<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------------
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
------ SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 4, 1998
OR
------ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to ______________________
Commission File Number 33-67854
CMI INDUSTRIES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified, on its charter)
Delaware 57-0836097
- --------------------------------------------- ----------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1301 Gervais Street, Suite 700, Columbia, South Carolina 29201
- ------------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number including area code: (803) 771-4434
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------- ------
As of July 30, 1998, there were 1,695,318 shares of $1 Par Value Common Stock
outstanding.
<PAGE> 2
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
CMI INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
(000's Omitted Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- -----------------------
JUNE 28, JULY 4, JUNE 28, JULY 4,
1997 1998 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 99,504 $ 101,111 $ 196,756 $ 210,156
Cost of sales 85,726 88,143 172,008 180,968
--------- --------- --------- ---------
Gross profit 13,778 12,968 24,748 29,188
Selling, general and administrative expenses 8,383 7,861 16,298 16,705
--------- --------- --------- ---------
Operating income 5,395 5,107 8,450 12,483
Other income (expenses):
Interest expense (3,778) (3,233) (7,459) (6,464)
Other, net 1,265 797 2,410 1,234
--------- --------- --------- ---------
(2,513) (2,436) (5,049) (5,230)
Income before income taxes 2,882 2,671 3,401 7,253
Income tax provision 1,127 975 1,325 2,750
--------- --------- --------- ---------
Net income $ 1,755 $ 1,696 $ 2,076 $ 4,503
========= ========= ========= =========
Average shares outstanding during period 1,690 1,695 1,690 1,695
Net income per share $ 1.04 $ 1.00 $ 1.23 $ 2.66
Depreciation and amortization included in
the above costs and expenses $ 4,494 $ 4,226 $ 9,118 $ 8,591
</TABLE>
See Accompanying Notes.
2
<PAGE> 3
CMI INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
January 3, 1998 and July 4, 1998
(000's Omitted)
<TABLE>
<CAPTION>
JANUARY 3, JULY 4,
1998 1998
---------- ---------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,729 $ 2,216
Receivables, less allowance for doubtful
accounts of $1,200 and $1,600 47,762 46,567
Inventories: (note 3)
Raw materials 11,474 15,654
Work-in-process 19,312 20,146
Finished goods 18,729 24,517
Supplies 4,412 4,624
--------- ---------
53,927 64,941
Other current assets (note 4) 931 2,510
--------- ---------
Total current assets 104,349 116,234
Property, plant and equipment: (note 5)
Land and land improvements 3,332 3,326
Buildings 38,725 38,880
Machinery and equipment 202,199 200,396
Construction in progress 3,500 6,585
--------- ---------
247,756 249,187
Less accumulated depreciation and amortization (144,164) (151,378)
--------- ---------
103,592 97,809
Other assets:
Cash value of life insurance, intangibles,
deferred charges, and other assets 8,599 9,272
--------- ---------
$ 216,540 $ 223,315
========= =========
</TABLE>
See Accompanying Notes
3
<PAGE> 4
CMI INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
January 3, 1998 and July 4, 1998
(000's Omitted)
<TABLE>
<CAPTION>
JANUARY 3, JULY 4,
1998 1998
---------- ---------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Payable - book overdraft $ 6,023 $ 6,966
Current portion of long-term debt (note 2) 2,204 --
Accounts payable 15,685 16,716
Accrued expenses 14,488 14,641
Income taxes payable 141 141
--------- ---------
Total current liabilities 38,541 38,464
Long-term debt (note 2) 124,528 124,488
Deferred income taxes 1,245 3,783
Other liabilities 13,182 13,033
Stockholders' equity:
Common stock of $1 par value per share;
2,100,000 shares authorized, 1,695,318
shares issued 1,695 1,695
Paid-in capital 11,358 11,358
Retained earnings (note 2) 25,991 30,494
--------- ---------
Total stockholders' equity 39,044 43,547
--------- ---------
$ 216,540 $ 223,315
========= =========
</TABLE>
See Accompanying Notes
4
<PAGE> 5
CMI INDUSTRIES, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended June 28, 1997 and July 4, 1998
(000's Omitted)
<TABLE>
<CAPTION>
JUNE 28, JULY 4,
1997 1998
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,076 $ 4,502
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 9,118 8,591
Changes in assets and liabilities
Receivables (5,149) 1,195
Inventories (6,411) (11,014)
Other current assets (1,156) (1,579)
Other assets (52) (891)
Accounts payable 43 1,031
Accrued expenses 878 153
Income taxes -- --
Deferred income taxes 1,073 2,538
Other liabilities (960) (149)
--------- ---------
Net cash (used in) provided by operating
activities (540) 4,377
--------- ---------
Cash flows from investing activities:
Capital expenditures, net (2,683) (2,541)
--------- ---------
Net cash used in investing activities (2,683) (2,541)
--------- ---------
Cash flows from financing activities:
Net borrowings on revolving credit facilities 9,207 (2,292)
Net change in payable-book overdraft (7,045) 943
--------- ---------
Net cash provided by (used in) financing
activities 2,162 (1,349)
--------- ---------
Net (decrease) increase in cash (1,061) 487
Cash and cash equivalents at beginning of year 2,244 1,729
--------- ---------
Cash and cash equivalents at end of period $ 1,183 $ 2,216
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 7,300 $ 6,209
========= =========
</TABLE>
See Accompanying Notes.
5
<PAGE> 6
Notes to Consolidated Financial Statements
Note 1:
Basis of Presentation:
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany balances
and transactions have been eliminated. In the opinion of management, the
accompanying unaudited consolidated financial statements include all adjustments
necessary to present fairly the Consolidated Balance Sheet as of July 4, 1998,
the Consolidated Statements of Cash Flows for the six months ended June 28, 1997
and July 4, 1998, and the Consolidated Statements of Income for the three months
and six months then ended. All dollar amounts are rounded to thousands. The
Consolidated Balance Sheet as of January 3, 1998 has been audited, but the
auditors' report is not included herein. The disclosures accompanying these
interim financial statements are condensed and should be read in conjunction
with the disclosures in the annual financial statements.
Note 2:
Long-Term Debt:
In October 1993, the Company completed a public offering ("the
Offering") of $125,000 in aggregate principal amount of 9 1/2% Senior
Subordinated Notes ("Notes") due October 1, 2003. The Notes are general
unsecured obligations of the Company. Interest on the Notes is payable
semiannually, and the Notes are redeemable at the option of the Company at any
time after October 1, 1998. Redemption prices commence at 104-3/4% of the
principal amount, declining annually to 100% of the principal amount in October
2000, plus accrued interest. The recorded balance of $124,488 at July 4, 1998 is
presented net of $512 of unamortized bond issue discount that is being amortized
over the period to maturity. The latest information available indicates the fair
value of the Notes was $125,000 at July 4, 1998. The fair value presented herein
is not necessarily indicative of the amounts that the Company would realize in a
current market exchange.
In March 1996, the Company replaced a $92 million unsecured revolving
credit facility with a new credit agreement and renewed a Wachovia Bank of South
Carolina facility at $4 million. The Company and its lenders amended the new
credit agreement in February 1997 to reduce the borrowing limit to $65 million,
to contemplate the realignment of the Company's assets into separate operating
entities, which was completed during 1997, and to extend the maturity of the
secured revolving credit facility by two years to January 2000. The borrowings
under the new credit agreement are secured by all receivables, certain
inventories and certain intangibles.
6
<PAGE> 7
Long-term debt as of January 3, 1998 and July 4, 1998 consisted of:
<TABLE>
<CAPTION>
January 3, 1998 July 4, 1998
--------------- ------------
<S> <C> <C>
Borrowings under credit agreements:
Secured revolving credit facility $ 88 $ --
Unsecured Wachovia Bank of SC facility 2,204 --
Senior subordinated notes, net 124,440 124,488
--------- ---------
126,732 124,488
Less current portion (2,204) --
--------- ---------
Long-term debt $ 124,528 $ 124,488
========= =========
</TABLE>
The secured revolving credit facility requires a commitment fee of 3/8
of 1% per annum on all unused amounts and as of July 4, 1998, the Company could
have borrowed an additional $55 million under the revolving credit facility.
Interest on the secured revolving credit facility is based on a floating prime
rate or an eurodollar rate plus 1 1/2%. At July 4, 1998, the average interest
rate on the revolving credit facility was 8.5%. The Wachovia Bank of South
Carolina facility is unsecured, requires no commitment fee and may be terminated
by the bank with 100 days notice. Interest on the Wachovia Bank of South
Carolina facility accrues at an amount based on the daily federal funds rate,
which was 7.5% at July 4, 1998.
The credit agreements and indenture contain various restrictive
covenants and conditions requiring, among other things, minimum levels of net
worth, certain interest coverage ratios, prohibitions against certain borrowings
and advances, and a negative covenant limiting the Company's right to grant
security interests or other liens on its assets. In addition, the credit
agreements and the indenture pursuant to which the Notes were issued contain
restrictions on the Company's ability to pay cash dividends or purchase its
capital stock. Under the most restrictive covenant, as of July 4, 1998, the
Company was authorized to pay up to $3 million of cash dividends or capital
stock purchases. At July 4, 1998, the Company was in compliance with all
covenants under all credit agreements.
As part of the Company's workers' compensation insurance agreements in
South Carolina, Alabama, Georgia and Virginia, the Company has obtained letters
of credit for $750, $200, $250 and $75. The letters of credit expire on February
10, 1999, June 30, 1999, January 11, 1999 and April 10, 1999, respectively. At
July 4, 1998, the Company owed no amount under these letters of credit.
Note 3:
Inventories:
Inventories at January 3, 1998 and July 4, 1998 are stated at the lower
of cost (first-in, first-out) or market, and include the costs of raw materials,
direct labor, and manufacturing overhead.
7
<PAGE> 8
Note 4:
Other Current Assets
CMI Industries, Inc. ("CMI") is currently evaluating various changes to
its capital structure, including a possible transaction which would result in
members of management, directly or indirectly, owning a controlling interest in
the Company. To date, approximately $640 of costs have been incurred in
connection with this effort. These costs have been capitalized and are included
in other current assets on the balance sheet as of July 4, 1998. If management
determines that a transaction will not occur, all capitalized costs related to
the transaction will be expensed.
Note 5:
Property, Plant and Equipment:
All additions to property, plant and equipment are stated at cost.
Depreciation is calculated for financial reporting purposes by the straight-line
method over the estimated useful lives of the respective assets
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains statements which to the extent that they are not
recitations of historical fact, may constitute "Forward looking statements"
within the meaning of applicable federal securities laws. All forward looking
statements contained in this report are intended to be subject to the safe
harbor protection provided by the Private Securities Litigation Reform Act of
1995 and Section 21E of the Securities Exchange Act of 1934, as amended. For a
discussion identifying some important factors that could cause actual results to
vary materially from those anticipated in the forward looking statements made by
the Company, see the Company's Annual Report on Form 10-K for the year ended
January 3, 1998, including, but not limited to, the "Overview" discussion to
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 17 and 18 of the Annual Report.
Recent Developments
In April 1998, CMI Management, Inc. ("Holdco") and CMI Acquisitions,
Inc. ("CMIA"), a wholly-owned subsidiary of Holdco, were formed by members of
senior management of CMI solely for the purpose of consummating the transactions
described below.
On May 15, 1998, CMI entered into a definitive merger agreement (the
"Merger Agreement"), providing for the merger (the "Merger") of CMIA into CMI,
with the result that Holdco would own all the outstanding common stock of CMI
(the "Company Common Stock"). In the Merger, each share of Company Common Stock
outstanding prior to the Merger would be converted into the right to receive
$43.00 in cash, plus 2/45's of a share of Holdco common stock ("Holdco Common
Stock"). The aggregate cash portion of the merger consideration would be equal
to approximately $65.3 million.
Each stockholder who is a current employee of the Company (the
"Management Stockholders") and certain other stockholders who are former
employees or who have historical ties to the Company (the "Interested
Stockholders") have entered into an exchange agreement (the "Exchange
Agreement"), pursuant to which, prior to the Merger, each Management Stockholder
and each Interested Stockholder would exchange (the "Exchange") a predetermined
number of shares of Company Common Stock for an equal number of shares of Holdco
Common Stock. In addition, the Company anticipates that BancBoston Ventures,
Inc. would provide an equity contribution to Holdco.
As part of the transactions, CMI, Holdco, and CMIA will effect a
recapitalization in which substantially all of the outstanding indebtedness of
CMI would be refinanced using the borrowings under a new credit facility, the
proceeds of anticipated equity financing and the proceeds of satisfactory debt
financing.
Also as a part of the transactions, on June 1, 1998, the Company
initiated a tender offer and consent solicitation for its outstanding $125
million principal amount 9-1/2% Senior Subordinated Notes due 2003 (the
"Notes"). The expiration date of the tender offer and consent solicitation,
originally set for June 26, 1998, has been extended by the Company until August
12, 1998 as a result of the postponement of the Company's private placement of
debt securities. Consummation of the
9
<PAGE> 10
Merger, the Exchange and the tender offer are subject to a number of conditions
including receipt of anticipated equity financing and satisfactory debt
financing.
Results of Operations
Three Months Ended July 4, 1998
Compared with Three Months Ended June 28, 1997
Sales
Sales for the three months ended July 4, 1998, increased $1.6 million,
or 1.6%, from $99.5 million to $101.1 million as compared to the corresponding
period of 1997. Sales of the Greige Fabrics Division decreased $1.7 million, or
4.1%, while sales for the Elastic Fabrics Division increased $0.5 million or
2.3%, and sales of the Chatham Division increased $2.8 million or 8.2% from the
prior year.
The decrease in sales of the Greige Fabrics Division is attributable to
weak market conditions for 100% filament fabrics produced at the Company's
Clarkesville, Georgia facility. Sales of these fabrics decreased $1.5 million as
a result of a 24.1% decline in volume with no change in selling prices. Sales of
blended or 100% cotton fabrics declined $0.2 million as volume declined by 3.7%
and average selling prices increased 3.3%. The increase in sales in the Elastic
Fabrics Division consisted of a 3.7% increase in sales of wide elastics while
sales of narrow elastics remained relatively unchanged. The sales increase for
the Chatham Division included a $3.7 million increase in automotive upholstery
sales and a $1.2 million decline in furniture upholstery sales, while sales of
consumer products remained relatively unchanged. The increased sales for
automotive upholstery reflect the Company's increased product placements in this
market segment, but also reflect the negative impact of a labor strike at
General Motors which significantly reduced shipments for this customer in the
last month of the period. The Company expects that the General Motors strike
will adversely affect its automotive upholstery sales in the third quarter. The
Company's sales were also negatively impacted at all divisions by the Company's
Fourth of July vacation week shutdown which has historically occurred in the
Company's third quarter, resulting in one less shipping week in the second
quarter of 1998.
Earnings
Operating income for the three-month period ended July 4, 1998
decreased to $5.1 million from $5.4 million in the corresponding period of 1997.
The decrease in profitability can be attributed to the timing of the Company's
Fourth of July vacation week shutdown which negatively impacted plant
utilization rates and operating costs at all divisions in the current period as
compared to the prior year when this shutdown occurred in the third quarter.
Chatham's earnings were also down because of significant start up costs
associated with its new residential upholstery and Sheneele yarn offering and
expenses associated with attaining its QS9000 certification on July 2, 1998.
Additionally, earnings in the Chatham Division were negatively impacted by an
unusual medical claim under the Company's self insured benefits program which
resulted in a $0.5 million charge being recorded in the quarter. Despite the
Company's July Fourth shutdown, earnings in the Elastics Division increased due
to the increased sales and continued improvements in the operating
10
<PAGE> 11
performance of its narrow elastics facility, and earnings in the Greige Fabrics
Division improved due to higher selling prices and lower raw material costs.
Interest expense for the three months ended July 4, 1998 was $3.2
million, a decrease of $0.5 million from the same period in 1997. The decrease
reflects lower average debt balances during the second quarter as compared to
the corresponding period of fiscal 1997.
Other income, net, for the three months ended July 4, 1998 was $0.8
million, a decrease of $0.5 million from the same period in 1997. This decrease
is due to income received from the sale of certain nonoperating real estate in
the second quarter of 1997.
As a result of the above mentioned items, income before income taxes
decreased $0.2 million for the three months ended July 4, 1998 over the
corresponding period in 1997, while the provision for income taxes decreased
$0.1 million. Net income of $1.7 million for the second period of fiscal 1998
represents a decrease of $0.1 million as compared to the corresponding period of
fiscal 1997.
Six Months Ended July 4, 1998
Compared with Six Months Ended June 28, 1997
Sales
Sales for the six months ended July 4, 1998 increased $13.4 million, or
6.8%, from $196.8 million to $210.2 million as compared to the corresponding
period in 1997. Sales of the Greige Fabrics Division decreased $2.9 million or
3.4%, while sales of the Elastic Fabrics Division increased $1.2 million or
2.5%, and sales of the Chatham Division increased $15.2 million or 23%.
The decrease in sales of the Greige Fabrics Division is attributable to
weak market conditions for 100% filament fabrics produced at the Company's
Clarkesville, Georgia facility. Although sales of these fabrics decreased $2.9
million as a result of a 23% decline in volume, average selling prices of these
fabrics increased 1.4%. Sales of blended or 100% cotton fabrics remained
relatively unchanged as volume decreased 4.4% and average selling prices
increased 4.5%. The increase in sales in the Elastics Division consisted of a
1.7% increase in wide elastic sales and a 4.5% increase in narrow elastic sales.
The sales increase for the Chatham Fabrics Division included a $13.5 million
increase in automotive upholstery sales while sales among the furniture
upholstery and consumer products segments remained relatively unchanged. The
Chatham Division also increased yarn sales by $1.5 million, which reflects the
Division's better utilization of available capacity. The increased sales for
automotive upholstery reflects the Company's increased product placements in
this market segment, but also reflects the negative impact of a labor strike at
General Motors which significantly reduced shipments to this customer in the
last month of the period. The company expects that the General Motors strike
will adversely affect automotive upholstery sales in the third quarter. The
Company's sales were also negatively impacted at all divisions by the Company's
Fourth of July vacation week shutdown which has historically occurred in the
Company's third quarter, but resulted in one less shipping week during this
year's first six months.
11
<PAGE> 12
Earnings
Operating income for the six-month period ended July 4, 1998 increased
$4.0 million, or 47.7% over the corresponding period of 1997, from $8.5 million
to an operating profit of $12.5 million. The increase in profitability is
primarily attributable to a combination of higher average selling prices, lower
raw material costs and improved operating efficiencies at the Greige Fabrics
Division. The Elastic Fabrics Division improved operating income due to
increased sales volumes and improved operating performance at its narrow
elastics facility. Earnings in the Chatham Fabrics Divisions increased as a
result of increased sales in the automotive business segment.
Interest expense for the six months ended July 4, 1998 was $6.5
million, a decrease of $1.0 million over the corresponding period in 1997. The
decrease reflects lower average debt balances during the first six months of
fiscal 1998 compared to the corresponding period of fiscal 1997.
Other income, net, for the six months ended July 4, 1998, was $1.2
million, down $1.2 million from the corresponding period in 1997. This decrease
is due to income received from certain life insurance contracts and the sale of
nonoperating real estate in the first two quarters of 1997.
As a result of the above mentioned items, income before income taxes
increased $3.9 million for the six months ended July 4, 1998 over the
corresponding period in 1997, while the provision for income taxes increased
$1.4 million. Net income of $4.5 million for the first six months of fiscal 1998
represents an increase of $2.4 million over the corresponding period of fiscal
1997.
Financial Condition
For the six months ended July 4, 1998, the Company generated $4.4
million of positive cash flow from operations. In addition to reducing its net
borrowings by $2.3 million, the Company also utilized the cash provided by
operating activities to fund $2.5 million of capital expenditures.
At July 4, 1998, working capital was approximately $77.8 million as
compared to approximately $65.8 million at January 3, 1998. The increase in
working capital can be attributed to a $3.4 million increase in raw cotton
inventories due to the seasonal nature of these purchases and a $5.8 million
increase in finished goods inventories associated with the seasonal nature of
Chatham's consumer products shipments and higher automotive upholstery
inventories due to reduced shipments associated with the General Motors strike.
Management is not aware of any present or potential impairments to the Company's
liquidity.
At July 4, 1998, long-term debt of approximately $124.5 million
represented 74.1% of total capital, compared to 76.1% at January 3, 1998.
The Company believes that funds from operations during the balance of
fiscal 1998 and amounts available under the credit agreements (see note 2 to
consolidated financial statements) are adequate to finance capital expenditures
of approximately $15 million during the remainder of 1998, in addition to
meeting working capital requirements and scheduled debt service payments.
Impact of Year 2000
Management has initiated a plan to prepare CMI's computer systems and
applications for the year 2000. At July 4, 1998, CMI had made substantial
progress in programming its business systems for year 2000 compliance.
Management estimates that all computer systems and applications will be year
2000 compliant prior to that date. CMI expects to incur primarily internal staff
costs related to enhancements necessary to prepare the systems for the year
2000. Testing and conversion of system application is expected to cost
approximately $1.8 million over the next eighteen months. This estimate includes
the cost to purchase and install certain software systems or to convert existing
systems which are currently not year 2000 compliant.
12
<PAGE> 13
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None Reportable
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The consents of the CMI stockholders were solicited by the Company in
connection with the following matters:
(a) the approval of a Merger Agreement pursuant to which (i) CMIA would
be merged with and into the Company and (ii) each share of the Company Common
Stock outstanding immediately prior to the Merger owned by stockholders (other
than shares held in treasury, shares of Company Common Stock owned by Holdco and
shares as to which dissenters rights are perfected) would be converted into the
right to receive $43.00 per share in cash plus a fractional interest in a share
of Holdco common stock, $1.00 par value per share (the "Holdco Common Stock")
equal to two forty-fifths (2/45) of a share of Holdco Common Stock;
(b) the approval of the Exchange Agreement, pursuant to which the
Management Stockholders and the Interested Stockholders would exchange a
predetermined number of shares of Company Common Stock for an equal number of
shares of Holdco Common Stock;
(c) the amendment and termination of the Company's Amended and Restated
Stockholders Agreement dated February 14, 1992, as amended (the "Stockholders
Agreement"), and the termination of the agreements, including the Management
Subscription Agreement dated as of December 23, 1986, as amended, pursuant to
which "Management Stockholders" (as defined in the Stockholders Agreement)
acquired outstanding Company Common Stock (the "Subscription Agreements");
(d) the execution by the stockholders of the Company of a stockholders
agreement which will govern the rights of the Holdco Stockholders following the
consummation of the Merger and the Exchange; and
(e) the approval of the following, which will occur prior to the Merger
(i) the offer by the Company or CMIA to repurchase or discharge the Notes and
the solicitation of consents from holders of the Notes to modify the Indenture
dated as of October 28, 1993 pursuant to which the Notes were issued to permit
the transactions associated with the Merger and the Exchange, (ii) the private
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<PAGE> 14
placement of debt securities by CMIA or the Company; and (iii) the replacement
of the Company's current credit facility with a new or amended credit facility.
All of the Company's stockholders consented to each of the items
described above in subparagraphs (a) - (e).
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
2.1 Merger Agreement by and among CMI Management, Inc.,
CMI Acquisitions, Inc. and CMI Industries, Inc. dated
as of May 15, 1998.
2.2 Termination of Subscription Agreements and
Stockholders Agreement of CMI Industries, Inc. dated
as of May 15, 1998.
4.1 Offer to Purchase for Cash Any and All Outstanding
9-1/2% Senior Subordinated Notes due 2003 issued by
CMI Industries, Inc. and Solicitation of Consents to
Amendments of the Indenture.
4.2 First Supplemental Indenture of CMI Industries, Inc.
9-1/2% Senior Subordinated Notes Due 2003 dated as of
June 17, 1998, Supplementing the Indenture of October
28, 1993.
10.1 Dealer Manager Agreement between NationsBanc
Montgomery Securities LLC and CMI Industries, Inc.
dated May 29, 1998.
27.1 Financial Data Schedule. (for SEC use only)
b) Reports on Form 8-K
Form 8-K filed on May 28, 1998 to announce merger agreement
between the Company and CMI Management, Inc. and CMI
Acquisitions, Inc.
Form 8-K filed on June 1, 1998 to announce a tender offer and
consent solicitation relating to the $125 million principal
amount 9-1/2% Senior Subordinated Notes due 2003 issued by CMI
Industries, Inc.
Form 8-K filed on June 22, 1998 to announce the extension of
the expiration date of its tender offer for the outstanding
9-1/2% Senior Subordinated Notes due 2003 issued by CMI
Industries, Inc. until midnight, New York City time, on July
15, 1998.
14
<PAGE> 15
SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CMI INDUSTRIES, INC.
Date: August 6, 1998 By /s/ JOSEPH L. GORGA
-------------------
Joseph L. Gorga
President and Chief Executive Officer
Date: August 6, 1998 By /s/ JAMES A OVENDEN
--------------------
James A. Ovenden
Executive Vice President and Chief
Financial Officer
15
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
2.1 Merger Agreement by and among CMI Management, Inc., CMI
Acquisitions, Inc. and CMI Industries, Inc. dated as of May
15, 1998.
2.2 Termination of Subscription Agreements and Stockholders
Agreement of CMI Industries, Inc. dated as of May 15, 1998.
4.1 Offer to Purchase for Cash Any and All Outstanding 9-1/2%
Senior Subordinated Notes due 2003 issued by CMI Industries,
Inc. and Solicitation of Consents to Amendments of the
Indenture.
4.2 First Supplemental Indenture of CMI Industries, Inc. 9-1/2%
Senior Subordinated Notes Due 2003 dated as of June 17, 1998,
Supplementing the Indenture of October 28, 1993.
10.1 Dealer Manager Agreement between NationsBanc Montgomery
Securities LLC and CMI Industries, Inc. dated May 29, 1998.
27.1 Financial Data Schedule. (for SEC use only)
</TABLE>
16
<PAGE> 1
EXHIBIT 2.1
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "AGREEMENT"), dated as of May 15, 1998, by
and between the following parties:
CMI MANAGEMENT, INC., a Delaware corporation ("HOLDINGS"),
CMI ACQUISITIONS, INC., a Delaware corporation ("CMI ACQUISITIONS"),
and
CMI INDUSTRIES, INC., a Delaware corporation ("CMI")
WITNESSETH
WHEREAS, CMI Acquisitions is a wholly-owned subsidiary of Holdings; and
WHEREAS, the parties wish to undertake a merger of CMI Acquisitions
with and into CMI pursuant to which CMI will be the surviving
corporation and will become a wholly-owned subsidiary of Holdings (the
"MERGER"); and
WHEREAS, it is the intention of the parties that prior to the effective
time of the Merger certain stockholders of CMI will
(i) exchange their shares of CMI Common Stock (as defined in
Section 2.1) for shares of Holdings Common Stock (as defined
in Section 2.1), and
(ii) exchange their existing options to purchase CMI Common Stock
for equivalent options to purchase Holdings Common Stock
(collectively the "EXCHANGE") pursuant to an Exchange Agreement, dated
as of even date herewith, between those stockholders and Holdings (the
"EXCHANGE AGREEMENT"); and
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WHEREAS, pursuant to the Merger the remaining shares of CMI Common
Stock and options to purchase CMI Common Stock will be converted into
the right to receive cash and shares of Holdings Common Stock as set
forth in this Agreement; and
WHEREAS, it is the intention of Holdings and CMI Acquisitions that
funding for the cash payments to be made to the holders of CMI Common
Stock in connection with the Merger will be obtained from the following
transactions:
(i) the issuance and sale by Holdings to BancBoston Ventures,
Inc., or one of its affiliates ("BBV") of approximately
200,000 shares of Holdings Common Stock (the ("NEW SHARES")
the proceeds of which will be contributed by Holdings to CMI
Acquisitions; and
(ii) the issuance by CMI Acquisitions or CMI of approximately
$175,000,000 principal amount of Senior Subordinated Notes
(the "NEW NOTES") the proceeds of which will also be used for
the repurchase of CMI's existing Senior Subordinated Notes
(the "OLD NOTES"); and
(iii) borrowings of approximately $28 million by CMI under its
existing credit facilities (as such facilities are to be
amended) or borrowings of such an amount by CMI Acquisitions
(the "NEW SENIOR CREDIT FACILITY")
(the Exchange, the issuance of the New Shares and the New Notes and the
borrowings under the New Senior Credit Facility are referred to herein
collectively as the "RELATED TRANSACTIONS");
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained in this Agreement, the parties agree
as follows:
ARTICLE 1 -- MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.3), CMI
Acquisitions shall be merged with and into CMI in accordance with the
provisions of this Agreement and the Delaware General Corporation Law
(the "DGCL"), and the separate existence of CMI Acquisitions shall
thereupon cease, and CMI, as the surviving corporation in the Merger
(the "SURVIVING CORPORATION"), shall continue its corporate existence
under the laws of the State of Delaware as a wholly-owned subsidiary of
Holdings. The Merger shall have the effect provided under the
applicable laws of the State of Delaware including, but not limited to,
Section 259 of the DGCL.
1.2 CLOSING. The closing of the transactions contemplated by this Agreement
(the "CLOSING") shall take place at the offices of Sutherland, Asbill &
Brennan, 999 Peachtree Street, N.E.,
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<PAGE> 3
Atlanta, Georgia 30309-3996, on June 30, 1998 or such later date and
time after all conditions set forth in Article 6 have been satisfied or
waived in writing but in no event later than the third business day
after all such conditions shall have been satisfied or waived or such
other date as may be agreed upon by the parties hereto (the "CLOSING
DATE"). At the Closing the parties shall confirm the satisfaction or
waiver of the conditions set forth in Article 6.
1.3 EFFECTIVE TIME OF THE MERGER. Simultaneously with or immediately after
the Closing, the parties shall cause the certificate of merger attached
as Exhibit A (the "CERTIFICATE OF MERGER") to be executed, delivered
and filed with the Secretary of State of Delaware in accordance with
the provisions of the DGCL. The Merger shall become effective at the
time of such filing unless a different effective time is specified in
the Certificate of Merger pursuant to the DGCL (such time being the
"EFFECTIVE TIME").
1.4 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and
franchises of CMI and CMI Acquisitions shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions,
disabilities and duties of each of CMI and CMI Acquisitions shall
become the debts, liabilities, obligations, restrictions, disabilities
and duties of the Surviving Corporation.
1.5 CERTIFICATE OF INCORPORATION; BY-LAWS. The Certificate of Incorporation
and By-laws of CMI as in effect immediately prior to the Effective Time
shall continue as the Certificate of Incorporation and By-laws of the
Surviving Corporation, until duly amended in accordance with applicable
law.
1.6 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. At the Effective
Time, the persons who are directors and officers of CMI Acquisitions at
the Effective Time will become the directors and officers of the
Surviving Corporation until such time as they may be replaced in
accordance with the By-laws of the Surviving Corporation.
ARTICLE 2 -- CONVERSION OF SHARES AND OPTIONS
2.1 CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of CMI, CMI Acquisition or any
holder of any of the following securities:
(a) CMI Common Stock. Each issued and outstanding share of $1.00
par value common stock of CMI ("CMI COMMON STOCK"), excluding
any such shares held in the treasury of CMI, any such shares
held by Holdings or its subsidiaries, and any such shares
exchanged for shares of $1.00 par value common stock of
Holdings ("HOLDINGS COMMON STOCK") pursuant to the Exchange
Agreement, shall automatically be canceled and shall
thereafter be converted into only the right to
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<PAGE> 4
receive the Common Merger Consideration. The term "COMMON
MERGER CONSIDERATION" shall mean the right to receive for each
share of CMI Common Stock:
(i) $43.00; and
(ii) 2/45 of a share of Holdings Common Stock.
(b) Treasury; Holdings Shares. Each share of CMI Common Stock held
in the treasury of CMI or held by Holdings or any of its
subsidiaries shall be automatically canceled and extinguished,
and no payment shall be made in respect thereof.
(c) CMI Acquisitions Common Stock. Each issued and outstanding
share of CMI Acquisitions common stock, par value $1.00, at
the Effective Time shall be converted into and shall
thereafter represent one validly issued, fully paid and
nonassessable share of common stock of the Surviving
Corporation.
2.2 CONVERSION OF CMI STOCK OPTIONS. At the Effective Time, the issued and
outstanding options to purchase shares of CMI Common Stock ("CMI
OPTIONS") will be treated as follows:
(a) Each CMI Option exchanged pursuant to the Exchange Agreement
will be canceled and exchanged for an option to purchase
shares of Holdings Common Stock in accordance with the terms
of the Exchange Agreement.
(b) Each CMI Option
(i) which is not exchanged pursuant to the Exchange
Agreement and
(ii) which the holder thereof has agreed to convert into
the Option Merger consideration,
shall automatically be canceled and converted into the right
to receive the Option Merger Consideration for each share of
CMI Common Stock that is subject to the CMI Option.
(c) All other CMI Options shall remain outstanding in accordance
with the terms of such Options provided that the right to
purchase each share of CMI Common Stock shall be converted
into the right to purchase Common Merger Consideration. No
interest shall accrue on the cash portion of the Common Merger
Consideration.
(d) The term "OPTION MERGER CONSIDERATION" shall mean the right to
receive for each such share:
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<PAGE> 5
(i) an amount equal to (A) $43.00 minus (B) the exercise
price per share pursuant to such CMI Option (its
"EXERCISE PRICE"), and
(ii) 2/45 of a share of Holdings Common Stock; provided
that
(A) if the Exercise Price is more than $43.00
but less than $45.00, then the number of
shares of Holdings Common Stock to be issued
under this clause (ii) shall be calculated
in accordance with the following formula:
Number of shares = 2/45 x ($45 minus Exercise Price),
------------------------
2
(B) if the Exercise Price is $45.00 or more then
this clause (ii) shall be inapplicable and
no shares of Holdings Common Stock will be
issued under this clause (ii).
2.3 NO FRACTIONAL SHARES. No scrip or fractional shares of Holdings Common
Stock shall be issued in the Merger upon conversion of CMI Common Stock
or CMI Options as provided in Section 2.1 or 2.2. Each registered
holder of CMI Common Stock or CMI Options who would otherwise have been
entitled to receive a fractional share of Holdings Common Stock upon
conversion of his CMI Common Stock or CMI Options shall be entitled to
receive a cash payment with respect to such fractional share in an
amount equal to $45.00 multiplied by a fraction equivalent to such
fractional share.
2.4 STOCK TRANSFER BOOKS. From and after the Effective Time, no transfer of
CMI Common Stock outstanding prior to the Effective Time shall be
registered on the stock transfer books of CMI. If, after the Effective
Time, certificates for CMI Common Stock are presented to the Surviving
Corporation for transfer, such certificates shall be canceled and
exchanged for the Common Merger Consideration (together with the Option
Merger Consideration, the "MERGER CONSIDERATION"). From and after the
Effective Time, the holders of shares of CMI Common Stock or CMI
Options outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to shares of CMI Common Stock or CMI
Options except as otherwise provided herein or by applicable law.
2.5 SURRENDER AND EXCHANGE OF CERTIFICATES REPRESENTING CMI COMMON STOCK.
(a) Surrender of Certificates. Subject to Section 2.6 with respect
to dissenting holders of CMI Common Stock, at the Closing, the
following actions shall be taken:
(i) Each holder of a certificate representing CMI Common
Stock (a "CMI CERTIFICATE") or any document
evidencing a CMI Option (a "CMI OPTION DOCUMENT")
shall surrender it to Holdings, together with a duly
endorsed
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<PAGE> 6
transfer power and a letter of transmittal (a "LETTER
OF TRANSMITTAL") in the form attached as Exhibit B
(such Letter of Transmittal to be provided to the
holder by CMI Acquisitions at least three business
days prior to the Closing). Letters of Transmittal,
together with any documents, transfer powers, or
certificates accompanying such Letter of Transmittal,
received by Holdings or CMI Acquisitions prior to the
Closing shall be held in escrow until the Closing, at
which time such documents shall, for purposes of this
Agreement, be deemed surrendered to Holdings as if
they were surrendered at the Closing.
(ii) Holdings shall deliver to each holder of CMI Common
Stock that is eligible for conversion pursuant to
Section 2.1 who surrenders his CMI Certificates, and
to each holder of any CMI Options who has agreed to
receive Option Merger Consideration pursuant to
Section 2.2 who surrenders his CMI Option Documents
(A) payment, by wire transfer in immediately
available funds to an account specified by
such holder not less than two business days
before the Closing Date, of an amount equal
to the sum of
(I) $43.00 multiplied by the number of
shares of CMI Common Stock
represented by such CMI
Certificates, plus
(II) if applicable, the cash amount
payable to that holder pursuant to
Section 2.2 with respect to any CMI
Options surrendered in accordance
with this Section 2.5.
(B) a certificate representing that number of
shares of Holdings Common Stock equal to (I)
2/45 multiplied by (II) the number of shares
of CMI Common Stock represented by such CMI
Certificates,
(C) if applicable, a certificate representing
that number of shares of Holdings Common
Stock to be issued to such holder pursuant
to Section 2.2 with respect to any CMI
Options surrendered in accordance with this
Section 2.5, and
(D) if applicable, as to any fractional share of
Holdings Common Stock, a check payable to
the holder representing the cash
consideration to which such holder shall
have become entitled pursuant to Section
2.3.
(iii) The CMI Certificates and CMI Option Documents so
surrendered shall be deemed canceled.
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<PAGE> 7
To those shareholders of record or CMI Option holders entitled
to receive consideration hereunder who do not surrender, or on
whose behalf there is not surrendered, their CMI Common Stock
or CMI Options at the Closing, the Surviving Corporation shall
cause to be mailed promptly after the Effective Time, the
Letter of Transmittal and the instructions thereto. After the
Effective Time, the holders of CMI Common Stock or CMI Options
shall be entitled to look to Holdings for payment of the
Merger Consideration and Holdings shall promptly pay to such
holder the Merger Consideration upon the surrender by such
holder of his or her CMI Certificates to Holdings in
accordance with this Section 2.5.
From the Effective Time until surrender in accordance with the
provisions of this Section 2.5, each share of CMI Common Stock
and any CMI Certificate evidencing such shares (other than
shares of CMI Common Stock that are held in CMI's treasury or
are owned by Holdings or its subsidiaries or have been
exchanged pursuant to the Exchange Agreement) and each CMI
Option with respect to which the holder agrees to receive the
Option Merger Consideration pursuant to Section 2.2 shall
represent for all purposes only the right to receive the
Common Merger Consideration or the Option Merger Consideration
from Holdings promptly upon surrender to Holdings of such
documents. All payments in respect of shares of CMI Common
Stock or CMI Options that are made in accordance with the
terms of this Agreement shall be deemed to have been made in
full satisfaction of all rights pertaining to such securities.
(b) Lost Certificates. In the case of any lost, misplaced, stolen
or destroyed CMI Certificate, the holder thereof may be
required, as a condition precedent to delivery to such holder
of the Common Merger Consideration, to deliver to Holdings (i)
an affidavit swearing before a notary that such certificates
have been lost, misplaced, stolen or destroyed and cannot be
located after a thorough search and (ii) an indemnity
agreement in customary form.
(c) No Interest. No interest shall be paid or accrued on any
portion of the Merger Consideration regardless of the cause of
delay in payment of the Merger Consideration.
(d) Dividends on Holdings Common Stock. No holder of a CMI
Certificate or a CMI Option shall be entitled to payment of
any dividend or other distribution from Holdings having a
record date after the Effective Time until surrender of such
holder's CMI Certificate and CMI Option Documents pursuant to
this Section 2.5. Upon such surrender, there shall be paid to
the holder the amount of any dividends or other distributions
(without interest) that previously became payable by Holdings,
but were not paid by reason of the foregoing, with respect to
the number of whole shares of Holdings Common Stock
represented by the certificate or certificates issued upon
such surrender. From and after the Effective Time, Holdings
shall, however, be
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<PAGE> 8
entitled to treat any such CMI Certificate or CMI Option
Document that has not yet been surrendered for exchange as
evidencing the ownership of the aggregate Merger Consideration
into which the CMI Common Stock or CMI Option represented by
such CMI Certificate or CMI Option Document shall have been
converted, notwithstanding any failure to surrender such CMI
Certificate or CMI Option Document.
(e) No Liability. Neither Holdings nor CMI shall be liable to any
holder of shares of CMI Common Stock or CMI Options for any
shares of Holdings Common Stock (or dividends or distributions
with respect thereto) delivered to a public official pursuant
to any abandoned property, escheat or similar law.
(f) Withholding Rights. Holdings shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any holder of shares of CMI
Common Stock or CMI Options such amounts as Holdings is
required to deduct and withhold with respect to the making of
such payment under the Internal Revenue Code, or any provision
of state, local or foreign tax law. To the extent that amounts
are so withheld by Holdings, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid
to the holder of the shares of CMI Common Stock or CMI Options
in respect of which such deduction and withholding was made by
Holdings.
2.6 DISSENTING CMI STOCKHOLDERS. Notwithstanding any provision of this
Agreement to the contrary, shares of CMI Common Stock that are
outstanding immediately prior to the Effective Time and which are held
by stockholders who shall have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in
writing appraisal for such shares in accordance with Section 262 of the
DGCL (collectively, the "DISSENTING SHARES") shall not be converted
into or represent the right to receive the Common Merger Consideration.
Such stockholders shall be entitled to receive payment of the appraised
value of such shares of CMI Common Stock held by them in accordance
with the provisions of such Section 262, except that all Dissenting
Shares held by stockholders who shall have failed to perfect or who
shall have withdrawn or lost their rights to appraisal of such shares
of CMI Common Stock under such Section 262 shall thereupon be deemed to
have been converted into and to have become exchangeable for, as of the
Effective Time, the right to receive the Common Merger Consideration,
without any interest thereon, upon surrender, in the manner provided in
Section 2.5, of the certificate or certificates that formerly evidenced
such shares.
ARTICLE 3 -- REPRESENTATIONS AND WARRANTIES OF CMI
CMI hereby represents and warrants to Holdings and CMI Acquisitions as
follows:
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3.1 ORGANIZATION AND AUTHORITY OF CMI. CMI is a Delaware corporation duly
organized and existing in good standing under the DGCL. CMI has all
necessary corporate power and authority to enter into this Agreement,
to carry out its obligations hereunder and to consummate the Merger.
Except for the approval of the holders of the requisite percentage of
CMI Common Stock contemplated by Section 6.1(a), the execution and
delivery of this Agreement by CMI, the performance by CMI of its
obligations hereunder and the consummation by CMI of the Merger and the
other Transactions to which CMI is a party have been duly authorized by
all requisite action on the part of CMI. This Agreement has been duly
executed and delivered by CMI, and (assuming due authorization,
execution and delivery by Holdings and CMI Acquisitions) this Agreement
constitutes a valid and binding obligation of CMI enforceable against
it in accordance with its terms.
3.2 CAPITALIZATION. The authorized capital stock of CMI consists of
2,100,000 shares of CMI Common Stock, of which 1,695,318 shares are
issued and outstanding, 83,000 shares are held in CMI's treasury and
225,000 shares are reserved for issuance upon the exercise of CMI
Options. All of the issued and outstanding shares of CMI Common Stock
have been duly authorized and are validly issued, fully paid and
nonassessable.
3.3 NO CONFLICT. Except as specified on Schedule 3.3 of the Disclosure
Schedule and assuming that the Merger is approved by the holders of the
requisite percentage of CMI Common Stock, the execution, delivery and
performance of this Agreement and the consummation by CMI of the Merger
and the other Transactions to which CMI is a party do not and will not
(a) violate, conflict with or result in the breach of any
provision of the Certificate of incorporation or By-laws of
CMI,
(b) conflict with or violate any law or governmental order
applicable to CMI, or
(c) conflict with, or result in any breach of, constitute a
default (or event which with the giving of notice or lapse or
time, or both, would become a default) under, require any
consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation, or
cancellation of, or result in the creation of any lien,
encumbrance or any other charges of whatsoever nature on any
of the assets or properties of CMI pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or
arrangement to which CMI is a party or by which any of such
assets or properties are bound or subject to.
3.4 GOVERNMENTAL CONSENTS AND APPROVALS. The execution, delivery and
performance of this Agreement and the consummation of the Transactions
by CMI do not and will not require any consent, approval, authorization
or other order of, action by, filing with, or notification to, any
governmental authority other than the filing of the appropriate merger
documents with the Secretary of State of Delaware as required by the
DGCL.
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3.5 ABSENCE OF LITIGATION. There is no action pending or, to the knowledge
of CMI, threatened against CMI, or any of its assets, before any
governmental authority which would prevent or delay consummation of the
transactions contemplated by this Agreement, or otherwise prevent CMI
from performing any of its obligations under this Agreement and the
consummation of the transactions contemplated thereby.
3.6 BROKERS. Except for
(a) fees and expenses payable to Merrill Lynch, Pierce, Fenner &
Smith, Inc.,
(b) fees and expenses payable in connection with the acquisition
or repayment of the Old Notes and the placement of the New
Notes,
(c) fees and expenses payable to BBV in connection with the
issuance and sale of the New Shares under certain
circumstances and fees and expenses payable in connection with
the New Senior Credit Facilities, and
(d) fees and expenses payable to The Robinson-Humphrey Company,
LLC in connection with the issuance of the fairness opinion
referred to in Section 6.1(j),
no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger or
any of the Related Transactions based upon arrangements made by or on
behalf of CMI.
3.7 DISCLAIMER. No representation or warranty is made by CMI except as
expressly set forth in this Article 3.
ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Holdings and CMI Acquisitions hereby jointly and severally represent
and warrant to CMI as follows:
4.1 ORGANIZATION AND AUTHORITY OF HOLDINGS AND CMI ACQUISITIONS. Each of
Holdings and CMI Acquisitions is a Delaware corporation duly organized
and existing in good standing under the DGCL. Each of Holdings and CMI
Acquisitions has all necessary corporate power and authority to enter
into this Agreement, to carry out its obligations hereunder and to
consummate the Merger. The execution and delivery of this Agreement by
Holdings and CMI Acquisitions, the performance by Holdings and CMI
Acquisitions of their respective obligations hereunder and the
consummation by Holdings and CMI Acquisitions of the Merger has been
duly authorized by all requisite action on the part of Holdings and CMI
Acquisitions. This Agreement has been duly executed and delivered by
Holdings and CMI Acquisitions, and (assuming due authorization,
execution and delivery by CMI) this
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Agreement constitutes a valid and binding obligation of Holdings and
CMI Acquisitions enforceable against Holdings and CMI Acquisitions in
accordance with its terms.
4.2 CAPITALIZATION. The authorized capital stock of Holdings consists of
750,000 shares of Holdings Common Stock of which 100 shares are issued
and outstanding. The authorized capital stock of CMI Acquisitions
consists of 1,000 shares of $1.00 par value common stock of which 1,000
shares are outstanding. All of the issued and outstanding shares of
Holdings Common Stock and common stock of CMI Acquisitions have been
duly authorized and are validly issued, fully paid and nonassessable.
As of the date of this Agreement, the shares of Holdings capital stock
are owned beneficially and of record as set forth in Schedule 4.2.
4.3 NO CONFLICT. Except as specified in Schedule 4.3, the execution,
delivery and performance of this Agreement and the consummation of the
Merger by Holdings and CMI Acquisitions do not and will not
(a) violate, conflict with or result in the breach of any
provision of the Certificate of incorporation or By-laws of
Holdings or CMI Acquisitions,
(b) conflict with or violate any law or governmental order
applicable to Holdings or CMI Acquisitions, or
(c) conflict with, or result in any breach of, constitute a
default (or event which with the giving of notice or lapse or
time, or both, would become a default) under, require any
consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation, or
cancellation of, or result in the creation of any lien,
encumbrance or any other charges of whatsoever nature on any
of the assets or properties of Holdings and CMI Acquisitions
pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which Holdings and CMI
Acquisitions is a party or by which any of such assets or
properties are bound or subject to.
4.4 SOLVENCY; FRAUDULENT CONVEYANCE. Each of Holdings and CMI Acquisitions
is solvent and will not be rendered insolvent by the Merger or the
Related Transactions and, after giving effect to the Merger and the
Related Transactions, neither Holdings nor the Surviving Corporation
will be left with an unreasonably small amount of capital with which to
engage in its business. Neither Holdings nor CMI Acquisitions intends
to incur, or believes that it has incurred, debts beyond its ability to
pay such debts as they mature. Neither Holdings nor CMI Acquisitions
contemplates the commencement of insolvency, bankruptcy, liquidation or
consolidation proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of Holdings or CMI
Acquisitions or any of their assets. Neither Holdings nor CMI
Acquisitions is entering into this Agreement or consummating the Merger
or any of the Related Transactions with any intent to hinder, delay or
defraud any creditors of Holdings, CMI Acquisitions, the Surviving
Corporation or CMI.
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4.5 GOVERNMENTAL CONSENTS AND APPROVALS. The execution, delivery and
performance of this Agreement and the consummation of the Transactions
by Holdings and CMI Acquisitions do not and will not require any
consent, approval, authorization or other order of, action by, filing
with, or notification to, any governmental authority other than the
filing of the appropriate merger documents with the Secretary of State
of Delaware as required by the DGCL.
4.6 ABSENCE OF LITIGATION. There is no action pending or, to the knowledge
of Holdings or CMI Acquisitions, threatened against Holdings or CMI
Acquisitions, or any assets of either corporation, before any
governmental authority which would prevent or delay consummation of the
transactions contemplated by this Agreement, or otherwise prevent
either corporation from performing any of their obligations under this
Agreement and the consummation of the transactions contemplated
thereby.
4.7 HOLDINGS AND MERGER SUB INCORPORATION. CMI Acquisitions and Holdings
have been incorporated for the sole purpose of acting as a vehicle for
the facilitation of the transactions contemplated by this Agreement and
have not undertaken and will not undertake prior to the Effective Date
any activities other than those specifically contemplated by this
Agreement or otherwise required for such purpose. Each of Holdings and
CMI Acquisitions has no subsidiaries, other than in the case of
Holdings, CMI Acquisitions. CMI Acquisitions will at all times through
the Closing be 100% owned by Holdings.
4.8 FINANCING. Holdings has received a letter agreement from BBV addressed
to CMI attached hereto as Exhibit C which contemplates the purchase by
BBV of approximately 200,000 shares of Holdings Common Stock. Holdings
has received a proposal attached as Exhibit D from NationsBanc
Montgomery Securities LLC addressed to CMI for the issuance of the New
Notes. The payment of the Merger Consideration shall be funded from the
proceeds, if any, received from the sale of the New Shares, the
issuance of the New Notes and borrowings under the New Senior Credit
Facility.
4.9 BROKERS. Except for fees and expenses detailed in Section 3.6, no
broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger or
any of the Related Transactions based upon arrangements made by or on
behalf of Holdings or CMI Acquisitions.
4.10 DISCLAIMER. No representation or warranty is made by either Holdings or
CMI Acquisitions except as expressly set forth in this Article 4.
ARTICLE 5 -- COVENANTS
The parties agree as follows with respect to the period from and after
the execution of this Agreement.
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5.1 GENERAL. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary in order to consummate
and make effective the Merger (including the satisfaction of the
closing conditions set forth in Article 6 below). Holdings and CMI
Acquisitions will use their reasonable best efforts to take all actions
and to do all things necessary in order to consummate and make
effective the Related Transactions and to obtain the financing required
to consummate and make effective the Merger and the transactions
contemplated by this Agreement.
5.2 NOTICES AND CONSENTS. CMI will give any notices to third parties, and
will use its reasonable best efforts to obtain any third-party
consents, that are required in connection with the Merger or any of the
Related Transactions to which it is a party.
5.3 REGULATORY MATTERS AND APPROVALS. Each of the Parties will give any
notices to, make any filings with, and use its reasonable best efforts
to obtain any authorizations, consents, and approvals of governments
and governmental agencies that are required in connection with the
Merger or any of the Related Transactions to which it is a party.
Holdings shall take any action required to be taken by it under any
applicable state securities laws in connection with the issuance of the
Holdings Common Stock pursuant to the Merger and the Exchange.
5.4 STOCKHOLDER MEETING AND DISCLOSURE DOCUMENT. CMI will call a special
meeting of its stockholders or will conduct a consent solicitation (the
"SPECIAL MEETING") as soon as reasonably practicable in order that the
stockholders may consider and vote upon or consent to the adoption of
this Agreement and the approval of the Merger in accordance with the
DGCL and all other applicable requirements. As soon as practicable
following the date of this Agreement, CMI and Holdings shall prepare an
Information Statement and Private Offering Memorandum with respect to
the Merger, the Exchange and the other Related Transactions (the
"DISCLOSURE DOCUMENT"). Subject to the board of directors of CMI's
fiduciary duties under applicable law (as determined in good faith by
the board after consultation with counsel)
(a) CMI will mail the Disclosure Document to its stockholders as
soon as reasonably practicable and
(b) the Disclosure Document will contain the affirmative
recommendation of the board of directors of CMI in favor of
the adoption of this Agreement and the approval of the Merger.
5.5 TERMS OF ADDITIONAL CAPITAL. Holdings and CMI Acquisition agree that,
in connection with the transactions contemplated by this Agreement and
the Related Transactions
(a) No shares of Holdings Common Stock or other capital stock will
be issued to any person or entity for an amount of
consideration, on a per share basis, less than $45 per share
(nor shall any options, warrants or any other type of security
convertible into
13
<PAGE> 14
shares of Holdings Common Stock or other capital stock be
issued at an exercise price less than $45 per share) on or
prior to the date 3 months after the Effective Date in
connection with the Merger, the Exchange or the Related
Transactions other than
(i) the Holdings Options issued pursuant to the Exchange
Agreement,
(ii) options issued to certain key executives of Holdings
which shall entitle the holders thereof to receive,
upon exercise of such options, not more than 50,000
shares of capital stock of Holdings, and
(iii) The rights granted to BBV pursuant to Section 5.9 of
the Holdings Stockholders Agreement (as defined in
Section 6.1(i)).
(b) Subject to the terms of the Holdings Stockholders Agreement,
the terms of the Holdings Common Stock issued in connection
with the Merger shall be identical to the terms of any common
stock of CMI issued to BBV or any other person or entity in
connection with the transactions contemplated by this
Agreement and the Related Transactions.
5.6 OLD NOTES. Prior to the Effective Time, either (a) Holdings, CMI
Acquisitions or CMI, as the parties shall agree shall make a tender
offer to purchase the debt of CMI then outstanding under the Indenture
(the "EXISTING INDENTURE") dated as of October 28, 1993 between CMI and
Chemical Bank, as trustee, or (b) if permitted by the Existing
Indenture and the parties so agree, CMI shall make arrangements to
discharge the Old Notes by payment to the Trustee of an amount
sufficient to repay the Old Notes in full. Holdings, CMI Acquisitions
or CMI will arrange for such tender offer or discharge, and for making
payment (or causing the Surviving Corporation to make payment) of the
amounts due such offer and shall take such reasonable actions as may be
necessary to facilitate such tender offer or discharge and payment,
provided that neither party shall be under any obligation to the other
in connection with this Agreement if less than the minimum amount of
Old Notes issued under the Existing Indenture specified in Section
6.1(e) are tendered in response to such tender offer or the Old Notes
cannot be discharged on terms satisfactory to Holdings or CMI. In
connection with the tender offer, CMI will solicit consents from
holders of Old Notes for a supplemental indenture on terms satisfactory
to Holdings and CMI.
5.7 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) The Certificate of Incorporation and By-laws of the Surviving
Corporation shall contain the respective provisions that are
set forth, as of the date of this Agreement, in Article IX of
the Certificate of Incorporation and Article V of the By-laws
of CMI, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the
Effective Time in any manner that would affect adversely the
14
<PAGE> 15
rights thereunder of individuals who at or at any time prior
to the Effective Time were directors, officers, employees,
fiduciaries or agents of CMI.
(b) For a period of six years after the Effective Time, Holdings
shall cause to be maintained in effect the current directors'
and officers' liability insurance policies maintained by CMI
(provided that Holdings or the Surviving Corporation may
substitute therefor policies that provide substantially
similar coverage) with respect to claims arising from facts or
events that occurred prior to the Effective Time.
ARTICLE 6 -- CONDITIONS TO CLOSING
6.1 CONDITIONS TO OBLIGATIONS OF CMI, HOLDINGS AND CMI ACQUISITIONS. The
obligations of CMI, Holdings and CMI Acquisitions to consummate the
Merger are subject to the satisfaction of the following conditions:
(a) CMI Stockholder Approval. This Agreement and the Merger shall
have been approved or consented to by the holders of not less
than 66 2/3's of the outstanding shares of CMI Common Stock in
accordance with CMI's Certificate of Incorporation, By-Laws,
applicable law and the existing CMI Stockholders' Agreement.
(b) Dissenting Stockholders. The number of shares of CMI Common
Stock with respect to which any CMI stockholders have
perfected their rights as dissenting stockholders under DGCL
ss.262 shall not exceed 5% of the outstanding shares of CMI
Common Stock.
(c) Exchange Agreement. The closing of the transactions
contemplated by the Exchange Agreement shall have occurred and
(i) all of the CMI Options specified as being exchanged
in the Exchange Agreement shall have been exchanged,
and
(ii) at least 190,000 shares of CMI Common Stock specified
as being exchanged in the Exchange Agreement shall
have been exchanged.
(d) New Shares. The New Shares shall have been issued and sold by
Holdings and Holdings shall have received not less than
$9,000,000 as the net proceeds of such issuance and sale.
(e) Old Notes. Either (i) holders of Old Notes that represent not
less than 80% of the aggregate outstanding principal amount of
such Old Notes shall have tendered and not withdrawn such Old
Notes in accordance with the tender offer contemplated by
Section 5.6, and sufficient consents to implement the
supplemental indenture shall have
15
<PAGE> 16
been received and not withdrawn; or (ii) the Old Notes shall
have been discharged in accordance with the terms of the
Existing Indenture and on terms satisfactory to Holdings.
(f) New Notes and Additional Funding. The parties shall have
received through the issuance of the New Notes and borrowings
under the New Senior Credit Facility, together with amounts
received from the sale of the New Shares, an amount sufficient
to fund the purchase or discharge of the Old Notes, the
repayment of any existing bank debt and the payment of the
Merger Consideration.
(g) CMI Stockholders Agreement. The Amended and Restated
Stockholders Agreement by and among CMI and its stockholders,
dated February 4, 1992, as amended, shall have been terminated
prior to the Exchange.
(h) Holdings' Stockholders Agreement. The Stockholders Agreement
by and among Holdings and its stockholders, of near or even
date herewith (the "HOLDINGS STOCKHOLDERS AGREEMENT" attached
as Exhibit E) shall have been executed and delivered by
persons who will receive not less than 95% of the shares of
Holdings Common Stock (including any Shares that are to be
issued in connection with the Exchange or the Merger) to be
outstanding on the Effective Date (other than those to be
issued to BBV).
(i) Fairness Opinion. The Board of Directors of CMI shall have
received an opinion in form and substance satisfactory to CMI
from The Robinson-Humphrey Company, LLC or another investment
banking firm designated by CMI and reasonably satisfactory to
the holders of a majority of the outstanding shares of CMI
Common Stock to the effect that the Common Merger
Consideration is fair from a financial point of view to the
stockholders of CMI receiving the Common Merger Consideration.
(j) Governmental Consents, Authorizations etc.. All consents,
authorizations, orders and approvals of, and all filings and
registrations with, any applicable governmental authority
(other than the filing of the Certificate of Merger with the
Secretary of State of Delaware) which are required for or
necessary in connection with the execution and delivery by
CMI, Holdings or CMI Acquisitions of this Agreement, or the
consummation by CMI, Holdings or CMI Acquisitions of the
Merger and the Related Transactions, shall have been obtained
or made (or the requirement therefor shall have been duly and
validly waived), and, if applicable, any required waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act
shall have expired.
(k) No Litigation. No action shall have been commenced or
threatened by or before any governmental authority against
CMI, Holdings or CMI Acquisitions seeking to restrain or
materially and adversely alter the form or substance of the
Merger or any
16
<PAGE> 17
of the Related Transactions which in the reasonable, good faith determination of
CMI, CMI Holdings or CMI Acquisitions is likely to render it impossible or
unlawful to consummate the Merger and the Related Transactions.
(l) Third Party Consents. All third party consents and approvals
necessary for the confirmation of the Merger and the Related
Transactions shall have been obtained, if the failure to
obtain such approvals or consents, individually or in the
aggregate could in the reasonable judgment of CMI, Holdings or
CMI Acquisitions have a materially adverse effect upon the
consummation of the Merger or upon CMI, its business or
operations.
(m) Financing. The terms and conditions of the issuance of the New
Shares to BBV, the issuance of the New Notes, the New Senior
Credit Facility and any other financing arrangement entered
into by Holdings or CMI Acquisitions in connection with the
transactions contemplated by this Agreement shall be in form
and substance reasonably satisfactory to CMI, in the good
faith exercise of CMI's judgment.
6.2 CONDITIONS TO OBLIGATIONS OF CMI. In addition to the provisions of
Section 6.1, the obligations of CMI to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) Representations and Warranties. The representations and
warranties of CMI Acquisitions and Holdings contained in this
Agreement shall have been true and correct when made and shall
be true and correct in all material respects as of the
Closing, with the same force and effect as if made as of the
Closing Date, the covenants and agreements contained in this
Agreement to be complied with by either CMI Acquisitions or
Holdings on or before the Closing shall have been complied
with in all material respects, and CMI shall have received a
certificate from an officer of Holdings to such effect signed
by such officer.
6.3 CONDITIONS TO OBLIGATIONS OF HOLDINGS AND CMI ACQUISITIONS. In addition
to the provisions of Section 6.1, the obligations of Holdings and CMI
Acquisitions to consummate the Merger are subject to the satisfaction
of the following conditions:
(a) Representations and Warranties. The representations and
warranties of CMI contained in this Agreement shall have been
true and correct when made and shall be true and correct in
all material respects as of the Closing, with the same force
and effect as if made as of the Closing Date, the covenants
and agreements contained in this Agreement to be complied with
by either CMI on or before the Closing shall have been
complied with in all material respects, and Holdings shall
have received a certificate from an officer of CMI to such
effect signed by such officer.
17
<PAGE> 18
ARTICLE 7 -- TERMINATION
7.1 TERMINATION OF AGREEMENT. Any of the Parties may terminate this
Agreement with the prior authorization of its board of directors
(whether before or after stockholder approval) as provided below:
(a) the parties may terminate this Agreement by mutual written
consent at any time prior to the Effective Time;
(b) CMI or Holdings may terminate this Agreement by giving written
notice to the other parties at any time prior to the Effective
Time in the event the fairness opinion referred to in Section
6.1(j) is withdrawn;
(c) any party may terminate this Agreement by giving written
notice to the other parties at any time after the date 60 days
after the date hereof in the event this Agreement and the
Merger fail to receive the requisite stockholder approval;
(d) any party may terminate this Agreement by giving written
notice to the other parties if the Closing shall not have
occurred by September 1, 1998; provided, however, that the
right to terminate this Agreement under this Section 7.1(d)
shall not be available to any party whose failure to fulfill
any obligation under this Agreement shall have been the cause
of, or shall have resulted in, the failure of the Closing to
occur on or prior to such date.
7.2 EFFECT OF TERMINATION. If any party terminates this Agreement pursuant
to Section 7.1, all rights and obligations of the parties hereunder
shall terminate without any liability of any party to any other party,
except as provided in Section 8.1.
ARTICLE 8 -- MISCELLANEOUS
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations and warranties and agreements in this Agreement and in
any certificate delivered pursuant hereto (excluding any
representations and warranties contained in the Letter of Transmittal)
are intended by the parties only to be conditions to their respective
obligations to consummate the Merger and shall be terminated and
extinguished by the occurrence of the Effective Time or upon the
termination of the Merger pursuant to Section 7.1, as the case may be;
provided however that the agreements set forth in Articles I and II and
Sections 5.5, 5.6 and 5.7 and Article VIII and the representations set
forth in Section 4.4 shall survive the Effective Time and those set
forth in Article VIII shall survive termination. The sole remedy of
Holdings and CMI Acquisitions, on the one hand, and CMI, on the other
hand, for breach of any representation, warranty or agreement made by
the other that does not survive termination pursuant to the first
sentence of this Section 8.1 shall be to terminate this Agreement in
18
<PAGE> 19
accordance with the terms of Section 7.1; provided, that nothing in
this Section 8.1 shall relieve any party from any willful breach of any
representation, warranty or agreement set forth in this Agreement.
8.2 EXPENSES. Except as otherwise specified in this Agreement, all costs
and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection
with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the
Closing shall have occurred. Notwithstanding the foregoing, it is
agreed that, whether or not the Closing occurs, CMI shall be solely
responsible for the payment of all fees, expenses and disbursements of
Sutherland, Asbill & Brennan, LLP and Shearman & Sterling.
8.3 NOTICES.
(a) All notices and other communications given or made pursuant to
this Agreement shall be in writing and shall be sent by an
overnight courier service that provides proof of receipt,
mailed by registered or certified mail (postage prepaid,
return receipt requested) or telecopy to the parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to CMI to:
CMI Industries, Inc.
1301 Gervais Street
Suite 700
Columbia, South Carolina 29201
Attention: Joseph L. Gorga
Chairman
Telecopy: (803) 748-1738
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Creighton O'M. Condon, Esq.
Telecopy: (212) 848-7179
19
<PAGE> 20
(ii) If to Holdings or CMI Acquisitions, to:
CMI Management, Inc., or
CMI Acquisitions, Inc.
1301 Gervais Street
Suite 700
Columbia, South Carolina 29201
Attention: Chief Financial Officer
Telecopy: (803) 748-1738
with a copy to:
Sutherland, Asbill & Brennan LLP
999 Peachtree Street, N.E.
Atlanta, Georgia 30309-3996
Attention: Ed Kallal, Esq.
Telecopy: (404) 853-8806
8.4 HEADINGS. The descriptive headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
8.5 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public
policy, all other terms and provisions of this Agreement shall
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 materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of
being enforced, the parties hereto shall 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 in order that
the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
8.6 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both
written and oral, between the parties with respect to the subject
matter hereof. The Disclosure Schedules and Schedules attached hereto
are incorporated into this Agreement and made a part hereof.
8.7 ASSIGNMENT. Neither this Agreement nor any rights or obligations
hereunder may be assigned by operation of law or otherwise without the
express written consent of all of the other parties hereto (which
consent may be granted or withheld by any party hereto in the sole
discretion of such party).
20
<PAGE> 21
8.8 NO THIRD PARTY BENEFICIARIES. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, except for Section 5.7, express or implied,
is intended to or shall confer upon any other person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
8.9 AMENDMENT. This Agreement may not be amended or modified except by an
instrument in writing signed by, or on behalf of each of the Parties.
8.10 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without
regard to principles of conflict of laws.
8.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an
original but all of which taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of a signature page
to this Agreement by telecopy shall be effective as deliver of a
manually executes counterpart of this Agreement.
8.12 PUBLIC ANNOUNCEMENTS. Unless otherwise required by applicable law, none
of the parties shall issue any press release or otherwise make any
public statements with respect to this Agreement or any transaction
contemplated thereby without the prior written consent of CMI and
Holdings.
8.13 HOLDINGS STOCKHOLDERS AGREEMENT. Holdings will execute the Holdings
Stockholders Agreement immediately after the execution of this
Agreement.
8.14 HOLDCO PAYMENT OBLIGATIONS. Holdco may delegate any payment obligation
hereunder to CMI Acquisitions or to the Surviving Corporation; provided
that no such delegation will relieve Holdco's obligations hereunder.
[signatures on following page]
21
<PAGE> 22
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above by their respective officers or
representatives thereunto duly authorized.
CMI INDUSTRIES, INC.
By:
--------------------------------------
Name:
Title:
CMI MANAGEMENT, INC.
By:
--------------------------------------
Name:
Title:
CMI ACQUISITIONS, INC.
By:
--------------------------------------
Name:
Title:
22
<PAGE> 23
EXHIBIT A TO
CMI INDUSTRIES/CMI MANAGEMENT/CMI ACQUISITIONS
MERGER AGREEMENT
CERTIFICATE OF MERGER
OF
CMI ACQUISITIONS INC.
WITH AND INTO
CMI INDUSTRIES, INC.
=====================
The undersigned corporation does hereby certify:
FIRST: That the name and state of incorporation of each of the constituent
corporations of the merger are as follows:
<TABLE>
<CAPTION>
Name State Of Incorporation
---- ----------------------
<S> <C>
CMI Industries, Inc. Delaware
CMI Acquisitions, Inc. Delaware
</TABLE>
SECOND: That an agreement of merger among the parties to the merger has been
approved, adopted, certified, executed and acknowledged by each of the
constituent corpora tions in accordance with the requirements of
section 251 of the General Corporation Law of the State of Delaware.
THIRD: The name of the surviving corporation of the merger is CMI Industries,
Inc.
FOURTH: The Certificate of Incorporation of CMI Industries, Inc. shall be the
Certificate of Incorporation of the surviving corporation.
FIFTH: That the executed agreement of merger is on file at the principal place
of business of CMI Industries, Inc., the surviving corporation. The
address of said principal place of business is 1301 Gervais Street,
Suite 700, Columbia, SC 29201.
SIXTH: That a copy of the agreement of merger will be furnished by CMI
Industries, Inc., the surviving corporation, on request and without
cost, to any stockholder of any constituent corporation.
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<PAGE> 24
SEVENTH: This Certificate of Merger shall be effective as of the opening of
business on ____________, 1998.
DULY EXECUTED, delivered and certified, under seal, by the duly
authorized officers of the Surviving Corporation on ___________ ____, 1998.
CMI INDUSTRIES, INC.
(Corporate Seal)
By:
-----------------------------------
Attest: Name:
-------------------------------- ------------------------------
Name: President
----------------------------------
Secretary
24
<PAGE> 25
EXHIBIT B TO
CMI INDUSTRIES/CMI MANAGEMENT/CMI ACQUISITIONS
MERGER AGREEMENT
LETTER OF TRANSMITTAL
To Accompany Certificates Representing Shares of Common Stock of
CMI Industries, Inc.
to be exchanged for cash and shares of CMI Investments, Inc.
By Mail or Hand Delivery to:
James A. Ovenden
CMI MANAGEMENT, INC.
1301 Gervais Street, Suite 700
Columbia, South Carolina 29201
To call for additional information:
James A. Ovenden
(803) 771-4434
In connection with the merger of CMI Industries Inc. ("CMI") with a subsidiary
of CMI Management, Inc., which is to become effective on or about ________ __,
1998 (the "EFFECTIVE DATE", unless otherwise specified capitalized terms used
herein shall have the same meaning ascribed to such terms in the Merger
Agreement by and between CMI Management, Inc., CMI Acquisitions, Inc. and CMI
Industries, Inc. dated [__________] (the "MERGER AGREEMENT")):
1. Representations and warranties. The undersigned hereby represents and
warrants to CMI Management Inc. that
1.1 Ownership of the Shares. The undersigned is the beneficial and
record owner of all shares of $1.00 par value common stock of
CMI Industries, Inc. represented by the share certificates
that accompany this letter of transmittal (the "CMI SHARES"),
free and clear of all liens, encumbrances, options, rights of
first refusal or other transfer restrictions, adverse claims
or any other charges of whatsoever nature.
1.2 Authority. The undersigned has full right, capacity and
authority to vote such shares in connection with the Merger
contemplated by the Merger Agreement and to surrender them to
CMI Management Inc. together with this letter of transmittal.
25
<PAGE> 26
1.3 Disclosure Document. The undersigned or a duly authorized
representative or officer thereof has received and reviewed
the Disclosure Document (as defined in the Merger Agreement)
and understands the materials contained therein. The
undersigned has had an opportunity to ask questions of CMI and
Holdings concerning the Disclosure Document, the Merger
Agreement and the transactions contemplated by such documents
(the "TRANSACTIONS"), and CMI and Holdings has answered all
such questions to the full satisfaction of the Seller. The
undersigned has carefully read the New Stockholders Agreement
and has discussed their requirements and other applicable
limitations upon resale of the Securities with is counsel.
1.4 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in
connection with the Merger Agreement or the transactions
contemplated by the Merger Agreement based upon arrangements
made by or on behalf of the undersigned.
1.5 Investment Considerations. The undersigned represents and
warrants that he is acquiring the shares of Holdings Common
Stock for his own account for the purpose of investment and
not with a view to or for sale in connection with any
distribution or other allocation thereof. The undersigned
further represents and warrants as follows:
(a) The undersigned shall not make any sale, transfer or
other disposition of shares of Holdings Common Stock
(the "SECURITIES") in violation of the Securities Act
of 1933, as amended (the "1933 Act") or any
applicable state securities laws (the "State Acts").
(b) The undersigned understands that the shares of
Holdings Common Stock have not been registered under
the Securities Act by reason of their issuance in a
transaction exempt from the registration requirements
of the Securities Act pursuant to Section 4(2) or
4(6) thereof, that the Securities are not being
registered under any State Acts on the ground that
this transaction is exempt from registration
thereunder and that reliance by Holdings on such
exemptions is predicated in part on his
representations set forth in this Agreement. The
undersigned agrees that Holdings may refuse to permit
him to sell, transfer or dispose of the Securities
unless there is in effect a registration statement
under any State Acts and the 1933 Act covering such
transfer or he furnishes an opinion of counsel,
satisfactory to counsel for Holdings, to the effect
that such registration is not required. The
undersigned also understands and agrees that stop
transfer instructions will be noted on the
appropriate records of Holdings and that there will
be placed on the certificate or certificates for the
shares, or
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<PAGE> 27
any substitutions therefor, a legend reflecting the
fact that the shares have not been registered under
the 1933 Act or any State Act.
(c) The undersigned understands that he may not make any
sale of the Securities without registration under the
1933 Act except upon compliance with Regulation A,
Rule 144 or some other exemption from such
registration.
(d) The undersigned understands that his ownership of the
shares of Holdings Common Stock may be subject to the
terms of the New Stockholders Agreement, which
contains certain restrictions on transfer, options
and other limitations on his ownership of Holdings
Common Stock.
(e) The undersigned has received no public solicitation
or advertisement concerning an offer to sell the
shares.
(f) The undersigned acknowledges and understands that the
acquisition of the Securities involves a high degree
of risk and can afford to lose his entire investment
in the Securities.
The undersigned further understands that the exemption from
registration afforded by Rule 144 under the Securities Act
depends on the satisfaction of various conditions and that, if
applicable, Rule 144 affords the exemptions of sale of the
Shares of Holdings Common Stock only in limited amounts under
certain conditions. The undersigned acknowledges that he has
had a full opportunity prior to the date hereof to ask
questions about the Company and Holdings and to request from
Holdings and has received all information which he deems
relevant in making a decision to participate in the Merger.
2. Release. The undersigned releases CMI from any and all claims, rights
and causes of action which the undersigned may have or may have had
against CMI arising out of the purchase by the undersigned (or its
predecessors) of the CMI Shares; provided however that nothing in this
letter of transmittal waives, releases or restricts in any manner
whatsoever any of the rights of the undersigned that arise under the
Merger Agreement or this letter of transmittal.
3. Surrender of Certificates. The undersigned, as registered holder of the
stock certificate(s) listed below and accompanying this letter of
transmittal (the "CMI STOCK CERTIFICATES"), hereby surrenders the
attached certificates in exchange for a cash payment and a number
shares of CMI Investments, Inc. for each share of CMI Industries, Inc.
computed in accordance with the Merger Agreement.
27
<PAGE> 28
ALL HOLDERS MUST COMPLETE BOXES A, B, AND D AND ENCLOSE STOCK CERTIFICATES.
CERTIFICATES ENCLOSED
BOX B
<TABLE>
<S> <C> <C>
Names and Address of Registered Holder(s) Certificate Number(s) Number of Shares
------------------------- ---------------------
------------------------- ---------------------
------------------------- ---------------------
------------------------- ---------------------
------------------------- ---------------------
------------------------- ---------------------
[ ] address change indicated above Total Shares:
</TABLE>
We will process letters of transmittal as submitted; however, to receive your
full entitlement of shares on this exchange, please submit all shares.
BOX A
SIGN HERE (all registered holders)
- ---------------------------------------------
- ---------------------------------------------
Signature of owner(s)
- ---------------------------------------------
Phone number
[ ] I have lost my certificate(s) for ____________ shares and require assistance
with respect to replacing the shares.
BOX C
SIGNATURE GUARANTEE
Your signature must be notarized by a notary public
- ---------------------------------------------------
GENERAL INFORMATION
- - SIGNATURE GUARANTEE: Box C (Notarization) only needs to be completed if
the registration of the new certificates will be different from the
current registration or if Box E is completed.
- - LOST CERTIFICATES: If your certificates are lost, please check the
small box above Box C, complete the Letter of Transmittal and return it
to us as normal. There may be a fee required to replace lost
certificates.
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<PAGE> 29
- - FRACTIONAL SHARES: Any fractional share amount resulting from the
exchange will be paid in cash.
- - DIVIDENDS: Payment of any dividends accrued will be paid at the time
the shares are submitted for exchange.
- - ADDRESS CHANGES: If your permanent address should be changed on our
records, please indicate address change in Box A. An address in Box F
will be treated as the one time only, special instructions.
IMPORTANT TAX INFORMATION
PLEASE PROVIDE YOUR SOCIAL SECURITY OR OTHER TAX IDENTIFICATION NUMBER ON THIS
SUBSTITUTE FORM W-9 AND CERTIFY THEREIN THAT YOU ARE NOT SUBJECT TO BACKUP
WITHHOLDING. FAILURE TO DO SO WILL SUBJECT YOU TO 31% FEDERAL INCOME TAX
WITHHOLDING FROM YOUR PAYMENT CHECK.
BOX D
Substitute Form W-9
Please provide the Taxpayer Identification Number ("TIN") of the person
submitting this Letter of Transmittal in the box at right and certify by signing
and dating below.
Social Security Number
- ---------------------------------------
CERTIFICATION - Under penalties of perjury, the undersigned hereby certifies the
following: (1) The TIN shown above is the correct TIN of the person who is
submitting this Letter of Transmittal and who is required by law to provide such
TIN, or such person is waiting for a TIN to be issued, and (2) The person who is
submitting this Letter of Transmittal and who is required by law to provide such
TIN is not subject to backup withholding because such person has not been
notified by the Internal Revenue Service ("IRS") that such person is subject to
backup withholding, or because the IRS has not notified such person that he or
she is no longer subject to backup withholding, or because such person is an
exempt payee.
Signature: Date:
----------------------------------- --------------------------
29
<PAGE> 30
<TABLE>
BOX E BOX F
- ---------------------------------------------------------- ----------------------------------------------------------
Special Payment Instructions Special Delivery Instructions
- ---------------------------------------------------------- ----------------------------------------------------------
<S> <C>
To be completed ONLY if the certificate is to be To be completed ONLY if the certificate is to be delivered
registered in the name(s) of someone other than the to an address other than that in Box A.
registered holder(s) in Box A. This may be done only with
the written consent of CMI Investments, Inc. MAIL TO:
ISSUE TO
----------------------------------------------------------
- ----------------------------------------------------------- Name
Name
----------------------------------------------------------
- ----------------------------------------------------------- Street Address
Street Address
----------------------------------------------------------
- ----------------------------------------------------------- City, State and Zip Code
City, State and Zip Code
- -----------------------------------------------------------
Tax ID Number
</TABLE>
30
<PAGE> 1
EXHIBIT 2.2
TERMINATION OF
SUBSCRIPTION AGREEMENTS
AND
STOCKHOLDERS AGREEMENT
OF CMI INDUSTRIES, INC.
THIS IS AN AGREEMENT (this "Agreement") by and among CMI INDUSTRIES,
INC., a Delaware corporation, formally known as CMI HOLDINGS, INC. ("CMI"), and
the stockholders of CMI signatory hereto (each a "Stockholder" and collectively
the "Stockholders") dated as of May 15, 1998.
WHEREAS, CMI and certain stockholders of CMI entered into a Management
Subscription Agreement dated as of December 23, 1986 and as amended as of April
14, 1989 (the "Management Subscription Agreement"), pursuant to which such
stockholders purchased shares of CMI Common Stock, $1.00 par value per share
(the "CMI Common Stock");
WHEREAS, CMI and James A. Ovenden entered into a Subscription Agreement
dated as of June 1, 1987 and as amended as of April 14, 1989 (the "Ovenden
Subscription Agreement"), pursuant to which Mr. Ovenden purchased shares of CMI
Common Stock;
WHEREAS, CMI and Michael H. deHavenon entered into a Subscription
Agreement dated as of November 9, 1988 (the "deHavenon Subscription Agreement")
pursuant to which Mr. deHavenon purchased shares of CMI Common Stock;
WHEREAS, CMI and Joseph L. Gorga entered into an agreement regarding
the restriction of shares of CMI Common Stock purchased by Mr. Gorga dated as of
October 21, 1997 (the "Gorga Agreement" and together with the Management
Subscription Agreement, the Ovenden Subscription Agreement and the deHavenon
Subscription Agreement collectively referred to herein as the "Subscription
Agreements");
WHEREAS, CMI and its stockholders entered into an Amended and Restated
Stockholders Agreement dated as of February 14, 1992, as amended (the
"Stockholders Agreement"); and
WHEREAS, in connection with the merger agreement of near or even date
herewith among CMI, CMI Management, Inc. ("CMI Management") and CMI
Acquisitions, Inc., a wholly-owned subsidiary of CMI Management ("CMI
Acquisitions"), pursuant to which CMI Acquisitions will be merged (the "Merger")
into CMI and CMI will be become a wholly-owned subsidiary of CMI Management, and
the proposed transfer of shares of CMI Common Stock by certain holders in
exchange for shares of the $1.00 par value common stock of CMI Management
("Management Common Stock"), CMI and its stockholders desire to terminate the
Stockholders Agreement and the Subscription Agreements and take certain related
actions.
<PAGE> 2
In consideration of the mutual agreements set forth below and other
good and valuable consideration, the mutuality, adequacy and sufficiency of
which are hereby acknowledged, CMI and each of the Stockholders agree as
follows:
1. Termination of Subscription Agreements. CMI and each of the
respective parties to the Management Subscription Agreement, the Ovenden
Subscription Agreement, the deHavenon Subscription Agreement and the Gorga
Agreement hereby terminate, as of the Effective Date, the respective
Subscription Agreements. From and after the Effective Date, CMI and each of the
respective parties to the Subscription Agreements shall have no further rights
or obligations with respect to the respective Subscription Agreements.
2. Certain Permitted Transferees. Section 4.2(a)(ii) of the
Stockholders Agreement is amended to permit each of the Management Stockholders
(as defined in the Stockholders Agreement) identified below to transfer pursuant
to section 4.2(a)(ii) up to 10% of their respective shares of CMI Common Stock
to a private charitable foundation in which, to the satisfaction of CMI
Management, the transferring Management Stockholder controls the investment and
other management decisions. Notwithstanding the foregoing, no such transfer may
be made unless (x) CMI and CMI Management are given notice of the proposed
transfer at least five business days prior to the transfer, (y) CMI and CMI
Management approve of the documentation to be used in the transfer and determine
in their discretion that neither the transfer of CMI Common Stock to such
foundation nor the subsequent issuance of Management Common Stock to such
foundation or others requires registration under the Securities Act of 1933, as
amended, or any applicable state securities law, and (z) CMI Management
otherwise approves of the proposed transfer. The Management Stockholders to whom
the amendment contained in this section applies are: Steve F. Warren, The Warren
Family Limited Partnership, J.R. Swetenburg, M.S. Bailey & Son, Bankers, Trustee
for Julius A. Swetenburg, Ada S. Cain and John Richard Swetenburg III (separate
trusts), Russell G. Vance, M.S. Bailey & Son, Bankers as Trustee under Trust for
the benefit of C. Bailey Dixon, II, W. James Raleigh, John E. Sullivan, as
trustee for Kimberly D. Raleigh and Christopher W. Raleigh (separate trusts),
Thomas E. Davenport, Joseph B. Nelson, Anthony J. Raffo, and G. Thaddeus
Williams.
3. Termination of the Stockholders Agreement. CMI and each Stockholder
who is a party to the Stockholders Agreement, hereby terminate, as of the
Effective Date, the Stockholders Agreement. From and after the Effective Date,
CMI and each such Stockholder shall have no further rights or obligations with
respect to the Stockholders Agreement.
4. Effective Date. The termination of the Stockholders Agreement and
the Subscription Agreements shall be effective immediately preceding the date
and times that Merger becomes effective (the "Effective Date"); provided however
in the event that the Merger is not consummated on or prior to September 1,
1998, the termination of such Agreements will be of no force and effect
whatsoever, and the Stockholders Agreement and the Subscription Agreements shall
continue in full force and effect in accordance with their respective terms and
conditions. The amendment to the
2
<PAGE> 3
Stockholders Agreement shall become effective upon execution of this Agreement
by the holders of not less than 75% of outstanding shares of CMI Common Stock.
5. Authority; Survival. Each party thereto represents and warrants to
the others (a) that said party has the requisite power and authority to enter
into this Agreement and to carry out the terms and agreements of this Agreement,
and (b) that the carrying out of the terms and conditions of this Agreement is
not restricted by or in violation either of any applicable law to which such
party is subject or of any agreement, commitment, order, ruling or proceeding to
which such party is a party to or to which such party or any of its assets are
subject.
6. Further Assurances. Upon the execution of this Agreement and
thereafter, each party to this Agreement agrees to do such things as may be
reasonably request by the other parties to this Agreement in order more
effectively to consummate or document the transactions contemplated by this
Agreement.
7. Miscellaneous.
A. Binding Nature. This Agreement is binding upon the parties
hereto and their respective legal representatives, heirs, devisees, legatees or
other successors and assigns and inures to the benefit of the parties hereto and
their respective permitted legal representatives, heirs, devisees, legatees or
other permitted successors and assigns.
B. Rules of Construction. Whenever the context so requires,
the singular includes the plural, the plural includes the singular, and the
gender of any pronoun includes the other genders. Titles and captions of or in
this Agreement are inserted only as a matter of convenience and are not intended
to be nor shall they be utilized for purposes of construing the meaning of this
Agreement. The parties hereto agree that "party," "parties," "parties to this
Agreement" and variations of such means each or all, as appropriate, of the
persons who have executed and delivered this Agreement, each permitted successor
or assign of such a party, and when appropriate to effect the binding nature of
this Agreement for the benefit of another party, any other successor or assign
of such a party.
C. Controlling Law. This Agreement is governed by, and shall
be construed and enforced in accordance with, the laws of the State of Delaware.
D. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement or its terms to produce or account
for more than one of such counterparts.
3
<PAGE> 4
DULY EXECUTED by the parties as of the day and year first above
written.
<TABLE>
<S> <C>
CMI INDUSTRIES, INC.
This day of , 1998 By:
---- ------------- -------------------------------------------------
Title:
----------------------------------------------
This day of , 1998
---- ------------- ----------------------------------------------------
James B. Barton
This day of , 1998
---- ------------- ----------------------------------------------------
John T. Cavanagh
This day of , 1998
---- ------------- ----------------------------------------------------
James H. Coleman
This day of , 1998
---- ------------- ----------------------------------------------------
Michael H. deHavenon
This day of , 1998
---- ------------- ----------------------------------------------------
Thomas E. Davenport
This day of , 1998
---- ------------- ----------------------------------------------------
McArthur A. George
This day of , 1998
---- ------------- ----------------------------------------------------
Joseph L. Gorga
This day of , 1998
---- ------------- ----------------------------------------------------
Joshua T. Hamilton
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
This day of , 1998
---- ------------- ----------------------------------------------------
William R. Hill
This day of , 1998
---- ------------- ----------------------------------------------------
Barry L. Hooks
This day of , 1998
---- ------------- ----------------------------------------------------
Robert E. Hooks
This day of , 1998
---- ------------- ----------------------------------------------------
G. Gregory Link
This day of , 1998
---- ------------- ----------------------------------------------------
Leon J. McCullough
This day of , 1998
---- ------------- ----------------------------------------------------
Joseph B. Nelson
This day of , 1998
---- ------------- ----------------------------------------------------
James A. Ovenden
This day of , 1998
---- ------------- ----------------------------------------------------
C. Mack Parsons
This day of , 1998
---- ------------- ----------------------------------------------------
W. James Raleigh
This day of , 1998
---- ------------- ----------------------------------------------------
William E. Stanton
This day of , 1998
---- ------------- ----------------------------------------------------
H. Jerome Stuckey
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C>
This day of , 1998
---- ------------- ----------------------------------------------------
Harry B. Sullivan
This day of , 1998
---- ------------- ----------------------------------------------------
John E. Sullivan, as Trustee for Kimberly D. Raleigh
under Instrument dated July 28, 1987
This day of , 1998
---- ------------- ----------------------------------------------------
John E. Sullivan, as Trustee for Christopher W.
Raleigh under Instrument dated July 28, 1987
This day of , 1998
---- ------------- ----------------------------------------------------
J. R. Swetenburg
This day of , 1998
---- ------------- ----------------------------------------------------
Steve F. Warren
This day of , 1998
---- ------------- ----------------------------------------------------
Russell G. Vance
This day of , 1998
---- ------------- ----------------------------------------------------
G. Thaddeus Williams
This day of , 1998
---- ------------- ----------------------------------------------------
Robert Aprea, as Trustee for Kimberly D. Raleigh
under Instrument dated 7/28/87
This day of , 1998
---- ------------- ----------------------------------------------------
Robert Aprea, as Trustee for Christopher W. Raleigh
under Instrument dated 7/28/87
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C>
M.S. Bailey & Son, Bankers, as Trustee for Julius A.
Swetenburg, Ada S. Cain and John Richard
Swetenburg, III
This day of , 1998 By:
---- ------------- -------------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------------
M.S. Bailey & Son, Bankers, as Trustee under Trust
for the benefit of C. Bailey Dixon, II
This day of , 1998 By:
---- ------------- -------------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------------
The Warren Family Limited Partnership
This day of , 1998 By:
---- ------------- -------------------------------------------------
Steve Warren, as general partner
This day of , 1998 By:
---- ------------- -------------------------------------------------
Jane C. Warren, as general partner
This day of , 1998
---- ------------- ----------------------------------------------------
John R. Russell, as Trustee under Instrument dated
August 11, 1987
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. VII, L.P.
By: Merrill Lynch LBO Partners No. II, L.P., as
General Partner
By: Merrill Lynch Capital Partners, Inc., as
General Partner of Merrill Lynch LBO
Partners No. II, L.P.
This day of , 1998 By:
---- ------------- -------------------------------------------------
Title:
----------------------------------------------
</TABLE>
7
<PAGE> 8
<TABLE>
<S> <C>
ML OFFSHORE LBO PARTNERSHIP NO. VII
By: Merrill Lynch LBO Partners No. II, L.P., as
Investment General Partner
By: Merrill Lynch Capital Partners, Inc., as
General Partner of Merrill Lynch LBO
Partners No. II, L.P.
This day of , 1998 By:
---- ------------- -------------------------------------------------
Title:
----------------------------------------------
ML EMPLOYEES LBO PARTNERSHIP NO. I,
L.P.
By: ML Employees LBO Managers, Inc., as
General Partner
This day of , 1998 By:
---- ------------- -------------------------------------------------
Title:
----------------------------------------------
MERRILL IBK POSITIONS, INC.
This day of , 1998 By:
---- ------------- -------------------------------------------------
Title:
----------------------------------------------
MERCHANT BANKING L.P. NO. I
By: Merrill Lynch MBP Inc., as General Partner
This day of , 1998 By:
---- ------------- -------------------------------------------------
Title:
----------------------------------------------
</TABLE>
8
<PAGE> 9
<TABLE>
<S> <C>
MERRILL LYNCH KECALP L.P. 1986
By: KECALP Inc., as General Partner
This day of , 1998 By:
---- ------------- -------------------------------------------------
Title:
----------------------------------------------
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. B-XVI, L.P.
This day of , 1998 By:
---- ------------- -------------------------------------------------
Title:
----------------------------------------------
ML OFFSHORE LBO PARTNERSHIP NO. B-XVI
This day of , 1998 By:
---- ------------- -------------------------------------------------
Title:
----------------------------------------------
MLCP ASSOCIATES L.P. NO. II
This day of , 1998 By:
---- ------------- -------------------------------------------------
Title:
----------------------------------------------
MERRILL LYNCH KECALP L.P. 1989
This day of , 1998 By:
---- ------------- -------------------------------------------------
Title:
----------------------------------------------
MERRILL LYNCH KECALP L.P. 1991
This day of , 1998 By:
---- ------------- -------------------------------------------------
Title:
----------------------------------------------
</TABLE>
9
<PAGE> 10
<TABLE>
<S> <C>
This day of , 1998 ANTHONY J. RAFFO
---- -------------
----------------------------------------------------
This day of , 1998 JOSHUA T. & MARQUITA C. HAMILTON
---- ------------- IRREVOCABLE TRUST
By:
-------------------------------------------------
Title:
----------------------------------------------
</TABLE>
10
<PAGE> 1
EXHIBIT 4.1
OFFER TO PURCHASE FOR CASH
ANY AND ALL
OUTSTANDING 9 1/2% SENIOR SUBORDINATED NOTES DUE 2003
ISSUED BY
CMI INDUSTRIES, INC.
AND
SOLICITATION OF CONSENTS TO AMENDMENTS OF THE INDENTURE
CMI Industries, Inc., a Delaware corporation ("CMI"), hereby offers to
purchase for cash, on the terms and subject to the conditions set forth in this
Offer to Purchase and Consent Solicitation (as it may be supplemented or amended
from time to time, the "Offer to Purchase") and the related Consent and Letter
of Transmittal (as it may be supplemented or amended from time to time, the
"Consent and Letter of Transmittal," and together with the Offer to Purchase,
the "Offer"), any and all of the outstanding 9 1/2% Senior Subordinated Notes
due 2003 (the "Notes") issued pursuant to the Indenture dated as of October 28,
1993 between CMI, as issuer (together with its successors and assigns, the
"Issuer"), and The Chase Manhattan Bank, as Trustee (the "Trustee"), at a price
per $1,000 in Note principal to be determined in the manner described herein by
reference to a fixed spread of 50 basis points (0.50%) over the yield, on June
23, 1998 or, if the Offer is extended, the third business day prior to the
Expiration Date (as defined below) (June 23, 1998 or such later date being
hereafter referred to as the "Pricing Date"), of the 6% U.S. Treasury Note due
September 30, 1998 (the "Benchmark Treasury Security"), plus accrued and unpaid
interest on the Notes to, but not including, the date of payment, less the
Consent Payment (as defined below), net to tendering holders of the Notes in
cash (the "Offer Price").
<TABLE>
<CAPTION>
CUSIP No. Security Benchmark Treasury Security Fixed Spread
--------- -------- --------------------------- ------------
<S> <C> <C> <C>
125765AA5 9 1/2% Senior Subordinated 6% U.S. Treasury Note due 0.50%
Notes due 2003 September 30, 1998
</TABLE>
In conjunction with the Offer, CMI is also hereby soliciting consents
(the "Solicitation") from holders of the Notes (each, a "Holder" and,
collectively, the "Holders") of at least a majority of the aggregate principal
amount of the outstanding Notes (the "Requisite Consents") to the proposed
amendments described herein (the "Proposed Amendments") of the Indenture dated
as of October 28, 1993 pursuant to which the Notes were issued. The Proposed
Amendments would eliminate substantially all of the covenants in the Indenture,
other than the covenants to pay interest on and principal of the Notes when due,
and would eliminate events of default under the Indenture relating to defaults
on other indebtedness. A consent payment of $10.00 per $1,000 in Note principal
(the "Consent Payment") is payable to Holders who tender their Notes and provide
their consents to the Proposed Amendments ("Consents") (and have not withdrawn
such Notes and such Consents) at or prior to Midnight, New York City time, on
the Consent Date (as defined below). No Consent Payment will be made in respect
to any Note which is not purchased pursuant to the Offer, and no Consent Payment
will be made in respect of any Consent which is not provided at or prior to
Midnight, New York City time, on the Consent Date. The Offer Price and the
Consent Payment, together, are hereinafter referred to as the "Total
Consideration."
THE DEALER MANAGER FOR THE OFFER AND THE SOLICITATION IS:
NATIONSBANC MONTGOMERY SECURITIES LLC
JUNE 1, 1998
<PAGE> 2
Adoption of the Proposed Amendments may have adverse consequences for
Holders who elect not to tender Notes in the Offer. See "Special
Factors--Effects of the Proposed Amendments" and "The Proposed Amendments".
The Offer is conditioned on, among other things, (a) the receipt of the
Requisite Consents at or prior to Midnight, New York City time, on the
Expiration Date and such Consents having not been revoked (the "Minimum Consent
Condition"), and (b) successful completion of the Debt Offering (as defined
below), all as more fully described below under the caption "The Offer and the
Solicitation - Certain Conditions of the Offer." CMI reserves the right to waive
any one or more of the conditions to the Offer. The Proposed Amendments will be
effective as of the execution of the Supplemental Indenture (as defined below)
and will become operative at such time as CMI accepts the tendered Notes for
payment.
HOLDERS WHO TENDER NOTES IN THE OFFER ARE OBLIGATED TO CONSENT TO ALL
OF THE PROPOSED AMENDMENTS. PURSUANT TO THE TERMS OF THE CONSENT AND LETTER OF
TRANSMITTAL, THE COMPLETION, EXECUTION AND DELIVERY THEREOF BY A HOLDER IN
CONNECTION WITH THE TENDER OF NOTES WILL BE DEEMED TO CONSTITUTE THE CONSENT OF
SUCH TENDERING HOLDER TO ALL OF THE PROPOSED AMENDMENTS.
Because the Offer Price is based on a fixed spread pricing formula
linked to a yield on the Benchmark Treasury Security, the Offer Price will be
affected by changes in such yield during the term of the Offer prior to the
Pricing Date.
THE OFFER WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME, ON JUNE 26,
1998, UNLESS THE OFFER IS EXTENDED (JUNE 26, 1998 OR SUCH LATER DATE TO WHICH
THE OFFER IS EXTENDED BEING HEREAFTER REFERRED TO AS THE "EXPIRATION DATE").
HOLDERS OF NOTES MUST TENDER NOTES (AND NOT HAVE WITHDRAWN SUCH NOTES) AT OR
PRIOR TO MIDNIGHT, NEW YORK CITY TIME, ON THE EXPIRATION DATE IN ORDER TO
RECEIVE THE OFFER PRICE. IN ORDER TO RECEIVE THE CONSENT PAYMENT, HOLDERS OF
NOTES MUST TENDER NOTES AND PROVIDE THEIR CONSENTS TO THE PROPOSED AMENDMENTS
(AND NOT HAVE WITHDRAWN SUCH NOTES OR REVOKED SUCH CONSENTS) AT OR PRIOR TO
MIDNIGHT, NEW YORK CITY TIME, ON THE DATE (THE "CONSENT DATE") THAT IS ONE
BUSINESS DAY FOLLOWING THE PUBLIC ANNOUNCEMENT BY PRESS RELEASE OF THE LATER OF
(i) JUNE 12, 1998 (PROVIDED CMI RECEIVES THE REQUISITE CONSENTS BY SUCH DATE) OR
(ii) SUCH DATE AS CMI HAS RECEIVED THE REQUISITE CONSENTS (SUCH DATE AS CMI
RECEIVES THE REQUISITE CONSENTS, THE "CONSENT ACHIEVEMENT DATE"). TENDERED NOTES
MAY BE WITHDRAWN AND RELATED CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO
MIDNIGHT, NEW YORK CITY TIME, ON THE CONSENT DATE BUT NOT THEREAFTER. IF
NECESSARY, THE COMPANY INTENDS TO EXTEND THE OFFER SO THAT THE EXPIRATION DATE
OCCURS NO EARLIER THAN FIVE BUSINESS DAYS FOLLOWING THE CONSENT DATE. THE
PRICING DATE FOR THE NOTES WILL BE JUNE 23, 1998 OR, IF THE OFFER IS EXTENDED,
THE PRICING DATE WILL BE THE DATE THAT IS THE THIRD BUSINESS DAY PRIOR TO THE
EXPIRATION DATE.
Any Holder desiring to tender, and give its Consent in respect of, all
or any portion of such Holder's Notes should either (i) complete and sign the
Consent and Letter of Transmittal (or a facsimile thereof) in accordance with
the instructions in the Consent and Letter of Transmittal and mail or deliver it
together with the tendered Notes, and any other required documents, to The Chase
Manhattan Bank, the depositary for the Offer (the "Depositary"), or tender such
Notes pursuant to the procedure for book entry transfer set forth in the "The
Offer and the Solicitation - Procedures for Tendering Notes" or (ii) request
such Holder's broker,
ii
<PAGE> 3
dealer, commercial bank, trust company or other nominee to effect the
transaction for such Holder. A Holder who has Notes registered in the name of a
broker, dealer, commercial bank, trust company or other nominee must contact
that entity if such Holder desires to tender such Notes and give its Consent.
Any Holder who desires to tender such Holder's Notes and whose Notes are not
immediately available or who cannot comply with the procedures for book-entry
transfer on a timely basis may tender such Notes and give its Consent by
following the procedures for guaranteed delivery set forth in "The Offer and the
Solicitation -- Procedures for Tendering Notes."
See "Special Factors" and "Certain Federal Income Tax Consequences" for
discussions of certain factors that should be considered in evaluating the Offer
and the Solicitation.
IN THE EVENT THAT THE OFFER AND THE SOLICITATION ARE WITHDRAWN OR
OTHERWISE NOT COMPLETED, THE TOTAL CONSIDERATION WILL NOT BE PAID OR BECOME
PAYABLE TO HOLDERS OF THE NOTES WHO HAVE VALIDLY TENDERED THEIR NOTES AND
DELIVERED CONSENTS IN CONNECTION WITH THE OFFER AND THE SOLICITATION.
NEITHER CMI NOR THE DEALER MANAGER MAKE ANY RECOMMENDATION AS TO
WHETHER OR NOT HOLDERS SHOULD TENDER NOTES IN RESPONSE TO THE OFFER OR PROVIDE
CONSENTS TO THE PROPOSED AMENDMENTS IN RESPONSE TO THE SOLICITATION.
Any questions regarding the terms of the Offer should be directed to
the Dealer Manager. Requests for additional copies of this Offer to Purchase,
the Consent and Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Information Agent as set forth on the back cover. Beneficial
owners may also contact their broker, dealer, commercial bank or trust company
for assistance concerning the Offer and the Solicitation.
iii
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
SUMMARY ............................................................................. 1
BACKGROUND OF THE OFFER ............................................................. 3
CMI Industries, Inc. ........................................................... 3
The Merger and the Exchange .................................................... 3
Purpose of the Offer and the Solicitation ...................................... 3
Source of Funds ................................................................ 3
SPECIAL FACTORS ..................................................................... 5
Effects of the Proposed Amendments ............................................. 5
Limited Market for the Notes ................................................... 5
Tax Matters .................................................................... 5
Subsequent CMI Repurchase of Notes; Discharge by CMI ........................... 5
DESCRIPTION OF NOTES ................................................................ 6
General ........................................................................ 6
Covenants ...................................................................... 6
THE PROPOSED AMENDMENTS ............................................................. 7
THE OFFER AND THE SOLICITATION ...................................................... 9
Principal Terms of the Offer and the Solicitation .............................. 9
Acceptance for Payment and Payment for Notes ................................... 11
Procedure for Tendering Notes .................................................. 12
Withdrawal Rights .............................................................. 14
Certain Conditions of the Offer ................................................ 15
Interest on Notes .............................................................. 16
Certain Legal Matters .......................................................... 16
Dealer Manager ................................................................. 16
Fees ........................................................................... 17
Depositary and Information Agent ............................................... 17
CERTAIN FEDERAL INCOME TAX CONSEQUENCES ............................................. 18
ADDITIONAL INFORMATION .............................................................. 20
MISCELLANEOUS ....................................................................... 21
Annex A-1 Formula For Calculation of Offer Price and Total Consideration ............ 22
Annex A-2 Hypothetical Calculation of Offer Price and Total Consideration ........... 23
</TABLE>
_______________
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN THIS OFFER TO PURCHASE AND RELATED CONSENT AND
LETTER OF TRANSMITTAL. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
iv
<PAGE> 5
SUMMARY
CMI hereby offers to purchase for cash, on the terms and subject to the
conditions set forth in the Offer, any and all of the outstanding Notes at the
Offer Price.
The Offer Price for each $1,000 of principal of the Notes tendered
pursuant to the Offer will equal (i) the present value on the Payment Date (as
hereinafter defined) of (a) $1,047.50 plus (b) interest payments which would
have been payable thereon from the Payment Date to, but not including, October
1, 1998 (the "First Redemption Date"), in each case as determined on the basis
of a yield to the First Redemption Date, equal to the sum of (x) the yield on
the Benchmark Treasury Security, as calculated by the Dealer Manager in
accordance with its standard practice for such calculations based on the bid
price for such Benchmark Treasury Security as of 2:00 p.m., New York City time,
on the Pricing Date, as displayed on page PX3 of the Bloomberg Government
Pricing Monitor (the "Bloomberg Page") or any recognized quotation source
selected by the Dealer Manager in its sole discretion if the Bloomberg
Government Pricing Monitor is not available or is manifestly erroneous, plus (y)
50 basis points (or 0.50%), plus (ii) accrued and unpaid interest thereon to,
but not including, the Payment Date, minus (iii) the Consent Payment. Holders
desiring to receive the Consent Payment of $10.00 per $1,000 principal amount of
tendered Notes must give their Consents to the Proposed Amendments as described
below at or prior to Midnight, New York City time, on the Consent Date. Holders
who tender Notes (and do not subsequently withdraw such Notes) at or prior to
Midnight, New York City time, on the Consent Date will receive aggregate
consideration in connection with the tender of their Notes (and the giving of
Consents) which shall be greater than the aggregate consideration received by
Holders tendering their Notes after the Consent Date (who will not be entitled
to receive the Consent Payment).
Although the yield on the Benchmark Treasury Security will be
determined only from the source noted above, information regarding the closing
yield of the Benchmark Treasury Security may also be found in The Wall Street
Journal, the New York Times and other published sources. Because the Offer Price
is based on a fixed spread pricing formula linked to a yield on the Benchmark
Treasury Security, the Offer Price will be affected by changes in such yield
during the term of the Offer prior to the Pricing Date. The formula for the
calculation of the Offer Price and the Total Consideration is included as Annex
A-1 hereto and an illustration of the calculation of the Offer Price and the
Total Consideration is included as Annex A-2 hereto.
CMI will publicly announce the pricing information referred to above by
press release to the Dow Jones News Service not later than 10:00 a.m. on the
first business day after the Pricing Date.
In conjunction with the Offer, CMI is also hereby soliciting Consents
from Holders of at least a majority in principal amount of the outstanding Notes
to the Proposed Amendments to the Indenture. The Proposed Amendments would
eliminate substantially all of the covenants in the Indenture other than the
covenants to pay interest on and principal of the Notes when due and would
eliminate Events of Default under the Indenture relating to defaults on other
indebtedness. See "The Proposed Amendments." The Consent Payment is an amount in
cash equal to $10.00 for each $1,000 of Note principal as to which Consents have
been validly delivered and not validly revoked at or prior to Midnight, New York
City time, on the Consent Date, provided that Holders will be entitled to a
Consent Payment only with respect to Notes purchased pursuant to the terms of
the Offer.
If a Holder's Notes are not properly tendered pursuant to the Offer at
or prior to Midnight, New York City time, on the Consent Date, or such Holder's
Consents are not properly delivered, or are revoked and not properly
redelivered, at or prior to Midnight, New York City time, on the Consent Date,
such Holder will
<PAGE> 6
not receive the Consent Payment, even though the Proposed Amendments will be
effective as to all Notes not purchased in the Offer, provided that the
Requisite Consents have been obtained and not revoked prior to the Consent Date.
Adoption of the Proposed Amendments may have adverse consequences for Holders of
Notes who elect not to tender Notes in the Offer because Holders of any such
Notes will not be entitled to the benefit of the covenants and certain default
provisions contained in the Indenture (which shall be eliminated upon receipt of
the Requisite Consents, execution of the Supplemental Indenture, and CMI
accepting the tendered Notes for payment), other than the covenants to pay
interest on and principal of the Notes when due and related default provisions.
See "Special Factors -- Effects of the Proposed Amendments" and "The Proposed
Amendments."
Holders who desire to have their Notes tendered pursuant to the Offer
are required to Consent to the Proposed Amendments. Pursuant to the terms
hereof, the completion, execution and delivery of the Consent and Letter of
Transmittal by a Holder in connection with the tender of Notes will be deemed to
constitute the Consent of such tendering Holder to the Proposed Amendments.
Holders may not deliver Consents without tendering the related Notes and may not
revoke Consents without withdrawing the previously tendered Notes from the
Offer. In no event may Notes be withdrawn or Consents previously given be
revoked after the Consent Date unless the Offer is terminated by CMI without any
Notes being purchased hereunder or as otherwise provided herein.
Holders who tender their Notes will not be obligated to pay brokerage
fees or commissions on the purchase by CMI of Notes pursuant to the Offer. CMI
will pay or reimburse all reasonable fees and expenses of NationsBanc Montgomery
Securities LLC, the dealer manager of the Offer (the "Dealer Manager"), The
Chase Manhattan Bank, the depositary for the Offer (the "Depositary"), and
Beacon Hill Partners, Inc., the information agent for the Offer (the
"Information Agent"), and all other reasonable costs and expenses in connection
with the Offer.
As of the date hereof, the aggregate principal amount of the
outstanding Notes is $125 million. As of May 22, 1998, the directors and
executive officers of CMI and their affiliates did not beneficially own any
Notes. CMI expressly reserves the absolute right, in its sole discretion from
time to time after the Expiration Date (i) to purchase any Notes through open
market or privately negotiated transactions, one or more additional tender or
exchange offers or otherwise, upon such terms and at such prices as it may
determine, and (ii) to exercise its rights under the Indenture to discharge its
obligations with respect to the Notes by depositing certain securities with the
Trustee and otherwise complying with Article Four of the Indenture.
The purchase of Notes pursuant to the Offer would reduce the number of
Notes that might otherwise trade publicly, and could adversely affect, among
other things, the liquidity or prices realizable in sales of the Notes following
the completion of the Offer. See "Special Factors--Certain Effects of the Offer"
for a discussion of these and other possible effects of the Offer.
Capitalized terms used herein that are not otherwise defined have the
meanings assigned to them in the Indenture.
HOLDERS ARE URGED TO READ THE OFFER TO PURCHASE AND THE RELATED CONSENT
AND LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
NOTES AND PROVIDE THEIR CONSENTS PURSUANT TO THE OFFER.
2
<PAGE> 7
BACKGROUND OF THE OFFER
CMI INDUSTRIES, INC.
CMI was formed in 1986 by Merrill Lynch Capital Partners, Inc. ("ML
Capital Partners"), a wholly owned subsidiary of Merrill Lynch & Co., Inc.,
together with certain members of present and former management. CMI is one of
the leading manufacturers and marketers of lightweight greige (unfinished)
fabrics in the United States. In addition, CMI also holds market leading
positions in certain segments of the elastic fabrics and upholstery fabrics
markets. CMI's core product offerings include greige fabrics such as
printcloths, broadcloths, twills and other fabrics used in home furnishings,
apparel, and industrial applications; elasticized fabrics used in the production
of intimate apparel, activewear and swimwear; and upholstery fabrics used in the
automotive, furniture and home textile industries. CMI is a key supplier to
leading companies in each of the industries it serves. CMI operates through
three primary divisions: the Greige Fabrics Division, the Elastic Fabrics
Division, and the Chatham Division.
THE MERGER AND THE EXCHANGE
CMI Management, Inc. ("Holdco") and CMI Acquisitions, Inc., a
wholly-owned subsidiary of Holdco ("CMIA"), were formed by members of present
senior management of CMI solely for the purpose of consummating the merger
described herein. On May 15, 1998 CMI entered into a definitive merger agreement
providing for the acquisition by CMIA of the outstanding CMI Common Stock, other
than shares held by Holdco (the "Merger"). In the Merger, each outstanding share
of CMI Common Stock will be converted into the right to receive cash plus a
fractional interest in a share of Holdco Common Stock. After giving effect to
the Merger, CMI shall be the surviving corporation in the Merger and will be a
wholly owned subsidiary of Holdco.
Each CMI stockholder who is a current employee of CMI, and certain
other stockholders who are former employees or who have historical ties to CMI,
have been asked to enter into an exchange agreement (the "Exchange Agreement"),
pursuant to which, prior to the Merger, each such person will exchange a
predetermined number of shares of CMI Common Stock for an equal number of shares
of Holdco Common Stock. In addition, BankBoston Ventures, Inc. has agreed to
provide an equity contribution to Holdco of $9.0 million in exchange for 200,000
shares of Holdco Common Stock.
PURPOSE OF THE OFFER AND THE SOLICITATION
The purpose of the Offer is to acquire any and all of the outstanding
Notes. The purpose of the Solicitation and the Proposed Amendments is to
eliminate certain of the restrictive covenants contained in the Indenture and,
thereby, to enhance the operating and financial flexibility of CMI.
SOURCE OF FUNDS
CMIA intends to issue at least $175 million in aggregate principal
amount of indebtedness of debt securities (the "New Notes"). Upon consummation
of the Merger, the new notes will become the obligation of CMI. The New Notes
will be issued in transactions exempt from the registration requirements of the
Securities Act of 1933, as amended, and may not be offered or sold by holders
thereof in the United States absent registration or an applicable exemption from
the registration requirements thereof. The terms of the New Notes will be
determined by market conditions and other factors at the time the New Notes are
offered for sale. This Offer to Purchase and Consent Solicitation does not
constitute an offer to sell or the solicitation of an offer to buy the New
Notes. CMI intends to fund the amounts required to consummate the
3
<PAGE> 8
Offer to Purchase and the Consent Solicitation, together with the fees and
expenses incurred in connection therewith, with the net proceeds of the New
Notes, its new $75 million Senior Secured Revolving Line of Credit, as well as
its general corporate funds.
4
<PAGE> 9
SPECIAL FACTORS
EFFECTS OF THE PROPOSED AMENDMENTS
Notes not purchased pursuant to the Offer will remain outstanding. If
the Proposed Amendments become operative, substantially all of the restrictive
covenants contained in the Indenture will be eliminated (other than the
covenants to pay interest on and principal of the Notes when due), and certain
Events of Defaults under the Indenture relating to defaults on other
indebtedness will be eliminated. The Indenture, as so amended, will continue to
govern the terms of all Notes that remain outstanding after the consummation of
the Offer. The elimination of these covenants would permit CMI to, among other
things, incur secured or unsecured indebtedness senior to that of the Notes and
enter into mergers and sales of all or substantially all of its assets. It is
possible that any such actions that CMI would be permitted to take as a result
of the Proposed Amendments would adversely affect the interests of the
non-tendering Holders. See "The Proposed Amendments."
As of April 4, 1998, CMI had approximately $133 million of long-term
indebtedness outstanding. Following the Merger, the closing of the Offer, and
the successful offering of the New Notes, CMI is expected to have approximately
$206.4 million of long-term indebtedness outstanding. Any remaining outstanding
Notes will be subordinated to CMI's Senior Secured Revolving Line of Credit, and
may be subordinated to other outstanding indebtedness.
LIMITED MARKET FOR THE NOTES
The Notes are not listed on any national or regional securities
exchange. To the extent that the Notes are tendered and accepted in the Offer,
any existing trading market for the remaining Notes may become more limited. A
debt security with a smaller outstanding principal amount available for trading
(a smaller "float") may command a lower price than would a comparable debt
security with a larger float. Consequently, the liquidity, market value and
price volatility of Notes which remain outstanding may be adversely affected.
Holders of unpurchased Notes may attempt to obtain quotations for the Notes from
their brokers; however, there can be no assurance that any trading market will
exist for the Notes following consummation of the Offer. The extent of the
public market for the Notes following consummation of the Offer would depend
upon the number of Holders remaining as of such time, the interest in
maintaining a market in such Notes on the part of securities dealers and other
factors.
TAX MATTERS
See "Certain Federal Income Tax Considerations" for a discussion of
certain tax matters that should be considered in evaluating the Offer and the
Solicitation.
SUBSEQUENT CMI REPURCHASE OF NOTES; DISCHARGE BY CMI
CMI expressly reserves the absolute right, in its sole discretion, from
time to time after the Expiration Date to purchase any Notes through open market
or privately negotiated transactions, one or more additional tender or exchange
offers or otherwise, upon such terms and at such prices as it may determine.
Nothing contained in the Offer will prevent CMI from exercising its rights under
the Indenture to discharge its obligations with respect to the Notes by
depositing certain securities with the Trustee and otherwise complying with
Article Four of the Indenture.
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<PAGE> 10
DESCRIPTION OF NOTES
THE FOLLOWING IS A SUMMARY OF CERTAIN TERMS OF THE NOTES, FORMS OF
WHICH, TOGETHER WITH THE INDENTURE, HAVE BEEN FILED AS EXHIBITS TO CMI'S FILINGS
WITH THE COMMISSION AND CAN BE OBTAINED AS DESCRIBED UNDER THE CAPTION
"ADDITIONAL INFORMATION." THE FOLLOWING SUMMARY OF THE TERMS OF THE NOTES IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT THEREOF AS SO FILED.
GENERAL
The Notes were issued under an Indenture dated as of October 28, 1993,
among CMI, as issuer, and The Chase Manhattan Bank, as Trustee. The Notes are
general unsecured obligations of CMI and are senior to any other subordinated
indebtedness. As of the date hereof, $125 million in aggregate principal amount
of Notes is outstanding. The Notes bear interest at the rate of 9 1/2% per
annum. Interest is paid semiannually on April 1 and October 1 of each year. At
any time on or after October 1, 1998, the Notes are redeemable at the option of
CMI prior to maturity and do not provide for any sinking fund. The Notes mature
on October 1, 2003.
COVENANTS
The Indenture includes covenants which (i) limit CMI's ability to incur
any other form of indebtedness, (ii) limit the creation or incurrence of liens
on assets of CMI's subsidiaries, (iii) upon the occurrence of a change in
control of CMI, obligate CMI to offer to repurchase all of the outstanding
Notes, (iv) restrict the disposition of the proceeds of asset sales conducted by
CMI and require CMI to use the net proceeds of asset sales for tender offers of
Notes under certain circumstances, (v) restrict CMI in the payment of dividends,
or other distributions and investments, (vi) restrict the issuance of preferred
stock by subsidiaries, (vii) restrict certain mergers and similar corporate
transactions, and (viii) limit certain affiliated party transactions.
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<PAGE> 11
THE PROPOSED AMENDMENTS
The Proposed Amendments will be set forth in a supplemental indenture
(the "Supplemental Indenture") to the Indenture, which will be provided by CMI
upon any Holder's request. Upon receipt of the Requisite Consents, CMI's
acceptance for payment of the Notes tendered pursuant to the Offer, and the
execution of the Supplemental Indenture, the Proposed Amendments will become
operative and will be binding upon all Holders who do not tender their Notes in
the Offer. The Proposed Amendments, upon becoming operative will eliminate
substantially all of the covenants in the Indenture, other than the covenants to
pay interest on and principal of the Notes when due, and will eliminate Events
of Default relating to defaults on certain other indebtedness of CMI. See
"Description of the Notes -Covenants" and "Special Factors - Effects of the
Proposed Amendments."
The following are summaries of the Proposed Amendments. For more
complete information regarding the Indenture and the Supplemental Indenture,
reference is made to the Indenture and the Supplemental Indenture.
The Proposed Amendments to the Indenture would eliminate the cross
default contained in Section 501(f) (Events of Default) of the Indenture. The
Proposed Amendments would also eliminate the following covenants in the
Indenture:
<TABLE>
<S> <C>
1. Section 501(d) (Default for Failure to Comply with Section 801);
2. Section 501(g) (Default Judgment);
3. Section 801 (Merger Covenant);
4. Section 1004 (Corporate and Subsidiary Existence);
5. Section 1005 (Payment of Taxes);
6. Section 1006 (Maintenance of Properties);
7. Section 1007 (Insurance);
8. Section 1010 (Restricted Payments);
9. Section 1011 (Restrictions on Investments);
10. Section 1012 (Restrictions on Indebtedness);
11. Section 1014 (Sale of Preferred Stock by Subsidiaries);
12. Section 1015 (Restrictions on Liens);
13. Section 1017 (Restrictions on Asset Sales);
14. Section 1018 (Restrictions on Affiliate Transactions); and
15. Section 1019 (Restrictions on Payments by Certain Subsidiaries).
</TABLE>
The Proposed Amendments would also delete definitions from the Indenture when
references to such definitions would be eliminated as a result of the foregoing
and will eliminate cross-references to any deleted covenants or events of
default.
Giving effect to the Proposed Amendments, the other material terms,
including the following covenants, would remain in the Indenture:
<TABLE>
<S> <C>
1. Section 501(a) (Interest);
2. Section 501(b) (Principal);
3. Section 501 (c) (Purchase of Notes on Change of Control);
4. Section 501(e) (Other Covenants);
5. Section 501(h) (Involuntary Bankruptcy);
6. Section 501(i) (Voluntary Bankruptcy);
</TABLE>
7
<PAGE> 12
<TABLE>
<S> <C>
7. Section 703 (Company Reports);
8. Section 1001 (Payment of Principal and Interest);
9. Section 1002 (Maintenance of NY Agency);
10. Section 1003 (Money to be Held in Trust);
11. Section 1008 (No Default Certificate);
12. Section 1009 (Financial Information);
13. Section 1013 (Issuance of Additional Subordinated Debt);
14. Section 1016 (Purchase of Notes on Change of Control);
15. Section 1020 (Waiver)
</TABLE>
Pursuant to the terms of the Indenture, the Proposed Amendments require
the written consent of the Holders of at least a majority of the aggregate
principal amount of the outstanding Notes. The Proposed Amendments with respect
to the Indenture constitute a single proposal and a tendering and/or consenting
Holder must consent to such Proposed Amendments as an entirety and may not
consent selectively with respect to certain of such Proposed Amendments.
Upon receipt of the Requisite Consents, the Supplemental Indenture will
be executed by CMI and the Trustee on or promptly after the Consent Achievement
Date. The Supplemental Indenture will become effective when executed; however,
the elimination of the covenants and default provisions set forth in the
Supplemental Indenture will become operative only at such time as CMI accepts
the tendered Notes for payment. If no Consent Achievement Date occurs with
respect to the Notes, the Supplemental Indenture will not be executed and the
Proposed Amendments will not become effective.
If the Proposed Amendments relating to the Indenture become operative,
the Holders of untendered Notes will be bound thereby.
The valid tender by a Holder of Notes pursuant to the Offer will be
deemed to constitute the giving of a Consent by such Holder to the Proposed
Amendments with respect to such Notes.
8
<PAGE> 13
THE OFFER AND THE SOLICITATION
PRINCIPAL TERMS OF THE OFFER AND THE SOLICITATION
The Offer. CMI hereby offers to purchase for cash, on the terms and
subject to the conditions set forth in the Offer, any and all of the outstanding
Notes at the Offer Price.
The Offer Price for each $1,000 of principal of the Notes tendered
pursuant to the Offer will equal (i) the present value on the Payment Date of
(a) $1,047.50 plus (b) interest payments which would have been payable thereon
from the Payment Date to, but not including, the First Redemption Date, in each
case as determined on the basis of a yield to the First Redemption Date equal to
the sum of (x) the yield on the Benchmark Treasury Security, as calculated by
the Dealer Manager in accordance with its standard practice for such
calculations based on the bid price for such Benchmark Treasury Security as of
2:00 p.m., New York City time, on the Pricing Date, as displayed on page PX3 of
the Bloomberg Government Pricing Monitor (the "Bloomberg Page") or any
recognized quotation source selected by the Dealer Manager in its sole
discretion if the Bloomberg Government Pricing Monitor is not available or is
manifestly erroneous, plus (y) 50 basis points (or 0.50%), plus (ii) accrued
and unpaid interest thereon to, but not including, the Payment Date, minus (iii)
the Consent Payment. Holders desiring to receive the Consent Payment of $10.00
per $1,000 principal amount of tendered Notes must give their consents to the
Proposed Amendments as described below at or prior to Midnight, New York City
time, on the Consent Date. Holders who tender Notes at or prior to Midnight, New
York City time, on the Consent Date will receive aggregate consideration in
connection with the tender of their Notes (and the giving of Consents) which
shall be greater than the aggregate consideration received by Holders tendering
their Notes after the Consent Date (who will not be entitled to receive the
Consent Payment).
Although the yield on the Benchmark Treasury Security will be
determined only from the source noted above, information regarding the closing
yield of the Benchmark Treasury Security may also be found in The Wall Street
Journal, the New York Times and other published sources. Because the Offer Price
is based on a fixed spread pricing formula linked to a yield on the Benchmark
Treasury Security, the Offer Price will be affected by changes in such yield
during the term of the Offer prior to the Pricing Date. The formula for the
calculation of the Offer Price and the Total Consideration is included as Annex
A-1 hereto, and an illustration of the calculation of the Offer Price and the
Total Consideration is included as Annex A-2 hereto.
CMI will publicly announce the pricing information referred to above by
press release to the Dow Jones News Service not later than 10:00 a.m. on the
first business day after the Pricing Date.
On the terms and subject to the conditions of the Offer (see "Certain
Conditions of the Offer"), CMI will accept for payment, and thereby purchase,
all Notes validly tendered at or prior to Midnight, New York City time, on the
Expiration Date and not properly withdrawn in the manner described in
"Withdrawal Rights." The term "Expiration Date" means Midnight, New York City
time, on June 26, 1998, unless CMI, in its sole discretion, has extended the
period of time for which the Offer is open, in which event the term "Expiration
Date" will mean the latest time and date on which the Offer, as so extended by
CMI, expires. If necessary, CMI intends to extend the Offer so that the
Expiration Date occurs no earlier than five business days following the Consent
Date. If the Offer is extended, the Pricing Date will be the date that is the
third business day prior to the Expiration Date.
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<PAGE> 14
The Solicitation. In conjunction with the Offer, CMI is also hereby
soliciting consents from Holders of at least a majority in principal amount of
the outstanding Notes to the Proposed Amendments to the Indenture. The Proposed
Amendments would eliminate substantially all of the covenants in the Indenture,
other than the covenants to pay interest on and principal of the Notes when due,
and would eliminate certain Events of Default under the Indenture relating to
defaults on other indebtedness of CMI. See "The Proposed Amendments." The
Consent Payment is an amount in cash equal to $10.00 for each $1,000 of Note
Principal as to which Consents have been validly delivered and not validly
revoked at or prior to Midnight, New York City time, the Consent Date, provided
that Holders will be entitled to a Consent Payment only with respect to Notes
purchased pursuant to the terms of the Offer.
Pursuant to the terms of the Consent and Letter of Transmittal, the
completion, execution and delivery thereof by such Holder in connection with the
tender of Notes at or prior to Midnight, New York City time, on the Expiration
Date constitutes the Consent of such tendering Holder to the Proposed
Amendments. Holders of Notes may not deliver Consents without tendering their
Notes in the Offer.
The Supplemental Indenture will be executed by CMI and the Trustee on
or promptly after the Consent Achievement Date. The Supplemental Indenture will
become effective when executed; however, the elimination of the covenants and
default provisions set forth in the Supplemental Indenture will become operative
only at such time as CMI accepts the tendered Notes for payment. If no Consent
Achievement Date occurs with respect to the Notes, the Supplemental Indenture
will not be executed and the Proposed Amendments will not become effective.
If the Offer is terminated or withdrawn or the validly tendered Notes
are not accepted for payment, no Offer Price or Consent Payment will be paid or
payable.
Extension or Amendment of the Offer. CMI expressly reserves the right,
at any time or from time to time, and regardless of the circumstances, to (i)
extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Notes, by giving oral or
written notice of such amendment to the Depositary and (ii) amend the offer in
any respect by giving oral or written notice of such extension to the
Depositary. The rights reserved by CMI in this paragraph are in addition to
CMI's right to extend, amend or terminate the Offer as described in "Certain
Conditions of the Offer." If the Offer is amended, the Offer, as so amended,
shall remain open for as long as is required by applicable law. Any extension,
amendment or termination will be followed as promptly as practicable by public
announcement thereof, such announcement, in the case of an extension, to be
issued no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. Without limiting the manner in
which CMI may choose to make any public announcement, CMI currently intends to
make announcements by issuing a press release to the Dow Jones News Service. If
CMI extends the Offer, then, without prejudice to CMI's rights under the Offer,
the Depositary may retain tendered Notes on behalf of CMI, and such Notes may
not be withdrawn, nor the related Consents revoked, except to the extent
tendering Holders are entitled to withdrawal rights as described in "Withdrawal
Rights." The Offer Price will include accrued and unpaid interest on the Notes
to, but not including, the Payment Date.
If CMI makes a material change in the terms of the offer or the
information concerning the Offer or waives a material condition of the Offer,
CMI will disseminate additional tender offer materials and extend the Offer, in
each case, to the extent required by law. As used in this Offer to Purchase,
"business day" means any day, other than Saturday, Sunday or a federal holiday,
and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York
City time.
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<PAGE> 15
The Offer to Purchase, the Consent and Letter of Transmittal and other
relevant materials are being mailed by CMI to record holders of Notes and are
being furnished to brokers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on CMI's list of
Holders or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial holders.
ACCEPTANCE FOR PAYMENT AND PAYMENT FOR NOTES
On the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), CMI will accept for payment, and thereby purchase, and will pay
(i) the Offer Price for all Notes validly tendered at or prior to Midnight, New
York City time, on the Expiration Date (and not properly withdrawn in the manner
described in "Withdrawal Rights") and (ii) the Consent Payments to all Holders
who have validly tendered their Notes and provided their Consent to the Proposed
Amendments at or prior to Midnight, New York City time, on the Consent Date (and
have not properly withdrawn such Notes or revoked such Consents in the manner
described in "Withdrawal Rights"), in each case, promptly after the later of (a)
the Expiration Date and (b) the satisfaction or waiver of the conditions
described in "Certain Conditions of the Offer." Such date of payment of the
Offer Price and Consent Payments is referred to herein as the "Payment Date." In
all cases, payment for Notes purchased pursuant to the Offer and payment of
Consent Payments will be made only after timely receipt by the Depositary of (i)
the Notes, or timely confirmation (a "Book-Entry Confirmation") of the book
entry transfer of such Notes into the Depositary's account at the Depository
Trust Company ("DTC") in accordance with the procedures described in "Procedure
for Tendering Notes," (ii) a properly completed and duly executed Consent and
Letter of Transmittal or facsimile thereof, with any required signature
guarantees, or an Agent's Message (as hereinafter defined) in the case of a
book-entry transfer, and (iii) any other documents required by the Consent and
Letter of Transmittal. The term "Agent's Message" means a message, transmitted
by DTC to, and received by, the Depositary and forming a part of a Book-Entry
Confirmation, which states that DTC has received an express acknowledgment from
the participant in DTC tendering the Notes which are the subject of such
Book-Entry Confirmation, that such participant has received and agrees to be
bound by the terms of the Consent and Letter of Transmittal, and that CMI may
enforce such agreement against such participant.
For purposes of the Offer, CMI will be deemed to have accepted for
payment, and thereby purchased, tendered Notes if, as and when CMI gives oral or
written notice to the Depositary of its acceptance of such Notes for payment.
Payment for Notes accepted for payment pursuant to the Offer will be made by
deposit of the purchase price therefore with the Depositary, which will act as
agent for the tendering Holders for purposes of receiving payment from CMI and
transmitting payments to the tendering Holders on the Payment Date. Payments for
the Notes will include accrued interest through, but not including, the Payment
Date.
If any tendered Notes are not accepted for payment pursuant to the
terms and conditions of the Offer for any reason, or if more Notes than are
tendered are submitted to the Depositary, Notes for such unpurchased or
untendered Notes will be returned, without expense to the tendering Holder (or,
in the case of Notes tendered by the book-entry transfer of such Notes into the
Depositary's account at DTC in accordance with the procedures set forth in
"Procedure for Tendering Notes," such Notes will be credited to an account
maintained within DTC), as promptly as practicable following expiration,
termination or withdrawal of the Offer.
CMI reserves the right, in its sole discretion, to transfer or assign
to any person, in whole or from time to time in part, Notes now or hereafter
beneficially owned by it. Any transfer or assignment
11
<PAGE> 16
contemplated in this paragraph will not relieve CMI of its obligations under the
Offer and will in no way prejudice the rights of tendering Holders to receive
payment for Notes validly tendered and accepted for payment pursuant to the
Offer.
PROCEDURE FOR TENDERING NOTES
For Notes to be validly tendered pursuant to the Offer, a properly
completed and duly executed Consent and Letter of Transmittal or facsimile
thereof, with any required signature guarantees, or an Agent's Message in the
case of a book-entry transfer, and all other documents required by the Consent
and Letter of Transmittal, must be received by the Depositary at its address set
forth on the back cover of this Offer to Purchase at or prior to Midnight, New
York City time, on the Expiration Date. In addition, either (i) Notes must be
received by the Depositary, together with the Consent and Letter of Transmittal,
at such address, or such Notes must be tendered pursuant to the procedures for
book-entry tender described below and a Book-Entry Confirmation received by the
Depositary, in each case prior to the Expiration Date, or (ii) the guaranteed
delivery procedure described below must be complied with.
The Depositary will establish accounts with respect to the Notes at DTC
for purposes of the Offer within two business days after the date of this Offer
to Purchase. Any financial institution that is a participant in DTC's system may
make book-entry delivery of Notes by causing DTC to transfer such Notes into the
Depositary's account in accordance with DTC's procedure for such transfer. To
effectively tender Notes that are held through DTC, DTC participants may, in
lieu of physically completing and signing the Consent and Letter of Transmittal
and delivering it to the Depositary, electronically transmit their acceptance
through the Automatic Tender Offer Program ("ATOP"), for which the Offer will be
eligible (and thereby provide their Consents to the Proposed Amendments), and
DTC will then edit and verify the acceptance and send an Agent's Message to the
Depositary for its acceptance. Delivery of tendered Notes must be made to the
Depositary pursuant to the book-entry delivery procedures set forth herein or
the tendering DTC participant must comply with the guaranteed delivery
procedures set forth below.
The method of delivery of Notes and Consents and Letters of
Transmittal, any required signature guarantees and all other required documents,
including delivery through DTC and any acceptance of an Agent's Message
transmitted through ATOP, is at the election and risk of the person tendering
Notes and delivering Consents and Letters of Transmittal and, except as
otherwise provided in the Consent and Letter of Transmittal, delivery will be
deemed made only when actually received by the Depositary. If delivery is by
mail, it is suggested that the Holder use properly insured, registered mail with
return receipt requested, and that the mailing be made sufficiently in advance
of the Consent Date or the Expiration Date, as applicable, to permit delivery to
the Depositary prior to such date.
Except as provided below, unless the Notes being tendered are deposited
with the Depositary on or prior to the Consent Date or the Expiration Date, as
applicable (accompanied by a properly completed and duly executed Consent, as
applicable, and Letter of Transmittal or Agent's Message), CMI may, at its
option, treat such tender as defective for purposes of the right to receive the
Consent Payment or the Offer Price, respectively. Payment for the Notes will be
made only against deposit of the tendered Notes and delivery of all other
required documents.
If Notes are tendered otherwise than (i) by a registered holder of such
Notes or (ii) for the account of a financial institution that is a participant
in the Securities Transfer Agents Medallion Program, the Stock Exchange
Medallion Program or the New York Stock Exchange, Inc. Medallion Signature
Program (each an "Eligible Institution"), all signatures on the Consent and
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 1 on the Consent and Letter of Transmittal. If the Notes are
registered
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<PAGE> 17
in the name of a person other than the signer of a Consent and Letter of
Transmittal, the Notes must be endorsed or accompanied by appropriate bond
powers, in either case signed exactly as the name or names of the registered
holder or holders appear on the Notes, with the signature on the Notes or unit
powers guaranteed as provided in the Consent and Letter of Transmittal. See
Instruction 1 of the Consent and Letter of Transmittal.
The method of delivery of all required documents is at the election and
risk of each Holder. If delivery is by mail, the use of registered mail with
return receipt requested, properly insured, is recommended.
If a Holder desires to tender Notes pursuant to the Offer and such
Holder's Notes are not immediately available or such Holder cannot deliver such
Holder's Notes and all other required documents to the Depositary at or prior to
Midnight, New York City time, on the Expiration Date, or if the procedure for
book-entry transfer cannot be completed on a timely basis, such Notes may
nevertheless be tendered if all of the following guaranteed delivery procedures
are complied with:
(i) such tenders are made by or through an Eligible Institution:
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by CMI herewith, is received by the
Depositary as provided below at or prior to Midnight, New York City time, on the
Expiration Date;
(iii) the certificates for all physically delivered Notes in proper
form for transfer or a Book-Entry Confirmation, together with a properly
completed and duly executed Consent and Letter of Transmittal or facsimile
thereof, with any required signature guarantees, or an Agent's Message in the
case of a book-entry transfer, and all other documents required by the Consent
and Letter of Transmittal, are received by the Depositary within three business
days after the date of execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by telegram, facsimile transmission or mail to the Depositary and
must include a signature guarantee by an Eligible Institution in the form set
forth in such Notice of Guaranteed Delivery.
In all cases, payment for Notes tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of such Notes or of a Book-Entry Confirmation relating to such Notes and a
properly completed and duly executed Consent and Letter of Transmittal or
facsimile thereof, with any required signature guarantees, or an Agent's Message
in the case of a book entry transfer, and any other documents required by the
Consent and Letter of Transmittal.
By executing a Consent and Letter of Transmittal or causing an Agent's
Message to be sent on its behalf as set forth above, a tendering Holder
irrevocably appoints designees of CMI as such Holder's attorney-in-fact and
proxy, each with full power of substitution and resubstitution, in the manner
set forth in the Consent and Letter of Transmittal, to the full extent of such
Holder's rights with respect to the Notes tendered by such Holder and accepted
for payment by CMI and with respect to any and all other Notes or other
securities issued or issuable in respect of such Notes on or after the date of
this Offer to Purchase. All such proxies will be considered coupled with an
interest in the tendered Notes. Such appointment will be effective when, and
only to the extent that, CMI accepts such Notes for payment pursuant to the
Offer. Upon such appointment, all prior proxies given by such Holder (with
respect to such Notes and such other Notes and securities) will be revoked,
without further action, and no subsequent proxies may be given by such Holder
(and, if given, will not be deemed effective). The designees of CMI will be
empowered, among other
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<PAGE> 18
things, to exercise all voting and other rights of such Holder as they in their
sole discretion may deem proper at any meeting of the Holders or otherwise. In
order for Notes to be validly tendered, upon the acceptance for payment of such
Notes, CMI must be able to exercise full voting rights with respect to such
Notes (or other securities or rights), including voting at any meeting of
Holders, whether or not scheduled, and consenting to any action to be taken by
Holders in the absence of a meeting.
In order for any tender of Notes to be valid, it must be in proper
form. All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Notes,
and all other determinations by CMI contemplated by the Offer, including in
respect of the conditions to the Offer, will be determined by CMI, in its sole
discretion, which determination will be final and binding on all parties. CMI
reserves the right to waive any defect or irregularity in the tender of any
Notes. No tender of Notes will be deemed to have been validly made until all
defects and irregularities have been cured or waived. None of CMI, the Dealer
Manager, the Depositary, the Information Agent or any other person will be under
any duty to give notification of any defects or irregularities in tenders or
incur any liability for failure to give any such notification. CMI's
interpretation of the terms and conditions of the Offer (including this Offer to
Purchase, the Consent and Letter of Transmittal and instructions thereto) will
be final and binding.
Upon the purchase of Notes pursuant to the Offer, CMI shall thereby
obtain the right to all interest payable on and principal of the Notes on and
subsequent to the Payment Date. The sale of Notes pursuant to the Offer will
also constitute a sale of all rights relating to the Holder's ownership of
Notes, including any rights in respect of claims against the issuer or any other
Person (except that nothing herein will relieve any Person, including without
limitation CMI, from any liability arising under the Federal securities law in
connection with the Offer).
The tender of Notes pursuant to one of the procedures described above
will constitute a binding agreement between the tendering Holder and CMI on the
terms and subject to the conditions of the Offer, including the tendering
Holder's representation and warranty that (i) such Holder has full power and
authority to tender, sell, assign and transfer such Notes and (ii) when the same
are accepted for payment by CMI, CMI will acquire good, marketable, and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and will not be subject to any adverse claim.
WITHDRAWAL RIGHTS
Except as otherwise stated below, tenders of Notes made pursuant to the
Offer are irrevocable. Notes tendered pursuant to the Offer may be withdrawn and
the related Consent revoked at any time prior to the Consent Date. In no event
may Notes be withdrawn or consents given be revoked after the Consent Date
unless the Offer is terminated by CMI without any Notes being purchased
hereunder or as otherwise provided herein.
For a withdrawal to be effective, a written, telegraphic or facsimile
notice of withdrawal must be received by the Depositary at its address set forth
on the back cover of this Offer to Purchase. Any such notice of withdrawal must
specify the name of the person who tendered the Notes to be withdrawn, the
number of Notes to be withdrawn and with respect to which Consents are being
revoked and the names in which the Notes to be withdrawn are registered, if
different from that of the person who tendered such Notes. If Notes have been
delivered or otherwise identified to the Depositary, then, prior to the release
of such Notes, the tendering Holder must also submit the serial numbers shown on
the particular Notes to be withdrawn or Consents to be revoked and, unless such
Notes have been tendered for the account of an Eligible Institution, the
signature(s) on the notice of withdrawal must be guaranteed by an Eligible
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<PAGE> 19
Institution. If Notes have been tendered pursuant to the procedures for
book-entry transfer set forth in "Procedure for Tendering Notes," any notice of
withdrawal must also specify the name and number of the account at DTC to be
credited with the withdrawn Notes.
Any Notes properly withdrawn or Consents properly revoked will
thereafter be deemed not validly tendered for purposes of the Offer, but may be
retendered at any subsequent time at or prior to Midnight, New York City time,
on the Expiration Date or Consent Date, as the case may be, by again following
one of the procedures described in "Procedure for Tendering Notes."
CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer, CMI will not be
required to accept for payment, purchase or pay for any Notes tendered or pay
any Consent Payment, and may postpone, subject to applicable law, the acceptance
for purchase and payment for Notes so tendered or payment of Consent Payments
and/or may amend or terminate the Offer if CMI has not (a) received the
Requisite Consents at or prior to Midnight, New York City time, on the
Expiration Date, (b) successfully completed the offering of the New Notes, or
(c) if at any time at or before acceptance for payment of Notes tendered
pursuant to the Offer (whether or not any Notes have theretofore been accepted
for payment or paid for pursuant to the Offer) any of the following events shall
occur:
(i) there shall have been threatened, instituted or pending any
action or proceeding by or before any court or governmental regulatory or
administrative agency or authority or tribunal, domestic or foreign, which (a)
challenges the making of the Offer or the Solicitation, the acquisition of Notes
pursuant to the Offer or the obtaining of Consents pursuant to the Solicitation
or otherwise relates in any manner to the Offer or the Solicitation, or (b) in
the sole judgment of CMI, could have a material adverse effect on the business,
financial condition, income, operations or prospects of CMI and its
subsidiaries, taken as a whole (either such effect, a "Material Adverse
Effect");
(ii) a statute, rule, regulation, judgment, order, stay, decree or
injunction shall have been threatened, proposed, sought, promulgated, enacted,
entered, enforced, or deemed to be applicable by any court or governmental
regulatory or administrative agency, authority or tribunal, domestic or foreign,
which, in the sole judgement of CMI, would or might directly or indirectly
prohibit, prevent, restrict or delay consummation of the Offer or the
Solicitation or that could have a Material Adverse Effect;
(iii) there shall have occurred (a) any general suspension of,
shortening of hours for or limitation on prices for trading in securities on the
New York Stock Exchange or in the over the counter market (whether or not
mandatory), (b) any significant adverse change in the price of the Notes or in
the United State securities or financial markets, (c) a significant impairment
in the trading market for debt securities, (d) a declaration of a banking
moratorium or any suspension of payments in respect of banks by federal or state
authorities in the United States (whether or not mandatory), (e) a commencement
of a war, armed hostilities or other national or international crisis, (f) any
limitation (whether or not mandatory) by any governmental authority on, or other
event having a reasonable likelihood of affecting, the extension of credit by
banks or other lending institutions in the United States, (g) any significant
change in United States currency exchange rate or a suspension of, or limitation
on, the markets therefor (whether or not mandatory), or (h) in the case of any
of the foregoing existing at the time of the commencement of the Offer, a
significant acceleration or worsening thereof;
(iv) the Trustee under the Indenture shall have objected in any
respect to, or taken any action that could, in the sole judgment of CMI,
adversely affect the consummation of the Offer or the Solicitation or
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<PAGE> 20
CMI's ability to effect any of the Proposed Amendments, or shall have taken any
action that challenges the validity or effectiveness of the procedures used by
CMI in soliciting the consents to the Proposed Amendments (including the form
thereof) or in the making of the Offer or the Solicitation or the acceptance of
or payment for any of the Notes or any of the Consents; or
(v) there shall have occurred or be likely to occur any event or
series of events that, in the sole judgment of CMI, would or might prohibit,
prevent, restrict or delay consummation of the Offer or that will, or is
reasonably likely to, impair the contemplated benefits to CMI of the Offer, or
otherwise result in the consummation of the Offer not being or not being
reasonably likely to be in the best interest of CMI; or
(vi) all conditions relating to the consummation of the Offering shall
not have been satisfied in a manner acceptable to the Company in its sole
discretion on or prior to the Expiration Date.
The foregoing conditions may be asserted by CMI regardless of the
circumstances and are for the sole benefit of CMI and its affiliates. The
foregoing conditions may be waived by CMI in whole or in part at any time and
from time to time in its sole discretion and any such waiver may be complete or
subject to such terms as CMI may impose in respect thereof. The failure by CMI
at any time to exercise any of the foregoing rights will not be deemed a waiver
of or otherwise affect any other rights and each such right will be deemed an
ongoing right which may be asserted at any time and from time to time. Any
determination by CMI concerning the events described above will be final and
binding upon all parties.
INTEREST ON NOTES
Interest under any of the Notes payable as of an interest payment date
prior to the date of acceptance for payment of Notes tendered pursuant to the
Offer will be retained by the registered owner of the Notes on which such
interest was paid as of such date. The Offer Price will include interest on the
Notes which is accrued and unpaid to, but not including, the Payment Date.
Assuming the payment for the purchase of Notes pursuant to the Offer on June 30,
1998, Holders would be entitled to $23.49 of accrued and unpaid interest per
$1,000 of Note principal.
CERTAIN LEGAL MATTERS
CMI is not aware of any approval or other action by any domestic or
foreign governmental or administrative agency that would be required prior to
the acquisition of Notes by CMI pursuant to the Offer. Should any such approval
or other action be required, CMI will evaluate at such time whether such
approval or action will be sought. There can be no assurance that any such
approval or action, if needed, would be obtained or effected or, if obtained or
effected, would be obtained or effected without substantial conditions or
adverse consequences. CMI's obligation to purchase and pay for the tendered
Notes is subject to certain conditions, including conditions relating to the
legal matters discussed herein. See "Certain Conditions of the Offer."
DEALER MANAGER
NationsBanc Montgomery Securities LLC is acting as the Dealer Manager
for CMI in connection with the Offer and the Solicitation and has provided
certain financial advisory services to CMI in connection with the Offer and the
Solicitation. CMI will pay the Dealer Manager reasonable and customary
compensation for such services. CMI has agreed to indemnify the Dealer Manager
against certain liabilities in connection with its services as the Dealer
Manager and financial advisor, including liabilities under the federal
securities law. At any time, the Dealer Manager may trade the Notes for its own
account or for the
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<PAGE> 21
accounts of customers and, accordingly, may hold a long or short position in the
Notes. All inquiries and correspondence addressed to the Dealer Manager relating
to the Offer and the Solicitation should be directed to the address or telephone
number set forth on the back cover of this Offer to Purchase.
An affiliate of the Dealer Manager is acting as co-agent and lender
under the Senior Secured Revolving Credit Facility. From time to time, the
Dealer Manager and its affiliate may provide other funding, investment banking
and advisory services to CMI and its affiliates.
FEES
In addition to the fees payable to the Dealer Manager, CMI will pay the
Depositary reasonable and customary fees for its services (and will reimburse it
for its reasonable out-of-pocket expenses in connection therewith), and will pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Offer to
Purchase and related documents to the beneficial owners of the Notes and in
handling or forwarding tenders for purchase. In addition, CMI has agreed to
indemnify the Depositary against certain liabilities in connection with its
services, including liabilities under the federal securities laws.
DEPOSITARY AND INFORMATION AGENT
The Depositary for the offer and the Solicitation is The Chase
Manhattan Bank. All deliveries, correspondence and questions sent or presented
to the Depositary relating to the Offer and the Solicitation should be directed
to the address or telephone number set forth on the back cover of this Offer to
Purchase. CMI will pay the Depositary reasonable and customary compensation for
its services in connection with the Offer and the Solicitation, plus
reimbursement for reasonable out-of-pocket expenses. CMI will indemnify the
Depositary against certain liabilities and expenses in connection therewith,
including liabilities under the federal securities laws.
Beacon Hill Partners, Inc. is acting as the Information Agent for CMI
in connection with the Offer and Solicitation. CMI will pay the Information
Agent reasonable and customary compensation for such services, plus
reimbursement for reasonable out-of-pocket expenses. All inquiries and
correspondence addressed to the Information Agent relating to the Offer and the
Solicitation should be directed to the address or telephone number set forth on
the back cover of this Offer to Purchase.
Brokers, dealers, commercial banks and trust companies will be
reimbursed by CMI for customary mailing and handling expenses incurred by them
in forwarding material to their customers. CMI will not pay any fees or
commissions to any broker, dealer or other person (other than the Dealer
Manager) in connection with the solicitation of tenders of Notes pursuant to the
Offer.
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<PAGE> 22
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The following discussion sets forth the principal federal
income tax consequences of the Offer applicable to Holders, and is included
herein for general information only. The summary is based upon existing law, and
there can be no assurance that future legislation, Treasury Department
Regulations, published administrative interpretations or judicial decisions will
not change the treatment of Holders described herein. The discussion does not
purport to consider all aspects of federal income taxation that may be relevant
to a particular Holder. Further, the tax treatment of a Holder may vary
depending on his particular situation. Certain Holders (including insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States) may be subject to special rules not discussed below. In addition, this
discussion does not consider the effect of any applicable foreign, state, local
or other tax laws. This discussion assumes that Holders hold their notes as
"capital assets" (generally, property held for investment) within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code").
Sale of Notes Pursuant to the Offer. In general, except as otherwise
indicated below, a Holder should recognize gain or loss on the sale of Notes to
CMI at the time of such sale in an amount equal to the difference between the
Holder's adjusted tax basis in such Notes and the cash received by such Holder
upon the sale (other than the amount, if any, in respect of accrued interest).
Subject to the market discount rules described below and subject to the
discussion of the Consent Payments below, such gain or loss should constitute
capital gain or loss of a short-term or long-term basis depending upon the
length of time the Holder is considered to have held the Notes. If the Consent
Payment is treated as a separate fee for consenting to the Proposed Amendments,
it is possible that such amount would be taxable as ordinary income (rather than
sale proceeds). CMI intends to treat the Consent Payments as cash paid in
exchange for a Holder's Notes for U.S. federal income tax purposes.
In the case of a Holder who acquired the Notes at a market discount
within the meaning of Sections 1276 and 1278(a)(2) of the Code (subject to a
statutory de minimis exception), any gain recognized upon the sale of the Notes
will represent ordinary income to the extent of the market discount that accrued
during the period such Holder held such Note, unless the Holder previously had
elected to include such accrued market discount in the Holder's income on a
current basis. Market discount generally equals the excess of the face amount of
a debt instrument over a Holder's initial tax basis in the debt instrument. If a
Note purchased at a premium to its principal amount is sold pursuant to the
Offer, a Holder who has elected to deduct bond premium may be permitted to
deduct any remaining unamortized bond premium (i.e., the excess of the Holder's
tax basis over the sale price) as an ordinary loss in the taxable year of
disposition.
Retention of Notes. Holders who retain their Notes should not incur any
tax liability because of the sale of the Notes by other Holders or the adoption
of the Proposed Amendments. The adoption of the Proposed Amendments should not
constitute a "significant modification" of the Notes for federal income tax
purposes. Therefore, the adoption of the Proposed Amendments should not cause a
Holder who retains its Notes to be treated as having exchanged, within the
meaning of Section 1001 of the Code, its Notes for new notes in a taxable
transaction.
Backup Withholding. A Holder whose Notes are tendered and accepted for
payment by CMI and who receives the Offer Price and/or a Consent Payment, as
applicable, may be subject to backup withholding at the rate of 31% with respect
to certain proceeds form the sale of such Notes received, unless such Holder (i)
is a corporation or other exempt recipient and, when required, establishes this
exemption or (ii) provides his correct taxpayer identification number, certifies
that he is not currently subject to backup withholding and otherwise complies
with applicable requirements of the backup withholding rules. Completion of the
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<PAGE> 23
Substitute Form W-9 provided in the Consent and Letter of Transmittal should be
used for this purpose. A Holder of Notes who does not provide CMI with his
correct taxpayer identification number may be subject to penalties imposed by
the Internal Revenue Service (the "IRS"). Any amount withheld under these rules
will be creditable against the Holder's federal income tax liability.
CMI will provide information statements to tendering Holders and to the
IRS reporting the payment of the Offer Price and the Consent Payment as required
by law.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS
FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF
NOTES IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE OFFER, INCLUDING THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
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<PAGE> 24
ADDITIONAL INFORMATION
CMI is subject to the informational filing requirements of the Exchange
Act and, in accordance therewith, is required to file with the Commission
periodic reports and other information relating to its business, financial
condition and other matters. CMI is required to disclose in such reports certain
information, as of particular dates, concerning its operating results and
financial condition, officers and directors, principal holders of securities,
any material interests of such persons in transactions with CMI and other
matters. These reports and other informational filings required by the Exchange
Act should be available for inspection at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W. Washington, D.C. 20549 and also should be available for inspection and
copying at the regional offices of the commission located at Citicorp Center,
500 West Madison Street, Chicago, Illinois 60611 and 7 World Trade Center, 13th
Floor, New York, New York 10048. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission's Web site
address, http://www.sec.gov. copies of such material may be obtained by mail,
upon payment of the Commission's customary fees, from the Commission's principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549.
CMI's (i) current report on Form 8-K dated May 28, 1998; (ii) Quarterly
Report on Form 10-Q for the fiscal quarter ended April 4, 1998; (iii) Annual
Report on Form 10-K for the fiscal year ended January 3, 1998; (iv) Quarterly
Reports on Form 10-Q for the fiscal quarters ended October 4, 1997, June 28,
1997 and March 29, 1997 (v) Annual Report on Form 10-K for the fiscal year ended
December 28, 1996; (vi) Post Effective Amendment No. 4 to Form S-1 Registration
Statement filed May 8, 1997 on Form POS AM; (vii) Prospectus for $125,000,000
CMI Industries, Inc. 9 1/2% Senior Subordinated Notes Due 2003 dated May 14,
1997; (viii) Prospectus Supplements Nos. 1, 2 and 3 dated August 12, 1997,
November 24, 1997 and May 14, 1998 to Prospectus dated May 14, 1997; (ix)
Prospectus for $125,000,000 CMI Industries, Inc. 9 1/2% Senior Subordinated
Notes Due 2003 dated June 27, 1996 on Form 424B3; (x) Prospectus Supplements
Nos. 1 and 2 dated August 26, 1996 and November 19, 1996 to Prospectus dated
June 27, 1996 on Form 424B3 each filed by CMI with the Commission are
incorporated herein by reference and shall be deemed to be a part hereof.
All documents and reports filed by CMI with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Statement and on or prior to the termination of the Offer shall be deemed to be
incorporated herein by reference and shall be deemed to be part hereof from the
date of filing of such documents and reports. Any statement contained in a
document or report incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Statement to
the extent that a statement contained herein or in any subsequently filed
document or report that also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Statement.
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<PAGE> 25
MISCELLANEOUS
No person has been authorized to give any information or make any
representation other than as contained in this Offer to Purchase or the related
Consent and Letter of Transmittal and, if given or made, such information or
representation must not be relied upon as having been authorized.
The Offer is being made to all Holders. CMI is not aware of any
jurisdiction in which the making of the Offer is prohibited by administrative or
judicial action pursuant to a state statute. If CMI becomes aware of any
jurisdiction where the making of the Offer is so prohibited, CMI will make a
good faith effort to comply with any such statute or seek to have such statute
declared inapplicable to the Offer. If, after such good faith effort, CMI cannot
comply with any applicable statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the Holders in such jurisdiction. In
those jurisdictions where securities, blue sky or other laws require the Offer
to be made by a licensed broker or dealer, the Offer will be deemed to be made
on behalf of CMI by one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
CMI Industries, Inc.
June 1, 1998
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ANNEX A-1
FORMULA FOR CALCULATION OF OFFER PRICE AND TOTAL CONSIDERATION
YLD - the sum of (x) the yield on the Benchmark Treasury
Security, as calculated by the Dealer Manager in
accordance with its standard practice for such
calculations based on the bid price for such Benchmark
Treasury Security as of 2:00 p.m., New York City time,
on the Pricing Date (which is June 23, 1998 or, if the
Offer is extended, the date that is the third business
day prior to the Expiration Date), as displayed on the
Bloomberg Page or any recognized quotation source
selected by the Dealer Manager in its sole discretion
if the Bloomberg Government Pricing Monitor is not
available or is manifestly erroneous, plus (y) 50.0
basis points (or 0.50%).
CPN - the contractual rate of interest payable on the
Notes, expressed as a decimal number.
N - the number of semi-annual interest payments from (but
not including) the Payment Date to (and including) the
First Redemption Date.
S - the number of days from and including the semi-annual
interest payment date immediately preceding the Payment
Date up to, but not including, the Payment Date. The
number of days is computed using the 30/360 day-count
method.
CP - $10.00 per $1,000 principal amount of Notes.
Exp - exponentiate (the term to the left of "exp" is raised
to the power indicated by the term to the right of
"exp").
RV - the assumed redemption amount, based on the First
Redemption Date for each Note per $1,000 principal
amount of the Note (as rounded to the nearest one
hundredth of one percent).
Offer Price - the purchase price of the Notes per $1,000 principal
amount of the Notes. The Offer Price is rounded to the
nearest cent.
Total Consideration - The Offer Price plus the Consent Payment per $1,000
principal amount of the Notes if tender is made at or
prior to 12:00 Midnight, New York City time, on the
Consent Date. The Total Consideration is rounded to the
nearest cent.
<TABLE>
<S> <C> <C> <C> <C>
OFFER PRICE = RV N $1,000 (CPN/2)
------------------------------ + Z ------------------------------ - $1,000(CPN/2)(S/180) - CP
(1 + (YLD/2)) exp (N - (S/180)) k = 1 (1 + (YLD/2)) exp (k - (S/180))
TOTAL CONSIDERATION = RV N $1,000 (CPN/2)
------------------------------ + Z ------------------------------ - $1,000(CPN/2)(S/180)
(1 + (YLD/2)) exp (N - (S/180)) k = 1 (1 + (YLD/2)) exp (k - (S/180))
</TABLE>
22
<PAGE> 27
ANNEX A-2
HYPOTHETICAL CALCULATION OF OFFER PRICE AND TOTAL CONSIDERATION
Set forth below is a hypothetical illustration of the calculation of
the Offer Price and Total Consideration for the Notes based on hypothetical data
and should, therefore, be used solely for the purpose of obtaining an
understanding of the calculation of the consideration for such Notes, as quoted
at hypothetical rates and times, and should not be used or relied upon for any
other purposes.
<TABLE>
<S> <C>
First Redemption Date: October 1, 1998
Reference Treasury Security: 6% U.S. Treasury Note due September 30,
1998 as displayed on the Bloomberg Page.
Fixed Spread: 50 basis points (0.50%)
Example:
-------
Assumed Pricing Date and Time 2:00 p.m. New York City time
on May 21, 1998
Assumed Payment Date June 30, 1998
Assumed Benchmark Treasury
Security Yield as of Assumed
Pricing Date and Time 5.420%
Fixed Spread 0.500%
YLD 5.920%
CPN 9.500%
N 1
S 89
RV $1,047.50
CP $10.00
Offer Price $1,045.37*
Total Consideration
(Offer Price Plus
Consent Payment) $1,055.37*
</TABLE>
* Plus accrued and unpaid interest to, but not including, the Payment Date of
$23.49 (assuming a Payment Date of June 30, 1998).
23
<PAGE> 28
Facsimile copies of the Consent and Letter of Transmittal will be accepted. The
Consent and Letter of Transmittal and Notes and any other required documents
should be sent by each Holder or his broker, dealer, commercial bank, trust
company or nominee to the Depositary at the address set forth below.
-------------------------
The Depositary for the Offer is:
THE CHASE MANHATTAN BANK
-------------------------
By Mail, Hand
or Overnight Delivery
The Chase Manhattan Bank
55 Water Street
Room 234, North Building
New York, New York 10041
Attention: Carlos Esteves
By Facsimile Transmission:
(212) 638-7375
or
(212) 344-9367
Attention: Carlos Esteves
Confirm by Telephone:
(212) 638-0828
-------------------------
Any questions or requests for assistance or additional copies of this Offer to
Purchase, the Consent and Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent at the telephone number and
location listed below. You may also contact your broker, dealer, commercial bank
or trust company for assistance concerning this Offer.
The Information Agent for the Offer is:
BEACON HILL PARTNERS, INC.
90 Broad Street
New York, New York 10004
(212) 843-8500 (collect)
(800) 755-5001 (toll-free)
The Dealer Manager for the Offer is:
NATIONSBANC MONTGOMERY SECURITIES LLC
100 North Tryon Street, 7th Floor
Charlotte, North Carolina 28255
Attention: Liability Management Group
(704) 388-4807 (collect)
(888) 292-0070 (toll-free)
<PAGE> 1
EXHIBIT 4.2
================================================================================
-----------------------------------------
CMI INDUSTRIES, INC.
9 1/2% SENIOR SUBORDINATED NOTES DUE 2003
-----------------------------------------
FIRST SUPPLEMENTAL INDENTURE
Dated as of June 17, 1998
-----------------------------------------
Supplementing the Indenture of October 28, 1993.
-----------------------------------------
THE CHASE MANHATTAN BANK
(formerly known as Chemical Bank)
-----------------------------------------
Trustee
================================================================================
<PAGE> 2
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of June __, 1998 is between
CMI Industries, Inc., a Delaware corporation (the "Company"), and The Chase
Manhattan Bank (formerly known as Chemical Bank), a New York banking
corporation, as trustee (the "Trustee").
WHEREAS, the Company executed and delivered to the Trustee an indenture
dated October 28, 1993 between the Issuer and the Trustee (the "Indenture"); and
WHEREAS, there have been issued and are now outstanding under the
Indenture, notes in the aggregate principal amount of $125,000,000; and
WHEREAS, Section 902 of the Indenture provides that the Company and the
Trustee may amend or supplement certain provisions of the Indenture with the
consent of the Holders of not less than a majority in principal amount of the
Notes then outstanding; and
WHEREAS, the Company has offered to purchase each of the Notes for
cash, upon the terms and subject to the conditions set forth in that certain
"Offer to Purchase for Cash and Solicitation of Consents to Amendments of the
Indenture" dated June 1, 1998 and accompanying "Consent and Letter of
Transmittal" (collectively, with the ancillary documents associated therewith,
the "Offer to Purchase"); and
WHEREAS, under the terms of the Offer to Purchase, Holders that tender
Notes in accordance with the terms of the Offer to Purchase and who deliver a
duly executed "Consent and Letter of Transmittal" are deemed to consent to
certain amendments to the Indenture which would permanently delete or amend
certain of the covenants, events of default and other related provisions of the
Indenture (the "Proposed Amendments"); and
WHEREAS, in accordance with the terms of the Indenture, Holders of not
less than a majority in principal amount of the outstanding Notes have tendered
their Notes and consented to the Proposed Amendments to be effected by this
First Supplemental Indenture; and
WHEREAS, the Company has authorized the execution and delivery of this
First Supplemental Indenture and the Trustee has received an Officers'
Certificate and an Opinion of Counsel pursuant to Sections 102 and 903 of the
Indenture, respectively, and therefore the Company and the Trustee are
authorized to execute and deliver this First Supplemental Indenture; and
WHEREAS, all things necessary to make this Supplemental Indenture a
valid agreement of the Company and the Trustee, in accordance with its terms,
have been done;
<PAGE> 3
NOW THEREFORE, WITNESSETH, that, for and in consideration of the
premises, and in order to comply with the terms of Article Nine of the
Indenture, the Company agrees with the Trustee as follows:
ARTICLE 1.
AMENDMENT TO INDENTURE
SECTION 1.01. AMENDMENT
Effective as of the Operative Date (as hereinafter defined), the
Indenture is hereby amended to delete the following sections of the Indenture in
their entirety:
(a) Sections 501(d), 501(f), 501(g), 801, 1004, 1005, 1006, 1007, 1010,
1011, 1012, 1014, 1015, 1017, 1018, and 1019;
The text of the above sections are replaced by the phrase,
"Intentionally deleted," and the surrounding sections are not renumbered.
(b) Section 802 is amended to delete any references to Section 801;
(c) All definitions set forth in Section 101 that relate to defined
terms used solely in sections deleted hereby are deleted in their entirety.
ARTICLE 2.
MISCELLANEOUS
SECTION 2.01. OPERATIVE DATE:
This First Supplemental Indenture is effective when executed. The
amendments to the Indenture made hereby shall only become operative at such time
as the Company accepts the Notes (as defined in the Offer to Purchase) tendered
pursuant to the Offer to Purchase for payment (the "Operative Date"). In the
event the Company does not accept the Notes tendered pursuant to the Offer to
Purchase for payment by no later than August 14, 1998, this First Supplemental
Indenture shall become null and void.
SECTION 2.02. RECITALS
The recitals contained herein shall be taken as the statements of the
Company, and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to
<PAGE> 4
the validity or sufficiency of this Supplement.
SECTION 2.03. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Supplemental
Indenture. Each signed copy shall be an original, but all of them together
represent the same agreement.
SECTION 2.04. GOVERNING LAW.
This Supplemental Indenture, the Indenture and the Securities shall be
governed by and construed in accordance with the law of the State of New York.
SECTION 2.05. TERMS DEFINED.
All terms defined in the Indenture have the same meanings herein.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date and year first written above.
[Signatures on following page]
<PAGE> 5
CMI INDUSTRIES, INC.
By:
-----------------------------------------
Name: Joseph L. Gorga
Title: President and Chief Executive Officer
THE CHASE MANHATTAN BANK
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
<PAGE> 1
EXHIBIT 10.1
NATIONSBANC MONTGOMERY SECURITIES LLC
NATIONSBANK CORPORATE CENTER
100 NORTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28255
May 29, 1998
CMI Industries, Inc.
1301 Gervais Street
Suite 700
Columbia, SC 29201
Attention: Jim Ovenden
Ladies and Gentlemen:
This letter agreement (the "Agreement") will confirm the understanding
between CMI Industries, Inc. (the "Company") and NationsBanc Montgomery
Securities LLC ("NMS") pursuant to which the Company has retained NMS to act as
the exclusive dealer manager (the "Dealer Manager"), on the terms and subject to
the conditions set forth herein, in connection with the proposed tender offer
and consent solicitation ("Tender Offer") for any and all of its outstanding
9-1/2% Senior Subordinated Notes due 2003 (the "Notes") issued pursuant to the
Indenture dated as of October 28, 1993, by and between the Company and The Chase
Manhattan Bank (as successor to Chemical Bank), as trustee (the "Trustee"),
governing the Notes (the "Indenture"). The holders of Notes are hereinafter
referred to as the "Holders."
1. Engagement. Subject to the terms and conditions set forth
herein:
(a) The Company hereby exclusively retains the Dealer Manager,
and, subject to Section 4 hereof, NMS agrees to act, as the dealer manager and
consent solicitation agent to the Company in connection with the Tender Offer
until the date on which the Tender Offer expires or is earlier terminated in
accordance with its terms. The Dealer Manager will advise the Company with
respect to the terms and timing of the Tender Offer and assist the Company in
preparing any documents to be delivered by the Company to the Holders or used in
connection with the Tender Offer (the "Tender Documents"). The Company
authorizes the Dealer Manager, in accordance with its customary practices and
consistent with industry practice, to communicate generally regarding the Tender
Offer with the Holders and their authorized agents. The date or dates on which
the Tender Documents are first mailed or otherwise distributed to Holders is
hereinafter referred to as the "Commencement Date."
1
<PAGE> 2
(b) The Company acknowledges that the Dealer Manager has been
retained solely to provide the services set forth in this Agreement. In
rendering such services, the Dealer Manager shall act as an independent
contractor, and any duties of the Dealer Manager arising out of its engagement
hereunder shall be owed solely to the Company. The Company also acknowledges
that (a) NMS shall not be deemed to act as an agent of the Company or any of its
affiliates (except that in any jurisdiction in which the Tender Offer is
required to be made by a licensed broker or dealer, it shall be deemed made by
NMS on behalf of the Company), and neither the Company nor any of its affiliates
shall be deemed to act as the agent of NMS and (b) no securities broker, dealer,
bank or trust company shall be deemed to act as the agent of NMS or as the agent
of the Company or any of its affiliates, and NMS shall not be deemed to act as
the agent of any securities broker, dealer, bank or trust company. NMS shall not
have any liability in tort, contract or otherwise to the Company or to any of
the Company's affiliates for any act or omission on the part of any securities
broker or dealer or any bank or trust company or any other person.
(c) The Company acknowledges that the Dealer Manager is a
securities firm that is engaged in securities trading and brokerage activities,
as well as providing investment banking and financial advisory services. In the
ordinary course of trading and brokerage activities, the Dealer Manager and its
affiliates may at any time hold long or short positions, and may trade or
otherwise effect transactions, for their own account or the accounts of
customers, in debt or equity securities of the Company or other entities that
may be involved in the transactions contemplated hereby.
(d) As Dealer Manager, NMS agrees, in accordance with its
customary practice and consistent with industry practice, to perform those
services in connection with the Tender Offer as are customarily performed by
investment banks in connection with tender offers and consent solicitations of a
like nature.
(e) The Company shall arrange for an appropriate institution
to act as information agent (the "Information Agent") in connection with the
Tender Offer and, as such to advise NMS at least daily as to such matters
relating to the Tender Offer as NMS may reasonably request. The Company shall
arrange for an appropriate institution to act as depositary (the "Depositary")
in connection with the Tender Offer and, as such, to advise NMS at least daily
as to such matters relating thereto as NMS may reasonably request. In addition,
the Company hereby authorizes the Dealer Manager to communicate with the
Depository and the Information Agent with respect to matters relating to the
Tender Offer.
(f) The Company shall furnish the Dealer Manager, or cause the
Trustee or registrar for the Notes to furnish the Dealer Manager, as soon as
practicable, with cards or lists or copies thereof showing the names of persons
who were the Holders of record of Notes as of the date or dates specified by the
Dealer Manager and, to the extent available to the Company, the beneficial
Holders of the Notes as of such date or dates, together with their addresses and
the principal amount of Notes held by them. Additionally, the Company shall
update such information from time to time during the term of this Agreement as
reasonably requested by the
2
<PAGE> 3
Dealer Manager and to the extent such information is reasonably available to the
Company within the time constraints specified.
(g) The Company agrees to advise the Dealer Manager promptly
of the occurrence of any event, of which it becomes aware, which could cause or
require the Company to withdraw, rescind or modify the Tender Documents. In
addition, if any event occurs as a result of which it shall be necessary to
amend or supplement any Tender Documents in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading in any material respect, the Company shall, promptly upon becoming
aware of any such event, advise NMS of such event and, as promptly as
practicable under the circumstances, prepare and furnish copies of such
amendments or supplements of any such Tender Documents to NMS, so that the
statements in such Tender Documents, as so amended or supplemented, will not, in
light of the circumstances under which they were made, be misleading in any
material respect.
(h) The Company will not use or publish any material in
connection with the Tender Documents, or refer to the Dealer Manager in any such
material, without the prior approval of the Dealer Manager. The Company, upon
receiving such approval, will promptly furnish the Dealer Manager with as many
copies of such approved materials as the Dealer Manager may reasonably request.
The Company will promptly inform the Dealer Manager of any litigation or
administrative proceeding which is initiated or (to the best of its knowledge)
threatened with respect to the Tender Offer.
(i) The Company agrees in accordance with and subject to the
terms and conditions of the Tender Documents, to pay promptly the applicable
purchase price for the Notes to the Holders entitled thereto.
2. Compensation and Certain Expenses. (a) In consideration of
services provided hereunder as Dealer Manager, the Company shall pay the Dealer
Manager a cash fee equal to $2.50 per $1,000 of the principal amount of Notes
purchased by the Company in the Tender Offer. Such fee shall be payable at the
time the Company first purchases Notes pursuant to the Tender Offer. Once any
such fees are paid, they shall not be refundable for any reason.
(b) Whether or not any Notes are tendered pursuant to the
Tender Offer, the Company shall pay all expenses of the preparation, printing,
mailing and publishing of the Tender Documents, and all amounts payable to
securities dealers (including the Dealer Manager), commercial banks, trust
companies and nominees as reimbursement of their customary mailing and handling
expenses incurred in forwarding the Tender Documents to their customers, and of
any forwarding agent, all advertising charges and all other expenses in
connection with the Tender Offer but the Dealer Manager shall be responsible for
all expenses incurred by the Dealer Manager in connection with its services as
Dealer Manager under this Agreement, including its out-of-pocket expenses.
3. Termination. Subject to Section 8 hereof, this Agreement may
be terminated by the Company or by the Dealer Manager at any time upon at least
10 days' prior written notice thereof to the other party. Upon any termination
by the Company of NMS's engagement as
3
<PAGE> 4
Dealer Manager hereunder, NMS shall continue to be entitled to receive payment
of the fees otherwise payable to NMS under Section 2(a), provided the Company
before March 31, 1999 purchases Notes or consents are accepted, except to the
extent that it shall be finally judicially determined that NMS (i) was grossly
negligent or engaged in willful misconduct in the performance of its duties
under this Agreement or (ii) failed to cure any material breach of any
obligations of the Dealer Manager under this Agreement.
4. Representations and Warranties by the Company. The Company
represents and warrants to the Dealer Manager, on the date hereof, on each date
that any Tender Documents are published, sent, given or otherwise distributed
and on the date of purchase of Notes by the Company pursuant to the Tender Offer
(the "Consummation Date") that:
(a) The Company (i) has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, (ii) has all necessary corporate power and authority to execute and
deliver this Agreement, and to perform all its obligations hereunder and to
consummate the Tender Offer in accordance with its terms and (iii) shall take on
a timely basis all material actions necessary or legally required in relation to
the Tender Offer.
(b) Prior to the Consummation Date, the Company will take all
necessary corporate action to authorize the making or consummation of the Tender
Offer and the performance by the Company of this Agreement; and this Agreement
has been duly executed and delivered by the Company and constitutes a valid and
legally binding agreement of the Company, enforceable against the Company in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to our affecting
creditors' rights generally, by general equitable principles (whether considered
in a proceeding in equity or at law) and an implied covenant of good faith and
fair dealing on the part of NMS.
(c) The Tender Documents (including the documents incorporated
or deemed to be incorporated by reference into the Tender Documents) comply and
(as amended or supplemented, if amended or supplemented) will comply in all
material respects with all applicable requirements of the federal securities
laws; and the Tender Documents (including the documents incorporated or deemed
to be incorporated by reference into the Tender Documents) do not and (as
amended or supplemented, if amended or supplemented) will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(d) The making and consummation of the Tender Offer and the
execution, delivery and performance by the Company of this Agreement do not and
will not conflict with, or result in a breach or violation of, or constitute a
default under, except with respect to indebtedness to be satisfied on or before
the Consummation Date, any of the provisions of the Indenture or of the charter
documents or by-laws of the Company, or any other note, indenture, loan
agreement, mortgage or other agreement, instrument or undertaking to which the
Company
4
<PAGE> 5
or any of its subsidiaries is a party or by which it or any of them is bound or
to which any of its or their properties or assets is subject, the breach or
violation of which could reasonably be expected to have a material adverse
effect upon the business, financial condition or prospects of the Company and
its subsidiaries, taken as a whole, nor will such actions result in any
violation of any law, rule or regulation, or any order of any court or of any
other governmental agency or instrumentality having jurisdiction over the
Company or any of its subsidiaries or any of its or their respective properties
or assets.
(e) No consent, approval, authorization or order of, or
registration, qualification or filing with, any court or regulatory authority or
other governmental agency or instrumentality is or will be required in
connection with the making or consummation of the Tender Offer and the
execution, delivery and performance by the Company of this Agreement which have
not been obtained.
(f) The Company shall advise the Dealer Manager promptly of
(i) the occurrence of any event that could cause the Company to withdraw,
rescind or terminate the Tender Offer or would permit the Company to exercise
any right not to purchase Notes tendered under the Tender Offer, (ii) the
occurrence of any event or the discovery by it of any fact, the occurrence or
existence of which it believes would require the making of any change in the
Tender Documents then being used or would cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect,
(iii) any proposal or requirement to make, amend or supplement any Tender
Document or any filing in connection with the Tender Offer pursuant to the
Exchange Act or any applicable law, rule or regulation, (iv) its awareness of
the issuance by any regulatory authority of any comment or order or the taking
of any other action concerning the Tender Offer (and, if in writing, will
furnish the Dealer Manager with a copy thereof), (v) its awareness of any
material developments in connection with the Tender Offer or the financing
thereof, including, without limitation, the commencement of any lawsuit
concerning the Tender Offer, and (vi) any other information relating to the
Tender Offer, the Tender Documents or this Agreement which the Dealer Manager
may from time to time reasonably request.
(g) There is no action, suit or proceeding before or by any
court or governmental agency or body now pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of its subsidiaries
which would adversely affect the consummation of the Tender Offer or the
effectiveness of this Agreement.
(h) Neither the Company nor any of its subsidiaries is an
"investment company" or a company "controlled" by an investment company within
the meaning of the Investment Company Act of 1940, as amended, and the rules and
regulations promulgated thereunder.
The representations and warranties set forth in this Section 4 shall
remain operative and in full force and effect regardless of (i) any
investigation made by or on behalf of any Indemnified Party (as defined in Annex
A attached hereto), (ii) any termination of this Agreement or (iii) any
withdrawal by NMS pursuant to Section 3 hereof or otherwise.
5
<PAGE> 6
5. Conditions and Obligations. The obligation of NMS to act as a
Dealer Manager hereunder shall at all times be subject, in its discretion, to
the conditions that:
(a) All representations and warranties of the Company
contained herein or in any certificate or writing delivered hereunder at all
times during the Tender Offer shall be true and correct in all material
respects.
(b) The Company at all times during the Tender Offer shall
have performed all of its obligations hereunder required as of such time to have
been performed by it.
(c) Sutherland, Asbill & Brennan, counsel for the Company,
shall have furnished to the Dealer Manager, an opinion on the Consummation Date,
dated such date, subject to customary qualifications and exceptions, to the
following effect:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware;
(ii) The Company has duly taken all necessary
corporate action to authorize the making and consummation of
the Tender Offer and the execution, delivery and performance
by the Company of this Agreement; and this Agreement has been
duly executed and delivered by the Company;
(iii) Assuming the due authorization, execution and
delivery of this Agreement by NMS, this Agreement constitutes
a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
except to the extent that such enforceability may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to
our affecting creditors' rights generally, by general
equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and
fair dealing on the part of NMS.
(iv) The making and consummation of the Tender Offer
and the execution, delivery and performance by the Company of
this Agreement do not and will not conflict with, or result in
a breach or violation of, or constitute a default under, any
of the provisions of the Indenture or of the charter documents
or by-laws of the Company or of any note, indenture, loan
agreement, mortgage or other agreement, instrument or
undertaking to which the Company is a party or by which it is
bound or any of its subsidiaries is a party or by which any of
them is bound or to which any of its or their properties or
assets is subject, each of which has been identified by the
Company as material on a schedule to such opinion and provided
to such counsel for the Company, nor will such action result
in a violation of any Delaware or federal law, rule or
regulation or any order known to such
6
<PAGE> 7
counsel of any court or of any other governmental agency or
instrumentality having jurisdiction over the Company or any of
its subsidiaries or any of its or their respective properties
or assets;
(v) No consent, approval, authorization, order of,
or registration, qualification or filing with, any Delaware or
federal court or regulatory authority or other governmental
agency or instrumentality is or will be required in connection
with the making and consummation of the Tender Offer and the
execution, delivery and performance by the Company of this
Agreement which have not been obtained; and
(vi) Such counsel has participated in conferences
with officers and other representatives of the Company,
representatives of the independent public accountants for the
Company, and the Dealer Manager's representatives, at which
the Tender Offer and the contents of the Tender Documents and
related matters were discussed and, although such counsel is
not passing upon, and does not assume any responsibility for,
the accuracy, completeness or fairness of the statements
contained in the Tender Documents and have not made any
independent check or verification thereof, during the course
of such participation, no facts came to such counsel's
attention that caused such counsel to believe that the Tender
Documents, as of their date, contained an untrue statement of
a material fact or omitted to state a material fact necessary
to make the statements therein, in light of the circumstances
under which they were made, not misleading, it being
understood that such counsel need not express a belief with
respect to the financial statements or other financial data
included in the Tender Documents.
6. Indemnification. In consideration of the engagement hereunder,
the Company on the one hand, and the Dealer Manager, on the other hand, shall
indemnify each other and hold each other harmless, and each Indemnified Person
(as defined in Annex A hereto) to the extent set forth in Annex A hereto, which
provisions are incorporated by reference herein and constitute a part hereof.
7. Confidentiality. (a) The Dealer Manager and its affiliates
shall use all information provided to it by or on behalf of the Company
hereunder solely for the purpose of providing the services which are the subject
of this Agreement and shall treat confidentially all such information, provided
that nothing herein shall prevent the Dealer Manager from disclosing any such
information (i) pursuant to the order of any court or administrative proceeding,
(ii) upon the request or demand of any regulatory authority having jurisdiction
over the Dealer Manager or any of its affiliates, (iii) to the extent that such
information becomes publicly available other than by reason of disclosure by the
Dealer Manager, (iv) to its employees, legal counsel, independent auditors and
other experts or agents who need to know such information and are informed of
the confidential nature of such information or (v) to any of its affiliates as
set forth in Section 11(c) hereof. With respect to clause (i) above, prior to
making any such disclosure, the Dealer
7
<PAGE> 8
Manager shall notify the Company of such order or request and use its best
efforts to cooperate with the Company in seeking a protective order or taking
such action as the Company may reasonably request, consistent with applicable
law.
(b) The Company agrees that it will not disclose this Agreement,
the contents hereof or the activities of the Dealer Manager pursuant hereto to
any person without the prior approval of the Dealer Manager, except that the
Company may disclose this Agreement and the contents hereof (i) to its officers,
employees, attorneys and advisors on a confidential and need-to-know basis and
(ii) as required by applicable law or compulsory legal process or in the
prosecution of any proceeding initiated by the Company.
8. Survival. The agreements contained in Sections 2, 6 and 7 and the
representations and warranties of the Company set forth in Section 4 hereof
shall survive any termination or cancellation of this Agreement, any completion
of the engagement provided by this Agreement or any investigation made by or on
behalf the Dealer Manager and any Indemnified Person and shall survive the
termination of the Tender Offer.
9. Governing Law and Submission to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of New
York, without giving effect to the conflicts of laws principles thereof. THE
COMPANY AND THE DEALER MANAGER IRREVOCABLY AGREE TO WAIVE TRIAL BY JURY IN ANY
ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY
RELATED TO OR ARISING OUT OF THIS AGREEMENT OR THE PERFORMANCE OF SERVICES
HEREUNDER.
The Company and the Dealer Manager irrevocably and unconditionally
submit to the non-exclusive jurisdiction of any state or federal court sitting
in the City of New York over any suit, action or proceeding arising out of or
relating to this Agreement. Service of any process, summons, notice or document
by registered mail addressed to the Company shall be effective service of
process against the Company for any suit, action or proceeding brought in any
such court. The Company and the Dealer Manager irrevocably and unconditionally
waive any objection to the laying of venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action or
proceeding has been brought in an inconvenient forum. A final judgment in any
such suit, action or proceeding brought in any such court may be enforced in any
other courts to whose jurisdiction the Company or the Dealer Manager is or may
be subject, by suit upon judgment.
10. Notices. Except as otherwise expressly provided in this Agreement,
whenever notice is required by the provisions of this Agreement to be given (i)
to the Company, such notice shall be in writing addressed to CMI Industries,
Inc., 1301 Gervais Street, Suite 700, Columbia, SC 29201, facsimile number:
(803) 748-1738, Attention: Jim Ovenden and (ii) to NMS, such notice shall be in
writing addressed to NationsBanc Montgomery Securities LLC, NationsBank
Corporate Center, 100 North Tryon Street, Charlotte, North Carolina 28255,
facsimile number: (704) 388-0830, Attention: Daniel Nass.
8
<PAGE> 9
11. Miscellaneous. (a) This Agreement contains the entire agreement
between the parties relating to the subject matter hereof and supersedes all
oral statements and prior writings with respect thereto. This Agreement may not
be amended or modified except by a writing executed by each of the parties
hereto. Section headings herein are for convenience only and are not a part of
this Agreement.
(b) This Agreement, including any right to indemnification or
contribution hereunder, is solely for the benefit of the Company and the Dealer
Manager, and no other person (except for Indemnified Persons, to the extent set
forth in Annex A hereto) shall acquire or have any rights under or by virtue of
this Agreement.
(c) The Dealer Manager may (subject to Section 7(a) hereof)
share any information or matters relating to the Company, the Tender Offer and
the transactions contemplated hereby with its affiliates, and such affiliates
may likewise share information relating to the Company with the Dealer Manager.
All such information shall be subject to the confidentiality provisions of
Section 7(a) hereof and the Dealer Manager shall be responsible for compliance
by its affiliates with Section 7(a) hereof.
(d) If any term, provision, covenant or restriction contained
in this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable or against public policy, the remainder of the terms,
provisions, covenants and restrictions contained herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated. The
Company and the Dealer Manager shall endeavor via good faith negotiations to
replace the invalid, void or unenforceable provisions with valid provisions, the
economic effect of which comes as close as possible to that of the invalid, void
or unenforceable provisions.
(e) This Agreement may be executed in counterparts each of
which will be deemed an original, but all of which, taken together, will
constitute one and the same instrument.
9
<PAGE> 10
If the foregoing correctly sets forth our understanding, please
indicate your acceptance of the terms hereof by signing in the appropriate space
below and returning to the Dealer Manager the enclosed duplicate originals
hereof, whereupon this letter shall become a binding agreement between us.
Very truly yours,
NATIONSBANC MONTGOMERY
SECURITIES LLC
By:
----------------------------------
Name:
Title:
Accepted and agreed to as of
the date first written above:
CMI INDUSTRIES, INC.
By:
--------------------------
Name:
Title:
<PAGE> 11
ANNEX A
The Company hereby agrees to indemnify and hold harmless the Dealer
Manager and its affiliates and officers, directors, employees, agents and
controlling persons (each a "Dealer Manager Indemnified Person") from and
against any and all losses, claims, damages, liabilities and reasonable
expenses, joint or several, to which any such Dealer Manager Indemnified Person
may become subject arising out of or based upon (A) any untrue statement or
alleged untrue statement of a material fact contained in the Tender Documents or
any of the documents incorporated by reference therein or in any amendment or
supplement to any of the foregoing, or the omission or alleged omission to state
therein a material fact necessary in order to make the statement therein, in the
light of the circumstances under which they were made, not misleading, (B) any
breach by the Company of any representation or warranty or failure to comply
with any of the agreements set forth in the Agreement to which this Annex A is
attached, (C) any withdrawal, termination, rescission or modification of, or
failure to purchase Notes properly tendered pursuant to, the Tender Offer or (D)
the transactions contemplated by the Agreement to which this Annex A is attached
or the performance by the Dealer Manager thereunder, or any claim, litigation,
investigation or proceedings relating to the foregoing ("Dealer Manager
Proceedings") regardless of whether any of such Dealer Manager Indemnified
Persons is a party thereto, and to reimburse such Dealer Manager Indemnified
Persons for any reasonable legal or other reasonable out-of-pocket expenses as
they are incurred in connection with investigating or defending any of the
foregoing, provided that the indemnification contemplated by clause (C) or (D)
above will not, as to any Dealer Manager Indemnified Person, apply to losses,
claims, damages, liabilities or expenses to the extent that they are finally
judicially determined to have resulted from (i) the gross negligence or willful
misconduct of any Dealer Manager Indemnified Person or (ii) the failure of the
Dealer Manager to cure any material breach of any obligations of the Dealer
Manager under this Agreement within a reasonable amount of time after receipt by
the Dealer Manager of written notice from the Company of such breach (which
notice shall specify that it is a notice of breach for purposes of this
Agreement). The Company shall not be liable for any settlement of any lawsuit,
claim or proceeding effected without its written consent (which consent shall
not be unreasonably withheld), but if settled with such consent, the Company and
its subsidiaries jointly and severally agree, subject to the provisions of this
Annex A, to indemnify the Dealer Manager Indemnified Person from and against any
loss, damage or liability by reason of such settlement.
The Dealer Manager shall indemnify and hold harmless the Company and
its affiliates and officers, directors, employees, agents and controlling
persons (each a "Company Indemnified Person") from and against any and all
losses, claims, damages, liabilities and reasonable expenses, joint or several,
to which any such Company Indemnified Person may become subject arising out of
or based upon the transactions contemplated by the Agreement to which this Annex
A is attached or the performance by the Company thereunder, or any claim,
litigation, investigation or proceedings relating to the foregoing ("Company
Proceedings") regardless of whether any of such Company Indemnified Persons is a
party thereto, and to reimburse such Company Indemnified Persons for any
reasonable legal or other reasonable out-of-pocket expenses as they are incurred
in connection with investigating or defending any of the foregoing,
A-1
<PAGE> 12
but only to the extent such losses, claims, damages, liabilities or expenses are
finally judicially determined to have resulted from (i) the gross negligence or
willful misconduct of the Dealer Manager Indemnified Person or (ii) the failure
of the Dealer Manager to cure any material breach of any obligations of the
Dealer Manager under this Agreement within a reasonable amount of time after
receipt by the Dealer Manager of written notice from the Company of such breach
(which notice shall specify that it is a notice of breach for purposes of this
Agreement). The Dealer Manager shall not be liable for any settlement of any
lawsuit, claim or proceeding effected without its written consent (which consent
shall not be unreasonably withheld), but if settled with such consent, the
Dealer Manager agrees, subject to the provisions of this Annex A, to indemnify
the Company Indemnified Person from and against any loss, damage or liability by
reason of such settlement. The terms "Dealer Manager Indemnified Person" and
"Company Indemnified Person" are herein collectively referred to as an
"Indemnified Person" and the terms "Dealer Manager Proceedings" and "Company
Proceedings" are herein collectively referred to as "Proceedings."
Promptly after receipt by an Indemnified Person of notice of the
commencement of any Proceedings, such Indemnified Person will, if a claim in
respect thereof is to be made against the Company or the Dealer Manager, as the
case may be, as indemnifying party (the "Indemnifying Party") for
indemnification hereunder, notify such Indemnifying Party in writing of the
commencement thereof; provided that (i) the omission so to notify the such
Indemnifying Party will not relieve it from any liability which it may have
hereunder except to the extent it has been materially prejudiced by such failure
and (ii) the omission so to notify such Indemnifying Party will not relieve it
from any liability which it may have to such Indemnified Person otherwise than
on account of this indemnity agreement. In case any such Proceedings are brought
against any Indemnified Person and it notifies the applicable Indemnifying Party
of the commencement thereof, such Indemnifying Party will be entitled to
participate therein, and, to the extent that it may elect by written notice
delivered to such Indemnified Person, to assume the defense thereof, with
counsel reasonably satisfactory to such Indemnified Person, provided that if the
defendants in any such Proceeding include both such Indemnified Person and the
Indemnifying Party and such Indemnified Person shall have concluded that there
may be legal defenses available to it which are different from or additional to
those available to the Indemnifying Party, such Indemnified Person shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such Proceedings on behalf of such
Indemnified Person. Upon receipt of notice from the Indemnifying Party to such
Indemnified Person of its election so to assume the defense of such Proceedings
and approval by such Indemnified Person of counsel, the Indemnifying Party shall
not be liable to such Indemnified Person for expenses incurred by such
Indemnified Person in connection with the defense thereof (other than reasonable
costs of investigation) unless (i) such Indemnified Person shall have employed
separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the Indemnifying Party shall not be liable for the expenses of
more than one separate counsel, approved by the Dealer Manager, representing the
Indemnified Persons who are parties to such Proceedings), (ii) the Indemnifying
Party shall not have employed counsel reasonably satisfactory to such
Indemnified Person to represent such Indemnified Person within a reasonable time
after notice of commencement of the Proceedings or (iii) the Indemnifying Party
shall have authorized in
A-2
<PAGE> 13
writing the employment of counsel for such Indemnified Person; and except that,
if clause (i) or (iii) is applicable, such liability shall be only in respect of
the counsel referred to in such clause (i) or (iii). The Indemnifying Party
shall not effect, without the prior written consent of the Indemnified Person,
any settlement of any pending or threatened proceeding unless such settlement
includes an unconditional release from the party bringing such proceeding of
such Indemnified Person and does not include a statement as to or an admission
of fault, culpability or a failure to act by or on behalf of any Indemnified
Person.
If for any reason the foregoing indemnification is unavailable to any
Indemnified Person or insufficient to hold it harmless, then the applicable
Indemnifying Party shall contribute to the amount paid or payable to such
Indemnified Person as a result of such loss, claim, damage, liability or expense
in such proportion as is appropriate to reflect not only the relative benefits
received by the Indemnifying Party on the one hand and such Indemnified Person
on the other hand but also the relative fault of the Indemnifying Party on the
one hand, and such Indemnified Person, on the other hand, as well as any
relevant equitable considerations. It is hereby agreed that the relevant
benefits to the Company (including its affiliates, officers, directors,
employees, agents and controlling persons) on the one hand and the Dealer
Manager (including its affiliates, officers, directors, employees, agents and
controlling persons) on the other hand shall be deemed to be in the same
proportion as (i) the aggregate original principal amount of the Notes
outstanding bears to (ii) the fee paid or proposed to be paid to the Dealer
Manager pursuant to Section 2(a) of the Agreement to which this Annex A is
attached. The relative fault of the Indemnifying Party on the one hand and the
Indemnified Person on the other relating to an untrue or alleged untrue
statement of material fact or the omission or alleged omission to state a
material fact shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by, or
relating to, the Indemnifying Party and its affiliates or the Indemnified Person
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The indemnity, reimbursement and contribution obligations of an
Indemnifying Party under this Annex A shall be in addition to any liability
which such Indemnifying Party may otherwise have to an Indemnified Party and
shall be binding upon and inure to the benefit of any successors, assigns, heirs
and personal representatives of such Indemnifying Party and any such Indemnified
Person. Notwithstanding the foregoing, in no event shall the Dealer Manager be
liable under the foregoing indemnity, reimbursement and contribution provisions
in an amount in excess of the fees actually received by the Dealer Manager in
connection with the Agreement to which this Annex A is attached.
Capitalized terms used but not defined in this Annex A have the
meanings assigned to such terms in the Agreement to which this Annex A is
attached.
A-3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CMI INDUSTRIES, INC. FOR THE SIX MONTHS ENDED JULY 4,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-03-1998
<PERIOD-END> JUL-04-1998
<CASH> 2,216
<SECURITIES> 0
<RECEIVABLES> 48,167
<ALLOWANCES> 1,600
<INVENTORY> 64,941
<CURRENT-ASSETS> 116,234
<PP&E> 249,187
<DEPRECIATION> 151,378
<TOTAL-ASSETS> 223,315
<CURRENT-LIABILITIES> 38,464
<BONDS> 124,488
0
0
<COMMON> 1,695
<OTHER-SE> 41,852
<TOTAL-LIABILITY-AND-EQUITY> 223,315
<SALES> 210,156
<TOTAL-REVENUES> 211,390
<CGS> 180,968
<TOTAL-COSTS> 197,673
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,464
<INCOME-PRETAX> 7,253
<INCOME-TAX> 2,750
<INCOME-CONTINUING> 4,503
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,503
<EPS-PRIMARY> 2.656
<EPS-DILUTED> 2.656
</TABLE>
