance. Each of the Parties acknowledges that the
rights created hereby are unique and recognizes and affirms that in the event of
a breach of this Agreement irreparable harm would be caused, money damages may
be inadequate and an aggrieved party may have no adequate remedy at law.
Accordingly, each of the Parties agrees that the other Party shall have the
right, in addition to any other rights and remedies existing in its favor at law
or in equity, to enforce its rights and the obligations of the other party
hereunder not only by an action or actions for damages but also by an
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action or actions for specific performance, injunctive and/or other equitable
relief (without posting of bond or other security).
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
MACDERMID, INCORPORATED
By: /s/ JOHN L. CORDANI
-----------------------------------------
Name: John L. Cordani
Title: Secretary
MCD ACQUISITION CORP.
By: /s/ JOHN L. CORDANI
-----------------------------------------
Name: John L. Cordani
Title: Vice President
PTI, INC.
By: /s/ DAVID R. BECKERMAN
-----------------------------------------
Name: David R. Beckerman
Title: President
CITICORP VENTURE CAPITAL, LTD.
By: /s/ JOSEPH M. SILVESTRI
-----------------------------------------
Name: Joseph M. Silvestri
Title: Vice President
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APPENDIX B
FIRST AMENDMENT
THIS FIRST AMENDMENT (the "Amendment") is entered into as of July 27, 1999
by and among MacDermid, Incorporated, a Connecticut corporation ("Buyer"), MCD
Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Buyer
("Merger Sub"), PTI, Inc., a Delaware corporation ("Seller"), and Citicorp
Venture Capital, Ltd., a New York corporation ("CVC"), to amend that certain
Plan and Agreement of Merger entered into as of February 18, 1999 (as amended
hereby, the "Merger Agreement"), by and among Buyer, Merger Sub, Seller and CVC.
Buyer, Merger Sub, Seller and CVC are collectively referred to as the "Parties."
Any capitalized term used in this Amendment and not otherwise defined shall have
the meaning ascribed to that term in the Merger Agreement.
WHEREAS, the Parties desire to extend the date on which the Parties may
terminate the Merger Agreement and to effectuate certain other amendments to the
Merger Agreement in accordance with the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual agreements set forth herein
and other good and valuable consideration the receipt and sufficiency of which
is hereby acknowledged the Parties agree as follows:
A. The Merger Agreement is hereby amended, effective as of the date hereof:
1. By deleting the section reference "2.4(e)" from Section 2.4(h) of
the Merger Agreement and substituting in the place thereof section
reference "2.4(e)(ii)."
2. By adding the following sentence to the end of Section 6.3 to the
Merger Agreement:
"The Parties shall use all commercially reasonable efforts, and will
negotiate in good faith with each other and the FTC, to persuade the FTC
to approve the Merger in exchange for a settlement with the FTC that is
consistent in all material respects with the terms set forth on Schedule
6.3 to this Agreement and containing such other terms and conditions as
the Parties and the FTC may agree; provided that nothing contained in
this Agreement shall obligate Buyer to accept a settlement with the FTC
that imposes any material term or condition that is (i) not expressly
specified in Schedule 6.3 and (ii) unacceptable to Buyer in Buyer's
reasonable discretion. Seller shall use all commercially reasonable
efforts to negotiate and enter into a definitive agreement for the sale
of the portion of its business described on Schedule 6.3 to a purchaser
that Buyer and Seller reasonably believe will be acceptable to the FTC,
which sale may be contingent on the completion of the Merger; and the
other Parties shall use all commercially reasonable efforts to cooperate
with Seller in negotiating such sale. A Party will be deemed to have
satisfied its obligations under this Section to use all commercially
reasonable efforts to obtain the FTC's approval of the Merger if the
Party complies with its obligations under the two immediately preceding
sentences. FTC approval that is conditioned upon a settlement on the
terms described in Schedule 6.3 hereto shall not by itself be deemed to
prevent the closing condition specified in Section 7.1(b) from being
satisfied.
3. Seller's actions in entering into one or more agreements necessary
for the sale of the portion of its business consistent with Section 6.3 and
Schedule 6.3, and all actions by Seller and CVC reasonably necessary in
connection therewith, shall not, individually or in the aggregate, (i)
constitute a breach by either Seller or CVC of
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any of their respective obligations under Section 6.4 or Section 6.8 of the
Merger Agreement or (ii) prevent the satisfaction of any of the closing
conditions in Section 7.1, Section 7.2 or Section 7.3 of the Merger
Agreement.
4. By deleting in its entirety Section 6.4(e) of the Merger Agreement
and substituting in the place thereof the following:
"(e) not make any single capital expenditure or series of capital
expenditures during the term of this Agreement outside the Ordinary
Course without the prior written consent of Buyer, which consent shall
not be unreasonably withheld, conditioned or delayed."
5. By deleting in its entirety Section 6.4(i) of the Merger Agreement
and substituting in the place thereof the following:
"(i) deliver to Buyer, within fifteen (15) Business Days of each
month end from the date hereof through the Closing Date, Seller's
consolidated unaudited balance sheets, income statements and cash flow
statements as of and for the immediately preceding month, all consistent
with the applicable requirements of Section 3.6;
6. By deleting in its entirety Section 6.4(f) of the Merger Agreement
and substituting in the place thereof the following:
"(f) not enter into any new line of business without Buyer's
consent, which consent shall not be unreasonably withheld, conditioned
or delayed and shall be deemed to be given if Buyer does not respond to
Seller in writing within ten (10) Business Days after receipt of a
written request from Seller;
7. By deleting in its entirety Section 6.4(m) of the Merger Agreement
and substituting in the place thereof the following:
"(m) not, without Buyer's consent, which consent shall not be
unreasonably withheld, conditioned or delayed and shall be deemed to be
given if Buyer does not respond to Seller in writing within ten (10)
Business Days after receipt of a written request from Seller, (i)
acquire 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, joint venture, association or other business
organization or division thereof (or any interest therein), or form any
subsidiary or (ii) solicit or negotiate any Acquisition Proposal with
respect to any other Person; provided, however, that Buyer shall have no
obligation whatsoever to consent to any action by Seller or CVC
regarding an Acquisition Proposal with respect to which Seller is the
target company and which is not permitted under Section 6.8 of this
Agreement;
8. By deleting all references to the date "July 31, 1999" from Section
9 of the Merger Agreement and substituting in the place thereof the date
"September 30, 1999."
9. By correcting Seller's facsimile number by replacing the number
"508-439-2105" from Section 10.6 of the Merger Agreement and substituting
in the place thereof the facsimile number "978-439-2105."
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10. By adding the following names to Schedule 1 to the Merger
Agreement:
H. Theodore Miller, Jr.
Kai Wenk-Wolff
Thomas O. Gavin
11. By adding the following disclosure to paragraphs (xiii) and (xiv)
of Schedule 3.8 to the Merger Agreement:
"Stay bonuses for 6 SAP specialists (none of whom hold PTI stock)
totalling $240,000 in the aggregate and to be paid after January 1, 2002
if the SAP specialist stays with PTI at least through January 1, 2002."
12. By deleting the disclosure to paragraph (xvi) of Schedule 3.8 to
the Merger Agreement and substituting in the place thereof the following
disclosure:
"Pursuant to a Stock Purchase Agreement among Polyfibron Technologies
("Buyer"), Nippon Paint (USA) Inc. and Nippon Paint Co., Ltd. ("Seller")
executed January 20, 1999, Buyer has consummated the transaction and
purchased the stock of Supratech, Inc. Pursuant to a Letter of Intent
between Polyfibron Technologies ("Buyer") and International Composites
Corporation, Inc. ("Seller") executed December 16, 1998, Buyer has
consummated the transaction and purchased the stock of International
Composites Corporation, Inc."
13. By adding the following name to Schedule 3.11(A)(i) of the Merger
Agreement under "Change of Control Contracts:" Kai Wenk-Wolff.
14. By adding the following name to Schedule 3.11(G) of the Merger
Agreement under "Change of Control Contracts:" Kai Wenk-Wolff.
15. By deleting the disclosure "NAPP Quality Council (seven
individuals)" in Schedule 3.11(G) of the Merger Agreement under "Severance
Contracts/Stay Bonuses for NAPP" and substituting in the place thereof the
following disclosure: "Two NAPP executives."
16. By adding the following contracts to Schedule 3.21(A)(ix) of the
Merger Agreement:
"Supply Contract with Precision Coating, Inc. for a three-year period
providing for the supply of certain film products."
"Sales Agreement with Lancaster Newspapers, Inc. for a three-year period
providing for the sale of Polyfibron's Letterflex Platemaking
materials."
B. Each of the Parties represents to the other that (i) it has full
corporate power and authority to execute and deliver this Amendment and to
perform its obligations hereunder, (ii) the execution and delivery of this
Amendment by such Party have been duly and validly approved its Board of
Directors and no other corporate proceedings on the part of such Party are
necessary in connection with this Amendment, except for shareholder approval of
the Merger Agreement as amended hereby by the shareholders of Buyer and the
holders of Seller voting common stock, and (iii) this Amendment has been duly
and validly executed and delivered by such Party and constitutes a valid and
binding obligation of such Party, enforceable against such Party in accordance
with its terms.
C. Each Party (an "Acknowledging Party") agrees that no action taken or
omitted to be taken by any other Party and known to the Acknowledging Party
through and including
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the date of this Amendment with respect to preparation and prosecution of either
the Joint Proxy Statement-Prospectus or any submission to the FTC or DOJ in
connection with the HSRA shall constitute a basis for any Acknowledging Party to
claim that another Party has breached any of its obligation under the Agreement,
including without limitation any obligation set forth in Section 6.1, Section
6.2 or Section 6.3 of the Merger Agreement. Each Acknowledging Party further
agrees that no statement, claim or allegation made by any Governmental Entity
(and known to the Acknowledging Party) in connection with SEC's review of the
Joint Proxy Statement-Prospectus or the FTC's review of the Merger under the
HSRA, including without limitation any allegation regarding the conduct of any
Party unrelated to the Merger or the Merger Agreement or the conduct underlying
or alleged to be underlying such statement, claim or allegation, and no response
by a Party (and known to the Acknowledging Party) to any such statement, claim
or allegation, shall constitute a basis for any Acknowledging Party to claim
that another Party has breached any of its representations, warranties,
covenants or agreements under the Merger Agreement.
D. Except as expressly provided by this Amendment, the Merger Agreement
remains in full force and effect, and except as expressly provided by this
Amendment, this Amendment shall not constitute a modification or waiver of any
other provision of the Merger Agreement.
E. This Amendment may be executed in counterparts, all of which shall be
considered one and the same instrument, each being deemed to constitute an
original, and shall be effective when one or more counterparts have been signed
by each Party and delivered to the other Parties, which delivery may be made by
facsimile transmission.
F. This Agreement shall be governed by, and interpreted in accordance with
the laws of the State of Connecticut, without regard to any applicable conflicts
of law.
G. In the event of any inconsistency between the terms of this Amendment
and the Merger Agreement, this Amendment shall govern.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed, under seal, in counterparts by their duly authorized officers, as of
the date first above written.
MACDERMID, INCORPORATED
By: /s/ JOHN L. CORDANI
---------------------------------------------
Name: John L. Cordani
Title: Secretary
MCD ACQUISITION CORP.
By: /s/ JOHN L. CORDANI
---------------------------------------------
Name: John L. Cordani
Title: Vice President
PTI, INC.
By: /s/ DAVID R. BECKERMAN
---------------------------------------------
Name: David R. Beckerman
Title: President
CITICORP VENTURE CAPITAL, LTD.
By: /s/ JOSEPH M. SILVESTRI
---------------------------------------------
Name: Joseph M. Silvestri
Title: Vice President
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APPENDIX C
DELAWARE GENERAL CORPORATION LAW
SECTION 262, APPRAISAL RIGHTS
262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merge or consolidation, who
has otherwise complied with subsection (d) of this section and who have neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to sec.228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec.251 (other than a merger effected pursuant to
sec.251(g) of this title), sec.252, sec.254, sec.257, sec.258, sec.263 or
sec.264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec.251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or depository
receipts in respect thereof) or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders;
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c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec.228 or
sec.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or
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consolidation, shall, also notify such stockholders of the effective date
of the merger or consolidation. Any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of such notice, demand
in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such holder's
shares. If such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such constituent corporation
shall send a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of
the effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders
on or within 10 days after such effective date; provided, however, that if
such second notice is sent more than 20 days following the sending of the
first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such
holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such
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a duly verified list. The Register in Chancery, if so ordered by the Court,
shall give notice of the time and place fixed for the hearing of such petition
by registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation of by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court may direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation by a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other
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distributions on the stock (except dividends or other distributions payable to
stockholders of record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition for an
appraisal shall be filed within the time provided in subsection (e) of this
section, of if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of such stockholder's demand for an appraisal
and an acceptance of the merger or consolidation, either within 60 days after
the effective date of the merger or consolidation as provided in subsection (e)
of this section or thereafter with the written approval of the corporation, then
the right of such stockholder to an appraisal shall cease. Notwithstanding the
foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such approval may
be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by Ch.
339, L. '98, eff. 7-1-98.)
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APPENDIX D
FORM OF ESCROW AGREEMENT
THIS ESCROW AGREEMENT is entered into as of the day of
[ ], 1999, by and among MacDermid, Incorporated, a Connecticut
corporation ("Buyer"), Citicorp Venture Capital, Ltd., a New York corporation
("CVC"), David Beckerman (the "Management Representative") and State Street Bank
and Trust Company, a Massachusetts trust company (the "Escrow Agent").
WHEREAS, Buyer has agreed to acquire all of the issued and outstanding
shares of capital stock of PTI, Inc., a Delaware corporation ("Seller"), in
exchange for shares of Buyer common stock, no par value (the "Buyer Shares"),
pursuant to that certain Plan and Agreement of Merger dated as of February ,
1999 (the "Merger Agreement") by and among Buyer, MCD Acquisition Corp., Seller
and CVC;
WHEREAS, Buyer has agreed to acquire a certain Warrant exercisable for
capital stock of Seller in partial exchange for the Escrow Warrant (as defined
below) pursuant to the Merger Agreement;
WHEREAS, CVC has entered into this Agreement on behalf of itself and as an
agent for and attorney-in-fact of those Seller stockholders designated as
outside stockholders on Schedule 1 attached hereto (the "Outside Stockholders")
pursuant to that certain Agency Agreement dated as of [ ], 1999
(the "Agency Agreement");
WHEREAS, Management Representative has entered into this Agreement on his
own behalf and as agent for and attorney-in-fact of those Seller stockholders
designated as management stockholders on Schedule 1 attached hereto (the
"Management Stockholders") pursuant to the Agency Agreement;
WHEREAS, the Merger Agreement provides that an Escrow Fund will be
established to secure the indemnification obligations to Buyer under Section
8.1(b) and 8.1(d) of the Merger Agreement on the terms and conditions set forth
herein; and
WHEREAS, the parties hereto desire to establish the terms and conditions
pursuant to which such Escrow Fund will be established and maintained.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Defined Terms.
"Closing Date" means April , 1999.
"CMP" means Citicorp Mezzanine Partners, L.P.
"Designated Percentages" has the meaning set forth in Section 3.2
hereof.
"Effective Date" means the effective date of the Merger, as defined in
the Merger Agreement.
"Escrow Account" has the meaning set forth in Section 3.2 hereof.
"Escrow Account Beneficiary" means CVC, the Management Representative,
a Person listed on Schedule 1 hereto, or any permitted successor or
assignee of such Person.
"Escrow Fund" has the meaning set forth in Section 3.1 hereof.
"Escrow Security" means any Primary Escrow Security or any Secondary
Escrow Security that is an asset of an Escrow Account.
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"Escrow Shares" means 127,000 shares of Buyer's common stock, no par
value, issued in connection with the Merger Agreement and deposited with
the Escrow Agent hereunder.
"Escrow Value" means, except as otherwise provided in this Agreement,
(i) with respect to each Escrow Share, Dollars ($ )(1),
(ii) with respect to any Primary Escrow Security (other than an Escrow
Share or the Escrow Warrant), the Escrow Value of the equivalent number of
Escrow Shares as determined by CVC and the Buyer, (iii) with respect to any
Secondary Escrow Security that is listed on a national exchange or Nasdaq,
the average of the daily closing prices per such for the thirty (30)
consecutive trading days immediately prior to the specified date, rounded
to the nearest cent and ignoring the highest and lowest closing prices
during such period as determined by CVC and the Buyer, and (iv) with
respect to any other assets in the Escrow Fund, other than cash or a cash
equivalent instrument, such value as Buyer and CVC may mutually agree, or,
if Buyer and CVC are unable to agree, as determined by a nationally
recognized investment banking firm selected by CVC and consented to by
Buyer, such consent not to be unreasonably withheld, and all fees and
expenses incurred in connection with such retention of an investment
banking shall be split equally between Buyer and CVC. The Escrow Value of
the Escrow Warrant shall be equal to (X) the Escrow Value of the total
number of the Primary Escrow Securities purchasable upon the full exercise
thereof minus (Y) the aggregate exercise price thereof. Notwithstanding
anything contained herein to the contrary, for the purpose of making
distributions to the Buyer pursuant to Section 6 hereof, the aggregate
value of the Escrow Fund and of each Escrow Account shall not be deemed to
exceed the Escrow Value of the Primary Escrow Securities held therein.
"Escrow Warrant" means that certain warrant for Buyer Shares held by
CMP or any successor holder and any replacement warrant issued in exchange
therefor.
"Primary Escrow Security" means the Escrow Shares and the Escrow
Warrant and any other securities distributable to the holders of those
Primary Escrow Securities in respect of or in exchange therefor, whether by
way of stock dividends, stock splits, merger or otherwise.
"Pooling Period Expiration Date" means that date on which results
covering at least thirty (30) days of combined operations of Buyer and
Seller have been published by Buyer, in the form of a quarterly earnings
report, an effective registration statement filed with the Commission, a
report to the Commission on Form 10-K, 10-Q, or 8-K, or any public filing
or announcement which includes the results of at least 30 days of combined
operations.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of the date of this Agreement, among Buyer, CVC and
certain other parties named therein providing for the registration under
the Securities Act of 1933, as amended, of the resale of Buyer Shares.
"Secondary Escrow Security" means any security (other than a Primary
Escrow Security) that is an asset of an Escrow Account.
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(1) This amount shall be calculated as of the Closing and shall equal the
average of the daily closing price of Buyer Common Stock for the thirty (30)
consecutive trading days immediately prior to the Closing Date, rounded to the
nearest cent and ignoring the highest and lowest closing prices during such
period.
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"Termination Date" means April 30, 2000 unless two (2) business days
prior to such date the Escrow Agent receives notice that such date will not
be the Termination Date, in which event, the Termination Date shall be the
date which is five (5) days after Escrow Agent has received written notice
from Buyer that the audit of Buyer's financial statements for the fiscal
year ending March 31, 2000 is completed.
2. Escrow Agent. The Escrow Agent accepts appointment hereunder and
agrees to hold in escrow the Escrow Fund in accordance with the terms of this
Escrow Agreement.
3. Escrow Fund.
3.1 Escrow Fund. In accordance with the provisions of the Merger
Agreement, Buyer will deliver to the Escrow Agent the Closing Date (i) a
certificate evidencing the Escrow Shares and (ii) a certificate evidencing the
Escrow Warrant, each registered in the name of the Escrow Agent, as Escrow Agent
under this Agreement. The Primary Escrow Securities represented by such
certificates and any income thereon, or other property which is delivered to the
Escrow Agent under the terms of this Agreement with respect thereto, shall be
referred to herein as the "Escrow Fund." The Escrow Fund and each Escrow Account
shall be held as a separate fund and shall not be subject to any lien,
attachment, trustee process or any other judicial process of any creditor of any
party hereto. The Escrow Agent will hold the Escrow Fund until it is released in
accordance with the provisions of this Agreement. In order to facilitate the
sale or release, in accordance with the terms of this Agreement, of the Escrow
Warrant (or an interest therein) or any Primary Escrow Securities purchasable
upon the exercise of the Escrow Warrant, Buyer shall deliver a replacement
Escrow Warrant to the Escrow Agent promptly after receipt of a written request
therefor from the Escrow Agent, which replacement Escrow Warrant shall be
adjusted appropriately to reflect the partial exercise of such Escrow Warrant,
the assignment of an interest therein, or the release of a portion of the
underlying Primary Escrow Securities thereof to Buyer or each Escrow Account
Beneficiary entitled thereto. The Escrow Agent shall have no responsibility for
the genuineness, validity, market value, title or sufficiency for any intended
purpose of the Escrow Fund.
3.2 Escrow Accounts. The Escrow Agent shall establish and maintain
separate escrow accounts (each an "Escrow Account") within the Escrow Fund for
each Escrow Account Beneficiary. Schedule 1 attached hereto specifies (i) the
percentage (each, a "Designated Percentage") of the total Escrow Fund which each
such Escrow Account shall constitute as of the Closing Date and (ii) the
specific assets (e.g., Escrow Shares or Escrow Warrant) that comprise each such
Escrow Account as of the Closing Date. The Escrow Agent shall promptly amend
Schedule 1 to reflect any change in the assets comprising an Escrow Account;
provided, however, that the Designated Percentages of the Escrow Accounts shall
remain fixed. The Escrow Agent shall deliver an amended Schedule 1 to Buyer,
CVC, the Management Representative and each Escrow Account Beneficiary on a
quarterly basis along with the reports required by Section 4.2 below.
4. Custody of Escrow Fund.
4.1. Investments. The Escrow Agent shall hold assets in an Escrow Account
until (i) sold in accordance with the written direction of the respective Escrow
Account Beneficiary or (ii) released in accordance with the provisions of this
Agreement. The Escrow Agent will invest and reinvest, from time to time, any
cash or cash equivalents in an Escrow Account (including without limitation cash
received as a result of dividends on or the sale of any Escrow Security) in any
one or more of the following investments as
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designated in writing by the respective Escrow Account Beneficiary: (a)
obligations of the United States of America having a remaining maturity of one
year or less; (b) general obligations of any State of the United States of
America having a remaining maturity of one year or less, if such obligations are
rated by at least two recognized rating services as at least "AAA"; (c)
certificates of deposit of any domestic commercial bank or trust company
(including, if applicable, the Escrow Agent or an affiliate of the Escrow Agent)
if the deposits of such bank are insured up to applicable limits by the Federal
Deposit Insurance Corporation (FDIC) and the bank has a net worth in excess of
$500 million (an "Acceptable Bank"), provided that the maturity date of any such
certificate of deposit is prior to April 30, 2000; (d) demand interest bearing
accounts of Escrow Agent or an affiliate of Escrow Agent if Escrow Agent is an
Acceptable Bank; or (e) any open-end or closed-end management type investment
company or investment trust registered under the Investment Company Act of 1940,
as amended, which invests in any of the investments described in clause (a) or
(b) of this sentence. In the absence of such instructions, the Escrow Agent
shall invest any cash in a State Street Money Market account.
The Escrow Agent shall not be responsible or liable for any loss accruing
from any investment made in accordance herewith. All earnings received from the
investment of property in an Escrow Account shall be credited to, and shall
become a part of such Escrow account (and any losses on such investments shall
be debited to the appropriate Escrow Account). The Escrow Agent shall have no
liability for any investment losses, including any losses on any investment
required to be liquidated prior to maturity in order to make a payment required
hereunder.
4.2. Reports. In addition to the delivery of an amended Schedule 1, the
Escrow Agent shall deliver to Buyer, CVC, the Management Representative and each
Escrow Account Beneficiary, as promptly as practicable after the end of each
calendar quarter during the term of this Agreement, a statement setting forth
the assets in each Escrow Account as of the end of such calendar quarter, and
the interest, income, dividends or distributions which were added to or paid
from, or any changes otherwise made to, any Escrow Account during the quarter
ending as of that date.
5. Dividends, Voting and Sale of Escrow Fund Assets.
5.1 Dividends, Etc. Any cash dividends or property (including, without
limitation, any securities distributable to the holders of Escrow Securities in
respect of or in exchange for any of the Escrow Securities, whether by way of
stock dividends, stock splits or otherwise) shall be delivered to the Escrow
Agent, in the name of the Escrow Agent or its nominee, who shall hold such cash
or securities in the applicable Escrow Account. Any such dividends or property
shall be accompanied by written notice from the person making such deposit
identifying such property as relating to an identified Escrow Account
Beneficiary and as being delivered for deposit to the Escrow Account identified
in such writing.
5.2 Voting of Shares. Each Account Beneficiary shall have the right to
direct the Escrow Agent in writing as to the exercise of any voting rights
pertaining to such Account Beneficiary's Escrow Securities and the Escrow Agent
shall comply with any such written instructions. In the absence of such
instructions, the Escrow Agent shall not vote any of the Escrow Securities. The
Escrow Agent shall not be responsible for forwarding to any Account Beneficiary
or any other party, notifying any such Beneficiary or Party with respect to, or
taking any action with respect to, any notice, solicitation or other document or
information, written or otherwise, received from an issuer or other person with
respect
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to the assets in the Escrow Fund, including but not limited to, proxy material,
tenders, options, the pendency of calls and maturities and expiration of rights.
5.3 Sale of Property Constituting Escrow Fund Assets. Except as otherwise
provided in this Agreement and the Registration Rights Agreement pursuant to
which CVC may request the registration of certain Primary Escrow Securities
pursuant to the Securities Act of 1933, as amended, at any time and from time to
time during the term of this Escrow Agreement, each Escrow Account Beneficiary
may direct in writing the Escrow Agent to sell for cash any or all of assets,
including without limitation, any of the Escrow Securities, in such Escrow
Account Beneficiary's Escrow Account. The Escrow Agent shall have no
responsibility for the adequacy of sale proceeds, compliance with securities
laws or otherwise in connection with any such sale and shall provide any
information reasonably required by the Escrow Agent to consummate such sale. No
Escrow Securities may be sold or otherwise transferred prior to the Pooling
Period Expiration Date (which date shall be noticed to the Escrow Agent by the
Buyer).
5.4 Transferability. No interest in the Escrow Fund or in any individual
Escrow Account may be assigned or transferred, other than by operation of law,
provided that CMP may assign one or more interests in its Escrow Account to any
one or more of its partners. Notice of any such assignment or transfer shall be
given to the Escrow Agent and Buyer, and no such assignment or transfer shall be
valid until such notice is given. Upon receipt of written notice substantially
in the form of Exhibit A attached hereto that a total or partial transfer or
assignment of an Escrow Account has been made, the Escrow Agent shall promptly
amend Schedule 1 to reflect such transfer or assignment and deliver such amended
Schedule 1 to Buyer, CVC, the Management Representative and each Escrow Account
Beneficiary simultaneously with the reports required by Section 4.2 above.
Escrow Agent shall have no duty or responsibility for determining that an
assignment or transfer is permissible hereunder.
5.5 CVC and Management Representative Representations and Succession.
(a) Each of CVC and the Management Representative represents and warrants
to the Escrow Agent that it or he has irrevocable right, power and authority (i)
to enter into and perform this Agreement and bind all of the Outside
Stockholders or Management Stockholders, as the case may be, to its terms, (ii)
to give and receive directions and notices hereunder; and (iii) to make all
determinations that may be required or that it or he deems appropriate under
this Escrow Agreement.
(b) Until notified in writing by CVC and the Management Representative that
it or he has resigned or been removed and a successor has been named, the Escrow
Agent may act upon the directions, instructions and notices of CVC and the
Management Representative and, thereafter, upon the directions, instructions and
notices of any successor named in such writing.
6. Claims Against Escrow Fund.
6.1 Claim Notice. If Buyer has incurred or suffered Damages for which it
is entitled to indemnification under Section 8.1(b) or (d) of the Merger
Agreement, Buyer shall, prior to the Termination Date, give written notice of
such claim (a "Claim Notice") to CVC, the Management Representative and the
Escrow Agent. Each Claim Notice shall state the amount of claimed Damages (the
"Claimed Amount") and the basis for such claim.
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6.2 Response Notice. Within 30 days after delivery of a Claim Notice, CVC
shall provide to Buyer, with a copy to the Escrow Agent and the Management
Representative, a written response (the "Response Notice") in which CVC shall
either: (i) agree that the full Claimed Amount may be released from the Escrow
Fund to Buyer, (ii) agree that part, but not all, of the Claimed Amount (the
"Agreed Amount") may be released from the Escrow Fund to Buyer or (iii) contest
that any of the Escrow Fund may be released to Buyer. CVC may contest the
release of Escrow Fund assets equal to all or a portion or the Claimed Amount
only based upon a good faith belief that all or such portion of the Claimed
Amount does not constitute Damages for which Buyer is entitled to
indemnification under Section 8.1(b) or (d) of the Merger Agreement. If no
Response Notice is delivered to the Escrow Agent by CVC within the 30-day period
from the Escrow Agent's receipt of such Claim Notice, CVC shall be deemed to
have agreed, on behalf of itself and all Escrow Account Beneficiaries, including
the Management Stockholders, that all of the Claimed Amount may be released to
Buyer from the Escrow Fund.
6.3 Contested Amount. If CVC in the Response Notice contests the release
of Escrow Fund assets equal to all or part of the Claimed Amount (the "Contested
Amount"), Buyer and CVC shall use good faith efforts to resolve the matter
between themselves. If the matter is not resolved within 15 days of the delivery
of the Response Notice contesting the Claimed Amount, either Buyer or CVC shall
have the right, by delivery of written notice to the other (the "Arbitration
Notice"), to submit the matter to binding arbitration in Stamford, Connecticut.
Such matter shall then be settled by three arbitrators in accordance with the
Commercial Arbitration Rules then in effect of the American Arbitration
Association (the "AAA Rules"). CVC and Buyer shall each designate one arbitrator
within 15 days of the delivery of the Arbitration Notice. CVC and Buyer shall
cause such designated arbitrators mutually to agree upon and shall designate a
third arbitrator; provided, however, that (i) failing such agreement within 45
days of delivery of the Arbitration Notice, the third arbitrator shall be
appointed in accordance with the AAA Rules and (ii) if either CVC or Buyer fails
to timely designate an arbitrator, the dispute shall be resolved by the one
arbitrator timely designated. CVC and Buyer shall pay the fees and expenses of
their respectively designated arbitrators and shall bear equally the fees and
expenses of the third arbitrator. CVC and Buyer shall cause the arbitrators to
decide the matter to be arbitrated pursuant hereto within 60 days after the
appointment of the last arbitrator. The arbitrators' decision shall relate
solely to whether Buyer is entitled to receive the Contested Amount (or a
portion thereof) pursuant to the applicable terms of the Merger Agreement and
this Agreement. The final decision of the majority of the arbitrators shall be
furnished to CVC, the Management Representative, Buyer and the Escrow Agent in
writing and shall constitute a conclusive, final and nonappealable determination
of the issue in question, binding upon CVC, the Management Representative,
Buyer, the Escrow Agent and all Escrow Account Beneficiaries. Such decision may
be used in a court of law only for the purpose of seeking enforcement of the
arbitrators' award. After delivery of a Response Notice that the Claimed Amount
is contested by CVC, the Escrow Agent shall continue to hold in the Escrow Fund
an amount of Escrow Fund assets sufficient to cover the Contested Amount (or
such lesser amount as is then available in the Escrow Fund), notwithstanding the
occurrence of the Termination Date, until (i) delivery of a copy of a settlement
agreement executed by Buyer and CVC setting forth instructions to the Escrow
Agent as to the release of Escrow Fund, if any, that shall be made with respect
to the Contested Amount or (ii) delivery of a copy of the final award of the
majority of the arbitrators setting forth instructions to the Escrow Agent as to
the amount of the Escrow Fund, if any, that shall be released with
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respect to the Contested Amount. The Escrow Agent shall promptly thereafter
release such Escrow Fund assets in accordance with Section 6.4 of this
Agreement.
6.4 Release of Escrow Fund to Buyer. If (i) pursuant to Section 6.2 CVC
agrees (or is deemed to have agreed) that Escrow Fund assets having a value
equal to all of the Claimed Amount may be released from the Escrow Fund to Buyer
or (ii) the Escrow Agent is instructed pursuant to Section 6.3 to release Escrow
Fund assets to Buyer, the Escrow Agent shall promptly thereafter transfer,
deliver and assign to Buyer such an amount of assets from the Escrow Fund equal
to (X) in the case of clause (i) of this sentence, the amount of the Escrow Fund
assets that CVC has agreed (or is deemed to have agreed) to allow the Escrow
Agent to release (or such lesser amount of assets as then comprises the entire
Escrow Fund) or (Y) in the case of clause (ii) of this sentence, the amount of
the Escrow Fund assets that the Escrow Agent has been directed to release (or
such lesser amount of assets as then comprises the entire Escrow Fund), in each
case pro rata from each Escrow Account in accordance with the Designated
Percentages. For purpose of calculating the amount of Escrow Fund assets to be
released, Escrow Securities shall be valued at the Escrow Value. If less than
all of the Escrow Fund assets in an Escrow Account will be released to Buyer
pursuant to this Section 6.4 such assets shall be released in the following
order: (i) first, Primary Escrow Securities in such amounts as the Escrow
Account Beneficiary may direct in writing and (ii) second (to the extent that
assets in addition to Escrow Securities must be released in order to give effect
to the provisions hereof), Secondary Escrow Securities, cash or cash equivalents
or other property constituting assets of each Escrow Account or any combination
thereof per the written instructions of each Escrow Account Beneficiary). If the
Escrow Agent does not receive such instruction from an Escrow Account
Beneficiary at least two (2) business days prior to an anticipated release date,
Buyer shall so instruct the Escrow Agent. Under no circumstances shall the terms
of this Escrow Agreement require the Escrow Agent to release or distribute all
or any portion of the Escrow Fund sooner than two (2) Business Days after the
Escrow Agent has received the requisite notices or paperwork in good form, or
passage of the applicable claims period or release date, as the case may be.
6.5 Limitations on Escrow Account Beneficiary Liability. Notwithstanding
anything contained in this Agreement to the contrary, if the Escrow Value of the
Escrow Fund assets in an Escrow Account is insufficient to satisfy the
indemnification obligations to the Buyer with respect thereto, none of CVC, the
Management Representative, the Escrow Account Beneficiary of that Escrow Account
or any other Escrow Account Beneficiary shall be liable hereunder for such
deficiency.
7. Release of Escrow Fund Upon Termination Date. Promptly after the
Termination Date, the Escrow Agent shall distribute to the Escrow Account
Beneficiaries, all of the assets constituting each such Escrow Account
Beneficiary's Escrow Account after the payment of such Escrow Account
Beneficiary's share of the fees and expenses of the Escrow Agent.
Notwithstanding the immediately preceding sentence, if Buyer has previously
given a Claim Notice which has not then been resolved in accordance with Section
6, the Escrow Agent shall retain in the Escrow Fund after the Termination Date
an amount of assets from the Escrow Fund equal to the Claimed Amount which has
not then been resolved, which amount shall be retained pro rata from each Escrow
Account in accordance with the Designated Percentages. For purpose of
calculating the amount of Escrow Fund assets to be distributed pursuant to this
Section 7, Escrow Securities shall be valued at the Escrow Value. If less than
all of the Escrow Fund assets in an Escrow Account will be released to an Escrow
Account Beneficiary pursuant to this Section 7, such assets shall be released in
the following order: (i) first, Secondary Escrow Securities,
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cash or cash equivalents, or other property (other than Primary Escrow
Securities) in such amounts as the Escrow Account Beneficiary may direct in
writing and (ii) second (to the extent that additional assets from an Escrow
Account must be released in order to give effect to the provisions hereof),
Primary Escrow Securities in such amounts as the Escrow Account Beneficiary may
direct in writing. If the Escrow Agent does not receive such instruction from an
Escrow Account Beneficiary, Buyer shall so instruct the Escrow Agent.
8. Fees and Expenses. The fees and expenses of the Escrow Agent
(including reasonable attorneys' fees and expenses) for the preparation of this
agreement and the services to be rendered by the Escrow Agent hereunder in
accordance with the attached fee schedule (which may be subject to change
hereafter on an annual basis) shall be payable out of the Escrow Account pro
rata in accordance with the Designated Percentages of the Escrow Account
Beneficiaries. To the extent there is insufficient cash in an Escrow Account to
pay the fees and expenses of the Escrow Agent in full on a timely basis, Buyer
shall advance such funds to the Escrow Agent, which amounts shall be reimbursed
in cash or Escrow Securities prior to any release of Escrow Fund assets to the
respective Escrow Account Beneficiary, provided, however, that if there are
insufficient assets in an Escrow Account to repay in full any such advance,
Buyer shall not be entitled to recover the deficiency from any other Escrow
Account or from any other Person.
9. Limitation of Escrow Agent's Liability.
9.1 Duties and Responsibilities. (a) The Escrow Agent may act on any
instrument or other writing reasonably believed by it to be genuine and to have
been signed or presented by the proper person and shall have no responsibility
for the accuracy thereof. The Escrow Agent shall incur no liability with respect
to any action taken or suffered by it in reliance upon any notice, direction,
instruction (including without limitation, wire transfer instructions, whether
incorporated herein or provided in a separate written instruction), consent,
statement or other documents believed by it to be genuine and duly authorized,
nor for other action on inaction except its own willful misconduct or gross
negligence. The Escrow Agent is not charged with any knowledge of, or any duties
or responsibilities in connection with, any other documents and agreements
(including without limitation the Merger Agreement or Agency Agreement), and
shall not be responsible for determining or compelling compliance therewith, and
shall not otherwise be bound thereby. The Escrow Agent's duties and
responsibilities shall be entirely administrative and not discretionary and
determined only with reference to this Escrow Agreement and applicable laws. The
Escrow Agent shall not be responsible for the validity or sufficiency of this
Agreement. In all questions arising under the Escrow Agreement, the Escrow Agent
may rely on the advice of counsel (provided such counsel is not counsel to any
other party to this Agreement) including in-house counsel, and for anything
done, omitted or suffered in good faith by the Escrow Agent based on such advice
the Escrow Agent shall not be liable to anyone. The Escrow Agent shall not be
required to take any action hereunder involving any expense or liability unless
the payment of such expense or liability is made or provided for in a manner
reasonably satisfactory to it. The Escrow Agent shall be obligated only for the
performance of such duties as are expressly and specifically set forth in this
Escrow Agreement on its part to be performed, each of which is ministerial (and
shall not be construed to be fiduciary) in nature, and no implied duties or
obligations of any kind shall be read into this Agreement against or on the part
of the Escrow Agent. In no event shall the Escrow Agent be liable for indirect,
punitive, special or consequential damage or loss (including but not limited to
lost profits) whatsoever, even if the Escrow Agent has been informed of the
likelihood of such loss or damage and regardless of the form of action.
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(b) The Escrow Agent shall have no more or less responsibility or liability
on account of any action or omission of any book-entry depository, securities
intermediary or other subescrow agent employed by the Escrow Agent than any such
book-entry depository, securities intermediary or other subescrow agent has to
the Escrow Agent, except to the extent that such action or omission of any
book-entry depository, securities intermediary or other subescrow agent was
caused by the Escrow Agent's own gross negligence, bad faith or wilful
misconduct in breach of this Agreement.
9.2 Indemnification. The Buyer, on the one hand, and the Escrow Account
Beneficiaries, on the other hand, hereby agree, severally and jointly, to
indemnify the Escrow Agent for, and to hold it harmless against, any loss,
liability or expense (including reasonable attorneys' fees and other costs and
expenses of defending or preparing to defend any claim of liability) incurred
without gross negligence or willful misconduct on the part of Escrow Agent
arising out of or in connection with its carrying out of its duties hereunder.
Without altering or limiting the joint and several liability of the parties
hereunder, as between themselves the Buyer, on the one hand, and the Escrow
Account Beneficiaries, on the other hand, shall be liable for half of any
indemnification amount due hereunder. The amount payable by the Escrow Account
Beneficiaries pursuant to this Section 9.2 shall be allocated among the Escrow
Accounts pro rata in accordance with the Designated Percentages and shall be
paid as an expense in accordance with Section 8. The foregoing indemnification
and agreement to hold harmless shall survive the termination of this Escrow
Agreement and the resignation of the Escrow Agent.
9.3 Tax-Related Terms.
(a) Tax Reporting. The parties hereto agree that, for tax reporting
purposes, all interest or other income earned from the investment of the Escrow
Funds in any tax year shall (i) to the extent such interest or other income is
distributed by the Escrow Agent to any person or entity pursuant to the terms of
this Agreement during such tax year, be allocated to such person or entity, and
(ii) otherwise shall be allocated to the applicable Escrow Account Beneficiary.
(b) Certification of Tax Identification Number. Each of the parties hereto
agree to, and shall cause each Escrow Account Beneficiary to, provide the Escrow
Agent with a certified tax identification number by signing and returning a Form
W-9 (or Form W-8, in case of non-U.S. persons) to the Escrow Agent prior to the
date on which any income earned on the investment of the Escrow Fund is credited
to the appropriate Escrow Account. The parties hereto understand that, in the
event their tax identification numbers are not certified to the Escrow Agent,
the Internal Revenue Code, as amended from time to time, may require withholding
of a portion of any interest or other income earned on the investment of the
Escrow Fund.
(c) Tax Indemnification. Each of the Buyer and the Escrow Account
Beneficiaries agrees, jointly and severally, (i) to assume any and all
obligations imposed now or hereafter by any applicable tax law with respect to
any payment or distribution of the Escrow Funds or performance of other
activities under this Agreement, (ii) to instruct the Escrow Agent in writing
with respect to the Escrow Agent's responsibility for withholding and other
taxes, assessments or other governmental charges, and to instruct the Escrow
Agent with respect to any certifications and governmental reporting that may be
required under any laws or regulations that may be applicable in connection with
its acting as Escrow Agent under this Agreement, and (iii) to indemnify and hold
the Escrow Agent harmless from any liability or obligation on account of taxes,
assessments, additions for late payment, interest, penalties, expenses and other
governmental charges that may be assessed
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or asserted against the Escrow Agent in connection with or relating to any
payment made or other activities performed under the terms of this Agreement,
including without limitation any liability for the withholding or deduction of
(or the failure to withhold or deduct) the same, and any liability for failure
to obtain proper certifications or to report properly to governmental
authorities in connection with this Agreement, including costs and expenses
(including reasonable legal fees and expenses), interest and penalties. The
foregoing indemnification and agreement to hold harmless shall survive the
termination of this Agreement.
10. Termination. This Agreement shall terminate upon the later of the
Termination Date or the release by the Escrow Agent of all of the Escrow Fund
assets in accordance with this Agreement.
11. Notices. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (i) by registered or certified
mail, return receipt requested, postage prepaid, or (ii) via a reputable
nationwide overnight courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered two business days after it is sent by registered or certified
mail, return receipt requested, postage prepaid, or one business day after it is
sent via a reputable nationwide overnight courier service for next day delivery.
If to Buyer:
245 Freight Street
Waterbury, Connecticut 06702
Attention: John Cordani, Esq.
If to CVC:
Citicorp Venture Capital, Ltd.
399 Park Avenue
New York, NY 10022
Attention: John Silvestri
If to Management Representative:
PTI, Inc.
c/o Polyfibron Technologies, Inc.
900 Middlesex Turnpike
Billerica, MA 01821-3946
If to Escrow Agent:
State Street Bank and Trust Company
Two International Place
Boston, Massachusetts 02110
Attention: Corporate Trust Department, Fourth Floor
Attention: [insert name of escrow agreement]
Fax: 617-664-5365
Any funds to be paid to or by the Escrow Agent hereunder shall be sent by
wire transfer pursuant to the following instructions (or by such method of
payment and
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pursuant to such instruction as may have been given in advance and in writing to
or by the Escrow Agent, as the case may be, in accordance with Section 11
above):
If to _________________________________ :
Bank: ___________________________
ABA #: __________________________
A/C #: __________________________
Attn: ___________________________
Ref: ____________________________
If to _________________________________ :
Bank: ___________________________
ABA #: __________________________
A/C #: __________________________
Attn: ___________________________
Ref: ____________________________
If to the Escrow Agent:
Bank: State Street Bank and Trust Company
ABA #: 0110 0002 8
A/C #: 9903-990-1
Attn: Corporate Trust Department
Ref: ____________ Escrow
Any party may give any notice, instruction or communication in connection
with this Agreement using any other means (including personal delivery, telecopy
or ordinary mail), but no such notice, instruction or communication shall be
deemed to have been delivered unless and until it is actually received by the
party to whom it was sent. Any party may change the address to which notices,
instructions or communications are to be delivered by giving the other parties
to this Agreement notice thereof in the manner set forth in this Section 11.
12. Successor Escrow Agent. In the event the Escrow Agent becomes
unavailable or unwilling to continue in its capacity herewith, Escrow Agent may
resign and be discharged from its duties and obligations hereunder by delivering
a resignation to the parties to this Escrow Agreement, not less than sixty (60)
days prior to the date when such resignation shall take effect. Buyer may
appoint a successor Escrow Agent without the consent of CVC so long as such
designee meets the definition of an Acceptable Bank, and may appoint any other
successor Escrow Agent with the consent of CVC, which shall not be unreasonably
withheld. If, within such notice period, Buyer provides to the Escrow Agent
written instructions with respect to the appointment of a successor Escrow Agent
and directions for the transfer of the Escrow Fund then held by the Escrow Agent
to such successor, the Escrow Agent shall act in accordance with such
instructions and promptly transfer such Escrow Fund to such designated
successor. If no successor is so named, the Escrow Agent may apply to a court of
competent jurisdiction for appointment of a successor.
13. General.
13.1 Governing Law, Assigns. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Connecticut
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Connecticut or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other
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than the State of Connecticut, and shall be binding upon, and inure to the
benefit of, the parties hereto and their respective successors and assigns.
13.2 Jurisdiction, Venue and Waiver of Jury Trial.
EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION
OF THE FEDERAL AND STATE COURTS SITTING IN THE STATE OF CONNECTICUT IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS ESCROW AGREEMENT, THE
MERGER AGREEMENT, THE AGENCY AGREEMENT AND THE WAIVER AND RELEASE OR THE
TRANSACTIONS CONTEMPLATED BY ANY OF THE FOREGOING. EACH PARTY HERETO HEREBY
IRREVOCABLY AGREES, THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
SHALL BE INSTITUTED, HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES ANY OBJECTION IT, HE OR SHE MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM.
EACH PARTY HERETO HEREBY WAIVES ANY RIGHT IT, HE OR SHE MAY HAVE TO TRIAL
BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS ESCROW AGREEMENT, THE MERGER AGREEMENT, THE WAIVER AND
RELEASE, THE AGENCY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY ANY OF THE
FOREGOING.
13.3 Dispute Resolution.
It is understood and agreed that should any dispute arise with respect to
the delivery, ownership, right of possession, and/or disposition of any or all
of the Escrow Fund, or should any claim be made upon the Escrow Agent or the
Escrow Fund by a third party, the Escrow Agent upon receipt of notice of such
dispute or claim is authorized and shall be entitled (at its sole option and
election) to retain in its possession without liability to anyone, all or any of
said Fund until such dispute shall have been settled either by the mutual
written agreement of the parties involved or by a final order, decree or
judgment of a court in the United States of America, the time for perfection of
an appeal of such order, decree or judgment having expired. The Escrow Agent
may, but shall be under no duty whatsoever to, institute or defend any legal
proceedings which relate to the Escrow Fund.
13.4 Force Majeure.
The Escrow Agent shall not be responsible for delays or failures in
performance resulting from acts beyond its control. Such acts shall include but
not be limited to acts of God, strikes, lockouts, riots, acts of war, epidemics,
governmental regulations superimposed after the fact, fire, communication line
failures, computer viruses, power failures, earthquakes or other disasters.
13.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.6 Entire Agreement. Except as set forth in the Merger Agreement (but
then solely with respect to CVC, Buyer, and the Management Stockholders), this
Agreement constitutes the entire understanding and agreement of the parties with
respect to the
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subject matter of this Agreement and supersedes all prior agreements or
understandings, written or oral, between the parties with respect to the subject
matter hereof.
13.7 Waivers. No waiver by any party hereto of any condition or of any
breach of any provision of this Escrow Agreement shall be effective unless in
writing. No waiver by any party of any such condition or breach, in any one
instance, shall be deemed to be a further or continuing waiver of any such
condition or breach or a waiver of any other condition or breach of any other
provision contained herein.
13.8 Amendment. This Agreement may be amended only with the written
consent of Buyer, the Escrow Agent, CVC and the Management Representative.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
MACDERMID, INCORPORATED
BY:
-----------------------------------------
Title:
--------------------------------------
CITICORP VENTURE CAPITAL, LTD.,
on its own behalf and as agent and
attorney-in-fact for the Outside Stockholders
By:
------------------------------------------
Title:
--------------------------------------
---------------------------------------------
David Beckerman, on his own behalf and as
agent and attorney-in-fact for the Management
Stockholders
STATE STREET BANK AND TRUST COMPANY
By:
------------------------------------------
Title:
--------------------------------------
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APPENDIX E
FORM OF AGENCY AGREEMENT, WAIVER AND RELEASE
THIS AGREEMENT, made as of the day of February, 1999, by and among
Citicorp Venture Capital, Ltd ("CVC,"), a Delaware corporation, David R.
Beckerman (the "Management Representative" and together with CVC, the
"Representatives" and each individually a "Representative") and the other
Stockholders (as defined herein).
W I T N E S S E T H:
WHEREAS, the parties hereto (the "Stockholders" and each individually a
"Stockholder") are stockholders or holders of warrants to purchase capital stock
of PTI, Inc. ("PTI"), a Delaware corporation;
WHEREAS, CVC has entered into a Plan and Agreement of Merger dated as of
February , 1999 (the "Merger Agreement") with PTI, MacDermid, Incorporated
("Buyer"), and MCD Acquisition Corp. (the "Merger Sub");
WHEREAS, in connection with the Merger Agreement, the Representatives will
enter into an Escrow Agreement (the "Escrow Agreement") with Buyer and an escrow
agent named therein in order to provide for the collateralization of those
indemnification obligations set forth in the Merger;
WHEREAS, it is the intention and desire of the parties hereto that the
indemnification provisions set forth in the Merger Agreement be the sole remedy
and recourse for any and all claims arising out of or in connection with the
Merger Agreement and the transactions contemplated thereby;
WHEREAS, the Stockholders wish to appoint the Representatives as their
agents and attorneys-in-fact to act on their behalf in connection with certain
transactions contemplated by the Merger Agreement and the Escrow Agreement; and
WHEREAS, the Merger Agreement requires the Stockholders to become parties
to this Agency Agreement appointing the Representatives as the Stockholders'
agents and attorneys-in-fact.
NOW, THEREFORE, for good and valuable consideration and the mutual
covenants and conditions herein contained, the receipt and sufficiency of which
is hereby acknowledged, it is agreed as follows:
1. Capitalized Terms. Capitalized terms not otherwise defined herein
shall have the meanings assigned to them in the Merger Agreement.
2. Appointment of Representatives by Stockholders.
2.1 General. Each Management Stockholder irrevocably appoints an
authorizes (i) CVC for the purposes set forth in Section 2.2(a) and (ii)
Management Representative for the purposes set forth in Section 2.2(b) and each
Outside Stockholder irrevocably appoints CVC for the purposes set forth in
Sections 2.2(a) and (b), in each case, to be such person's true and lawful agent
and attorney-in-fact, to act for such person and in such person's name, place
and stead, in any and all capacities, as fully to all intents and purposes as
such person might or could do in person with full power of substitution and with
the power to make, execute, sign, acknowledge and deliver all waivers, opinions,
certificates, agreements and other documents and instruments in connection with
the exercise of such powers.
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2.2 Scope of Authority. (a) CVC is authorized to act on behalf of the
Stockholders to do and perform every act and thing required or permitted to be
done in connection with or contemplated by Section 8 of the Merger Agreement and
Section 6 of the Escrow Agreement (collectively, the "Indemnification
Provisions") or which CVC may deem necessary or appropriate in order to give
effect to the Indemnification Provisions including without limitation:
(i) To give or accept any notices or other communications and to
authorize or give any waiver or consent with respect to the Indemnification
Provisions.
(ii) To approve or disapprove claims against the Escrow Fund (as
defined in the Escrow Agreement) made by Buyer against the Stockholders.
(iii) To defend claims made against the Stockholders and to bring
claims against the Buyer on behalf of the Stockholders in each case, under
the Merger Agreement and to retain and hire, or replace counsel in
connection therewith.
(iv) To refer any matter to dispute resolution or arbitration as
provided in the Merger Agreement and to settle, resolve or dismiss any
matter.
(v) To incur or pay expenses on behalf of the Stockholders in
connection with this Agreement and the Indemnification Provisions.
(b) The Management Representative is authorized to act on behalf of the
Management Stockholders and CVC is authorized to act on behalf of the Outside
Stockholders to do and perform every acta d thing required or permitted to be
done in connection with the transactions contemplated by the Escrow Agreement
other than Section 6 thereof, or which a Representative may deem necessary or
appropriate in order to give effect to this Agreement and the Escrow Agreement,
including without limitation:
(i) To negotiate, execute and perform the Escrow Agreement.
(ii) To give or accept notices under, or to amend, give any waiver or
consent with respect to any provision of, the Escrow Agreement or to
terminate the Escrow Agreement.
(iii) To incur and pay expenses in connection with this Agreement and
in connection with the negotiation and performance of the transactions
contemplated by the Escrow Agreement.
2.3 Power to Bind Stockholders. Each Stockholder acknowledges and agrees
that upon execution of this Agreement, such Stockholder shall be bound by any
waiver, opinion, certificate, agreement or other document executed by its
Representative and delivered to Buyer in accordance with this Section 2, as
fully as if such Stockholder had executed and delivered such documents.
2.4 Duration of Appointment. Each Stockholder hereby empowers each of the
Representatives to determine in the Representative's sole discretion the time
when, purpose for, and the manner in which any power herein conferred upon the
Representative shall be exercised an the conditions, provisions an covenants of
any instruments or document which may be executed by it pursuant to this Section
2. The powers granted hereunder are coupled with an interest and shall be
irrevocable and shall survive the termination, liquidation, dissolution or
bankruptcy of each Stockholder, but shall terminate upon a Representative's
resignation. In the event CVC's appointment hereunder is so terminated, CVC
shall be succeeded by a person selected by Stockholders owning two-thirds of the
Buyer Shares issued to the Stockholders in the Merger in exchange for the Seller
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Common Shares (giving effect tot he exercise of the Buyer Warrants). Such
successor agent shall have all the powers, duties and obligations of CVC
provided under this Agreement.
2.5 Reservation of Rights. Nothing in this Section 2 shall be interpreted
to abridge or otherwise negate the powers and privileges specifically granted to
the Stockholders pursuant to Sections 4.1, 5.2 and 5.3 of the Escrow Agreement,
except to the extent that the Escrow Agreement is amended in accordance with its
terms.
3. Instructions to Escrow Agent. CVC hereby covenants and agrees that it
will promptly deliver to the Escrow Agent all written instructions received from
an Outside Stockholder relating to the exercise of the powers and privileges
granted to such Outside Stockholder pursuant to Sections 4.1, 5.2 and 5.3 of the
Escrow Agreement. The Management Representative hereby covenants and agrees that
it will promptly deliver to the Escrow Agent all written instructions received
from a Management Stockholder relating to the exercise of the powers and
privileges granted to such Management Stockholder pursuant to Sections 4.1, 5.2
and 5.3 of the Escrow Agreement.
4. Limitation on Liability. Neither Representative shall have by reason
of this Agreement a fiduciary relationship in respect of any Stockholder, except
in respect of amounts received on behalf of such Stockholder. Neither
Representative shall not be liable to any Stockholder for any action taken or
omitted by it or him hereunder, under the Merger Agreement, Escrow Agreement or
under any other certificate, agreement or document contemplated hereunder or
thereunder, in connection therewith, except that neither Representative shall be
relieved of any liability imposed by law for gross negligence or willful
misconduct. Neither Representative shall be liable to the Stockholders for any
apportionment or distribution of payments made by it or him in good faith, and
if any such apportionment or distribution is subsequently determined to have
been made in error the sole recourse of any Stockholder to whom payment was due,
but not made, shall be to recover from the other Stockholders any payment in
excess of the amount to which such other Stockholders are determined to have
been entitled. Neither Representative shall be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement, the Merger Agreement, the Escrow Agreement or
any other certificate, agreement or document contemplated hereunder or
thereunder.
5. Representations and Warranties of Stockholders. Each of the
Stockholders hereby, represents and warrants to the Representatives that the
statements contained in this Section 5 are correct and complete as of the date
of this Agreement. The representations and warranties which follow are deemed to
be repeated on the Closing Date.
5.1 Organization and Corporate Power. Each of the non-individual
Stockholders (i) is duly organized, validly existing, and in good standing under
the laws of its jurisdiction of organization, and (ii) has the power and
authority necessary to enter into and perform its obligations under this
Agreement.
5.2 Authorization of Agreement. This Agreement has been duly authorized
by each non-individual Stockholder. This Agreement has been duly executed and
delivered by each Stockholder and constitutes the valid and legally binding
obligation of each Stockholder, enforceable in accordance with its terms and
conditions.
5.3 Noncontravention. Neither the execution or delivery of this Agreement
nor the consummation of the transactions contemplated hereby, will (i) violate
any constitution,
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statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
any Stockholder is subject or any provision of the charter or bylaws of any
Stockholder or (ii) conflict with, result in a breach of, constitute a default
(or any event which, with notice or lapse of time, or both, would constitute a
default) under, result in the acceleration of, create in any party a put right
or repurchase obligation or the right to accelerate, terminate, modify or
cancel, create any lien, encumbrance, claim or other security interest or
require any notice, under any agreement to which any Stockholder is a party or
by which it, he or she is bound or to which any of its, his or her assets is
subject.
5.4 Consultation with Attorney. Each Stockholder has reviewed the
provisions of this Agreement carefully and to the extent necessary discussed
such provisions with PTI's counsel or its, his or her counsel.
6. Waiver and Release.
6.1 Definitions. For the purposes of this Section 6, "Claims" shall mean
any and all claims, demands, judgments, liabilities, damages, accounts, bonds,
bills, covenants, contracts, agreements, promises, complaints, and causes of
action of whatever kind or character, whether known or unknown, at law or in
equity, contingent or liquidated.
6.2 Released Claims. Each Stockholder, on behalf of itself, himself or
herself and its, his or her estate, agents, employees, former employees,
representatives, attorneys, accountants, assigns, partners, administrators,
executors, successors, and any other person or entity claiming by, through or
under it, him or her (collectively, the "Releasing Party"), does hereby
unconditionally, waive, release and forever discharge Buyer, and all of its
respective agents, employees, former employees, officers, directors,
shareholders, affiliates (including but not limited to the Merger Sub and the
Surviving Corporation), representatives, attorneys, accountants and successors
and assigns (collectively the "Released Party") from any and all Claims arising
from, in connection with or relating to the following:
(i) the execution, delivery or performance of the Merger Agreement;
(ii) the execution or performance of any agreement, document or
instrument delivered in connection with the Merger Agreement, including but
not limited to this Agency Agreement, the Escrow Agreement and the
Registration Rights Agreement;
(iii) the consummation of the transactions contemplated by the Merger
Agreement including but not limited to the Merger; or
(iv) the issuance of Buyer Shares;
which the Releasing Party may now have or ever had against any Released Party,
from the beginning of the world through and including the date of this Waiver
and Release (the "Released Claims"); provided, however, that nothing in this
Waiver and Release shall be construed to release any Claim that the Releasing
Party may have to indemnification pursuant to the terms and conditions of the
Merger Agreement.
The Releasing Party acknowledges and agrees that the Released Claims
include all Claims, whether known or unknown, suspected or unsuspected, and even
though it, he or she may hereafter discover facts different from or in addition
to those which the Releasing Party now knows, or believes to be true with
respect to the Released Claims. This Waiver and Release shall remain effective
in all respects, notwithstanding such different or additional facts, or the
discovery thereof.
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Notwithstanding anything to the contrary contained herein, this Waiver and
Release shall not extend to, or operate to release, any Claims which the
Releasing Party may have against PTI or its affiliates in the nature of
indemnity or contribution if a Claim is brought by a third party against the
Releasing Party which arises out of or relates to the Releasing Party having
been an officer, director or employee of PTI or an affiliate of PTI, and PTI or
such affiliate would otherwise have had an obligation to defend and/or indemnify
the Releasing Party with regard to such Claim. In addition, this Waiver and
Release shall not be construed to have, and shall have, no effect upon, and
shall not be construed to affect, any insurance coverages which may be available
to the Releasing Party.
6.3 Enforceability of Waiver and Release. No breach or alleged breach of
the terms and conditions of this Agency Agreement, shall affect, limit, or
otherwise negate the enforceability of the Waiver and Release granted pursuant
to this Section 6.
7. Entire Agreement. This Agreement contains the entire understanding of
the parties with respect to the subject matter hereof and supersedes all prior
written or oral understandings.
8. Governing Law, Jurisdiction and Venue. This Agreement shall be
governed by and construed in accordance with the domestic laws of the State of
Connecticut without giving effect to any choice or conflict of law provision or
rule (whether of the State of Connecticut or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Connecticut.
EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION
OF THE FEDERAL AND STATE COURTS SITTING IN THE STATE OF CONNECTICUT IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGENCY AGREEMENT, THE
MERGER AGREEMENT, THE ESCROW AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, OR
THE TRANSACTIONS CONTEMPLATED BY ANY OF THE FOREGOING. EACH PARTY HERETO HEREBY
IRREVOCABLY AGREES, ON BEHALF OF ITSELF, HIMSELF OR HERSELF AND ON BEHALF OF
SUCH PARTY'S SUCCESSORS AND PERMITTED ASSIGNS THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING SHALL BE INSTITUTED, HEARD AND DETERMINED IN ANY SUCH COURT
AND IRREVOCABLY WAIVES ANY OBJECTION IT, HE OR SHE MAY NOW OR HEREAFTER HAVE AS
TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR
THAT SUCH COURT IS AN INCONVENIENT FORUM.
EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT IT, HE OR SHE MAY
HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGENCY AGREEMENT, THE MERGER AGREEMENT, THE
ESCROW AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED BY ANY OF THE FOREGOING.
9. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally or
mailed, by certified or registered mail, return receipt requested, first class
postage prepaid or by Federal Express or some other reputable overnight carrier
to the parties at the addresses set forth on the records of PTI or to such other
place and with such other copies as any party may designate by written notice.
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10. Enforceability. If any one or more of the provisions of this
Agreement or any application thereof shall be invalid, illegal, or unenforceable
in any respect, the validity, legality, and enforceability of the remaining
provisions hereof and any other application thereof shall not be affected or
impaired.
11. Assignment. No Stockholder shall assign its, his or her liabilities
and obligations under this Agreement without the express written consents of the
other Stockholders. This Agreement shall be binding on the heirs,
administrators, executors, personal representatives and assigns of the parties
hereto.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
E-6
<PAGE> 222
IN WITNESS WHEREOF, CVC, the Management Representative and each of the
Stockholders has set his or her hands, hereto as of the date and year first
above written.
MACDERMID, INCORPORATED
By:
---------------------------------------------
Name:
Title:
CITICORP VENTURE CAPITAL, LTD.
By:
---------------------------------------------
Name:
Title:
---------------------------------------------
David R. Beckerman
CCT PARTNERS I, L.P.
By:
---------------------------------------------
Name:
Title:
CITICORP MEZZANINE PARTNERS
By:
---------------------------------------------
Name:
Title:
---------------------------------------------
Bruce C. Bruckman
---------------------------------------------
WTC/63 BR Partnership
---------------------------------------------
Richard M. Cashin
---------------------------------------------
Stephen C. Sherrill
---------------------------------------------
David F. Thomas
---------------------------------------------
Joseph M. Silvestri
E-7
<PAGE> 223
---------------------------------------------
Harold O. Rosse
---------------------------------------------
Michael A. Delaney
---------------------------------------------
Thomas McWilliams
---------------------------------------------
Stephen Edwards
---------------------------------------------
James Urry
---------------------------------------------
Richard E. Mayberry
---------------------------------------------
Saleem Muqaddam
---------------------------------------------
David Howe
---------------------------------------------
Noelle Cournoyer
---------------------------------------------
John Weber
---------------------------------------------
David Kolb
---------------------------------------------
Robert Pokelwaldt
---------------------------------------------
Ann P. McDowell
---------------------------------------------
James W. Stevens
---------------------------------------------
Gerald Loeb
E-8
<PAGE> 224
---------------------------------------------
Thomas C. Weaver
---------------------------------------------
Edward T. Murphy
---------------------------------------------
Shojiro Makino
---------------------------------------------
Tom Gavin
---------------------------------------------
John Rastetter
---------------------------------------------
Etienne Igersheim
---------------------------------------------
Hugues Serain
---------------------------------------------
Reto Buchli
---------------------------------------------
Michael M. Yang
---------------------------------------------
Ted Miller
---------------------------------------------
Rai Wenk-Wolff
---------------------------------------------
Terence Smith
---------------------------------------------
Allan T. Michaud
---------------------------------------------
Douglas H. Rich
---------------------------------------------
Thomas W. Pietrocini
E-9
<PAGE> 225
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Connecticut Business Corporation Act, Sections 33-770 to 33-778, inclusive,
and Article 11 of MacDermid, Incorporated (the "Registrant")'s by-laws, contain
provisions authorizing indemnification by the Registrant of directors, officers
and employees of the Registrant against certain liabilities and expenses which
they may incur as directors, officers and employees of the Registrant or of
certain other corporations. Section 33-773 also provides that such
indemnification may include payment by the Registrant of expenses incurred in
defending a proceeding in advance of the final disposition of such proceeding,
upon certain representations being made by such indemnified person as to his or
her good faith belief that he or she has met the relevant standard of conduct
and upon agreement by the person indemnified to repay such payment if he or she
shall be adjudicated not entitled to be indemnified under Sections 33-772,
33-774 or 33-775.
Section 33-777 provides that the Registrant may purchase and maintain
insurance on behalf of an individual who is a director, officer, employee or
agent of the corporation, or who, while a director, officer, employee or agent
of the corporation, serves at the corporation's request as a director, officer,
employee or agent of another entity against liability asserted against or
incurred by such person in such capacity, whether or not the corporation would
have power to indemnify or advance expenses to him against the same liability
under Sections 33-770 to 33-778 inclusive. The Registrant maintains an officer's
and director's liability insurance policy.
ITEM 21. EXHIBITS.
See the Exhibit Index immediately preceding the exhibits attached hereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-1
<PAGE> 226
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(e) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions of the Connecticut Business Corporation
Act and the registrant's certificate of incorporation and by-laws, or otherwise,
the registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or a controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-2
<PAGE> 227
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Waterbury, State of Connecticut, on the 30th day of
August, 1999.
MACDERMID, INCORPORATED.
By: /s/ DANIEL H. LEEVER
----------------------------------
Daniel H. Leever
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints Daniel H. Leever and John L. Cordani, and each
of them, with full power to act without the other, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities (until revoked in writing), to sign any and all amendments (including
post-effective amendments and amendments thereto) to this Registration Statement
on Form S-4 of the registrant, and to file the same, with all exhibits thereto
and other document in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary fully to all intents and purposes as he or she might or
could do in person, thereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ HAROLD LEEVER Chairman Emeritus August 30, 1999
- ------------------------------------------ Director
Harold Leever
/s/ DANIEL H. LEEVER Chairman of the Board August 30, 1999
- ------------------------------------------ Chief Executive Officer
Daniel H. Leever Director
/s/ R. NELSON GRIEBEL President, Chief August 30, 1999
- ------------------------------------------ Operating Officer
R. Nelson Griebel Director
/s/ DONALD G. OGILVIE Director August 30, 1999
- ------------------------------------------
Donald G. Ogilvie
</TABLE>
II-3
<PAGE> 228
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES C. SMITH Director August 30, 1999
- ------------------------------------------
James C. Smith
/s/ THOMAS W. SMITH Director August 30, 1999
- ------------------------------------------
Thomas W. Smith
</TABLE>
II-4
<PAGE> 229
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
+2.1 Plan and Agreement of Merger dated as of February 18, 1999,
by and among MacDermid, Incorporated, MCD Acquisition Corp.,
PTI, Inc. and Citicorp. Venture Capital, Ltd.
++2.2 First Amendment to Plan and Agreement of Merger dated as of
July 27, 1999 by and among MacDermid, Incorporated, MCD
Acquisition Corp., PTI, Inc. and Citicorp Venture Capital,
Ltd.
+++3.1 Restated Certificate of Incorporation of MacDermid,
Incorporated amended as of December 1, 1997
+++3.2 By-Laws of MacDermid, Incorporated amended as of February
12, 1997
*5 Opinion of Nutter, McClennen & Fish, LLP
*8.1 Opinion of Nutter, McClennen & Fish, LLP with respect to
certain tax matters
*8.2 Opinion of Kirkland & Ellis with respect to certain tax
matters
*10.1 Second Amended and Restated Multicurrency Credit Agreement,
dated as of October 25, 1998, amended and restated December
15, 1998 and June 15, 1999, among MacDermid, Incorporated,
the banks signatory thereto and Chase Manhattan Bank, N.A.,
as Agent
*23.1 Consent of Nutter, McClennen & Fish, LLP (contained in
Exhibits 5 and 8.1)
*23.2 Consent of Kirkland & Ellis (contained in Exhibit 8.2)
*23.3 Consent of KPMG Peat Marwick LLP
*23.4 Consent of PricewaterhouseCoopers LLP / Boston
*23.5 Consent of PricewaterhouseCoopers LLP / U.K.
*24 Power of Attorney (contained in signature page to this
Registration Statement)
*27 Financial Data Schedule
*99.1 Form of MacDermid Proxy Card
*99.2 Form of PTI Proxy Card
*99.3 Consent of Joseph M. Silvestri
</TABLE>
- -------------------------
* Filed herewith.
+ Incorporated by reference from MacDermid's joint proxy statement --
prospectus, Appendix
A-1.
++ Incorporated by reference from MacDermid's joint proxy statement --
prospectus, Appendix
B-1.
+++ Incorporated by reference from MacDermid's 1999 Annual Report on Form 10-K.
<PAGE> 1
EXHIBIT 5
(617) 439-2000
August 30, 1999
MacDermid, Incorporated
245 Freight Street
Waterbury, CT 06702
Ladies and Gentlemen:
Reference is made to the Registration Statement on Form S-4 and the
Joint Proxy Statement-Prospectus constituting a part thereof (the "Registration
Statement"), which MacDermid, Incorporated, a Connecticut company (the
"Company"), has filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to up to
7,827,000 shares of the Company's Common Stock, no par value (the "Common
Stock").
We have acted as counsel for the Company in connection with the
Registration Statement. We have examined original or certified copies of the
Restated Certificate of Incorporation of the Company and all amendments thereto,
its By-laws, as amended, the corporate records of the Company to the date
hereof, certificates of public officials and such other documents, records and
materials as we have deemed necessary in connection with this opinion letter.
Based upon the foregoing, and in reliance upon information from time to
time furnished to us by the Company's officers, directors and agents, we are of
the opinion that under Connecticut law the shares of Common Stock to be issued
by the Company, when issued upon the terms described in the Registration
Statement, will be duly and validly issued, fully paid and non-assessable.
It is understood that this opinion letter is to be used in connection
with the offer and sale of the aforesaid shares only while the Registration
Statement is effective as so amended and as it may be amended from time to time
as contemplated by Section 10(a)(3) of the Securities Act.
<PAGE> 2
MacDermid, Incorporated
August 30, 1999
Page 2
We understand that this opinion letter is to be used in connection with
the Registration Statement, as finally amended, and hereby consent to the filing
of this opinion letter with and as a part of the Registration Statement as so
amended, and to the reference to our firm in the Prospectus under the heading
"Legal Matters." In giving such consent, we do not thereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the SEC thereunder.
Very truly yours,
/s/ Nutter, McClennen & Fish, LLP
Nutter, McClennen & Fish, LLP
MKK/AMJ2/DM
- -----------
<PAGE> 1
EXHIBIT 8.1
August 30, 1999
9678-7846
MacDermid, Incorporated
245 Freight Street
Waterbury, CT 06702
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to MacDermid, Incorporated, a Connecticut
corporation ("MacDermid"), in connection with (i) the Merger, as defined and
described in the Plan and Agreement of Merger dated as of February 18, 1999 (the
"Merger Agreement") by and among MacDermid, MCD Acquisition Corporation, a
Delaware corporation ("Merger Subsidiary") and a wholly owned subsidiary of
MacDermid, PTI, Inc., a Delaware corporation ("PTI"), and Citicorp Venture
Capital, Ltd., a New York corporation ("CVC") and (ii) the preparation and
filing of the related Registration Statement on Form S-4 (the "Registration
Statement"), which includes the Joint Proxy Statement-Prospectus (the "Proxy
Statement"), filed with the Securities and Exchange Commission (the "SEC") under
the Securities Act of 1933, as amended (the "Securities Act"), and the
Securities Exchange Act of 1934, as amended. Unless otherwise indicated, each
capitalized term used herein has the meaning ascribed to it in the Merger
Agreement.
In connection with this opinion, we have examined the Merger Agreement,
the Proxy Statement and such other documents as we have deemed necessary or
appropriate in order to enable us to render this opinion. For purposes of this
opinion, we have assumed (i) the validity and accuracy of the documents that we
have examined, (ii) that the Merger will be consummated in the manner described
in the Merger Agreement and the Proxy Statement, and (iii) that the
representations made and the representations to be made by MacDermid and the
Merger Subsidiary pursuant to Section 5 of the Merger Agreement, PTI pursuant to
Section 3 of the Merger Agreement, CVC pursuant to Section 4 of the Merger
Agreement, and the officers of each of the aforementioned entities pursuant to
certain respective officer's certificates, are and will be accurate and
complete. In rendering our opinion, we have considered the applicable provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Department regulations promulgated thereunder, pertinent judicial authorities,
interpretive rulings of the Internal Revenue Service (the "Service") and such
other
<PAGE> 2
MacDermid, Incorporated
August 30, 1999
Page 2
authorities as we have considered relevant. It should be noted that statutes,
regulations, judicial decisions and administrative interpretations are subject
to change at any time (possibly with retroactive effect).
A change in the authorities or the inaccuracy of any of the documents or
assumptions on which our opinion is based could affect our conclusions.
Based solely upon the foregoing, in our opinion, the Merger will be
treated for Federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code and MacDermid, Merger Subsidiary and PTI will each
be a party to the reorganization within the meaning of Section 368(b) of the
Code, and accordingly, for Federal income tax purposes:
(i) No gain or loss will be recognized by MacDermid or PTI as a
result of the Merger; and
(ii) There will be no Federal income tax consequences arising from
the Merger due solely to status as a MacDermid shareholder
prior to the Merger.
The preceding are all of the material U.S. Federal income tax
consequences of the Merger to MacDermid and shareholders of MacDermid. Our
opinion does not address, however, Federal income tax consequences which may
vary with, or are contingent upon, a shareholder's individual circumstances. In
addition, our opinion does not address any non-income tax or any foreign, state
or local tax consequences of the Merger.
This opinion is furnished to you solely for use in connection with the
Merger, as described in the Merger Agreement and the Proxy Statement, and is not
to be used, circulated, quoted or otherwise referred to for any other purpose
without our express written permission. In accordance with the requirements of
Item 601(b)(23) of Regulation S-K under the Securities Act, we hereby consent to
the discussion of this opinion in the Proxy Statement, to the filing of this
opinion as an exhibit to the Registration Statement, and to the reference to our
firm under the headings "MERGER TRANSACTION - Material Federal Tax Consequences
of the Merger to MacDermid Shareholders," "MERGER AGREEMENT - Conditions to the
Merger" and "LEGAL MATTERS" in the Proxy Statement. In giving such consent, we
do not thereby admit that we are in the category of persons whose consent is
required under Section 7 of the Securities Act or the rules and regulations of
the SEC thereunder.
Very truly yours,
/s/ Nutter, McClennen & Fish, LLP
NUTTER, MCCLENNEN & FISH, LLP
<PAGE> 1
To Call Writer Directly:
(212) 446-4800
August 30, 1999
PTI, Inc.
c/o Polyfibron Technologies, Inc.
900 Middlesex Turnpike
Billerica, MA 01821-3946
Re: Registration Statement on Form S-4
Dear Ladies and Gentlemen:
We have acted as counsel to PTI, Inc., (the "COMPANY"), a Delaware
corporation, with respect to (i) the merger with and into the Company of MCD
Acquisition Corp. ("MACDERMID SUB"), a Delaware corporation and direct
wholly-owned subsidiary of MacDermid, Incorporated, a Connecticut corporation
("MACDERMID"), pursuant to that certain Agreement and Plan of Merger by and
among the Company, Citicorp Venture Capital, Ltd., MacDermid Sub and MacDermid,
dated February 18, 1999 (the "MERGER AGREEMENT", and such transaction, the
"MERGER"), and (ii) the preparation and filing of the related Registration
Statement on Form S-4 (the "REGISTRATION STATEMENT"), which includes the Joint
Proxy Statement-Prospectus (the "PROXY STATEMENT"), filed with the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), and the Securities Exchange Act of 1934, as amended.
Defined terms used herein shall have the meaning ascribed to such terms in the
Merger Agreement, unless otherwise specified.
In connection with rendering our opinion, we have examined the Merger
Agreement, the Proxy Statement and such other documents as we have determined to
be necessary for purposes of this opinion. In addition, with your permission, we
have examined and relied upon certain Officers' Certificates of the Company,
MacDermid and MacDermid Sub, copies of which are attached hereto as Exhibits A,
B and C (the "OFFICERS' CERTIFICATES"). Our opinion is conditioned on, among
other things, the initial and continuing accuracy of the facts, information,
covenants and representations set forth in the Merger Agreement and other
documents referred to above. We have assumed the genuineness of all signatures,
the legal capacity of natural persons, and that the person who affixed such
signature to such documents had authority to do so. Moreover, we have assumed
the accuracy of all information contained in the documents described above, but
have not made any independent inquiry with regard thereto. We have assumed the
authenticity of all documents submitted to us as originals, and the
<PAGE> 2
PTI, Inc.
August 30, 1999
Page 2
conformity to original documents of all documents submitted to us as certified,
telecopied or photostatic copies. We also have assumed that the Merger will be
consummated in the manner contemplated by the Merger Agreement and as described
in the Proxy Statement.
In rendering our opinion, we have considered the current provisions of
the Internal Revenue Code of 1986, as amended (the "CODE"), Treasury regulations
(proposed, temporary and final) promulgated thereunder, judicial decisions and
Internal Revenue Service rulings, all of which are subject to change, which
changes may be retroactively applied. A change in the authorities upon which our
opinion is based could affect our conclusions. Moreover, there can be no
assurance that any of the opinions expressed herein will be accepted by the
Internal Revenue Service or, if challenged, by a court.
Based solely upon the foregoing, in our opinion:
1. The Merger will be treated for federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the
Code, and MacDermid, MacDermid Sub and the Company will each
be a party to the reorganization within the meaning of Section
368(b) of the Code.
2. No gain or loss will be recognized by the Company as a result
of the Merger.
3. A shareholder of the Company will not recognize taxable gain
or loss on the exchange of stock of the Company for MacDermid
common stock in the Merger, except in respect of cash received
instead of fractional shares or as a consequence of the
exercise of appraisal rights.
4. A shareholder of the Company will recognize gain or loss with
respect to cash received instead of a fractional share of
MacDermid common stock, measured by the difference between the
amount of cash received and the portion of the tax basis of
the shareholder's share(s) of Company stock allocable to the
fractional share. Such gain or loss will be capital gain or
loss if the holder of Company stock holds such stock as a
capital asset within the meaning of Section 1221 of the Code,
and such capital gain or loss will be long-term if the
shareholder's holding period in the Company stock exchanged
for cash in lieu of the fractional share is more than one year
at the time of the Merger.
5. A shareholder of the Company who, as a result of exercising
appraisal
<PAGE> 3
PTI, Inc.
August 30, 1999
Page 3
rights, receives solely cash in exchange for the shareholder's
shares of Company stock will recognize gain or loss with
respect to the cash received, measured by the difference
between the amount of cash received and the tax basis of the
shareholder's shares of Company stock surrendered. Such gain
or loss will be capital gain or loss if the shareholder holds
such shares as a capital asset within the meaning of Section
1221 of the Code, and such capital gain or loss will be
long-term if the shareholder's holding period in such shares
is more than one year at the time of the Merger.
6. The tax basis of MacDermid common stock received by a Company
shareholder in the Merger will be the same as the tax basis of
the Company stock surrendered by the shareholder in the
Merger, reduced by any portion of such basis allocable to a
fractional share interest for which cash is received.
7. The holding period of the MacDermid common stock that a
Company shareholder receives in the Merger will include the
holding period of the Company stock exchanged therefor,
provided that the shareholder holds the Company common stock
as a capital asset at the time of the Merger.
You have not requested, and we do not express, an opinion concerning any other
tax consequences of the Merger, including without limitation any tax
consequences of the Merger under state, local or foreign law. Our opinion also
does not address U.S. federal income tax consequences which may vary with, or
are contingent upon, a shareholder's individual circumstances (including as a
result of a Company shareholder or certain related persons owning MacDermid
common stock other than as a result of the Merger).
This opinion is furnished to you solely for use in connection with the
Merger, as described in the Merger Agreement and the Proxy Statement, and is not
to be used, circulated, quoted or otherwise referred to for any other purpose
without our express written permission. In accordance with the requirements of
Item 601(b)(23) of Regulation S-K under the Securities Act, we hereby consent to
the discussion of this opinion in the Proxy Statement, to the filing of this
opinion as an exhibit to the Proxy Statement, and to the reference to our firm
under the headings "MERGER TRANSACTION - Material Federal Tax Consequences of
the Merger to PTI Shareholders", "MERGER AGREEMENT - Conditions to the Merger",
and "LEGAL MATTERS" in the Proxy Statement. In giving such consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the Securities Act or the rules and regulations of the SEC
thereunder.
<PAGE> 4
PTI, Inc.
August 30, 1999
Page 4
Very Truly Yours,
/s/ Kirkland & Ellis
Kirkland & Ellis
<PAGE> 1
EXHIBIT 10.1
SECOND AMENDED AND RESTATED
MULTICURRENCY CREDIT AGREEMENT
DATED AS OF OCTOBER 25, 1998,
AMENDED AND RESTATED AS OF
DECEMBER 15, 1998,
AND FURTHER AMENDED AND RESTATED AS OF
JUNE 15, 1999
AMONG
MACDERMID, INCORPORATED,
NATIONSBANK, N.A.,
AS ADMINISTRATIVE AGENT,
LETTER OF CREDIT ISSUING BANK
AND
SWING LINE LENDER,
BANKBOSTON, N.A.,
AS DOCUMENTATION AGENT,
FLEET NATIONAL BANK,
AS SYNDICATION AGENT,
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
AND
BANC OF AMERICA SECURITIES LLC
AS
LEAD ARRANGER AND BOOK MANAGER
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
ARTICLE I
DEFINITIONS.......................................................... 2
1.01 Certain Defined Terms................................................ 2
1.02 Other Interpretive Provisions........................................ 30
1.03 Accounting Principles................................................ 31
ARTICLE II
THE CREDITS.......................................................... 32
2.01 Amounts and Terms of Commitment...................................... 32
(a) Term Loan................................................... 32
(b) Sterling Acquisition Loan................................... 32
(c) The Revolving Credit........................................ 32
(d) Swing Line Loans............................................ 34
(e) PTI Term Loan............................................... 37
2.02 Loan Accounts........................................................ 37
2.03 Procedure for Borrowing.............................................. 37
2.04 Conversion and Continuation Elections for Revolving Loans............ 39
2.05 Voluntary Termination or Reduction of Commitments.................... 41
2.06 Optional Prepayments of Loans........................................ 41
2.07 Termination of Commitments; Mandatory Prepayments of
Loans; Mandatory Commitment Reductions............................... 42
2.08 Repayment of Loans................................................... 45
2.09 Interest............................................................. 45
2.10 Fees................................................................. 46
(a) Agency Fees................................................. 46
(b) Revolving Loan Commitment Fee............................... 46
(c) Term Loan Commitment Fee.................................... 47
(d) Sterling Acquisition Loan Commitment Fee.................... 47
(e) PTI Term Loan Commitment Fee................................ 48
(f) Amendment Fee............................................... 48
2.12 Payments by a Borrower............................................... 49
2.13 Payments by the Lenders to the Administrative Agent.................. 50
2.14 Sharing of Payments, Etc............................................. 50
2.15 Utilization of Commitments in Offshore Currencies.................... 51
ARTICLE III
THE LETTERS OF CREDIT FACILITY...................................... 53
3.01 The Letter of Credit Facility........................................ 53
3.02 Issuance, Amendment and Renewal of Letters of Credit................. 54
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
3.03 Risk Participations, Drawings, Revolving Loans and Reimbursements.... 56
3.04 Repayment of Participations.......................................... 57
3.05 Role of the Issuing Bank............................................. 58
3.06 Obligations Absolute................................................. 59
3.07 Cash Collateral Pledge............................................... 60
3.08 Letter of Credit Fees................................................ 60
3.09 Existing Letters of Credit........................................... 60
3.10 Uniform Customs and Practice......................................... 61
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY............................... 61
4.01 Taxes................................................................ 61
4.02 Illegality........................................................... 62
4.03 Increased Costs and Reduction of Return.............................. 63
4.04 Funding Losses....................................................... 64
4.05 Inability to Determine Rates......................................... 65
4.06 Reserves on Offshore Rate Loans...................................... 65
4.07 Certificates of Lenders.............................................. 66
4.08 Substitution of Lenders.............................................. 66
4.09 Survival............................................................. 66
ARTICLE V
CONDITIONS PRECEDENT................................................. 66
5.01 Conditions to Announcement Date...................................... 66
(a) Prior Loan Document......................................... 67
(b) Resolutions; Incumbency..................................... 67
(c) Organization Documents; Good Standing....................... 67
(d) Legal Opinions.............................................. 67
(e) Payment of Fees............................................. 67
(f) Certificate................................................. 68
(g) Press Release............................................... 68
(h) Consent to Existing Credit Agreement........................ 68
(i) Currency Fluctuations Protection............................ 68
(j) Environment Review.......................................... 69
(k) Pro Forma Balance Sheet; Projections; and Financials........ 69
(l) Solvency Certificates....................................... 69
(m) Collateral Documents........................................ 69
(n) Other Documents............................................. 70
5.02 Conditions of Initial Funding Date................................... 70
(a) First Amended and Restated Credit Agreement and
the promissory notes contemplated thereby................... 70
(b) Bring Down Certificate...................................... 70
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Section Page
<S> <C>
(c) Lender Payoff Letter........................................ 70
(d) Solvency Certificates....................................... 71
(e) Resolutions; Incumbency..................................... 71
(f) Organization Documents; Good Standing....................... 71
(g) Collateral Documents........................................ 71
(h) Completion of Offer......................................... 72
(i) Legal Opinion............................................... 72
(j) Applicable Margin Certificate............................... 73
(k) Application of Swap Contract Proceeds....................... 73
(l) Payment of Fees............................................. 73
(m) Other Documents............................................. 73
5.03 Conditions to All Credit Extensions.................................. 73
(a) Notice, Application......................................... 74
(b) Continuation of Representations and Warranties.............. 74
(c) No Existing Default......................................... 74
5.04 First Borrowing by Each Eligible Borrower............................ 75
5.05 Conditions to PTI Effective Date..................................... 76
(a) Credit Agreement............................................ 76
(b) PTI Merger Documents........................................ 76
(c) Resolutions; Incumbency..................................... 76
(d) Organization Documents; Good Standing....................... 77
(e) Legal Opinion............................................... 77
(f) Payment of Fees............................................. 77
(g) Certificate................................................. 77
(h) Environmental Review........................................ 78
(i) Pro Forma Balance Sheet; Projections; and Financials........ 78
(j) Solvency Certificates....................................... 79
(k) Collateral Documents........................................ 79
(l) Updated Disclosure Schedules................................ 79
(m) Other Documents............................................. 79
5.06 Conditions of PTI Funding Date....................................... 79
(a) Notes....................................................... 79
(b) Bring Down Certificate for Disclosure Schedules............. 79
(c) Applicable Margin Certificate............................... 80
(d) Lender Payoff Letters....................................... 80
(e) Certificate................................................. 80
(f) Solvency Certificates....................................... 81
(g) Resolutions; Incumbency..................................... 81
(h) Organization Documents; Good Standing....................... 82
(i) Collateral Documents........................................ 82
(j) Completion of PTI Merger.................................... 83
(k) Approval of Pro Forma Balance Sheet and Delivery
of Updated PTI Financial Statements......................... 84
(l) Legal Opinions.............................................. 84
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
(m) Y2K Problem Review.......................................... 85
(n) Payment of Fees............................................. 85
(o) Other Documents............................................. 85
</TABLE>
<TABLE>
<CAPTION>
ARTICLE VI
<S> <C> <C>
REPRESENTATIONS AND WARRANTIES....................................... 85
6.01 Incorporation, Good Standing and Due Qualification................... 85
6.02 Corporate Power and Authority; No Conflicts.......................... 85
6.03 Legally Enforceable Agreements....................................... 86
6.04 Litigation........................................................... 86
6.05 Financial Statements; SEC Filings.................................... 86
6.06 Taxes................................................................ 87
6.07 ERISA................................................................ 88
6.08 Subsidiaries and Ownership of Stock.................................. 88
6.09 Credit Arrangements.................................................. 88
6.10 No Default on Outstanding Judgments or Orders........................ 88
6.11 Governmental Regulation.............................................. 88
6.12 Environmental Matters................................................ 88
6.13 Margin Stock......................................................... 89
6.14 Full Disclosure...................................................... 89
6.15 Collateral Documents................................................. 89
6.16 Solvency............................................................. 90
6.17 Labor Relations...................................................... 90
6.18 Copyrights, Patents, Trademarks and Licenses, etc.................... 90
6.19 Broker's; Transaction Fees........................................... 90
6.20 Insurance............................................................ 90
6.21 Swap Obligations..................................................... 91
6.22 Transaction Agreements and PTI Merger Documents...................... 91
6.23 Governmental Authorization........................................... 92
6.24 Year 2000 Compliance................................................. 93
6.25 Representations of Eligible Borrowers................................ 93
ARTICLE VII
AFFIRMATIVE COVENANTS................................................ 94
7.01 Reporting Requirements............................................... 94
7.02 Payment of Obligations............................................... 96
7.03 Maintenance of Property; Insurance................................... 96
7.04 Conduct of Business and Maintenance of Existence..................... 97
7.05 Compliance with Laws................................................. 97
7.06 Inspection of Property, Books and Records............................ 97
7.07 Maintenance of Ownership of Subsidiaries............................. 97
7.08 Use of Proceeds...................................................... 98
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
7.09 Solvency............................................................. 99
7.10 Further Assurances................................................... 99
7.11 Foreign Subsidiaries Security........................................ 99
7.12 The Offer............................................................ 100
7.13 Bidco Capitalization................................................ 102
7.14 The PTI Merger...................................................... 102
ARTICLE VIII
NEGATIVE COVENANTS................................................. 102
8.01 Debt................................................................ 103
8.02 Restricted Payments................................................. 104
8.03 Investments......................................................... 104
8.04 Negative Pledge..................................................... 105
8.05 Consolidations, Mergers and Sales of Assets......................... 106
8.06 Transactions with Affiliates........................................ 106
8.07 Change in Business.................................................. 107
8.08 Accounting Changes.................................................. 108
8.09 Target Operations................................................... 108
ARTICLE IX
FINANCIAL COVENANTS................................................. 108
9.01 EBIT to Interest Expense Ratio...................................... 109
9.02 Minimum Consolidated Net Worth...................................... 109
9.03 Maximum Total Debt to Consolidated EBITDA........................... 109
ARTICLE X
EVENTS OF DEFAULT................................................... 109
10.01 Event of Default.................................................... 109
10.02 Relevant Events of Default with respect to Offer.................... 112
10.03 Remedies............................................................ 113
10.04 Rights Not Exclusive................................................ 114
10.05 Permitted Swap Contract Remedies.................................... 114
ARTICLE XI
THE ADMINISTRATIVE AGENT............................................ 115
11.01 Appointment and Authorization; "Administrative Agent"............... 115
11.02 Delegation of Duties................................................ 115
11.03 Liability of Administrative Agent................................... 116
11.04 Reliance by Administrative Agent.................................... 116
11.05 Notice of Default................................................... 116
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
11.06 Credit Decision..................................................... 117
11.07 Indemnification of Administrative Agent............................. 117
11.08 Administrative Agent in Individual Capacity......................... 118
11.09 Successor Administrative Agent...................................... 118
11.10 Withholding Tax..................................................... 119
11.11 Collateral Matters.................................................. 120
11.12 Administrative Agent as English Trustee............................. 121
11.13 Assignment under Dutch Law.......................................... 121
ARTICLE XII
MISCELLANEOUS....................................................... 122
12.01 Amendments and Waivers.............................................. 122
12.02 Notices............................................................. 123
12.03 No Waiver; Cumulative Remedies...................................... 124
12.04 Costs and Expenses.................................................. 124
12.05 Company Indemnification............................................. 125
12.06 Payments Set Aside.................................................. 126
12.07 Successors and Assigns.............................................. 126
12.08 Assignments, Participations, etc.................................... 126
12.09 Confidentiality..................................................... 128
12.10 Set-off............................................................. 129
12.11 Notification of Addresses, Lending Offices, etc..................... 129
12.12 Counterparts........................................................ 129
12.13 Severability........................................................ 129
12.14 No Third Parties Benefited.......................................... 129
12.15 Governing Law and Jurisdiction...................................... 129
12.16 Waiver of Jury Trial................................................ 130
12.17 Entire Agreement.................................................... 131
12.18 Judgment Currency................................................... 131
</TABLE>
vi
<PAGE> 8
SCHEDULES
<TABLE>
<S> <C>
Schedule 1(a) Reserve Asset Costs
Schedule 2.01 Commitments
Schedule 2.08(d) Term Loan, PTI Term Loan and Sterling Acquisition Loan
Amortization
Schedule 3.09 Existing Letters of Credit
Schedule 5.02 Specified Foreign Subsidiaries
Schedule 6.04 Litigation
Schedule 6.05(a) Company Financial Statements
Schedule 6.05(b) Target Financial Statements
Schedule 6.05(c) PTI Financial Statements
Schedule 6.08 Subsidiaries
Schedule 6.09 Existing Debt
Schedule 6.12 Environmental Matters
Schedule 6.18 Exceptions to Title for Intellectual Property
Schedule 6.19 Brokers' and Transaction Fees
Schedule 6.21 Existing Swap Contracts
Schedule 8.03(a) Existing Investments
Schedule 8.03(b) Existing ViaTek Investments
Schedule 8.04 Existing Liens
Schedule 12.02 Lending Offices; Addresses for Notices
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
Exhibit A-1 Form of Notice of Borrowing (Certain Funds Period)
Exhibit A-2 Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D-1 Form of Legal Opinion of Nutter, McClennen & Fish LLP
Exhibit D-2 Form of Legal Opinion of Simmons & Simmons
Exhibit D-3 Form of Legal Opinion of Allen & Overy
Exhibit D-4 Form of Legal Opinion Nutter, McClennen & Fish, LLP (as of PTI Effective
Date)
Exhibit E Form of Assignment and Acceptance
Exhibit F-1(A) Form of Revolving Loan Note
Exhibit F-1(B) Form of Revolving Loan Note
Exhibit F-2 Form of Term Loan Note
Exhibit F-3 Form of Sterling Acquisition Loan Note
Exhibit F-4 Form of Swing Line Loan Note
Exhibit F-5 Form of PTI Term Loan Note
Exhibit G Form of Election to Participate
Exhibit H Form of Election to Terminate
Exhibit I-1 Form of Company Pledge Agreement
Exhibit I-2 Form of US Holdco Pledge Agreement
Exhibit I-3 Form of Subsidiary Guarantor Pledge Agreement
</TABLE>
vii
<PAGE> 9
<TABLE>
<S> <C>
Exhibit J-1 Form of Company Guaranty
Exhibit J-2 Form of Subsidiary Guaranty
Exhibit K-1 Form of Solvency Certificate - Company, US Holdco#1 and US Holdco#2
Exhibit K-2 Form of Solvency Certificate - Bidco
Exhibit L Form of Solvency Certificate - Target
Exhibit M Form of Announcement Date Notice
Exhibit N Form of Authorization Letter
Exhibit O Press Release
</TABLE>
viii
<PAGE> 10
SECOND AMENDED AND RESTATED
MULTICURRENCY CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED MULTICURRENCY CREDIT AGREEMENT is
entered into as of October 25, 1998, amended and restated as of December 15,
1998 and as further amended and restated as of June 15, 1999 among MacDERMID,
INCORPORATED, a Connecticut corporation (the "Company"), the several financial
institutions from time to time party to this Agreement (collectively, the
"Lenders"; individually, a "Lender"), and NationsBank, N.A., as letter of credit
issuing bank, swing line lender and administrative agent for the Lenders.
RECITALS
WHEREAS, the Company (such term and each other capitalized term used
but not defined in these recitals having the meaning assigned to such terms in
Article I), through MacDermid (UK) Limited, a private limited liability company
incorporated under the laws of England and Wales and an indirect Wholly-Owned
Subsidiary of the Company ("Bidco"), acquired W. Canning plc, a public limited
liability company incorporated under the laws of England and Wales ("Target"),
pursuant to a recommended cash offer by Bidco for all the outstanding shares of
Target's capital stock, followed by a compulsory squeeze out of the remaining
shareholders of Target pursuant to Section 428-430F of the Companies Act (the
"Squeeze-Out") pursuant to which (i) Target became a Wholly-Owned Subsidiary of
Bidco and (ii) all holders of shares of capital stock of Target (other than
those acquired pursuant to the Offer) received cash consideration for their
shares;
WHEREAS, in connection therewith, the Company amended and restated the
terms and provisions of the Multicurrency Credit Agreement, dated as of October
25, 1998 (the "Prior Loan Document"), among the Company, the existing lenders
thereunder and the Agent, to facilitate the funding and consummation of the
Offer and the Transaction and to provide for the Loans permitted thereby and the
Lenders agreed to make available to the Company and, in certain circumstances,
Eligible Borrowers, additional financing pursuant to that certain Amended and
Restated Multicurrency Credit Agreement, dated as of December 15, 1998 (the
"First Amended and Restated Credit Agreement") comprising a multicurrency
revolving credit facility, with a letter of credit subfacility and, with respect
to the Company, a swing line subfacility, a term loan facility and an
acquisition loan facility upon the terms and conditions set forth in the First
Amended and Restated Credit Agreement;
WHEREAS, the Company, (i) through MCD Acquisition Corp., a Delaware
corporation and a Wholly-Owned Subsidiary of the Company ("PTI MergeCo"),
intends to acquire all of the capital stock of PTI, Inc., a Delaware corporation
("PTI") in exchange for (x) the issuance of 7.7 million shares of Company
Capital Stock and (y) the refinancing of PTI's existing debt in an amount not to
exceed $180,000,000 and (ii) intends to cause PTI MergeCo to merge with and into
PTI causing PTI to become a Wholly-Owned Subsidiary of the Company
(collectively, the "PTI Merger");
WHEREAS, in connection with the PTI Merger and the various transactions
related thereto, the Company has requested that (i) the Lenders agree to (a) an
increase in the Aggregate Revolving
1
<PAGE> 11
Loan Commitment by $50,000,000 (from $75,000,000 to $125,000,000) (the "PTI
Revolver Increase Commitment"); and (b) the Company incurring the PTI Term Loans
in the aggregate principal amount of $115,000,000, subject to certain
restrictions set forth herein; and (ii) the PTI Term Loan Lenders agree to make
the PTI Term Loans in the aggregate principal amount of $115,000,000, subject to
the terms and conditions set forth herein; and
WHEREAS, the Company, the Lenders and Administrative Agent now desire
to further amend and restate the First Amended and Restated Credit Agreement to,
among other things, set forth the terms and conditions under which each Lender
with a PTI Term Loan Commitment hereafter will make the PTI Term Loans to the
Company, to set forth the terms and conditions under which the PTI Revolver
Increase Commitment shall occur and to amend and restate the First Amended and
Restated Credit Agreement to reflect the amendments thereto;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms.
The following terms have the following meanings:
"Acquisition" means any transaction or series of related transactions
(other than the Transaction or the PTI Merger) for the purpose of or resulting,
directly or indirectly, in (a) the acquisition of all or substantially all of
the assets of a Person, or of any business or division of a Person, (b) the
acquisition of in excess of 50% of the capital stock, partnership interests,
membership interests or other equity interests of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger or consolidation or
any other combination with another Person (other than a Person that is a
Subsidiary) provided that the Company or a Subsidiary is the surviving entity.
"Administrative Agent" means NationsBank in its capacity as agent for
the Lenders hereunder, or any successor agent arising under Section 11.09.
"Administrative Agent-Related Persons" means NationsBank (solely in its
capacities as administrative agent, letter of credit issuing bank or swing line
lender hereunder) and any successor administrative agent arising under Section
11.09 or any successor letter of credit issuing bank or swing line lender
hereunder, together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and its
Affiliates.
"Administrative Agent's Payment Office" means the address for payments
set forth on Schedule 12.02 or such other address as the Administrative Agent
may from time to time specify.
2
<PAGE> 12
"Affiliate" means, as to any Person, any other Person which, directly
or indirectly, is in control of, is controlled by, or is under common control
with, such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of the other Person, whether
through the ownership of voting securities, membership interests, partnership
interests or other equity interests, by contract or otherwise, but shall with
respect to the Company or any of its Subsidiaries specifically exclude
NationsBank.
"Agreed Alternative Currency" has the meaning specified in Section
2.15(e).
"Aggregate Commitment" means the sum of (a) the Aggregate Revolving
Loan Commitment, (b) the Aggregate Term Loan Commitment; (c) the Aggregate
Sterling Acquisition Loan Commitment; and (d) the Aggregate PTI Term Loan
Commitment.
"Aggregate PTI Term Loan Commitment" means the aggregate PTI Term Loan
Commitments of the Lenders equal to One Hundred Fifteen Million Dollars
($115,000,000).
"Aggregate Revolving Loan Commitment" means (i) at all times prior to
the PTI Funding Date, the aggregate Revolving Loan Commitments of the Lenders
equal to Seventy-Five Million Dollars ($75,000,000), as such amount is increased
pursuant to Section 2.01(c)(ii) or decreased pursuant to Section 2.05; and (ii)
at all times on or after the PTI Funding Date, the aggregate Revolving Loan
Commitments of the Lenders equal to One Hundred Twenty-Five Million Dollars
($125,000,000), subject to any increase or decrease in such commitment effected
under clause (i) above as of the PTI Funding Date, as such amount is further
increased pursuant to Section 2.01(c)(ii) or further decreased pursuant to
Section 2.05.
"Aggregate Sterling Acquisition Loan Commitment" means the aggregate
Sterling Acquisition Loan Commitments of the Lenders equal to Forty-Five Million
Sterling (pound sterling45,000,000).
"Aggregate Term Loan Commitment" means the aggregate Term Loan
Commitments of the Lenders equal to Two Hundred Million Three Hundred Thousand
Dollars ($200,300,000).
"Agreement" means this Second Amended and Restated Multicurrency Credit
Agreement, as the same may be amended, supplemented or otherwise modified from
time to time.
"Agreement Currency" has the meaning specified in Section 12.18.
"Amendment Fee" has the meaning specified in Section 2.10(f).
"Announcement Date" means the date on which all of the conditions
precedent set forth in Section 5.01 are satisfied or waived by the
Administrative Agent as evidenced by its delivery of a notice in the form of
Exhibit M hereto.
"Applicable Currency" means, as to any particular payment, with respect
to any Loan or Letter of Credit, Dollars or, with respect to Revolving Loans and
Letters of Credit, the Offshore Currency in which it is denominated or is
payable.
3
<PAGE> 13
"Applicable Margin" means on any date the applicable percentage per
annum set forth below based upon the Level as shown in the Compliance
Certificate then most recently delivered to the Lenders:
<TABLE>
<CAPTION>
Commitment
Level Base Rate Loans Offshore Rate Loans Fee
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I 0.75% 1.75% 0.375%
- --------------------------------------------------------------------------------------------------------------
II 0.50% 1.50% 0.375%
- --------------------------------------------------------------------------------------------------------------
III 0.25% 1.25% 0.275%
- --------------------------------------------------------------------------------------------------------------
IV 0.00% 1.00% 0.250%
- --------------------------------------------------------------------------------------------------------------
V 0.00% 0.75% 0.250%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
;provided, however, that for the period from (i) the Announcement Date until the
Initial Funding Date, the Applicable Margin shall be deemed to be Level II, (ii)
the Initial Funding Date until the date which is the 180th day following the
Initial Funding Date, the Applicable Margin shall be deemed to be the Level
which is the higher of (x) Level II and (y) the Applicable Margin as determined
pursuant to the most recent Compliance Certificate delivered to the Lenders
pursuant to Section 7.01(c) and (iii) thereafter, the Applicable Margin as
determined pursuant to the most recent Compliance Certificate; and provided
further that, if the Company shall have failed to deliver the Applicable Margin
certificate referred to in Section 5.02(j) or any Compliance Certificate
pursuant to Section 7.01(c), in each case by the date required, or if any other
Event of Default shall have occurred and be continuing, then from the date such
Applicable Margin certificate or Compliance Certificate was required to be
delivered until the date of such delivery or the cure or waiver in writing of
such other Event of Default, as the case may be, the Applicable Margin shall be
deemed to be Level I. Each change in the Applicable Margin shall take effect
with respect to all outstanding Loans and fees on the first Business Day
immediately succeeding the day on which such Compliance Certificate is received
by the Administrative Agent. Notwithstanding the foregoing, no reduction in the
Applicable Margin shall be effected if an Event of Default shall have occurred
and be continuing on the date when such change would otherwise occur, it being
understood that on the first Business Day immediately succeeding the day on
which such Event of Default is either waived or cured (assuming no other Event
of Default shall be then pending), the Applicable Margin shall be reduced (on a
prospective basis) in accordance with the then most recently delivered
Compliance Certificate.
"Asset Disposition" means the direct or indirect sale, assignment,
conveyance, transfer or other disposition (whether in one or a series of
transactions) of any property or assets (including accounts and notes
receivable, with or without recourse), or the entering into of an agreement to
do any of the foregoing; provided, however, that the Company and Qualified
Subsidiaries shall at all times be permitted to effect such sales, assignments,
conveyances, transfers and other dispositions among such Persons, and such
permitted dispositions shall be specifically excluded from the definition of
Asset Disposition.
"Assignee" has the meaning specified in Section 12.08(a).
4
<PAGE> 14
"Attorney Costs" means and includes all reasonable and customary fees
and disbursements of any law firm or other external counsel and, without
duplication, the reasonable allocated cost of internal legal services and all
reasonable disbursements of internal counsel.
"Authorization Letter" means the letter agreement executed by an
Eligible Borrower in the form of Exhibit N.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. Section 101, et seq.).
"Base Rate" means, for any day, the higher of: (a) 0.50% per annum
above the latest Federal Funds Rate; and (b) the rate of interest in effect for
such day as publicly announced from time to time by NationsBank in Charlotte,
North Carolina as its "reference rate." The "reference rate" is a rate set by
NationsBank based upon various factors including NationsBank's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate. Any change in the reference rate announced by NationsBank
shall take effect at the opening of business on the day specified in the public
announcement of such change.
"Base Rate Loan" means a Loan or an L/C Advance that bears interest
based on the Base Rate.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or Multiemployer Plan
and which is maintained or otherwise contributed to by any member of the ERISA
Group.
"Bidco" has the meaning set forth in the recitals.
"Borrower" means the Company or any Eligible Borrower, as the context
may require, and their respective successors and assigns, and "Borrowers" means
all of the foregoing.
"Borrowing" means a borrowing hereunder consisting of Loans of the same
Type and in the same Applicable Currency made to a Borrower on the same day by
the Lenders under Article II, and, in the case of Offshore Rate Loans, having
the same Interest Period.
"Borrowing Date" means any date on which a Borrowing occurs under
Section 2.03.
"Business Day" means any day other than a Saturday, Sunday or other day
on which commercial banks in New York or Charlotte, North Carolina are
authorized or required by law to close and (i) with respect to disbursements and
payments in Dollars with respect to any Loan bearing interest based upon the
Offshore Rate, a day on which dealings are carried on in the applicable offshore
Dollar interbank market, and (ii) with respect to any disbursements and payments
in and calculations pertaining to any Offshore Currency Loan, a day on which
commercial banks are open for foreign exchange business in London, England, and
on which dealings in the relevant Offshore Currency are carried on in the
applicable offshore foreign exchange interbank market in which disbursements or
payment in such Offshore Currency will be made or received hereunder.
5
<PAGE> 15
"Capital Adequacy Regulation" means any guideline, request or directive
of any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Cash Collateralize" means to pledge and deposit with or deliver to the
Administrative Agent, for the benefit of the Administrative Agent, the Issuing
Bank and the Lenders, as additional collateral for the Obligations, cash or
deposit account balances pursuant to documentation in form and substance
satisfactory to the Administrative Agent. Derivatives of such term shall have
corresponding meaning.
"Cash Equivalents" means:
(a) securities issued or fully guaranteed or insured by the
United States Government or any agency thereof and backed by the full faith and
credit of the United States having maturities of not more than one year from the
date of acquisition;
(b) certificates of deposit, time deposits, Eurocurrency time
deposits, repurchase agreements, reverse repurchase agreements, or bankers'
acceptances, having in each case a tenor of not more than one year, issued by
any Lender, or by any commercial bank having combined capital and surplus of not
less than $100,000,000 and either located in the U.S. or with respect to Foreign
Subsidiaries organized under the laws of an Approved Country (as defined in
clause (d) below) whose short term securities are rated at least A-1 by S&P and
P-1 by Moody's, or with respect to banks located in an Approved Country the
equivalent thereof;
(c) commercial paper of an issuer rated at least A-1 by S&P
or P-1 by Moody's, and in either case having a tenor of not more than six
months; and
(d) with respect to Foreign Subsidiaries organized under the
laws of an Approved Country, government obligations of the United Kingdom and of
any other country approved by the Administrative Agent or whose debt securities
are rated by S&P and Moody's A-1 or P-1, respectively, or the equivalent thereof
(if a short-term debt rating is provided by either) or at least AA or AA2,
respectively, or the equivalent thereof (if a long-term unsecured debt rating is
provided by either (each such country, an "Approved Country"), in each case with
maturities of less than 12 months.
"Certain Funds Period" means the period commencing on the first day
after the Announcement Date and ending on whichever is the earlier of (a) the
date on which the Aggregate Commitment is terminated pursuant to Section
2.07(a), (b) the Business Day following the Squeeze- Out Date and (c) the date
which is six (6) calendar months after the Announcement Date; provided, however,
that the date set forth in clause (c) above shall be extended by an additional
one (1) month and two weeks if Bidco has initiated the Squeeze-Out during the
initial six months after the Announcement Date.
"Change in Control" means (a) the acquisition by any Person (other than
a Plan, the MacDermid, Incorporated Employee Pension Plan, the MacDermid,
Incorporated Employee Profit
6
<PAGE> 16
Sharing Plan, the MacDermid, Incorporated Employee Stock Ownership Plan or other
qualified ERISA plan (other than a Multiemployer Plan)), or two or more Persons
acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended) of 30% or more of the outstanding shares of voting stock of
the Company, or (b) during any period of twelve consecutive calendar months,
individuals who at the beginning of such period constituted the Company's board
of directors (together with any new directors whose election by the Company's
board of directors or whose nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reasons other than death or disability to constitute a majority of the
directors then in office.
"Chase" means The Chase Manhattan Bank, in its individual capacity.
"City Code" means The City Code on Take-overs and Mergers as issued by
the Panel on Take-overs and Mergers in the United Kingdom.
"Code" means the Internal Revenue Code of 1986, and regulations
promulgated thereunder.
"Collateral" means all property and interests in property and proceeds
thereof now owned or hereafter acquired by a Borrower or any Subsidiary
Guarantor in or upon which a Lien now or hereafter exists in favor of the
Lenders, or the Administrative Agent on behalf of itself, the Issuing Bank and
the Lenders, whether under this Agreement or under any other document executed
by any of such Persons and delivered to the Administrative Agent.
"Collateral Documents" means, collectively (if and when each such
document is required to be executed and delivered hereunder), (a) each Credit
Agreement Guaranty, the Pledge Agreements and all other pledge agreements,
guarantees and other similar agreements between a Borrower or its Subsidiaries
and the Lenders or the Administrative Agent, for the benefit of itself, the
Issuing Bank and the Lenders, now or hereafter delivered to the Lenders or the
Administrative Agent pursuant to or in connection with the transactions
contemplated hereby, and all financing statements (or comparable documents now
or hereafter filed in accordance with the Uniform Commercial Code or comparable
law) against a Borrower or any of its Subsidiaries as debtor in favor of the
Lenders or the Administrative Agent, for the benefit of itself, the Issuing Bank
and the Lenders, as secured party, and (b) any amendments, supplements,
modifications, renewals, replacements, consolidations, substitutions and
extensions of any of the foregoing.
"Commitments" means, collectively, the Revolving Loan Commitment
(including the L/C Commitment and Swing Line Loan Commitment thereunder), the
Term Loan Commitment, the Sterling Acquisition Loan Commitment and the PTI Term
Loan Commitment.
"Commitment Fee" means, collectively, the Revolving Loan Commitment
Fee, the Term Loan Commitment Fee, the Sterling Acquisition Loan Commitment Fee
and the PTI Term Loan Commitment Fee.
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<PAGE> 17
"Companies Act" means the Companies Act of 1985 of the United Kingdom.
"Company" means MacDermid, Incorporated, a Connecticut corporation.
"Company Common Stock" means the authorized common stock of the Company
which is publicly traded on the New York Stock Exchange.
"Company Guaranty" means the Guaranty to be executed and delivered by
the Company in the form attached to this Agreement as Exhibit J-1.
"Company Pledge Agreement" means the Pledge Agreement to be executed
and delivered by the Company in the form attached to this Agreement as Exhibit
I-1.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit C.
"Computation Date" has the meaning specified in Section 2.15(a).
"Consolidated EBIT" means, for any period the sum of (a) Consolidated
Net Income of the Company and its Consolidated Subsidiaries for such period,
plus (b) to the extent deducted in determining Consolidated Net Income, the sum
of (i) Consolidated Interest Expense and (ii) consolidated taxes of the Company
and its Consolidated Subsidiaries for such period; provided, however, that for
all purposes for any businesses acquired (whether by purchase accounting or
pooling accounting) during the period of determination (including Target and its
Subsidiaries), Consolidated EBIT for such period shall be determined on a pro
forma basis as if such acquisition had occurred as of the beginning of such
period (including synergies agreed to by the Administrative Agent in its
reasonable discretion); provided, further, that without the consent of the
Administrative Agent and the Majority Lenders, the Consolidated EBIT being added
as a result of any such acquisition shall not exceed (i) in the case that only
unaudited financial statements are available with respect to the assets, Person
or division being acquired (whether by merger, stock or asset purchase, or
otherwise), the amount of Consolidated EBIT of the acquiree on a stand alone
basis being added from such acquisition shall not exceed 15% of the otherwise
applicable amount of Consolidated EBIT of the Company and its Subsidiaries
(other than the acquiree) taken as a whole, or (ii) the instance that
unqualified audited financial statements in accordance with GAAP are available
for the acquiree, then 100% of the Consolidated EBIT of the acquiree.
"Consolidated EBITDA" means, for any period, the sum of (a)
Consolidated Net Income of the Company and its Consolidated Subsidiaries for
such period, plus (b) to the extent deducted in determining such Consolidated
Net Income, the sum of (i) Consolidated Interest Expense, (ii) consolidated
depreciation and amortization expense and (iii) consolidated taxes of the
Company and its Consolidated Subsidiaries for such period; provided, however,
that for all purposes for any businesses acquired (whether by purchase
accounting or pooling accounting) during the period of determination (including
Target and its Subsidiaries), Consolidated EBITDA for such period shall be
determined on a pro forma basis as if such acquisition had occurred as of the
beginning of such period (including synergies agreed to by the Administrative
Agent in its reasonable discretion); provided, further, that without the consent
of the Administrative Agent and the Majority Lenders, the Consolidated EBITDA
being added as a result of any such acquisition shall not exceed (i) in the
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<PAGE> 18
case that only unaudited financial statements are available with respect to the
assets, Person or division being acquired (whether by merger, stock or asset
purchase, or otherwise), the amount of Consolidated EBITDA of the acquiree on a
stand alone basis being added from such acquisition shall not exceed 15% of the
otherwise applicable amount of Consolidated EBITDA of the Company and its
Subsidiaries (other than the acquiree) taken as a whole, or (ii) the instance
that unqualified audited financial statements in accordance with GAAP are
available for the acquiree, then 100% of the Consolidated EBITDA of the
acquiree.
"Consolidated Interest Expense" means, for any period, the interest
expense of the Company and its Consolidated Subsidiaries determined on a
consolidated basis for such period.
"Consolidated Net Income" means, for any period, the net income of the
Company and its Consolidated Subsidiaries for such period as adjusted to exclude
the following:
(a) the effect of each change in accounting principles;
(b) any gain, together with any related provisions for taxes
on such gain, realized upon the sale or other disposition of any asset of the
Company or any Consolidated Subsidiary (including pursuant to any sale/leaseback
transaction) which is not sold or otherwise disposed of in the ordinary course
of business;
(c) any gain or loss, together with any related provision for
taxes on such gain, realized in connection with the extinguishment of any Debt
of the Company or any of its Consolidated Subsidiaries;
(d) all extraordinary gains and losses determined in
accordance with generally accepted accounting principles;
(e) subject to the proviso below, the net income (to the
extent not distributed to the Company in cash) or loss of any Person that is not
a Consolidated Subsidiary of the Company or that the Company accounts for by the
equity method of accounting; and
(f) the net income or loss of any Person acquired in a pooling
of interests transaction for any period prior to the date of such acquisition;
provided, however, that to the extent deducted in determining net income at any
time during the nine month period following the Initial Funding Date, and
without duplication, Consolidated Net Income shall be adjusted to include the
following:
(i) non-cash charges relating to the Transaction;
(ii) cash charges relating to the Transaction in an
aggregate amount not to exceed $5,000,000; and
(iii) cash charges (other than as provided in clause
(ii)) relating to the Transaction and reasonably acceptable to the
Administrative Agent.
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<PAGE> 19
"Consolidated Net Worth" means at any date the consolidated
stockholders' equity of the Company and its Consolidated Subsidiaries as at such
date.
"Consolidated Subsidiary" means any Subsidiary whose accounts are, or
are required to be, consolidated with the accounts of the Company.
"Consolidated Total Debt" means with respect to the Company and its
Subsidiaries (on a consolidated basis) at any date the sum of (i) total Debt of
the type described in clauses (a), (b) and (d) contained in the definition of
Debt, (ii) all standby letters of credit, other than at any time that Galvanevet
s.r.l. is not a Consolidated Subsidiary, Existing Letters of Credit related to
or given in connection with the Galvanevet acquisition, and (y) standby letters
of credit backing trade obligations incurred in the ordinary course of business
in an aggregate Stated Amount up to $5,000,000, and (iii) Guarantees of Debt of
any Person other than the Company or any of its Consolidated Subsidiaries.
"Conversion/Continuation Date" means any date on which, under Section
2.04, the Company (a) converts Loans (other than Swing Line Loans) of one Type
to another Type, or (b) continues as Loans (other than Swing Line Loans) of the
same Type, but with a new Interest Period, Loans having Interest Periods
expiring on such date.
"Credit Agreement Guaranty" means, collectively, if and when each such
document is executed and delivered (a) the Company Guaranty, (b) the Subsidiary
Guaranty and (c) each guaranty required to be delivered by a Foreign Subsidiary
pursuant to Section 7.11, in each case in favor of the Administrative Agent, on
behalf of itself, the Issuing Bank and the Lenders, as each of the same may be
amended, supplemented or otherwise modified from time to time.
"Credit Extension" means and includes (a) the making of any Loans
hereunder, and (b) the Issuance of any Letters of Credit hereunder.
"Debt" means, with respect to any Person at any date, without
duplication: (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) all obligations of such Person to pay the deferred
purchase price of property or services, except trade accounts payable arising in
the ordinary course of business, (d) all obligations of such Person as lessee
which are capitalized in accordance with generally accepted accounting
principles, (e) all obligations of such Person to reimburse or prepay any bank
or other Person in respect of amounts paid under a letter of credit, banker's
acceptance or similar instrument, whether drawn or undrawn (provided, however,
if the Company provides standby letters of credit or bank guarantees in support
of obligations of a Subsidiary, only the underlying obligation and not the
contingent liability created by the letter of credit or bank guaranty shall be
treated as Debt of the Company and such Subsidiary), (f) all Debt of other
Persons secured by a Lien on any asset of such Person, whether or not such Debt
is assumed by such Person, (g) all obligations of such Person under a synthetic
lease transaction and (h) all Guarantees.
"Default" means any event or circumstance which, with the giving of
notice, the lapse of time, or both, would (if not cured or otherwise remedied
during such time) constitute an Event of Default.
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<PAGE> 20
"Deutschemarks" and the sign "DM" each mean the national currency unit
for the time being of Germany.
"Dollars", "dollars" and the symbol "$" each mean the lawful currency
of the United States.
"Dollar Equivalent" means, at any time, (a) as to any amount
denominated in Dollars, the amount thereof at such time and (b) as to any amount
denominated in an Offshore Currency, the equivalent amount in Dollars as
determined by the Administrative Agent at such time on the basis of the Spot
Rate for the purchase of Dollars with such Offshore Currency on the most recent
Computation Date.
"Domestic Subsidiary" means each Subsidiary that is organized under the
laws of the United States or any state thereof.
"Effective Amount" means:
(a) with respect to any Revolving Loans on any date, the
Dollar Equivalent of the aggregate outstanding principal amount thereof after
giving effect to any Borrowing and prepayments or repayments of Revolving Loans
occurring on such date;
(b) with respect to any outstanding L/C Obligations on any
date, the Dollar Equivalent of the aggregate amount of such L/C Obligations on
such date after giving effect to the Issuance of any Letter of Credit occurring
on such date and any other changes in the amount of the L/C Obligations as of
such date, including as a result of any reimbursements of outstanding unpaid
drawings under Letters of Credit or any reductions in the maximum amount
available for drawing under the Letters of Credit taking effect on such date;
(c) with respect to any Swing Line Loan on any date, the
aggregate outstanding principal amount thereof after giving effect to any
Borrowing and prepayments or repayments of Swing Line Loans occurring on such
date;
(d) with respect to any Term Loan on any date, the aggregate
outstanding principal amount thereof after giving effect to any Borrowing and
prepayments or repayments of Term Loans occurring on such date;
(e) with respect to any Sterling Acquisition Loan on any date,
the aggregate outstanding principal amount thereof after giving effect to any
Borrowing and prepayments or repayments of Sterling Acquisition Loans occurring
on such date; and
(f) with respect to any PTI Term Loan on any date, the
aggregate outstanding principal amount thereof after giving effect to any
Borrowing and prepayments or repayments of PTI Term Loans occurring on such
date.
For purposes of Section 2.07, the Effective Amount shall be determined without
giving effect to any mandatory prepayments to be made under said Section.
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<PAGE> 21
"Election to Participate" means an Election to Participate executed by
an Eligible Borrower and substantially in the form of Exhibit G.
"Election to Terminate" means an Election to Terminate executed by an
Eligible Borrower and substantially in the form of Exhibit H.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $100,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in the
United States; (c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary
of a Person of which a Lender is a Subsidiary, or (iii) a Person of which a
Lender is a Subsidiary; (d) a commercial finance company or finance subsidiary
of a corporation organized under the laws of the United States of America, or
any State thereof, and having total assets in excess of $100,000,000; (e) a
savings bank or savings and loan association organized under the laws of the
United States of America, or any State thereof, and having total assets in
excess of $100,000,000; (f) as to the Term Loans, an "accredited investor" as
such term is defined in Rule 501(a) of Regulation D under the Securities Act of
1933, as amended (other than the Company or an Affiliate of the Company); and
(g) any other entity approved by the Company and the Administrative Agent.
"Eligible Borrower" means any (a) Wholly-Owned Consolidated Subsidiary
that is a Domestic Subsidiary the capital stock of which has been delivered to
the Administrative Agent pursuant to a Pledge Agreement and (b) Wholly-Owned
Consolidated Subsidiary that is a Foreign Subsidiary whose ultimate non-U.S.
parent's capital stock has been delivered to the Administrative Agent pursuant
to a Pledge Agreement, and in each case as to which an Election to Participate
shall have been delivered to the Administrative Agent and as to which an
Election to Terminate shall not have been delivered to the Administrative Agent.
Each such Election to Participate and Election to Terminate shall be duly
executed on behalf of such Wholly-Owned Consolidated Subsidiary and the Company
in such number of copies as the Administrative Agent may request. The delivery
of an Election to Terminate shall not affect any obligation of an Eligible
Borrower theretofore incurred. The Administrative Agent shall promptly give
notice to the Lenders of the receipt of any Election to Participate or Election
to Terminate.
"EMU" means European Economic and Monetary Union.
"EMU Legislation" means legislative measures of the European Council in
relation to EMU.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, injunctions, permits, conversions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
the environment, to the effect of the environment on human health or to
emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment, including ambient air, surface water,
ground water or land, or otherwise relating to the manufacture,
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<PAGE> 22
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean up or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor statute including any rules and
regulations promulgated thereunder.
"ERISA Group" means the Company, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section 414(c) of the Code.
"euro" means the single currency of the Participating Member States.
"euro unit" means a currency unit of the euro.
"Eurocurrency Reserve Percentage" has the meaning specified in the
definition of "Offshore Rate".
"Event of Default" means any of the events or circumstances specified
in Section 10.01.
"Existing Credit Agreement" means the Amended and Restated Credit
Agreement, dated as of August 23, 1996, as amended by the First Amendment, dated
as of March 30, 1998, the Second Amendment, dated as of April 24, 1998, the
Third Amendment, dated as of June 26, 1998 and the Fourth Amendment, dated as of
August 5, 1998, among the Company, the financial institutions from time to time
party thereto and The Chase Manhattan Bank, as agent.
"Existing Letters of Credit" shall mean each letter of credit listed on
Schedule 3.09.
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York (including any
such successor, "H.15(519)") on the preceding Business Day opposite the caption
"Federal Funds (Effective)"; or, if for any relevant day such rate is not so
published on any such preceding Business Day, the rate for such day will be the
arithmetic mean as determined by the Administrative Agent of the rates for the
last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
York City time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Administrative Agent.
"Fee Letter" has the meaning specified in Section 2.10(a).
"First Amended and Restated Credit Agreement" has the meaning specified
in the Recitals hereto.
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<PAGE> 23
"First Amended and Restated Credit Agreement Lenders" has the meaning
specified in Section 12.19(b).
"Foreign Subsidiary" means each Subsidiary that is not a Domestic
Subsidiary.
"Francs" and the symbol "FF" each mean the national currency unit for
the time being of France.
"FRB" means the Board of Governors of the Federal Reserve System, and
any Governmental Authority succeeding to any of its principal functions.
"FTC" means the Federal Trade Commission of the United States.
"Further Taxes" means any and all present or future taxes, levies,
assessments, imposts, duties, deductions, fees, withholdings or similar charges
(including, without limitation, net income taxes and franchise taxes), and all
liabilities with respect thereto, imposed by any jurisdiction on account of
amounts payable or paid pursuant to Section 4.01.
"FX Trading Office" means the Foreign Exchange Trading Center
Charlotte, North Carolina of NationsBank, or such other foreign exchange trading
center of NationsBank as it may designate from time to time.
"GAAP" means U.S. generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of the
date of determination; provided, however, that for purposes of all computations
required to be made with respect to compliance by the Company with Sections
9.01, 9.02 and 9.03, such term shall mean generally accepted accounting
principles as in effect on the date of this Agreement, applied in a manner
consistent with those used in preparing the financial statements referred to in
Section 6.05(a).
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt or other obligation of any
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (a) to purchase or
pay (or advance or supply funds for the purchase or payment of) such Debt or
other obligation (whether arising by virtue of partnership arrangements, by
agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (b)
entered into for the purpose of assuring in any other manner the
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<PAGE> 24
obligee of such Debt or other obligation of the payment thereof or to protect
such obligee against loss in respect thereof (in whole or in part); provided
that the term Guarantee shall not include endorsements for collection or deposit
in the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guilders" means the national currency unit for the time being of the
Netherlands.
"Hazardous Substances" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives, by-products
and other hydro-carbons, or any substance having any constituent elements
displaying any of the foregoing characteristics and any other element, compound,
mixture, solution or substance which poses a present or potential hazard to
human health or the environment.
"Honor Date" shall mean the date that any amount is paid by the Issuing
Bank under any Letter of Credit.
"Indemnified Liabilities" has the meaning specified in Section 12.05.
"Indemnified Party" has the meaning specified in Section 12.05.
"Initial Funding Date" means the date on which all of the conditions
precedent set forth in Section 5.02 are satisfied in all material respects or
waived by the Majority Lenders and the initial Loans are made by the Lenders
hereunder to the Company to facilitate the purchase by Bidco of the Target
Shares pursuant to the Offer.
"Insolvency Proceeding" means, with respect to any Person, (a) any
case, action or proceeding with respect to such Person before any court or other
Governmental Authority relating to bankruptcy, reorganization, insolvency,
liquidation, receivership, dissolution, winding-up or relief of debtors, or (b)
any general assignment for the benefit of creditors, composition, marshaling of
assets for creditors, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors; undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code or any foreign
equivalent.
"Intercompany Debt" means Debt representing loans from the Company or
any Qualified Subsidiary to a Non-Qualified Subsidiary.
"Interest Payment Date" means, as to any (i) Offshore Rate Loan, the
last day of each Interest Period applicable to such Offshore Rate Loan, (ii)
Base Rate Loan, the last Business Day of each March, June, September and
December and (iii) any Swing Line Loan bearing interest at the Quoted Rate, the
date such Swing Line Loan is to be repaid; provided, however, that if any
Interest Period exceeds three months, the date that falls three months after the
beginning of such Interest Period and after each Interest Payment Date
thereafter is also an Interest Payment Date.
"Interest Period" means, as to any Offshore Rate Loan, the period
commencing on the Borrowing Date of such Offshore Rate Loan or on the
Conversion/Continuation Date on which the relevant Loan is converted into or
continued as an Offshore Rate Loan, and ending (x) with respect
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<PAGE> 25
to any Offshore Rate Loan made on the Initial Funding Date or on the Business
Day following the Initial Funding Date, on March 31, 1999 and (y) with respect
to all other Offshore Rate Loans, on the date one, two, three or six months
thereafter as selected by the Company in its Notice of Borrowing or Notice of
Conversion/Continuation;
provided that:
(a) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such Interest
Period into another calendar month, in which event such Interest Period shall
end on the preceding Business Day;
(b) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on the
last Business Day of the calendar month at the end of such Interest Period;
(c) no Interest Period for any Term Loan, PTI Term Loan or
Sterling Acquisition Loan shall extend beyond the Maturity Date and no Interest
Period for any Revolving Loan shall extend beyond the Revolving Loan Termination
Date; and
(d) no Interest Period applicable to a Term Loan, PTI Term
Loan or Sterling Acquisition Loan or portion thereof shall extend beyond any
Principal Payment Date unless the aggregate principal amount of such Term Loans,
PTI Term Loans and Sterling Acquisition Loans represented by Base Rate Loans or
Offshore Rate Loans having Interest Periods that will expire on or before such
date, equals or exceeds the amount of the principal payment due on such
Principal Payment Date.
"Investment" means any investment in any Person, whether by means of
share purchase, capital contribution, loan, time deposit or otherwise.
"IRS" means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
"Issuance Date" means the date upon which the Issuing Bank Issues a
Letter of Credit.
"Issue" means, with respect to any Letter of Credit, to issue or to
extend the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "Issued," "Issuing" and "Issuance" have corresponding
meanings.
"Issuing Bank" means (x) NationsBank in its capacity as issuer of the
Letters of Credit (other than Existing Letters of Credit) hereunder, together
with any replacement letter of credit issuer arising under Section 11.01(b) or
Section 11.09 and (y) Chase in its capacity as issuer of the Existing Letters of
Credit hereunder.
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<PAGE> 26
"Joint Venture" means a single-purpose corporation, partnership,
limited liability company, joint venture or other similar legal arrangement
(whether created by contract or conducted through a separate legal entity) now
or hereafter formed by the Company or any of its Subsidiaries with another
Person in order to conduct a common venture or enterprise with such Person.
"Judgment Currency" has the meaning specified in Section 12.18.
"L/C Advance" means each Revolving Lender's participation in any L/C
Borrowing in accordance with its Pro Rata Revolving Share.
"L/C Amendment Application" means an application form for amendment of
outstanding Letters of Credit as shall at any time be in use at the Issuing
Bank, as the Issuing Bank shall request.
"L/C Application" means an application form for issuances of Letters of
Credit as shall at any time be in use at the Issuing Bank, as the Issuing Bank
shall request.
"L/C Borrowing" means an extension of credit resulting from a drawing
under any Letter of Credit which shall not have been reimbursed on the date when
made or converted into a Borrowing of Revolving Loans under Section 3.03(b).
"L/C Commitment" means the commitment of the Issuing Bank to Issue, and
the commitment of the Revolving Lenders severally to participate in, Letters of
Credit from time to time Issued or outstanding under Article III, in an
aggregate amount not to exceed on any date the Effective Amount of $38,000,000
(of which amount (x) no more than the Effective Amount of $15,000,000 shall be
attributable to Letters of Credit issued on and after the Initial Funding Date
not relating to Existing Letters of Credit and (y) no more than the Effective
Amount of $23,000,000 shall be attributable to Existing Letters of Credit), as
the same shall be reduced as a result of a reduction in the L/C Commitment
pursuant to Section 2.05; provided that the L/C Commitment is a part of the
combined Revolving Loan Commitments, rather than a separate, independent
commitment.
"L/C-Related Documents" means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document relating to
any Letter of Credit, including any of the Issuing Bank's standard form
documents for letter of credit issuances.
"L/C Obligations" means the sum of (i) the aggregate undrawn amount of
all Letters of Credit then outstanding, plus (ii) the amount of all unreimbursed
drawings under all Letters of Credit, including all outstanding L/C Borrowings.
"Lender" has the meaning specified in the introductory clause hereto.
References to the "Lenders" shall include NationsBank, including in its capacity
as Issuing Bank and Swing Line Lender and any other Lender assuming such
capacity in the future, and for purposes of clarification only, to the extent
that NationsBank may have any rights or obligations in addition to those of the
Lenders due to its status as Issuing Bank or Swing Line Lender, its status as
such will be specifically referenced.
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"Lending Office" means, as to any Lender, the office or offices of such
Lender specified as its "Lending Office" or "Domestic Lending Office" or
"Offshore Lending Office", as the case may be, on Schedule 12.02, or such other
office or offices as such Lender may from time to time notify the Company and
the Administrative Agent.
"Letters of Credit" means any letter of credit issued by Issuing Bank
hereunder, and any amendments thereto or replacements thereof, pursuant to
Article III, and each Existing Letter of Credit.
"Level" means, and includes, Level I, Level II, Level III, Level IV or
Level V, whichever is in effect at the relevant time.
"Level I" shall exist at any time the Leverage Ratio is greater than
3.50:1.0.
"Level II" shall exist at any time the Leverage Ratio is equal to or
less than 3.50:1.0 but greater than 3.00:1.0.
"Level III" shall exist at any time the Leverage Ratio is equal to or
less than 3.00:1.0 but greater than 2.50:1.0.
"Level IV" shall exist at any time the Leverage Ratio is equal to or
less than 2.50:1.0 but greater than 2.00:1.0.
"Level V" shall exist at any time the Leverage Ratio is equal to or
less than 2.00:1.0.
"Leverage Ratio" means, with respect to any period, the ratio of
Consolidated Total Debt to Consolidated EBITDA tested as of the end of each
fiscal quarter for the preceding four fiscal quarters.
"LIBOR" has the meaning specified in the definition "Offshore Rate".
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement of any kind or nature
whatsoever in respect of any property (including those created by, arising under
or evidenced by any conditional sale or other title retention agreement, the
interest of a lessor under a capital lease, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the Uniform Commercial Code or any comparable law) and any
contingent or other agreement to provide any of the foregoing, but not including
the interest of a lessor under an operating lease.
"Lira" means the national currency unit for the time being of Italy.
"Loan" means an extension of credit by a Lender to a Borrower under
Article II or Article III in the form of a Revolving Loan, a Term Loan, a PTI
Term Loan, a Sterling Acquisition Loan, a Swing Line Loan or a L/C Borrowing.
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"Loan Documents" means this Agreement, any Notes, the Fee Letter, the
L/C-Related Documents, the Collateral Documents, each Election to Participate,
each Authorization Letter and all other documents delivered to the
Administrative Agent or any Lender in connection herewith.
"Majority Lenders" means as of the date of determination thereof, the
Lenders having at least 51% of the sum of (i) the aggregate principal amount of
loans and other extensions of credit then outstanding under any of the Loan
Documents plus (ii) the aggregate amount of the remaining available commitments
of the Lenders under any of the Loan Documents; provided, however, that for
purposes of determining the amount of a Revolving Lender's Loans, each Revolving
Lender shall be deemed to hold the principal amount of Swing Line Loans and the
amount L/C Obligations equal to its Revolving Loan Pro Rata Share of the Swing
Line Loans and L/C Obligations then outstanding.
"Mandatory Cost" means the cost imputed to the Lender(s) of compliance
with:
(a) the Mandatory Liquid Assets requirements of the Bank of
England and/or the banking supervision or other costs of the Financial Services
Authority as determined in accordance with Schedule 1(a); and
(b) any other applicable regulatory or central bank
requirement relating to any Loan made through a branch in the jurisdiction of
the currency of that Loan including any reserve asset requirements of the
European Central Bank.
"Margin Stock" means "margin stock" as such term is defined in
Regulation T, U or X of the FRB.
"Material Debt" means Debt (other than the Notes) of the Company and/or
one or more of its Subsidiaries, in an aggregate principal amount, individually
or in the aggregate, exceeding $5,000,000.
"Material Plan" means at any time a Plan or Plans having an aggregate
amount of Unfunded Liabilities in excess of $1,000,000.
"Material Subsidiary" means US Holdco #1, US Holdco #2, Bidco, Target,
each Eligible Borrower, PTI MergeCo, PTI and any other Subsidiary of the Company
whose assets constitute 5% or more of the total assets of the Company and its
Subsidiaries taken as a whole.
"Moody's" means Moody's Investors Service, Inc., and any successor
thereto.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five (5) plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
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"national currency unit" means the lawful currency unit (other than a
euro unit) of a Participating Member State, being a sub-denomination of the euro
unit.
"NationsBank" means NationsBank, N.A., a national banking association,
individually.
"Net Proceeds" means proceeds in cash, checks or other cash equivalent
financial instruments (including Cash Equivalents) as and when received by the
Person making an Asset Disposition, net of: (a) the direct costs relating to
such Asset Disposition (excluding amounts payable to the Company or any
Affiliate of the Company), (b) all taxes paid or payable as a result thereof and
(c) amounts required to be applied to repay principal, interest and prepayment
premiums and penalties on Debt secured by a Lien on the asset which is the
subject of such Asset Disposition.
"Non-Qualified Subsidiary" means any Subsidiary that is not a Qualified
Subsidiary.
"Note" means a promissory note executed by a Borrower in favor of a
Lender pursuant to Section 2.02(b), in substantially the form of Exhibit F-1(A),
with respect to Revolving Loans before the PTI Effective Date, Exhibit F-1(B)
with respect to Revolving Loans after the PTI Funding Date, Exhibit F-2, with
respect to Term Loans, Exhibit F-3, with respect to Sterling Acquisition Loans,
Exhibit F-4, with respect to Swing Line Loans and Exhibit F-5 with respect to
PTI Term Loans.
"Notice of Borrowing" means a notice in substantially the form of (a)
Exhibit A-1 with respect to a Borrowing of Sterling Acquisition Loans or Term
Loans on a Business Day during the Certain Funds Period and (b) Exhibit A-2 with
respect to any other Borrowing.
"Notice of Conversion/Continuation" means a notice in substantially the
form of Exhibit B.
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document owing by the Company to any
Lender, the Administrative Agent or any Indemnified Party, whether direct or
indirect (including those acquired by assignment), absolute or contingent, due
or to become due, now existing or hereafter arising.
"Offer" means the cash offer, recommended by the Directors of the
Target, for the Target Shares made or to be made by Bidco on the terms and
conditions contained in the Press Release, as such offer may be amended, varied
or waived in compliance with Section 7.12.
"Offer Document" means the document to be issued to the shareholders of
Target containing the Offer outlined in the Press Release.
"Offshore Currency" means, at any time, Sterling, Deutschemarks,
Guilders, Pesetas, Yen, Francs, Lira, Swiss Francs, euros and/or euro units or
such other currency as is acceptable to the Administrative Agent and the Lenders
in accordance with Section 2.15(e).
"Offshore Currency Loan" means any Revolving Loan that is an Offshore
Rate Loan denominated in an Offshore Currency and any Sterling Acquisition Loan.
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<PAGE> 30
"Offshore Rate" means, for any Interest Period, with respect to
Offshore Rate Loans comprising part of the same Borrowing, the rate of interest
per annum (rounded upward to the next 1/100th of 1%) determined by the
Administrative Agent as follows:
Offshore Rate = LIBOR
--------------------------------------
1.00 - Eurocurrency Reserve Percentage
Where,
"Eurocurrency Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1%) in effect
on such day (whether or not applicable to any bank or Lender)
under regulations issued from time to time by the FRB for
determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities"); and
"LIBOR" means the rate of interest per annum determined by the
Administrative Agent to be the rate of interest per annum at
which deposits, in the Applicable Currency in the approximate
amount of the Loan to be made or continued as, or converted
into, an Offshore Rate Loan by the entity that is the
Administrative Agent and having a maturity comparable to such
Interest Period, would be offered to major banks in the London
interbank market at their request at approximately 11:00 a.m.
(London time) two Business Days prior to the commencement of
such Interest Period rounded upwards to the next 1/100th of
1%.
The Offshore Rate shall be adjusted automatically as to all Offshore Rate Loans
then outstanding as of the effective date of any change in the Eurocurrency
Reserve Percentage. In the case of Offshore Currency Loans, the cost to the
Lenders of complying with any Mandatory Costs will be added to the interest rate
computed in the manner set forth in Schedule 1(a).
"Offshore Rate Loan" means a Loan (other than Swing Line Loans) that
bears interest based on the Offshore Rate.
"Organization Documents" means, for any corporation, partnership,
limited liability company or other similar organization or business entry, the
certificate or articles of incorporation, partnership agreement, limited
liability company agreement, memorandum or articles of association, the bylaws,
any certificate of determination or instrument relating to the rights of
preferred shareholders of such corporation or other entity, any shareholder
rights agreement, and all applicable resolutions of the board of directors (or
any committee thereof) of such corporation or other entity.
"Other Taxes" means any present or future stamp, court or documentary
taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or from the execution, delivery,
performance, enforcement or registration of, or otherwise with respect to, this
Agreement or any other Loan Documents.
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"Overnight Rate" means, for any day, the rate of interest per annum at
which overnight deposits in the Applicable Currency, in an amount approximately
equal to the amount with respect to which such rate is being determined, would
be offered for such day by NationsBank's London Branch to major banks in the
London or other applicable offshore interbank market.
"Participant" has the meaning specified in Section 12.08(d).
"Participating Member State" means a member state of the European Union
that adopts the euro as its currency in accordance with legislation of the
European Union relating to European Economic and Monetary Union.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means:
(a) in the case of real properties, easements, restrictions,
exceptions, reservations or defects which, in the aggregate, do not interfere
materially with the continued use of such properties for the purposes for which
they are used and do not affect materially the value thereof;
(b) liens, if contested in good faith by appropriate
proceedings and appropriate reserves are maintained, in accordance with
generally accepted accounting principles, with respect thereto;
(c) pledges or deposits to secure obligations under workmen's
compensation laws or similar legislation or to secure performance in connection
with bids, tenders and contracts (other than contracts for the payment of
borrowed money) to which the Company or any of its Subsidiaries is a party;
(d) deposits to secure public or statutory obligations of the
Company or any of its Subsidiaries;
(e) materialmen's, mechanics', carriers', workmen's or other
like liens arising in the ordinary course of business, or deposits of cash or
United States obligations to obtain the release of such liens;
(f) deposits to secure surety or appeal bonds in proceedings
to which the Company or any of its Subsidiaries is a party;
(g) existing leases by the Company or its Subsidiaries of real
and personal property;
(h) liens for taxes not yet due and payable;
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<PAGE> 32
(i) liens on the assets of Target and its Subsidiaries to the
extent such liens were in effect prior to the Announcement Date and are
otherwise acceptable to the Administrative Agent in the Administrative Agent's
reasonable discretion; and
(j) liens on the assets of PTI and its Subsidiaries to the
extent such liens were in effect prior to the PTI Effective Date and are
otherwise acceptable to the Administrative Agent in the Administrative Agent's
reasonable discretion.
"Permitted Swap Obligations" means all obligations (contingent or
otherwise) of the Company or any Subsidiary existing or arising under Swap
Contracts, provided that each of the following criteria is satisfied: (I) (a)
such obligations are (or were) entered into by such Person in the ordinary
course of business for the purpose of directly mitigating risks associated with
liabilities, commitments or assets held or reasonably anticipated by such
Person, or changes in the value of securities issued by such Person in
conjunction with a securities repurchase program not otherwise prohibited
hereunder, and not for purposes of speculation or taking a "market view" and (b)
such Swap Contracts do not contain (i) any provision ("walk-away" provision)
exonerating the non-defaulting party from its obligation to make payments on
outstanding transactions to the defaulting party, or (ii) any provision creating
or permitting the declaration of an event of default, termination event or
similar event upon the occurrence of an Event of Default (other than an Event of
Default under Section 10.01(a)) or (II) such Swap Contract was entered into
prior to the Announcement Date and is listed on Schedule 6.21.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture or Governmental Authority.
"Pesetas" means the national currency unit for the time being of Spain.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards set forth in Section 412 of the Code and either (a) is
maintained, or contributed to, by any member of the ERISA Group for employees of
any member of the ERISA Group or (b) has at any time within the preceding five
(5) years been maintained, or contributed to, by any Person which was at such
time a member of the ERISA Group for employees of any Person which was at such
time a member of the ERISA Group.
"Pledge Agreements" means, collectively, if and when each such document
is executed and delivered, (a) the Company Pledge Agreement, (b) each US Holdco
Pledge Agreement, (c) the Subsidiary Guarantor Pledge Agreement and (d) each
pledge agreement required to be delivered by a Foreign Subsidiary pursuant to
Section 7.11, in each case pledging the stock of their respective Subsidiaries
and (other than with respect to Foreign Subsidiaries) intercompany notes to the
Administrative Agent, for the benefit of itself, the Issuing Bank and the
Lenders, as each of the same may be amended, supplemented or otherwise modified
from time to time.
"Pledged Collateral" has the meaning specified in the relevant Pledge
Agreement.
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"Principal Payment Date" has the meaning specified in Section 2.08(d).
"Prior Loan Document" has the meaning specified in the Recitals.
"Prior Loan Document Lender" has the meaning specified in Section
12.19(a).
"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.
"Press Release" means the form of press release agreed between the
Company and the Administrative Agent, which has been initialed by or on behalf
of the Company and the Administrative Agent for the purpose of identification, a
true and correct copy of which is attached as Exhibit O hereto.
"Projections" means the Company's forecasted consolidated: (a) balance
sheets; (b) income statements; and (c) cash flow statements, all prepared on a
basis consistent with the Company's historical financial statements.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, and whether tangible or intangible.
"Pro Rata Revolving Share" means, as to any Revolving Lender, (a) at
any time at which the Aggregate Revolving Loan Commitment remains outstanding,
the percentage equivalent (expressed as a decimal rounded to the ninth decimal
place) at such time of such Lender's Revolving Loan Commitment divided by the
Aggregate Revolving Loan Commitment, and (b) after the termination of the
Aggregate Revolving Loan Commitment, the percentage equivalent (expressed as a
decimal, rounded to the ninth decimal place) at such time of the principal
amount of such Lender's outstanding Revolving Loans (other than Swing Line
Loans) divided by the aggregate principal amount of the outstanding Revolving
Loans (other than Swing Line Loans) of all the Lenders.
"Pro Rata Share" means, as to any Lender, (a) in respect of a
particular Loan and/or Commitment, (i) at any time at which the Commitments in
respect of such Loan remain outstanding, the percentage equivalent (expressed as
a decimal, rounded to the ninth decimal place) at such time of such Lender's
Commitment in respect of such Loan divided by the combined Commitments in
respect of such Loan, and (ii) after the termination of the Commitments in
respect of such Loan, the percentage equivalent (expressed as a decimal, rounded
to the ninth decimal place) at such time of the principal amount outstanding of
such Loans held by such Lender divided by the aggregate principal amount
outstanding of such Loans held by all Lenders, and (b) in respect of all Loans
and/or Commitments, (i) at any time at which the Aggregate Commitment (or any
portion thereof) remains outstanding, the percentage equivalent (expressed as a
decimal, rounded to the ninth decimal place) at such time of such Lender's
Commitments in respect of all Loans divided by the Aggregate Commitment, and (b)
after the termination of the Aggregate Commitment, the percentage equivalent
(expressed as a decimal, rounded to the ninth decimal place) at such time of the
principal amount of such Lender's outstanding Loans (including such Lender's
ratable share of outstanding Swing Line Loans and L/C Obligations) divided by
the aggregate principal amount of the outstanding Loans and L/C Obligations of
all of the Lenders.
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"PTI" means PTI, Inc. a Delaware corporation.
"PTI Effective Date" means the date on which all of the conditions
precedent set forth in Section 5.05 are satisfied or waived by the Lenders.
"PTI Funding Date" means the date on which all of the conditions
precedent set forth in Section 5.06 are satisfied or waived by the Lenders or
the Administrative Agent, as the case may require, and the initial PTI Term
Loans are made by the Lenders holding PTI Term Loan Commitments hereunder to the
Company to facilitate the purchase by PTI MergeCo of all of the outstanding
capital stock of PTI pursuant to the PTI Merger.
"PTI MergeCo" has the meaning specified in the Recitals hereto.
"PTI Merger" has the meaning specified in the Recitals hereto.
"PTI Merger Documents" has the meaning specified in Section 6.22(b).
"PTI Revolver Increase Commitment" has the meaning specified in the
Recitals hereto.
"PTI Subsidiaries" means each Subsidiary of PTI.
"PTI Term Loan" has the meaning specified in Section 2.01(e).
"PTI Term Loan Commitment" means, as to each Lender, such Lender's PTI
Term Loan Commitment, as specified on Schedule 2.01.
"PTI Term Loan Commitment Fee" has the meaning specified in Section
2.10(e).
"Qualified Subsidiary" means any Subsidiary Guarantor and any Eligible
Borrower.
"Quoted Rate" means the rate of interest per annum with respect to a
Swing Line Loan as agreed to between the Company and the Swing Line Lender at
the time such Swing Line Loan is made to the Company.
"Relevant Event of Default" has the meaning specified in Section 10.02.
"Relevant Representations and Warranties" means each of the matters
represented in Section 6.01(a) (with respect to the Company, US Holdco #1, US
Holdco #2 and Bidco) and Sections 6.02(b), 6.03, 6.15(a) and 6.16.
"Relevant Undertakings" means each of the undertakings and covenants of
the Company contained in Sections 7.04(a), 7.08(d), 7.09, 7.12(a), (c), (f) and
(j) and 8.02.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case
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<PAGE> 35
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"Responsible Officer" means (i) the chief executive officer or the
president of the Company, or any other officer having substantially the same
authority and responsibility; or, with respect to compliance with financial
covenants, the chief financial officer or the treasurer of the Company, or any
other officer having substantially the same authority and responsibility or (ii)
with respect to PTI or PTI MergeCo, the chief executive officer or the president
of such Person, or any other officer having substantially the same authority and
responsibility; or, with respect to compliance with financial covenants, the
chief financial officer or the treasurer of such Person, or any other officer
having substantially the same authority and responsibility. Unless otherwise
qualified, "Responsible Officer" means a Responsible Officer of the Company.
"Restricted Payment" means (a) any dividend or other distribution on
any shares of the Company's or any of its Subsidiaries' capital stock (except
dividends payable solely in shares of such Person's capital stock) or (b) any
payment on account of the purchase, redemption, retirement or acquisition of (i)
any shares of the Company's or any of its Subsidiaries' capital stock or (ii)
any option, warrant or other right to acquire shares of the Company's or any of
its Subsidiaries' capital stock; provided, that any Subsidiary of the Company
shall at all times be permitted to make payments, distributions or dividends of
the type referenced in clauses (a) and (b) above to the Company or any
Wholly-Owned Consolidated Subsidiary of the Company and such payments,
distributions or dividends shall be excluded under the definition of Restricted
Payments.
"Revolving Lender" means a Lender having a Revolving Loan Commitment.
"Revolving Loan" has the meaning specified in Section 2.01(c).
"Revolving Loan Commitment" has the meaning specified in Section
2.01(c).
"Revolving Loan Commitment Fee" has the meaning specified in Section
2.10(b).
"Revolving Loan Termination Date" means the earlier to occur of:
(a) the date which is the fifth anniversary of the
Announcement Date; and
(b) the date on which the Revolving Loan Commitments terminate
and are reduced to zero in accordance with Section 2.05(a), 2.07(a) or 10.03.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill
Companies, and any successor thereto.
"Same Day Funds" means (a) with respect to disbursements and payments
in Dollars, immediately available funds, and (b) with respect to disbursements
and payments in an Offshore Currency, same day or other funds as may be
reasonably determined by the Administrative Agent to be customary in the place
of disbursement or payment for the settlement of international banking
transactions in the relevant Offshore Currency.
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<PAGE> 36
"SEC" means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
"Solvent" means, when used with respect to (A) a Person (other than
subject to clause (B)), that (a) the fair saleable value of the assets of such
Person (including goodwill) is in excess of the total amount of the present
value of its liabilities (including for purposes of this definition all
liabilities (including loss reserves as determined by such Person), whether or
not reflected on a balance sheet prepared in accordance with GAAP), (b) such
Person is able to pay its debts or obligations in the ordinary course as they
mature and (c) such Person does not have unreasonably small capital to carry out
its business as conducted and as proposed to be conducted and (B) for any Person
incorporated in England and Wales, on a particular date, on that date such
Person has the ability to pay its debts as and when they fall due and could not
be deemed to be insolvent for the purposes of the Insolvency Act 1986 of the
United Kingdom. "Solvency" shall have a correlative meaning.
"Specified Foreign Subsidiary" has the meaning specified in Section
5.02(g).
"Spot Rate" for a currency means the rate generally quoted by
NationsBank as the spot rate for the purchase by NationsBank of such currency
with another currency through its FX Trading Office on the date two Business
Days prior to the date as of which the foreign exchange computation is made.
"Squeeze-Out" has the meaning specified in the second paragraph of this
Agreement.
"Squeeze-Out Date" means the Business Day after the Business Day
following the last date upon which Bidco becomes obliged to pay any
consideration for the purchase of the Target Shares.
"Squeeze-Out Period" means the period from the Initial Funding Date to
and including the last day of the Certain Funds Period.
"Stated Amount" means the stated or face amount of a Letter of Credit
to the extent available at the time for drawing (subject to presentment of all
requested documents), as the same may be increased or decreased from time to
time in accordance with the terms of such Letter of Credit
"Sterling" and the symbol "pound sterling" each mean the lawful
currency of the United Kingdom.
"Sterling Acquisition Loan" has the meaning specified in Section
2.01(b).
"Sterling Acquisition Loan Commitment" means, as to each Lender, such
Lender's Sterling Acquisition Loan Commitment, as specified on Schedule 2.01.
"Sterling Acquisition Loan Commitment Fee" has the meaning specified in
Section 2.10(d).
"Subsidiary" of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business entity
(A) of which more than 50% of the voting stock, membership interests or other
equity interests (in the case of Persons other than corporations), is
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<PAGE> 37
owned or controlled directly or indirectly by the such Person, or one or more of
the Subsidiaries of such Person, or a combination thereof and (B) with respect
to any Person incorporated in England and Wales, a subsidiary within the meaning
of Section 736 of the Companies Act or, unless the context otherwise requires, a
subsidiary undertaking within the meaning of Section 258 of the Companies Act.
Unless the context otherwise clearly requires, references herein to a
"Subsidiary" refer to a Subsidiary of the Company; provided, that for purposes
of this Agreement, neither Target nor any Target Subsidiary shall be a
Subsidiary until the occurrence of the Initial Funding Date after giving effect
to the Transaction completed on such date.
"Subsidiary Guarantor" means, collectively, (a) US Holdco #1, US Holdco
#2, each Domestic Subsidiary identified as a Subsidiary Guarantor on the
Announcement Date on Schedule 6.08 and each other Domestic Subsidiary created or
acquired after the Announcement Date and (b) to the extent required pursuant to
Section 7.11, each Foreign Subsidiary.
"Subsidiary Guarantor Pledge Agreement" means the Pledge Agreement to
be executed and delivered by the Subsidiary Guarantors (other than US Holdco #1
and US Holdco #2) in the form attached to this Agreement as Exhibit I-3.
"Subsidiary Guaranty" means the Guaranty to be executed and delivered
by the Subsidiary Guarantors in the form attached to this Agreement as Exhibit
J-2.
"Surety Instruments" means all letters of credit (including standby and
documentary), banker's acceptances, bank guaranties, shipside bonds, surety
bonds and similar instruments.
"Swap Contract" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other, similar
transaction (including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.
"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Swap Contracts, as determined by the Company
based upon one or more mid-market or other readily available quotations provided
by any recognized dealer in such Swap Contracts (which may include any Lender).
"Swing Line Loan Commitment" has the meaning specified in Section
2.01(d).
"Swing Line Lender" means NationsBank, in its capacity as provider of
the Swing Line Loans. With respect to Swing Line Loans, NationsBank may cause a
local affiliate to make such
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<PAGE> 38
Swing Line Loans and such local affiliate shall be deemed to be the Swing Line
Lender for the purposes of this Agreement.
"Swing Line Loan" means a Loan made by the Swing Line Lender,
denominated in Dollars, pursuant to Section 2.01(d).
"Swing Line Termination Date" means the earlier to occur of:
(a) the date which is the fifth Business Day prior to the
fifth anniversary of the Announcement Date; and
(b) the date on which the Revolving Loan Commitment terminates
in accordance with the provisions of this Agreement.
"Swiss Francs" means the lawful currency of Switzerland.
"Take Out Debt" has the meaning specified in Section 8.01(g).
"Target" has the meaning ascribed thereto in the recitals.
"Target Shares" means the issued shares of each class of the capital of
the Target (including any shares of the Target issued while the Offer remains
open for acceptance).
"Target Subsidiaries" means each Subsidiary of the Target.
"Taxes" means any and all present or future taxes, levies, assessments,
imposts, duties, deductions, fees, withholdings or similar charges, and all
liabilities with respect thereto, excluding, in the case of each Lender and the
Administrative Agent, respectively, taxes imposed on or measured by its net
income by the jurisdiction (or any political subdivision thereof) under the laws
of which such Lender or the Administrative Agent, as the case may be, is
organized or maintains a lending office.
"Term Loan" has the meaning specified in Section 2.01(a).
"Term Loan Commitment" means, as to each Lender, such Lender's Term
Loan Commitment, as specified on Schedule 2.01.
"Term Loan Commitment Fee" has the meaning specified in Section
2.10(c).
"Transaction" shall include (a) the Offer, (b) the purchase of Target
Shares by Bidco (c) the Credit Extensions made on the Initial Funding Date and
(d) the refinancing of certain Debt of the Company and its Subsidiaries
(including Target and certain Target Subsidiaries) on the Initial Funding Date.
"Transaction Agreements" has the meaning specified in Section 6.22.
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"Type" means, with respect to any Borrowing of Loans (other than Swing
Line Loans), its nature as a Base Rate Loan or an Offshore Rate Loan.
"Unconditional Date" means the date upon which the Offer becomes or is
declared unconditional in all respects.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (a) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (b) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), but only to the extent that
such excess represents a potential liability of any member of the ERISA Group to
the PBGC or any other Person under Title IV of ERISA.
"United States" and "U.S." each means the United States of America.
"US Holdco #1" means MacDermid Tower, Inc., a Delaware corporation, a
Wholly-Owned Consolidated Subsidiary of the Company and 50% shareholder of
Bidco.
"US Holdco #2" means MacDermid Tartan, Inc., a Delaware corporation, a
Wholly-Owned Consolidated Subsidiary of the Company and 50% shareholder of
Bidco.
"US Holdco Pledge Agreement" means the Pledge Agreement to be executed
and delivered by each of US Holdco #1 and US Holdco #2 in the form attached as
Exhibit I-2 hereto.
"Wholly-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary all of the shares of capital stock or other ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Company.
"Y2K Problem" means any significant risk that computer hardware,
software or equipment containing embedded microchips essential to the business
or operations of a Person will not, in the case of dates or time periods
occurring after December 31, 1999, function at least as efficiently and reliably
in all material respects as in the case of times or time periods occurring
before January 1, 2000, including the making of accurate leap year calculations.
"Yen" means the lawful currency of Japan.
1.02 Other Interpretive Provisions
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
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(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and means
"including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding", and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any statute
or regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting
such statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and other Loan Documents may use several
different limitations, tests or measurements to regulate the same or similar
matters. All such limitations, tests and measurements are cumulative and shall
each be performed in accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Administrative Agent or the Lenders
by way of consent, approval or waiver shall be deemed modified by the phrase "in
its/their sole discretion."
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Administrative
Agent, the Company and the other parties, and are the products of all parties.
Accordingly, they shall not be construed against the Lenders or the
Administrative Agent merely because of the Administrative Agent's or Lenders'
involvement in their preparation.
(h) Any test, threshold, item, limit or other measurement
expressed in Dollars herein shall also mean and include the Dollar Equivalent of
such amount from time to time should the test, threshold, item, limit or other
measurement be used in respect of any item expressed in a currency other than
Dollars.
(i) To the extent that any provision of this Agreement relates
to any currency of a state which is not a Participating Member State on the date
of this Agreement, that provision shall take effect as though the reference to
that currency were a reference to euro on the date on which that country becomes
a Participating Member State.
1.03 Accounting Principles
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(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitment.
(a) Term Loan
Each Lender with a Term Loan Commitment severally agrees, on
the terms and conditions set forth herein, to make loans to the Company (each
such loan, a "Term Loan") on the Initial Funding Date, in an amount not to
exceed such Lender's Term Loan Commitment as set forth on Schedule 2.01. Amounts
borrowed as a Term Loan which are repaid or prepaid by the Company may not be
reborrowed.
(b) Sterling Acquisition Loan
Each Lender with a Sterling Acquisition Loan Commitment
severally agrees, on the terms and conditions set forth herein, to make loans to
the Company (each such loan, a "Sterling Acquisition Loan") on the Business Day
following the Initial Funding Date, in an amount not to exceed such Lender's
Sterling Acquisition Loan Commitment as set forth on Schedule 2.01. Amounts
borrowed as a Sterling Acquisition Loan which are repaid or prepaid by the
Company may not be reborrowed.
(c) The Revolving Credit
(i) Subject to Section 2.01(d), each Revolving Lender
severally agrees, on the terms and conditions set forth herein, to make
loans to a Borrower (each such loan, a "Revolving Loan") from time to
time on any Business Day during the period from the Initial Funding
Date to the Revolving Loan Termination Date, in an aggregate amount not
to exceed at any time outstanding the amount set forth on Schedule 2.01
(such amount, as the same may be increased pursuant to Section
2.01(c)(ii), reduced under Section 2.05 or 2.07 or reduced or increased
as a result of one or more assignments under Section 12.08, such
Revolving Lender's "Revolving Loan Commitment"); provided, however,
that, after giving effect to any Borrowing of Revolving Loans, the
Effective Amount of Revolving Loans, Swing Line Loans and L/C
Obligations at such time shall not at any time exceed the Aggregate
Revolving Loan Commitment; and provided further, that the Effective
Amount of Revolving Loans of any Revolving Lender plus the
participation of such Revolving Lender in the Effective Amount of all
L/C Obligations and such Revolving Lender's Pro Rata
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Revolving Share of the Effective Amount of Swing Line Loans shall not
at any time exceed such Revolving Lender's Revolving Loan Commitment.
Within the limits of each Revolving Lender's Commitment, and subject to
the other terms and conditions hereof, a Borrower may borrow under this
Section 2.01(c), prepay under Section 2.06 and reborrow under this
Section 2.01(c).
(ii) On and after the date upon which the
Administrative Agent and any co-arrangers have notified the Company
that they are satisfied with the initial syndication of the Commitments
and Loans, the Company may, at its option at any time on a single
occasion, seek to increase the Revolving Loan Commitment by up to
$50,000,000 (after giving effect to which the Aggregate Revolving Loan
Commitment shall not exceed an amount equal to $125,000,000 (provided,
however, in the event that the Aggregate Revolving Loan Commitment has
been increased on the PTI Funding Date pursuant to the PTI Revolver
Increase Commitment, such amount shall not exceed $175,000,000 and
provided, further, that each Revolving Lender hereby agrees to make the
necessary adjustments or payments as determined by the Administrative
Agent on the PTI Funding Date (including the wiring of funds to other
Revolving Lenders) to properly reflect such Revolving Lender's Pro Rata
Share of the outstanding Revolving Loans after taking into account the
PTI Revolver Increase Commitment and any Revolving Loan borrowings on
the PTI Funding Date) less the aggregate amount of reductions to the
Revolving Loan Commitment effected on or prior to the date of such
increase) upon at least 30 days (but not more than 45 days) written
notice to the Administrative Agent (which notice the Administrative
Agent shall promptly deliver to the Lenders), which notice shall
specify the date upon which such increase is to occur and shall be
delivered at a time when no Default or Event of Default has occurred
and is continuing. The Company shall, after giving such notice, offer
the increase in the Revolving Loan Commitment (A) (i) first on a
pro-rata basis to the Lenders, which Lenders may in their individual
sole discretion decline such offer, and (ii) then on a non pro-rata
basis to Lenders and/or (B) to other lenders or entities constituting
Eligible Assignees and otherwise reasonably acceptable to the
Administrative Agent and the Company, provided that the minimum final
allocated Revolving Loan Commitment of each such lender or other entity
is equal to or in excess of $10,000,000 in the case of any new lender
and $5,000,000 in the case of an existing Lender. No increase in the
Revolving Loan Commitments shall become effective until the existing or
new Lenders extending such incremental commitment amount shall have
delivered to the Administrative Agent a writing in form reasonably
satisfactory to the Administrative Agent pursuant to which such
existing Lenders state the amount of their Revolving Loan Commitment
increase and any such new Lenders state their Revolving Loan Commitment
amount and agree to assume and accept the obligations and rights of a
Lender hereunder and any such new and increasing Lenders agree to make
a Revolving Loan such that the outstandings of such new Lender or
increasing Lender constitute a proportionate amount of the aggregate
outstanding Revolving Loans based on the Revolving Loan Commitment of
such new or increasing Lender. Any Borrowing as a result of an increase
to the Revolving Loan Commitment pursuant to this Section 2.01(c)(ii)
shall be subject to the terms and conditions contained in this
Agreement.
(iii) (A) On and after the third anniversary of the
Announcement Date, the Company may make a written request to the
Administrative Agent, who shall
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forward a copy of each such request to each of the Lenders, that the
Revolving Loan Termination Date then in effect be extended to the date
which is one year after such existing Revolving Loan Termination Date;
provided, however, that the Borrower shall not be permitted to obtain
more than one extension pursuant to this clause (iii). Such request
shall be accompanied by a certificate of a Responsible Officer of the
Company stating that no Default or Event of Default has occurred and is
continuing. If, by the date (a "Response Date") which is 60 days after
the date of such request, Lenders holding at least 85% of the Revolving
Loan Commitments then outstanding agree thereto in writing (each such
Lender, a "Continuing Lender"), the Revolving Loan Termination Date of
each Continuing Lender shall be automatically extended to the first
anniversary of the then existing Revolving Loan Termination Date, and
the Revolving Loan Termination Date with respect to any non-Continuing
Lender (a "Non-Continuing Lender") shall, subject to the following
clause (B), remain the then existing Revolving Loan Termination Date.
In the event that the Company has not obtained agreement to the
requested extension from the requisite percentage of Lenders to permit
an extension by the Response Date, the Revolving Loan Termination Date
shall not be extended. If the Borrower obtains agreement from the
requisite percentage of the Lenders during such 60 day period, the
Revolving Loan Termination Date shall be extended as provided in the
second preceding sentence. The Administrative Agent shall notify the
Company and each Lender of the effectiveness of any such extension. No
Lender shall be obligated to agree to any extension pursuant to this
clause (iii), and the extension of the Revolving Loan Termination Date
as to any Lender shall be in its sole discretion; provided, however,
that as to any extension by a Lender pursuant to this Section
2.01(c)(iii), the definition of Revolving Loan Termination Date as to
such Lender shall be construed so as to take into account the extension
of such Lender's Revolving Loan Commitment.
(B) In the case of a Non-Continuing Lender, the Company, after
giving notice to the Administrative Agent and such Non-Continuing
Lender, may request such Non-Continuing Lender to assign its entire
Revolving Loan Commitment (and upon receipt of such notice such
Non-Continuing Lender hereby agrees to take such action as reasonably
requested by the Company to effect such assignment pursuant to Section
12.08) (i) to the Continuing Lenders, (x) first on a pro-rata basis,
which the Continuing Lenders may in their individual sole discretion
decline to accept such offer, and (y) then on a non pro-rata basis to
Continuing Lenders and/or (ii) to other lenders or entities
constituting Eligible Assignees and otherwise reasonably acceptable to
the Administrative Agent and the Company, provided that any such new
lender shall agree that its Revolving Loan Commitment will terminate on
the date applicable to the Revolving Loan Commitment of the Continuing
Lenders, and all then outstanding Obligations owing to such Non-
Continuing Lender shall be repaid in full on the date of any such
assignment.
(d) Swing Line Loans
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(i) Subject to the terms and conditions hereof, the
Swing Line Lender agrees to make Swing Line Loans to the Company from
time to time prior to the Swing Line Termination Date in an aggregate
principal amount at any one time outstanding not to exceed $15,000,000
(the "Swing Line Loan Commitment"); provided, that after giving effect
to any such Swing Line Loan, the Effective Amount of Revolving Loans,
Swing Line Loans and L/C Obligations at such time would not exceed the
Aggregate Revolving Loan Commitment at such time. Prior to the Swing
Line Termination Date, the Company may use the Swing Line Commitment by
borrowing, prepaying the Swing Line Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof.
(ii) The Company may borrow under the Swing Line
Commitment on any Business Day after the Initial Funding Date but on or
prior to the Swing Line Termination Date; provided, that the Company
shall deliver to the Swing Line Lender a Notice of Borrowing signed by
a Responsible Officer (which notice must be received by the Swing Line
Lender prior to 1:00 p.m. (New York time)) with a copy to the
Administrative Agent specifying the amount of the requested Swing Line
Loan, which shall be in a minimum amount of $500,000 or a whole
multiple of $100,000 in excess thereof. The proceeds of the Swing Line
Loan will be made available by the Swing Line Lender to the Company in
immediately available funds at the office of the Swing Line Lender by
2:00 p.m. (New York time) on the date of such notice. The Company may
at any time and from time to time, prepay the Swing Line Loans, in
whole or in part, without premium or penalty, by notifying the Swing
Line Lender prior to 1:00 p.m. (New York time) on any Business Day of
the date and amount of prepayment with a copy to the Administrative
Agent. If any such notice is given, the amount specified in such notice
shall be due and payable on the date specified therein. Partial
prepayments shall be in an aggregate principal amount of $500,000 or a
whole multiple of $100,000 in excess thereof.
(iii) The Swing Line Lender, at any time in its sole
and absolute discretion, may on behalf of the Company (which hereby
irrevocably directs the Swing Line Lender to so act on its behalf)
notify the Administrative Agent to notify each Revolving Lender
(including the Swing Line Lender) to make a Revolving Loan to the
Company in a principal amount equal to such Lender's Pro Rata Revolving
Share of the amount of such Swing Line Loan, and such Revolving Lender
shall be obligated, pursuant to Section 2.01(c), to make Same Day Funds
available to the Administrative Agent on the date such notice is given
in an aggregate amount equal to or in excess of such Swing Line Loan,
in which case such funds shall be applied by the Administrative Agent
first to repay such Swing Line Loan and any remaining funds shall be
made available to the Company in accordance with Section 2.01(c);
provided, however, that such notice shall be deemed to have
automatically been given upon the occurrence of an Event of Default
under Section 10.01(g) or (h). Upon notice from the Administrative
Agent, each Revolving Lender (other than the Swing Line Lender) will
immediately transfer to the Administrative Agent, for transfer to the
Swing Line Lender, in immediately available funds, an amount equal to
such Revolving Lender's Pro Rata Revolving Share of the amount of such
Swing Line Loan so repaid. So long as no notice has been delivered to
the Swing Line Lender pursuant to Section 2.01(d)(iv)(ii) prior to the
making of each relevant Swing Line Loan, each Revolving Lender's
obligation to transfer the amount of such Revolving Loan to the
Administrative Agent shall be absolute and
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unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any set- off, counterclaim, recoupment, defense
or other right which such Revolving Lender or any other Person may have
against the Swing Line Lender, (ii) the occurrence or continuance of a
Default or an Event of Default or the termination of the Revolving Loan
Commitments, (iii) any adverse change in the condition (financial or
otherwise) of the Company or any other Person, (iv) any breach of this
Agreement by the Company or any other Person or (v) any other
circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing.
(iv) Notwithstanding anything herein to the contrary,
the Swing Line Lender (i) shall not be obligated to make any Swing Line
Loan if the conditions set forth in Article V have not been satisfied
and (ii) shall not make any requested Swing Line Loan if, prior to
11:00 a.m. (New York time) on the date two (2) days preceding the date
of such requested Swing Line Loan, it has received a written notice
from the Administrative Agent or any Revolving Lender directing it not
to make further Swing Line Loans because one or more of the conditions
specified in Article V are not then satisfied.
(v) If prior to the making of a Revolving Loan
required to be made by Section 2.01(d)(iii) an Event of Default
described in Section 10.01(g) or (h) shall have occurred, each
Revolving Lender will, on the date such Revolving Loan was to have been
made pursuant to the notice described in Section 2.01(d)(iii), purchase
an undivided participating interest in the Effective Amount of Swing
Line Loans in an amount equal to its Pro Rata Revolving Share of the
Effective Amount of Swing Line Loans then outstanding. Each Revolving
Lender will immediately transfer to the Administrative Agent for the
benefit of the Swing Line Lender, in immediately available funds, the
amount of its participation.
(vi) Whenever, at any time after a Revolving Lender
has purchased a participating interest in a Swing Line Loan, the Swing
Line Lender receives any payment on account thereof, the Swing Line
Lender will distribute to the Administrative Agent for delivery to such
Revolving Lender the amount of its participating interest in such
amount (appropriately adjusted, in the case of interest payments, to
reflect the period of time during which such Revolving Lender's
participating interest was outstanding and funded); provided, however,
that in the event that such payment received by the Swing Line Lender
is required to be returned, such Revolving Lender will return to the
Administrative Agent for delivery to the Swing Line Lender any portion
thereof previously distributed by the Swing Line Lender to it.
(vii) So long as no notice has been delivered to the
Swing Line Lender pursuant to Section 2.01(d)(iv)(ii) prior to the
making of each relevant Swing Line Loan, each Revolving Lender's
obligation to make the Revolving Loans referred to in Section
2.01(d)(iii) and to purchase participating interests pursuant to
Section 2.01(d)(v) shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (I) any
set-off, counterclaim, recoupment, defense or other right which such
Revolving Lender or a Borrower may have against the Swing Line Lender,
a Borrower or any other Person for any reason whatsoever, (II) the
occurrence or continuance of a Default or an Event of Default, (III)
any adverse change in the condition (financial or otherwise) of
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the Company or any Subsidiary Guarantor, (IV) any breach of this
Agreement or any other Loan Document by the Company or any of its
Subsidiaries or any other Lender or (V) any other circumstance,
happening or event whatsoever, whether or not similar to any of the
foregoing.
(e) PTI Term Loan
Each Lender with a PTI Term Loan Commitment severally agrees,
on the terms and conditions set forth herein, to make loans to the Company (each
such loan, a "PTI Term Loan") on the PTI Funding Date, in an amount not to
exceed such Lender's PTI Term Loan Commitment as set forth on Schedule 2.01.
Amounts borrowed as a PTI Term Loan which are repaid or prepaid by the Company
may not be reborrowed.
2.02 Loan Accounts.
(a) The Loans made by each Lender and the Letters of Credit
Issued by the Issuing Bank shall be evidenced by one or more accounts or records
maintained by such Lender or Issuing Bank, as the case may be, in the ordinary
course of business. The accounts or records maintained by the Administrative
Agent, the Issuing Bank and each Lender shall be prima facie evidence of the
amount of the Loans made by the Lenders to a Borrower and the Letters of Credit
Issued by the Issuing Bank for the account of the Company, and the interest and
payments thereon. Any failure so to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of a Borrower hereunder to pay
any amount owing with respect to the Loans or any Letter of Credit.
(b) Upon the request of any Lender made through the
Administrative Agent, the Loans made by such Lender may be evidenced by one or
more Notes, instead of or in addition to loan accounts. Each such Lender may
record on the schedules annexed to its Note(s) the date, amount and maturity of
each Loan made by it and the amount of each payment of principal made by the
applicable Borrower with respect thereto. Each such Lender is irrevocably
authorized by each Borrower to make such recordations on its Note(s) and each
Lender's record shall be deemed prima facie correct; provided, however, that the
failure of a Lender to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the obligations any
Borrower hereunder or under any such Note to such Lender.
2.03 Procedure for Borrowing.
(a) Each Borrowing (other than a Borrowing of Swing Line Loans
or a L/C Borrowing) shall be made upon a Borrower's irrevocable written notice
delivered to the Administrative Agent in the form of a Notice of Borrowing
(which notice must be received by the Administrative Agent prior to (i) 11:30
a.m. (New York time) three Business Days prior to the requested Borrowing Date,
in the case of Offshore Rate Loans denominated in Dollars, (ii) 1:00 p.m. (New
York time) four Business Days prior to the requested Borrowing Date, in the case
of Offshore Rate Loans in an Offshore Currency and (iii) 11:30 a.m. (New York
time) on the date of the requested Borrowing, in the case of Base Rate Loans,
specifying:
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(i) the amount of the Borrowing, which shall be in an
aggregate minimum amount of $1,000,000, or any multiple of $100,000 in
excess thereof, in the case of Base Rate Loans, and $2,00,000, or any
multiple of $100,000 in excess thereof, in the case of Offshore Rate
Loans;
(ii) the requested Borrowing Date, which shall be a
Business Day;
(iii) whether such Loan shall be a Revolving Loan, a
Term Loan, PTI Term Loan or a Sterling Acquisition Loan;
(iv) the Type of Loans comprising the Borrowing;
(v) if a Revolving Loan comprised of Offshore Currency
Loans, the Applicable Currency;
(vi) if the Loan then requested is to be an Offshore
Rate Loan, the duration of the Interest Period applicable to such Loans
included in such notice, provided, however, that in the event the
Notice of Borrowing fails to specify the duration of the Interest
Period for any Borrowing comprised of Offshore Rate Loans, such
Interest Period shall be three months; and
(vii) if a Revolving Loan, the identity of the Borrower.
(b) Upon receipt of the Notice of Borrowing, the Administrative
Agent will promptly notify each Lender thereof and of the amount of such
Lender's Pro Rata Share of the related Borrowing. In the case of a Borrowing of
Revolving Loans comprised of Offshore Currency Loans, such notice will provide
the amount of each Lender's Pro Rata Revolving Share of such Borrowing, and the
Administrative Agent will, upon the determination of the Dollar Equivalent
amount of such Borrowing as specified in the Notice of Borrowing, promptly
notify each Lender of the exact Dollar Equivalent amount of such Lender's Pro
Rata Revolving Share of such Borrowing. The Dollar Equivalent amount of any
Borrowing in an Offshore Currency will be determined by the Administrative
Agent for such Borrowing on the Computation Date therefor in accordance with
Section 2.15(a).
(c) Each Lender will make the amount of its Pro Rata Share of each
Borrowing available to the Administrative Agent for the account of the
requesting Borrower at the Administrative Agent's Payment Office on the
Borrowing Date requested in Same Day Funds and in the requested currency (i) in
the case of a Borrowing comprised of Loans in Dollars, by 2:00 p.m. (New York
time) and (ii) in the case of a Borrowing comprised of Offshore Currency Loans,
by such time as the Administrative Agent may specify. The proceeds of all such
Loans will then be made available to the requesting Borrower by the
Administrative Agent at such office by crediting the account of the requesting
Borrower on the books of NationsBank with the aggregate of the amounts made
available to the Administrative Agent by the Lenders and in like funds as
received by the Administrative Agent.
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(d) After giving effect to any Borrowing, unless the
Administrative Agent shall otherwise consent, there may not be more than six (6)
different Interest Periods in effect with respect to Offshore Rate Loans.
(e) After the occurrence of an Event of Default (other than a
Relevant Event of Default) during the Certain Funds Period, the Company hereby
requests that any Sterling Acquisition Loans being made to facilitate the
purchase of Target Shares be funded (on behalf of the Company) as a loan to the
Company directly to the receiving agent for the Offer pursuant to wire transfer
information as provided by the Company and subject to (i) compliance with all
laws and (ii) the satisfaction of any other borrowing conditions by the Company
hereunder.
2.04 Conversion and Continuation Elections for Revolving Loans
(a) A Borrower may, upon irrevocable written notice to the
Administrative Agent in accordance with Section 2.04(b):
(i) elect, as of any Business Day, in the case of
Base Rate Loans, or as of the last day of the applicable Interest
Period, in the case of Offshore Rate Loans (other than Sterling
Acquisition Loans), to convert any such Loans (or any part thereof in
an aggregate minimum amount of $1,000,000, or any multiple of $100,000
in excess thereof, in the case of Base Rate Loans, and $2,000,000, or
any multiple of $100,000 in excess thereof, in the case of Offshore
Rate Loans) into Loans of any other Type; or
(ii) elect as of the last day of the applicable
Interest Period with respect of any Offshore Rate Loan, to continue any
Loans having Interest Periods expiring on such day (or any part thereof
in an amount not less than the Dollar Equivalent of $2,000,000, or that
is in an integral multiple of the Dollar Equivalent of $100,000 in
excess thereof) as Loans of the same Type;
provided, that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $2,000,000, such Offshore Rate Loans shall
automatically convert into Base Rate Loans as of the last day of the Interest
Period applicable thereto, and on and after such date the right of the Company
to continue such Revolving Loans as, and convert such Revolving Loans into,
Offshore Rate Loans shall terminate.
(b) A Borrower shall deliver a Notice of
Conversion/Continuation to be received by the Administrative Agent not later
than 11:00 a.m. (New York time) at least (i) three Business Days in advance of
the Conversion/Continuation Date, if the Loans (x) are to be converted into or
continued as Offshore Rate Loans denominated in Dollars or (y) are Sterling
Acquisition Loans, (ii) four Business Days in advance of the
Conversion/Continuation Date, if the Loans are to be converted into or continued
as Offshore Rate Loans in an Offshore Currency and (iii) on the
Conversion/Continuation Date, if the Loans are to be converted into Base Rate
Loans, specifying:
(i) the proposed Conversion/Continuation Date;
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(ii) the aggregate amount of Loans to be converted or
continued;
(iii) the Type of Loans resulting from the proposed
conversion or continuation;
(iv) the Applicable Currency;
(v) other than in the case of conversions into Base
Rate Loans, the duration of the requested Interest Period; and
(vi) the identity of the Borrower.
(c) If upon the expiration of any Interest Period applicable
to Offshore Rate Loans (other than Offshore Currency Loans), the relevant
Borrower has failed to select a new Interest Period to be applicable to such
Offshore Rate Loans by the time specified in Section 2.04(b), or if any Default
or Event of Default then exists, such Borrower shall be deemed to have elected
to convert such Offshore Rate Loans into Base Rate Loans effective as of the
expiration date of such Interest Period. If the Company has failed to select a
new Interest Period to be applicable to Sterling Acquisition Loans by the time
specified in Section 2.04(b), or if any Default or Event of Default then exists,
the Company shall be deemed to have elected to continue such Sterling
Acquisition Loan on the basis of a one month Interest Period. If the relevant
Borrower has failed to select a new Interest Period to be applicable to Offshore
Currency Loans (other than Sterling Acquisition Loans) prior to the fourth
Business Day in advance of the expiration date of the current Interest Period
applicable thereto as provided in Section 2.04(b), or if any Default or Event of
Default shall then exist, such Borrower shall be deemed to have elected to
continue such Offshore Currency Loans on the basis of a one month Interest
Period.
(d) The Administrative Agent will promptly notify each Lender
of its receipt of a Notice of Conversion/Continuation, or, if no timely notice
is provided by the relevant Borrower, the Administrative Agent will promptly
notify each Lender of the details of any automatic conversion. All conversions
and continuations shall be made ratably according to the respective outstanding
principal amounts of the Loans, with respect to which the notice was given, held
by each Lender.
(e) Unless the Majority Lenders otherwise consent, during the
existence of a Default or Event of Default, a Borrower may not elect to have (i)
a Loan converted into or continued as an Offshore Rate Loan or (ii) an Offshore
Currency Loan continued on the basis of an Interest Period exceeding one month.
(f) After giving effect to any conversion or continuation of
Loans, unless the Administrative Agent shall otherwise consent, there may not be
more than six (6) different Interest Periods in effect with respect to Offshore
Rate Loans.
(g) Notwithstanding anything else to the contrary in this
Agreement, Swing Line Loans may only bear interest at the Base Rate or the
Quoted Rate.
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(h) Upon the delivery of an Election to Participate, each
Eligible Borrower hereby appoints the Company as its agent, and authorizes the
Company to deliver any Notice of Borrowing or Notice of Conversion/Continuation
to the Administrative Agent on behalf of such Eligible Borrower.
2.05 Voluntary Termination or Reduction of Commitments
(a) The Company may, upon not less than three Business Days'
prior notice to the Administrative Agent (which notice the Administrative Agent
shall promptly deliver to Lenders), terminate the Commitments of all Lenders
ratably, or permanently reduce the Commitments of all Lenders ratably by an
aggregate minimum amount of the Dollar Equivalent of $5,000,000 or any multiple
of the Dollar Equivalent of $1,000,000 in excess thereof; unless, after giving
effect thereto and to any prepayments of Loans plus Swing Line Loans plus L/C
Obligations made on the effective date thereof, (a) the Effective Amount of all
Revolving Loans, Swing Line Loans and L/C Obligations would exceed the amount of
the combined Revolving Loan Commitments of all Revolving Lenders then in effect,
(b) the Effective Amount of all L/C Obligations would exceed the amount of the
L/C Commitment then in effect or (c) the Effective Amount of all Swing Line
Loans would exceed the Swing Line Loan Commitment then in effect. Once reduced
in accordance with this Section, the Commitments may not be increased. Any
reduction of the Commitments shall be applied to each Lender according to its
Pro Rata Share. All accrued commitment and letter of credit fees and interest,
if applicable, to, but not including, the effective date of any reduction or
termination of the Commitments shall be paid on the effective date of such
reduction or termination.
(b) At no time shall the Swing Line Commitment exceed the
Aggregate Revolving Loan Commitment, and any reduction of the Aggregate
Revolving Loan Commitment which reduces the Aggregate Revolving Loan Commitment
below the then-current amount of the Swing Line Commitment shall result in an
automatic corresponding reduction of the Swing Line Commitment to the amount of
the Aggregate Revolving Loan Commitment, as so reduced, without any action on
the part of the Swing Line Lender. Any reduction of the Aggregate Revolving Loan
Commitment below the then-current amount of the Swing Line Commitment shall
result in an automatic corresponding reduction of the Swing Line Commitment to
the amount of the Aggregate Revolving Loan Commitment as so reduced, without any
action on the part of the Swing Line Lender.
2.06 Optional Prepayments of Loans
Subject to Section 4.04, any Borrower, may, at any time or
from time to time, upon irrevocable notice to the Administrative Agent, prepay
(but not permanently reduce the Revolving Loan Commitments to the extent of
prepayments on the Revolving Loans unless otherwise expressly requested in
writing by the Company) the Loans in whole or in part, in minimum amounts of
$1,000,000, or any multiple of $100,000 in excess thereof, in the case of Base
Rate Loans, and the Dollar Equivalent of $2,000,000, or any multiple of the
Dollar Equivalent of $100,000 in excess thereof (or such other amount necessary
to repay any Offshore Currency Loan in full), in the case of Offshore Rate
Loans. The relevant Borrower may designate whether such prepayments shall be
applied to prepay Revolving Loans, Term Loans, PTI Term Loans or Sterling
Acquisition Loans provided that such prepayments shall be applied ratably among
the Lenders holding such Loans. A
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Borrower shall deliver a notice of prepayment in accordance with Section 12.02
to be received by the Administrative Agent not later than 11:00 a.m. (New York
time) (a) at least three Business Days in advance of the prepayment date if the
Loans to be prepaid are Offshore Currency Loans, (b) at least two Business Days
in advance of the prepayment date if the Loans to be prepaid are Offshore Rate
Loans in Dollars, and (iii) on the date of the prepayment date if the Loans to
be prepaid are Base Rate Loans. Such notice of prepayment shall specify the date
and amount of such prepayment, the Loans being prepaid and whether such
prepayment is of Base Rate Loans or Offshore Rate Loans, or any combination
thereof, the Applicable Currency and the identity of the Borrower. The
Administrative Agent will promptly notify each Lender of its receipt of any such
notice, and of such Lender's Pro Rata Share of such prepayment. If such notice
is given by a Borrower, such Borrower shall make such prepayment and the payment
amount specified in such notice shall be due and payable on the date specified
therein, together with accrued interest to each such date on the amount prepaid
and any amounts required pursuant to Section 4.04.
2.07 Termination of Commitments; Mandatory Prepayments of Loans;
Mandatory Commitment Reductions
(a) The Aggregate Commitment shall be terminated and reduced
to zero in the event that:
(i) the Offer is not posted on or prior to the
thirtieth (30th) day following the Announcement Date;
(ii) the Company and/or Bidco withdraws the Offer or
the Offer lapses;
(iii) the Offer has not gone wholly unconditional
within six (6) calendar months after the Announcement Date;
(iv) the Initial Funding Date has not occurred within
sixteen (16) days after the Offer has gone wholly unconditional; or
(v) the consent relating to the Existing Credit
Agreement delivered pursuant to Section 5.01(h) fails for any reason to
remain in full force and effect, or is not extended before December 31,
1998 to April 30, 1999 or a date thereafter.
(b) Subject to Section 4.04, if on any date the Effective
Amount of Revolving Loans, Swing Line Loans and L/C Obligations exceeds the
Aggregate Revolving Loan Commitment, the Company shall immediately, and without
notice or demand, prepay the outstanding principal amount of the Swing Line
Loans, Revolving Loans and L/C Advances by an amount equal to the applicable
excess and the Lenders shall apply such amounts first to repay Base Rate Loans
and thereafter to repay Offshore Rate Loans.
(c) If on any date the Effective Amount of L/C Obligations
exceeds the L/C Commitment, the Company shall Cash Collateralize on such date
the outstanding Letters of Credit in an amount equal to the excess of the
maximum amount then available to be drawn under all outstanding Letters of
Credit over the L/C Commitment. Subject to Section 4.04, if on any date
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after giving effect to any Cash Collateralization made on such date pursuant to
the preceding sentence, the Effective Amount of Revolving Loans, Swing Line
Loans and L/C Obligations exceeds the Aggregate Revolving Loan Commitment, the
Company shall immediately, and without notice or demand, prepay the outstanding
principal amount of the Swing Line Loans, Revolving Loans and L/C Advances by an
amount equal to the applicable excess. Each Borrower, effective as of the
Initial Funding Date, hereby grants to the Administrative Agent, for the benefit
of the Administrative Agent, the Issuing Bank and the Lenders, a security
interest in all cash and deposit account balances subject to Cash
Collateralization. Cash collateral subject to Cash Collateralization shall be
maintained in blocked deposit accounts at NationsBank. NationsBank shall invest
any and all available funds deposited in such deposit account, promptly upon the
relevant funds becoming available, in securities issued or fully guaranteed or
insured by the United States Government or any agency thereof backed by the full
faith and credit of the United States having maturities of no greater than three
months from the date of acquisition thereof (collectively, "Government
Obligations"). Each Borrower hereby acknowledges and agrees that NationsBank
shall not have any liability with respect to, and each Borrower hereby
indemnifies NationsBank against, any loss resulting from the acquisition of the
Government Obligations and NationsBank shall not have any obligation to monitor
the trading activity of any such Governmental Obligations on and after the
acquisition thereof for the purpose of obtaining the highest possible return
with respect thereto, NationsBank's responsibility being limited to acquiring
such Governmental Obligations.
(d) If on any Computation Date the Administrative Agent shall
have determined that the aggregate Dollar Equivalent principal amount of all
Revolving Loans and Swing Line Loans then outstanding and the aggregate amount
of outstanding L/C Obligations exceeds the Aggregate Revolving Loan Commitment,
due to a change in applicable rates of exchange between Dollars and Offshore
Currencies, then the Administrative Agent shall give notice to the Company that
a prepayment is required under Section 2.07(b), and the Company agrees thereupon
to make prepayments of Revolving Loans, subject to Section 4.04, such that,
after giving effect to such prepayment, the aggregate Dollar Equivalent amount
of all Revolving Loans, Swing Line Loans and aggregate outstanding L/C
Obligations does not exceed the Aggregate Revolving Loan Commitment.
(e) The Company shall prepay Loans in an amount equal to 100%
of the insurance proceeds received by the Company or any Subsidiary following a
casualty involving such Person's Property, to the extent not applied (or
intended to be applied) within 90 days after the consummation or receipt
thereof, as applicable, to the purchase of replacement assets or repair of
damaged assets. Such prepayment shall be made on the 90th day after receipt of
such insurance proceeds and the amount of such prepayment shall be applied (i)
first, to prepay Term Loans, PTI Term Loans and Sterling Acquisition Loans on a
ratable basis among the then outstanding Term Loans, PTI Term Loans and Sterling
Acquisition Loans (based on the Dollar Equivalent thereof on the date of such
prepayment), applied on a ratable basis among all remaining payments in respect
of each such Loan, (ii) second, to prepay the then outstanding Swing Line Loans
(without a corresponding reduction in the Swing Line Loan Commitment), and (iii)
third, to prepay the then outstanding Revolving Loans (without a corresponding
reduction in the Aggregate Revolving Loan Commitment). Such proceeds shall be
applied first, to the extent possible, to prepay Base Rate Loans and then to
prepay Offshore Rate Loans. The Company shall use its commercially reasonable
efforts to notify the Administrative Agent of the amount of any required
prepayment at least three (3) Business Days before it is made.
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(f) The Company shall prepay Loans in an amount equal to 100%
of the sum of the Net Proceeds realized upon all Asset Dispositions (other than
an Asset Disposition pursuant to Section 8.05(ii)(y)) made by the Company or any
Subsidiary, aggregating in excess of $3,000,000 during any calendar year, within
one hundred eighty (180) Business Days after the date of such Asset Disposition
or, if later, the date of the receipt of the proceeds therefrom to the extent
not applied (or committed to be applied) within such period to the purchase of
other assets that are not classified as current assets under GAAP and are used
or useful in the business of the Company and its Subsidiaries. The amount of
such prepayment shall be applied (i) first, to prepay Term Loans, PTI Term Loans
and Sterling Acquisition Loans on a ratable basis among the then outstanding
Term Loans, PTI Term Loans and Sterling Acquisition Loans (based on the Dollar
Equivalent thereof on the date of such prepayment), applied on a ratable basis
among all remaining payments in respect of each such Loan, (ii) second, to
prepay the then outstanding Swing Line Loans (without a corresponding reduction
in the Swing Line Loan Commitment), and (iii) third, to prepay the then
outstanding Revolving Loans (without a corresponding reduction in the Aggregate
Revolving Loan Commitment). Such proceeds shall be applied first, to the extent
possible, to prepay Base Rate Loans and then to prepay Offshore Rate Loans. The
Company shall use its commercially reasonable efforts to notify the
Administrative Agent of the amount of any required prepayment at least three (3)
Business Days before it is made.
(g) The relevant Borrower shall pay, together with each
prepayment under this Section 2.07, accrued interest on the amount prepaid
through the date of such prepayment.
(h) The Aggregate Term Loan Commitment and the Aggregate
Sterling Acquisition Loan Commitment, and the Term Loan Commitment and Sterling
Acquisition Loan Commitment of each Lender, shall be reduced on the Initial
Funding Date or the Business Day occurring after the Initial Funding Date (after
giving effect to any Term Loan and/or Sterling Acquisition Loan, as the case may
be, made on the Initial Funding Date) in an amount equal to the unutilized
Aggregate Term Loan Commitment and the unutilized Aggregate Sterling Acquisition
Loan Commitment, and the unutilized Term Loan Commitment and unutilized Sterling
Acquisition Loan Commitment of each Lender, as of such date.
(i) The Aggregate PTI Term Loan Commitment and the PTI
Revolver Increase Commitment shall be terminated and reduced to zero in the
event that:
(I) the PTI Merger has not been consummated on or
prior to September 30, 1999; and
(II) the PTI Funding Date has not occurred on or
prior to September 30, 1999.
(j) The Aggregate PTI Term Loan Commitment and the PTI Term
Loan Commitment of each Lender shall be reduced on the PTI Funding Date (after
giving effect to any PTI Term Loan made on the PTI Funding Date) in an amount
equal to the unutilized Aggregate PTI Term Loan Commitment and the unutilized
PTI Term Loan Commitment of each Lender, as of such date.
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(k) The Company shall prepay Loans in an amount equal to 100%
of the sum of the net proceeds (meaning gross proceeds less reasonable
transaction expenses) realized upon the issuance of any Take Out Debt
substantially simultaneously with the receipt of the proceeds therefrom. The
amount of such prepayment shall be applied (i) first, to prepay Term Loans and
PTI Term Loans on a ratable basis among the then outstanding Term Loans and PTI
Term Loans, applied on a ratable basis among all remaining payments in respect
of each such Loan, (ii) second, to prepay the then outstanding Swing Line Loans
(without a corresponding reduction in the Swing Line Loan Commitment), and (iii)
third, to prepay the then outstanding Revolving Loans (without a corresponding
reduction in the Aggregate Revolving Loan Commitment). Such proceeds shall be
applied first, to the extent possible, to prepay Base Rate Loans and then to
prepay Offshore Rate Loans. The Company shall use its commercially reasonable
efforts to notify the Administrative Agent of the amount of any required
prepayment at least three (3) Business Days before it is made.
2.08 Repayment of Loans
(a) Each Borrower shall repay to the Revolving Lenders on the
Revolving Loan Termination Date the aggregate principal amount of Revolving
Loans of such Borrower outstanding on such date.
(b) The Company shall repay Swing Line Loans (other than with
proceeds of a Swing Line Loan) in full on the thirtieth (30th) day following the
incurrence of any such Swing Line Loan.
(c) The Company shall repay to the Swing Line Lender on the
Swing Line Termination Date the aggregate principal amount of Swing Line Loans
outstanding on such date.
(d) The Company shall repay the Term Loans, PTI Term Loans and
Sterling Acquisition Loans on each date and in the amount set forth on Schedule
2.08(d) (each a "Principal Payment Date").
2.09 Interest
(a) Each (i) Loan (other than a Sterling Acquisition Loan or a
Swing Line Loan) shall bear interest on the outstanding principal amount thereof
from the applicable Borrowing Date at a rate per annum equal to the Offshore
Rate or the Base Rate, as the case may be (and subject to the Company's right to
convert to other Types of Loans under Section 2.04), plus the Applicable Margin,
(ii) Sterling Acquisition Loan shall bear interest on the outstanding principal
amount thereof from the applicable Borrowing Date at a rate per annum equal to
the Offshore Rate, plus the Applicable Margin and (iii) Swing Line Loan shall
bear interest on the outstanding principal amount thereof from the applicable
Borrowing Date at a rate per annum equal to the Base Rate, plus the Applicable
Margin for Revolving Loans maintained as Base Rate Loans or the Quoted Rate.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date. Interest shall also be paid on the date of the conversion
of an Offshore Rate Loan into a Base Rate Loan, on the date of any prepayment of
any Loans under Section 2.06 or 2.07 for the portion of the Loans so prepaid and
upon payment (including prepayment) in full thereof and, during the existence
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of any Event of Default, interest shall be paid on demand of the Administrative
Agent at the request or with the consent of the Majority Lenders.
(c) Notwithstanding Section 2.09(a), while any Event of
Default exists or after acceleration, each Borrower shall pay interest or
additional fees (after as well as before entry of judgment thereon to the extent
permitted by law) on the principal amount of all outstanding Obligations, at a
rate per annum which is determined by adding 2% per annum to the Applicable
Margin or rate then in effect for such Obligations; provided, however, that, on
and after the expiration of any Interest Period applicable to any Offshore Rate
Loan outstanding on the date of occurrence of such Event of Default or
acceleration, the principal amount of such Offshore Rate Loan shall, during the
continuation of such Event of Default or after acceleration, bear interest at a
rate per annum equal to the Base Rate plus the Applicable Margin plus 2%.
(d) Anything herein to the contrary notwithstanding, the
obligations of each Borrower to any Lender hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by such Lender would be contrary
to the provisions of any law applicable to such Lender limiting the highest rate
of interest that may be lawfully contracted for, charged or received by such
Lender, and in such event each Borrower shall pay such Lender interest at the
highest rate permitted by applicable law.
2.10 Fees
In addition to certain fees described in Section 3.08:
(a) Agency Fees
The Company shall pay the fees to the Administrative Agent for
the Administrative Agent's own account, as required by the letter agreements (as
amended from time to time, collectively, the "Fee Letter") between the Company
and the Administrative Agent, dated as of October 16, 1998 and March 23, 1999.
(b) Revolving Loan Commitment Fee
The Company shall pay to the Administrative Agent for the
account of each Revolving Lender a commitment fee ("Revolving Loan Commitment
Fee") on the actual daily unused portion of such Revolving Lender's Revolving
Loan Commitment computed on a quarterly basis in arrears on the last Business
Day of each calendar quarter based upon the daily utilization for that quarter
as calculated by the Administrative Agent, equal to (x) for the period from and
including the Announcement Date and to but excluding the sixtieth (60th) day
following the Announcement Date, 0.20% per annum and (y) thereafter, the
Applicable Margin per annum applicable to the Commitment Fee. For purposes of
calculating utilization under this clause (b), the Revolving Loan Commitments
shall be deemed used to the extent of the Effective Amount of Revolving Loans
then outstanding and the Effective Amount of all L/C Obligations then
outstanding. Such commitment fee shall accrue from the Announcement Date to the
Revolving Loan Termination Date and shall be
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due and payable quarterly in arrears on the last Business Day of each March,
June, September and December through the Revolving Loan Termination Date, with
the final payment to be made on the Revolving Loan Termination Date. The
commitment fees provided in this clause (b) shall accrue at all times after the
Announcement Date, including at any time during which one or more conditions in
Article V are not met. Notwithstanding anything herein to the contrary, for
purposes of the PTI Revolver Increase Commitment amount, the Company shall pay
to the Administrative Agent for the account of each Revolving Lender a
commitment fee equal to 0.20% per annum on the PTI Revolver Increase Commitment
for the period from and including the PTI Effective Date and to but excluding
the PTI Funding Date (provided, however, in the event that the PTI Funding Date
has not occurred on or before July 31, 1999, such commitment fee shall equal the
Applicable Margin per annum applicable to the Commitment Fee for the period on
and including August 1, 1999 to and excluding the PTI Funding Date).
(c) Term Loan Commitment Fee
The Company shall pay to the Administrative Agent for the
account of each Lender with a Term Loan Commitment a commitment fee ("Term Loan
Commitment Fee") on the actual daily unused portion of such Lender's Term Loan
Commitment computed on a quarterly basis in arrears on the last Business Day of
each calendar quarter based upon the daily utilization for that quarter as
calculated by the Administrative Agent, equal to (x) for the period from and
including the Announcement Date and to but excluding the sixtieth (60th) day
following the Announcement Date, 0.20% per annum and (y) thereafter, the
Applicable Margin per annum applicable to the Commitment Fee. For purposes of
calculating utilization under this clause (c), the Term Loan Commitments shall
be deemed used to the extent of the Effective Amount of Term Loans then
outstanding. Such Term Loan Commitment Fee shall accrue from the Announcement
Date to the Initial Funding Date and shall be due and payable quarterly in
arrears on the last Business Day of each March, June, September and December
through the Initial Funding Date, with the final payment to be made on the
Initial Funding Date; provided, that in connection with any reduction or
termination of Term Loan Commitments, as the case may be, under Section 2.05 or
2.07(a), the accrued Term Loan Commitment Fee calculated for the period ending
on such date shall also be paid on the date of such reduction or termination,
with the following quarterly payment being calculated on the basis of the period
from such reduction or termination date to such quarterly payment date. The Term
Loan Commitment Fee shall accrue at all times after the above-mentioned
commencement date until the Initial Funding Date.
(d) Sterling Acquisition Loan Commitment Fee
The Company shall pay to the Administrative Agent for the
account of each Lender with a Sterling Acquisition Loan Commitment a commitment
fee ("Sterling Acquisition Loan Commitment Fee") on the actual daily unused
portion of such Lender's Sterling Acquisition Loan Commitment computed on a
quarterly basis in arrears on the last Business Day of each calendar quarter
based upon the daily utilization for that quarter as calculated by the
Administrative Agent, equal to (x) for the period from and including the
Announcement Date and to but excluding the sixtieth (60th) day following the
Announcement Date, 0.20% per annum and (y) thereafter, the Applicable Margin per
annum applicable to the Commitment Fee. For purposes of calculating utilization
under this clause (d), the Sterling Acquisition Loan Commitments shall be deemed
used
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to the extent of the Effective Amount of Sterling Acquisition Loans then
outstanding. Such Sterling Acquisition Loan Commitment Fee shall be paid in
Dollars and shall accrue from the Announcement Date to the Business Day
following the Initial Funding Date and shall be due and payable quarterly in
arrears on the last Business Day of each March, June, September and December
through the Business Day following the Initial Funding Date with the final
payment to be made on the Squeeze Out Date; provided, that in connection with
any reduction or termination of Sterling Acquisition Loan Commitments, as the
case may be, under Section 2.05 or 2.07(a), the accrued Sterling Acquisition
Loan Commitment Fee calculated for the period ending on such date shall also be
paid on the date of such reduction or termination, with the following quarterly
payment being calculated on the basis of the period from such reduction or
termination date to such quarterly payment date. The Sterling Acquisition Loan
Commitment Fee shall accrue at all times after the above-mentioned commencement
date until the Business Day following the Initial Funding Date.
(e) PTI Term Loan Commitment Fee
The Company shall pay to the Administrative Agent for the
account of each Lender with a PTI Term Loan Commitment a commitment fee ("PTI
Term Loan Commitment Fee") on the actual daily unused portion of such Lender's
PTI Term Loan Commitment computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter based upon the daily utilization for that
quarter as calculated by the Administrative Agent, equal to 0.20% per annum for
the period from and including the PTI Effective Date and to but excluding the
PTI Funding Date; provided, however, in the event that the PTI Funding Date has
not occurred on or before July 31, 1999, such commitment fee shall equal the
Applicable Margin per annum applicable to the Commitment Fee for the period on
and including August 1, 1999 to and excluding the PTI Funding Date. For purposes
of calculating utilization under this clause (e), the PTI Term Loan Commitments
shall be deemed used to the extent of the Effective Amount of PTI Term Loans
then outstanding. Such PTI Term Loan Commitment Fee shall accrue from the PTI
Effective Date to but excluding the PTI Funding Date and shall be due and
payable quarterly in arrears on the last Business Day of each March, June,
September and December through the day preceding the PTI Funding Date, with the
final payment to be made on the PTI Funding Date; provided, that in connection
with any reduction or termination of PTI Term Loan Commitments, as the case may
be, under Section 2.05 or 2.07(i), the accrued PTI Term Loan Commitment Fee
calculated for the period ending on such date shall also be paid on the date of
such reduction or termination, with the following quarterly payment being
calculated on the basis of the period from such reduction or termination date to
such quarterly payment date. The PTI Term Loan Commitment Fee shall accrue at
all times after the above-mentioned commencement date until the PTI Funding
Date.
(f) Amendment Fee.
The Company shall pay to the Administrative Agent for the
account of each consenting Lender party hereto immediately prior to the
effectiveness of this Agreement an amendment fee ("Amendment Fee") in an amount
equal to $5,000 for each such consenting Lender party to the First Amended and
Restated Credit Agreement on the PTI Effective Date.
2.11 Computation of Fees and Interest
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(a) All computations of interest for Base Rate Loans when the
Base Rate is determined by NationsBank's "reference rate" shall be made on the
basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.
All other computations of fees and interest shall be made on the basis of a
360-day year and actual days elapsed (which results in more interest being paid
than if computed on the basis of a 365-day year). Interest and fees shall accrue
during each period during which interest or such fees are computed from the
first day thereof to the last day thereof.
(b) Each determination of an interest rate or a Dollar
Equivalent amount by the Administrative Agent shall be conclusive and binding on
each Borrower and the Lenders in the absence of manifest error. The
Administrative Agent will, at the request of a Borrower or any Lender, deliver
to such Borrower or such Lender, as the case may be, a statement showing the
quotations used by the Administrative Agent in determining any interest rate and
the resulting interest rate or any Dollar Equivalent Amount.
(c) Without prejudice and in addition to any method of
conversion or rounding prescribed by any EMU Legislation, any amount translated
from a national currency unit to a euro unit under this Agreement (or under any
EMU Legislation) may be rounded up or down by the Administrative Agent acting
reasonably.
2.12 Payments by a Borrower
(a) All payments to be made by a Borrower shall be made
without set-off, recoupment or counterclaim. Except as otherwise expressly
provided herein, all payments by a Borrower shall be made to the Administrative
Agent for the account of the Lenders at the Administrative Agent's Payment
Office, and, with respect to principal of, interest on, and any other amounts
relating to, any Offshore Currency Loan, shall be made in the Offshore Currency
in which such Loan is denominated or payable, and, with respect to all other
amounts payable hereunder, shall be made in Dollars. Such payments shall be made
in Same Day Funds, and (i) in the case of Offshore Currency payments, no later
than such time on the dates specified herein as may be reasonably determined by
the Administrative Agent to be necessary for such payment to be credited on such
date in accordance with normal lending procedures in the place of payment, and
(ii) in the case of any Dollar payments, no later than 12:00 noon (New York
time) on the date specified herein. The Administrative Agent will promptly
distribute to each Lender its Pro Rata Share (or other applicable share as
expressly provided herein) of such principal, interest, fees or other amounts,
in like funds as received. Any payment which is received by the Administrative
Agent later than 12:00 noon (New York time) in the case of Dollar payments, or
later than the time specified by the Administrative Agent as provided in clause
(i) above (in the case of Offshore Currency payments), shall be deemed to have
been received on the following Business Day and any applicable interest or fee
shall continue to accrue.
(b) Subject to the provisions set forth in the definition of
"Interest Period" herein, whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
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(c) Unless the Administrative Agent receives notice from the
Company prior to the date on which any payment is due to the Lenders that a
Borrower will not make such payment in full as and when required, the
Administrative Agent may assume that such Borrower has made such payment in full
to the Administrative Agent on such date in Same Day Funds and the
Administrative Agent may (but shall not be so required), in reliance upon such
assumption, distribute to each Lender on such due date an amount equal to the
amount then due such Lender. If and to the extent such Borrower has not made
such payment in full to the Administrative Agent, each Lender shall repay to the
Administrative Agent on demand such amount distributed to such Lender, together
with interest thereon at the Federal Funds Rate or, in the case of a payment in
an Offshore Currency, the Overnight Rate, for each day from the date such amount
is distributed to such Lender until the date repaid.
2.13 Payments by the Lenders to the Administrative Agent
(a) Unless the Administrative Agent receives notice from a
Lender at least one Business Day prior to the date of any Borrowing, that such
Lender will not make available as and when required hereunder to the
Administrative Agent for the account of the relevant Borrower the amount of that
Lender's Pro Rata Share of such Borrowing, the Administrative Agent may assume
that each Lender has made such amount available to the Administrative Agent in
Same Day Funds on the relevant Borrowing Date and the Administrative Agent may
(but shall not be so required), in reliance upon such assumption, make available
to the relevant Borrower on such date a corresponding amount. If and to the
extent any Lender shall not have made its full amount available to the
Administrative Agent in Same Day Funds and the Administrative Agent in such
circumstances has made available to the Company such amount, that Lender shall
on the Business Day following such Borrowing Date make such amount available to
the Administrative Agent, together with interest at the Federal Funds Rate or,
in the case of any Borrowing consisting of Offshore Currency Loans, the
Overnight Rate, for each day during such period. A notice of the Administrative
Agent submitted to any Lender with respect to amounts owing under this Section
2.13(a) shall be conclusive, absent manifest error. If such amount is so made
available, such payment to the Administrative Agent shall constitute such
Lender's Loan on the date of Borrowing for all purposes of this Agreement. If
such amount is not made available to the Administrative Agent on the Business
Day following the relevant Borrowing Date, the Administrative Agent will notify
the relevant Borrower of such failure to fund and, upon demand by the
Administrative Agent, the relevant Borrower shall pay such amount to the
Administrative Agent for the Administrative Agent's account, together with
interest thereon for each day elapsed since the date of such Borrowing, at a
rate per annum equal to the interest rate applicable at the time to the Loans
comprising such Borrowing.
(b) The failure of any Lender to make any Loan on any
Borrowing Date shall not relieve any other Lender of any obligation hereunder to
make a Loan on such Borrowing Date, but no Lender shall be responsible for the
failure of any other Lender to make the Loan to be made by such other Lender on
any Borrowing Date.
2.14 Sharing of Payments, Etc.
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If, other than as expressly provided elsewhere herein, any
Lender shall obtain on account of the Loans made by it any payment (whether
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) in excess of its ratable share (or other share contemplated
hereunder), such Lender shall immediately (a) notify the Administrative Agent of
such fact, and (b) purchase from the other Lenders such participation in the
Loans made by them as shall be necessary to cause such purchasing Lender to
share the excess payment pro rata with each of them; provided, however, that if
all or any portion of such excess payment is thereafter recovered from the
purchasing Lender, such purchase shall to that extent be rescinded and each
other Lender shall repay to the purchasing Lender the purchase price paid
therefor, together with an amount equal to such paying Lender's ratable share
(according to the proportion of (i) the amount of such paying Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. Each Borrower agrees that any Lender so
purchasing a participation from another Lender may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off, but subject to Section 11.10) with respect to such participation as
fully as if such Lender were the direct creditor of the relevant Borrower in the
amount of such participation. The Administrative Agent will keep records (which
shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section and will in each case notify the
Lenders following any such purchases or repayments.
2.15 Utilization of Commitments in Offshore Currencies
(a) The Administrative Agent will determine the Dollar
Equivalent amount with respect to any (i) Borrowing comprised of Offshore
Currency Loans (other than Sterling Acquisition Loans) as of the requested
Borrowing Date, (ii) outstanding Offshore Currency Loans denominated in a
currency other than Dollars as of the last Business Day of each month, (iii)
outstanding Offshore Currency Loans denominated in a currency other than Dollars
as of any redenomination date pursuant to this Section 2.15 or Section 4.05,
(iv) L/C Obligations denominated in a currency other than Dollars, on the date
of Issuance and thereafter as of the last Business Day of each month and (v)
Offshore Currency Loans or L/C Obligations, as of any date specified for
determining the Dollar Equivalent of any amount (each such date under clauses
(i) through (iv) a "Computation Date").
(b) In the case of a proposed Borrowing comprised of Offshore
Currency Loans (other than Sterling Acquisition Loans), the Lenders shall be
under no obligation to make Offshore Currency Loans in the requested Offshore
Currency as part of such Borrowing if the Administrative Agent has received
notice from any of the Lenders by 5:00 p.m. (New York time) four Business Days
prior to the day of such Borrowing that such Lender cannot provide Loans in the
requested Offshore Currency, in which event the Administrative Agent will give
notice to the Company no later than 12:00 noon (New York time) on the third
Business Day prior to the requested date of such Borrowing that the Borrowing in
the requested Offshore Currency (other than Sterling Acquisition Loans) is not
then available, and notice thereof also will be given promptly by the
Administrative Agent to the Lenders. If the Administrative Agent shall have so
notified the Company that any such Borrowing in a requested Offshore Currency is
not then available, the Company may, by notice to the Administrative Agent not
later than 5:00 p.m. (New York time) two Business Days prior to the requested
date of such Borrowing, withdraw the Notice of Borrowing relating to such
requested Borrowing. If the Company does so withdraw such Notice of Borrowing,
the Borrowing requested
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therein shall not occur and the Administrative Agent will promptly so notify
each Lender. If the Company does not so withdraw such Notice of Borrowing, the
Administrative Agent will promptly so notify each Lender and such Notice of
Borrowing shall be deemed to be a Notice of Borrowing that requests a Borrowing
comprised of Offshore Rate Loans (other than Sterling Acquisition Loans) for the
same Interest Period previously applicable in an aggregate amount equal to the
amount of the originally requested Borrowing as expressed in Dollars in the
Notice of Borrowing; and in such notice by the Administrative Agent to each
Lender the Administrative Agent will state such aggregate amount of such
Borrowing in Dollars and such Lender's Pro Rata Share thereof.
(c) In the case of a proposed continuation of Offshore
Currency Loans (other than Sterling Acquisition Loans) for an additional
Interest Period pursuant to Section 2.04, the Lenders shall be under no
obligation to continue such Offshore Currency Loans if the Administrative Agent
has received notice from any of the Lenders by 5:00 p.m. (New York time) four
Business Days prior to the day of such continuation that such Lender cannot
continue to provide Loans in the relevant Offshore Currency, in which event the
Administrative Agent will give notice to the Company not later than 12:00 noon
(New York time) on the third Business Day prior to the requested date of such
continuation that the continuation of such Offshore Currency Loans in the
relevant Offshore Currency is not then available, and notice thereof also will
be given promptly by the Administrative Agent to the Lenders. If the
Administrative Agent shall have so notified the Company that any such
continuation of Offshore Currency Loans (other than Sterling Acquisition Loans)
is not then available, any Notice of Continuation/Conversion with respect
thereto shall be deemed withdrawn and such Offshore Currency Loans shall be
redenominated into Offshore Rate Loans in Dollars for the same Interest Period
previously applicable with effect from the last day of the Interest Period with
respect to any such Offshore Currency Loans. The Administrative Agent will
promptly notify the Company and the Lenders of any such redenomination and in
such notice by the Administrative Agent to each Lender the Administrative Agent
will state the aggregate Dollar Equivalent amount of the redenominated Offshore
Currency Loans (other than Sterling Acquisition Loans) as of the Computation
Date with respect thereto and such Lender's Pro Rata Share thereof.
(d) Notwithstanding anything herein to the contrary, during
the existence of a payment default or an Event of Default, upon the request of
the Majority Lenders, all or any part of any outstanding Offshore Currency Loans
(other than Sterling Acquisition Loans) shall be redenominated and converted
into Base Rate Loans in Dollars with effect from the last day of the Interest
Period with respect to any such Offshore Currency Loans. The Administrative
Agent will promptly notify the Company and the Lenders of any such
redenomination and conversion request.
(e) The Company shall be entitled to request that Revolving
Loans and Swing Line Loans hereunder also be permitted to be made in any other
lawful currency (other than Dollars), in addition to the currencies specified in
the definition of "Offshore Currency" herein, that in the opinion of the
Administrative Agent, the Swing Line Lender and the Lenders is at such time
freely traded in the offshore interbank foreign exchange markets and is freely
transferable and freely convertible into Dollars (an "Agreed Alternative
Currency"). The Company shall deliver to the Administrative Agent any request
for designation of an Agreed Alternative Currency in accordance with Section
12.02, to be received by the Administrative Agent not later than 12:00 noon (New
York time) at least 10 Business Days in advance of the date of any Borrowing
hereunder proposed to be made in such Agreed Alternative Currency. Upon receipt
of any such request the Administrative
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Agent will promptly notify the Lenders thereof, and each Lender will use its
commercially reasonable efforts to respond to such request within five (5)
Business Days of receipt thereof. Each Lender may grant or accept such request
in its sole discretion. The Administrative Agent will promptly notify the
Company and the Lenders of the acceptance or rejection of any such request.
ARTICLE III
THE LETTERS OF CREDIT FACILITY
3.01 The Letter of Credit Facility
(a) On the terms and conditions set forth herein (i) the
Issuing Bank agrees, (A) from time to time on any Business Day during the period
from the Initial Funding Date to the day which is thirty (30) days prior to the
Revolving Loan Termination Date, to issue standby or trade Letters of Credit for
the account of a Borrower and to amend or renew Letters of Credit previously
issued by it under this clause (a) in accordance with Section 3.02(b), and (B)
to honor drafts under the Letters of Credit issued under this clause (a); and
(ii) the Revolving Lenders severally agree to participate in Letters of Credit
issued for the account of the relevant Borrower under this clause (a); provided,
that the Issuer shall not be obligated to Issue any Letter of Credit under this
clause (a), if as of the Issuance Date of such Letter of Credit (1) the
Effective Amount of all L/C Obligations exceeds the combined L/C Commitments of
all Revolving Lenders or (2) the participation of any Revolving Lender in the
Effective Amount of all L/C Obligations and participation in Swing Line Loans of
such Revolving Lender exceeds such Lender's Revolving Loan Commitment less the
Effective Amount of Revolving Loans of such Revolving Lender. Within the
foregoing limits, and subject to the other terms and conditions hereof, the
relevant Borrower's ability to obtain standby and trade Letters of Credit under
this clause (a) shall be fully revolving, and, accordingly, the relevant
Borrower may, during the forgoing period, obtain under this clause (a) new
Letters of Credit, or replacement Letters of Credit for Letters of Credit which
have expired or which have been drawn upon and reimbursed, provided all such
Letters of Credit are issued in compliance with this Agreement.
(b) The Issuing Bank is under no obligation to Issue, amend or
renew any Letter of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or
restrain the Issuing Bank from Issuing such Letter of Credit, or any
Requirement of Law applicable to the Issuing Bank or any request or
directive (whether or not having the force of law) from any
Governmental Authority with jurisdiction over the Issuing Bank shall
prohibit, or request that the Issuing Bank refrain from, the Issuance
of letters of credit generally or such Letter of Credit in particular
or shall impose upon the Issuing Bank with respect to such Letter of
Credit any restriction, reserve or capital requirement (for which the
Issuing Bank is not otherwise compensated hereunder) not in effect on
the Initial Funding Date, or shall impose upon the Issuing Bank any
unreimbursed loss, cost or expense which was not applicable on the
Initial Funding Date and which the Issuing Bank in good faith deems
material to it;
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(ii) the Issuing Bank has received written notice
from any Revolving Lender, the Administrative Agent or any Borrower, on
or prior to the Business Day prior to the requested Issuance Date of
such Letter of Credit, that one or more of the applicable conditions
contained in Article V is not then satisfied;
(iii) the expiry date of any requested Letter of
Credit is after the Revolving Loan Termination Date;
(iv) any requested Letter of Credit does not provide
for drafts, or is not otherwise in form and substance acceptable to the
Issuing Bank, or the Issuance of a Letter of Credit shall violate any
applicable policies of the Issuing Bank; or
(v) such Letter of Credit (x) is in a face amount
less than $250,000, unless such lesser amount is approved by the
Administrative Agent and the Issuing Bank, and (y) is to be denominated
in a currency other than Dollars or an Offshore Currency.
3.02 Issuance, Amendment and Renewal of Letters of Credit
(a) Each Letter of Credit shall be issued upon the irrevocable
written request of the relevant Borrower received by the Issuing Bank (with a
copy sent by the relevant Borrower to the Administrative Agent) at least five
(5) days (or such shorter time as the Issuing Bank may agree in a particular
instance in its sole discretion) prior to the proposed Issuance Date. Each such
request for issuance of a Letter of Credit shall be in writing or by facsimile,
confirmed immediately in an original writing, in the form of an L/C Application,
and shall specify in form and detail satisfactory to the Issuing Bank: (i) the
proposed Issuance Date of such Letter of Credit (which shall be a Business Day);
(ii) the face amount of such Letter of Credit; (iii) the expiry date of such
Letter of Credit; (iv) the name and address of the beneficiary thereof; (v) the
documents to be presented by the beneficiary of such Letter of Credit in case of
any drawing thereunder; (vi) the full text of any certificate to be presented by
the beneficiary in case of any drawing thereunder; (vii) the denomination of the
Stated Amount in Dollars or an Offshore Currency, and (viii) such other matters
as the Issuing Bank may require.
(b) Prior to the Issuance of any Letter of Credit, the Issuing
Bank will confirm with the Administrative Agent (by telephone or in writing)
that the Administrative Agent has received a copy of the L/C Application or L/C
Amendment Application from the relevant Borrower and, if not, the Issuing Bank
will provide the Administrative Agent with a copy thereof. Unless the Issuing
Bank has received notice on or before the Business Day the Issuing Bank is to
issue a requested Letter of Credit (A) from the Administrative Agent directing
the Issuing Bank not to issue such Letter of Credit because such issuance is not
then permitted under Section 3.01(a) as a result of the limitations set forth in
clauses (1) or (2) thereof, or (B) that one or more terms or conditions
specified in Section 3.01(b) or in Article V are not then satisfied; then,
subject to the terms and conditions hereof, the Issuing Bank shall, with the
approval of the Administrative Agent, on the requested date, issue a Letter of
Credit for the account of the relevant Borrower in accordance with the Issuing
Bank's usual and customary business practices.
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(c) From time to time while a Letter of Credit is outstanding
and prior to the Termination Date, the Issuing Bank will, upon the written
request of the relevant Borrower received by the Issuing Bank (with a copy sent
by the relevant Borrower to the Administrative Agent) at least five (5) days (or
such shorter time as the Issuing Bank may agree in a particular instance in its
sole discretion) prior to the proposed date of amendment, amend any Letter of
Credit issued by it. Each such request for amendment of a Letter of Credit shall
be made in writing or by facsimile, confirmed immediately in an original
writing, made in the form of an L/C Amendment Application and shall specify in
form and detail satisfactory to the Issuing Bank: (i) the Letter of Credit to be
amended; (ii) such proposed date of amendment of the Letter of Credit (which
shall be a Business Day); (iii) the nature of the proposed amendment; and (iv)
such other matters as the Issuing Bank may require. The Issuing Bank shall be
under no obligation to amend any Letter of Credit if: (A) the Issuing Bank would
have no obligation at such time to issue such Letter of Credit in its amended
form under the terms of this Agreement; or (B) the beneficiary of any such
Letter of Credit does not accept the proposed amendment to the Letter of Credit.
The Administrative Agent will promptly notify the Lenders of the receipt by it
of any L/C Application or L/C Amendment Application.
(d) The Issuing Bank and the Lenders agree that, while a
Letter of Credit is outstanding and prior to the Revolving Loan Termination
Date, at the option of the relevant Borrower and upon the written request of the
relevant Borrower received by the Issuing Bank (with a copy sent by the relevant
Borrower to the Administrative Agent) at least five (5) days (or such shorter
time as the Issuing Bank may agree in a particular instance in its sole
discretion) prior to the proposed date of notification of renewal, the Issuing
Bank shall be entitled to authorize the automatic renewal of any Letter of
Credit issued by it. Each such request for renewal of a Letter of Credit shall
be made in writing or by facsimile, confirmed immediately in an original
writing, in the form of an L/C Amendment Application, and shall specify in form
and detail satisfactory to the Issuing Bank: (i) the Letter of Credit to be
renewed; (ii) the proposed date of notification of renewal of such Letter of
Credit (which shall be a Business Day); (iii) the revised expiry date of such
Letter of Credit; and (iv) such other matters as the Issuing Bank may require.
The Issuing Bank shall be under no obligation so to renew any Letter of Credit
if: (A) the Issuing Bank would have no obligation at such time to issue or amend
such Letter of Credit in its renewed form under the terms of this Agreement; or
(B) the beneficiary of any such Letter of Credit does not accept the proposed
renewal of such Letter of Credit. If any outstanding Letter of Credit shall
provide that it shall be automatically renewed unless the beneficiary thereof
receives notice from the Issuing Bank that such Letter of Credit shall not be
renewed, and if at the time of renewal the Issuing Bank would be entitled to
authorize the automatic renewal of such Letter of Credit in accordance with this
clause (d) upon the request of the relevant Borrower but the Issuing Bank shall
not have received any L/C Amendment Application from the relevant Borrower with
respect to such renewal or other written direction by the relevant Borrower with
respect thereto, the Issuing Bank shall nonetheless be permitted to allow such
Letter of Credit to renew, and the relevant Borrower and the Revolving Lenders
hereby authorize such renewal, and, accordingly, the Issuing Bank shall be
deemed to have received an L/C Amendment Application from the Borrower
requesting such renewal.
(e) The Issuing Bank may, at its election (or as required by
the Administrative Agent at the direction of the Majority Lenders), deliver any
notices of termination or other communications to any Letter of Credit
beneficiary or transferee, and take any other action as
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necessary or appropriate, at any time and from time to time, in order to cause
the expiry date of such Letter of Credit to be a date not later than the
Revolving Loan Termination Date.
(f) This Agreement shall control in the event of any conflict
with any L/C-Related Document (other than any Letter of Credit).
(g) The Issuing Bank will also deliver to the Administrative
Agent, concurrently or promptly following its delivery of a Letter of Credit, or
amendment to or renewal of a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit or amendment
to or renewal of a Letter of Credit.
3.03 Risk Participations, Drawings, Revolving Loans and
Reimbursements.
(a) Immediately upon the Issuance of each Letter of Credit,
each Revolving Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuing Bank a participation in
such Letter of Credit and each drawing thereunder in an amount equal to the
product of (i) the Pro Rata Revolving Share of such Revolving Lender, times (ii)
the maximum amount available to be drawn under such Letter of Credit and the
amount of such drawing, respectively.
(b) (i) In the event of any request for a drawing under a
Letter of Credit by the beneficiary or transferee thereof, the Issuing
Bank will promptly notify the relevant Borrower. The Company shall
reimburse the Issuing Bank (by an L/C Borrowing or otherwise) prior to
12:00 Noon (New York time), on the Honor Date, in an amount equal to
the amount so paid by the Issuing Bank. In the event the relevant
Borrower fails to reimburse the Issuing Bank for the full amount of any
drawing under any Letter of Credit by 12:00 Noon (New York time) on the
Honor Date, the Issuing Bank will promptly notify the Administrative
Agent and the Administrative Agent will promptly notify each Revolving
Lender thereof, and the relevant Borrower shall be deemed to have
requested that Base Rate Loans in an aggregate amount equal to the
unreimbursed drawing be made by the Revolving Lenders to be disbursed
on the Honor Date under such Letter of Credit, subject to the amount of
the unutilized portion of the Revolving Loan Commitment and subject to
the conditions set forth in Section 5.03. Any notice given by the
Issuing Bank or the Administrative Agent pursuant to this clause (d)(i)
may be oral if immediately confirmed in writing (including by
facsimile); provided, that the lack of such an immediate confirmation
shall not affect the conclusiveness or binding effect of such notice.
(ii) Each Revolving Lender shall upon any notice
pursuant to Section 3.03(b)(i) make available to the Administrative
Agent for the account of the relevant Issuing Bank an amount in Same
Day Funds equal to its Pro Rata Revolving Share of the amount of the
drawing, whereupon the participating Revolving Lenders shall (subject
to Section 3.03(b)(iii)) each be deemed to have made a Revolving Loan
consisting of a Base Rate Loan to the relevant Borrower in that amount.
If any Revolving Lender so notified fails to make available to the
Administrative Agent for the account of the Issuing Bank the amount of
such Revolving Lender's Pro Rata Revolving Share of the amount of the
drawing by no later than 2:00 p.m. (New York time) on the Honor Date,
then interest shall accrue on
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such Revolving Lender's obligation to make such payment, from the Honor
Date to the date such Revolving Lender makes such payment, at a rate
per annum equal to the Federal Funds Rate in effect from time to time
during such period. The Administrative Agent will promptly give notice
of the occurrence of the Honor Date, but failure of the Administrative
Agent to give any such notice on the Honor Date or in sufficient time
to enable any Lender to effect such payment on such date shall not
relieve such Lender from its obligations under this Section 3.03(b).
(iii) With respect to any unreimbursed drawing that
is not converted into Revolving Loans consisting of Base Rate Loans to
the relevant Borrower in whole or in part, because of the relevant
Borrower's failure to satisfy the conditions set forth in Section 5.03
or for any other reason, the relevant Borrower shall be deemed to have
incurred from the Issuing Bank an L/C Borrowing in the amount of such
drawing which L/C Borrowing shall be due and payable on demand
(together with interest) and shall bear interest at a rate per annum
equal to the Base Rate plus the Applicable Margin for Revolving Loans
maintained as Base Rate Loans plus 2% per annum, and each Revolving
Lender's payment to the Issuing Bank pursuant to Section 3.03(b)(ii)
shall be deemed payment in respect of its participation in such L/C
Borrowing and shall constitute an L/C Advance from such Revolving
Lender in satisfaction of its participation obligation under this
Section 3.03(b).
(c) Each Lender's obligation in accordance with this Agreement
to make an L/C Advance or Revolving Loans as contemplated by this Section 3.03
as a result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to the Issuing Bank and shall not be affected
by any circumstance, including (i) any set-off, counterclaim, recoupment,
defense or other right which such Lender or any Borrower may have against the
Issuing Bank, a Borrower or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of a Default, an Event of Default, a Material Adverse
Effect or any failure to satisfy the conditions under Article V; or (iii) any
other circumstance, happening or event whatsoever, whether or not similar to any
of the foregoing.
3.04 Repayment of Participations
(a) Upon (and only upon) receipt by the Administrative Agent
for the account of the Issuing Bank of immediately available funds from the
relevant Borrower (i) in reimbursement of any payment made by the Issuing Bank
under any Letter of Credit with respect to which any Lender has paid the
Administrative Agent for the account of the Issuing Bank for such Lender's
participation in such Letter of Credit pursuant to Section 3.03 or (ii) in
payment of interest thereon, the Administrative Agent will pay to each Revolving
Lender, in the same funds as those received by the Administrative Agent for the
account of the Issuing Bank, the amount of such Revolving Lender's Pro Rata
Revolving Share of such funds, and the Issuing Bank shall receive the amount of
the Pro Rata Revolving Share of such funds of any Revolving Lender that did not
so pay the Administrative Agent for the account of the Issuing Bank.
(b) If the Administrative Agent or the Issuing Bank is
required at any time to return to a Borrower, or to a trustee, receiver,
liquidator, custodian, or any official in any Insolvency Proceeding, any portion
of the payments made by such Borrower to the Administrative Agent for
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the account of the Issuing Bank pursuant to Section 3.04(a) in reimbursement of
a payment made under a Letter of Credit or interest or fee thereon, each
Revolving Lender shall, on demand of the Administrative Agent, forthwith return
to the Administrative Agent or the Issuing Bank the amount of its Pro Rata
Revolving Share of any amounts so returned by the Administrative Agent or the
Issuing Bank plus interest thereon from the date such demand is made to the date
such amounts are returned by such Revolving Lender to the Administrative Agent
or the Issuing Bank, at a rate per annum equal to the Federal Funds Rate in
effect from time to time.
3.05 Role of the Issuing Bank
(a) Each Lender and each Borrower agree that, in paying any
drawing under a Letter of Credit, the Issuing Bank shall not have any
responsibility to obtain any document (other than any sight draft and
certificates or documents expressly required by the Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document.
(b) No Administrative Agent-Related Person nor any of the
respective correspondents, participants or assignees of the Issuing Bank shall
be liable to any Lender for: (i) any action taken or omitted in connection
herewith at the request or with the approval of the Revolving Lenders (including
the Majority Lenders, as applicable); (ii) any action taken or omitted in the
absence of gross negligence or willful misconduct; or (iii) the due execution,
effectiveness, validity or enforceability of any L/C-Related Document.
(c) Each Borrower hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit; provided, however, that this assumption is not intended to, and shall
not, preclude a Borrower's pursuing such rights and remedies as it may have
against the beneficiary or transferee at law or under any other agreement. No
Administrative Agent-Related Person, nor any of the respective correspondents,
participants (including the Revolving Lenders) or assignees of the Issuing Bank,
shall be liable or responsible for any of the matters described in clauses (i)
through (vii) of Section 3.06; provided, however, anything in such clauses to
the contrary notwithstanding, that a Borrower may have a claim against the
Issuing Bank, and the Issuing Bank may be liable to such Borrower, to the
extent, but only to the extent, of any direct, as opposed to consequential or
exemplary, damages suffered by such Borrower which such Borrower proves were
caused by the Issuing Bank's willful misconduct or gross negligence or the
Issuing Bank's willful failure to pay under any Letter of Credit after the
presentation to it by the beneficiary of a sight draft and certificate(s)
strictly complying with the terms and conditions of a Letter of Credit. In
furtherance and not in limitation of the foregoing: (i) the Issuing Bank may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Issuing Bank shall not be responsible
for the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason.
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3.06 Obligations Absolute
The obligations of each Borrower under this Agreement and any
L/C-Related Document to reimburse the Issuing Bank for a drawing under a Letter
of Credit, and to repay any L/C Borrowing and any drawing under a Letter of
Credit converted into Revolving Loans, shall be unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement and
each such other L/C-Related Document under all circumstances (unless due to the
gross negligence or wilful misconduct of the Issuing Bank), including the
following:
(i) any lack of validity or enforceability of this
Agreement or any L/C-Related Document;
(ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the obligations of a
Borrower in respect of any Letter of Credit or any other amendment or
waiver of or any consent to departure from all or any of the
L/C-Related Documents;
(iii) the existence of any claim, set-off, defense or
other right that a Borrower may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any Person
for whom any such beneficiary or any such transferee may be acting),
the Issuing Bank or any other Person, whether in connection with this
Agreement, the transactions contemplated hereby or by the L/C-Related
Documents or any unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by the Issuing Bank under any Letter
of Credit against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit; or any payment
made by the Issuing Bank under any Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession,
assignee for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of
any Letter of Credit, including any arising in connection with any
Insolvency Proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the obligations
of a Borrower in respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or
a discharge of, a Borrower or a guarantor.
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3.07 Cash Collateral Pledge
If, as of the Revolving Loan Termination Date, any Letters of
Credit may for any reason remain outstanding and partially or wholly undrawn, or
upon the occurrence and continuation of the circumstances described in Section
2.07(c) requiring the relevant Borrower to Cash Collateralize Letters of Credit,
then, the relevant Borrower shall immediately Cash Collateralize the L/C
Obligations in an amount equal to such L/C Obligations or any excess amount.
3.08 Letter of Credit Fees.
(a) The Company shall pay to the Administrative Agent for the
account of each of the Revolving Lenders a letter of credit fee with respect to
the Letters of Credit equal to the Applicable Margin per annum specified for
Revolving Loans maintained as Offshore Rate Loans on the Stated Amount available
to be drawn on the outstanding Letters of Credit, computed on a quarterly basis
in arrears on the last Business Day of each March, June, September and December
based upon Letters of Credit outstanding for that quarter as calculated by the
Administrative Agent. Such letter of credit fees shall be due and payable
quarterly in arrears on the last Business Day of each calendar quarter during
which Letters of Credit are outstanding, commencing on the first such quarterly
date to occur after the Initial Funding Date, through the Revolving Loan
Termination Date (or such later date upon which the outstanding Letters of
Credit shall expire), with the final payment to be made on the Revolving Loan
Termination Date (or such later expiration date).
(b) The Company shall pay to the relevant Issuing Bank,
individually, a fronting fee for each Letter of Credit Issued by such Issuing
Bank equal to .125% per annum of the Stated Amount of such Letter of Credit.
Such fronting fee shall be due and payable quarterly in arrears on the last
Business Day of each calendar quarter during which such Letter of Credit is
outstanding, commencing on the first such quarterly date to occur after such
Letter of Credit is issued, through the Revolving Loan Termination Date, with
the final payment to be made on the Revolving Loan Termination Date.
(c) The Company shall pay to the relevant Issuing Bank from
time to time on demand the normal issuance, presentation, amendment and other
processing fees, and other standard costs and charges, of such Issuing Bank
relating to letters of credit as from time to time in effect.
3.09 Existing Letters of Credit. Schedule 3.09 hereto contains a
description of all Existing Letters of Credit issued by Chase pursuant to the
Existing Credit Agreement outstanding on the Initial Funding Date. Each such
Existing Letter of Credit, including any extension thereof issued by Chase in
its sole discretion (provided, however, that the Existing Letters of Credit
described on items 1 and 2 of Schedule 3.09 may not be extended beyond their
current termination date) shall constitute "Letters of Credit" for all purposes
of this Agreement, Issued, for purposes of Section 3.01(a), on the Initial
Funding Date. The Company, the Administrative Agent and each Lender hereby agree
that, from and after the Initial Funding Date, the terms of this Agreement shall
apply to the Existing Letters of Credit and that the terms of this Agreement
shall supersede the Existing Credit Agreement with respect to the Existing
Letters of Credit.
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3.10 Uniform Customs and Practice
The Uniform Customs and Practice for Documentary Credits as
published by the International Chamber of Commerce most recently at the time of
issuance of any Letter of Credit shall (unless otherwise expressly provided in
the Letters of Credit) apply to the Letters of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.01 Taxes
(a) Any and all payments by a Borrower to each Lender or the
Administrative Agent under this Agreement and any other Loan Document shall be
made free and clear of, and without deduction or withholding for, any Taxes. In
addition, the relevant Borrower shall pay all Other Taxes.
(b) If a Borrower shall be required by law to deduct or
withhold any Taxes, Other Taxes or Further Taxes from or in respect of any sum
payable hereunder to any Lender or the Administrative Agent, then:
(i) the sum payable shall be increased as necessary
so that, after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums
payable under this Section), such Lender or the Administrative Agent,
as the case may be, receives and retains an amount equal to the sum it
would have received and retained had no such deductions or withholdings
been made;
(ii) such Borrower shall make such deductions and
withholdings;
(iii) such Borrower shall pay the full amount
deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law; and
(iv) such Borrower shall also pay to each Lender or
the Administrative Agent for the account of such Lender, at the time
interest is paid, Further Taxes in the amount that the respective
Lender specifies as necessary to preserve the after-tax yield the
Lender would have received if such Taxes, Other Taxes or Further Taxes
had not been imposed.
(c) Each Borrower agrees to indemnify and hold harmless each
Lender and the Administrative Agent for the full amount of (i) Taxes, (ii) Other
Taxes, and (iii) Further Taxes in the amount necessary to preserve the after-tax
yield such Lender would have received if such Taxes, Other Taxes or Further
Taxes had not been imposed, and any liability (including penalties, interest,
additions to tax and expenses) arising therefrom or with respect thereto,
whether or not such Taxes, Other Taxes or Further Taxes were correctly or
legally asserted. Payment under this indemnification
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shall be made within 30 days after the date the relevant Lender or the
Administrative Agent makes written demand therefor.
(d) Within 30 days after the date of any payment pursuant to
this Section by a Borrower of Taxes, Other Taxes or Further Taxes, such Borrower
shall furnish to each Lender or the Administrative Agent the original or a
certified copy of a receipt evidencing payment thereof, or other evidence of
payment satisfactory to such Lender or the Administrative Agent.
(e) If a Borrower is required to pay any amount to any Lender
or the Administrative Agent pursuant to clauses (b) or (c) of this Section, then
such Lender shall use reasonable efforts (consistent with legal and regulatory
restrictions) to change the jurisdiction of its Lending Office so as to
eliminate any such additional payment by such Borrower which may thereafter
accrue, if such change in the sole judgment of such Lender is not otherwise
disadvantageous to such Lender; provided, however, that the Swing Line Lender
may in any event continue to make Swing Line Loans out of its Lending Office in
London.
4.02 Illegality.
(a) If any Lender reasonably determines that the introduction
of any Requirement of Law, or any change in any Requirement of Law, or in the
interpretation or administration of any Requirement of Law, has made it
unlawful, or that any central bank or other Governmental Authority has asserted
that it is unlawful, for any Lender or its applicable Lending Office to make
Offshore Rate Loans (including Offshore Rate Loans in any Applicable Currency),
then, on notice thereof by that Lender to the Company through the Administrative
Agent, any obligation of that Lender to make Offshore Rate Loans shall be
suspended until that Lender notifies the Administrative Agent and the Company
that the circumstances giving rise to such determination no longer exist.
(b) If a Lender reasonably determines that it is unlawful to
maintain any Offshore Rate Loan, the Company shall, upon its receipt of notice
of such fact and demand from such Lender (with a copy to the Administrative
Agent), prepay in full such Offshore Rate Loans of that Lender then outstanding,
together with interest accrued thereon and amounts required under Section 4.04,
either on the last day of the Interest Period thereof, if such Lender may
lawfully continue to maintain such Offshore Rate Loans to such day, or
immediately, if such Lender may not lawfully continue to maintain such Offshore
Rate Loan. If the Company is required to so prepay any Offshore Rate Loan, then
concurrently with such prepayment, the Company may borrow from the affected
Lender, in the amount of such repayment, a Base Rate Loan.
(c) If the obligation of any Lender to make or maintain
Offshore Rate Loans has been so terminated or suspended, the Company may elect,
by giving notice to such Lender through the Administrative Agent that all Loans
which would otherwise be made by such Lender as Offshore Rate Loans shall be
instead Base Rate Loans.
(d) Before giving any notice to the Administrative Agent under
this Section, the affected Lender shall designate a different Lending Office
with respect to its Offshore Rate Loans if such designation will avoid the need
for giving such notice or making such demand and will not, in the judgment of
such Lender, be illegal or otherwise disadvantageous to the Lender.
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4.03 Increased Costs and Reduction of Return.
(a) If any Lender reasonably determines that, due to either
(i) the introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance by that Lender with any guideline or request
from any central bank or other Governmental Authority (whether or not having the
force of law), there shall be any increase in the cost to such Lender of
agreeing to make or making, funding or maintaining any Offshore Rate Loans or
participating in Letters of Credit, or, in the case of the Issuing Bank, any
increase in the cost to the Issuing Bank of agreeing to issue, issuing or
maintaining any Letter of Credit or of agreeing to make or making, funding or
maintaining any unpaid drawing under any Letter of Credit, then the relevant
Borrower shall be liable for, and shall from time to time, upon demand (with a
copy of such demand to be sent to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender, additional amounts as are
sufficient to compensate such Lender for such increased costs.
(b) If any Lender shall have reasonably determined that (i)
the introduction of any Capital Adequacy Regulation, (ii) any change in any
Capital Adequacy Regulation, (iii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or (iv) compliance by such Lender (or its Lending Office) or any
corporation controlling such Lender with any Capital Adequacy Regulation,
affects or would affect the amount of capital required or expected to be
maintained by such Lender or any corporation controlling such Lender and (taking
into consideration such Lender's or such corporation's policies with respect to
capital adequacy and such
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Lender's customary return on capital) determines that the amount of such capital
is increased as a consequence of its Commitment, loans, credits or obligations
under this Agreement, then, upon demand of such Lender to the Company through
the Administrative Agent, the relevant Borrower shall pay to such Lender, from
time to time as specified by such Lender, additional amounts sufficient to
compensate such Lender or such corporation for such increase.
(c) Any provision of this Agreement stated to have effect on,
after, or as from, the Commencement Date will, to the extent that the provision
relates to any currency of a state which is not a Participating Member State on
the Commencement Date, have effect in relation to that currency on the date on
which it becomes a Participating Member State.
4.04 Funding Losses
(a) Each Borrower shall reimburse each Lender and hold each
Lender harmless from any loss or expense which such Lender may sustain or incur
(other than as a result of Section 4.05) as a consequence of:
(i) the failure of such Borrower to make on a timely
basis any payment of principal of any Offshore Rate Loan;
(ii) the failure of such Borrower to borrow, continue
or convert a Loan after the Company has given (or is deemed to have
given) a Notice of Borrowing or a Notice of Conversion/ Continuation;
(iii) the failure of such Borrower to make any
prepayment in accordance with any notice delivered under Section 2.06;
(iv) the prepayment or other payment (including after
acceleration thereof) of an Offshore Rate Loan on a day that is not the
last day of the relevant Interest Period;
(v) the automatic conversion under Section 2.04 of
any Offshore Rate Loan to a Base Rate Loan on a day that is not the
last day of the relevant Interest Period; or
(vi) in the event that during the 180 day period
following the Initial Funding Date, the Borrowers maintain (x) more
than one Offshore Rate Loan with different Interest Periods or (y) any
Offshore Rate Loan with an Interest Period in excess of one month, any
breakage costs, charges or fees incurred by NationsBank or any
co-arranger in connection with the assignment of an Offshore Rate Loan;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained or from changes
relating to any Offshore Currency Loans. For purposes of calculating amounts
payable by a Borrower to the Lenders under this Section and under Section
4.03(a), each Offshore Rate Loan made by a Lender (and each related reserve,
special deposit or similar requirement) shall be conclusively deemed to have
been funded at the LIBOR used in
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determining the Offshore Rate for such Offshore Rate Loan by a matching deposit
or other borrowing in the interbank eurodollar market for a comparable amount
and for a comparable period, whether or not such Offshore Rate Loan is in fact
so funded.
(b) Unless otherwise prohibited by law, if more than one
currency or currency unit are at the same time recognized by the central bank of
any country as the lawful currency of that country, then:
(i) any reference in the Loan Documents to, and any
obligations arising under the Loan Documents in, the currency of that
country shall be translated into, or paid in, the currency or currency
unit of that country designated by the Administrative Agent; and
(ii) any translation from one currency or currency
unit to another shall be at the official rate of exchange recognized by
the central bank for the conversion of that currency or currency unit
into the other, rounded up or down by the Administrative Agent acting
reasonably.
(c) If a change in any currency of a country occurs, this
Agreement will be amended to the extent the Administrative Agent specifies to be
necessary to reflect the change in currency and to put the Administrative Agent,
the Issuing Bank and each Lender in the same position, so far as possible, that
it would have been in if no change in currency had occurred.
4.05 Inability to Determine Rates
If the Administrative Agent determines that for any reason
adequate and reasonable means do not exist for determining the Offshore Rate for
any requested Interest Period with respect to a proposed Offshore Rate Loan, the
Administrative Agent will promptly so notify the Company and each Lender.
Thereafter, the obligation of the Lenders to make or maintain Offshore Rate
Loans hereunder shall be suspended until the Administrative Agent revokes such
notice in writing. Upon receipt of such notice, the Company may revoke any
Notice of Borrowing or Notice of Conversion/Continuation then submitted by it.
If the Company does not revoke such notice, the Lenders shall make, convert or
continue the Loans, as proposed by the Company, in the amount specified in the
applicable notice submitted by the Company, but such Loans shall be made,
converted or continued as Base Rate Loans instead of Offshore Rate Loans. In the
case of any Offshore Currency Loans (other than Sterling Acquisition Loans), the
Borrowing or continuation shall be in an aggregate amount equal to the Dollar
Equivalent amount of the originally requested Borrowing or continuation in the
Offshore Currency, and to that end any outstanding Offshore Currency Loans
(other than Sterling Acquisition Loans) which are the subject of any
continuation shall be redenominated and converted into Base Rate Loans in
Dollars with effect from the last day of the Interest Period with respect to any
such Offshore Currency Loans.
4.06 Reserves on Offshore Rate Loans
The Company shall pay to each Lender, in respect of any
Offshore Currency Loans, additional costs arising under any applicable
regulations of the central bank or other relevant
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Governmental Authority in the country in which the Offshore Currency of such
Offshore Rate Loan circulates on the unpaid principal amount of each Offshore
Rate Loan equal to the actual costs of such reserves allocated to such Loan by
such Lender (as determined by such Lender in good faith, which determination
shall be conclusive), payable on each date on which interest is payable on such
Loan; provided the Company shall have received at least 15 days' prior written
notice (with a copy to the Administrative Agent) of such additional interest
from such Lender. If such Lender fails to give notice 15 days prior to the
relevant Interest Payment Date, such additional interest shall be payable 15
days from receipt of such notice.
4.07 Certificates of Lenders
Any Lender claiming reimbursement or compensation under this
Article IV shall deliver to the Company (with a copy to the Administrative
Agent) a certificate setting forth in reasonable detail the amount payable to
such Lender hereunder and such certificate shall be conclusive and binding on
the Company in the absence of manifest error.
4.08 Substitution of Lenders
Upon the receipt by a Borrower from any Lender (an "Affected
Lender") of a claim for compensation under this Article IV, such Borrower may:
(i) request the Affected Lender to use commercially reasonable efforts to obtain
a replacement Lender or financial institution satisfactory to such Borrower to
acquire and assume all or a ratable part of all of such Affected Lender's Loans,
Commitments and participation in Letters of Credit (a "Replacement Lender");
(ii) request one more of the other Lenders to acquire and assume all or part of
such Affected Lender's Loans, Commitment and participation in Letters of Credit;
or (iii) designate a Replacement Lender. Any such designation of a Replacement
Lender under clause (i) or (iii) above shall be subject to the prior written
consent of the Administrative Agent (which consent shall not be unreasonably
withheld), and any such substitution shall in any event be effective upon
satisfaction of the conditions set forth in Section 12.08 and all then
outstanding Obligations owing to such Affected Lender shall be repaid in full on
the date of any such assignment.
4.09 Survival
The agreements and obligations of the Company in this Article
IV shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
5.01 Conditions to Announcement Date
The obligation of each Lender to enter into the Prior Loan
Document was subject to the condition that the Administrative Agent received on
or prior to the date of the Press Release each
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of the following, in form and substance satisfactory to the Administrative
Agent, and in sufficient copies for each Lender:
(a) Prior Loan Document
The Prior Loan Document was executed by each party thereto.
(b) Resolutions; Incumbency
With respect to each the Company, US Holdco #1, US Holdco #2
and Bidco:
(i) copies of the resolutions of the board of
directors of such Person authorizing the Transactions and the
transactions contemplated thereby, certified by the Secretary or an
Assistant Secretary of such Person; and
(ii) a certificate of the Secretary or Assistant
Secretary of such Person, dated as of the Announcement Date, and
certifying the names and true signatures of the officers of such Person
authorized to execute, deliver and perform, as applicable, this
Agreement, and all other Loan Documents to be delivered by it
hereunder.
(c) Organization Documents; Good Standing
Each of the following documents with respect to each of the
Company, US Holdco #1, US Holdco #2 and Bidco:
(i) the articles or certificate of incorporation,
memorandum of association, bylaws and board of directors resolutions of
such Person as then in effect, certified by the Secretary or Assistant
Secretary of such Person; and
(ii) a good standing certificate for such Person from
the Secretary of State (or similar, applicable Governmental Authority)
of its state of incorporation and each state where such Person is
qualified to do business as a foreign corporation as of a recent date,
together with a bring-down certificate by facsimile.
(d) Legal Opinions
An opinion addressed to the Administrative Agent and the
Lenders, dated as of the Announcement Date, (i) of Nutter, McClennen & Fish LLP,
counsel to the Company and US Holdco, substantially in the form of Exhibit D-1,
(ii) of Simmons & Simmons, special English counsel to the Company, substantially
in the form of Exhibit D-2; and (iii) of Allen & Overy, special English counsel
to the Administrative Agent, substantially in the form of Exhibit D-3.
(e) Payment of Fees
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Evidence of payment by the Company of all accrued and unpaid
fees, costs and expenses to the extent then due and payable, together with
Attorney Costs of NationsBank to the extent invoiced prior to or on the
Announcement Date, including any such costs, fees and expenses arising under or
referenced in Sections 2.10 and 12.04.
(f) Certificate
A certificate signed by a Responsible Officer of the Company,
dated as of the Announcement Date:
(i) stating that the representations and warranties
contained in Article VI are true and correct on and as of such date, as
though made on and as of such date;
(ii) stating that no Default or Event of Default
exists both before and after giving effect to the Transaction; and
(iii) stating that there has occurred (x) since March
31, 1998, with respect to the Company and its Subsidiaries and (y) to
the best knowledge of the Company since December 31, 1997 with respect
to Target and its Subsidiaries, no event or circumstance that has
resulted or could reasonably be expected to result in a material
adverse change in the business, assets, liabilities (actual or
contingent), operations, condition (financial or otherwise) or
prospects of such Person.
(g) Press Release
A true and complete copy of the Press Release, certified as
true and correct by a Responsible Officer, which Press Release (including,
without limitation, any conditions to the Offer contained therein) shall (i) be
in form and substance reasonably satisfactory to the Administrative Agent, and
(ii) indicate that the Offer is recommended by the Directors of the Target, and
that such Directors are giving personal undertakings, in form and substance
acceptable to the Administrative Agent, in favor of Bidco with respect to the
Offer, and the Administrative Agent shall have received evidence satisfactory to
it that the Press Release has been released for publication at the opening of
business in London on October 26, 1998.
(h) Consent to Existing Credit Agreement
The Administrative Agent shall have received a fully executed
consent executed by the requisite lenders party to the Existing Credit Agreement
with respect to the Transaction, such consent to be in form and substance
satisfactory to the Administrative Agent, and such consent shall be in full
force and effect.
(i) Currency Fluctuations Protection
On or prior to the Announcement Date, the Company shall enter
into Swap Contracts providing protection against fluctuations in the rate of
exchange between Sterling and Dollars with
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one or more financial institutions each having a combined capital and surplus of
at least $100,000,000, which shall hedge against any fluctuations in the
exchange rate of Dollars against Sterling the effect of which $160,000,000 will
purchase pound sterling 86,614,000, and such Swap Contract shall contain such
other terms as are customary and satisfactory to the Administrative Agent.
(j) Environment Review
Such environmental site assessments with respect to the real
property of the Company and its Subsidiaries and the Target and the Target
Subsidiaries as shall be requested by the Administrative Agent.
(k) Pro Forma Balance Sheet; Projections; and Financials
(i) A pro forma consolidated and consolidating
balance sheet of the Company and its Subsidiaries, after giving effect
to the Transaction and the related financing thereof (based on the
interim financial statements of the Company as of September 30, 1998
and of the Target as of June 30, 1998) together with a Compliance
Certificate executed by a Responsible Officer, demonstrating compliance
by the Company with Sections 9.1, 9.2 and 9.3 as of September 30, 1998
(after giving effect to the Transaction and the related financing
thereof), which pro forma balance sheet and Compliance Certificate
shall be in form and substance acceptable to the Administrative Agent;
and
(ii) Projections for the period commencing in 1998
and concluding on the date approximately five years thereafter in form
and substance acceptable to the Administrative Agent.
(l) Solvency Certificates
Each of the Company, US Holdco #1 and US Holdco #2 shall have
delivered a Solvency Certificate substantially in the form of Exhibit K-1
hereto.
(m) Collateral Documents
The Subsidiary Guaranty executed by US Holdco #1 and US Holdco
#2 and the Company Pledge Agreement and the US Holdco Pledge Agreements,
together with:
(i) evidence satisfactory to the Administrative Agent
that there has been or will be filed, registered or recorded all
filings, registrations and recordings necessary and advisable to
perfect the Liens of the Administrative Agent for the benefit of the
Lenders in accordance with applicable law;
(ii) written advice relating to such Lien and
judgment researches as the Administrative Agent shall have requested of
the Company, and such termination statements or other documents as may
be necessary to confirm that the Collateral is subject to no other
Liens in favor of any Persons (other than Permitted Liens);
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(iii) all certificates and instruments representing
the Pledged Collateral under the Company Pledge Agreement and the US
Holdco Pledge Agreements, together with stock transfer powers and other
evidence or transferability executed in blank as the Administrative
Agent may specify; and
(iv) evidence that all other actions necessary or, in
the reasonable opinion of the Administrative Agent, customary to
perfect and protect the first priority Lien created by the Collateral
Documents.
(n) Other Documents
Such other customary approvals, opinions, documents or
materials as the Administrative Agent may reasonably request.
5.02 Conditions of Initial Funding Date
The obligation of each Lender to make its initial Credit
Extension under the First Amended and Restated Credit Agreement was subject to
the condition that the Administrative Agent received executed originals of each
of the following on or before such funding date:
(a) First Amended and Restated Credit Agreement and the
promissory notes contemplated thereby.
The First Amended and Restated Credit Agreement and the
promissory notes contemplated thereby executed by the Company.
(b) Bring Down Certificate
A certificate signed by a Responsible Officer dated as of the
Initial Funding Date, proposing any necessary changes to the Disclosure
Schedules to this Agreement occurring after the Announcement Date (provided,
however, that the Administrative Agent, in its reasonable discretion, may accept
or reject such proposed changes, but any rejection of the changes will not mean
that this condition has not been satisfied).
(c) Lender Payoff Letter
A fully executed, valid and binding bank payoff letter, or
other customary evidence of satisfaction reasonably acceptable to the
Administrative Agent fully executed and delivered by each lender to the Company
and each of its Subsidiaries (which must include the lenders under Existing
Credit Agreement) being repaid on the Initial Funding Date and of the Target and
each of its Subsidiaries being repaid on the Business Day following the Initial
Funding Date, in each case stating the total amount due under any credit and
loan documents or agreements with such lenders, as the case may be, howsoever
due and owing (whether as principal, interest or premium) shall be satisfied
(and such agreements terminated) upon payment of an amount certain, together
with such lien releases and other customary payoff documents as the
Administrative Agent shall reasonably
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require; provided, however, that (x) the aggregate amount of such Debt of the
Company and its Subsidiaries (including Target and its Subsidiaries) covered by
such payoff letters shall not exceed $205,000,000, and (y) any Debt of the
Company or its Subsidiaries or the Target and its Subsidiaries not being repaid
must be permitted Debt under Section 8.01.
(d) Solvency Certificates
A written solvency certificate from a Responsible Officer of
the Company in the form of Exhibit K-1, with respect to Bidco in the form of
Exhibit K-2, and with respect to Target in the form of Exhibit L, each dated as
of the Initial Funding Date, with respect to the Solvency of each such Person on
a consolidated basis after giving effect to the Transaction (except that the
certification with respect to Target and its Subsidiaries will be as of the
Unconditional Date).
(e) Resolutions; Incumbency
With respect to each Subsidiary Guarantor (other than US
Holdco #1 and US Holdco #2):
(i) copies of the resolutions of the board of
directors of such Person authorizing the Transactions and the
transactions contemplated thereby, certified by the Secretary or an
Assistant Secretary of such Person; and
(ii) a certificate of the Secretary or Assistant
Secretary of such Person, dated as of the Initial Funding Date, and
certifying the names and true signatures of the officers of such Person
authorized to execute, deliver and perform, as applicable, this
Agreement, and all other Loan Documents to be delivered by it
hereunder.
(f) Organization Documents; Good Standing
Each of the following documents with respect to each
Subsidiary Guarantor (other than US Holdco #1 and US Holdco #2):
(i) the articles or certificate of incorporation,
memorandum of association, bylaws and board of directors resolutions of
such Person as then in effect, certified by the Secretary or Assistant
Secretary of such Person; and
(ii) a good standing certificate for such Person from
the Secretary of State (or similar, applicable Governmental Authority)
of its state of incorporation and each state where such Person is
qualified to do business as a foreign corporation as of a recent date,
together with a bring-down certificate by facsimile.
(g) Collateral Documents
The Company Guaranty, Subsidiary Guaranty and Subsidiary
Guarantor Pledge Agreement, in each case executed by each Subsidiary Guarantor,
together with:
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(i) evidence reasonably satisfactory to the
Administrative Agent that there has been or will be filed, registered
or recorded all filings, registrations and recordings necessary and
advisable to perfect the Liens of the Administrative Agent for the
benefit of the Lenders in accordance with applicable law;
(ii) written advice relating to such Lien and
judgment searches as the Administrative Agent shall have reasonably
requested of the Company, and such termination statements or other
documents as may be necessary to confirm that the Collateral is subject
to no other Liens in favor of any Persons (other than Permitted Liens);
(iii) all certificates and instruments representing
Pledged Collateral under the Pledge Agreements (other than with respect
to the Foreign Subsidiaries listed on Schedule 5.02, each a "Specified
Foreign Subsidiary"), together with undated stock transfer powers and
other evidence of transferability executed in blank as the
Administrative Agent may reasonably specify; and
(iv) evidence that all other actions necessary or, in
the reasonable opinion of the Administrative Agent, customary to
perfect and protect the first priority Lien created by the Collateral
Documents has been taken; provided, however, that the Lenders hereby
acknowledge and agree that their obligations to make any Loan to enable
the Company to facilitate the purchase of Target Shares and pay off the
Existing Credit Agreement during the Certain Funds Period will not be
dependent upon the satisfaction of this clause (iv).
(h) Completion of Offer
The Administrative Agent shall have received evidence that
each of the following has occurred on the Initial Funding Date or will occur on
the Business Day following the Initial Funding Date, certified by a Responsible
Officer of the Company:
(i) evidence that the Offer shall have been declared
and/or become unconditional in all respects and that valid acceptances
relating to the number of Target Shares to which the Offer relates
referred to in Section 7.12(f) have been received and have not (where
permitted) been withdrawn; and
(ii) a certificate in form and substance acceptable
to the Administrative Agent from the Company certifying as to
compliance with, and the receipt of any consents or waivers required
by, the terms and conditions of Sections 7.12 (a), (c) and (j) and
8.02.
(i) Legal Opinion
An opinion addressed to the Administrative Agent and the
Lenders, dated as of the Initial Funding Date, of Nutter, McClennen & Fish LLP,
updating their opinion delivered pursuant to Section 5.01(d)(i) to bring down
the opinions therein, expand the coverage of the opinion to include all
guarantors and each Collateral Document being executed at such time and cover
such other customary matters as the Administrative Agent shall reasonably
request, such opinion to be
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in form and substance satisfactory to the Administrative Agent; provided,
however, that the Lenders hereby acknowledge and agree that their obligation to
make any Loan to enable the Company to facilitate the purchase of Target Shares
and pay off the Existing Credit Agreement during the Certain Funds Period will
not be dependent upon the satisfaction of this clause (i).
(j) Applicable Margin Certificate
A certificate delivered to the Administrative Agent on the
Initial Funding Date, executed by a Responsible Officer, delineating the
Applicable Margin after giving pro forma effect to the Loans to be incurred on
the Initial Funding Date and the consummation of the Transaction, the form and
substance of such certificate to be satisfactory to the Administrative Agent;
provided, however, that the Lenders hereby acknowledge and agree that their
obligation to make any Loan to enable the Company to facilitate the purchase of
Target Shares and pay off the Existing Credit Agreement during the Certain Funds
Period will not be dependent upon the satisfaction of this clause (j).
(k) Application of Swap Contract Proceeds
Prior to the incurrence of any Loan to purchase Target Shares,
the Company shall liquidate the Swap Contract referred to in Section 5.01(i) and
utilize 100% of the proceeds thereof, if any, together with any proceeds of any
other forward or exchange contracts (as reasonably determined by the
Administrative Agent) to effect the Transaction.
(l) Payment of Fees.
Evidence of payment by each Borrower of all accrued and unpaid
fees, costs and expenses to the extent then due and payable on the Initial
Funding Date, together with Attorney Costs of NationsBank to the extent invoiced
prior to or on the Initial Funding Date; including any such costs, fees and
expenses arising under or referenced in Sections 2.10 and 12.04; provided,
however, that the Lenders hereby acknowledge and agree that their obligation to
make any Loan to the Company to facilitate the purchase of Target Shares and the
payoff of the Existing Credit Agreement during the Certain Funds Period will not
be dependent upon the satisfaction of this clause (l).
(m) Other Documents
Such other customary approvals, opinions, documents or
materials as in the Administrative Agent may reasonably request; provided,
however, that the Lenders hereby acknowledge and agree that their obligation to
make any Loan to the Company to facilitate the purchase of Target Shares and the
payoff of the Existing Credit Agreement during the Certain Funds Period will not
be dependent upon the satisfaction of this clause (m).
5.03 Conditions to All Credit Extensions
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The obligation of each Lender to make any Loan to be made by
it (including its initial Loan) or to continue or convert any Loan under Section
2.04 and the obligation of the Issuing Bank to Issue any Letter of Credit
(including the initial Letters of Credit) is subject to the satisfaction of the
following conditions precedent on the relevant Borrowing Date or Issuance Date:
(a) Notice, Application
The Administrative Agent shall have received (with, in the
case of the initial Loans only, a copy for each Lender) a Notice of Borrowing in
the form of Exhibit A-1 or, in the case of any Issuance of any Letter of Credit,
the Issuing Bank and the Administrative Agent shall have received an L/C
Application or L/C Amendment Application, as required under Section 3.02.
(b) Continuation of Representations and Warranties
The representations and warranties in Article VI shall be true
and correct in all material respects on and as of such Borrowing Date or
Issuance Date with the same effect as if made on and as of such Borrowing Date,
or Issuance Date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and correct
as of such earlier date); provided, however, that notwithstanding the provisions
of this clause (b) (but subject to compliance with Sections 5.01 and 5.02), at
any time during the Certain Funds Period the obligations of the Lenders to make
any Loan to enable the Company to fund the purchase by Bidco of Target Shares
and the repayment of loans under the Existing Credit Agreement are only subject
to the condition that, at the time of the making of such Loan, the Relevant
Representations and Warranties are true and correct in all material respects;
and
(c) No Existing Default
No Default or Event of Default shall exist or shall result
after giving effect to such Borrowing (or continuation or conversion) or
Issuance (or amendment or renewal); provided, however, that notwithstanding the
provisions of this clause (c) (but subject to compliance with Sections 5.01 and
5.02), at any time during the Certain Funds Period, the obligations of the
Lenders to make any Loans to enable the Company to fund the purchase by Bidco of
Target Shares and the repayment of loans under the Existing Credit Agreement,
are only subject to the condition that, at the time of the making of such Loan,
no Relevant Event of Default has occurred and is continuing or would result
after giving effect to such Loan.
Each Notice of Borrowing, Notice of Continuation/Conversion,
L/C Application or L/C Amendment Application submitted by a Borrower hereunder
shall constitute a representation and warranty by such Borrower hereunder, as of
the date of each such notice or application and as of each Borrowing Date or
Issuance Date, as applicable, that the conditions in this Section 5.03 are
satisfied and the statements in clause (b) above are deemed remade as of such
date. For purposes of the immediately preceding sentence and Section 10.02, each
of the representations and warranties contained in Article VI and any obligation
to make delivery of documents hereunder shall be deemed to have been made
notwithstanding the fact the Lenders may be required to make Loans during the
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Certain Funds Period, and any Default or Event of Default that may exist under
Section 10.01(b) on the date such Loan is made shall not be deemed to have been
waived as a result of such Loan.
5.04 First Borrowing by Each Eligible Borrower
The obligation of each Lender to make a Loan or issue a Letter
of Credit on the occasion of the first Borrowing request or first request for
issuance of a Letter of Credit by each Eligible Borrower is subject to the
satisfaction of the following further conditions:
(a) receipt by the Administrative Agent for the account of
each Lender of a duly executed Note in the form of Exhibit F-1(A) of such
Eligible Borrower dated on or before the date of such Borrowing;
(b) receipt by the Administrative Agent of an Authorization
Letter duly executed by such Eligible Borrower;
(c) receipt by the Administrative Agent of an Election to
Participate duly executed by such Eligible Borrower;
(d) receipt by the Administrative Agent of a Subsidiary
Guaranty duly executed by such Eligible Borrower that is a Domestic Subsidiary;
(e) receipt by the Administrative Agent of such certificates,
together with executed and undated stock powers, of such Eligible Borrower or
where such Eligible Borrower is a Foreign Subsidiary, of the first-tier Foreign
Subsidiary parent entity of such Eligible Borrower and, in the case of an
Eligible Borrower that is a Domestic Subsidiary, intercompany notes endorsed in
blank;
(f) receipt by the Administrative Agent of an opinion of
counsel for such Eligible Borrower acceptable to the Administrative Agent and
covering such matters relating to the transactions contemplated hereby as the
Administrative Agent may reasonably request; provided, however, that in the
event that such opinion is not delivered on the date of such first Borrowing,
then such opinion shall be delivered no later than the 30th day following such
date and the aggregate Effective Amount of Revolving Loans and L/C Obligations
of all such Eligible Borrowers for which opinions have not been delivered shall
not at any time exceed $10,000,000 prior to the date such opinion is delivered
in compliance with this clause (e);
(g) receipt by the Administrative Agent of all documents which
it may reasonably request relating to the existence of such Eligible Borrower,
the corporate authority for and the validity of this Agreement, the
Authorization Letter, the Election to Participate and the Notes of such Eligible
Borrower, and any other matters relevant thereto, all in form and substance
satisfactory to the Administrative Agent;
(h) receipt by the Administrative Agent of a letter from US
Corporation System in New York, New York (or such other agent to receive service
of process in New York, New York
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reasonably acceptable to the Administrative Agent), indicating its consent to
its appointment by such Eligible Borrower as its agent to receive service of
process; and
(i) the representations and warranties contained in Section
6.25 shall be true and correct on and as of the date of such Borrowing as though
made on and as of such date, and no Default or Event of Default shall have
occurred and be continuing, or would result from such Loans.
Except as otherwise provided in Section 5.04(f), the opinion referred to in
Section 5.04(f) above shall be dated no more than five Business Days before the
date of the first Borrowing by such Eligible Borrower hereunder.
5.05 Conditions to PTI Effective Date
The obligation of each Lender to enter into this Agreement is
subject to (in addition to compliance with Sections 5.03 and 5.04) the condition
that the Administrative Agent receives on or prior to the date hereof each of
the following, in form and substance satisfactory to the Administrative Agent,
and in sufficient copies for each Lender:
(a) Credit Agreement
This Agreement, executed by each party hereto.
(b) PTI Merger Documents
(i) The PTI Merger Documents and all transactions
contemplated thereby shall be effective pursuant to documentation and
agreements in form and substance satisfactory to the Administrative
Agent and certified copies of the same shall be delivered to the
Administrative Agent.
(ii) The Administrative Agent shall have received and
reviewed, and shall be reasonably satisfied with the contents thereof,
information regarding litigation, tax, accounting, labor, insurance,
pension liabilities (actual or contingent), real estate leases,
environmental matters, material contracts, debt agreements, property
ownership, contingent liabilities and management of PTI and the PTI
Subsidiaries.
(c) Resolutions; Incumbency
With respect to each of the Company and PTI MergeCo:
(i) copies of the resolutions of the board of
directors of such Person authorizing the PTI Merger and the
transactions contemplated thereby, certified by the Secretary or an
Assistant Secretary of such Person; and
(ii) a certificate of the Secretary or Assistant
Secretary of such Person, dated as of the PTI Effective Date, and
certifying the names and true signatures of the
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officers of such Person authorized to execute, deliver and perform, as
applicable, this Agreement and all other Loan Documents to be delivered
by it hereunder.
(d) Organization Documents; Good Standing
Each of the following documents with respect to each of the
Company and PTI MergeCo:
(i) the articles or certificate of incorporation,
memorandum of association, bylaws and board of directors resolutions of
such Person as then in effect, certified by the Secretary or Assistant
Secretary of such Person; and
(ii) a good standing certificate for such Person from
the Secretary of State (or similar, applicable Governmental Authority)
of its state of incorporation and each state where such Person is
qualified to do business as a foreign corporation as of a recent date,
together with a bring-down certificate by facsimile.
(e) Legal Opinion
An opinion addressed to the Administrative Agent and the
Lenders, dated as of the PTI Effective Date, of Nutter, McClennen & Fish LLP,
counsel to the Company, substantially in the form of Exhibit D-4 together with
such changes as are acceptable to the Administrative Agent.
(f) Payment of Fees
Evidence of payment by the Company of all accrued and unpaid
fees, costs and expenses to the extent then due and payable, together with
Attorney Costs of NationsBank to the extent invoiced prior to or on the PTI
Effective Date, including (i) any such costs, fees and expenses arising under or
referenced in Sections 2.10 and 12.04; and (ii) the payment of the Amendment Fee
by the Company to the Administrative Agent for the account of each Lender.
(g) Certificate
A certificate signed by a Responsible Officer of the Company,
dated as of the PTI Effective Date:
(i) stating that the representations and warranties
contained in Article VI are true and correct on and as of such date as
though made on and as of such date;
(ii) stating that no Default or Event of Default
exists;
(iii) stating that there has occurred since March 31,
1998, with respect to the Company and its Subsidiaries on a
consolidated basis, no event or circumstance that has resulted or could
reasonably be expected to result in a material adverse change in the
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business, assets, liabilities (actual or contingent), operations,
condition (financial or otherwise) or prospects of such Person; and
(iv) stating that, except for (x) in connection with
the required expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and related
antitrust laws and regulations and any regulatory or judicial
proceeding thereunder, including without limitation the submission of
documents by the Company and PTI to the FTC pursuant to a so-called
"second request", and (y) any filing or related proceeding under the
securities laws of the United States relating to either the
solicitation of proxies from Company shareholders or the issuance of up
to 7.7 million shares of Company Common Stock and the issuance by the
SEC of an order declaring effective the Company's registration
statement on Form S-4 pursuant to which the Company will register under
the Securities Act of 1933 the issuance of up to 7.7 million shares of
Company Common Stock in the PTI Merger, there does not exist (a) any
order, decree, judgment, ruling or injunction which restrains the
consummation of the PTI Merger and the transactions contemplated
thereby in the manner contemplated by the PTI Merger Documents or (b)
any pending or threatened action, suit, investigation or proceeding ,
which, if adversely determined, could materially and adversely affect
the Company or its Subsidiaries (including PTI and the PTI
Subsidiaries), the PTI Merger, any other transaction contemplated by
the PTI Merger or the ability of the Company and its Subsidiaries or
any other Subsidiary Guarantor to perform its obligations under the
Loan Documents.
(h) Environmental Review
Such environmental site assessments with respect to the real
property of PTI and the PTI Subsidiaries as shall be requested by the
Administrative Agent.
(i) Pro Forma Balance Sheet; Projections; and Financials
(i) A pro forma consolidated and consolidating
balance sheet of the Company and its Subsidiaries, after giving effect
to the PTI Merger and the related financing thereof together with a
Compliance Certificate executed by a Responsible Officer, demonstrating
compliance by the Company with Sections 9.1, 9.2 and 9.3 as of March
31, 1999 (after giving effect to the PTI Merger and the related
financing thereof), which pro forma balance sheet and Compliance
Certificate shall be in form and substance acceptable to the
Administrative Agent;
(ii) Projections for the period commencing in 1998
and concluding on the date approximately five years thereafter after
giving effect to the PTI Merger in form and substance acceptable to the
Administrative Agent; and
(iii) Financial statements for the first fiscal
quarter ended March 31, 1999 for the Company and PTI of a type and kind
which satisfy the requests for such financial statements as set forth
in Section 7.01(b).
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(j) Solvency Certificates
Each of the Company and PTI MergeCo shall have delivered a
Solvency Certificate substantially in the form of Exhibit K-1 hereto.
(k) Collateral Documents.
Evidence in form and substance reasonably satisfactory to the
Administrative Agent that all Subsidiary Guarantors under the Subsidiary
Guaranty have acknowledged and consented to this Amendment and the obligations
created hereunder.
(l) Updated Disclosure Schedules
A certificate signed by a Responsible Officer dated as of the
PTI Effective Date, proposing any necessary changes to the Disclosure Schedules
to this Agreement in form and substance reasonably satisfactory to the
Administrative Agent occurring after the Initial Funding Date (including changes
which the Company in good faith reasonably believes will be required on the PTI
Funding Date).
(m) Other Documents
Such other customary approvals, opinions, documents or
materials as the Administrative Agent may reasonably request.
5.06 Conditions of PTI Funding Date
The obligation of each Lender to make initial advances under
its PTI Term Loan Commitment and the PTI Revolver Increase Commitment is subject
to (in addition to compliance with Sections 5.03 and 5.04) the condition that
the Administrative Agent shall have received executed originals of each of the
following on or before such funding date:
(a) Notes
(i) Notes with respect to the Revolving Loan
Commitment amended to reflect the PTI Revolver Increase Commitment, as
applicable, in favor of the Lenders with Revolving Loan Commitments; and Notes
with respect to the PTI Term Loan Commitment executed by the Company in favor of
the Lenders with PTI Term Loan Commitments.
(b) Bring Down Certificate for Disclosure Schedules
A certificate signed by a Responsible Officer dated as of the
PTI Funding Date, proposing any necessary changes to the Disclosure Schedules to
this Agreement (provided, however, that the Administrative Agent on behalf of
the Lenders, in its reasonable discretion, may accept or reject such proposed
changes, but any rejection of the changes will not mean that this condition has
not been satisfied).
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(c) Applicable Margin Certificate
A certificate delivered to the Administrative Agent on the PTI
Funding Date, executed by a Responsible Officer, delineating the Applicable
Margin after giving pro forma effect to the Loans to be incurred on the PTI
Funding Date and the consummation of the PTI Merger, the form and substance of
such certificate to be satisfactory to the Administrative Agent, which new
Applicable Margin shall then be effective as of the fifth business day following
the PTI Funding Date and which shall replace the Applicable Margin certificate
previously delivered by the Company.
(d) Lender Payoff Letters
A fully executed, valid and binding bank payoff letter, or
other customary evidence of satisfaction reasonably acceptable to the
Administrative Agent fully executed and delivered by each lender to PTI and each
of its Subsidiaries being repaid on the PTI Funding Date in each case stating
that the total amount due under any credit and loan documents or agreements with
such lenders, as the case may be, howsoever due and owing (whether as principal,
interest or premium) shall be satisfied (and such agreements terminated) upon
payment of an amount certain, together with such lien releases and other
customary payoff documents as the Administrative Agent shall reasonably require;
provided, however, that (x) the aggregate amount of such Debt of PTI and its
Subsidiaries covered by such payoff letters shall not exceed $180,000,000, and
(y) any Debt of the Company or its Subsidiaries or PTI and its Subsidiaries not
being repaid must be permitted Debt under Section 8.01.
(e) Certificate
A certificate signed by a Responsible Officer of the Company,
dated as of the PTI Funding Date:
(i) stating that the representations and warranties
contained in Article VI are true and correct on and as of such date
(both before and after giving effect to the PTI Merger, the making of
PTI Term Loans and the PTI Revolver Increase Commitment), as though
made on and as of such date;
(ii) stating that no Default or Event of Default
exists both before and after giving effect to the PTI Merger, the
making of PTI Term Loans and the PTI Revolver Increase Commitment;
(iii) stating that there has occurred (x) since March
31, 1998, with respect to the Company and its Subsidiaries and (y)
since December 31, 1997 with respect to PTI and its Subsidiaries, no
event or circumstance that has resulted or could reasonably be expected
to result in a material adverse change in the business, assets,
liabilities (actual or contingent), operations, condition (financial or
otherwise) or prospects of such Person;
(iv) stating that there does not exist (a) any order,
decree, judgment, ruling or injunction which restrains the consummation
of the PTI Merger and the transactions
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contemplated thereby in the manner contemplated by the PTI Merger
Documents or (b) any pending or threatened action, suit, investigation
or proceeding , which, if adversely determined, could materially and
adversely affect the Company or its Subsidiaries (including PTI and the
PTI Subsidiaries), the PTI Merger, any other transaction contemplated
by the PTI Merger or the ability of the Company and its Subsidiaries or
any other Guarantor to perform its obligations under the Loan
Documents; and
(v) stating that all governmental, shareholder and
third party consents (including, without limitation, all FTC and other
anti-trust clearance and SEC approval of the form of proxy solicitation
used to seek approval of the issuance of new shares of Company Common
Stock) and approvals necessary or desirable in connection with the PTI
Merger and the other transactions contemplated thereby have been
obtained;
provided, however, that for purposes of clauses (iv) and (v) of this
Section 5.06(e), required Asset Dispositions or other changes in the business or
assets of PTI which are required by a Governmental Authority as a condition to
such Person's consent to or approval of the PTI Merger shall be permitted if
reasonably satisfactory to the Administrative Agent and in an amount not to
exceed 7.5% of the 1998 consolidated net revenues of PTI (before giving effect
to the PTI Merger) as reflected on the most recent audited financial statements
of PTI.
(f) Solvency Certificates
A written solvency certificate from a Responsible Officer of
the Company, PTI MergeCo and PTI in the form of Exhibit K-1, each dated as of
the PTI Funding Date, with respect to the Solvency of each such Person on a
consolidated basis after giving effect to the PTI Merger.
(g) Resolutions; Incumbency
(a) With respect to PTI:
(i) copies of the resolutions of the board of
directors of PTI authorizing the PTI Merger and the transactions
contemplated thereby, certified by the Secretary or an Assistant
Secretary of PTI; and
(ii) a certificate of the Secretary or Assistant
Secretary of PTI dated as of the PTI Funding Date, and certifying the
names and true signatures of the officers of PTI authorized to execute,
deliver and perform, as applicable, this Agreement and all other Loan
Documents to be delivered by it hereunder.
(b) With respect to each new Subsidiary Guarantor:
(i) copies of the resolutions of the board of
directors of such Person authorizing the execution of the Loan
Documents contemplated hereby, certified by the Secretary or an
Assistant Secretary of such Person; and
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(ii) a certificate of the Secretary or Assistant
Secretary of such Person, dated as of the PTI Funding Date, and
certifying the names and true signatures of the officers of such Person
authorized to execute, deliver and perform, as applicable, this
Agreement and all other Loan Documents to be delivered by it hereunder.
(h) Organization Documents; Good Standing
Each of the following documents with respect to PTI, PTI
MergeCo and each Subsidiary Guarantor (for which such certificates have not been
previously delivered, and a bring down as to the continuing validity of all
previously provided information by each existing Subsidiary Guarantor):
(i) the articles or certificate of incorporation,
memorandum of association, bylaws and board of directors resolutions of
such Person as then in effect, certified by the Secretary or Assistant
Secretary of such Person; and
(ii) a good standing certificate for such Person from
the Secretary of State (or similar, applicable Governmental Authority)
of its state of incorporation and each state where such Person is
qualified to do business as a foreign corporation as of a recent date,
together with a bring-down certificate by facsimile.
(i) Collateral Documents
(i) The Subsidiary Guaranty executed by PTI, PTI MergeCo and
any other new Subsidiaries required to execute the same and the Subsidiary
Guarantor Pledge Agreement, together with:
(a) evidence satisfactory to the Administrative Agent
that there has been or will be filed, registered or recorded all
filings, registrations and recordings necessary and advisable to
perfect the Liens of the Administrative Agent for the benefit of the
Lenders in accordance with applicable law;
(b) written advice relating to such Lien and judgment
researches as the Administrative Agent shall have requested of the
Company, and such termination statements or other documents as may be
necessary to confirm that the Collateral is subject to no other Liens
in favor of any Persons (other than Permitted Liens);
(c) all certificates and instruments representing the
Pledged Collateral under the Company Pledge Agreement and the
Subsidiary Guarantor Pledge Agreement, together with undated stock
transfer powers and other evidence or transferability executed in blank
as the Administrative Agent may specify;
(d) evidence that all other actions necessary or, in
the reasonable opinion of the Administrative Agent, customary to
perfect and protect the first priority Lien created by the Collateral
Documents; and
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(e) evidence that all Subsidiary Guarantors under the
Subsidiary Guaranty have acknowledged and consented to this Amendment
and the obligations created hereunder.
(ii) A properly executed agreement (whether pursuant to an
amendment, acknowledgment or other joinder agreement in form and substance
reasonably acceptable to the Administrative Agent) for each of the Subsidiary
Guaranty and Subsidiary Guarantor Pledge Agreement, in each case executed by
each Subsidiary Guarantor (after giving effect to the PTI Merger) not yet a
party thereto, together with:
(a) evidence reasonably satisfactory to the
Administrative Agent that there has been or will be filed, registered
or recorded all filings, registrations and recordings necessary and
advisable to perfect the Liens of the Administrative Agent for the
benefit of the Lenders in accordance with applicable law;
(b) written advice relating to such Lien and judgment
searches as the Administrative Agent shall have reasonably requested of
the Company, and such termination statements or other documents as may
be necessary to confirm that the Collateral is subject to no other
Liens in favor of any Persons (other than Permitted Liens);
(c) all certificates and instruments representing
Pledged Collateral under the Pledge Agreements, as required from such
new Subsidiary Guarantors, together with undated stock transfer powers
and other evidence of transferability executed in blank as the
Administrative Agent may reasonably specify; provided, however, that
with respect to Foreign Subsidiaries (which are not Eligible Borrowers
seeking to make a Borrowing and to comply with Section 5.04) of the
Company which were formerly Subsidiaries of PTI, the Company shall have
60 days after the PTI Funding Date within which to comply with the
delivery requirements of this clause (c); and
(d) evidence that all other actions necessary or, in
the reasonable opinion of the Administrative Agent, customary to
perfect and protect the first priority Lien created by the Collateral
Documents has been taken.
(j) Completion of PTI Merger
The Administrative Agent shall have received evidence in form
and substance reasonably satisfactory to it that each of the following has
occurred on the PTI Funding Date as certified by a Responsible Officer of the
Company:
(i) that the PTI Merger has been consummated and is
effective in accordance with the PTI Merger Documents and in compliance
with applicable law and regulatory approvals;
(ii) that the PTI Merger Documents have not been
materially altered, amended or otherwise changed or supplemented or any
condition therein waived without
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prior written consent of the Administrative Agent which consent shall
not be unreasonably withheld or delayed;
(iii) that the board of directors of the Company, PTI
MergeCo and PTI, and shareholders of the Company, PTI MergeCo and PTI
approved the PTI Merger;
(iv) a copy of the joint proxy solicitation sent to
the shareholders of the Company and PTI in connection with the PTI
Merger; and
(v) that the Company's shareholders have approved the
issuance of new shares of common stock and any other actions required
to consummate the transactions contemplated by the PTI Merger.
(k) Approval of Pro Forma Balance Sheet and Delivery of
Updated PTI Financial Statements
(i) The Administrative Agent shall have received and
approved the pro forma consolidated and consolidating balance sheet of
the Company and its Subsidiaries, after giving effect to the PTI Merger
and the related financing thereof together with a Compliance
Certificate executed by a Responsible Officer, demonstrating compliance
by the Company with Sections 9.1, 9.2 and 9.3 as of March 31, 1999
(after giving effect to the PTI Merger and the related financing
thereof); and
(ii) if the PTI Funding Date shall have occurred
later than August 15, 1999 then the Administrative Agent shall have
received financial statements for the fiscal quarter ending June 30,
1999 for the Company and PTI of a type and kind which satisfy the
requests for such financial statements as set forth in Section 7.01(b).
(l) Legal Opinions
(i) An opinion addressed to the Administrative Agent and the
Lenders, dated as of the PTI Funding Date, of Nutter, McClennen & Fish, LLP,
counsel to the Company and PTI MergeCo, updating their opinion delivered
pursuant to Section 5.05(d)(i) to bring down the opinions therein, expand the
coverage of the opinion to include all guarantors, including PTI MergeCo, and
each Collateral Document being executed at such time and cover such other
customary matters as the Administrative Agent shall reasonably request,
including, but not limited to, an opinion that (I) the PTI Merger shall qualify
as a tax-free reorganization and (II) the PTI Merger is valid, legal and
effectively consummated in accordance with law, such opinion to be in form and
substance satisfactory to the Administrative Agent; and
(ii) Copies of all opinions delivered in connection with the
PTI Merger agreement, together with reliance letters addressed to the
Administrative Agent and the Lenders, dated as of the PTI Funding Date
permitting the Lenders to rely on such opinions, or such other opinions that are
reasonably acceptable to the Administrative Agent.
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(m) Y2K Problem Review
Administrative Agent shall have received and be satisfied
with information confirming that PTI and the PTI Subsidiaries have taken and are
taking all necessary steps to quantify and successfully address business and
financial risks facing each such Person related to the Y2K Problem.
(n) Payment of Fees.
Evidence of payment by each Borrower of all accrued and unpaid
fees, costs and expenses to the extent then due and payable on the PTI Funding
Date, together with Attorney Costs of NationsBank to the extent invoiced prior
to or on the PTI Funding Date, including any such costs, fees and expenses
arising under or referenced in Sections 2.10 and 12.04.
(o) Other Documents
Such other customary approvals, opinions, documents or
materials as the Administrative Agent may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Administrative Agent and
each Lender that:
6.01 Incorporation, Good Standing and Due Qualification. Each of the
Company and its Subsidiaries (other than Elnic, Inc. which is a dormant
corporation) (a) is duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation, has the corporate power
and authority to own its assets and to transact the business in which it is now
engaged, and (b) is duly qualified as a foreign corporation and in good standing
under the laws of each other jurisdiction in which such qualification is
required except where failure to be so qualified would not have a material
adverse effect on the Company's business as a whole or its properties, condition
(financial or otherwise) or operation.
6.02 Corporate Power and Authority; No Conflicts. The execution,
delivery and performance by the Company and each Subsidiary of the PTI Merger
Documents, Offer Documents and the Loan Documents to which it is a party are
within its corporate power, have been duly authorized by all necessary corporate
action and do not and, except for (x) approval by Company shareholders of the
issuance of up to 7.7 million shares of Company Common Stock pursuant to the PTI
Merger, (y) any filing or related proceeding under the securities laws of the
United States relating to either the solicitation of proxies from Company
shareholders or the issuance of up to 7.7 million shares of Company Common Stock
and the issuance by the SEC of an order declaring effective the Company's
registration statement on Form S-4 pursuant to which the Company will register
under the Securities Act of 1933 the issuance of up to 7.7 million shares of
Company
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Common Stock in the PTI Merger, and (z) the expiration or termination of any
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
and related antitrust laws and regulations (and provided that all such
approvals, consents, filings and expirations will be completed before the PTI
Funding Date) will not: (a) require any consent or approval of its stockholders;
(b) contravene its charter or by-laws; (c) violate any provision of, or require
any filing (except for the filing of this Agreement with the SEC and the New
York Stock Exchange), registration, consent or approval under, any law, rule,
regulation (including Regulation U of the FRB), order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to the Company or any of its Subsidiaries or affiliates; (d)
result in a breach of, or constitute a default or require any consent (except
for those consents which have been obtained) under, any indenture or loan or
credit agreement or any other agreement, lease or instrument to which the
Company or any of its Subsidiaries is a party or by which it or its properties
may be bound; (e) result in, or require, the creation or imposition of any Lien
upon or with respect to any of the properties now owned or hereafter acquired by
the Company or any of its Subsidiaries; or (f) cause the Company (or any
Subsidiary or affiliate, as the case may be) to be in default under any law,
rule, regulation, order, writ, judgment, injunction, decree, determination or
award or any such indenture, agreement, lease or instrument.
6.03 Legally Enforceable Agreements. Each Loan Document to which the
Company or any of its Subsidiaries is a party is, or when delivered under this
Agreement will be, a legal, valid and binding obligation of the Company or such
Subsidiary, as applicable, enforceable against the Company or such Subsidiary,
as applicable, in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability and the time barring of claims under any
applicable limitations act.
6.04 Litigation. Except as disclosed on Schedule 6.04, there are no
actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries before
any court, governmental agency or arbitrator, which, in any one case or in the
aggregate, would have a reasonable likelihood of having a material adverse
effect on the financial condition, operations, properties or business of the
Company and its Subsidiaries as taken as a whole or the ability of the Company
or any of its Subsidiaries to perform its obligations under the Loan Documents
to which it is a party.
6.05 Financial Statements; SEC Filings.
(a) Attached hereto as Schedule 6.05(a) is a true and correct
copy of the audited consolidated balance sheet of the Company and its
Consolidated Subsidiaries as at March 31, 1998, and the related consolidated
statements of income and statements of cash flows and changes in stockholders'
equity of the Company and its Consolidated Subsidiaries for the fiscal year then
ended, and the accompanying footnotes, together with the opinion thereon, of
KPMG Peat Marwick LLP, independent certified public accountants, a copy of which
is contained in Schedule 6.05(a), and such financial statements present fairly
in all material respects the financial condition of the Company and its
Consolidated Subsidiaries as at such date and the results of the operations of
the Company and its Consolidated Subsidiaries for the periods covered by such
statements, all in accordance with
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generally accepted accounting principles. Since March 31, 1998, there has been
no material adverse change in the business, financial position or results of
operations of the Company and its Subsidiaries. The Company has timely made all
filings required of it with the SEC and is in material compliance with all
securities laws applicable to it.
(b) (i) Attached hereto as Schedule 6.05(b) is a true and
correct copy of the audited financial statements of the Target for the
fiscal years ended December 31, 1995, December 31, 1996 and December
31, 1997, together with the opinion thereon of Price Waterhouse,
independent certified public accountants, a copy of which is contained
in Schedule 6.05(b), and to the knowledge of the Company, such
financial statements give a true and fair view of the state of affairs
of Target and its Subsidiaries as at such dates and of the profit and
cash flows of Target and its Subsidiaries for the years then ended and
have been properly prepared in accordance with the Companies Act of
1985.
(ii) Since December 31, 1998, there has been no
material adverse change in the business, financial position or results
of operations of Target and its Subsidiaries; provided, however, that
up to and including the Initial Funding Date this representation and
warranty contained in this clause (ii) shall be deemed to have been
made only to the best knowledge of the Company.
(c) (i) Attached hereto as Schedule 6.05(c) is a true and
correct copy of the audited financial statements of PTI for the fiscal
years ended December 31, 1996, December 31, 1997 and December 31, 1998,
together with the opinion thereon of PricewaterhouseCoopers,
independent certified public accountants, a copy of which is contained
in Schedule 6.05(c), and to the knowledge of the Company, such
financial statements present fairly in all material respects the
financial condition of PTI and its Consolidated Subsidiaries as at such
date and the results of the operations of PTI and its Consolidated
Subsidiaries for the periods covered by such statements, all in
accordance with generally accepted accounting principles.
(ii) Beginning on the PTI Funding Date, there has
been no material adverse change in the business, financial position or
results of operations of PTI and its Subsidiaries since December 31,
1997.
6.06 Taxes. Each of the Company and its Subsidiaries has filed all
United States Federal income tax returns and all other material tax returns
required to be filed and has paid all taxes, assessments and governmental
charges and levies shown thereon to be due, including interest and penalties,
except for those which are being contested in good faith and by appropriate
proceedings diligently conducted. The federal income tax liability of the
Company and its Subsidiaries has been audited by the Internal Revenue Service
and has been finally determined and satisfied for all taxable years up to and
including the taxable year ended March 31, 1994 (other than with respect to any
research and development credit attributable to any taxable year prior to March
31, 1994). The charges, accruals and reserves on the books of the Company and
its Subsidiaries with respect to taxes or other governmental charges are
adequate in the opinion of the Company.
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6.07 ERISA. Each member of the ERISA Group has fulfilled its
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code with respect to each Plan.
No member of the ERISA Group has (a) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (b) failed to
make any contribution or payment to any Plan or Multiemployer Plan or in respect
of any Benefit Arrangement, or made any amendment to any Plan or Benefit
Arrangement, which has resulted or could result in the imposition of a Lien or
the posting of a bond or other security under ERISA or the Code or (c) incurred
any liability under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA.
6.08 Subsidiaries and Ownership of Stock. (a) Schedule 6.08 is a
complete and accurate list of Subsidiaries of the Company as of the date hereof
(including, without limitation, an additional attachment thereto showing the
capital structure of PTI), showing the jurisdiction of incorporation or
organization of each Subsidiary and showing the percentage of the Company's
ownership of the outstanding capital stock or other ownership interest of each
such Subsidiary. Except as set forth on Schedule 6.08, all of the outstanding
capital stock or other ownership interest of each such Subsidiary has been
validly issued, is fully paid and nonassessable and if owned by the Company is
free and clear of all Liens; and (b) PTI MergeCo prior to the PTI Funding Date
shall have no property, assets, business operations or employees.
6.09 Credit Arrangements. As of September 30, 1998, Schedule 6.09 (as
such Schedule is updated on the Initial Funding Date with the consent of the
Administrative Agent) is a complete and correct list of all Debt of the Company
and its Subsidiaries outstanding pursuant to which in each case the Company or
its Subsidiaries are or may be, in any manner, directly or contingently,
obligated in an amount equal to or greater than $1,000,000 and all Liens
existing securing Debt outstanding.
6.10 No Default on Outstanding Judgments or Orders. Each of the Company
and its Subsidiaries has satisfied all material judgments, and neither the
Company nor any of its Subsidiaries is in default with respect to any material
judgment, writ, injunction, decree, rule or regulation of any court, arbitrator
or federal, state, municipal or other governmental authority, commission, board,
bureau, agency or instrumentality, domestic or foreign.
6.11 Governmental Regulation. Neither the Company nor any of its
Subsidiaries is a "holding company" or a "public utility" within the meaning of
the Public Utility Holding Company Act of 1935, or an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or an "investment advisor" within
the meaning of the Investment Advisors Act of 1940, as amended.
6.12 Environmental Matters. Except as disclosed in Schedule 6.12, each
of the Company and its Subsidiaries is in compliance with all applicable
Environmental Laws, and neither the Company nor any of its Subsidiaries has any
fixed or contingent liability under any Environmental Law applicable to the
business, operations or properties of the Company or any of its Subsidiaries
(for purposes of this Section 6.12, "liabilities" shall include liabilities for
any capital or operating
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expenditures required for clean-up or closure of properties presently or
previously owned, any capital or operating expenditures required to achieve or
maintain compliance with environmental protection standards imposed by law or as
a condition of any license, permit or contract, any related constraints on
operating activities, including any losses or expenses relating to periodic or
permanent shutdown of any facility or reduction in the level of or change in the
nature of operations conducted thereat, any costs or liabilities in connection
with off-site disposal of wastes or Hazardous Substances, and any actual or
potential liabilities to third parties, including employees, and any related
costs and expenses), except in each case where the amount of the liabilities
associated with such noncompliance and the amount of such fixed or contingent
liabilities does not exceed in the aggregate $5,000,000. For purposes of
determining the liability of the Company and its Subsidiaries with respect to
any remedial obligation imposed pursuant to the Comprehensive Environmental
Response Compensation and Liability Act, as amended, or other similar laws,
whether state or federal, the Company and the Lenders shall take account of the
contribution obligations of other potentially responsible parties associated
with such remedial obligation.
6.13 Margin Stock. As of the PTI Effective Date, the fair market value
of all margin stock (as defined in Regulation U of the FRB, 12 CFR Section
221.2(h)) owned by the Company and its Subsidiaries does not exceed $150,000
(not including any shares of the Company's Common Stock held in the MacDermid,
Incorporated Employee Pension Plan, the MacDermid, Incorporated Employees Profit
Sharing Plan and the MacDermid, Incorporated Employee Stock Ownership Plan and
14,267,816 shares of Common Stock held in the Company's treasury as of the
Announcement Date).
6.14 Full Disclosure. All information heretofore furnished by the
Company or any of its Subsidiaries to the Administrative Agent or any Lender for
purposes of or in connection with this Agreement or any transaction contemplated
hereby is, and all such information hereafter furnished by the Company to the
Administrative Agent or any Lender will be, true and accurate in all material
respects on the date as of which such information is stated or certified. The
Company has disclosed to the Lenders any and all facts, other than general
economic conditions, which materially and adversely affect or may affect (to the
extent the Company can now reasonably foresee) the business, operations or
financial condition of the Company and its Subsidiaries, taken as a whole, or
the ability of the Company or any of its Subsidiaries to perform their
respective obligations under any Loan Document.
6.15 Collateral Documents.
(a) The provisions of each Pledge Agreement are effective to
create, in favor of the Administrative Agent for the benefit of the Lenders, a
legal, valid and enforceable security interest in all of the collateral
described therein; and the Pledged Collateral was delivered to the
Administrative Agent or its nominee in accordance with the terms thereof. The
Lien of each Pledge Agreement constitutes a perfected, first priority security
interest in all right, title and interest of a Borrower or its Subsidiary, as
the case may be, in the Collateral described therein, prior and superior to all
other Liens and interests.
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(b) All representations and warranties of a Borrower and any
of its Subsidiaries party thereto contained in the Collateral Documents are true
and correct in all material respects.
6.16 Solvency
The Company and its Subsidiaries, on a consolidated basis, are
Solvent, and, on and after the Initial Funding Date, US Holdco #1, US Holdco #2,
and Bidco, each on a stand alone basis, and the Target and its Subsidiaries, on
a consolidated basis, are, Solvent, and on and after the PTI Funding Date, PTI
and its Subsidiaries on a consolidated basis are Solvent.
6.17 Labor Relations
There are no strikes, lockouts or other material labor
disputes against the Company or any of its Subsidiaries, or, to the best of the
Company's knowledge, threatened against or materially affecting the Company or
any of its Subsidiaries, and no significant unfair labor practice complaint is
pending against the Company or any of its Subsidiaries or, to the best knowledge
of the Company, threatened against or materially affecting any of them before
any Governmental Authority.
6.18 Copyrights, Patents, Trademarks and Licenses, etc.
Except as set forth on Schedule 6.18 hereto, the Company or a
Subsidiary owned or is licensed or otherwise has the right to use all of the
patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are material to the operation
of their respective businesses, without conflict by, or with the rights of, any
other Person. To the best knowledge of the Company, no slogan or other
advertising device, product, process, method, substance, part or other material
employed by the Company or any of its Subsidiaries infringes upon any rights
held by any other Person. Except as set forth on Schedule 6.18 hereto, no claim
or litigation regarding any of the foregoing is pending or to the knowledge of
the Company threatened, and no patent, invention, device, application, principle
or any statute, law, rule, regulation, standard or code is pending or, to the
knowledge of the Company, proposed, which, in either case, could reasonably be
expected to have a material adverse change in the business, financial position
or results of operations of the Company and its Subsidiaries.
6.19 Broker's; Transaction Fees
Neither the Company nor any of its Subsidiaries has any
obligation to any Person in respect of any finder's, broker's or investment
banker's fee in connection with the Transaction except as disclosed on Schedule
6.19.
6.20 Insurance
The properties of each of the Company and its Subsidiaries are
insured with financially sound and reputable insurance companies not Affiliates
of the Company, in such amounts, with such deductibles and covering such risks
as are customarily carried by companies
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engaged in similar businesses and owning similar properties in localities where
the Company or such Subsidiary operates.
6.21 Swap Obligations
Neither the Company nor any of its Subsidiaries has incurred
any outstanding obligations under any Swap Contracts, other than Permitted Swap
Obligations. The Company has undertaken its own independent assessment of its
consolidated assets, liabilities and commitments and has considered appropriate
means of mitigating and managing risks associated with such matters and has not
relied on any swap counterparty or any Affiliate of any swap counterparty in
determining whether to enter into any Swap Contract. All of the Swap Contracts
of the Company and its Subsidiaries in effect as of the date of this Agreement
are set forth on Schedule 6.21.
6.22 Transaction Agreements and PTI Merger Documents
(a) The agreements in connection with the Transaction
(including, without limitation, the Press Release, the Offer Documents and the
agreements relating to the refinancing of certain Debt of the Target and certain
Target Subsidiaries) ("Transaction Agreements") are, or when executed (or
released in the case of the Press Release) will be, in full force and effect,
and if previously executed, have not been terminated, rescinded or withdrawn,
and no material portion thereof has been amended or waived by any party except
as permitted pursuant to the terms and conditions contained in Section 7.14. As
of the Initial Funding Date, all requisite approvals by governmental authorities
and regulatory bodies having jurisdiction over the Company and other Persons
referenced therein, with respect to the transactions contemplated by the
Transaction Agreements, have been obtained, and no such approvals impose any
conditions to the consummation of the transactions contemplated by the
Transaction Agreements or to the conduct in any material respect by the Company
and its Subsidiaries of its business thereafter. To the best of the Company's
knowledge, none of any Person's representations or warranties in the Transaction
Agreements contain any untrue statement of a material fact or omit any fact
necessary to make the facts necessary to make the statements contained therein
not misleading in light of the circumstances in which made.
(b) The agreements in connection with the PTI Merger
(including, without limitation, that certain Plan and Agreement of Merger dated
February 18, 1999 among PTI, PTI MergeCo, the Company, and Citicorp Venture
Capital, Ltd., a New York corporation ("CVC"), the Certificate of Merger; the
Escrow Agreement among the Company, CVC, David Beckerman ("PTI's Management
Representative") and State Street Bank and Trust Company (the "Escrow Agent");
the Agency Agreement, Waiver and Release among CVC, PTI'S Management
Representative, and PTI Stockholders (as defined therein); and the Registration
Rights Agreement between the Company and CVC; and the agreements relating to the
refinancing of certain Debt of PTI and certain PTI Subsidiaries) ("PTI Merger
Documents") are, or when executed will be, in full force and effect, and if
previously executed, have not been terminated, rescinded or withdrawn, and no
material portion thereof has been amended or waived by any party except as
permitted pursuant to the terms and conditions contained in Section 7.14. As of
the PTI Funding Date, all requisite approvals by governmental authorities and
regulatory bodies having jurisdiction over the Company and other
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Persons referenced therein, with respect to the transactions contemplated by the
PTI Merger Documents, have been obtained, and no such approvals impose any
material conditions to the consummation of the transactions contemplated by the
PTI Merger Documents or to the conduct in any material respect by the Company
and its Subsidiaries of their businesses thereafter. To the best of the
Company's knowledge, none of any Person's representations or warranties in the
PTI Merger Documents contains any untrue statement of a material fact or omits
any fact necessary to make the facts necessary to make the statements contained
therein not misleading in light of the circumstances in which made; provided,
however, that for purposes of this Section 6.22(b), required Asset Dispositions
or other changes in the business or assets of PTI which are required by a
Governmental Authority as a condition to such Person's consent to the PTI Merger
shall be permitted if reasonably satisfactory to the Administrative Agent and in
an amount not to exceed 7.5% of the 1998 consolidated net revenues of PTI
(before giving effect to the PTI Merger) as reflected on the most recent audited
financial statements of PTI.
6.23 Governmental Authorization
(a) In connection with the Transaction and the Offer, no
approval, consent, exemption, authorization, or other action by, or notice to,
or filing (other than pursuant to the Collateral Documents) with, any
Governmental Authority is materially necessary or required in connection with
the execution, delivery or performance by, or enforcement against, a Borrower or
any of its Subsidiaries of this Agreement, any other Loan Document or any
Transaction Agreement other than (a) those approvals, consents, exemptions and
authorizations which have already been obtained, (b) any consent or
dispensations in connection with Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and appropriate clearances from the Office of Fair Trading,
each of which will be obtained on or prior to the Initial Funding Date and (c)
the registration of certain of the Collateral Documents as required by Section
395 of the Companies Act.
(b) In connection with the PTI Merger, no approval, consent,
exemption, authorization, or other action by, or notice to, or filing (other
than pursuant to the Collateral Documents) with, any Governmental Authority is
materially necessary or required in connection with the execution, delivery or
performance by, or enforcement against, a Borrower or any of its Subsidiaries of
this Agreement, any other Loan Document or any PTI Merger Documents other than
(a) those approvals, consents, exemptions and authorizations which have already
been obtained, (b) any consent or dispensations in connection with
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and related
anti-trust laws and regulations, which will be obtained on or prior to the PTI
Funding Date; (c) any filings required pursuant to the securities laws of the
United States relating to either the solicitation of proxies from Company
shareholders or the issuance of up to 7.7 million shares of Company Common Stock
and the issuance by the SEC of an order declaring effective the Company's
registration statement on Form S-4 pursuant to which the Company will register
under the Securities Act of 1933 the issuance of up to 7.7 million shares of
Company Common Stock in the PTI Merger ; (d) approval by the Company's
shareholders of the issuance of up to 7.7 million shares of Company Common Stock
pursuant to the PTI Merger, which approval will be obtained prior to the PTI
Funding Date and prior to any issuance of Company Common Stock pursuant to the
PTI Merger; and (e) approval of the PTI Merger by the holders of a majority of
the
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shares of PTI Class A common stock and any other shares required to approve the
PTI Merger, which approval will be obtained prior to the PTI Funding Date and
prior to the issuance of Company Common Stock pursuant to the PTI Merger.
6.24 Year 2000 Compliance
On the basis of an investigation made by Company and each of
its Subsidiaries, the Company to the best of its knowledge reasonably believes
that the Y2K Problem will not result in a material adverse change in the
business, financial position or results of operations of the Company and its
Subsidiaries.
6.25 Representations of Eligible Borrowers.
Each Eligible Borrower shall be deemed by the execution and
delivery of its Election to Participate to have represented and warranted as of
the date thereof that:
(a) It is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation and is
a Wholly-Owned Consolidated Subsidiary of the Company;
(b) The execution and delivery by it of its Authorization
Letter, its Election to Participate, the Subsidiary Guaranty (in the case of a
Domestic Subsidiary only), the Subsidiary Pledge Agreement (in the case of a
Domestic Subsidiary only) and its Notes, and the performance by it of this
Agreement and the other Loan Documents to which it is a party are within its
corporate powers; have been duly authorized by all necessary corporate action;
require no action by or in respect of, or filing with, any governmental body,
agency or official; do not contravene, or constitute a default under, any
provision of any applicable law or regulation or of its certificate of
incorporation or by-laws or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Company or such Eligible Borrower;
and will not result in the creation or imposition of any Lien on any asset of
the Company or any of its Subsidiaries other than Permitted Liens;
(c) This Agreement and each other Loan Document to which it is
a party constitutes a legal, valid and binding obligation of such Eligible
Borrower, enforceable against such Eligible Borrower in accordance with its
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability and the
time barring of claims under any applicable limitations act;
(d) Except as disclosed in such Election to Participate, there
is no income, stamp or other tax of any country, or any taxing authority thereof
or therein, in the nature of withholding or otherwise, which is imposed on any
payment to be made by such Eligible Borrower pursuant hereto or on any of its
Notes, or is imposed on or by virtue of the execution, delivery, performance or
enforcement of its Election to Participate or any of its Notes.
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ARTICLE VII
AFFIRMATIVE COVENANTS
On and after the PTI Effective Date, so long as any Lender
shall have any Commitment hereunder, or any Loan or other Obligation shall
remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding,
unless the Majority Lenders waive compliance in writing:
7.01 Reporting Requirements. The Company shall furnish directly to
the Administrative Agent (and the Administrative Agent shall promptly furnish a
copy to the Lenders):
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of the Company, a consolidated and consolidating
balance sheet of the Company and its Consolidated Subsidiaries as of the end of
such fiscal year and the related consolidated and consolidating statements of
income and consolidated statements of cash flows and changes in stockholders'
equity of the Company and its Consolidated Subsidiaries for such fiscal year,
all in reasonable detail and stating in comparative form the respective
consolidated and consolidating figures for the corresponding date and period in
the prior fiscal year and (i) in the case of the consolidated statements, all
reported on in a manner acceptable to the SEC by KPMG Peat Marwick LLP or other
independent public accountants of nationally recognized standing, and (ii) in
the case of consolidating statements, all certified as to fairness of
presentation, compliance with generally accepted accounting principles and
consistency by a Responsible Officer of the Company;
(b) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of the Company,
a consolidated and consolidating balance sheet of the Company and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated and consolidating statements of income and consolidated statements
of cash flows and changes in stockholders' equity of the Company and its
Consolidated Subsidiaries for such quarter and for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter, all in
reasonable detail and stating in comparative form the respective consolidated
figures as of the end of and for the corresponding quarter and the corresponding
year-to-date period in the previous fiscal year, and certified by a Responsible
Officer of the Company (subject to year end adjustments and the omission of
notes permitted by the applicable regulations of the SEC to be excluded from
quarterly reports filed on Form 10-Q) as to fairness of presentation, compliance
with generally accepted accounting principles and consistency;
(c) simultaneously with the delivery of each set of financial
statements referred to in Sections 7.01(a) and 7.01(b) , a certificate of a
Responsible Officer of the Company in the form of Exhibit C hereto (a
"Compliance Certificate") (i) setting forth in reasonable detail the
calculations required to establish whether the Company was in compliance with
the requirements of Sections 8.01 through 8.04, inclusive, and Sections 8.06,
9.01, 9.02 and 9.03 on the date of such financial statements, (ii) certifying as
to the ratio for the twelve-month period then ending of the Debt of the Company
and its Consolidated Subsidiaries on a consolidated basis to its Consolidated
EBITDA for such period, and (iii) stating whether any Default or Event of
Default exists on the date of such
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certificate and, if any Default or Event of Default then exists, setting forth
the details thereof and the action which the Company is taking or proposes to
take with respect thereto;
(d) within ten days after any officer of the Company obtains
knowledge of any Default or Event of Default, if such Default or Event of
Default is then continuing, a certificate of a Responsible Officer of the
Company setting forth the details thereof and the action which the Company is
taking or proposes to take with respect thereto;
(e) promptly upon the mailing thereof to the shareholders of
the Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(f) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and
8-K (or their equivalents) which the Company shall file with the Securities and
Exchange Commission;
(g) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the Plan
administrator of any Plan has given or is required to give notice of any such
reportable event to the PBGC, a copy of such notice; (ii) receives notice of
complete or partial withdrawal liability under Title IV of ERISA or notice that
any Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate, impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to
administer any Plan, a copy of such notice; (iv) applies for a waiver of the
minimum funding standard under Section 412 of the Code, a copy of such
application; (v) gives notice of intent to terminate any Plan under Section
4041(c) of ERISA, a copy of such notice and other information filed with the
PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of
ERISA, a copy of such notice; or (vii) fails to make any payment or contribution
to any Plan or Multiemployer Plan or in respect of any Benefit Arrangement or
makes any amendment to any Plan or Benefit Arrangement which has resulted or
could result in the imposition of a Lien or the posting of a bond or other
security, a certificate of a Responsible Officer of the Company setting forth
details as to such occurrence and action, if any, which any member of the ERISA
Group is required or proposes to take;
(h) promptly after the commencement thereof, notice of all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company or any of its Subsidiaries which have a reasonable
likelihood of a material adverse effect on the financial condition, properties,
or operations of the Company and its Subsidiaries taken as a whole;
(i) if, at any time, the Company shall become aware or have
reasonable cause to believe (i) that Hazardous Substances or solid wastes have
been released, or have otherwise come to be located, on or in or have begun to
affect any real property owned or leased by the Company or any Subsidiary or
that any liability arising out of the violation of any Environmental Laws has
arisen,
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including liability for off-site environmental conditions, or (ii) that a notice
has been received from any governmental body or other party seeking any
information or alleging any violation of any Environmental Laws or alleging any
liability with regard to any real property owned or leased by the Company or any
Subsidiary or off-site environmental conditions, in either case which shall have
a reasonable likelihood of materially impairing the Borrowers' ability to meet
their obligations under the Loan Documents, notice of that event;
(j) such other information respecting the condition or
operations, financial or otherwise, of the Company or any of its Subsidiaries as
the Administrative Agent or any Lender may from time to time reasonably request;
and
(k) if, at any time, the Company shall wish to add any
information or material to the Schedules to this Agreement, it shall propose
such additions to the Agent and the Lenders, provided that such Schedules shall
only be amended with the consent of the Majority Lenders, which they may
withhold in their sole discretion (which consent will not be unreasonably
withheld).
7.02 Payment of Obligations.
The Company will pay and discharge, and will cause each
Subsidiary to pay and discharge, at or before maturity or in accordance with the
Company's customary trade practices, all their respective material obligations
and liabilities, including tax liabilities, except where the same may be
contested in good faith by appropriate proceedings, and will maintain, and will
cause each Subsidiary to maintain, in accordance with generally accepted
accounting principles, appropriate reserves for the accrual of any of the same.
7.03 Maintenance of Property; Insurance.
(a) The Company will maintain, and will cause each Subsidiary
to maintain, all property useful and necessary in its business in good working
order and condition, ordinary wear and tear excepted.
(b) To the extent that insurance is reasonably available to
the Company and its Subsidiaries at a price comparable to the price paid by
other Persons in the same or similar types of business conducted by the Company
or the relevant Subsidiary, the Company will, and will cause each of its
Subsidiaries to, maintain (either in the name of the Company or in such
Subsidiary's own name) with financially sound and responsible insurance
companies, insurance on all their respective properties in at least such amounts
and against at least such risks (and with such risk retention) as are (i)
insured against under the policies of insurance of the Company and its
Subsidiaries set forth on the schedule previously provided by the Company to the
Lenders or (ii) usually insured against in the same general area by companies of
established repute engaged in the same or a similar business; and will furnish
to the Lenders, upon request from the Administrative Agent, information
presented in reasonable detail as to the insurance so carried. To the extent
such insurance is not obtained, the Company will adopt, in lieu of or
supplemental to such insurance, such other plan or method of protection, whether
by the establishment of an insurance fund or a reserve to be held and
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applied to casualty losses, or otherwise, satisfactory to the Lenders and
conforming to the practices of similar corporations' self-insurance.
7.04 Conduct of Business and Maintenance of Existence.
The Company will continue, and will cause each Subsidiary to
continue, to engage in business of the same general type as now conducted by the
Company and its Subsidiaries (i.e., the business of specialty chemicals and
related equipment), and will preserve, renew and keep in full force and effect
as necessary, and will cause each Subsidiary to preserve, renew and keep in full
force and effect as necessary, (a) their respective corporate existence and (b)
their respective permits, licenses, certifications, approvals, rights,
privileges and franchises necessary or desirable in the normal conduct of
business; provided that nothing in this Section 7.04 shall prohibit (i) the
merger or consolidation of a Subsidiary with or into another Person if the
corporation surviving such consolidation or merger is a Wholly-Owned Subsidiary
or the merger of a Subsidiary into the Company if, in each case, after giving
effect thereto, no Default or Event of Default shall have occurred and be
continuing, or (ii) the termination of the corporate existence of any Subsidiary
if (A) such termination is not materially disadvantageous to the Lenders and the
Company in good faith determines that such termination is in the best interest
of the Company or (B) such termination is in compliance with Section 8.05(ii).
7.05 Compliance with Laws.
The Company will comply, and will cause each Subsidiary to
comply, in all material respects with all applicable laws, ordinances, rules,
regulations and requirements of governmental authorities (including
Environmental Laws and ERISA and the rules and regulations thereunder), whether
foreign or domestic, except (a) where the necessity of compliance therewith is
contested in good faith by appropriate proceedings and appropriate reserves are
maintained in accordance with generally accepted accounting principles and (b)
where failure to comply with such law, ordinance, rule, regulation or
requirement would not have a material adverse effect on the financial condition
of the Company and its Subsidiaries taken as a whole.
7.06 Inspection of Property, Books and Records.
The Company will keep, and will cause each Subsidiary to keep,
proper books of record and account in which materially full, true and correct
entries shall be made of all dealings and transactions in relation to its
business and activities; and will permit, and will cause each Subsidiary to
permit, representatives of any Lender to visit and inspect any of their
respective properties, to examine and make abstracts from any of their
respective books and records and to discuss their respective affairs, finances
and accounts with their respective officers, employees and independent public
accountants, provided the Company shall have the right to be present at any
meeting with its independent public accountants, all at such reasonable times,
upon reasonable notice and as often as may reasonably be desired.
7.07 Maintenance of Ownership of Subsidiaries.
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The Company will at all times maintain direct or indirect
legal and beneficial ownership of the percentage of outstanding shares of each
class of capital stock substantially as set forth on Schedule 6.08 of each of
its Subsidiaries, except as modified by a consolidation merger or sale permitted
pursuant to the proviso to Section 8.05.
7.08 Use of Proceeds
(a) The Borrowers shall use the proceeds of the Revolving
Loans (including the amount of the PTI Revolver Increase Commitment after the
PTI Funding Date) and Swing Line Loans for working capital and other general
corporate purposes (other than for the purpose of financing a hostile
Acquisition), the refinancing of certain Debt of the Company and its
Subsidiaries under the Existing Credit Agreement, to the payment of fees and
expenses relating to the Transaction. In addition, the Company shall use
proceeds of Revolving Loans and Swing Line Loans for the acquisition of Target
Shares during the Certain Funds Period.
(b) The Company shall apply the proceeds of the Term Loan to
the refinancing or prepayment of all outstanding Debt of the Company and its
Subsidiaries under the Existing Credit Agreement , for the purchase of Target
Shares (in accordance with the funding procedures clause (c) below), and for
other general corporate purposes.
(c) The Company shall apply the proceeds of all Sterling
Acquisition Loans first to make equity contributions and/or intercompany loans
to US Holdco #1 and US Holdco #2, each of which shall use 100% of such proceeds
to make equity contributions and/or intercompany loans to Bidco to enable Bidco
to facilitate the refinancing of certain Debt of the Target and certain Target
Subsidiaries as provided in Section 5.02(c), towards financing the cash
consideration to be paid by Bidco for the Target Shares pursuant to acceptances
of the Offer, and second towards the payment of fees and expenses relating to
the Transaction and for other general corporate purposes.
(d) The Company hereby acknowledges and agrees that the
aggregate Dollar Equivalent of Loans incurred during the Certain Funds Period in
connection with the purchase of Target Shares, any refinancing of Debt of Target
and its Subsidiaries in connection with the acquisition of Target pursuant to
the Offer, any refinancing of Debt of the Company and its Subsidiaries on the
Initial Funding Date and the payment of fees in connection with the Transaction
shall not exceed the Dollar Equivalent of $320,000,000.
(e) The Company shall apply the proceeds of the PTI Term Loan
to refinance certain Debt of PTI and/or PTI's Subsidiaries pursuant to the PTI
Merger and the transactions related thereto.
(f) The Company hereby acknowledges and agrees that the
aggregate Dollar Equivalent of Loans incurred in connection with the PTI Merger
shall not exceed the Dollar Equivalent of $205,000,000; provided, however, that
no more than the Dollar Equivalent of (i) $180,000,000 may be used to repay
indebtedness of PTI, (ii) $10,000,000 may be used for the payment of fees and
expenses in connection with the PTI Merger, and (iii) $15,000,000 may be used,
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if needed, to purchase in cash PTI shares from PTI shareholders asserting
dissenters' rights in connection with the PTI Merger.
7.09 Solvency
The Company and its Subsidiaries, on a consolidated basis,
shall at all times be Solvent, and on and after (a) the Initial Funding Date, US
Holdco #1, US Holdco #2 and Bidco, each on a stand-alone basis, and the Target
and its Subsidiaries, on a consolidated basis, shall at all times be Solvent,
and (b) the PTI Funding Date, PTI and the PTI Subsidiaries taken as a whole
shall at all times be Solvent.
7.10 Further Assurances.
(a) Each Borrower shall ensure that all written information,
exhibits and reports furnished to the Administrative Agent or the Lenders do not
and will not contain any untrue statement of a material fact and do not and will
not omit to state any material fact or any fact necessary to make the statements
contained therein not misleading in light of the circumstances in which made,
and will promptly disclose to the Administrative Agent and the Lenders and
correct any defect or error that may be discovered therein or in any Loan
Document or in the execution, acknowledgment or recordation thereof.
(b) Promptly upon the written request of the Administrative
Agent or the Majority Lenders, each Borrower shall (and shall cause any of its
Subsidiaries to) do, execute, acknowledge, deliver, record, re-record, file,
re-file, register and re-register any and all such further acts, security
agreements, mortgages, assignments, financing statements and continuations
thereof, termination statements, notices of assignment, transfers, certificates,
assurances and other instruments the Administrative Agent or such Lenders, as
the case may be, may reasonably require from time to time in order (i) to carry
out more effectively the purposes of this Agreement or any other Loan Document,
(ii) to subject any of the properties, rights or interests covered by any of the
Collateral Documents to the Liens created by any of the Collateral Documents,
(iii) to perfect and maintain the validity, effectiveness and priority of any of
the Collateral Documents and the Liens intended to be created thereby, and (iv)
to better assure, convey, grant, assign, transfer, preserve, protect and confirm
to the Administrative Agent and the Lenders the rights granted or now or
hereafter intended to be granted to the Administrative Agent and the Lenders
under any Loan Document or under any other document executed in connection
therewith.
7.11 Foreign Subsidiaries Security
(a) The Company will, and will cause its relevant Subsidiaries
to, deliver to the Administrative Agent on or prior to the 45th day following
the Initial Funding Date (or such later date as is acceptable to the
Administrative Agent to accommodate processing or local law requirements) the
Pledged Collateral relating to each Specified Foreign Subsidiary, together with
such instruments of transfer as are reasonably acceptable to the Administrative
Agent.
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(b) If the Administrative Agent reasonably believes that
appropriate changes have been made to the relevant sections of the Code as in
effect on the Announcement Date, the regulations and rules promulgated
thereunder and any rulings issued thereunder, the Administrative Agent may (or
upon the reasonable request of the Majority Lenders, shall) request that counsel
for the Company acceptable to the Administrative Agent within 30 days after such
request deliver evidence satisfactory to the Administrative Agent, with respect
to any Foreign Subsidiary which is a first-tier Wholly-Owned Consolidated
Subsidiary of the Company, that (i) a pledge of 65% or more of the total
combined voting power of all classes of capital stock of such Foreign Subsidiary
entitled to vote, (ii) the entering into by such Foreign Subsidiary of a
guaranty in substantially the form of the Subsidiary Guaranty or (iii) the
entering into by such Foreign Subsidiary of a pledge agreement in substantially
the form of the Subsidiary Guarantor Pledge Agreement, in either case would
cause the earnings of such Foreign Subsidiary to be treated as a deemed dividend
to such Foreign Subsidiary's United States parent or would otherwise violate a
material applicable law or governmental or regulatory restriction or rule
(including laws, rules, or restrictions of, or issued by, a government or
regulatory authorities of a foreign jurisdiction or would otherwise cause a
material adverse monetary tax consequence to the Company), and in the case of a
failure to deliver the evidence described in clause (i) above, (A) that portion
of such Foreign Subsidiary's outstanding capital stock and intercompany notes
not theretofore pledged pursuant to a Pledge Agreement shall be pledged to the
Administrative Agent, for the benefit of itself, the Issuing Bank and the
Lenders pursuant to a Pledge Agreement (or another pledge agreement in
substantially similar form, if needed), (B) such Foreign Subsidiary shall
execute and deliver a guaranty of the Obligations of the Company under the Loan
Documents and (C) such Foreign Subsidiary shall execute and deliver a pledge
agreement granting the Administrative Agent for the benefit of the Lenders a
security interest in all of the capital stock of each Subsidiary of such Foreign
Subsidiary and intercompany notes payable to such Foreign Subsidiary, in each
case with all documents delivered pursuant to this Section 7.11 to be in form
and substance satisfactory to the Administrative Agent.
7.12 The Offer
(a) The Company will procure that the Offer is made on the
terms and conditions set out in the Press Release.
(b) The Company will keep the Administrative Agent informed as
to the status of, and progress with respect to, the Offer and updated financial
information on Target and each Target Subsidiary (as available) and, in
particular, will promptly give to the Administrative Agent such information
(including details as to the current level of acceptances) concerning the Offer
or otherwise relevant to the Offer as the Administrative Agent may reasonably
request and shall promptly upon receipt deliver to the Administrative Agent a
copy of every certificate delivered to Bidco in connection with the Offer by the
receiving agent pursuant to the City Code.
(c) Without the prior approval of the Administrative Agent
(the Administrative Agent's response not to be unreasonably delayed), the
Company will not, and will procure that Bidco will not:
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(i) waive, in whole or in part, either of the
conditions specified in 1(B) and (C) of Appendix 1 to the Press Release
relating to the UK Fair Trading Act 1973 and the US Hart-Scott-Rodino
Anti-Trust Improvements Act of 1976; or
(ii) make any increase in the per share offer
purchase price or any change in the form of consideration of the offer
purchase price (each as delineated in the Press Release) or take or
permit to be taken any step as a result of which such an increase or
change is or may be required; and
(iii) take or permit to be taken any step which would
require the Company or any of its Subsidiaries (including Bidco) to
make a mandatory offer for Target within Rule 9 of the City Code.
(d) The Company will notify the Administrative Agent
immediately upon becoming aware of any circumstance or event which is or could
reasonably be construed as being covered by a condition of the Offer which, if
not waived, would entitle it, with the consent of the Panel on Take-overs and
Mergers in the United Kingdom, if needed, to lapse the Offer and will consult
with the Administrative Agent in relation to such event or circumstances and its
intended actions.
(e) The Company will consult with the Administrative Agent
before declaring the Offer unconditional as to acceptances in circumstances
where it has not acquired or agreed to acquire pursuant to the Offer at least
90% in nominal value of the Target Shares to which the Offer relates (within the
meaning of Section 428-430F of the Companies Act).
(f) The Company will not, and will not permit Bidco to,
exercise its rights to declare the Offer unconditional as to acceptances unless
it has acquired or agreed to acquire pursuant to the Offer not less than 75% of
the Target Shares on a fully diluted basis.
(g) The Company shall, and shall cause US Holdco #1, US Holdco
#2 and Bidco to, comply in all material respects with the provisions of the City
Code, the Financial Services Act 1986 and the Companies Act 1985 and all other
applicable statutes, laws and regulations relevant in the context of the Offer.
(h) The Company shall cause Bidco to give notice under Section
429 of the Companies Act to relevant Target shareholders promptly upon becoming
entitled to do so under the Companies Act.
(i) The Company shall ensure that, on the Initial Funding
Date, the Administrative Agent is provided with copies of such constitutional
documents of the Target and each Target Subsidiary as it deems to be material.
(j) The Company will (and will cause Bidco to) consult with
the Administrative Agent with respect to any condition which is attached to:
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(i) any indication by the Office of Fair Trading that
it is not the intention of the Secretary of State for Trade and
Industry to refer the proposed acquisition of Target by Bidco to the
Monopolies and Mergers Commission; or
(ii) the expiry, lapsing or termination of any
appropriate waiting period (including any extension thereof) under the
United States Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
the regulations thereunder;
and will not in any event treat or deem the conditions to the Offer specified in
Sections 1(b) or (c) (as the case may be) of Appendix 1 to the Press Release as
satisfied or waived if it would, in the reasonable opinion of the Administrative
Agent, have a material adverse effect on the business, assets, financial
conditions or prospects of the Company, Bidco or the Target.
7.13 Bidco Capitalization. On or prior to the Initial Funding Date, the
Company shall take any and all actions necessary to ensure that the shares of
Bidco are fully paid, and shall have delivered evidence satisfactory to the
Administrative Agent that such actions have been taken.
7.14 The PTI Merger. On or prior to the PTI Funding Date (except
paragraph (d), which shall continue in effect thereafter), the Company shall:
(a) deliver to the Administrative Agent correct and complete
copies of the PTI Merger Documents and update such documents as necessary;
(b) obtain all anti-trust clearance from the FTC and other
Governmental Agencies for the PTI Merger and deliver to the Administrative Agent
proof thereof (or promptly notify Administrative Agent in the event such
clearance has been refused);
(c) obtain all necessary consents and approvals from the SEC
and any necessary state authority relating to the issuance of Company Capital
Stock as partial consideration for the PTI Merger and required by the PTI Merger
Documents; and
(d) not permit or cause PTI MergeCo or any of its other
Subsidiaries to consent to any amendment or waiver to the terms or conditions of
the PTI Merger Documents without the prior written consent of the Administrative
Agent.
ARTICLE VIII
NEGATIVE COVENANTS
On and after the PTI Effective Date, so long as any Lender
shall have any Commitment hereunder, or any Loan or other Obligation shall
remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding,
unless the Majority Lenders waive compliance in writing the Company shall not,
and shall not permit any of its Subsidiaries to:
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8.01 Debt.
Incur or at any time be liable with respect to any Debt
except:
(a) Debt outstanding under this Agreement and the other Loan
Documents;
(b) Debt not evidenced by this Agreement or the other Loan
Documents and in an amount outstanding as of September 30, 1998 and identified
on Schedule 6.09 (as such Schedule is updated on the PTI Funding Date with the
consent of the Administrative Agent) and other Debt in an amount outstanding as
of the PTI Effective Date (which shall be identified on Schedule 6.09 if in each
case it is in excess of $1,000,000) and any extensions, renewals and
refinancings of any such Debt to the extent that (x) the aggregate principal
amount of the Debt permitted pursuant to this clause (b) is not increased as of
such date as a result thereof, and (y) the respective issue of refinancing Debt
shall have no restrictions which would violate any terms of this Agreement or
any other Loan Document or of any other Debt of the Company and its Subsidiaries
which is to remain in effect; provided, however, that no Debt under the Existing
Credit Agreement (or any refinancing thereof other than with the proceeds of the
Loans) will be permitted on or after the Initial Funding Date.
(c) Debt (in addition to the allowances in clauses (a), (b),
(d), (e),(f) , and (g)of this Section 8.01) in an aggregate principal amount not
to exceed $30,000,000 (provided, however, that on and after the PTI Funding
Date, this amount shall be $50,000,000) at any time outstanding;
(d) Debt subordinated to the Debt hereunder, in amounts and on
terms and conditions satisfactory to the Majority Lenders;
(e) Debt constituting a guaranty issued by the Company with
respect to (x) Debt of any Subsidiary to the extent such Subsidiary's Debt is
permitted to be incurred pursuant to a clause (other than this clause (e)) of
this Section 8.01 and (y) Debt of any Person not a Subsidiary, provided that the
aggregate principal amount of such Debt shall not at any time exceed $15,000,000
(without giving effect to any write-offs or write-downs of such Debt);
(f) intercompany loans to the extent permitted pursuant to
Section 8.06; and
(g) Debt of the Company in a principal amount not to exceed
$100,000,000 (the "Take Out Debt") which is unsecured, contains interest rates,
fees and other pricing terms reflecting fair market value rates, does not mature
in whole or in part or require any principal amortization or prepayments until
after the maturity date of all Loans hereunder and is on such other terms and
conditions as are not materially more restrictive than the terms and conditions
of the Loan Documents, together with Debt (without double counting) consisting
of unsecured guarantees of the Take Out Debt by any Subsidiaries of the Company
that are then party to the Subsidiary Guaranty on a pari passu basis with the
obligations under the Subsidiary Guaranty, and is on such terms and conditions
as are not materially more restrictive than the terms and conditions of the Loan
Documents; provided, further, that prior to incurring such Take Out Debt (i) no
Default or Event of Default shall then exist or result after giving effect
thereto (as further evidenced by a written
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certificate to such effect from the Company in favor of the Lenders and the
Administrative Agent), (ii) the Company demonstrates in writing to the
reasonable satisfaction of the Administrative Agent that it is and will be in
compliance on a pro forma basis with the financial covenants set forth in
Article IX after giving effect to such Take Out Debt and (iii) the proceeds of
such Take Out Debt are applied in accordance with Section 2.07(k).
8.02 Restricted Payments.
Declare or make any Restricted Payments except Restricted
Payments made when no Default or Event of Default has occurred and is continuing
(or would result after giving effect to such Restricted Payment) and where
immediately after giving effect thereto, the aggregate of all Restricted
Payments declared or made subsequent to the Announcement Date does not exceed
(a) $22,500,000 (provided, however, that on and after the PTI Funding Date, this
amount shall be $32,500,000) plus (b) 50% of Consolidated Net Income (less
consolidated net loss, if any) of the Company and its Consolidated Subsidiaries
for the period from the Announcement Date through the end of the Company's then
most recent fiscal quarter (treated for this purpose as a single accounting
period).
Nothing in this Section 8.02 shall prohibit the payment of (A)
any dividend or distribution within 60 days after the declaration thereof if
such declaration was not prohibited by this Section 8.02; and (B) the
distribution of up to 7.7 million shares of Company Common Stock (as such amount
is adjusted pursuant to any dividend, stock split, merger, reverse stock merger
or similar transaction after the PTI Effective Date) to PTI MergeCo for delivery
to the former shareholders of PTI pursuant to the PTI Merger Documents.
8.03 Investments.
Make or acquire any Investment in any Person other than:
(a) Investments (other than pursuant to Section 8.03(f)) in an
aggregate amount not to exceed $33,000,000 (provided, however, that on and after
the PTI Funding Date, this amount shall be $40,000,000) outstanding as of the
Announcement Date (such Investments in excess of $1,000,000 are set forth on
Schedule 8.03(a) (as such Schedule is updated on the Initial Funding Date with
the consent of the Administrative Agent) and any replacements of such
Investments with Investments of equal amount thereto;
(b) Investments in joint ventures of the Company or its
Subsidiaries if after giving effect thereto the aggregate amount of all such
Investments does not exceed $10,000,000 (provided, however, that on and after
the PTI Funding Date, this amount shall be $20,000,000) outstanding at any one
time, excluding any Investments described in Sections 8.03(a) and (f);
(c) deposits with, or time deposits with, including
certificates of deposits issued by, (i) any office located in the United States
of any bank or trust company which is organized under the laws of the United
States or any state thereof and has capital surplus and undivided profits
aggregating at least $100,000,000, (ii) any Lender or (iii) any foreign bank for
which S & P or
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Moody's issues a rating of "A" or higher and which has capital surplus and
undivided profits aggregating at least $100,000,000;
(d) Investments in investment grade securities;
(e) Investments made in another Person pursuant to a merger or
asset acquisition made in compliance with clause (i) of the proviso in Section
8.05;
(f) Investments relating to the ViaTek program existing or
planned as of the Announcement Date and listed on Schedule 8.03(b), and
additional Investments relating to the ViaTek program in an aggregate amount not
to exceed $12,000,000 at any time;
(g) Investments to the extent permitted pursuant to Section
8.06; and
(h) other Investments (other than pursuant to Section 8.03
(f)) up to (x) at any time prior to the Initial Funding Date, $45,000,000 in the
aggregate and (y) on and after the Initial Funding Date, $20,000,000 in the
aggregate.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without adjustments for increases or
decreases in value, write-ups, write-downs or write-offs with respect to such
Investment.
8.04 Negative Pledge.
Create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing as of the Announcement Date securing Debt
outstanding on such date and identified on Schedule 8.04 (as such Schedule is
updated on the Initial Funding Date with the consent of the Administrative
Agent), provided, that the Lien identified in Item 5(b) on Schedule 8.04 shall
not be permitted to exist at any time on and after February 28, 1999;
(b) Permitted Liens;
(c) any Lien existing on any non-current asset securing Debt
in an aggregate principal amount up to $15,000,000 at any time;
(d) any Lien securing factoring programs of Foreign
Subsidiaries in an aggregate amount of up to $5,000,000 at any time; and
(e) any Lien relating to a transaction permitted by Section
8.05(ii)(y).
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8.05 Consolidations, Mergers and Sales of Assets.
Suffer, permit or enter into any agreement to (a) consolidate
or merge with or into any other Person or (b) make an Asset Disposition;
provided that:
(i) the Company or any Subsidiary may merge with or
acquire another Person, through a stock, asset or any other similar
transaction, which is in the business of specialty chemicals and
related equipment if (A) the Company or such Subsidiary is the
surviving entity, (B) such acquisition is friendly and is done with the
recommendation of the acquiree's board of directors or similar
governing body and (C) the Company has delivered to the Administrative
Agent a certificate executed by a Responsible Officer (x) certifying
that no Default or Event of Default has occurred and is continuing both
before and after giving effect to such transaction and (y)
demonstrating pro forma compliance with Sections 9.01, 9.02 and 9.03
after giving effect to such transaction;
(ii) the Company or any Subsidiary may make Asset
Dispositions the aggregate net proceeds of which received by the
Company after the Announcement Date shall not exceed (x) $25,000,000
(other than an Asset Disposition subject to the following clause (y))
(and, subject to compliance with Section 2.07(f), the Lenders hereby
agree not to unreasonably withhold their consent for Asset Dispositions
in excess of such aggregate amount ) and (y) $10,000,000 (provided,
however, that on and after the PTI Funding Date, this amount shall be
$20,000,000) with respect to Asset Dispositions of equipment in
connection with a sale-leaseback transaction pursuant to which the
Company or a Subsidiary will be the lessee;
(iii) a Subsidiary of a Borrower may merge with a
Borrower or a Wholly-Owned Subsidiary of a Borrower if (A) such
Borrower or such Wholly-Owned Subsidiary, as the case may be, is the
corporation surviving such merger and (B) immediately after giving
effect to such merger, no Default or Event of Default shall have
occurred and be continuing;
(iv) the Transaction shall be permitted; and
(v) subject to the satisfaction of Sections 5.05 and
5.06, the PTI Merger shall be permitted in accordance with the PTI
Merger Documents.
8.06 Transactions with Affiliates.
Directly or indirectly, pay any funds to or for the account
of, make any Investment in (whether by acquisition of stock or Debt, by loan,
advance, transfer of property, guarantee or other agreement to pay, purchase or
service, directly or indirectly, any Debt, or otherwise), lease, sell, transfer
or otherwise dispose of any assets, tangible or intangible, to, or participate
in, or effect any transaction in connection with any joint enterprise or other
joint arrangement with, any Affiliate; provided, however, that the foregoing
provisions of this Section 8.06 shall not prohibit:
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(a) the Company from declaring or paying any lawful dividend
permitted pursuant to Section 8.02;
(b) the Company or any Subsidiary from making sales to or
purchases from any Affiliate and, in connection therewith, extending credit or
making payments, or from making payments for extending credit or making
payments, or from making payments for services rendered by any Affiliate, if
such sales or purchases are made or such services are rendered in the ordinary
course of business and on terms and conditions at least as favorable to the
Company or such Subsidiary as the terms and conditions which would apply in a
similar transaction with a Person not an Affiliate;
(c) the Company or any Subsidiary from participating in, or
effecting any transaction in connection with, any joint enterprise or other
joint arrangement with any Affiliate if the Company or such Subsidiary
participates in the ordinary course of its business and on a basis no less
advantageous than the basis on which such Affiliate participates;
(d) any transactions between the Company and any Eligible
Borrower which has executed and delivered an Election to Participate which is
still in effect or any Subsidiary that has executed a Subsidiary Guaranty
hereunder;
(e) any payment from any Subsidiary to the Company;
(f) intercompany loans (i) involving only the Company and a
Qualified Subsidiary, (ii) between Qualified Subsidiaries, (iii) between
Non-Qualified Subsidiaries and (iv) from a Non-Qualified Subsidiary to the
Company or a Qualified Subsidiary, in each case so long as the payee with
respect to such intercompany loan is Solvent both before and after giving effect
to such intercompany loan;
(g) as a further limitation on clause (f), during the
Squeeze-Out Period the Company may purchase shares of US Holdco #1 and US Holdco
#2, and US Holdco #1 and US Holdco #2 may (x) make intercompany loans to Bidco
and (y) purchase shares of Bidco, in each case so long as (i) 100% of the
proceeds of all such Investments shall be utilized by Bidco to purchase Target
Shares pursuant to the Offer and related fees and costs for the Offer and (ii)
the ratio of (x) to (y) above shall be at least 1.0 to 1.0; and
(h) Intercompany Debt which does not exceed $15,000,000 in the
aggregate.
8.07 Change in Business.
(a) Engage in any material line of business substantially
different from those lines of business carried on by the Company and its
Subsidiaries on the Announcement Date (or, in the case of Target and each Target
Subsidiary, on the Unconditional Date) and lines of business reasonably
ancillary or complementary to such current lines of business.
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(b) The Company will not permit (x) US Holdco #1 and US Holdco
#2 to engage in any business activities other than in connection with its
ownership interest in Bidco and the execution, delivery and performance of the
Collateral Documents to which it is a party or (y) Bidco to engage in any
business activities other than those necessary (i) to effect the Offer and (ii)
with respect to its ownership interest in Target.
8.08 Accounting Changes.
Make any significant change in accounting treatment or
reporting practices, except as required by GAAP.
8.09 Target Operations.
For a period of sixty (60) days (the "Cure Period") after the
Unconditional Date, the representations and warranties set out in Section 6.04,
6.06, 6.07, 6.10, 6.17, 6.18, 6.20, 6.21 and (to the extent any disclosure
covered under Section 6.14 relates to or provides information covered solely and
specifically to one of the representations previously listed) Section 6.14 and
the negative covenants set out in Sections 8.01, 8.03, 8.04, 8.05 and 8.06 shall
not apply in respect of events or circumstances not known to the Company and
existing on the Initial Funding Date (a "Cure Period Event") with respect to
Target and each Target Subsidiary and capable of remedy within such sixty (60)
day Cure Period; provided, that:
(a) the Company agrees to notify the Administrative Agent
promptly upon learning of any such Cure Period Event that would, but for this
covenant, constitute a Default or Event of Default;
(b) such Cure Period Event is not reasonably likely to cause a
material adverse effect on the business, financial position or results of
operations of the Company and its Subsidiaries or the Target and its
Subsidiaries;
(c) the aggregate amount that will be required to cure such
Cure Period Event is not in excess of $7,500,000; and
(d) if at the end of such Cure Period the Cure Period Event
still exists, it shall be an immediate Event of Default.
ARTICLE IX
FINANCIAL COVENANTS
So long as any of the Notes shall remain unpaid, any amounts
shall be owing hereunder by any Borrower, or any Lender shall have any
Commitment under this Agreement, the Company covenants that:
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9.01 EBIT to Interest Expense Ratio.
The ratio of Consolidated EBIT for the preceding four fiscal
quarters to Consolidated Interest Expense for the preceding four fiscal quarters
shall not be less than 2.50 to 1.00, tested at end of each fiscal quarter.
9.02 Minimum Consolidated Net Worth.
The Company shall maintain at all times Consolidated Net Worth
(without giving effect to any adjustments made in accordance with GAAP with
respect to currency translations) at the end of each fiscal quarter of not less
than $98,279,000, plus an amount equal to the sum of (a) 50% of positive
Consolidated Net Income for each full fiscal quarter since September 30, 1998 to
the measurement date plus (b) an amount equal to the net proceeds received by
the Company from the issuance of its capital stock during such period.
9.03 Maximum Total Debt to Consolidated EBITDA.
The ratio of Consolidated Total Debt to Consolidated EBITDA
tested at the end of each fiscal quarter for the preceding four fiscal quarters
shall not during the periods set forth below exceed the following:
<TABLE>
<CAPTION>
Period Ratio
- ------ -----
<S> <C>
Announcement Date to March 31, 2000 4.00 to 1.00
April 1, 2000 to March 31, 2001 3.50 to 1.00
April 1, 2001 to March 31, 2002 3.25 to 1.00
April 1, 2002 and thereafter 3.00 to 1.00
</TABLE>
ARTICLE X
EVENTS OF DEFAULT
10.01 Event of Default
Any of the following shall constitute an "Event of Default":
(a) any Borrower shall: (i) fail to pay the principal of any
Note as and when due and payable; (ii) fail to pay interest on any Note or any
fee or other amount due hereunder as and when due and payable and such failure
shall continue for five (5) Business Days; or
(b) any representation or warranty made or deemed made by any
Borrower in this Agreement or in any other Loan Document or which is contained
in any certificate, document, opinion, financial or other written statement
furnished at any time under or in connection with any
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Loan Document shall prove to have been incorrect in any material respect on or
as of the date made or deemed made or furnished; or
(c) any Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 5.04(e), Article VII, Article VIII or
Article IX; or
(d) any Borrower shall fail to perform or observe any term,
covenant or agreement on its part to be performed or observed (other than the
obligations specifically referred to elsewhere in this Section 10.01) in any
Loan Document and such failure shall continue for thirty (30) consecutive
calendar days after written notice thereof has been given to the Company by the
Administrative Agent at the request of the Majority Lenders; or
(e) (i) the Company or any Subsidiary shall fail to make any
payment in respect of any Material Debt when due or within any applicable grace
period or (ii) there occurs under any Swap Contract an early termination date or
similar termination or payment event resulting from (1) any breach, violation or
event of default under Swap Contract as to which the Company or any of its
Subsidiaries is the defaulting or breaching party or (2) any termination or
similar event as to which the Company or any of its Subsidiaries is an affected
party, and, in either event, the Swap Termination Value owed and not immediately
paid by the Company or such Subsidiary as a result thereof is greater than
$5,000,000; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such Debt
or any Person acting on such holder's behalf to accelerate the maturity thereof;
or
(g) the Company or any Material Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally or admit in writing its
inability to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or
(h) an involuntary case or other proceeding shall be commenced
against the Company or any Material Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of sixty (60) days; or an order for relief shall be entered against the
Company or any Material Subsidiary under the federal bankruptcy laws as now or
hereafter in effect; or
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(i) any member of the ERISA Group shall fail to pay when due
an amount or amounts aggregating in excess of $1,000,000 which such member shall
have become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any member
of the ERISA Group, any plan administrator or any combination of the foregoing;
or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to
impose liability (other than for premiums under Section 4007 of ERISA) in
respect of, or to cause a trustee to be appointed to administer, any Material
Plan; or a condition shall exist by reason of which the PBGC would be entitled
to obtain a decree adjudicating that any Material Plan must be terminated; or
there shall occur a complete or partial withdrawal from, or a default, within
the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more members of the ERISA Group to
incur a current payment obligation in excess of $1,000,000; or
(j) a final, non-appealable judgment or order for the payment
of money in excess of $5,000,000 shall be rendered against the Company or any
Subsidiary and such judgment or order shall continue unsatisfied and unstayed
for a period of (i) in the case of a judgment or order rendered by a court,
arbitrator or governmental authority located in the United States, ten (10) days
or (ii) in the case of a judgment or order rendered by a court, arbitrator or
governmental authority located outside the United States, thirty (30) days; or
(k) (i) any provision of any Collateral Document (other than a
Credit Agreement Guaranty) shall for any reason cease to be valid and
binding on or enforceable against the Company or any of its
Subsidiaries party thereto and, with respect to Pledged Collateral to
be perfected in a jurisdiction other than the United States, shall
remain so for thirty (30) consecutive days, or any such Person shall so
state in writing or bring an action to limit its obligations or
liabilities thereunder; or
(ii) any Collateral Document (other than a Credit
Agreement Guaranty) shall for any reason (other than pursuant to the
terms thereof) cease to create a valid security interest in the
Collateral purported to be covered thereby or such security interest
shall for any reason cease to be a perfected and first priority
security interest and, with respect to Pledged Collateral to be
perfected in a jurisdiction other than the United States, shall remain
so for thirty (30) consecutive days; or
(l) there occurs any Change of Control; or
(m) any Person party thereto fails in any material respect to
perform or observe any term, covenant or agreement in any Credit Agreement
Guaranty or any Credit Agreement Guaranty is for any reason partially (including
with respect to future advances) or wholly revoked or invalidated, or otherwise
ceases to be in full force and effect, or any Person party thereto or any other
Person contests in any manner the validity or enforceability thereof or denies
that it has any further liability or obligation thereunder; or any event
described at clauses (g) or (h) of this Section occurs with respect to such
Person party to a Credit Agreement Guaranty; or
(n) a Relevant Event of Default occurs and is continuing at
any time; or
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(o) Bidco shall have failed for any reason to have caused
Target to become a Wholly-Owned Consolidated Subsidiary of the Company by
acquiring 100% in nominal value of the Target Shares (and cancelling all
options) within six (6) months after the Announcement Date; provided, however,
that the time period set forth in this clause (o) shall be extended by an
additional one month and two weeks if Bidco has initiated the Squeeze-Out during
the initial six months after the Announcement Date.
10.02 Relevant Events of Default with respect to Offer.
Notwithstanding the provisions of Section 10.01, until the
expiration of the Certain Funds Period the events set out below shall be the
only Events of Default upon the occurrence of which Administrative Agent and/or
the Lenders shall be entitled to exercise their powers under Section 10.03 with
respect to making aggregate Loans sufficient to permit the Company to repay its
existing indebtedness under the Existing Credit Agreement and contribute or loan
funds to Bidco to permit Bidco to purchase the Target Shares (a "Relevant Event
of Default") whether or not caused by any reason outside the control of the
Company:
(a) the Company fails to comply with Sections 7.04(a),
7.08(d), 7.09, 7.12(a), (c), (f) or (j) or Section 8.02 and, if such event is,
in the opinion of the Administrative Agent, capable of remedy, within 15 days
after the earlier of the Administrative Agent becoming aware of such default or
written notice from the Administrative Agent to the Company requiring the
failure to be remedied, the Company shall have failed to cure such default,
provided no funding need occur during such cure period; or
(b) any of the representations and warranties with respect to
the Company, US Holdco #1, US Holdco #2 and Bidco contained in Section 6.01(a),
and in respect of the Company and its Subsidiaries contained in Sections
6.02(b), 6.03, 6.15 or 6.16 made or deemed to be repeated during the Certain
Funds Period is incorrect in any respect when made or deemed to be repeated, in
each case by reference to the facts and circumstances then subsisting; or
(c) any Default or Event of Default with respect to the
Company, US Holdco #1 or US Holdco #2 pursuant to Section 10.01(g) or (h); or
(d) an order is made for the winding up of Bidco or Target; or
(e) an administration order is made in relation to or an
administrative or other receiver or manager is appointed of Bidco or the Target
or any such Person is not Solvent; or
(f) a resolution is passed for the winding up of Bidco or the
Target;
provided, however, that in the event that a Default or Event of Default shall
have occurred during the Certain Funds Period that would not constitute a
Relevant Event of Default, the Company hereby acknowledges and agrees that the
Administrative Agent and the Lenders shall not be deemed to have waived such
Default or Event of Default by the making of any Loan to the Company during the
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Certain Funds Period and that such Default or Event of Default shall be
continuing and otherwise actionable in accordance with the terms of this
Agreement.
10.03 Remedies
(a) If any Event of Default or Relevant Event of Default
occurs, the Administrative Agent shall, at the request of, or may, with the
consent of, the Majority Lenders:
(i) declare the commitment and obligation of each
Lender to make Loans and any obligation of the Issuing Bank to Issue
Letters of Credit to be terminated, whereupon such commitments and
obligation shall be terminated;
(ii) declare an amount equal to the maximum aggregate
amount that is or at any time thereafter may become available for
drawing under any outstanding Letters of Credit (whether or not any
beneficiary shall have presented, or shall be entitled at such time to
present, the drafts or other documents required to draw under such
Letters of Credit) to be immediately due and payable (including,
without limitation, satisfying the obligations under paragraph (c)
below), and declare the unpaid principal amount of all outstanding
Loans, all interest accrued and unpaid thereon, and all other amounts
owing or payable hereunder or under any other Loan Document to be
immediately due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by
the Company; and/or
(iii) exercise on behalf of itself and the Lenders
all rights and remedies available to it and the Lenders under the Loan
Documents or applicable law.
(b) If an Event of Default exists: (i) the Administrative
Agent shall have for the benefit of the Lenders, in addition to all other rights
of the Administrative Agent and the Lenders, the rights and remedies of a
secured party under the UCC; and (ii) the Administrative Agent may sell and
deliver any Collateral at public or private sales, for cash, upon credit or
otherwise, at such prices and upon such terms as the Administrative Agent deems
advisable, in its sole discretion, and may, if the Administrative Agent deems it
reasonable, postpone or adjourn any sale of the Collateral by an announcement at
the time and place of sale or of such postponed or adjourned sale without giving
a new notice of sale. Without in any way requiring notice to be given in the
following manner, each Borrower agrees that any notice by the Administrative
Agent of sale, disposition or other intended action hereunder or in connection
herewith, whether required by the UCC or otherwise, shall constitute reasonable
notice to a Borrower if such notice is mailed by registered or certified mail,
return receipt requested, postage prepaid, or is delivered personally against
receipt, at least ten (10) Business Days prior to such action. The proceeds of
sale shall be applied in accordance with this Agreement and the Borrower shall
remain liable for any deficiency.
(c) If any Letter of Credit is outstanding upon the
termination of this Agreement or the Commitments or if an Event of Default has
occurred and is continuing, then upon such termination or during the
continuation of such Event of Default the relevant Borrower shall with respect
to each Letter of Credit then outstanding, as the Majority Lenders, in their
sole discretion
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shall specify, either (A) deposit with Administrative Agent a standby letter of
credit (a "Supporting Letter of Credit") in form and substance satisfactory to
the Administrative Agent, issued by an issuer satisfactory to the Administrative
Agent and in an amount equal to the greatest amount for which such Letter of
Credit may be drawn, under which Supporting Letter of Credit the Administrative
Agent is entitled to draw amounts necessary to reimburse the Administrative
Agent and the Revolving Lenders for payments made by the Administrative Agent
and the Revolving Lenders under such Letter of Credit or under any credit
support or enhancement provided through the Administrative Agent with respect
thereto, or (B) deposit with NationsBank cash in amounts necessary to reimburse
the Administrative Agent and the Revolving Lenders for payments made or to be
made (including, without limitation, the amount that the Administrative Agent
estimates will be necessary to cover its expenses and legal fees in connection
therewith) by the Administrative Agent or the Revolving Lenders under such
Letter of Credit or under any credit support or enhancement provided through the
Administrative Agent with respect thereto, and grant the Administrative Agent
(on behalf of the Lenders) a security interest in such deposited funds. Such
Supporting Letter of Credit shall be held by Administrative Agent and any
deposit of cash shall be held by NationsBank, pursuant to Section 2.07(c), for
the ratable benefit of the Administrative Agent and the Revolving Lenders as
security for, and to provide for the payment of, the aggregate undrawn amount of
such Letters of Credit remaining outstanding.
(d) Notwithstanding the foregoing, upon the occurrence of any
event specified in Sections 10.01(g) or (h) (in the case of clause (h), upon the
expiration of the 60-day period mentioned therein), the commitment and
obligation of each Revolving Lender and the Swing Line Lender to make Loans and
any obligation of the Issuing Bank to Issue Letters of Credit shall
automatically terminate and the unpaid principal amount of all outstanding Loans
and all interest and other amounts and obligations as aforesaid (including,
without limitation, under clause (c) above) shall automatically become due and
payable without further act of the Administrative Agent, the Issuing Bank or any
Lender and without presentment, demand, protest or notice of any kind in
connection therewith.
10.04 Rights Not Exclusive
The rights provided for in this Agreement and the other Loan
Documents are cumulative and are not exclusive of any other rights, powers,
privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter arising.
10.05 Permitted Swap Contract Remedies.
Notwithstanding any other provision of this Article X, each
swap provider shall have the right, with prior notice to the Administrative
Agent, but without the approval or consent of the Administrative Agent or the
Lenders, with respect to any Permitted Swap Obligations of such swap provider,
(a) to declare an event of default, termination event or other similar event
thereunder, (b) to determine net termination amounts in accordance with the
terms of such Permitted Swap Obligation, and (c) to prosecute any legal action
against any Borrower to enforce net amounts owing to such swap provider.
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ARTICLE XI
THE ADMINISTRATIVE AGENT
11.01 Appointment and Authorization; "Administrative Agent"
(a) Each Lender hereby irrevocably (subject to Section 11.09)
appoints, designates and authorizes the Administrative Agent to take such action
on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the
Administrative Agent have or be deemed to have any fiduciary relationship with
any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Administrative Agent. Without limiting
the generality of the foregoing sentence, the use of the term "agent" in this
Agreement with reference to the Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
(b) The Issuing Bank shall act on behalf of the Lenders with
respect to any Letters of Credit Issued by it and the documents associated
therewith until such time and except for so long as the Administrative Agent may
agree at the request of the Majority Lenders to act for such Issuing Bank with
respect thereto; provided, however, that the Issuing Bank shall have all of the
benefits and immunities (i) provided to the Administrative Agent in this Article
XI with respect to any acts taken or omissions suffered by the Issuing Bank in
connection with Letters of Credit Issued by it or proposed to be Issued by it
and the application and agreements for letters of credit pertaining to the
Letters of Credit as fully as if the term "Administrative Agent", as used in
this Article XI, included the Issuing Bank with respect to such acts or
omissions, and (ii) as additionally provided in this Agreement with respect to
the Issuing Bank.
11.02 Delegation of Duties
The Administrative Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
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11.03 Liability of Administrative Agent
None of the Administrative Agent-Related Persons shall (i) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (ii) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by any Borrower or any Subsidiary or
Affiliate of any Borrower, or any officer thereof, contained in this Agreement
or in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection with, this Agreement or any other Loan Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Loan Document, or for any failure of any Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Administrative Agent-Related Person shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement or any
other Loan Document, or to inspect the properties, books or records of any
Borrower or any of Subsidiary or Affiliate of any Borrower.
11.04 Reliance by Administrative Agent
(a) The Administrative Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Borrowers), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Majority Lenders (or, to the extent required by Section 12.01, all of the
Lenders) as it deems appropriate and, if it so requests, it shall first be
indemnified to its satisfaction by the Lenders against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement or any other Loan
Document in accordance with a request or consent of the Majority Lenders (or, to
the extent required by Section 12.01, all of the Lenders) and such request and
any action taken or failure to act pursuant thereto shall be binding upon all of
the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Article V, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter sent by the Administrative Agent to such Lender for
consent, approval, acceptance or satisfaction.
11.05 Notice of Default
The Administrative Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default, except with
respect to defaults in the payment of
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principal, interest and fees required to be paid to the Administrative Agent for
the account of the Lenders, unless the Administrative Agent shall have received
written notice from a Lender or a Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". The Administrative Agent will promptly notify the Lenders
of its receipt of any such notice. Subject to Section 12.01, the Administrative
Agent shall take such action with respect to such Default or Event of Default as
may be requested by the Majority Lenders in accordance with Article X; provided,
however, that unless and until the Administrative Agent has received any such
request, the Administrative Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable and in the best interest of the
Lenders.
11.06 Credit Decision
Each Lender acknowledges that none of the Administrative
Agent-Related Persons nor any Prior Loan Document Lender has made any
representation or warranty to it, and that no act by the Administrative Agent
hereafter taken, including any review of the affairs of each Borrower and each
of its Subsidiaries, shall be deemed to constitute any representation or
warranty by any Administrative Agent-Related Person or any Prior Loan Document
Lender to any Lender. Each Lender represents to the Administrative Agent and
each Prior Loan Document Lender that it has, independently and without reliance
upon any Administrative Agent- Related Person or any Prior Loan Document Lender
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of each Borrower
and each of its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to each Borrower and each of its
Subsidiaries hereunder. Each Lender also represents that it will, independently
and without reliance upon any Administrative Agent-Related Person or any Prior
Loan Document Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of each Borrower. Except for notices,
reports and other documents expressly herein required to be furnished to the
Lenders by the Administrative Agent, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, prospects, operations, property, financial
and other condition or creditworthiness of any Borrower which may come into the
possession of any of the Administrative Agent-Related Persons.
11.07 Indemnification of Administrative Agent
Whether or not the transactions contemplated hereby are
consummated, the Lenders shall indemnify upon demand the Administrative
Agent-Related Persons (to the extent not reimbursed by or on behalf of a
Borrower and without limiting the obligation of such Borrower to do so), pro
rata, from and against any and all Indemnified Liabilities; provided, however,
that no Lender shall be liable for the payment to the Administrative
Agent-Related Persons of any portion
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of such indemnified liabilities resulting solely from any such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender shall reimburse the Administrative Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including Attorney Costs) incurred
by the Administrative Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, any other Loan
Document, or any document contemplated by or referred to herein, to the extent
that the Administrative Agent is not reimbursed for such expenses by or on
behalf of a Borrower. The undertaking in this Section shall survive the payment
of all Obligations hereunder and the resignation or replacement of the
Administrative Agent.
11.08 Administrative Agent in Individual Capacity
NationsBank and its Affiliates may make loans to, issue
letters of credit for the account of, accept deposits from, enter into Swap
Contracts with, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with a
Borrower and its Subsidiaries and Affiliates as though NationsBank were not the
Administrative Agent or the Issuing Bank hereunder and without notice to or
consent of the Lenders; provided, however, nothing in this Section 11.08 shall
relieve the Borrower or its Subsidiaries from providing notices to or obtaining
consents of the Lenders otherwise required by this Agreement. The Lenders
acknowledge that, pursuant to such activities, NationsBank or its Affiliates may
receive information regarding a Borrower or its Affiliates (including
information that may be subject to confidentiality obligations in favor of such
Borrower or such Affiliate) and acknowledge that the Administrative Agent shall
be under no obligation to provide such information to them. With respect to its
Loans and L/C Obligations, NationsBank shall have the same rights and powers
under this Agreement as any other Lender and may exercise the same as though it
were not the Administrative Agent or the Issuing Bank.
11.09 Successor Administrative Agent
The Administrative Agent may, and at the request of the
Majority Lenders shall, resign as Administrative Agent upon 30 days' notice to
the Lenders. If the Administrative Agent resigns under this Agreement, the
Majority Lenders shall appoint from among the Lenders a successor agent for the
Lenders which successor agent shall be approved by the Company. If no successor
agent is appointed prior to the effective date of the resignation of the
Administrative Agent, the Administrative Agent may appoint, after consulting
with the Lenders and the Company, a successor agent from among the Lenders. Upon
the acceptance of its appointment as successor agent hereunder, such successor
agent shall succeed to all the rights, powers and duties of the retiring
Administrative Agent and the term "Administrative Agent" shall mean such
successor agent and the retiring Administrative Agent's appointment, powers and
duties as Administrative Agent shall be terminated. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Article XI and Sections 12.04 and 12.05 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. If no successor agent has accepted
appointment as Administrative Agent by the date which is 30 days following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's
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resignation shall nevertheless thereupon become effective and the Lenders shall
perform all of the duties of the Administrative Agent hereunder until such time,
if any, as the Majority Lenders appoint a successor agent as provided for above.
Notwithstanding the foregoing, however, NationsBank may not be removed as the
Administrative Agent at the request of the Majority Lenders unless NationsBank
shall also simultaneously be replaced as "Issuing Bank" and "Swing Line Lender"
hereunder pursuant to documentation in form and substance reasonably
satisfactory to NationsBank.
11.10 Withholding Tax
(a) If any Lender is a "foreign corporation, partnership or
trust" within the meaning of the Code and such Lender claims exemption from, or
a reduction of, U.S. withholding tax under Section 1441 or 1442 of the Code,
such Lender agrees with and in favor of the Administrative Agent to deliver to
the Administrative Agent:
(i) if such Lender claims an exemption from, or a
reduction of, withholding tax under a United States tax treaty, two
properly completed and executed copies of IRS Form 1001 before the
payment of any interest in the first calendar year and before the
payment of any interest in each third succeeding calendar year during
which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under
this Agreement is exempt from United States withholding tax because it
is effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Lender and in each succeeding taxable year of such Lender during
which interest may be paid under this Agreement; and
(iii) such other form or forms as may be required
under the Code or other laws of the United States as a condition to
exemption from, or reduction of, United States withholding tax.
Such Lender agrees to promptly notify the Administrative Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of a Borrower to such Lender, such Lender agrees
to notify the Administrative Agent of the percentage amount in which it is no
longer the beneficial owner of Obligations of a Borrower to such Lender. To the
extent of such percentage amount, the Administrative Agent will treat such
Lender's IRS Form 1001 as no longer valid.
(c) If any Lender claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Administrative Agent sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of a Borrower to such Lender, such Lender agrees
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to undertake sole responsibility for complying with the withholding tax
requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Administrative Agent may withhold from any interest payment
to such Lender an amount equivalent to the applicable withholding tax after
taking into account such reduction. However, if the forms or other documentation
required by clause (a) of this Section are not delivered to the Administrative
Agent, then the Administrative Agent may withhold from any interest payment to
such Lender not providing such forms or other documentation an amount equivalent
to the applicable withholding tax imposed by Sections 1441 and 1442 of the Code,
without reduction.
(e) If the IRS or any other Governmental Authority of the
United States or other jurisdiction asserts a claim that the Administrative
Agent did not properly withhold tax from amounts paid to or for the account of
any Lender (because the appropriate form was not delivered or was not properly
executed, or because such Lender failed to notify the Administrative Agent of a
change in circumstances which rendered the exemption from, or reduction of,
withholding tax ineffective, or for any other reason) such Lender shall
indemnify the Administrative Agent fully for all amounts paid, directly or
indirectly, by the Administrative Agent as tax or otherwise, including penalties
and interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Administrative Agent under this Section, together with all costs
and expenses (including Attorney Costs). The obligation of the Lenders under
this Section shall survive the payment of all Obligations and the resignation or
replacement of the Administrative Agent.
11.11 Collateral Matters
(a) The Administrative Agent is authorized on behalf of all
the Lenders, without the necessity of any notice to or further consent from the
Lenders, from time to time to take any action with respect to any Collateral or
the Collateral Documents which may be necessary to perfect and maintain
perfected the security interest in and Liens upon the Collateral granted
pursuant to the Collateral Documents.
(b) The Lenders irrevocably authorize the Administrative
Agent, at its option and in its discretion, to release any Lien granted to or
held by the Administrative Agent upon any Collateral (i) upon termination of the
Commitments and payment in full of all Loans and all other Obligations known to
the Administrative Agent and payable under this Agreement or any other Loan
Document; (ii) constituting property sold or to be sold or disposed of as part
of or in connection with any disposition permitted hereunder; (iii) constituting
property in which the Company or any Subsidiary owned no interest at the time
the Lien was granted or at any time thereafter; (iv) constituting property
leased to the Company or any Subsidiary under a lease which has expired or been
terminated in a transaction not prohibited under this Agreement or is about to
expire and which has not been, and is not intended by the Company or such
Subsidiary to be, renewed or extended; (v) consisting of an instrument
evidencing Debt or other debt instrument, if the Debt evidenced thereby has been
paid in full; or (vi) if approved, authorized or ratified in writing by the
Majority Lenders or all the Lenders, as the case may be, as provided in Section
12.01(f). Upon request by the Administrative Agent at any time, the Lenders will
confirm in writing the
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Administrative Agent's authority to release particular types or items of
Collateral pursuant to this Section 11.11(b), provided that the absence of any
such confirmation for whatever reason shall not affect the Administrative
Agent's rights under this Section 11.11.
11.12 Administrative Agent as English Trustee
(a) The Administrative Agent in its capacity as trustee or
otherwise under the Loan Documents governed by English law:
(i) is not liable for any failure, omission, or
defect in perfecting or registering the security constituted or created
by any Loan Document;
(ii) may accept without inquiry such title as any
Borrower or any of its Subsidiaries may have to any asset secured by
any Loan Document; and
(iii) is not under any obligation to hold any Loan
Document or any other document in connection with the Loan Documents or
the assets secured by any Loan Document (including title deeds) in its
own possession or take any steps to protect or preserve the same. The
Administrative Agent may permit any Borrower or any of its Subsidiaries
to retain any Loan Document or other document in its possession.
(b) Except as otherwise provided in the Loan Documents
governed by English law, all moneys which under the trusts contained in the Loan
Documents are received by the Administrative Agent in its capacity as trustee or
otherwise may be invested in the name of or under the control of the
Administrative Agent in any investment authorized by English law for the
investment by a trustee of trust money or in any other investments which may be
selected by the Administrative Agent. Additionally, the same may be placed on
deposit in the name or under the control of the Administrative Agent with such
Lender or institution (including the Administrative Agent itself) and upon such
terms as the Administrative Agent may think fit.
11.13 Assignment under Dutch Law
In connection with any assignment and delegation of all, or
any part of, the Loans, the Commitments, the L/C Obligations and the other
rights or obligations of any Lender (or former Lender) hereunder, the
Administrative Agent is authorized on behalf of both the assignor Lender and the
assignee Lender, without necessity of any notice to or further consent from such
Lenders (or former Lenders, if applicable), to take any action the
Administrative Agent deems reasonably necessary or appropriate to assign a
corresponding interest in the community of Lenders (which is a community in
accordance with Article 166 (and subsequent articles) of Book 3 of the Dutch
Civil Code), including without limitation the rights and interests of such
assignor Lender (whether held directly or indirectly through the Administrative
Agent) under any Loan Documents in any pledged stock or equity interest of any
corporation or other legal entity organized under the laws of the Kingdom of the
Netherlands and constituting Collateral, to the assignee Lender. The
Administrative Agent will notify the Borrower and each pledgor of any pledged
stock or equity interest of any such
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corporation or other legal entity organized under the laws of the Kingdom of the
Netherlands of the assignment of the rights under this Agreement and under any
deed of pledge or similar Loan Documents evidencing such security interest to
the assignee Lender in writing in advance. Each such pledgor and the Borrower
acknowledge and agree that Lenders may assign their interests from time to time
as described in this Section 11.13.
ARTICLE XII
MISCELLANEOUS
12.01 Amendments and Waivers
No amendment or waiver of any provision of this Agreement or
any other Loan Document, and no consent with respect to any departure by the
applicable Borrower or any applicable Subsidiary therefrom, shall be effective
unless the same shall be in writing and signed by the Majority Lenders (or by
the Administrative Agent at the written request of the Majority Lenders) and the
applicable Borrower and acknowledged by the Administrative Agent, and then any
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given; provided, however, that no such waiver,
amendment, or consent shall:
(a) increase or extend the Commitment of any Lender (or
reinstate any Commitment terminated pursuant to Section 2.05 or Section 10.03)
without the prior written consent of each Lender directly affected thereby;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to any Lenders hereunder or under any other Loan Document without
the prior written consent of each Lender directly affected thereby;
(c) reduce the principal of, or the rate of interest specified
herein on, any Loan, or (subject to clause (iv) below) any fees or other amounts
payable hereunder or under any other Loan Document without the prior written
consent of each Lender directly affected thereby;
(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Lenders
or any of them to take any action hereunder without the prior written consent of
each Lender;
(e) amend this Section, or Section 2.14, the definition of
"Majority Lenders" or any provision herein providing for consent or other action
by all Lenders without the prior written consent of each Lender; or
(f) release all or substantially all of the Collateral or all
of the Credit Agreement Guaranties, except in connection with a repayment in
full of all Obligations and Loans and a
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termination of the Commitments or as otherwise permitted under this Agreement
without the prior written consent of each Lender;
and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the affected Issuing Bank in addition to the Majority
Lenders or all the Lenders, as the case may be, affect the rights or duties of
such Issuing Bank under this Agreement or any L/C-Related Document relating to
any Letter of Credit Issued or to be Issued by it, (ii) no amendment, waiver or
consent shall, unless in writing and signed by the Administrative Agent in
addition to the Majority Lenders or all the Lenders, as the case may be, affect
the rights or duties of the Administrative Agent under this Agreement or any
other Loan Document, (iii) no amendment, waiver or consent shall, unless in
writing and signed by the Swing Line Lender in addition to the Majority Lenders
or all Lenders, as the case may be, affect the rights or duties of the Swing
Line Lender under this Agreement, (iv) the Fee Letter may be amended, or rights
or privileges thereunder waived, in a writing executed by the parties thereto
and (v) any references in this Agreement to a Business Day, day-count, fraction
or other convention (whether for the calculation of interest, determination of
payment dates or otherwise) will, to the extent that the Administrative Agent
specifies to be necessary, be amended to comply with any generally accepted
conventions and market practice applicable to euro-denominated obligations in
the London interbank market.
12.02 Notices
(a) All notices, requests, consents, approvals, waivers and
other communications shall be in writing (including, unless the context
expressly otherwise provides, by facsimile transmission, provided that any
matter transmitted by facsimile (i) shall be immediately confirmed by a
telephone call to the recipient at the number specified on Schedule 12.02, and
(ii) shall be followed promptly by delivery of a hard copy original thereof) and
mailed, faxed or delivered, to the address or facsimile number specified for
notices on Schedule 12.02; or, as directed to a Borrower or the Administrative
Agent and/or the Swing Line Lender, as the case may be, to such other address as
shall be designated by such party in a written notice to the other parties, and
as directed to any other party, at such other address as shall be designated by
such party in a written notice to the Company and the Administrative Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II, III or XI to the Administrative Agent and/or the
Swing Line Lender, as the case may be, shall not be effective until actually
received by the Administrative Agent and/or the Swing Line Lender, as the case
may be, and notices pursuant to Article III to the Issuing Bank shall not be
effective until actually received by the Issuing Bank at the address specified
for the "Issuing Bank" on the applicable signature page hereof.
(c) Any agreement of the Administrative Agent and the Lenders
herein to receive certain notices by telephone or facsimile is solely for the
convenience and at the request of a Borrower. The Administrative Agent and the
Lenders shall be entitled to rely on the authority of any
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Person purporting to be a Person authorized by the relevant Borrower to give
such notice and the Administrative Agent and the Lenders shall not have any
liability to such Borrower or other Person on account of any action taken or not
taken by the Administrative Agent or the Lenders in reliance upon such
telephonic or facsimile notice. The obligation of each Borrower to repay the
Loans and L/C Obligations shall not be affected in any way or to any extent by
any failure by the Administrative Agent and the Lenders to receive written
confirmation of any telephonic or facsimile notice or the receipt by the
Administrative Agent and the Lenders of a confirmation which is at variance with
the terms understood by the Administrative Agent and the Lenders to be contained
in the telephonic or facsimile notice.
12.03 No Waiver; Cumulative Remedies
No failure to exercise and no delay in exercising, on the part
of the Administrative Agent or any Lender, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege.
12.04 Costs and Expenses
Each Borrower shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse NationsBank (including in its capacity as
Administrative Agent and Issuing Bank) within five Business Days after demand
(subject to Section 5.01(e)) for all reasonable out-of-pocket costs and expenses
incurred by NationsBank (including in its capacity as Administrative Agent and
Issuing Bank) in connection with the development, preparation, delivery,
administration and execution of, and any amendment, supplement, waiver or
modification to (in each case, whether or not consummated), this Agreement, any
other Loan Document and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated hereby and
thereby, including, without limitation, reasonable Attorney Costs incurred by
NationsBank (including in its capacity as Administrative Agent and Issuing Bank)
with respect thereto and all fees and expenses for title and lien searches,
appraisals, surveys, title commitment and insurance costs and corporate search
fees; and
(b) pay or reimburse the Administrative Agent and each Lender
within 15 Business Days after demand (subject to Section 5.01(e)) for all
reasonable out-of-pocket costs and expenses (including Attorney Costs) incurred
by them in connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies under this Agreement or any other Loan
Document during the existence of a Default or an Event of Default or after
acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Loans, and including in any Insolvency Proceeding or
appellate proceeding).
The undertaking in this Section shall survive the payment of all Obligations
hereunder.
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12.05 Company Indemnification
Whether or not the transactions contemplated hereby are
consummated, the Company hereby agrees to indemnify and hold harmless the
Administrative Agent-Related Persons and each Lender and each of their
affiliates and their respective directors, officers, employees, advisors and
agents (each, an "Indemnified Party") from and against (and will reimburse each
Indemnified Party as the same are incurred) any and all losses, claims, damages,
liabilities, and expenses (including, without limitation, the reasonable fees
and expenses of counsel (including, without duplication, the allocated cost of
internal counsel)) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of (including, without limitation, in connection with any investigation,
litigation or proceeding or preparation of a defense in connection therewith)
(a) the Transaction or any similar transaction and any of the other transactions
contemplated thereby, or (b) this Agreement, the other Loan Documents, any Loan
or any Letter of Credit, or any use made or proposed to be made with the
proceeds thereof (including any arising out of the negligence of such
Indemnified Party)(collectively, "Indemnified Liabilities"), unless and except
to the extent that, as to such Indemnified Party, it shall be determined in a
final, nonappealable judgment by a court of competent jurisdiction that such
losses, claims, damages, liabilities or expenses resulted from the gross
negligence or willful misconduct of such Indemnified Party or the intentional
breach by such Indemnified Party of its agreement to make Loans or issue Letters
of Credit in accordance with the terms of this Agreement and the other Loan
Documents. In the case of any investigation, litigation or proceeding to which
the indemnity in this Section 12.05 applies, such indemnity shall be effective
whether or not such investigation, litigation or proceeding is brought by the
Company, the Company's shareholders or creditors or such Indemnified Party and
whether or not the Transaction is consummated, unless and except to the extent
that, as to such Indemnified Party, it shall be determined in a final,
nonappealable judgment by a court of competent jurisdiction that such losses,
claims, damages, liabilities or expenses resulted from the gross negligence or
wilful misconduct of such Indemnified Party or the intentional breach by such
Indemnified Party of its agreement to make Loans or issue Letters of Credit in
accordance with the terms of this Agreement and the other Loan Documents. The
Company hereby agrees that no Indemnified Party shall have any liability to the
Company or any of its Subsidiaries or Affiliates or to the Company's or their
respective security holders or creditors for any indirect, consequential or
punitive damages arising out of, related to or in connection with the
Transaction or the Loan Documents. The agreements in this Section shall survive
payment of all other Obligations.
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12.06 Payments Set Aside
To the extent that a Borrower makes a payment to the
Administrative Agent or the Lenders, or the Administrative Agent or the Lenders
exercise their right of set-off, and such payment or the proceeds of such
set-off or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required (including pursuant to any
settlement entered into by the Administrative Agent or such Lender in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred, and (b) each Lender
severally agrees to pay to the Administrative Agent upon demand its pro rata
share of any amount so recovered from or repaid by the Administrative Agent.
12.07 Successors and Assigns
The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, except that no Borrower may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of the
Administrative Agent and each Lender.
12.08 Assignments, Participations, etc.
(a) Any Lender may, with the written consent of the
Administrative Agent, the Issuing Bank, the Swing Line Lender and, so long as no
Default or Event of Default has occurred and is continuing, the Company, which
consents shall not be unreasonably withheld, at any time assign and delegate to
one or more Eligible Assignees (provided that no written consent of the
Administrative Agent, the Issuing Bank, the Swing Line Lender or the Company
shall be required in connection with any assignment and delegation by a Lender
to an Eligible Assignee that is an Affiliate of such Lender) (each an
"Assignee") all of, or any part of, the Loans, the Commitments, the L/C
Obligations and the other rights and obligations of such Lender hereunder, in a
minimum aggregate Dollar Equivalent of $5,000,000 (or, if less, the entire
amount of such Lender's Loans and Commitments, and such Loans and Commitments
may consist of the Revolving Loan Commitments, the Term Loan Commitments and the
Sterling Acquisition Loan Commitments as determined by the assigning Lender)
calculated by aggregating the Commitments, Loans and L/C Obligations held by an
Eligible Assignee which are Affiliates; provided, however, that each Borrower
and the Administrative Agent may continue to deal solely and directly with such
Lender in connection with the interest so assigned to an Assignee until (i)
written notice of such assignment, together with payment instructions, addresses
and related information with respect to the Assignee, shall have been given to
each Borrower and the Administrative Agent by such Lender and the Assignee; (ii)
such Lender and its Assignee shall have delivered to each Borrower and the
Administrative Agent an Assignment and Acceptance in the form of Exhibit E
attached hereto ("Assignment and Acceptance") together with any Note or Notes
subject to such assignment and (iii) the assignor Lender or Assignee has paid to
the Administrative Agent a processing fee in the amount of $3,500.
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(b) From and after the date that the Administrative Agent
notifies the assignor Lender that it has received (and provided its consent with
respect to) an executed Assignment and Acceptance and payment of the
above-referenced processing fee, (i) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Lender under the Loan Documents, and (ii) the assignor
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Loan Documents (other than with respect to any indemnification pursuant to
Article IV or Section 12.05).
(c) Within five Business Days after its receipt of notice by
the Administrative Agent that it has received an executed Assignment and
Acceptance and payment of the processing fee (and provided that it consents to
such assignment in accordance with Section 12.08(a)), the relevant Borrower
shall execute and deliver to the Administrative Agent, new Notes evidencing such
Assignee's assigned Loans and Commitments and, if the assignor Lender has
retained a portion of its Loans and its Commitments, replacement Notes in the
principal amount of the Loans retained by the assignor Lender (such Notes to be
in exchange for, but not in payment of, the Notes held by such Lender).
Immediately upon receipt by the Administrative Agent of the processing fee
payment under the Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitments allocated to each Assignee shall reduce such
Commitments of the assigning Lender pro tanto.
(d) Any Lender may at any time sell to one or more commercial
banks or other Persons not Affiliates of a Borrower (a "Participant")
participating interests in any Loans, the Commitments of that Lender and the
other interests of that Lender (the "originating Lender") hereunder and under
the other Loan Documents; provided, however, that (i) the originating Lender's
obligations under this Agreement shall remain unchanged, (ii) the originating
Lender shall remain solely responsible for the performance of such obligations,
(iii) each Borrower, the Issuing Bank, the Swing Line Lender and the
Administrative Agent shall continue to deal solely and directly with the
originating Lender in connection with the originating Lender's rights and
obligations under this Agreement and the other Loan Documents, and (iv) no
Lender shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to the extent
such amendment, consent or waiver would require unanimous consent of the Lenders
as required pursuant to the first proviso to Section 12.01. In the case of any
such participation, the Participant shall not have any rights under this
Agreement, or any of the other Loan Documents, and all amounts payable by a
Borrower hereunder shall be determined as if such Lender had not sold such
participation; except that, if amounts outstanding under this Agreement are due
and unpaid, or shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant shall be deemed to
have the right of set-off in respect of its participating interest in amounts
owing under this Agreement to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement.
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(e) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement and the Notes held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR Section 203.14, and such Federal Reserve
Bank may enforce such pledge or security interest in any manner permitted under
applicable law.
(f) No assignee, participant or other transferee of any
Lender's rights shall be entitled to receive any greater payment under Article
IV than such Lender would have been entitled to receive with respect to the
rights transferred or by reason of the provisions of Article IV requiring such
Lender to designate a different Applicable Lending office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
(g) In connection with any assignment by NationsBank including
in connection with the execution of this Agreement, NationsBank may, with the
consent of the Administrative Agent, designate any such assignee with the title
"documentation agent," "syndication agent," "co-manager, "co-agent",
"co-arranger" or other similar title in addition to such assignee being a
"Lender" under this Agreement; provided, that any such assignee shall not
receive any fee from the Company or have any additional duties or
responsibilities by virtue of such title.
12.09 Confidentiality
Each Lender agrees to take and to cause its Affiliates to take
normal and reasonable precautions and exercise due care to maintain the
confidentiality of all information identified as "confidential" or "secret" by a
Borrower and provided to it by a Borrower or any Subsidiary of a Borrower, or by
the Administrative Agent on such Person's behalf, under this Agreement or any
other Loan Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents or in connection with other business now or
hereafter existing or contemplated with any Borrower or any of its Subsidiaries;
except to the extent such information (i) was or becomes generally available to
the public other than as a result of disclosure by such Lender, or (ii) was or
becomes available on a non-confidential basis from a source other than a
Borrower, provided that such source is not bound by a confidentiality agreement
with a Borrower known to such Lender; provided, however, that any Lender may
disclose such information (A) at the request or pursuant to any requirement of
any Governmental Authority to which such Lender is subject or in connection with
an examination of such Lender by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the
Administrative Agent, any Lender or their respective Affiliates may be party;
(E) to the extent reasonably required in connection with the exercise of any
remedy hereunder or under any other Loan Document; (F) to such Lender's
independent auditors and other professional advisors; (G) to any Participant or
Assignee, actual or potential, provided that such Person agrees in writing to
keep such information confidential to the same extent required of the Lenders
hereunder; (H) as to any Lender or its Affiliate, as expressly permitted under
the terms of any other document or agreement regarding confidentiality to which
a Borrower or any Subsidiary of a Borrower is party or is deemed party with such
Lender or such Affiliate; and (I) to its Affiliates.
128
<PAGE> 138
12.10 Set-off
In addition to any rights and remedies of the Lenders provided
by law, if an Event of Default exists or the Loans have been accelerated, each
Lender is authorized at any time and from time to time, without prior notice to
a Borrower, any such notice being waived by each Borrower to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by, and other Debt at any
time owing by, such Lender to or for the credit or the account of the relevant
Borrower or any Subsidiary Guarantor against any and all Obligations owing to
such Lender, now or hereafter existing, irrespective of whether or not the
Administrative Agent or such Lender shall have made demand under this Agreement
or any other Loan Document and although such Obligations may be contingent or
unmatured. Each Lender agrees promptly to notify the relevant Borrower or any
Subsidiary Guarantor and the Administrative Agent after any such set-off and
application made by such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application.
12.11 Notification of Addresses, Lending Offices, etc.
Each Lender shall notify the Administrative Agent in writing
of any changes in the address to which notices to the Lender should be directed,
of addresses of any Lending Office, of payment instructions in respect of all
payments to be made to it hereunder and of such other administrative information
as the Administrative Agent shall reasonably request.
12.12 Counterparts
This Agreement may be executed in any number of separate
counterparts, each of which, when so executed, shall be deemed an original, and
all of said counterparts taken together shall be deemed to constitute but one
and the same instrument.
12.13 Severability
The illegality or unenforceability of any provision of this
Agreement or any instrument or agreement required hereunder shall not in any way
affect or impair the legality or enforceability of the remaining provisions of
this Agreement or any instrument or agreement required hereunder.
12.14 No Third Parties Benefited.
This Agreement is made and entered into for the sole
protection and legal benefit of each Borrower, the Lenders, the Administrative
Agent and the Administrative Agent-Related Persons, and their permitted
successors and assigns, and no other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents.
12.15 Governing Law and Jurisdiction.
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<PAGE> 139
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF NEW YORK;
PROVIDED THAT THE PARTIES SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE BORROWER, THE
ADMINISTRATIVE AGENT, THE ISSUING BANK AND THE LENDERS CONSENTS, FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.
EACH BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH BORROWER, THE ADMINISTRATIVE
AGENT AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
(c) THE COMPANY HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND
EMPOWERS US CORPORATION SYSTEMS WITH OFFICES ON THE DATE HEREOF IN NEW YORK, NEW
YORK (OR SUCH OTHER AGENT TO RECEIVE SERVICE OF PROCESS IN NEW YORK, NEW YORK AS
IS REASONABLY ACCEPTABLE TO THE ADMINISTRATIVE AGENT), AS ITS DESIGNEE,
APPOINTEE AND AGENT TO RECEIVE, ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF,
AND IN RESPECT OF ITS PROPERTY, SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS,
NOTICES AND DOCUMENTS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. IF
FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND AGENT SHALL CEASE TO BE AVAILABLE TO
ACT AS SUCH, THE COMPANY AGREES TO DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT
IN NEW YORK ON THE TERMS AND FOR THE PURPOSES OF THIS PROVISION SATISFACTORY TO
THE ADMINISTRATIVE AGENT UNDER THIS AGREEMENT. THE COMPANY FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE COMPANY AT ITS ADDRESS SET FORTH ON
SCHEDULE 12.02, SUCH SERVICE TO BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT UNDER THIS
AGREEMENT, ANY LENDER OR THE HOLDER OF ANY NOTE TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST ANY BORROWER IN ANY OTHER JURISDICTION.
12.16 Waiver of Jury Trial
130
<PAGE> 140
THE COMPANY, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH
WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY ADMINISTRATIVE AGENT-RELATED PERSON, PARTICIPANT OR
ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE.
THE COMPANY, THE LENDERS AND THE ADMINISTRATIVE AGENT EACH AGREE THAT ANY SUCH
CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
12.17 Entire Agreement
This Agreement, together with the other Loan Documents,
embodies the entire agreement and understanding among each Borrower, the Lenders
and the Administrative Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof including, without limitation, the
commitment letters among NationsBank, NationsBanc Montgomery Securities, LLC and
the Company, dated October 16, 1998 and March 23, 1999 (except the provisions of
such commitment letter which expressly survive the execution of this Agreement,
and the Administrative Agent hereby confirms that during the Certain Funds
Period none of such provisions include additional conditions to any Borrowing
pursuant to Section 5.02 of this Agreement).
12.18 Judgment Currency
If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder or under any other Loan Document in one
currency into another currency, the rate of exchange used shall be that at which
in accordance with normal banking procedures the Administrative Agent could
purchase the first currency with such other currency on the Business Day
preceding that on which final judgment is given. The obligation of any Borrower
in respect of any such sum due from it to the Administrative Agent or any Lender
hereunder or under the other Loan Documents shall, notwithstanding any judgment
in a currency (the "Judgment Currency") other than that in which such sum is
denominated in accordance with the applicable provisions of this Agreement (the
"Agreement Currency"), be discharged only to the extent that on the Business Day
following receipt by the Administrative Agent or such Lender of any sum adjudged
to be so due in the Judgment Currency, the Administrative Agent or such Lender
may in accordance with normal banking procedures purchase the Agreement Currency
with the Judgment Currency. If the amount
131
<PAGE> 141
of the Agreement Currency so purchased is less than the sum originally due to
the Administrative Agent or such Lender in the Agreement Currency, the Company
agrees, as a separate obligation and notwithstanding any such judgment, to
indemnify the Administrative Agent or such Lender or the Person to whom such
obligation was owing against such loss. If the amount of the Agreement Currency
so purchased is greater than the sum originally due to the Administrative Agent
or such Lender in such currency, the Administrative Agent or such Lender agrees
to return the amount of any excess to the Company (or to any other Person who
may be entitled thereto under applicable law).
12.19 Amendment and Restatement
(a) (i) On and after the Initial Funding Date, the First
Amended and Restated Credit Agreement automatically and without further action
of any kind amended and restated in its entirety the Prior Loan Document and,
upon the Initial Funding Date, the terms and provisions of the Prior Loan
Document were, subject to this Section 12.19(a), superseded thereby; provided,
however, that notwithstanding the amendment and restatement of the Prior Loan
Document by the First Amended and Restated Credit Agreement, the Company
continues to be liable to NationsBank, the Administrative Agent-Related Persons
(as defined in the Prior Loan Document) and the Lenders under, and as defined
in, the Prior Loan Document (the "Prior Loan Document Lenders") with respect to
agreements on the part of the Company or any of its Subsidiaries under the Prior
Loan Document to indemnify and hold NationsBank (individually and as
Administrative Agent), the Administrative Agent-Related Persons and the Prior
Loan Document Lenders harmless from and against all claims, demands,
liabilities, damages, losses, costs, charges and expenses to which NationsBank
(individually and as Administrative Agent), the Administrative Agent-Related
Persons and the Prior Loan Document Lenders may be subject arising in connection
with any action taken, failure to take action or transaction contemplated in or
under the Prior Loan Document during the period that such agreement was in
effect. Without limiting the generality of the foregoing, the obligations of the
Company pursuant to Sections 4.01, 4.03, 4.04, 4.09 and 12.05 of the Prior Loan
Document and the Fee Letter, as such term is defined in the Prior Loan Document,
are not superseded, modified or otherwise affected by the First Amended and
Restated Credit Agreement.
(ii) Simultaneously with the occurrence of the Initial Funding
Date, each Prior Loan Document Lender assigned (subject to Section 11.06 of the
First Amended and Restated Credit Agreement) a portion of its Commitments under,
and as defined in, the Prior Loan Document to the Lenders under the First
Amended and Restated Credit Agreement in such amounts so that the allocation of
the Commitments as of the Initial Funding Date was in the amounts specified on
Schedule 2.01 thereto, and each Lender accepted such assignment and assumed its
portion of the Commitments in accordance with the terms and conditions
thereunder (and the Prior Loan Document Lenders had no further obligations with
respect to such Commitments).
(iii) In furtherance of and without limiting the foregoing,
all amounts owing with respect to accrued fees with respect to the Commitments
under, and as defined in, the Prior Loan Documents shall have been paid to the
Prior Loan Document Lenders currently on and as of the Initial Funding Date in
their entirety.
132
<PAGE> 142
(b) (i) On and after the PTI Effective Date, this Agreement
will automatically and without further action of any kind amend and restate in
its entirety the First Amended and Restated Credit Agreement and, upon the PTI
Effective Date, the terms and provisions of the First Amended and Restated
Credit Agreement shall, subject to this Section 12.19(b), be superseded hereby;
provided, however, that notwithstanding the amendment and restatement of the
First Amended and Restated Credit Agreement by this Agreement, the Company shall
continue to be liable to NationsBank, the Administrative Agent-Related Persons
(as defined in the First Amended and Restated Credit Agreement) and the Lenders
under, and as defined in, the First Amended and Restated Credit Agreement (the
"First Amended and Restated Credit Agreement Lenders") with respect to
agreements on the part of the Company or any of its Subsidiaries in Section
12.19(a) of the First Amended and Restated Credit Agreement to indemnify and
hold NationsBank (individually and as Administrative Agent), the Administrative
Agent-Related Persons and the First Amended and Restated Credit Agreement
Lenders from time to time harmless from and against all claims, demands,
liabilities, damages, losses, costs, charges and expenses to which NationsBank
(individually and as Administrative Agent), the Administrative Agent-Related
Persons and the First Amended and Restated Credit Agreement Lenders may be
subject arising in connection with any action taken, failure to take action or
transaction contemplated in or under but only to the extent set forth in the
First Amended and Restated Credit Agreement during the period that such
agreement was in effect. Without limiting the generality of the foregoing, the
obligations of the Company pursuant to (I) Sections 4.01, 4.03, 4.04, 4.09 and
12.05 of the First Amended and Restated Credit Agreement and the Fee Letter, as
such term is defined in the First Amended and Restated Credit Agreement, and
(II) under Section 12.19(a), shall not be superseded, modified or otherwise
affected by this Agreement.
(ii) Simultaneously with the occurrence of the PTI Effective
Date, each First Amended and Restated Credit Agreement Lender shall be deemed to
have assigned (subject to Section 11.06 of this Agreement) a portion of its
Commitments under, and as defined in, the First Amended and Restated Credit
Agreement to the Lenders under this Agreement in such amounts so that the
allocation of the Commitments as of the PTI Effective Date shall be in the
amounts specified on Schedule 2.01 hereto, and each Lender hereby accepts such
assignment and assumes its portion of the Commitments in accordance with the
terms and conditions hereunder (and the First Amended and Restated Credit
Agreement Lenders shall have no further obligations with respect to such
Commitments).
(iii) In furtherance of and without limiting the foregoing,
all amounts owing with respect to accrued fees with respect to the Commitments
under, and as defined in, the First Amended and Restated Credit Agreement shall
have been paid to the First Amended and Restated Credit Agreement Lenders
currently on and as of the PTI Effective Date in their entirety.
[Signature pages to follow]
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<PAGE> 143
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
MacDERMID, INCORPORATED
By:_______________________________________
Name:_____________________________________
Title:____________________________________
NATIONSBANK, N.A., as Administrative Agent
By:_______________________________________
Name:_____________________________________
Title:____________________________________
NATIONSBANK, N.A.,
Individually as a Lender, the Swing Line Lender and
as the Issuing Bank
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-1
<PAGE> 144
BANKBOSTON, N.A., as Documentation Agent and as a
Lender
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-2
<PAGE> 145
FLEET NATIONAL BANK, as Syndication Agent and as a
Lender
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-3
<PAGE> 146
THE BANK OF NEW YORK, as Co-Agent and as a Lender
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-4
<PAGE> 147
FIRST UNION NATIONAL BANK, as Co-Agent and as a
Lender
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-5
<PAGE> 148
LLOYDS BANK PLC, MIAMI, as Co-Agent and as a
Lender
By:_______________________________________
Name:_____________________________________
Title:____________________________________
LLOYDS BANK PLC, MIAMI, as Co-Agent and as a Lender
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-6
<PAGE> 149
THE CHASE MANHATTAN BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-7
<PAGE> 150
COMERICA BANK
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-8
<PAGE> 151
THE FIRST NATIONAL BANK OF CHICAGO
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-9
<PAGE> 152
ABN AMRO BANK N.V.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
ABN AMRO BANK N.V.
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-10
<PAGE> 153
BANK OF MONTREAL
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-11
<PAGE> 154
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-12
<PAGE> 155
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK AG, CAYMAN
ISLAND BRANCH
By:_______________________________________
Name:_____________________________________
Title:____________________________________
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK AG, CAYMAN
ISLAND BRANCH
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-13
<PAGE> 156
THE ROYAL BANK OF SCOTLAND plc
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-14
<PAGE> 157
UNICREDITO ITALIANO S.p.A., New York Branch
By:_______________________________________
Name:_____________________________________
Title:____________________________________
UNICREDITO ITALIANO S.p.A., New York Branch
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-15
<PAGE> 158
HSBC BANK USA
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-16
<PAGE> 159
GENERALE (USA) FINANCE LLC
By:_______________________________________
Name:_____________________________________
Title:____________________________________
[TO CREDIT AGREEMENT]
S-17
<PAGE> 160
SCHEDULE 1(a)
CALCULATION OF THE MANDATORY COST
(a) The Mandatory Cost for a Lender in relation to a Loan for each of its
Interest Periods is the rate determined by that Lender to be equal to
the following formulae:
in relation to a Loan denominated in Sterling:
BY + S(Y-Z) + F x 0.01 % per annum = Mandatory Cost
----------------------
100-(B + S)
in relation to any other Loan:
F x 0.01 % per annum = Mandatory Cost
---------
300
where on the day of application of the formula:
B is the percentage of the relevant Lender's eligible
liabilities (in excess of any stated minimum) which the Bank
of England requires that Lender to hold on a
non-interest-bearing deposit account in accordance with its
cash ratio requirements;
Y is the rate at which Sterling deposits are offered by the
relevant Lender to leading banks in the London interbank
market at or about 11.00 a.m. on that day for the relevant
period;
S is the percentage of the relevant Lender's eligible
liabilities which the Bank of England requires that Lender to
place as a special deposit;
Z is the interest rate per annum allowed by the Bank of England
on special deposits; and
F is the charge payable by the relevant Lender to the Financial
Services Authority under paragraph 2.02 or 2.03 (as
appropriate) of the Fees Regulations but where for this
purpose, the figure in paragraph 2.02b and 2.03b will be
deemed to be zero expressed in pounds per pound sterling
1 million of the fee base of the relevant Lender.
(b) For the purposes of this Schedule 3:
(i) "eligible liabilities" and "special deposits" have the
meanings given to them at the time of application of the
formula by the Bank of England; and
(ii) "fee base" has the meaning given to it in the Fees
Regulations;
<PAGE> 161
(iii) "Fees Regulations" means:
(1) prior to 31st March, 1999, the Banking Supervision
(Fees) Regulations 1998; and
(2) on and after 31st March, 1999, any regulations
governing the payment of fees for banking
supervision.
(ii) "relevant period" in relation to each Interest Period, means:
(A) if it is three months or less, that Interest Period;
or
(B) if it is more than three months, each successive
period of three months and any necessary shorter
period comprised in that Interest Period.
(c) In the application of the formula, B, Y, S and Z are included in the
formula as figures and not as percentages, e.g. if B = 0.5% and Y =
15%, BY is calculated as 0.5 x 15.
(d) If the relevant Lender can not determine a rate, the applicable
Mandatory Cost will be determined on the basis of the rate(s) supplied
by reference banks selected by the relevant Lender.
(e) (i) The formula is applied on the first day of each relevant
period comprised in the relevant Interest Period.
(ii) Each rate calculated in accordance with the formula is, if
necessary, rounded upward to four decimal places.
(f) If the relevant Lender determines that a change in circumstances has
rendered, or will render, the formula inappropriate, the relevant
Lender (after consultation with the other Lenders) shall notify the
Company of the manner in which the Mandatory Cost will subsequently be
calculated. The manner of calculation so notified by the relevant
Lender shall, in the absence of manifest error, be binding on all the
Parties.
<PAGE> 162
SCHEDULE 2.01
COMMITMENTS
<TABLE>
<CAPTION>
LENDERS $75,000,000.00 $200,300,000.00 POUND STERLING 45,000,000.00
REVOLVER TERM STERLING
ACQUISITION
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NationsBank, N.A. 9,214,285.72 24,608,285.69 5,528,571.41
BankBoston, N.A. 7,714,285.72 20,602,285.71 4,628,571.41
Fleet National Bank 7,714,285.72 20,602,285.71 4,628,571.41
The Bank of New York 5,785,714.30 15,451,714.27 3,471,428.57
First Union National Bank 5,785,714.30 15,451,714.27 3,471,428.57
Lloyds Bank Plc, Miami 5,785,714.30 15,451,714.27 3,471,428.57
The Chase Manhattan Bank 4,928,571.43 13,162,571.43 2,957,142.86
Comerica Bank 4,928,571.43 13,162,571.43 2,957,142.86
The First National Bank of 4,928,571.43 13,162,571.43 2,957,142.86
Chicago
ABN Amro Bank N.V. 3,214,285.70 8,584,285.73 1,928,571.43
Bank of Montreal 3,214,285.70 8,584,285.73 1,928,571.43
Bank of Tokyo-Mitsubishi Trust 3,214,285.70 8,584,285.73 1,928,571.43
Company
DG Bank 3,214,285.70 8,584,285.73 1,928,571.43
Deutschegenossenschaftbank AG,
Cayman Island Branch
Royal Bank of Scotland plc 3,214,285.70 8,584,285.73 1,928,571.43
Generale Bank 0.00 0.00 0.00
HSBC 0.00 0.00 0.00
UniCredito Italiano S.p.A., New 2,142,857.15 5,722,857.14 1,285,714.29
York Branch
TOTAL COMMITMENT $75,000,000.00 $200,300,000.00 pound sterling 45,000,000.00
</TABLE>
<TABLE>
<CAPTION>
LENDERS $50,000,000 $115,000,000
REVOLVER PTI
INCREASE TERM
- ---------------------------------------------------------------------
<S> <C> <C>
NationsBank, N.A. 3,636,363.64 8,363,636.36
BankBoston, N.A. 1,515,151.52 3,484,848.48
Fleet National Bank 1,515,151.52 3,484,848.48
The Bank of New York 3,939,393.94 9,060,606.06
First Union National Bank 3,939,393.94 9,060,606.06
Lloyds Bank Plc, Miami 3,939,393.94 9,060,606.06
The Chase Manhattan Bank 0.00 0.00
Comerica Bank 2,121,212.12 4,878,787.88
The First National Bank of 5,151,515.15 11,848,484.85
Chicago
ABN Amro Bank N.V. 1,515,151.51 3,484,848.49
Bank of Montreal 4,545,454.55 10,454,545.45
Bank of Tokyo-Mitsubishi Trust 1,515,151.51 3,484,848.49
Company
DG Bank 1,515,151.51 3,484,848.49
Deutschegenossenschaftbank AG,
Cayman Island Branch
Royal Bank of Scotland plc 1,515,151.51 3,484,848.49
Generale Bank 7,575,757.58 17,424,242.42
HSBC 6,060,606.06 13,939,393.94
UniCredito Italiano S.p.A., New 0.00 0.00
York Branch
TOTAL COMMITMENT 50,000,000.00 115,000,000.00
</TABLE>
<PAGE> 1
Exhibit 23.3
[KPMG LOGO]
CITYPLACE II
HARTFORD, CT 06103-4103
The Board of Directors
MacDermid, Incorporated;
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in our prospectus.
/s/ KPMG LLP
KPMG LLP
Hartford, Connecticut
August 30, 1999
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Proxy Statement of MacDermid, Incorporated
of our report dated March 19, 1999 relating to the financial statements of PTI,
Inc., which appear in such Proxy Statement. We also consent to the references to
us under the headings "Experts" in such Proxy Statement.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Boston, MA
August 30, 1999
<PAGE> 1
Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Proxy Statement of
MacDermid, Incorporated of our report on W. Canning plc dated 18 March 1998,
except for note 28 which is as of 8 June 1999, appearing in such Proxy
Statement. We also consent to the references to us under the headings "Experts"
in such Proxy Statement.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
30 August 1999
Birmingham, England
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of March 31, 1999 and the consolidated statement
of earnings for the fiscal year ended March 31, 1999 included in Exhibit 13 to
the 1999 Form 10-K Annual Report of MacDermid, Incorporated and is qualified in
its entirety to such statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 15486
<SECURITIES> 968
<RECEIVABLES> 115030
<ALLOWANCES> 6411
<INVENTORY> 56049
<CURRENT-ASSETS> 189374
<PP&E> 109205
<DEPRECIATION> 49966
<TOTAL-ASSETS> 506279
<CURRENT-LIABILITIES> 126126
<BONDS> 231009
0
0
<COMMON> 39413
<OTHER-SE> 102626
<TOTAL-LIABILITY-AND-EQUITY> 506279
<SALES> 382648
<TOTAL-REVENUES> 382648
<CGS> 192961
<TOTAL-COSTS> 328585
<OTHER-EXPENSES> 135624
<LOSS-PROVISION> 1383
<INTEREST-EXPENSE> 13271
<INCOME-PRETAX> 54063
<INCOME-TAX> 17780
<INCOME-CONTINUING> 36283
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36283
<EPS-BASIC> 1.44
<EPS-DILUTED> 1.43
</TABLE>
<PAGE> 1
Exhibit 99.1
PROXY MACDERMID, INCORPORATED PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE HELD SEPTEMBER 30, 1999
The undersigned, having received the Notice of Special Meeting and
accompanying Joint Proxy Statement-Prospectus, hereby appoint(s) John L.
Cordani and Daniel H. Leever, and each of them, Proxies of the undersigned
(with full power of substitution) to attend the above Special Meeting of
Shareholders and all adjournments thereof (the "Meeting"), and there to vote
all shares of common stock, no par value, of MacDermid, Incorporated that the
undersigned would be entitled to vote, if personally present, in regard to all
matters which may come before the Meeting.
The undersigned hereby confer(s) upon the Proxies, and each of them,
discretionary authority to consider and act upon such business, matters or
proposals other than the proposal set forth below as may properly come before
the Meeting. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
SPECIFIED HEREIN, IF NO SPECIFICATION IS MADE THE PROXIES INTEND TO VOTE FOR
ITEM 1.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed and dated on reverse side)
- -------------------------------------------------------------------------------
<PAGE> 2
MACDERMID, INCORPORATED
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
THE BOARD OF DIRECTORS OF MACDERMID, INCORPORATED RECOMMENDS A VOTE FOR ITEM 1.
1. Proposal to approve and adopt the Plan and Agreement of Merger dated as of
February 18, 1998, as amended as of July 27, 1999, by and among MacDermid,
Incorporated, a Connecticut corporation, MCD Acquisition Corp., a Delaware
corporation, PTI, Inc., a Delaware corporation, and Citicorp Venture
Capital, Ltd., a New York corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Dated: ______________________, 1999
Signature(s) ___________________________________________
___________________________________________
In signing, please write name(s) exactly as
appearing in the imprint on this card. For
shares held jointly, each joint owner
should sign. If signing as executor, or in
any other representative capacity, or as an
officer of a corporation, please indicate
your full vote as such.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 1
Exhibit 99.2
PROXY PTI, INC PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO THE HELD SEPTEMBER 30, 1999
The undersigned, having received the Notice of Special Meeting and
accompanying Joint Proxy Statement-Prospectus, hereby appoint(s) David R.
Beckerman and Thomas C. Weaver, and each of them, Proxies of the undersigned
(with full power of substitution) to attend the above Special Meeting of
Shareholders and all adjournments thereof (the "Meeting"), and there to vote
all shares of common stock, no par value, of PTI, Inc that the undersigned
would be entitled to vote, if personally present, in regard to all matters
which may come before the Meeting.
The undersigned hereby confer(s) upon the Proxies, and each of them,
discretionary authority to consider and act upon such business, matters or
proposals other than the proposal set forth below as may properly come before
the Meeting. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
SPECIFIED HEREIN. IF NO SPECIFICATION IS MADE THE PROXIES INTEND TO VOTE FOR
ITEM 1.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed and dated on reverse side.)
- -------------------------------------------------------------------------------
<PAGE> 2
PTI, INC
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
[ ]
The Board of Directors of PTI, Inc recommends a vote FOR Item 1.
1. Proposal to approve and adopt the Plan and Agreement of Merger, dated as
of February 18, 1999, as amended as of July 27, 1999, by and among
MacDermid, Incorporated a Connecticut corporation, MCD Acquisition
Corp., a Delaware corporation, PTI, Inc, a Delaware corporation, and
Citicorp Venture Capital, Ltd, a New York corporation.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Dated: ______________________, 1999
Signature____________________________________________
_____________________________________________________
In signing, please write name(s) exactly as appearing
in the imprint on this card. For shares held jointly,
each joint owner should sign, if signing as executor,
or in any other representative capacity, or as an
officer of a corporation, please indicate your full
title as such.
- --------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 1
EXHIBIT 99.3
CONSENT OF JOSEPH M. SILVESTRI
------------------------------
I hereby consent to my inclusion as a prospective director of MacDermid,
Incorporated and to the use in this Joint Proxy Statement -- Prospectus of
MacDermid, Incorporated of my name and information which appears relating to me
under the headings "Summary -- Executive Officers and Directors of MacDermid
After the Merger" and Executive Officers and Directors of MacDermid After the
Merger."
/s/ Joseph M. Silvestri
- ------------------------------
Joseph M. Silvestri
August 26, 1999
