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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
CIMCO, INC.
(NAME OF SUBJECT COMPANY)
CIMCO, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
171842107
(CUSIP NUMBER OF CLASS OF SECURITIES)
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RUSSELL T. GILBERT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
265 BRIGGS AVENUE
COSTA MESA, CALIFORNIA 92626
(714) 546-4460
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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COPIES TO:
NICK E. YOCCA, ESQ.
BEN A. FRYDMAN, ESQ.
NICHOLAS J. YOCCA, ESQ.
STRADLING, YOCCA, CARLSON & RAUTH
660 NEWPORT CENTER DRIVE, SUITE 1600
NEWPORT BEACH, CALIFORNIA 92660
(714) 725-4000
JAMES W. HAMILTON, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER
695 TOWN CENTER DRIVE
COSTA MESA, CALIFORNIA 92626
(714) 668-6230
LYLE G. GANSKE, ESQ.
BENJAMIN G. LOMBARD, ESQ.
PATRICK J. LEDDY, ESQ.
JONES, DAY, REAVIS & POGUE
901 LAKESIDE AVENUE
CLEVELAND, OHIO 44114
(216) 586-3939
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is CIMCO, Inc., a Delaware corporation (the
"Company"). The address of the principal executive offices of the Company is 265
Briggs Avenue, Costa Mesa, California 92626. The title of the class of equity
securities to which this statement relates is the Company's Common Stock, par
value $.01 per share (the "Common Stock"), including the associated stock
purchase rights (the "Rights") issued pursuant to the Rights Agreement dated as
of December 5, 1992, as amended (the "Company Rights Agreement") between the
Company and First Interstate Bank of California, as Rights Agent (collectively,
the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to a tender offer (the "Offer") made by Hanwest,
Inc. ("Purchaser"), a Delaware corporation and a wholly-owned subsidiary of M.A.
Hanna Company, a Delaware corporation ("Parent"), disclosed in a Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1") dated December 27, 1995, to
purchase all outstanding Shares at a price of $10.50 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated December 27, 1995 (the "Offer to Purchase") and the
related Letter of Transmittal (which together constitute the "Offer Documents").
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of December 19, 1995 (the "Merger Agreement"), among Parent, Purchaser and
the Company, which provides, among other things, for the making of the Offer by
Purchaser, upon the terms and subject to the conditions of the Merger Agreement,
and for the subsequent merger (the "Merger") of Purchaser with and into the
Company, which will continue as the surviving corporation following the Merger.
The Parent represents that it has sufficient funds to consummate all of the
transactions contemplated by the Merger Agreement and will make available to the
Purchaser sufficient funds in sufficient time to consummate the Offer and the
Merger. A copy of the Merger Agreement is filed as Exhibit (c)(1) hereto and is
incorporated herein by reference.
The Schedule 14D-1 states that the principal executive offices of the
Parent and the Purchaser are located at M.A. Hanna Company, Suite 36-5000, 200
Public Square, Cleveland, Ohio 44114-2304.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this statement, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements and understandings and
potential conflicts of interest between the Company and its directors, executive
officers and affiliates and between the Company and Parent and Purchaser, and
their directors, executive officers and their affiliates, are set forth below:
MERGER AGREEMENT. The following is a summary of certain provisions of the
Merger Agreement, a copy of which is attached hereto as Exhibit (c)(1) and is
incorporated herein by reference. Such summary is qualified in its entirety by
reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the making of the Offer by the
Purchaser. The obligation of Purchaser to accept for payment and pay for Shares
tendered pursuant to the Offer is subject to the satisfaction of the Minimum
Condition and certain other conditions that are described in Section 15 of the
Merger Agreement. The Purchaser has agreed that, without the written consent of
the Company, no change in the Offer may be made that: (i) changes the form of
consideration to be paid or decreases the price per Share or the maximum number
of Shares sought in the Offer; (ii) imposes conditions to the Offer in addition
to the Minimum Condition and those other conditions described in Section 15 of
the Merger Agreement which broaden the scope of such conditions; (iii) increases
the minimum number of Shares that must be tendered as a condition to the
acceptance for payment and payment for the Shares; (iv) waives the Minimum
Condition if such waiver would result in less than a majority of the Shares
being accepted for payment or paid for pursuant to the Offer; (v) except as
provided in the Merger Agreement, extends the period of the Offer beyond 45 days
after the commencement of the Offer; or (vi) otherwise amends the terms of the
Offer (including any of the
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conditions set forth in Section 15 of the Merger Agreement) in a manner that is
materially adverse to the holders of Shares.
The Merger. The Merger Agreement provides that, following the purchase of
Shares pursuant to the Offer, the approval of the Merger Agreement by the
stockholders of the Company (if required) and the satisfaction or waiver of the
other conditions to the Merger, the Purchaser will be merged with and into the
Company, which will continue as the surviving corporation (sometimes called,
"Surviving Corporation"). The Merger shall become effective at such time as a
certificate of merger is filed with the Secretary of State of the State of
Delaware, or at such later time as is specified in such certificate of merger
(the "Effective Time"). As a result of the Merger, all of the properties,
rights, privileges and franchises of the Company and the Purchaser shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and the Purchaser shall become the debts, liabilities and duties of the
Surviving Corporation.
At the Effective Time, by virtue of the Merger (i) each issued and
outstanding Share held in the treasury of the Company, or by the Parent or any
wholly-owned subsidiary of the Parent shall be cancelled, and no payment shall
be made with respect thereto; (ii) each share of common stock of the Purchaser
then outstanding shall be converted into and become one share of Common Stock of
the Surviving Corporation; and (iii) each Share outstanding immediately prior to
the Effective Time shall, except as otherwise provided in (i) above and except
for Shares held by stockholders exercising appraisal rights pursuant to Section
262 of the Delaware General Corporation Law ("DGCL"), be converted into the
right to receive $10.50 in cash or any higher price per Share that may be paid
pursuant to the Offer, without interest.
The Merger Agreement provides that the Certificate of Incorporation and
Bylaws of the Company at the Effective Time will be the Certificate of
Incorporation and Bylaws of the Surviving Corporation. The Merger Agreement also
provides that the directors of the Purchaser at the Effective Time will be the
directors of the Surviving Corporation and the officers of the Company at the
Effective Time will be the officers of the Surviving Corporation.
Recommendation. The Merger Agreement states that the Board of Directors has
(i) determined that the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, are fair to, and in the best
interests of, the stockholders of the Company, (ii) approved and adopted the
Merger Agreement and the transactions contemplated thereby, including the Offer,
the Merger and the Stockholder Tender Agreement (described below) and the
transactions contemplated thereby and (iii) resolved to recommend acceptance of
the Offer, the tender of the Shares thereunder and approval and adoption of the
Merger Agreement and the Merger by the Company's stockholders. This
recommendation of the Board of Directors may be withdrawn, modified or amended
if the Board, by a majority vote, determines in its good faith judgment, based
as to legal matters on the advice of legal counsel, that such withdrawal,
amendment or modification is required by the Board in the proper discharge of
its fiduciary duties. Any such withdrawal, modification or amendment may give
rise to certain termination rights on the part of the Parent and the Purchaser,
as described below.
Interim Agreements of the Parent, Purchaser and the Company. Pursuant to
the Merger Agreement, the Company has covenanted and agreed that, during the
period from the date of the Merger Agreement to the Effective Time, the Company
will conduct its business and operations only in the ordinary and usual course
consistent with past practice. Pursuant to the Merger Agreement, without
limiting the generality of the foregoing, and except as otherwise expressly
provided in the Merger Agreement, prior to the Effective Time, neither the
Company nor any of its subsidiaries will, without the prior written consent of
the Parent (which consent will not be unreasonably withheld with respect to the
incurrence of indebtedness by the Company evidenced by certain promissory notes
but excluding all of the Company's other indebtedness pursuant to clause (ii)(a)
below): (i) amend its charter or Bylaws; (ii)(a) create, incur or assume any
indebtedness for money borrowed, including obligations in respect of capital
leases, except (A) purchase money mortgages granted in connection with past
practice, or (B) indebtedness for borrowed money incurred in the ordinary course
of business not aggregating in excess of $7.0 million outstanding at any time
under its revolving credit facility provided by the Company's existing Credit
Agreement with Wells Fargo Bank, National Association (the "Bank"), as the same
may be amended from time to time ("Credit Agreement"), reduced by the net
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proceeds of any sale of assets by the Company or any subsidiary out of the
ordinary course of business, provided that the proceeds of any borrowing are not
distributed to the stockholders of the Company; or (b) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person; provided,
however that the Company may endorse negotiable instruments in the ordinary
course of business consistent with past practice; (iii) declare, set aside or
pay any dividend or other distribution (whether in cash, stock or property or
any combination thereof) in respect of the Shares; (iv) issue, sell, grant,
purchase or redeem, or issue or sell any securities convertible into, or options
with respect to, or warrants to purchase or rights to subscribe to, or subdivide
or in any way reclassify, any Shares, except in any case above pursuant to
outstanding stock purchase rights; (v)(a) increase the aggregate amount of
compensation payable or to become payable by the Company to its directors,
officers or employees whether by salary or bonus, by more than two percent in
the aggregate on an annual basis (excluding commission-only compensation, the
rate of which shall not be increased); or (b) increase the rate or term of, or
otherwise alter, any bonus (other than any bonus permitted by clause (v)(a)
above), insurance, pension, severance or other employee benefit plan, payment or
arrangement made to, for or with any such directors, officers or employees; (vi)
enter into any agreement, commitment or transaction (other than certain
borrowings described above), except agreements, commitments or transactions in
the ordinary course of business consistent with past practice; (vii) sell,
transfer, mortgage, pledge, grant any security interest or permit the imposition
of any lien or other encumbrance on any asset other than in the ordinary course
of business consistent with past practice and except (a) pursuant to the Credit
Agreement, (b) in connection with any permitted purchase money mortgages or (c)
for any lien or other encumbrance as to which the Company has a valid defense;
(viii) waive any right under certain contracts and other agreements if such
waiver would have a Material Adverse Effect (defined below); (ix) other than as
required by any change in generally accepted accounting principles, make any
material change in its accounting methods or practices or make any material
change in depreciation or amortization policies or rates adopted by it for
accounting purposes or, other than normal writedowns or writeoffs consistent
with past practices, make any writedowns of inventory or writeoffs of notes or
accounts receivable; (x) make any loan or advance to any of its stockholders,
officers, directors, employees (other than advances to field sales personnel,
vacation advances, relocation advances and travel advances in each case made in
the ordinary course of business in a manner consistent with past practice), or
make any other loan or advance to any other person or group otherwise than in
the ordinary course of business consistent with past practice; (xi) terminate or
fail to renew, where such renewal is at the Company's or subsidiary's option,
any contract or other agreement (excluding customer leases), the termination or
failure of which to renew would have a Material Adverse Effect; (xii) enter into
any collective bargaining agreement; (xiii) make any addition to or modification
of the Company's employee benefits plans; (xiv) take any action, agree to take
any action or do or, with respect to anything within the Company's or
subsidiary's control, knowingly permit to be done or to be taken, anything in
the conduct of its business which (a) would cause any of the representations of
the Company to be or become untrue in any material respect, and (b) would
reasonably be expected to have a Material Adverse Effect; provided, however,
that nothing in the Merger Agreement shall affect the generality of any of the
conditions set forth in Section 15 of the Merger Agreement; or (xv) agree to do
any of the foregoing.
When used in the Merger Agreement, the term "Material Adverse Effect" means
a material adverse effect on the business, assets, prospects, financial
condition or results of operations of the Company and its subsidiaries
considered on a consolidated basis or on the ability of the Company, the Parent
or the Purchaser to consummate the transactions contemplated by the Merger
Agreement.
Other Agreements of the Parent, the Purchaser and the Company. In the
Merger Agreement, the Company, its affiliates and their respective officers,
directors, employees, representatives and agents have agreed that they shall
immediately cease any existing discussions or negotiations with any parties
conducted theretofore with respect to any acquisition of all or any material
portion of the assets of, or any equity interest in, the Company or any business
combination with the Company, subject to certain exceptions. The Company may,
directly or indirectly, furnish information and access, in each case only in
response to unsolicited requests therefor, to any corporation, partnership,
person or other entity or group pursuant to confidentiality agreements that do
not prohibit or restrict disclosure of any matter to the Parent other than
confidential information regarding such person, and may participate in
discussions and negotiate with such entity or group concerning
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any proposed merger, sale of assets, sale of shares of capital stock,
acquisition of Shares other than pursuant to the Offer or the Merger or similar
transaction involving the Company or any division of the Company (an
"Acquisition Proposal"), only if such entity or group has submitted a written
proposal to the Board relating to any such transaction and the Board by a
majority vote determines in its good faith judgment, based as to legal matters
on the advice of legal counsel, that failing to take such action would
constitute a breach of the Board's fiduciary obligations under applicable law.
The Board shall promptly advise the Parent orally or in writing of any
Acquisition Proposal and any inquiries or developments with respect thereto.
Except as set forth above, neither the Company or any of its affiliates, nor any
of its or their respective officers, directors, employees, representatives or
agents shall, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than the Parent
and the Purchaser, any affiliate or associate of the Parent and the Purchaser or
any designees of the Parent and Purchaser) concerning any Acquisition Proposal
or take any other action to facilitate the making of a proposal that constitutes
or could reasonably be expected to lead to an Acquisition Proposal, provided,
however, that nothing in the Merger Agreement shall prevent the Board from
approving or recommending to the Company's stockholders any unsolicited tender
offer or exchange offer by a third party as contemplated by Rules 14d-9 and
14e-2 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in the event any unsolicited takeover proposal shall have been
made by a third party, if, in the good faith judgment of the Board, based as to
legal matters on the advice of legal counsel, that withdrawing or modifying such
approval or recommendation is required under applicable law in the proper
discharge of its fiduciary duties. Notwithstanding the foregoing, nothing shall
prevent the Company from negotiating and executing agreements relating to the
sale by the Company of its real estate located in Corona, California.
Pursuant to the Merger Agreement, between the date of the Merger Agreement
and the Effective Time, the Company will give the Parent and the Purchaser and
their authorized representatives reasonable access to all personnel, books,
records, plants, offices, and other facilities and properties of the Company and
its subsidiaries, will permit the Parent and the Purchaser to make such
inspections as the Parent and the Purchaser may reasonably request and will
cause the Company's officers to furnish Purchaser with such financial and
operating data and other information with respect to the business and properties
of the Company and its subsidiaries as Purchaser may from time to time
reasonably request.
The Merger Agreement provides that promptly upon acceptance for payment of,
and commencement of payment for, such number of Shares which represents at least
a majority of the Shares (determined on a fully diluted basis) by the Purchaser,
the Purchaser shall be entitled to designate the number of directors, rounded up
to the next whole number, on the Company's Board of Directors that equals the
product of (i) the total number of directors on the Board of Directors (giving
effect to the election of any additional directors pursuant to this paragraph)
and (ii) the percentage that the number of Shares owned by the Purchaser
(including Shares accepted for payment) bears to the total number of Shares, and
the Company shall cause the Purchaser's designees to be elected or appointed to
the Board of Directors, including, without limitation, increasing the number of
directors, and seeking and accepting resignations of its incumbent directors.
Notwithstanding the foregoing, the Company has agreed to use its best efforts to
ensure that two of the current members of the Board who are not officers,
employees or affiliates of the Company or the Parent remain members of the Board
until the Purchaser owns a majority of the Shares and thereafter until the
Effective Time.
Pursuant to the Merger Agreement, the Company shall, at the Parent's
request, cause a meeting of its stockholders (the "Company Stockholder Meeting")
to be duly called and held as soon as practicable (provided the Purchaser shall
have accepted for payment and paid for Shares pursuant to the Offer) for the
purposes of voting on the approval and adoption of the Merger Agreement, the
Merger and the transactions contemplated thereby.
The Merger Agreement provides that the Company will promptly prepare and
file with the Securities and Exchange Commission (the "Commission") under the
Exchange Act a proxy statement relating to the Company Stockholder Meeting (the
"Proxy Statement") and cause the Proxy Statement to be mailed to its
stockholders at the earliest practicable time and obtain the necessary approvals
by its stockholders of the
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Merger Agreement. The Parent has agreed to vote and to cause its affiliates
(including, without limitation, the Purchaser) to vote all Shares owned by them
in favor of adoption of the Merger Agreement. Notwithstanding the foregoing, in
the event that Purchaser acquires at least 90% of the Shares and the Purchaser
so requests, the Parent, the Purchaser and the Company will take all actions
necessary and appropriate to cause the Merger to become effective without a
meeting of the stockholders of the Company in accordance with Section 253 of the
DGCL.
The Parent has agreed that all rights to indemnification now existing in
favor of the directors and officers of the Company as provided in the Company's
Bylaws as of the date of the Merger Agreement shall survive the Merger and shall
continue in full force and effect for a period of at least five years. The
Parent shall not permit the indemnification agreements between the Company and
each of the directors and officers that are in existence as of the date of the
Merger Agreement to be amended during the term of such indemnification
agreements without the consent of the respective parties. For a period of at
least five years after the Effective Time, the Purchaser has agreed to indemnify
and hold harmless, to the maximum extent permitted by the DGCL, each of the
present or former directors and officers of the Company and advance expenses in
connection with such indemnification. In addition, the Parent has agreed that
for two years after the Effective Time, the Parent will cause the Surviving
Corporation to use its reasonable efforts to maintain, if available for an
annual premium not in excess of $150,000, officers' and directors' liability
insurance with respect to acts or omissions occurring prior to the Effective
Time covering each such person currently covered by the Company's officers' and
directors' liability insurance policy on terms no less favorable than those of
such policy in effect on the date of the Merger Agreement or at the Effective
Time, or, if such insurance coverage is not available for an annual premium not
in excess of $150,000, to obtain the amount of coverage that is available for an
annual premium of $150,000.
The Merger Agreement provides that the Company, the Purchaser and the
Parent will each use their best efforts to consummate the transactions
contemplated by the Merger Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations by the Company as to undisclosed
liabilities, certain changes or events concerning its businesses, compliance
with applicable law, employee benefit plans, litigation and environmental
liabilities. In addition, the Company represented to the Parent and the
Purchaser that the Board, at a meeting duly called and held, has (i) determined
that the Merger Agreement and the transactions contemplated thereby, including
the Offer and the Merger, are fair to, and in the best interests of, the
stockholders of the Company, and (ii) approved and adopted the Merger Agreement
and the transactions contemplated thereby, including the Offer, the Merger, and
the Stockholder Tender Agreement and the transactions contemplated thereby in
all respects and that such approval constitutes approval of the Offer, the
Merger Agreement, the Merger and the Stockholder Tender Agreement and the
transactions contemplated thereby for purposes of Article EIGHTH of the
Certificate of Incorporation of the Company and Section 203 of the DGCL and
similar statutes of other states that might be deemed applicable.
Conditions to the Offer. Annex A to the Merger Agreement provides that the
Purchaser shall not be required to complete the transaction or may terminate or
amend the Offer or postpone the acceptance for payment for the Shares if, prior
to the time of acceptance for payment of the Shares tendered pursuant to the
Offer:
(a) at least a majority of the Shares shall not have been validly
tendered in the Offer and, if tendered, not withdrawn immediately prior to the
expiration of the Offer;
(b) any waiting period applicable to the Offer pursuant to the Hart
Scott Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
shall not have expired or been terminated;
(c) at any time before the time of acceptance for payment for any of the
Shares any of the following shall occur or exist:
(i) there shall have been instituted or be pending any action,
proceeding, application, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, before any
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court or governmental regulatory or administrative agency, authority or
tribunal, domestic or foreign, (A) challenging the acquisition by the
Parent or the Purchaser of the Shares, seeking to restrain or prohibit the
making or consummation of the Offer or the Merger or seeking to obtain from
the Parent or the Purchaser any damages that would result in a Material
Adverse Effect if such were assessed against the Company, (B) seeking to
prohibit or materially limit the ownership or operation by the Parent or
the Surviving Corporation of all or any material portion of the business or
assets of the Company or compel the Parent or the Surviving Corporation to
dispose of or to hold separate all or any material portion of the business
or assets of the Company, or to impose any material limitation on the
ability of the Company or the Surviving Corporation to conduct such
business or own such assets, or (C) seeking to impose material limitations
on the ability of the Parent (or any other affiliate of the Parent) to
acquire or hold or to exercise full rights of ownership of the Shares,
including, but not limited to, the right to vote the Shares purchased by
them on all matters properly presented to the stockholders of the Company;
or
(ii) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, promulgated, entered, enforced or deemed
applicable to the Offer, the Merger or the Merger Agreement, or any other
action shall have been taken by any government, governmental authority or
court, domestic or foreign, other than the routine application to the Offer
or the Merger of waiting periods under the HSR Act, that has, or has a
substantial likelihood of resulting in, any of the consequences referred to
in clauses (A) through (C) of subparagraph (c)(i) above; or
(iii) the Company shall have breached or failed to perform in
any material respect any of its obligations, covenants or agreements
contained in the Merger Agreement, or any of the representations and
warranties of the Company set forth in the Merger Agreement shall not have
been true and correct in any material respect when made or, except for any
representations and warranties made as of a specific date, shall have
ceased to be true and correct in any material respect as if made on and as
of the Expiration Date (or, in the case of representations and warranties
that are specifically qualified as to materiality, shall not have been true
and correct when made or shall have ceased to be true and correct on and as
of the Expiration Date); or
(iv) there shall have occurred (A) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange, Inc., (B) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States (whether or
not mandatory), (C) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States and having a Material Adverse Effect or materially adversely
affecting (or materially delaying) the consummation of the Offer, (D) any
limitation by any U.S. governmental authority on, or any other event that,
in the judgment of the Parent, is substantially likely to materially
adversely affect, the extension of credit by banks or other financial
institutions, or (E) from the date of the Merger Agreement through the date
of termination or expiration of the Offer, a decline of at least 25% in the
Standard & Poor's 500 Index;
(v) the Merger Agreement shall have been terminated in
accordance with its terms;
(vi) prior to the purchase of Shares pursuant to the Offer, the
Company's Board of Directors shall have withdrawn or modified (including by
amendment of this Schedule 14D-9) in a manner adverse to the Parent its
approval or recommendation of the Offer, the Merger Agreement or the Merger
or shall have recommended another offer for the purchase of the Shares,
which, in the sole judgment of the Parent in any such case, and regardless
of the circumstances giving rise to such condition, makes it inadvisable to
proceed with such acceptance for payment except where as a result of the
Company's receipt of an unsolicited Acquisition Proposal from a third party
(A) the Company issues to its stockholders a communication that contains
only the statement permitted by Rule 14d-9(e) under the Exchange Act (and
does not otherwise withdraw, modify or amend its approval or recommendation
of the transactions contemplated by the Merger Agreement) and (B) within
five business days of issuing such communication the Company publicly
reconfirms its approval and recommendation of the transactions contemplated
by the Offer and the Merger Agreement;
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(vii) There shall have occurred since July 31, 1995 a change,
occurrence or circumstance in the Company's business having a Material
Adverse Effect thereon; or
(viii) There shall have been a failure to obtain any of the
waivers or consents of Wells Fargo Bank pursuant to a letter agreement
dated December 19, 1995 from Wells Fargo Bank to the Company, CTI and
Medical Molding Corporation of America (which is also a wholly-owned
subsidiary of the Company.
The foregoing conditions are for the sole benefit of the Parent and
Purchaser and may be asserted by them regardless of the circumstances giving
rise to such conditions or may be waived by Parent and Purchaser in whole or in
part in the sole discretion of Parent or Purchaser.
Conditions to the Merger. The obligations of each of the Parent, the
Purchaser and the Company to effect the Merger are subject to the satisfaction
of certain conditions, including (i) the Purchaser shall have accepted for
payment Shares tendered pursuant to the Offer; (ii) the Merger Agreement shall
have been adopted by the requisite vote, if any is required, of the stockholders
of the Company in accordance with applicable law; (iii) no order, statute, rule,
regulation, executive order, stay, decree, judgment or injunction shall have
been enacted, entered, issued, promulgated or enforced by any court or
governmental authority that prohibits or restricts the consummation of the
Merger; and (iv) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired. The obligation of the Purchaser and the Parent
to effect the Merger is further subject to satisfaction of the conditions,
unless waived by the Parent, that (i) the Company shall have performed and
complied in all material respects with (a) the agreements and obligations
contained in Section 1.03 of the Merger Agreement and (b) the agreements and
obligations contained in the Merger Agreement (other than in Section 1.03)
required to be performed and complied with by it at or prior to the Effective
Time, except where the failure to have performed and complied is not reasonably
expected to have a Material Adverse Effect, (ii) all outstanding stock options
of the Company shall have been surrendered to the Company as provided in the
Merger Agreement and cancelled by the Company, and (iii) the Parent shall have
received a comfort letter, in form and substance reasonably requested by the
Parent, from Grant Thornton or another nationally recognized public accounting
firm regarding the updating of the Company's most recent financial statements.
The obligation of the Company to effect the Merger is further subject to the
Parent and the Purchaser having performed and complied in all material respects
with the agreements and obligations contained in the Merger Agreement required
to be performed and complied with by each of them at or prior to the Effective
Time, except where the failure to have so performed or complied is not
reasonably expected to have a material adverse effect on the ability of the
Parent or the Purchaser to consummate the transactions contemplated by the
Merger Agreement.
Termination. The Merger Agreement may be terminated and the Offer (prior to
acceptance of Shares in the Offer) and the Merger may be abandoned at any time
prior to the Effective Time: (i) by mutual written consent of the Parent, the
Purchaser and the Company; (ii) by the Parent and the Purchaser or the Company
if any court of competent jurisdiction in the United States or other United
States governmental body shall have issued an order, decree or ruling or taken
any other final action restraining, enjoining or otherwise prohibiting the
Merger or the acceptance for payment of and payment for the Shares and such
order, decree, ruling or other action shall have become nonappealable; (iii) by
the Parent and the Purchaser if, due to an occurrence or circumstance which
would result in a failure to satisfy any of the conditions set forth in Section
15 of the Merger Agreement, the Purchaser shall have (a) failed to commence the
Offer within five business days following the initial public announcement of the
Offer, (b) terminated the Offer or allowed the Offer to expire without the
purchase of any Shares thereunder, or (c) failed to pay for Shares pursuant to
the Offer within 75 days following the commencement of the Offer; (iv) by the
Company if (a) there shall not have been a material breach of any
representation, warranty, covenant or agreement on the part of the Company which
would entitle the Parent or the Purchaser to terminate the Merger Agreement
pursuant to clause (v) of this paragraph and, due to an occurrence or
circumstance which would result in a failure to satisfy any of the conditions
set forth in Section 15 the Purchaser shall have (A) failed to commence the
Offer within five business days following the initial public announcement of the
Offer, (B) terminated the Offer or allowed the Offer to expire without the
purchase of any Shares thereunder, or (C) failed to pay for Shares pursuant to
the Offer within 75 days following the commencement of the Offer, or (b) prior
to the purchase of
8
<PAGE> 9
Shares pursuant to the Offer, a corporation, partnership, person or other entity
or group shall have made a bona fide offer that the Board by a majority vote,
determines in its good faith judgment and in the discharge of its fiduciary
duties, based as to legal matters on the advice of legal counsel and as to
financial matters on the written opinion of an investment banking firm of
national reputation, is more favorable to the Company's stockholders than the
Offer and the Merger and that the failure to terminate the Merger Agreement and
accept such offer would be inconsistent with the proper exercise of the Board's
fiduciary duties, provided that such termination under this clause (b) shall not
be effective until payment of the Termination Fee (as defined below); (v) by the
Parent and the Purchaser prior to the purchase of Shares pursuant to the Offer
if (a) there shall have been a breach of any representation or warranty on the
part of the Company having a Material Adverse Effect, (b) there shall have been
a breach of any covenant or agreement on the part of the Company resulting in a
Material Adverse Effect, (c) the Company shall engage in negotiations with any
entity or group (other than the Parent or the Purchaser) that has proposed a
Third Party Acquisition (as defined below), (d) the Board shall have withdrawn
or modified (including by amendment of this Schedule 14D-9) in a manner adverse
to the Purchaser its approval or recommendation of the Offer, the Merger
Agreement or the Merger or shall have recommended another offer, or shall have
adopted any resolution to effect any of the foregoing, or (e) a majority of
Shares on a fully diluted basis shall not have been tendered in the Offer by the
expiration date of the Offer and on or prior to such date an entity or group
(other than the Parent or the Purchaser) shall have made and not withdrawn a
proposal with respect to a Third Party Acquisition; or (vi) by the Company if
(a) there shall have been a breach of any representation or warranty on the part
of the Parent or the Purchaser which materially adversely affects (or materially
delays) the consummation of the Offer, or (b) there shall have been a material
breach of any covenant or agreement on the part of the Parent or the Purchaser
and which materially adversely affects (or materially delays) the consummation
of the Offer.
Termination Fee and Expenses. In the event the Parent and the Purchaser
terminate the Merger Agreement pursuant to clause (iii) of the preceding
paragraph (other than any termination based upon the failure to satisfy clause
(iii)(d) of Section 15 of the Merger Agreement) or clause (v)(a) of the
preceding paragraph, or the Company terminates the Merger Agreement pursuant to
clause (iv)(a) of the preceding paragraph, the Company shall reimburse the
Parent, the Purchaser and their affiliates (not later than one business day
after submission of statements therefor) for all actual documented out-of-pocket
fees and expenses, not to exceed $750,000, actually and reasonably incurred by
any of them or on their behalf in connection with the Offer and the Merger and
the consummation of all transactions contemplated by the Merger Agreement
(including, without limitation, attorneys' fees, fees payable to financing
sources, investment bankers, counsel to any of the foregoing, and accountants
and filing fees and printing costs). In the event the Company terminates the
Merger Agreement pursuant to clause (iv)(b) of the preceding paragraph or in the
event the Parent and the Purchaser terminate the Merger Agreement pursuant to
clause (v)(b), (c), (d) or (e) of the preceding paragraph, the Company shall pay
to the Purchaser the amount of $1,400,000 as liquidated damages immediately upon
such termination as well as all amounts to which the Parent and the Purchaser
would be entitled pursuant to the immediately preceding sentence; provided,
however, that if the Parent and the Purchaser terminate the Merger Agreement
pursuant to clause (v)(c) of the preceding paragraph, the Company shall pay to
the Purchaser the amount of $700,000 as liquidated damages immediately upon such
a termination (as well as all amounts to which the Parent and the Purchaser
would be entitled to pursuant to the first sentence of this paragraph), and if
within 12 months thereafter the Company enters into an agreement with respect to
a Third Party Acquisition, or a Third Party Acquisition occurs, the Company
shall pay to the Purchaser the amount of $700,000 within one business day
following the execution of such an agreement or such occurrence, as the case may
be; provided, however, that the Parent and the Purchaser will be entitled to
recover only one $1,400,000 payment or two $700,000 payments of liquidated
damages, even if the Merger Agreement is terminated under more than one
provisions in clause (iv)(b) or clause (v) described above.
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger or otherwise by any person
(which includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) or entity other than the Parent, the Purchaser or any affiliate
thereof (a "Third Party"); (ii) the acquisition by a Third Party of more than
30% of the total assets of the Company; (iii) the acquisition by a Third Party
of 30% or more of the Shares; (iv) the adoption by the Company of a
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<PAGE> 10
plan of liquidation or the declaration or payment of an extraordinary dividend;
or (v) the repurchase by the Company of more than 20% of the Shares.
Pursuant to the Merger Agreement, in the event of the termination of the
Merger Agreement and abandonment of the Offer and the Merger, the Merger
Agreement will become void and have no effect, without any liability on the part
of any party or its affiliates, directors, officers or stockholders, provided
that a party will not be relieved from liability for any damages arising out of
any willful or intentional breach of the Merger Agreement or from their
obligations with respect to brokers and finders, the Termination Fee, expenses
of the parties and confidentiality of information.
Costs and Expenses. Except as discussed above, the Merger Agreement
provides that all costs and expenses incurred in connection with the
transactions contemplated by the Merger Agreement shall be paid by the party
incurring such costs and expenses.
Amendments and Modifications. Subject to applicable law, at any time prior
to the Effective Time, the Merger Agreement may be amended, modified or
supplemented by a written agreement of the Parent (for itself and the Purchaser)
and the Company executed by duly authorized officers of the respective parties
except that after the earlier of (i) the purchase by the Purchaser of a majority
of the Shares on a fully diluted basis, and (ii) the Company Stockholder Meeting
to approve the Merger, the price per Share to be paid pursuant to the Merger
Agreement to the holders of Shares may not be decreased and the form of
consideration to be received by the holders of such Shares in the Merger may not
be altered without approval of such holders.
THE STOCKHOLDER TENDER AGREEMENT. Concurrently with the execution of the
Merger Agreement, the Purchaser entered into a Stockholder Tender Agreement with
Russell T. Gilbert, the Company's President and Chief Executive Officer (the
"Seller Stockholder"). A copy of the Stockholder Tender Agreement is attached as
Exhibit (c)(2) and is incorporated herein by reference. The Seller Stockholder
owns 539,734 Shares (representing approximately 16.6% of the Shares outstanding
on December 18, 1995, calculated on a fully-diluted basis) and is the holder of
options issued under the Company's 1991 Incentive Stock Option Plan and the
Company's 1988 Incentive Stock Option Plan (the "Options") entitling him to
purchase an aggregate of 76,250 additional Shares. Pursuant to the Stockholder
Tender Agreement, the Seller Stockholder has agreed to tender and sell (and not
withdraw) all outstanding Shares owned (beneficially or of record) by him to the
Purchaser pursuant to and in accordance with the terms of the Offer. Except with
respect to the Seller Stockholder Fee (as described below) and the
representations and warranties of the Seller Stockholder contained in the
Stockholder Tender Agreement, the Stockholder Tender Agreement remains in effect
until the earliest to occur of (i) the Shares held by the Seller Stockholders
are purchased in accordance with the terms of the Offer, (ii) the termination of
the Merger Agreement and (iii) March 31, 1996.
During the term of the Stockholder Tender Agreement, the Seller Stockholder
will not, except pursuant to the terms of the Offer, (i) offer to sell, sell,
pledge or otherwise dispose of or transfer any interest in or encumber with any
lien any of his Shares, (ii) acquire any shares of Common Stock or other
securities (except for additional shares of Common Stock or securities issued as
a result of a stock dividend, stock split, recapitalization or similar event and
any such additional shares of Common Stock or securities will constitute
Shares), including, without limitation, by exercising any of the Options, (iii)
deposit his Shares into a voting trust, enter into a voting agreement or
arrangement with respect to the Shares or grant any proxy or power of attorney
with respect to the Shares or (iv) enter into any contract, option or other
arrangement or undertaking with respect to the acquisition or sale, assignment
or other disposition of or transfer of any interest in or the voting of any of
his Shares or any other securities of the Company. In addition, the Seller
Stockholder agrees to comply with the requirements of Section 6.12 of the Merger
Agreement, which provides, among other things, that such Seller Stockholder will
not, directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to any corporation,
partnership, person or other entity or group (other than the Purchaser and the
Parent and their affiliates and associates) concerning any merger, sale of
assets, sale of shares of capital stock or similar transaction involving the
Company, or take any action to facilitate the making of a proposal that
constitutes or could reasonably be expected to lead to an acquisition proposal.
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<PAGE> 11
The Seller Stockholder appoints the Purchaser, or its nominee, during the
term of the Stockholder Tender Agreement, as his proxy to vote each of his
Shares at any annual, special or adjourned meeting of the stockholders of the
Company, including the right to sign his name (as stockholder) to any consent,
certificate or other document relating to the Company which the laws of the
State of Delaware may require or permit: (i) in favor of the Merger, the
execution and delivery by the Company of the Merger Agreement and the approval
and adoption of the terms thereof; (ii) against any action or agreement that
would result in a breach in any respect of any covenant, agreement,
representation or warranty of the Company under the Merger Agreement; and (iii)
against the following actions (other than the Merger and the other transactions
contemplated by the Merger Agreement): (a) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company or its subsidiaries; (b) a sale, lease or transfer of a
material amount of assets of the Company or one of its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries; and (c)(A) any change in a majority of the persons who
constitute the Board of Directors as of December 19, 1995; (B) any change in the
present capitalization of the Company or any amendment of the Company's
Certificate of Incorporation or Bylaws, as amended to date; (C) any other
material change in the Company's corporate structure or business; or (D) any
other action which, in the case of each of the matters referred to in clauses
(c)(A), (B), (C) and (D), is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or adversely affect the Merger and the
other transactions contemplated by the Merger Agreement and the Seller
Stockholder Agreement. The proxy and power of attorney provided for in the
Seller Stockholder Agreement is irrevocable and, pursuant thereto, the Seller
Stockholder revoked all other proxies with respect to his Shares that he may
have heretofore made or granted.
The Stockholder Tender Agreement provides that the Seller Stockholder
agrees to pay to the Purchaser a fee ("Seller Stockholder Fee") if, as provided
below, the Merger Agreement is terminated and the Seller Stockholder
subsequently sells or otherwise disposes of his Shares in a Subsequent
Transaction (as defined below). Specifically, a Seller Stockholder Fee is
payable by the Seller Stockholder to the Purchaser if: (i) the Purchaser or the
Company terminate the Merger Agreement in accordance with its terms (other than
a termination (a) by the Company because of a breach by the Purchaser or the
Parent of any of their respective covenants, agreements, representations or
warranties contained in the Merger Agreement which materially adversely affects
(or materially delays) the consummation of the Offer, (b) by the Parent and the
Purchaser or the Company if any court of competent jurisdiction in the United
States or other United States governmental body shall have issued an order,
decree or ruling or taken any other final action restraining, enjoining or
otherwise prohibiting the Merger or the acceptance for payment and payment for
the Shares in the Offer and such order, decree, ruling or other action is or
shall have become nonappealable or (c) by mutual written consent of the Parent,
the Purchaser and the Company); and (ii) not later than one year from the date
of such termination, (a) the Board of Directors approves or recommends any
proposal or offer (an "Acquisition Proposal") concerning any merger, sale of
assets, sale of shares of capital stock or similar transaction involving the
Company other than from the Purchaser, or (b) the Company enters into an
agreement with respect to a merger, acquisition, consolidation,
recapitalization, liquidation, dissolution or similar transaction involving, or
any purchase of all or a substantial portion of the assets or equity securities
of, the Company, or (c) the Seller Stockholder disposes of any or all of his
Shares to any person not an affiliate or an associate of the Purchaser or to the
Company or any affiliate thereof (or realizes cash proceeds in respect of such
Shares as a result of a distribution to the Seller Stockholder by the Company
following the sale of a material amount of the Company's assets) in connection
with a transaction proposed, described or set forth in such Acquisition Proposal
or agreement (each a "Subsequent Transaction") at a per Share price or with
equivalent per Share proceeds, as the case may be with a value (the "Subsequent
Price") in excess of $10.50 (the "Offer Price"). The Seller Stockholder Fee is
an amount equal to one-half of the product of (i) the excess of the Subsequent
Price over the Offer Price and (ii) the number of Seller Stockholder's Shares
disposed of or otherwise participating in each Subsequent Transaction.
THE CONFIDENTIALITY AGREEMENT. On September 2, 1994, the Parent and the
Company entered into a confidentiality agreement (the "Confidentiality
Agreement"), a copy of which is attached as Exhibit (c)(3) and incorporated by
reference, pursuant to which each party agreed to keep confidential all
information (the "Information") provided to it by the other party. The
Confidentiality Agreement provides, among other
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<PAGE> 12
things, that (i) the Information must not be disclosed for any reason by the
receiving party or any of its representatives, except with the prior written
consent of the disclosing party, (ii) the Information must not be used by the
receiving party or its representatives for any purpose other than evaluating a
possible transaction involving the Company and the Parent ("Transaction"),
except as and to the extent required by a court or regulatory order, (iii)
neither party will disclose the fact that Information has been made available or
that discussions or negotiations are taking place concerning a possible
Transaction, except with the prior written consent of the other party, and (iv)
it will terminate on December 31, 1995, unless mutually extended. The Merger
Agreement provides for an extension of the term of the Confidentiality Agreement
to December 31, 1996 and amends the Confidentiality Agreement to permit
disclosure by Parent, Purchaser and the Company of information required to be
disclosed pursuant to the Exchange Act or otherwise required or requested to be
disclosed by the Commission.
APPRAISAL RIGHTS. Shares that are not voted in favor of the approval and
adoption of the Merger and with respect to which appraisal rights have been
demanded and perfected in accordance with Section 262 of the DGCL and not
withdrawn will not be converted into the right to receive cash at or after the
Effective Time, but such Shares shall instead become the right to receive
consideration as may be determined to be due to such holders in respect of such
Shares pursuant to the DGCL unless such stockholder withdraws its demand for
appraisal or becomes ineligible for such appraisal. If a stockholder withdraws
its demand for appraisal or becomes ineligible for appraisal (through failure to
perfect or otherwise), then, as of the Effective Time or the occurrence of such
event, whichever last occurs, the Shares subject to the demand for appraisal
will be automatically converted into and represent the right to receive $10.50
per Share or any higher price per Share that may be paid pursuant to the Offer,
without interest.
THE RIGHTS AGREEMENT. The following summary of the Company's Rights
Agreement, and the rights granted to the Company's stockholders pursuant thereto
(the "Rights"), is based upon the Company's Current Report on Form 8-K dated
December 5, 1992 (the "Company 8-K").
Pursuant to the Rights Agreement, on December 5, 1992, the Board of
Directors of the Company declared a dividend of one Right for each Share. The
dividend was payable as of the close of business on December 17, 1992 to the
stockholders of record on that date. Each Right entitles the registered holder
to purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock, par value $.01 per share (the "Preferred
Shares"), of the Company at a price of $25 per one one-hundredth of a Preferred
Share (the "Purchase Price"), subject to adjustment.
Until the earlier to occur of (a) 10 days following a public announcement
that a person or group of affiliated or associated persons has acquired
beneficial ownership of 20% or more of the outstanding Shares (an "Acquiring
Person") or such earlier date as a majority of the Board becomes aware of the
existence of an Acquiring Person (the "Stock Acquisition Date") or (b) 10 days
following the commencement of a tender offer or exchange offer that would result
in a person or group becoming an Acquiring Person (the earlier of such dates
being called the "Distribution Date"), the Rights will be evidenced by the
certificates for Shares.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any
certificates for Shares will also constitute the surrender for transfer of the
Rights associated with the Shares represented by such certificates. The Rights
Agreement further provides that, as soon as practicable following the
Distribution Date, separate certificates for Rights will be mailed by the
Company or the Rights Agent to holders of record of the Shares as of the close
of business on the Distribution Date.
The Rights will expire on December 4, 2002 (the "Final Expiration Date"),
unless the Rights are earlier redeemed by the Company.
The Purchase Price payable and the number of Preferred Shares or other
securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time as provided in the Rights Agreement.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a preferential quarterly
dividend payment of the greater of $.25 per share or 100 times the dividend
declared per Share. In the event of liquidation, the holders of the Preferred
Shares will be entitled to
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<PAGE> 13
a minimum preferential liquidation payment of the greater of $100 per share or
100 times the payment made per Share. Each Preferred Share will have 100 votes,
voting together as a single class with the Shares. Finally, in the event of any
merger, consolidation or other transaction in which Shares are exchanged for or
changed into other stock or securities, cash and/or other property, each
Preferred Share will be entitled to receive 100 times the amount received per
Share. Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should, according to the Company 8-K,
approximate the value of one Share.
If any person becomes an Acquiring Person (except pursuant to an offer for
all outstanding shares of Common Stock which a majority of the independent
directors who are not affiliated with the Acquiring Person determines to be fair
to and otherwise in the best interests of the Company and its stockholders),
then the Rights Agreement requires that proper provision be made so that each
holder of a Right, other than Rights beneficially owned by the Acquiring Person
and certain affiliated or associated persons (which will thereafter be void),
will thereafter have the right to receive upon exercise that number of Shares
(or, in certain circumstances, other securities or cash) having a market value
of two times the exercise price of the Right. In the event that the Company is
acquired in a merger or other business combination transaction or 50% or more of
the assets or earning power of the Company and its subsidiaries is sold or
transferred, the Rights Agreement requires that proper provisions be made so
that each holder of a Right will thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of the Right, that number of
shares of common stock of the acquiring company that at the time of such
transaction will have a market value of two times the exercise price of the
Right.
The Rights Agreement provides that, at any time prior to the close of
business on the earlier of (a) the Stock Acquisition Date and (b) the Final
Expiration Date, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.01 per Right. The redemption period may
be extended by the Board by amending the Rights Agreement prior to the time when
the Rights become nonredeemable.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
Other than those provisions relating to the redemption price of the Rights
or the Final Expiration Date, any of the provisions of the Rights Agreement may
be supplemented or amended by the Company prior to the Distribution Date,
without approval of the Rights holders, whether or not a supplement or amendment
is adverse to the Rights holders. After the Distribution Date, any provisions of
the Rights Agreement (other than those provisions relating to the redemption
price of the Rights or the Final Expiration Date) may be amended by the Company
in order to make changes which do not materially and adversely affect the
interests of holders of Rights (other than any Acquiring Person), provided,
however, that the Rights Agreement may not be amended to lengthen (i) the time
period governing redemption or the time period during which the Rights Agreement
may be amended at the sole discretion of the Company at such time as the Rights
are not redeemable, or (ii) any other time period unless such amendment is for
the benefit of the Rights holders (other than any Acquiring Person).
The foregoing summary of the Rights Agreement does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement
and the other documents included in the Company 8-K. The Company 8-K are
available for inspection and copies thereof may be obtained by written request
mailed to: Chief Financial Officer, Cimco, Inc., 265 Briggs Avenue, Costa Mesa,
California 92626.
On December 19, 1995, the Board authorized the amendment of the Rights
Agreement to assure that the execution and delivery of the Merger Agreement and
the Stockholder Tender Agreement and the consummation of the transactions
contemplated thereby will not cause (i) the defined term "Acquiring Person" to
apply to the Parent or the Purchaser, (ii) a "Distribution Date" to occur, (iii)
the provisions of Section 13(a) of the Rights Agreement to be applicable in
respect of the capital stock of the Purchaser or any affiliate thereof or (iv)
any adjustment under the provisions of Section 11(a) of the Rights Agreement.
The amendment was executed by the parties to the Rights Agreement on December
19, 1995. Accordingly, the operation of the Rights Agreement will not affect the
Offer or the Merger.
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<PAGE> 14
LIMITED LIABILITY AND INDEMNIFICATION. Section 102(b)(7) of the DGCL
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to certain statutory limitations, the liability of directors
to the corporation or its stockholders for monetary damages for breaches of
fiduciary duty. Article Ninth of the Company's Certificate of Incorporation
provides that a director of the Company will not be personally liable to the
Company or any of its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (A) for any breach of that director's
duty of loyalty to the Company or its stockholders, (B) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (C) under Section 174 of the DGCL, or (D) for any transaction from which
that director derived an improper personal benefit.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees, actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of occupying certain positions of or on behalf
of the corporation. Article VIII of the Company's Bylaws provides that the
Company will indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding
by reason of the fact that he is or was a director, officer, employee or agent
of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another entity, against certain costs
and expenses. Article VI further permits the Company to maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another entity against any liability asserted
against such person and incurred by such person in any such capacity or arising
out of his status as such, whether or not the Company would have the power to
indemnify such person against such liability under the DGCL. In this regard, the
Company has entered into Indemnity Agreements with all of its directors and
executive officers, obligating the Company to indemnify such parties with
respect to certain matters to the fullest extent provided by applicable law. The
Company has purchased directors' and officers' liability insurance. Pursuant to
the Merger Agreement, Parent and the Surviving Corporation have made certain
covenants with respect to indemnification and insurance arrangements. See
"Merger Agreement -- Other Agreements of the Parent, the Purchaser and the
Company" above.
MESA AGREEMENT. Concurrently with the execution and delivery of the Merger
Agreement and the Seller Stockholder Tender Agreement, Mr. Gilbert executed and
delivered to the Company (i) on behalf of Mesa Leasing Company, a general
partnership between Mr. Gilbert and the Company ("Mesa"), a letter agreement
pursuant to which Mesa acknowledges that the consummation of the Offer and the
Merger will not constitute a prohibited assignment under Mesa's real property
lease with the Company dated December 7, 1984, as amended, relating to the
property located at 265 Briggs Avenue in Costa Mesa, California, leased by the
Company from Mesa, and (ii) on behalf of himself as a general partner of Mesa,
certain letter agreements which provide, among other things, that Mr. Gilbert
will provide one-half of the funds necessary to satisfy all of Mesa's
outstanding indebtedness and that Mr. Gilbert acknowledges that the consummation
of the Offer and the Merger will not cause Mesa to be dissolved.
EMPLOYMENT CONTINUATION PLAN. To encourage the Company's key employees to
remain with the Company through the consummation of an acquisition of the
Company, the Company adopted an Employment Continuation Plan. Under the Plan,
which was adopted on December 6, 1995, certain officers and key employees became
entitled to receive a pre-determined sum which would become payable upon
consummation of an acquisition of the Company, so long as the employee remains
continuously employed by the Company to the date of the consummation of the
acquisition. For purposes of the Employment Continuation Plan, the purchase of
Shares pursuant to the Offer would constitute an acquisition of the Company. The
aggregate maximum liability of the Company under the Employment Continuation
Plan is approximately $344,000, and the largest amount allocated to any officer
or key employee is $65,000.
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<PAGE> 15
Set forth below is a list of the executive officers of the Company that are
eligible to receive payments under this Plan and the maximum amount that would
be payable to each of them upon consummation of the Offer:
<TABLE>
<CAPTION>
NAME POSITION AMOUNT
----------------------------------------- -------------------------------- -------
<S> <C> <C>
Franklin A. Jackson...................... President of CTI $65,000
James T. Bagwell......................... President of Medical Molding $20,000
Corporation of America
James L. Richter......................... Vice President of Sales and $10,000
Marketing
Jennifer A. Shea......................... Vice President of Administration $10,000
</TABLE>
TREPP EMPLOYMENT AGREEMENT. On September 15, 1995, L. Ronald Trepp, Vice
President of Finance and Chief Financial Officer, entered into an employment
agreement with the Company. The employment agreement provides for a term of two
years commencing August 1, 1995, an annual salary of $100,000, plus other
benefits available to other corporate officers and full payment for the
unexpired term of the agreement if Mr. Trepp is terminated without cause or if
Mr. Trepp terminates his employment voluntarily for Good Reason. Good Reason
would include a nonconsentual relocation outside southern California or
reassignment to a non-titled position within the Company. A copy of Mr. Trepp's
Employment Agreement is filed as Exhibit (c)(4) hereto.
ACCELERATION OF STOCK OPTIONS. The Compensation Committee has accelerated
the vesting of options to purchase Shares held by the officers, directors and
employees of the Company to the closing of a transaction resulting in a change
of control of the Company, with the expectation that those persons will become
entitled to receive the full benefit of such options upon consummation of the
Offer. The following is a list of executive officers of the Company, together
with the number of unvested options and the exercise price per share of such
options which are subject to such accelerated vesting.
<TABLE>
<CAPTION>
NAME NO. OF SHARES EXERCISE PRICE
-------------------------------------------------- ------------- --------------
<S> <C> <C>
James T. Bagwell.................................. 5,000 $ 6.19
Russell T. Gilbert................................ 18,750 6.88
6,250 6.33
Franklin L. Jackson............................... 3,750 6.25
1,250 5.75
James L. Richter.................................. 10,000 4.50
Jennifer A. Shea.................................. 1,600 7.75
1,300 6.19
Laurance W. Simmons............................... 3,300 6.19
L. Ronald Trepp................................... 0 --
</TABLE>
OTHER TRANSACTIONS. Reference is hereby made to Schedule I hereto, which
includes information from the Company's Proxy Statement dated September 18, 1995
relating to other transactions and arrangements between the Company and its
officers and directors, which information is incorporated herein by this
reference.
As a result of the matters described in this Item 3 and in Item 4 below,
various directors and executive officers of the Company could be deemed to have
a financial interest in the transactions contemplated herein between Parent and
the Purchaser and the Company that differ from the financial interests of the
stockholders of the Company generally.
Except as described above, and in Item 4 below, to the best knowledge of
the Company, as of the date hereof, there is no material contract, agreement,
arrangement or understanding and no actual or potential conflict of interest
between the Company or its affiliates and: (i) the Company's executive officers,
directors or its affiliates; or (ii) Purchaser or Parent or their executive
officers, directors or affiliates.
15
<PAGE> 16
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
During the fiscal year ended April 30, 1994, the Company's molding division
(the "Molding Division") sustained significant operating losses that exceeded
the aggregate operating income of the Company's respiratory medical products
division (the "Medical Products Division") and the Company's wholly-owned
subsidiary, Compounding Technology, Inc. ("CTI"), which operates the Company's
plastics compounding business. As a result, the Company sustained a net loss in
excess of $1.2 million in the fiscal year ended April 30, 1994 and management
advised the Board that it expected such losses to continue into fiscal 1995,
attributable almost entirely to decreases in sales and higher manufacturing and
operating costs in the Molding Division. At the same time, while CTI was
profitable, it required substantial additional capital for expansion of its
manufacturing capability in order to be able to capture new business and
increase sales in what was becoming a growing, but also an increasingly
competitive, market. In addition, the Company's outstanding borrowings had more
than doubled in fiscal 1994 to more than $18 million and, as a result, available
borrowings under the Company's bank credit facility (the "credit facility") to
fund the Company's cash requirements in fiscal 1995 were limited and it was
uncertain whether the Bank would be willing to increase available borrowings or
extend the credit facility beyond its September 15, 1995 maturity date.
In September 1994, Martin D. Walker, the Chairman and Chief Executive
Officer of Parent, advised Mr. Russell T. Gilbert, the President and Chief
Executive Officer of the Company, of Parent's renewed interest in a possible
purchase of CTI. Parent had, on prior occasions dating back to 1991, expressed
an interest in acquiring CTI or establishing a joint venture between CTI and
Parent's plastics compounding business. Although some preliminary discussions
did take place in late 1993 regarding a possible purchase of CTI by Parent, the
Company concluded that it had no desire to sell CTI and so advised Parent.
At a meeting of the Board of Directors held on September 29, 1994, Mr.
Gilbert informed the Board of Parent's renewed interest in CTI and that Parent
had requested information regarding CTI. Mr. Gilbert advised the Board that he
believed that CTI had the opportunity to achieve significant additional growth,
but only if it was able to obtain a significant cash infusion to fund working
capital requirements and the capital expenditures needed to increase CTI's
manufacturing capability in Singapore and in Europe. Since the Company lacked
such cash resources, he believed the Board should give consideration to a sale
of CTI as a strategic alternative for enhancing shareholder value that might
otherwise be lost if the Company were unable to fund CTI's cash needs. After
discussing the matter, the Board directed Mr. Gilbert to furnish the information
requested by Parent and the Board also established a committee of independent
directors (the "Independent Committee" or the "Committee"), initially comprised
of directors James L. Doti and Kenneth E. Hendrickson, to consider any proposal
for a strategic transaction that might be received from Parent and to select and
retain an investment banking firm to assist in evaluating strategic alternatives
available to the Company.
At a December 3, 1994 meeting of the Board of Directors, the Independent
Committee reported that it had engaged PaineWebber Incorporated ("PaineWebber")
to advise the Company on strategic alternatives and to assist it in evaluating
any acquisition proposal that might be received from Parent. Representatives of
PaineWebber (the "PW Representatives") attended the meeting and discussed with
the Board various strategic alternatives, including (a) an internal
restructuring of existing operations to reduce expenses and return the Company
to profitability, (b) a sale or liquidation of the Molding Division, followed by
the retention or a sale of CTI and the Medical Products Division, and (c) a sale
of the Company as an entirety to, or a merger or other business combination of
the Company with, another corporation. The PW Representatives also reported that
Parent was finalizing its due diligence review of CTI's operations and that
Parent continued to have an interest in acquiring CTI, but had no interest in
acquiring the Molding Division or the Medical Products Division and, therefore,
was not prepared to propose an acquisition of or business combination with the
Company as a whole. The Board authorized management to continue discussions with
Parent and, at the same time, approved a cost-cutting program designed to reduce
the losses being incurred by the Molding Division and to preserve cash for the
expansion of CTI's business.
16
<PAGE> 17
On December 15 and 16, 1994, representatives of Parent and the Company, and
their respective financial and legal advisors, met to develop a proposal for the
Parent to acquire CTI. However, the parties were unable to reach agreement on
the terms of such a proposal, including a price for CTI.
At a meeting of the Board of Directors held March 4, 1995, the PW
Representatives reported that Parent had submitted to it a proposal to acquire
CTI (including the land and building occupied by CTI in Corona, California) for
an aggregate cash price of $12 million. The Board concluded that the price
offered by Parent, which approximated CTI's book value, was inadequate. In
addition, the Board concluded that a sale of CTI, coupled with the retention of
the Molding Division, which was continuing to sustain losses, was not in the
best interests of the stockholders. The PW Representatives also advised the
Board that, in their view, efforts should first be made to sell the Molding
Division. This would enable the Company to stem its losses and reduce its
outstanding indebtedness substantially, which would enhance the value of the
Company and make it possible for the Company either to retain CTI or to sell CTI
for a higher price. The Board, therefore, decided to reject Parent's offer and
instructed management, together with PaineWebber, to focus their efforts on
selling the Molding and the Medical Products Divisions. The Board also
instructed management to downsize the Molding Division even further as a means
of reducing its operating losses and preserving cash.
At a meeting held on May 30, 1995, the Board concluded that, due to the
continuing losses being sustained by the Molding Division and what appeared to
be a lack of willingness on the part of Mr. Gilbert to implement more
significant cost-cutting measures, including further staff reductions, at the
Molding Division, Mr. Gilbert should retire as President and Chief Executive
Officer, that the Board should commence efforts to recruit a replacement for him
who would be willing to take more drastic cost-cutting measures, and that Mr.
Gilbert should be elected Chairman of the Board and assist the Independent
Committee and PaineWebber with efforts to find a buyer for the Molding Division
or the Company as a whole. Mr. Gilbert stated that, although he was reluctant to
do so, he would be willing to retire from his current positions with the Company
and accept the chairmanship, if it was in the best interests of the Company and
the stockholders for him to do so. A special committee of the Board was then
established to find a new chief executive officer for the Company. The
anticipated retirement of Mr. Gilbert was announced in a press release issued by
the Company on June 12, 1995, a copy of which is filed as Exhibit (c)(5) and
incorporated herein by reference.
On July 20, 1995, the Company received a letter dated July 19, 1995 from
Mr. Walker indicating an interest on the part of Parent to acquire CTI for $18.5
million in cash and also indicating a willingness to consider an alternative
transaction, which might include an acquisition by Parent of the Company, in its
entirety, followed by a sale of the Molding Division.
At a meeting of the Board held on July 23, 1995, Mr. Gilbert advised the
Board that he had discussed the matter of his retirement with certain other
stockholders of the Company and he had come to the conclusion that it was not in
the best interests of the Company or the stockholders that he retire at this
time from his positions as President and Chief Executive Officer. After
considerable discussion, the Board concluded that management, with the
assistance of PaineWebber, should actively seek a buyer for the Molding Division
or a buyer or merger partner for the Company, and that Mr. Gilbert should remain
as President and Chief Executive Officer to assist with those efforts, provided
that he enter into an agreement with the Company specifically outlining the
responsibilities that were expected of him by the Board in his capacity as
President and Chief Executive Officer and confirming his agreement to retire by
December 31, 1995 if a sale or merger was not consummated by that date. At the
July 23, 1995 Board meeting, it was also reported that the Bank had agreed to
extend its waiver of loan covenant violations to the September 15, 1995 maturity
date of the Company's credit facility.
As a result of the receipt of unsolicited inquiries from third parties, on
August 9, 1995 the Company issued a press release announcing the retention of
PaineWebber to assist the Board in evaluating strategic alternatives, including
a possible sale of part or all of the Company. A copy of the August 9, 1995
press release is filed as Exhibit (c)(6) and incorporated herein by reference.
At the August 12, 1995 meeting of the Board, Mr. Gilbert reported to the
Board that he had held discussions with Parent regarding a new proposal dated
August 10, 1995 for an acquisition by Parent of the Company, followed
immediately by a sale by Parent of the Molding Division to another corporation
that would
17
<PAGE> 18
be organized by Mentmore Holdings, Inc. ("Mentmore") for the purpose of
acquiring the assets and business of the Molding Division. The proposal also
contemplated that Mr. Gilbert would be offered a minority ownership interest in
and employment by that corporation. Mr. Gilbert advised the Board that Parent
had stated that, subject to arranging for such a sale of the Molding Division,
Parent was prepared to acquire all of the outstanding stock of the Company for
an aggregate purchase price of $25 million, payable wholly in cash or wholly in
shares of Parent common stock (valued at $28 per Parent share).
Directors Doti and Hendrickson then reiterated their earlier position that
Mr. Gilbert should retire as President and Chief Executive Officer of the
Company and accept the position of Chairman of the Board. After deliberations
and considering the views of the PW Representatives, the non-management
directors, by vote of 4-to-2, decided to retain Mr. Gilbert as the Company's
President and Chief Executive Officer. The majority had concluded that Mr.
Gilbert's retirement from those positions would create concerns and
uncertainties among the Company's vendors, customers and lenders that could
adversely affect operating results and could also make a sale of the Company
more difficult. Dr. Doti and Mr. Hendrickson, who had voted against Mr.
Gilbert's retention as President and Chief Executive Officer, then resigned from
the Board of Directors. The remaining Board members then voted to reduce the
authorized membership on the Board from seven to five, and elected non-employee
directors Karin Harrison, Franklin I. Remer and Frederick M. Swenson to replace
Dr. Doti and Mr. Hendrickson as the members of the Independent Committee and to
consider, with the assistance of PaineWebber and the Company's legal counsel,
and make recommendations regarding strategic alternatives, including a sale of
the Molding and Medical Products Divisions, CTI or the Company as a whole.
The Board then resumed discussions of the August 10, 1995 proposal received
from the Parent. The PW Representatives requested more time to analyze the
proposal and recommended that no action be taken at this time, despite the fact
that the proposal, by its terms, would expire on August 16, 1995. The PW
Representatives stated that they believed that Parent was likely to make a
better offer than the one contained in its August 10, 1995 proposal and advised
that other potential buyers had expressed an interest in acquiring the Molding
Division or the Medical Products Division and that efforts should continue to be
focused on first selling those Divisions. The Board of Directors voted
unanimously to accept the recommendation of the PW Representatives.
On August 30, 1995, the Company's Board of Directors held a special meeting
to review recent developments, including a new proposal from Parent, contained
in a letter dated August 25, 1995 from Parent to purchase CTI for $25 million
or, in the alternative to purchase the Company in its entirety, for $22.5
million without conditioning that purchase by Parent on a sale of the Molding
Division or, if the Company was able to arrange for a sale to a third party of
its non-CTI assets, at a price of $22.5 million plus an amount equal to the cash
purchase price paid for the non-CTI assets and the assumption of indebtedness of
the Company by the third party. The Board was advised that it was the
recommendation of the Independent Committee, which had previously reviewed and
discussed this new proposal at length, that the Board should defer any action on
this new proposal to allow time for the Company to obtain a buyer for the
Molding Division, because the Committee had concluded, after consultation with
PaineWebber, that the price being offered by Parent was not "preemptive" in
amount, there were a number of other prospective buyers that were making
inquiries concerning a possible purchase of and performing due diligence reviews
with respect to the Molding and the Medical Products Divisions and that, based
on the advice of PaineWebber, a separate sale of the Molding Division could
enable the Company to realize a better price for the Company than that being
offered by Parent. The Board unanimously adopted the Independent Committee's
recommendation and, at the Board's instruction, PaineWebber advised Parent that
the Board needed more time to pursue efforts to find a buyer for the Molding
Division. Parent withdrew its proposal, but advised PaineWebber that it was
still interested in a purchase of CTI or the Company as a whole.
At a meeting of the Independent Committee held on October 2, 1995, the PW
Representative reported that, despite the number of potential buyers that has
initially expressed an interest in purchasing the Molding Division, the Company
had received purchase offers only from Mr. Gilbert, who proposed to purchase the
Molding Division for a price consisting of $4.1 million in cash (subject to
downward adjustment for Molding Division assets sold by the Company) and $13.9
million of assumed liabilities, and one prospective unaffiliated
18
<PAGE> 19
purchaser. Following their discussions and obtaining the views of PaineWebber
regarding these two offers, the members of the Independent Committee unanimously
concluded that the offer from the unaffiliated party was not adequate in amount
and that, due to financing and other contingencies, Mr. Gilbert's offer
presented risks of non-consummation that were not acceptable in light of the
Company's need for cash. The PW Representative then advised the Independent
Committee that, faced with continuing losses in the Molding Division and a
continuing need for cash to fund CTI's growth and meet the Company's debt
service obligations, and the realization that a sale of the Molding Division was
unlikely, efforts should now be focused principally on selling either CTI or the
Company as a whole. The PW Representative reported that Spartech Corporation, a
manufacturer of plastic products ("Spartech"), had expressed an interest in
acquiring the Company. The PW Representatives also recommended that the
Independent Committee consider a possible liquidation of the Molding Division as
an alternative to attempting to sell it either as a separate operating unit or
as part of the Company.
At a special meeting of the Independent Committee held on October 4, 1995,
Mr. Trepp, the Company's Chief Financial Officer, presented an analysis with
respect to the potential net proceeds that the Company might realize from a
liquidation of the Molding Division. To augment Mr. Trepp's analysis, Mr.
Gilbert subsequently submitted to the Independent Committee a memorandum dated
October 7, 1995 in which he set forth information regarding additional
liabilities which he believed could be incurred by the Company as a result of a
liquidation of the Molding Division.
A special meeting of the Board of Directors was held on October 9, 1995.
Present were all of the directors, a PW Representative, Mr. Trepp, a member of
Stradling, Yocca, Carlson & Rauth, legal counsel to the Company, representatives
of Deloitte & Touche, and a member of O'Melveny & Myers, counsel to Mr. Gilbert.
Also present, at the invitation of Mr. Gilbert, were officers of Mentmore, which
in August 1995 had expressed an interest in purchasing, together with Mr.
Gilbert, the Molding Division in conjunction with a sale of CTI to Parent. At
the October 9 meeting, the Mentmore officers presented a proposal that would
involve (i) a purchase by Mentmore of the shares of Company Common Stock owned
by Mr. Gilbert for $7.50 per share in cash, (ii) the addition of Mentmore
representatives to comprise a minority of the Company's Board of Directors, and
(iii) the assistance of Mentmore to improve the operating results of the Molding
Division, principally by significantly "down-sizing" its operations, followed by
a sale of the Molding Division to Mr. Gilbert or another purchaser. Mentmore's
representatives stated that they believed a liquidation of the Molding Division
would involve unreasonable costs and uncertainties for the Company and that the
Company was more likely to obtain a higher price by selling the Molding Division
as a going concern. At the conclusion of their presentation, the Mentmore
representatives left the meeting.
Mr. Gilbert then reported that at a meeting held on October 4, 1995 with
representatives of the Bank, management was advised that the Bank was not
willing to extend the maturity date of the Company's bank loans beyond November
1, 1995 unless the Company were to obtain an agreement, acceptable to the Bank,
for a transaction that would result in a substantial payment on, or the
repayment in full of, the bank loans in their entirety. The directors then
discussed the alternative of liquidating the Molding Division and requested the
views of the Deloitte & Touche representatives with respect to the contingent
liabilities of the Molding Division and also the length of time it might take
under current market conditions to liquidate the equipment and real estate used
by the Molding Division.
The Board Meeting was recessed while the members of the Independent
Committee met to discuss the Mentmore proposal. Also in attendance were the PW
Representatives and legal counsel for the Company. The Independent Committee
unanimously voted to reject the Mentmore proposal, after concluding that it did
not address the Company's near-term needs for cash and that it would appear to
favor Mr. Gilbert over the other stockholders.
The Committee then reviewed an October 3, 1995 proposal from Parent to
purchase CTI and a September 27, 1995 proposal from Spartech to purchase the
Company as a whole. In its October 3 proposal, Parent offered to purchase CTI
for an aggregate purchase price of $32 million in cash, subject to customary due
diligence investigations and subject further to the Company agreeing to pay
Parent a 10% break-up fee, plus expenses, if the Company accepted Parent's
proposal, but the sale of CTI to Parent was not consummated
19
<PAGE> 20
and CTI was sold to a third party within a year. In its September 27 proposal,
Spartech proposed to acquire the stock or assets of the Company for a purchase
consideration of approximately $20,600,000, comprised of $10 million in cash
(subject to adjustment based on the Company's earnings or losses subsequent to
July 31, 1995) and 1.6 million shares of Spartech Common Stock that was then
trading at approximately $6.625 per share. Based on the number of Shares
outstanding, the purchase consideration proposed by Spartech approximated $7.00
per Share. The Spartech offer was further conditioned on the completion of
arrangements satisfactory to Spartech for the sale of the Molding Division,
including the Medical Products Division, for a net sale price of at least $15
million reduced by the amount of payables or accruals assumed by Spartech in any
such sale. The Committee concluded that Parent's proposal was not acceptable
because (i) the sales proceeds to the Company would be significantly reduced by
taxes and required debt repayments, and (ii) the Company would have to retain
the Molding Division as its only operating unit or liquidate that Division. The
Committee also determined that the Spartech proposal was unacceptable because
the purchase consideration was inadequate in amount and because the requirement
of a concurrent sale of the Molding Division created an unacceptable risk of
non-consummation of the proposed transaction. The Board meeting was then
reconvened and, upon the recommendation of the Independent Committee, the Board
instructed the PW Representatives to advise Parent and Spartech that their
proposals were not acceptable and to seek new proposals from them to purchase
the Company, as a whole, for at least $10.00 per share in cash and to advise
Parent that the Board was not interested in and would not be likely to entertain
a proposal for a sale of CTI separately from the Company.
At a meeting of the Board of Directors held on October 23, 1995, the Board
was advised that there had been modest improvements in the Company's cash flow
and that the Company had received an offer from Vital Signs, Inc. ("Vital
Signs") to purchase the assets of the Company's Medical Products Division for a
cash purchase price of approximately $2.1 million and the assumption by Vital
Signs of approximately $290,000 of liabilities of that Division. It was also
reported that based upon that offer, and a commitment by the Company to use at
least $2 million of the net proceeds to reduce outstanding borrowings under its
credit facility, the Bank had advised management that it would be willing to
extend the maturity date of the Company's bank loans and the waiver of loan
covenant violations to the end of December 1995.
The Board also was advised that, in response to requests made by
PaineWebber for firm and final proposals, the Parent and Spartech had each
submitted a new proposal to purchase the Company. At the direction of the
Independent Committee, PaineWebber then entered into negotiations with
representatives of Parent and Spartech with respect to those proposals. Those
negotiations culminated in an October 27, 1995 offer from Parent and an October
30, 1995 offer from Spartech. The Independent Committee met on October 31, 1995
to consider these offers. Also in attendance were PW Representatives, a member
of Stradling, Yocca, Carlson & Rauth, legal counsel for the Company, and a
member of Paul, Hastings, Janofsky & Walker, which had been retained as special
legal counsel to the Independent Committee.
In its October 27, 1995 offer, Parent proposed to acquire all of the
Company's outstanding capital stock for $9.25 per share, net in cash, with
Parent reserving the right to adjust the price downward based on its analysis of
certain contingencies relating to the Molding Division, as discussed in Mr.
Gilbert's memorandum of October 7, 1995 to the Independent Committee. Parent's
offer was also made contingent on its obtaining from Mr. Gilbert an option to
acquire Mr. Gilbert's Shares at $9.25 per share and included a break-up fee
provision.
In a letter dated October 30, 1995, Spartech proposed to acquire the
Company for $10.00 per share in a merger in which each of the Company's shares
would be converted into a number of Spartech shares with a value of $5.10 and
cash in the amount of $4.90 (the "Spartech Merger"). A copy of the Spartech
letter containing the terms of the proposed Spartech Merger is filed as Exhibit
(c)(7) and incorporated herein by this reference. The Spartech proposal was not
conditioned on obtaining an option for Mr. Gilbert's stock and did not provide
for payment of any break-up fee. It did, however, provide for an adjustment in
the cash portion of the merger consideration based on the net income earned or
losses incurred by the Company subsequent to July 31, 1995. The PW
Representatives then made a presentation with respect to Spartech's business and
financial condition and its historical and recent operating results, the
performance of its stock in the public market and its ownership structure and
comparative financial data for the Company, Spartech and other
20
<PAGE> 21
publicly traded corporations in the plastics fabrication business with respect
to several measures of performance.
After considerable discussion of the terms and the relative merits of the
two offers, it was decided that PaineWebber should contact each of Parent and
Spartech to determine whether either would be willing to increase the price it
was prepared to pay for the Company's Shares and also to determine if Spartech
would consider an all-cash offer. PaineWebber also was directed to ask Parent to
remove the condition regarding Mr. Gilbert's grant of an option to Parent to
acquire his shares of the Company's Common Stock.
On November 1, 1995, the Independent Committee met again to consider and
act upon the October 27 proposal from Parent and the October 30 Spartech
proposal. Also present at the meeting were the PW Representatives, legal counsel
for the Company, legal counsel for the Independent Committee and Messrs.
Gilbert, Posnick and Trepp. The PW Representatives reported on their most recent
discussions with Parent and Spartech. Spartech maintained that the current offer
was its best offer and that it would not consider an all cash offer. Spartech
reconfirmed to PaineWebber that there would be no contingencies regarding a sale
of the Molding Division, but that it was Spartech's intention to sell the
Molding Division, and that Mr. Gilbert was a potential purchaser. Parent also
stated that it was unwilling to increase the price it had offered and continued
to insist on obtaining an option to acquire Mr. Gilbert's shares of Company
Common Stock as a condition to its entering into a definitive acquisition
agreement. Parent also confirmed that it would probably seek to sell the Molding
Division to Mr. Gilbert, although this was not a condition of its offer.
The Independent Committee then reviewed at length the terms and conditions
of both offers, including:
(a) The respective prices per share of Company Common Stock offered by
Spartech and the Parent, which in each case represented a substantial
premium over the prices at which the Company's shares were trading on
August 8, 1995, the day preceding the Company's press release announcing
that PaineWebber had been retained to assist the Company to review
strategic alternatives available to the Company, including a possible sale
of the Company;
(b) The price differential of $.75 per share between the Spartech
offer and the Parent offer;
(c) The value attributable to the stock component of Spartech's offer
and the fact that the number of Spartech shares to be issued to the
Company's stockholders would be calculated on the basis of the market price
of such shares at the time of consummation, thereby reducing the interim
market risk to the Company's stockholders;
(d) The provisions of the Spartech offer that called for an adjustment
in the cash portion of the merger consideration that would be received by
the Company's stockholders based on the Company's operating results
subsequent to July 31, 1995;
(e) The publicly available information furnished by PaineWebber with
respect to Spartech's historical operating results and the performance of
its stock;
(f) The fact that Parent's was an all cash offer that would be fully
taxable to the stockholders; while the Company's stockholders might be able
to defer income taxes on the stock component of the merger consideration
offered by Spartech by retaining, rather than selling, such stock;
(g) The recent trading volume in Spartech stock and the potential
difficulties Company stockholders would have and the costs involved in
selling Spartech stock received in the transaction;
(h) The price adjustment contingencies in the Parent offer;
(i) The non-solicitation and break-up fee provisions included in
Parent's proposal and the fact that a fee of the magnitude proposed by
Parent could discourage other offers; and
(j) The fact that consummation of the Spartech acquisition was likely
to take longer to consummate than the all-cash proposal from Parent.
After further discussions, the Independent Committee concluded that the
Spartech offer was financially superior to Parent's offer and, although it was
likely that it could not be consummated as quickly as the
21
<PAGE> 22
acquisition transaction proposed by Parent, the Spartech offer contained fewer
contingencies. The Committee then unanimously recommended to the Board that the
Company reject the offer from Parent and that PaineWebber should notify Spartech
that the Board had approved acceptance of the Spartech proposal, subject to (i)
negotiation of a definitive agreement on mutually satisfactory terms, which
would include appropriate "fiduciary-out" provisions that would enable the Board
to consider and act on any other acquisition proposal that the Company might
receive on terms that were determined to be more favorable, from a financial
standpoint, to the Company and its stockholders, and (ii) receipt of an opinion
from PaineWebber confirming that the merger consideration in Spartech's proposal
is fair from a financial point of view to the Company's stockholders.
Immediately following the Committee meeting, the Board of Directors met to
consider the Committee's recommendation. Also present at the meeting were a PW
Representative, the Company's legal counsel and Mr. Trepp. After discussion,
including a review of the considerations described above, and based on the
recommendation of the Independent Committee, the Board unanimously resolved (i)
to accept, subject to its fiduciary obligations, the Spartech proposal of
October 30, 1995, (ii) to proceed with negotiation of a definitive merger
agreement with Spartech on the terms set forth in Spartech's October 30, 1995
proposal, and (iii) to reject the Parent proposal of October 27, 1995.
On November 2, 1995, Parent submitted a new proposal, which the Independent
Committee met to consider on November 3, 1995. In the new proposal, which by its
terms would expire at the end of the day on November 3, 1995, Parent proposed to
acquire all of the outstanding shares of stock of the Company for a cash
purchase price of $10.25 per share in a cash tender offer and any shares that
were not tendered in that tender offer in a subsequent cash merger in which
those shares would be converted into a right to receive $10.25 per share in
cash. The offer was conditioned on the Company's approval of Parent's obtaining
an agreement from Mr. Gilbert that he would sell his shares to Parent. However,
unlike the price in its October 27, 1995 proposal, the $10.25 price now being
offered by Parent was not subject to possible downward adjustment for contingent
liabilities. The Committee and its advisors considered the merits of the
November 2 Parent offer, on its own, and in comparison to the Spartech offer,
which had been conditionally approved by the Board on November 1, 1995. The
Committee concluded that, while Parent's new offer was not sufficiently superior
to the terms of the Spartech Merger as to justify termination of negotiations
with Spartech, it did justify resumption of negotiations with Parent.
Accordingly, the Committee directed PaineWebber to resume negotiations with
Parent and to advise Spartech that the Company had received an unsolicited and,
on its face, a financially better offer, and that the Company was in the process
of reviewing the new offer and would keep Spartech informed.
In those negotiations Parent agreed to increase the price to $10.50 per
share, net in cash, to the Company's stockholders. The terms of the Parent
offer, as modified (the "Revised Parent Proposal"), were incorporated into a
letter of intent, a copy of which is filed as Exhibit (c)(8) and incorporated
herein by reference (the "Letter of Intent"). The Letter of Intent was then
submitted to the Independent Committee. Following further consultation with the
Company's legal and financial advisors and further deliberations, the
Independent Committee unanimously determined that terms of the Revised Parent
Proposal were superior to the terms of the Spartech Merger and that the Offer
and Merger proposed by Parent were in the best interests of the Company and its
stockholders.
In reaching this determination, the Committee considered the merits of
Revised Parent Proposal on its own terms and in comparison to the Spartech
Merger, and the factors described above when it considered the Spartech Merger
and the October 27, 1995 proposal from Parent. The Committee also considered
that (i) the consideration to be received by the Company's stockholders pursuant
to the Offer and Merger, as contemplated in the Revised Parent Proposal, is
$10.50, all in cash, and exceeds the consideration to be received in the
Spartech Merger; (ii) the price of $10.50 per share represents a premium of
nearly 105% of the trading price of the Company's Common Stock on August 8,
1995, the day preceding the date on which it was first publicly announced that
the Board was considering a possible sale of the Company and a premium of 35% of
the trading price of the Company's Common Stock on November 2, 1995, the trading
day immediately preceding the receipt of the $10.50 offer from Parent; (iii)
oral advice from the PW Representatives; (iv) the terms and conditions of the
Revised Parent Proposal; (v) the structure of the transaction proposed by
Parent,
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<PAGE> 23
which the Committee was advised could be consummated sooner than would be
possible for consummation of the Spartech Merger, and the cash resources
available to Parent to consummate the Offer and the Merger, which reduced the
risks of nonconsummation of the Parent Revised Proposal as compared to the
Spartech Merger, both of which factors were viewed by the Independent Committee
and the Board as particularly important given the cash requirements faced by the
Company and the December 31, 1995 maturity date of the Company's credit
facility. In this regard the Independent Committee recognized that a failure to
consummate the sale of the Company, following the announcement of the
transaction, would place the Company in an even more difficult financial
position, given the continuing losses at the Molding Division and the need for
cash for CTI and for the Company to meet its debt service obligations. The
Independent Committee then voted unanimously to recommend approval of the Letter
of Intent by the Board of Directors. A meeting of the full Board of Directors
was then convened and, after further deliberations, the Board of Directors
adopted the Independent Committee's recommendation and approved the Letter of
Intent. PaineWebber then notified Spartech that the Company appreciated
Spartech's interest, but that the Company had accepted the unsolicited superior
proposal from a third party about which Spartech had previously been informed by
PaineWebber.
On the morning of November 6, 1995, Spartech advised the Company that it
was prepared to increase the consideration that it would pay for the Company's
shares in the proposed Spartech Merger from $10.00 to $11.00 per share of
Company Common Stock, with the result that the Company's stockholders would
receive a number of Spartech shares with a value, based on the trading price of
the Spartech shares at the time of the consummation of that Merger, of
approximately $5.61 and cash in the amount of $5.39 for each of their shares of
Company Common Stock, subject however, to possible adjustment based on the
Company's earnings or losses subsequent to July 31, 1995. Spartech indicated
that it was not prepared to change any of the other terms of the proposed
Spartech Merger or to make an all-cash offer for the Company. A special
telephonic meeting of the Board was held later that day to consider the revised
terms of the proposed Spartech Merger. Participating in that meeting were all
five of the Company's directors, including the three directors who were members
of the Independent Committee, the PW Representatives, legal counsel to the
Company and legal counsel to the Independent Committee. The directors considered
the relative merits of the Offer and Merger, at $10.50 per share, net in cash,
as compared to Spartech's latest proposal. After consultation with the PW
Representatives, the Board of Directors determined that it was in the best
interests of the Company and its stockholders that the Company proceed with the
Offer and Merger with Parent, on the terms set forth in the Letter of Intent,
and reject the revised Spartech Merger proposal. The Board determined that the
increase in the proposed merger consideration offered by Spartech was not
sufficient to overcome the considerations that led it to approve the Offer and
Merger on the terms set forth in the Letter of Intent, including (i) the fact
that the Company's stockholders would receive consideration consisting of all
cash in the Offer and Merger; (ii) the uncertainties of future valuations of the
stock component of the consideration offered in the Spartech Merger,
particularly in view of the relatively limited trading volume of Spartech
shares, and the possibility that the merger consideration of $11.00 per share
proposed by Spartech could be reduced if the Company continued to sustain losses
subsequent to July 31, 1995; (iii) the belief of the Board that the Offer and
Merger, as proposed by Parent, could be consummated in less time than would be
required to consummate the Spartech Merger; (iv) the cash resources available to
Parent and relative risks of non-consummation between the two transactions; and
(v) the terms of the Offer and Merger, which would not preclude the Board, even
after the definitive Merger Agreement contemplated by the Letter of Intent is
entered into by the Company and Parent, from considering competing offers that
the Board determines are more favorable, from a financial standpoint, to the
Company's stockholders, although the Company would be required to make certain
payments to Parent in the event of a termination of the Merger Agreement as a
result of its negotiation or recommendation of such a competing offer.
On November 8, 1995, Parent and the Company issued a joint press release
announcing the signing of the Letter of Intent and that the Letter of Intent
contemplated an acquisition by Parent of the Company's outstanding shares for a
price of $10.50 in cash, subject to the completion of Parent's due diligence
review of the Company, negotiation of a definite acquisition agreement and
satisfaction of other conditions. The release also disclosed that it was
Parent's intent to sell the Molding Division to Mr. Gilbert following
consummation of its acquisition of the Company, but that the sale of the Molding
Division was not a condition of the
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<PAGE> 24
acquisition by Parent of the Company. A copy of the press release is filed as
Exhibit (c)(9) and incorporated herein by this reference.
During the period from November 7, 1995 and December 18, 1995,
representatives of Parent met with members of the Company's management to
conduct due diligence reviews of the Company's operations and representatives of
Parent and the Company, together with their respective financial and legal
advisors, met to negotiate the terms of the definitive Merger Agreement
contemplated by the Letter of Intent.
During the week of November 26, 1995, the Independent Committee held
meetings with the Company's Chief Financial Officer and the representatives of
an independent business liquidation firm in order to obtain an independent
confirmation of information that a separate liquidation of the Molding Division
would not enable the Company to obtain a higher price for the Company's shares
than the $10.50 per share in cash that had been offered by Parent. The
representatives of that business liquidation firm advised the Committee that (i)
as a general rule a seller will realize a greater price from the sale of a
business as a going concern than from a liquidation, (ii) a liquidation of the
Molding Division would be time consuming and would probably increase the
operating losses being incurred by the Molding Division pending completion of
the liquidation and sale of the Division's assets and exacerbate the Company's
already difficult cash position, and (iii) based on financial data supplied by
the Company with respect to the assets and liabilities of the Molding Division,
it appeared unlikely that the Company could generate proceeds from a liquidation
that would be sufficient to enable the Company to pay the liabilities of the
Molding Division and cover the costs of the liquidation and, consequently, a
liquidation of Molding by the Company might adversely affect consummation of the
Offer and Merger.
From time to time during the months of November and December 1995, Mr.
Gilbert's attorneys and Parent's attorneys negotiated the terms of the
Stockholder Tender Agreement that provides for Mr. Gilbert to tender his Shares
in the Offer. The Company was advised that Mr. Gilbert had sought, during those
negotiations, to obtain an agreement from Parent to sell to Mr. Gilbert, or a
company to be organized by Mr. Gilbert, the assets of the Molding Division
following consummation of the Offer and Merger. However, the Company was
informed by Parent that, although its representatives advised Mr. Gilbert that
it was Parent's intention to sell or liquidate the Molding Division following
consummation of the Offer and the Merger, and that it was inclined to sell the
Molding Division to Mr. Gilbert, Parent refused to enter into negotiations with
Mr. Gilbert with respect to such a sale and that, in conformity with the
conditions insisted upon by the Independent Committee of the Board of Directors
of the Company, neither the Offer or Merger, nor the Stockholder Tender
Agreement, would be conditioned on a disposition of the Molding Division or any
agreement with respect thereto.
During the week of December 4, 1995, the Company completed the sale of the
assets of the Medical Products Division to a wholly-owned subsidiary of Vital
Signs. The Company received a purchase price for those assets consisting of
approximately $2,000,000 (net of transaction expenses) in cash, which was used
to reduce the Company's indebtedness to the Bank, and the assumption of
approximately $200,000 of liabilities of the Division.
By December 14, 1995, the terms of the Merger Agreement among the Company,
Parent and Purchaser, and the terms of the Stockholder Tender Agreement between
Mr. Gilbert and Parent, had been substantially finalized. On Thursday, December
14, 1995, the Board of Directors of the Company held a meeting to review and
consider the Merger Agreement, including the terms of the Offer and the Merger,
as set forth therein, and the transactions contemplated thereby. At that meeting
the Board received presentations from the Company's Chief Financial Officer, a
PW Representative, the Company's financial advisor, and a member of Stradling,
Yocca, Carlson & Rauth, the Company's legal advisor, concerning the structure of
the proposed business combination and the financial and legal terms of the
Merger Agreement, including the conditions and the tax aspects thereof, the
merits of the proposed business combination and a comparison of the structure of
the proposed business combination and terms of the Offer and Merger Agreement
with other alternatives that had been considered by the Company (which are more
fully described above). In attendance during such presentations were Messrs.
Gilbert, Posnick and Remer and Ms. Harrison, a member of Paul, Hastings,
Janofsky & Walker, counsel to the Independent Committee. The Board also received
from PaineWebber a
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<PAGE> 25
presentation of data and information that had been prepared as of December 5,
1995 regarding the terms of the Offer and Merger and rendered its opinion to the
effect that as of such date, the $10.50 cash consideration to be paid pursuant
to the Offer and the Merger was fair, from a financial point of view, to the
Company's stockholders (other than Parent and its affiliates).
Following the PaineWebber presentation to the full Board, the Board meeting
was recessed while the Independent Committee entered into its own deliberations.
Based on (i) the presentations described above, including a presentation by the
Company's Chief Financial Officer regarding recent operating results and the
financial condition of the Company, which disclosed that, although operating
results had recently improved, the Company continued to have substantial cash
requirements, including an obligation to repay its outstanding bank borrowings
by December 31, 1995, with no currently fixed source of funds to satisfy those
requirements, (ii) the Committee's consideration, during the previous six
months, of other proposals and alternatives to the business combination proposed
by Parent, (iii) the lack of any acceptable offers for the Molding Division
despite the efforts of management and PaineWebber to find a buyer for that
Division, (iv) the conclusion of the Board, after consultation with an
experienced business liquidation firm, that a liquidation of the Molding
Division was not a viable alternative that would enable the Company to obtain a
higher price for the Company's shares; (v) the factors considered by the
Committee at its meeting held on November 3, 1995 and those considered by the
Board at its meeting held on November 6, 1995, when it was determined to reject
the revised terms of the Spartech Merger, and (vi) further deliberations among
the members of the Independent Committee during the meeting, the Committee
determined that consummation of the Offer and Merger, on the terms and
conditions of the Merger Agreement, is in the best interests of the Company and
its stockholders and preferable to other transactions and alternatives that had
been considered by the Committee, and by unanimous vote the Independent
Committee recommended that the Company's Board of Directors approve the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger, and that the Board recommend to stockholders that they tender their
shares pursuant to the Offer. The Independent Committee also reviewed and
considered, and voted unanimously to recommend that the Board of Directors
approve, the Stockholder Tender Agreement proposed to be entered into by Parent
with Russell T. Gilbert. Under the Stockholder Tender Agreement, Mr. Gilbert,
who owns approximately 16.6% of the outstanding Shares (determined on a fully
diluted basis) and holds options to purchase an additional 76,250 shares of
Company Common Stock, would agree to tender his Shares in the Offer, and not
withdraw those Shares unless the Offer is terminated, as an inducement to Parent
(i) to enter into the Merger Agreement and proceed with the transactions
contemplated thereby, and (ii) to agree that the minimum number of shares of
Company Common Stock required to be tendered in the Offer and not withdrawn as a
condition to Purchaser's obligation to consummate the purchase of shares in the
Offer (the "Minimum Condition") would be a simple majority of the Company's
outstanding shares (inclusive of the Gilbert Shares), as opposed to a higher
percentage of the Company's outstanding shares, as had been proposed by Parent.
In approving the Stockholder Tender Agreement, the Committee also considered the
terms of that Agreement restricting Gilbert from selling his shares to any third
party and requiring that his shares be voted for the Merger and against any
other merger or extraordinary transaction involving the Company. The Committee
concluded, after discussing the matter with the PW Representatives, the
Committee's legal counsel and the Company's legal counsel, that while such
provisions might discourage, they could not by themselves prevent, a third party
from successfully completing an acquisition of the Company if the third party
was prepared to make a firm proposal to acquire the Company that was financially
superior to the Offer and the Merger.
Following the completion of the meeting of the Independent Committee, the
meeting of the full Board of Directors of the Company was reconvened and the
directors were informed of the determination and recommendation of the
Independent Committee with respect to the approval of the Merger Agreement and
the Offer and Merger contemplated therein, and the Stockholder Tender Agreement.
Based on the presentations described above, the recommendation of the
Independent Committee and further deliberations, the Board of Directors
unanimously determined that the Merger Agreement is in the best interests of the
stockholders of the Company and that the terms of the Offer and Merger
contemplated thereby are, from a financial standpoint, fair to the Company's
stockholders and, by unanimous vote, approved the Merger Agreement with Parent
and Purchaser and the consummation of the Offer and Merger pursuant to the terms
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<PAGE> 26
and conditions of the Merger Agreement, and unanimously adopted resolutions
recommending that the Company's stockholders accept the Offer and tender their
shares pursuant to the Offer.
In addition, the Board (i) approved the Offer and the Merger, and the
Stockholder Tender Agreement, in accordance with Section 203 of the DGCL and
fair price and supermajority vote provisions contained in the Company's
Certificate of Incorporation, with the effect that neither Section 203 nor such
fair price and supermajority vote provisions will require any special vote of
the stockholders in connection with the Offer or the Merger or the transactions
contemplated by the Stockholder Tender Agreement and none of the restrictions on
business combinations set forth in Section 203 or the Certificate of
Incorporation shall apply to the Merger, and (ii) resolved to recommend approval
and adoption of the Merger Agreement and the Merger by the Company's
stockholders (if such approval is required by law). The Board of Directors also
unanimously approved an amendment to the Company's Stockholders Rights Plan (the
"Rights Plan") that provides that neither Parent nor Purchaser, nor any of their
affiliates, will be deemed to be an Acquiring Person under the Rights Plan, and
none of the rights issued pursuant thereto would be distributed or triggered, by
reason of the Merger Agreement or consummation of any of the transactions
contemplated thereby.
The December 14 meetings of the Independent Committee and of the Board were
recessed to December 19, 1995, in order that the Committee and the Board could
further consider all of the information which had been presented and in order
that the Company and Parent and their respective attorneys could finalize
documentation and arrange for a written agreement from the Bank under which the
Bank would agree to waive restrictions against the Merger and would extend due
dates and existing waivers of default until April 30, 1996. On the morning of
December 19, 1995, the Bank and the Company finalized a letter agreement under
which the parties agreed that such waivers and extensions would be conditioned
upon factors including: (1) the parties preparation and execution of definitive
amendments on or before December 28, 1995, and (2) the Merger Agreement being
executed no later than December 28, 1995, and (3) the Merger being consummated
no later than April 30, 1996. The Bank also agreed to extend the maturity date
of its bridge loans and line of credit note to April 30, 1996 and increase the
credit availability under its bridge note by $650,000, subject to the foregoing
conditions and the Company's payment of a restructuring fee of $25,000. In
addition, the Bank will reasonably consider a request by Mesa Leasing, a
partnership of which the partners are the Company and Mr. Gilbert, to reinstate
an original maturity date of its promissory note in favor of the Bank and
eliminate the need for cash collateral for the Letter of Credit for the debt
secured by the deed of trust on the property owned by Mesa Leasing and used in
the Molding Division of the Company. On December 22, 1995 the Company and the
Bank entered into the definitive amendment agreements contemplated by the
December 19, 1995 letter agreement.
On the morning of December 19, 1995, the Independent Committee and the
Board of Directors reconvened the meeting recessed from December 14, 1995. The
Independent Committee met first and reviewed the final documentation related to
the Offer and Merger and determined that the considerations and discussions held
at its meeting of December 14, 1995 continued to apply. The Independent
Committee received and reviewed the written fairness opinion of PaineWebber, a
copy of which is attached hereto as Exhibit (c)(10). Based upon all of the
factors described above and with respect to the meeting of December 14, 1995,
the Independent Committee renewed, ratified and affirmed its prior
recommendations to the Board of Directors. The Board of Directors then met and
reviewed the final versions of the documentation. The Board also was advised by
Mr. Gilbert that there were no agreements or commitments between himself and
Parent relating to a possible purchase by him of the Molding Division, although
it was his intention to enter into negotiations with Parent regarding such a
purchase that would be conditioned on consummation of the Offer and the Merger.
Based upon the foregoing and the opinion and presentation of PaineWebber, the
Board of Directors ratified and confirmed its actions taken on December 14, 1995
and authorized the officers of the Corporation to execute and perform the Merger
Agreement on behalf of the Company and to consummate the transactions
contemplated thereby. On December 20, 1995, Parent and the Company issued a
joint press release announcing the signing of the Merger Agreement and the
Offer. A copy of that press release is filed as Exhibit (c)(11) hereto and
incorporated herein by this reference.
The written opinion of PaineWebber (the "Opinion") contains a description
of the procedures followed, matters considered, assumptions made and limitations
of the review undertaken by PaineWebber in rendering
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<PAGE> 27
its Opinion. STOCKHOLDERS ARE URGED TO READ CAREFULLY THE OPINION IN ITS
ENTIRETY. The Opinion has been provided solely for use by the Board of Directors
of the Company, only addresses the fairness of the consideration to be received
by the stockholders of the Company from a financial point of view and does not
constitute a recommendation to any stockholder of the Company to tender his or
her shares pursuant to the Offer.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
THE STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER
AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The foregoing discussion of the information and factors considered and
given weight by the Board in approving the Merger Agreement and the Offer and
Merger, is not intended to be exhaustive. In view of the variety of factors
considered, the Board did not find it practicable to, and did not, quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination. In addition, different members of the Board may have given
different weights to different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained PaineWebber Incorporated ("PaineWebber") to act as
exclusive financial advisor to the Special Committee of the Board of Directors
of the Company to evaluate strategic alternatives, including a possible
acquisition, merger, sale or financing involving the Company or any of its
Subsidiaries. The Company has agreed to pay PaineWebber (i) a retainer fee of
$25,000 per month commencing in June 1995 and payable for a minimum of four
months (the "Monthly Payments"), in addition to $175,000 earned by PaineWebber
prior to August 16, 1995, (ii) an Opinion Fee of $300,000 payable at the time
PaineWebber delivers its opinion with respect to whether or not the
consideration to be received in the transaction with Parent is fair, from a
financial point of view, to the shareholders of the Company, and (iii) upon
successful completion of the Offer and the Merger, an M & A Advisory Fee equal
to 1.5% of the total purchase price. The Monthly Payments paid after September
1995 and the Opinion Fee will be credited toward the M & A Advisory Fee. "Total
purchase price" is defined as the fair market value of any securities issued and
any cash consideration paid to the Company in connection with the Offer and the
Merger, plus the amount of any indebtedness of the Company that is assumed,
directly or indirectly, by the Purchaser; provided that the M & A Advisory Fee
payable with respect to the Offer and the Merger shall be based upon the greater
of (i) the amount of the indebtedness of the Company as of the date of execution
of the Merger Agreement, and (ii) the amount of such indebtedness as of the date
of consummation of the merger contemplated by the Merger Agreement. The Company
also has agreed to reimburse PaineWebber for its reasonable out-of-pocket
expenses, including the reasonable fees and expenses of its counsel up to a
maximum of $50,000, and to indemnify PaineWebber and certain related persons
against certain liabilities, including liability under the federal securities
laws.
PaineWebber is an internationally recognized investment banking firm and,
as part of its investment banking services, is regularly engaged in the
valuation of businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. In
the ordinary course of its business, PaineWebber from time to time may effect
transactions and hold positions in securities of the Company.
Neither the Company nor any person acting on its behalf intends to employ,
retain or compensate any other person to make solicitations or recommendations
to the stockholders of the Company in connection with the Offer or the Merger.
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<PAGE> 28
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, except as otherwise disclosed
in Item 3 above, no transactions in Shares have been effected within the past 60
days by the Company or by any executive officer, director, affiliate or
subsidiary of the Company.
(b) To the best of the Company's knowledge, all of the Company's executive
officers, directors and affiliates currently intend to tender their Shares
pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) No negotiation is being undertaken or is underway by the Company in
response to the Offer that relates to or would result in: (i) an extraordinary
transaction, such as a merger or reorganization, involving the Company or any
subsidiary of the Company; (ii) a purchase, sale or transfer of a material
amount of assets by the Company or any subsidiary of the Company; (iii) a tender
offer for, or other acquisition of, securities by or of the Company; or (iv) any
material change in the present capitalization or dividend policy of the Company.
(b) Except as set forth in Items 3(b) and 4 above, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Offer which relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
In connection with the possible designation by Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board other than at
a meeting of the Company's stockholders, the Company will furnish to its
stockholders an Information Statement pursuant to Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
(a)(1)................... Letter to Stockholders dated December 27, 1995 from Russell T.
Gilbert, President and Chief Executive Officer of the Company*
(b)...................... None
(c)(1)................... Agreement and Plan of Merger, dated as of December 19, 1995, among
Parent, Purchaser and the Company.
(c)(2)................... Stockholder Tender Agreement, dated as of December 19, 1995, among
Parent, Purchaser and Mr. Russell T. Gilbert.
(c)(3)................... Confidentiality Agreement, dated September 2, 1994, between the
Company and Parent.
(c)(4)................... Ronald Trepp Employment Agreement dated as of September 15, 1995.
(c)(5)................... Press Release issued June 12, 1995 announcing anticipated
retirement of Russell T. Gilbert.
(c)(6)................... Press Release issued on August 9, 1995 relating to the engagement
of PaineWebber.
(c)(7)................... Letter dated October 30, 1995 from Spartech relating to the
proposed Spartech Merger.
(c)(8)................... Letter of Intent, in the form executed on November 3, 1995, by
Parent and the Company and amendments dated December 4, 1995,
December 11, 1995 and December 14, 1995, respectively.
(c)(9)................... Press Release issued on November 8, 1995 announcing the signing of
the Letter of Intent with Parent.
(c)(10).................. Fairness Opinion dated December 19, 1995 issued to the Company's
Board of Directors by PaineWebber.*
(c)(11).................. Press Release issued December 20, 1995 announcing the signing of
the Merger Agreement and the Offer to be commenced by Purchaser.
(c)(12).................. Amendment No. One to Rights Agreement dated as of December 19,
1995 between the Company and First Interstate Bank, as Rights
Agent
</TABLE>
- ---------------
* Included in copies mailed to stockholders.
28
<PAGE> 29
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
CIMCO, INC.
/s/ RUSSELL T. GILBERT
------------------------------------
Date: December 27, 1995 Name: Russell T. Gilbert
Title: President and Chief Executive
Officer
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<PAGE> 30
SCHEDULE I
ADDITIONAL INFORMATION PROVIDED PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, AND RULE 14F-1 THEREUNDER
This information is being furnished in connection with the designation by
the Purchaser, pursuant to the Merger Agreement, of persons to be elected to the
Company's Board of Directors other than at a meeting of the Company's
stockholders. The Merger Agreement provides that, promptly upon the payment by
Purchaser or any of Parent's direct or indirect subsidiaries pursuant to the
Offer for such number of Shares which represent at least a majority of the
outstanding Shares and from time to time thereafter, Purchaser shall be entitled
to designate members of the Company's Board of Directors such that Purchaser,
subject to compliance with Section 14(f) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), will have a number of representatives on the
Board of Directors, rounded up to the next whole number, equal to the product
obtained by multiplying the number of directors fixed in the Company's Bylaws by
the percentage of Shares beneficially owned by Parent or any of its
subsidiaries.
The Company has agreed, upon request by Purchaser, promptly to increase the
size of the Board of Directors to the extent permitted by its Certificate of
Incorporation and/or use its best efforts to secure the resignations of such
number of directors as is necessary to enable Purchaser's designees to be
elected to the Board of Directors and use its best efforts to cause Purchaser's
designees to be so elected. The Company has agreed to take, at the request of
Purchaser and at its expense, all action necessary to effect any such election,
including the mailing to its stockholders of the information required by Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, in form and
substance reasonably satisfactory to Purchaser and its counsel.
INFORMATION WITH RESPECT TO PURCHASER'S DESIGNEES
Purchaser has stated in the Offer to Purchase that Purchaser intends to
designate at least a majority of the directors of the Company following
consummation of the Offer. The names and certain biographical information
concerning these designees are as follows.
Purchaser reserves the right to select other designees to be elected to the
Board of Directors. Any such other designees shall be selected from the
directors and executive officers of Parent or Purchaser. Information with
respect to such persons is set forth in Annex I of the Offer to Purchase, a copy
of which is being mailed to the Company's stockholders. The information on such
Annex I is incorporated herein by reference.
None of the Purchaser's designees currently is a director of, or holds any
position with, the Company. The Company has been advised by Purchaser and Parent
that, to the best of their knowledge, none of Purchaser's designees or any of
their associates beneficially owns any equity securities of the Company, or
rights to acquire any equity securities of the Company, or, except as disclosed
in the Offer to Purchase, has been involved in any transactions with the Company
or any of its directors, executive officers or affiliates which are required to
be disclosed pursuant to rules and regulations of the Securities and Exchange
Commission (the "Commission").
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<PAGE> 31
<TABLE>
<S> <C>
D. R. Schrank -- Age-47 Vice President -- North American Plastics of Parent, 1995.
Vice President and Chief Financial Officer of Parent,
1993-1995. Senior Vice President and Chief Financial Officer,
Sealy, Inc., 1989-1993.
G. W. Henry -- Age-50 Vice President -- International Operations of Parent, 1994 to
date. Vice President -- Operations of Parent, 1992-1994. Vice
President -- Marine Services and Special Projects of Parent,
1990-1992.
J. S. Pyke, Jr. -- Age-57 Vice President and General Counsel of Parent, 1979 to date.
Secretary of Parent, 1973 to date.
M. S. Duffey -- Age-41 Vice President, Chief Financial Officer and Treasurer of
Parent, 1995. Treasurer of Parent, 1994-1995; Vice President
and Treasurer, Foote, Cone & Belding Communications, Inc.
(worldwide advertising agency), 1992-1994, Chicago, Illinois;
Vice President and Treasurer, Outboard Marine Corporation,
1986-1992, Waukegan, Illinois.
T. E. Lindsey -- Age-45 Controller of Parent, 1990 to date.
</TABLE>
I-2
<PAGE> 32
INFORMATION WITH RESPECT TO THE COMPANY
1. CERTAIN INFORMATION CONCERNING THE COMPANY AND THE COMPANY'S BOARD OF
DIRECTORS AND
EXECUTIVE OFFICERS
GENERAL
The Shares comprise the only class of voting stock of the Company
outstanding and each Share is entitled to one vote. There were 2,970,481 Shares
outstanding on November 30, 1995.
THE CURRENT MEMBERS OF THE BOARD
The Company's Board of Directors currently consists of 5 members. To the
extent the Company's Board of Directors will consist of persons who are not
Purchaser's Designees, the Board is expected to consist of those persons who are
currently directors of the Company who have not resigned.
The information presented below sets forth, as of the date hereof, as to
each director, his or her age and principal occupation and business experience
and the period during which each has served as a director of the Company. In
addition, as to each director who is also an executive officer, his or her age
and employment history with the Company are included. See "Information Regarding
Board Meetings and Committees" for information concerning the composition of
Board committees, and "Security Ownership of Certain Beneficial Owners and
Management" for the aggregate number of Shares beneficially owned by each
director.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH COMPANY
- ---------------------- --- -----------------------------------
<S> <C> <C>
Russell T. Gilbert 65 President, Chief Executive Officer,
Director and Chairman of the Board
Utta K. Harrison 59 Corporate Secretary and Director
Adolph Posnick 69 Director
Franklin I. Remer 66 Director
Frederick M. Swenson 69 Director
</TABLE>
MR. GILBERT founded the Company in 1959 and has served as its President,
Chief Executive Officer and as a director since its inception. In May 1993, Mr.
Gilbert also assumed the newly-created position of Chairman of the Board of
Compounding Technology, Inc., a wholly-owned subsidiary of the Company.
MS. HARRISON joined the Company in August 1968 and has served as Corporate
Secretary and as a director since July 1977. From December 1988 until January
1991, she also served as Associate Vice President of the Company.
MR. POSNICK was elected to the Board in September 1994. He is the retired
Chairman and Chief Executive Officer of Ferro Corporation, a company engaged in
the manufacture of filled and reinforced thermoplastics and color concentrates;
porcelain enamel frit, organic powder coatings inks, colors and pigments; and
polymer additives, including heat and light stabilizers. Mr. Posnick held this
position from 1988 until his retirement in 1991. Mr. Posnick joined Ferro
Corporation in 1947 as a Research Engineer and held many positions with that
company over the next 44 years. Mr. Posnick continues to serve as the chairman
of the board of directors of Ferro Corporation as well as on the boards of
directors of First Union Management, Inc. and Baldwin Wallace College. Mr.
Posnick also served as Chairman of the Greater Cleveland Trade Alliance and
continues to serve on its board.
MR. REMER has been a director of the Company since 1972. Mr. Remer is a
partner in the law firm of Remer, DiVincenzo & Griffith located in Corona del
Mar, California, and has rendered legal services to the Company and Mr. Gilbert,
as an individual, for more than thirty years.
MR. SWENSON has been a director of the Company since 1964. Mr. Swenson is
currently a self-employed business consultant and has been engaged in this
business for more than five years.
I-3
<PAGE> 33
CERTAIN ARRANGEMENTS CONCERNING THE ELECTION OF DIRECTORS
Other than as described in Item 3 of Schedule 14D-9 under the heading
"Merger Agreement -- Other Agreements of Parent, the Purchaser and the Company,"
there are presently no arrangements concerning the election of directors of the
Company.
INFORMATION REGARDING BOARD AND COMMITTEE MEETINGS
The Board of Directors held five meetings during the fiscal year ended
April 30, 1995. Each current director attended 75% or more of the aggregate
number of (a) the meetings of the Board held while he or she was a director and
(b) the meetings of each Board committee held while he or she was assigned as a
regular member of such committee.
The Board of Directors has an Audit Committee, a Compensation Committee, a
Stock Option Committee and a Nominating Committee.
During fiscal 1995, the Audit Committee was comprised of Dr. James L. Doti
and Messrs. Kenneth E. Hendrickson and Swenson. Dr. Doti and Mr. Hendrickson
resigned from the Board of Directors in August 1995. The principal duties of the
Audit Committee are to recommend to the Board of Directors the selection of the
Company's independent accountants, to discuss and review the Company's
accounting policies, and to review the accounting procedures and internal
control procedures recommended by the Company's independent accountants. One
Audit Committee meeting was held during the fiscal year.
During fiscal 1995, the Compensation Committee consisted of Dr. Doti and
Messrs. Hendrickson, Remer and Swenson. The Compensation Committee's
responsibilities include reviewing the compensation of the Company's President
and Chief Executive Officer and all other officers of the Company and reporting
its findings and recommendations to the Board of Directors. The Compensation
Committee held one meeting during the fiscal year. A detailed report of the
Compensation Committee begins at page I-10.
During fiscal 1995, Ms. Harrison, Mr. Posnick and Mr. Remer comprised the
Stock Option Committee. The Stock Option Committee is responsible for
administering the Company's stock option plans adopted in 1988 and 1991. The
Stock Option Committee held four meetings during fiscal 1995.
During fiscal 1995, the Nominating Committee was comprised of Dr. Doti, Ms.
Harrison and Mr. Posnick. The Nominating Committee is responsible for
recommending candidates to the full Board of Directors for consideration for
nomination as directors. The Nominating Committee also considers candidates
recommended by stockholders. The stockholders may submit such recommendations to
the Secretary of the Company, and the submission should include a statement of
the candidate's business experience and other business affiliations and
confirmation of the candidate's willingness to serve if elected. The Nominating
Committee held one meeting during the fiscal year.
CURRENT EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE COMPANY
The names, ages and positions of all executive officers and key employees
of the Company and its subsidiaries as of the date hereof are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH COMPANY
- --------------------- --- -----------------------------------------------------
<S> <C> <C>
Russell T. Gilbert 65 President and Chief Executive Officer
Utta K. Harrison 59 Secretary
Franklin L. Jackson 62 President and Chief Operating Officer of the
Company's specialty compounding subsidiaries
James L. Richter 40 Vice President of Sales and Marketing
Jennifer A. Shea 38 Vice President of Administration
Laurance W. Simmons 67 Treasurer
L. Ronald Trepp 57 Vice President of Finance and Chief Financial Officer
</TABLE>
I-4
<PAGE> 34
Additional information with respect to the executive officers and key
employees of the Company and its subsidiaries is set forth below.
MR. GILBERT and MS. HARRISON are also directors of the Company. See "The
Current Members of the Board" for biographical information regarding such
executive officers.
MR. JACKSON joined the Company in March 1980. From 1983 to February 1988
Mr. Jackson served as Vice President and General Manager of Compounding
Technology, Inc., the Company's specialty compounding subsidiary. In March 1988
Mr. Jackson was promoted to Executive Vice President and to the offices of
President and Chief Operating Officer in May 1993.
MR. RICHTER joined the Company in January 1995 as Vice President of Sales
and Marketing for the Company's custom molding operations. Prior to joining the
Company, Mr. Richter was employed by General Electric Company ("GE") for
thirteen years in various positions in GE's plastics and silicones businesses.
His most recent position was Business Manager for the silicone rubber business
within GE Silicones.
MS. SHEA joined the Company in April 1986. From 1991 to 1993 Ms. Shea
served as Assistant to the President of the Company. In March 1993 she was
promoted to Associate Vice President and assumed her present position in March
1995.
MR. SIMMONS joined the Company in August 1974, was appointed Chief
Financial Officer in January 1977, and was elected as a director of the Company
in 1977. In December 1991, Mr. Simmons resigned from the Board of Directors and
was elected to the position of Treasurer of the Company.
MR. TREPP joined the Company in December 1991 as Vice President of Finance
and Chief Financial Officer. From 1987 until December 1991, Mr. Trepp was
Executive Vice President and Chief Financial Officer of Computer Communications,
Inc., a company engaged in the design, development and marketing of data
communications equipment and software. From 1981 until 1987 Mr. Trepp was Vice
President of Finance with Laidlaw Transportation, Inc., a national school bus
contracting company.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Under the securities laws of the United States, the directors and executive
officers of the Company and persons who own more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Commission and The Nasdaq Stock Market. Specific due dates for these reports
have been established, and the Company is required to disclose herein any late
filings during fiscal 1995. To the Company's knowledge, based solely on its
review of the copies of such reports required to be furnished to the Company
during fiscal 1995, all of these reports were timely filed except that Mr.
Richter submitted (i) a late filing on Form 3, notifying the SEC of his position
as an officer of the Company, and (ii) a late filing on Form 4 related to
issuance of a stock option. Mr. Richter does not currently own any of the
Company's Common Stock.
I-5
<PAGE> 35
2. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of November 30, 1995
regarding the beneficial ownership of the Company's Common Stock by (i) each
person known to the Company to beneficially own more than 5% of the Common
Stock, (ii) each director of the Company or person who will be a director-
designate of Purchaser individually, (iii) each of the executive officers named
in the Summary Compensation Table appearing elsewhere herein and (iv) all
directors, director-designates and executive officers of the Company as a group.
Unless otherwise indicated in the footnotes to the following table, (and except
for voting and investment powers held jointly with such person's spouse) each of
the persons or entities listed below has sole voting and investment power with
respect to the outstanding shares of Common Stock shown as beneficially owned by
such person or entity.
<TABLE>
<CAPTION>
SHARES OF COMMON PERCENT OF OUTSTANDING COMMON
NAME AND ADDRESS* STOCK BENEFICIALLY OWNED STOCK BENEFICIALLY OWNED***
- ------------------------------------------ ------------------------ -----------------------------
<S> <C> <C>
Russell T. Gilbert........................ 590,984(1) 19.62
Utta K. Harrison.......................... 10,000(3) **
Adolph Posnick............................ 10,000(4) **
Franklin I. Remer......................... 14,390(2) **
Frederick M. Swenson...................... 14,298(2)(5) **
Franklin L. Jackson....................... 6,603(5)(6) **
L. Ronald Trepp........................... 10,010(4)(7) **
Employee Stock Ownership Plan
of the Company and its Subsidiaries....... 159,817(8) 5.40
265 Briggs Avenue
Costa Mesa, CA 92626
Pioneering Management Co.................. 290,000(9) 9.80
60 State Street
Boston, MA 02109
Dimensional Fund Advisors Inc............. 154,150(10) 5.21
1299 Ocean Avenue
Santa Monica, CA 90401
All executive officers and
directors as a group (12 persons)......... 688,717(11) 22.37
All director designates as a group (5
persons)................................ 0(12) **
</TABLE>
- ---------------
* All directors and executive officers can be contacted at Cimco, Inc., 265
Briggs Avenue, Costa Mesa, CA 92626-4555.
** Represents less than one percent of the outstanding shares of the Company's
Common Stock.
*** The percentage ownership for each stockholder is calculated by assuming the
exercise or conversion of all warrants, options and convertible securities
held by such holder exercisable on or within 60 days of November 30, 1995,
and the nonexercise and nonconversion of all other outstanding warrants,
options and convertible securities.
(1) Includes an aggregate of 4,394 shares owned of record by Mr. Gilbert as
custodian for such shares held for the benefit of his grandchildren, and
51,250 shares which he has, or will have on or within 60 days after the
Record Date, the right to acquire upon exercise of a stock option. In
addition, includes 10,257 shares credited under the Company's Employee
Stock Ownership Plan ("ESOP") to the account of Mr. Gilbert as of April 30,
1995, but does not include any additional shares which may have accrued to
his account subsequent to that date.
(2) Includes 11,250 shares which the designated individual has, or will have on
or within 60 days after November 30, 1995, the right to acquire upon
exercise of a stock option.
(3) Includes 10,000 shares which the designated individual has, or will have on
or within 60 days after November 30, 1995, the right to acquire upon
exercise of a stock option.
I-6
<PAGE> 36
(4) Includes 5,000 shares which the designated individual has, or will have on
or within 60 days after November 30, 1995, the right to acquire upon
exercise of a stock option.
(5) Includes 625 shares owned by Mr. Swenson's spouse in her own name as to
which he disclaims any beneficial ownership.
(6) Includes 1,603 shares credited under the ESOP to Mr. Jackson's account as
of April 30, 1995, but does not include any additional shares which may
have accrued to his account subsequent to that date.
(7) Includes 10 shares credited under the ESOP to the account of Mr. Trepp as
of April 30, 1995, but does not include any additional shares which may
have accrued to his account subsequent to that date.
(8) The ESOP Trust owns these shares for the benefit of approximately 750
employees who were participants in the ESOP as of April 30, 1995, and
certain former employees who have not yet received their distributions. The
total number of shares listed for the ESOP in the foregoing table includes
amounts included in the individual totals shown for Messrs. Gilbert,
Jackson and Trepp, and all executive officers and directors as a group, as
described in footnote (11) below. In general, shares listed as owned by the
ESOP are beneficially owned by the ESOP participants. Sole voting power
with respect to ESOP shares allocated to a participant's account is
exercised by the trustee in accordance with the participant's directions.
Unallocated ESOP shares are voted by the trustee. Sole investment power
with respect to all ESOP shares is held by the ESOP Committee, which
consists of employees of the Company, including management employees.
(9) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on February 11, 1995, and verified with a
representative of Pioneering Management Corporation on August 21, 1995,
represents 290,000 shares which are owned of record by various investment
advisory clients of Pioneering Management Corporation.
(10) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on February 9, 1995, and verified with a
representative of Dimensional Fund Advisors Inc. on August 21, 1995,
represents 154,150 shares which are owned of record by various funds of
Dimensional Fund Advisors Inc.
(11) Includes an aggregate of 19,423 shares credited under the ESOP to the
accounts of executive officers as of April 30, 1995, but does not include
any additional shares which may have accrued to those accounts subsequent
to that date. Also includes 134,800 shares which executive officers have,
or will have on or within 60 days after November 30, 1995, the right to
acquire upon the exercise of stock options; and includes an aggregate of
24,033 shares owned by, or jointly with, the spouses of certain executive
officers. Also includes 900 shares owned by one executive officer under the
Company's 401(k) Plan and 4,394 shares owned by another as custodian for
his grandchildren.
(12) The director-designates (G.W. Henry; J.S. Pyke, Jr.; M.S. Duffey; T.E.
Lindsey; and D.R. Schrank) do not beneficially own any shares of the Common
Stock.
I-7
<PAGE> 37
3. CERTAIN INFORMATION CONCERNING EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash compensation paid or
accrued by the Company during each of the last three fiscal years to the Chief
Executive Officer and each of the other three most highly compensated executive
officers of the Company whose aggregate cash compensation exceeded $100,000.
There are no other executive officers of the Company whose aggregate cash
compensation exceeded $100,000 in fiscal 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
- ---------------------------------------------------------------------------------------------------------------
LONG TERM
COMPENSATION
AWARDS
------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($)(2) ($)(2) (#) ($)(3)
- ------------------------------- ---- ------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Russell T. Gilbert 1995 253,760 0 4,500 50,000 4,713
President and Chief 1994 253,760 0 5,500 0 4,509
Executive Officer 1993 248,880 0 4,500 10,000 4,364
Dale H. Behm(4) 1995 99,760 0 0 10,000 0
Executive Vice President 1994 0 0 0 0 0
and General Manager 1993 0 0 0 0 0
Franklin L. Jackson 1995 162,500 0 2,000 10,000 3,572
President and Chief 1994 150,775 15,000 2,000 0 3,464
Operating Officer -- 1993 146,570 12,260 2,000 0 3,911
Compounding Technology Inc.
L. Ronald Trepp 1995 100,100 0 0 0 1,531
Vice President of Finance 1994 100,100 0 0 0 1,502
and Chief Financial Officer 1993 103,950 0 0 0 491
</TABLE>
- ---------------
(1) Amounts shown include compensation deferred pursuant to Section 401(k) of
the Internal Revenue Code of 1986, as amended.
(2) Amounts shown represent fees paid to management for their services as
directors of the Company or of a subsidiary. As permitted by rules
promulgated by the SEC, no perquisites are listed individually where such
perquisites do not exceed the lesser of 10% of annual salary plus bonus or
$50,000.
(3) Amounts shown represent Company matching contributions under the Company's
401(k) Plan, but exclude incidental car allowances which did not exceed
$10,000 for any one executive during fiscal year 1995.
(4) Mr. Behm joined the Company in July 1994 and his employment terminated in
November 1995.
OPTION GRANTS AND EXERCISES IN FISCAL 1995
The Company currently maintains two stock option plans for the purpose of
attracting and retaining qualified personnel. Under the 1988 Incentive Stock
Option Plan ("1988 Plan"), options with respect to 250,000 shares (after
adjustment for a five-for-four stock split effective May 2, 1989) of Common
Stock may be granted to employees and directors of the Company and its
subsidiaries. Under the 1991 Stock Option Plan ("1991 Plan"), options with
respect to 150,000 shares of Common Stock may be granted to employees and
directors of the Company and its subsidiaries.
The Plans are administered by a Stock Option Committee appointed by the
Board of Directors. The exercise price of an incentive stock option granted
under the Plans may not be less than the fair market value of a share of the
Common Stock on the date of grant of the option, and the term of such incentive
stock option may not exceed five years from the date of grant. The exercise
price of each share subject to non-qualified stock options must be at least 80%
of the fair market value of a share of Common Stock on the date the option is
granted, and the term of a non-qualified option may not exceed ten years and one
day from the date of grant.
I-8
<PAGE> 38
The following tables summarize option grants and exercises during fiscal
1995 by the named executive officers along with the value of unexercised options
held by such persons at the end of fiscal 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
---------------------------------------- ASSUMED ANNUAL RATES OF STOCK
% OF TOTAL PRICE
OPTIONS APPRECIATION FOR OPTION TERM(3)
OPTIONS GRANTED TO EXERCISE OR ----------------------------------
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#)(1) FISCAL 1995 ($/SH) DATE 5% [$] 10% [$]
- -------------------------- ------- ------------ ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Russell T. Gilbert 37,500 32.8% 6.88(2) 05/18/109 329,250 415,875
12,500 10.9% 6.33(2) 06/04/109 101,125 127,500
Dale H. Behm 10,000 8.7% 6.00 07/25/109 76,700 96,700
Franklin L. Jackson 7,500 6.6% 6.25 05/18/109 59,775 75,600
2,500 2.2% 5.75 06/04/109 18,350 23,175
L. Ronald Trepp 0.0%
</TABLE>
- ---------------
(1) Options disclosed above were granted pursuant to the Company's 1988 Stock
Option Plan on May 18, 1994, June 4, 1994 or July 25, 1994. All options
disclosed above, excluding Mr. Gilbert's, became and will become exercisable
in one-third increments on the first, second and third anniversaries of the
grant date. One half of Mr. Gilbert's options became exercisable on the date
of grant and one half will become exercisable on the first anniversary of
the grant date.
(2) The exercise price per share of Common Stock represents 110% of the fair
market value of the underlying shares on the date of grant.
(3) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
I-9
<PAGE> 39
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY
AT OPTIONS AT APRIL 30, 1995
APRIL 30, 1995 (#) (#)(2)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Russell T. Gilbert 51,250 25,000 0 0
Dale H. Behm 0 10,000 0 0
Franklin L. Jackson 0 10,000 0 0
L. Ronald Trepp 10,000 0 0 0
</TABLE>
- ---------------
(1) No options were exercised by the named executive officers in fiscal 1995.
(2) Based on the reported closing price of the Common Stock ($5.25) on The
Nasdaq National Market on April 28, 1995.
DIRECTOR COMPENSATION
Each director receives an attendance fee of $500 for each meeting of the
Board of Directors he or she personally attends and for each meeting of a
committee of the Board of Directors he or she attends which is not attended on
the same day as a meeting of the Board of Directors. Each of the directors who
are not employees of the Company also receives an annual retainer of $7,200 for
services as a director. As detailed in the footnotes to the table under the
heading Security Ownership of Certain Beneficial Owners and Management, each
non-employee director was granted non-qualified stock options under an agreement
issued outside of the Plans.
CERTAIN TRANSACTIONS
The Company leases its executive offices and principal manufacturing
facility from Mesa Leasing Company ("Mesa Leasing"), a partnership in which the
Company and Russell T. Gilbert, the President, Chief Executive Officer, and a
director of the Company, each have a 50% ownership interest. Aggregate rental
payments made by the Company to Mesa Leasing in fiscal 1995 were $388,512. The
lease currently provides for monthly rent of $32,376 in addition to insurance,
maintenance, property taxes and certain other rental costs.
During fiscal 1995, the Company continued to engage the law firm of Remer,
DiVincenzo & Griffith to perform certain legal services for the Company. This
law firm has provided legal services to the Company for more than 30 years. Mr.
Remer, a director of the Company, is a partner of Remer, DiVincenzo & Griffith.
4. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following non-employee directors served on the Compensation Committee
of the Company's Board of Directors during fiscal 1995: Dr. Doti, Mr.
Hendrickson, Mr. Remer and Mr. Swenson. No current member of the Company's
Compensation Committee is a current or former officer or employee of the
Company. There are no Compensation Committee interlocks between the Company and
other entities involving the Company's executive officers and Board members who
serve as executive officers or board members of such other entities. For a
discussion of the relationship between the Company and the law firm in which Mr.
Remer is a partner, see "Certain Transactions" above.
5. REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION.
The Compensation Committee of the Board of Directors (the "Compensation
Committee") administers the Company's executive compensation program. After
consideration of the Committee's recommendations, the full Board of Directors
reviews and approves salaries of all elected officers, including those of the
executive officers named in the Summary Compensation Table. The Compensation
Committee is responsible for recommending to the Board and administrating all of
the elements of executive compensation, including incentive awards and
recommending the grant of long-term incentive awards, subject to Stock Option
I-10
<PAGE> 40
Committee approval. CIMCO's executive compensation program is designed to align
total compensation with stockholders' interest and to provide a balanced
relationship between annual and long-term strategic objectives.
COMPENSATION OBJECTIVES
The objectives of the Company's executive compensation program are:
- To provide cash compensation at levels competitive within the
industry;
- To reward above-average performance; and
- To tie individual compensation to the achievement of previously
determined sales and income goals.
COMPENSATION COMPONENTS
The executive compensation program is comprised of three compensation
related components: base salary, incentive awards (bonuses) and long-term
incentive awards (stock options).
Base Salary. The Company's intent is to pay base salaries at a level close
to the industry average for the particular position. The Company participates in
and utilizes a well-recognized, annual compensation survey that focuses on
manufacturing companies in the Company's geographic region. Salary increases are
considered on an annual basis and, when granted, are also based on other factors
including, but not limited to, individual performance, attainment of
pre-established goals, managerial ability and performance on special projects.
Incentive Awards (Bonuses). Executives who have been nominated and approved
by the Board participate in the Company's Management Incentive Bonus Plan (the
"Incentive Plan"). Achievement of established return on assets and income
objectives is rewarded financially; and significant compensation is at risk for
failing to meet these objectives. Earned bonuses are paid in full thirty days
after completion of fiscal year end accounting. There are no provisions to defer
payment of all or a portion of earned bonuses to a later date.
Long-Term Incentive Awards (Stock Options). Long-term incentives are
provided through stockholder-approved stock option plans that are designed to
develop and maintain strong management through Company stock ownership. Stock
option awards under the Company's stock option plans are made by the Stock
Option Committee, which was comprised of Ms. Harrison, Mr. Posnick and Mr. Remer
during fiscal 1995. Five year options are granted at the market value of the
Company's Common Stock on the date of the grant and generally become exercisable
in increments of one-third of the total grant at the end of each of the first
three years. The number of options granted by the Stock Option Committee to each
executive officer is based on the individual's performance and his or her level
of responsibility, and the amount of the grant is intended to be sufficient in
size to provide a strong incentive.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Gilbert has served as President and Chief Executive Officer of the
Company since its inception in 1959. Based on Mr. Gilbert's recommendation, the
Compensation Committee has held constant Mr. Gilbert's salary since June 1990.
Mr. Gilbert was eligible to receive a bonus under the Incentive Plan if the
Company achieved certain sales and income goals for fiscal 1995. However,
because the Company did not achieve such goals in fiscal 1995, no bonus was paid
to Mr. Gilbert. In May 1994, the Stock Option Committee granted Mr. Gilbert a
stock option for 37,500 shares to replace an option of the same amount that had
expired. Additionally, based upon the Compensation Committee's recommendation,
in June 1994 Mr. Gilbert was granted an additional stock option for 12,500
shares which was approved by the Stock Option Committee.
I-11
<PAGE> 41
This report has been provided by the Compensation Committee:
Franklin I. Remer
Frederick M. Swenson
Notwithstanding anything to the contrary set forth in any of the Company's
previous or future filings under the Securities Act of 1933, as amended (the
"Securities Act"), or the Exchange Act, that might incorporate by reference
previous or future filings, in whole or in part, the foregoing report and the
Performance Graph which follows shall not be incorporated by reference into any
of such filings.
6. STOCKHOLDER RETURN PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company for the last five fiscal years with the cumulative
total return on the Russell 2000 Index and a peer group consisting of the
Company and five other plastics-related companies for the same five-year period.
The graph assumes that all dividends have been reinvested. Measurement points
are the last trading days of each of the last five fiscal years.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG THE COMPANY, THE RUSSELL 2000 INDEX AND A PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) CIMCO, INC. PEER GROUP RUSSELL 2000
<S> <C> <C> <C>
4/90 100 100 100
4/91 102 91 110
4/92 77 82 129
4/93 73 123 150
4/94 59 123 171
4/95 50 122 184
</TABLE>
- ---------------
* $100 invested on 04/30/90 in stock or index -- including reinvestment of
dividends. Fiscal year ending April 30.
7. COMPENSATION PURSUANT TO PLANS
MANAGEMENT INCENTIVE BONUS PLAN
The Company has a cash bonus plan under which payments are made to officers
and other employees selected by the Board of Directors based upon the attainment
of annual performance goals previously established by the Board of Directors.
The Company also pays discretionary bonuses to officers and other
I-12
<PAGE> 42
employees from time to time to recognize exceptional performance. No bonuses
were accrued or paid with respect to the fiscal year ended April 30, 1995.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company adopted an Employee Stock Ownership Plan (the "ESOP"),
effective May 1, 1982, to enable eligible employees to share in the growth and
prosperity of the Company and provide all participants with an opportunity to
accumulate capital for their future economic security. All employees of the
Company and certain participating subsidiaries are eligible to participate in
the ESOP except for employees covered by a collective bargaining agreement.
Participation in the ESOP begins after completion of one year of service with
the employer. The Company's contributions to the ESOP are determined annually in
the discretion of the Board of Directors. Contributions by the Company are made
in cash, shares of the Common Stock, or other property and are held in a trust
established by the Company. Allocations to the accounts of participants under
the ESOP are based on compensation for the year with respect to which
allocations are made. Amounts allocated to the account of a participant vest
according to the number of years of service with the Company and its
participating subsidiary companies.
Allocations (if any) of shares of the Company's Common Stock to the
accounts of participants under the ESOP have not been calculated with respect to
the fiscal year ended April 30, 1995.
401(K) PLAN
Effective May 6, 1991, the Company adopted a plan with a cash or deferred
arrangement under Section 401(k) of the Internal Revenue Code (the "401(k)
Plan") to provide eligible employees with the opportunity to accumulate
retirement funds. All employees of the Company and certain participating
subsidiaries are eligible to participate in the 401(k) Plan with the exception
of (a) employees covered by a collective bargaining agreement, and (b) employees
whose principal place of employment is outside the United States. Participation
in the 401(k) Plan generally begins after the end of a twelve-month period in
which the employee completes 1,000 hours of service with the employer.
Participants are entitled to make contributions (called "Participant
Contribution") to the 401(k) Plan. Participant Contributions are allocated to
the Participant Contributions Account of the participant who made such
contributions.
For each payroll period, the employer may make a Matching Employer
Contribution for the benefit of a participant equal to a percentage (called the
"Matching Percentage") of his or her Participant Contributions, not to exceed a
percentage of the participant's compensation (called the "Maximum Matchable
Contributions Percentage"). The Company Board of Directors determines the
Matching Percentage and the Maximum Matchable Contributions Percentage that will
be applicable for a calendar year and announces them to the participants before
the beginning of the year. Matching Employer Contributions made for a
participant are allocated to the participant's Matching Employer Contributions
Account.
Each year the Company Board of Directors determines whether any additional
employer contributions (called "Discretionary Employer Contributions") are to be
made to the 401(k) Plan for the year. If a Discretionary Employer Contribution
is to be made, it is allocated to the Discretionary Employer Contributions
Accounts of participants based on their relative compensation.
Participants are at all times fully vested in their Participant
Contributions Accounts. A participant's rights in his Matching Employer
Contributions Account and Discretionary Employer Contributions Account vest
according to the number of years of service the participant has with the Company
and its participating subsidiary companies.
Participants are entitled to receive the vested portion of their accounts
under the 401(k) Plan in the form of an in-kind distribution subsequent to
termination of employment or upon death or retirement. Withdrawals prior to
termination of employment may be made in the event of hardship or after the
participant attains age 59 1/2.
I-13
<PAGE> 43
401(K) PLAN ONE-YEAR SUMMARY
The following table sets forth, as to the Chief Executive Officer and each
of the other three most highly compensated executive officers and all current
executive officers as a group, payments made by the Company for such officers
pursuant to the 401(k) Plan from May 1, 1994 through April 30, 1995:
<TABLE>
<CAPTION>
ALL CURRENT
EXECUTIVE
OFFICERS AS A
RUSSELL T. DALE H. FRANKLIN L. L. RONALD GROUP
GILBERT BEHM JACKSON TREPP (7 PERSONS)
---------- ------- ----------- --------- -------------
<S> <C> <C> <C> <C> <C>
May 1, 1994 through April 30, 1995
401(k) Plan Matching contributions(1)... $4,713 $ 0 $ 3,572 $ 1,531 $13,567
</TABLE>
- ---------------
(1) Such contributions are vested 100%, 0%, 100% and 40% for Messrs. Gilbert,
Behm, Jackson and Trepp respectively.
STOCK INCENTIVE PLANS
The Company currently maintains two incentive stock plans for the purpose
of attracting and retaining qualified personnel.
Under the 1988 Stock Option Plan ("1988 Plan"), options and stock
appreciation rights ("SARs") with respect to 250,000 shares of Common Stock
(after adjustment for a five-for-four stock split effective May 2, 1989) may be
granted to employees and directors of the Company and its subsidiaries. As of
April 30, 1992, there were outstanding options to purchase 182,880 shares of
Common Stock and SARs with respect to 61,495 shares covered by the 1988 Plan
with exercise prices ranging from $7.25 to $14.38 per share. Such options and
SARs have expiration dates ranging from May 26, 1993 to May 23, 2001. Shares
which are covered by options or SARs which are cancelled or not exercised within
the option period become available for future grants. As of April 30, 1992,
there were 5,625 shares available for future grants under the 1988 Plan.
The 1991 Stock Incentive Plan ("1991 Plan") provides for stock-based
awards, including qualified and incentive stock options, stock appreciations
rights, restricted stock, sales of securities, stock bonuses, performance
shares, performance units, phantom stock, dividend equivalents and other
stock-based awards. Such awards may be granted with respect to 150,000 shares of
Common Stock to employees and directors of the Company and its subsidiaries. As
of April 30, 1992, no awards have been granted under the 1991 Plan.
The Plans are administered by a Stock Option Committee appointed by the
Board of Directors. Members of the Stock Option Committee are not eligible to
receive grants while serving on the Committee. The exercise price of an
incentive stock option granted under the Plans may not be less than the fair
market value of a share of CIMCO Common Stock on the date of grant of the option
and the term of an incentive stock option may not exceed ten years from the date
of grant. In the case of incentive stock option grants to stockholders holding
more than 10% of CIMCO's outstanding stock, the exercise price may not be less
than 110% of the fair market value of a share of CIMCO Common Stock on the date
of grant and term of such incentive stock option may not exceed five years from
the date of grant. The exercise price of each share subject to non-qualified
stock options granted under the 1982, 1986 and 1988 Plans must be at least 80%
of the fair market value of a share of CIMCO Common Stock on the date the option
is granted and the term of a non-qualified option may not exceed ten years and
one day from the date of grant.
If the Board of Directors determines that a change in control has occurred
or is about to occur, options granted pursuant to the 1986 Plan will become
immediately exercisable (unless the individual option expressly states
otherwise) and may be exercised at any time within a period of sixty days
following the date on which a change in control occurs. For purposes of the 1986
Plan, a change in control means (i) the acquisition by a single entity or group
of affiliated entities of more than fifty percent of the outstanding CIMCO
Common Stock or (ii) the merger of CIMCO with or into any other entity or sale
or other disposition of all or substantially all of its assets, if the
stockholders of CIMCO before the transaction own, immediately after the
consummation of the transaction, equity securities (other than options or other
rights to acquire equity securities) possessing less than fifty percent of the
voting power of the surviving or acquiring corporation.
I-14
<PAGE> 44
With respect to the 1988 Plan, in the event of the merger or consolidation
of CIMCO with or into another corporation, or the acquisition by another
corporation or person of all or substantially all of CIMCO's assets or eighty
percent or more of CIMCO's then outstanding voting stock, or the liquidation or
dissolution of CIMCO, the Stock Option Committee may, in its absolute discretion
and upon such terms and conditions it deems appropriate, provide by resolution,
adopted prior to such event, that prior to the effective date of such event all
options granted pursuant to the 1988 Plan will become exercisable.
With respect to the 1991 Plan, awards granted thereunder may, but are not
required to, provide for acceleration of vesting, lapse of restrictions, cash
settlement or other adjustments to the terms of such awards in the event of a
merger, sale of assets, or change in control of CIMCO.
8. OTHER COMPENSATION ARRANGEMENTS
The Company has entered into an Employment Agreement dated September 15,
1995 with L. Ronald Trepp. The description thereof is set forth in Item 3 of the
Schedule 14D-9 under the heading Trepp Employment Agreement.
Pursuant to the Merger Agreement, Parent, Purchaser and the Company have
agreed that the options outstanding under the Company's option plans or
agreements will accelerate at the Effective Time. Options will be exchangeable
prior to the Effective Time for a cash payment (subject to tax withholding) to
be made as of the Effective Time and equal to the difference between the
exercise price thereof and the $10.50 price per share of Common Stock to be
offered in the Offer and the Merger.
The Company also adopted a "stay pay" bonus plan for certain key employees
of the Company and its subsidiaries requiring continuation of employment until
the Effective Time. See Employment Continuation Plan in Item 3 of the Schedule
14D-9.
I-15
<PAGE> 1
EXHIBIT (a)(1)
CIMCO LOGO
265 BRIGGS AVENUE - COSTA MESA, CALIFORNIA 92626-4555 -
TEL (714) 546-4460 - FAX (714) 556-6955
December 27, 1995
Dear Stockholder:
On December 19, 1995, CIMCO, Inc., a Delaware corporation ("CIMCO"),
entered into an agreement and plan of merger (the "Merger Agreement") with M.A.
Hanna Company, a Delaware corporation, and Hanwest, Inc. ("Hanwest"), a Delaware
corporation and wholly-owned subsidiary of M.A. Hanna Company, which provides
for the acquisition of all of the outstanding Common Stock of CIMCO by Hanwest
for $10.50 per share in cash.
Pursuant to the Merger Agreement, Hanwest has today commenced a cash tender
offer (the "Tender Offer") for all of CIMCO's outstanding Common Stock at $10.50
net in cash per share. Following consummation of the Tender Offer, CIMCO will
merge with Hanwest (the "Merger") and, as a result, become a wholly-owned
subsidiary of M.A. Hanna Company. The holders of shares of Common Stock who do
not tender their shares in the Tender Offer will be entitled to receive $10.50
per share in cash in the Merger.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE TERMS OF THE TENDER OFFER
AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE CIMCO
STOCKHOLDERS, AND HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT WITH M.A. HANNA
COMPANY AND HANWEST, AND RECOMMENDS THAT ALL HOLDERS OF COMMON STOCK ACCEPT THE
OFFER AND TENDER THEIR SHARES.
As a stockholder of CIMCO that owns approximately 20% of CIMCO's
outstanding shares, I have agreed to tender my shares to Hanwest in the Tender
Offer.
Enclosed with this letter is Hanwest's Offer to Purchase and a letter of
transmittal instructing you how to tender your shares. These documents set forth
the terms and conditions of Hanwest's Tender Offer. Attached to this letter is a
copy of CIMCO's Schedule 14D-9 (without all of the bulky exhibits), which sets
forth the reasons for the Board's recommendation and the background of the
transaction.
The Schedule 14D-9 and Hanwest's offering materials should be read
carefully.
On behalf of the CIMCO Board of Directors,
Sincerely,
RUSSELL T. GILBERT
-------------------------------------
Russell T. Gilbert
President and Chief Executive Officer
PRECISION THERMOPLASTIC COMPONENTS FOR INDUSTRIAL, COMMERCIAL, AND MEDICAL
APPLICATIONS
<PAGE> 1
EXHIBIT (c)(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
CIMCO, INC.,
M.A. HANNA COMPANY
AND
HANWEST, INC.
DATED AS OF DECEMBER 19, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
(Not Part of the Agreement)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I -- THE TENDER OFFER. . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 The Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Company Action . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.03 Board of Directors and Committees; Section 14(f) . . . . . . . . . 6
ARTICLE II -- THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.01 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.02 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.03 Certificate of Incorporation . . . . . . . . . . . . . . . . . . . 7
2.04 By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.05 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . 8
2.06 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 8
2.07 Stockholders' Meeting. . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III -- CONVERSION OR CANCELLATION OF SHARES; STOCK RIGHTS. . . . . . 10
3.01 Conversion or Cancellation of Shares . . . . . . . . . . . . . . . 10
3.02 Exchange of Certificates; Paying Agent . . . . . . . . . . . . . . 10
3.03 Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . 12
3.04 Transfer of Shares After the Effective Time. . . . . . . . . . . . 12
3.05 Company Stock Rights . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . 13
4.01 Organization; Qualification. . . . . . . . . . . . . . . . . . . . 13
4.02 Company Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 13
4.03 The Company's Capitalization . . . . . . . . . . . . . . . . . . . 14
4.04 Company Equity Investments . . . . . . . . . . . . . . . . . . . . 15
4.05 Authority Relative to this Agreement . . . . . . . . . . . . . . . 15
4.06 Consents and Approvals; No Violation . . . . . . . . . . . . . . . 16
4.07 SEC Reports; Financial Statements. . . . . . . . . . . . . . . . . 17
4.08 Proxy Statement; Offer Documents . . . . . . . . . . . . . . . . . 17
4.09 Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . 18
4.10 Absence of Certain Changes or Events . . . . . . . . . . . . . . . 18
4.11 Title, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.12 Patents, Trademarks, Etc.. . . . . . . . . . . . . . . . . . . . . 19
4.13 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . 20
4.15 Legal Proceedings, Etc.. . . . . . . . . . . . . . . . . . . . . . 21
4.16 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.17 Material Agreements. . . . . . . . . . . . . . . . . . . . . . . . 22
4.18 Compliance with Law. . . . . . . . . . . . . . . . . . . . . . . . 23
4.19 Insider Interests. . . . . . . . . . . . . . . . . . . . . . . . . 23
4.20 Officers, Directors and Employees. . . . . . . . . . . . . . . . . 23
4.21 Environmental Protection . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
- i -
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.22 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . 24
4.23 Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.24 Respiratory Medical Products Sale. . . . . . . . . . . . . . . . . 25
4.25 No Other Representations or Warranties . . . . . . . . . . . . . . 25
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE
PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.01 Corporation Organization . . . . . . . . . . . . . . . . . . . . . 25
5.02 Authorized Capital . . . . . . . . . . . . . . . . . . . . . . . . 26
5.03 Corporation Authority. . . . . . . . . . . . . . . . . . . . . . . 26
5.04 No Prior Activities. . . . . . . . . . . . . . . . . . . . . . . . 26
5.05 No Financing Contingency . . . . . . . . . . . . . . . . . . . . . 26
5.06 Governmental Filings; No Violations. . . . . . . . . . . . . . . . 27
5.07 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . 27
5.08 Offer Documents; Proxy Statement; Other Information. . . . . . . . 27
5.09 No Other Representations or Warranties . . . . . . . . . . . . . . 28
ARTICLE VI -- COVENANTS OF THE PARTIES . . . . . . . . . . . . . . . . . . . 28
6.01 Conduct of Business of the Company . . . . . . . . . . . . . . . . 28
6.02 Notification of Certain Matters. . . . . . . . . . . . . . . . . . 30
6.03 Access to Information. . . . . . . . . . . . . . . . . . . . . . . 31
6.04 Further Information. . . . . . . . . . . . . . . . . . . . . . . . 32
6.05 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 32
6.06 Interim Financial Statements . . . . . . . . . . . . . . . . . . . 32
6.07 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.08 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.09 Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.10 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . 34
6.11 Indemnity; D&O Insurance . . . . . . . . . . . . . . . . . . . . . 34
6.12 Other Potential Bidders. . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII -- CONDITIONS TO THE MERGER. . . . . . . . . . . . . . . . . . . 38
7.01 Conditions to Each Party's Obligation to Effect the Merger . . . . 38
7.02 Conditions to the Obligations of the Parent and the Purchaser to
Effect the Merger. . . . . . . . . . . . . . . . . . . . . . . . . 38
7.03 Conditions to the Obligations of the Company to Effect the Merger. 39
ARTICLE VIII -- CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.01 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.02 Filings at the Closing . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE IX -- TERMINATION; AMENDMENT; WAIVER . . . . . . . . . . . . . . . . 39
9.01 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.02 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . 41
9.03 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 42
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE X -- MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.01 Survival of Representations, Warranties, Covenants and
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.02 Amendment and Modification. . . . . . . . . . . . . . . . . . 43
10.03 Waiver of Compliance; Consents. . . . . . . . . . . . . . . . 43
10.04 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 44
10.05 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 44
10.06 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.07 Entire Agreement, Assignment Etc. . . . . . . . . . . . . . . 45
10.08 Validity. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.09 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
10.10 Specific Performance. . . . . . . . . . . . . . . . . . . . . 45
</TABLE>
ANNEX A Certain Conditions to Offer
ANNEX B Form of Stockholder Tender Agreement
- iii -
<PAGE> 5
DEFINITIONS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Acquiring Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Bridge Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . 7
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Balance Sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Company Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Company Disclosure Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Company Right. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Company Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Confidentiality Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Constituent Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Delaware Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . 7
Department of Justice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dissenting Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Distribution Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Environmental Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Equity Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Indemnified Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Independent Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Line of Credit Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Minimum Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
MMCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Offer Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Other Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PaineWebber. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
</TABLE>
- iv -
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parent Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Parent Disclosure Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Pertinent Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . 24
Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Purchaser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Real Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Real Property Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Redelivering Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Related Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Revolving Line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Schedule 14D-9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Series A Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Stockholder Tender Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 4
Stockholders' Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Third Party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Third Party Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
- v -
<PAGE> 7
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated as of December 19, 1995, among CIMCO, Inc., a Delaware corporation (the
"Company"), Hanwest, Inc., a Delaware corporation (the "Purchaser"), and M.A.
Hanna Company, a Delaware corporation (the "Parent").
WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of its stockholders for the Purchaser to acquire the
Company upon the terms and subject to the conditions set forth herein;
WHEREAS, the Company, the Parent and the Purchaser desire to make
certain representations, warranties and agreements in connection with this
Agreement;
WHEREAS, in furtherance of such acquisition, the Parent proposes to
cause the Purchaser to make the Offer (as defined in Section 1.01) to purchase
all of the issued and outstanding shares of common stock of the Company, par
value $0.01 per share (the "Common Stock"), upon the terms and subject to the
conditions of this Agreement, and the Board of Directors of the Company has
approved the Offer and determined to recommend that the Company's stockholders
accept the Offer; and
WHEREAS, to complete such acquisition, the respective Boards of
Directors of the Parent, the Purchaser and the Company, and the Parent acting as
the sole stockholder of the Purchaser, have approved the Offer and the merger of
the Purchaser with and into the Company upon the terms and subject to the
conditions of this Agreement, whereby each issued and outstanding share of
Common Stock not owned directly or indirectly by the Parent or the Company,
except shares of Common Stock held by persons who object to such merger and
demand payment of the value of their shares of Common Stock, will be converted
into the right to receive in cash the same price per share of Common Stock paid
pursuant to the Offer;
NOW, THEREFORE, in consideration of the representations, warranties
and agreements herein contained, and subject to the terms and conditions herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
THE TENDER OFFER
1.01 THE OFFER. (a) Provided that this Agreement shall not have been
terminated in accordance with Article IX and none of
<PAGE> 8
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the events or conditions set forth in Annex A shall have occurred and be
existing, then, not later than the first business day after execution of this
Agreement, the Parent shall issue a public announcement of the execution of this
Agreement, and not later than the fifth business day after the date of the
public announcement of the execution of this Agreement, the Purchaser shall,
subject to the provisions of this Agreement, commence a tender offer (the
"Offer") for all of the outstanding shares of Common Stock, together with the
associated rights issued pursuant to the Rights Agreement dated as of December
5, 1992, as amended (the "Company Rights Agreement"), between the Company and
First Interstate Bank of California, as Rights Agent (collectively, the
"Shares") at a price of $10.50 per Share, net to the seller in cash. The
Purchaser shall accept for payment and pay for all Shares which have been
validly tendered and not withdrawn pursuant to the Offer at the earliest time
following expiration of the Offer that all conditions to the Offer set forth in
Annex A hereto shall have been satisfied or waived by the Purchaser. The
obligation of the Purchaser to accept for payment, purchase and pay for Shares
tendered pursuant to the Offer shall be subject to the conditions set forth in
Annex A hereto, including the condition that a number of Shares representing not
less than a majority of the Shares on a fully diluted basis shall have been
validly tendered and not withdrawn prior to the expiration date of the Offer
(the "Minimum Condition"). Solely for purposes of determining whether the
Minimum Condition has been satisfied, any Shares owned by Parent or Purchaser
shall be deemed to have been validly tendered and not withdrawn pursuant to the
Offer. The Purchaser expressly reserves the right to increase the price per
Share payable in the Offer or to make any other changes in the terms and
conditions of the Offer; PROVIDED, HOWEVER, that, unless previously approved by
the Company in writing, no change may be made which decreases the price per
Share payable in the Offer, which changes the form of consideration to be paid
in the Offer, which reduces the maximum number of Shares to be purchased in the
Offer, which imposes conditions to the Offer in addition to those set forth in
Annex A hereto, which broadens the scope of such conditions, which increases the
minimum number of Shares which must be tendered as a condition to the acceptance
for payment and payment for shares in the Offer, which waives the Minimum
Condition if such waiver would result in less than a majority of Shares being
accepted for payment or paid for pursuant to the Offer, which, except as
hereinafter set forth in this Subsection 1.01(a), extends the period of the
Offer beyond 45 days after the date of commencement of the Offer, or which
otherwise amends the terms of the Offer (including any of the conditions set
forth in Annex A) in a manner that is materially adverse to holders of Shares.
Notwithstanding the foregoing, the Purchaser may, without the consent of the
Company, (i) extend the Offer if, at the scheduled expiration date of the Offer,
any of the conditions to the Purchaser's obligation to purchase Shares shall not
be satisfied until such time as such conditions are satisfied, or (ii) extend
the Offer for a period of not more than 15 business days beyond the latest
expiration date that would otherwise be
<PAGE> 9
- 3 -
permitted under clause (i) of this sentence if, on the date of such extension,
more than two-thirds but less than 90 percent of Shares have been validly
tendered and not properly withdrawn pursuant to the Offer. It is agreed that the
conditions set forth in Annex A are for the sole benefit of the Parent and the
Purchaser and may be asserted by the Parent or the Purchaser regardless of the
circumstances giving rise to any such condition (including any action or
inaction by the Purchaser, unless any such action or inaction by the Purchaser
would constitute a breach by the Purchaser of any of its covenants under this
Agreement) or may be waived by the Parent or the Purchaser, in whole or in part
at any time and from time to time, in its sole discretion. The failure by the
Parent or the Purchaser at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
Any determination by the Parent or the Purchaser with respect to any of the
foregoing conditions (including, without limitation, the satisfaction of such
conditions) shall be final and binding on the parties. The Company agrees that
no Shares held by the Company will be tendered in the Offer.
(b) As promptly as reasonably practicable following execution of this
Agreement, the Parent and the Purchaser shall file with the Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer, which shall contain an offer to purchase and related
letter of transmittal and summary advertisement (such Schedule 14D-1 and the
documents therein pursuant to which the Offer will be made, together with any
supplements or amendments thereto, the "Offer Documents"). The Offer Documents
shall comply as to form in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder and, on the date filed with the SEC and
on the date first published, sent or given to the holders of Shares, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by the Parent or the Purchaser
with respect to information supplied by the Company in writing specifically for
inclusion in the Offer Documents. Each of the Parent, the Purchaser and the
Company agrees promptly to correct any information supplied by it specifically
for inclusion in the Offer Documents if and to the extent that such information
shall have become false or misleading in any material respect, and each of the
Parent and the Purchaser further agrees to take all steps necessary to cause the
Offer Documents as so corrected to be filed with the SEC and to be disseminated
to holders of Shares, in each case as and to the extent required by applicable
Federal securities laws. The Parent and the Purchaser agree to provide the
Company and its counsel in writing with any comments the Parent, the Purchaser
or their counsel may receive from the SEC or its Staff with respect to the Offer
Documents
<PAGE> 10
- 4 -
promptly after the receipt of such comments. The Company and its counsel shall
be given a reasonable opportunity to review and comment upon the Offer Documents
and all amendments and supplements thereto prior to their filing with the SEC or
dissemination to the stockholders of the Company.
1.02 COMPANY ACTION. (a) The Company hereby approves of and consents
to the Offer and represents and warrants that the Board of Directors of the
Company (the "Board"), at a meeting duly called and held, has unanimously
adopted resolutions (i) determining that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger (as defined in Section
2.01), are fair to, and in the best interests of, the stockholders of the
Company, (ii) approving and adopting this Agreement and the transactions
contemplated hereby, including the Offer, the Merger, and the Stockholder Tender
Agreement of even date between the Purchaser and a certain stockholder of the
Company (the "Stockholder Tender Agreement") and the transactions contemplated
thereby, in all respects and that such approval constitutes approval of the
Offer, this Agreement, the Merger and the Stockholder Tender Agreement, and the
transactions contemplated hereby and thereby, for purposes of Section 203 of the
General Corporation Law of the State of Delaware (the "DGCL") and similar
provisions of any other similar state statutes that might be deemed applicable
to the transactions contemplated hereby, and Article EIGHTH of the Certificate
of Incorporation (as defined in Section 2.03 of this Agreement), and (iii)
recommending that the stockholders of the Company accept the Offer, tender their
Shares thereunder to the Purchaser and approve and adopt this Agreement and the
Merger; PROVIDED, HOWEVER, that such recommendation may be withdrawn, modified
or amended to the extent that the Board, by a majority vote, determines in its
good faith judgment, based as to legal matters on the advice of legal counsel,
that the Board is required to do so for the proper discharge of its fiduciary
duties.
(b) The Company has been advised by each of its executive officers who
as of the date hereof is aware of the transactions contemplated hereby and each
of its Directors, that each such person intends to tender pursuant to the Offer
all Shares owned by such person. The Company represents that the Board has
received the opinion of PaineWebber Incorporated ("PaineWebber") that the
proposed consideration to be received by holders of Shares pursuant to the Offer
and the Merger is fair to such holders from a financial point of view.
(c) The Company shall use its best efforts to file with the SEC a
Solicitation/ Recommendation Statement on Schedule 14D-9 with respect to the
Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-9")
on the date the Offer Documents are filed with the SEC, and in any event shall
file with the SEC the Schedule 14D-9 not later than the date required pursuant
to the Exchange Act and the applicable rules and regulations promulgated
thereunder, containing the recommendation
<PAGE> 11
- 5 -
described in Section 1.02(a) and shall mail the Schedule 14D-9 to the
stockholders of the Company. The Schedule 14D-9 shall comply in all material
respects with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder on the date filed with the SEC and on the date first
published, sent or given to the Company's stockholders, and shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect to
information supplied in writing by the Parent or the Purchaser specifically for
inclusion or incorporation by reference in the Schedule 14D-9. Each of the
Company, the Parent and the Purchaser agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that such
information shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to amend or supplement
the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or supplemented
to be filed with the SEC and disseminated to the Company's stockholders, in each
case as and to the extent required by applicable Federal securities laws. The
Parent and its counsel shall be given a reasonable opportunity to review and
comment upon the Schedule 14D-9 and all amendments and supplements thereto prior
to their filing with the SEC or dissemination to stockholders of the Company.
(d) In connection with the Offer, the Company will, and will cause its
transfer agent (the "Transfer Agent") to, furnish promptly to the Parent and the
Purchaser mailing labels containing the names and addresses of all record
holders of Shares as of a recent date and of those persons becoming record
holders after such date, together with copies of all lists of stockholders and
security position listing and computer files and all other information in the
Company's possession and control regarding the beneficial ownership of Shares.
The Company shall promptly furnish the Parent and the Purchaser with such
additional information (including, but not limited to, updated lists of holders
of Shares and their addresses, mailing labels and security position listings and
computer files) and such other assistance as the Parent and the Purchaser or
their agents may reasonably request in communicating the Offer to the record and
beneficial holders of Shares. Subject to the requirements of law, and except for
such steps as are necessary or advisable to disseminate the Offer and any other
documents necessary to consummate the Merger and to solicit tenders of Shares
and the approval of the Merger, Parent and Purchaser and each of their
affiliates shall hold in confidence the information contained in any of such
labels, lists and additional information, shall use such information only in
connection with the Offer and the Merger, and, if this Agreement shall be
terminated, shall deliver to the Company all copies of such information then in
their possession or under their control.
<PAGE> 12
- 6 -
1.03 BOARD OF DIRECTORS AND COMMITTEES; SECTION 14(f). (a) Promptly
upon acceptance for payment of, and commencement of payment for, such number of
Shares which represent at least a majority of the Shares (determined on a fully
diluted basis) by Purchaser pursuant to the Offer and from time to time
thereafter, the Purchaser shall be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board as will give the
Purchaser representation on the Board equal to the product of the number of
directors on the Board (giving effect to any increase in the number of directors
pursuant to this Section 1.03) and the percentage that such number of Shares
beneficially owned by the Purchaser and its affiliates bears to the total number
of Shares, and the Company shall, at such time, cause the Purchaser's designees
to be elected or appointed, upon request by the Purchaser. In connection with
the foregoing, the Company shall promptly, as reasonably agreed by the Parent
and the Company, either increase the size of the Board and/or secure the
resignation of such number of its current directors as is necessary to enable
the Purchaser's designees to be elected or appointed to the Board and to cause
the Purchaser's designees to be so elected or appointed. At such times and,
subject to the last sentence of this Section 1.03(a), to the extent requested by
the Parent, the Company will use its best efforts to cause persons designated by
the Purchaser to constitute the same percentage of each committee of the Board
(other than any committee of the Board established to take action under this
Agreement) as the Purchaser's designees constitute on the Board. Notwithstanding
the foregoing, the Company, the Parent and the Purchaser shall each use its best
efforts to ensure that two of the members of the Board as of the date hereof who
are not officers, employees or affiliates of the Company or the Parent (the
"Independent Directors") shall remain members of the Board until the Purchaser
owns a majority of the Shares and thereafter until the Effective Time (as
defined in Section 2.02) and if the number of the Independent Directors shall be
reduced below two for any reason, any remaining Independent Director(s) shall be
entitled to designate independent persons to fill such vacancies and such
persons shall be deemed to be Independent Directors; or, if no Independent
Directors then remain, the other directors shall designate two independent
persons to fill such vacancies, and such persons shall be deemed to be
Independent Directors.
(b) The Company's obligation to appoint designees to the Board shall
be subject to Section 14(f) of the Exchange Act, and Rule 14f-1 promulgated
thereunder. The Company shall promptly take all action required pursuant to such
Section and Rule in order to fulfill its obligations under this Section 1.03,
including mailing to its stockholders with the Schedule 14D-9 such information
as is required under such Section and Rule in order to fulfill its obligations
under this Section 1.03. The Purchaser will supply to the Company in writing and
be solely responsible for any information with respect to itself and its
nominees, officers, directors and affiliates required by such Section and Rule.
<PAGE> 13
- 7 -
(c) Following the election or appointment of the Purchaser's designees
pursuant to this Section 1.03, any amendment of this Agreement, any termination
of this Agreement by the Company, any recommendation made by the Board pursuant
to Section 2.07(a)(ii) of this Agreement, any extension by the Company of the
time for the performance of any of the obligations or other acts of the
Purchaser or the Parent hereunder or waiver of any of the Company's rights or
waiver by the Company of any condition hereunder, will require the concurrence
of a majority of the Independent Directors.
ARTICLE II
THE MERGER
2.01 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 2.02), the Parent shall
cause the Purchaser to merge (the "Merger") with and into the Company and the
separate corporate existence of the Purchaser shall thereupon cease. The Company
shall be the surviving corporation in the Merger (the Purchaser and the Company
are sometimes hereinafter referred to as the "Constituent Corporations" and the
Company is sometimes hereinafter referred to as the "Surviving Corporation") and
shall, following the Merger, be governed by the laws of the State of Delaware,
and the separate corporate existence of the Company, with all its rights,
privileges, immunities, powers and franchises, of a public as well as of a
private nature, shall continue unaffected by the Merger. From and after the
Effective Time, the Merger shall have the effects specified in the DGCL.
2.02 EFFECTIVE TIME. At the Closing contemplated in Section 8.01, the
Company and the Parent will cause a Certificate of Merger (the "Delaware
Certificate of Merger") to be executed and filed by the Company and the
Purchaser with the Secretary of State of the State of Delaware as provided in
the DGCL. The Merger shall become effective as of the date and at the time the
Delaware Certificate of Merger is duly filed with the Secretary of State of the
State of Delaware, and such time is hereinafter referred to as the "Effective
Time."
2.03 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
the Company (the "Certificate of Incorporation") in effect immediately prior to
the Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
DGCL.
2.04 BY-LAWS. The By-Laws of the Company as in effect immediately
prior to the Effective Time shall be the By-Laws of the Surviving Corporation,
until duly amended in accordance with the terms thereof and the DGCL.
<PAGE> 14
- 8 -
2.05 DIRECTORS AND OFFICERS. At the Effective Time, the directors of
the Purchaser immediately prior to the Effective Time shall be the directors of
the Surviving Corporation, each of such directors to hold office, subject to the
applicable provisions of the Certificate of Incorporation and By-Laws of the
Surviving Corporation, until their respective successors shall be duly elected
or appointed and qualified. The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
2.06 FURTHER ASSURANCES. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper: (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the proper officers and directors of the Surviving Corporation are
hereby authorized on behalf of the respective Constituent Corporations to
execute and deliver, in the name and on behalf of the respective Constituent
Corporations, all such deeds, bills of sale, assignments and assurances and do,
in the name and on behalf of the Constituent Corporations, all such other acts
and things necessary, desirable or proper to vest, perfect or confirm its right,
title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of the Constituent Corporations and otherwise
to carry out the purposes of this Agreement.
2.07 STOCKHOLDERS' MEETING. (a) After the Purchaser has accepted for
payment the Shares tendered pursuant to the Offer, the Company, acting through
the Board, shall, at the Parent's request and in accordance with applicable law:
(i) duly call, give notice of, convene and hold an annual or special
meeting of its stockholders (the "Stockholders' Meeting"), to be held as soon as
practicable for the purpose of approving this Agreement, the Merger and the
transactions contemplated hereby and thereby;
(ii) include in the Proxy Statement (as defined in Section 4.08) the
recommendation of the Board that stockholders of the Company vote in favor of
the approval and adoption of this Agreement and the Merger and the other
transactions contemplated hereby and thereby and that the cash consideration to
be received by the stockholders of the Company pursuant to the Merger is fair to
such stockholders; and
(iii) as soon as practicable after the Parent's request, prepare and
file a preliminary Proxy Statement with the SEC and, after consultation with the
Parent and the Purchaser,
<PAGE> 15
- 9 -
respond promptly to any comments made by the SEC with respect to the Proxy
Statement and any preliminary version thereof and cause the Proxy Statement to
be mailed to its stockholders at the earliest practicable time after responding
to all such comments to the satisfaction of the Staff of the SEC and to obtain
the necessary approvals by its stockholders of this Agreement. Without limiting
the generality of the foregoing, the Company agrees that its obligations
pursuant to this Section 2.07(a) shall not be affected by either the
commencement, public proposal, public disclosure or other communication to the
Company of any offer to acquire some or all of the Shares or all or any
substantial portion of the assets of the Company or any change in the
recommendation of the Board.
(b) The Company, the Parent and the Purchaser, as the case may be,
shall promptly prepare and file any other filings required under the Exchange
Act or any other Federal or state securities or corporate laws relating to the
Merger and the transactions contemplated herein (the "Other Filings"). Each of
the parties hereto shall notify the other parties hereto promptly of the receipt
by it of any comments from the SEC or its Staff and of any request of the SEC
for amendments or supplements to the Proxy Statement or by the SEC or any other
governmental officials with respect to any Other Filings or for additional
information and will supply the other parties hereto with copies of all
correspondence between it and its representatives, on the one hand, and the SEC
or the members of its Staff or any other governmental officials, on the other
hand, with respect to the Proxy Statement, any Other Filings or the Merger. The
Company, the Parent and the Purchaser each shall use its best efforts to obtain
and furnish the information required to be included in the Proxy Statement, any
Other Filings or the Merger. If at any time prior to the time of approval of
this Agreement by the Company's stockholders there shall occur any event that
should be set forth in an amendment or supplement to the Proxy Statement, the
Company shall promptly prepare and mail to its stockholders such amendment or
supplement. The Company shall not mail the Proxy Statement or, except as
required by the Exchange Act or the rules and regulations promulgated
thereunder, any amendment or supplement thereto, to the Company's stockholders
unless the Company has first obtained the consent of the Parent to such mailing.
(c) At the Stockholders' Meeting, the Parent, the Purchaser and their
affiliates will vote all Shares owned by them in favor of approval and adoption
of this Agreement, the Merger, and the transactions contemplated hereby and
thereby.
(d) Notwithstanding the foregoing, in the event that the Purchaser
shall acquire at least 90 percent of the Shares, the parties hereto agree, at
the request of the Purchaser, to take all necessary and appropriate action to
cause the Merger to become effective, in accordance with Section 253 of the
DGCL, as soon as reasonably practicable after such acquisition and satisfaction
or
<PAGE> 16
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waiver of the conditions of Article VII, without a meeting of the stockholders
of the Company.
ARTICLE III
CONVERSION OR CANCELLATION OF SHARES; STOCK RIGHTS
3.01 CONVERSION OR CANCELLATION OF SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares owned by the Parent or any wholly-owned
subsidiary of the Parent (collectively, the "Parent Companies"), Shares held by
stockholders exercising appraisal rights pursuant to Section 262 of the DGCL
(the "Dissenting Stockholders"), and any shares held in the treasury of the
Company) shall be converted into and represent the right to receive, without
interest, an amount in cash equal to the greater of $10.50 net or the amount per
share which may be paid pursuant to the Offer as it may be amended (the "Merger
Consideration") upon surrender of the certificate or certificates that,
immediately prior to the Effective Time, represented issued and outstanding
Shares (the "Certificates"). As of the Effective Time, all such Shares shall no
longer be outstanding, shall be automatically cancelled and shall cease to
exist, and each holder of a Certificate representing any such Shares shall
thereafter cease to have any rights with respect to such Shares, except the
right to receive the Merger Consideration without interest for such Shares upon
the surrender of such Certificate or Certificates in accordance with Section
3.02.
(b) Each Share issued and outstanding immediately prior to the
Effective Time and owned by any of the Parent Companies, and each Share issued
and held in the Company's treasury immediately prior to the Effective Time,
shall no longer be outstanding, shall be cancelled without payment of any
consideration therefor and shall cease to exist, and each holder of a
Certificate representing any such Shares shall thereafter cease to have any
rights with respect to such Shares.
(c) Each share of Common Stock, without par value, of the Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully-paid and non-assessable share of Common
Stock, par value $0.01 per share, of the Surviving Corporation.
3.02 EXCHANGE OF CERTIFICATES; PAYING AGENT. (a) Prior to the Closing,
the Parent shall select a bank or trust company to act as paying agent (the
"Paying Agent") for the payment of the cash consideration specified in Section
3.01 upon surrender of Certificates converted into the right to receive cash
pursuant to the Merger. From time to time at and after the Effective Time,
<PAGE> 17
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the Parent shall make available, or cause the Purchaser or the Surviving
Corporation to make available, to the Paying Agent immediately available funds
in amounts and at times necessary for the payment of the Merger Consideration
(the "Funds") upon surrender of Certificates pursuant to Section 3.01, it being
understood that any and all interest earned on the Funds shall be paid over by
the Paying Agent as the Parent shall direct.
(b) Promptly after the Effective Time, the Paying Agent shall mail to
each person who was, at the Effective Time, a holder of record of a Certificate
or Certificates, other than the Company or any of the Parent Companies, a letter
of transmittal and instructions for use in effecting the surrender, in exchange
for payment in cash therefor, of the Certificates. The letter of transmittal
shall specify that delivery shall be effected, and risk of loss and title shall
pass, only upon proper delivery to and receipt of such Certificates by the
Paying Agent and shall be in such form and have such provisions as the Parent
shall reasonably specify. Upon surrender to the Paying Agent of such
Certificates, together with the letter of transmittal, duly executed and
completed in accordance with the instructions thereto and such other documents
as may be reasonably required by the Paying Agent, the Paying Agent shall
promptly pay to the persons entitled thereto, out of the Funds, a check in the
amount to which such persons are entitled pursuant to Section 3.01(a), after
giving effect to any required tax withholdings, and such Certificate shall
forthwith be cancelled. No interest will be paid or will accrue on the amount
payable upon the surrender of any such Certificates. If payment is to be made to
a person other than the registered holder of the Certificates surrendered, it
shall be a condition of such payment that the Certificates so surrendered shall
be properly endorsed or otherwise in proper form for transfer and that the
person requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
Certificates surrendered or establish to the satisfaction of the Surviving
Corporation or the Paying Agent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 3.02, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the amount of cash, without
interest, into which the Shares theretofore represented by such Certificate
shall have been converted pursuant to Section 3.01. No interest shall accrue or
be paid on any portion of the Merger Consideration.
(c) One hundred eighty days following the Effective Time, the
Surviving Corporation shall be entitled to cause the Paying Agent to deliver to
it any Funds (including any interest, dividends, earnings or distributions
received with respect thereto which shall be paid as directed by the Parent)
made available to the Paying Agent by the Parent which have not been disbursed,
and thereafter holders of Certificates who have not theretofore complied with
the instructions for exchanging their Certificates shall be entitled to look
only to the Surviving Corporation for
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payment as general creditors thereof with respect to the cash payable upon due
surrender of their Certificates.
(d) Except as otherwise provided herein, the Parent shall pay all
charges and expenses, including those of the Paying Agent, in connection with
the exchange of the Merger Consideration for Certificates.
(e) Notwithstanding anything to the contrary in this Section 3.02,
none of the Paying Agent, the Parent, the Company, the Surviving Corporation or
the Purchaser shall be liable to a holder of a Certificate formerly representing
Shares for any amount properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If Certificates are not
surrendered prior to two years after the Effective Time (or immediately prior to
such earlier date on which any payment pursuant to this Article III would
otherwise escheat or become the property of any Federal, state or local
government agency or authority, court or commission), unclaimed funds payable
with respect to such Certificates shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
3.03 DISSENTERS' RIGHTS. Notwithstanding the provisions of Section
3.01 or any other provision of this Agreement to the contrary, Shares that have
not been voted in favor of the approval and adoption of the Merger and with
respect to which dissenters' rights shall have been demanded and perfected in
accordance with Section 262 of the DGCL (the "Dissenting Shares") and not
withdrawn shall not be converted into the right to receive cash at or after the
Effective Time, but such Shares shall become the right to receive such
consideration as may be determined to be due to holders of Dissenting Shares
pursuant to the laws of the State of Delaware unless and until the holder of
such Dissenting Shares withdraws his or her demand for such appraisal or becomes
ineligible for such appraisal. If a holder of Dissenting Shares shall withdraw
his or her demand for such appraisal or shall become ineligible for such
appraisal (through failure to perfect or otherwise), then, as of the Effective
Time or the occurrence of such event, whichever last occurs, such holder's
Dissenting Shares shall automatically be converted into and represent the right
to receive the Merger Consideration, without interest, as provided in Section
3.01(a). The Company shall give the Parent (i) prompt notice of any demands for
appraisal of Shares received by the Company and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to any
such demands. The Company shall not, without the prior written consent of the
Parent, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
3.04 TRANSFER OF SHARES AFTER THE EFFECTIVE TIME. No transfers of
Shares shall be made in the stock transfer books of the Surviving Corporation at
or after the Effective Time. If,
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after the Effective Time, Certificates formerly representing Shares are
presented to the Surviving Corporation, they shall be cancelled and exchanged
for the Merger Consideration set forth in Section 3.01.
3.05 COMPANY STOCK RIGHTS. Prior to the Effective Time, the Company
shall use its best efforts to procure the surrender as of the Effective Time of
all outstanding options to purchase shares of Common Stock of the Company (the
"Options") pursuant to the CIMCO, Inc. 1988 Incentive Stock Option Plan and the
CIMCO, Inc. 1991 Incentive Stock Option Plan (collectively, the "Stock Option
Plans"), in consideration of the payment at the Effective Time of an amount of
cash per share subject to each such Option equal to the difference between the
exercise price of such Option and the Merger Consideration, less an amount equal
to all taxes required to be withheld from such payment. As to any Option not so
surrendered, the Company shall use its best efforts to obtain, prior to the
Effective Time, the consent of the holder of the Option to acquire upon payment
of the exercise price an amount of cash equal to the Merger Consideration, less
an amount equal to all taxes required to be withheld from such payment, in lieu
of each Share formerly covered thereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent and the
Purchaser that:
4.01 ORGANIZATION; QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own, lease and
operate its properties and carry on its business as now being conducted. The
Company is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of the Company's business or the location of
its properties makes such qualification necessary, except for any such failure
to qualify or be in good standing as shall not have a Material Adverse Effect
(as defined in Section 4.06) on the Company. The Company Disclosure Letter (as
defined in Section 4.06) identifies, and the Company has heretofore made
available to the Parent, complete and correct copies of the Certificate of
Incorporation and By-Laws of the Company, as currently in effect.
4.02 COMPANY SUBSIDIARIES. (a) The Company Disclosure Letter lists
all subsidiaries of the Company. Except as indicated in the Company Disclosure
Letter, all of the outstanding shares of capital stock of each such subsidiary
are owned by the Company either directly or indirectly through another of its
subsidiaries. Except as set forth in the Company Disclosure Letter, no equity
securities of any subsidiary of the Company are or may be required
<PAGE> 20
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to be issued (other than to the Company or its other subsidiaries) by reason of
any Equity Rights (as defined in Section 4.03) for shares of the capital stock
of any subsidiary of the Company, and there are no contracts, commitments,
understandings or arrangements by which any subsidiary of the Company is bound
to issue (other than to the Company) additional shares of its capital stock or
options, warrants or rights to purchase or acquire any additional shares of its
capital stock. Except as set forth in the Company Disclosure Letter, there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its subsidiaries is or may be obligated to transfer any shares of the
capital stock of any subsidiary of the Company. Except as set forth in the
Company Disclosure Letter, all of the shares of capital stock of each subsidiary
of the Company held by the Company or any subsidiary of the Company are fully
paid and nonassessable and are owned by the Company or such subsidiary of the
Company free and clear of any claim, lien or encumbrance other than restrictions
on transferability under federal and any applicable state securities laws. Each
subsidiary of the Company is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated or
organized, has the corporate power and authority necessary for it to own or
lease its properties and assets and to carry on its business as it is now being
conducted, and is duly qualified to do business and in good standing in the
states of the United States in which the ownership of its property or the
conduct of its business requires it to be so qualified, except for such
jurisdictions in which the failure to be so qualified and in good standing would
not have a Material Adverse Effect. As used in this Agreement, the term
"subsidiary" shall mean, with respect to the Company, any corporation or other
legal entity of which the Company or any of its subsidiaries controls or owns,
directly or indirectly, 50% or more of the stock or other equity interest
entitled to vote on the election of members to the board of directors or similar
governing body.
(b) Except for interests in the Company's subsidiaries and except as
set forth in the Company Disclosure Letter, neither the Company nor any of the
Company's subsidiaries owns, directly or indirectly, any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity, other than (i) non-controlling investments made in
the ordinary course of business and corporate partnering, development,
cooperative marketing and similar undertakings and arrangements entered into in
the ordinary course of business, and (ii) other investments of less than
$250,000 in the aggregate.
4.03 THE COMPANY'S CAPITALIZATION. The authorized capital stock of the
Company consists of (i) ten million Shares, and (ii) five million shares of
Preferred Stock, $.01 par value (the "Preferred Shares"), which Preferred Shares
include one hundred thousand shares of Series A Junior Participating Preferred
Stock, $.01 par value (the "Series A Shares"). As of the close of business on
December 18, 1995, there were (i) 2,970,481 Shares
<PAGE> 21
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issued and outstanding and no Shares held in the Company's treasury, (ii) no
Preferred Shares issued and outstanding, and (iii) no Series A Shares issued and
outstanding. All outstanding Shares have been duly authorized and validly
issued, and are fully paid, nonassessable and were issued free of preemptive
rights. Except for the Options described in Section 3.05 hereof and except as
set forth on the Company Disclosure Letter there are not now, and at the
Effective Time there will not be, any subscriptions, options, warrants, calls,
rights, agreements or commitments relating to the issuance, sale, delivery or
transfer by the Company (including any right of conversion or exchange under any
outstanding security or other instrument) of its Shares (collectively, "Equity
Rights"). There are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any Shares. The Company Disclosure
Letter contains a complete and accurate list of all holders of Options and any
other options or rights of any kind to purchase or acquire shares of the Common
Stock of the Company, together with the number of such options and the terms of
such options held by each such holder.
4.04 COMPANY EQUITY INVESTMENTS. Except as set forth on the Company
Disclosure Letter, neither the Company nor any of its subsidiaries owns,
directly or indirectly, or has the right to acquire, any equity security of
another entity nor has the Company or any of its subsidiaries made any loan or
advance to any other entity.
4.05 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has full
corporate power and authority to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly approved by the Board, and the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by the Board and, except for the approval
of the Merger by the holders of at least a majority of the Shares in accordance
with the DGCL, no other corporate actions on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby, including the acquisition of Shares pursuant to the Offer
and the Merger. The Company has taken all actions necessary to render the
prohibitions of Section 203 of the DGCL and the provisions of Article EIGHTH of
the Certificate of Incorporation to be inapplicable to the execution and
delivery of this Agreement and the Stockholder Tender Agreement and the
transactions contemplated hereby and thereby, including the acquisition of the
Shares pursuant to the Offer and the Merger. To the knowledge of the Company, no
other "fair price", "merger moratorium", "control share acquisition" or other
anti-takeover statute or similar statute or regulation applies or purports to
apply to the Merger, this Agreement or any of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Company and, assuming due authorization, execution and delivery by the Parent
and the
<PAGE> 22
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Purchaser, constitutes a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally as at the time in effect and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
4.06 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth on the
Company Disclosure Letter delivered to the Parent as of the date of this
Agreement (the "Company Disclosure Letter"), and except for any required
approval of the Merger by the stockholders of the Company and the filing of the
Delaware Certificate of Merger in accordance with the DGCL, neither the
execution, delivery and performance of this Agreement by the Company nor the
consummation by it of the transactions contemplated hereby will (i) conflict
with or result in any breach of any provision of the Certificate of
Incorporation or By-Laws of the Company; (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (A) in connection with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (B) in
connection with the Exchange Act, (C) where the failure to obtain such consent,
approval, authorization or permit, or to make such filing or notification, would
not have a Material Adverse Effect, and (D) for any requirements which became
applicable to the Company as a result of the specific regulatory status of the
Parent or the Purchaser or as a result of any other facts that specifically
relate to the business or activities in which the Parent or the Purchaser is or
proposes to be engaged; (iii) constitute a breach or result in a default under,
or give rise to any right of termination, amendment, cancellation or
acceleration under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, agreement or other instrument or
obligation of any kind to which the Company is a party or by which the Company
or any of its assets may be bound, except for any such breach, default or right
as to which requisite waivers or consents have been obtained or which, in the
aggregate, would not have a Material Adverse Effect; or (iv) assuming compliance
with the DGCL and the HSR Act, violate any order, writ, injunction, judgment,
decree, law, statute, rule, regulation or governmental permit or license
applicable to the Company or any of its assets, which violation would have a
Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means a
material adverse effect on the business, assets, prospects, financial condition
or results of operation of the Company and its subsidiaries considered on a
consolidated basis or on the ability of the Company, the Parent or the Purchaser
to consummate the transactions contemplated by this Agreement.
<PAGE> 23
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4.07 SEC REPORTS; FINANCIAL STATEMENTS. The Company has filed all
required forms, reports and documents with the SEC since May 1, 1992
(collectively, the "SEC Reports"), each of which has complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Act, each as in effect on the
dates so filed. None of such forms, reports or documents, including, without
limitation, any financial statements or schedules included or incorporated by
reference therein, contained, when filed, any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company has heretofore made available or promptly will make available to the
Parent, a complete and correct copy of any amendment to the SEC Reports. The
Company has previously furnished to the Parent audited consolidated balance
sheets of the Company and its subsidiaries as of April 30th in each of the years
1991 through 1995, and the related audited consolidated statements of income,
statements of cash flow or changes in financial position and changes in
stockholders' equity of the Company and its subsidiaries for the fiscal years
then ended (collectively, the "Related Statements"), together with the
respective reports thereon of Grant Thornton. The unaudited consolidated balance
sheet of the Company and its subsidiaries as of October 31, 1995 is hereinafter
referred to as the "Company Balance Sheet." Each of the balance sheets included
in the financial statements referred to in this Section 4.06 (including the
related notes thereto) presents fairly the financial position of the Company and
its subsidiaries as of their respective dates, and the Related Statements
included therein (including the related notes thereto) present fairly the
consolidated results of operations, the cash flows or changes in financial
position, and changes in stockholders' equity for the periods then ended, all in
conformity with generally accepted accounting principles applied on a consistent
basis, except as otherwise noted therein.
4.08 PROXY STATEMENT; OFFER DOCUMENTS. Any proxy or similar materials
distributed to the Company's stockholders in connection with the Merger,
including any amendments or supplements thereto (the "Proxy Statement"), will
comply in all material respects with applicable federal securities laws and will
not contain any untrue statements of a material fact required to be stated
therein or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by the Parent in
writing for inclusion in the Proxy Statement. None of the information supplied
by the Company in writing for inclusion in the Offer Documents or provided by
the Company in the Schedule 14D-9 will, at the respective times that the Offer
Documents and the Schedule 14D-9 or any amendments or supplements thereto are
filed with the SEC and are first published or sent or
<PAGE> 24
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given to holders of Shares, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
4.09 UNDISCLOSED LIABILITIES. Except as set forth on the Company
Disclosure Letter or reflected in the financial statements referred to in
Section 4.07, neither the Company nor any of its subsidiaries has any liability
or obligation, secured or unsecured (whether absolute, accrued, contingent or
otherwise, and whether due or to become due) except those which would not,
individually or in the aggregate, have a Material Adverse Effect.
4.10 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on the
Company Disclosure Letter, since the date of the Company Balance Sheet (i) the
business of the Company and its subsidiaries has been conducted in the ordinary
course consistent with past practice (except as otherwise contemplated by this
Agreement), (ii) there has not been any change which has had a Material Adverse
Effect, and (iii) neither the Company nor any of its subsidiaries has taken any
action described in Section 6.01.
4.11 TITLE, ETC. (a) The Company Disclosure Letter sets forth a list
of all of the land, which includes the buildings, structures and other
improvements located thereon (the "Real Property"), which is owned in fee by the
Company and any of its subsidiaries. The Company or such subsidiary, as the case
may be, has, with respect to personal property, good, and, with respect to real
property, good, marketable and insurable, title to all of the properties and
assets which it purports to own and which are material to the business,
operation or financial condition of the Company and its subsidiaries free and
clear of all mortgages, security interests, liens, claims, charges or other
encumbrances of any nature whatsoever, except for (i) any liens, encumbrances or
defects reflected in the Company Balance Sheet or disclosed in the notes
thereto; (ii) any liens, encumbrances or defects which do not, individually or
in the aggregate, materially detract from the fair market value (free of such
liens, encumbrances or defects) of the property or assets subject thereto or
materially interfere with the current use by the Company and its subsidiaries of
the property or assets subject thereto or affected thereby or otherwise have a
Material Adverse Effect; (iii) any liens or encumbrances for taxes not
delinquent or which are being contested in good faith, provided that adequate
reserves for the same have been established on the Company Balance Sheet to the
extent required by generally accepted accounting principles; (iv) any liens or
encumbrances for current taxes and assessments not yet past due; (v) any
inchoate mechanic's and materialmen's liens and encumbrances for construction in
progress; (vi) any workmen's, repairmen's, warehousemen's and carriers' liens
and encumbrances arising in the ordinary course of business, so long as such
liens have not been filed; (vii) any liens of the type referred to in (vi) above
that have been filed, so long as such
<PAGE> 25
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liens do not aggregate in excess of $25,000; (viii) liens securing obligations
under the Credit Agreement (as defined in Section 6.01); and (ix) with respect
to Real Property, any liens, encumbrances or defects which are matters of
record, including but not limited to, easements, quasi-easements, rights of way,
land use ordinances and zoning plans.
(b) The Company Disclosure Letter sets forth a list of all of the
leases and subleases (the "Real Property Leases") under which, as of the date
hereof, the Company or any subsidiary has the right to occupy space. The Company
has heretofore delivered to the Parent a true, correct and complete copy of all
of the Real Property Leases, including all amendments thereto. All Real Property
Leases and material leases pursuant to which the Company or any subsidiary
leases personal property from others are, in all material respects, valid,
binding and enforceable in accordance with their terms; neither the Company nor
any subsidiary has received notice of any default by the Company or any
subsidiary under any Real Property Lease which would have a Material Adverse
Effect; there are no existing defaults, or any condition or event which with the
giving of notice or lapse of time would constitute a default, by the Company or
any subsidiary thereunder which would have a Material Adverse Effect; and, with
respect to the Company's or any subsidiary's obligations thereunder without
qualification and with respect to the obligations of all other parties thereto,
to the knowledge of the Company, no uncured default or event or condition on the
part of any landlord exists under any Real Property Lease which with the giving
of notice or the lapse of time would constitute a default thereunder which would
have a Material Adverse Effect.
(c) All of the land, buildings, structures and other improvements
occupied by the Company and its subsidiaries in the conduct of its business are
included in the Real Property or the Real Property Leases.
(d) Neither the Company or any subsidiary owns or holds, nor is
obligated under or a party to, any option, right of first refusal or other
contractual right to purchase, acquire, sell or dispose of the Real Property and
the Real Property Leases or any portion thereof or interest therein.
4.12 PATENTS, TRADEMARKS, ETC. The Company Disclosure Letter
identifies all registered trademarks, copyrights and patents owned or licensed
by the Company and its subsidiaries as of the date hereof. To the Company's best
knowledge, the Company or its subsidiaries own, or are licensed or otherwise
have adequate right to use, all patents, patent rights, trademarks, trademark
rights, service marks, service mark rights, trade names, trade name rights,
copyrights, know-how, technology, trade secrets and other proprietary
information (collectively, the "Intellectual Property") which are material to
the conduct of the business of the Company and its subsidiaries. Except as set
forth in the Company Disclosure Letter, no claims have been asserted by any
<PAGE> 26
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person, and neither the Company nor any of its subsidiaries has asserted a claim
against any person, with respect to any of the Intellectual Property owned or
used by the Company or its subsidiaries or challenging or questioning the
validity or effectiveness of any license or agreement relating thereto to which
the Company or any subsidiary is a party.
4.13 INSURANCE. The Company Disclosure Letter identifies all material
property, general liability and casualty insurance policies which currently
insure the Company and its subsidiaries and the Company shall use its reasonable
efforts to keep such policies in full force and effect up to the Closing Date.
Such policies are adequate in the view of the management of the Company for the
assets and operations of the Company and its subsidiaries.
4.14 EMPLOYEE BENEFIT PLANS. (a) For purposes of this Section 4.14,
"Company Benefit Plans" means all employee benefit plans and arrangements
described in section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), with respect to which the Company or any subsidiary
has a liability, whether direct or indirect, actual or contingent, and any
material bonus, incentive and similar plans maintained by the Company or any
subsidiary.
(b) The Company Disclosure Letter sets forth a list of all Company
Benefit Plans and the Company has delivered or made available to the Parent,
where applicable, accurate and complete copies of all Company Benefit Plan texts
and related agreements.
(c) Except as set forth in the Company Disclosure Letter with respect
to each Company Benefit Plan: (i) to the best knowledge of the Company, such
plan has been administered and enforced in all material respects in accordance
with its terms and applicable law; (ii) to the best knowledge of the Company
after reasonable inquiry, no breach of fiduciary duty or prohibited transaction
has occurred; (iii) no actions, suits, claims or disputes are pending, or to the
knowledge of the Company, threatened, other than routine claims for benefits;
(iv) all contributions and premiums due have been made on a timely basis; (v) to
the Company's best knowledge, all contributions made or required to be made
under such Company Benefit Plan meet the requirements for deductibility under
the Internal Revenue Code of 1986, as amended (the "Code"); and (vi) no Company
Benefit Plan is a multiemployer plan (as defined in ERISA section 3(37)), a
multiple employer plan within the meaning of the Code or ERISA, a defined
benefit plan within the meaning of ERISA section 3(35), a plan subject to
section 302 of ERISA or section 412 of the Code, or funded through a "welfare
benefit fund" (as defined in Section 419(e) of the Code).
(d) Except as set forth on the Company Disclosure Letter or as
specifically provided in Section 3.05, the consummation of the transactions
contemplated by this Agreement
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will not (i) entitle any individual to severance pay, or (ii) accelerate the
time of payment or vesting, or increase the amount, of compensation due to any
individual. The Company has delivered to the Parent true, correct and complete
copies of each plan, agreement or arrangement relating to the foregoing,
including all amendments thereto.
(e) The Company Disclosure Letter sets forth a description of all
obligations of the Company and its subsidiaries with respect to retiree medical
and retiree life insurance benefits under the Company Benefit Plans. The Company
has delivered to the Parent written material which is representative in all
material respects of written communications of the Company and its subsidiaries
with respect to retiree medical and retiree life insurance benefits under the
Company Benefit Plans, a list of which is set forth on the Company Disclosure
Letter.
(f) Each Company Benefit Plan intended to be qualified under section
401(a) of the Code is so qualified, and each trust or other funding vehicle
related thereto is exempt from federal income tax under section 501(a) of the
Code.
(g) With respect to any insurance policy providing funding for
benefits under any Company Benefit Plan, (i) there is no material liability of
the Company or any subsidiary in the nature of a retroactive or retrospective
rate adjustment, loss sharing arrangement, or other actual or contingent
liability, nor would there be any such material liability if such insurance
policy was terminated on the date hereof, and (ii) to the knowledge of the
Company, no insurance company issuing any such policy is in receivership,
conservatorship, liquidation or similar proceeding and, to the knowledge of the
Company, no such proceeding with respect to any insurer is imminent.
4.15 LEGAL PROCEEDINGS, ETC. Except as set forth on the Company
Disclosure Letter, (i) there is no claim, action, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or relating to
the Company or any subsidiary before any court or governmental or regulatory
authority or body with respect to which there is a reasonable likelihood of a
determination which would have a Material Adverse Effect, and (ii) neither the
Company nor any subsidiary is subject to any outstanding order, writ, judgment,
injunction or decree of any court or governmental or regulatory authority or
body.
4.16 TAXES. Except as set forth on the Company Disclosure Letter, (i)
each of the Company and its subsidiaries has timely paid or adequately reserved
for in the Company Balance Sheet all Taxes (as defined below) required to be
paid by it through the date hereof (other than Taxes or audit adjustments which
would not, in the aggregate, have a Material Adverse Effect) and shall timely
pay any Taxes required to be paid by it after the date hereof and on or before
the Effective Time (unless the payment of such Taxes is being contested by the
Company or such
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subsidiary in good faith and an adequate reserve therefor is set up on the
Company's books to the extent required by generally accepted accounting
principles), (ii) each of the Company and its subsidiaries has timely filed all
notices, reports and returns for Taxes ("Tax Returns") that it is required to
file through the date hereof and shall, on or before the Effective Time,
correctly prepare and timely file, consistent with prior years in all material
respects, all Tax Returns that it is required to file after the date hereof and
on or before the Effective Time, (iii) the Company has correctly prepared, in
all material respects, all previously filed Tax Returns which remain open for
assessment and have not been examined or are currently under examination by the
appropriate governmental taxing authority, (iv) no material penalties or other
material charges are due with respect to the late filing of any Tax Return, (v)
neither the Company nor any subsidiary has been notified that it is currently
being audited by any taxing authority, (vi) no extension of time with respect to
any date on which any Tax Return was or is to be filed by the Company or any
subsidiary is in force as of the date hereof, (vii) no waiver or agreement by
the Company or any subsidiary is in force as of the date hereof for the
extension of time for the assessment or payment of any Tax, (viii) neither the
Company nor any subsidiary has agreed to make nor is required to make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise, and (ix) the Company has not agreed to indemnify or
reimburse any subsidiary for the amount of any savings in Taxes which the
Company realized for any year as a result of including such subsidiary in the
combined and consolidated Tax Returns which the Company filed for such year, and
neither the Company nor any subsidiary has agreed to indemnify or reimburse, or
to pay any refund to, any third party for any liability or benefit with respect
to Taxes that such third party may owe or be entitled to receive, as the case
may be. "Taxes" shall mean all taxes, levies or other fiscal assessments,
including, without limitation, income, excise, property, sales, use, gross
receipts, value added, payroll, employment, import and franchise taxes and
customs duties imposed by the United States, or any state, county, local or
foreign government, or subdivision or agency thereof, and including any
interest, penalties or additions attributable thereto.
4.17 MATERIAL AGREEMENTS. Except as set forth on the Company
Disclosure Letter and except for agreements made for the purpose of completing
the transactions contemplated by this Agreement, neither the Company nor any of
its subsidiaries is as of the date hereof a party to, or bound by, any material
agreement of any kind to be performed in whole or in part after the Effective
Time. Solely for the purpose of this Section, the term "material agreement"
shall mean any single agreement which involves the payment or receipt by the
Company or any subsidiary, subsequent to the date of this Agreement, of more
than $100,000. Except as set forth on the Company Disclosure Letter, to the best
knowledge of the Company, there is no breach or default and there are no facts
which with notice or the passage of time would
<PAGE> 29
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constitute a breach or default under, or give rise to any right of termination,
amendment, cancellation or acceleration under, whether as a result of the
consummation of the transactions contemplated hereby or otherwise, any
obligation to be performed by any party to a material agreement to which the
Company or any subsidiary is a party, which breach, default or right (assuming
the exercise thereof) would have a Material Adverse Effect.
4.18 COMPLIANCE WITH LAW. Except as set forth on the Company
Disclosure Letter, to the best knowledge of the Company, the business of the
Company and its subsidiaries is not being conducted and the properties and
assets of the Company and its subsidiaries are not currently owned or operated
in violation of any law, ordinance, regulation, order, judgment, injunction,
award or decree of any governmental or regulatory entity or court or arbitrator,
except for possible violations which either individually or in the aggregate do
not, and so far as can be reasonably foreseen will not, have a Material Adverse
Effect.
4.19 INSIDER INTERESTS. The Company Disclosure Letter sets forth all
material contracts, agreements with and other obligations to officers, directors
and employees or stockholders of the Company and its subsidiaries. Except as set
forth on the Company Disclosure Letter, no officer, director or stockholder of
the Company or any subsidiary, and no entity controlled by any such officer,
director or stockholder, and no relative or spouse who resides with any such
officer, director or stockholder (i) owns, directly or indirectly, any material
interest in any person that is or is engaged in business, other than on an
arm's-length basis, as a competitor, lessor, lessee, customer or supplier of the
Company or any subsidiary or (ii) owns, in whole or in part, any tangible or
intangible property that the Company or any subsidiary uses in the conduct of
the business of the Company and its subsidiaries.
4.20 OFFICERS, DIRECTORS AND EMPLOYEES. The Company Disclosure Letter
sets forth the name and current compensation of each officer, director or
employee of the Company and its subsidiaries whose current annual rate of
compensation from the Company (including bonuses but excluding commission-only
compensation) exceeds $50,000.
4.21 ENVIRONMENTAL PROTECTION. Except as set forth on the Company
Disclosure Letter, the Company and each of its subsidiaries have obtained all
material permits, certificates, licenses, approvals and other authorizations
(collectively "Environmental Permits") relating to pollution or protection of
the environment, including those relating to emissions, discharges, releases of
pollutants, contaminants or chemicals, or industrial, toxic or hazardous
substances or wastes into the environment (including, without limitation,
ambient air, surface water, ground water, or land) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or
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chemicals, or industrial, toxic or hazardous substances or wastes, except where
the failure to have obtained any Environmental Permits shall not have a Material
Adverse Effect on the Company. To the best knowledge of the Company, except as
set forth on the Company Disclosure Letter, the Company and each of its
subsidiaries is in material compliance with all terms and conditions of the
Environmental Permits, and the Company and each of its subsidiaries is also in
material compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in all applicable environmental laws or contained in any regulation,
code, plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, if any ("Pertinent Environmental
Laws"), except where the failure to have complied shall not have a Material
Adverse Effect on the Company. Except as set forth on the Company Disclosure
Letter, to the best knowledge of the Company, there are no past, present or
future events, conditions, circumstances, activities, practices, incidents,
actions or plans which may materially interfere with or prevent material
compliance or continued compliance with Pertinent Environmental Laws, or which
may give rise to any material common law or legal liability, or otherwise form
the basis of any material claim, action, demand, suit, proceeding, hearing,
study or investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge, release or threatened release into the environment, of any
pollutant, contaminant or chemical, or industrial, toxic or hazardous substance
or waste. Except as set forth on the Company Disclosure Letter, there is no
civil, criminal or administrative action, suit, demand, claim, hearing, notice
or demand letter, notice of violation, investigation, or proceeding pending or,
to the Company's knowledge, threatened against the Company or any subsidiary
relating in any way to any Pertinent Environmental Laws.
4.22 BROKERS AND FINDERS. Neither the Company or its subsidiaries nor
any of their respective officers, directors or employees has employed any
broker, finder or investment banker or incurred any liability for any brokerage
fees, commissions, finders' fees or investment banking fees in connection with
the transactions contemplated herein, except that the Company has employed, and
will pay the fees and expenses of, PaineWebber Incorporated as its financial
advisor, the arrangements with which have been disclosed in writing to the
Parent prior to the date hereof.
4.23 RIGHTS AGREEMENT. The Company Rights Agreement has been amended
to provide that the execution and delivery of this Agreement and the Stockholder
Tender Agreement and the consummation of the transactions contemplated hereby
and thereby will not cause (a) Parent or Purchaser to become an "Acquiring
Person" (as such term is defined in the Company Rights Agreement), (b) the
"Distribution Date" (as such term is defined in the
<PAGE> 31
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Company Rights Agreement) to occur, (c) the provisions of Section 13(a) of the
Company Rights Agreement to be applicable in respect of capital stock of the
Purchaser or the Parent or the capital stock of any affiliate of the Purchaser
or the Parent or (d) any adjustment under the provisions of Section 11(a) of the
Company Rights Agreement.
4.24 RESPIRATORY MEDICAL PRODUCTS SALE. The Asset Purchase Agreement,
dated as of December 4, 1995, between Medical Molding Corporation of America, a
California corporation and wholly owned subsidiary of the Company ("MMCA"), and
Vital Signs CA, Inc. ("VSCA"), a California corporation and wholly owned
subsidiary of Vital Signs, Inc., a New Jersey corporation, provides for (i) the
assumption by VSCA of all substantial liabilities known to the Company, whether
absolute or contingent, arising out of the Respiratory Medical Products business
of MMCA and (ii) aggregate cash consideration paid by VSCA to MMCA of no less
than $2,151,000, and at least $113,000 of liabilities assumed by VSCA, taking
into account all provisions for adjustment of such cash consideration.
$2,000,000 of the cash consideration paid by VSCA to MMCA in connection with the
sale of the Respiratory Medical Products business of MMCA was used to reduce the
indebtedness of the Company provided pursuant to the Company's existing Credit
Agreement with Wells Fargo Bank, National Association ("Wells Fargo"), as the
same may be amended from time to time (the "Credit Agreement").
4.25 NO OTHER REPRESENTATIONS OR WARRANTIES. Subject solely to the
information set forth in the Company Disclosure Letter, each of the
representations and warranties of the Company in this Agreement is true and
correct as of the date of this Agreement. Any document delivered by the Company
pursuant to this Agreement is a true, correct and complete copy of such
document, and has not been modified or amended unless such amendment or
modification is included with such document or has been delivered to Parent on
or prior to the date hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE PARENT AND THE PURCHASER
5.01 CORPORATION ORGANIZATION. The Parent is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Delaware and the Purchaser is a corporation duly organized and validly
existing and in good standing under the laws of the State of Delaware. The
Parent and the Purchaser each has all requisite corporate power and authority to
own its assets and carry on its business as now being conducted or proposed to
be conducted. Each of the Parent and the Purchaser has delivered to the Company
complete and correct copies of its
<PAGE> 32
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Certificate of Incorporation and By-Laws as in effect on the date hereof.
5.02 AUTHORIZED CAPITAL. The authorized capital stock of the Purchaser
consists of 10,000 shares of Common Stock, without par value, of which 100
shares are outstanding as of the Effective Time and are owned, beneficially or
of record, by Parent. All of the issued and outstanding shares of capital stock
of the Purchaser are validly issued, fully paid, nonassessable and free of
preemptive rights and all liens.
5.03 CORPORATION AUTHORITY. Each of the Parent and the Purchaser has
the necessary corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by each of the Parent and the Purchaser, the performance by the Parent
and the Purchaser of their respective obligations hereunder and the consummation
by the Parent and the Purchaser of the transactions contemplated hereby have
been duly authorized by its Board of Directors and approved by the Parent as
sole stockholder of the Purchaser, and no other corporate proceeding on the part
of the Parent or the Purchaser is necessary for the execution and delivery of
this Agreement by the Parent and the Purchaser and the performance by the Parent
and the Purchaser of their respective obligations hereunder and the consummation
by the Parent and the Purchaser of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each of the Parent and the
Purchaser and, assuming the due authorization, execution and delivery hereof by
the Company, is a legal, valid and binding obligation of the Parent and the
Purchaser, enforceable against each of the Parent and the Purchaser in
accordance with its terms, except to the extent that its enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general equitable principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
5.04 NO PRIOR ACTIVITIES. The Purchaser has not incurred, directly or
indirectly, any liabilities or obligations, except those incurred in connection
with its incorporation or with the negotiation of this Agreement, the Offer
Documents and the consummation of the transactions contemplated hereby and
thereby. The Purchaser has not engaged, directly or indirectly, in any business
or activity of any type or kind, or entered into any agreement or arrangement
with any person or entity, and is not subject to or bound by any obligation or
undertaking, that is not contemplated by or in connection with this Agreement,
the Offer Documents and the transactions contemplated hereby and thereby.
5.05 NO FINANCING CONTINGENCY. The Parent has sufficient funds to
consummate all of the transactions contemplated by this Agreement and will make
available to the Purchaser sufficient funds in sufficient time to consummate the
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Offer and the Merger in accordance with the terms of this Agreement.
5.06 GOVERNMENTAL FILINGS; NO VIOLATIONS. (a) No notices, reports or
other filings are required to be made by the Parent or the Purchaser with, nor
are any consents, registrations, approvals, permits or authorizations required
to be obtained by the Parent or the Purchaser from, any governmental or
regulatory authorities of the United States, the several States or any foreign
jurisdictions in connection with the execution and delivery of this Agreement by
the Parent and the Purchaser and the consummation by the Parent and the
Purchaser of the transactions contemplated hereby, the failure to make or obtain
any or all of which could prevent, materially delay or materially burden the
transactions contemplated by this Agreement, except (A) in connection with the
HSR Act, and (B) in connection with the Exchange Act.
(b) Neither the execution and delivery of this Agreement by the Parent
or the Purchaser nor the consummation by the Parent or the Purchaser of the
transactions contemplated hereby nor compliance by the Parent or the Purchaser
with any of the provisions hereof will: (i) conflict with or result in any
breach of any provision of its Certificate of Incorporation or By-Laws, (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or require any consent under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which the Parent or the
Purchaser is a party or by which it or any of its properties or assets may be
bound, (iii) require the creation or imposition of any lien upon or with respect
to the properties of the Parent or the Purchaser or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Parent
or the Purchaser or any of its properties or assets, excluding from the
foregoing clauses (iii) and (iv) violations, breaches or defaults which in the
aggregate, would neither have a material adverse effect on the business,
financial condition or operations of the Parent or the Purchaser nor prevent,
materially delay or materially burden the transactions contemplated by this
Agreement.
5.07 BROKERS AND FINDERS. Neither the Parent, the Purchaser nor any of
its officers, directors or employees has employed any broker, finder or
investment banker or incurred any liability for any brokerage fees, commissions,
finders fees or investment banking fees in connection with the transactions
contemplated herein, except that the Parent has employed and will pay the fees
and expenses of Salomon Brothers Inc.
5.08 OFFER DOCUMENTS; PROXY STATEMENT; OTHER INFORMATION. None of the
information included in the Offer Documents (including any amendments or
supplements thereto) or any
<PAGE> 34
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schedules required to be filed with the SEC in connection therewith and
described therein as being supplied by the Parent or the Purchaser will, at the
respective times that the Offer Documents or any amendments or supplements
thereto or any such schedules are filed with the SEC, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. None of the
information supplied in writing by the Parent or the Purchaser specifically for
inclusion in the Proxy Statement, Schedule 14D-9 or any statement required
pursuant to Section 14(f) of the Exchange Act or any other schedules or
statements required to be filed with the SEC in connection therewith will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading.
5.09 NO OTHER REPRESENTATIONS OR WARRANTIES. Each of the
representations and warranties of the Parent and the Purchaser in this Agreement
is true and correct as of the date of this Agreement. Any document delivered by
the Parent or the Purchaser pursuant to this Agreement is a true, correct and
complete copy of such document, and has not been modified or amended unless such
amendment or modification is included with such document or has been delivered
to the Company on or prior to the date hereof.
ARTICLE VI
COVENANTS OF THE PARTIES
6.01 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by
this Agreement or as set forth on the Company Disclosure Letter, during the
period from the date of this Agreement to the Effective Time, the Company and
its subsidiaries will conduct their business and operations only in the ordinary
and usual course of business consistent with past practice. Without limiting the
generality of the foregoing, and, except as contemplated in this Agreement or as
set forth on the Company Disclosure Letter, prior to the Effective Time, without
the advance written consent of the Parent (which consent will not be
unreasonably withheld with respect to the incurrence of indebtedness by the
Company under the revolving facility provided by Wells Fargo pursuant to the
Credit Agreement, as currently evidenced by the Promissory Note made by the
Company in favor of Wells Fargo, dated as of June 9, 1995, in the original
principal amount of $6,758,500 (the "Line of Credit Note") and the Promissory
Note made by the Company in favor of Wells Fargo, dated as of August 24, 1995,
in the original principal amount of $1,800,000 (the "Bridge Note"), but
excluding all of the Company's other indebtedness to Wells Fargo (the "Revolving
Line") pursuant to Section 6.01(b)(i)), neither the Company nor any of its
subsidiaries will:
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(a) Amend its Certificate of Incorporation or By-Laws or similar
governing documents;
(b) (i) Create, incur or assume any indebtedness for money borrowed,
including obligations in respect of capital leases, except (A) purchase money
mortgages granted in connection with past practice, (B) in the case of the
Company, indebtedness for borrowed money incurred in the ordinary course of
business not aggregating in excess of $7,000,000 outstanding at any time under
the Revolving Line, reduced by the net proceeds of any sale of assets by the
Company or any subsidiary out of the ordinary course of business, PROVIDED that
the proceeds of any borrowing are not distributed to the stockholders of the
Company; or (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person; PROVIDED, HOWEVER, that the Company and its subsidiaries may
endorse negotiable instruments in the ordinary course of business consistent
with past practice;
(c) Declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
the Common Stock of the Company or any capital stock of any subsidiary;
(d) Issue, sell, grant, purchase or redeem, or issue or sell any
securities convertible into, or options with respect to, or warrants to purchase
or rights to subscribe to, or subdivide or in any way reclassify, any Shares,
except in any case above pursuant to the Stock Option Plans;
(e) (i) Increase the aggregate amount of compensation payable or to
become payable by the Company or any subsidiary to its directors, officers or
employees, whether by salary or bonus, by more than two percent in the aggregate
on an annual basis (excluding commission-only compensation, the rate of which
shall not be increased); or (ii) increase the rate or term of, or otherwise
alter, any bonus (other than any bonus permitted by clause (i) of this Section
6.01(e)), insurance, pension, severance or other employee benefit plan, payment
or arrangement made to, for or with any such directors, officers or employees;
(f) Enter into any agreement, commitment or transaction (other than
borrowings permitted by Section 6.01(b)), except agreements, commitments or
transactions in the ordinary course of business consistent with past practice;
(g) Sell, transfer, mortgage, pledge, grant any security interest or
permit the imposition of any lien or other encumbrance on any asset other than
in the ordinary course of business consistent with past practice and except (i)
pursuant to the Credit Agreement, (ii) in connection with purchase money
mortgages permitted by Section 6.01(b) or (iii) for any lien or other
encumbrance as to which the Company has a valid defense;
<PAGE> 36
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(h) Waive any right under any contract or other agreement identified
on the Company Disclosure Letter if such waiver would have a Material Adverse
Effect;
(i) Other than as required by any change in generally accepted
accounting principles, make any material change in its accounting methods or
practices or make any material change in depreciation or amortization policies
or rates adopted by it for accounting purposes or, other than normal writedowns
or writeoffs consistent with past practices, make any writedowns of inventory or
writeoffs of notes or accounts receivable;
(j) Make any loan or advance to any of its stockholders, officers,
directors, employees (other than advances to field sales personnel, vacation
advances, relocation advances and travel advances in each case made in the
ordinary course of business in a manner consistent with past practice) or make
any other loan or advance to any other person or group otherwise than in the
ordinary course of business consistent with past practice;
(k) Terminate or fail to renew, where such renewal is at the Company's
or a subsidiary's option, any contract or other agreement (excluding customer
leases or contracts), the termination or failure of which to renew would have a
Material Adverse Effect;
(l) Enter into any collective bargaining agreement;
(m) Make any addition to or modification of the Company Benefits
Plans;
(n) Take, agree to take, or do or, with respect to anything within the
Company's or its subsidiaries control, knowingly permit to be done or to be
taken anything in the conduct of its business which (i) would cause any of the
representations of the Company to be or become untrue in any material respect,
and (ii) would reasonably be expected to have a Material Adverse Effect,
PROVIDED, HOWEVER,that nothing in this Section 6.01(n) shall affect the
generality of any provision of Annex A hereto; or
(o) Agree to do any of the foregoing.
6.02 NOTIFICATION OF CERTAIN MATTERS. (a) The Company shall give
prompt notice to the Parent of: (i) any notice or other communication from any
third party alleging that the consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement; (ii) any
notice or other communication from any regulatory authority in connection with
the transactions contemplated by this Agreement; and (iii) the occurrence of any
event having, or which insofar as can be reasonably foreseen would have, a
Material Adverse Effect.
(b) Between the date of this Agreement and the Effective Time, the
Company shall give prompt notice to the Parent of any
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proposed settlement or similar agreement ("Settlement") with the Internal
Revenue Service or any other state, local or foreign governmental taxing
authority providing for any adjustment with respect to any Tax Return or any
additional liability for Taxes, and shall not enter into any Settlement without
the prior written consent of the Parent, which consent shall not be unreasonably
withheld.
6.03 ACCESS TO INFORMATION. (a) Between the date of this Agreement and
the Effective Time, the Company will during ordinary business hours and upon
reasonable advance notice, (i) give the Parent and the Parent's authorized
representatives all access the Parent shall reasonably request to all of its and
its subsidiaries' books, records (including, without limitation, the workpapers
of the Company's outside accountants), contracts, commitments, plants, offices
and other facilities and properties, and its and its subsidiaries' personnel,
representatives, accountants and agents; PROVIDED, HOWEVER, that all such access
shall take place after appropriate prior consultation with the officers of the
Company, (ii) permit the Parent to make such inspections thereof as it may
reasonably request (including, without limitation, observing the Company's or a
subsidiary's physical inventory of its assets), (iii) cause its and its
subsidiaries' officers and advisors to furnish to the Parent its financial and
operating data and such other existing information with respect to its business,
properties, assets, liabilities and personnel (including, without limitation,
title insurance reports, real property surveys and environmental reports, if
any), as the Parent may from time to time reasonably request, (iv) take such
actions as the Parent reasonably deems appropriate to verify the existence and
condition of equipment leased by the Company or any of its subsidiaries to its
customers, and (v) permit the Parent's accountants to conduct such confirmation
and testing procedures with respect to the receivables of the Company and its
subsidiaries as the Parent reasonably deems appropriate; PROVIDED, HOWEVER, that
(A) any such investigation shall be conducted in such a manner as not to
interfere unreasonably with the operation of the business of the Company, (B)
neither the Company nor any of its subsidiaries shall be required to take any
action which would constitute a waiver of the attorney-client privilege, (C)
neither the Company nor any of its subsidiaries need supply the Parent with any
information which it is under a legal obligation not to supply, and (D) until
such time as the Parent and/or its affiliates are the beneficial owners of a
majority of the Shares, any such activities by the Parent prior to the purchase
by the Purchaser of Shares pursuant to the Offer shall be for the purposes of
verifying the accuracy of representations and warranties of the Company and the
compliance by the Company with its covenants contained in this Agreement.
(b) Any information provided pursuant to this Agreement shall be held
by the Parent in accordance with and shall be subject to the terms of the
Confidentiality Agreement dated September 2, 1994 between the Company and the
Parent (the
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"Confidentiality Agreement"), the term of which the parties hereby agree to
extend to December 31, 1996. Notwithstanding anything herein or in the
Confidentiality Agreement to the contrary, the Parent, the Purchaser or the
Company may disclose any information required to be disclosed pursuant to the
Exchange Act, or otherwise required or requested to be disclosed by the SEC.
6.04 FURTHER INFORMATION. The Company and the Parent shall give prompt
written notice to the other of (i) any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate in any material
respect (including the Company, the Parent or the Purchaser receiving knowledge
of any fact, event or circumstance which may cause any representation qualified
as to knowledge to be or become untrue in any material respect) or (ii) the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; PROVIDED, HOWEVER, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
6.05 FURTHER ASSURANCES. Consistent with the terms and conditions
hereof, each party hereto will execute and deliver such instruments and take
such other action as the other parties hereto may reasonably require in order to
carry out this Agreement and the transactions contemplated hereby.
6.06 INTERIM FINANCIAL STATEMENTS. Within 45 days after the end of
each fiscal quarter and 90 days after the end of any fiscal year after the date
of this Agreement, and until the Effective Time, the Company will deliver to the
Parent its Form 10-Q's or 10-K's, as the case may be, for such quarter or year.
The financial statements contained therein shall fairly present their respective
financial condition, results of operations and cash flows as at the date or for
the periods indicated in accordance with generally accepted accounting
principles consistently applied in accordance with past practice (except as may
be indicated in the notes thereto and except, in the case of unaudited
statements, as may be permitted by Form 10-Q of the Exchange Act), and shall be
prepared in conformity with the requirements of Regulation S-X under the
Exchange Act and Item 303 of Regulation S-K.
6.07 FAIRNESS OPINION. Within three business days of the execution of
this Agreement, the Company shall provide to the Parent a signed copy of the
written opinion of PaineWebber Incorporated that the Offer is fair to the
Company stockholders from a financial point of view, which PaineWebber
Incorporated has advised the Company it fully expects to be able to deliver at
such time.
6.08 BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use their best
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efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement and shall use its best efforts to satisfy the conditions to the
transactions contemplated hereby and to obtain all waivers, permits, consents
and approvals and to effect all registrations, filings and notices with or to
third parties or governmental or public bodies or authorities which are
necessary or desirable in connection with the transactions contemplated by this
Agreement, including, but not limited to, filings to the extent required under
the Exchange Act and HSR Act, and obtaining consent to the Merger from Wells
Fargo Bank, National Association pursuant to the Credit Agreement. If at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers or directors of
each of the parties hereto shall take such action. Without limiting the
generality of the foregoing, the Parent as the sole stockholder of the
Purchaser, and the Purchaser as a stockholder of the Company, will consent
and/or vote in favor of the transactions contemplated hereunder, and Company,
the Parent, and the Purchaser will vigorously defend against any lawsuit or
proceeding, whether judicial or administrative, challenging this Agreement or
the consummation of any of the transactions contemplated hereby. Subject to the
terms and conditions of this Agreement, from time to time after the date hereof,
without further consideration, the Company will, at its own expense, execute and
deliver such documents to the Parent as the Parent may reasonably request in
order to consummate the transactions contemplated by this Agreement. Subject to
the terms and conditions of this Agreement, from time to time after the date
hereof, without further consideration, each of the Parent and the Purchaser
will, at its own expense, execute and deliver such documents to the Company as
the Company may reasonably request in order to consummate the transactions
contemplated by this Agreement.
6.09 FILINGS. The Company and the Parent will file, or cause to be
filed, as promptly as possible and, in the case of the Parent in no event later
than five business days after the date hereof, with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice (the "Department of Justice") pursuant to the HSR Act the
notification required by the HSR Act, including all requisite documents,
materials and information therefor, and request early termination of the waiting
period under the HSR Act. Each of the Company and the Parent 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 HSR Act. The Company and the Parent shall each keep the
other apprised of the status of any inquiries or requests for additional
information made by any governmental authority and shall comply promptly with
any such inquiry or request.
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6.10 PUBLIC ANNOUNCEMENTS. The initial press release with respect to
the transactions contemplated hereby shall be a joint press release, and
thereafter the Company and the Parent shall consult with each other before
issuing any press release or otherwise making any public statements with respect
to the transactions contemplated hereby and shall not issue any such press
release or make any such public statement prior to such consultation, except as
may be required by law or any listing agreement with a national securities
exchange or with National Association of Securities Dealers, Inc., or in order
to carry out the fiduciary duties of the Board, as advised by counsel.
6.11 INDEMNITY; D&O INSURANCE. (a) The Parent shall cause all rights
to indemnification by the Company now existing in favor of each present and
former director or officer of the Company (hereinafter referred to in this
Section as the "Indemnified Parties") as provided in the Company's By-Laws to
survive the Merger and to continue in full force and effect as rights to
indemnification by the Surviving Corporation for a period of five years
following the Effective Time. The Parent shall not permit the indemnification
agreements between the Company and each of the Indemnified Parties that are in
existence as of the date of this Agreement to be amended during the term of such
indemnification agreements without the consent of the respective parties
thereto.
(b) Subject to the terms set forth herein, the Surviving Corporation
shall indemnify and hold harmless, to the fullest extent permitted under
applicable law (and shall also advance expenses as incurred by an Indemnified
Party to the extent permitted under applicable law, provided the person to whom
expenses are advanced provides an undertaking to repay such advances if it is
ultimately determined that such person is not entitled to indemnification), each
Indemnified Party against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to any action, alleged action, omission or alleged omission
occurring on or prior to the Effective Time in their capacity as director or
officer (including, without limitation, any claims, actions, suits, proceedings
and investigations which arise out of or relate to the transactions contemplated
by this Agreement) for a period of five years after the Effective Time, provided
that, in the event any claim or claims are asserted or made within such five
year period, all rights to indemnification in respect of any such claim or
claims shall continue until final disposition of any and all such claims.
(c) Any Indemnified Party wishing to claim indemnification under this
Section 6.11, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Surviving Corporation thereof, but the
failure to so
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notify shall not relieve the Surviving Corporation of any obligation to
indemnify such Indemnified Party or of any other obligation imposed by this
Section 6.11 unless and to the extent that such failure prejudices the Parent or
the Surviving Corporation; it being understood that it shall be deemed to
materially prejudice the Parent or the Surviving Corporation, as the case may
be, if, as a result of such failure to notify, the Parent or the Surviving
Corporation is not given an opportunity to assume the defense of such claim,
action, suit, proceeding or investigation within a reasonably prompt time after
such claim, action, suit, proceeding or investigation is asserted or initiated.
In the event of any such claim, action, suit, proceeding or investigation, (i)
the Surviving Corporation or the Parent shall have the right to assume the
defense thereof and shall not be liable to such Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Party in connection with the defense hereof, except that if the
Parent or Surviving Corporation elects not to assume such defense or counsel for
the Indemnified Party advises that there are issues which raise conflicts of
interest between the Parent or Surviving Corporation and the Indemnified Party,
the Indemnified Party may retain counsel satisfactory to it, and the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Party promptly as statements therefore are received; PROVIDED,
HOWEVER, that in no event shall the Parent or Surviving Corporation be required
to pay fees and expenses, including disbursements and other charges, for more
than one firm of attorneys in any one legal action or group of related legal
actions unless (A) counsel for the Indemnified Party advises that there are
issues which raise conflicts of interest that require more than one firm of
attorneys, or (B) local counsel of record is needed in any jurisdiction in which
any such action is pending, (ii) the Parent and the Indemnified Party shall
cooperate in the defense of any such matter, and (iii) the Parent and the
Surviving Corporation shall not be liable for any settlement effected without
the prior written consent of one of them (which consent shall not be
unreasonably withheld); and PROVIDED, FURTHER, that the Parent and Surviving
Corporation shall not have any obligation hereunder to any Indemnified Party if
and to the extent a court of competent jurisdiction ultimately determines, and
such determination shall have become final, that the indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited by applicable
law.
(d) For two years after the Effective Time, the Parent shall cause the
Surviving Corporation to use reasonable efforts to maintain, if available for an
annual premium not in excess of $150,000, the officers' and directors' liability
insurance covering the Indemnified Parties who are presently covered by the
Company's officers' and directors' liability insurance (copies of which have
been delivered to the Parent), with respect to acts or omissions occurring at or
prior to the Effective Time, on terms no less favorable than those in effect on
the date hereof or at the Effective Time, or if such insurance coverage is not
available for
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an annual premium not in excess of $150,000, to obtain the amount of coverage
that is available for an annual premium of $150,000.
(e) In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person (except for any sale of the Company's molding business whether
through a merger, sale of assets, sale of stock or otherwise), then and in each
such case, proper provisions shall be made so that the successors and assigns of
the Surviving Corporation, or at Parent's option, Parent, shall assume the
obligations set forth in this Section 6.11. Notwithstanding the foregoing, if a
majority of the shares of common stock of the Company or Surviving Corporation
are sold or transferred to a third party, but the Parent, or any subsidiary of
Parent, retains ownership either of any of Company's subsidiaries that
immediately prior to the date hereof were engaged in, or substantially all of
the assets that prior to the date hereof were used in, the plastics compounding
business of the Company, the Parent shall assume the obligations of the
Surviving Corporation set forth in this Section 6.11.
(f) In the event that any of the provisions of Section 6.11(a), (b) or
(c) above would conflict with any of the provisions of the Company's By-Laws or
the indemnification agreements referenced in Section 6.11(a) above in a manner
that, if held applicable, would limit or restrict, or impose conditions or
obligations on the exercise by any of the Indemnified Parties of, any of the
indemnification rights granted to them under the Company's By-Laws or such
indemnification agreements, then, in any such event or circumstance the
applicable provisions of the Company's By-Laws or the indemnification agreements
shall control, as it is the intention of the parties that the Indemnified
Parties shall have indemnification rights no less favorable than those which
they have under the Company's By-Laws and such indemnification agreements, as in
effect on the date hereof.
(g) The covenants contained in this Section 6.11 shall survive the
Effective Time until fully discharged and are intended to benefit each of the
Indemnified Parties.
6.12 OTHER POTENTIAL BIDDERS. The Company, its affiliates and their
respective officers, directors, employees, investment bankers, attorneys and
other representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any acquisition of all or any material portion of the assets of, or
any equity interest in, the Company or any business combination with the
Company. Prior to the acceptance for payment of Shares, the Company, directly or
indirectly, (a) may furnish information and access, in each case only in
response to unsolicited requests therefor, to any corporation, partnership,
person or other entity
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or group pursuant to confidentiality agreements that do not prohibit or restrict
disclosure to the Parent of any matter other than confidential information
regarding any such corporation, partnership, person or other entity or group and
(b) may participate in discussions and negotiate with such entity or group
concerning any proposed merger, sale of assets, sale of shares of capital stock,
acquisition of Shares other than pursuant to the Offer or the Merger or similar
transaction involving the Company or any division of the Company (an
"Acquisition Proposal"), only if such entity or group to which information or
access is furnished or discussions or negotiations are held has submitted a
written proposal to the Board relating to any such transaction and the Board by
a majority vote has determined in its good faith judgment, based as to legal
matters on the advice of legal counsel, that failing to take such action would
constitute a breach of the Board's fiduciary obligations under applicable law.
Except as set forth above, neither the Company or any of its affiliates, nor any
of its or their respective officers, directors, employees, representatives or
agents, shall, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than the Parent
and the Purchaser, any affiliate or associate of the Parent and the Purchaser or
any designees of the Parent and the Purchaser) concerning any Acquisition
Proposal, or take any other action to facilitate the making of a proposal that
constitutes or could reasonably be expected to lead to an Acquisition Proposal.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any executive officer of the
Company or any of its subsidiaries shall be deemed to be a breach of this
Section 6.12 by the Company. The Company shall use its best efforts to ensure
that the officers, directors and employees of the Company and its subsidiaries
and any investment banker or other advisor or representatives retained by the
Company are aware of the restrictions set forth in the preceding sentences, and
the Company hereby represents that the Board has adopted resolutions directing
the officers, directors and employees of the Company and its subsidiaries to
comply with such restrictions. The Company promptly shall advise the Parent
orally and in writing of any Acquisition Proposal and any inquiries or
developments with respect thereto. Neither the Board nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify, in a manner
adverse to the Parent or the Purchaser the approval or recommendation by the
Board of the Offer, the Merger or this Agreement, or (ii) approve or recommend,
or propose to approve or recommend, any Acquisition Proposal. Notwithstanding
the foregoing, nothing contained in this Agreement shall prevent the Board from
approving or recommending to the Company stockholders any unsolicited tender
offer or exchange offer by a third party as contemplated by Rules 14d-9 and
14e-2 promulgated under the Exchange Act (and, in connection therewith,
withdrawing or modifying the approval or recommendation by the Board of the
Offer, the Merger or this Agreement) in the event any unsolicited
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takeover proposal shall have been made by a third party if, in the good faith
judgment of the Board, based as to legal matters on the advice of legal counsel,
withdrawing or modifying such approval or recommendation is required under
applicable law in the proper discharge of its fiduciary duties. Notwithstanding
the foregoing, nothing contained in this Section 6.12 shall prevent the Company
from negotiating and executing agreements relating to the sale by the Company of
its remaining parcel of real estate located in Corona, California as long as (i)
the terms and conditions of any such agreement shall be reasonably acceptable to
Parent and (ii) the proceeds (net of reasonable expenses of the Company relating
to such sale) of any such sale are used to reduce the indebtedness of the
Company under the revolving credit facility under the Credit Agreement.
ARTICLE VII
CONDITIONS TO THE MERGER
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to consummate the Merger
shall be subject to the following conditions, which have not been waived at or
prior to the Closing:
(a) The Purchaser shall have accepted for payment Shares tendered
pursuant to the Offer;
(b) This Agreement and the Merger shall have been approved and adopted
by the requisite vote or consent, if any is required, of the stockholders of the
Company required by the Company's Certificate of Incorporation and the DGCL;
(c) Any waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have expired or been terminated; and
(d) No order, statute, rule, regulation, execution order, stay,
decree, judgment, or injunction shall have been enacted, entered, issued,
promulgated or enforced by any court or governmental authority which prohibits
or restricts the consummation of the Merger.
7.02 CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND THE PURCHASER TO
EFFECT THE MERGER. The obligation of the Purchaser and the Parent to effect the
Merger shall be further subject to satisfaction of the conditions, unless waived
by the Parent, that (i) the Company shall have performed and complied in all
material respects with the agreements and obligations contained in Section 1.03,
(ii) the Company shall have performed and complied in all material respects with
the agreements and obligations contained in this Agreement (other than in
Section 1.03) required to be performed and complied with by it at or prior to
the Effective
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Time, except where the failure to have so performed and complied is not
reasonably expected to have a Material Adverse Effect, (iii) all outstanding
Options shall have been surrendered to the Company as provided in Section 3.05
of this Agreement and cancelled by the Company, and (iv) the Parent shall have
received a comfort letter, in form and substance reasonably requested by the
Parent, from Grant Thornton or another nationally recognized public accounting
firm regarding the updating of the Company's most recent financial statements.
7.03 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger shall be further
subject to the Parent and the Purchaser having performed and complied in all
material respects with the agreements and obligations contained in this
Agreement required to be performed and complied with by each of them at or prior
to the Effective Time, except where the failure to have so performed or complied
is not reasonably expected to have a material adverse effect on the ability of
the Parent or the Purchaser to consummate the transactions contemplated by this
Agreement.
ARTICLE VIII
CLOSING
8.01 TIME AND PLACE. The closing of the Merger (the "Closing") shall
take place at the offices of Jones, Day, Reavis & Pogue, North Point, 901
Lakeside Avenue, Cleveland, Ohio 44114, at 10:00 a.m. local time on a date to be
specified by the parties which shall be no later than the third business day
after the date on which the last of the closing conditions set forth in Article
VII is satisfied or waived (if waivable) unless another time, date or place is
agreed upon in writing by the parties hereto. The date on which the Closing
actually occurs is herein referred to as the "Closing Date."
8.02 FILINGS AT THE CLOSING. At the Closing, the Purchaser shall cause
the Delaware Certificate of Merger to be filed and recorded with the Secretary
of State of the State of Delaware in accordance with the provisions of Section
103 of the DGCL, and shall take any and all other lawful actions and do any and
all other lawful things necessary to cause the Merger to become effective.
ARTICLE IX
TERMINATION; AMENDMENT; WAIVER
9.01 TERMINATION. This Agreement may be terminated and the Offer (if
Purchaser has not accepted Shares for payment) and the Merger may be abandoned
at any time prior to the Effective Time:
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(a) by mutual written consent of the Parent, the Purchaser and the
Company;
(b) by the Parent and the Purchaser or the Company if any court of
competent jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the Merger or the
acceptance for payment and payment for the Shares in the Offer and such order,
decree, ruling or other action is or shall have become nonappealable;
(c) by the Parent and the Purchaser if, due to an occurrence or
circumstance which would result in a failure to satisfy any of the conditions
set forth in Annex A hereto, the Purchaser shall have (A) failed to commence the
Offer within five business days following the date of the initial public
announcement of the Offer, (B) terminated the Offer or allowed the Offer to
expire without the purchase of any Shares thereunder, or (C) failed to pay for
Shares pursuant to the Offer within 75 days following the commencement of the
Offer;
(d) by the Company if (i) there shall not have been a material breach
of any representation, warranty, covenant or agreement on the part of the
Company which would entitle the Parent or the Purchaser to terminate this
Agreement pursuant to Section 9.01(e) and, due to an occurrence or circumstance
which would result in a failure to satisfy any of the conditions set forth in
Annex A hereto, the Purchaser shall have (A) failed to commence the Offer within
five business days following the date of the initial public announcement of the
Offer, (B) terminated the Offer or allowed the Offer to expire without the
purchase of any Shares thereunder, or (C) failed to pay for Shares pursuant to
the Offer within 75 days following the commencement of the Offer, or (ii) prior
to the purchase of Shares pursuant to the Offer, a corporation, partnership,
person or other entity or group shall have made a bona fide offer with respect
to an Acquisition Proposal that the Board by a majority vote determines in its
good faith judgment and in the exercise of its fiduciary duties, based as to
legal matters on the advice of legal counsel and as to financial matters on the
written fairness opinion of an investment banking firm of national reputation,
is more favorable to the Company's stockholders than the Offer and the Merger
and that the failure to terminate this Agreement and accept such offer would be
inconsistent with the proper exercise of the Board's fiduciary duties, provided
that such termination under this clause (ii) shall not be effective until
payment of the fee required by Section 9.03(b) hereof;
(e) by the Parent and the Purchaser prior to the purchase of Shares
pursuant to the Offer, if (i) there shall have been a breach of any
representation or warranty on the part of the Company having a Material Adverse
Effect or materially adversely affecting (or materially delaying) the
consummation of the Offer, (ii) there shall have been a breach of any covenant
or agreement
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on the part of the Company resulting in a Material Adverse Effect or materially
adversely affecting (or materially delaying) the consummation of the Offer,
(iii) the Company shall engage in negotiations with any entity or group (other
than the Parent or the Purchaser) that has proposed a Third Party Acquisition
(as defined below), (iv) the Board shall have withdrawn or modified (including
by amendment of the Schedule 14D-9) in a manner adverse to the Purchaser, its
approval or recommendation of the Offer, this Agreement or the Merger or shall
have recommended another offer, or shall have adopted any resolution to effect
any of the foregoing, or (v) a majority of the Shares on a fully diluted basis
shall not have been tendered in the Offer by the expiration date of the Offer
and on or prior to such date an entity or group (other than the Parent or the
Purchaser) shall have made and not withdrawn a proposal with respect to a Third
Party Acquisition; or
(f) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of the Parent or the Purchaser which
materially adversely affects (or materially delays) the consummation of the
Offer or (ii) there shall have been a material breach of any covenant or
agreement on the part of the Parent or the Purchaser and which materially
adversely affects (or materially delays) the consummation of the Offer.
"Third Party Acquisition" means the occurrence of any of the following
events (i) the acquisition of the Company by merger or otherwise by any person
(which includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) or entity other than the Parent, the Purchaser or any affiliate
thereof (a "Third Party"); (ii) the acquisition by a Third Party of more than
30% of the total assets of the Company, taken as a whole; (iii) the acquisition
by a Third Party of 30% or more of the Shares; (iv) the adoption by the Company
of a plan of liquidation or the declaration or payment of an extraordinary
dividend; or (v) the repurchase by the Company of more than 20% of the Shares.
9.02 EFFECT OF TERMINATION. In the event of the termination of this
Agreement and the abandonment of the Offer and the Merger pursuant to Section
9.01, this Agreement shall forthwith become void and have no effect, without any
liability on the part of any party hereto or its affiliates, directors, officers
or stockholders, provided that no such termination shall relieve any of the
Company, the Parent or the Purchaser from liability for damages arising (a) from
any willful or intentional breach of this Agreement or (b) from their
obligations under Sections 4.22, 5.07, 6.03(b) and 9.03, this Section 9.02 and
Article X. If this Agreement is terminated as provided herein, upon request
therefor each party (the "Redelivering Party") shall redeliver all documents,
work papers and other materials obtained (whether before or after execution of
this Agreement) by the Redelivering Party from the requesting party in
connection with the transaction contemplated hereby, together with all copies
thereof in the possession of the Redelivering Party.
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9.03 FEES AND EXPENSES. (a) In the event the Parent and the Purchaser
terminate this Agreement pursuant to Section 9.01(c) (other than any such
termination based upon the failure to satisfy clause (iii)(d) of Annex A) or
9.01(e)(i) hereof, or the Company terminates this Agreement pursuant to Section
9.01(d)(i), or in the event that this Agreement is terminated in a manner
described in Section 9.03(b), the Company shall reimburse the Parent, the
Purchaser and their affiliates (not later than one business day after submission
of statements therefor) for all actual documented out-of-pocket fees and
expenses, not to exceed $750,000, actually and reasonably incurred by any of
them or on their behalf in connection with the Offer and the Merger and the
consummation of all transactions contemplated by this Agreement (including,
without limitation, attorneys' fees, fees payable to financing sources,
investment bankers, counsel to any of the foregoing, and accountants and filing
fees and printing costs). Upon the termination of this Agreement pursuant to any
provision described in the first sentence of this Section 9.01(a), Parent and
Purchaser will promptly provide the Company with an estimate of the amount of
such fees and expenses and a request for reimbursement hereunder, and will
provide the Company in due course with invoices or other reasonable evidence of
such expenses upon request. The Company shall in any event pay the amount
requested (not to exceed $750,000) within one business day of such request,
subject to the Company's right to demand a return of any portion as to which
invoices are not received in due course.
(b) In the event the Company terminates this Agreement pursuant to
Section 9.01(d)(ii) or in the event the Parent and the Purchaser terminate this
Agreement pursuant to 9.01(e)(ii), (iii), (iv) or (v) hereof, the Parent and the
Purchaser would suffer direct and substantial damages, which damages cannot be
determined with reasonable certainty. To compensate the Parent and the Purchaser
for such damages, the Company shall pay to the Purchaser the amount of
$1,400,000 as liquidated damages immediately upon such a termination as well as
all amounts to which the Parent and the Purchaser would be entitled pursuant to
Section 9.03(a); PROVIDED, HOWEVER, that if the Parent and the Purchaser
terminate this Agreement pursuant to 9.01(e)(iii) hereof, the Company shall pay
to the Purchaser the amount of $700,000 as liquidated damages immediately upon
such a termination (as well as all amounts to which the Parent and the Purchaser
would be entitled pursuant to Section 9.03(a)), and if within 12 months
thereafter the Company enters into an agreement with respect to a Third Party
Acquisition, or a Third Party Acquisition occurs, the Company shall pay to the
Purchaser the amount of $700,000 within one business day following the execution
of such an agreement or such occurrence, as the case may be; PROVIDED FURTHER,
HOWEVER, that Parent and Purchaser will only be entitled to recover only one
$1,400,000 payment or two $700,000 payments of liquidated damages under this
Section 9.03(b) (and one payment of fees and expenses pursuant to Section
9.03(a)) even if this Agreement is or may be terminated under more than one of
the provisions of Section 9.01
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described in the first sentence of this Section 9.03(b). It is specifically
agreed that the amount to be paid pursuant to this Section 9.03 represents
liquidated damages and not a penalty.
(c) Except as specifically provided in this Section 9.03 each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
ARTICLE X
MISCELLANEOUS
10.01 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. The representations, warranties and agreements of the parties
contained in Sections 2.06, 3.01, 3.02 (but only to the extent that such Section
expressly relates to actions to be taken after the Effective Time), 3.03, 3.04,
3.05, 6.05, 6.08, 6.09, 6.11 and Article X hereof, shall survive the
consummation of the Offer and the Merger. The agreements of the parties
contained in Sections 6.03(b), 9.02, 9.03 and Article X hereof and the
representations and warranties in Sections 4.22 and 5.07 shall survive the
termination of this Agreement without termination. All other representations,
warranties, agreements and covenants in this Agreement shall not survive the
consummation of the Offer and the Merger or the termination of this Agreement.
10.02 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
the Parent (for itself and the Purchaser) and the Company at any time prior to
the Effective Time with respect to any of the terms contained herein executed by
duly authorized officers of the respective parties, except that after the
earlier of (a) the purchase by the Purchaser of a majority of the Shares on a
fully diluted basis, and (b) the meeting of stockholders to approve the Merger
contemplated by this Agreement, the price per Share to be paid pursuant to this
Agreement to the holders of Shares shall in no event be decreased and the form
of consideration to be received by the holders of such Shares in the Merger
shall in no event be altered without the approval of such holders.
10.03 WAIVER OF COMPLIANCE; CONSENTS. At any time prior to the
Effective Time, the parties hereto may extend the time for performance of any of
the obligations or other acts or waive any inaccuracies in the representations
and warranties contained herein or in the documents delivered pursuant hereto.
Any failure of the Parent (for itself and the Purchaser), on the one hand, or
the Company, on the other hand, to comply with any obligation, covenant,
agreement or condition herein may be waived in writing by the Parent (for itself
and the Purchaser) or the Company, respectively, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of or estoppel with
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respect to any subsequent or other failure. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto or any extensions, such
consent or extension shall be given in writing in a manner consistent with the
requirements for a waiver of compliance as set forth in this Section 10.03.
10.04 COUNTERPARTS. This Agreement may be executed in any number
of counterparts each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
10.05 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
its conflicts of laws rules.
10.06 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) or by overnight courier
service to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) If to the Company, to:
Prior to the Effective Time,
CIMCO, Inc.
265 Briggs Avenue
Costa Mesa, California 92626-4555
Attention: Chief Executive Officer
After the Effective Time,
CIMCO, Inc.
c/o M.A. Hanna Company
Suite 36-5000
200 Public Square
Cleveland, Ohio 44114-2304
Attention: General Counsel
with copies to:
Stradling, Yocca, Carlson & Rauth, P.C.
660 Newport Center Drive
Suite 1600
Newport Beach, California 92660-6441
Attention: Nick E. Yocca, Esq.
(b) if to the Parent or the Purchaser, to:
M. A. Hanna Company
Suite 36-5000
200 Public Square
Cleveland, Ohio 44114-2304
Attention: General Counsel
<PAGE> 51
- 45 -
with copies to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Lyle G. Ganske, Esq.
10.07 ENTIRE AGREEMENT, ASSIGNMENT ETC. This Agreement, which hereby
incorporates the Company Disclosure Letter, the Parent Disclosure Letter, the
Confidentiality Agreement and the Stockholder Tender Agreement, embodies the
entire agreement and understanding of the parties hereto in respect of the
subject matter hereof and, except for Section 6.11, is not intended to confer
upon any other person any rights or remedies hereunder. This Agreement
supersedes all prior agreements and understanding of the parties with respect to
the subject matter hereof other than the Confidentiality Agreement. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights, interest or
obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties hereto, except that the Parent shall have
the right to assign the rights of the Purchaser to any other (directly or
indirectly) wholly-owned subsidiary of the Parent without the prior written
consent of the Company.
10.08 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
10.09 HEADINGS; CERTAIN DEFINITIONS. The Articles and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not affect in any way the meaning
or interpretation of this Agreement. Every reference herein to the word "days,"
if not preceded by the word "business," shall mean calendar days, and every
reference herein to the words "business days" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday that is not a day on which banking institutions
in the city of New York are authorized or obligated by law to close.
10.10 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this
<PAGE> 52
- 46 -
being in addition to any other remedy to which they are entitled at law or in
equity.
[INTENTIONALLY LEFT BLANK]
<PAGE> 53
- 47 -
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first above
written.
CIMCO, INC.
By: /s/ Russell T. Gilbert
--------------------------------------
Name: Russell T. Gilbert
Title: President and Chief Executive
Officer
M.A. HANNA COMPANY
By: /s/ Michael S. Duffey
--------------------------------------
Name: Michael S. Duffey
Title: Vice President
HANWEST, INC.
By: /s/ Michael S. Duffey
--------------------------------------
Name: Michael S. Duffey
Title: Vice President
<PAGE> 54
- 48 -
ANNEX A
The capitalized terms used herein have the meanings
set forth in the Agreement and Plan of Merger
to which this Annex A is attached
Notwithstanding any other provision of the Agreement and Plan of
Merger to which this ANNEX A is attached (the "MERGER AGREEMENT") or the Offer,
the Purchaser shall not be required to accept for payment, purchase or pay for
any Shares of the Company tendered, and may terminate or, subject to the terms
of the Merger Agreement, amend the Offer and may postpone the acceptance for
payment of and payment for any Shares, if prior to the time of acceptance for
payment of Shares tendered pursuant to the Offer:
(i) at least a majority of the Shares on a fully diluted basis shall
not have been validly tendered and, if tendered, not withdrawn immediately
prior to the expiration of the Offer (the "MINIMUM CONDITION");
(ii) any waiting period applicable to the Offer pursuant to the HSR
Act shall not have expired or been terminated;
(iii) at any time before the time of acceptance for payment for any
such Shares any of the following shall occur or exist:
(a) there shall have been instituted or be pending any action,
proceeding, application, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, before any
court or governmental regulatory or administrative agency, authority
or tribunal, domestic or foreign, (i) challenging the acquisition by
the Parent or the Purchaser of the Shares, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or
seeking to obtain from the Parent or the Purchaser any damages that
would result in a Material Adverse Effect if such were assessed
against the Company, (ii) seeking to prohibit or materially limit the
ownership or operation by the Parent or the Surviving Corporation of
all or any material portion of the business or assets of the Company
or compel the Parent or the Surviving Corporation to dispose of or to
hold separate all or any material portion of the business or assets of
the Company, or to impose any material limitation on the ability of
the Company or the Surviving Corporation to conduct such business or
own such assets, or (iii) seeking to impose material limitations on
the ability of the Parent (or any other affiliate of the Parent) to
acquire or hold or to exercise full rights of ownership of the Shares,
including, but not limited to,
<PAGE> 55
- 49 -
the right to vote the Shares purchased by them on all matters properly
presented to the stockholders of the Company; or
(b) there shall be any statute, rule, regulation, judgment, order
or injunction enacted, promulgated, entered, enforced or deemed
applicable to the Offer, the Merger or the Merger Agreement, or any
other action shall have been taken by any government, governmental
authority or court, domestic or foreign, other than the routine
application to the Offer or the Merger of waiting periods under the
HSR Act, that has, or has a substantial likelihood of resulting in,
any of the consequences referred to in clauses (i) through (iii) of
paragraph (a) above; or
(c) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements
contained in the Merger Agreement, or any of the representations and
warranties of the Company set forth in the Merger Agreement shall not
have been true and correct in any material respect when made or,
except for any representations and warranties made as of a specific
date, shall have ceased to be true and correct in any material respect
as if made on and as of the scheduled expiration of the Offer, as it
may be extended from time to time (the "EXPIRATION DATE") (or, in the
case of representations and warranties that are specifically qualified
as to materiality, shall not have been true and correct when made or
shall have ceased to be true and correct on and as of the Expiration
Date); or
(d) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the New York
Stock Exchange, Inc. (ii) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States
(whether or not mandatory), (iii) the commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States and having a Material Adverse
Effect on or materially adversely affecting (or materially delaying)
the consummation of the Offer, (iv) any limitation (whether or not
mandatory), by any U.S. governmental authority or agency on, or any
other event that, in the judgment of the Parent, is substantially
likely to materially adversely affect, the extension of credit by
banks or other financial institutions, or (v) from the date of the
Merger Agreement through the date of termination or expiration of the
Offer, a decline of at least 25% in the Standard & Poor's 500 Index;
or
<PAGE> 56
- 50 -
(e) the Merger Agreement shall have been terminated in
accordance with its terms; or
(f) prior to the purchase of Shares pursuant to the Offer, the
Company Board of Directors shall have withdrawn or modified (including
by amendment of the Schedule 14D-9) in a manner adverse to the Parent
its approval or recommendation of the Offer, the Merger Agreement or
the Merger or shall have recommended another offer for the purchase of
the Shares, which, in the sole judgment of the Parent in any such
case, and regardless of the circumstances (including any action or
omission by the Parent) giving rise to such condition, makes it
inadvisable to proceed with such acceptance for payment except where
as a result of the Company's receipt of an unsolicited acquisition
proposal from a third party (A) the Company issues to its stockholders
a communication that contains only the statements permitted by Rule
14d-9(e) under the Securities Exchange Act of 1934 (and does not
otherwise withdraw, modify or amend its approval or recommendation of
the transactions contemplated hereby) and (B) within five business
days of issuing such communication the Company publicly reconfirms its
approval and recommendation of the transactions contemplated by the
Offer and the Merger Agreement;
(g) There shall have occurred since July 31, 1995, a change,
occurrence or circumstance in the Company's business having a Material
Adverse Effect thereon; or
(h) The failure of the Company to obtain any of the waivers or
consents of Wells Fargo pursuant to the letter dated December 19, 1995
from Wells Fargo to the Company, Compounding Technology, Inc., and
Medical Molding Corporation of America.
<PAGE> 1
EXHIBIT (c)(2)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
STOCKHOLDER TENDER AGREEMENT
by and between
HANWEST, INC.
and RUSSELL T. GILBERT
Dated as of December 19, 1995
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE> 2
STOCKHOLDER TENDER AGREEMENT
STOCKHOLDER TENDER AGREEMENT, dated as of December 19, 1995 (this
"Agreement"), by and between Hanwest, Inc., a Delaware corporation
("Purchaser"), and Russell T. Gilbert ("Stockholder").
WHEREAS, the Stockholder is the owner of 539,734 shares (the "Shares")
of Common Stock, $.01 par value per share (the "Common Stock"), of CIMCO, Inc.,
a Delaware corporation (the "Company"), including 4,394 Shares owned of record
by Stockholder for the benefit of his grandchildren and 10,257 Shares (the "ESOP
Shares") credited under the Company's Employee Stock Ownership Plan (the "ESOP")
to the account of Stockholder as of the date hereof, and holds stock options
(the "Options") to acquire an aggregate of 76,250 shares of Common Stock granted
pursuant to the Company's 1991 Incentive Stock Option Plan and the Company's
1988 Incentive Stock Option Plan; and
WHEREAS, M.A. Hanna Company, a Delaware corporation ("Parent"), the
Purchaser and the Company, have entered into an Agreement and Plan of Merger,
dated as of the date hereof (as amended from time to time, the "Merger
Agreement"), which provides, among other things, that, upon the terms and
subject to the conditions therein, Purchaser will make a cash tender offer (the
"Offer") for all of the outstanding shares of Common Stock and will merge with
the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Parent and Purchaser to
enter into the Merger Agreement, Purchaser has requested that the Stockholder
agree, and in order to induce Parent and Purchaser to enter into the Merger
Agreement, the Stockholder has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. The
Stockholder represents and warrants to the Purchaser as follows:
(a) The Stockholder is the sole record (except for the ESOP
Shares) and beneficial owner (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), which meaning will apply
for all purposes of this Agreement) of, and has good title to, all of the
Shares, and there exist no liens, claims, security interests, options, proxies,
voting agreements, charges or encumbrances of whatever
<PAGE> 3
nature ("Liens") affecting the Shares, subject, in the case of the ESOP Shares,
to the terms of the ESOP.
(b) Upon transfer to the Purchaser by the Stockholder of the
Shares upon consummation of the Offer or the Merger (whichever is earlier),
Purchaser will have good title to the Shares, free and clear of all Liens.
(c) Other than the Options, the Shares constitute all of the
securities (as defined in Section 3(10) of the Exchange Act, which definition
will apply for all purposes of this Agreement) of the Company beneficially
owned, directly or indirectly, by the Stockholder (excluding any securities
beneficially owned by any of his affiliates or associates (as such terms are
defined in Rule 12b-2 under the Exchange Act, which definition will apply for
all purposes of this Agreement) as to which he does not have voting or
investment power).
(d) Except for the Shares and the Options, the Stockholder does
not, directly or indirectly, beneficially own or have any option, warrant or
other right to acquire any securities of the Company that are or may by their
terms become entitled to vote or any securities that are convertible or
exchangeable into or exercisable for any securities of the Company that are or
may by their terms become entitled to vote, nor is the Stockholder subject to
any contract, commitment, arrangement, understanding or relationship (whether or
not legally enforceable) that allows or obligates him to vote or acquire any
securities of the Company.
(e) The execution and delivery of this Agreement by the
Stockholder does not, and the performance by the Stockholder of his obligations
hereunder will not, constitute a violation of, conflict with, result in a
default (or an event which, with notice or lapse of time or both, would result
in a default) under, or result in the creation of any Lien on any Shares under,
(i) any contract, commitment, agreement, understanding, arrangement or
restriction of any kind to which Stockholder is a party or by which the
Stockholder is bound or (ii) any judgment, writ, decree, order or ruling
applicable to the Stockholder.
(f) Neither the execution and delivery of this Agreement nor the
performance by the Stockholder of his obligations hereunder will (i) violate any
order, writ, injunction or judgment applicable to the Stockholder or (ii) to the
best knowledge of Stockholder, violate any law, decree, statute, rule or
regulation applicable to the Stockholder or require any consent, authorization
or approval of, filing with or notice to, any court, administrative agency or
other governmental body or authority, other than any required notices or filings
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act") or
the federal securities laws.
2
<PAGE> 4
2. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser
represents and warrants to the Stockholder as follows:
(a) Purchaser is duly organized and validly existing and in good
standing under the laws of the State of Delaware, has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement. This
Agreement has been duly and validly executed and delivered by Purchaser and
constitutes the legal, valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms, except that (i) the
enforceability hereof may be subject to applicable bankruptcy, insolvency or
other similar laws, now or hereinafter in effect, affecting creditors' rights
generally, and (ii) the availability of the remedy of specific performance or
injunctive or other forms of equitable relief may be subject to equitable
defenses and would be subject to the discretion of the court before which any
proceeding therefor may be brought.
(b) The execution and delivery of this Agreement by Purchaser
does not, and the performance by Purchaser of its obligations hereunder will
not, constitute a violation of, conflict with, or result in a default (or an
event which, with notice or lapse of time or both, would result in a default)
under, its certificate of incorporation or bylaws or any contract, commitment,
agreement, understanding, arrangement or restriction of any kind to which
Purchaser is a party or by which Purchaser is bound or any judgment, writ,
decree, order or ruling applicable to Purchaser.
(c) Neither the execution and delivery of this Agreement nor the
performance by Purchaser of its obligations hereunder will violate any order,
writ, injunction, judgment, law, decree, statute, rule or regulation applicable
to Purchaser or require any consent, authorization or approval of, filing with,
or notice to, any court, administrative agency or other governmental body or
authority, other than any required notices or filings pursuant to the HSR Act or
the federal securities laws.
3. TENDER OF SHARES. The Stockholder will tender and sell (and not
withdraw) pursuant to and in accordance with the terms of the Offer all of the
Shares. Upon the purchase of all the Shares pursuant to the Offer in accordance
with this Section 3, this Agreement will terminate. In the event,
notwithstanding the provisions of the first sentence of this Section 3, any
Shares are for any reason withdrawn from the Offer or are not purchased pursuant
to the Offer, such Shares will remain subject to the terms of this Agreement.
The Stockholder acknowledges that Purchaser's obligation to accept for payment
and pay for the Shares in the Offer is subject to all the terms and conditions
of the Offer.
3
<PAGE> 5
4. TRANSFER OF THE SHARES. During the term of this Agreement, except
as otherwise provided herein, the Stockholder will not (a) offer to sell, sell,
pledge or otherwise dispose of or transfer any interest in or encumber with any
Lien any of the Shares, (b) acquire any shares of Common Stock or other
securities of the Company (otherwise than in connection with a transaction of
the type described in Section 7 and any such additional shares or securities
will be deemed Shares and included in the Shares subject to this Agreement),
including, without limitation, by exercising any of the Options, (c) deposit the
Shares into a voting trust, enter into a voting agreement or arrangement with
respect to the Shares or grant any proxy or power of attorney with respect to
the Shares, or (d) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect acquisition or sale,
assignment or other disposition of or transfer of any interest in or the voting
of any shares of Common Stock or any other securities of the Company.
5. VOTING OF SHARES. The Stockholder, by this Agreement, does hereby
constitute and appoint Purchaser, or any nominee thereof, with full power of
substitution, during and for the term of this Agreement, as his true and lawful
attorney and proxy for and in his name, place and stead, to vote each of such
Shares at any annual, special or adjourned meeting of the stockholders of the
Company (and this appointment will include the right to sign his name (as
stockholder) to any consent, certificate or other document relating to the
Company which the laws of the State of Delaware may require or permit) (a) in
favor of the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval and adoption of the terms thereof and hereof; (b)
against any action or agreement that would result in a breach in any respect of
any covenant, agreement, representation or warranty of the Company under the
Merger Agreement; and (c) against the following actions (other than the Merger
and the other transactions contemplated by the Merger Agreement): (i) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company or its subsidiaries; (ii) a sale,
lease or transfer of a material amount of assets of the Company or one of its
subsidiaries, or a reorganization, recapitalization, dissolution or liquidation
of the Company or its subsidiaries; (iii) (A) any change in a majority of the
persons who constitute the board of directors of the Company as of the date
hereof; (B) any change in the present capitalization of the Company or any
amendment of the Company's Certificate of Incorporation or By-Laws, as amended
to date; (C) any other material change in the Company's corporate structure or
business; or (D) any other action which, in the case of each of the matters
referred to in clauses (iii)(A), (B), (C) and (D), is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, or adversely
affect the Merger and the other transactions contemplated by this Agreement and
the Merger Agreement. This proxy and power of attorney is a proxy and power
4
<PAGE> 6
coupled with an interest, and the Stockholder declares that it is irrevocable.
The Stockholder hereby revokes all and any other proxies with respect to the
Shares that he may have heretofore made or granted.
6. ENFORCEMENT OF THE AGREEMENT. The Stockholder acknowledges that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that Purchaser will be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which it is entitled at law or in equity, including without limitation
under Section 12 hereof.
7. ADJUSTMENTS. The number and type of securities subject to this
Agreement will be appropriately adjusted in the event of any stock dividends,
stock splits, recapitalizations, combinations, exchanges of shares or the like
or any other action that would have the effect of changing the Stockholder's
ownership of the Company's capital stock or other securities.
8. COMPLIANCE WITH MERGER AGREEMENT. Stockholder shall comply with
the requirements of Section 6.12 of the Merger Agreement.
9. TERMINATION. Except for Section 12 hereof which will only terminate
as and when provided therein, this Agreement will terminate on the earlier of
(a) the date the Merger Agreement is terminated in accordance with its terms,
(b) the purchase of all the Shares pursuant to the Offer in accordance with
Section 3, and (c) March 31, 1996.
10. EXPENSES. All fees and expenses incurred by either of the
parties hereto will be borne by the party incurring such fees and expenses.
11. BROKERAGE. Purchaser and the Stockholder represent and warrant to
the other that the negotiations relevant to this Agreement have been carried on
by Purchaser, on the one hand, and the Stockholder, on the other hand, directly
with the other, and that there are no claims for finder's fees or brokerage
commissions or other like payments in connection with this Agreement or the
transactions contemplated hereby. Purchaser, on the one hand, and the
Stockholder, on the other hand, will indemnify and hold harmless the other from
and against any and all claims or liabilities for finder's fees or brokerage
commissions or other like payments incurred by reason of action taken by him, it
or any of them, as the case may be.
12. FEE. If (a) Parent and Purchaser or the Company terminates the
Merger Agreement pursuant to Section 9.01(c), (d)
5
<PAGE> 7
or (e) thereof and (b) on or after the date hereof and not later than one year
from the date of such termination, (i) the Board of Directors of the Company
approves or recommends any proposal or offer (an "Acquisition Proposal")
concerning any merger, sale of assets, sale of shares of capital stock or
similar transaction involving the Company other than from Purchaser, or (ii) the
Company enters into an agreement with respect to a merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or a substantial portion of the assets or
equity securities of, the Company, or (iii) Stockholder disposes of any or all
of his Shares to any person not an affiliate or an associate of Purchaser or to
the Company or any affiliate thereof (or realizes cash proceeds in respect of
such Shares as a result of a distribution to the Stockholder by the Company
following the sale of a material amount of the Company's assets) in connection
with a transaction proposed, described or set forth in such Acquisition Proposal
or agreement or pursuant to such acquisition or (iv) the Company undergoes a
recapitalization, dissolution, liquidation or similar transaction proposed,
described or set forth in such Acquisition Proposal or agreement or the Company
issues an extraordinary dividend or other distribution in accordance with such
Acquisition Proposal or agreement (each, a "Subsequent Transaction") at a per
share price or with equivalent per share proceeds, as the case may be (the
"Subsequent Price"), with a value in excess of $10.50 (the "Offer Price"), then
the Stockholder will promptly pay to Purchaser an amount equal to one-half of
the product of (x) the excess of the Subsequent Price over the Offer Price and
(y) the number of Shares disposed of or otherwise participating in the
Subsequent Transaction. In the event of any stock dividends, stock splits,
recapitalizations, combinations, exchanges of shares or the like or any other
action that would have the effect of changing the Stockholder's ownership of the
Company's capital stock or other securities, the Offer Price will be
appropriately adjusted for the purpose of this Section 12.
13. MISCELLANEOUS.
(a) All representations and warranties contained herein will
survive for one year after the termination hereof.
(b) Any provision of this Agreement may be waived at any time by
the party that is entitled to the benefits thereof. No such waiver, amendment or
supplement will be effective unless in a writing and is signed by the party or
parties sought to be bound thereby. Any waiver by any party of a breach of any
provision of this Agreement will not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement or one or more sections hereof will not be considered a
waiver or deprive that party of the right thereafter
6
<PAGE> 8
to insist upon strict adherence to that term or any other term of this
Agreement.
(c) This Agreement contains the entire agreement among Purchaser
and the Stockholder with respect to the subject matter hereof, and supersedes
all prior agreements among Purchaser and the Stockholder with respect to such
matters. This Agreement may not be amended, changed, supplemented, waived or
otherwise modified, except upon the delivery of a written agreement executed by
the parties hereto.
(d) This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and performed in that state.
(e) The descriptive headings contained herein are for convenience
and reference only and will not affect in any way the meaning or interpretation
of this Agreement.
(f) All notices and other communications hereunder will be in
writing and will be given (and will be deemed to have been duly given upon
receipt) by delivery in person, by telecopy, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
If to the Stockholder to:
Mr. Russell T. Gilbert
c/o Cimco, Inc.
265 Briggs Avenue
Costa Mesa, California 92626-4555
Telecopier: (714) 549-1167
With a copy to:
O'Melveny & Myers
Suite 1700
610 Newport Center Drive
Newport Beach, California 92660
Attention: David A. Krinsky, Esq.
Telecopier:(714) 669-6994
If to the Purchaser to:
Hanwest, Inc.
c/o M.A. Hanna Company
Suite 36-5000
200 Public Square
Cleveland, Ohio 44114-2304
Attention: General Counsel
Telecopier: (216) 589-4200
7
<PAGE> 9
with copies to:
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
Attention: Lyle G. Ganske, Esq.
Telecopier: (216) 579-0212
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.
(g) This Agreement may be executed in any number of counterparts,
each of which will be deemed to be an original, but all of which together will
constitute one agreement.
(h) This Agreement is binding upon and is solely for the benefit
of the parties hereto and their respective successors, legal representatives and
assigns. Neither this Agreement nor any of the rights, interests or obligations
under this Agreement will be assigned by any of the parties hereto without the
prior written consent of the other parties, except that Purchaser will have the
right to assign to Purchaser or any other direct or indirect wholly owned
subsidiary of Parent any and all rights and obligations of Purchaser under this
Agreement, including the right to purchase Shares tendered by the Stockholder
pursuant to the terms hereof and the Offer, provided that any such assignment
will not relieve Purchaser from any of its obligations hereunder.
(i) If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other terms and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party hereto. Upon any such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
will negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that the transactions contemplated by this Agreement are consummated to
the extent possible.
(j) All rights, powers and remedies provided under this Agreement
or otherwise available in respect hereof at law or in equity will be cumulative
and not alternative, and the exercise of any thereof by either party will not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
8
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
HANWEST, INC.
By: /s/ Michael S. Duffy
----------------------------------
Name: Michael S. Duffy
Title: Vice President
Stockholder
/s/ Russell T. Gilbert
--------------------------------------
Russell T. Gilbert
9
<PAGE> 1
EXHIBIT (c)(3)
M.A. Hanna Company
Suite 36-5000
200 Public Square
Cleveland, Ohio 44114-2304
(216) 589-4000
(216) 489-4200 (Facsimile)
September 2, 1994
CONFIDENTIAL
CIMCO, Inc.
265 Briggs Avenue
Costa Mesa, CA 92626-4555
Attention: Mr. Russell T. Gilbert, President and Chief Operating
Officer
Gentlemen:
In connection with our discussion of a possible transaction involving our
respective companies (the "Transaction"), each party hereto will be furnishing
the other with certain information with respect to its respective businesses
(the "Business") which is either non-public, confidential or proprietary in
nature. All information furnished to each party hereto, its respective
directors, employees, attorneys, accountants and financial advisors
(collectively "representatives") (whether before or after the date of this
Agreement), together with analyses, compilations, studies or other documents
prepared by each party or its respective representatives which contain or
otherwise reflect such information or our review of, or interest in, the
Business or the Transaction is hereafter referred to as the "Information." In
consideration of each party being furnished with the Information, each party
agrees that:
1. The information will be kept confidential and will not, without
the prior written consent of the disclosing party, be disclosed by the
receiving party, or by its representatives, in any manner whatsoever, in whole
or in part, and shall not be used by the receiving party or its representatives
for any purpose other than evaluating the Transaction, except as and to the
extent required by a court or regulatory order. Moreover, the receiving party
agrees to transmit the Information only to its representatives who need to know
the Information for the purpose of evaluating the Transaction and who are
informed by the receiving party of the confidential nature of the Information
and who agree to be bound by the terms of this Agreement.
2. Without the prior written consent of the other party and except
as required by a court or regulatory order, each party and its respective
representatives will not disclose to any other corporation, partnership or
other entity or any other individual the fact that Information has been made
available or that discussions or negotiations are taking place concerning a
possible Transaction.
3. The Information which is furnished to each party, or to its
respective representatives, will be destroyed or returned to the disclosing
party immediately upon its request without retaining any copies thereof. That
portion of the Information which consists of analyses, compilations, studies or
other documents prepared by each party, or by its respective representatives,
will be destroyed or held by each party and kept confidential and subject to
the terms of this Agreement.
<PAGE> 2
4. This Agreement shall be inoperative as to such portions of the
Information which (i) are or become generally available to the public through
no fault or action by the receiving party or by its representatives; (ii)
become available to the receiving party or to the general public on a
non-confidential basis from a source, other than the disclosing such portions
by a contractual, legal or fiduciary obligation; or (iii) were known to the
receiving party on a non-confidential basis prior to its disclosure to the
receiving party by the disclosing party or one of its representatives or are
developed independently by the receiving party without reference to any of the
Information disclosed to the receiving party.
5. Except as otherwise provided therein, this Agreement supersedes
all previous agreements and shall terminate on December 31, 1995, unless
mutually extended.
If the foregoing is acceptable, please sign and return the enclosed copy of
this letter, whereupon this will become a binding Agreement.
Sincerely,
M.A. HANNA COMPANY
By /s/ John S. Pyke, Jr.
--------------------------
John S. Pyke, Jr.
Vice President, General Counsel
and Secretary
Enclosure
Agreed this 13th day of September, 1994
CIMCO, Inc.
By /s/ Russell T. Gilbert
--------------------------
Russell T. Gilbert
President and CEO
<PAGE> 1
EXHIBIT (c)(4)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is executed this 15th day of
September, 1995, but effective as of the 1st day of August, 1995, by and between
L. RONALD TREPP, an individual ("Employee"), and CIMCO, INC., a Delaware
corporation ("Company"), with reference to the following facts:
RECITALS
A. Employee is an individual possessing unique management and
executive talents of value to the Company and has been the acting Vice
President - Finance and Chief Financial Officer of the Company.
B. The Company desires to continue the employment of Employee as the
Vice President - Finance and Chief Financial Officer of the Company, and
Employee desires to accept such employment, all on the terms and conditions set
forth in this Agreement.
AGREEMENT
In consideration of the foregoing recitals and of the covenants and
agreements herein, the parties agree as follows:
1. Employment.
The Company hereby engages Employee to perform the duties and render
the services set forth in Section 2 for a period commencing on August 1, 1995
and ending on the second anniversary of such date (the "Employment Period"), and
Employee hereby accepts said employment and agrees to perform such services
during the Employment Period.
2. Duties.
2.1 Current Duties. Employee agrees to render to the Company and
continue his services as Vice President - Finance and Chief Financial Officer of
the Company. As such, during the Employment Period, Employee shall continue to
perform such duties and functions as are customarily performed by the principal
financial officer of the Company and additionally those which are consistent
with those of a company of a size and nature reasonably comparable to the
Company or any successor. Employee recognizes that the Board of Directors of the
Company may be required under its fiduciary duty to the Company and its
stockholders to eliminate the position or to appoint a different person as Vice
President - Finance and Chief Financial Officer of the Company. The parties
agree, however, that any such elimination or replacement of Employee by the
Company as the Vice President - Finance and Chief Financial Officer, other than
pursuant to Section 2.2 or Section 4.1 or 4.2(a) or 4.3(b) hereof, shall
constitute a termination of Employee's employment hereunder by the Company
without cause and shall not be made without the vote or written consent of a
majority of the Board of Directors of the Company.
<PAGE> 2
2.2 Change of Control. Notwithstanding the terms of Section 2.1 above,
if the Company or a significant portion thereof is sold or merged or undergoes a
change of control transaction of the nature described in Section 5.2(b) below,
this Agreement shall survive consummation of such transaction and shall continue
in effect for the remainder of the Employment Period, but Employee shall serve
as a senior financial officer of the entity which succeeds to the business or a
substantial portion of the business of the Company, and in such case shall bear
a suitable title and perform the duties and functions of such publicly traded or
privately held successor consistent with those customarily performed by a senior
financial officer of such a unit, division or entity comparable to the then
business of the Company, unit, division or entity. Employee may be required to
accept greater or lesser responsibility by any successor, and agrees to fully
cooperate and assist in any resulting transition for up to the remainder of the
Employment Period; and any adjustments required of Employee to complete the
transition to any successor or to serve as a senior financial officer of the
resulting company, unit, division or entity, shall not violate this Agreement so
long as "good reason" does not arise under Sections 4.5(b)(ii), (iii) or (iv).
This Agreement shall apply to the automatic modification in duties resulting
from such transaction as set forth above.
3. Compensation.
As compensation for his services to be performed hereunder, the Company
shall provide Employee with the following compensation and benefits:
3.1 Base Salary. Employee's base salary shall be $100,000 per year,
subject to an annual increase (if any) in the sole discretion of the Board,
payable in accordance with the Company's payroll practices as in effect from
time to time, and subject to such withholding as is required by law.
3.2 Bonus. Any bonus shall be in the sole discretion of the Board of
Directors, and if any is declared or paid, it shall be paid consistent with
executive bonus programs of the Company (if any) in existence during the
Employment Period, and be subject to such withholding as is required by law.
3.3 Benefits.
(a) Vacation. Employee shall be entitled to paid vacation
during each year of the Employment Period consistent with the Company's then
policy for executive employees of the level comparable to Employee. In the event
Employee does not use such vacation, he shall receive, upon termination of the
Employment Period, vacation pay for all unused vacation calculated at the base
salary rate set forth in Section 3.1 hereof. However, Employee shall endeavor to
take vacation time in the year in which it is allocated to him.
(b) Business Expenses. The Company shall reimburse Employee
for all reasonable business expenses incurred by Employee in the course of
performing services for the Company and in compliance with procedures
established from time to time by the Company.
(c) Other Benefits. Company shall provide Employee with
such normal employment benefits, such as 401(k) participation, automobile
allowance, medical insurance and
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<PAGE> 3
disability insurance, on the terms and to the extent generally provided by the
Company to its executive employees of the level comparable to Employee.
(d) Other Persons. The parties understand that other officers
and employees may be afforded payments and benefits and employment agreements
which differ from those of Employee in this Agreement; but Employee's
compensation and benefits shall be governed solely by the terms of this
Agreement, which shall supersede all prior understandings or agreements between
the parties concerning terms and benefits of employment of Employee with the
Company. Other officers or employees shall not become entitled to any benefits
under this Agreement.
4. Termination.
4.1 Termination by Reason of Death or Disability. The Employment Period
shall terminate upon the death or permanent disability (as defined below) of
Employee.
4.2 Termination by Company.
(a) The Company may terminate the Employment Period for
"cause" by written notice to Employee.
(b) The Company may terminate the Employment Period for any
other reason by written notice to Employee.
4.3 Termination by Employee.
(a) Employee may terminate the Employment Period for "good
reason" at any time by written notice to the Company.
(b) Employee may terminate the Employment Period for any other
reason by written notice to the Company.
4.4 Severance Pay.
(a) In the event the Employment Period is terminated by the
Company for any reason other than pursuant to Section 4.2(a) or 4.3(b) hereof or
if the Employment Period is terminated because of the death or disability of
Employee pursuant to Section 4.1, upon the effectiveness of any such
termination, the Company shall be obligated to pay to Employee (or his
executors, administrators or assigns, as the case may be) all unpaid salary,
benefits and bonuses (if any) accrued through the date of effectiveness of such
termination and, in addition, a cash payment equal to the Employee's unpaid
salary at the base rate set forth in Section 3.1 hereof (as adjusted pursuant to
such Section through the date of such termination) which would have accrued
through the remainder of the Employment Period, if any, as well as continued
medical and disability insurance, if any, which would have been required for
Employee's survivors under Section 3.3(c) for the remainder of the Employment
Period and such other benefits as may be required by law.
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<PAGE> 4
(b) In the event the Employment Period is terminated by the
Company pursuant to Section 4.2(a) hereof or the Employment Period is terminated
by Employee pursuant to Section 4.3(b) hereof, the Company shall have no
obligation to pay any severance pay to Employee. The Company shall, however, be
obligated to pay to Employee (or his executors, administrators or assigns, as
the case may be) all unpaid salary, benefits and bonuses (if any) accrued
through the date of termination and shall provide such other benefits as may be
required by law.
4.5 Certain Definitions. For purposes of this Agreement:
(a) The term "cause" shall mean those acts identified in
Section 2924 of the California Labor Code.
(b) The term "good reason" shall mean the occurrence of one or
more of the following events without Employee's express written consent: (i)
removal of Employee from the position and responsibilities as set forth under
Section 2 above; (ii) a material reduction by the Company in the kind or level
of employee benefits to which Employee is entitled immediately prior to such
reduction with the result that Employee's overall benefit package is
significantly reduced (other than any such reduction applicable to senior
officers and employees of the Company generally); (iii) the relocation of
Employee to a facility or a location outside of California; or (iv) any material
breach by the Company of any material provision of this Agreement which
continues uncured for thirty (30) days following written notice thereof.
(c) The term "permanent disability" shall mean Employee's
incapacity due to physical or mental illness, which results in Employee being
absent from the performance of his duties with the Company on a full-time basis
for a period of six (6) consecutive months. The existence or cessation of a
physical or mental illness which renders Employee absent from the performance of
his duties on a full-time basis shall, if disputed by the Company or Employee,
be conclusively determined by written opinions rendered by two qualified
physicians, one selected by Employee and one selected by the Company. During the
period of absence, but not beyond the expiration of the Employment Period,
Employee shall be deemed to be on disability leave of absence, with his
compensation paid in full. During the period of such disability leave of
absence, the Board of Directors may designate an interim Chief Financial Officer
on such terms as it deems proper.
5. Stock Option.
5.1 Options.
(a) Except to the extent inconsistent with the terms of this
Section 5, options (if any) granted to Employee shall be subject to the terms
and conditions of the Company's equity incentive program and the Company's
standard form of option agreement.
5.2 Vesting.
(a) In the event of a change in control (as defined below)
within the Employment Period, vesting will be accelerated as to all of the then
unvested shares under all options held by Employee and, in the event that any
such change in control will result in a
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<PAGE> 5
termination of the option(s) (in whole or in part), Employee shall have at least
ninety (90) days within which to exercise the option(s) after the date such
option(s) become fully vested.
(b) For purposes of this Agreement, "change in control" means
the occurrence of any of the following events:
(i) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than fifty percent
(50%) of the total voting power represented by the Company's then outstanding
voting securities;
(ii) Consummation of a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least eighty
percent (80%) of the total voting power represented by the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation, or the stockholders of the Company approving a plan of
complete liquidation of the Company or a consummation of the sale or
disposition by the Company of all or substantially all of the Company's assets.
(c) In the event the Employment Period is terminated by the
Company pursuant to Section 4.2(b) or by Employee pursuant to Section 4.3(a) and
a "change in control" had not accelerated vesting pursuant to Section 5 prior to
effectiveness of such termination, the option(s) shall (upon effectiveness of
such termination) vest with respect to an additional number of shares equal to
the lesser of: (a) the balance of the unvested option shares or (b) the option
shares which otherwise would have vested on or prior to the expiration of the
Employment Period, and such option(s) shall continue to be exercisable for a
minimum period of ninety (90) days following the date of effectiveness of such
termination (or such longer period up to ninety (90) additional days as is
permitted by the applicable stock plan).
6. Employee Benefit Plans.
Any employee benefit plans in which Employee may participate pursuant
to the terms of this Agreement shall be governed solely by the terms of the
underlying plan documents and by applicable law, and nothing in this Agreement
shall impair the Company's right to amend, modify, replace, and terminate any
and all such plans in its sole discretion as provided by law. This Agreement is
for the sole benefit of Employee and the Company, and is not intended to create
an employee benefit plan or to modify the terms of any of the Company's existing
plans.
7. Miscellaneous.
7.1 Arbitration/Governing Law. To the fullest extent permitted by law,
any dispute, claim or controversy of any kind (including but not limited to
tort, contract and statute) arising under, in connection with, or relating to
this Agreement or Employee's employment, shall be resolved exclusively by
binding arbitration in Orange County, California in accordance with the
commercial rules of the American Arbitration Association then in effect. The
Company and
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<PAGE> 6
Employee agree to waive any objection to personal jurisdiction or venue in any
forum located in Orange County, California. No claim, lawsuit or action of any
kind may be filed by either party to this Agreement except to compel arbitration
or to enforce an arbitration award; arbitration is the exclusive dispute
resolution mechanism between the parties hereto. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The validity,
interpretation, effect and enforcement of this Agreement shall be governed by
the laws of the State of California.
7.2 Assignment. This Agreement shall inure to the benefit of and shall
be binding upon the successors and the assigns of the Company, and all such
successors and assigns shall specifically assume this Agreement. Since this
Agreement is based upon the unique abilities of, and the Company's personal
confidence in Employee, Employee shall have no right to assign this Agreement or
any of his rights hereunder without the prior written consent of the Company.
7.3 Severability. If any provision of this Agreement shall be found
invalid, such findings shall not affect the validity of the other provisions
hereof and the invalid provisions shall be deemed to have been severed herefrom.
7.4 Waiver of Breach. The waiver by any party of the breach of any
provision of this Agreement by the other party or the failure of any party to
exercise any right granted to it hereunder shall not operate or be construed as
the waiver of any subsequent breach by such other party nor the waiver of the
right to exercise any such right.
7.5 Entire Agreement. This instrument, together with the option
agreements referred to in Section 5.1(a), contains the entire agreement of the
parties. It may not be changed orally but only by an agreement in writing signed
by the parties.
7.6 Notices. Any notice required or permitted to be given hereunder
shall be in writing and may be personally served or sent by United States mail,
and shall be deemed to have been given when personally served or two days after
having been deposited in the United States mail, registered or certified mail,
return receipt requested, with first-class postage prepaid and properly
addressed as follows. For the purposes hereof, the addresses of the parties
hereto (until notice of a change thereof is given as provided in this Section
7.6) shall be as follows:
If to Employee: L. Ronald Trepp, at his address last appearing
on the books and records of the Company
If to the Company: CIMCO, Inc.
265 Briggs Avenue
Costa Mesa, California 92626
Attention: President
7.7 Headings. The paragraph and subparagraph headings herein are for
convenience only and shall not affect the construction hereof.
7.8 Further Assurances. Each of the parties hereto shall, from time to
time, and without charge to the other parties, take such additional actions and
execute, deliver and file such additional instruments as may be reasonably
required to give effect to the transactions contemplated hereby.
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<PAGE> 7
7.9 Attorneys' Fees. In the event any party hereto commences
arbitration or legal action in connection with this Agreement, the prevailing
party shall be entitled to its attorneys' fees, costs and expenses reasonably
incurred in such action, and the amount thereof shall be included in any
judgment or award granted under Section 7.1.
7.10 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
7.11 Separate Counsel. The Company has been represented by Stradling,
Yocca, Carlson & Rauth in the negotiation and execution of this Agreement and
has relied on such counsel with respect to any matter relating hereto. The
Employee has been invited to have his own counsel review and negotiate this
Agreement and Employee has either obtained his own counsel or has elected not to
obtain counsel.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the day and year first above written.
"EMPLOYEE"
/S/ L. RONALD TREPP
---------------------------
L. Ronald Trepp
"COMPANY"
CIMCO, INC., a Delaware corporation
By: /S/ RUSSELL T. GILBERT
--------------------------
Russell T. Gilbert, President and
Chief Executive Officer
7
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EXHIBIT (c)(5)
NEWS RELEASE
FOR IMMEDIATE RELEASE Contact: Jennifer A. Shea
Vice President
714/546-4460
Cecilia A. Wilkinson
Pondel Parsons & Wilkinson
310/207-9300
CIMCO ANNOUNCES SUCCESSION PLAN FOR
NEW PRESIDENT AND CHIEF EXECUTIVE OFFICER
--GILBERT TO BECOME CHAIRMAN OF THE BOARD--
Costa Mesa, California -- June 12, 1995 -- CIMCO, Inc. (Nasdaq: CIMC)
today announced a succession plan for senior leadership of the company.
Russell T. Gilbert, 65, who has served as CIMCO's president and chief
executive officer since founding the company in 1959, has set in motion an
executive search for a new president and chief executive officer. Upon hiring
the new executive, Gilbert will continue on with the company and become
chairman of the board.
"It is our desire to effect a smooth transition in the day-to-day
leadership of CIMCO," Gilbert said. "This is a critical time for our company
as we continue our move toward regaining profitability. We have
achieved a significant turnaround in our medical molding operations; our
Dayton, Nevada molding plant continues to show progress; and our Compounding
Group remains strong. A new president and chief executive will be stepping in
at a time when our company is poised for renewed growth, capitalizing on the
company's many unique capabilities."
Gilbert added: "After three and a half decades of building CIMCO
into an international diversified operation, I am enthusiastic about bringing
in a new president so that I can devote more time to developing strategies and
implementing plans to enhance shareholder value."
Founded in 1959, CIMCO, Inc. is a major developer and manufacturer of
high performance plastic components for commercial, industrial and medical
markets. The company also custom formulates and compounds reinforced
thermoplastic materials. CIMCO supplies more than 100 original
equipment manufacturers in the computer, commercial irrigation, automotive
safety, residential products, telecommunications and health care industries.
###
<PAGE> 1
EXHIBIT (c)(6)
NEWS RELEASE
FOR IMMEDIATE RELEASE
Contact: L. Ronald Trepp Roger Pondel
Chief Financial Officer Pondel Parsons & Wilkinson
CIMCO, Inc. 310 207-9300
714 546-4460
CIMCO RETAINS INVESTMENT BANKER
IN RESPONSE TO UNSOLICITED INQUIRIES
Costa Mesa, California -- August 9, 1995 -- In response to several
unsolicited inquiries, CIMCO, Inc. (Nasdaq: NMS:CIMC) announced that its Board
of Directors has retained PaineWebber Incorporated to assist the Board in
reviewing and evaluating the inquiries.
Founded in 1959, CIMCO, Inc. is a major developer and manufacturer of
high performance plastic components for commercial, industrial and medical
markets. The company also custom formulates and compounds reinforced
thermoplastic materials. CIMCO supplies more than 100 original equipment
manufacturers in the computer, commercial irrigation, automotive safety,
residential products, telecommunications and health care industries.
###
<PAGE> 1
EXHIBIT (c)(7)
SPARTECH CORPORATION
====================
October 30, 1995
CONFIDENTIAL
- ------------
Mr. Gregory Brundage
CIMCO, Inc.
c/o PaineWebber, Incorporated
725 South Figueroa Street
Los Angeles, California 90017
Gentlemen:
The purpose of this letter is to summarize our proposal to purchase
all of the outstanding common stock of CIMCO, Inc. This letter is not intended
to be a binding commitment on our part, but is intended to serve as the basis
for our further discussions with you.
We propose the following:
1. Structure. Spartech will acquire all of the outstanding common
stock of CIMCO for $10.00 per share payable 51% in stock of
Spartech (valued on the date of closing at the average closing
over the prior 15 trading days on the New York Stock Exchange) and
the remainder in cash. The cash and stock portion will be
adjusted upward or downward on a pro rata basis, based upon
CIMCO's adjusted income occurring after July 31, 1995, defined as
net income (loss), exclusive of any gain or loss on the sale of
the respiratory medical products group plus depreciation and
amortization, minus capital expenditures relating to CIMCO's
molding operations. The acquisition will be structured as a
merger, with CTI becoming part of Spartech's compounding group.
2. SEC Registration. The shares of Spartech common stock issued in
the transaction will be registered with the Securities and
Exchange Commission. Because of the nature of this partially
tax-free exchange, an S-4 registration statement will be needed.
We expect the timing between acceptance of this letter and closing
of the transaction to be approximately 90 days.
3. Continued Employment. Spartech will offer continued employment to
all existing management and full-time employees of the compounding
division. It is expected the remaining employees will be employed
by Russell Gilbert in connection with his purchase of the molding
assets from Spartech.
4. Conditions. Consummation of the transaction shall be subject to
the following:
(a) Satisfactory completion of an investigation of CIMCO's
financial condition, results of operations, business,
pending litigation, accounting, tax,
<PAGE> 2
Mr. Gregory Brundage
October 30, 1995
Page 2
environmental, and other matters. We expect this to be
completed within three weeks from the date of acceptance of
this letter. Major issues not yet reviewed in detail
include a meeting with Hewlett Packard's personnel, a
review of the legal affairs of CIMCO by Spartech's outside
counsel, and a review of CIMCO's tax returns and the status
for any open Revenue Agent Reviews;
(b) Signing of a definitive agreement containing mutually
satisfactory representations, covenants, and conditions.
Negotiations of a definitive agreement will run concurrent
with the preparation of the S-4 Registration Statement;
(c) Receipt of all necessary consents and approvals from
directors, stockholders, lenders, governmental entities, and
other third parties; and
(d) Completion by CIMCO of the sale to a third party of the
assets of its respiratory medical products division in
consideration for at least $2.4 million in cash and the
assumption by the purchaser of at least $300,000 of accounts
payable.
If there is interest on CIMCO's part in proceeding with this
transaction, we are prepared to meet with you immediately to spell out our
proposal in greater detail and prepare the necessary legal documents.
I look forward to hearing from you. Please feel free to contact me at any
time.
Kindest regards,
SPARTECH CORPORATION
By:
---------------------------
Bradley B. Buechler
President and
Chief Executive Officer
<PAGE> 1
EXHIBIT (c)(8)
M.A. HANNA COMPANY
Suite 36-5000
200 Public Square
Cleveland, Ohio 44114-2304
(216) 589-4000
(216) 489-4200 (Facsimile)
HIGHLY CONFIDENTIAL
VIA TELECOPIER AND OVERNIGHT COURIER
November 2, 1995
The Board of Directors
CIMCO, Inc.
265 Briggs Avenue
Costa Mesa, CA 92626-4555
Dear Madam and Sirs:
We hereby offer to acquire all of the capital stock of CIMCO for $10.50 per
share in cash on the following terms and conditions:
1. Subject to the conditions set forth in this letter, Hanna will promptly
negotiate with CIMCO a Merger Agreement containing provisions standard in such
agreements. After approval of the Merger Agreement by the Boards of Directors of
Hanna and CIMCO, Hanna will make a tender offer to acquire all of the
outstanding stock of CIMCO (the "Acquisition"). Concurrently with the approval
of the Merger Agreement, the CIMCO Board will also approve the Hanna option to
acquire in the tender the CIMCO shares owned by Russell T. Gilbert and the CIMCO
shares subject to acquisition by exercise of stock options held by Mr. Gilbert,
and the amendment of CIMCO's stockholder rights plan to exclude Hanna's
transaction from its operation. It is understood that the proposed acquisition
is not contingent upon Mr. Gilbert's purchase of the molding division.
2. For purposes of this offer, we have assumed that (a) the Phase 1
environmental audits of CIMCO's properties being prepared for CIMCO will not
indicate any actual or potential substantial liabilities, (b) the Respiratory
Medical Products business will be sold for a cash consideration of at least
$2,568,000, the purchaser will assume trade liabilities relating to the business
of no less than $290,000 and CIMCO will not retain any substantial liabilities
arising out of that business and (c) the two Corona properties of CIMCO will be
sold for at least a gross price of $1,130,000 and $650,000 each and the cash
proceeds of the sales will be used to reduce CIMCO's indebtedness and the
purchaser of the Corona property now occupied by Compounding Technology, Inc.
will enter into a lease with Compounding Technology, Inc. on arms-length,
commercial terms.
3. Hanna reserves the right to complete its due diligence investigation and
requests delivery of definitive documentation reflecting the audits and
transactions referred to in paragraph 2 above.
4. After reviewing the PaineWebber engagement letter dated August 16, 1995,
Hanna requests that CIMCO obtain written confirmation from PaineWebber that it
agrees that in the event that the transaction described in this letter is
consummated, its M&A Advisory Fee will not apply to transactions executed
subsequent to the date of acceptance of this letter.
5. For a period of 30 days commencing with the acceptance of this letter subject
to customary fiduciary out provisions based upon advice of counsel, CIMCO will
work exclusively with Hanna on the Acquisition and will not directly or
indirectly encourage, invite, pursue or take any action to facilitate other
offers to purchase CIMCO and/or its subsidiaries or any assets of CIMCO and/or
its subsidiaries or effect any other business combination involving CIMCO and/or
its subsidiaries. In the event CIMCO shall receive such an offer, it will
immediately notify Hanna and provide details of the offer. For a period of one
year after the date of this letter CIMCO also agrees to reimburse Hanna for its
<PAGE> 2
expenses incurred in connection with the transactions proposed in this letter,
not to exceed $500,000, if CIMCO closes an alternative transaction within such
year and Hanna has not terminated its participation for a reason other than the
fault of CIMCO.
6. From and after the date of receipt of this letter CIMCO agrees to conduct its
businesses in the ordinary course consistent with past practice and will grant
Hanna the right to review and veto any disposal or acquisition of stock or
assets having a value in excess of $500,000 proposed to be made after the
acceptance of this letter which veto rights shall not be used unreasonably.
7. CIMCO will not make any press release, announcement, report, disclosure, or
filing with respect to the transaction described in this letter without the
prior written consent of Hanna, except as required by law based on the advice of
counsel.
8. Closing of the Acquisition transaction described in this letter is subject
among other things to:
- Approval by the governmental agencies and regulatory authorities; and
- the absence at the time of the Acquisition of any environmental, health,
safety, product or other liabilities known to CIMCO's management which,
if realized, would have a material adverse affect on the financial
condition of CIMCO.
9. It is the intention of Hanna, and by signing this letter CIMCO acknowledges
that it is CIMCO's intention as well, that this letter and any actions of the
parties with respect hereto, not be deemed to constitute legally binding
obligations except with respect to the matters described in paragraphs 5, 6 and
7 above, or an obligation or commitment to enter into any definitive agreements.
Any legal obligations binding upon the parties hereto with respect to the
transactions described in this letter, except with respect to paragraphs 5, 6
and 7 above, is subject to, and shall exist only upon the due execution and
delivery of the definitive agreements with respect to such transactions, and all
obligations and rights of the parties hereto (except as aforesaid) shall be
governed by such agreements.
Your signature below shall indicate your intentions and obligations with respect
to the matters discussed above; please return a fully signed copy to us. Upon
your execution of this letter, we will deliver to you a draft Merger Agreement
which we have already prepared.
If we have not received a fully signed copy of this letter by 5:00 p.m. EST on
Friday, November 3, 1995, this offer will expire and the intentions stated in
this letter shall be null and void.
Whether or not you elect to accept this letter, please be kind enough to provide
a written response.
Very truly yours,
M. A. HANNA COMPANY
/s/ Martin D. Walker
- -----------------------------
Martin D. Walker
Chairman and Chief Executive Officer
cc: PaineWebber, Incorporated, Attention: G.R. Brundage
Accepted this 3rd day of
November, 1995.
CIMCO, INC.
/s/ Russell T. Gilbert
- -----------------------------
Russell T. Gilbert
President and Chief Executive Officer
<PAGE> 3
M.A. HANNA COMPANY
Suite 36-5000
200 Public Square
Cleveland, Ohio 44114-2304
(216) 589-4000
(216) 589-4200 (Facsimile)
HIGHLY CONFIDENTIAL
December 15, 1995
The Board of Directors
CIMCO, Inc.
265 Briggs Avenue
Costa Mesa, CA 92626-4555
Attention: Mr. Russell T. Gilbert
President and Chief Executive Officer
Dear Madam and Sirs:
Please reference our letter dated November 2, 1995 to you, accepted by CIMCO,
Inc. on November 3, 1995, as amended by our letters dated December 4, 1995 and
December 11, 1995.
This will confirm our agreement reached today to amend the first sentence of
paragraph 5 of the letter to extend the period of exclusivity to and including
December 22, 1995. All other provisions of the November 2, 1995 letter shall
remain in full force and effect.
Your signature below shall indicate your obligations with respect to the matters
discussed above; please return a fully signed copy to us.
Thank you.
Very truly yours,
M. A. HANNA COMPANY
/s/ John S. Pyke, Jr.
- ---------------------------------------------
John S. Pyke, Jr.
Vice President, General Counsel and Secretary
Accepted this 15th day of
December, 1995.
CIMCO, Inc.
/s/ Russell T. Gilbert
- ---------------------------------------------
Russell T. Gilbert
President and Chief Executive Officer
<PAGE> 1
EXHIBIT (c)(9)
CIMCO
NEWS RELEASE
FOR IMMEDIATE RELEASE
M.A. HANNA CONTACTS: CIMCO CONTACTS:
(Investor) (Media) Cecilia Wilkinson Jennifer Shea
Barb Gould Andy Opila Pondel Parsons & Wilkinson Vice President
216 589-4085 216 589-4018 310 207-9300 714 546-4460
CIMCO ANNOUNCES PRELIMINARY AGREEMENT
TO BE ACQUIRED BY M.A. HANNA
COSTA MESA, California -- November 8, 1995 -- CIMCO, Inc.
(Nasdaq:CIMC), a producer of thermoplastic compounds and plastic components,
and M.A. Hanna Company, an international specialty chemicals company, jointly
announced today a preliminary agreement for M.A. Hanna Company to acquire for
$10.50 a share of all the outstanding capital stock of CIMCO.
The transaction is subject to approval by the board of directors of
both corporations, negotiation and execution of definitive agreements,
obtaining governmental approvals and other conditions. The CIMCO board of
directors established a special committee of independent directors to evaluate
and make recommendations to the board as to whether the transaction as finally
negotiated is in the best interests of the Company and its stockholders.
Russell T. Gilbert, president and chief executive officer of CIMCO and
CIMCO's largest stockholder, has stated that he intends, subject to approval of
the acquisition as finally negotiated by the special committee and board of
CIMCO, to sell his 615,984 shares, or 21 percent of CIMCO's shares outstanding,
to M.A. Hanna on the same terms offered to other CIMCO stockholders.
Consistent with its strategy of being an intermediary between the
polymer producer and the end product manufacturer, M.A. Hanna intends to sell
CIMCO's plastics components business and retain its plastics compounding
operations. M.A. Hanna has received an offer from Gilbert to purchase the
molded components business as a going concern. M.A. Hanna has advised Gilbert
that it intends to sell the molded components business to him promptly after
completing the acquisition of CIMCO. The transaction would be subject to
negotiation and execution of definitive agreements and other conditions, but
the sale of the molded components business is not a condition of the proposed
CIMCO acquisition by M.A. Hanna.
<PAGE> 2
CIMCO's plastics compounding businesses, which operate as Compounding
Technology, Inc. (CTi), are located in Singapore; Corona, California; and
Charlotte, North Carolina.
"The acquisition of CTi helps us on three fronts to have a more
balanced market profile. First, we will grow our international business. CTi
provides M.A. Hanna with an excellent base for growth in Asia. In fact, the
operation in Singapore is CTi's largest," said Martin D. Walker, M.A. Hanna
chairman and chief executive officer. "CTi is also in the process of expanding
its production capabilities into Europe to service one of its global
customers."
"Second, CTi's strong engineering plastics compounding business will
add breadth to our specialty compounding portfolio throughout the world,"
Walker continued. "Finally, we are able to build a stronger position in the
electrical and electronics and business machines markets."
CTi, formed in 1980, had sales of $44 million in fiscal 1995 and has
95 employees. In addition to the facility in Asia and the two in the United
States, accounting for 31 million pounds of capacity, a facility is under
construction in France.
CTi develops and produces engineering plastic compounds with an
emphasis on polycarbonate resins, which are used in the electrical/electronics,
business machine and appliance markets because of the material's toughness,
clarity and heat resistance.
"CTi's expertise in polycarbonate complements our leadership position
as the number one independent compounder of nylon, another engineering plastic.
In addition, CTi provides us with access to compounding technologies to offer
conductive, internally lubricated and reinforced thermoplastics for demanding
specialty applications, and this fits with our capabilities in flame retardant
materials, which are developed for the same markets," said Douglas J. McGregor,
president and chief operating officer of M.A. Hanna.
"Additionally, the management team of CTi has an excellent track
record of growing the compounding business -- especially in Southeast Asia --
and we are looking forward to having them on our team," he added.
Founded in 1959, CIMCO, Inc. with headquarters in Costa Mesa,
California, reported sales of $83 million for fiscal 1995. CIMCO is a major
developer and manufacturer of high performance plastic components for
commercial, industrial and medical markets. CIMCO supplies more than 100
original equipment manufacturers in the computer, commercial irrigation,
automotive safety, residential products, telecommunications and health care
industries.
M.A. Hanna Company is a leading international specialty chemicals
company, its primary businesses are plastics and rubber compounding, color and
additive concentrates and distribution of plastic resins and engineering
shapes.
###
<PAGE> 1
EXHIBIT (c)(10)
INVESTMENT BANKING DIVISION
PaineWebber Incorporated
725 South Figueroa Street
Suite 4100
Los Angeles, CA 90017
213 972-1787
[PaineWebber LOGO]
December 19, 1995
Board of Directors
CIMCO, Inc.
265 Briggs Avenue
Costa Mesa, California 92626
Gentlemen:
CIMCO, Inc. ("CIMCO" or the "Company") proposes to enter into an Agreement
and Plan of Merger (the "Agreement") with M.A. Hanna Company ("Parent") and
Hanwest, Inc., a wholly owned subsidiary of Parent ("Purchaser"). Pursuant to
the Agreement: (i) Purchaser will make a tender offer (the "Offer") for all of
the outstanding shares of common stock, par value $.01 per share ("Common
Stock") of the Company at $10.50 per share in cash (the "Consideration") and
(ii) following completion of the Offer, each issued and outstanding share of
Common Stock (other than shares owned by Parent and its affiliates) will be
converted in a merger (the "Merger" and, together with the Offer, the
"Transaction") solely into the right to receive the Consideration.
You have asked us whether or not, in our opinion, the Consideration is
fair, from a financial point of view, to the holders of Common Stock (other than
Parent and its affiliates).
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed, among other public information, the Company's Annual Reports,
Forms 10-K and related financial information for the three fiscal years
ended April 30, 1995, the Company's Form 10-Q, the related unaudited
financial information for the three months ended July 31, 1995, and
preliminary unaudited financial information for the six months ended
October 31, 1995 provided by management;
(2) Reviewed certain information, including financial forecasts for the
fiscal year ending April 30, 1996, relating to the business, earnings,
cash flow, assets and prospects of the Company, furnished to us by the
Company;
(3) Conducted discussions with members of senior management of the Company
concerning its businesses and prospects and conducted site visits of
certain CIMCO facilities;
(4) Reviewed the historical market prices and trading activity for the
Common Stock and compared such price and trading history with that of
certain other publicly traded companies which we deemed relevant;
(5) Compared the financial position and operating results of the Company
with those of certain other publicly traded companies which we deemed
relevant;
<PAGE> 2
(6) Reviewed the proposed financial terms of the Transaction and compared
such terms with the financial terms of certain other mergers and
acquisitions which we deemed relevant;
(7) Reviewed the draft Merger Agreement dated December 12, 1995; and
(8) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed appropriate, including our assessment of general economic,
market and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information that was publicly available or supplied or otherwise
communicated to us by or on behalf of the Company, and we have not assumed any
responsibility for independent verification of such information or undertaken an
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of the Company and have assumed that all material assets and
liabilities (contingent or otherwise, known or unknown) are as set forth on the
Company's financial statements. We have assumed that the financial forecasts
examined by us were reasonably prepared on bases reflecting the best currently
available estimates and good faith judgments of the Company's management as to
the future performance of the Company. We understand that financial forecasts
relating to periods after fiscal year 1996 have not been, and will not be,
prepared by the Company's management. Accordingly, with your consent, in
connection with our opinion we have not conducted certain analyses, including
discounted cash flow analysis, which would require such long-term forecasts, and
our opinion is necessarily limited thereby. We have, at the request of the
Company, solicited third party indications of interest with respect to the
acquisition of all or a portion of the Company. Our opinion is based on
regulatory, economic, monetary and market conditions existing on the date
hereof.
Our opinion is directed to the Board of Directors and does not constitute a
recommendation to any shareholder of the Company as to whether or not any such
shareholder should tender his or her shares pursuant to the Offer or approve the
Merger. Our opinion does not address the relative merits of the Transaction and
any other potential transactions or business strategies discussed by the Board
of Directors of the Company or the Special Committee thereof as alternatives to
the Transaction or the decision of the Board of Directors of the Company to
proceed with the Transaction.
This opinion has been prepared solely for the use of the Board of Directors
of the Company and shall not be reproduced, summarized, described or referred
to, or given to any other person or otherwise made public without the prior
written consent of PaineWebber Incorporated; provided, however, that this letter
may be reproduced in full in the Schedule 14D-9 to be filed with the Securities
and Exchange Commission in connection with the Offer.
PaineWebber Incorporated is currently acting as financial advisor to the
Special Committee of the Board of Directors of the Company and will receive a
fee upon delivery of this opinion and upon consummation of the Offer.
In the ordinary course of our business, we may trade the securities of the
Company for our own account and for the accounts of our customers and,
accordingly, may at any time hold long or short positions in such securities.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Consideration is fair, from a financial point of
view, to the holders of Common Stock (other than Parent and its affiliates).
Very truly yours,
PAINEWEBBER INCORPORATED
<PAGE> 1
EXHIBIT (c)(11)
NEWS RELEASE
For Immediate Release
Investor contact: Barb Gould 216/589-4085
Media contact: Andy Opila 216/589-4018
CIMCO, Inc. contact: Tammy Trenkmann 714/546-4460
Pondel Parsons & Wilkinson contact: Cecilia Wilkinson 310/207-9300
M.A. HANNA REACHES DEFINITIVE
AGREEMENT TO ACQUIRE CIMCO
CLEVELAND (December 20, 1995) -- M.A. Hanna Company (NYSE/CHX:MAH), an
international specialty chemicals company, and CIMCO, Inc. (NASD:CIMC) jointly
announced that they have entered into a definitive merger agreement whereby M.A.
Hanna will acquire for $10.50 per share in cash all of the outstanding capital
stock of CIMCO, a producer of thermoplastic compounds and plastic components.
M.A. Hanna will promptly commence a tender offer to acquire all
outstanding shares of CIMCO common stock for $10.50 per share in cash. The
tender offer will be conditioned upon governmental approvals, among other
clearances, and the acquisition of a majority of the CIMCO commmon shares
by M.A. Hanna. Russell T. Gilbert, president and chief executive officer of
CIMCO and that company's largest stockholder, agreed to tender his 539,734
shares to
<PAGE> 2
M.A. Hanna pursuant to the tender offer. The merger agreement provides that
following the consummation of the offer the remaining CIMCO common shares will
be acquired for $10.50 per share in cash through a merger in which CIMCO will
become a business unit of M.A. Hanna. In connection with its approval of the
definitive agreement, CIMCO amended its share purchase rights to exclude the
M.A. Hanna transaction.
Gilbert said, "My objective and that of the CIMCO management team and board
of directors has been to maximize shareholder value. This transaction fulfills
that objective, and we're pleased that Hanna has recognized our achievements."
Consistent with its strategy as an intermediary between the polymer
producer and the end product manufacturer, M.A. Hanna intends to sell CIMCO's
plastics components business and retain its plastics compounding operations.
CIMCO's plastics compounding businesses, which operate as Compounding
Technology, Inc. (CTi), are located in Singapore; Corona, Calif.; and Charlotte,
N.C. accounting for 31 million pounds of capacity. Another facility is under
construction in France.
"The acquisition of CTi helps us on three fronts to have a more balanced
market profile. First, we will grow out international business. CTi provides
Hanna with an excellent base for growth in Asia," said Martin D. Walker, M.A.
Hanna chairman and chief executive officer.
<PAGE> 3
"Second, CTi's strong engineering plastics compounding business will add
breadth to our specialty compounding portfolio throughout the world," Walker
continued. "Third, we are able to build a stronger position in the electrical
and electronics and business machines markets."
CTi, formed in 1980, had sales of $44 million in fiscal 1995 and has 95
associates. Through the first six months of fiscal 1996, CTi's sales have nearly
doubled and operating profits are running five times greater than the same
period in fiscal 1995. The company develops and produces engineering plastic
compounds with an emphasis on polycarbonate resins, which are used in the
electrical/electronics, business machine and appliance markets because of the
material's toughness, clarity and heat resistance.
CIMCO, Inc., with headquarters in Costa Mesa, Calif., reported sales of $83
million for fiscal 1995. CIMCO was founded in 1959.
M.A. Hanna Company is a leading international specialty chemicals company.
It's primary businesses are plastics and rubber compounding, color and additive
concentrates and distribution of plastic resins and engineered shapes.
<PAGE> 1
EXHIBIT (c)(12)
AMENDMENT NUMBER ONE
TO RIGHTS AGREEMENT
THIS AMENDMENT NUMBER ONE TO RIGHTS AGREEMENT, dated as of
December 19, 1995 (the "Amendment"), with respect to the Rights Agreement,
dated as of December 5, 1992 (the "Agreement"), between CIMCO, Inc., a Delaware
corporation (the "Company"), and First Interstate Bank of California, a
California corporation (the "Rights Agent").
WITNESSETH
WHEREAS, the Board of Directors of the Company has approved
the Agreement and Plan of Merger, dated as of December 19 , 1995 (the "Merger
Agreement"), among M.A. Hanna Company, a Delaware corporation ("Parent"),
Hanwest, Inc., a Delaware corporation ("Purchaser") and the Company and the
Stockholder Tender Agreement, dated as of December 19, 1995 (the "Stockholder
Tender Agreement"), between Russell T. Gilbert and Purchaser; and
WHEREAS, the Board of Directors deems it appropriate in the
exercise of its authority under Section 26 of the Agreement to approve an
amendment to the Agreement in order to assure that the execution and delivery
of the Merger Agreement and the Stockholder Tender Agreement and the
consummation of the transactions contemplated in the Merger Agreement and the
Stockholder Tender Agreement will not cause (i) the defined term "Acquiring
Person" to apply to Parent or Purchaser, (ii) the "Distribution Date" to occur,
(iii) the provisions of Section 13(a) of the Agreement to be applicable in
respect of capital stock of Purchaser or capital stock of an affiliate of
Purchaser, or (iv) any adjustment under the provisions of Section 11(a) of the
Agreement;
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, the
receipt and sufficiency of which are hereby acknowledged, the Agreement is
hereby amended as follows:
1. In Section 1(a) of the Agreement, immediately after
the first sentence thereof, the following provision is hereby added:
Notwithstanding the definition of Acquiring Person
above, none of the M.A. Hanna Company, a Delaware
corporation ("Parent"), Hanwest, Inc., a Delaware
corporation ("Purchaser"), or any of their Affiliates
or Associates will become, or be deemed to be, an
Acquiring Person by reason of the execution and
delivery of, and the consummation of the transactions
contemplated in, the Agreement and Plan of Merger,
dated as of December 19, 1995 (the "Merger
Agreement") among Parent, Purchaser and the Company
or the Stockholder Tender Agreement, dated as of
December 19, 1995 (the "Stockholder Tender
Agreement"), between Russell T. Gilbert and
Purchaser.
<PAGE> 2
2. In Section 3(a) of the Agreement, immediately
preceding such Section's first sentence, which commences as follows: "No
Distribution Date...", the following provision is hereby added:
No Distribution Date shall occur, notwithstanding the
definition of Distribution Date below, with respect
to any Beneficial Ownership of shares of Common Stock
by Purchaser, Parent or any Affiliate or Associate of
Parent or Purchaser or any tender offer made by
Parent, Purchaser or any Affiliate or Associate of
Parent or Purchaser.
3. In Section 11(a) (ii) of the Agreement, at the end
thereof, the following new sentence is added:
Notwithstanding the foregoing, the provisions of this
Section 11(a) (iii) shall not apply to Parent,
Purchaser or any Affiliate or Associate of Parent or
Purchaser by reason of the execution and delivery of,
and the consummation of the transactions contemplated
in, the Merger Agreement and the Stockholder Tender
Agreement.
4. In Section 13(a) of the Agreement and immediately
preceding such Section's first sentence, which commences as follows: "A Person
shall not...", the following provision is hereby added:
The provisions of this Section 13 shall not apply to
Parent, Purchaser or any Affiliate or Associate of
Parent or Purchaser by reason of the execution and
delivery of, and the consummation of the transactions
contemplated in, the Merger Agreement and the
Stockholder Tender Agreement.
5. Capitalized terms used herein and not defined herein
shall have their defined meanings as set forth in the Agreement.
6. Except as expressly provided above, and except for
the additional terms and provisions set forth above, the Agreement shall
continue in full force and effect in accordance with its terms.
7. This Amendment shall be governed by and construed in
accordance with the substantive laws of the State of Delaware.
8. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
9. The undersigned officer of the Company certifies, as
indicated by his signature below, to the Rights Agent that the Amendment is in
compliance with the terms of Section 26 of the Agreement.
10. The Summary of Rights to Purchase Preferred Stock,
attached to the Agreement as Exhibit C, is hereby amended to reflect the terms
of this Amendment.
2
<PAGE> 3
11. This Amendment shall constitute the first and only
amendment of the Agreement as of the date hereof, and all prior amendments of
the Agreement are hereby terminated and shall be of no further force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused the
Amendment to be duly executed as of the day and year first above written.
CIMCO, INC.
By: RUSSELL T. GILBERT
-----------------------
Russell T. Gilbert
Chairman of the Board,
President and Chief Executive
Officer
Attest:
[Seal]
By: L. RONALD TREPP
----------------------
L. Ronald Trepp
Chief Financial Officer
FIRST INTERSTATE BANK OF CALIFORNIA
By: JOHN G. KIRBY
-----------------------
Name: John G. Kirby
Title: Vice President
Attest:
[Seal]
By: JOSEPH CANNATA
------------------------
Name: Joseph Cannata
Title: Vice President
3
