<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D*
UNDER THE
SECURITIES EXCHANGE ACT OF 1934
SEDA SPECIALTY PACKAGING CORP.
(Name of Subject Company)
SEAWOLF ACQUISITION CORPORATION
AND
CCL INDUSTRIES INC.
(Bidders)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Title of Class of Securities)
81517R10
(CUSIP Number of Class of Securities)
Mr. Wayne M.E. McLeod
President and Chief Executive Officer
CCL Industries Inc.
105 Gordon Baker Road
Willowdale, Ontario
Canada, M2H 3P8
(416) 756-8500
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Bidder)
<TABLE>
COPIES TO:
<S> <C>
ALBERT GNAT, ESQ. BRIAN HOFFMANN, ESQ.
AND GEOFREY MYERS McDERMOTT, WILL & EMERY
LANG MICHENER 50 ROCKEFELLER PLAZA
BCE PLACE 11TH FLOOR
181 BAY STREET, SUITE 2500 NEW YORK, NEW YORK 10020-1605
TORONTO, ONTARIO, CANADA M5J 2T7 (212) 547-5400
(416) 360-8600
</TABLE>
CALCULATION OF FILING FEE
TRANSACTION VALUATION AMOUNT OF FILING FEE
$152,681,346** $30,537
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<PAGE>
Amount Previously Paid: None
---------------------------------------------------------
Form or Registration No.:
-------------------------------------------------------
Filing Party:
-------------------------------------------------------------------
Date Filed:
---------------------------------------------------------------------
* NOTE: This Statement also constitutes the Statement on Schedule 13D of CCL
Industries Inc. and Seawolf Acquisition Corporation filed with respect to the
shares of Common Stock, $0.001 par value per share, of Seda Specialty
Packaging Corp., beneficially owned by CCL Industries Inc. and Seawolf
Acquisition Corporation.
**NOTE: For the purpose of calculating the filing fee only. This amount
assumes the purchase of 5,264,874 shares of Common Stock ("Shares") of
Seda Specialty Packaging Corp. (the "Company") at $29.00 in cash per Share.
Specifically, based on representations made by the Company, as of June 16,
1997, 5,264,874 Shares were outstanding.
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<PAGE>
CUSIP NO. 81517R10
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Seawolf Acquisition Corporation (EIN #98-0170583)
2 Check the Appropriate Box if a Member of a Group (See Instructions) (a) /X/
(b) / /
3 SEC Use Only
4 Source of Funds (See Instructions)
AF; BK
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to / /
Items 2(e) or 2(f)
6 Citizenship or Place of Organization
Delaware
7 Aggregate Amount Beneficially Owned by Each Reporting Person
517,713
8 Check if the Aggregate Amount in Row (7) Excludes Certain Shares / /
(See Instructions)
9 Percent of Class Represented by Amount in Row (7)
9.8%
10 Type of Reporting Person (See Instructions)
CO
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<PAGE>
CUSIP NO. 81517R10
1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
CCL Industries Inc. (EIN #980126400)
2 Check the Appropriate Box if a Member of a Group (See Instructions) (a) /X/
(b) / /
3 SEC Use Only
4 Source of Funds (See Instructions)
BK
5 Check Box if Disclosure of Legal Proceedings is Required Pursuant to / /
Items 2(e) or 2(f)
6 Citizenship or Place of Organization
Canada
7 Aggregate Amount Beneficially Owned by Each Reporting Person
517,713
8 Check if the Aggregate Amount in Row (7) Excludes Certain Shares / /
(See Instructions)
9 Percent of Class Represented by Amount in Row (7)
9.8%
10 Type of Reporting Person (See Instructions)
CO
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<PAGE>
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by Seawolf Acquisition Corporation, a Delaware corporation (the
"Purchaser") and an indirect wholly owned subsidiary of CCL Industries Inc., a
Canadian corporation (the "Parent"), to purchase all outstanding shares of
common stock, par value $0.001 per share (the "Shares"), of Seda Specialty
Packaging Corp., a Delaware corporation, at a price of $29 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase dated June 23, 1997 (the "Offer to Purchase") and
in the related Letter of Transmittal (which together constitute the "Offer"),
copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively.
This Statement also constitutes the Statement on Schedule 13D of the Purchaser
and the Parent with respect to the Shares beneficially owned by the Purchaser
and the Parent.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is SEDA Specialty Packaging Corp., a
Delaware corporation (the "Company"), which has its principal executive offices
at 2501 West Rosecrans Avenue, Los Angeles, California 90059-3510.
(b) The class of equity securities to which this Statement relates is the
Shares. The information set forth in the "INTRODUCTION" and Section 1, "Terms
of the Offer" and Section 15, "Conditions to the Offer" of the Offer to Purchase
is incorporated herein by reference.
(c) The information concerning the principal market in which the Shares
are traded and certain high and low sales prices for the Shares in such
principal market set forth in Section 6, "Price Range of Shares; Dividends" of
the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by the Purchaser and the Parent.
The information set forth in the "INTRODUCTION," Section 8, "Certain Information
Concerning the Purchaser and the Parent" and Schedule I, "Directors and
Executive Officers of the Parent and the Purchaser" of the Offer to Purchase is
incorporated herein by reference.
(e) and (f) During the last 5 years, none of the Purchaser or the Parent,
and, to the best knowledge of the Purchaser and the Parent, none of the persons
listed in Schedule I, "Directors and Executive Officers of the Parent and the
Purchaser" of the Offer to Purchase has been (i) convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation of such
laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in the "INTRODUCTION" and Section 10,
"Background of the Offer; The Merger Agreement; The Tender Agreement; The
Sedaghat Employment Agreement" and Schedule I, "Directors and Executive Officers
of Parent and Purchaser" is incorporated herein by reference.
(b) The information set forth in the "INTRODUCTION," Section 10,
"Background of the Offer; The Merger Agreement; The Tender Agreement; The
Sedaghat Employment Agreement"
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<PAGE>
and Section 11, "Purpose of the Offer and the Merger; Plans for the Company" of
the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 9, "Sources and Amounts of
Funds" of the Offer to Purchase is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the "INTRODUCTION," Section 10,
"Background of the Offer; The Merger Agreement; The Tender Agreement; The
Sedaghat Employment Agreement" and Section 11, "Purpose of the Offer and the
Merger; Plans for the Company" of the Offer to Purchase is incorporated herein
by reference.
(f) and (g) The information set forth in Section 12, "Effect of the Offer
on the Market for the Shares, Exchange Act Registration; Margin Regulations" of
the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the "INTRODUCTION," Section 10,
"Background of the Offer; The Merger Agreement; The Tender Agreement; The
Sedaghat Employment Agreement" and Schedule I, "Directors and Executive Officers
of Parent and Purchaser" of the Offer to Purchase is incorporated herein by
reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "INTRODUCTION," and Section 10,
"Background of the Offer; The Merger Agreement; The Tender Agreement; The
Sedaghat Employment Agreement" of the Offer to Purchase is incorporated herein
by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "INTRODUCTION" and Section 17, "Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8, "Certain Information Concerning the
Purchaser and the Parent" of the Offer to Purchase and in the financial
statements and notes related thereto for the years ended December 31, 1996 and
1995, and for the three months ended March 31, 1997, of the Parent, copies of
which are attached as Exhibits g(1) and g(2), respectively, is incorporated
herein by reference. The incorporation by reference herein of the above-
referenced financial information does not constitute an admission that such
information is material to a decision by a stockholder of the Company whether to
sell, tender or hold Shares being sought in the Offer.
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<PAGE>
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the "INTRODUCTION", Section 10,
"Background of the Offer; The Merger Agreement; The Tender Agreement; The
Sedaghat Employment Agreement" and Section 11, "Purpose of the Offer and Merger;
Plans for the Company" is incorporated herein by reference.
(b)-(c) The information set forth in Section 16, "Certain Legal Matters;
Regulatory Approvals" of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 12, "Effect of the Offer on the
Market for the Shares; Exchange Act Registration; Margin Regulations" of the
Offer to Purchase is incorporated herein by reference.
(e) To the best knowledge of the Purchaser and the Parent, no such
proceedings are pending or have been instituted.
(f) The entire text of the Offer to Purchase and related Letter of
Transmittal is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offer to Purchase dated June 23, 1997.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from The Beacon Group Capital Services, L.L.C. to
Brokers, Dealers, Commercial Banks, Trust Companies and Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
(a)(7) Form of Tombstone Advertisement dated June 23, 1997.
(a)(8) Joint Press Release issued on June 17, 1997.
(a)(9) Press Release issued by the Parent on June 23, 1997.
(b)(1) Letter Agreement, dated June 16, 1997, between the Bank (as defined
in the Offer to Purchase) and the Parent (tender offer facility
commitment letter).
(c)(1) Agreement and Plan of Merger and Reorganization, dated as of June
16, 1997, among the Parent, the Purchaser and the Company.
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<PAGE>
(c)(2) Letter Agreement, dated June 16, 1997, among Shapour Sedaghat,
Parvindokht Sedaghat, the Sedaghat Remainder Uni Trust, Shahrokh
Sedaghat, the Purchaser and the Parent (the Tender Agreement).
(c)(3) Memorandum of Agreement, dated as of June 16, 1997, among Shahrokh
Sedaghat, the Parent and the Company (The Sedaghat Employment
Agreement).
(c)(4) Option Agreement, dated as of June 16, 1997, between Shahrokh
Sedaghat and the Parent.
(c)(5) Incentive Option Agreement, dated as of June 16, 1997, between
Shahrokh Sedaghat and the Parent.
(c)(6) Qualification and Listing of Shares Agreement, dated June 16,
1997, between the Parent and Shahrokh Sedaghat.
(d) None.
(e) Not applicable.
(f) None.
(g)(1) Financial Statements of the Parent for years ended December 31, 1996
and 1995.
(g)(2) Financial Statements of the Parent for three months ended March 31,
1997.
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
June 23, 1997
SEAWOLF ACQUISITION CORPORATION
By: /s/ Meldon H. Snider
----------------------------------
Meldon H. Snider, VICE PRESIDENT
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<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
June 23, 1997
CCL INDUSTRIES INC.
By: /s/ Meldon H. Snider
---------------------------
Meldon H. Snider, Vice President
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<PAGE>
EXHIBIT INDEX
EXHIBIT PAGE IN SEQUENTIAL
NO. NUMBERING SYSTEM
- --------- ----------------
(a)(1) Form of Offer to Purchase dated June 23, 1997.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter from The Beacon Group Capital Services, L.L.C. to
Brokers, Dealers, Commercial Banks, Trust Companies and Nominees.
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees to Clients.
(a)(6) Form of Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(7) Form of Tombstone Advertisement dated June 23, 1997.
(a)(8) Joint Press Release issued on June 17, 1997.
(a)(9) Press Release issued by the Parent on June 23, 1997.
(b)(1) Letter Agreement, dated June 16, 1997, between the Bank (as defined in
the Offer to Purchase) and the Parent (tender offer facility
commitment letter).
(c)(1) Agreement and Plan of Merger and Reorganization, dated as of June 16,
1997, among the Parent, the Purchaser and the Company.
(c)(2) Letter Agreement, dated June 16, 1997, among Shapour Sedaghat,
Parvindokht Sedaghat, the Sedaghat Remainder Uni Trust, Shahrokh
Sedaghat, the Purchaser and the Parent (the Tender Agreement).
(c)(3) Memorandum of Agreement, dated as of June 16, 1997, among Shahrokh
Sedaghat, Parent and Company (the The Sedaghat Employment Agreement).
(c)(4) Option Agreement, dated as of June 16, 1997, between Shahrokh Sedaghat
and the Parent.
(c)(5) Incentive Option Agreement, dated as of June 16, 1997, between
Shahrokh Sedaghat and the Parent.
(c)(6) Qualification and Listing of Shares Agreement, dated June 16, 1997,
between the Parent and Shahrokh Sedaghat.
(d) None.
(e) Not applicable.
(f) None.
(g)(1) Financial Statements of the Parent for years ended December 31, 1996
and 1995.
(g)(2) Financial Statements of the Parent for three months ended March 31,
1997.
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<PAGE>
EXHIBIT (A)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SEDA SPECIALTY PACKAGING CORP.
AT
$29.00 NET PER SHARE
BY
SEAWOLF ACQUISITION CORPORATION,
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
CCL INDUSTRIES INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, JULY 21, 1997, UNLESS EXTENDED.
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS OF SEDA SPECIALTY PACKAGING CORP. (THE "COMPANY") HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE MERGER,
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS
OF THE STOCKHOLDERS OF THE COMPANY, AND UNANIMOUSLY RECOMMENDS ACCEPTANCE OF
THE OFFER BY THE STOCKHOLDERS OF THE COMPANY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE A NUMBER OF SHARES OF
COMMON STOCK, $0.001 PAR VALUE PER SHARE (THE "SHARES"), WHICH, TOGETHER WITH
SHARES THEN BENEFICIALLY OWNED BY SEAWOLF ACQUISITION CORPORATION (THE
"PURCHASER") AND ITS AFFILIATES, CONSTITUTES AT LEAST A MAJORITY OF THE
CAPITAL STOCK OF THE COMPANY ENTITLED TO VOTE AND THEN OUTSTANDING ON A FULLY
DILUTED BASIS. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE
SECTION 15.
CCL INDUSTRIES INC. (THE "PARENT") AND THE PURCHASER HAVE ENTERED INTO AN
AGREEMENT (THE "TENDER AGREEMENT") WITH SHAPOUR AND PARVINDOKHT SEDAGHAT, THE
SEDAGHAT CHARITABLE REMAINDER UNI TRUST AND SHAHROKH SEDAGHAT (THE "EXECUTIVE"
AND, COLLECTIVELY, THE "PRINCIPAL STOCKHOLDERS"). PURSUANT TO THE TENDER
AGREEMENT, EACH PRINCIPAL STOCKHOLDER HAS AGREED, AMONG OTHER THINGS, TO
TENDER AND NOT WITHDRAW ALL OF THE SHARES BENEFICIALLY OWNED BY SUCH PRINCIPAL
STOCKHOLDER IN THE OFFER, EXCEPT, IN THE CASE OF THE EXECUTIVE, FOR 517,713
SHARES WHICH WILL BE ACQUIRED BY THE PURCHASER PURSUANT TO AN OPTION OR THE
MERGER AND 545,000 SHARES ISSUABLE UPON THE EXERCISE OF OPTIONS.
IMPORTANT
Any holder desiring to tender all or any portion of such holder's Shares
should either: (a) complete and sign the Letter of Transmittal (or a manually
signed facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificates evidencing
the tendered Shares and all other required documents to First Chicago Trust
Company of New York (the "DEPOSITARY"), or tender such Shares pursuant to the
procedure for book-entry transfer set forth in Section 3 of this Offer to
Purchase; or (b) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder.
A holder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if such holder desires
to tender such Shares.
Any holder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available or who cannot comply with the
procedures for book-entry transfer on a timely basis may tender such Shares by
following the procedures for guaranteed delivery set forth in Section 3 of
this Offer to Purchase.
Questions and requests for assistance and for additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed
Delivery and other related materials may be directed to the Information Agent
or the Dealer Manager at their respective addresses and telephone numbers set
forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal and the other tender offer
materials may also be obtained from brokers, dealers, commercial banks or
trust companies.
--------------
THE DEALER MANAGER FOR THE OFFER IS:
THE BEACON GROUP
CAPITAL SERVICES, L.L.C.
--------------
June 23, 1997
<PAGE>
TABLE OF CONTENTS
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PAGE
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INTRODUCTION............................................................. 1
1. Terms of the Offer................................................... 2
2. Acceptance for Payment and Payment................................... 3
3. Procedures for Tendering Shares...................................... 4
4. Withdrawal Rights.................................................... 6
5. Certain Tax Considerations........................................... 7
6. Price Range of Shares; Dividends..................................... 8
7. Certain Information Concerning the Company........................... 8
8. Certain Information Concerning the Purchaser and the Parent.......... 10
9. Sources and Amounts of Funds......................................... 13
10. Background of the Offer; The Merger Agreement; The Tender Agreement;
The Sedaghat Employment Agreement.................................... 14
11. Purpose of the Offer and the Merger; Plans for the Company........... 25
12. Effect of the Offer on the Market for the Shares; Exchange Act
Registration; Margin Regulations..................................... 26
13. Dividends and Distributions.......................................... 28
14. Extension of Tender Period; Amendment; Termination................... 28
15. Conditions to the Offer.............................................. 29
16. Certain Legal Matters; Regulatory Approvals.......................... 31
17. Fees and Expenses.................................................... 32
18. Miscellaneous........................................................ 33
</TABLE>
Schedule I--Directors and Executive Officers of the Parent and the Purchaser
<PAGE>
To the Holders of Common Stock of SEDA Specialty Packaging Corp.:
INTRODUCTION
Seawolf Acquisition Corporation, a Delaware corporation (the "PURCHASER"),
and an indirect wholly owned subsidiary of CCL Industries Inc., a Canadian
corporation (the "PARENT"), hereby offers to purchase all outstanding shares
of common stock, par value $0.001 per share (the "SHARES"), of SEDA Specialty
Packaging Corp., a Delaware corporation (the "COMPANY"), at $29.00 per Share,
net to the seller in cash, without interest thereon (the "OFFER PRICE"), upon
the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (which together with any supplements
or amendments thereto collectively constitute the "OFFER").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer. The Purchaser will pay all charges and expenses of The
Beacon Group Capital Services, L.L.C. ("BEACON") which is acting as the
Dealer-Manager for the Offer (in such capacity, the "DEALER MANAGER"), First
Chicago Trust Company of New York (the "DEPOSITARY"), and Kissel-Blake Inc.
(the "INFORMATION AGENT"), incurred in connection with the Offer. See Section
17. For purposes of this Offer to Purchase, references to "SECTION" are
references to a section of this Offer to Purchase, unless the context
otherwise requires.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW) A
NUMBER OF SHARES WHICH, TOGETHER WITH SHARES THEN BENEFICIALLY OWNED BY THE
PURCHASER AND ITS AFFILIATES, CONSTITUTES AT LEAST A MAJORITY OF THE SHARES
THEN OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). SEE
SECTION 15.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD" OR THE "BOARD OF
DIRECTORS") HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE OFFER AND THE
MERGER, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, AND UNANIMOUSLY RECOMMENDS
ACCEPTANCE OF THE OFFER BY THE STOCKHOLDERS OF THE COMPANY.
The Offer is being made pursuant to an Agreement and Plan of Merger and
Reorganization, dated as of June 16, 1997 (the "MERGER AGREEMENT"), among the
Company, the Parent and the Purchaser. The Merger Agreement provides, among
other things, that upon the terms and subject to the conditions therein, as
promptly as practicable following completion of the Offer and the satisfaction
or waiver of certain conditions, including the purchase of Shares pursuant to
the Offer (sometimes referred to herein as the "CONSUMMATION" of the Offer)
and the approval and adoption of the Merger Agreement by the stockholders of
the Company, if required by applicable law, the Purchaser will be merged with
and into the Company (the "MERGER") with the Company as the corporation
surviving the Merger (the "SURVIVING CORPORATION"). In the Merger, each issued
and outstanding Share (other than the Remaining Shares (as defined below) and
Dissenting Shares (as defined below)) not owned by the Parent, the Purchaser,
any affiliate of the Purchaser, or the Company, will be converted into and
represent the right to receive $29.00 in cash, or any higher price that may be
paid per Share in the Offer, without interest (the "MERGER PRICE"). Each of
the Remaining Shares will be converted into Participating Exchangeable Stock
(as defined below) and Top Up Rights (as defined below). See Section 10.
Crowell, Weedon & Co. ("CWC"), financial advisor to the Company, has
delivered to the Board of Directors a written opinion dated June 16, 1997, to
the effect that, as of such date and based upon its review and analysis and
subject to the limitations set forth therein, the consideration to be received
by the public holders of the Shares in the Offer and the Merger is fair from a
financial point of view to such holders. A copy of such opinion is included
with the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "SCHEDULE 14D-9"), which is being mailed to stockholders concurrently
herewith, and should be read carefully in its entirety for a description of
the assumptions made, matters considered and limitations on the review
undertaken by CWC.
1
<PAGE>
The Purchaser and Parent have entered into an agreement dated as of June 16,
1997 (the "TENDER AGREEMENT"), with each of Shapour and Parvindokht Sedaghat
("MR. AND MRS. SEDAGHAT"), the Sedaghat Charitable Remainder Uni Trust (the
"SEDAGHAT TRUST") and Shahrokh Sedaghat (the "EXECUTIVE" and, together with
Mr. and Mrs. Sedaghat and the Sedaghat Trust, the "PRINCIPAL STOCKHOLDERS").
Pursuant to the Tender Agreement, each Principal Stockholder has agreed, among
other things, to validly tender or cause to be validly tendered pursuant to
the Offer, within ten (10) business days after the Offer has been made in
accordance with the terms hereof, and not withdraw, all Shares beneficially
owned or controlled by such Principal Stockholder less, in the case of the
Executive, 517,713 Shares (the "REMAINING SHARES") held by the Executive, and
less the 545,000 Shares that would be issuable upon exercise of Company
Options (as defined below) held by the Executive. Upon completion of the
Merger and assuming that the Stockholder Option (as defined below) has not
been exercised, the Executive shall be paid the Stockholder Merger
Consideration (as defined below). Pursuant to the Merger Agreement, all of the
Executive's Company Options will be cancelled and exchanged for options to
purchase Class B non-voting shares of Parent (the "CLASS B SHARES"). See
Section 10. Based upon representations made in the Tender Agreement by the
Principal Stockholders to the Purchaser and the Parent, as of the date of the
Tender Agreement, the Executive held 1,053,333 Shares, representing
approximately 20.0% of the outstanding Shares, and Mr. and Mrs. Sedaghat, as
joint tenants, held 1,685,967 Shares and the Sedaghat Trust held 500,000
Shares, representing collectively approximately 41.5% of the outstanding
Shares. See Section 10.
Based upon representations made in the Merger Agreement by the Company, as
of June 16, 1997: (i) 5,264,874 Shares were validly issued and outstanding;
(ii) 802,000 Shares were issuable upon exercise of outstanding options to
purchase Shares ("COMPANY OPTIONS") granted to directors, officers, employees
and consultants of the Company pursuant to the Company's 1993 Incentive and
Nonstatutory Stock Option Plan (the "COMPANY STOCK OPTION PLAN"); and (iii)
150,000 Shares were issuable upon the exercise of outstanding warrants (the
"WARRANTS").
Based upon information provided by the Company, assuming no Shares (or
equivalents) are issued (except upon exercise of the Company Options or the
Warrants) or repurchased prior to consummation of the Offer, the Purchaser
understands that the Minimum Condition would be satisfied if at least
3,108,438 Shares are validly tendered and not withdrawn prior to the
Expiration Date.
Affiliates of the Purchaser currently own 100 Shares, which were acquired in
1995. Assuming no Shares (or equivalents) are issued (except upon exercise of
the Company Options or the Warrants) or repurchased prior to consummation of
the Offer and assuming that the Stockholder Option (as defined below) has not
been exercised, tender of Shares in the Offer by the Principal Stockholders in
accordance with the terms of the Tender Agreement would provide the Purchaser
with at least a 43.8% equity interest in the Company on a fully diluted basis.
Accordingly, assuming the tender of Shares by the Principal Stockholders in
accordance with the Tender Agreement, and assuming no Shares (or equivalents)
are issued (except upon exercise of the Company Options or the Warrants) or
repurchased prior to consummation of the Offer and assuming that the
Stockholder Option has not been exercised, a further 386,751 Shares would need
to be tendered by other stockholders in order to satisfy the Minimum
Condition.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for all Shares which are validly tendered
prior to the Expiration Date and not withdrawn in accordance with Section 4.
The term "EXPIRATION DATE" means 12:00 midnight, New York City time, on
Monday, July 21, 1997, unless and until the Purchaser, subject to the terms of
the Merger Agreement, shall have extended the period of time during which the
Offer is open, in which event the term "Expiration Date" shall refer to the
latest time and date at which the Offer, as so extended by the Purchaser,
shall expire.
2
<PAGE>
Pursuant to the Merger Agreement, the Purchaser, subject to the terms and
conditions of the Offer, may, at its discretion, extend the period of time
during which the Offer is open: (i) in order to comply with any provision of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR ACT") or otherwise comply with law
for the minimum period of time reasonably necessary to so comply; and (ii) if
any of the Conditions (as defined in Section 15) shall not be satisfied, for
the minimum period of time reasonably necessary to satisfy such conditions;
provided that in either case, such extension shall not extend beyond September
2, 1997.
The Purchaser expressly reserves the right to amend the terms and conditions
of the Offer; provided that pursuant to the Merger Agreement, except as
provided in the preceding paragraph, without the prior written consent of the
Company, the Purchaser shall not (and the Parent shall not cause the Purchaser
to): (i) decrease the Offer Price, or change the form of consideration
therefor, or decrease the number of Shares sought pursuant to the Offer; (ii)
change the Conditions; (iii) impose additional conditions to the Offer; (iv)
waive the Minimum Condition; (v) amend any term of the Offer in any manner
adverse to holders of Shares; or (vi) extend the Expiration Date.
THE OFFER IS SUBJECT TO CERTAIN CONDITIONS SET FORTH IN SECTION 15,
INCLUDING SATISFACTION OF THE MINIMUM CONDITION AND THE EXPIRATION OR
TERMINATION OF ANY WAITING PERIOD UNDER THE HSR ACT. If any such condition is
not satisfied prior to the expiration of the Offer, the Purchaser may, subject
to the terms of the Merger Agreement: (i) terminate the Offer and return all
tendered Shares to tendering stockholders; (ii) extend the Offer and, subject
to withdrawal rights as set forth in Section 4, retain all such Shares until
the expiration of the Offer as so extended; (iii) other than as described in
Section 15, waive such condition and, subject to any requirement to receive
written consent from the Company pursuant to the Merger Agreement, purchase
all Shares validly tendered and not withdrawn by the Expiration Date; or (iv)
delay acceptance for payment of (whether or not the Shares have theretofore
been accepted for payment), or payment for, any Shares tendered and not
withdrawn, subject to applicable law, until satisfaction or waiver of the
conditions to the Offer. In the Merger Agreement, the Purchaser has agreed,
subject to the terms and conditions of the Offer, to promptly pay for all
Shares duly tendered thereunder after the expiration time of the Offer. For a
description of the Purchaser's right to extend the period of time during which
the Offer is open, and to amend, delay or terminate the Offer, see Section 14.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal
and other related materials will be mailed to record holders of Shares and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the stockholder list or, if applicable, who
are listed as participants in a clearing agency's security position listing
for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon 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), the Purchaser will accept for payment and pay for all Shares
validly tendered and not properly withdrawn by the Expiration Date as soon as
practicable after the later of: (i) the Expiration Date; and (ii) the
satisfaction or waiver of the conditions set forth in Section 15. For a
description of the Purchaser's right to terminate the Offer and not accept for
payment or pay for Shares or to delay acceptance for payment or payment for
Shares, see Section 14.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment tendered Shares if, as and when the Purchaser gives oral or written
notice to the Depositary of its acceptance of the tender of such Shares.
Payment for Shares accepted for payment pursuant to the Offer will be made by
deposit of the purchase price with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from the
Purchaser and transmitting such payments to tendering stockholders. In all
cases, payment for Shares accepted for payment pursuant to the Offer will be
made only after timely receipt by the Depositary of certificates for such
Shares (or of a confirmation of a book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities (as defined
in Section 3)), a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) (or, in the case of a book-entry
transfer, an Agent's Message (as defined below in Section 3)) and any other
documents required by the Letter of Transmittal.
3
<PAGE>
For a description of the procedure for tendering Shares pursuant to the Offer,
see Section 3. Accordingly, payment may be made to tendering stockholders at
different times if delivery of the Shares and other required documents occur
at different times. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE
PURCHASER ON THE CONSIDERATION PAID FOR SHARES PURSUANT TO THE OFFER,
REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
If the Purchaser increases the consideration to be paid for Shares pursuant
to the Offer, the Purchaser will pay such increased consideration for all
Shares purchased pursuant to the Offer whether or not such shares were
tendered prior to such increase in consideration.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted for more Shares than are tendered,
certificates for such unpurchased or untendered Shares will be returned (or,
in the case of Shares tendered by book-entry transfer, such Shares will be
credited to an account maintained at one of the Book-Entry Transfer
Facilities), without expense to the tendering stockholder, as promptly as
practicable after the expiration or termination of the Offer.
3. PROCEDURES FOR TENDERING SHARES
To tender Shares pursuant to the Offer, either: (a) a properly completed and
duly executed Letter of Transmittal (or manually signed facsimile thereof),
with any required signature guarantees, and any other documents required by
the Letter of Transmittal must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either: (i) certificates for Shares to be tendered must be
received by the Depositary; or (ii) such Shares must be delivered to the
Depositary pursuant to the procedures for book entry transfer described below
(and a confirmation of such delivery received by the Depositary, including an
Agent's Message (as defined below) if the tendering stockholder has not
delivered a Letter of Transmittal), in each case prior to the Expiration Date;
or (b) the tendering stockholder must comply with the guaranteed delivery
procedures described below. The term "AGENT'S MESSAGE" means a message
transmitted by a Book-Entry Transfer Facility to and received by the
Depositary and forming a part of a book-entry confirmation, which states that
such Book-Entry Transfer Facility has received an express acknowledgement from
the participant in such Book-Entry Transfer Facility tendering the Shares
which are the subject of such book-entry confirmation that such participant
has received and agrees to be bound by the terms of the Letter of Transmittal
and that the Company may enforce such agreement against such participant.
Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at each of The Depositary Trust Company and the Philadelphia
Depository Trust Company (collectively referred to as the "BOOK-ENTRY TRANSFER
FACILITIES") for purposes of the Offer within two (2) business days after the
date of this Offer to Purchase, and any financial institution that is a
participant in the system of any Book-Entry Transfer Facility may make
delivery of Shares by causing such a Book-Entry Transfer Facility to transfer
such Shares into the Depositary's account in accordance with the procedures of
such Book-Entry Transfer Facility. However, although delivery of Shares may be
effected through book-entry transfer, the Letter of Transmittal (or manually
signed facsimile thereof) properly completed and duly executed, together with
any required signature guarantees or an Agent's Message and any other required
documents, must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the guaranteed delivery procedures described below must be
complied with. DELIVERY OF THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO
THE DEPOSITARY.
Except as provided below, all signatures on all Letters of Transmittal must
be guaranteed by a recognized member of a Medallion Signature Guarantee
Program or by any other "eligible guarantor institution," as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT") (each of the foregoing, an "ELIGIBLE INSTITUTION"). Signatures on a
Letter of Transmittal need not be guaranteed: (a) if the Letter of Transmittal
is signed by a registered holder of the Shares tendered therewith, and such
holder has not completed either the box entitled "Special Payment
Instructions," or the box entitled "Special Delivery Instructions" on the
Letter of Transmittal; or (b) if such Shares are tendered for the account of
an Eligible Institution.
4
<PAGE>
If the certificates evidencing Shares are registered in the name of a person
other than the signer of the Letter of Transmittal, or if payment is to be
made or certificates for Shares which are not tendered or accepted for payment
are to be returned to a person other than the registered holder of the
certificates surrendered, then such tendered certificates must be endorsed or
accompanied by appropriate stock powers signed exactly as the name or names of
the registered holder or holders appear on the certificates, with the
signature(s) on the certificate or stock powers guaranteed as described above.
See Instruction 5 of the Letter of Transmittal.
If a stockholder desires to tender Shares pursuant to the Offer, and such
holder's certificates for Shares are not immediately available, or such
stockholder cannot deliver such Shares and all other required documents to
reach the Depositary on or prior to the Expiration Date, or such stockholder
cannot complete the procedure for book-entry transfer on a timely basis, such
Shares may nevertheless be tendered if all the following conditions are
satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary prior to the Expiration Date as provided below; and
(iii) the certificates for such Shares (or a confirmation of a book-entry
transfer of such Shares into the Depositary's account at a Book-Entry
Transfer Facility), together with a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof) or, in the
case of book-entry, an Agent's Message, with any required signature
guarantees and any other documents required by the Letter of Transmittal,
are received by the Depositary within three (3) trading days after the date
of execution of the Notice of Guaranteed Delivery. A "TRADING DAY" is any
day on which The NASDAQ Stock Market, National Market ("NASDAQ") is open
for business.
The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile transmission, or mailed to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS, INCLUDING THROUGH BOOK-ENTRY TRANSFER FACILITIES, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
Under the U.S. federal income tax laws, the Depositary will be required to
withhold 31% of the amount of any payments made to certain stockholders
pursuant to the Offer. In order to avoid such backup withholding, each
tendering stockholder must provide the Depositary with such stockholder's
correct taxpayer identification number and certify that such stockholder is
not subject to backup U.S. federal income tax withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal (see Instruction 10
of the Letter of Transmittal) or by filing a Form W-9 with the Depositary
prior to any such payments. If the stockholder is a nonresident alien or
foreign entity not subject to backup withholding, the stockholder must give
the Depositary a completed Form W-8 Certificate of Foreign Status prior to
receipt of any payments.
By executing a Letter of Transmittal as set forth above, a tendering
stockholder irrevocably appoints designees of the Purchaser as the
stockholder's attorneys in fact and proxies, in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by the
stockholder and accepted for payment by the Purchaser (and any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after the date of the Merger Agreement). All such proxies and powers of
attorney shall be irrevocable and coupled with an interest in the tendered
Shares. Such appointment is effective only upon acceptance for payment of the
Shares by the Purchaser. Upon such acceptance for payment, all prior proxies
and consents granted by such stockholder with respect to such Shares
5
<PAGE>
and other securities will, without further action, be revoked, and no
subsequent proxies or powers of attorney may be given nor any subsequent
written consent executed by such stockholder (and, if given or executed, will
be deemed to be ineffective). The designees of the Purchaser will be empowered
to exercise all voting and other rights of such stockholder as they in their
sole discretion may deem proper at any annual, special or adjourned meeting of
the Company's stockholders, by written consent or otherwise. The Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon the Purchaser's acceptance for payment of such
Shares, the Purchaser is able to exercise full voting and other rights with
respect to such Shares (including voting at any meeting of stockholders then
scheduled or acting by written consent without a meeting).
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that such stockholder has the full power and authority to tender
and assign the Shares tendered, as specified in the Letter of Transmittal. The
Purchaser's acceptance for payment of Shares tendered pursuant to the Offer
will constitute a binding agreement between the tendering stockholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tendered Shares
will be determined by the Purchaser, in its sole discretion, which
determination shall be final and binding. The Purchaser reserves the absolute
right to reject any or all tenders of any Shares determined by it not to be in
proper form or the acceptance for payment of, or payment for which may, in the
opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any defect or irregularity in any tender of
Shares. No tender of Shares will be deemed to have been properly made until
all defects and irregularities relating thereto have been cured or waived. The
Purchaser's interpretation of the terms and conditions of the Offer in this
regard will be final and binding. None of the Purchaser, the Parent, the
Depositary, the Dealer Manager, the Information Agent, or any other person
will be under any duty to give notification of any defects or irregularities
in tenders or will incur any liability for failure to give any such
notification.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date. Thereafter, such tenders are irrevocable, except
that they may be withdrawn after August 22, 1997, unless theretofore accepted
for payment as provided in this Offer to Purchase.
For a withdrawal to be effective, a written, telegraphic, or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses 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 Shares to be withdrawn, the number of Shares to be withdrawn and the name
of the registered holder, if different from that of the person who tendered
such Shares. If the Shares to be withdrawn have been delivered to the
Depositary, a signed notice of withdrawal with (except in the case of Shares
tendered by an Eligible Institution) signatures guaranteed by an Eligible
Institution must be submitted prior to the release of such Shares. In
addition, such notice must specify, in the case of Shares tendered by delivery
of certificates, the name of the registered holder (if different from that of
the tendering holder) and the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn, or, in the case of Shares
tendered by book-entry transfer, the name and number of the account at one of
the Book-Entry Transfer Facilities to be credited with the withdrawn
securities. Withdrawals may not be rescinded, and Shares withdrawn will
thereafter be deemed not validly tendered for purposes of the Offer. However,
withdrawn Shares may be re-tendered by again following one of the procedures
described in Section 3 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of the
Purchaser, the Parent, the Depositary, the Dealer Manager, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability
for failure to give any such notification.
6
<PAGE>
5. CERTAIN TAX CONSIDERATIONS
The following summary addresses the material U.S. federal income tax
consequences to holders of Shares who sell their Shares in the Offer. The
summary does not address all aspects of U.S. federal income taxation that may
be relevant to particular holders of Shares and thus, for example, may not be
applicable to holders of Shares who are not citizens or residents of the
United States, who are employees and who acquired their Shares pursuant to the
exercise of compensatory stock options or who are entities that are otherwise
subject to special tax treatment under the Internal Revenue Code of 1986, as
amended (the "CODE") (such as insurance companies, tax-exempt entities and
regulated investment companies), nor does this summary address the effect of
any applicable foreign, state, local or other tax laws. The discussion assumes
that each holder of Shares hold such Shares as a capital asset within the
meaning of Section 1221 of the Code.
The receipt of cash for Shares pursuant to the Offer (or the Merger) will be
a taxable transaction for U.S. federal income tax purposes and may also be a
taxable transaction under applicable state, local or foreign tax laws. In
general, a stockholder who receives cash for Shares pursuant to the Offer (or
the Merger) will recognize gain or loss for federal income tax purposes equal
to the difference between the amount of cash received in exchange for the
Shares sold and such stockholder's adjusted tax basis in such Shares. Such
gain or loss will be capital gain or loss, and will be long-term capital gain
or loss if the holder has held the Shares for more than one year at the time
of sale. Under current law, gain or loss will be calculated separately for
each block of Shares tendered pursuant to the Offer.
Under current law, the maximum federal tax rate applicable to long term
capital gains recognized by an individual is 28%, and the maximum federal tax
rate applicable to ordinary income (including dividends and short term capital
gains recognized by individuals) is 39.6%. The maximum federal tax rate
applicable to all capital gains and ordinary income recognized by a
corporation is 35%. It is possible that legislation may be enacted that would
reduce the maximum federal tax rate applicable to long term capital gains,
possibly with retroactive effect. It is not possible to predict whether or in
what form any such legislation may be enacted.
Dissenters. A holder of Shares who does not sell such Shares in the Offer
(or the Merger) and who exercises and perfects his or her applicable rights
under the Delaware General Corporation Law (the "DGCL") to demand fair value
for such Shares will recognize capital gain or loss (and may recognize an
amount of interest income) attributable to any payment received pursuant to
the exercise of such rights based upon the principles described above. See
Section 16.
Withholding. Unless a stockholder complies with certain reporting and/or
certification procedures or is an exempt recipient under applicable provisions
of the Code (and regulations promulgated thereunder), such stockholder may be
subject to a "backup" withholding tax of 31% with respect to any payments
received in the Offer, the Merger or as a result of the exercise of the
holder's dissenters' rights. Stockholders should contact their brokers to
ensure compliance with such procedures. Foreign stockholders should consult
with their tax advisors regarding withholding taxes in general.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF
THE OFFER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE
MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS. IN ADDITION, THE
DISCUSSION SET FORTH ABOVE MAY NOT APPLY TO PARTICULAR CATEGORIES OF
STOCKHOLDERS, INCLUDING STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS
WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES AND FOREIGN
CORPORATIONS, OR ENTITIES THAT ARE OTHERWISE SUBJECT TO SPECIAL TAX TREATMENT.
7
<PAGE>
6. PRICE RANGE OF SHARES; DIVIDENDS
The Shares are traded on NASDAQ under the symbol SSPC. The following table
sets forth, for the fiscal quarters indicated, the high and low closing sale
prices per Share on NASDAQ based on published financial sources:
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1995
First Quarter............................................. $11 3/4 $ 9 3/8
Second Quarter............................................ 11 1/4 6 1/2
Third Quarter............................................. 10 7/8 7 3/8
Fourth Quarter............................................ 13 1/2 10 3/16
1996
First Quarter............................................. 17 3/4 11 5/8
Second Quarter............................................ 24 1/4 15 7/8
Third Quarter............................................. 20 3/4 16
Fourth Quarter............................................ 21 3/4 16
1997
First Quarter............................................. 21 1/4 15 1/2
Second Quarter (through June 20).......................... 28 41/64 14 3/4
</TABLE>
No cash dividends have been declared or paid on the Shares since the
Company's initial public offering on October 26, 1993. The Merger Agreement
prohibits the Company from declaring or paying any dividends on the Shares.
On June 16, 1997, the last full trading day prior to announcement of the
Merger Agreement, the last reported sale price per Share on NASDAQ was $22.00.
On June 20, 1997, the last full trading day prior to the commencement of the
Offer, the last reported sale price per Share on NASDAQ was $28 41/64.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal offices located at
2501 West Rosecrans Avenue, Los Angeles, California, 90059-3510.
The Company develops, manufactures and sells specialty plastic packaging
products to the personal care, food and beverage, household and industrial
chemical and pharmaceutical industries. The Company's products include various
types of plastic containers (including flexible plastic tubes, single and
double wall stock and custom jars, bottles and vials), plastic closures
(including lines and linerless standard screw caps, tamper evident closures
and dispensing closures), and other stock and custom plastic products. The
Company manufactures these products using injection molding, extrusion and
stretch blow molding processes and decorates many of its products using offset
printing, hot stamping and other labeling processes to satisfy customer
requirements. The Company's containers, closures and custom products are sold
directly through the Company's in house sales force and indirectly through
distributors.
Plastic closures are used to cap primarily plastic containers which store a
wide variety of cosmetic, food, chemical and other commercial and industrial
products. Flexible plastic tubes encase a variety of products including
lotions, creams, shampoos, foodstuffs, adhesives and household chemicals.
Single and double wall plastic jars also encase a variety of creams, lotions
and other products, primarily for the person care industry, that require a
rigid container. Plastic vials are used by the pharmaceutical industry for
prescription or over the counter medications. Polyethylene tetrachloride
("PET") bottles are used by the specialty drinking water market and can be
used for a variety of other products.
8
<PAGE>
The Company's custom products include nail enamel caps, lipstick cases,
marking pen components, pizza trays and plastic lid supports for pizza boxes
and other specialty plastic parts which the Company manufactures for use by
end user customers to their specifications. The Company also provides design
assistance to customers in connection with the production of their custom
products.
The Company is subject to the information requirements of the Exchange Act
and is required to file reports and other information with the Securities and
Exchange Commission (the "COMMISSION") relating to its business, financial
condition and other matters. Information, as of particular dates, concerning
the Company's directors and officers, their remuneration, options granted to
them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company is required to be
described in periodic statements distributed to the Company's stockholders and
filed with the Commission. These reports, proxy statements, and other
information, including the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 (the "COMPANY 10-K"), and the Schedule 14D-9, should
be available for inspection and copying at the Commission's principal office
at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices
of the Commission located at Seven World Trade Center, Suite 1300, New York,
New York, 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois,
60661. Copies of this material may also be obtained by mail, upon payment of
the Commission's customary fees, from the Commission's principal office. Such
material should also be available for inspection at the offices of NASDAQ,
1735 K Street, NW, Washington, DC, 20006. The Commission also maintains an
Internet site on the world wide web at http://www.sec.gov that contains
reports and other information.
The above information concerning the Company has been taken from or based
upon the Company 10-K and other publicly available documents on file with the
Commission, other publicly available information and information provided by
the Company. Although neither the Purchaser nor the Parent has any knowledge
that would indicate that such information is untrue, none of the Purchaser,
the Parent or the Dealer Manager takes any responsibility for, or makes any
representation with respect to, the accuracy or completeness of such
information or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information
but which are unknown to the Purchaser or the Parent.
A copy of this Offer to Purchase, and certain of the agreements referred to
herein, are attached to the Purchaser's Tender Offer Statement on Schedule
14D-1, dated June 23, 1997 (the "SCHEDULE 14D-1"), which has been filed with
the Commission. The Schedule 14D-1 and the exhibits thereto, along with such
other documents as may be filed by the Purchaser with the Commission, may be
examined and copied from the offices of the Commission in the manner set forth
in this Section 7.
9
<PAGE>
Summary Financial Information for the Company. The following table sets
forth certain summary consolidated financial information with respect to the
Company and its subsidiaries excerpted or derived from the audited financial
statements contained in the Company 10-K and the unaudited financial
information contained in the Company's Quarterly Reports on Form 10-Q for the
three months ended March 31, 1997, and March 31, 1996. More comprehensive
financial information is included in such reports and other documents filed by
the Company with the Commission, and the following summary is qualified in its
entirety by reference to such documents (which may be inspected and obtained
as described above), including the financial statements and related notes
contained therein. None of the Parent, the Purchaser or the Dealer Manager
assumes any responsibility for the accuracy of the financial information set
forth below.
SEDA SPECIALTY PACKAGING CORP.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, FISCAL YEAR ENDED DECEMBER 31,
------------------- --------------------------------
1997 1996 1996 1995 1994
--------- --------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Net Sales............... $ 16,213 $ 14,943 $ 59,445 $ 41,676 $ 30,400
Net Income.............. 1,907 1,588 6,749 4,135 4,842
BALANCE SHEET DATA (AT
END OF PERIOD)
Working Capital......... 13,525 10,616 10,453 11,270 11,070
Total long-term debt
(excluding current
portion) and capital
leases (excluding
current portion)....... 7,983 12,258 7,281 14,778 9,061
Total assets............ 73,760 64,219 74,203 65,882 50,759
Shareholders' equity.... 46,947 37,581 45,040 36,814 32,170
PER SHARE DATA
Earnings per common
share and common
equivalent share....... 0.35 0.30 1.25 0.82 0.94
WEIGHTED AVERAGE SHARES
Weighted average number
of common and common
equivalent shares
outstanding............ 5,449 5,218 5,378 5,061 5,147
</TABLE>
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT
The Purchaser is a newly formed Delaware corporation and an indirect wholly
owned subsidiary of the Parent. To date, the Purchaser has not conducted any
business other than in connection with the Offer, the Merger Agreement and the
transactions contemplated therein. Until immediately prior to the time the
Purchaser purchases Shares pursuant to the Offer, it is not anticipated that
the Purchaser will have any significant assets or liabilities or engage in
activities other than those incident to its formation and capitalization and
the transactions contemplated by the Offer, the Merger Agreement and the
transactions contemplated therein. Because the Purchaser is a newly formed
corporation and has minimal assets and capitalization, no meaningful financial
information regarding the Purchaser is available.
The Parent is a corporation continued under the laws of Canada. The Parent
commenced operations in 1951 as a custom manufacturer for major marketers of
consumer products. Over the past forty-six years the Parent has grown in
Canada and internationally to be one of the world's largest custom
manufacturers of consumer products and specialty packaging. The Parent has two
main operating areas of expertise: Consumer Products Manufacturing consisting
of the Custom Manufacturing Division and the Kolmar Cosmetics Division, and
Specialty Packaging, subdivided into Container Manufacturing and Label
Manufacturing.
10
<PAGE>
The Consumer Products Manufacturing Division operates on an international
basis, principally in North America and the United Kingdom, and consists of
the Parent's custom manufacturing plants, CCL Custom Manufacturing, Inc., CCL
Custom Manufacturing Corp. and Kolmar Laboratories, Inc. in North America and
CCL Industries Limited in the United Kingdom.
The subdivisions of Consumer Products Manufacturing are the Custom
Manufacturing North America Division, Custom Manufacturing United Kingdom
Division and the cosmetics business of Kolmar Laboratories, Inc. The Consumer
Products Manufacturing Division manufactures a wide range of products
including aerosols, household liquids, personal care liquids, powders, solid
sticks, food wrap and cosmetics serving the personal care, household,
automotive, pharmaceutical, food, paint, pesticide and cosmetic markets. The
headquarters for the Custom Manufacturing Division, which is responsible for
custom manufacturing in North America and the United Kingdom, is located in
Chicago, Illinois, providing a centralized approach to management, financial
control, capital spending allocation and human resources generating
operational efficiencies and allowing management to focus on common customers
and suppliers on an international basis.
The Container Manufacturing Division operates under the name of Advanced
Monobloc and Victor Tube. It consists of the Advanced Monobloc Division of
Parent operating two plants in Canada and, in the United States, Advanced
Monobloc Corporation with one plant in Pennsylvania and Victor Tube Corp. with
one plant in Virginia. Both of the U.S. companies are indirect wholly owned
subsidiaries of Parent. In addition, with the acquisition of Alustar, the
Container Division now operates in Mexico. The Container Division is the
largest supplier in North America of extruded aluminum aerosol containers and
bottles, and one of the largest suppliers of tubes, caulking cartridges,
marker pen shells and cigar tubes. It is also a supplier of piston barrier
food packages, as well as plastic tubes.
The Parent prints self-adhesive labels through its CCL Label Division. Its
customers are supplied with a variety of labels and related automatic
application equipment that identify, decorate and promote their products. This
division consists of CCL Label, Inc., and CCL Label/Sioux Falls, Inc.,
subsidiaries in the United States, the CCL Label and CCL Labeling Equipment
divisions of CCL Industries Inc., in Canada, and CCL Label de Mexico, S.A. de
C.V. CCL operates four (4) label manufacturing plants in the United States
(California, Ohio, South Dakota and Connecticut), two (2) plants in Canada
(Manitoba and Ontario), and one (1) in Mexico City.
The registered office of the Parent is located at 105 Gordon Baker Road,
Willowdale, Ontario, Canada, M2H 3P8. The registered office of the Purchaser
is located at c/o Corporation Service Company, 1013 Centre Road, Wilmington,
Delaware 19805-1297. The name, citizenship, business address, present
principal occupation or employment, and material positions held during the
past five years of each of the directors and executive officers of the
Purchaser and of the Parent are set forth in Schedule I to this Offer to
Purchase.
Except as set forth in this Offer to Purchase, neither the Parent nor the
Purchaser, or, to the best knowledge of the Parent or the Purchaser, any of
the persons listed on Schedule I, has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or the voting of any
securities of the Company, joint ventures, loan or option arrangements, puts
or calls, guarantees of loans, guarantees against loss or the giving or
withholding of proxies. Except as set forth in this Offer to Purchase, neither
the Parent nor the Purchaser, or, to the best knowledge of the Parent or the
Purchaser, any of the persons listed on Schedule I, has had, since January 1,
1994, any business relationships or transactions with the Company or any of
its executive officers, directors or affiliates that would require reporting
under the rules of the Commission. Except as set forth in this Offer to
Purchase, since January 1, 1994, there have been no contacts, negotiations or
transactions between the Parent or the Purchaser, or their respective
subsidiaries or, to the best knowledge of any of the Parent or the Purchaser,
any of the persons listed on Schedule I, and the Company or its affiliates,
concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, election of directors or a sale or other transfer
of a material amount of assets. Except as set forth in this Offer to Purchase,
neither the Parent nor the Purchaser or, to the best knowledge of the Parent
or the Purchaser, any of the persons listed on Schedule I, or any majority
owned subsidiary or associate of the Parent or the Purchaser or
11
<PAGE>
any person so listed beneficially owns any Shares or has effected any
transactions in the Shares in the past sixty (60) days. Kolmar Laboratories,
Inc. purchases less than $1 million of products from the Company annually in
arms-length transactions.
Certain Financial Information of the Parent. Set forth below is a summary of
certain consolidated financial and operating data relating to the Parent and
its consolidated subsidiaries excerpted or derived from the information
contained in or incorporated by reference from the Parent's Annual Information
Form, dated February 20, 1997, filed with the Ontario Securities Commission
(the "OSC") (the "PARENT AIF"), and the Parent's Quarterly Reports for the
quarters ended March 31, 1997, and March 31, 1996 filed with the the OSC. More
comprehensive financial information is included in or incorporated by
reference into the Parent AIF and other documents filed by the Parent with the
OSC, and the financial information summary set forth below is qualified in its
entirety by reference to the Parent AIF, such other documents, the financial
statements of the Parent for the years ended December 31, 1996 and 1995 and
the financial statements for of the Parent for the three months ended March
31, 1997 and 1996 (which are filed as Exhibits g(1) and g(2) respectively, to
the Schedule 14D-1) and all the financial information and related notes
contained therein.
CCL INDUSTRIES INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(CDN. $ IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
MARCH 31, DECEMBER 31,
------------------- ----------------------------
1997 1996 1996 1995 1994
--------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales........................ $ 301,515 $ 289,438 $1,151,546 $979,318 $933,226
Net Income................... 10,283 9,157 38,646 32,768 28,035
BALANCE SHEET DATA
(at end of period)
Working Capital.............. 61,474 110,074 56,650 57,711 31,811
Total assets................. 862,468 826,747 853,002 791,612 664,760
Total long-term indebtedness
(excluding current
portion).................... 168,429 242,418 167,122 195,491 80,620
Shareholders' equity......... 400,196 363,347 394,104 357,867 335,287
PER SHARE DATA
Net Income (Loss) Per Class B
Share....................... .30 .27 1.13 .98 .85
NUMBER OF SHARES
(in thousands)
Class A...................... 2,486 2,502 2,498 2,509 3,425
Class B...................... 32,425 36,681 32,477 31,612 29,503
Weighted average for the pe-
riod........................ 34,969 34,163 34,436 33,710 33,313
</TABLE>
The Parent is subject to the informational filing requirements of the
Securities Act (Ontario) and other securities legislation of the provinces of
Canada and, in accordance therewith, is required to file periodic reports,
management proxy circulars and other information with the OSC and other
securities regulatory authorities of the provinces of Canada relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning the Parent's directors and officers, their remuneration,
stock options granted to them, the principal holders of the Parent's
securities and any material interest of such persons in transactions with the
Parent is required to be described in management proxy circulars distributed
to the Parent's shareholders and filed with the OSC. Copies of documents filed
by the Parent with the OSC pursuant to National Policy 47 may be inspected at
the registered office of the Parent at 105 Gordon Baker Road, Willowdale,
Ontario, Canada between 9:00 a.m. and 4:30 p.m. on any business day in Canada.
12
<PAGE>
9. SOURCES AND AMOUNTS OF FUNDS
The Purchaser estimates that the total amount of funds required to purchase,
pursuant to the Offer and the Merger, the number of Shares that are
outstanding on a fully diluted basis and to pay fees and expenses related to
the Offer and the Merger will be approximately $155.3 million (not including
the issuance of the Participating Exchangeable Stock and the Roll Over Options
to the Executive). To obtain these funds, the Purchaser intends to use cash on
hand and borrowings under the credit facility described below.
An unsecured short term acquisition credit facility (the "ACQUISITION CREDIT
FACILITY") is available to the Purchaser, through the Parent, pursuant to a
commitment letter (the "BANK COMMITMENT LETTER") dated June 16, 1997 issued by
a Canadian chartered bank (the "BANK") to the Parent and accepted by the
Parent on June 17, 1997 (the "ACCEPTANCE DATE"). A copy of the Bank Commitment
Letter is filed as an Exhibit to the Schedule 14D-1. Pursuant to the terms of
the Bank Commitment Letter, the Purchaser, through the Parent, may borrow up
to $150 million in up to three draws in order to finance the acquisition of
the Shares and the payment for Company Options (in each case upon consummation
of the Offer), and, if required, in order to repay debt of the Company.
Pursuant to the Bank Commitment Letter, the Purchaser's ability to borrow
through the Parent under the Acquisition Credit Facility is conditioned upon
(i) the execution of the Tender Agreement by the parties thereto, (ii) the
total cost of acquiring the Company, including 100% of the Shares and any
assumed debt, not exceeding $190 million, (iii) the Purchaser obtaining all
required regulatory approvals in connection with the Offer and the Merger to
the satisfaction of the Bank, (iv) the Parent obtaining consents to the
transactions from Parent's working capital lenders and (v) execution of
documentation satisfactory to the Bank, including a credit agreement
containing the terms of the Bank Commitment Letter and a guarantee from CCL
Industries Corporation, a Delaware corporation and an indirect wholly owned
subsidiary of the Parent.
The Bank Commitment Letter provides that advances under the Acquisition
Credit Facility will be made as direct advances from the Bank or from
available LIBOR funds and will bear interest and be payable (i) with respect
to direct advances, at the U.S. Base Rate (as defined below), calculated on
the basis of a 365/366 day year with interest payable monthly in arrears or
(ii) with respect to LIBOR advances, at the LIBOR Rate (as defined below),
plus 75 basis points per annum or, in the event at least 90% of the Shares are
not acquired pursuant to the Offer and Merger Agreement within ten (10) days
of the first draw under the Acquisition Credit Facility, 100 basis points per
annum calculated on the basis of a 360 day year with interest payable
quarterly in arrears with all accrued amounts due at maturity. The term "U.S.
BASE RATE," as used in the Bank Commitment Letter, means the annual rate of
interest established from time to time by the Bank as the reference rate it
will use to determine the rates of interest on United States dollar loans made
in Canada and designated as its "U.S. Base Rate." The term "LIBOR RATE," as
used in the Bank Commitment Letter, means the applicable rate on maturities
available for LIBOR advances from ten (10) to ninety (90) days, on a subject
to availability basis, and such other maturities to which the Bank may agree
in its sole discretion.
The Bank Commitment Letter also provides that direct advances or LIBOR
advances accruing at the U.S. Base Rate or applicable LIBOR Rate,
respectively, can be rolled over to direct advances or LIBOR advances with the
corresponding U.S. Base Rate or LIBOR Rate which is then applicable. All
rollovers must be in multiples of $100,000, and in the case of a rollover from
LIBOR to direct advances, the amount rolled over must be in multiples of
$100,000 with a minimum of $5 million.
The Bank Commitment Letter further provides that the term of the Acquisition
Credit Facility will be for a period of nine months commencing on the
Acceptance Date and expiring on the nine (9) month anniversary hereof. Any
undrawn amounts at the time of the third draw will be cancelled. The Parent
may cancel or decrease the maximum amount of the Acquisition Credit Facility,
upon three (3) days prior notice, in minimum amounts and multiples of $1
million, at any time prior to its drawdown. Prepayment of advances under the
Acquisition Credit Facility are permitted, subject to prior notice, without
penalty at any time with respect to direct advances from the Bank and on
applicable rollover dates for LIBOR advances with respect to such advances.
The Bank
13
<PAGE>
Commitment Letter also requires that 100% of the net proceeds from any debt
issuances be used to repay any advances under the Acquisition Credit Facility
and that the Parent use its best reasonable commercial efforts to dedicate any
asset sale proceeds to the repayment of any such advances.
The preceding description of certain terms and conditions of the Bank
Commitment Letter and Acquisition Credit Facility is subject in its entirety
to the terms and conditions of the Bank Commitment Letter, which is filed as
an exhibit to the Schedule 14D-1.
The Purchaser's ability to borrow under the Acquisition Credit Facility is
conditioned only upon the accuracy at the time of borrowing of customary
representations and warranties, the absence of a default under the Acquisition
Credit Facility and the consummation of the Offer. The Purchaser currently
satisfies these conditions (with the exception of the consummation of the
Offer) and believes that these conditions will be satisfied, and that adequate
borrowing capacity will exist under the Acquisition Credit Facility at the
time that funds are required to pay for Shares tendered in the Offer or
acquired in the Merger.
The Purchaser and the Parent expect that any amounts borrowed under the
above described credit facility will be repaid with cash flow from operations
and/or with proceeds from asset dispositions and/or proceeds from subsequent
refinancings in the public or private securities markets, the commercial paper
market or a refinancing of such credit facility prior to its expiration date.
10. BACKGROUND OF THE OFFER; THE MERGER AGREEMENT; THE TENDER AGREEMENT;
THE SEDAGHAT EMPLOYMENT AGREEMENT
BACKGROUND OF THE OFFER
During the fall of 1995 and the spring of 1996, management of the Parent
held a series of internal strategic planning meetings, the primary outcome of
which was a decision to focus the Parent's main expansion in the area of
specialty packaging and in particular on plastic tubes, plastic enclosures and
other value added related plastic packaging products. At that time a review
was undertaken of the various companies in the industry and the Company was
identified as a company of a size and nature of business that might make a
good business partner or acquisition candidate for the Parent. To that end, in
the mid-summer of 1996 the Senior Vice-President of Corporate Development of
the Parent, Larry Eddy, contacted the Executive and arranged to meet with the
Executive in Los Angeles to discuss the Company's direction and objectives. It
was determined at that meeting that the Company and the Parent had similar
strategic objectives and that further discussions would be appropriate. Over
the next few months, the senior executives of the Parent did not pursue
further discussions until January 29, 1997, when Wayne McLeod, the President
and Chief Executive Officer of the Parent, Mr. Eddy and Rami Younes, President
of the Container Division of the Parent met with the Executive and Mr.
Frederic M. Roberts, of F. M. Roberts & Company, Inc. ("FMRC"), the Company's
financial advisor, to initiate discussions concerning possible transactions
involving the Parent's and the Company's tube manufacturing operations.
Although nothing definitive was reached, as a result of these discussions, the
Parent decided to pursue a possible transaction with the Company. On March 5,
1997, the Parent entered into a confidentiality agreement with the Company
and, as a result, the Company provided the Parent with copies of its publicly
available information and certain other financial and corporate information
concerning the Company.
On March 18, 1997, Mr. Eddy and Mr. Edward Witz, who is a representative of
Beacon, met in Chicago with Mr. Roberts to continue discussions concerning a
possible transaction involving the Parent and the Company. Although
productive, no firm proposals resulted from this meeting. On March 26, 1997,
Mr. McLeod met in Los Angeles with the Executive to further pursue a possible
transaction and to discuss a variety of alternatives but did not reach any
firm conclusions in this regard. Nevertheless, discussions were encouraging
with the result that, the Executive was invited to come to Toronto on April 7,
1997 and was introduced to certain members of the Parent's board of directors
and certain of the Parent's senior management to become further acquainted. On
April 10, 1997, Mr. McLeod and the Executive met in Philadelphia to further
discuss a possible transaction. On April 10, 1997 the Parent entered into an
engagement letter with Beacon pursuant to which Beacon agreed to act as the
Parent's financial advisor with respect to a possible transaction involving
the Company.
14
<PAGE>
On April 30, 1997 discussions continued in Los Angeles among Mr. McLeod, Mr.
John Hermann, who is a representative of Beacon, the Executive and Mr. Roberts
with respect to a proposed acquisition of the Company by the Parent,
furthering the process and understanding of each parties' goals. Further
discussions took place on May 7, 1997 in New York at a meeting between the
Executive, Edward Csaszar, Vice President of Sales and Marketing of the
Company, Mr. McLeod and Mr. Eddy. At this meeting, to assist the Parent in
considering an acquisition, certain financial data concerning the Company was
disclosed. Nevertheless the meeting did not result in any agreement with
respect to an acquisition or any other transaction between the Company and the
Parent.
A further meeting was held on May 26, 1997 in Los Angeles between the
Executive, Mr. Roberts, Mr. McLeod and Mr. Albert Gnat, who is a member of the
board of directors of the Parent and senior partner of Lang Michener, counsel
to Parent. At this meeting, the framework of a transaction involving the
acquisition of the Company was outlined, including the price and terms,
subject to the entering into of legally binding definitive agreements and
board of directors approval of the Parent and the Company. Over the ensuing
days numerous telephone discussions occurred involving Mr. McLeod, Mr. Gnat,
the Executive and Mr. Roberts and a meeting was held between Mr. Gnat, the
Executive and Mr. Roberts elaborating, clarifying and refining the terms of a
possible transaction.
In early June, the Parent commenced a limited due diligence examination of
the Company and also commenced preparation of documentation with respect to
the transaction. On June 3, the Executive met with additional members of the
Parent's management and its board. On June 6, 1997, the Parent delivered the
first draft of definitive documents to the Company. Negotiations, due
diligence and document preparation continued throughout the week commencing
June 8. On June 12, 1997 the Parent's board of directors held a regularly
scheduled meeting at which a possible transaction with the Company was
discussed and at which senior management of the Parent and the Parent's
financial advisors apprised the board of directors of the status of
negotiations with the Company. No action was taken by the board of directors
at this meeting.
The Purchaser's, the Parent's and the Company's boards of directors each
separately held special meetings on June 16, 1997, and the Offer and the
Merger were unanimously approved. The Company received the fairness opinion of
CWC and the definitive agreements were finalized, executed and delivered on
June 16, 1997. The transaction was publicly announced on the morning of June
17, 1997. On June 23, 1997, the Purchaser commenced the Offer.
To the extent any of the foregoing information described events to which
neither the Parent nor its advisors were a party, it is based on information
provided by the Company.
THE MERGER AGREEMENT
The following is a summary of certain provisions of the Merger Agreement, a
copy of which is filed as an exhibit to the Schedule 14D-1 and which is
incorporated herein by reference. The following summary is qualified in its
entirety by reference to the Merger Agreement.
The Offer is being made pursuant to the Merger Agreement. The Merger
Agreement provides that without the prior written consent of the Company, the
Purchaser shall not (and Parent shall not cause the Purchaser to): (i)
decrease the Offer Price, or change the form of consideration therefor, or
decrease the number of Shares sought pursuant to the Offer; (ii) change the
Conditions; (iii) impose additional conditions to the Offer; (iv) waive the
condition that there shall be validly tendered, and not withdrawn prior to the
time the Offer expires, a number of Shares which, together with all Shares
owned by the Parent, the Purchaser and their respective Affiliates (as defined
in Section 10.9 of the Merger Agreement) constitutes a majority of the Shares
outstanding on a fully diluted basis on the date of purchase; (v) amend any
term of the Offer in any manner adverse to holders of Shares; or (vi) extend
the Expiration Date; provided, however, that the Expiration Date may be
extended from time to time at the sole discretion of the Purchaser: (x) in
order to comply with any provision of the HSR Act, and the rules and
regulations thereunder, or to otherwise comply with law, for the minimum
period of time reasonably necessary to so comply; and (y) if any of the
Conditions are not satisfied, for the minimum period of time reasonably
necessary to satisfy the Conditions, but in either case, the Expiration Date
shall not be extended beyond September 2, 1997.
15
<PAGE>
The Merger Agreement provides that, if the Purchaser purchases any Shares
pursuant to the Offer, as soon as practicable after the satisfaction or waiver
of certain conditions, the Purchaser will be merged with and into the Company.
The Merger Will be effective upon the filing of a certificate of merger with
the Secretary of State of Delaware pursuant to the DGCL (the "EFFECTIVE TIME")
At the Effective Time, each Share issued and outstanding immediately prior to
the Effective Time, other than: (i) Shares owned by the Purchaser or any
Affiliate of the Purchaser; (ii) the Remaining Shares, if outstanding; (iii)
Shares held in the treasury of the Company; and (iv) Shares held by
stockholders who have perfected appraisal rights pursuant to the DGCL, shall,
by virtue of the Merger, and without any action on the part of the holder
thereof, be converted into the right to receive, without interest, an amount
in cash equal to $29 per Share, or such greater amount which may be paid
pursuant to the Offer as it may be amended (the "MERGER CONSIDERATION"). All
such Shares, by virtue of the Merger and without any action on the part of the
holders thereof, will no longer be outstanding, will be cancelled and retired
and will cease to exist, and each holder of a certificate representing any
such Shares will thereafter cease to have any rights with respect to such
Shares, except the right to receive the Merger Consideration in cash for such
Shares upon the surrender of such certificates.
At the Effective Time, each Remaining Share held by the Executive
immediately prior to the Effective Time will, by virtue of the Merger and
without any action on the part of the Executive be converted into:
(i) 0.0001931572126 shares of Class A participating exchangeable common stock
of the Surviving Corporation ("PARTICIPATING EXCHANGEABLE STOCK"), aggregating
100 shares of Participating Exchangeable Stock for all Remaining Shares,
having the rights and preferences as described in Exhibit 5.1(b)(i) to the
Merger Agreement; and (ii) the right to receive, on the terms set forth below,
(x) if, and only if, EBITDA (as defined in a Exhibit 5.1(c) to the Merger
Agreement) of the Surviving Corporation for the fiscal year ended December 31,
1997, is at least $20,000,000, $3.051882993; and (y) if, and only if, EBITDA
of the Surviving Corporation for the fiscal year ended December 31, 1998, is
at least equal to the greater of $24,000,000 or 120% of the EBITDA of the
Surviving Corporation for the fiscal year ended December 31, 1997,
$3.051882993; and (z) if, and only if, the Executive was not entitled to
receive the payment described in subclause (x) above, and the aggregate EBITDA
for the two fiscal years ended December 31, 1998, is at least $44,000,000,
$3.051882993; provided, however, that in no event shall the Executive be
entitled to receive more than $6.103765986 per Remaining Share pursuant to
subclauses (x), (y), and (z) (the "TOP UP AMOUNT" and, together with the
Participating Exchangeable Stock, the "STOCKHOLDER MERGER CONSIDERATION"). All
such Remaining Shares, by virtue of the Merger and without any action on the
part of the Executive, shall no longer be outstanding, shall be cancelled and
retired and shall cease to exist, and the Executive shall thereafter cease to
have any rights with respect to such Remaining Shares, except the right to
receive the Shareholder Merger Consideration for such Remaining Shares upon
the surrender of certificates representing any Remaining Shares in accordance
with Section 5.2 of the Merger Agreement. Amounts payable pursuant to clause
(ii) above will bear simple interest from the date of the Merger Agreement to
the date of payment at the rate per annum quoted or published by Harris Trust
and Savings Bank as its prime rate, as the same varies from time to time. The
rate of interest applicable to amounts payable pursuant to clause (ii) shall
vary with each change in such prime rate.
The Participating Exchangeable Stock rank pari passu with the common stock
of Purchaser with respect to the payment of dividends and, unless the holder
of such shares elects to receive the Liquidation Amount (as defined below),
the distribution of property or assets in the event of liquidation,
dissolution or winding up of the Purchaser, whether voluntary or involuntary,
or any other distribution of the property or assets of the Purchaser among its
stockholders for the purpose of winding up its affairs. Except (a) as required
by applicable law (b) for certain mergers, consolidations or similar
transactions in which Purchaser does not survive (but excluding the Merger
between the Purchaser and the Company) and (c) for additions, changes,
modifications or removals affecting the rights, privileges, restrictions and
conditions attaching to the Participating Exchangeable Stock, the
Participating Exchangeable Stock is not entitled to vote on matters submitted
to the stockholders. After (i) the third anniversary of the issuance of the
Participating Exchangeable Stock, or (ii) the termination of the Executive's
employment under certain circumstances, the Executive's death, or a Change of
Control (as defined in Exhibit 5.1(b)(i) to the Merger Agreement), a holder of
Participating Exchangeable Stock shall be entitled to require the Purchaser to
redeem the Participating Exchangeable Stock registered in the name of such
holder for
16
<PAGE>
an amount per share equal to (A) the U.S. Dollar equivalent of the current
market price of the Specified Number (as defined below) of the Class B Shares
for each share of Participating Exchangeable Stock, plus (B) an additional
amount equivalent to the amount by which declared and unpaid dividends on one
share of Participating Exchangeable Stock exceed the declared and unpaid
dividends on the Specified Number of the Class B Shares (the "REDEMPTION
PRICE"). The portion of the Redemption Price described in clause (A) shall be
paid by delivering to such holder the Specified Number of the Class B Shares
for each share of Participating Exchangeable Stock redeemed. A holder of each
share of Participating Exchangeable Stock is entitled to receive on each
dividend payment date of the Parent an amount in cash, stock or other property
equivalent to the dividend paid on the Specified Number of Class B Shares. The
Specified Number is 10,000 shares, subject to certain antidilution
adjustments. The Liquidation Amount is equal to the then current Redemption
Price.
At the Effective Time, each Share issued and outstanding immediately prior
to the Effective Time and: (i) owned by the Purchaser or any Affiliate of the
Purchaser; and (ii) each Share issued and held in the Company's treasury
immediately prior to the Effective Time, by virtue of the Merger and without
any action on the part of the holders thereof, shall no longer be outstanding,
shall be cancelled and retired without payment of any consideration therefor
and shall cease to exist and each holder of a certificate representing any
such Shares will thereafter cease to have any rights with respect to such
Shares. At the Effective Time, each share of capital stock of the Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into one share of capital stock of the Surviving Corporation with
rights, obligations and preferences identical to the rights, obligations and
preferences of such capital stock of the Purchaser immediately prior to the
Effective Time.
Shares 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 Merger Consideration. Such stockholders
instead shall be entitled to receive payment of the appraised value of such
Shares held by them in accordance with the provisions of such Section 262,
except that all Dissenting Shares held by stockholders who have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such Shares under such Section 262 shall thereupon be deemed to
have been converted into and to have become exchangeable, as of the Effective
Time, for the right to receive, without any interest thereon, the Merger
Consideration upon surrender in the manner provided in Section 5.2 of the
Merger Agreement of the certificate or certificates that, immediately prior to
the Effective Time, evidenced such Shares.
At and after the Effective Time, each of the outstanding and unexercised
Warrants shall continue to be outstanding and, upon payment of the exercise
price then in effect with respect to such Warrant, the holder of such Warrant
shall be entitled to receive upon exercise of such Warrant the amount of cash
(without interest) which such holder would have been entitled to receive upon
exercise had such Warrant been exercised immediately prior to the Effective
Time.
The directors of the Purchaser and the officers of the Company, at the
Effective Time, will be the directors and officers, respectively, of the
Surviving Corporation from and after the Effective Time, until their
successors have been duly elected or appointed and qualified, or until their
earlier death, resignation, or removal in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation.
In the Merger Agreement, the Company has agreed, if required following
consummation of the Offer, to take all action necessary in accordance with
applicable law and its Certificate of Incorporation and Bylaws to convene a
meeting of holders of Shares as promptly as practicable to consider and vote
upon the approval of the Merger Agreement and the Merger, unless the Company's
Board of Directors, following the receipt of advice of counsel, in the
exercise of its fiduciary obligations under applicable law, has withdrawn its
recommendation to the holders of Shares to accept the Offer and to approve the
Merger. Subject to such fiduciary requirements under applicable law, the Board
of Directors of the Company agreed to recommend such approval and the Company
agreed to use its reasonable best efforts to solicit such approval. At any
such meeting, all the Shares then owned by the Purchaser or its Affiliates
will be voted in favor of the Merger Agreement and the Merger. If permitted by
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the DGCL and the Company's Certificate of Incorporation, in the event that
Purchaser shall beneficially own at least ninety percent (90%) of the
outstanding shares of each class of capital stock of the Company, the Company,
Parent and Purchaser have agreed to take all necessary and appropriate action
to cause the Merger to become effective as soon as practicable after the
consummation of the Offer.
Pursuant to the Merger Agreement, the Company has agreed that, except as
otherwise provided on the Disclosure Schedule to the Merger Agreement or as
contemplated by the Merger Agreement, prior to the Effective Time (a) it will
conduct its operations and the operation of its subsidiaries only in the
ordinary and usual course of business, and, to the extent consistent
therewith, each of the Company and its subsidiaries will use its reasonable
best efforts to preserve its business organization intact and maintain its
existing relations with customers, suppliers, licensees, employees and other
business associates; (b) it will not (i) sell or pledge, or agree to sell or
pledge, any stock owned by it or any of its subsidiaries; (ii) amend its
Certificate of Incorporation or Bylaws; (iii) split, combine, or reclassify
outstanding Shares; (iv) declare, set aside, or pay any dividend payable in
cash, stock, or property with respect to the Shares; or (v) adopt a plan of
liquidation; (c) neither it nor any of its subsidiaries will (i) issue, sell,
pledge, dispose of, or encumber any shares of, or securities convertible or
exchangeable for, or options, warrants, calls, commitments, or rights of any
kind, to acquire any shares of capital stock of any class of the Company or
its subsidiaries other than, in the case of the Company, Shares issuable
pursuant to (x) Company Options outstanding on the date of the Merger
Agreement; or (y) the exercise of the Warrants; (ii) transfer, lease, license,
sell, mortgage, pledge, dispose of, or encumber any material assets other than
in the ordinary and usual course of business; (iii) acquire directly or
indirectly by redemption, or otherwise, any shares of the capital stock of the
Company or the Warrants; (d) neither it nor any of its subsidiaries shall
(i) otherwise ordered by any governmental or regulatory authorities of Canada
or any province or other governmental subdivision thereof, the United States,
the several states or any other jurisdiction (foreign or domestic) of
competent authority, provided that, in the case of any such order, the Company
shall consult with the Parent and the Purchaser regarding the appeal of or
compliance with such order, establish, adopt, enter into, make any new grants
or awards under, or amend any collective bargaining agreement, and, except in
the ordinary and usual course of business and consistent with past practice,
any bonus, profit-sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust fund, policy or arrangement for the
benefit of any directors, officers or employees (except as specifically
described in Section 7.6 to the Merger Agreement or Schedule 7.1(d) thereto),
or (ii)(x) grant any increase in the compensation payable, or to become
payable, by the Company or any of its subsidiaries to any of its directors,
executive officers, or key employees; or (y) subject to Section 7.6 of the
Merger Agreement, enter into or amend any employment agreement with or, except
in accordance with existing written policy of the Company, grant any severance
or termination pay to, any officer, director or employee of the Company or any
of its subsidiaries; (e) neither it nor any of its subsidiaries shall settle
or compromise any material claims or litigation, or, except in the ordinary
and usual course of business, modify, amend or terminate any of its material
contracts or waive, release or assign any material rights or claims;
(f) except as set forth on Schedule 7.1(f) to the Merger Agreement, neither it
nor any of its subsidiaries shall incur any indebtedness for money borrowed,
or issue or sell any debt securities, or assume, guarantee, endorse, or
otherwise as an accommodation become responsible for the obligations of any
other individual or entity, or make any loans or advances, other than in the
ordinary and usual course of business, provided that the aggregate value of
such indebtedness, debt securities, or other obligations, contingent or
otherwise, shall not exceed $750,000; (g) neither it, nor any of its
subsidiaries shall acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership, or other business organization or
division thereof (other than an entity which is already a wholly owned
subsidiary of the Company), or make any investment either by purchase of stock
or securities, contributions to capital (other than to wholly owned
subsidiaries), material property transfer or purchase of any material property
or assets, in any other individual or entity (other than an entity which is
already a wholly owned subsidiary of the Company); (h) neither it nor any of
its subsidiaries shall, except in the ordinary and usual course of business
and consistent with past practice, make any tax elections, or settle, or
compromise any income tax liability, or, except as required by law or
applicable accounting standards, change any accounting policies or procedures;
(i) neither it nor any of its subsidiaries shall make any payment, direct or
indirect, of any material liability of the Company before the same comes due
in accordance with its terms; (j) neither it nor any of its
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subsidiaries shall, in the event any existing insurance coverage shall be
terminated or lapse to the extent available at reasonable cost, fail to
procure substantially similar substitute insurance policies with financially
sound and reputable insurance companies in at least such amounts and against
such risks as are currently covered by such policies; (k) except as set forth
on Schedule 7.1(k) to the Merger Agreement, neither it nor any of its
subsidiaries shall incur any capital expenditures other than in the ordinary
and usual course of business and consistent with past practice and not in an
amount in excess of $500,000; (l) neither it nor any of its subsidiaries shall
take, or commit to take, any action that would make any representation or
warranty of the Company under the Merger Agreement inaccurate in any material
respect at, or as of, any time prior to, the termination or expiration of the
Offer, unless such inaccuracy results from any action or inaction permitted or
required by the Merger Agreement or the Tender Agreement; and (m) neither it
nor any of its subsidiaries shall enter into an agreement to do any of the
foregoing.
The Company has agreed in the Merger Agreement that neither it, nor any of
its subsidiaries, nor any of their respective officers and directors will, and
the Company will cause its employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by
the Company or any of its subsidiaries) not to initiate or solicit, directly
or indirectly, any inquiries or the making of any proposal with respect to a
merger, consolidation, recapitalization, or similar transaction involving, or
any purchase of all or any significant portion of the assets of, or any equity
interest in, the Company or any of its subsidiaries (an "ACQUISITION
PROPOSAL"), or, except to the extent required, based upon the advice of
counsel, under applicable law for the discharge by the Board of Directors of
its fiduciary duties, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal. Pursuant to the Merger
Agreement, the Company immediately ceased and caused to be terminated any
activities, discussions or negotiations with any third parties conducted prior
to the execution of the Merger Agreement with respect to any of the foregoing.
The Company has agreed in the Merger Agreement to notify the Purchaser
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, the Company. Pursuant to the Merger
Agreement, the Company has requested each person who has executed a
confidentiality agreement in connection with its consideration of acquiring
the Company to return or destroy all confidential information heretofore
furnished to such person by or on behalf of the Company.
The Merger Agreement provides that, promptly upon the Purchaser obtaining,
through acceptance for payment and payment by the Purchaser for the Shares,
pursuant to the Offer or otherwise (with the consent of the Company), actual
ownership of at least a majority of the issued and outstanding Shares on a
fully diluted basis, the Purchaser will be entitled to designate at least such
number of directors to the Board of Directors of the Company as will give the
Purchaser a majority of the directors on the Board of Directors of the
Company, and the Company will, at such time, promptly cause the Purchaser's
designees to be so elected. The Purchaser expects to designate for this
purpose, among others, persons named in Schedule I to this Offer to Purchase.
In connection therewith, the Company will mail to the stockholders of the
Company the information required pursuant to Section 14(f) of the Exchange Act
and Rule 14f-1 thereunder, unless such information has previously been
provided to such stockholders in the Schedule 14D-1. The Purchaser will
promptly furnish to the Company any information in its possession requested by
the Company in connection therewith. In the event that the Purchaser's
designees are appointed or elected to the Board of Directors of the Company,
until the Effective Time, the Board of Directors of the Company will have at
least two directors who are directors on the date of the Merger Agreement (the
"CONTINUING DIRECTORS"). Moreover, in such event, if the number of Continuing
Directors is reduced below two for any reason whatsoever, any remaining
Continuing Directors will be entitled to designate persons to fill such
vacancies who will be deemed to be Continuing Directors for purposes of the
Merger Agreement, or, if no Continuing Directors then remain, the other
directors will designate two persons to fill such vacancies who will not be
either officers or directors of the Purchaser or any of its designees, or
stockholders or Affiliates of the Purchaser, and such persons shall be deemed
to be Continuing Directors for purposes of the Merger Agreement. The Company's
efforts will, if necessary, include the adoption by the Board of Directors of
any resolutions or any amendment to the Company's Bylaws needed to cause the
Purchaser's
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designees to be so elected, including increasing the number of directors. The
directors designated by the Purchaser will, subject to their fiduciary duty to
the Company and its stockholders, cause the Company to fulfill its obligations
pursuant to the Merger Agreement.
Except as may hereafter be agreed upon with the holders of Company Options,
and subject to the next succeeding paragraph, prior to the Effective Time, the
Company will take such actions as may be necessary such that at the Effective
Time each Company Option which was outstanding on the Expiration Date and not
subsequently exercised, whether or not then exercisable, will be cancelled and
only entitle the holder thereof, upon surrender thereof (to the extent then
outstanding), to receive from the Company, prior to the Effective Time (or
such later time as may be provided in agreements entered into prior to the
Effective Time), an amount in cash equal to the difference between the Merger
Consideration and the exercise price per Share of such Company Option,
multiplied by the number of Shares subject to such Company Option.
The Company will take such action as may be necessary such that at the
Effective Time, the 545,000 Company Options granted to the Executive shall be
amended such that, at the Effective Time, such Company Options shall be
cancelled and entitle the Executive to: (i) options (the "ROLL OVER OPTIONS")
to acquire 545,000 shares of the Class B Shares at an exercise price
(expressed in Canadian currency) equal to the simple average of the daily high
and low board lot trading prices for the Class B Shares on the Toronto Stock
Exchange ("TSE") for the 10 day trading period commencing June 10, 1997 and
ending June 23, 1997 (the "10 DAY AVERAGE") less Cdn. $10.35 per share; and
(ii) immediately receive from the Parent or the Purchaser in immediately
available funds $5,491,997; provided that if the 10 Day Average is less than
Cdn. $10.35, then the Executive shall receive from the Parent or the Purchaser
an amount in immediately available funds equal to the product of (A) the
difference of Cdn. $10.35 and the 10 Day Average and (B) 545,000. Such Roll
Over Options shall be substantially in the form of Exhibit 7.6(a) to the
Merger Agreement.
The Parent has agreed in the Merger Agreement that, on or prior to the
termination of the Offer, it will enter into employment agreements with each
of the employees listed on Schedule I to the Merger Agreement (the "EMPLOYMENT
AGREEMENTS") providing for: (i) the employment of each such employee by the
Company and the Surviving Corporation for a three year term with positions and
duties and compensation and benefits at least as favorable, and with
termination provisions no more favorable, to each such employee as such
employee is currently receiving from the Company as of the date of the Merger
Agreement; and (ii) the grant of stock options under and in conformity with
the Parent's Employee Stock Option Plan, in the amount and for exercise price
set forth in such Schedule I; provided that the Parent shall not be in breach
of such covenant with respect to any such employee, if such employee will not
execute his Employment Agreement.
Parent will cause the Surviving Corporation to honor the arrangements
(including without limitation the indemnity and payment arrangements) with CWC
and FMRC referred to in Section 6.1(i) of the Merger Agreement and such other
consulting and advisory fees as have been or may be incurred in compliance
with such Section in connection with the transactions contemplated by the
Merger Agreement.
The Parent and the Purchaser also agreed that all rights to indemnification
by the Company existing as of the date of the Merger Agreement in favor of
each present and former director, officer, or employee (and their respective
heirs and assigns) of the Company, or any of its subsidiaries (the
"Indemnified Parties") as provided in its Certificate of Incorporation or
Bylaws or pursuant to other agreements in effect on the date of the Merger
Agreement will survive the Merger and will continue in full force and effect
for a period of at least six (6) years from the Effective Time. To the extent
the provision described in the foregoing sentence does not serve to indemnify
and hold harmless an Indemnified Party, after the purchase of the Shares
pursuant to the Offer, the Parent and the Purchaser will cause the Company to,
and after the Effective Time, the Parent and the Surviving Corporation will,
indemnify and hold harmless, to the fullest extent permitted under applicable
law, the Indemnified Party against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages, liabilities, and
amounts paid in settlement in connection with any claim, action, suit,
proceeding, or investigation, whether civil, criminal, administrative, or
investigative, arising out of, or pertaining
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to, such individuals' services prior to the Effective Time, as directors,
officers, employees, or agents of the Company or any of its subsidiaries, or
as trustees or fiduciaries of any plan for the benefit of employees of the
Company (including, without limitation, the transactions contemplated by the
Merger Agreement or the Tender Agreement) for a period of six (6) years after
the Effective Time, provided that, in the event any claim or claims are
asserted or made within such six-year period, all rights to indemnification in
respect of any such claim or claims shall continue until final disposition of
any and all such claims. The Surviving Corporation will maintain the Company's
existing officers' and directors' liability insurance, or cause the Surviving
Corporation to receive similar coverage to the Company's existing officers and
directors' liability insurance pursuant to Parent's officers' and directors'
liability insurance ("D&O INSURANCE"), for a period of three (3) years after
the Effective Time; provided, however, if the existing D&O Insurance expires,
is terminated or cancelled during such three-year period, the Surviving
Corporation will use commercially reasonable efforts to obtain D&O Insurance
with comparable coverage; provided, further, that in no event shall the
Surviving Corporation be required to maintain the D&O Insurance with
comparable coverage, if the cost of such D&O Insurance is more than one
hundred twenty-five percent (125%) of the cost of such D&O Insurance in the
prior year, but in such case, the Surviving Corporation shall purchase as much
coverage as possible for such amount.
The Merger Agreement contains various representations and warranties of the
parties thereto. These include, among others, representations and warranties
by the Company as to its organization and good standing, its capitalization,
the authorization of the Merger Agreement, the accuracy of the Company's
financial statements and filings with the Commission, and the absence of
certain changes in the financial condition or the business of the Company.
The respective obligations of the Parent and the Purchaser, on the one hand,
and the Company, on the other hand, to consummate the Merger are subject to
the following conditions: (i) if applicable, the Merger Agreement shall have
been duly approved by the holders of a majority of the Shares in accordance
with applicable law and the Certificate of Incorporation and Bylaws of the
Company; (ii) the Purchaser, or any Affiliate of the Purchaser, shall have
purchased Shares pursuant to the Offer, provided that this condition will be
deemed satisfied if the Purchaser fails to purchase Shares tendered pursuant
to the Offer in violation of the terms of the Merger Agreement; (iii) any
waiting period applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated, and all filings required to be made
prior to the Effective Time with, and all consents, approvals, permits and
authorizations required to be obtained prior to the Effective Time from
governmental and regulatory authorities in connection with the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated by the Merger Agreement shall have been made, or obtained (as the
case may be), other than those the failure to make or obtain of which would
not render the Merger illegal; and (iv) no Canadian or United States or state
court or governmental or regulatory authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits consummation of the
transactions contemplated by the Merger Agreement.
The Merger Agreement is subject to termination at any time prior to the
Effective Time according to the following provisions: (i) by the mutual
consent of the Purchaser and the Company; or (ii) by the Purchaser or the
Company if, without the fault of the terminating party, the Merger has not
been consummated prior to March 31, 1998, or if, after the Offer is
consummated, a stockholder meeting is held to consider the Merger, and the
Merger is not approved by holders of at least a majority of the Shares; or
(iii) if there has been a material breach of any representation, warranty,
covenant, or agreement on the part of the other party set forth in the Merger
Agreement which breach has not been cured within ten (10) days following
receipt by the breaching party of notice of such breach, or if any permanent
injunction or other order of a court of competent jurisdiction preventing the
consummation of the Merger shall have become final and non-appealable.
The Merger Agreement may be terminated, and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval by holders
of Shares, by action of the Board of Directors of Purchaser, if the Offer has
been terminated because of the failure of any of the Conditions.
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The Merger Agreement may be terminated, and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval by holders
of Shares, by action of the Board of Directors of the Company, if: (i)
Purchaser shall have failed to commence the Offer within the time required in
Section 1.1 of the Merger Agreement, or such Offer shall have expired without
any Shares being purchased by Purchaser within the time required in such
Section; or (ii) the Board of Directors of the Company receives a written
offer which was not solicited after the date of the Merger Agreement with
respect to an Acquisition Proposal, and the Board of Directors of the Company
determines that such transaction is more favorable to the Company and its
stockholders than the Offer, as may be amended, and the transactions
contemplated by the Merger Agreement, and that approval, acceptance or
recommendation of such other proposal is required by fiduciary obligations of
the Company's Board of Directors under applicable law; provided, however, that
the Company shall not terminate the Merger Agreement pursuant to this sentence
without providing Purchaser at least five (5) days' notice.
In the event of termination of the Merger Agreement and abandonment of the
Merger pursuant to the termination provisions thereof, no party thereto (or
any of its directors, officers or stockholders) will have any liability or
further obligation to any other party to the Merger Agreement, except as
provided in the following paragraph or in Section 10.2 of the Merger
Agreement.
If, at any time following the entrance into the Merger Agreement: (i) any
person, entity or "group" (as that term is used in Section 13(d)(3) of the
Exchange Act), other than the Principal Stockholders and their respective
Affiliates, shall have become the beneficial owner of 20% or more of the
Shares or the Board of Directors shall have publicly withdrawn or adversely
modified its recommendation of acceptance of the Offer, other than as a result
of the Purchaser's or the Parent's material breach of the Merger Agreement,
and shall have recommended to the stockholders another offer or have resolved
to do so; (ii) the Company terminates the Merger Agreement pursuant to Section
9.4(ii) thereof (relating to Acquisition Proposals); or (iii) the Purchaser
shall have terminated the Offer as a result of the Company's failure to
comply, in any material respect, with any of its material covenants under the
Merger Agreement after notice to the Company and the expiration of five (5)
days without such breach being cured, then the Company shall promptly, but in
no event later than two (2) days after the first of such events occurs (the
"PAYMENT DATE"), pay to the Purchaser a fee of $7,200,000, provided that such
fee shall not be paid if: (x) either the Parent or the Purchaser shall have
breached its material obligations under the Merger Agreement, or if any of the
Parent's or the Purchaser's representations and warranties in the Merger
Agreement shall have been incorrect in any material respect when made, or
shall have since ceased to be true and correct in any material respect; or (y)
the Purchaser has not terminated the Offer.
THE TENDER AGREEMENT
The following is a summary of certain provisions of the Tender Agreement. A
copy of the Tender Agreement is filed as an exhibit to the Schedule 14D-1 and
is incorporated herein by reference. The Tender Agreement may be examined, and
copies may be obtained, as set forth in Section 7 above. The following summary
is qualified in its entirety by reference to the Tender Agreement.
The Tender Agreement contains, among other representations and warranties, a
representation and warranty by each Principal Stockholder as to its beneficial
ownership of Shares. The Tender Agreement contains a representation and
warranty that (a) Mr. and Mrs. Sedaghat, as joint tenants, are the beneficial
owners of 1,685,967 Shares (excluding Shares held of record by the Sedaghat
Trust); (b) the Sedaghat Trust is the beneficial owner of 500,000 Shares; and
(c) the Executive is the beneficial owner of 1,053,333 Shares, and 545,000
Options to purchase Shares.
Pursuant to the Tender Agreement, each Principal Stockholder irrevocably
agreed to validly tender or cause to be validly tendered pursuant to the
Offer, within ten (10) business days after the Offer has been made in
accordance with the terms hereof, and not withdraw, all Shares beneficially
owned or controlled by such Principal Stockholder less, in the case of the
Executive, the Remaining Shares, and less the 545,000 Shares that would be
issuable upon exercise of Company Options held by the Executive. Thereafter,
each Principal Stockholder has agreed not to withdraw such Shares from the
Offer under any circumstances, notwithstanding
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any statutory or other rights of withdrawal such Principal Stockholder may
otherwise have, unless: (a) the Purchaser fails or is legally unable to accept
for payment and pay for the Shares in accordance with the terms of the Offer;
(b) the Tender Agreement is terminated in accordance with its terms; or (c)
the Purchaser amends or modifies the Offer in any manner adverse to the
stockholders of the Company (other than changes or amendments to the Offer not
in violation of the Merger Agreement or other than to waive any Condition, if
such a waiver is permitted by the Merger Agreement).
Subject to the terms and conditions of the Tender Agreement, and subject to
the exercise by the Purchaser of the Stockholder Option, the Executive has
irrevocably agreed, during the term of the Tender Agreement, to vote or cause
to be voted all of the Remaining Shares at any annual, special or other
meeting of the holders of Shares and at any adjournment or adjournments
thereof or pursuant to any written consent or other instrument in writing in
favor of the Merger without amendment to the terms thereof except for
amendments to the terms of the Merger or the Merger Agreement which are not in
violation of the terms of the Merger Agreement.
Upon completion of the Merger, and assuming that the Stockholder Option has
not been exercised, the Executive shall be paid the Stockholder Merger
Consideration.
Pursuant to the Tender Agreement, the Executive has granted to the Purchaser
an option (the "STOCKHOLDER OPTION") to acquire all, but not less than all, of
the Remaining Shares for the Stockholder Merger Consideration (except the
Participating Exchangeable Stock would be issued by the Purchaser). The
Stockholder Option is irrevocable by the Executive during the term of the
Tender Agreement and may, subject to applicable law and the terms of the
Tender Agreement, be exercised at any time by the Purchaser during the term of
the Tender Agreement, provided that all of the terms and conditions precedent
to the Merger have been satisfied or waived by the Purchaser to the extent
such waiver is permitted under the Merger Agreement other than the requirement
for stockholder approval of the Merger and the requirement that Shares be
purchased pursuant to the Offer.
Each Principal Stockholder has agreed that: (a) subject, in the case of the
Executive, to any fiduciary duties he may have as a director or officer of the
Company, such Principal Stockholder will not, directly or indirectly, provide
any information concerning the Company to, solicit, initiate, invite, assist,
facilitate, promote or encourage proposals or offers from, or entertain or
enter into discussions or negotiations with, any other person relating to the
Shares, or any other securities of the Company, any amalgamation, merger, or
other form of business combination involving the Company or any of its
subsidiaries, any sale, lease, exchange or transfer of all or a substantial
portion of the assets of the Company or any of its subsidiaries, or any take-
over bid, reorganization, recapitalization, liquidation or winding-up of or
other business combination or other transaction involving the Company or any
of its subsidiaries with any person other than the Parent, the Purchaser, or
any of their affiliates (each, a "PROPOSED TRANSACTION"); (b) subject, in the
case of the Executive, to any fiduciary duties he may have as a director or
officer of the Company, such Principal Stockholder will not enter into any
agreement, discussions or negotiations with any person, other than the Parent,
the Purchaser, or any of their affiliates with respect to a Proposed
Transaction or potential Proposed Transaction; (c) subject, in the case of the
Executive, to any fiduciary duties he may have as a director or officer of the
Company, such Principal Stockholder will not furnish or cause to be furnished
any non-public information concerning the business, results of operations,
assets, liabilities, prospects, financial condition or affairs of the Company
or any of its subsidiaries to any person, other than the Parent and its
representatives, other than as disclosed prior to the date hereof;
(d) subject, in the case of the Executive, to any fiduciary duties he may have
as a director or officer of the Company, such Principal Stockholder will
exercise the voting rights attaching to Shares owned or controlled by it or
him to oppose the occurrence of any of the following events to the extent a
vote by the shareholders of the Company is required: (i) any change in the
Certificate of Incorporation or By-laws of the Company or any subsidiary
thereof or in the authorized or outstanding capital stock of the Company or
any subsidiary thereof; (ii) the grant of any option, warrant or security
convertible into capital stock of the Company or any subsidiary thereof; (iii)
the distribution, sale, pledge or transfer of all or a substantial part of the
business or property of the Company or any subsidiary thereof; (iv) the
merger, consolidation or reorganization of the Company or any subsidiary
thereof or any other material change in the corporate structure of the Company
or any subsidiary thereof, other than the Merger; and (v) any other material
change in the business or affairs of the Company or
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any subsidiary thereof; (e) subject, in the case of the Executive, to any
fiduciary duties he may have as a director or officer of the Company, such
Principal Stockholder will exercise the voting rights attached to Shares owned
or controlled by it or him to oppose any proposed action by the Company, its
shareholders or others, and shall not take any action, the result of which
could be reasonably expected to prevent or delay the Purchaser from completing
the transactions contemplated by the Tender Agreement, including the Offer and
the Merger; (f) such Principal Stockholder will not grant proxies or enter
into any voting trust or, except for any agreements necessary to the release
of the lien described in Schedule B to the Tender Agreement, enter into any
other agreement or arrangement with respect to any of the Shares other than
the Tender Agreement; such Principal Stockholder will not acquire or sell,
assign, transfer, encumber or otherwise dispose of any Shares or enter into
any contract, agreement or understanding with respect to the direct or
indirect acquisition or sale, assignment, transfer, encumbrance or other
disposition of any Shares, except pursuant to the terms of the Tender
Agreement and the Merger Agreement; prior to the consummation of the Merger,
the Executive will not exercise any options to acquire Shares; (g) the
Executive will take all such actions as are necessary to terminate all
outstanding agreements, options, warrants or rights to purchase or acquire or
agreements relating to any of the Shares and the Remaining Shares (other than
the Tender Agreement and the Merger Agreement) and to discharge all liens,
charges, claims, encumbrances, pledges and security interests with respect to
the Shares and the Remaining Shares prior to receipt of payment therefor; (h)
such Principal Stockholder shall cooperate with the Purchaser and the Parent
in making all requisite regulatory filings in connection with the Offer and,
in the case of the Executive, the Merger; (i) the Executive will not exercise,
and, pursuant to the Tender Agreement, irrevocably waives, any dissent and
appraisal rights accruing to the Shares under the DGCL; and (j) such Principal
Stockholder shall not take, or commit to take, any action that would cause or
make any of the representations and warranties of such Principal Stockholder
contained in the Tender Agreement inaccurate in any material respect at, or as
of any time prior to, the completion of the Offer, or in the Executive's case,
the completion of the Merger, except such actions as may be contemplated by
the Tender Agreement or the Merger Agreement.
Subject, in the case of the Executive, to any fiduciary duties he may have
as a director or officer of the Company, the Principal Stockholders will
promptly notify the Parent of any such discussions or negotiations or of any
proposal in respect of a Proposed Transaction of which they become aware.
The Tender Agreement shall terminate on the first to occur of: (a) 11:59
p.m. Pacific Daylight Time, on June 23, 1997, if the Purchaser has not made
the Offer at or prior to such time; (b) the termination of the Merger
Agreement in accordance with its terms; and (c) the Effective Time.
If, at any time after the execution and delivery of the Tender Agreement,
any event occurs, and, as a result thereof, Purchaser is entitled to the fee
described in Section 9.6 of the Merger Agreement and any Principal Stockholder
within eighteen (18) month thereafter sells, transfers or assigns any of its
or his Shares to, or agrees to any of the foregoing during such eighteen month
period (provided any such agreement is consummated within three months after
the end of such eighteen month period) with, any person in an Alternative
Transaction (as defined below), then such Principal Stockholder shall pay to
the Purchaser a fee for each Share which is subject to such Alternative
Transaction equal to the amount by which the aggregate consideration per Share
payable under such Alternative Transaction exceeds $29.00. The term
"ALTERNATIVE TRANSACTION" means the occurrence of any of the following events:
(i) the Company or any subsidiary of the Company whose assets constitute
twenty percent (20%) or more of the Company's consolidated assets is acquired
by merger or otherwise by any person or group, other than the Parent, the
Purchaser, or any affiliate thereof (a "THIRD PARTY"); (ii) the Company or any
subsidiary of the Company enters into an agreement with a Third Party which
contemplates the acquisition of twenty percent (20%) or more of the total
assets of the Company and its subsidiaries, taken as a whole; (iii) the
Company, enters into a merger or other agreement with a Third Party which
contemplates the acquisition of more than twenty percent (20%) of the Shares;
or (iv) a Third Party acquires more than ten percent (10%) of the Shares from
the Principal Stockholders.
If an Alternative Transaction includes cash and non-cash consideration, with
the cash component equalling or exceeding $29 per Share, the fee payable to
the Purchaser shall be all of the non-cash consideration in such Alternative
Transaction and the excess over $29, if any, of the cash component in such
Alternative Transaction. If the Alternative Transaction includes cash and non-
cash consideration, with the cash component in such
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Alternative Transaction being less than $29, the fee payable to the Purchaser
will be that portion of each component of non-cash consideration in such
Alternative Transaction that equals the Excess Percentage. The "EXCESS
PERCENTAGE" shall be a fraction, the numerator of which is (a) the fair-market
value of the non-cash consideration in such Alternative Transaction (as
determined in accordance with the following sentence), plus the cash component
in the Alternative Transaction, less $29; and the denominator of which is (b)
the fair-market value of the non-cash consideration in such Alternative
Transaction (as determined in accordance with the following sentence). The
fair market value of the non-cash consideration in such Alternative
Transaction shall be determined by the mutual agreement of the Purchaser and
the Principal Stockholders participating in such Alternative Transaction
within three days of the consummation of such Alternative Transaction, or if
such agreement is not reached, the fair market value of the non-cash
consideration in such Alternative Transaction shall be determined by an
investment banking firm of national reputation agreed to in good faith by the
Principal Stockholders participating in such Alternative Transaction and the
Purchaser. The fees and expenses of such investment banking firm shall be
split evenly among the Principal Stockholders participating in such
Alternative Transaction, on the one hand, and the Purchaser, on the other
hand.
THE SEDAGHAT EMPLOYMENT AGREEMENT
The following is a summary of certain provisions of the Sedaghat Employment
Agreement. A copy of the Sedaghat Employment Agreement is filed as an exhibit
to Schedule 14D-1 and is incorporated herein by reference. The Sedaghat
Employment Agreement may be examined, and copies may be obtained, as set forth
in Section 7 above. The following summary is qualified in its entirety by
reference to the Confidentiality Agreement.
The Company has entered into the Sedaghat Employment Agreement with the
Executive for a three-year term commencing on the day the Offer is
consummated. Pursuant to the Sedaghat Employment Agreement, the Executive
shall serve as President of the Company and shall carry out such duties and
functions as are vested in him by the Company's By-laws and its Board of
Directors. The Executive shall be entitled to an annual salary of $250,000
plus a retention and non-competition bonus of $600,000 payable in installments
of $200,000 per year on each of December 31, 1997, 1998 and 1999. The
Executive shall also be entitled to a bonus of 100% of his salary based on
achieving a target of 20% EBITDA growth over the prior year. Such bonus shall
be adjusted so that, if EBITDA growth is between 15% and 20%, the bonus is
prorated. For EBITDA growth over 20%, a bonus of 10% of salary shall be paid
for each 1% of excess growth. The Executive shall be granted options
(the "INCENTIVE OPTIONS") to acquire 500,000 Class B Shares at an exercise
price equal to the 10 Day Average, which options will vest in 100,000 share
increments if EBITDA growth is 20% over the prior year. If EBITDA growth is
less than 20%, the 100,000 options for that year will be forfeited. Under a
Qualification and Listing of Shares between the Parent and the Executive, the
Parent has agreed to take the steps necessary so that any of the Class B
Shares issued to him pursuant to the Roll Over Options and the Incentive
Options will be freely tradeable.
If the Company elects to terminate the Sedaghat Employment Agreement without
cause, or the Executive dies, is disabled, or terminated for good reason, the
salary and benefits payable thereunder are paid out over the remaining term,
the retention bonus is paid in a lump sum and the performance bonus and
options are paid for the year of termination.
The Executive is also subject to a non-competition covenant and non-
solicitation and confidentiality obligations for one year after termination of
employment with an option of the Company to extend the covenant and such
obligations for one year upon the payment of $500,000.
11. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY
The purpose of the Offer and the Merger is for the Purchaser to acquire the
entire equity interest in the Company. Consummation of the Offer in accordance
with its terms and conditions will provide the Purchaser with at least a
majority equity interest in the Company. The Merger will allow the Purchaser
to acquire all outstanding Shares not tendered and purchased pursuant to the
Offer. The acquisition by Purchaser of the entire
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equity interest in the Company has been structured as a cash tender offer and
a cash merger in order to provide a prompt and orderly transfer of ownership
of the Company from the public shareholders of the Company to the Parent. The
purchase of Shares pursuant to the Offer will increase the likelihood that the
Merger will be consummated.
As soon as practicable following consummation of the Offer, the Purchaser
intends to seek to effect the Merger, pursuant to which each outstanding Share
(other than Shares held by the Purchaser or any Affiliate of the Purchaser,
Remaining Shares, Shares held in the treasury of the Company and Dissenting
Shares) would be converted into the right to receive, without interest, an
amount in cash equal to the price per share paid pursuant to the Offer. See
Section 10. The Purchaser has agreed in the Merger Agreement to vote any
Shares acquired pursuant to the Offer or otherwise owned by it in favor of the
Merger.
In general, under Delaware law the approval of both the stockholders and the
board of directors of a corporation is required to effect the merger of that
corporation with or into another corporation. Section 253 of the DGCL
provides, however, that if a parent corporation owns at least 90% of each
class of the outstanding shares of capital stock of a subsidiary corporation,
the parent corporation may merge with or into the subsidiary corporation
without any action or vote on the part of the board of directors or the other
stockholders of the subsidiary corporation. A merger effected under this law
is referred to herein as a "SHORT FORM MERGER." The Merger Agreement provides
that, if permitted by the DGCL and the Company's Certificate of Incorporation,
in the event that the Purchaser shall beneficially own at least 90% of the
outstanding Shares of each class of capital stock of the Company, the parties
to the Merger Agreement agree to take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after the
expiration of the Offer, but in no event later than ten business days
thereafter, without a meeting of the stockholders of the Company, in
accordance with Section 253 of the DGCL. The merger consideration in such a
merger shall be the same as the Merger Consideration. Unless the Merger is
consummated pursuant to a Short Form Merger, the approval of the holders of
the majority of the outstanding Shares will be required under Delaware law to
effect the Merger.
Following the Merger the indebtedness of the Purchaser incurred through the
loans pursuant to the Acquisition Credit Facility will become indebtedness of
the Surviving Corporation. The Purchaser anticipates that such indebtedness
will be refinanced following the Merger and thereafter repaid from the cash
flow of the operations of the Surviving Corporation.
Following the Merger the Purchaser anticipates that the Board of Directors
will be comprised of three directors nominated by the Parent, namely Messrs.
Wayne M.E. McLeod, Albert Gnat and Gordon S. Lang.
Except as indicated in this Offer to Purchase, the Purchaser has no present
plans or proposals which relate to or which would result in an extraordinary
corporate transaction, such as a merger, reorganization, liquidation,
relocation of operations, or sale or transfer of substantially all of the
Company's assets, involving the Company or any of its subsidiaries, or any
material changes in the Company's corporate structure or business or the
composition of its management or personnel.
12. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE ACT
REGISTRATION; MARGIN REGULATIONS
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and may reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by stockholders other than the Purchaser. The
Purchaser cannot predict whether the reduction in the number of Shares that
might otherwise trade publicly would have an adverse or beneficial effect on
the market price for or marketability of the Shares or whether it would cause
future market prices to be greater or less than the Offer Price.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the National Association of
Securities Dealers, Inc. ("NASD") for continued inclusion in NASDAQ, which
require that an issuer have at least 200,000 publicly traded shares, held by
at least 400 stockholders or 300 round lot stockholders, with a market value
of at least $1,000,000. If these standards are not
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met, or if there are not at least two registered and active market makers for
the Shares, the NASD rules provide that the Shares would no longer be
"qualified" for NASDAQ reporting and NASDAQ would cease to provide any
quotations. Shares held directly or indirectly by directors, officers or
beneficial owners of more than 10% of the Shares are not considered as being
publicly held for this purpose. If, as a result of the purchase of Shares
pursuant to the Offer or otherwise, the Shares no longer meet the requirements
of the NASD for continued inclusion in NASDAQ or in any other tier of the
NASDAQ Stock Market, as the case may be, the market for the Shares could be
adversely affected.
In the event that the Shares no longer meet the requirements of the NASD for
inclusion in any tier of the NASDAQ Stock Market it is possible that the
Shares would continue to trade in the over-the-counter market and that price
quotations would be reported by other sources. The extent of the public market
for the Shares and the availability of such quotations would, however, depend
upon the number of holders of Shares remaining at such time, the interest in
maintaining a market in Shares on the part of securities firms, the possible
termination of registration of the Shares under the Exchange Act, as described
below, and other factors.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "FEDERAL RESERVE
BOARD"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. Depending upon factors similar
to those described above regarding listing and market quotations, the Shares
might no longer constitute "margin securities" for the purposes of the Federal
Reserve Board's margin regulations and, therefore, could no longer be used as
collateral for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the
Commission if the Shares are neither listed on a national securities exchange
nor held by 300 or more holders of record. Termination of the registration of
the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission and would make certain of the provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b) of the Exchange
Act, the requirement of furnishing a proxy statement pursuant to Section 14(a)
of the Exchange Act in connection with stockholders' meetings and the related
requirement of furnishing an annual report to stockholders and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Shares. Furthermore,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant
to Rule 144 or Rule 144A promulgated under the Securities Act of 1933, as
amended (the "SECURITIES ACT").
IT IS THE CURRENT INTENTION OF THE PARENT TO CAUSE THE COMPANY TO TERMINATE
THE INCLUSION OF THE SHARES IN NASDAQ AND TO TERMINATE THE REGISTRATION OF THE
SHARES UNDER THE EXCHANGE ACT AFTER CONSUMMATION OF THE OFFER, IF THE
REQUIREMENTS FOR SUCH TERMINATION ARE MET. AS A RESULT, A NON-TENDERING
STOCKHOLDER MAY IN THE FUTURE HOLD A HIGHLY ILLIQUID INVESTMENT WITH NO
ASSURANCE AS TO THE TIMING OF ANY OPPORTUNITY FOR DISPOSITION.
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, stockholders of the Company may have certain rights
under the DGCL to dissent and demand appraisal of, and receive payment in cash
for the fair value of, the Shares. If the statutory procedures are complied
with, such rights could lead to a judicial determination of the fair value
(excluding any element of value arising from accomplishment or expectation of
the Merger) required to be paid in cash to such dissenting holders for their
Shares. Any such judicial determination of the fair value of Shares could be
based upon considerations other than or in addition to the price paid in the
Offer and the market value of the Shares, including asset values and the
investment value of the Shares. The value so determined could be more or less
than the Offer Price. The foregoing summary of the rights of dissenting
stockholders does not purport to be a complete statement of the procedures to
be followed by stockholders desiring to exercise their dissenters' rights. The
preservation and exercise of dissenters' rights are conditioned on strict
adherence to the applicable provisions of Delaware law.
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In addition, the Merger will have to comply with other applicable procedural
and substantive requirements of Delaware law, including any duties to minority
stockholders imposed upon a controlling or, if applicable, majority
stockholder.
The Commission has adopted Rule 13e-3 under the Exchange Act, which is
applicable to certain "going private" transactions and which may under certain
circumstances be applicable to the Merger or another business combination
following the purchase of Shares pursuant to the Offer in which the Purchaser
seeks to acquire the remaining Shares not held by it and the Shares remain
registered under the Exchange Act. The Purchaser believes, however, that if
the Merger is consummated within one year of its purchase of Shares pursuant
to the Offer, Rule 13e-3 would not be applicable to the Merger. The Purchaser
believes that if the Merger is not consummated within one year of its purchase
of Shares pursuant to the Offer, and if the Shares are still subject to the
Exchange Act, then Rule 13e-3 will be applicable to the Merger. Rule 13e-3
requires, among other things, that certain financial information concerning
the Company and certain information relating to the fairness of the proposed
transaction and the consideration offered to minority stockholders in such
transaction be filed with the Commission and disclosed to stockholders prior
to consummation of the transaction.
13. DIVIDENDS AND DISTRIBUTIONS
If, on or after the date of the Merger Agreement, the Company should (a)
split, combine or otherwise change the Shares or its capitalization, (b)
acquire or otherwise cause a reduction in the number of outstanding Shares or
other securities or (c) issue or sell additional Shares (other than the
issuance of Shares under exercise of Company Options granted prior to the date
of the Merger Agreement, in accordance with the terms of the Company Stock
Option Plan as then in effect or exercise of the Warrants), shares of any
other class of capital stock, other voting securities or any securities
convertible into or exchangeable for, or rights, warrants or options,
conditional or otherwise, to acquire, any of the foregoing, then, without
prejudice to the Purchaser's rights under Sections 1 and 15, the Purchaser, in
its sole discretion, may make such adjustments as it deems appropriate in the
Offer Price and other terms of the Offer, including, without limitation, the
number or type of securities offered to be purchased.
If, on or after the date of the Merger Agreement, the Company should declare
or pay any dividend on the Shares or make any distribution (including, without
limitation, cash dividends, the issuance of additional Shares pursuant to a
stock dividend or stock split, the issuance of other securities or the
issuance of rights for the purchase of any securities) with respect to the
Shares, payable or distributable to stockholders of record on a date prior to
the transfer of the Shares purchased pursuant to the Offer to the Purchaser or
its nominee or transferee on the Company's stock transfer records, then,
without prejudice to the Purchaser's rights under Sections 1 and 15: (a) the
Offer Price may, in the sole discretion of the Purchaser, be reduced by the
amount of any such cash dividend or cash distribution and (b) the whole of any
such noncash dividend, distribution or issuance to be received by the
tendering stockholders will (i) be received and held by the tendering
stockholders for the account of the Purchaser and will be required to be
promptly remitted and transferred by each tendering stockholder to the
Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer, or (ii) at the direction of the Purchaser, be
exercised for the benefit of the Purchaser, in which case the proceeds of such
exercise will promptly be remitted to the Purchaser. Pending such remittance
and subject to applicable law, the Purchaser will be entitled to all rights
and privileges as owner of any such dividend, distribution or right and may
withhold the entire purchase price for Shares tendered in the Offer or deduct
from the purchase price the amount or value thereof, as determined by the
Purchaser in its sole discretion.
The Merger Agreement prohibits the Company from taking any of the foregoing
actions without the prior written consent of the Purchaser.
14. EXTENSION OF TENDER PERIOD; AMENDMENT; TERMINATION
The Purchaser expressly reserves the right, in its sole discretion, at any
time or from time to time, regardless of whether or not any of the Conditions
set forth in Section 15 will have occurred or will have been determined by the
Purchaser to have occurred, subject to the terms of the Merger Agreement and
the applicable rules of the
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Commission, (i) to extend the period of time during which the Offer is open
and thereby delay acceptance for payment of, and the payment for, any Shares,
by giving oral or written notice of such extension to the Depositary, and (ii)
to amend the Offer in any respect by giving oral or written notice of such
amendment to the Depositary. In the Merger Agreement, the Purchaser and the
Company have agreed that the Offer may be extended from time to time at the
sole discretion of the Purchaser: (i) in order to comply with any provision of
the HSR Act or otherwise comply with law for the minimum period of time
reasonably necessary to so comply; and (ii) if any of the Conditions shall not
be satisfied, for the minimum period of time reasonably necessary to satisfy
such conditions, but, in either case, such extension shall not extend beyond
September 2, 1997.
The Purchaser also reserves the right, in its sole discretion, subject to
the terms of the Merger Agreement, in the event any of the Conditions
specified in Section 15 will not have been satisfied and so long as Shares
have not theretofore been accepted for payment, to delay (except as otherwise
required by applicable law) acceptance for payment of or payment for Shares or
to terminate the Offer and not accept for payment or pay for Shares.
If the Purchaser extends the Offer, or if the Purchaser (whether before or
after its acceptance for payment of Shares) is delayed in its purchase of or
payment for Shares or is unable to pay for Shares pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under the Offer,
the Depositary may retain tendered Shares on behalf of the Purchaser, and such
Shares may not be withdrawn except to the extent tendering stockholders are
entitled to withdrawal rights as described in Section 4. However, the ability
of the Purchaser to delay the payment for Shares which the Purchaser has
accepted for payment is limited by Rule 14e-l(c) under the Exchange Act, which
requires that a bidder pay the consideration offered or return the securities
deposited by or on behalf of holders of securities promptly after the
termination or withdrawal of such bidder's offer.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer (including the Minimum Condition), the
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the terms or information. With respect to a change in
price or a change in percentage of securities sought, a minimum ten business
day period is generally required to allow for adequate dissemination to
stockholders and investor response. If prior to the Expiration Date, the
Purchaser should decide to increase the Offer Price, such increase will be
applicable to all holders whose Shares are accepted for payment pursuant to
the Offer. As used in this Offer to Purchase, "business day" means any day
other than a 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, as computed
in accordance with Rule 14d-1 under the Exchange Act.
15. CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, the Purchaser shall not be
required to accept for payment or pay for, or may delay the acceptance for
payment of or payment for, any tendered Shares, or may, in its sole
discretion, terminate or amend the Offer as to any Shares not then paid for,
if (i) at the Expiration Date, any applicable waiting periods under the HSR
Act shall not have expired or been terminated; (ii) at the Expiration Date,
Shares that when added to the Shares already held by the Purchaser,
representing less than a majority of the outstanding Shares on a fully diluted
basis shall have been validly tendered and not withdrawn (the "MINIMUM
CONDITION"); or (iii) on or after June 16, 1997, and at or before the time of
acceptance of payment for any of such Shares any of the following events shall
occur and be continuing; provided, however, that any such event shall not be
required to be continuing if the Purchaser shall have publicly announced its
determination to waive such condition temporarily at the time of the
occurrence of such event:
(a) there shall have occurred and be continuing, (i) any general
suspension of, or limitation on times or prices for, trading in securities
on the NYSE or NASDAQ, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii) a
commencement of a war, armed
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hostilities or other international or national calamity directly or
indirectly involving the United States, which war, armed hostilities or
national calamity materially and adversely affects the Purchaser's ability
to pay for the Shares or has a material adverse effect on the value of the
Company or its Shares, or (iv) any limitation (whether or not mandatory) by
any governmental authority on the extension of credit by banks or other
lending institutions, which limitation materially and adversely affects the
Purchaser's ability to pay for the Shares;
(b) the Company shall have breached, or failed to comply with, in any
material respect any of its obligations under the Merger Agreement or any
representation or warranty of the Company in the Merger Agreement shall
have been incorrect in any material respect, when made or shall have since
ceased to be true and correct in any material respect, in each case, after
being provided written notice of such breach, failure to comply or
materially incorrect representation or warranty, and having failed to cure
the same within five (5) days of receipt of such notice, except for any
such breach or failure to comply with such obligations, or such failure of
such representations and warranties to be so true and correct (without
giving effect to any limitation as to "materiality" or "Material Adverse
Effect" set forth therein) that would not have a Material Adverse Effect
(as defined in the Merger Agreement);
(c) there shall have been instituted or pending any action or proceeding
by any government or governmental, regulatory or administrative authority
or agency or tribunal of competent authority, or any other person, domestic
or foreign or before any court or governmental, regulatory or
administrative authority or agency or tribunal of competent authority,
domestic or foreign, which would (i) make the purchase of, or payment for,
some or all of the Shares pursuant to the Offer or the Merger illegal; (ii)
prevent consummation of the Offer or the Merger; or (iii) impose
limitations on the ability of the Purchaser effectively (x) to acquire,
hold or operate the business of the Company and its subsidiaries taken as a
whole, or (y) to exercise full rights of ownership of the Shares acquired
by it, including, but not limited to, the right to vote the Shares
purchased by it on all matters properly presented to the stockholders of
the Company, which, in either case, would have a Material Adverse Effect;
(d) there shall have been any federal or state statute, rule or
regulation enacted or promulgated on or after the date of the Offer that
would reasonably be expected to, directly or indirectly, result in any of
the material adverse consequences referred to in clause (i), (ii) or (iii)
of subparagraph (c) above;
(e) any person, entity or "group" (as that term is used in Section
13(d)(3) of the Exchange Act), other than Mr. and Mrs. Sedaghat, the
Executive and their respective Affiliates, formed after the date hereof
shall have become the beneficial owner of twenty percent (20%) or more of
the Company's outstanding Shares;
(f) the Merger Agreement shall have been terminated in accordance with
its terms or the Purchaser shall have reached an agreement or understanding
in writing with the Company providing for termination or amendment of the
Offer; or
(g) the Board of Directors of the Company shall have publicly (including
by amendment of its Schedule 14D-9) withdrawn or adversely modified its
recommendation of acceptance of the Offer other than as a result of the
Purchaser's or the Parent's material breach of the Merger Agreement, and
shall have recommended to the stockholders another offer or shall have
resolved to do so;
which, in the judgment of the Purchaser, in any such case, and regardless of
the circumstances (including any action or inaction by the Purchaser) giving
rise to any such conditions, makes it inadvisable to proceed with the Offer
and/or with such acceptance for payment of or payment for the Shares.
The conditions set forth in this Section 15 (the "CONDITIONS") are for the
sole benefit of the Purchaser and may be asserted by the Purchaser may be
waived by the Purchaser, in whole or in part at any time and from time to
time, in each case, in its sole judgment. The failure by the Purchaser (or any
affiliate of the Purchaser) at any time to exercise any of the foregoing
rights will not be deemed a waiver of any right and each right will be deemed
an ongoing right which may be asserted at any time and from time to time.
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16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS
Except as described in this Section 16, based upon a review of publicly
available filings by the Company with the Commission and other publicly
available information concerning the Company, neither the Parent nor the
Purchaser is aware of any license or regulatory permit that appears to be
material to the business of the Company and its subsidiaries, taken as a
whole, that might be adversely affected by the acquisition of Shares by the
Purchaser or the Parent pursuant to the Offer, the Merger or otherwise or,
except as set forth below, of any approval or other action by any
governmental, administrative or regulatory agency or authority, domestic or
foreign, that would be required prior to the acquisition of Shares by the
Purchaser pursuant to the Offer, the Merger or otherwise. Should any such
approval or other action be required, the Purchaser and the Parent currently
contemplate that it will be sought. While the Purchaser does not currently
intend to delay the acceptance for payment of Shares tendered pursuant to the
Offer pending the outcome of any such matter, there can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that adverse consequences might not
result to the Company's business or that certain parts of the business of the
Company or the Parent might not have to be disposed of in the event that such
approvals were not obtained or any other actions were not taken. The
Purchaser's obligation under the Offer to accept for payment and pay for
Shares is subject to certain conditions, including conditions relating to
certain of the legal matters discussed in this Section 16. See Section 15.
State Takeover Statutes. Under Section 203 of the DGCL, a Delaware
corporation may not engage in any "business combination" with any "interested
stockholder" for a period of three (3) years following the date on which the
stockholder became an "interested stockholder," unless: (i) prior to such
date, the corporation's board of directors had approved either the "business
combination," or the transaction in which the stockholder became an
"interested stockholder"; (ii) upon consummation of the transaction in which
the stockholder became an "interested stockholder," the "interested
stockholder" owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding shares owned by
certain employee stock plans and persons who are directors and also officers
of the corporation); or (iii) on or subsequent to such date, the business
combination is approved by the corporation's board of directors and authorized
at an annual or special meeting of the corporation's stockholders, and not by
written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the "interested stockholder." In
general, the DGCL defines an "interested stockholder" as a person that owns
15% or more of the outstanding voting stock of a corporation and such person's
affiliates and associates. A "business combination" is defined to include a
merger or consolidation involving an "interested stockholder" and the
corporation or any other corporation, if, in the latter event, the merger or
consolidation is caused by an "interested stockholder," and as a result of
such merger or consolidation, the restrictions of the DGCL would not apply to
the surviving corporation, a sale or other disposition to an "interested
stockholder" of assets having a market value of 10% or more of the market
value of the assets or outstanding stock of the corporation, issuance of stock
of the corporation or any subsidiary to the "interested stockholder" other
than issuances which are made pro rata to all stockholders, any transaction
which has the effect of increasing the "interested stockholder's"
proportionate share of any class of stock or securities convertible into stock
of the corporation or any subsidiary or any receipt by the "interested
stockholder" (except proportionately as a stockholder) of any financial
benefits provided by the corporation or any subsidiary. The Section 203
limitations will not apply to the Merger, because the directors of the Company
have duly and validly approved the Merger pursuant to the terms of the Merger
Agreement and the acquisition of Shares pursuant to the Tender Agreement.
A number of other states have adopted "takeover" statutes that purport to
apply to attempts to acquire corporations that are incorporated in such
states, or whose business operations have substantial economic effects in such
states, or which have substantial assets, security holders, employees,
principal executive offices or principal places of business in such states.
In Edgar v. MITE Corporation, the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover Act,
which involved state securities laws that made takeovers of corporations
meeting certain requirements more difficult. However, in CTS Corp. v. Dynamics
Corp. of America, addressing Indiana's Control Share Acquisition Act, the
Supreme Court held that a state may, as a matter of corporate law and, in
particular, those laws concerning corporate governance, constitutionally
disqualify a
31
<PAGE>
potential acquiror from voting on the affairs of a target corporation without
prior approval of the remaining stockholders, provided that such laws were
applicable under certain conditions, in particular, that the corporation has a
substantial number of stockholders in the state and is incorporated there.
The Company, directly and through its subsidiaries, conducts business in a
number of states throughout the United States, some of which have enacted
"takeover" statutes. The Purchaser does not know whether any of these statutes
will, by their terms, apply to the Offer, and has not complied with any such
statutes. To the extent that certain provisions of these statutes purport to
apply to the Offer, the Purchaser believes that there are reasonable bases for
contesting such statutes. If any person should seek to apply any state
takeover statute, the Purchaser would take such action as then appears
desirable, which action may include challenging the validity or applicability
of any such statute in appropriate court proceedings. If it is asserted that
one or more takeover statutes apply to the Offer, and it is not determined by
an appropriate court that such statute or statutes do not apply or are invalid
as applied to the Offer, the Purchaser might be required to file certain
information with, or receive approvals from, the relevant state authorities,
and the Purchaser might be unable to purchase or pay for Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer.
In such case, the Purchaser may not be obligated to accept for payment or pay
for Shares tendered. See Section 14.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated following the
expiration of a 15 calendar day waiting period following the filing by the
Parent of a Notification and Report Form with respect to the Offer, unless the
Parent receives a request for additional information or documentary material
from the Antitrust Division or the FTC or unless early termination of the
waiting period is granted. If, within the initial 15 calendar day waiting
period, either the Antitrust Division or the FTC requests additional
information or material from the Parent concerning the Offer, the waiting
period will be extended and would expire at 11:59 p.m., New York City time, on
the tenth calendar day after the date of substantial compliance by the Parent
with such request. Only one extension of the waiting period pursuant to a
request for additional information is authorized by the HSR Act. Thereafter,
such waiting period may be extended only by court order or with the consent of
the Parent. In practice, complying with a request for additional information
or material can take a significant amount of time.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of the
Shares pursuant to the Offer and the Merger Agreement. At any time before or
after the Purchaser's acquisition of Shares, the Antitrust Division or the FTC
could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin the acquisition
of Shares pursuant to the Offer or otherwise or seeking divestiture of Shares
acquired by the Purchaser or divestiture of substantial assets of the Parent
or its subsidiaries. Private parties and state attorneys general may also
bring legal action under the antitrust laws in certain circumstances. Based
upon an examination of publicly available information relating to the business
in which the Parent and the Company are engaged, the Parent and the Purchaser
believe that the acquisition of Shares by the Purchaser will not violate the
antitrust laws. Nevertheless, there can be no assurance that a challenge to
the Offer or other acquisition of Shares by the Purchaser on antitrust grounds
will not be made or, if such challenge is made, of the result. See Section 15
for certain conditions to the Offer, including conditions with respect to
litigation and certain governmental actions.
Federal Reserve Board Regulations. The margin regulations promulgated by the
Federal Reserve Board place restrictions on the amount of credit that may be
extended for the purpose of purchasing margin stock (including the Shares) if
such credit is secured directly or indirectly by margin stock. The Purchaser
and the Parent believes that the financing of the acquisition of the Shares
will not be subject to the margin regulations.
17. FEES AND EXPENSES
The Parent and the Purchaser have retained Beacon to act as Dealer Manager
in connection with the Offer and the Parent has retained Beacon to serve as
financial advisor to the Parent in connection with the proposed
32
<PAGE>
acquisition of the Company. Upon the acquisition by the Purchaser of a
material interest in the Company or any of its businesses or assets, the
Parent has agreed to pay Beacon a fee of $1.25 million. The Parent will also
reimburse Beacon for reasonable out of pocket expenses, including reasonable
attorneys' fees and expenses, and has also agreed to indemnify Beacon against
certain liabilities and expenses in connection with the Offer, including
certain liabilities under the federal securities laws.
The Parent has also retained Salomon Brothers Inc to provide certain
financial advisory services to the Parent in connection with the proposed
acquisition of the Company. The Parent has agreed to pay Salomon Brothers Inc
a fee of $500,000 and will also reimburse Salomon Brothers Inc for reasonable
out of pocket expenses.
The Purchaser has retained Kissel-Blake Inc. to act as the Information Agent
and First Chicago Trust Company of New York to serve as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, Internet, telephone, telecopy, or facsimile transmission, telegraph
and personal interview and may request brokers, dealers, commercial banks,
trust companies and other nominees to forward the Offer material to beneficial
owners. The Information Agent and the Depositary each will receive reasonable
and customary compensation for their services, be reimbursed for certain
reasonable out of pocket expenses and be indemnified against certain
liabilities and expenses in connection therewith, including certain
liabilities and expenses under the federal securities laws.
Neither the Purchaser nor the Parent will pay any fees or commissions to any
broker or dealer or other person (other than the fees of the Dealer Manager,
the Information Agent and the Depositary described above) in connection with
the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies will be reimbursed by the Purchaser upon
request for customary mailing and handling expenses incurred by them in
forwarding material to their customers.
18. MISCELLANEOUS
The Purchaser is not aware of any jurisdiction in which the making of the
Offer is not in compliance with applicable law. If the Purchaser becomes aware
of any jurisdiction in which the making of the Offer would not be in
compliance with applicable law, the Purchaser will make a good faith effort to
comply with any such law. If, after such good faith effort, the Purchaser
cannot comply with any such law, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares residing in
such jurisdiction. In any jurisdiction whose securities or blue-sky laws
require the Offer to be made by a licensed broker or dealer, the Offer shall
be deemed to be made on behalf of the Purchaser by The Beacon Group Capital
Services, L.L.C., the Dealer Manager for the Offer, or one or more registered
brokers or dealers which are licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
The Purchaser and the Parent have filed with the Commission the Tender Offer
Statement on Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act,
together with exhibits, furnishing certain additional information with respect
to the Offer, and may file amendments thereto. The Schedule 14D-1 and any
amendments thereto, including exhibits, should be available for inspection and
copies should be obtainable in the manner set forth in Section 7 (except that
such material will not be available at the regional offices of the
Commission).
SEAWOLF ACQUISITION CORPORATION
June 23, 1997
33
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT AND THE PURCHASER
1. The Parent. The name, business address, present principal occupation or
employment and five-year employment history of each director and executive
officer of the Parent and certain other information is set forth below. Unless
otherwise indicated below, the address of each director and executive officer
is 105 Gordon Baker Road, Willowdale, Ontario, Canada, M2H 3P8. Unless
otherwise indicated, each occupation set forth opposite such director's or
executive officer's name refers to employment with the Parent. Except as
noted, none of the persons listed below owns any Shares or has engaged in any
transactions with respect to Shares during the past 60 days. During the last
five years, neither the Parent nor any director or executive officer of the
Parent indicated has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) nor was such person a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction, and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws. Unless otherwise indicated, all directors and
executive officers listed below are citizens of Canada.
<TABLE>
<CAPTION>
NAME (AGE) EMPLOYMENT HISTORY
---------- ------------------
<C> <S>
Gordon S. Lang(72) Chairman of the Board of the Parent. Director since
April 30, 1957. Also Member of Executive Committee,
Human Resources Committee and Nominating and
Governance Committee.
Wayne M.E. McLeod(57) President and Chief Executive Officer of the Parent
since 1990. Director since
May 26, 1982. Also Chairman of Executive Committee.
Senior Vice President, Corporate Development of the
Larry A. Eddy(54) Parent since March 1, 1988.
Meldon H. Snider(56) Senior Vice President, Finance and Administration of
the Parent since February 1983.
Janis M. Wade(46) Senior Vice President, Human Resources and Corporate
Communications of Parent since December 1995;
previously Vice President, Human Resources of the
Parent for more than 5 years.
Robert C. Broad(63) Vice President of the Parent since 1989; President of
CCL Label, a division of the Parent, since January
1994; previously Vice President, Investor Relations of
the Parent.
Christopher Denney(52) Vice President of the Parent and President of Kolmar
Laboratories, a division of the Parent, since August
1994; President of Kolmar Laboratories from January to
August 1994; Chief Executive of CCL Custom
Manufacturing United Kingdom, a division of the
Parent, to December 1993; previously Operations
Director of CCL Custom Manufacturing United Kingdom
until December 1992.
L. George Inman(42) Vice President of the Parent and Senior Vice
President, Finance and Administration of CCL Custom
Manufacturing, a division of the Parent, since
December 1992; previously Vice President of the Parent
and Vice President, Finance and Administration, CCL
Consumer Products Group of the Parent.
Steven W. Lancaster(48) Vice President and Treasurer of the Parent since 1991.
Donald G. Lang(42) Vice President of the Parent and President, CCL Custom
Manufacturing, a division of the Parent since January
1993; previously President, Aerosol Division, CCL
Custom Manufacturing, a division of the Parent.
Stuart W. Lang(46) President of CCL Label Canada, a division of the
Parent, since October 1991. Director of the Parent
since May 23, 1991. Also Chairman of Nominating and
Governance Committee.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
NAME (AGE) EMPLOYMENT HISTORY
---------- ------------------
<C> <S>
Mary T. Roy(40) Vice President, Environmental and Regulatory Services
of the Parent since January 1995; previously Director
of Environmental and Regulatory Services of the Parent.
Ronald N. Terin(49) Vice President of the Parent and Vice President,
Finance of CCL Label since November 1995; previously
Vice President & Corporate Controller of the Parent and
Vice President, Finance of CCL Label since June 1994;
previously Vice President & Corporate Controller of the
Parent.
Rami E. Younes(46) Vice President of the Parent and President and Chief
Executive Officer of CCL Container Manufacturing, a
division of the Parent, since November 1993; previously
President and Chief Executive Officer, CCL Container
Manufacturing division.
Bohdan I. Sirota(46) Assistant Secretary and General Counsel of the Parent
since May 1990.
Dermot G. Coughlan(61) Chairman and Chief Executive Officer of Derlan
Industries Limited (North American industrial
corporation serving aerospace and industrial technology
markets) since 1984. Director of the Parent since May
23, 1991. Also Chairman of Human Resources Committee.
Arnold Englander(59) Partner, Lang Michener (Barristers & Solicitors) since
1974. Director of the Parent since April 22, 1978. Also
Member of Audit Committee. The address of Mr. Englander
is Lang Michener, BCE Place, Suite 2500, 181 Bay
Street, Toronto, Ontario, Canada M5J 2T7.
Albert Gnat, Q.C.(58) Partner, Lang Michener (Barristers & Solicitors) since
1974. Director of the Parent since March 14, 1973, and
Secretary. Also Member of Executive Committee. The
address of Mr. Gnat is Lang Michener, BCE Place, Suite
2500, 181 Bay Street, Toronto, Ontario, Canada M5J 2T7.
Jon K. Grant(62) Chairman of Canada Lands Company Limited (Crown
corporation administering sale of federal lands).
Director of the Parent since December 8, 1994. Prior to
that, Chairman of the Quaker Oats Company of Canada
Limited, July 1993 to June 30, 1994. Prior to that,
Chairman and Chief Executive Officer of the Quaker Oats
Company of Canada Limited. Also Chairman of the
Environment and Health & Safety Committee and Member of
Nominating and Governance Committee.
Edward G. Johnston(69) Corporate Director since July, 1993. Director of the
Parent and Vice Chairman since March 21, 1972. Also
Member of Nominating and Governance Committee, Human
Resources Committee and Environment and Health & Safety
Committee.
David R. Pepall(73) Corporate Director since 1986; President of PPG Canada
Inc. from 1980 to 1986, at which time he retired.
Director of the Parent since February 27, 1980. Also
Member of Audit Committee and Human Resources
Committee.
Lawrence G. Tapp(59) Dean of the Richard Ivey School of Business, University
of Western Ontario since July 1995. Executive in
Residence, Faculty of Management University of Toronto
since 1992. Director of the Parent since December 8,
1994. Also Chairman of the Audit Committee and Member
of Human Resources Committee. Mr. Tapp owns 1,000
Shares that were purchased more than 60 days prior to
the execution of the Merger Agreement.
</TABLE>
I-2
<PAGE>
2. The Purchaser. The name, business address, present principal occupation
or employment and five-year employment history of each director and executive
officer of the Purchaser and certain other information is set forth below.
Unless otherwise indicated below, the address of each director and executive
officer is 105 Gordon Baker Road, Willowdale, Ontario, Canada, M2H 3P8. Unless
otherwise indicated, each occupation set forth opposite such director's or
executive officer's name refers to employment with the Purchaser. None of the
persons listed below owns any Shares or has engaged in any transactions with
respect to Shares during the past 60 days. During the last five years, neither
the Purchaser nor any director or executive officer of the Purchaser indicated
has been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) nor was such person a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction, and as a result of
such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting activities subject to, federal
or state securities laws or finding any violation of such laws. Unless
otherwise indicated, all directors and executive officers listed below are
citizens of Canada.
<TABLE>
<CAPTION>
NAME AND TITLE EMPLOYMENT HISTORY
-------------- ------------------
<C> <S>
Wayne M.E. McLeod See part (1) above.
Director and President
Larry A. Eddy See part (1) above.
Vice President
Meldon H. Snider See part (1) above.
Vice President
Steven W. Lancaster See part (1) above.
Treasurer
Geofrey Myers (46) Partner, Lang Michener (Barristers and Solicitors)
Secretary since 1984. The address of Mr. Myers is Lang Michener,
BCE Place, Suite 2500, 181 Bay Street, Toronto,
Ontario, Canada M5J 2T7.
</TABLE>
I-3
<PAGE>
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each holder or his broker, dealer,
commercial bank or other nominee to the Depositary at one of its addresses set
forth below.
The Depositary for the Offer is:
First Chicago Trust Company of New York
<TABLE>
<S> <C> <C>
By Mail: By Hand: By Overnight Courier:
First Chicago Trust First Chicago Trust First Chicago Trust
Company of New York Company of New York Company of New York
Tenders & Exchanges ATTN: Tenders & Exchanges Tenders & Exchanges
P.O. Box 2569 c/o The Depository Trust Company 14 Wall Street, 8th Floor
Suite 4660-SEDA 55 Water Street, DTC TAD Suite 4680-SEDA
Jersey City, New Jersey Vietnam Veterans Memorial Plaza New York, New York 10005
07303-2569 New York, New York 10041
</TABLE>
Confirm Receipt of Notice of Guaranteed Delivery:
201-222-4707
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery
may be directed to the Information Agent or the Dealer Manager at their
respective telephone numbers and locations listed below. You may also contact
your broker, dealer, commercial bank or trust company or nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
Kissel-Blake Inc.
110 Wall Street
New York, New York 10005
Banks and Brokers call: (212) 344-6733
All Others call Toll Free: (800) 564-7733
The Dealer Manager for the Offer is:
THE BEACON GROUP
CAPITAL SERVICES, L.L.C.
399 Park Avenue
New York, New York 10022
Telephone: (212) 339-9108
<PAGE>
EXHIBIT 99(A)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
SEDA SPECIALTY PACKAGING CORP.
PURSUANT TO THE OFFER TO PURCHASE
DATED JUNE 23, 1997
BY
SEAWOLF ACQUISITION CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
CCL INDUSTRIES INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY
TIME, ON MONDAY, JULY 21, 1997, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
By Mail: By Hand: By Overnight Courier:
<S> <C> <C>
First Chicago Trust First Chicago Trust First Chicago Trust
Company of New York Company of New York Company of New York
Tenders & Exchanges ATTN: Tenders & Exchanges Tenders & Exchanges
P. O. Box 2569 c/o The Depository Trust Company 14 Wall Street, 8th Floor
Suite 4660 -- SEDA 55 Water Street DTC TAD Suite 4680--SEDA
Jersey City, New Jersey 07303-2569 Vietnam Veterans Memorial Plaza New York, New York 10005
New York, New York 10041
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING
THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates are to be forwarded herewith or if delivery is to be made by
book-entry transfer to the Depositary's account at The Depository Trust
Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC"), which
are hereinafter collectively referred to as the "Book-Entry Transfer
Facilities," pursuant to the procedures set forth in Section 3 of the Offer to
Purchase (as defined below). Stockholders whose certificates are not
immediately available or who cannot deliver their certificates and all other
documents required hereby to the Depositary prior to the Expiration Date (as
defined in Section 1 of the Offer to Purchase) or who cannot comply with the
book-entry transfer procedures on a timely basis must tender their Shares (as
defined below) according to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. See Instruction 2. Delivery of documents
to a Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
<PAGE>
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH DTC OR PDTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution__________________________________________________
Check Box of Book-Entry Transfer Facility (check one):
[_] DTC [_] PDTC
Account Number_________________________________________________________________
Transaction Code Number________________________________________________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY SENT TO THE DEPOSITARY PRIOR TO THE DATE HEREOF AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s)_________________________________________________
Window Ticket Number (if any)__________________________________________________
Date of Execution of Notice of Guaranteed Delivery_____________________________
Name of Institution that Guaranteed Delivery___________________________________
Check Box of Book-Entry Transfer Facility if Delivered by Book-Entry Transfer
(check one):
[_] DTC [_] PDTC
Account Number (if delivered by Book-Entry Transfer)___________________________
Transaction Code Number________________________________________________________
BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) CERTIFICATE(S) TENDERED
APPEAR(S) ON CERTIFICATES(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE REGISTERED BY SHARES
NUMBER(S)* CERTIFICATE(S)** TENDERED**
<S> <C> <C> <C>
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
TOTAL SHARES
- -----------------------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by any certificates delivered to the Depositary are being tendered.
See Instruction 4.
- -----------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Seawolf Acquisition Corporation (the
"Purchaser"), a Delaware corporation and an indirect wholly owned subsidiary
of CCL Industries Inc., a Canadian corporation (the "Parent"), the above-
described shares (the "Shares") of common stock, par value U.S. $0.001 per
share (the "Common Stock"), of SEDA Specialty Packaging Corp., a Delaware
corporation (the "Company"), at U.S. $29.00 per Share, net to the seller in
cash, without interest, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated June 23, 1997 (the "Offer to Purchase"),
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which, together with the Offer to Purchase, constitutes the "Offer").
Subject to and effective upon acceptance for payment of the Shares tendered
herewith in accordance with the terms and subject to the conditions of the
Offer, the undersigned hereby sells, assigns and transfers to, or upon the
order of, the Purchaser all right, title and interest in and to all of the
Shares that are being tendered hereby (and any and all other Shares or other
securities ("Other Securities") or property issued or issuable in respect
thereof on or after June 16, 1997) and irrevocably appoints the Depositary the
true and lawful agent and attorney-in-fact of the undersigned with respect to
such Shares and Other Securities with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (i) deliver certificates for such Shares (and any such Other Securities),
or transfer ownership of such Shares (and any such Other Securities) on the
account books maintained by any of the Book-Entry Transfer Facilities,
together in any such case with all accompanying evidences of transfer and
authenticity, to or upon the order of the Purchaser, upon receipt by the
Depositary, as the undersigned's agent, of the purchase price (adjusted, if
appropriate, as provided in the Offer to Purchase), (ii) present such Shares
and any such Other Securities for transfer on the books of the Company and
(iii) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Shares and any such Other Securities, all in accordance with
the terms and subject to the conditions of the Offer.
The undersigned hereby irrevocably appoints Wayne M.E. McLeod and Albert
Gnat, and each of them or any other designees of the Purchaser, the attorneys
and proxies of the undersigned, each with full power of substitution, to
exercise such voting and other rights as each such attorney and proxy or his
substitute shall, in his sole discretion, deem proper, and otherwise act
(including pursuant to written consent) with respect to all of the Shares (and
any Other Securities) tendered hereby which have been accepted for payment by
the Purchaser prior to the time of such vote or action, which the undersigned
is entitled to vote at any meeting of stockholders of the Company (whether
annual or special and whether or not an adjourned meeting), or written consent
in lieu of such meeting, or otherwise. This proxy is coupled with an interest
in the Shares (and any Other Securities) tendered hereby and is irrevocable
and is granted in consideration of, and is effective upon, the acceptance for
payment of such Shares (and any Other Securities) by the Purchaser in
accordance with the terms of the Offer. Such acceptance for payment shall
revoke all prior proxies granted by the undersigned with respect to such
Shares (and any Other Securities) and no subsequent proxies may be given (and
if given will be deemed not to be effective) with respect thereto by the
undersigned. The Purchaser reserves the right to require that, in order for
Shares (and any Other Securities) to be deemed validly tendered, immediately
upon the Purchaser's acceptance for payment of such Shares (and any Other
Securities), the Purchaser is able to exercise full voting and other rights of
a record holder or beneficial holder, including rights in respect of acting by
written consent, with respect to such Shares (and any Other Securities).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares (and any
Other Securities) tendered hereby, and that when the same are accepted for
payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances, and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any signature guarantees
or additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to complete the
3
<PAGE>
sale, assignment and transfer of the Shares (and any Other Securities)
tendered hereby. In addition, the undersigned shall promptly remit and
transfer to the Depositary for the account of the Purchaser any such Other
Securities issued to the undersigned on or after June 16, 1997, in respect of
the Shares tendered hereby, accompanied by appropriate documentation of
transfer, and pending such remittance or appropriate assurance thereof, the
Purchaser shall be entitled to all rights and privileges as owner of any such
Other Securities and may withhold the entire purchase price or deduct from the
purchase price the amount or value thereof, as determined by the Purchaser in
its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned. Except as stated
in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer. The undersigned recognizes that under certain circumstances set
forth in the Offer to Purchase, the Purchaser may not be required to accept
for payment any of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
for Shares not tendered or not accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment (and accompanying documents,
as appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Shares Tendered." In the event that both the Special Delivery
Instructions and the Special Payment Instructions are completed, please issue
the check for the purchase price and/or return any certificates for Shares not
purchased (together with accompanying documents as appropriate) in the name(s)
of, and deliver said check and/or return such certificates to, the person or
persons so indicated. Stockholders tendering Shares by book-entry transfer may
request that any Shares not accepted for payment be returned by crediting such
account maintained at DTC or PDTC as such stockholder may designate by making
an appropriate entry under "Special Payment Instructions." The undersigned
recognizes that the Purchaser has no obligation pursuant to the Special
Payment Instructions to transfer any Shares from the name of the registered
holder(s) thereof if the Purchaser does not accept for payment any of the
Shares so tendered.
4
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to
be issued in the name of someone other than the undersigned.
Issue: [_] Check [_] Certificate(s) to:
Name
-------------------------------------------------------------------
(Please Print)
Address
----------------------------------------------------------------
-----------------------------------------------------------------------
(Include Zip Code)
-----------------------------------------------------------------------
(Tax Identification or Social Security Number)
(See Substitute Form W-9 Included Herein)
-----------------------------------------------------------------------
(Account Number)
5
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to
be sent to someone other than the undersigned or to the undersigned at an
address other than that appearing under "Description of Shares Tendered."
Issue: [_] Check [_] Certificate(s) to:
Name
-------------------------------------------------------------------
(Please Print)
Address
----------------------------------------------------------------
-----------------------------------------------------------------------
(Include Zip Code)
-----------------------------------------------------------------------
(Tax Identification or Social Security Number)
(See Substitute Form W-9 Included Herein)
6
<PAGE>
- --------------------------------------------------------------------------------
STOCKHOLDERS SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
_____________________________________________________________________________
_____________________________________________________________________________
(Signature(s) of Owner(s))
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or any other
person acting in a fiduciary or representative capacity, please provide the
following information. See Instruction 5.)
Dated____________________________________________________________, 1997
Name(s)________________________________________________________________
_______________________________________________________________________
(Please Print)
Capacity (full title)__________________________________________________
Address _______________________________________________________________
_______________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number_________________________________________
Tax Identification or
Social Security Number_________________________________________________
_______________________________________________________________________
(See Substitute Form W-9 Below)
GUARANTEE OF SIGNATURES
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature __________________________________________________
Name __________________________________________________________________
(Please Print)
Name of Firm __________________________________________________________
Address _______________________________________________________________
(Include Zip Code)
Area Code and Telephone Number ________________________________________
Dated ___________________________________________________________, 1997
- --------------------------------------------------------------------------------
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Signatures on all Letters of Transmittal must be
guaranteed by a recognized member of a Medallion Signature Guarantee Program
(each of the foregoing being referred to as an "Eligible Institution"), unless
(i) this Letter of Transmittal is signed by the registered holder(s) of Shares
(which term, for the purposes of this document, shall include any participant
in a Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of Shares) and such holder(s) has (have) not completed
either the box entitled "Special Delivery Instructions" or the box entitled
"Special Payment Instructions" on this Letter of Transmittal or (ii) such
Shares are tendered for the account of an Eligible Institution. See
Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be completed by stockholders
either if certificates for Shares are to be forwarded herewith or if a tender
of Shares is to be made pursuant to the procedures for delivery by book-entry
transfer set forth in Section 3 of the Offer to Purchase. Certificates for all
physically tendered Shares, or confirmation ("Book-Entry Confirmation") of any
book-entry transfer into the Depositary's account at DTC or PDTC of Shares
delivered by book-entry transfer as well as a properly completed and duly
executed Letter of Transmittal, must be received by the Depositary, at one of
the addresses set forth herein prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase). Stockholders whose certificates are not
immediately available or who cannot deliver their certificates and all other
required documents to the Depositary prior to the Expiration Date or who
cannot comply with the book-entry transfer procedures on a timely basis may
tender their Shares by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. Pursuant to such procedure, (i) such
tender must be made by or through an Eligible Institution, (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in
the form provided by the Purchaser, must be received by the Depositary (as
provided in (iii) below) prior to the Expiration Date and (iii) the
certificates for all physically tendered Shares (or Book-Entry Confirmation
with respect to such Shares), as well as a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof) with
any required signature guarantees and any other documents required by this
Letter of Transmittal, must be received by the Depositary within three (3)
Trading Days (as defined in the Offer to Purchase) after the date of execution
of such Notice of Guaranteed Delivery, all as provided in Section 3 of the
Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, CERTIFICATES FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-
ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND DOCUMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO
INSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or manually signed facsimile thereof), waive
any right to receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate number and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to stockholders who tender by book-entry
transfer.) If fewer than all the Shares evidenced by any certificate submitted
are to be tendered, fill in the number of Shares which are to be tendered in
the box entitled "Number of Shares Tendered." In such case, new certificate(s)
for the remainder of the Shares that were evidenced by the old certificate(s)
will be sent to the registered holder, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after
the Expiration Date. All Shares represented by certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
8
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face of the certificate(s) without alteration, enlargement or
any change whatsoever. If any of the Shares tendered hereby are held of record
by two or more persons, all such persons must sign this Letter of Transmittal.
If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, agent,
officer of a corporation or any person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to the Purchaser of such person's authority so to act must be
submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares evidenced by certificates listed and transmitted hereby, no
endorsements of certificates or separate stock powers are required unless
payment is to be made to or certificates for Shares not tendered or purchased
are to be issued in the name of a person other than the registered holder(s).
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares, evidenced by certificates listed and
transmitted hereby, the certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names
of the registered holder or holders appear on the certificates. Signatures on
such certificates or stock powers must be guaranteed by an Eligible
Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect
to the transfer and sale of Shares to it or its order pursuant to the Offer.
If, however, payment of the purchase price is to be made to, or if
certificates for Shares not tendered or purchased are to be registered in the
name of, any person other than the registered holder(s), or if certificates
for tendered shares are registered in the name of any person other than the
person(s) signing this letter of transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder(s) or such other person)
payable on account of the transfer to such person will be deducted from the
purchase price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) LISTED IN THIS LETTER
OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check is to be issued
in the name of and/or certificates for Shares not tendered or not purchased
are to be returned to a person other than signer of this Letter of Transmittal
or if a check is to be sent and/or such certificates are to be returned to
someone other than the signer above, the appropriate boxes on this Letter of
Transmittal should be completed. Stockholders tendering Shares by book-entry
transfer may request that Shares not purchased be credited to such account
maintained at any of the Book-Entry Transfer Facilities as such stockholder
may designate under "Special Delivery Instructions." If no such instructions
are given, any such Share not purchased will be returned by crediting the
account at the Book-Entry Transfer Facilities designated above.
8. REQUEST FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may
be directed to, or additional copies of the Offer to Purchase and this Letter
of Transmittal may be obtained from, the Information Agent or Dealer Manager
at the telephone numbers and addresses set forth below. Stockholders may also
contact their broker, dealer, commercial bank or trust company.
9. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to
Purchase, the Purchaser reserves the right in its sole discretion to waive in
whole or in part at any time or from time to time any of the specified
conditions of the Offer or any defect or irregularity in tender with regard to
any Shares tendered.
9
<PAGE>
10. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"),
generally the stockholder's social security or employer identification number,
on Substitute Form W-9, which is provided under "Important Tax Information"
below, and to certify whether he or she is subject to backup withholding of
federal income tax. If a tendering stockholder is subject to backup
withholding, he or she must cross out item (2) of the Certification Box on
Substitute Form W-9. Failure to provide the information on Substitute Form W-9
may subject the tendering stockholder to 31% federal income tax withholding on
the payment of the purchase price. If the tendering stockholder has not been
issued a TIN and has applied for a number or intends to apply for a number in
the near future, he or she should write "Applied For" in the space provided
for the TIN in Part I, sign and date the Substitute Form W-9 and sign and date
the Certificate of Awaiting Taxpayer Identification Number. If "Applied For"
is written in Part I and the Depositary is not provided with a TIN within 60
days, the Depositary will withhold 31% of payments for surrendered Shares
thereafter until a TIN is provided to the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE
HEREOF) TOGETHER WITH CERTIFICATES (OR BOOK-ENTRY CONFIRMATION) AND ALL OTHER
REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY
THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO
PURCHASE).
10
<PAGE>
IMPORTANT TAX INFORMATION
Under federal tax law, a stockholder whose tendered Shares are accepted for
payment is required to provide the Depositary (as payor) with such
stockholder's correct TIN on Substitute Form W-9 below. If such stockholder is
an individual, the TIN is his Social Security Number. If the Depositary is not
provided with the correct TIN or an adequate basis for exemption, the
stockholder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, payments that are made to such stockholder with respect
to Shares purchased pursuant to the Offer may be subject to backup withholding
in an amount equal to 31% of the gross proceeds resulting from the Offer.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that stockholder must submit an IRS Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Depositary. See the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the stockholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will
be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of his correct TIN by completing the
Substitute Form W-9 contained herein certifying that the TIN provided on the
Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN)
and that (i) the stockholder is exempt from backup withholding, (ii) the
stockholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of failure to report all interest or
dividends, or (iii) the Internal Revenue Service has notified the stockholder
that he or she is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report. If the tendering stockholder has not been issued a TIN and
has applied for a number or intends to apply for a number in the near future,
he or she should write "Applied For" in the space provided for the TIN in Part
1, sign and date the Substitute Form W-9 and sign and date the Certificate of
Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I
and the Depositary is not provided with a TIN within 60 days, the Depositary
will withhold 31% of all payments of the purchase price until a TIN is
provided to the Depositary.
11
<PAGE>
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
- --------------------------------------------------------------------------------
PART I--PLEASE PROVIDE
SUBSTITUTE FORM W-9 YOUR TIN IN THE BOX AT _____________________
RIGHT AND CERTIFY BY SOCIAL SECURITY NUMBER
SIGNING AND DATING
BELOW.
Department of the OR ___________________
Treasury Internal EMPLOYER
Revenue Service IDENTIFICATION NUMBER
(If awaiting TIN write
"Applied For")
--------------------------------------------------------
Payer's Request for PART II--For Payees not subject to backup
Taxpayer withholding, see the enclosed Guidelines for
Identification Number Certification of Taxpayer Identification Number
(TIN) on Substitute Form W-9 and complete as
instructed therein.
- -------------------------------------------------------------------------------
CERTIFICATION--Under the penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or a Taxpayer Identification Number has not been issued to
me) and either (a) I have mailed or delivered an application to
receive a Taxpayer Identification Number to the appropriate
Internal Revenue Service ("IRS") or Social Security Administration
office or (b) I intend to mail or deliver an application in the
near future. (I understand that if I do not provide a Taxpayer
Identification Number within (60) days, 31% of all reportable
payments made to me thereafter will be withheld until I provide a
number); and
(2) I am not subject to backup withholding either because I am exempt
from backup withholding, I have not been notified by the IRS that I
am subject to backup withholding as a result of a failure to report
all interest or dividends, or the IRS has notified me that I am no
longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you
have been notified by the IRS that you are subject to backup
withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were
subject to backup withholding you received another notification from
the IRS that you are no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the enclosed Guidelines.)
- --------------------------------------------------------------------------------
SIGNATURE______________________________ DATE_______________ 1997
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN
PART I OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalities of perjury that a taxpayer identification
number has not been issued to me, and either (i) I have mailed or
delivered an application to receive a taxpayer identification number
to the appropriate Internal Revenue Service Center or Social Security
Administration Office or (ii) I intend to mail or deliver an
application in the near future. I understand that if I do not provide
a taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I
provide a number.
Signature(s):__________________________ Dated:_______________________
- --------------------------------------------------------------------------------
12
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
If you have any questions regarding the Offer, please contact the Information
Agent or the Dealer Manager:
The Information Agent for the Offer is:
[LOGO OF KISSEL BLAKE INC.]
110 Wall Street
New York, New York 10005
Banks and Brokers Call: (212) 344-6733
All Others Call Toll-Free: (800) 564-7733
The Dealer Manager for the Offer is:
THE BEACON GROUP
CAPITAL SERVICES, L.L.C.
399 Park Avenue
New York, New York 10022
Telephone: (212) 339-9108
NAME(S) AND ADDRESS(ES)
OF REGISTERED HOLDER(S)
-------------------------------------
-------------------------------------
<PAGE>
EXHIBIT 99(A)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
SEDA SPECIALTY PACKAGING CORP.
TO
SEAWOLF ACQUISITION CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
CCL INDUSTRIES INC.
This form, or a form substantially equivalent to this form, must be used to
accept the Offer (as defined below) if the certificates representing shares of
common stock, par value $0.001 per share (the "Shares"), are not immediately
available or if the procedure for book-entry transfer cannot be completed on a
timely basis or if time will not permit all required documents to reach the
Depositary at or prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase). Such form may be delivered by hand or transmitted by
facsimile transmission or mail to the Depositary. See Section 3 of the Offer
to Purchase.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Hand or Overnight Courier: By Hand:
Tenders & Exchanges Tenders & Exchanges ATTN: Tenders & Exchanges
P. O. Box 2569 14 Wall Street, 8th Floor c/o The Depository Trust Company
Suite 4660 -- SEDA Suite 4680-SEDA 55 Water Street, DTC TAD
Jersey City, New Jersey New York, New York 10005 Vietnam Veterans Memorial Hospital
07303-2569 New York, New York 10041
</TABLE>
By Facsimile Transmission:
(For Eligible Institutions Only)
(201) 222-4720
or
(201) 222-4721
Confirm Receipt of Notice of Guaranteed Delivery by Telephone:
(201) 222-4707
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER
THAN AS LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
1
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Seawolf Acquisition Corporation, a
Delaware corporation, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated June 23, 1997 (the "Offer to Purchase") and the
related Letter of Transmittal (which together with any supplements or
amendments thereto collectively constitute the "Offer"), receipt of which is
hereby acknowledged, the number of Shares indicated below pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
<TABLE>
<S> <C>
Number of Shares: _________________________ Name(s) of Record Holder(s):
___________________________________________
Share Certificate Numbers (if available): ___________________________________________
___________________________________________ Please Type or Print
___________________________________________ Address(es)________________________________
___________________________________________
___________________________________________
If Shares will be delivered by book-entry
transfer, check one box: Zip Code
Area Code and Telephone Number:____________
[_] The Depository Trust Company ___________________________________________
[_] Philadelphia Depository Trust Company
___________________________________________
___________________________________________
Account Number_____________________________ ___________________________________________
Signature(s)
Dated:_______________________________, 1997 Dated:_______________________________, 1997
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a recognized member of a Medallion Signature Guarantee
Program or any other "eligible guarantor institution" as defined in Rule 17Ad-
15 under the Securities Exchange Act of 1934, as amended (each, an "Eligible
Institution"), hereby guarantees that either the certificates representing the
Shares tendered hereby in proper form for transfer, or timely confirmation of
a book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company
(pursuant to guaranteed delivery procedures set forth in Section 3 of the
Offer to Purchase), together with a properly completed and duly executed
Letter of Transmittal (or manually signed facsimile thereof) or, in the case
of book-entry, an Agent's Message (as defined in the Offer to Purchase) with
any required signature guarantees and any other documents required by the
Letter of Transmittal, will be received by the Depositary at one of its
addresses set forth above within three (3) Trading Days (as defined in the
Offer to Purchase) after the date of execution hereof.
THE ELIGIBLE INSTITUTION THAT COMPLETES THIS FORM MUST COMMUNICATE THE
GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF TRANSMITTAL,
CERTIFICATES FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS TO THE DEPOSITARY
WITHIN THE TIME PERIOD SHOWN HEREIN. FAILURE TO DO SO COULD RESULT IN A
FINANCIAL LOSS TO SUCH ELIGIBLE INSTITUTION.
<TABLE>
<S> <C>
Name of Firm:______________________________ ___________________________________________
Authorized Signature
Address:___________________________________ Name:______________________________________
___________________________________________ Please Type or Print
Zip Code
Title:_____________________________________
Area Code and
Telephone Number:__________________________ Dated:_______________________________, 1997
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES ARE TO BE DELIVERED WITH THE LETTER OF
TRANSMITTAL.
2
<PAGE>
EXHIBIT 99(A)(4)
The Beacon Group
Capital Services, L.L.C.
399 Park Avenue New York,
New York 10022
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SEDA SPECIALTY PACKAGING CORP.
AT
$29.00 NET PER SHARE
BY
SEAWOLF ACQUISITION CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
CCL INDUSTRIES INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, JULY 21, 1997 UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
June 23, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Seawolf Acquisition Corporation, a Delaware
corporation (the "Purchaser") and an indirect wholly owned subsidiary of CCL
Industries Inc., a Canadian corporation (the "Parent"), to act as Dealer
Manager in connection with its offer to purchase all outstanding shares (the
"Shares") of common stock (the "Common Stock"), par value $0.001 per share, of
SEDA Specialty Packaging Corp., a Delaware corporation (the "Company"), at
$29.00 per Share, net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in the Purchaser's Offer to
Purchase dated June 23, 1997 (the "Offer to Purchase") and the related Letter
of Transmittal (which together with any supplements or amendments thereto
collectively constitute the "Offer"), copies of which are enclosed herewith.
The Offer is being made in connection with the Agreement and Plan of Merger
and Reorganization dated as of June 16, 1997 among the Parent, the Purchaser
and the Company.
For your information and for forwarding to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. The Offer to Purchase;
2. The Letter of Transmittal for your use and for the information of your
clients, together with Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 providing information relating
to backup federal income tax withholding;
3. The Notice of Guaranteed Delivery to be used to accept the Offer if
the Shares and all other required documents cannot be delivered to the
Depositary by the Expiration Date (as defined in the Offer to Purchase);
4. A form of letter which may be sent to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee,
with space provided for obtaining such clients' instructions with regard to
the Offer;
<PAGE>
5. A Solicitation/Recommendation Statement on Schedule 14D-9 issued by
the Company; and
6. A Return envelope addressed to First Chicago Trust Company of New
York, as the Depositary.
Upon 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), the Purchaser will be deemed to have accepted for payment, and
will pay for, all Shares validly tendered and not properly withdrawn by the
Expiration Date (as defined in the Offer to Purchase) if, as and when the
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance of the tender of such Shares for payment pursuant to the Offer.
Payment for Shares purchased pursuant to the Offer will be made only after
timely receipt by the Depositary of certificates for such Shares (or
confirmation of a book-entry transfer of such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities (as defined in the Offer
to Purchase)), a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile thereof) (unless, in the case of a book-entry
transfer, an Agent's Message (as defined in the Offer to Purchase) is
utilized) and any other documents required by the Letter of Transmittal.
In order to accept the Offer, a duly executed and properly completed Letter
of Transmittal (or manually signed facsimile thereof), with any required
signature guarantees and any other documents required by the Letter of
Transmittal, should be sent to the Depositary, and either certificates
representing the tendered Shares should be delivered or such Shares must be
delivered to the Depositary pursuant to the procedures for book entry
transfers, all in accordance with the instructions set forth in the Letter of
Transmittal and the Offer to Purchase.
If holders of Shares wish to tender their Shares, but it is impracticable
for them to deliver their certificates on or prior to the Expiration Date or
to comply with the book-entry transfer procedures on a timely basis, a tender
may be effected by following the guaranteed delivery procedures specified in
Section 3 of the Offer to Purchase.
The Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager, the Information Agent and the
Depositary as described in the Offer to Purchase) in connection with the
solicitation of tenders of Shares pursuant to the Offer. The Purchaser will,
however, upon request, reimburse brokers, dealers, commercial banks and trust
companies for customary mailing and handling expenses incurred by them in
forwarding materials to their customers. The Purchaser will pay all stock
transfer taxes applicable to its purchase of Shares pursuant to the Offer,
subject to Instruction 6 of the Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JULY 21, 1997, UNLESS THE OFFER IS
EXTENDED.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained from, the
Information Agent or the undersigned at the addresses and telephone numbers
set forth on the back cover page of the Offer to Purchase.
Very truly yours,
The Beacon Group Capital Services,
L.L.C.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR
ANY PERSON AS AN AGENT OF THE PARENT, THE PURCHASER, THE COMPANY, ANY
AFFILIATE OF THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE
DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE
ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN
THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
EXHIBIT 99(A)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SEDA SPECIALTY PACKAGING CORP.
AT
$29.00 NET PER SHARE
BY
SEAWOLF ACQUISITION CORPORATION
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
CCL INDUSTRIES INC.
--------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, JULY 21, 1997 UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------
June 23, 1997
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated June 23, 1997
(the "Offer to Purchase"), and the related Letter of Transmittal relating to
the offer by Seawolf Acquisition Corporation, a Delaware corporation (the
"Purchaser") and an indirect wholly owned subsidiary of CCL Industries Inc., a
Canadian corporation (the "Parent"), to purchase all of the outstanding shares
of common stock, par value $0.001 per share (the "Shares"), of SEDA Specialty
Packaging Corp., a Delaware corporation (the "Company"), at a purchase price
of $29.00 per share, net to the seller in cash without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase and
in the related Letter of Transmittal (which, as amended from time to time,
together constitute the "Offer"). Holders of Shares whose certificates for
such Shares (the "Share Certificates") are not immediately available or who
cannot deliver their Share Certificates and all other required documents to
First Chicago Trust Company of New York, the Depositary, prior to the
Expiration Date (as defined in the Offer to Purchase), or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3
of the Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER
OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT.
Your attention is directed to the following:
1. The tender price is $29.00 per Share, net to the seller in cash
without interest thereon.
2. The Offer is made for all of the outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the
Merger Agreement (as defined below) and the transactions contemplated
thereby, and determined that the Offer and the Merger (as defined below)
are fair to, and in the best interests of, the holders of Shares and
recommends that holders of the Shares accept the Offer and tender their
Shares to the Purchaser.
<PAGE>
4. The Offer is being made pursuant to the Agreement and Plan of Merger
and Reorganization, dated as of June 16, 1997 (the "Merger Agreement"),
which provides that subsequent to the consummation of the Offer, the
Purchaser will merge with and into the Company (the "Merger"). At the
effective time of the Merger (the "Effective Time"), each Share issued and
outstanding immediately prior to the Effective Time (other than Shares held
by the Purchaser or any affiliate of the Purchaser, certain remaining
Shares held by a principal stockholder of the Company, Shares held in the
treasury of the Company and Shares, if any, held by stockholders who have
not voted in favor of or consented to the Merger and who have delivered a
written demand for appraisal of such Shares in accordance with the Delaware
General Corporation Law) will be cancelled, extinguished and converted into
the right to receive $29.00 in cash, without interest thereon.
5. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Monday, July 21, 1997, unless the Offer is extended.
6. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer.
7. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not properly withdrawn prior to the expiration of the
Offer, a number of Shares which constitute more than 50% of the voting
power (determined on a fully-diluted basis) of all securities of the
Company entitled to vote generally in the election of directors or in a
merger and (ii) the expiration or termination of all applicable waiting
periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
The Offer is being made solely by the Offer to Purchase and the related
Letter of Transmittal and is being made to all holders of Shares. The
Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute.
If, after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to, nor will tenders be accepted from or
on behalf of, the holders of Shares in such state. In any jurisdiction where
the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer shall be deemed to be made on behalf of
the Purchaser by The Beacon Group Capital Services, L.L.C., the Dealer Manager
for the Offer, or one or more registered brokers or dealers that are licensed
under the laws of such jurisdiction.
If you wish to have us tender any or all of the Shares held by us for your
account, please instruct us by completing, executing and returning to us the
instruction form contained in this letter. If you authorize a tender of your
Shares, all such Shares will be tendered unless otherwise specified in such
instruction form. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO
PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE
OFFER.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SEDA SPECIALTY PACKAGING CORP.
BY
SEAWOLF ACQUISITION CORPORATION
The undersigned acknowledge(s) receipt of your letter enclosing the Offer to
Purchase dated June 23, 1997 (the "Offer to Purchase") and the related Letter
of Transmittal pursuant to an offer by Seawolf Acquisition Corporation, a
Delaware corporation and an indirect wholly owned subsidiary of CCL Industries
Inc., a Canadian corporation, to purchase all outstanding shares of common
stock, par value $0.001 per share (the "Shares"), of SEDA Specialty Packaging
Corp., a Delaware corporation, at a purchase price of $29.00 per Share, net to
the seller in cash without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase and the related Letter of
Transmittal.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) which are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related Letter of Transmittal
furnished to the undersigned.
Number of Shares to Be Tendered*
, Shares
- -----------------------
Dated: , 1997
------------------- SIGN HERE
---------------------------------------
Signature(s)
---------------------------------------
Please print name(s)
---------------------------------------
Address
---------------------------------------
Area Code and Telephone Number
---------------------------------------
Tax Identification or Social
Security Number
* Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
3
<PAGE>
EXHIBIT 99.(A)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- ----------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ----------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one of
the
individuals(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only contributor,
the minor(1)
6. Account in the name of The ward, minor,
guardian or committee for a or incompetent
designated ward, minor, or person(3)
incompetent person
7. a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust account The actual
that is not a legal or owner(1)
valid trust under State
law
8. Sole proprietorship The owner(3)
account
<CAPTION>
- ----------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
- ----------------------------------------------------
<S> <C>
9. A valid trust, estate, or The legal entity
pension trust (Do not furnish
the identifying
number of the
personal
representative or
trustee unless
the legal entity
itself is not
designated in the
account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
- ----------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a)
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
2
<PAGE>
EXHIBIT (a)(7)
================================================================================
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares (as defined below). The Offer (as defined below) is made solely
by the Offer to Purchase dated June 23, 1997 and the related Letter of
Transmittal, and is not being made to, nor will tenders be accepted from,
or on behalf of, holders of Shares residing in any jurisdiction in which
the making of the Offer or the acceptance thereof would not be in
compliance with the securities, blue sky or other applicable laws of
such jurisdiction. In any jurisdiction where the securities, blue sky
or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the
Purchaser (as defined below) by The Beacon Group Capital Services,
L.L.C., the Dealer Manager for the Offer, or one or more
registered brokers or dealers licensed under the laws
of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SEDA SPECIALTY PACKAGING CORP.
AT
$29 NET PER SHARE
BY
SEAWOLF ACQUISITION CORPORATION,
AN INDIRECT WHOLLY OWNED SUBSIDIARY
OF
CCL INDUSTRIES INC.
Seawolf Acquisition Corporation, a Delaware corporation (the "Purchaser")
and an indirect wholly owned subsidiary of CCL Industries Inc., a Canadian
corporation (the "Parent"), hereby offers to purchase all outstanding shares of
common stock, par value $0.001 per share (the "Shares"), of SEDA Specialty
Packaging Corp., a Delaware corporation (the "Company"), at a price of $29 per
Share, net to the seller in cash, without interest thereon upon the terms and
subject to the conditions set forth in the Offer to Purchase dated June 23, 1997
(the "Offer to Purchase"), and in the related Letter of Transmittal (which
together constitute the "Offer"). Following the Offer, Purchaser intends to
effect the Merger described below.
----------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY,
JULY 21, 1997, UNLESS THE OFFER IS EXTENDED.
----------------------------------------------
<PAGE>
The Board of Directors of the Company has unanimously approved the Merger
Agreement (as defined below), the Offer and the Merger, determined that the
Offer and the Merger are fair to and in the best interests of the stockholders
of the Company and unanimously recommends acceptance of the Offer by the
stockholders of the Company.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer a number of
Shares which, together with the Shares then beneficially owned by the Purchaser
and its affiliates, constitutes at least a majority of the capital stock of the
Company entitled to vote and then outstanding on a fully diluted basis (the
"Minimum Condition").
The Offer is being made pursuant to an Agreement and Plan of Merger and
Reorganization (the "Merger Agreement") dated as of June 16, 1997, among the
Parent, the Purchaser and the Company. The Merger Agreement provides that, among
other things, as soon as practicable following consummation of the Offer and
upon the terms and subject to the conditions of the Merger Agreement, the
Purchaser will be merged with and into the Company (the "Merger"). At the
effective time of the Merger, each then outstanding Share (other than Shares
owned by the Purchaser or any affiliate of the Purchaser, Shares held in the
treasury of the Company, certain remaining Shares held by a principal
stockholder of the Company, and Shares, if any, held by stockholders who have
perfected their appraisal rights under Delaware law) will be converted into the
right to receive $29 in cash (or any higher price that may be paid pursuant to
the Offer), without interest.
For purposes of the Offer, the Purchaser shall be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if, as and when the Purchaser gives oral or written notice to First
Chicago Trust Company of New York (the "Depositary") of the Purchaser's
acceptance of such Shares for payment pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payments from the Purchaser and transmitting such payments
to tendering stockholders whose Shares have been accepted for payment. Under no
circumstances will interest on the purchase price of Shares be paid by the
Purchaser, regardless of any extension of the Offer or any delay in making such
payment. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) certificates representing such Shares or timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company (each a
"Book-Entry Transfer Facility") pursuant to the procedures set forth in Section
3 of the Offer to Purchase, (ii) the Letter of Transmittal (or a manually signed
facsimile thereof) properly completed and duly executed with any required
signature guarantees or an Agent's Message (as defined in Section 3 of the Offer
to Purchase) in connection with a book-entry transfer, and (iii) any other
documents required by the Letter of Transmittal.
Subject to the applicable rules and regulations of the Securities and
Exchange Commission and the terms of the Merger Agreement, the Purchaser
expressly reserves the right, in its sole discretion, at any time and from time
to time, and regardless of whether or not any of the events set forth in Section
15 of the Offer to Purchase shall have occurred, 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 Shares, by giving oral or written notice of such
extension to the Depositary or (ii) amend the Offer in any respect by giving
oral or written notice of such amendment to the Depositary. Any extension,
delay, termination, waiver or amendment will be followed as promptly as
practicable by public announcement to be made no later than 9:00 A.M., New York
City time, on the next business day after the previously scheduled Expiration
Date (as defined below). During any such extension, all Shares previously
tendered and not properly withdrawn will remain subject to the Offer, subject to
the rights of a tendering stockholder to withdraw such stockholder's Shares.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Monday, July 21, 1997, unless and until the Purchaser, in its sole discretion
(but subject to the terms and conditions of the Merger Agreement) shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall refer to the latest time and date at which the
Offer, as so extended by the Purchaser, shall expire. Except as otherwise
provided below, tenders of Shares made pursuant to the Offer are irrevocable,
except that Shares tendered pursuant to the Offer may be withdrawn at any time
on or prior to the Expiration Date and, unless theretofor accepted for payment
pursuant to the Offer, may also be withdrawn at any time after August 22, 1997.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase. Any
notice of withdrawal must specify the name of the person having tendered the
Shares to be withdrawn, the number of Shares tendered and the number to be
withdrawn and the name of the registered stockholder, if different from that of
the person who tendered such Shares. If certificates representing Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, then
prior to the physical release of such certificates, the serial numbers shown on
such certificates must be submitted to the Depositary and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution (as defined
in Section 3 of the Offer to Purchase), except in the case of Shares tendered
for the account of an Eligible Institution. If Shares have been tendered
pursuant to the procedures for book-entry transfer as set forth in Section 3 of
the Offer to Purchase, any notice of withdrawal must also specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares, in which case a notice of withdrawal will be effective if
delivered to the Depositary by any method of delivery described in the second
sentence of this paragraph. All questions as to the form and validity (including
time of receipt) of any notice of withdrawal will be determined by the
Purchaser, in its sole discretion, whose determination will be final and
binding.
<PAGE>
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
and other relevant materials are being mailed by the Purchaser to the
stockholders of record and are being furnished to brokers, dealers, commercial
banks, trust companies, and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
The Offer to Purchase and related Letter of Transmittal contain important
information which should be read carefully before any decision is made with
respect to the Offer.
Questions and requests for assistance may be directed to the Dealer Manager
or the Information Agent as set forth below. Requests for copies of the Offer to
Purchase and the related Letter of Transmittal and all other tender offer
materials may be directed to the Information Agent or the Dealer Manager, and
copies will be furnished promptly at the Purchaser's expense. The Purchaser will
not pay any fees or commissions to any broker, dealer or other person (other
than the Dealer Manager or Information Agent) for soliciting tenders of Shares
pursuant to the Offer.
The Information Agent for the Offer is:
KISSEL BLAKE INC.
110 Wall Street
New York, New York 10005
Banks and Brokers Call: (212) 344-6733
All Others Call Toll-Free: (800) 554-7733
The Dealer Manager for the Offer is:
THE BEACON GROUP
CAPITAL SERVICES, L.L.C.
399 Park Avenue
New York, New York 10022
Telephone: (212) 339-9108
June 23, 1997
================================================================================
<PAGE>
EXHIBIT (a)(8)
[LETTERHEAD OF CCL INDUSTRIES INC.]
CCL INDUSTRIES INC. (TORONTO)
Stock Symbol: TSE & ME - CCQ
for release: June 17, 1997
CCL TO ACQUIRE SEDA SPECIALTY PACKAGING
FOR $225 MILLION
TORONTO, June 17, 1997 -- The Board of Directors of CCL Industries Inc. and SEDA
Specialty Packaging Corp. (NASDAQ: SSPC) announced today that they have signed
an agreement for the purchase of SEDA by CCL. Valued at $225 (Cdn.) million,
the transaction brings together two of North America's leading producers of
specialty packaging for personal care products. The acquisition will be
accomplished by a cash tender offer for SEDA shares at U.S. $29.00 per share.
It will be financed primarily with debt. Subject to regulatory approval, the
transaction is expected to be completed by the end of July, 1997.
This major acquisition is consistent with CCL's strategy to grow its specialty
packaging segment, expand its core businesses into higher growth and new
geographic markets, and add value to its products and services.
With 1997 sales expected to be approximately $100 million (Cdn.), SEDA is a
leading North American manufacturer of flexible plastic tubes, lined and
liner-less plastic caps and closures, tamper-evident closures, dispensing
closures, single and double-wall jars, bottles and related items. Its clients
include major producers and marketers of personal care products, cosmetics,
foods and beverages, pharmaceuticals, and household and industrial products.
SEDA has over 450 employees at manufacturing facilities in Los Angeles,
California and Plattsburgh, New York.
"The transaction leverages our capabilities for growth," said Wayne McLeod,
President and CEO of CCL. "Through our Container Manufacturing Division,
comprised of Advanced Monobloc and Victor Tube, we are already the North
American market leader in aluminum aerosol cans and aluminum tubes. The
addition of SEDA to this division provides substantial manufacturing synergies,
as well as a platform on which we intend to build a leading market position in
the plastic specialty packaging business. We will come out of this acquisition
with a company that has a full complement of strengths in manufacturing,
marketing and distribution in specialty plastic packaging."
-more-
<PAGE>
CCL Announces
Page 2
Shawn Sedaghat, Chairman, President and CEO of SEDA will continue to lead the
SEDA Packaging business which will become a part of CCL's Container
Manufacturing Division.
"The scale of the combined businesses will provide us with entry into many
markets worldwide which were previously difficult to penetrate because of our
size and lack of international production facilities," Mr. Sedaghat said.
"Further, our proven manufacturing expertise should increase the profitability
of CCL's existing product lines. We anticipate that this combination will
provide a greatly enhanced ability to successfully accomplish key strategic
acquisitions."
With sales over one billion dollars, CCL is a leading international supplier of
manufacturing services and specialty packaging products for the non-durable
consumer products market. Through its international network of 34 production
facilities and with over 6,700 employees, CCL provides comprehensive formulation
and manufacturing services, labels, and aluminum specialty containers, to
marketers of well-known brand cosmetic, personal care, pharmaceutical, household
and specialty food products.
FOR FURTHER INFORMATION:
Mel Snider
Senior Vice-President, Finance and Administration
(416) 756-8508
<PAGE>
EXHIBIT (a)(9)
Contact: Mel Snider
Senior Vice-President of Finance and Administration
CCL Industries Inc.
105 Gordon Baker Road
Willowdale, Ontario
Canada, M2H 3P8
Telephone: (416) 756-8508
FOR IMMEDIATE RELEASE
CCL INDUSTRIES INC. COMMENCES TENDER OFFER
Willowdale, Ontario, June 23, 1997 - CCL Industries Inc. announced today
that Seawolf Acquisition Corporation, an indirectly wholly owned subsidiary of
CCL Industries Inc., has commenced a cash tender offer for all outstanding
shares of SEDA Specialty Packaging Corp. at a price of $29 per common share, net
to the seller, in cash, without interest. The offer and withdrawal rights will
expire at 12:00 midnight, New York City time, on Monday, July 21, 1997, unless
extended.
The offer will be followed by a cash merger in which all common shares of
SEDA Specialty Packaging Corp., other than shares owned by Seawolf Acquisition
Corporation and its affiliates, shares owned by dissenting shareholders,
treasury shares and certain shares owned by a principal stockholder, will be
converted into the right to receive $29 per share in cash.
The dealer manager for the offer is The Beacon Group Capital Services,
L.L.C.
The purpose for the tender offer and the merger is for CCL Industries Inc.
to indirectly acquire the entire equity interest in SEDA Specialty Packaging
Corp. The acquisition by CCL Industries Inc. through its newly formed subsidiary
has been structured as a cash tender offer and a cash merger in order to provide
a prompt and orderly transfer of ownership of SEDA Specialty Packaging Corp.
from the public shareholders to CCL Industries Inc.
With sales over one billion dollars, CCL Industries Inc. is a leading
international supplier of manufacturing services and specialty packaging
products for the non-durable consumer products market. Through its international
network of 34 production facilities and with over 6,700 employees, CCL
Industries Inc. provides comprehensive formulation and manufacturing services,
labels and aluminum specialty containers to marketers of well-known brand
cosmetic, personal care, pharmaceutical, household and specialty food products.
SEDA Specialty Packaging Corp. develops, manufactures and sells specialty
plastic packaging products to the personal care, food and beverage, household
and industrial chemical and pharmaceutical industries.
<PAGE>
EXHIBIT (b)(1)
[LETTERHEAD OF BANK]
June 16, 1997
Mr. Steve Lancaster
Vice-President & Treasurer
CCL Industries Inc.,
105 Gordon Baker Rd.,
Willowdale, Ontario
M2H 3P8
Dear Steve,
As discussed today, please find enclosed the revised term sheet for our
commitment of up to US$150,000,000 to finance CCL Industries Inc.'s proposed
acquisition of Seda Specialty Packaging Corp.
If you are in agreement with the provisions of this term sheet, please
indicate your acceptance of the terms and conditions of this credit facility by
executing the term sheet and returning it to our attention at your earliest
convenience.
Yours truly,
Director Director
Encl.
<PAGE>
CCL INDUSTRIES INC.
TERMS AND CONDITIONS
--------------------
FACILITY SHORT TERM ACQUISITION FINANCING
Amount Up to US$150,000,000.
- ------
Purpose To finance a portion of the Borrower's acquisition of Seda
- ------- Specialty Packaging Corp. ("Seda").
Lender Bank.
- ------
Borrower CCL Industries Inc. ("CCL Inc.").
- --------
Guarantor CCL Industries Corporation ("CCL Corp.").
- ---------
Availability Non-revolving committed facility. Facility available in up
- ------------ to three draws at the time of funding of the Seda
acquisition and repayment of Seda debt. Any undrawn amounts
at the time of the third draw will be cancelled.
US dollars by way of Direct Advances and/or LIBOR.
Maturities available for LIBOR advances from 10-90 days, on
a subject to availability basis, and/or such other
maturities to which the Bank may agree in its sole
discretion. Nothwithstanding the terms above, LIBOR
maturities may not exceed the term of this Facility.
Term Up to a maximum of 9 months from the Acceptance Date.
- ----
Remuneration US Dollars
- ------------ Direct Advances
---------------
US Base Rate (as defined below). Interest to be calculated,
on the basis of a 365/366 day year, and payable monthly in
arrears, to the debit of the Borrower's account.
"US Base Rate" is the annual rate of interest established
from time to time by the Bank as the reference rate it will
use to determine the rates of interest on United States
dollar loans made in Canada and designated as its US Base
Rate.
LIBOR
-----
LIBOR = 75 bp per annum calculated on the basis of a 360 day
year and payable at the earlier of quarterly in arrears or
maturity.
In the event CCL is unsuccessful in achieving control of at
least 90% of Seda's common shares within 10 days of the
first draw, LIBOR pricing will be LIBOR + 100 bp per annum
calculated on the basis of a 360 day year and payable at the
earlier of quarterly in arrears or maturity.
<PAGE>
2
LIBOR is the annual rate of interest at which leading
banks in the interbank market would be prepared to
offer deposits in US dollars to the Bank at
approximately 11:00 a.m. London time two business days
prior to the drawdown of a LIBOR loan for a specified
maturity period.
Note Rollover Direct Advances: US$100,000 multiples.
- ------------- LIBOR: US$100,000 multiples; minimum US$5 million.
Notice
Requirements Drawdown and repayment of Direct Advances in excess of
- ------------ US$10 million, up to but not including US$25 million,
requires two banking days' notice.
Drawdown and repayment of Direct Advances in excess of
US$25 million requires three banking days' notice.
LIBOR borrowings are subject to three banking days'
notice including renewals and/or repayments.
Repayment
of Advances Earlier of maturity or receipt of proceeds from take-
- ----------- out financing(s). 100% of net proceeds of debt
issuances to be dedicated to the repayment of this
Facility. Additionally, CCL Inc. will covenant to use
its best reasonable commercial efforts to dedicate
asset sale proceeds to the repayment of this Facility.
Prepayment of advances may be made at any time without
penalty on rollover dates for LIBOR, and at any time
for US Base Rate advances subject to Notice
Requirements above.
Cancellation The Borrower may at any time prior to drawdown, with 3
- ------------ days notice, cancel and decrease the Facility Amount.
Such cancellations shall be in minimum amounts and
multiples of US$1 million.
Conditions Precedent
to Drawdown Conditions precedent customary for credit agreements of
- ----------- this nature and satisfactory to the Bank, including but
not limited to:
<PAGE>
3
(i) The Borrower shall have executed an agreement to
purchase the Sedaghat family's stake in Seda. The total
acquisition price for 100% of Seda, including deferred
payments, transaction costs and debt assumed, shall not
exceed US$190 million. Additionally, CCL shall confirm that
contracts with Sedaghat family have been put in place.
(ii) Required regulatory approvals, if any, have been
received to the Bank's satisfaction.
(iii) Receipt of consents to the Seda transaction from CCL's
working capital lenders.
(iv) Execution of documentation satisfactory to the Bank,
including but not limited to a Credit Agreement containing
inter alia the terms and conditions set out hereto as well
as legal opinions and corporate documentation as the Bank
may require. Receipt of guarantee from CCL Corp. in form and
substance satisfactory to the Bank, including such legal
opinions and corporate documentation as the Bank requires.
Covenants and
Events of Default Covenants and Events of Default customary for credit
- ----------------- agreements of this nature, including but not limited to
those contained in the Credit Agreement dated May 31, 1996
between the Borrower, Bank and certain other banks. Such
covenants shall include, inter alia, a negative pledge,
restrictions on acquisitions, additional debt, leverage and
coverage tests, and cross-default provisions, with such
changes as the circumstances may require. Additionally, the
Borrower will covenant to use its best reasonable commercial
efforts to repay Seda's debt obligations (excluding capital
leases) on a timely basis and to have the associated
security discharged.
Other Conditions The Bank reserves the right to syndicate the Facility.
- ----------------
The Bank also reserves the right of the first refusal on any
bank refinancing of this Facility.
Expenses All fees, legal costs and out of pocket expenses in respect
- -------- of the negotiation, preparation, administration and
documentation of this Facility or related to the enforcement
of this credit are for the account of the Borrower. Any
other legal expenses as agreed in writing on a prior basis
by the Borrower are for the account of the Borrower.
Expiry Date This financing offer will expire Friday, June 20, 1997 at
- ----------- 5:00 p.m. if not accepted by the Borrower prior to such time
(the "Acceptance Date").
<PAGE>
4
ACCEPTED THIS 17TH DAY OF JUNE, 1997
CCL INDUSTRIES INC.
Per: /s/ S.W. Lancaster
------------------
Name: S.W. LANCASTER
Title: V.P. & TREASURER
<PAGE>
EXHIBIT 99(C)(1)
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
SEAWOLF ACQUISITION CORPORATION, CCL INDUSTRIES INC.
and
SEDA SPECIALTY PACKAGING CORP.
Dated as of June 16, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I - THE TENDER OFFER............................................................ 1
1.1 Tender Offer................................................................ 1
ARTICLE II - THE MERGER; EFFECTIVE TIME.................................................. 4
2.1 The Merger.................................................................. 4
2.2 Effective Time.............................................................. 5
2.3 Stockholders Meeting; Proxy Statement....................................... 5
2.4 Merger Without Meeting of Stockholders...................................... 6
2.5 Closing..................................................................... 6
2.6 Further Assurances.......................................................... 6
ARTICLE III - CERTIFICATE OF INCORPORATION AND BY-LAWS THE SURVIVING CORPORATION.......... 6
3.1 The Certificate of Incorporation............................................ 6
3.2 The By-Laws................................................................. 6
ARTICLE IV - OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION......................... 7
4.1 Directors and Officers...................................................... 7
4.2 Actions by Directors........................................................ 7
ARTICLE V - CONVERSION OR CANCELLATION OF SHARES IN THE MERGER; WARRANTS OUTSTANDING.... 7
5.1 Conversion or Cancellation of Shares........................................ 7
5.2 Payment for Shares.......................................................... 9
5.3 Dissenting Shares........................................................... 11
5.4 Transfer of Shares After the Effective Time................................. 11
5.5 Warrants Outstanding........................................................ 11
5.6 Stock Options............................................................... 11
ARTICLE VI - REPRESENTATIONS AND WARRANTIES.............................................. 12
6.1 Representations and Warranties of the Company............................... 12
6.2 Representations and Warranties of Parent and Purchaser...................... 16
ARTICLE VII - COVENANTS................................................................... 18
7.1 Interim Operations of the Company........................................... 18
7.2 Acquisition Proposals....................................................... 20
7.3 Filings; Other Action....................................................... 20
7.4 Access...................................................................... 21
7.5 Publicity................................................................... 21
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
7.6 Stock Options, Other........................................................21
7.7 Indemnification; Directors and Officers' Insurance..........................22
7.8 Other Actions by the Company................................................23
7.9 Additional Agreements.......................................................23
7.10 Recapitalization............................................................23
ARTICLE VIII - CONDITIONS..................................................................24
8.1 Conditions to Obligations of Parent and Purchaser...........................24
8.2 Conditions to Obligations of the Company....................................24
ARTICLE IX - TERMINATION.................................................................25
9.1 Termination by Mutual Consent...............................................25
9.2 Termination by either Purchaser or the Company..............................25
9.3 Termination by Purchaser....................................................25
9.4 Termination by the Company..................................................25
9.5 Effect of Termination and Abandonment.......................................26
9.6 Termination Fees............................................................26
ARTICLE X - MISCELLANEOUS AND GENERAL...................................................26
10.1 Payment of Expenses; Certain Fees...........................................26
10.2 Survival....................................................................26
10.3 Modification or Amendment...................................................26
10.4 Waiver of Conditions........................................................26
10.5 Counterparts................................................................26
10.6 Governing Law...............................................................26
10.7 Notices.....................................................................27
10.8 Entire Agreement, etc.......................................................27
10.9 Definition of "Affiliate"...................................................28
10.10 Specific Performance........................................................28
10.11 Captions....................................................................28
10.12 Currency....................................................................28
10.13 Attorneys' Fees.............................................................28
ANNEX A - CONDITIONS OF THE OFFER.....................................................i
Exhibit 3.1 Amendment to Certificate of Incorporation...................................
Exhibit 5.1(b)(i) Provisions Attaching to the Class A Participating Exchangeable Common Stock.
Exhibit 5.1(c) Definition of EBITDA........................................................
Exhibit 7.6(a) Stock Options...............................................................
Schedule I List of Employees...........................................................
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the "Agreement"), dated as
of June 16, 1997, between SEDA Speciality Packaging Corp., a Delaware
corporation (the "Company"), CCL Industries Inc., a Canadian corporation
("Parent"), and Seawolf Acquisition Corporation , a newly formed Delaware
corporation and indirect wholly owned subsidiary of Parent ("Purchaser", and
together with the Company, the "Constituent Corporations").
RECITALS
WHEREAS, Purchaser has been formed solely for the purpose of effecting the
transactions described herein;
WHEREAS, the Boards of Directors of Parent, Purchaser and the Company each
have determined that it is in the best interests of their respective
stockholders for Parent to acquire the Company upon the terms and subject to the
conditions set forth herein;
WHEREAS, Parent, Purchaser and certain stockholders of the Company have
entered into a Stock Tender Agreement (the "Tender Agreement") of even date
herewith providing for Purchaser to obtain an option (the "Option") to acquire
certain Shares (as defined below) of Shahrokh Sedaghat (the "Shareholder") and
the tender into the Offer (as defined below) by such stockholders of the
remainder of the Shares owned by such stockholders; and
WHEREAS, the Company, Parent and Purchaser desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
ARTICLE I
THE TENDER OFFER
1.1 Tender Offer.
-------------
a) Offer. Provided that this Agreement shall not have been terminated in
-----
accordance with Article IX hereof and none of the events set forth in
Annex A hereto shall have occurred on or after the date hereof or be
existing, as soon as practicable after the date hereof, and in any
event within five (5) business days of the date hereof, Purchaser will
commence (within the meaning of Rule 14d-2 under the
<PAGE>
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act")) a tender offer (the
"Offer") for all of the outstanding shares (the "Shares") of common
stock, par value U.S. $0.001 per share of the Company (the "Common
Stock"), at a price of U.S. $29.00 per Share, net to the seller, in
cash (the "Stock Price"), such Offer to be subject only to the
conditions set forth in Annex A hereto (the "Offer Conditions"). If
the Merger Agreement is terminated in accordance with its terms,
Purchaser shall terminate the Offer. Without the prior written consent
of the Company, Purchaser shall not (and Parent shall not cause
Purchaser to) (i) decrease the Stock Price or change the form of
consideration therefor or decrease the number of Shares sought
pursuant to the Offer, (ii) change the Offer Conditions, (iii) impose
additional conditions to the Offer, (iv) waive the condition that
there shall be validly tendered and not withdrawn prior to the time
the Offer expires a number of Shares of Common Stock which together
with all Shares owned by Parent, Purchaser and their respective
Affiliates (as defined in Section 10.9) constitutes a majority of the
Shares outstanding on a fully diluted basis on the date of purchase,
(v) amend any term of the Offer in any manner adverse to holders of
Shares or (vi) extend the expiration date of the Offer; provided
however that the expiration date of the Offer may be extended from
time to time at the sole discretion of Purchaser (i) in order to
comply with any provision of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules
and regulations thereunder or otherwise comply with law for the
minimum period of time reasonably necessary to so comply and (ii) if
any of the Offer Conditions shall not be satisfied for the minimum
period of time reasonably necessary to satisfy such conditions, but in
either case, such extension shall not extend beyond September 2, 1997.
Assuming the prior satisfaction or waiver of the Offer Conditions on
the expiration date of the Offer, Purchaser shall accept for payment,
and pay for, in accordance with the terms of the Offer, all Shares
validly tendered and not withdrawn pursuant to the Offer as promptly
as practicable after the expiration date thereof. The Company hereby
consents to the Offer and represents that (a) its Board of Directors,
at a meeting duly called and held at which a majority of the directors
were present, (i) determined that each of the Offer and the Merger (as
hereinafter defined) is fair to and in the best interests of the
holders of the Shares, (ii) resolved to recommend acceptance of the
Offer and approval and adoption of this Agreement and the transactions
contemplated hereby by the stockholders of the Company; provided,
--------
however, that such recommendation may be withdrawn, modified or
-------
amended if the Company's Board of Directors determines, following the
receipt of advice of counsel, that it is required to do so in the
exercise of its fiduciary obligations under applicable law, (iii)
approved the transactions contemplated by the Tender Agreement and
(iv) irrevocably approved the Offer, the Merger, this Agreement and
the Tender Agreement as provided in Section 203(a) of the General
Corporation Law of the State of Delaware (the "DGCL") in such manner
as to make the restrictions contained therein inapplicable to the
transactions contemplated by this Agreement and the Tender Agreement
(the "Section 203 Approval"), and (b) Crowell, Weedon & Co.
2
<PAGE>
("CWC") has advised the Board of Directors of the Company that, based
on certain assumptions and subject to certain limitations, the Stock
Price to be received by the public holders of the Shares in the Offer
and the Merger is fair from a financial point of view to such holders.
b) 14D-1/14D-9. As soon as practicable on the date of commencement of the
-----------
Offer, Parent and Purchaser shall file or cause to be filed with the
Securities and Exchange Commission ("SEC") a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer which
shall contain the offer to purchase and related letter of transmittal
and other ancillary offer documents and instruments pursuant to which
the Offer will be made (collectively, with any supplements or
amendments thereto, the "Offer Documents") and shall contain (or shall
be amended in a timely manner to contain) all information which is
required to be included therein in accordance with the Exchange Act
and any other applicable law. Parent, Purchaser and the Company each
agree to promptly correct any information provided by them for use in
the Offer Documents if and to the extent that it shall have become
false or misleading in any material respect and Purchaser further
agrees to take all lawful action necessary to cause the Offer
Documents as so corrected to be filed promptly with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent
required by applicable law. In conducting the Offer, Parent and
Purchaser shall comply in all material respects with the provisions of
the Exchange Act and any other applicable law; provided, however, that
-------- -------
no agreement or representation hereby is made or shall be made by
Parent or Purchaser with respect to information supplied by the
Company in writing expressly for inclusion in or, with respect to the
Company information derived from the Company's public filings, which
are incorporated by reference in the Offer Documents. The Company and
its counsel shall be given the opportunity to review and comment on
the Offer Documents and any amendments thereto prior to the filing
thereof with the SEC. In addition, Parent and Purchaser agree to
provide Company and its counsel in writing with any comments Parent,
Purchaser or their counsel may receive from time to time from the SEC
or its staff with respect to the Offer Documents promptly after the
receipt of such comments. The Company's Board of Directors shall
recommend acceptance of the Offer to its stockholders in a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") to be filed with the SEC concurrently with the filing by
Parent and Purchaser of the Schedule14D-1; provided, however, that if
-------- -------
the Company's Board of Directors determines, following the receipt of
advice of counsel, that it is required by fiduciary obligations under
applicable law to amend, modify or withdraw its recommendation, such
amendment, modification or withdrawal shall not constitute a breach of
this Agreement. Subject to the proviso of the preceding sentence, the
Offer Documents (as defined in Section 1.1(b)) shall contain the
recommendation of the Board of Directors of the Company that the
holders of the Shares accept the Offer as described in this Section
1.1(a) and shall contain (or shall be amended in a timely manner to
contain) all information which is required
3
<PAGE>
to be included therein in accordance with the Exchange Act and any
other applicable law. The Company, Parent and Purchaser each agree to
promptly correct any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect and the Company further agrees to
take all lawful action necessary to cause the Schedule 14D-9 as so
corrected to be filed promptly with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by
applicable law. The Company agrees, as to the Schedule 14D-9, as
amended from time to time, that such document shall, in all material
respects, comply with the requirements of the Exchange Act and other
applicable laws; provided, however, that no agreement or
-------- -------
representation hereby is made or shall be made by the Company with
respect to information supplied by Parent or Purchaser in writing
expressly for inclusion in the Schedule 14D-9 or with respect to
Parent information derived from Parent's public filings included in
the Schedule 14D-9. Purchaser and its counsel, as to the Schedule 14D-
9, shall be given an opportunity to review and comment on such
documents, and any amendments thereto, prior to their being filed with
the SEC. In addition, the Company agrees to provide Parent and
Purchaser and their counsel in writing with any comments the Company
or its counsel may receive from time to time from the SEC or its staff
with respect to the Schedule 14D-9 promptly after the receipt of such
comments.
c) Mailing List. In connection with the Offer, the Company will cause its
------------
transfer agent to furnish promptly (but in any event within three (3)
business days of the date hereof) to Purchaser a list, as of a recent
date, of the record holders of Shares and their addresses, as well as
mailing labels containing the names and addresses of all record
holders of Shares and lists of security positions of Shares held in
stock depositories. The Company will furnish Purchaser with such
additional information (including, but not limited to, updated lists
of holders of Shares and their addresses, mailing labels and lists of
security positions) and such other assistance as Purchaser or its
agents may reasonably request in communicating the Offer to the record
and beneficial holders of Shares; provided, however, that such
shareholders lists shall be returned to the Company in the event this
Agreement is terminated.
d) Board of Directors. Promptly upon Purchaser obtaining, through, inter
------------------ -----
alia, acceptance for payment and payment by Purchaser for the Shares,
----
pursuant to the Offer or otherwise (with the consent of the Company),
actual ownership of at least a majority of the issued and outstanding
Shares on a fully diluted basis, Purchaser (or any of its Affiliates)
shall be entitled to designate at least such number of directors on
the Board of Directors of the Company as will give Purchaser a
majority of the directors on the Board of Directors of the Company,
and the Company shall, at such time, promptly cause Purchaser's
designees to be so elected; provided, however, that, in the event that
Purchaser's designees are appointed or elected to the Board of
Directors of the Company, until the Effective Time (as defined in
Section 2.2), the Board of Directors of the Company shall
4
<PAGE>
have at least two (2) directors who are directors on the date hereof
(the "Continuing Directors"); provided, further, that, in such event,
-------- ------- ----
if the number of Continuing Directors shall be reduced below two (2)
for any reason whatsoever, any remaining Continuing Directors shall be
entitled to designate persons to fill such vacancies who shall be
deemed to be Continuing Directors for purposes of this Agreement or,
if no Continuing Directors then remain, the other directors shall
designate two (2) persons to fill such vacancies who shall not be
either officers or directors of Purchaser or any of its designees, or
stockholders or Affiliates of Purchaser, and such persons shall be
deemed to be Continuing Directors for purposes of this Agreement.
These efforts shall, if necessary, include the adoption by the Board
of Directors of any resolutions or any amendments to the Company's By-
Laws needed to cause Purchaser's designees to be so elected, including
increasing the number of directors. The directors designated by
Purchaser shall, subject to their fiduciary duty to the Company and
its stockholders, cause the Company to fulfill its obligations
pursuant to this Agreement. Prior to any such election or designation,
the Company shall take such actions as may be required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder and Purchaser will promptly furnish to the Company any
information in its possession requested by the Company in connection
therewith.
e) Continuing Director Approvals. Following the election or appointment
-----------------------------
of PurchaserOs designees pursuant to Section 1.1(d) and prior to the
Effective Time, any amendment or termination of this Agreement, any
amendment to the Company's Certificate of Incorporation or By-Laws,
any extension for the performance of the obligations or other acts of
Parent or Purchaser, any waiver of any of the Company's rights
hereunder or any other action by the Company which adversely affects
the interests of the stockholders of the Company (other than Parent or
Purchaser) with respect to the transactions contemplated hereby, will
require the concurrence of a majority of the Continuing Directors.
ARTICLE II
THE MERGER; EFFECTIVE TIME
2.1 The Merger. Subject to the terms and conditions of this Agreement and the
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DGCL, at the Effective Time, Purchaser shall effect a merger (the "Merger") with
and into the Company and the separate corporate existence of Purchaser shall
thereupon cease. The Company shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue to be governed by the laws of the State of Delaware, and the separate
corporate existence of the Company with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger. The Merger shall
have the effects specified in the DGCL.
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2.2 Effective Time. As soon as practicable after all conditions set forth in
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Article VIII hereof have been fulfilled or waived, and provided that this
Agreement has not been terminated or abandoned pursuant to Article IX hereof,
the Company and Purchaser will cause a certificate of ownership or merger or
other appropriate documents (the "Certificate of Merger") to be executed and
filed with the Secretary of State of Delaware as provided in the DGCL. The
Merger shall become effective at such time and on the date on which the
Certificate of Merger has been duly filed with the Secretary of State of
Delaware, and such time is hereinafter referred to as the "Effective Time."
2.3 Stockholders' Meeting; Proxy Statement.
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a) Special Meeting. If required by applicable law or the Company's
---------------
Certificate of Incorporation in order to consummate the Merger, the
Company, acting through its Board of Directors, shall, in accordance
with applicable law, the Company's Certificate of Incorporation and
its By-Laws:
(i) duly call, give notice of, convene and hold a special
meeting (the "Special Meeting") of its stockholders as soon
as practicable following the consummation of the Offer for
the purpose of approving and adopting this Agreement;
(ii) subject to the fiduciary duties of the Company's Board of
Directors under applicable law as advised by counsel,
include in the Proxy Statement (as hereinafter defined), (A)
the recommendation that the stockholders of the Company vote
in favor of approval and adoption of this Agreement and (B)
the written opinion of CWC advising the Board of Directors
of the Company that, based on certain assumptions and
subject to certain limitations, the Stock Price to be
received by the public holders of the Shares in the Offer
and the Merger is fair from a financial point of view to
such holders; and
(iii) as soon as practicable after the consummation of the Offer,
(A) obtain and furnish the information required to be
included in the Proxy Statement, (B) subject to the prior
approval of Parent and Purchaser (which approval shall not
be unreasonably withheld), prepare and file a preliminary
form of the Proxy Statement with the SEC, (C) respond
promptly to any comments made by the SEC with respect to the
preliminary or any amended form of the Proxy Statement, (D)
cause the Proxy Statement (to the extent appropriate) to be
mailed to the Company's stockholders at the earliest
practicable date, and (E) use its reasonable best efforts
subject to the fiduciary duties of the Company's Board of
Directors under applicable law as advised by counsel to
obtain the necessary approval of the Merger by its
stockholders.
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b) Proxy Statement. The letter to stockholders, notice of meeting, form
---------------
of proxy (if any) and proxy statement or information statement, as the
case may be, to be distributed to the stockholders of the Company in
connection with the Merger and any forms or schedules required to be
filed with the SEC in connection therewith are collectively referred
to herein as the "Proxy Statement".
c) Voting of Shares. At the Special Meeting, Purchaser shall vote all
----------------
Shares in favor of adoption and approval of this Agreement and the
transactions contemplated hereby.
2.4 Merger Without Meeting of Stockholders. Notwithstanding any other provision
--------------------------------------
of this Agreement, except Section 8.1 hereof, and if permitted by the DGCL and
the Company's Certificate of Incorporation, in the event that Parent, Purchaser
or any other subsidiary of Parent, or any combination of such persons, shall
beneficially own at least ninety percent (90%) of the outstanding shares of each
class of capital stock of the Company, the parties hereto agree to take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the consummation of the Offer.
2.5 Closing. Upon the terms and subject to the conditions hereof, as soon as
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practicable after the expiration of the Offer, and, if required by law, after
the vote of the stockholders of the Company in favor of approval and adoption of
this Agreement has been obtained, the Company (or Purchaser, if appropriate)
shall deliver to the Secretary of State of the State of Delaware a duly executed
and verified certificate of merger or certificate of ownership and merger, if
permitted by the DGCL, as required by the DGCL and the parties shall take all
such other and further actions as may be required by law to make the Merger
effective.
2.6 Further Assurances. If at any time after the Effective Time, the Surviving
------------------
Corporation shall consider or be advised that any deeds, bills of sale,
assignments or assurances or any other acts or things are necessary, desirable
or proper (a) to vest, perfect or confirm, of record or otherwise, in the
Surviving Corporation, its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of the Company
acquired or to be acquired as a result of the Merger, or (b) otherwise to carry
out the purposes of this Agreement, the Surviving Corporation and its proper
officers and directors or their designees shall be authorized to execute and
deliver, in the name and on behalf of the Company, all such deeds, bills of
sale, assignments and assurances and do, in the name and on behalf of the
Company, all such other acts and things necessary, desirable or proper to vest,
perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of the Company
acquired or to be acquired as a result of the Merger and otherwise to carry out
the purpose of this Agreement.
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ARTICLE III
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
3.1. The Certificate of Incorporation. The Certificate of Incorporation of the
--------------------------------
Company in effect at the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation with such amendment as set forth in
Exhibit 3.1, until duly amended in accordance with the terms thereof and the
DGCL.
3.2 The By-Laws. The By-Laws of Purchaser in effect at the Effective Time shall
-----------
be the By-Laws of the Surviving Corporation, until duly amended in accordance
with the terms thereof and the DGCL.
ARTICLE IV
OFFICERS AND DIRECTORS
OF THE SURVIVING CORPORATION
4.1 Directors and Officers. The directors of Purchaser and the officers of the
----------------------
Company at the Effective Time shall, from and after the Effective Time, be the
directors and officers, respectively, of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and By-Laws.
4.2 Actions by Directors. For purposes of Article IX and Sections 10.3 and
--------------------
10.4, no action taken by the Board of Directors of the Company at or after the
purchase of the Shares pursuant to the Offer and prior to the Merger shall be
effective unless such action is approved by the affirmative vote of at least a
majority of the Continuing Directors.
ARTICLE V
CONVERSION OR CANCELLATION OF SHARES
IN THE MERGER; WARRANTS OUTSTANDING
5.1 Conversion or Cancellation of Shares. The manner of converting or canceling
------------------------------------
shares of the Company and Purchaser in the Merger shall be as follows:
a) Merger Consideration. At the Effective Time, each Share issued and
--------------------
outstanding immediately prior to the Effective Time (other than the
Shares owned by Purchaser or any Affiliate of Purchaser (collectively,
the "Purchaser Companies"), the Shares held by the Shareholder which
are subject to the Option,
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if unexercised (the "Option Shares"), the Shares held in the treasury
of the Company or the Shares which are held by stockholders who have
perfected appraisal rights pursuant to Section 262 of the DGCL
("Dissenting Stockholders")) shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted
into the right to receive, without interest, an amount in cash equal
to U.S. $29.00 or such greater amount which may be paid pursuant to
the Offer as it may be amended (the "Merger Consideration"). All such
Shares, by virtue of the Merger and without any action on the part of
the holders thereof, shall no longer be outstanding, shall be canceled
and retired and shall cease to exist, and each holder of certificates
representing any such Shares shall thereafter cease to have any rights
with respect to such Shares, except the right to receive the Merger
Consideration for such Shares upon the surrender of such certificates
in accordance with Section 5.2.
b) Shareholder Merger Consideration. At the Effective Time, each Option
--------------------------------
Share held by the Shareholder immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of
the Shareholder, be converted into (i) 0.0001931572126 shares of Class
A participating exchangeable common stock of the Surviving Corporation
("Class A Stock"), aggregating 100 shares of Class A Stock for all
Option Shares, having the rights and preferences described in Exhibit
5.1(b)(i) hereto, and (ii)the right to receive, on the terms set forth
below, (x)if and only if EBITDA (as herein defined) of the Surviving
Corporation for the fiscal year ended December 31, 1997 is at least
$20,000,000,$3.051882993; (y)if and only if EBITDA of the Surviving
Corporation for the fiscal year ended December 31, 1998 is at least
equal to the greater of $24,000,000 or 120% of the EBITDA of the
Surviving Corporation for the fiscal year ended December 31, 1997,
$3.051882993and (z) if and only if the Shareholder was not entitled to
receive the payment described in subsection (b)(ii)(x) above and the
aggregate EBITDA of the Surviving Corporation for the two fiscal years
ended December 31, 1998 is at least $44,000,000, $3.051882993;
provided, however, that in no event shall the Shareholder be entitled
to receive more than $6.103765986 per Option Share pursuant to
subsections (b)(ii) (x), (y) and (z) (collectively, the consideration
described in subsections b(i) and b(ii) above is hereinafter referred
to as the "Shareholder Merger Consideration"). All such Option Shares,
by virtue of the Merger and without any action on the part of the
Shareholder, shall no longer be outstanding, shall be canceled and
retired and shall cease to exist, and the Shareholder shall thereafter
cease to have any rights with respect to such Option Shares, except
the right to receive the Shareholder Merger Consideration (with
interest as provided in Section 5.1(c) below) for such Option Shares
upon the surrender of certificates representing any Option Shares in
accordance with Section 5.2.
c) Payment of Shareholder Merger Consideration. Amounts payable pursuant
to subsection (b)(ii) will bear simple interest from the date hereof
to the date of payment at the rate per annum equal to the rate per
annum quoted or published by Harris Trust and Savings Bank as its
prime rate, as the same varies from time to
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time. The rate of interest applicable to amounts payable pursuant to
subsection (b)(ii) shall vary with each change in such prime rate.
Payments under subsection (b)(ii), if any, together with any
interest thereon shall be paid to the Shareholder within one hundred
twenty-five (125) days of the end of the fiscal year for which it was
earned, by certified check or bank draft payable to the Shareholder or
by wire transfer of immediately available funds to an account
designated in writing by the Shareholder; provided, however, if after
the Effective Time, the Shareholder's employment is terminated
pursuant to subsections 2.2(b), (c) or (d) of the employment agreement
made of even date herewith among the Shareholder, the Company and
Parent or upon the Shareholder's death, then the Surviving
Corporation, notwithstanding the conditions set forth in Section
5.1(b), shall promptly pay to the Shareholder the Shareholder Merger
Consideration (other than the Class A Stock less any amounts
previously paid pursuant to subsection (b)(ii), but including interest
as described above to the date of payment) by certified check or bank
draft payable to the Shareholder or by wire transfer of immediately
available funds to an account designated in writing by the
Shareholder; and provided, further, that in the event of a dispute
between the Shareholder and the Company with respect to the
calculation of EBITDA of the Surviving Corporation, pending the final
outcome of any appeal pursuant to the procedures described in the last
paragraph of this Section 5.1(c), the disputed amount of
the payment shall not be made to the Shareholder; provided,
further, however, that interest will continue to accrue with respect
to such disputed amounts during such appeal period and shall be
payable if and when and to the extent it is determined that the
Shareholder is entitled to such disputed amounts.
For the purposes of this subsection (b)(ii), EBITDA and certain
other terms relevant thereto are defined in Exhibit 5.1(c) hereto.
EBITDA of the Surviving Corporation shall be calculated from the
audited financial statements of the Surviving Corporation for the
relevant fiscal year.
If there is a dispute between the Shareholder and the Company
with respect to the calculation of EBITDA of the Surviving
Corporation, the audit committee of Parent shall, subject only to a
right of appeal from the decision of the audit committee, within ten
(10) business days of such decision, to the Chairman of Parent, who
shall consider such appeal in good faith and whose decision shall be
final, binding and unappealable, make a determination of all such
disputed matters. The Shareholder and the Company shall have the right
to make representations to the audit committee of Parent in respect of
a dispute with respect to
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the calculation of EBITDA of the Surviving Corporation. The
Shareholder shall have twenty (20) business days from the date of
notice to the Shareholder of the Company's calculation of EBITDA of
the Surviving Corporation to dispute such calculation by referring
such dispute to the audit committee, and if the Shareholder does not
dispute such calculation and refer such dispute to the audit committee
within such period, he shall have no right to do so thereafter.
d) Cancellation of Shares. At the Effective Time, each Share issued and
----------------------
outstanding immediately prior to the Effective Time and owned by
Purchaser or any of the Purchaser Companies, and each Share issued and
held in the Company's treasury immediately prior to the Effective
Time, by virtue of the Merger and without any action on the part of
the holders thereof, shall no longer be outstanding, shall be canceled
and retired without payment of any consideration therefor and shall
cease to exist, and each holder of a certificate representing any such
Shares shall thereafter cease to have any rights with respect to such
Shares.
e) Purchaser Shares. At the Effective Time, each share of capital stock
----------------
of Purchaser issued and outstanding immediately prior to the Effective
Time shall, by virtue of the Merger and without any action on the part
of Purchaser or the holders of such shares, be converted into one (1)
share of capital stock of the Surviving Corporation with rights,
obligations and preferences identical to the rights, obligations and
preferences of such capital stock of Purchaser immediately prior to
the Effective Time.
5.2 Payment for Shares
------------------
a) Paying Agent. Prior to the Effective Time, Purchaser shall appoint
------------
First Chicago Trust Company of New York or a commercial bank of
national reputation chosen by Purchaser and reasonably acceptable to
the Company to act as paying agent (the "Paying Agent") for the
payment of the Merger Consideration, and Parent shall deposit or shall
cause to be deposited with the Paying Agent in a separate fund
established for the benefit of the holders of Shares, for payment in
accordance with this Article V, through the Paying Agent (the "Payment
Fund"), immediately available funds in amounts necessary to make the
payments pursuant to Section 5.1(a) and this Section 5.2. The Paying
Agent shall, pursuant to irrevocable instructions, pay the Merger
Consideration out of the Payment Fund.
The Paying Agent shall invest portions of the Payment Fund as
Parent directs in obligations of or guaranteed by the United States of
America, in commercial paper obligations receiving the highest
investment grade rating from both Moody's Investors Services, Inc. and
Standard & Poor's Corporation, or in certificates of deposit, bank
repurchase agreements or banker's acceptances of commercial banks with
capital exceeding $500,000,000 (collectively, "Permitted
Investments"); provided, however, that the maturities of Permitted
-------- -------
Investments shall be such as to permit the Paying Agent to make prompt
payment to former
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holders of the Shares entitled thereto as contemplated by this
Section. Parent shall cause the Payment Fund to be promptly
replenished to the extent of any losses incurred as a result of
Permitted Investments. All earnings on Permitted Investments shall be
paid to Parent. If for any reason (including losses) the Payment Fund
is inadequate to pay the amounts to which holders of Shares shall be
entitled under this Section 5.2, Parent shall in any event be liable
for payment thereof. The Payment Fund shall not be used for any
purpose except as expressly provided in this Agreement.
b) Payment Procedures. As soon as reasonably practicable after the
------------------
Effective Time, Parent shall instruct the Paying Agent to mail to each
holder of record (other than the Company or any subsidiary of the
Company or Parent, Purchaser or any other subsidiary of Parent or the
Shareholder) of a certificate or certificates which, immediately prior
to the Effective Time, evidenced outstanding Shares (the
"Certificates"), (i) a form of letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon proper delivery of the
Certificates to the Paying Agent, and shall be in such form and have
such other provisions as Parent reasonably may specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for payment therefor. Upon surrender of a Certificate for
cancellation to the Paying Agent together with such letter of
transmittal, duly executed, and such other customary documents as may
be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in respect thereof cash in an
amount equal to the product of (x) the number of Shares represented by
such Certificate and (y) the Merger Consideration, and the Certificate
so surrendered shall forthwith be canceled. Absolutely no interest
shall be paid or accrued on the Merger Consideration payable upon the
surrender of any Certificate. If payment is to be made to a person
other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be promptly endorsed or otherwise in proper form for
transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person
other than the registered holder of the surrendered Certificate or
have established to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered in
accordance with the provisions of this Section 5.2(b), each
Certificate (other than Certificates representing the Shares owned by
Parent, any subsidiary of Parent or the Shareholder or held in the
treasury of the Company) shall represent for all purposes only the
right to receive the Merger Consideration.
c) Termination of Payment Fund; Interest. Any portion of the Payment Fund
-------------------------------------
which remains undistributed to the holders of the Shares for one
hundred fifty (150) days after the Effective Time shall be delivered
to Parent, upon demand, and any holders of Shares who have not
therefore complied with this Article V and the instructions set forth
in the letter of transmittal mailed to such holder after the Effective
Time shall thereafter look only to Parent for payment of the Merger
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Consideration to which they are entitled. All interest accrued in
respect of the Payment Fund shall inure to the benefit of and be paid
to Parent.
d) No Liability. Neither Parent nor the Surviving Corporation shall be
------------
liable to any holder of Shares for any cash from the Payment Fund
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
e) Withholding Rights. The Surviving Corporation shall be entitled to
------------------
deduct and withhold from the consideration otherwise payable pursuant
to this Agreement to any holder of Shares such amounts as the
Surviving Corporation is required to deduct and withhold with respect
to the making of such payment under the Internal Revenue Code of 1986,
as amended (the "Code"), or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld by the Surviving
Corporation, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made by the
Surviving Corporation.
5.3 Dissenting Shares. Notwithstanding any other provisions of this Agreement
-----------------
to the contrary, Shares 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 Merger Consideration. Such stockholders instead shall
be entitled to receive payment of the appraised value of such Shares 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
effectively shall have withdrawn or lost their rights to appraisal of such
Shares under such Section 262 shall thereupon be deemed to have been converted
into and to have become exchangeable, as of the Effective Time, for the right to
receive, without any interest thereon, the Merger Consideration upon surrender
in the manner provided in Section 5.2 of the Certificate or Certificates that,
immediately prior to the Effective Time, evidenced such Shares.
5.4 Transfer of Shares After the Effective Time. No transfers of Shares shall
-------------------------------------------
be made on the stock transfer books of the Surviving Corporation at or after the
Effective Time.
5.5 Warrants Outstanding. At and after the Effective Time, each of the
--------------------
outstanding and unexercised warrants to purchase 150,000 Shares in the aggregate
issued in connection with the Company's initial public offering (the "Warrants")
shall continue to be outstanding and, upon payment of the exercise price then in
effect, the holder of such Warrant shall be entitled to receive upon exercise of
such Warrant the amount of cash (without interest) which the holder of such
Warrant would have been entitled to receive upon exercise had such Warrants been
exercised immediately prior to the Effective Time.
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5.6 Stock Options. At the Effective Time and subject to Section 7.6(a)(ii)
-------------
herein, each holder of a then outstanding Stock Option (as defined below),
whether or not then exercisable, shall, in settlement thereof, receive for each
Share subject to such Stock Option an amount (subject to any applicable
withholding tax) in cash equal to the difference between the Merger
Consideration and the per Share exercise price of such Stock Option to the
extent such difference is a positive number (such amount being hereinafter
referred to as the "Option Consideration"); provided, however, that with respect
to any person subject to Section 16(a) of the Exchange Act, any such amount
shall be paid as soon as practicable after the first date payment can be made
without liability to such person under Section 16(b) of the Exchange Act. Upon
receipt of the Option Consideration, the Stock Option shall be canceled. The
surrender of a Stock Option to the Company in exchange for the Option
Consideration shall be deemed a release of any and all rights the holder had or
may have had in respect of such Stock Option. Except as otherwise agreed to by
the parties, the Company shall take all action necessary to ensure that
following the Effective Time no participant in any stock option plan or other
plans, programs or arrangements shall have any right thereunder to acquire
equity securities of the Company, the Surviving Corporation or any subsidiary
thereof and to terminate all such plans.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of the Company. The Company hereby
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represents and warrants to Purchaser and Parent that, except as set forth on a
disclosure schedule previously delivered to Parent (the "Disclosure Schedule"):
a) Corporate Organization and Qualification. Each of the Company and its
----------------------------------------
subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation and
each has all requisite power and authority to own, lease and operate
its properties and carry on its business as now being conducted. When
a reference is made in this Agreement to subsidiaries of the Company,
the word "Subsidiaries" means any corporation, partnership, limited
liability company or other entity of which more than fifty percent
(50%) of the outstanding voting securities are directly or indirectly
owned, as of the date hereof, by the Company. Each of the Company and
its subsidiaries is in good standing as a foreign corporation in each
jurisdiction where the properties owned, leased or operated, or the
business conducted, by it require such qualification, except where the
failure to be so organized, existing or in good standing or to have
such power or authority would not have a material adverse effect on
the financial condition, properties, business, results of operations
or prospects of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Effect"). The Company has made available to
Purchaser a complete and correct copy of the Company's and each of its
subsidiaries Certificate of Incorporation and By-Laws, each as
amended to date. The Company's and each of its subsidiaries
Certificate of Incorporation and By-Laws so delivered are in
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full force and effect. Except as set forth in Schedule 6.1(a) of the
Disclosure Schedule, the only direct or indirect subsidiaries of the
Company are those set forth in Exhibit 21.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 (the
"1996 10-K").
b) Authorized Capital. The authorized capital stock of the Company as of
------------------
the date hereof consists of (i) 30,000,000 Shares, of which 5,264,874
Shares were outstanding and 96,000 Shares were held in its treasury on
the date hereof, and (ii) 10,000,000 shares of preferred stock, U.S.
$0.001 par value, no shares of which had been issued or were
outstanding as of the date hereof. As of the date hereof, there were
802,000 Shares subject to outstanding stock options (each a "Stock
Option") and 150,000 Shares subject to issuance upon the exercise of
the Warrants. As of the date hereof, the weighted average exercise
price of such outstanding Stock Options was U.S. $11.55 per share.
Set forth on Schedule 6.1(b)(1) of the Disclosure Schedule is the
following information with respect to the Company's Stock Options by
date of grant: (i) the aggregate number of Stock Options granted,
(ii) the exercise price of such Stock Options and (iii) the number of
Stock Options that are currently exercisable. All the outstanding
Shares are, and all Shares which may be issued pursuant to outstanding
Stock Options or upon exercise of Warrants will be, validly issued,
fully paid and nonassessable and free of any preemptive rights in
respect thereto. Except as set forth on Schedule 6.1(b)(2), each of
the outstanding shares of capital stock of, or other ownership
interests in, each of the Company's subsidiaries is duly authorized,
validly issued, fully paid and non-assessable and owned, either
directly or indirectly, by the Company free and clear of all liens,
pledges, security interests, claims, encumbrances, limitations or
restrictions (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests)
(collectively, "Liens"). Except as set forth above, there are no
shares of capital stock of the Company authorized, issued or
outstanding. Except as set forth above or as contemplated hereby, and
except for the Warrants and the Tender Agreement, there are no pre-
emptive rights nor any outstanding subscriptions, options, warrants,
rights, convertible securities or other agreements or commitments of
any character to which the Company is bound and relating to the issued
or unissued capital stock or other securities of the Company or any of
its subsidiaries. Neither the Company nor any subsidiary is a party
to a joint venture, partnership or similar agreement. Except as set
forth on Schedule 6.1(b)(3) of the Disclosure Schedule, the Company
has no direct or indirect interest in any corporation, partnership,
limited liability company or any other entity that is not a
subsidiary.
c) Corporate Authority. Subject only to approval of this Agreement by the
holders of a majority of the outstanding Shares (if required), the
Company has the requisite corporate power and authority and has taken
all corporate action necessary in order to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly authorized,
15
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executed and delivered by the Company and assuming due authorization,
execution and delivery by Parent and Purchaser, is a valid and binding
agreement of the Company enforceable against the Company in accordance
with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, enforcement of creditors' rights
generally and by general principals of equity, regardless of whether
such enforceability is considered in a proceeding in equity or at law.
The Board of Directors of the Company has irrevocably granted the
Section 203 Approval.
d) Governmental Filings; No Violations.
------------------------------------
(i) Other than the filings provided for in Sections 1.1 and 2.2 and
other than as required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") and the Exchange Act
(the "Regulatory Filings"), no notices, reports or other filings
are required to be made by the Company with, nor are consents,
registrations, approvals, permits or authorizations required to
be obtained by the Company from, any governmental or regulatory
authorities of the United States, the several States or any other
jurisdiction in connection with the execution and delivery of
this Agreement by the Company and the consummation by the Company
of the transactions contemplated hereby, except for such filings,
notices, reports, consents, registrations, approvals, permits or
authorizations that the failure to make or obtain would not have
a Material Adverse Effect or that would not prevent or materially
delay transactions contemplated by this Agreement.
(ii) Except as set forth on Schedule 6.1(d) of the Disclosure
Schedule, the execution and delivery of this Agreement by the
Company do not, and the consummation by the Company of the
transactions contemplated hereby will not, constitute or result
in (x) a breach or violation of, or a default under, the
Certificate of Incorporation or By-Laws or comparable governing
instruments of the Company or the comparable governing
instruments of its subsidiaries or (y) a breach or violation of,
or a default under, the acceleration of indebtedness or the
creation of a Lien on assets (with or without the giving of
notice or the lapse of time) pursuant to any provision of any
agreement, lease, contract, note, mortgage, indenture,
arrangement or other obligation (any of the foregoing being
hereinafter referred to as a "Contract") of the Company or its
subsidiaries or any law, rule, ordinance or regulation or
judgment, decree, order, award or governmental or non-
governmental permit or license to which the Company or any of its
subsidiaries is subject, except, in the case of clause (y) above,
for such breaches, violations, defaults, accelerations or Liens
that, alone or in the aggregate, will not have a Material Adverse
Effect or
16
<PAGE>
that would not prevent or materially delay the transactions
contemplated by this Agreement.
e) Company Reports; Financial Statements. The Company has filed all
-------------------------------------
reports, forms and documents with the SEC required to be filed by it
under the Exchange Act since January 1, 1995 (all such reports filed
as of the date hereof, collectively, the "Company Reports"), and has
made available to Purchaser a true and complete copy of each such
Company Report. As of their respective dates, the Company Reports
(including, without limitation, any financial statements or schedules
included in or incorporated by reference therein) did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not
misleading. Each of the historical consolidated balance sheets
included in or incorporated by reference into the 1996 10-K or the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1997 (including the related notes and schedules) fairly presents
the consolidated financial position of the Company and its
subsidiaries as of its date and each of the historical consolidated
statements of income and of changes in financial position included in
or incorporated by reference into the Company Reports (including any
related notes and schedules) fairly presents the results of
operations, retained earnings and changes in financial position, as
the case may be, of the Company and its subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to
normal year-end adjustments), in each case in accordance with
generally accepted accounting principles consistently applied during
the periods involved, except as may be noted therein or as may be
permitted under Form 10-Q of the Exchange Act. Except as set forth on
Schedule 6.1(e) of the Disclosure Schedule or in the Company Reports,
the Company and its subsidiaries do not have any liabilities of any
nature required by generally accepted accounting principles to be
reflected on a consolidated balance sheet of the Company and its
subsidiaries other than liabilities incurred after March 31, 1997 in
the ordinary course of business.
f) Taxes.
------
(i) The Company and its subsidiaries have duly filed all federal,
state, local and other Tax Returns (as defined below) required to
be filed by them, except for Tax Returns which, individually and
in the aggregate, the failure to file at the time required to be
filed will not have a Material Adverse Effect, and have duly paid
or made adequate provision for the payment of all Taxes (as
defined below) shown to be due thereon. All such Tax Returns
are, in all material respects, true, correct and, to the
Company's knowledge, complete. The Internal Revenue Service has
never audited the federal income tax returns of the Company or
its subsidiaries. All assertions of deficiencies or assessments
of Taxes due and payable by the Company or any subsidiary have
been paid or provided
17
<PAGE>
for or are reflected on Schedule 6.1(f) of the Disclosure
Schedule and are being contested in good faith by appropriate
proceedings except for deficiencies or assertions the non-
payment of which would not have a Material Adverse Effect. To
the Company's knowledge, no issue has been raised by the
Internal Revenue Service in any such examination which by
application of the same or similar principles, resulted in
material assessments or deficiencies for the period so examined
or could reasonably be expected to result in a material proposed
deficiency for any period not so examined. Except as set forth
in Schedule 6.1(f) of the Disclosure Schedule, there are no
outstanding agreements or waivers extending the statutory period
of limitation applicable to any federal income tax return for
any period. The liabilities and reserves for Taxes reflected in
the Company's balance sheet as of December 31, 1996 and March
31, 1997 contained in the Company Reports and reflected in the
books and records of the Company were adequate as of such date
and to the Company's knowledge, there are no material liens for
Taxes upon any property or assets of the Company or any
subsidiary except liens for Taxes not yet due or the validity of
which is being contested in good faith by appropriate
proceedings. All material Taxes that the Company or any
subsidiary is required by law to withhold or collect have been
duly withheld or collected and, to the extent required by law,
have been paid to the appropriate governmental authorities or
properly deposited. Neither the Company nor any subsidiary has,
with regard to any assets or property held, acquired or to be
acquired by any of them, filed a consent to the application of
Section 341(f)(2) of the Code.
(ii) As used herein, "Taxes" shall mean all taxes, charges, fees,
levies or other assessments, including, without limitation,
income, gross receipts, excise, property, sales, occupation,
use, service, service use, license, payroll, franchise, transfer
and recording taxes, fees and charges, imposed by the United
States, or any state, local or foreign government or subdivision
or agency thereof whether computed on a separate, consolidated,
unitary, combined or any other basis; and such term shall
include any interest, liabilities, additional amounts, penalties
and additions to tax.
(iii) The term "Tax Return" shall mean any report, return, information
return or other document (including related or supporting
information) filed or required to be filed by the Company or any
of its subsidiaries with any governmental authority or other
authority in connection with the determination, assessment or
collection of any Tax (whether or not such Tax is imposed on the
Company) or the administration of any law, regulation or
administrative requirements relating to any Tax.
g) Absence of Certain Changes. Except as disclosed in the Company Reports
--------------------------
or in the Disclosure Schedule, (x) since March 31, 1997, the Company
and its
18
<PAGE>
subsidiaries have conducted their respective businesses only in, and
have not engaged in any material transaction other than according to,
the ordinary and usual course of such businesses and have conducted
their business as provided in Section 7.1(a) and have not taken any of
the actions set forth in Section 7.1 and (y) since March 31, 1997,
there has not been any material adverse change in the financial
condition, properties, business, results of operations or prospects of
the Company and its subsidiaries taken as a whole.
h) Litigation. Except as disclosed in the Company Reports or Schedule
----------
6.1(h) of the Disclosure Schedule, there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened
against the Company or any of its subsidiaries that, alone or in the
aggregate, are reasonably likely to have a Material Adverse Effect.
i) Brokers and Finders. Neither the Company nor any of its officers,
-------------------
directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated herein, except that the
Company has employed F.M. Roberts & Company, Inc. ("FMR") and CWC, the
payment arrangements of which have been disclosed in Schedule 6.1(i)
of the Disclosure Schedule, and true and complete copies of which have
been furnished to Purchaser.
j) Offer Documents; Proxy Statements; Other Information. None of the
----------------------------------------------------
information furnished by the Company relating to the Company and its
subsidiaries included in the Offer Documents, the Schedule 14D-9, the
Proxy Statement or any other schedules or documents (or in any
amendment or supplement to any of the foregoing) required to be filed
with the SEC in connection with the Offer or the Special Meeting,
will, at the respective times the Offer Documents, Schedule 14D-9, the
Proxy Statement or any other such schedules or documents, or any
amendments or supplements thereto are first filed with the SEC or
first published, sent or given to the Company's stockholders, contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
k) Compliance with Law. The operations of the Company and its
-------------------
subsidiaries have been conducted in accordance with all applicable
laws, regulations or other requirements of all national governmental
authorities, and of all states, municipalities and other political
subdivisions and agencies thereof, having jurisdiction over the
Company and its subsidiaries, including, without limitation, all such
laws, regulations and requirements relating to antitrust, consumer
protection, environmental, currency exchange, equal opportunity, food
and drugs, health, occupational, safety, pension, securities and
trading-with-the-enemy matters, except where the failure to so conduct
or comply would not have a Material Adverse Effect. In connection
with the operation of the Company's
19
<PAGE>
business, there has been no Release of any Hazardous Substance, as
those terms are defined under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601 et seq.
-- ---
("CERCLA"), at, in, or from any of the Company's or any of its
subsidiaries' current or former facilities or real property, or, to
the Company's best knowledge, at any other location at which the
Company or any of its subsidiaries has arranged for the disposal or
has disposed of any Hazardous Substance, nor is there any condition
existing at any of the Company's or any of its subsidiaries' current
or former facilities or real property which might give rise to
liability under CERCLA or any analogous state law, except where such
Release of any Hazardous Substance or such condition would not have a
Material Adverse Effect
6.2 Representations and Warranties of Parent and Purchaser. Parent and
------------------------------------------------------
Purchaser jointly and severally represent and warrant to the Company that:
a) Corporate Organization. Purchaser is a Delaware corporation duly
----------------------
organized, validly existing and in good standing under the laws of
Delaware. Parent is a Canadian corporation duly incorporated and
validly subsisting under the laws of Canada. Parent and Purchaser
have made available to the Company complete and correct copies of
Parent's, Purchaser's and all subsidiaries', which directly or
indirectly own an interest in Purchaser, respective Certificates of
Incorporation and By-Laws, each as amended to date. Parent's,
Purchaser's and all such subsidiaries' respective Certificates of
Incorporation and By-Laws so delivered are in full force and effect.
b) Corporate Authority. Each of Parent and Purchaser has the requisite
-------------------
corporate power and authority and has taken all corporate action
necessary in order to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement has
been duly executed and delivered by each of Parent and Purchaser and,
assuming due authorization, execution and delivery by the Company, is
a valid and binding agreement of each of them enforceable against each
of them in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and by general principals
of equity, regardless of whether such enforceability is considered in
a proceeding in equity or at law.
c) Governmental Filings; No Violations.
------------------------------------
(i) Other than the Regulatory Filings, no notices, reports or other
filings are required to be made by either Parent or Purchaser
with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by either Parent or
Purchaser from, any governmental or regulatory authorities of
Canada or any province or other governmental subdivision thereof,
the United States, the several States or any other
20
<PAGE>
jurisdictions (foreign or domestic) in connection with the
execution and delivery of this Agreement by either Parent or
Purchaser and the consummation by Parent and Purchaser of the
transactions contemplated hereby, except that Parent must provide
a notice of material change to the securities commissions of each
of the Provinces of Canada (which Parent shall do forthwith
following announcement of the Offer), provide notice to and
obtain acceptance of notice from The Toronto Stock Exchange and
the Montreal Exchange with respect to the stock options to be
granted to the Shareholder and the issuance of Parent's Class B
non-voting shares on the exercise of the exchange rights attached
to the Class A Stock (which notice has been given to The Toronto
Stock Exchange and will forthwith be given to the Montreal
Exchange) and provide notice of issuance to the Ontario
Securities Commission with respect to and forthwith following the
issuance of any of the Parent's Class B non-voting shares, and
except for such filings, notices, reports, consents,
registrations, approvals, permits or authorizations that the
failure to make or obtain would not have a Material Adverse
Effect or that would not prevent or materially delay transactions
contemplated by this Agreement.
(ii) The execution and delivery of this Agreement by each of Parent
and Purchaser do not, and the consummation by each of Parent and
Purchaser of the transactions contemplated hereby will not,
constitute or result in (x) a breach or violation of, or a
default under, the respective Certificate of Incorporation or By-
Laws or comparable governing instruments of Parent and Purchaser
or (y) a breach or violation of, or a default under, the
acceleration of indebtedness or the creation of a Lien on assets
(with or without the giving of notice or the lapse of time)
pursuant to any provision of any Contract of either Parent or
Purchaser or any law, rule, ordinance or regulation or judgment,
decree, order, award or governmental or non-governmental permit
or license to which Parent or Purchaser is subject, except, in
the case of clause (y) above, for such breaches, violations,
defaults, accelerations or Liens that, alone or in the aggregate,
would not prevent or materially delay the transactions
contemplated by this Agreement.
d) Schedule 14D-1; Offer Documents. The Schedule 14D-1 and all amendments
-------------------------------
thereof, the Offer Documents and the Offer will comply in all material
respects with the provisions of the Exchange Act, except that no
representation is made by Parent and Purchaser with respect to
information supplied in writing by the Company specifically for
inclusion in the Schedule 14D-1 (and all amendments thereof) and the
Offer Documents. The Schedule 14D-1 (and all amendments thereof) and
the Offer Documents, at the respective times the Schedule 14D-1 and
such amendments are first filed with the SEC, and at the respective
times the Offer Documents are first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any
21
<PAGE>
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made
by Parent or Purchaser with respect to information supplied in writing
by the Company specifically for inclusion in the Schedule 14D-1 (and
all amendments thereof) and the Offer Documents.
e) Brokers and Finders. Neither Parent, Purchaser nor any of their
-------------------
officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated herein, except
that Purchaser has employed Salomon Brothers Inc and The Beacon Group
Capital Services LLC as its financial advisors.
f) Funds. Purchaser has commitments and available cash
-----
sufficient to consummate the transactions contemplated by this
Agreement and the Tender Agreement and to pay related fees and
expenses, and such financing commitments are in full force and effect,
a copy of which was previously delivered to the Company and as
delivered is true and correct.
ARTICLE VII
COVENANTS
7.1 Interim Operations of the Company. The Company covenants and agrees that,
---------------------------------
except as set forth on the Disclosure Schedule, prior to the Effective Time
(unless Purchaser shall otherwise agree in writing and except as otherwise
contemplated by this Agreement):
a) the business of the Company and its subsidiaries shall be conducted
only in the ordinary and usual course and, to the extent consistent
therewith, each of the Company and its subsidiaries shall use its
reasonable best efforts to preserve its business organization intact
and maintain its existing relations with customers, suppliers,
licensees, employees and other business associates;
b) the Company shall not (i) sell or pledge or agree to sell or pledge
any stock owned by it or any of its subsidiaries; (ii) amend its
Certificate of Incorporation or By-Laws; (iii) split, combine or
reclassify outstanding Shares; (iv) declare, set aside or pay any
dividend payable in cash, stock or property with respect to the
Shares; or (v) adopt a plan of liquidation;
c) neither the Company nor any of its subsidiaries shall (i) issue, sell,
pledge, dispose of or encumber any shares of, or securities
convertible or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital
stock of any class of the Company or its subsidiaries other than,
22
<PAGE>
in the case of the Company, Shares issuable pursuant to (A) Stock
Options outstanding on the date hereof or (B) exercise of the
Warrants; (ii) transfer, lease, license, sell, mortgage, pledge,
dispose of or encumber any material assets other than in the ordinary
and usual course of business; or (iii) acquire directly or indirectly
by redemption or otherwise any shares of the capital stock of the
Company or Warrants;
d) (i) unless otherwise ordered by any governmental or regulatory
authorities of Canada or any province or other governmental
subdivision thereof, the United States, the several states, or
any other jurisdiction (foreign or domestic) of competent
authority, provided that, in the case of any such order, Company
shall consult with Parent and Purchaser regarding the appeal of
or compliance with such order, neither the Company nor any of its
subsidiaries shall establish, adopt, enter into, make any new
grants or awards under or amend, any collective bargaining
agreement, and, except in the ordinary and usual course of
business and consistent with past practice, any bonus, profit
sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust fund,
policy or arrangement for the benefit of any directors, officers
or employees (except as specifically described in Section 7.6 or
Schedule 7.1(d) hereto) and (ii) neither the Company nor any of
its subsidiaries shall (A) grant any increase in the compensation
payable or to become payable by the Company or any of its
subsidiaries to any of its directors, executive officers or key
employees or (B) subject to Section 7.6, enter into or amend any
employment agreement with or, except in accordance with existing
written policy of the Company, grant any severance or termination
pay to, any officer, director or employee of the Company or any
of its subsidiaries;
e) neither the Company nor any of its subsidiaries shall settle or
compromise any material claims or litigation or, except in the
ordinary and usual course of business, modify, amend or terminate any
of its material Contracts or waive, release or assign any material
rights or claims;
f) except as set forth on Schedule 7.1(f), neither the Company nor any of
its subsidiaries shall incur any indebtedness for money borrowed or
issue or sell any debt securities, or assume, guarantee, endorse or
otherwise as an accommodation become responsible for the obligations
of any other individual or entity, or make any loans or advances,
other than in the ordinary and usual course of business, provided that
the aggregate value of such indebtedness, debt securities or other
obligations, contingent or otherwise, shall not exceed $750,000;
g) neither the Company nor any of its subsidiaries shall acquire (by
merger, consolidation or acquisition of stock or assets) any
corporation, partnership or
23
<PAGE>
other business organization or division thereof (other than an entity
which is already a wholly-owned subsidiary of the Company) or make any
investment either by purchase of stock or securities, contributions to
capital (other than to wholly-owned subsidiaries of the Company),
material property transfer or purchase of any material property or
assets, in any other individual or entity (other than an entity which
is already a wholly-owned subsidiary of the Company);
h) neither the Company nor any of its subsidiaries shall, except in the
ordinary course consistent with past practice, make any tax elections
or settle or compromise any income tax liability or, except as
required by law or applicable accounting standards, change any
accounting policies or procedures;
i) neither the Company nor any of its subsidiaries shall make any
payment, direct or indirect, of any material liability of the Company
before the same comes due in accordance with its terms;
j) neither the Company nor any of its subsidiaries shall, in the event
any existing insurance coverage shall be terminated or lapse, to the
extent available at reasonable cost, fail to procure substantially
similar substitute insurance policies with financially sound and
reputable insurance companies in at least such amounts and against
such risks as are currently covered by such policies;
k) except as set forth on Schedule 7.1(k), neither the Company nor any of
its subsidiaries shall incur any capital expenditures other than in
the ordinary course of business and consistent with past practice and
not in an amount in excess of $500,000;
l) neither the Company nor any of its subsidiaries shall take or commit
to take any action that would make any representation or warranty of
the Company hereunder inaccurate in any material respect at, or as of
any time prior to, the termination or expiration of the Offer, unless
such inaccuracy results from any action or inaction permitted or
required by this Agreement or the Tender Agreement; and
m) neither the Company nor any of its subsidiaries will agree in writing
or otherwise to do any of the foregoing.
7.2 Acquisition Proposals. Neither the Company nor any of its subsidiaries nor
---------------------
any of the respective officers and directors of the Company and its subsidiaries
shall, and the Company will cause its employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of its subsidiaries) not to, initiate or solicit,
directly or indirectly, any inquiries or the making of any proposal with respect
to a merger, consolidation, recapitalization or similar transaction involving,
or any purchase of all or any significant portion of the assets of, or any
equity interest in, the Company or any of its subsidiaries (an "Acquisition
Proposal") or, except to the extent required, following the receipt of advice of
counsel, under applicable law for the discharge by the Board of Directors of its
24
<PAGE>
fiduciary duties, engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to any Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal. The Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any third parties conducted heretofore with
respect to any of the foregoing. The Company will notify Purchaser immediately
if any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with, the Company and will promptly request each person
which has heretofore executed a confidentiality agreement in connection with its
consideration of acquiring the Company to return or destroy all confidential
information heretofore furnished to such person by or on behalf of the Company.
7.3 Filings; Other Action. Subject to the terms and conditions herein
---------------------
provided, the Company, Parent and Purchaser shall (a) promptly make their
respective filings and thereafter make any other required submissions under the
HSR Act and other Regulatory Filings with respect to the Offer and the Merger;
and (b) use their reasonable best efforts to promptly take, or cause to be
taken, all other action and do, or cause to be done, all other things necessary,
proper or appropriate under applicable laws and regulations or otherwise to
consummate and make effective the transactions contemplated by this Agreement as
soon as practicable.
7.4 Access. Access by Purchaser to the Company's properties, books, Contracts
------
and records shall be governed by the terms of the Confidentiality Agreement
dated March 5, 1997 between Parent and the Company, as amended (the
"Confidentiality Agreement").
7.5 Publicity. The initial press release with respect to the transactions
---------
contemplated hereby shall be a joint press release. Thereafter the Company,
Parent and Purchaser shall consult with one another to the extent possible in
issuing any press release or otherwise making public statements with respect to
the transactions contemplated hereby and in making any filings with any federal
or state governmental or regulatory agency or with any national securities
exchange with respect thereto.
7.6 Stock Options, Other.
--------------------
a) Stock Options.
-------------
(i) Except as may be agreed upon with the holders of Stock Options
and subject to Section 7.6(a)(ii), prior to the Effective Time,
the Company shall take such actions as may be necessary such that
at the Effective Time each Stock Option under the Company's 1993
Incentive and Nonstatutory Stock Option Plan, as amended (the
"Stock Options"), which was outstanding on the expiration date of
the Offer and not subsequently exercised whether or not then
exercisable, shall be canceled and only entitle the holder
thereof, upon surrender thereof (to the extent then outstanding),
to receive from the Company prior to the Effective Time (or such
later time as may be provided in agreements entered into prior to
the
25
<PAGE>
date hereof) an amount in cash equal to the difference between
the Merger Consideration and the exercise price per Share of such
Stock Option multiplied by the number of Shares previously
subject to such Stock Option.
(ii) The Company shall take such actions as may be necessary such that
at the Effective Time, the 545,000 Stock Options granted to the
Shareholder shall be canceled and entitle the Shareholder to (A)
options to acquire 545,000 shares of Parent's Class B non-voting
stock at an exercise price (expressed in Canadian currency) equal
to the simple average of the daily high and low board lot trading
prices for Parent's Class B non-voting stock on the Toronto Stock
Exchange for the 10 trading days commenced June 10, 1997 and
ending June 23, 1997 (the "10 Day Average") less Cdn $10.35 per
share and (B) receive from Parent or Purchaser in immediately
available funds US $5,491,997; provided that if the 10 Day
Average is less than Cdn $10.35, then the Shareholder shall
immediately receive from Parent or Purchaser an amount in
immediately available funds equal to the product of (A) the
difference of Cdn $10.35 and the 10 Day Average and (B) 545,000.
Such stock options shall be substantially in the form of Exhibit
7.6(a).
b) Employment Agreements. Parent agrees that, on or prior to the
---------------------
termination of the Offer it will enter into employment agreements with
each of the employees listed on Schedule I hereto (the "Employment
Agreement") providing for: (i) the employment of each such employee by
the Company and the Surviving Corporation for a three year term with
positions and duties and compensation and benefits at least as
favorable, and with termination provisions no more favorable, to such
employee as such employee is currently receiving from the Company as
of the date hereof; and (ii) the grant of stock options under and in
conformity with the Parent's Employee Stock Option Plan, in the amount
and for exercise price set forth in Schedule I; provided that Parent
shall not be in breach of this covenant with respect to any such
employee, if such employee will not execute his Employment Agreement.
c) Advisory fees. Parent shall cause the Surviving Corporation to honor
-------------
the arrangements with CWC and FMR referred to in section 6.1(i) hereof
and such other consulting and advisory fees as have been or may be
incurred in compliance with Section 6.1(i) in connection with the
transactions contemplated hereby.
7.7 Indemnification; Directors' and Officers' Insurance.
----------------------------------------------------
a) Parent and Purchaser agree that all rights to indemnification by the
Company now existing in favor of each present and former director,
officer or employee (and their respective heirs and assigns) of the
Company or any of its subsidiaries (the "Indemnified Parties") as
provided in its Certificate of Incorporation or By-Laws or pursuant to
other agreements in effect on the date hereof shall survive the Merger
and shall continue in full force and effect for a period of at least
six (6) years from the Effective Time.
b) To the extent paragraph (a) shall not serve to indemnify and hold
harmless an Indemnified Party, after the purchase of the Shares
pursuant to the Offer, Parent
26
<PAGE>
and Purchaser shall cause the Company to, and after the Effective
Time, Parent and the Surviving Corporation shall, subject to the terms
set forth herein, indemnify and hold harmless, to the fullest extent
permitted under applicable law, the Indemnified Parties against any
costs or expenses (including reasonable Attorneys' fees), judgments,
fines, losses, claims, damages, liabilities and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to such individuals
services prior to the Effective Time, as directors, officers,
employees or agents of the Company or any of its subsidiaries or as
trustees or fiduciaries of any plan for the benefit of employees of
the Company (including, without limitation, the transactions
contemplated by this Agreement or the Tender Agreement) for a period
of six (6) years after the Effective Time, provided that, in the event
any claim or claims are asserted or made within such six (6) year
period, all rights to indemnification in respect of any such claim or
claims shall continue until final disposition of any and all such
claims. Any Indemnified Party wishing to claim indemnification under
this paragraph (b), upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Parent or the
Surviving Corporation thereof, but the failure to so notify shall not
relieve Parent or the Surviving Corporation of any liability either
may have to such Indemnified Party if such failure does not materially
prejudice the indemnifying party. Without limiting the foregoing, in
the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), (i) Parent and
the Surviving Corporation shall have the right to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified
Party, Parent and the Surviving Corporation shall not be liable to
such Indemnified Parties for any legal expenses of other counsel or
any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof, except that if Parent and the
Surviving Corporation elect not to assume such defense or counsel for
the Indemnified Parties advises that there are issues which raise
conflicts of interest between Parent or the Surviving Corporation and
the Indemnified Parties, the Indemnified Parties may retain counsel
satisfactory to them and Parent and the Surviving Corporation, and
Parent and the Surviving Corporation shall pay all reasonable fees and
expenses of one (1) such counsel for the Indemnified Parties promptly
as statements therefor are received, (ii) Parent and the Surviving
Corporation will use all reasonable best efforts to assist in the
vigorous defense of any such matter, (iii) the Indemnified Parties
will cooperate in the defense of any such matter and (iv) Parent and
the Surviving Corporation shall not be liable for any settlement
effected without its prior written consent, which consent shall not be
unreasonably withheld.
c) The Surviving Corporation shall be required to maintain the Company's
existing officers' and directors' liability insurance or cause the
Surviving Corporation to receive similar coverage to the Company's
existing officers' and directors' liability insurance pursuant to
Parent's officers' and directors' liability insurance ("D&O
27
<PAGE>
Insurance") for a period of three (3) years after the Effective Time;
provided, however, if the existing D&O Insurance expires, is
-------- -------
terminated or canceled during such three (3) year period, the
Surviving Corporation will use commercially reasonable efforts to
obtain D&O Insurance with comparable coverage; provided, further, that
in no event shall the Surviving Corporation be required to maintain
the D&O Insurance with comparable coverage if the cost of such D&O
Insurance is more than one hundred twenty-five percent (125%) of the
cost of such D&O Insurance in the prior year, but in such case, the
Surviving Corporation shall purchase as much coverage as possible for
such amount.
7.8 Other Actions by the Company. If any "fair price," "moratorium," "control
----------------------------
share acquisition" or other form of anti-takeover statute, regulation or charter
provision is or shall become applicable to the transactions contemplated hereby
(including, without limitation, Section 203 of the DGCL), the Company and the
members of the Board of Directors of the Company shall use their reasonable best
efforts (subject to applicable fiduciary duties) to grant such approvals and
take such actions as are necessary so that the transactions contemplated hereby
may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise act to eliminate or minimize the effects of such statute,
regulation or charter provision on the transactions contemplated hereby, unless
the Company's Board of Directors determines, following the receipt of advice of
counsel, that it is required by fiduciary obligations under applicable law to
amend, modify or withdraw its recommendation to the holders of the Shares to
accept the Offer and to approve the Merger.
7.9 Additional Agreements. Subject to the terms and conditions herein provided
---------------------
and to the Confidentiality Agreement, each of the parties hereto agrees to use
its reasonable best efforts to take, or cause to be taken, all actions and to do
or cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by the
Offer and this Agreement and to cooperate with each other in connection with the
foregoing, including using all reasonable efforts (A) to obtain all necessary
waivers, consents and approvals from other parties to material loan agreements,
leases and other contracts, (B) to obtain all necessary consents, approvals and
authorizations as are required to be obtained under any federal, state or
foreign law or regulations, (C) to lift or rescind any injunction or restraining
order or other order adversely affecting the ability of the parties to
consummate the transactions contemplated hereby, (D) to effect all necessary
registrations and filings, including, but not limited to, filings under the HSR
Act and submissions of information required by governmental authorities, (E) to
obtain the proceeds of the financing commitments referred to in Section 6.2(f)
in accordance with the terms and conditions of such commitments, and (F) to
fulfill all conditions to this Agreement.
7.10 Recapitalization. It is intended by the parties hereto that the
----------------
conversion of the Option Shares into Class A Stock will qualify as a
recapitalization under Section 368(a)(1)(E) of the Code. Each of the parties
hereto agrees to use its reasonable best efforts to cause the conversion of the
Option Shares into Class A Stock to so qualify and to report such conversion as
a recapitalization under Section 368(a)(1)(E) of the Code on all future Tax
Returns.
28
<PAGE>
ARTICLE VIII
CONDITIONS
8.1 Conditions to Obligations of Parent and Purchaser. The obligations of
-------------------------------------------------
Parent and Purchaser to consummate the Merger are subject to the fulfillment of
each of the following conditions, any or all of which may be waived in whole or
in part by Purchaser to the extent permitted by applicable law:
a) Stockholder Approval. If applicable, this Agreement shall have been
--------------------
duly approved by the holders of a majority of the Shares entitled to
vote thereon, in accordance with applicable law and the Certificate of
Incorporation and By-Laws of the Company;
b) Purchase of Shares. Purchaser (or one of Purchaser Companies) shall
------------------
have purchased Shares pursuant to the Offer; provided that this
condition will be deemed satisfied if Purchaser (or any of Purchaser
Companies) fails to purchase Shares tendered pursuant to the Offer in
violation of the terms of this Agreement;
c) Governmental Consents. The waiting period applicable to the
---------------------
consummation of the Merger under the HSR Act shall have expired or
been terminated and all filings required to be made by the Company
prior to the Effective Time with, and all consents, approvals, permits
and authorizations required to be obtained by the Company prior to the
Effective Time from, governmental and regulatory authorities in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been
made or obtained (as the case may be), other than those the failure to
make or obtain of which would not render the Merger illegal; and
d) Litigation. No Canadian or United States or state court or
----------
governmental or regulatory authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by this Agreement
(collectively, an "Order").
8.2 Conditions to Obligations of the Company. The obligations of the Company
----------------------------------------
to consummate the Merger are subject to the fulfillment of each of the following
conditions, any or all of which may be waived in whole or in part by the Company
to the extent permitted by applicable law:
a) Stockholder Approval. If applicable, this Agreement shall have been
--------------------
duly approved by the holders of a majority of the Shares entitled to
vote thereon, in
29
<PAGE>
accordance with applicable law and the Certificate of Incorporation
and By-Laws of the Company;
b) Purchase of Shares. Purchaser (or one of Purchaser Companies) shall
------------------
have purchased Shares pursuant to the Offer;
c) Governmental Consents. The waiting period applicable to the
---------------------
consummation of the Merger under the HSR Act shall have expired or
been terminated and all filings required to be made by Parent and
Purchaser and their respective Affiliates prior to the Effective Time
with, and all consents, approvals, permits and authorizations required
to be obtained by Parent and Purchaser and their respective Affiliates
prior to the Effective Time from, governmental and regulatory
authorities in connection with the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
shall have been made or obtained (as the case may be), other than
those the failure to make or obtain of which would not render the
Merger illegal; and
d) Litigation. There shall be in effect no Order.
----------
ARTICLE IX
TERMINATION
9.1 Termination by Mutual Consent. This Agreement may be terminated and the
-----------------------------
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by holders of Shares, by the mutual consent of Purchaser and the
Company, by action of their respective Boards of Directors.
9.2 Termination by either Purchaser or the Company. This Agreement may be
----------------------------------------------
terminated and the Merger may be abandoned by action of the Board of Directors
of either Purchaser or the Company if, without the fault of the terminating
party, the Merger has not been consummated prior to March 31, 1998 or if, after
the Offer is consummated, a stockholder meeting is held to consider the Merger
and the Merger is not approved by holders of at least a majority of the Shares,
or if there has been a material breach of any representation, warranty, covenant
or agreement on the part of the other set forth in this Agreement which breach
has not been cured within ten (10) days following receipt by the breaching party
of notice of such breach, or if any permanent injunction or other order of a
court or other competent authority preventing the consummation of the Merger
shall have become final and non-appealable.
9.3 Termination by Purchaser. This Agreement may be terminated and the Merger
------------------------
may be abandoned at any time prior to the Effective Time, before or after the
approval by holders of Shares, by action of the Board of Directors of Purchaser,
if the Offer shall have been terminated because of the failure of any of the
conditions set forth in Annex A.
30
<PAGE>
9.4 Termination by the Company. This Agreement may be terminated and the
--------------------------
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by holders of Shares, by action of the Board of Directors of the
Company, if (i) Purchaser shall have failed to commence the Offer within the
time required in Section 1.1 or such Offer shall have expired without any Shares
being purchased by Purchaser within the time required in Section 1.1 or (ii) the
Board of Directors of the Company receives a written offer which was not
solicited after the date hereof with respect to an Acquisition Proposal and the
Board of Directors of the Company determines that such transaction is more
favorable to the stockholders of the Company than the Offer, as may be amended,
and the transactions contemplated hereby and that approval, acceptance or
recommendation of such other proposal is required by fiduciary obligations of
the Company's Board of Directors under applicable law; provided, however, that
the Company shall not terminate this Agreement pursuant to this Section 9.4(ii)
without providing Purchaser at least five (5) days notice.
9.5 Effect of Termination and Abandonment. In the event of termination of this
-------------------------------------
Agreement and abandonment of the Merger pursuant to this Article IX, no party
hereto (or any of its directors, officers or stockholders) shall have any
liability or further obligation to any other party to this Agreement, except as
provided in Sections 9.6 and 10.2.
9.6 Termination Fees. If, at any time following the entrance into this
----------------
Agreement, (i) any of the conditions set forth in paragraphs (e) or (g) of Annex
A of this Agreement shall have occurred, (ii) the Company terminates this
Agreement pursuant to Section 9.4(ii) hereof or (iii) Purchaser shall have
terminated the Offer as a result of the Company's failure to comply, in any
material respect, with any of its material covenants under this Agreement after
notice to the Company and the expiration of five (5) days without such breach
being cured, then the Company shall promptly, but in no event later than two (2)
days after the first of such events occurs (the "Payment Date"), pay to
Purchaser a fee of $7,200,000, provided that such fee shall not be paid if (x)
--------
either Parent or Purchaser shall have breached its material obligations under
this Agreement, or if any of Parent's or PurchaserOs representations and
warranties in this Agreement shall have been incorrect in any material respect
when made, or shall have since ceased to be true and correct in any material
respect or (y) Purchaser has not terminated the Offer.
ARTICLE X
MISCELLANEOUS AND GENERAL
10.1 Payment of Expenses; Certain Fees. Except as provided herein, whether or
---------------------------------
not the Merger shall be consummated, each party hereto shall pay its own
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the Merger.
10.2 Survival. The agreements of the Company, Parent and Purchaser contained
--------
in Sections 5.1 and 5.2 (but only to the extent that such Sections expressly
relate to actions to be taken after the Effective Time), 5.3, 5.4, 5.5, 5.6,
7.3, 7.6, 7.7, 7.10, 10.1, 10.2, 10.6, 10.7, 10.8, 10.9, 10.10, 10.12 and 10.13
shall survive the consummation of the Merger. The agreements of the
31
<PAGE>
Company and Purchaser contained in Sections 9.5, 9.6, 10.1 and 10.2 shall
survive the termination of this Agreement. All other representations,
warranties, agreements and covenants in this Agreement shall not survive the
consummation of the Merger or the termination of this Agreement.
10.3 Modification or Amendment. Subject to the applicable provisions of the
-------------------------
DGCL, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement only by written mutual agreement executed and delivered by
duly authorized officers of the respective parties.
10.4 Waiver of Conditions. The conditions to each party's obligations to
--------------------
consummate the Merger are for the sole benefit of such party and may be waived
by such party in whole or in part to the extent permitted by applicable law.
10.5 Counterparts. For the convenience of the parties hereto, this Agreement
------------
may be executed in any number of counterparts, each such counterpart being
deemed to be an original instrument, and all such counterparts shall together
constitute the same agreement.
10.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO
CHOICE OF LAW PRINCIPLES THEREOF. ANY JUDICIAL PROCEEDING BROUGHT AGAINST ANY
PARTY HERETO WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTION CONTEMPLATED
HEREBY, MAY BE BROUGHT IN THE COURTS OF THE STATE OF DELAWARE AND, BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO (I) ACCEPTS,
GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF SUCH COURT AND
ANY RELATED APPELLATE COURT, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, SUBJECT, IN EACH CASE, TO
ALL RIGHTS TO APPEAL SUCH DECISIONS TO THE EXTENT AVAILABLE TO THE PARTIES AND
(II) IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE
VENUE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT
IS AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS THAT SERVICE OF PROCESS UPON SUCH PARTY MAY BE MADE BY
DELIVERY OR BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT SUCH
PARTY'S ADDRESS SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF
THIS AGREEMENT, AND SERVICE SO MADE SHALL BE DEEMED COMPLETED ON THE DATE OF
DELIVERY OR ON THE FIFTH BUSINESS DAY AFTER SUCH SERVICE IS DEPOSITED IN THE
MAIL, AS THE CASE MAY BE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH PARTY HEREBY WAIVES TRIAL BY
JURY IN ANY JUDICIAL PROCEEDINGS INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE.
10.7 Notices. Any notice, request, instruction or other document to be given
-------
hereunder by either party to the other shall be in writing and delivered
personally or sent by facsimile followed by a copy delivered personally or sent
by registered or certified mail, postage prepaid, if to
32
<PAGE>
Purchaser or Parent, addressed to Parent, 105 Gordon Baker Road, Willowdale,
Ontario, CANADA M2H 3P8, Attention: Wayne M. E. McLeod, President and Chief
Executive Officer, Facsimile: (416)756-8549 (with copies to Albert Gnat, Q.C.
and Geofrey Myers, Lang Michener, BCE Place, Suite 2500, 181 Bay Street,
Toronto, Ontario, CANADA M5J 2T7, Facsimile:(416) 365-1719 and to Brian
Hoffmann, Esq., McDermott, Will & Emery, 50 Rockefeller Plaza, New York, New
York 10020-1605, Facsimile: (212) 547-5444); and if to the Company, addressed to
the Company at 2501 West Rosecrans Avenue, Los Angeles, California 90059-3510,
Attention: Shahrokh Sedaghat, Chairman and Chief Executive Officer (with a copy
to Paul D. Tosetti, Latham & Watkins, 633 West Fifth Street, Los Angeles
California 90071 Facsimile: (213) 891-8763), or to such other persons or
addresses as may be designated in writing by the party to receive such notice.
10.8 Entire Agreement, etc.
----------------------
a) This Agreement (including any exhibits or annexes hereto), together
with the Confidentiality Agreement and the Tender Agreement, (i)
constitutes the entire agreement, and supersedes all prior agreements,
understandings, representations and warranties, both written and oral,
among the parties with respect to the subject matter hereof, and (ii)
shall not be assignable by operation of law or otherwise; provided,
--------
however, that Purchaser may designate, by written notice to the
-------
Company, another Affiliate of Purchaser to be a Constituent
Corporation in lieu of Purchaser (provided that Purchaser remains
directly liable under this Agreement), in the event of which, all
references herein to Purchaser shall be deemed references to such
Affiliate except that all representations and warranties made herein
with respect to Purchaser as of the date of this Agreement shall be
deemed representations and warranties made with respect to such
Affiliate as of the date of such designation.
b) It is expressly agreed that all of the persons (and their successors
and assigns) who are beneficiaries of Section 7.7 (whether as
individuals or members of a class or group) shall be entitled to
enforce such Sections against the Surviving Corporation and such
Sections shall be binding on all successors and assigns of the
Surviving Corporation.
10.9 Definition of "Affiliate". When a reference is made in this Agreement to
-------------------------
an affiliate of a party, the word "Affiliate" means any corporation or other
organization, whether incorporated or unincorporated, controlling, controlled by
or under common control with such party.
10.10 Specific Performance. The parties hereto agree that irreparable damage
--------------------
would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof in addition to any other
remedy at law or equity.
33
<PAGE>
10.11 Captions. The Article, Section and paragraph captions herein are for
--------
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the Provisions hereof.
10.12 Currency. Unless otherwise stated, all dollar amounts herein are in U.S.
--------
dollars.
10.13 Attorneys' Fees. Should any party to this Agreement reasonably retain
---------------
counsel for the purpose of enforcing or preventing the breach of any provision
of this Agreement, including, but not limited to, by instituting any action or
proceeding to enforce any provision of this Agreement, for damages by reason of
any alleged breach of any provision of this Agreement, for a declaration of such
party's rights or obligations under this Agreement or for any other judicial
remedy, then, if the matter is resolved by litigation, the prevailing party
(whether at trial or on appeal) shall be entitled, in addition to such other
relief as may be granted, to be reimbursed by the losing party for all costs and
expenses incurred, including, but not limited to, reasonable attorneys' fees and
costs for services rendered to the prevailing party. This Section shall not
apply to expenses incurred in mediation.
[SIGNATURE PAGE TO FOLLOW]
34
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
SEDA SPECIALTY PACKAGING CORP.
By /s/ SEDA SPECIALTY PACKAGING CORP.
----------------------------------
SEAWOLF ACQUISITION CORPORATION
By /s/ SEAWOLF ACQUISITION CORPORATION
-----------------------------------
CCL INDUSTRIES INC.
By /s/ CCL INDUSTRIES INC.
-----------------------------------
S1
<PAGE>
ANNEX A
-------
Conditions of the Offer. Notwithstanding any other provision of the Offer,
- -----------------------
Purchaser shall not be required to accept for payment or pay for, or may delay
the acceptance for payment of or payment for, any tendered Shares, or may, in
its sole discretion, terminate or amend the Offer as to any Shares not then paid
for, if (i) at the expiration date of the Offer, any applicable waiting periods
under the HSR Act shall not have expired or been terminated, (ii) at the
expiration date of the Offer, Shares that when added to the Shares already held
by Purchaser, representing less than a majority of the outstanding Shares on a
fully diluted basis shall have been validly tendered and not withdrawn (the
"Minimum Condition"), or (iii) on or after June 16, 1997, and at or before the
time of acceptance of payment for any of such Shares any of the following events
shall occur and be continuing, provided, however, that any such event shall not
be required to be continuing if Purchaser shall have publicly announced its
determination to waive such condition temporarily at the time of the occurrence
of such event:
a) there shall have occurred and be continuing (i) any general suspension
of, or limitation on times or prices for, trading in securities on the
NYSE or the NASDAQ, (ii) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (iii)
a commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States,
which war, armed hostilities or national calamity materially and
adversely affects Purchaser's ability to pay for the Shares or has a
material adverse effect on the value of the Company or its Shares or
(iv)any limitation (whether or not mandatory) by any governmental
authority on the extension of credit by banks or other lending
institutions, which limitation materially and adversely affects
Purchaser's ability to pay for the Shares;
b) the Company shall have breached, or failed to comply with, in any
material respect any of its obligations under the Agreement or any
representation or warranty of the Company in the Agreement shall have
been incorrect in any material respect, when made or shall have since
ceased to be true and correct in any material respect, in each case,
after being provided written notice of such breach, failure to comply
or materially incorrect representation or warranty, and having failed
to cure the same within five (5) days of receipt of such notice,
except for any such breach or failure to comply with such
obligations, or such failure of such representations and warranties to
be so true and correct (without giving effect to any limitation as to
"materiality" or "Materal Adverse Effect" set forth therein) that
would not have a Material Adverse Effect;
c) there shall have been instituted or pending any action or proceeding
by any government or governmental, regulatory or administrative
authority or agency or tribunal of competent authority, or any other
person, domestic or foreign or before any court or governmental,
regulatory or administrative authority or agency or tribunal of
competent authority, domestic or foreign, which would (i) make the
i
<PAGE>
purchase of, or payment for, some or all of the Shares pursuant to the
Offer or the Merger illegal, (ii) prevent consummation of the Offer or
the Merger or (iii) impose limitations on the ability of Purchaser
effectively (A) to acquire, hold or operate the business of the
Company and its subsidiaries taken as a whole or (B) to exercise full
rights of ownership of the Shares acquired by it, including, but not
limited to, the right to vote the Shares purchased by it on all
matters properly presented to the stockholders of the Company, which,
in either case, would have a Material Adverse Effect;
d) there shall have been any federal or state statute, rule or regulation
enacted or promulgated on or after the date of the Offer that would
reasonably be expected to, directly or indirectly, result in any of
the material adverse consequences referred to in clause (i), (ii) or
(iii) of paragraph (c) above;
e) any person, entity or "group" (as that term is used in Section
13(d)(3) of the Exchange Act) (other than the Shareholder, Shapour
Sedaghat and their respective Affiliates) formed after the date hereof
shall have become the beneficial owner of twenty percent (20%) or more
of the Company's outstanding Shares;
f) the Agreement shall have been terminated in accordance with its terms
or Purchaser shall have reached an agreement or understanding in
writing with the Company providing for termination or amendment of the
Offer; or
g) the Board of Directors of the Company shall have publicly (including
by amendment of its Schedule 14D-9) withdrawn or adversely modified
its recommendation of acceptance of the Offer other than as a result
of PurchaserOs or Parent's material breach of the Merger Agreement,
and shall have recommended to the stockholders another offer or shall
have resolved to do so;
which, in the judgment of Purchaser, in any such case, and regardless of the
circumstances (including any action or inaction by Purchaser) giving rise to any
such conditions, makes it inadvisable to proceed with the Offer and/or with such
acceptance for payment of or payment for the Shares.
The foregoing conditions are for the sole benefit of and may be asserted by
Purchaser, or may be waived by Purchaser in whole or in part at any time and
from time to time, in each case, in its sole judgment.
ii
<PAGE>
EXHIBIT 3.1
(to the Merger
Agreement)
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION OF
SEDA SPECIALTY PACKAGING CORP.
SEDA Specialty Packaging Corp. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, DOES HEREBY CERTIFY:
1. That the Board of Directors of the Corporation, acting by written
consent without a meeting in accordance with Section 141 of the General
Corporation Law of the State of Delaware, approved resolutions recommending to
the stockholders of the Corporation that the Certificate of Incorporation of the
Corporation be amended in the following respects:
A. Article FIFTH shall be deleted in its entirety and shall be amended to
read as follows:
"FIFTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is one thousand (1,000), par value
$0.01 per share.
Each share of Common Stock shall have the voting power of one (1) vote. In
the event of dissolution of the Corporation, any funds remaining after payment
of claims pursuant to Section 281 of the General Corporation Law of the State of
Delaware shall be distributed ratably to each share to the extent of any such
remaining funds.
Of the shares of Common Stock, the Corporation shall have the authority to
issue one hundred (100) shares of Class A Participating Exchangeable Common
Stock, which shall have the following rights, privileges, restrictions and
conditions:
For the purposes of these share provisions:
5.1 "Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means a day other than a Saturday, a Sunday or any other day
when commercial banks are not open for the transaction of regular business
in New York, New York.
"CCL" means CCL Industries Inc., a corporation incorporated and existing
under the laws of Canada.
"CCL Class B Shares" means Class B non-voting shares of CCL.
"CCL Dividend Declaration Date" means the date on which the board of
directors of CCL declares any dividend on the CCL Class B Shares.
"Change of Control" shall mean and shall have occurred if, and only if, (a)
a person, or persons acting jointly and in concert pursuant to an agreement
among them (other than one or more members of Gordon S. Lang's family),
beneficially owns more than fifty percent (50%) of the voting shares of CCL
and, as a result, holds the right to elect a majority of the members of the
Board of Directors of CCL; (b) any merger or consolidation of the
Corporation with, or sale of all or substantially all of the Corporation's
assets or business to, another person (other than CCL or an affiliate of
CCL) or any similar transaction or combination of the foregoing which would
have substantially the same effect as the foregoing; or (c) there is a sale
of ownership of fifty percent (50%) or more of the voting securities of the
Corporation to another person, other than to CCL or an affiliate thereof.
<PAGE>
"Common Shares" mean the common shares of the Corporation.
"Current Market Price" means, in respect of a CCL Class B Share, on any
date as of which the Current Market Price is to be determined, the simple
average of the closing prices of a CCL Class B Share on The Toronto Stock
Exchange on the twenty (20) trading days immediately preceding such date
and if there is no closing price on any trading day, the average of the bid
and ask prices on such day, or, if the CCL Class B Shares are not then
listed on The Toronto Stock Exchange, on such other stock exchange or
automated quotation system on which CCL Class B Shares are then listed or
quoted, as the case may be, and, if CCL Class B Shares are listed or quoted
on more than one such exchange or automated quotation system, on such
exchange or automated quotation system as may be selected by the Board of
Directors for such purpose.
"DGCL" means the General Corporation Law of the State of Delaware.
"Employment Agreement" means the employment agreement made as of the 16th
day of June, 1997 among Shahrokh Sedaghat ("Mr. Sedaghat"), CCL and the
Corporation.
"Fair Market Value" means the value obtainable upon a sale in an arm's
length transaction to a third party under usual and normal circumstances,
with neither the buyer nor the seller under any compulsion to act, with
equity to both, as determined by the Board of Directors, provided, however,
that if the holders of a majority of the outstanding Participating
Exchangeable Shares shall dispute the Fair Market Value as determined by
the Board of Directors, such holders may undertake to have such holders and
the Corporation retain an Independent Expert. The determination of Fair
Market Value by the Independent Expert shall be final, binding and
conclusive on the Corporation and the holders of Participating Exchangeable
Shares. All costs and expenses of the Independent Expert shall be borne by
the holders of the Participating Exchangeable Shares unless the
determination of Fair Market Value by the Independent Expert is more than
5% more favourable to the holders of the Participating Exchangeable Shares,
in which event the cost of the Independent Expert shall be borne solely by
the Corporation.
"Independent Expert" means an investment banking firm reasonably agreeable
to the holders of the majority of outstanding Participating Exchangeable
Shares and to the Board of Directors.
"Liquidation Amount" has the meaning ascribed thereto in Section 5.5.1 of
these share provisions.
"Liquidation Date" has the meaning ascribed thereto in Section 5.5.1 of
these share provisions.
"Liquidation Event" has the meaning ascribed thereto in Section 5.5.1 of
these provisions.
"Participating Exchangeable Shares" means the Shares of Class A
Participating Exchangeable Common Stock of the Corporation having the
rights, privileges, restrictions and conditions set forth herein.
"Retracted Shares" has the meaning ascribed thereto in subsection 5.6.1(A)
of these share provisions.
"Retraction Date" has the meaning ascribed thereto in subsection 5.6.1(B)
of these share provisions.
-2-
<PAGE>
"Retraction Price" has the meaning ascribed thereto in Section 5.6.1 of
these share provisions.
"Retraction Request" has the meaning ascribed thereto in Section 5.6.1 of
these share provisions.
"Specified Number" means ten thousand shares, subject to adjustment in
accordance with Section 5.9 of these share provisions.
"U.S. Dollar Equivalent" means in respect of an amount expressed in
Canadian currency (the "Foreign Currency Amount") at any date the product
obtained by multiplying (a) the Foreign Currency Amount by (b) the exchange
rate reported by the Federal Reserve Bank of New York for cable transfers
payable in Canadian dollars as certified for customs purposes.
5.2 Ranking of Participating Exchangeable Shares: The Participating
--------------------------------------------
Exchangeable Shares shall be entitled to the rights and privileges as herein
provided.
5.3 Dividends:
---------
5.3.1 A holder of an Participating Exchangeable Share shall be entitled,
subject to applicable law, to receive on each dividend payment date specified by
the board of directors of CCL, a dividend on each Participating Exchangeable
Share:
(a) in the case of a cash dividend declared on CCL Class B Shares, in an
amount in cash for each Participating Exchangeable Share equal to the
U.S. Dollar Equivalent on the CCL Dividend Declaration Date of the
cash dividend declared on the Specified Number of CCL Class B Shares;
(b) in the case of a stock dividend declared on the CCL Class B Shares to
be paid in CCL Class B Shares, in such number of Participating
Exchangeable Shares for each Participating Exchangeable Share as is
equal to the number of CCL Class B Shares to be paid on the Specified
Number of CCL Class B Shares; or
(c) in the case of a dividend declared on the CCL Class B Shares in
property other than cash or CCL Class B Shares, in such type and
amount of property for each Participating Exchangeable Share as is the
same as or economically equivalent to (to be determined by the Board
of Directors, in good faith and its reasonable discretion, with the
assistance of such reputable and independent financial advisors and/or
other experts as the Board of Directors may require) the type and
amount of property declared on the Specified Number of CCL Class B
Shares. Such dividends shall be paid out of money, assets or property
of the Corporation properly applicable to the payment of dividends, or
out of authorized, but unissued shares of the Corporation.
5.3.2 Cash dividends shall be paid by check of the Corporation payable at par
at any branch of the bankers of the Corporation or by electronic fund transfer
to the bank accounts specified by the holders from time to time and the sending
of such a check to each holder of a Participating Exchangeable Share shall
satisfy the cash dividend represented thereby unless the check is not paid on
presentation. Certificates registered in the name of the registered holder of
Participating Exchangeable Shares shall be issued or transferred in respect of
any stock dividends contemplated by subsection 5.3.1(b) hereof and the sending
of such a certificate to each holder of a Participating Exchangeable Share shall
satisfy the stock dividend represented thereby. Such other type and amount of
property in respect of any dividends contemplated by subsection 5.3.1(c) hereof
shall be
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<PAGE>
issued, distributed or transferred by the Corporation in such manner as it shall
determine and the issuance, distribution or transfer thereof by the Corporation
to each holder of a Participating Exchangeable Share shall satisfy the dividend
represented thereby. Any check required to be mailed or sent to a holder of
Participating Exchangeable Shares shall be validly sent or mailed if mailed to
the address of the holder, recorded in the securities register of the
Corporation, or in the event of such address not being so recorded, then at the
last known address of such holder. The Corporation may deduct and withhold from
any payments of dividends in cash, shares or other property any amounts required
by law to be deducted and withheld, to the extent the Corporation reasonably
believes that such withholding may be required. Subject to applicable law, no
holder of a Participating Exchangeable Share shall be entitled to recover by
action or other legal process against the Corporation any dividend that is
represented by a check that has not been duly presented to the Corporation's
bankers for payment or that otherwise remains unclaimed for a period of six
years from the date on which such dividend was payable.
5.3.3 The record date for the determination of the holders of Participating
Exchangeable Shares entitled to receive payment of, and the payment date for,
any dividend declared on the Participating Exchangeable Shares under Section
5.3.1 hereof shall be the same dates as the record dates and payment date,
respectively, for the corresponding dividend declared on the CCL Class B Shares.
5.3.4 If on any payment date for any dividend declared on the Participating
Exchangeable Shares under Section 5.3.1 hereof the dividends are not paid in
full on all of the Participating Exchangeable Shares then outstanding, any such
dividends that remain unpaid shall be paid on the next date or dates on which
the Corporation shall have sufficient moneys, assets or property properly
applicable to the payment of such dividends as is determined by the Board of
Directors in good faith.
5.4 Certain Restrictions: So long as any of the Participating Exchangeable
--------------------
Shares are outstanding, the Corporation shall not at any time without, but may
at any time with, the approval of the holders of the Participating Exchangeable
Shares given as specified in Section 5.8.2 of these share provisions:
(a) pay any dividends on any shares of the Corporation (other than
Participating Exchangeable Shares), other than stock dividends
payable in Common Shares;
(b) redeem or purchase or make any capital distribution in respect of
any shares of the Corporation (other than Participating
Exchangeable Shares);
(c) redeem or purchase any shares of the Corporation (other than
Participating Exchangeable Shares); or
(d) issue any Participating Exchangeable Shares or any other shares of
the Corporation ranking superior to the Participating Exchangeable
Shares other than by way of stock dividends to the holders of
Participating Exchangeable Shares.
The restrictions in subsections 5.4(a), 5.4(b) and 5.4(c) above shall not apply
if all dividends on the outstanding Participating Exchangeable Shares required
by Section 5.3.1 to have been declared and paid on the Participating
Exchangeable Shares prior to occurrence of any of the events described in
subsections 5.4(a), 5.4(b) or 5.4(c), have been declared and paid in full.
5.5 Distribution on Liquidation:
---------------------------
5.5.1 In the event of the liquidation, dissolution or winding-up of the
Corporation or any other distribution of the assets of the Corporation among its
shareholders for the purpose of winding up
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<PAGE>
its affairs (collectively, a "Liquidation Event"), a holder of Participating
Exchangeable Shares shall be entitled, subject to applicable law and subject to
Section 5.5.5 hereof, to receive from the assets of the Corporation in respect
of each Participating Exchangeable Share held by the holder on the date on which
the Liquidation Event becomes effective (the "Liquidation Date") in connection
with such liquidation, dissolution or winding-up, in priority to any
distribution of any part of the assets of the Corporation among the holders of
the Common Shares, or any other shares ranking junior to the Participating
Exchangeable Shares, an amount per share equal to (a) the US Dollar Equivalent
of the Current Market Price of the Specified Number of CCL Class B Shares on the
last Business Day prior to the Liquidation Date, which shall be satisfied in
full by the Corporation causing to be delivered to such holder the Specified
Number of CCL Class B Shares, plus (b) an additional amount equivalent to the
amount by which the declared and unpaid dividends on one Participating
Exchangeable Share exceed, if at all, the declared and unpaid dividends on the
Specified Number of CCL Class B Shares (calculated as of the date of declaration
of such dividend or dividends in accordance with the provisions
hereof)(collectively the "Liquidation Amount").
5.5.2 On or promptly after the Liquidation Date, the Corporation shall cause to
be delivered to the holders of the Participating Exchangeable Shares the
Liquidation Amount for each Participating Exchangeable Share upon presentation
and surrender of the certificates representing such Participating Exchangeable
Shares, together with such other documents and instruments as may be required to
effect a transfer of Participating Exchangeable Shares under the DGCL and the
by-laws of the Corporation and such additional documents and instruments as the
Corporation may reasonably require, at the registered office of the Corporation.
Payment of the total Liquidation Amount for such Participating Exchangeable
Shares shall be made by delivery to each holder at the address of the holder
recorded in the securities register of the Corporation for the Participating
Exchangeable Shares or by holding (as specified in writing by such holder) for
pick up by the holder at the registered office of the Corporation of
certificates representing the Specified Number of CCL Class B Shares (which
shares shall be duly issued as fully paid and non-assessable and shall be free
and clear of any lien, claim or encumbrance) with respect to each such
Participating Exchangeable Share (less any CCL Class B Shares withheld in
respect of any tax required to be deducted or withheld therefrom by the
Corporation) and a check of the Corporation payable at par at any branch of the
bankers of the Corporation in respect of the amount specified in subsection
5.5.1(b) hereof and comprising part of the total Liquidation Amount (less any
tax required to be deducted and withheld therefrom by the Corporation to the
extent the Corporation reasonably believes that such withholding may be
required). On and after the Liquidation Date, the holders of such Participating
Exchangeable Shares shall cease to be holders of such Participating Exchangeable
Shares and shall not be entitled to exercise any of the rights of holders in
respect thereof, other than the right to receive their proportionate part of the
total Liquidation Amount, unless payment of the total Liquidation Amount for
such Participating Exchangeable Shares shall not be made upon presentation and
surrender of share certificates in accordance with the foregoing provisions, in
which case the rights of the holders shall remain unaffected to the extent the
Liquidation Amount has not been paid until the total Liquidation Amount has been
fully paid in the manner hereinbefore provided. After the Liquidation Date, the
Corporation shall deposit or cause to be deposited in a custodial account with
any commercial bank in the United States the total Liquidation Amount in respect
of the Participating Exchangeable Shares represented by certificates that have
not at the Liquidation Date been surrendered by the holders thereof and
immediately upon making such deposit the Corporation shall give notice thereof
to the holders of the Participating Exchangeable Shares. Upon such deposit being
made, the rights of the holders of Participating Exchangeable Shares after such
deposit shall be limited to the right to receive their proportionate part of the
total Liquidation Amount (less any tax required to be deducted or withheld
therefrom to the extent that the Corporation reasonably believes that such
withholding may be required) for the Participating Exchangeable Shares with
respect to which the Liquidation Amount has been so deposited, against
presentation and surrender of the certificates representing such Participating
Exchangeable Shares to such bank. Upon such payment or deposit of the total
Liquidation Amount, the holders of the Participating Exchangeable Shares shall
thereafter be considered and
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<PAGE>
deemed for all purposes to be the holders of the CCL Class B Shares either (i)
delivered to such holder, or (ii) deposited with such commercial bank.
5.5.3 After the Liquidation Amount per Participating Exchangeable Shares has
been paid or deposited, holders of Participating Exchangeable Shares shall not
be entitled to share in any further distribution of the assets of the
Corporation.
5.5.4 In paying the Liquidation Amount the Corporation shall not be required
to deliver fractional shares of CCL Class B Shares provided, however, that in
lieu thereof, the Corporation shall pay to the holders of Participating
Exchangeable Shares in accordance with Section 5.5.2 an amount in cash equal to
the same fraction of the U.S. Dollar Equivalent of the Current Market Price of
one CCL Class B Share on the last Business Day prior to the Liquidation Date.
5.5.5 The holders of all of the Participating Exchangeable Shares may jointly
elect, upon delivery of written notice to the Corporation not less than three
(3) business days prior to the Liquidation Date, that the provisions of Section
5.5.1, 5.5.2, 5.5.3 and 5.5.4 hereof shall not apply and in lieu thereof, all
property or assets of the Corporation available for distribution to the
shareholders of the Corporation shall be paid or distributed equally, share for
share, to the holders of the Participating Exchangeable Shares and the Common
Shares respectively, without preference or distinction, and the Corporation
shall so pay or distribute such assets or property in accordance with the
provisions of this Section 5.5.5.
5.5.6 Upon (a) a Change of Control or (b) an event giving rise to an
adjustment to the Participating Exchangeable Shares in accordance with Section
5.9 hereof, then the Corporation shall, to the extent it has any advance notice
of either (a) or (b), forthwith mail to each holder of Participating
Exchangeable Shares the particulars of the Change of Control or the event giving
rise to such adjustment to the Participating Exchangeable Shares.
5.6 Retraction of Participating Exchangeable Shares by Holder:
---------------------------------------------------------
5.6.1 Subject to the provisions of the DGCL and otherwise upon compliance with
the provisions of this Section 5.6, a holder of Participating Exchangeable
Shares shall be entitled at any time (i) after the third anniversary of the date
of issue of the Participating Exchangeable Shares, or (ii) after: (a) notice is
given pursuant to subsections 2.2(b), (c) or (d) of the Employment Agreement,
(b) Mr. Sedaghat's death or (c) a Change of Control, and prior to the
Liquidation Date, to require the Corporation to redeem any or all of the
Participating Exchangeable Shares registered in the name of such holder for an
amount per share equal to (I) the U.S. Dollar Equivalent of the Current Market
Price of the Specified Number of CCL Class B Shares on the last Business Day
prior to the Retraction Date, which shall be satisfied in full by the
Corporation causing to be delivered to such holder the Specified Number of CCL
Class B Shares for each Participating Exchangeable Share presented and
surrendered by the holder, plus (II) an additional amount equivalent to the
amount, if any, by which the declared and unpaid dividends on one Participating
Exchangeable Share exceed the declared and unpaid dividends on the Specified
Number of CCL Class B Shares (calculated as of the date of declaration of such
dividends in accordance with the provisions hereof) (collectively the
"Retraction Price"). To effect such redemption, the holder shall present and
surrender at the registered office of the Corporation the certificate or
certificates representing the Participating Exchangeable Shares which the holder
desires to have the Corporation redeem, together with such other documents and
instruments as may be required to effect a transfer of Participating
Exchangeable Shares under the DGCL and the by-laws of the Corporation and such
additional documents and instruments as the Corporation may reasonably require,
and together with a duly executed statement (the "Retraction Request") in the
form of Appendix 1 hereto in such other form as may be acceptable to the
Corporation:
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<PAGE>
(A) specifying that the holder desires to have all or any number
specified therein of the Participating Exchangeable Shares
represented by such certificate or certificates (the "Retracted
Shares") redeemed by the Corporation; and
(B) stating the Business Day on which the holder desires to have the
Corporation redeem the Retracted Shares (the "Retraction Date"),
provided that the Retraction Date shall be not less than ten (10)
Business Days nor more than fifteen (15) Business Days after the date
on which the Retraction Request is received by the Corporation and
further provided that, in the event that no such Business Day is
specified by the holder in the Registration Request, the Retraction
Date shall be deemed to be the tenth (10th) Business Day after the
date on which the Retraction Request is received by the Corporation.
The holder shall also send a copy of the Retraction Request to CCL.
5.6.2 Upon receipt by the Corporation in the manner specified in Section 5.6.1
hereof of a certificate or certificates representing the number of Participating
Exchangeable Shares which the holder desires to have the Corporation redeem,
together with a Retraction Request, the Corporation shall redeem the Retracted
Shares effective at the close of business on the Retraction Date and shall cause
to be delivered to such holder the Retraction Price with respect to such shares
in the manner provided in Section 5.6.3 hereof. If only a part of the
Participating Exchangeable Shares represented by any certificate are redeemed, a
new certificate for the balance of such Participating Exchangeable Shares shall
be issued to the holder at the expense of the Corporation.
5.6.3 On the Retraction Date, the Corporation shall deliver to the holder at
the address of the holder recorded in the securities register of the Corporation
for the Participating Exchangeable Shares or at the address specified in the
holder's Retraction Request or by holding for pick up by the holder, at the
registered office of the Corporation, as specified in writing by such holder,
certificates representing the Specified Number of CCL Class B Shares with
respect to each such Participating Exchangeable Share (which shares shall be
duly issued as fully paid and non-assessable and shall be free and clear of any
lien, claim or encumbrance) registered in the name of the holder in payment of
the total Retraction Price (less any CCL Class B Shares withheld in respect of
any tax required to be deducted or withheld therefrom by the Corporation) and a
check of the Corporation payable at par at any branch of the bank of the
Corporation in payment of the additional amount specified in subsection
5.6.1(II) comprising part of the total Retraction Price (less any tax required
to be deducted or withheld therefrom by the Corporation to the extent the
Corporation believes that such withholding may be required) and such delivery of
such certificates and check on behalf of the Corporation shall be deemed to be
payment of and shall satisfy and discharge all liability for the total
Retraction Price to the extent that the same is represented by such share
certificates and check (plus any tax required and in fact deducted and withheld
therefrom and remitted to the proper tax authority) unless such check is not
paid on due presentation.
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<PAGE>
5.6.4 On and after the closing of business on the Retraction Date, the holder of
the Retracted Shares shall cease to be a holder of such Retracted Shares and
shall not be entitled to exercise any of the rights of a holder in respect
thereof, other than the right to receive, subject to these share provisions, his
proportionate part of the total Retraction Price unless upon presentation and
surrender of certificates in accordance with the foregoing provisions, payment
of the total Retraction Price shall not be made, in which case the rights of
such holder shall remain unaffected to the extent payment of the Retraction
Price has not been made until the total Retraction Price has been fully paid in
the manner hereinbefore provided. On and after the close of business on the
Retraction Date, provided that presentation and surrender of certificates and
payment of the total Retraction Price has been made in accordance with the
foregoing provisions, the holder of the Retracted Shares so redeemed by the
Corporation shall thereafter be considered and deemed for all purposes to be a
holder of the CCL Class B Shares delivered to it.
5.6.5 Notwithstanding any other provision of this Section 5.6, the Corporation
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to the provisions of the DGCL. If the Board of Directors reasonably
believes that on any Retraction Date the Corporation would not be permitted by
any of such provisions to redeem the Retracted Shares tendered for redemption on
such date, the Corporation shall only be obligated to redeem Retracted Shares
specified by a holder in a Retraction Request to the extent of the maximum
number that may be redeemed (rounded down to a whole number of shares) as would
not be contrary to such provisions and shall notify the holder at least two (2)
Business Days prior to the Retraction Date as to the number of Retracted Shares
which will not be redeemed by the Corporation. In any case in which the
redemption by the Corporation of Retracted Shares would be contrary to solvency
requirements or other provisions of applicable law, the Corporation shall redeem
Retracted Shares in accordance with Section 5.6.3 of these share provisions on a
pro rata basis and shall issue to each holder of Retracted Shares a new
certificate, at the expense of the Corporation, representing the Retracted
Shares not redeemed by the Corporation pursuant to Section 5.6.3 hereof.
5.6.6 In paying the Retraction Price, the Corporation shall not be required to
deliver fractional shares of CCL Class B Shares provided, however, that in lieu
thereof, the Corporation shall pay to the holders of Participating Exchangeable
Shares in accordance with Section 5.6.3 an amount in cash equal to the same
fraction of the U.S. Dollar Equivalent of the Current Market Price of CCL Class
B Shares on the last Business Day prior to the Retraction Date.
5.7 Voting Rights: Except as required by applicable law and except with
-------------
respect to a merger, consolidation or similar transactions which would result in
the Corporation not being the surviving corporation following such merger,
consolidation or similar transactions (for which holders of Participating
Exchangeable Shares shall be entitled to a separate class vote) and subject to
Section 5.8, the holders of the Participating Exchangeable Shares shall not be
entitled as such to receive notice of or to attend any meetings of the
shareholders of the Corporation or to vote at any such meeting.
5.8 Amendment and Approval:
----------------------
5.8.1 The rights, privileges, restrictions and conditions attaching to the
Participating Exchangeable Shares may be added to, changed, modified or removed
but only with, in addition to the approval of the holders of Common Shares, the
approval of the holders of the Participating Exchangeable Shares, voting
separately as a class, given as hereinafter specified.
5.8.2 Any approval given by the holders of the Participating Exchangeable Shares
to add to, change, modify or remove any right, privilege, restriction or
condition attaching to the Participating Exchangeable Shares or any other
matter requiring the approval or consent of the holders of Participating
Exchangeable Shares shall be deemed to have been sufficiently given if it shall
have
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<PAGE>
been given in accordance with applicable law subject to a minimum requirement
that such approval be evidenced by a resolution passed by not less than
two-thirds of the votes cast on such resolution at a meeting of holders of
Participating Exchangeable Shares duly called and held at which the holders of
at least 50% of the outstanding Participating Exchangeable Shares at that time
are present and represented by proxy; provided that if at any such meeting the
holders of at least 50% of the outstanding Participating Exchangeable Shares at
that time are not present or represented by proxy within one-half hour after the
time appointed for such meeting then the meeting shall be adjourned to such date
not less than ten (10) days thereafter and to such time and place as may be
designated by the Chairman of such meeting. At such adjourned meeting the
holders of Participating Exchangeable Shares present and represented by proxy
thereat may transact the business for which the meeting was originally called
and a resolution passed thereat by the affirmative vote of not less than
two-thirds of the votes cast on such resolution at such meeting shall constitute
the approval or consent of the holders of the Participating Exchangeable Shares.
On every poll taken at any meeting of holders of Participating Exchangeable
Shares, each holder shall be entitled to one vote in respect of each
Participating Exchangeable Share held. Subject to the foregoing, the formalities
to be observed in respect of the giving or waiving of notice of any such meeting
and the conduct thereof shall be those from time to time prescribed in the
by-laws of the Corporation with respect to meetings of shareholders. Any
approval or consent required to be given by the holders of Participating
Exchangeable Shares shall also be validly given if expressed by an instrument or
instruments in writing signed by all the holders of Participating Exchangeable
Shares.
5.9 Adjustment to the Specified Number:
----------------------------------
5.9.1 If and whenever at any time up to and including the Liquidation Date, the
outstanding CCL Class B Shares are subdivided or redivided into a greater number
of CCL Class B Shares or are reduced, combined or consolidated into a smaller
number of CCL Class B Shares (any of such events being hereinafter called a
"Class B Share Reorganization"), the Specified Number shall be adjusted
effective immediately upon the occurrence of the Class B Share Reorganization by
multiplying the Specified Number at that time by the quotient or fraction, as
the case may be, obtained when: (A) the number of CCL Class B Shares outstanding
after the completion of such Class B Share Reorganization is divided by (B) the
number of CCL Class B Shares outstanding before giving effect to the Class B
Share Reorganization.
5.9.2 If and whenever at any time up to and including the Liquidation Date, the
outstanding CCL Class B Shares shall be reclassified, exchanged or converted
into other shares, securities or property, otherwise than as a result of a Class
B Share Reorganization, or if the designation of or rights, privileges,
restrictions and conditions attached to the CCL Class B Shares are changed, or
if there shall be an amalgamation, merger, reorganization, liquidation,
dissolution, winding-up or other similar transaction affecting CCL (other than a
transaction which does not result in any reclassification of the outstanding CCL
Class B Shares or a change of the CCL Class B Shares into other assets,
securities or property), or a transfer of all or substantially all of the assets
of CCL to another corporation or entity (any such event being referred to in
this Section 5.9.2 as a "Reclassification"), then each such holder of
Participating Exchangeable Shares shall be entitled to receive and shall accept
and the Corporation shall deliver to each such holder at the time such holder
would otherwise have received CCL Class B Shares, in lieu of the number of CCL
Class B Shares such holder would have received at such time if there had been no
Reclassification, the aggregate number and kind of shares or other securities or
amount of other property which such holder would have been entitled to receive
as a result of the Reclassification if, on the effective date thereof, it had
been the registered holder of the number of CCL Class B Shares to which it was
theretofore entitled at such time.
5.9.3 If CCL shall fix a record date for the issuance of rights, options or
warrants to all or substantially all the holders of the outstanding CCL Class B
Shares entitling such holders to
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<PAGE>
subscribe for or purchase additional CCL Class B Shares (or securities
convertible into CCL Class B Shares), the Specified Number shall be adjusted
immediately after such record date so that it shall equal the rate determined by
multiplying the Specified Number in effect on such record date by a fraction, of
which the denominator shall be the total number of CCL Class B Shares
outstanding on such record date plus the number of CCL Class B Shares equal to
the number arrived at by dividing the aggregate price of the total number of
additional CCL Class B Shares offered for subscription or purchase (or the
aggregate conversion price of the convertible securities so offered) by the
Current Market Price per share of CCL Class B Shares on such record date and of
which the numerator shall be the total number of CCL Class B Shares outstanding
on such record date plus the total number of additional CCL Class B Shares
offered for subscription or purchase (or into which the convertible securities
so offered are convertible), provided, however, that any CCL Class B Shares
owned by or held for the account of CCL shall be deemed not to be outstanding
for the purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed. If such rights, options or
warrants are not so issued or to the extent that such rights, options or
warrants are not exercised prior to the expiration thereof, the Specified Number
shall be readjusted to the Specified Number which would then be in effect if
such record date had not been fixed, or to the Specified Number which would then
be in effect based upon the number of CCL Class B Shares (or securities
convertible into CCL Class B Shares) actually issued upon the exercise of such
rights, options or warrants, as the case may be.
5.9.4 If CCL shall fix a record date for the making of a distribution to all or
substantially all the holders of outstanding CCL Class B Shares of (i) shares of
any class other than CCL Class B Shares, or (ii) rights, options or warrants
(excluding those referred to in Section 5.9.3), or (iii) evidences of its
indebtedness, then in each such case the Specified Number shall be adjusted
immediately after such record date so that it shall equal the rate determined by
multiplying the Specified Number in effect on such record date by a fraction, of
which the denominator shall be the total number of CCL Class B Shares
outstanding on such record date multiplied by the Current Market Price per share
of CCL Class B Shares on such record date less the Fair Market Value of such
shares or rights, options or warrants or evidences of indebtedness or assets so
to be distributed, and of which the numerator shall be the total number of CCL
Class B Shares outstanding on such record date multiplied by such Current Market
Price per share of CCL Class B Shares, provided, however, CCL Class B Shares
owned by or held for the account of CCL shall be deemed not to be outstanding
for the purpose of any such computation. Such adjustment shall be made
successively whenever such a record date is fixed. To the extent that such
distribution is not so made, the Specified Number shall be readjusted to the
Specified Number which would then be in effect based upon such shares or rights,
options or warrants or evidences of indebtedness or assets actually distributed.
5.9.5 If and whenever at any time up to and including the Liquidation Date, CCL
shall take any action affecting or relating to CCL Class B Shares, other than an
event described in Section 5.9.1, 5.9.2, 5.9.3 or 5.9.4, which in the opinion of
the Board of Directors would prejudicially affect the rights of the holders of
Participating Exchangeable Shares, then the Specified Number shall be adjusted
in such manner, if any, and at such time, as the Board of Directors may
determine in their reasonable discretion and in good faith to be equitable in
the circumstances to the holders of Participating Exchangeable Shares. Subject
to Section 5.9.6, any such determination shall be binding upon the Corporation
and each holder of Participating Exchangeable Shares. The failure by the Board
of Directors to take any action to provide for an adjustment on or prior to the
effective date of any action by CCL affecting the CCL Class B Shares shall be
conclusive evidence that the Board of Directors has determined that it is
equitable to make no adjustment in the circumstances.
5.9.6 If the holder of a majority of the Participating Exchangeable Shares
disputes the adjustment provided for in this Section 5.9 the audit committee
of CCL shall, subject only to a right of appeal from the decision of the audit
committee within ten (10) Business Days of such decision to the Chairman of CCL,
who shall consider such appeal in good faith and whose decision shall
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<PAGE>
be final, binding and unappealable, make a determination of all such disputed
matters. The holders of the Participating Exchangeable Shares and the
Corporation shall have the right to make representations to the audit committee
of CCL in respect of a dispute. The holder of the Participating Exchangeable
Shares shall have twenty (20) Business Days from the date of notice of an
adjustment as provided for in this Section 5.9 to dispute such calculation by
referring such dispute to the audit committee, and if the holder does not
dispute such adjustment and refer such dispute to the audit committee within
such period, he shall have no right to do so thereafter.
5.9.7 No adjustment in the Specified Number shall be required unless such
adjustment would require an increase or decrease of at least one per cent in
such rate; provided, however, that any adjustments which by reason of this
Section 5.9.7 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. The adjustments provided for in this
Section shall be cumulative.
5.9.8 No adjustments in the Specified Number shall be made pursuant to Section
5.9.1 above if the Corporation shall correspondingly (i) subdivide or redivide
its outstanding Participating Exchangeable Shares into a greater number of
shares, or (ii) reduce, combine or consolidate the outstanding Participating
Exchangeable Shares into a smaller number of shares.
5.9.9 No adjustments in the Specified Number shall be made pursuant to Section
5.9.1, Section 5.9.2, Section 5.9.3 or Section 4.9.4 above if the holders of the
Participating Exchangeable Shares were permitted to participate in a Common
Share Reorganization, Reclassification, the issuance of such rights, options or
warrants or such distribution, as the case may be, as though and to the same
effect as if they had exchanged their Participating Exchangeable Shares for CCL
Class B Shares prior to the Common Share Reorganization, Reclassification,
issuance of such rights, options or warrants or such distribution, as the case
may be, or if such holders were permitted to participate in the issuance of
substantially equivalent rights, options or warrants of the Corporation or any
equivalent distribution by the Corporation, as the case may be.
5.9.10 In any case where the application of the foregoing provisions results in
an increase in the Specified Number taking effect immediately after the record
date for a specific event, then, if the Corporation is required to deliver any
CCL Class B Shares prior to completion of the event, the Corporation may
postpone the distribution to a holder of Participating Exchangeable Shares of
the additional CCL Class B Shares to which such holder is entitled by reason of
the increase of the Specified Number, but such additional CCL Class B Shares
shall be issued and delivered to that holder upon completion of the event and
the Corporation shall deliver to the holder an appropriate instrument evidencing
such holder's right to receive such additional CCL Class B Shares.
5.9.11 The Corporation shall from time to time immediately after the occurrence
of any event which requires an adjustment as provided in Section 5.9.1, Section
5.9.2, Section 5.9.3 or Section 5.9.4, deliver a certificate of the Corporation
to the holders of the Participating Exchangeable Shares specifying the nature of
the event requiring the same and the amount of the adjustment necessitated
thereby and setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such certificate shall be supported
by a certificate of an accounting firm having national status, verifying such
calculation.
-11-
<PAGE>
5.10 Notices:
-------
5.10.1 Any notice, request or other communication to be given to the
Corporation or to CCL by a holder of Participating Exchangeable Shares shall be
in writing and shall be valid and effective if given by mail (postage prepaid)
or by telecopy or by delivery to the registered office of the Corporation or, in
the case of a notice, request or communication to CCL, to CCL's registered
office and addressed to the attention of the President. Any such notice,
request or other communication, if given by mail, telecopy or delivery, shall
only be deemed to have been given and received upon actual receipt thereof by
the Corporation or CCL as the case may be.
5.10.2 Any presentation and surrender by a holder of Participating Exchangeable
Shares to the Corporation or certificates representing Participating
Exchangeable Shares in connection with the liquidation, dissolution or winding
up of the Corporation or the retraction of Participating Exchangeable Shares
shall be made by registered mail (postage prepaid) or by delivery to the
registered office of the Corporation addressed to the attention of the President
of the Corporation. Any such presentation and surrender of certificates shall
only be deemed to have been made and to be effective upon actual receipt thereof
by the Corporation. Any such presentation and surrender of certificates made by
registered mail shall be at the sole risk of the holder mailing the same.
5.10.3 Any notice, request or other communication to be given or sent to a
holder of Participating Exchangeable Shares by or on behalf of the Corporation
shall be in writing and shall be valid and effective if given by mail (postage
prepaid) or by delivery to the address of the holder recorded in the securities
register of the Corporation or, in the event of the address of any such holder
not being so recorded, then at the last known address of such holder. Any such
notice, request or other communication, if given by mail, shall be deemed to
have been given and received on the third (3rd) Business Day following the date
of mailing and, if given by delivery, shall be deemed to have been given and
received on the date of delivery. Accidental failure or omission to give any
notice, request or other communication to one or more holders of Participating
Exchangeable Shares shall not invalidate or otherwise alter or affect any action
or proceeding to be taken by the Corporation pursuant thereto.
5.11 Issuance of CCL Class B Shares. Notwithstanding any of the
------------------------------
provisions hereof, any issuance of CCL Class B Shares will only occur upon
(a) compliance by CCL with the terms of Section 1.1, and by the holder of
Section 1.3, of the Qualification and Listing of Shares Agreement (the "Rights
Agreement") dated June 16, 1997 between CCL and the holder of the Participating
Exchangeable Shares, but only insofar as such terms relate to the issue of CCL
Class B Shares issuable in connection with the Participating Exchangeable Shares
(provided that such holder is a party to and entitled to the benefit of, and is
bound by, the Rights Agreement), or (b) waiver by the holder of the
Participating Exchangeable Shares of compliance by CCL with such terms
(provided that such holder is a party to and entitled to the benefit of, and is
bound by, the Rights Agreement).
-12-
<PAGE>
APPENDIX 1
- --------------------------------------------------------------------------------
NOTICE OF RETRACTION
To the Corporation and CCL Industries Inc.
This notice is given pursuant to Section 5.6 of the provisions (the
"Share Provisions") attaching to the share(s) represented by this certificate
and all capitalized words and expressions used in this notice which are defined
in the Share Provisions have the meaning ascribed to such words and expressions
in such Share Provisions.
The undersigned hereby notifies the Corporation that the undersigned
desires to have the Corporation redeem in accordance with Article 6 of the Share
Provisions:
[ ] all share(s) represented by this certificate; or
[ ] _________________ share(s) only.
The undersigned hereby notifies the Corporation that the Retraction
Date shall be _______________.
NOTE: The Retraction Date must be a Business Day and must not be less than
ten Business Days nor more than fifteen Business Days after the date
upon which this notice is received by the Corporation. In the event
that no such Business Day is specified above, the Retraction Date
shall be deemed to be the tenth Business Day after the date on which
the notice is received by the Corporation.
The undersigned hereby represents and warrants to the Corporation that
the undersigned has good title to, and owns, the share(s) represented by this
certificate to be acquired by the Corporation free and clear of all liens,
claims and encumbrances.
__________________ __________________________ _______________________
(Date) (Signature of Shareholder) (Guarantee of Signature)
Address of Shareholder: ______________________________________
______________________________________
NOTE: If the notice of retraction is for less than all of the share(s)
represented by this certificate, a certificate representing the
remaining shares of the Corporation will be issued and registered in
the name of the shareholder as it appears on the register of the
Corporation.
- --------------------------------------------------------------------------------
-13-
<PAGE>
2. That said resolutions were duly approved by the stockholders of the
Corporation, acting by written consent without a meeting in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, this Certificate of Amendment of the Certificate of
Incorporation of the Corporation has been executed the ___ day of June, 1997.
SEDA SPECIALTY PACKAGING CORP.
By: _____________________________
Name:
Title: President
ATTEST:
By:_____________________
Name:
Title: Secretary
-14-
<PAGE>
EXHIBIT 99(C)(2)
June 16, 1997
THE PERSONS NAMED
IN SCHEDULE A HERETO
c/o Shapour Sedaghat and Shahrokh Sedaghat
2501 West Rosecrans Avenue
Los Angeles, CA
90059-3510
Attention: Mr. Shapour Sedaghat and Mr. Shahrokh Sedaghat
Dear Sirs:
RE: CASH OFFER FOR SHARES OF SEDA SPECIALTY PACKAGING CORP.
CCL Industries Inc., a corporation incorporated under the laws of Canada,
("CCL"), and its wholly-owned indirect subsidiary, Seawolf Acquisition
Corporation, a corporation incorporated under the laws of the State of Delaware,
("Merger Sub") understand that the persons named in Schedule A hereto are the
beneficial owners of an aggregate of 3,239,300 common shares of Seda Specialty
Packaging Corp., a corporation incorporated under the laws of State of Delaware
(the "Company"), each owning the number of shares set out opposite such person's
name in Schedule A. The persons named in Schedule A are hereinafter referred to
collectively as the "Sedaghat Shareholders" and individually as a "Sedaghat
Shareholder" and the 3,239,300 common shares owned by them in the aggregate are
hereinafter referred to as the "Shares".
1. THE OFFER
Upon execution of this agreement by the Sedaghat Shareholders, CCL and
Merger Sub shall enter into a merger agreement (the "Merger Agreement") with the
Company which will obligate Merger Sub to make, as soon as reasonably
practicable but on or before June 23, 1997, a tender offer (the "Offer") for all
of the outstanding common shares of the Company (the "Common Shares"), all in
accordance with the terms set forth in the Merger Agreement.
2. AGREEMENT TO TENDER
Subject to the terms and conditions hereof, each Sedaghat Shareholder
hereby irrevocably agrees to validly tender or cause to be validly tendered
pursuant to the Offer within ten business days after the Offer has been made in
accordance with the terms hereof and not withdraw, all
<PAGE>
-2-
Shares beneficially owned or controlled by such Sedaghat Shareholder less, in
the case of Mr. Shahrokh Sedaghat ("Mr. Sedaghat"), the 517,713 Common Shares
referred to in Section 3 hereof (the "Remaining Shares"), and less the 545,000
Common Shares that would be issuable upon exercise of options held by
Mr. Sedaghat. Thereafter, each Sedaghat Shareholder agrees not to withdraw such
Shares from the Offer under any circumstances, notwithstanding any statutory or
other rights of withdrawal such Sedaghat Shareholder may otherwise have, unless
(a) Merger Sub fails or is legally unable to accept for payment and pay for the
Common Shares in accordance with the terms of the Offer; (b) this agreement is
terminated in accordance with the terms hereof; or (c) Merger Sub amends or
modifies the Offer in any manner adverse to the shareholders of the Company
(other than changes or amendments to the Offer not in violation of the Merger
Agreement or other than to waive any condition of the Offer if such a waiver is
permitted by the Merger Agreement).
3. AGREEMENT TO SUPPORT MERGER
(a) Subject to the terms and conditions hereof and subject to the exercise
by Merger Sub of the Option (as defined in Section 4), Mr. Sedaghat hereby
irrevocably agrees during the term of this agreement to vote or cause to be
voted all of the Remaining Shares at any annual, special or other meeting of the
holders of Common Shares and at any adjournment or adjournments thereof or
pursuant to any written consent or other instrument in writing in favour of the
Merger (as defined in the Merger Agreement) without amendment to the terms
thereof except for amendments to the terms of the Merger or the Merger Agreement
which are not in violation of the terms of the Merger Agreement.
(b) Upon completion of the Merger and assuming that the Option has not been
exercised, Mr. Sedaghat shall be paid the Shareholder Merger Consideration, as
defined in the Merger Agreement.
4. OPTION FOR REMAINING SHARES
(a) Subject to the terms and conditions hereof, Mr. Sedaghat hereby grants
to Merger Sub an option (the "Option") to acquire all, but not less than all, of
the Remaining Shares for the Shareholder Merger Consideration. The Option shall
be irrevocable by Mr. Sedaghat during the term of this agreement and may,
subject to applicable law and the terms of this agreement, be exercised at any
time by Merger Sub during the term of this agreement provided that all of the
terms and conditions precedent to the Merger have been satisfied or waived
(other than the condition set forth in Section 8.1(b) of the Merger Agreement,
which cannot be waived) by Merger Sub to the extent such waiver is permitted
under the Merger Agreement other than the requirement for shareholder approval
of the Merger.
(b) Merger Sub may exercise the option by providing written notice to
Mr. Sedaghat which notice shall provide that the acquisition of the Remaining
Shares pursuant to the exercise of the Option shall be completed at the offices
of the Company on the third business day following receipt by Mr. Sedaghat of
the notice (the "Option Closing").
<PAGE>
-3-
(c) At the Option Closing: (i) Merger Sub shall issue and deliver Class A
Participating Exchangeable Common Stock of Merger Sub ("Participating
Exchangeable Shares") constituting approximately 10% of its capital stock free
and clear of all liens, charges, claims, encumbrances, security interests and
rights of others whatsoever ("Liens") in the amount and on the terms described
in Section 5.1(b)(i) of the Merger Agreement except that, in lieu of shares of
Class A Stock (as defined in the Merger Agreement), Merger Sub shall issue and
deliver Participating Exchangeable Shares registered in the name of Mr.
Sedaghat, and a covenant of CCL and Merger Sub to pay the remainder of the
Shareholder Merger Consideration other than the Participating Exchangeable
Shares (the "Top-Up") to Mr. Sedaghat in accordance with the terms of the Merger
Agreement as if the Effective Time (as defined in the Merger Agreement) had
occurred; and (ii) Mr. Sedaghat shall deliver or cause to be delivered the
Remaining Shares accompanied by such conveyances, instruments and other
documents as may reasonably be required by Merger Sub to ensure that Merger Sub
acquires good and marketable title to all of the Remaining Shares, free and
clear of all liens, charges, claims, encumbrances and security interests of any
nature whatsoever.
(d) If Mr. Sedaghat refuses or fails for any reason to proceed with the
Option Closing, Merger Sub shall have the right and power, upon delivery of the
Participating Exchangeable Shares and the covenant of Merger Sub and CCL to pay
the Top-Up to the address of Mr. Sedaghat herein provided, for and on behalf of
Mr. Sedaghat and his nominees, to execute and deliver all such transfers,
conveyances, instruments and other documents as may be necessary or desirable to
complete the acquisition of the Remaining Shares, and thereafter Mr. Sedaghat
shall have no rights as a holder of the Remaining Shares except to receive the
Shareholder Merger Consideration in accordance with the terms hereof and of the
Merger Agreement. This right and power coupled with an interest shall survive
the death, incapacity, insolvency or bankruptcy of Mr. Sedaghat.
(e) If Mr. Sedaghat's employment with the Company is terminated pursuant to
the provisions of subsections 2.2(b), (c) or (d) of the employment agreement
made as of the date hereof among Mr. Sedaghat, CCL and the Company (the
"Employment Agreement") or as a result of Mr. Sedaghat's death, then Merger Sub
or CCL shall notwithstanding the conditions set forth in Section 5.1(b) of the
Merger Agreement, promptly pay, together with interest to the date of payment
calculated in accordance with Section 5.1(c) of the Merger Agreement, all
amounts which could become payable pursuant to the Top-Up (less any amounts
previously paid).
5. REPRESENTATIONS AND WARRANTIES OF THE SEDAGHAT SHAREHOLDERS
Each Sedaghat Shareholder hereby severally, but not jointly nor jointly and
severally, represents and warrants to Merger Sub and CCL as follows (which
representations and warranties shall be true as of the date hereof) and
acknowledges and confirms that Merger Sub and CCL are relying thereon, that:
(a) such Sedaghat Shareholder has good and sufficient power, authority and
right to enter into this agreement and to complete the transactions contemplated
hereby and the execution and delivery of this agreement, the performance by such
Sedaghat Shareholder of its or his obligations hereunder and the consummation by
such Sedaghat Shareholder of the transactions contemplated hereby have been duly
and validly authorized by all requisite actions and
<PAGE>
-4-
proceedings and will not constitute a violation of, conflict with or result in a
default under any agreement, contract, indenture or restriction of any kind to
which such Sedaghat Shareholder is a party or by which it or he is bound which
would prevent or materially delay such Sedaghat Shareholder's ability to
complete the transactions herein contemplated;
(b) except for any applicable requirements of the Securities Exchange Act
of 1934, as amended, and the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, no filing or registration with, no notice to and no permit,
authorization, report, consent or approval of any public, governmental or
regulatory body or authority or of any other person is necessary for the
consummation by such Sedaghat Shareholder of the transactions contemplated by
this agreement except for such filings, registrations, notices, permits,
authorizations, reports, consents or approvals the failure to obtain would not
prevent or materially delay such Sedaghat's Shareholders ability to complete the
transactions herein comtemplated;
(c) except for this agreement, the Merger Agreement and as set forth on
Schedule B, there are no outstanding agreements, options, warrants or rights to
purchase or acquire, or agreements (whether voting or otherwise) relating to any
of the Shares owned by such Sedaghat Shareholder;
(d) except as set forth on Schedule B, such Sedaghat Shareholder is the
beneficial owner of the number of Common Shares set out opposite such
Shareholder's name in Schedule A hereto, free and clear of all Liens upon
compliance with the covenant in subsection 7.1(g) hereof, such Common Shares
tendered under the Offer having been accepted for payment and paid for in
accordance with the Offer and, in the case of the Remaining Shares, at the
Option Closing, Merger Sub will acquire good and marketable title to all of the
Shares, free and clear of all Liens except for those created by Merger Sub or
the affiliates of Merger Sub;
(e) except for options held by Mr. Sedaghat to acquire 545,000 Common
Shares of the Company and except for 10,800 Common Shares held by the wife of
Mr. Sedaghat, the Common Shares set out opposite the name of such Sedaghat
Shareholder in Schedule A constitute all of the securities of the Company of any
kind or nature which such Sedaghat Shareholder owns, directly or indirectly, or
over which such Sedaghat Shareholder exercises dispositive, voting or other
control or direction;
(f) this agreement has been duly executed and delivered by such Sedaghat
Shareholder and constitutes a legal and validly binding obligation of such
Sedaghat Shareholder enforceable by Merger Sub and CCL against such Sedaghat
Shareholder in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(g) Mr. Sedaghat is acquiring the Participating Exchangeable Shares and the
Class A Stock for his own account and not as nominee or agent for any other
person and not with a view to, or for offer or sale in connection with, any
distribution thereof (within the meaning of the Securities Act of 1933, as
amended (the "Securities Act")) that would be in violation of the
<PAGE>
-5-
securities laws of the United States of America or any state thereof, without
prejudice, however, to his right at all times to sell or otherwise dispose of
all or any part of the Participating Exchangeable Shares and the Class A Stock
pursuant to a registration statement under the Securities Act or pursuant to an
exemption from the registration requirements of the Securities Act, and subject,
nevertheless, to the disposition of his property being at all times within his
control;
(h) Mr. Sedaghat is knowledgeable, sophisticated and experienced in
business and financial matters; acknowledges that the Participating Exchangeable
Shares have not been and the Class A Stock will not be registered under the
Securities Act and understands that the Participating Exchangeable Shares and
the Class A Stock must be held indefinitely unless they are subsequently
registered under the Securities Act or such sale is permitted pursuant to an
available exemption from such registration requirement; he is able to bear the
economic risk of his investment in the Participating Exchangeable Shares and the
Class A Stock and is presently able to afford the complete loss of such
investment; he is an "accredited investor" as defined in Regulation D
-------------------
promulgated under the Securities Act; and he has been afforded access to
information about Merger Sub and the Company and its financial condition and
business sufficient to enable him to evaluate his investment in the
Participating Exchangeable Shares and the Class A Stock; and
(i) No transfer or sale (including, without limitation, by pledge or
hypothecation) of the Participating Exchangeable Shares or the Class A Stock by
Mr. Sedaghat which is otherwise permitted hereunder, other than a transfer or
sale to Merger Sub shall be effective unless such transfer or sale is made (i)
pursuant to an effective registration statement under the Securities Act and a
valid qualification under applicable state securities or "blue sky" laws or (ii)
--------
without such registration or qualification as a result of the availability of an
exemption therefrom, and, if reasonably requested by Merger Sub, at the sole
cost and expense of Merger Sub, counsel for Mr. Sedaghat shall have furnished
Merger Sub with an opinion, reasonably satisfactory in form and substance to
Merger Sub, to the effect that no such registration is required because of the
availability of an exemption from the registration requirements of the
Securities Act.
6. REPRESENTATIONS AND WARRANTIES OF CCL AND MERGER SUB
6.1 Each of CCL and Merger Sub hereby, jointly and severally, represent and
warrant to the Sedaghat Shareholders as follows (which representations and
warranties shall be true as of the date hereof) and acknowledges and confirms
that the Sedaghat Shareholders are relying thereon, that:
(a) CCL is a corporation duly incorporated and subsisting and Merger Sub is
a corporation duly organized and in good standing under the laws of its
jurisdiction of incorporation and each has all requisite power and authority to
own, lease and operate its properties and carry on its business as now being
conducted. CCL is registered in each jurisdiction where the properties owned,
leased or operated or the business conducted by its require such registration
except where the failure to be so incorporated, subsisting, organized, existing
or in good standing, as the case may be, or to have such power or authority
would not have a material adverse effect on the financial condition, properties,
business, results of operations or prospects of CCL and the subsidiaries, taken
as a whole (a "Material Adverse Effect"). Each of CCL and Merger Sub has good
and sufficient power, authority and right to enter into this agreement and to
complete the transactions contemplated hereby and the execution and delivery of
this agreement, the performance of their respective obligations hereunder and
the consummation by each of them of the transactions contemplated hereby has
been duly and validly authorized by all requisite actions and proceedings and
will not constitute a violation of, conflict with or result in a default under
any agreement, contract, indenture or restriction of any kind to which either of
CCL or Merger Sub is a party by which either of them or their respective
properties or assets are bound or any judgement, decree, order, injunction,
statute, rule or regulation applicable to Merger Sub or CCL (or rights of
termination or cancellation or acceleration) which would have a Material Adverse
Effect or materially impair their ability to complete the transactions herein
contemplated;
<PAGE>
-6-
(b) the authorized capital of CCL consists of an unlimited number of Class
A voting and an unlimited number of Class B non-voting shares of which, as of
May 31, 1997, 2,485,545 of such Class A voting shares and 32,364,633 of such
Class B non-voting shares are issued and outstanding as fully-paid and non-
assessable shares; in addition, as of May 31, 1997, there are outstanding
options to acquire 1,358,500 Class B non-voting shares of CCL. All the
outstanding shares of CCL's capital stock are validly issued, fully paid and
nonassessable and free of any preemptive rights in respect thereto. Each of the
outstanding shares of capital stock of, or other ownership interests in, each of
CCL's subsidiaries is duly authorized, validly issued, fully paid and non-
assessable and owned, either directly or indirectly, by CCL free and clear of
all Liens. The authorized capital stock of the Purchaser as of the date hereof
consists of 1,000 shares of common stock, U.S. $0.01 par value, of which 100
shares are outstanding. Except as set forth above, and except for shares of
capital stock issuable in connection with options granted in connection with the
Merger or options granted under CCL's Employee Stock Option Plan, there are no
shares of capital stock of CCL authorized, issued or outstanding except for an
immaterial amount of Class B non-voting shares issued after May 31, 1997 in
connection with the exercise of outstanding stock options. Except as set forth
above or as contemplated hereby, and except for this agreement, there are no
pre-emptive rights nor any outstanding subscriptions, options, warrants, rights,
convertible securities or other agreements or commitments of any character to
which the CCL is bound and relating to the issued or unissued capital stock or
other securities of CCL or any of its subsidiaries.
(c) except for any applicable requirements of the Securities Exchange Act
of 1934, as amended, and the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, no filing or registration with, no notice to and no permit,
authorization, report, consent or approval of any public, governmental or
regulatory body or authority or of any other person is necessary for the
consummation by CCL or Merger Sub of the transactions contemplated by this
agreement, except for such filings, registrations, notices, permits,
authorizations, reports, consents or approvals the failure to obtain would not
prevent or materially delay CCL's or Merger Sub's ability to complete the
transactions herein contemplated and except that CCL must: (i) provide a notice
of material change to the securities commissions of each of the Provinces of
Canada (which CCL shall do forthwith following announcement of the Offer), (ii)
provide notice to and obtain acceptance of notice from The Toronto Stock
Exchange and the Montreal Exchange with respect to the options to be granted to
Mr. Sedaghat and the issuance of CCL Class B non-voting shares on the exercise
of the exchange rights attached to the Participating Exchangeable Shares (which
notice has been given to The Toronto Stock Exchange and will forthwith be given
to the Montreal Exchange) and (iii) provide notice of issuance to the Ontario
Securities Commission with respect to and forthwith following the issuance of
any of the CCL Class B non-voting shares;
(d) this agreement has been duly executed and delivered by each of CCL and
Merger Sub and constitutes a legal and validly binding obligation of each of CCL
and Merger Sub, enforceable by the Sedaghat Shareholders against each of CCL and
Merger Sub in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law; and
(e) Merger Sub has taken all necessary corporate action to duly authorize
the allotment, issuance and transfer of the Participating Exchangeable Shares
such that, upon exercise of the Option, the Participating Exchangeable Shares
shall be validly issued and outstanding as fully paid and non-assessable shares
in the capital of Merger Sub, free and clear of all Liens;
(f) CCL has taken all necessary corporate action to duly authorize the
allotment and issuance of the CCL Class B non-voting shares to the holder of the
Participating Exchangeable
<PAGE>
-7-
Shares and, upon exercise of the right of exchange in accordance with the rights
and privileges attaching to the Participating Exchangeable Shares, the CCL Class
B non-voting shares allotted for such purpose will be validly issued and
outstanding as fully paid and non-assessable Class B non-voting shares in the
capital of CCL;
(g) except as disclosed in the Merger Agreement, no broker or finder is
entitled to a commission or fee from Merger Sub or CCL in respect of this
agreement based on any arrangement or agreement made by or on behalf of Merger
Sub or CCL;
(h) CCL is a reporting issuer under the Securities Act (Ontario) and is not
in default of any provision of such Act or the regulations promulgated
thereunder; CCL has made available to the advisors of the Sedaghat Shareholders
true and complete copies of CCL's Annual Report for the year ended December 31,
1996, CCL's Interim Report to Shareholders for the three months ended March 31,
1997, CCL's Annual Information Form for the year ended December 31, 1996 and
CCL's Management Proxy Circular for its 1997 Annual Meeting of Shareholders;
(i) the Class B non-voting shares of CCL are listed and posted for trading
on The Toronto Stock Exchange and the Montreal Exchange and CCL is not in
default of any of the policies or by-laws of either of the Exchanges;
(j) CCL and its subsidiaries have duly filed all federal, provincial,
state, local and other Tax Returns (as defined below) required to be filed by
them, except for Tax Returns which, individually and in the aggregate, the
failure to file at the time required to be filed will not have a Material
Adverse Effect, and have duly paid or made adequate provision for the payment of
all Taxes (as defined below) shown to be due thereon. All such Tax Returns are,
in all material respects, true, correct and, to CCL's knowledge, complete. The
federal income tax returns of CCL and its subsidiaries have been examined by
Revenue Canada or the Internal Revenue Service, as applicable, for all periods
up to and including 1991. All assertions of deficiencies or assessments of
Taxes due and payable by CCL or any subsidiary have been paid or provided for or
are being contested in good faith by appropriate proceedings except for
deficiencies or assertions the non-payment of which would not have a Material
Adverse Effect. To CCL's knowledge, no issue has been raised by Revenue Canada
or the Internal Revenue Service in any such examination which by application of
the same or similar principles, resulted in material assessments or deficiencies
for the period so examined or could reasonably be expected to result in a
material proposed deficiency for any period not so examined. Except as set
forth in Schedule 6(i), there are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any federal income tax return
for any period. The liabilities and reserves for Taxes reflected in CCL's
balance sheet as of December 31, 1996 and reflected in the books and records of
CCL were adequate as of such date and to CCL's knowledge, there are no material
liens for Taxes upon any property or assets of CCL or any subsidiary except
liens for Taxes not yet due or the validity of which is being contested in good
faith by appropriate proceedings. All material Taxes that CCL or any subsidiary
is required by law to withhold or collect have been duly withheld or collected
and, to the extent required by law, have been paid to the appropriate
governmental authorities or properly deposited. Neither CCL nor any subsidiary
has, with regard to any assets or property held, acquired or to be acquired by
any of them, filed a
<PAGE>
-8-
consent to the application of Section 341(f)(2) of the Internal Revenue Code of
1986, as amended (the "Code").
As used herein, "Taxes" shall mean all taxes, charges, fees, levies or
other assessments, including, without limitation, income, gross receipts,
excise, property, sales, occupation, use, service, service use, license,
payroll, franchise, transfer and recording taxes, fees and charges, imposed by
Canada, the United States, or any state, local or foreign government or
subdivision or agency thereof whether computed on a separate, consolidated,
unitary, combined or any other basis; and such term shall include any interest,
liabilities, additional amounts, penalties and additions to tax; and
The term "Tax Return" shall mean any report, return, information
return or other document (including related or supporting information) filed or
required to be filed by CCL or any of its subsidiaries with any governmental
authority or other authority in connection with the determination, assessment or
collection of any Tax (whether or not such Tax is imposed on CCL) or the
administration of any law, regulation or administrative requirements relating to
any Tax;
(k) Since March 31, 1997, CCL and its subsidiaries have conducted their
respective businesses only in, and have not engaged in any material transaction
except for the transactions contemplated herein, other than according to, the
ordinary and usual course of such businesses and since March 31, 1997, there has
not been any material adverse change in the financial condition, properties,
business, results of operations or prospects of CCL and its subsidiaries taken
as a whole;
(l) There are no actions, suits or proceedings pending or, to the knowledge
of CCL, threatened against CCL or any of its subsidiaries that, alone or in the
aggregate, are reasonably likely to have a Material Adverse Effect;
(m) None of the information furnished by CCL relating to CCL or its
subsidiaries included in the Offer Documents, the Schedule 14D-9, the Proxy
Statement (each as defined in the Merger Agreement) or in any amendment or
supplement to any of the foregoing) required to be filed with the Securities and
Exchange Commission ("SEC") in connection with the Offer or the Special Meeting
(as defined in the Merger Agreement) will, at the respective times the Offer
Documents, Schedule 14D-9, the Proxy Statement or any other such schedules or
documents, or any amendments or supplements thereto are first filed with the SEC
or first published, sent or given to the Company's stockholders, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading; and
(n) The operations of CCL and its subsidiaries have been conducted in
accordance with all applicable laws, regulations or other requirements of all
national governmental authorities, and of all states, municipalities and other
political subdivisions and agencies thereof, having jurisdiction over CCL and
its subsidiaries, including, without limitation, all such laws, regulations and
requirements relating to antitrust, consumer protection, environmental, currency
exchange, equal opportunity, food and drugs, health, occupational, safety,
pension, securities and
<PAGE>
-9-
trading-with-the-enemy matters, except where the failure to so conduct or comply
would not have a Material Adverse Effect. In connection with the operation of
CCL's business, there has been no Release of any Hazardous Substance, as those
terms are defined under the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C. (S)(S) 9601 et seq. ("CERCLA"), at, in, or from any
of CCL's or any of its subsidiaries' current or former facilities or real
property, or, to CCL's knowledge, at any other location at which CCL or any of
its subsidiaries has arranged for the disposal or has disposed of any Hazardous
Substance, nor is there any condition existing at any of CCL's or any of its
subsidiaries' current or former facilities or real property which might give
rise to liability under CERCLA or any analogous state law, except where such
Release of any Hazardous Substance or condition would not have a Material
Adverse Effect.
6.2 CCL covenants and agrees with Mr. Sedaghat as follows:
(a) that prior to the purchase of Shares pursuant to the Offer, all
acceptance of notice required to be received from The Toronto Stock Exchange
shall have been obtained with respect to the options to purchase CCL Class B
non-voting shares granted to Mr. Sedaghat and the issuance of CCL Class B
non-voting shares upon exercise of the exchange rights attached to the
Participating Exchangeable Shares; and
(b) that prior to the purchase of Shares pursuant to the Offer, it shall
have received confirmation from The Toronto Stock Exchange that no undertaking
will be required with respect to the CCL Class B non-voting shares issuable in
the circumstances described in (a) hereof other than an undertaking that would
cease to be effective upon compliance by CCL with the terms of the Qualification
and Listing of Shares Agreement of even date herewith between CCL and Mr.
Sedaghat.
6.3 Each of CCL and Merger Sub covenants and agrees with the Sedaghat
Shareholders that it shall not take or commit any action that would cause or
make any of the representations and warranties contained in Section 6.1 hereof
inaccurate in any material respect at or as of any time prior to the completion
of the Merger, except such actions as may be contemplated by this agreement or
the Merger Agreement.
7. COVENANTS OF THE SEDAGHAT SHAREHOLDERS
7.1 From the date hereof until the earlier of: (i) the termination of this
agreement in accordance with Section 8 hereof and (ii) the completion of the
Offer, or in Mr. Sedaghat's case, the earlier of the Option Closing and the
completion of the Merger, each Sedaghat Shareholder, severally, but not jointly
nor jointly and severally, covenants and agrees with CCL and Merger Sub as
follows:
(a) subject in the case of Mr. Sedaghat to any fiduciary duties he may have
as a director or officer of the Company, such Sedaghat Shareholder will not,
directly or indirectly, provide any information concerning the Company to,
solicit, initiate, invite, assist, facilitate, promote or encourage proposals or
offers from, or entertain or enter into discussions or
<PAGE>
-10-
negotiations with, any other person relating to the Common Shares or any other
securities of the Company, any amalgamation, merger or other form of business
combination involving the Company or any of its subsidiaries, any sale, lease,
exchange or transfer of all or a substantial portion of the assets of the
Company or any of its subsidiaries, or any take-over bid, reorganization,
recapitalization, liquidation or winding-up of or other business combination or
other transaction involving the Company or any of its subsidiaries with any
person other than CCL, Merger Sub or any of their affiliates (each, a "Proposed
Transaction");
(b) subject in the case of Mr. Sedaghat to any fiduciary duties he may have
as a director or officer of the Company, such Sedaghat Shareholder will not
enter into any agreement, discussions or negotiations with any person, other
than CCL, Merger Sub or any of their affiliates with respect to a Proposed
Transaction or potential Proposed Transaction;
(c) subject in the case of Mr. Sedaghat to any fiduciary duties he may have
as a director or officer of the Company, such Sedaghat Shareholder will not
furnish or cause to be furnished any non-public information concerning the
business, results of operations, assets, liabilities, prospects, financial
condition or affairs of the Company or any of its subsidiaries to any person,
other than CCL and its representatives, other than as disclosed prior to the
date hereof;
(d) subject in the case of Mr. Sedaghat to any fiduciary duties he may have
as a director or officer of the Company, such Sedaghat Shareholder will exercise
the voting rights attaching to Shares owned or controlled by it or him to oppose
the occurrence of any of the following events to the extent a vote by the
stockholders of the Company is required: (i) any change in the certificate of
incorporation or by-laws of the Company or any subsidiary thereof or in the
authorized or outstanding capital stock of the Company or any subsidiary
thereof; (ii) the grant of any option, warrant or security convertible into
capital stock of the Company or any subsidiary thereof; (iii) the distribution,
sale, pledge or transfer of all or a substantial part of the business or
property of the Company or any subsidiary thereof; (iv) the merger,
consolidation or reorganization of the Company or any subsidiary thereof or any
other material change in the corporate structure of the Company or any
subsidiary thereof, other than the Merger; and (v) any other material change in
the business or affairs of the Company or any subsidiary thereof;
(e) subject in the case of Mr. Sedaghat to any fiduciary duties he may have
as a director or officer of the Company, such Sedaghat Shareholder will exercise
the voting rights attached to Shares owned or controlled by it or him to oppose
any proposed action by the Company, its shareholders or others, and shall not
take any action, the result of which could be reasonably expected to prevent or
delay Merger Sub from completing the transactions contemplated hereby, including
the Offer and the Merger;
(f) such Sedaghat Shareholder will not grant proxies or enter into any
voting trust or, except for any agreements necessary to the release of the lien
described in Schedule B, will not enter into any other agreement or arrangement
with respect to any of the Shares other than this Agreement; such Sedaghat
Shareholder will not acquire or sell, assign, transfer, encumber or otherwise
dispose of any Common Shares or enter into any contract, agreement or
understanding
<PAGE>
-11-
with respect to the direct or indirect acquisition or sale, assignment,
transfer, encumbrance or other disposition of any Common Shares, except pursuant
to the terms hereof and the Merger Agreement prior to the consummation of the
Merger. Mr. Sedaghat will not exercise any options to acquire Common Shares;
(g) Mr. Sedaghat will take all such actions as are necessary to terminate
all outstanding agreements, options, warrants or rights to purchase or acquire
or agreements relating to any of the Shares and the Remaining Shares (other than
this agreement and the Merger Agreement) and to discharge all liens, charges,
claims, encumbrances, pledges and security interests with respect to the Shares
and the Remaining Shares prior to receipt of payment therefor;
(h) such Sedaghat Shareholder shall reasonably co-operate with Merger Sub
and CCL in making all requisite regulatory filings in connection with the Offer
and in the case of Mr. Sedaghat, the Merger and in furtherance of Section 6.2;
(i) Mr. Sedaghat will not exercise and hereby irrevocably waives any
dissent and appraisal rights accruing to the Common Shares under the General
Corporation Law of the State of Delaware; and
(j) such Sedaghat Shareholder shall not take or commit to take any action
that would cause or make any of the representations and warranties contained in
Section 5 hereof inaccurate in any material respect at or as of any time prior
to, the completion of the Offer, or in Mr. Sedaghat's case, the completion of
the Merger, except such actions as may be contemplated by this agreement or the
Merger Agreement.
7.2 Subject in the case of Mr. Sedaghat to any fiduciary duties he may have as
a director or officer of the Company, the Sedaghat Shareholders will promptly
notify CCL of any such discussions or negotiations or of any proposal in respect
of a Proposed Transaction of which they become aware.
8. TERMINATION
Except for the provisions of Section 9 as therein provided, this agreement
and all obligations hereunder shall terminate on the first to occur of: (a)
11:59 p.m. Pacific daylight time, on June 23, 1997 if Merger Sub has not made
the Offer at or prior to such time; (b) the termination of the Merger Agreement
in accordance with its terms; and (c) the Effective Time (as defined in the
Merger Agreement); provided however that the representations and warranties of
CCL and Merger Sub contained in subsections 6(g), (h), (j), (k), (l), (m) and
(n) hereof shall terminate upon the Effective Time as defined in the Merger
Agreement. All other representations and warranties of CCL, Merger Sub and the
Sedaghat Shareholders shall continue in full force and effect until the
expiration of the applicable statutory limitation period, notwithstanding the
completion of the Offer and the Merger.
9. TERMINATION FEES
<PAGE>
-12-
If, at any time after the execution and delivery of this agreement, any
event occurs and, as a result thereof, Merger Sub is entitled to the fee
described in Section 9.6 of the Merger Agreement and any Sedaghat Shareholder
within 18 months thereafter sells, transfers or assigns any of its or his Shares
to, or agrees to any of the foregoing during such 18 month period (provided any
such agreement is consummated within 3 months after the end of such 18 month
period) with, any person in an Alternative Transaction (as hereinafter defined),
then such Sedaghat Shareholder shall pay to Merger Sub a fee for each Share
which is subject to such Alternative Transaction equal to the amount by which
the aggregate consideration per Share payable under such Alternative Transaction
exceeds $29.00. The term "Alternative Transaction" means the occurrence of any
of the following events: (i) the Company or any subsidiary of the Company whose
assets constitute twenty percent (20%) or more of the Company's consolidated
assets is acquired by merger or otherwise by any person or group, other than
CCL, Merger Sub, or any affiliate thereof (a "Third Party"); (ii) the Company or
any subsidiary of the Company enters into an agreement with a Third Party which
contemplates the acquisition of twenty percent (20%) or more of the total assets
of the Company and its subsidiaries, taken as a whole; (iii) the Company, enters
into a merger or other agreement with a Third Party which contemplates the
acquisition of more than twenty percent (20%) of the Common Shares; or (iv) a
Third Party acquires more than ten percent (10%) of the Common Shares from
any one or more of the Sedaghat Shareholders.
If an Alternative Transaction includes cash and non-cash consideration,
with the cash component equalling or exceeding $29 per Share, the fee payable to
Merger Sub shall be all of the non-cash consideration in such Alternative
Transaction and the excess over $29, if any, of the cash component in such
Alternative Transaction. If the Alternative Transaction includes cash and non-
cash consideration, with the cash component in such Alternative Transaction
being less than $29, the fee payable to Merger Sub will be that portion of each
component of non-cash consideration in such Alternative Transaction that equals
the Excess Percentage (as defined below). The "Excess Percentage" shall be a
fraction, the numerator of which is (a) the fair market value of the non-cash
consideration in such Alternative Transaction (as determined in accordance with
the following sentence), plus the cash component in the Alternative Transaction,
less $29, and the denominator of which is (b) the fair market value of the non-
cash consideration in such Alternative Transaction (as determined in accordance
with the following sentence). The fair market value of the non-cash
consideration in such Alternative Transaction shall be determined by the mutual
agreement of the Merger Sub and the Sedaghat Shareholders participating in such
Alternative Transaction within three days of the consummation of such
Alternative Transaction, or if such agreement is not reached, the fair market
value of the non-cash consideration in such Alternative Transaction shall be
determined by an investment banking firm of national reputation agreed to in
good faith by the Sedaghat Shareholders participating in such Alternative
Transaction and the Merger Sub. The fees and expenses of such investment
banking firm shall be split evenly among the Sedaghat Shareholders participating
in such Alternative Transaction, on the one hand, and the Merger Sub, on the
other hand.
The obligation of the Sedaghat Shareholders to pay the fees pursuant to
this Section 9 shall survive the termination of this agreement and the Merger
Agreement and shall continue in full force and effect until such obligation has
been satisfied in full.
<PAGE>
-13-
10. GENERAL
(a) Each of the parties hereto shall coordinate with one another with
respect to, (i) any public filings it or he makes relating to the subject matter
of this agreement and, if reasonably practicable, shall make such filings
available to the other parties hereto for its review prior to such filing, and
(ii) any public statements relating to the transactions contemplated hereunder
and under the Merger Agreement.
(b) Neither Merger Sub or CCL, on the one hand, nor the Sedaghat
Shareholders on the other hand, shall take or commit to take any actions that
would make any of their respective representations or warranties hereunder
inaccurate in any material respect at, or as of any time prior to, the
completion, termination or expiration of the Offer and in the case of Merger
Sub, CCL and Mr. Sedaghat, the completion of the Merger.
(c) This agreement shall not be assignable by the parties hereto.
(d) This agreement shall be binding upon, shall enure to the benefit of and
shall be enforceable by each of the parties hereto and their respective heirs,
executors, legal personal representatives, successors and permitted assigns.
(e) Time shall be of the essence in this agreement.
(f) For purposes of this agreement, "persons" shall include individuals,
partnerships, joint ventures, associations, corporations and all other forms of
business organizations, governments, regulatory or governmental agencies,
commissions, departments or instrumentalities.
(g) For purposes of this agreement "business day" means a day other than
Saturday, Sunday or federal holiday in the United States of America, during
which the Securities and Exchange Commission is not open for business.
(h) Any provision of this agreement may be waived at any time by the party
that is entitled to the benefits thereof and this agreement may be amended or
supplemented at any time provided however that no such waiver, amendment or
supplement shall be effective unless it is in writing and signed by the party
sought to be bound thereby.
(i) This agreement, the Merger Agreement, the Employment Agreement and the
option agreements dated as of the date hereof between Mr. Sedaghat and CCL: (i)
contain the entire agreement, and supersede all other prior agreements and
understandings, both written and oral, among the parties hereto with respect to
the purchase and sale of the Shares, and (ii) are not intended to confer upon
any other persons any rights or remedies hereunder.
(j) Merger Sub and CCL, on the one hand, and the Sedaghat Shareholders on
the other hand, each hereby acknowledge and agree that the other parties to this
agreement would be irreparably damaged in the event that any of the provisions
of this agreement are not performed by the party required to perform such
provision hereunder in accordance with their specific terms or are otherwise
breached. It is accordingly agreed that each party shall be entitled to an
<PAGE>
-14-
injunction or injunctions to redress the breaches of this agreement and to
specifically enforce the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction in
addition to any other remedy to which such party may be entitled at law or in
equity. In the event that litigation shall be necessary to enforce, interpret
or rescind the provisions of this agreement, the prevailing party shall be
entitled to recover from the other party, in addition to other relief, the
prevailing party's reasonable attorney's fees for service before trial, on trial
and on any appeal therefrom.
(k) Any notice, direction or other communication required or permitted to
be given or made hereunder shall be in writing and shall be sufficiently given
or made if delivered in person to the address set forth below, or telecopied or
sent by other means of recorded electronic communication and confirmed by
delivery as soon as practicable thereafter. Notices shall be addressed to the
parties as follows:
If to the Sedaghat Shareholders:
c/o Mr. Shapour Sedaghat or Mr. Shahrokh Sedaghat
2501 West Rosecrans Avenue
Los Angeles, CA
90059-3510
Telecopier: (310) 635-4133
and with a courtesy copy to:
Latham & Watkins
Attorneys at Law
633 West Fifth Street
Suite 4000
Los Angeles, California
90071-2007
Attention: Paul Tosetti
Telecopier: (213) 891-8763
If to CCL or Merger Sub:
105 Gordon Baker Road
Willowdale, Ontario
M2H 3P8
Attention: President
Telecopier: (416) 256-8555
<PAGE>
-15-
and with a courtesy copy to:
Lang Michener
Barristers and Solicitors
P.O. Box 747, Suite 2500
BCE Place, 181 Bay Street
Toronto, Ontario
M5J 2T7
Attention: Albert Gnat, Q.C. or Geofrey Myers
Telecopier: (416) 365-1719
and with a courtesy copy to:
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York
10020-1605
Attention: Brian Hoffmann
Telecopier: (212) 547-5444
Any notice, direction or other communication so given or made shall be
deemed to have been given or made and to have been received on the day of
delivery, if delivered, or on the day of sending if sent by telecopier or other
means of recorded electronic communication. Any party hereto may change its or
his address for notice by giving written notice thereof to the other parties
hereto. Delivery of courtesy copies of any notice, direction or other
communication shall not be a condition to the valid delivery of any notice,
direction or other communication.
(l) Each party hereto shall pay its own expenses incurred in connection
with the negotiation, execution and performance of this agreement.
(m) This agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument. Delivery of any counterpart may be
effected by means of facsimile transmission.
(n) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO CHOICE OF LAW
PRINCIPLES THEREOF.
(o) ANY JUDICIAL PROCEEDING BROUGHT AGAINST ANY PARTY HERETO WITH RESPECT
TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY, MAY BE BROUGHT IN
THE COURTS OF THE STATE OF DELAWARE AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HERETO (I) ACCEPTS, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF SUCH COURT AND ANY RELATED
APPELLATE COURT, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
<PAGE>
-16-
THEREBY IN CONNECTION WITH THIS AGREEMENT, SUBJECT, IN EACH CASE, TO ALL RIGHTS
TO APPEAL SUCH DECISIONS TO THE EXTENT AVAILABLE TO THE PARTIES AND (II)
IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. EACH PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF PROCESS
AND CONSENTS THAT SERVICE OF PROCESS UPON SUCH PARTY MAY BE MADE BY DELIVERY AT
SUCH PARTY'S ADDRESS SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS
OF THIS AGREEMENT, AND SERVICE SO MADE SHALL BE DEEMED COMPLETED ON THE DATE OF
DELIVERY. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW. EACH PARTY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDINGS INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT
OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE.
(p) Schedules A and B are incorporated into this agreement by reference and
deemed to be a part hereof.
(q) All references to Common Shares or Shares herein shall include any
shares into which the Common Shares or Shares may be reclassified, subdivided,
redivided, consolidated or converted by amendment to the articles of the Company
and the price per share referred to herein shall be amended accordingly.
(r) Words signifying the singular number shall include, whenever
appropriate, the plural and vice versa; and words signifying the masculine
gender shall include, whenever appropriate, the feminine or neuter gender.
(s) Each of the parties hereto covenants and agrees to execute or cause to
be executed all such further and other documents as may be necessary or
desirable to give effect to the purposes and intent of this agreement.
(t) Unless otherwise stated, all dollar amounts referred to herein are in
lawful currency of the United States of America.
(u) Notwithstanding any other provisions of this agreement, the obligation
of Mr. Sedaghat to sell his Shares under the Offer and to complete the transfer
of the Remaining Shares on the Option Closing shall be conditional upon:
(a) acceptance of notice having been received from The Toronto Stock
Exchange on or before completion of the Offer with respect to the
options to purchase Class B non-voting shares of CCL granted to Mr.
Sedaghat and the issuance of CCL Class B non-voting shares upon
exercise of the exchange rights attached to the Exchangeable Shares;
and
(b) receipt of confirmation from The Toronto Stock Exchange that in
connection with the CCL Class B non-voting shares issuable in the
circumstances described in (a) hereof, no undertaking will be required
other than an undertaking that would
<PAGE>
-17-
cease to be effective upon compliance by CCL with the terms of the
Qualification and Listing Agreement of even date herewith between CCL
and Mr. Sedaghat; which conditions may be waived in whole or in part
by Mr. Sedaghat to the extent permitted by applicable law.
<PAGE>
-18-
If you are in agreement with the foregoing, kindly indicate your acceptance
by signing this agreement where indicated on Schedule A and returning a copy to
CCL.
Yours very truly,
CCL INDUSTRIES INC. SEAWOLF ACQUISITION CORPORATION
By: /s/ CCL INDUSTRIES INC. By: /s/ SEAWOLF ACQUISITION CORPORATION
----------------------- ------------------------------------
<PAGE>
S-1
SCHEDULE A
The agreement to which this Schedule A forms a part thereof is hereby accepted
and confirmed as evidenced by the signatures hereinafter set out.
<TABLE>
<CAPTION>
NAME OF SHAREHOLDER NUMBER OF COMMON SHARES AUTHORIZED SIGNATORY
<S> <C> <C>
Shahrokh Sedaghat 1,053,333 (1) /s/ Shahrokh Sedaghat
-----------------------------
Shapour Sedaghat and
Parvindokht Sedaghat, JT 1,685,967 /s/Shapour Sedaghat and
Parvindokht Sedaghat, JT
The Sedaghat Charitable ----------------------------
Remainder Uni Trust,
Shapour Sedaghat and
Parvindokht Sedaghat,
Co-Trustees 500,000 /s/ The Sedaghat Charitable
Remainder Uni Trust,
Shapour Sedaghat and
Parvindokht Sedaghat,
Co-Trustees
----------------------------
</TABLE>
_______________________________
(1) see Schedule B
<PAGE>
S-2
SCHEDULE B
Shahrokh Sedaghat currently maintains a margin account with Prudential
Securities (the "Margin Account"). All or a portion of his Shares and the
Remaining Shares may be currently pledged as part of the Margin Account which
pledge shall be removed prior to or concurrently with the completion of the
Offer, or in the case of the Remaining Shares, prior to the earlier of the
Option Closing and completion of the Merger.
<PAGE>
EXHIBIT 99(C)(3)
MEMORANDUM OF AGREEMENT made as of the 16th day of June, 1997.
B E T W E E N:
SHAHROKH SEDAGHAT,
of the City of Los Angeles,
in the State of California,
(hereinafter called the "Executive"),
OF THE FIRST PART,
- and -
CCL INDUSTRIES INC.,
a corporation continued under the
laws of Canada,
(hereinafter called "CCL")
OF THE SECOND PART,
- and -
SEDA SPECIALTY PACKAGING CORP.,
a corporation reincorporated under the
laws of Delaware,
(hereinafter called the "Corporation")
OF THE THIRD PART.
WHEREAS:
1. The Executive is the Chairman, President and Chief Executive Officer of
the Corporation.
2. Pursuant to an Agreement and Plan of Merger and Reorganization dated the
date hereof, Seawolf Acquisition Corporation, a wholly-owned indirect subsidiary
of CCL ("Seawolf"), has agreed to make, and CCL has agreed to cause Seawolf to
make, as soon as reasonably practicable but on or before June 23, 1997, a tender
offer in accordance with applicable laws in the United States of America (the
"Offer") for all of the outstanding shares of common stock (the "Common Shares")
of the Corporation and thereafter on successful completion of the Offer,
Seawolf will merge with and into the Corporation (the "Merger"), with the
Corporation being the corporation surviving the Merger.
<PAGE>
Page 2
3. Pursuant to a Lock-Up Agreement (the "Lock-Up Agreement") dated June 16th,
1997 with CCL and Seawolf, the Executive, amongst others, has agreed, subject to
certain conditions, to tender 535,620 Common Shares into the Offer, vote his
517,713 remaining common shares (the "Remaining Shares") in favour of the Merger
and accept on the Merger for Remaining Shares the consideration described in the
Lock-Up Agreement, and has granted Seawolf the option to acquire, in the
circumstances specified in the Lock-Up Agreement, the Remaining Shares for the
consideration specified therein.
4. The value of the consideration paid or payable by Seawolf to the Executive
for the Common Shares of the Corporation to be acquired by Seawolf and the
Corporation pursuant to the Offer, the Option and the Merger will be at least
$27.67 million.
5. Under the Executive's control, direction, guidance and supervision the
Corporation has carried on the businesses of developing, manufacturing and
marketing specialty plastic packaging products to the personal care and
cosmetics, food and beverage, household and industrial chemical, and
pharmaceutical industries (the "Business") and has sold such products throughout
the United States and in Canada and Mexico from plants located in California and
New York.
6. The Executive, in the course of carrying out his responsibilities to the
Corporation in the past and hereafter, has had and will continue to have
fiduciary responsibilities to the Corporation and has had and will continue to
have access to and has been and will continue to be entrusted with the
confidential and proprietary information and trade secrets of the Corporation
including, without limitation, information not previously disclosed to the
public regarding the names, addresses, terms of contracts and other arrangements
with customers, suppliers, agents and employees of the Corporation; revenues,
expenses, costs, mark-ups, profit margins and other financial and budgeting
information; marketing and distribution plans and practices; manufacturing
processes, formulae, methods and facilities; research and development; manuals;
confidential reports; business plans, opportunities and projects; product
information including information entrusted to the Corporation by its customers
in confidence; and other information not generally known regarding the business,
affairs and plans of the Corporation (herein "Confidential Information"), the
unauthorized use or disclosure of which would be detrimental to the Corporation
and the Business and would reasonably be anticipated to materially impair the
value of the Corporation and the Business.
<PAGE>
Page 3
7. The Executive has been and will be the principal representative of the
Corporation to customers and suppliers of the Business and has been and will be
responsible for maintaining those relations and the Corporation's goodwill and
has been and will be primarily responsible for the Corporation's business
success and profitability.
8. The right to maintain the Confidential Information and to preserve the
Corporation's goodwill constitute proprietary rights that the Corporation is
entitled to protect; failure to do so would result in irreparable harm to the
Corporation which could not be compensated for by monetary damages alone.
9. The entering into of this Agreement by the Executive is a fundamental and
material inducement to Seawolf making the Offer and completing the Merger and to
CCL in causing Seawolf to make the Offer.
10. The Executive and the Corporation wish to record the terms upon which the
Executive will continue to be employed by the Corporation.
11. CCL has agreed to be party to this Agreement for the purpose of granting
stock options to the Executive pursuant to section 3.5 of this Agreement and
purchasing or causing to be purchased key-man insurance pursuant to section 1.5.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
covenants and agreements herein contained, the payments and inducements provided
by the Corporation to the Executive and for other good and valuable
consideration it is hereby agreed as follows:
1.0 EMPLOYMENT
1.1 POSITION - The Executive shall hold the position of President of the
Corporation, and shall carry out such duties and functions, on behalf of the
Corporation and its subsidiaries and affiliates, as from time to time are vested
in him by the by-laws of the Corporation or assigned to him by the Board of
Directors of the Corporation (the "Board") consistent with the Executive's prior
responsibilities (but recognizing that the Corporation will upon completion of
the Merger cease to be a "public company") and consistent with the position of
President, including, without limiting the generality of the foregoing,
supervising the day to day business and affairs of the Corporation and its
subsidiaries and affiliates. The Board shall, with due consultation with
<PAGE>
Page 4
the Executive, develop an annual business plan, and once adopted by the Board,
the plan shall be implemented by the Executive. Any material change in such plan
or the implementation thereof shall require the approval of the Board. The
Executive shall generally report to Rami Younes, President of the Container
Division of CCL and shall also report to and be under the control and direction
of the Board. The Executive shall be located in and report from Los Angeles and
shall not be required to relocate from Los Angeles without his consent. The
Executive acknowledges that it is contemplated that the business carried on by
CCL and its subsidiaries and affiliates will be reorganized at an appropriate
time during the Term to create the CCL Specialty Packaging group and upon such
reorganization the Executive will have the responsibility for the day-to-day
operations of the plastic packaging division of CCL Specialty Packaging group,
reporting to the head of the CCL Specialty Packaging group on the terms set out
in this Agreement.
1.2 TIME TO BE DEVOTED - The Executive shall devote his full working time and
attention to carrying out his duties and responsibilities hereunder and shall
report to and be subject to the control and direction of the Board.
1.3 EMPLOYMENT OBLIGATIONS - During the continuance of his employment
hereunder, the Executive shall well and faithfully serve the Corporation and its
subsidiaries and affiliates (including, without limiting the generality of the
foregoing, by submitting to the Corporation all reports and other communications
whenever the same may be reasonably required by the Board) and shall use his
best efforts to promote the interests of the Corporation and its subsidiaries
and affiliates.
1.4 ACTIVE EMPLOYMENT - For the purposes hereof, "Active Employment" means the
employment of the Executive by the Corporation hereunder prior to the giving of
any notice of termination pursuant to subsection 2.2(b), subsection 2.2(c) or
subsection 2.2(d).
1.5 KEY-MAN INSURANCE - CCL, or any affiliate thereof, other than the
Corporation, shall have the right to obtain for its benefit such amount of life
insurance on the life of the Executive as CCL, or such affiliate, may in its
sole discretion determine, and the Executive shall, if requested by the Board,
make all reasonable efforts to assist CCL, or such affiliate, to obtain such
insurance, including submitting to a medical examination of the kind typically
required in similar circumstances.
<PAGE>
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2.0 TERM AND TERMINATION
2.1 TERM - This Agreement, and the employment of the Executive by the
Corporation hereunder, shall commence on the day on which the Offer is completed
in accordance with the terms thereof and shall continue in full force and effect
for a term of three (3) years (the "Term"), unless terminated in accordance with
section 2.2. Until the commencement of the Term, the employment of the
Executive by the Corporation shall continue in accordance with the terms of his
existing employment agreement with the Corporation, which terms are summarized
in Schedule A hereto. If the Executive meets the conditions for earning the
bonus or benefits provided for in his existing employment agreement, the
Executive shall be entitled to a pro-rated portion of such bonus or benefits,
based on the portion of the fiscal year ending December 31, 1997 in respect of
which the Executive was employed pursuant to his existing employment agreement.
With respect to that portion of the 1997 fiscal year ending December 31, 1997 in
respect of which the Executive is employed pursuant to this Agreement, the
Executive shall be entitled to a pro-rated portion of the performance bonus
provided for in section 3.4 hereof. Any bonus or benefits accrued and payable
pursuant to the foregoing shall be payable within 60 days of the applicable
year-end. The parties agree that they shall, not less than six (6) months prior
to the end of the Term, enter into good faith negotiations with respect to the
continued employment of the Executive by the Corporation, provided that the
Executive shall have no obligation to accept any offer of employment by the
Corporation.
2.2 TERMINATION BY THE CORPORATION OR THE EXECUTIVE - During the Term of this
Agreement, the employment of the Executive may be terminated in the following
manner:
(a) by the Corporation, at any time, including during any Notice Period
(as hereinafter defined), by notice in writing from the Corporation to
the Executive for cause, which, for the purposes of this Agreement,
shall be deemed to occur upon (A) the willful failure by the Executive
to substantially perform his duties with the Corporation, other than
any such failure resulting from Disability (as hereafter defined) or
as a result of the termination of the employment of the Executive
pursuant to subsection 2.2(d), or (B) the willful engaging by the
Executive in gross misconduct materially injurious to the Corporation
or the commission of a criminal act which is materially injurious to
the Corporation or materially affects the Executive's ability to
perform his duties under this Agreement. For the purposes of this
paragraph, no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done,
<PAGE>
Page 6
by the Executive not in good faith and without reasonable belief that
the Executive's action or omission was in the best interest of the
Corporation. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for cause unless and until there shall
have been delivered to the Executive a copy of a notice from the
Chairman of the Board after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's counsel,
to be heard before the Chairman, finding that in the good faith
opinion of such executive the Executive was guilty of conduct set
forth above in clauses (A) or (B) of the first sentence of this
paragraph and specifying the particulars thereof in detail;
(b) by the Corporation, at any time, other than pursuant to subsection
2.2(a) or subsection 2.2(c), by prior written notice equal to the
period of time commencing on the date notice of termination of
employment is given, and ending the last day of the Term, less the
number of weeks of termination pay to which the Executive shall be
entitled pursuant to any applicable employment legislation as at the
effective date of termination (the "Notice Period");
(c) by the Corporation, if the Executive shall by reason of illness or
mental or physical disability or incapacity ("Disability") fail for
any six (6) consecutive calendar months, or nine (9) months in
aggregate (and not necessarily consecutive) in any two (2) year
period, to perform his duties hereunder; or
(d) by the Executive, for "Good Reason", which shall mean, without the
express written consent of the Executive, the occurrence of any of the
following events unless such events are corrected in all material
respects within 30 days following written notification by the
Executive to the Corporation that he intends to terminate his
employment hereunder for one of the reasons set forth below:
(i) any material alteration, reduction or diminution in the
duties, responsibilities and status of the Executive's
position as described in section 1.1 having regard to the
recognitions and acknowledgments of the Executive contained
therein;
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Page 7
(ii) the Corporation's requiring the Executive to be based
anywhere other than at the Corporation's headquarters, or
anywhere outside of Los Angeles County, California;
(iii) a material breach by the Corporation of any provision of
this Agreement; or
(iv) the occurrence of a "Change of Control";
A "Change of Control" shall have occurred if, and only if, (w) a person, or
persons acting jointly and in concert pursuant to an agreement among them,
(other than one or more members of Gordon S. Lang's family), holds more than 50%
of the voting shares of CCL and, as a result, holds the right to elect a
majority of the members of the Board of Directors of CCL or (x) any merger or
consolidation of the Corporation with, or sale of all or substantially all of
the Corporation's assets or business to, another person (other than CCL or any
affiliate of CCL) or any similar transaction or combination of the foregoing
which would have substantially the same effect as any of the foregoing; or (y)
there is a sale of ownership of fifty percent (50%) or more of the voting
securities of the Corporation to another person, other than to CCL or an
affiliate thereof. If a Change of Control occurs the Executive shall have the
right, exercisable no earlier than three (3) months, but no later than four (4)
months, following a Change of Control, to give notice pursuant to subsection
2.2(d), and for a period of one (1) month after the giving of such notice the
Executive shall use his reasonable best efforts to assist the Corporation in
making an orderly transition to new management, whereupon his Active Employment
shall cease and the provisions of section 2.4 shall apply.
2.3 EFFECT OF TERMINATION FOR CAUSE PURSUANT TO SUBSECTION 2.2 (A) OR UPON
RESIGNATION NOT FOR GOOD REASON - Upon any notice being given pursuant to
subsection 2.2(a) or upon the resignation of the Executive otherwise than for
Good Reason, subject to section 8.4, this Agreement and the employment of the
Executive hereunder shall be wholly terminated, and the Executive, his heirs and
representatives, shall have no claim against the Corporation for damages or
otherwise except in respect of payment of the remuneration provided for in
section 3.1 to the effective date of such termination or resignation.
2.4 EFFECT OF TERMINATION PURSUANT TO SUBSECTION 2.2(B) OR SUBSECTION 2.2(D) -
Upon any notice being given pursuant to subsection 2.2(b) or subsection 2.2(d),
but subject to the provisions thereof including clause 2.2(d)(iv), effective as
of the commencement of the Notice Period, the Executive shall be relieved from
Active Employment, and this Agreement shall not be subject to renewal or
extension, and this Agreement shall, subject to section 8.4, expire at the
<PAGE>
Page 8
end of the Notice Period, whereupon the employment of the Executive hereunder
shall be wholly at an end, and the Executive, his heirs and representatives,
shall have no claim against the Corporation for damages or otherwise, except in
respect of:
(a) payment of the Termination Salary and Termination Bonuses (as defined
in section 4.1) pursuant to section 4.1;
(b) entitlement to the Termination Benefits (as defined in section 4.2)
pursuant to section 4.2;
(c) entitlement to the Incentive Options (as defined in subsection
3.5(b)), if earned pursuant to subsection 3.5(b), in respect only of
the fiscal year in which notice of termination is given; and
(d) payment of any lump sum payment required to be made by the Corporation
to the Executive at the end of the Notice Period pursuant to any
applicable employment legislation.
2.5 EFFECT OF TERMINATION PURSUANT TO SUBSECTION 2.2(C) - Upon any notice being
given pursuant to subsection 2.2(c), effective as of the commencement of the
Notice Period, the Executive shall be relieved from Active Employment, and this
Agreement shall not be subject to any renewal or extension, but shall, subject
to section 8.4, expire at the end of the Notice Period, whereupon the employment
of the Executive hereunder shall be wholly at an end, and the Executive, his
heirs and representatives shall have no claim against the Corporation for
damages or otherwise, except in respect of:
(a) payment of the Termination Salary, subject to the deductions provided
for in section 2.7;
(b) entitlement to the Termination Bonuses (as defined in section 4.1) on
the same basis as the Executive would have been entitled thereto had
notice of termination been given pursuant to subsection 2.2 (b) or
subsection 2.2(d);
(c) entitlement to the Incentive Options (as defined in subsection 3.5(b))
on the same basis as the Executive would have been entitled thereto
had notice of termination been given pursuant to subsection 2.2(b) or
subsection 2.2(d);
<PAGE>
Page 9
(d) entitlement to the Termination Benefits (as defined in section 4.2) on
the same basis as the Executive would have been entitled thereto had
notice of termination been given pursuant to subsection 2.2(b) or
subsection 2.2(d); and
(e) payment of any lump sum payment required to be made by the Corporation
to the Executive at the end of the Notice Period pursuant to any
applicable employment legislation.
2.6 TERMINATION OF OBLIGATIONS OF THE CORPORATION - For greater certainty,
notwithstanding anything to the contrary contained herein, the Executive hereby
expressly acknowledges and agrees that each and every obligation of the
Corporation contained in this Agreement including, without limitation, the
Corporation's obligations to make any payments in the nature of salary or
bonuses, and to provide any benefits shall, unless otherwise expressly provided
herein, expire effective as of the last day of the Term; provided that the
foregoing shall not affect the Corporation's obligation to pay all amounts owing
to the Executive in respect of periods prior to the last day of the Term or the
Notice Period, as the case may be or pursuant to any plan, policy or other
agreement with the Corporation.
2.7 DEDUCTION OF AMOUNTS TO WHICH EXECUTIVE BECOMES ENTITLED AS A RESULT OF
DISABILITY - For greater certainty, notwithstanding anything to the contrary
contained herein, the Executive shall, and shall be required to account to the
Corporation and the Corporation shall be entitled to withhold from any and all
payments made by the Corporation to the Executive during a Notice Period
relating to a termination pursuant to subsection 2.2(c), an amount equal to all
amounts to which the Executive becomes entitled as a result of or in connection
with his Disability from or under any disability plans maintained by the
Corporation.
3.0 REMUNERATION AND BENEFITS
3.1 REMUNERATION - During the Executive's Active Employment hereunder, the
salary payable to the Executive for his services hereunder shall be two hundred
and fifty thousand dollars ($250,000) per annum, payable in equal monthly
installments in arrears on the last business day of the month, the first of such
payments to be due the last business day of the month following the month in
which the Offer is completed in accordance with its terms. If the first month
is a part month such equal monthly instalment will be appropriately pro-rated.
There shall
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Page 10
be deducted from all such payments all required deductions for income tax and
other withholdings. On or about each anniversary date of the Executive's Active
Employment hereunder, the Executive's salary will be reviewed in accordance with
the policies of the Corporation, but shall not be reduced.
3.2 BENEFITS - During the Term the Executive shall be entitled to the benefits
described in Schedule A hereto (the "Benefits").
3.3 RETENTION BONUS AND NON-COMPETITION PAYMENTS
(a) Provided that, and as long as, the Executive is not in default or
breach of any of his obligations pursuant to sections 5.3, 5.4 and
5.6, and no notice of termination of employment has been given to the
Executive by the Corporation under, or on a basis set forth in,
subsection 2.2(a) hereof, on the last business day of each of the
calendar years 1997, 1998 and 1999 if the Executive is in compliance
with his obligations pursuant to sections 5.3, 5.4 and 5.6 prior to
and up to the time of payment, the Corporation shall pay to the
Executive in equal monthly instalments, in arrears, less all required
withholdings, additional compensation in the form of a retention and
non-competition payment (the "R&N Payment") at the rate of two hundred
thousand dollars ($200,000) per annum.
(b) Should the Executive die while still employed by the Corporation prior
to all of the R&N Payments having been made to the Executive in
accordance with subsection (a) of this section 3.3 and without any
notice of termination of employment having been given to the Executive
by the Corporation under, or on a basis set forth in, subsection
2.2(a) hereof, the Corporation shall instead pay to the estate of the
Executive within six (6) weeks of receipt of proof of death an amount
equal to the aggregate of all such unpaid R&N Payments.
3.4 PERFORMANCE BONUS - Provided that the Executive is still employed by the
Corporation (and provided such employment is Active Employment) on the last
business day of each of the calendar years 1997, 1998 and 1999 (the "payment
dates") and no notice of termination of employment has been given to the
Executive by the Corporation under subsection 2.2 (a) hereof on or before a
particular payment date, the Corporation shall pay to the Executive additional
compensation in the form of a performance bonus (the "Performance Bonuses"),
based on the increase of EBITDA (as such term is defined in Schedule B hereto)
of the Corporation over the
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Page 11
immediately proceeding fiscal year, commencing with the fiscal year ending
December 31, 1997 and ending with the fiscal year ending December 31, 1999, in
the following amounts:
<TABLE>
<CAPTION>
EBITDA GROWTH OVER Bonus Amount
Prior Fiscal Year
<S> <C>
15% 50% of Salary Amount
20% 100% of Salary Amount
21% or more 100% of Salary Amount plus 10% of Salary
Amount for each whole percentage point of
EBITDA above 20%
15-20% 50% of Salary Amount plus 10% of Salary
Amount for each whole percentage point of
EBITDA above 15%
</TABLE>
The parties acknowledge that EBITDA of $20 million in respect of the fiscal year
ending December 31, 1997 represents growth of 20% over the prior fiscal year and
will, subject to the other terms of this section 3.4, entitle the Executive to a
Performance Bonus equal to 100% of the Salary Amount. For the purposes of this
section 3.4, "Salary Amount" means the remuneration paid to the Executive in
respect of the fiscal year then ended pursuant to section 3.1. Performance
Bonuses, if earned, shall be payable within 60 days of the applicable payment
date. Notwithstanding anything else in this section 3.4, the Performance Bonus,
if any, payable to the Executive in respect of the fiscal year ending December
31, 1997, shall be pro-rated in accordance with section 2.1 hereof.
3.5 OPTIONS
(a) During the Executive's employment hereunder, the Executive shall be
entitled to participate in CCL's Stock Option Plan on the same terms
and conditions (and on a comparable basis) as such plan is made
available to other senior executive officers of CCL, and shall be
entitled to such benefits thereunder as the compensation committee of
CCL, subject to the approval of the Board of Directors of CCL, shall
determine from time to time;
(b) In addition to the right of the Executive to participate in CCL's
Stock Option Plan, the Executive shall be entitled to receive and CCL
shall grant to the Executive immediately upon completion of the Offer
in accordance with its terms, additional options (the "Incentive
Options") to acquire 500,000 CCL Class B
<PAGE>
<PAGE>
Page 12
non-voting common shares ("Class B Shares"). The Incentive Options
shall vest and be exercisable as to 100,000 Class B Shares with
respect to each of the next five consecutive fiscal years commencing
with the fiscal year ending December 31, 1997, if and only if EBITDA
for a particular fiscal year is 20% greater than EBITDA for the prior
fiscal year. The parties acknowledge that the EBITDA target for the
vesting of the first 100,000 Incentive Options (for the fiscal year
ending December 31, 1997) is $20 million. For greater certainty (i)
the vesting of Incentive Options shall be based on EBITDA growth in a
fiscal year over EBITDA for the prior fiscal year, and EBITDA for any
other fiscal years shall not be relevant for such purpose; (ii) if in
respect of any fiscal year EBITDA is less than 20% of EBITDA for the
prior fiscal year, the 100,000 Incentive Options in respect of such
year shall not vest and shall be cancelled; (iii) Incentive Options
shall not vest or be exercisable but shall be cancelled if the
Executive is in breach of his obligations pursuant to sections 5.3,
5.4 or 5.6 hereunder; and (iv) Incentive Options which vest and become
exercisable in accordance with this subsection 3.5(b) shall expire on
the sixth anniversary of the date of the granting of the Incentive
Options hereunder. The exercise price of the Incentive Options shall
be equal to the simple average of the daily high and low board lot
trading prices for Class B Shares on The Toronto Stock Exchange for
the ten trading days commenced June 10, 1997 and ending June 23, 1997
(the "Option Price"). Notwithstanding the foregoing, any issuance of
Incentive Options will occur only upon (a) compliance by CCL with the
terms of Section 1.1, and by Shawn of Section 1.3, of the
Qualification and Listing of Shares Agreement (the "Rights Agreement")
dated June 16, 1997 between CCL and Shawn, but only insofar as such
terms relate to the issuance of Class B Shares issuable upon exercise
of the Incentive Options, or (b) waiver by Shawn of compliance by CCL
with such terms. Notwithstanding anything else in this section 3.5,
but provided that the Executive is not in breach of his obligations
pursuant to sections 5.3, 5.4 and 5.6, if the employment of the
Executive is terminated pursuant to subsection 2.2(b), subsection
2.2(c), subsection 2.2(d) or the Executive dies, only those Incentive
Options scheduled to vest in the fiscal year in which the Executive's
employment is terminated shall vest, and the remaining balance of the
unvested Incentive Options shall not vest or be exercisable and shall
be cancelled.
(c) Pursuant to an option agreement made as of the 16th day of June, 1997
between the Executive and CCL, CCL has agreed to grant Shawn an
irrevocable option (the "Rollover Option") to purchase from CCL
545,000 Class B Shares (the "Rollover Option Shares"). Upon exercise
of the Rollover Option in the manner therein provided, CCL shall pay
to the Executive forthwith an amount in cash equal to the number of
Rollover Option Shares in respect of which the Rollover Option is to
be exercised multiplied by the amount by which the Option Price (less
Cdn. $10.35) exceeds Cdn $6.0225.
<PAGE>
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3.6 REIMBURSEMENT FOR EXPENSES - During the Executive's Active Employment
hereunder, the Executive shall be reimbursed for all traveling and other out-of-
pocket expenses actually and properly incurred by him in connection with his
duties hereunder. For all such expenses, the Executive shall furnish to the
Corporation statements and vouchers as and when reasonably required by it.
3.7 VACATION - During the Executive's Active Employment hereunder, the
Executive shall be entitled to five (5) weeks vacation per calendar year, in
accordance with the Corporation's policy concerning vacations for senior
executives, as the same may exist from time to time. Such vacation may be taken
as the Executive may from time to time reasonably decide, provided such vacation
time does not materially interfere with his duties to the Corporation.
3.8 EXCHANGEABLE SHARES - Notwithstanding anything in this Agreement or in the
provisions attaching to the exchangeable shares of the Corporation or Seawolf,
as the case may be (the "Exchangeable Shares") to be issued to the Executive as
partial consideration for the Common Shares of the Corporation to be acquired by
Seawolf pursuant to the Merger, the Exchangeable Shares shall not be retractable
by the Executive prior to the third anniversary of the date of issue of the
Exchangeable Shares (the "Anniversary Date"); provided that if notice is given
pursuant to subsection 2.2(b), subsection 2.2(c) or subsection 2.2(d) (subject
to the provisions thereof), upon the death of the Executive, or if a Change of
Control occurs, then the Exchangeable Shares shall thereafter be immediately
retractable by the Executive (or if applicable his heirs and representatives)
for Class B Shares. In the event the Executive is distributed Class B Shares
upon a liquidation of the Corporation, pursuant to the provisions attaching to
the Exchangeable Shares, the Executive covenants and agrees that he shall not
sell, assign, transfer, encumber or otherwise dispose of any of the Class B non-
voting shares ("Class B Shares") in the capital of CCL received upon such
distribution prior to the Anniversary Date. All share certificates evidencing
the Exchangeable Shares or, in the event of the distribution of Class B Shares
pursuant to the liquidation of the Corporation, the Class B Shares received upon
such distribution, shall bear a legend setting out the foregoing restrictions
provided that upon the expiration of such restrictions, such shares shall be
recertificated without such legend. The Executive shall use reasonable
commercial efforts to conduct all permitted dispositions of Exchangeable Shares
and Class B Shares in an orderly manner such that the market price of the Class
B Shares shall not be unduly affected by any such disposition, and the Executive
shall provide reasonable advance notice to CCL of any proposed disposition,
whereupon CCL shall have the right (which right CCL shall have the right to
assign to an institution, pension fund, mutual fund or similar purchaser,
provided that any such assignment shall not relieve CCL from its obligations
with
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Page 14
respect to the exercise of such right, and provided that such assignment shall
not delay the right or ability of the Executive to so dispose of his Class B
Shares) but not the obligation, upon notice in writing to the Executive within
one business day of receipt by CCL of the Executive's notice, to purchase all or
part of such Class B Shares at a price per share equal to the closing price of
the Class B Shares on the TSE on the trading day immediately preceding the date
of notice by the Executive. Such purchase and sale shall be completed on the
third business day following the date of CCL's (or its assigns) notice to the
Executive. It shall be a condition, which the Executive may waive, to the right
of CCL (or its assigns) to purchase all or part of such Class B Shares that the
Executive receive a legal opinion that the sale of such shares to CCL (or its
assigns) shall not result in tax consequences to the Executive which are
materially less favourable than if the Executive were to sell such Class B
Shares in the open market. If such condition is not waived by the Executive, the
opinion shall be obtained at the expense of the Executive (and a copy delivered
to CCL (or its assigns)) not more than ten (10) business days following the
giving of notice by the Executive, in which case the time periods in which CCL
(or its assigns) is required to give notice of its intention to purchase such
shares, and to complete the purchase of such shares, shall not commence until
receipt of such opinion by CCL (or its assigns).
4.0 EXECUTIVE'S ENTITLEMENT ON NOTICE OF TERMINATION PURSUANT TO
SUBSECTION 2.2(B), SUBSECTION 2.2(C), SUBSECTION 2.2(D), DEATH OR
DISABILITY
4.1 TERMINATION PAYMENTS - Upon any notice of termination being given
pursuant to subsection 2.2(b), subsection 2.2(c) or subsection 2.2(d)
(and subject to the provisions thereof) provided that, and as long as,
the Executive is not in default or breach of any of his obligations
pursuant to sections 5.4, 5.5 and 5.7, and provided that, and as long
as, no notice of termination has been given to the Executive pursuant
to subsection 2.2(a), the Corporation shall continue to pay, during
the Notice Period, the Executive's then current annual salary in
accordance with and in the manner prescribed by section 3.1 (the
"Termination Salary"); provided that the Executive shall be entitled
to receive, in addition to the Termination Salary, (i) all unpaid R&N
Payments, if earned in accordance with the provisions of section 3.3,
payable immediately; and (ii) the Performance Bonus, if earned in
accordance with the provisions of section 3.4, in respect only of the
fiscal year in which notice of termination has been given pursuant to
subsection 2.2(b), subsection 2.2(c) or subsection 2.2(d) (and subject
to the provisions thereof), and not in respect of subsequent fiscal
years, payable at such time as the Performance Bonus, if any, would
have been payable pursuant to subsection 3.4 to the Executive but for
notice of termination having been given pursuant to subsection 2.2
(b), subsection 2.2(c) or subsection 2.2(d) (and subject to the
provisions thereof); and
<PAGE>
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provided that in no event or under any circumstances shall such
Performance Bonus for such fiscal year exceed 100% of the Salary
Amount. The R&N Payments and the Performance Bonuses payable pursuant
to this subsection 4.1 (a) are herein referred to as the "Termination
Bonuses".
4.2 BENEFITS DURING NOTICE PERIOD - Upon any notice of termination being
given pursuant to subsection 2.2(b) or subsection 2.2(d) (and subject to
the provisions thereof), provided that, and as long as, the Executive is
not in default or breach of any of his obligations pursuant to sections
5.3, 5.4 and 5.6, and provided that, and as long as, no notice of
termination has been given to the Executive pursuant to subsection 2.2(a),
the Executive shall continue to be entitled to the Benefits (collectively,
the "Termination Benefits") until the date of expiry of the Notice
Period; provided that if notice of termination is given pursuant to
subsection 2.2(c), the Corporation shall not be required to extend the
Benefits, if comparable benefits are provided to the Executive pursuant to
any disability plans maintained by the Corporation.
4.3 ENTITLEMENT ON DEATH Should the Executive die while still employed by the
Corporation without any notice of termination of employment having been given to
the Executive by the Corporation under, or on a basis set forth in, subsection
2.2(a) hereof, his heirs and representatives shall have no claim against the
Corporation for damages or otherwise, except that the Corporation shall pay to
the estate of the Executive the following:
(a) the amount of the Executive's salary in accordance with and in the
manner described in section 3.1, for the balance of the Term within
six (6) weeks of proof of death;
(b) the unpaid R&N Payments, within six (6) weeks of proof of death; and
(c) if the Executive died in the second half of a fiscal year, the
Incentive Options and Performance Bonus in respect only of the fiscal
year in which the Executive dies, provided that the entitlement to
such Incentive Options and Performance Bonus shall be calculated based
on the EBITDA for the first two quarters of the fiscal year (or the
first three quarters, if the Executive dies after the completion of
the third quarter) compared to EBITDA for the same period in the prior
year.
<PAGE>
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4.4 VESTING AND EXERCISE OF STOCK OPTIONS UPON NOTICE OF TERMINATION PURSUANT
TO SUBSECTION 2.2(B), SUBSECTION 2.2(C) OR SUBSECTION 2.2(D) - Upon any notice
of termination being given pursuant to subsection 2.2(b), subsection 2.2(c) or
subsection 2.2(d) (and subject to the provisions thereof), notwithstanding
anything to the contrary contained in any Stock Option Plan of CCL in which the
Executive is entitled to participate, or in any agreement or certificate between
the Corporation and the Executive in respect thereof, but subject to any
required regulatory approvals, all stock options (other than the Rollover Option
and the Incentive Options) which would otherwise have become exercisable during
the Notice Period if the Executive had not received notice of termination, shall
immediately become exercisable and the Executive shall have the privilege of
exercising, within twelve (12) months of the date of commencement of the Notice
Period, all stock options which were exercisable and remained unexercised as at
the date of commencement of the Notice Period, and which have not expired,
together with all stock options which become exercisable at the commencement of
the Notice Period pursuant to this section 4.3; provided that the Executive's
right to exercise any such stock options shall expire at the end of such twelve
(12) month period. The vesting and exercise of the options granted to the
Executive in connection with the Merger shall be governed by the terms of the
agreement entered into between CCL and the Executive providing for the grant of
such options, and not by this section 4.4. The vesting and exercise of Incentive
Options shall be governed by subsection 3.5 (b) and not by this section 4.4.
4.5 ACCRUED BENEFITS - For greater certainty, notwithstanding anything else in
this Agreement, the Executive shall be entitled on notice of termination of this
Agreement to any benefits which have accrued and are payable to the Executive
pursuant to and in accordance with the terms of any benefit plan or similar
arrangement with the Corporation.
5.0 COVENANTS OF THE EXECUTIVE
5.1 OBLIGATION OF THE EXECUTIVE TO PROVIDE COUNSEL AND ADVICE - During any
Notice Period and the Consulting Period (as hereafter defined) hereunder, the
Executive covenants and agrees, upon each reasonable request by the Corporation,
to make himself available to the Corporation for the purpose of providing
counsel and advice, and such other consulting services as are requested from
time to time, provided that the Corporation pays or reimburses the Executive for
all out-of-pocket expenses incurred by him in connection with rendering such
services.
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5.2 ACKNOWLEDGMENT - The Executive acknowledges that the recitals to this
Agreement are true and correct. In addition, the Executive acknowledges that
the Corporation, its subsidiaries and affiliates have heretofore carried on and
will hereafter carry on the Business and that in the course of carrying out,
performing and fulfilling his responsibilities to the Corporation hereunder he
has had and will continue to have access to and has been and will continue to
be entrusted with the Confidential Information relating to the Business, and to
any other businesses now, or during the Term or Notice Period hereof, carried on
by the Corporation, its subsidiaries and affiliates, the disclosure of any of
which Confidential Information to competitors of the Corporation or to the
general public may be detrimental to the best interests of the Corporation. The
Executive further acknowledges that in the course of performing his obligations
to the Corporation hereunder he has been and will continue to be the principal
representative of the Corporation and as such has been and will continue to be
significantly responsible for maintaining or enhancing the goodwill of the
Corporation. The Executive acknowledges and agrees that the right to maintain
the confidentiality of such Confidential Information, and the right to preserve
its goodwill, constitute proprietary rights which the Corporation is entitled to
protect.
5.3 CONFIDENTIALITY - Accordingly, the Executive covenants and agrees with the
Corporation that he will not, either during the Term or, if applicable, any
Notice Period, of this Agreement, or at any time after the expiry thereof,
disclose any of such Confidential Information to any person other than to the
officers of the Corporation and the Board, nor shall he use the same for any
purpose other than those of the Corporation; provided, however, that the
foregoing shall not apply to any Confidential Information which is or becomes
known to the public or to the competitors of the Corporation otherwise than by a
breach of this Agreement by the Executive or which the Executive is required by
law to disclose pursuant to the order of any court of competent jurisdiction or
a governmental regulatory agency or body, in which case he will provide the
Corporation with prompt notice of such circumstance so that the Corporation may
seek a protective order or other appropriate remedy and/or waive compliance with
the provisions of this Agreement. In the event that such protective order or
other remedy is not obtained, or that the Corporation waives compliance with the
provisions of this Agreement, he will furnish only that portion of the
Confidential Information which he is advised by written opinion of counsel is
legally required. The Executive will exercise his reasonable best efforts to
obtain a protective order or other reasonable assurance that confidential
treatment will be accorded the Confidential Information.
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5.4 NON-COMPETITION - Accordingly, the Executive covenants and agrees with the
Corporation that he will not, during the Term or, if applicable, any Notice
Period, of this Agreement, nor at any time within a period of one (1) year after
the expiry thereof (or within a period of two (2) years after the expiry thereof
if such period is extended pursuant to section 5.9) (in either case, the
"Consulting Period"), either individually or in partnership or jointly or in
conjunction with any person or persons as principal, agent, shareholder,
trustee, beneficiary, or in any other manner whatsoever whether directly or
indirectly, carry on or be engaged in or concerned with or interested in, or
advise, lend money to, guarantee the debts or obligations of, or permit his name
or any part thereof to be used or employed by or associated with, any person or
persons, firm, association, syndicate, trust, company or corporation engaged in
or concerned with or interested in any business which is competitive with the
Business in any of the 58 counties in the State of California or in any of the
thousands of cities, counties and other political subdivisions of the largest of
the following geographical areas:
(a) Canada, the United States and Mexico; or
(b) Canada and the United States; or
(c) the United States; or
(d) the States of the United States west of the Mississippi River; or
(e) the State of California.
And for greater certainty and without limiting the provisions of
article 6, subsections 5.4(a) through 5.4(e) are each separate and distinct
covenants, severable one from the other and the most restrictive of subsections
5.4(a) through 5.4(e) shall apply unless such covenant is determined to be
invalid or unenforceable, in which event the next most restrictive shall apply,
and so on.
5.5 PERMITTED INVESTMENTS - Nothing herein shall restrict or prevent the
Executive from owning as a passive investor less than 10% of any class of
securities of a corporation which is a competitor of the Corporation whose
securities are trading in the public market.
5.6 NON-SOLICITATION - The Executive hereby covenants and agrees with the
Corporation that he will not at any time during the Term or Notice Period of
this Agreement, or at any time within
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one (1) year after the expiry thereof (or within a period of two (2) years after
the expiry thereof if such period is extended pursuant to section 5.9), directly
or indirectly, solicit or attempt to induce, procure, encourage or direct away
from the Corporation any customer, supplier or employee of the Corporation.
5.7 REMEDIAL RIGHTS - Nothing contained in this article 5 shall be deemed to
affect or impair the otherwise lawful rights of the Corporation to enforce its
legal remedies against the Executive either during the period from the date
hereof to the date the Executive ceases to be employed by the Corporation or at
any time thereafter to prevent the Executive from approaching or soliciting any
customer, supplier or employee of the Corporation with a view towards inducing
such customer, supplier or employee to breach a contract between the Corporation
and such customer, supplier or employee and to recover any damages resulting
therefrom. Time shall not toll during any breach of the provisions of article 5.
5.8 RESIGNATION AS OFFICER AND DIRECTOR - The Executive covenants and agrees
that upon any notice of termination being given pursuant to article 2, he shall
tender his resignation from all offices then held by him in the Corporation and
its subsidiaries and affiliates and if requested by the Board, he shall tender
his resignation as a director of the Corporation and its subsidiaries and
affiliates. Such resignations shall provide that they are to be effective as of
the commencement of the Notice Period or as of such other date as may be
mutually agreed to by the Executive and the Corporation. The Executive further
agrees to accept such other suitable corporate senior office or position with
the Corporation or with its subsidiaries and affiliates as may be determined by
the Board and which is acceptable to the Executive acting reasonably.
5.9 EXTENSIONS OF COVENANTS - In addition to the R & N Payments, if any, to be
made to the Executive, the Corporation shall have the right at any time during
the Term or, if applicable, any Notice Period, or within one (1) year after the
expiry thereof, in its sole discretion, and upon notice in writing to the
Executive, to extend the periods of restriction provided for in sections 5.4 and
5.6 from one (1) year to two (2) years, and in respect of such extension the
Corporation shall pay the Executive $500,000 on the first day of the second year
of such period of restriction.
5.10 ACKNOWLEDGMENTS BY EXECUTIVE - The Executive hereby acknowledges and
agrees that: (a) based on the Corporation's Business, business plans and
prospects, the provision and restrictions in this article 5 are reasonable in
the circumstances and, in particular, the duration, area and types of activities
referred to therein are necessary for the protection of legitimate proprietary
interests of the Corporation; (b) the Corporation presently carries on business,
<PAGE>
Page 20
directly or indirectly, in the United States, Canada and Mexico; (c) without
prejudice to and in addition to any other recourse or remedy which the
Corporation may have, the Corporation has the right to obtain an injunction
enjoining any violation of any provision of article 5; (d) any violation of any
provision of article 5 will cause the Corporation irreparable harm for which
monetary damages are not an adequate remedy and that an interim interlocutory
and permanent injunction restraining any breach of his obligations hereunder
will be necessary to protect the Corporation from irreparable harm to its
legitimate business interests. In the event of any such breach, the Executive
hereby waives any defences to such an injunction and consents to the immediate
issuance of such an injunction to restrain such breach; and (e) nothing in this
Agreement releases the Executive from any fiduciary or other obligation, duty or
responsibility he may have to the Corporation under any other agreement or
implied at law.
5.11 TERMS - The terms "customer" and "supplier" as used in this article 5
means those persons, who supplied or were supplied by or whose business was
actively sought by the Corporation during the last eighteen (18) months of the
Executive's employment by the Corporation. The term "employee" means a person
employed by the Corporation or otherwise in a management position at the
Corporation within the last eighteen (18) months of the Executive's employment
by the Corporation.
6.0 SEVERABILITY
If any covenant or provision of this Agreement is determined to be invalid,
void or unenforceable in whole or in part, it shall not nor be deemed to affect
or impair the validity of any other covenant or provision hereof and each of
such covenants and provisions is hereby declared to be separate and distinct and
severable from each of the others for the purpose of this Agreement. The
Executive hereby agrees that all covenants and provisions contained in article 5
are reasonable, valid and necessary both as to area and duration for the
protection of the Corporation's proprietary interests and the parties intend
this Agreement to be enforced as written. However, if any provision, or part
thereof is held to be unenforceable because of the duration thereof, the area
covered thereby, or the types of activities restricted thereby, the parties
agree that a Court of competent jurisdiction making such determination shall
have the power to reduce the duration and/or area of such provision or types of
activities restricted to the maximum duration and/or area permitted by
applicable law and/or to delete specific words or phrases and in its reduced
form such provision shall then be enforceable.
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Page 21
7.0 NOTICES - Any notice, direction or other instrument required or permitted
to be given or made hereunder shall be in writing and shall be sufficiently
given or made if delivered in person to the address set forth below, or
telecopied or sent by other means of recorded electronic communication and
confirmed by delivery as soon as practicable thereafter. Notices shall be
addressed to the parties as follows:
If to the Executive:
Mr. Shahrokh Sedaghat
2501 West Rosecrans Avenue
Los Angeles, CA
90059-3510
Telecopier: (310) 635-4133
If to CCL or the Corporation
105 Gordon Baker Road
Willowdale, Ontario
M2H 3P8
Attention: President
Telecopier: (416) 256-8555
Any notice, direction or other communication so given or made shall be
deemed to have been given or made and to have been received on the day of
delivery, if delivered, or on the day of sending if sent by telecopier or other
means of recorded electronic communication. Either party hereto may change its
address for notice by giving written notice thereof to the other parties hereto.
Delivery of courtesy copies of notice shall not be a condition to the valid
delivery of any notice, direction or other communication.
8.0 GENERAL
8.1 PREVIOUS AGREEMENTS - Any and all previous agreements, written or oral,
between the parties hereto or on their behalf relating to the employment of the
Executive by the Corporation, are hereby terminated and canceled effective the
completion of the Offer in accordance with its terms and each of the parties
hereto hereby releases and forever discharges the other of and from all manner
of actions, causes of action, claims and demands whatsoever under or in respect
of such previous agreements effective the completion of the Offer in accordance
with its terms.
8.2 GOVERNING LAW AND CONSENT TO JURISDICTION - THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
<PAGE>
Page 22
DELAWARE WITHOUT GIVING EFFECT TO CHOICE OF LAW PRINCIPLES THEREOF. ANY JUDICIAL
PROCEEDING BROUGHT AGAINST ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT, OR
THE TRANSACTION CONTEMPLATED HEREBY, MAY BE BROUGHT IN THE COURTS OF THE STATE
OF DELAWARE AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE
PARTIES HERETO (I) ACCEPTS, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF SUCH COURT AND ANY RELATED APPELLATE COURT, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, SUBJECT, IN EACH CASE, TO ALL RIGHTS TO APPEAL SUCH DECISIONS TO THE
EXTENT AVAILABLE TO THE PARTIES AND (II) IRREVOCABLY WAIVES ANY OBJECTION IT MAY
NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT
IN SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH PARTY HERETO
HEREBY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS THAT SERVICE OF PROCESS
UPON SUCH PARTY MAY BE MADE BY DELIVERY AT SUCH PARTY'S ADDRESS SPECIFIED OR
DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, AND SERVICE SO
MADE SHALL BE DEEMED COMPLETED ON THE DATE OF DELIVERY. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH
PARTY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDINGS INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO OR
CONNECTED WITH THIS AGREEMENT WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
8.3 ENUREMENT - The provisions hereof, where the context permits, shall enure
to the benefit of and be binding upon the Executive and his heirs, executors,
administrators and legal personal representatives and the Corporation and its
successors and assigns.
8.4 SURVIVAL - For greater certainty, notwithstanding anything to the contrary
contained herein, the provisions of sections 3.5, 5.2, 5.3, 5.4, 5.5, 5.6, 5.7,
5.8, 5.9, 5.10, 5.11, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.10 and 8.11 and
article 6 hereof shall survive any termination of this Agreement or the
Executive's employment hereunder.
8.5 WAIVER - No provision of this Agreement shall be deemed to be waived as a
result of the failure of the Corporation to require the performance of any term
or condition of this Agreement or by other course of conduct. To be effective,
a waiver must be in writing, signed by each of the parties hereto and state
specifically that it is intended to constitute a waiver of a term or breach of
this Agreement. The waiver by the Corporation of any term or breach of this
Agreement shall not prevent a subsequent enforcement of such term or any other
term and shall not be deemed to be a waiver of any subsequent breach.
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Page 23
8.6 LEGAL ADVICE - The executive hereby represents and warrants to the
Corporation that he has had sufficient opportunity to seek legal advice with
respect to this Agreement, that he fully understands the nature and effect of
this Agreement and that he is entering into it freely and voluntarily.
8.7 CURRENCY - Unless otherwise stated, all dollar amounts herein are in U.S.
dollars.
8.8 WITHHOLDINGS AND DEDUCTIONS - All salary, remuneration, bonuses, and
payments of any other nature whatsoever payable by the Corporation pursuant to
this Agreement shall be subject to and reduced by any withholdings or deductions
required to be made by law, whether for income tax or otherwise for any reason.
8.9 FURTHER ASSURANCES - Each of the parties hereto hereby covenants and agrees
to execute or cause to be executed all such further and other documents as may
be necessary or desirable to give effect to the purposes and intent of this
Agreement. In particular, and without limiting the generality of the foregoing,
the Executive covenants and agrees to execute all such further and other
covenants as to non-competition, non-solicitation, confidentiality and non-
disclosure consistent into the terms of this Agreement as may be required by the
Corporation from time to time in order to protect, preserve and maintain the
Confidential Information, and goodwill of the corporation, its subsidiaries and
affiliates, in each and every jurisdiction in which the Corporation, its
subsidiaries and affiliates carries on business.
8.10 ATTORNEY'S FEES - In the event that litigation shall be necessary to
enforce, interpret or rescind the provisions of this Agreement, the prevailing
party shall be entitled to recover from the other party, in addition to other
relief all costs and reasonable attorney's fees incurred by the prevailing party
for service before trial, on trial and on any appeal therefrom.
<PAGE>
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8.11 PERSONS The term "person" as used in this Agreement includes an
individual, a firm, a corporation, a syndicate, a partnership, a trust, an
association, a joint venture, an incorporated organization, a government or a
regulatory authority, agency or commission or other entity.
IN WITNESS WHEREOF the Corporation has executed this Agreement under its
corporate seal and the Executive has hereunto set his hand and seal.
CCL INDUSTRIES INC.
By: /s/ CCL INDUSTRIES INC.
----------------------------------
By: /s/ CCL INDUSTRIES INC. c/s
----------------------------------
SEDA SPECIALTY PACKAGING CORP.
By: /s/ SEDA SPECIALTY PACKAGING CORP.
-----------------------------------
By: /s/ SEDA SPECIALTY PACKAGING CORP. c/s
-----------------------------------
SIGNED, SEALED AND DELIVERED )
in the presence of )
)
)
________________________________ ) /s/ SHAHROKH SEDAGHAT l/s
------------------------
)
<PAGE>
SCHEDULE A
TO EMPLOYMENT AGREEMENT
BASE SALARY $400,000
BONUS UP TO 100% OF BASE
COMPANY CAR AND RELATED EXPENSES FORD EXPEDITION
OTHER AUTO RELATED EXPENSES $20,000
ELIGIBLE FOR 401(K) PLAN PARTICIPATION PARTICIPATES
ELIGIBLE FOR 125 PLAN PARTICIPATION DOES NOT PARTICIPATE
<PAGE>
SCHEDULE B
TO EMPLOYMENT AGREEMENT
CAPITAL LEASE: as applied to any person, any lease (however designated) of any
property (whether real, personal or mixed) by such person as lessee which would,
in accordance with GAAP, be required to be classified and accounted for as a
capital lease on the balance sheet of the Corporation or in the notes thereto,
other than, in the case of the Corporation or any of its Subsidiaries, any such
lease under which the Corporation or a Subsidiary is the lessor.
CAPITAL LEASE OBLIGATION: as of any date, with respect to any Capital Lease,
the amount of the obligation of the lessee thereunder which would, in accordance
with GAAP, appear on a balance sheet of such lessee or in the notes thereto in
respect of such Capital Lease.
CONSOLIDATED NET INCOME: of the Corporation for any fiscal year, the net income
(or deficit) of the Corporation for such period (taken as a cumulative whole),
as determined in accordance with GAAP, after deducting, without duplication,
operating expenses, provisions for all taxes and reserves (including reserves
for deferred income taxes) and all other proper deductions, all determined in
accordance with GAAP on a consolidated basis, after eliminating all offsetting
debits and credits between the Corporation and its Subsidiaries and all other
items required to be eliminated in the course of the preparation of consolidated
financial statements of the Corporation and its Subsidiaries in accordance with
GAAP and after deducting portions of income properly attributable to outside
minority interests, if any, in the stock (or its equivalent) and surplus of any
such Subsidiary, provided, however, that there shall in any event be excluded
from Consolidated Net Income the following:
(a) the income (or loss) of any other person accrued prior to the date
it becomes a Subsidiary of the Corporation or is merged into or consolidated
with the Corporation or any Subsidiary of the Corporation;
(b) the income (or loss) of any person in which the Corporation or any
Subsidiary of the Corporation has an ownership interest (other than a Subsidiary
of the Corporation), except to the extent that such income has been actually
received by the Corporation or such Subsidiary in the form of cash dividends or
similar distributions;
(c) the undistributed earnings of any Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary;
(d) any aggregate net income (but not any aggregate net loss) during
such period arising from the sale, exchange or other distribution of capital
assets;
(e) any income resulting from any write-up of any assets;
<PAGE>
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(f) any gain or loss arising from the acquisition of any securities,
or the extinguishment of any Debt of the Corporation or any of its Subsidiaries
or the termination of an employee benefit plan; and
(g) the net proceeds of any life insurance policy.
DEBT: as applied to any person, as of any date (without duplication):
(a) all obligations of such person evidenced by bonds, debentures,
notes, drafts or similar instruments and all obligations of such person for
borrowed money (whether or not so evidenced);
(b) all obligations of such person for all or any part of the deferred
purchase price of property or services or for the cost of property constructed
or of improvements thereon, other than trade payables and accrued liability
incurred in respect of property purchased or services provided in the ordinary
course of business or which are being contested in good faith by appropriate
proceedings and are not required to be classified on such person's balance
sheet, in accordance with GAAP, as debt;
(c) all obligations secured by any Lien on or payable out of the
proceeds of production from property owned or held by such person even though
such person has not assumed or become liable for the payment of such obligation;
(d) all Capital Lease Obligations of such person;
(e) all obligations of such person, contingent or otherwise, in
respect of any letter of credit facilities, bankers' acceptance facilities or
other similar credit facilities other than any such obligation which relates to
an underlying obligation which otherwise constitutes Debt of such person
hereunder or a current account payable of such person incurred in the ordinary
course of business;
(f) all Redeemable Preferred Stock issued by such person;
(g) all obligations of such person upon which interest payments are
customarily made; and
(h) all Guarantees by such person of or with respect to obligations of
the character referred to in the foregoing subdivisions (a) through (g) of
another person;
provided, however, that in determining the Debt of any person, (i) all
liabilities for which such person is jointly and severally liable with one or
more other persons (including, without limitation, all liabilities of any
partnership or joint venture of which such person is a general partner or co-
venturer) shall be included at the full amount thereof without regard to any
right such person may have against any such other persons for contribution or
indemnity, and (ii) no effect shall be given to deposits, trust arrangements or
similar arrangements which, in accordance with GAAP, extinguish Debt for which
such person remains legally liable.
<PAGE>
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EBITDA: of the Corporation for any fiscal year, the sum of (a) Consolidated Net
Income of the Corporation for such period, plus (b) the sum of the following
amounts for the Corporation and its Subsidiaries to the extent deducted in
determining such Consolidated Net Income for such period: (i) Interest Charges,
(ii) federal, state and local income taxes, (iii) depreciation and (iv)
amortization. The EBITDA targets set out in the agreement to which this Schedule
is attached are based on the capital expenditure budget for the fiscal year
ending December 31, 1997 of $15.1 million. To the extent capital expenditures in
any fiscal year exceed $15.1 million, there will be an appropriate increase in
the targeted EBITDA. In addition, the targeted EBITDA for any fiscal year will
be adjusted in an equitable fashion to take into account the effect on EBITDA of
any acquisition made by the Corporation or any reorganization of the Corporation
with CCL Industries Inc. ("CCL") or any division or subsidiary thereof. EBITDA
shall be calculated after giving effect to any incentive based compensation paid
or payable to any employee of the Corporation including Shawn Sedaghat. EBITDA
shall not be reduced by costs and expenses incurred in connection with
acquisitions or dispositions by the Corporation. If there is a dispute between
the Executive and the Corporation with respect to the calculation of EBITDA, the
audit committee of CCL shall, subject only to a right of appeal from the
decision of the audit committee, within ten business days of such decision, to
the Chairman of CCL who shall consider such appeal in good faith and whose
decision shall be final, binding and unappealable, make a determination of all
such disputed matters. The Executive and the Corporation shall have the right to
make representations to the audit committee of CCL in respect of a dispute with
respect to the calculation of EBITDA. The Executive shall have twenty business
days from the date of notice to the Executive of the Corporation's calculation
of EBITDA to dispute such calculation by referring such dispute to the audit
committee, and if the Executive does not dispute such calculation and refer such
dispute to the audit committee within such period, he shall have no right to do
so thereafter.
GAAP: generally accepted accounting principles as set forth in the opinions of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and in statements by the Financial Accounting Standards Board as at
the date hereof.
GUARANTEE: as applied to any person, any direct or indirect liability,
contingent or otherwise, of such person with respect to any indebtedness, lease,
dividend or other obligation of any other, including, without limitation, any
such obligation directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business) or discounted or sold
with recourse (including receivables) by such person, or in respect of which
such person is otherwise in any manner directly or indirectly liable, including,
without limitation, any such obligation in effect guaranteed by such person
through any agreement (contingent or otherwise) to (a) purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), or to (b)
maintain the solvency or any balance sheet or other financial condition of the
obligor of such obligation, or to (c) make payment for any products, materials
or supplies or for any transportation or services regardless of the non-delivery
or non-furnishing thereof, in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged, or that any
<PAGE>
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agreements relating thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof. For purposes of
all computations made under this agreement the amount of any Guarantee shall be
equal to the amount of the obligation guaranteed or, if not stated or
determined, the maximum reasonably anticipated liability in respect thereof
(assuming such person is required to perform thereunder) as determined by such
person in good faith.
INTEREST CHARGES: of the Corporation for any fiscal year, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between the Corporation and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Corporation and it Subsidiaries in accordance with
GAAP): (a) all interest in respect of Debt of the Corporation and its
Subsidiaries (including imputed interest on Capital Lease Obligations), deducted
in determining Consolidated Net Income of the Corporation for such period, (b)
all dividends in respect of Redeemable Preferred Stock payable during such
period, and (c) all imputed interest associated with the amount of any debt
discount and expense amortized or required to be amortized in the determination
of such Consolidated Net Income for such period.
LIEN: as to any person, any mortgage, lien (statutory or other), pledge,
assignment, hypothecation, charge, security interest or other encumbrance in or
on, or any interest or title of any vendor, lessor, lender or other secured
party to or of such person under any conditional sale, trust receipt or other
title retention agreement or Capital Lease with respect to, any property or
asset of such person, or the signing or filing of a financing statement which
names such person as debtor, or the signing of any security agreement
authorizing any other party as the secured party thereunder to file any
financing statement which names such person as debtor. The term "Lien" shall
not include any encumbrance which is deemed to exist in respect of any property
or asset of any person solely as a result of an agreement entered into by such
person not to subject all or any part of such person's property or assets to a
Lien. For purposes of this agreement, a person shall be deemed to be the owner
of any property which it has placed in trust for the benefit of holders of Debt
of such person which Debt is deemed to be extinguished under GAAP but for which
such person remains legally liable, and such trust shall be deemed to be a Lien.
REDEEMABLE PREFERRED STOCK: any class of preferred stock of the Corporation
which by its terms has any of the following characteristics: (i) it is
redeemable at a fixed or determinable date or dates, whether by operation or a
sinking fund or otherwise, (ii) it is redeemable at the option of the holder, or
(iii) it has conditions for redemption which are not solely within the control
of the Corporation, such as stock which must be redeemed out of future earnings.
SUBSIDIARY: means a subsidiary under GAAP. Unless otherwise specified, any
reference to a Subsidiary is intended as a reference to a Subsidiary of the
Corporation.
VOTING STOCK: as to any corporation, association, partnership, trust, joint
venture or other entity, capital stock (or equivalent ownership interests) the
holders of which are ordinarily, in the
<PAGE>
-5-
absence of contingencies, entitled to elect a majority of the corporate
directors (or persons performing similar functions) of such corporation,
association, partnership, trust, joint venture or entity involved.
<PAGE>
EXHIBIT 99(C)(4)
OPTION AGREEMENT
THIS AGREEMENT made as of the 16th day of June, 1997
B E T W E E N:
SHAHROKH SEDAGHAT,
an individual resident in Los Angeles, California
(hereinafter called "Shawn")
- and -
CCL INDUSTRIES INC.,
a corporation continued under the laws of Canada
(hereinafter called "CCL")
THIS AGREEMENT WITNESSES that in consideration of the covenants, agreements
and warranties herein set out and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
respectively covenant and agree as follows:
1. Subject to the terms hereof, CCL hereby grants (effective upon the
commencement of employment of Shawn pursuant to an employment agreement
among Seda Specialty Packaging Corp., Shawn and CCL as of the 16th day of
June, 1997 (the "Employment Agreement")) to Shawn an irrevocable option
(the "Option") to purchase from CCL within the time period hereinafter
provided and subject to compliance with all requirements of all stock
exchanges and securities regulatory authorities having jurisdiction, all or
any part of 545,000 authorized and unissued Class B non-voting shares
("Class B Shares") in the capital of CCL (the "Option Shares") at a price
per share equal to the simple average of the daily high and low board lot
trading prices for Class B Shares on The Toronto Stock Exchange for the ten
trading days commenced June 10, 1997 and ending June 23, 1997, less $10.35
(the "Option Price"). CCL and Shawn acknowledge that the Option is intended
to replace existing stock options granted Shawn by Seda Specialty Packing
Corp. which will be cancelled upon completion of the Merger (as defined in
the Employment Agreement).
2. The Option shall be exercisable by Shawn in whole or in part at any time
and from time to time commencing from the date hereof until 4:30 p.m.
(Toronto time) on June 16, 2003 (the "Option Term"). Notwithstanding any of
the provisions hereof, any issuance of Option Shares will occur only upon
compliance by CCL with the terms of section 1.1, and by Shawn of section
1.3, of the Qualification and Listing of Shares Agreement dated June 16,
1997 between CCL and Shawn, but only insofar as such terms relate to the
issue of Class B Shares issuable in connection with the Option, or the
waiver by Shawn of compliance by CCL with such terms.
<PAGE>
Page 2
3. In the event Shawn elects to exercise all or any portion of the Option,
Shawn shall duly complete, execute and deliver to CCL at its address
hereinafter provided, a signed notice specifying the number of Option
Shares with respect to which the Option is being exercised together with a
certified cheque, bank draft or money order payable to or to the order of
CCL in an amount equal to the product of the Option Price multiplied by the
number of Option Shares in respect of which the Option is to be exercised.
Upon each exercise of the Option in the manner herein provided, CCL shall
instruct and cause the registrar and transfer agent of CCL to deliver to
Shawn, within a reasonable time of such exercise and at the address
specified in section 18 or such other address as Shawn shall direct in
writing, certificates representing the Option Shares being purchased
registered in the name of Shawn, or subject to section 4 and section 18A,
in such other name as Shawn shall direct in writing at the time of such
exercise.
4. Shawn covenants and agrees that he will not sell, assign, transfer,
encumber or otherwise dispose of any of the Option Shares prior to the
third anniversary of the date hereof without the prior written consent of
CCL, which consent may be granted or withheld by CCL in its sole and
absolute discretion. Notwithstanding the foregoing, but provided that
Shawn is not in breach of his obligations pursuant to sections 5.3, 5.4 or
5.6 of the Employment Agreement, if Shawn's employment is terminated
pursuant to subsection 2.2(b), subsection 2.2(c) or subsection 2.2(d) of
the employment agreement or Shawn dies the three-year period hereinbefore
referred to shall be deemed to have expired upon the occurrence of such
event.
5. CCL represents and warrants to Shawn that:
(a) all corporate action has been taken by or on behalf of CCL to
authorize and permit CCL to enter into and perform this Agreement and
to validly allot and reserve for issuance the Option Shares to and in
favour of Shawn, his heirs, executors, legal representatives and
permitted assigns; this Agreement constitutes a legal, valid and
binding obligation of CCL enforceable against it in accordance with
its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other
laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law; and
upon the due exercise of the Option or any part thereof and upon the
payment of the Option Price, each Option Share issued to Shawn or his
nominee shall be outstanding as a fully paid and non-assessable Class
B Share in the capital of CCL;
(b) CCL is a reporting issuer pursuant to the Securities Act (Ontario)
(the "Act") and is not in default of any provision of the Act or the
regulation or rules promulgated thereunder;
(c) the Class B Shares of CCL are presently listed and posted for trading
on The Toronto Stock Exchange and The Montreal Exchange and CCL is not
in default of the by-laws, policies or rules of such Stock Exchanges;
<PAGE>
Page 3
(d) neither the execution and delivery of this Agreement by CCL nor the
performance by CCL of its obligations hereunder will constitute a
violation of, conflict with, or result in a default (or give rise to
any right of termination, cancellation or acceleration) under any
note, bond, mortgage, indenture, licence, contract, commitment,
agreement, understanding, arrangement or restriction of any kind to
which CCL is a party or by which CCL or its properties or assets is
bound, or any judgement, decree, order, injunction, statute, rule or
regulation of any court, agency, securities commission or regulatory
authority of any kind applicable to CCL or any of its assets or
properties, except for violations, conflicts, defaults (or rights of
termination, cancellation or acceleration) which would not impair
CCL's ability to issue the Option Shares to Shawn on the terms and
conditions hereof; and
(e) all consents, approvals and authorizations required to be obtained in
connection with the grant of the Option and the issuance of the Option
Shares have been obtained, other than the approval of the Montreal
Exchange which approval CCL shall use its reasonable best efforts to
obtain.
6. CCL hereby covenants with Shawn that it will, at all times (subject to
section 7 hereof):
(a) cause the Option Shares from time to time acquired by Shawn pursuant
to the terms hereof to be issued as fully paid and non-assessable
Class B Shares in the capital of CCL and to cause the certificate(s)
representing such Option Shares to be delivered in accordance with the
terms hereof;
(b) comply at its expense in all material respects with all legal,
regulatory, stock exchange and administrative requirements applicable
to the Class B Shares (including, without limitation, any such
requirements relating to the Option); and
(c) cause the Class B Shares of CCL to be listed on either the Montreal
Exchange or The Toronto Stock Exchange and cause either of the said
Stock Exchanges to list and reserve for issuance a sufficient number
of Class B Shares of CCL for issuance to Shawn pursuant to this
Agreement, in each case, at its own expense.
7. Each of the representations, warranties and covenants contained in sections
5 and 6 hereof shall survive for a period of twelve months following the
expiration of the three-year period set forth in section 4 with respect to
the Option Shares purchased by Shawn pursuant to this agreement provided
that if Shawn does not exercise the Option herein granted in respect of any
of the Option Shares prior to the expiry of the Option, CCL shall thereupon
be thereafter released from any and all representations, warranties and
covenants herein contained with respect to the unexercised portion of the
Option.
8. Nothing herein contained or done pursuant hereto shall obligate Shawn to
purchase and/or pay for any Option Shares except upon the exercise of the
Option in the manner hereinbefore provided.
<PAGE>
Page 4
9. Shawn covenants and agrees:
(a) to execute and deliver to CCL upon request, all such filings as may be
required in respect of the exercise by Shawn of the Option, from time
to time by all stock exchanges and securities regulatory authorities
having jurisdiction; provided that Shawn shall not be responsible for
more than nominal expense for doing so;
(b) not to sell, transfer, or distribute any of the Option Shares in the
United States except pursuant to: (i) an effective registration
statement under the Securities Act of 1933, as amended (the "Act"); or
(ii) if there is no registration statement in effect, pursuant to a
specific exemption from registration under the Act; and
(c) that he will use reasonable commercial efforts to conduct all
dispositions of the Option Shares in an orderly manner such that the
market price of the Class B Shares shall not be unduly affected by any
such disposition, and shawn shall provide reasonable advance notice to
CCL of any proposed disposition, whereupon CCL shall have the right
(which right CCL shall have the right to assign an institution,
pension fund, mutual fund or similar purchaser, provided that any such
assignment shall not relieve CCL from its obligations with respect to
the exercise of such right, and provided that such assignment shall
not delay the right or ability of the Executive to so dispose of his
Class B Shares), but not the obligation, upon notice in writing to
shawn within one business day of receipt by CCL of shawn's notice, to
purchase all or any part of such Option Shares at a price per share
equal to the closing price of the Class B Shares on The Toronto Stock
Exchange on the trading day immediately preceding the date of notice
by Shawn, such purchase and sale to be completed on the third business
day following the date of CCL's (or its assigns) notice to shawn. it
shall be a condition, which shawn may waive, to the right of CCL (or
its assigns) to purchase all or part of such Class B Shares, that
Shawn receive a legal opinion that the sale of such shares to CCL (or
its assigns) shall not result in tax consequences to Shawn which are
materially less favourable than if Shawn were to sell such Class B
Shares in the open market. If such condition is not waived by Shawn,
the opinion shall be obtained at the expense of Shawn (and a copy
delivered to CCL) not more than ten (10) business days following the
giving of notice by Shawn, in which case the time periods in which CCL
(or its assigns) is required to give notice of its intention to
purchase such shares, and to complete the purchase of such shares,
shall not commence until receipt of such opinion by CCL (or its
assigns).
10. If CCL shall amalgamate, consolidate with, or merge with or into another
company or the Class B Shares of CCL are reclassified, the Option, to the
extent it has not been exercised, shall entitle Shawn, upon the future
exercise of the option, to such number and kind of securities or other
property, subject to the terms of the Option, which Shawn would have
received upon such amalgamation, consolidation, merger or reclassification
if Shawn had fully exercised the Option immediately prior to the
amalgamation, consolidation, merger or reclassification.
11. The number of Option Shares issuable upon the exercise of the Option shall
be subject to adjustment from time to time as follows:
<PAGE>
Page 5
(a) If and whenever at any time during the Option Term, CCL shall:
(i) subdivide, redivide, reclassify or otherwise change the
outstanding Class B Shares or securities convertible or
exchangeable into Class B Shares into a greater number of Class
B Shares; or
(ii) reduce, combine, or consolidate the outstanding Class B Shares
or securities convertible or exchangeable into Class B Shares
into a lesser number of Class B Shares; or
(iii) issue any Class B Shares, or securities convertible to or
exchangeable for or with respect to Class B Shares, to the
holders of all or substantially all of the outstanding Class B
Shares by way of a stock dividend; or
(iv) issue rights, options or warrants (collectively, "Rights") to
all or substantially all of the holders of its outstanding
Class B Shares entitling them for a period expiring not later
than 60 days after such record date to subscribe for, acquire
or purchase Class B Shares or securities convertible or
exchangeable for Class B Shares;
(any of such events in (i), (ii), (iii) and (iv) being herein called a
"Share Reorganization")
the number of Option Shares issuable upon the exercise of the Option
shall (subject to subsection 11(b) below) be adjusted effective
immediately after the record date of which the holders of common
shares are determined for the purposes of the Share Reorganization, by
multiplying the number of Option Shares which would have been
determined pursuant to section 1 without regard to the Share
Reorganization by a fraction, the numerator of which shall be the
number of Class B Shares outstanding after giving effect to such Share
Reorganization, and the denominator of which shall be the number of
Class B Shares outstanding on such record date before giving effect to
such Share Reorganization. To the extent that any of the Rights are
not so issued or if issued, are not exercised prior to the expiry
thereof, the number of Option Shares issuable upon exercise of the
Option shall be readjusted to that number of Option Shares issuable
upon exercise of the Option without regard to those of the Rights not
so issued or exercised, as the case may be;
(b) No adjustments to the number of Option Shares shall be made pursuant
to paragraphs (iii) and (iv) of subsection 11(a) if Shawn is permitted
to participate in such stock dividend or in the issue of such Rights,
as the case may be, as though and to the same extent as if Shawn had
exercised the Option prior to the applicable record date or effective
date for such stock dividend or the issue of such Rights, as the case
may be;
(c) The adjustment to the number of Option Shares provided for in this
section 11 shall be cumulative and shall apply to successive
subdivisions, reclassifications,
<PAGE>
Page 6
reductions, combinations, consolidations, issuances or other events
that result in the requirement for adjustment pursuant to the terms
hereof;
(d) When any action is taken which would, if implemented, require an
adjustment to the number of Class B Shares issuable upon the exercise
of the Option as herein provided, CCL shall forthwith prepare and
deliver to Shawn a certificate signed by a senior officer of CCL
setting forth the details of the proposed Share Reorganization or
other event, the number of Class B Shares before adjustment to which
Shawn would be entitled upon exercise of the Option and details of the
computation of the adjustments required to be made to the number of
Option Shares in accordance with the terms of this section 11. If any
dispute shall at any time arise with respect to such adjustments, such
disputes shall be conclusively determined by the auditors of CCL and
any such determination shall be binding upon CCL and Shawn; and
(e) No fractional shares shall be issued upon the exercise of this Option.
If as a result of any adjustment pursuant to this section 11, Shawn
would become entitled to a fractional share, Shawn will have the right
to purchase only the next lower whole number of shares and no payment
or other adjustment will be made with respect to the fractional
interest so disregarded.
12. Upon the occurrence of a Share Reorganization resulting in an adjustment to
the number of Option Shares issuable upon the exercise of the Option, the
Option Price shall be adjusted by multiplying the Option Price in effect
immediately prior to such time by a fraction which shall be the reciprocal
of the fraction employed in the adjustment of the number of Option Shares.
13. The adjustments provided for in sections 10, 11 and 12 hereof shall be made
successively and cumulatively and in the case of adjustments to the Option
Price shall be computed to the nearest cent. After any such adjustment,
the term "Class B Shares" as used herein shall mean the shares or property,
as a result of such adjustments, which Shawn is entitled to receive upon
exercise of the Option.
14. No modification or waiver of any provision of this Agreement and no consent
by either party to any departure therefrom shall be effective unless in
writing signed by a duly authorized officer of the party so modifying or
waiving, and the same will only then be effective for the period and on the
conditions and for the specific instance and purposes specified in such
writing.
15. All dollar amounts referred to herein are in lawful currency of Canada
unless otherwise expressed.
16. Subject to the terms and conditions herein provided, CCL and Shawn use
their reasonable best efforts to promptly take, or cause to be taken, all
other action and do, or cause to be done, all other things necessary,
proper or appropriate under applicable laws and regulations or otherwise to
consummate and make effective the transactions contemplated by this
Agreement as soon as practicable.
<PAGE>
Page 7
17. This Agreement shall be governed by, construed and enforced in accordance
with the laws of the Province of Ontario and the courts of Ontario shall
have non-exclusive jurisdiction to entertain any action arising hereunder.
18. Any notice or other communication required or permitted to be given under
this Agreement shall be in writing and shall be sufficiently given if
personally delivered by courier, charges prepaid, to CCL and to Shawn, as
the case may be, at the applicable address set out below, or transmitted to
it by telecopy:
(a) If to Shawn, addressed to him as follows:
Mr. Shahrokh Sedaghat
2501 West Rosecrans Avenue
Los Angeles, California
90059-3510
Telecopier No. (310) 635-4133
(b) If to CCL, addressed to it as follows:
150 Gordon Baker Road
Willowdale, Ontario
M2H 3P8
Attention: President
Telecopier No. (416) 256-8555
or such other address as the party to whom such writing is to be given
shall have notified the party giving the same in the manner provided in
this section. Any notice delivered to the party to whom it is addressed as
hereinbefore provided shall be deemed to have been given and received on
the date it is so delivered at such address, provided that if such day is
not a business day, then a notice shall be deemed to have been given and
received on the next business day following such day. Any notice
transmitted by telecopy shall be deemed given and received on the first
business day after its transmission.
18A. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their successors and assigns, but shall not be
assignable by either party without the written consent of the other party
other than by will or by the applicable laws of descent and distribution.
A beneficial interest in the Option shall not be assigned nor shall any
agreement, understanding or commitment to do so be entered into, other than
by will or by the applicable laws or descent and distribution without prior
receipt of all regulatory approvals.
<PAGE>
Page S1
19. This Agreement, the employment agreement between Shawn, CCL and Seda
Specialty Packaging Corp. dated June 16, 1997 and the incentive option
agreement between Shawn and CCL dated June 16, 1997 supersede all prior
agreements, understandings and representations (oral, written, implied or
expressed) between Shawn and CCL relating to the Option Shares.
IN WITNESS WHEREOF this Agreement has been executed and delivered by the
parties hereto on the date first above written.
/s/ SHAHROKH SEDAGHAT
- ----------------------- ----------------------------------
WITNESS SHAHROKH SEDAGHAT
CCL INDUSTRIES INC.
BY: /s/ CCL INDUSTRIES INC.
------------------------------
<PAGE>
EXHIBIT 99(C)(5)
INCENTIVE OPTION AGREEMENT
THIS AGREEMENT made as of the 16th day of June, 1997
B E T W E E N:
SHAHROKH SEDAGHAT,
an individual resident in Los Angeles, California
(hereinafter called "Shawn")
- and -
CCL INDUSTRIES INC.
a corporation continued under the laws of Canada
(hereinafter called "CCL")
WHEREAS:
1. Seda Specialty Packaging Corp. ("Seda"), Shawn and CCL have entered into an
agreement made as of the 16th day of June, 1997 pursuant to which Seda has
agreed to continue to employ Shawn on and subject to the terms specified therein
(the "Employment Agreement").
2. CCL is a party to the Employment Agreement for the purpose of granting stock
options to Shawn pursuant to section 3.5 thereof.
3. Shawn and CCL have agreed to enter into this agreement to provide for the
grant of the Incentive Options (as defined in the Employment Agreement) to
Shawn, and the terms and conditions to which the Incentive Options shall be
subject.
THIS AGREEMENT WITNESSES that in consideration of the covenants,
agreements and warranties herein set out and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto respectively covenant and agree as follows:
<PAGE>
Page 2
1. Subject to the terms hereof, CCL hereby grants to Shawn (effective upon the
commencement of employment of Shawn pursuant to the Employment Agreement)
an irrevocable option (the "Incentive Option") to purchase from CCL within
the time period hereinafter provided and subject to compliance with all
requirements of all stock exchanges and securities regulatory authorities
having jurisdiction, all or any part of 500,000 authorized and unissued
Class B non-voting shares ("Class B Shares") in the capital of CCL (the
"Option Shares") at a price per share equal to the simple average of the
daily high and low board lot trading prices for Class B Shares on The
Toronto Stock Exchange for the ten trading days commenced June 10, 1997 and
ending June 23, 1997 (the "Option Price"). Notwithstanding any of the
provisions hereof, any issuance of Option Shares will occur only upon (a)
compliance by CCL with the terms of section 1.1, and by Shawn of
section 1.3, of the Qualification and Listing of Shares Agreement dated
June 16, 1997 between CCL and Shawn, but only insofar as such terms
relate to the isssuance of Class B Shares issuable upon exercise of the
Incentive Options, or (b) the waiver by Shawn of compliance by CCL with
such terms.
2. The Incentive Option shall vest and be exercisable as to 100,000 Option
Shares with respect to each of the next five consecutive fiscal years
commencing with the fiscal year ending December 31, 1997, if and only if
EBITDA (as defined in the Employment Agreement) for a particular fiscal
year is 20% greater than EBITDA for the prior fiscal year. Shawn and CCL
acknowledge that the EBITDA target for the vesting of the first 100,000
Incentive Options (for the fiscal year ending December 31, 1997) is US$20
million. For greater certainty (i) the vesting of the Incentive Options
shall be based on EBITDA growth in a fiscal year over EBITDA for the prior
fiscal year, and EBITDA for any other fiscal years shall not be relevant
for such purpose; (ii) if in respect of any fiscal year EBITDA is less that
20% of EBITDA of the prior fiscal year, the 100,000 Incentive Options in
respect of such year shall not vest and shall be cancelled; (iii) the
Incentive Options shall not vest or be exercisable but shall be cancelled
if Shawn is in breach of his obligations pursuant to sections 5.3, 5.4 or
5.6 of the Employment Agreement; (iv) Incentive Options which vest and
become exercisable in accordance with this section 2 shall expire at 4:30
p.m. (Toronto time) on the 16th day of June, 2003. Notwithstanding anything
else in this section 2, but provided that Shawn is not in breach of his
obligations pursuant to section 5.3, 5.4 and 5.6 of the Employment
Agreement, if Shawn's employment is terminated pursuant to subsection
2.2(b), subsection 2.2(c) or subsection 2.2(d) of the Employment Agreement
or Shawn dies, only those Incentive Options scheduled to vest in the fiscal
year in which Shawn's employment is terminated shall
<PAGE>
Page 3
vest, and the remaining balance of the unvested Incentive Options shall not
vest or be exercisable and shall be cancelled. If CCL adopts a policy
generally of extending the term of outstanding options held by senior
executives of CCL, provided all regulatory approvals and consents are
obtained and the terms thereof are complied with, the Incentive Option
shall be similarly extended.
3. In the event Shawn elects to exercise all or any portion of the Incentive
Option, Shawn shall duly complete, execute and deliver to CCL at its
address hereinafter provided, a signed notice specifying the number of
Option Shares with respect to which the Incentive Option is being exercised
together with a certified cheque, bank draft or money order payable to or
to the order of CCL in an amount equal to the product of the Option Price
multiplied by the number of Option Shares in respect of which the Incentive
Option is to be exercised. Upon each exercise of the Incentive Option in
the manner herein provided, CCL shall cause the registrar and transfer
agent of CCL to deliver to Shawn, within a reasonable time of such exercise
and at the address specified in section 17 or such other address as Shawn
shall direct in writing, certificates representing the Option Shares being
purchased registered in the name of Shawn, or subject to section 17A, in
such other name as Shawn shall direct in writing at the time of such
exercise. If Shawn exercises the Incentive Option in the manner herein
provided, certificates for the Option Shares registered in the name of
Shawn in respect of which the Incentive Option has been exercised shall be
delivered to Shawn within a reasonable time thereafter. Shawn shall use
reasonable commercial efforts to conduct dispositions of Option Shares in
an orderly manner such that the market price of the Class B non-voting
shares of CCL shall not be unduly affected by any such disposition, and
Shawn shall provide reasonable advance notice to CCL of any proposed
disposition whereupon CCL shall have the right (which right CCL shall have
the right to assign to an institution, pension fund, mutual fund or similar
purchaser, provided that any such assignment shall not relieve CCL from its
obligations with respect to the exercise of such right) but not the
obligation, upon notice in writing to Shawn within one business day of
receipt by CCL of Shawn's notice, to purchase all or part of such shares at
a price per share equal to the closing price of the Class B Shares on The
Toronto Stock Exchange on the trading day immediately preceding the date of
notice by Shawn. Such purchase and sale shall be completed on the third
business day following the date of CCL's (or its assigns) notice to Shawn.
It shall be a condition, which Shawn may waive, to the right of CCL (or its
assigns) to purchase all or part of the Option Shares that Shawn receive a
legal opinion that the sale of such shares to CCL (or its assigns) shall
not result in tax consequences to Shawn which are materially less
favourable than if Shawn were to sell such Option Shares in the open
market. If such condition is not waived by Shawn, the opinion shall be
obtained at the expense of Shawn (and a copy delivered to CCL (or its
assigns)) not more than ten (10) business days following the giving of
notice by Shawn, in which case the time periods in which CCL (or its
assigns) is required to give notice of its intention to purchase such
shares, and to complete the purchase of such shares, shall not commence
until receipt of such opinion by CCL (or its assigns).
<PAGE>
Page 4
4. CCL represents and warrants to Shawn that:
(a) all corporate action has been taken by or on behalf of CCL to
authorize and permit CCL to enter into and perform this Agreement and
to validly allot and reserve for issuance the Option Shares to and in
favour of Shawn, his heirs, executors, legal representatives and
permitted assigns; this Agreement constitutes a legal, valid and
binding obligation of CCL enforceable against it in accordance with
its terms except to the extent that enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other
laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law and
upon the due exercise of the Incentive Option or any part thereof and
upon the payment of the Option Price, each Option Share issued to
Shawn or his nominee shall be outstanding as a fully paid and non-
assessable Class B Share in the capital of CCL;
(b) CCL is a reporting issuer pursuant to the Securities Act (Ontario)
(the "Act") and is not in default of any provision of the Act or the
regulation or rules promulgated thereunder;
(c) the Class B Shares of CCL are presently listed and posted for trading
on The Toronto Stock Exchange and The Montreal Exchange and CCL is not
in default of the by-laws, policies or rules of such stock exchanges;
(d) neither the execution and delivery of this Agreement by CCL nor the
performance by CCL of its obligations hereunder will constitute a
violation of, conflict with, or result in a default (or give rise to
any right of termination, cancellation or acceleration) under any
note, bond, mortgage indenture, licence, contract, commitment,
agreement, understanding, arrangement or restriction of any kind to
which CCL is a party or by which CCL or its properties or assets is
bound or any judgement, decree, order, injunction, statute, rule or
regulation of any court, agency, securities commission or regulatory
authority of any kind applicable to CCL or any of its assets or
properties, except for violations, conflicts, defaults (or rights of
termination, cancellation or acceleration) which would not impair
CCL's ability to issue the Option Shares to Shawn on the terms and
conditions hereof; and
(e) all consents, approvals and authorizations required to be obtained in
connection with the grant of the Incentive Option and the issuance of
the Option Shares have been obtained, other than the approval of the
Montreal Exchange, which approval CCL shall use its reasonable best
efforts to obtain.
5. CCL hereby covenants with Shawn that it will, at all times (subject to
section 6 hereof):
<PAGE>
Page 5
(a) cause the Option Shares from time to time acquired by Shawn pursuant
to the terms hereof to be issued as fully paid and non-assessable
Class B Shares in the capital of CCL and to cause the certificate(s)
representing such Option Shares to be delivered in accordance with the
terms hereof;
(b) comply at its expense with all legal, regulatory, stock exchange and
administrative requirements applicable to the Class B Shares
(including, without limitation, any such requirements relating to the
Incentive Option); and
(c) cause the Class B Shares of CCL to be listed on either The Montreal
Exchange or The Toronto Stock Exchange and cause either of the said
Stock Exchanges to list and reserve for issuance a sufficient number
of Class B Shares of CCL for issuance to Shawn pursuant to this
Agreement, in each case, at its own expense.
6. Each of the representations, warranties and covenants contained in sections
4 and 5 hereof shall survive for a period of twelve months following the
last purchase by Shawn of the Option Shares pursuant to this Agreement
provided that if Shawn does not exercise the Incentive Option herein
granted in respect of any of the Option Shares prior to the expiry of the
Incentive Option or if the Incentive Option does not vest and become
exercisable in whole or in part, CCL shall thereupon be thereafter released
from any and all representations, warranties and covenants herein contained
with respect to the unexercised portion of the Incentive Option.
7. Nothing herein contained or done pursuant hereto shall obligate Shawn to
purchase and/or pay for any Option Shares except upon the exercise of the
Incentive Option in the manner hereinbefore provided.
8. Shawn covenants and agrees:
(a) to execute and deliver to CCL upon request, all such filings as may be
required in respect of the exercise by Shawn of the Incentive Option
from time to time by all stock exchanges and securities regulatory
authorities having jurisdiction; provided that Shawn shall not be
responsible for more than nominal expense for doing so; and
(b) not to sell, transfer, or distribute any of the Option Shares in the
United States except pursuant to: (i) an effective registration
statement under the Securities Act of 1933, as amended (the "Act"); or
(ii) if there is no registration statement in effect, pursuant to a
specific exemption from registration under the Act.
9. If CCL shall amalgamate, consolidate with, or merge with or into another
company or the Class B Shares of CCL are reclassified, the Incentive
Option, to the extent it has not been exercised, shall entitle Shawn, upon
the future exercise of the Incentive Option, to such number and kind of
securities or other property, subject to the terms of the Incentive
<PAGE>
Page 6
Option, which Shawn would have received upon such amalgamation,
consolidation, merger or reclassification if Shawn had fully exercised the
Incentive Option immediately prior to the amalgamation, consolidation,
merger or reclassification.
10. The number of Option Shares issuable upon the exercise of the Incentive
Option shall be subject to adjustment from time to time as follows:
(a) If and whenever at any time prior to the expiry of the Incentive
Option (the "Option Term"), CCL shall:
(i) subdivide, redivide, reclassify or otherwise change the
outstanding Class B Shares or securities convertible or
exchangeable into Class B Shares into a greater number of Class
B Shares; or
(ii) reduce, combine, or consolidate the outstanding Class B Shares
or securities convertible or exchangeable into Class B Shares
into a lesser number of Class B Shares; or
(iii) issue any Class B Shares, or securities convertible to or
exchangeable for or with respect to Class B Shares, to the
holders of all or substantially all of the outstanding Class B
Shares by way of a stock dividend; or
(iv) issue rights, options or warrants (collectively, "Rights") to
all or substantially all of the holders of its outstanding
Class B Shares entitling them for a period expiring not later
than 60 days after such record date to subscribe for, acquire
or purchase Class B Shares or securities convertible or
exchangeable for Class B Shares;
(any of such events in (i), (ii), (iii) and (iv) being herein called a
"Share Reorganization")
the number of Option Shares issuable upon the exercise of the
Incentive Option shall (subject to subsection 10(b) below) be adjusted
effective immediately after the record date of which the holders of
common shares are determined for the purposes of the Share
Reorganization, by multiplying the number of Option Shares which would
have been determined pursuant to section 1 without regard to the Share
Reorganization by a fraction, the numerator of which shall be the
number of Class B Shares outstanding after giving effect to such Share
Reorganization, and the denominator of which shall be the number of
Class B Shares outstanding on such record date before giving effect to
such Share Reorganization. To the extent that any of the Rights are
not so issued or if issued, are not exercised prior to the expiry
thereof, the number of Option Shares issuable upon exercise of the
Incentive Option shall be readjusted to that number of Option
<PAGE>
Page 7
Shares issuable upon exercise of the Incentive Option without regard
to those of the Rights not so issued or exercised, as the case may be;
(b) No adjustments to the number of Option Shares shall be made pursuant
to paragraphs (iii) and (iv) of subsection 10(a) if Shawn is permitted
to participate in such stock dividend or in the issue of such Rights,
as the case may be, as though and to the same extent as if Shawn had
exercised the Incentive Option prior to the applicable record date or
effective date for such stock dividend or the issue of such Rights, as
the case may be;
(c) The adjustment to the number of Option Shares provided for in this
section 10 shall be cumulative and shall apply to successive
subdivisions, reclassifications, reductions, combinations,
consolidations, issuances or other events that result in the
requirement for adjustment pursuant to the terms hereof;
(d) When any action is taken which would, if implemented, require an
adjustment to the number of Class B Shares issuable upon the exercise
of the Incentive Option as herein provided, CCL shall forthwith
prepare and deliver to Shawn a certificate signed by a senior officer
of CCL setting forth the details of the proposed Share Reorganization
or other event, the number of Class B Shares before adjustment to
which Shawn would be entitled upon exercise of the Incentive Option
and details of the computation of the adjustments required to be made
to the number of Option Shares in accordance with the terms of this
section 10. If any dispute shall at any time arise with respect to
such adjustments, such disputes shall be conclusively determined by
the auditors of CCL and any such determination shall be binding upon
CCL and Shawn; and
(e) No fractional shares shall be issued upon the exercise of this
Incentive Option. If as a result of any adjustment pursuant to this
section 10, Shawn would become entitled to a fractional share, Shawn
will have the right to purchase only the next lower whole number of
shares and no payment or other adjustment will be made with respect to
the fractional interest so disregarded.
11. Upon the occurrence of a Share Reorganization resulting in an adjustment to
the number of Option Shares issuable upon the exercise of the Incentive
Option, the Option Price shall be adjusted by multiplying the Option Price
in effect immediately prior to such time by a fraction which shall be the
reciprocal of the fraction employed in the adjustment of the number of
Option Shares.
<PAGE>
Page 8
12. The adjustments provided for in sections 9, 10 and 11 hereof shall be made
successively and cumulatively and in the case of adjustments to the Option
Price shall be computed to the nearest cent. After any such adjustment, the
term "Class B Shares" as used herein shall mean the shares or property, as
a result of such adjustments, which Shawn is entitled to receive upon
exercise of the Incentive Option.
13. No modification or waiver of any provision of this Agreement and no consent
by either party to any departure therefrom shall be effective unless in
writing signed by a duly authorized officer of the party so modifying or
waiving, and the same will only then be effective for the period and on the
conditions and for the specific instance and purposes specified in such
writing.
14. All dollar amounts referred to herein are in lawful currency of Canada
unless otherwise expressed.
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO CHOICE OF LAW
PRINCIPLES THEREOF. ANY JUDICIAL PROCEEDING BROUGHT AGAINST ANY PARTY
HERETO WITH RESPECT TO THIS AGREEMENT, OR THE TRANSACTION CONTEMPLATED
HEREBY, MAY BE BROUGHT IN THE COURTS OF THE STATE OF DELAWARE AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO (I)
ACCEPTS, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF
SUCH COURT AND ANY RELATED APPELLATE COURT, AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT,
SUBJECT, IN EACH CASE, TO ALL RIGHTS TO APPEAL SUCH DECISIONS TO THE EXTENT
AVAILABLE TO THE PARTIES AND (II) IRREVOCABLY WAIVES ANY OBJECTION IT MAY
NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH
PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS THAT
SERVICE OF PROCESS UPON SUCH PARTY MAY BE MADE BY DELIVERY AT SUCH PARTY'S
ADDRESS SPECIFIED OR DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THIS
AGREEMENT, AND SERVICE SO MADE SHALL BE DEEMED COMPLETED ON THE DATE OF
DELIVERY. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW. EACH PARTY HEREBY WAIVES TRIAL BY JURY IN
ANY JUDICIAL PROCEEDINGS INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN
ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE.
<PAGE>
Page 9
16. Subject to the terms and conditions herein provided, CCL and Shawn use
their reasonable best efforts to promptly take, or cause to be taken, all
other action and do, or cause to be done, all other things necessary,
proper or appropriate under applicable laws and regulations or otherwise to
consummate and make effective the transactions contemplated by this
Agreement as soon as practicable.
17. Any notice or other communication required or permitted to be given under
this Agreement shall be in writing and shall be sufficiently given if
personally delivered by courier, charges prepaid, to CCL and to Shawn, as
the case may be, at the applicable address set out below, or transmitted to
it by telecopy:
(a) If to Shawn, addressed to him as follows:
Mr. Shahrokh Sedaghat
2501 West Rosecrans Avenue
Los Angeles, California
90059-3510
Telecopier No. (310) 635-4133
(b) If to CCL, addressed to it as follows:
150 Gordon Baker Road
Willowdale, Ontario
M2H 3P8
Attention: President
Telecopier No. (416) 256-8555
or such other address as the party to whom such writing is to be given
shall have notified the party giving the same in the manner provided in
this section. Any notice delivered to the party to whom it is addressed as
hereinbefore provided shall be deemed to have been given and received on
the date it is so delivered at such address, provided that if such day is
not a business day, then a notice shall be deemed to have been given and
received on the next business day following such day. Any notice
transmitted by telecopy shall be deemed given and received on the first
business day after its transmission.
17A. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their successors and assigns, but shall not be
assignable by either party without the written consent of the other party
other than by will or by the applicable laws of descent and distribution. A
beneficial interest in the Incentive Option shall not be assigned nor shall
any agreement, undertaking or commitment to do so be entered into, other
than by
<PAGE>
Page 10
will or by the applicable laws of descent and distribution, without prior
receipt of all regulatory approvals.
<PAGE>
Page S1
18. This Agreement, the Employment Agreement and the option agreement between
Shawn and CCL dated June 16, 1997 supersede all prior agreements,
understandings and representations (oral, written, implied or expressed)
between Shawn and CCL relating to the Option Shares.
IN WITNESS WHEREOF this Agreement has been executed and delivered by the
parties hereto on the date first above written.
/s/ SHAHROKH SEDAGHAT
- ------------------------ ------------------------------------
Witness SHAHROKH SEDAGHAT
CCL INDUSTRIES INC.
By: /s/ CCL INDUSTRIES INC.
-------------------------------
<PAGE>
EXHIBIT 99.(C)(6)
QUALIFICATION AND LISTING OF SHARES AGREEMENT
QUALIFICATION AND LISTING OF SHARES AGREEMENT (the "Agreement") made June
16, 1997 between CCL Industries Inc., a corporation continued under the laws of
Canada ("CCL"), and Shahrokh Sedaghat, an individual resident in the City of Los
Angeles, California, United States of America ("SHAWN").
WHEREAS:
1. Shawn is the Chairman, President and Executive Officer of Seda Specialty
Packaging Corp., a corporation reincorporated under the laws of Delaware (the
"CORPORATION").
2. Pursuant to an Agreement and Plan of Merger and Reorganization dated the
date hereof, Seawolf Acquisition Corporation, a wholly-owned indirect subsidiary
of CCL ("MERGER SUB"), has agreed to make a tender offer in accordance with
applicable laws in the United States of America (the "OFFER") for all of the
outstanding shares of common stock (the "COMMON SHARES") of the Corporation and
thereafter on successful completion of the Offer, Merger Sub will merge with and
into the Corporation (the "MERGER") with the Corporation being the corporation
surviving the Merger (such surviving corporation being hereafter referred to as
the "CORPORATION").
3. Pursuant to a lock-up agreement dated the date hereof among Shawn, CCL,
Merger Sub and others (the "LOCK-UP AGREEMENT"), Shawn has agreed, among other
things and subject to certain conditions, to tender and not withdraw 535,620
Common Shares into the Offer and vote his remaining Common Shares in favour of
the Merger.
4. Upon completion of the Merger Shawn shall have received, pursuant to the
Merger, participating exchangeable shares of common stock of the Corporation
("EXCHANGEABLE SHARES").
5. Pursuant to the share conditions attaching to the Exchangeable Shares, upon
the exercise of the exchange right attaching to the Exchangeable Shares and upon
the liquidation, dissolution or winding-up of the Corporation, Shawn may receive
from CCL Class B non-voting shares ("CLASS B SHARES").
6. Pursuant to an option agreement between CCL and Shawn dated the date hereof
CCL has granted to Shawn, in connection with the cancellation of certain options
on shares of the Corporation held by Shawn, the right (the "OPTION") on certain
conditions to purchase from CCL 545,000 Class B Shares at the price set forth
therein.
7. Pursuant to an employment agreement between the Corporation, CCL and Shawn
dated the date hereof (the "EMPLOYMENT AGREEMENT"), the Corporation has agreed
to employ Shawn on the terms and conditions set forth therein and CCL has agreed
to grant to Shawn certain options to purchase its Class B Shares.
<PAGE>
-2-
8. Pursuant to an incentive option agreement between CCL and Shawn dated the
date hereof CCL has granted to Shawn, in connection with the Employment
Agreement, the right (the "INCENTIVE OPTION"), on certain conditions, to
purchase from CCL 500,000 Class B Shares at a price equal to the simple average
of the daily high and low board lot trading prices for Class B Shares on The
Toronto Stock Exchange (the "TSE") for the ten trading days commenced June 10,
1997 and ending June 23, 1997.
NOW THEREFORE, in consideration of Shawn having entered into the Employment
Agreement, the sum of $10.00 in lawful money of Canada now paid by Shawn to CCL
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
QUALIFICATION AND LISTING OF SHARES
1.1 QUALIFICATION AND LISTING OF SHARES. CCL agrees that as soon as reasonably
practicable after receiving notice of any exercise by Shawn of the Option or the
Incentive Option or any part thereof for Class B Shares or of a proposed
issuance of Class B Shares to Shawn upon the exchange by Shawn of any
Exchangeable Shares or upon the liquidation, dissolution or winding-up of the
Corporation, it shall cause such Class B Shares, upon their issuance, to be
unconditionally listed upon the TSE, and shall:
(a) cause such Class B Shares upon their issuance to Shawn to be
distributed to him in accordance with the Securities Act (Ontario) and
the regulations, rules and policies promulgated thereunder and
applicable Canadian stock exchange by-laws, policies and rules
(collectively, the "SECURITIES LAWS") in a manner such that such Class
B Shares shall not be subject to any restrictions on resale by Shawn
in Ontario and Shawn shall not be under any obligation to file any
document or notice or obtain any consent under any applicable
Securities Laws;
(b) obtain an order of the Ontario Securities Commission to the effect of
paragraph (a) hereof, provided that such order shall not impose upon
Shawn any condition or obligation not acceptable to him in his
discretion acting reasonably; or
(c) deliver to Shawn a legal opinion of Canadian counsel to CCL, in form
and substance acceptable to Shawn in his discretion acting reasonably,
stating that upon their issuance to Shawn such Class B Shares shall
have been issued to Shawn in accordance with paragraph (a) hereof.
<PAGE>
-3-
1.2 EXPENSES, FILINGS, FEES, ETC. CCL agrees that notwithstanding the
provisions of any other agreement between the parties, all expenses, costs and
fees paid or payable in connection with Section 1.1, including the fees of CCL's
advisors and agents and any fees due to any securities regulatory authority or
stock exchange, shall be for the account of CCL.
1.3 CO-OPERATION. Shawn agrees to use reasonable efforts to co-operate with
CCL in the performance of CCL's obligations under paragraphs 1.1(a) and (b)
hereof, provided that Shawn shall not be responsible for any expense for doing
so.
ARTICLE II
INDEMNIFICATION
2.1 INDEMNIFICATION. CCL agrees to indemnify and hold harmless Shawn from and
against any losses, claims, damages, liabilities and expenses, including
reasonable legal fees and expenses, to which Shawn may become subject as result
of CCL's breach of its obligations under this Agreement.
ARTICLE III
GENERAL
3.1 ASSIGNMENT. This Agreement shall be binding upon and enure to the benefit
of and shall be enforceable by each of the parties hereto and their respective
heirs, executors, legal personal representatives, successors and permitted
assigns, but shall not be assignable by either party without the prior written
consent of the other party.
3.2 TIME OF ESSENCE. Time shall be of the essence of this Agreement.
3.3 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original but which taken together shall
constitute one and the same instrument. Delivery of any counterpart may be
effected by means of facsimile transmission.
3.4 NO WAIVERS, ETC. No modification or waiver of any provision of this
Agreement and no consent by either party to any departure therefrom shall be
effective unless in writing signed by a duly authorized officer of the party so
modifying or waiving, and the same will only then be effective for the period
and on the conditions and for the specific instance and purposes specified in
such writing.
3.5 CURRENCY. All dollar amounts referred to herein are in lawful currency of
Canada unless otherwise expressed.
<PAGE>
-4-
3.6 GOVERNING LAW, ETC. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the Province of Ontario without
reference to conflicts of laws principles and the courts of Ontario shall have
non-exclusive jurisdiction to entertain any action arising hereunder.
3.7 NOTICES. Any notice, direction or other communication required or
permitted to be given under this Agreement shall be in writing and shall be
sufficiently given or made if delivered in person to the address set forth
below, or telecopied or sent by other means of recorded electronic communication
and confirmed by delivery as soon as practicable thereafter. Notices shall be
addressed to the parties as follows:
If to Shawn:
2501 West Rosecrans Avenue
Los Angeles, California
90059-3510
Telecopier: (310) 635-3877
with a courtesy copy to:
Latham & Watkins
Attorneys at Law
633 West Fifth Street
Suite 4400
Los Angeles, California 90071-2007
Attention: Paul Tosetti
Telecopier: (213) 891-8763
If to CCL:
105 Gordon Baker Road
Willowdale, Ontario
M2H 3P8
Attention: President
Telecopier: (416) 256-8555
<PAGE>
-5-
and with a courtesy copy to:
Lang Michener
Barristers and Solicitors
P.O. Box 747, Suite 2500
BCE Place, 181 Bay Street
Toronto, Ontario
M5J 2T7
Attention: Albert Gnat, Q.C. or Geofrey Myers
Telecopier: (416) 365-1719
Any notice, direction or other communication so given or made shall be
deemed to have been given or made and to have been received on the day of
delivery, if delivered, or on the day of sending if sent by telecopier or other
means of recorded electronic communication. Either party hereto may change its
or his address for notice by giving written notice as aforesaid to the other
party. Delivery of courtesy copies of any notice, direction or other
communication shall not be a condition to the valid delivery of any notice,
direction or other communication.
<PAGE>
-6-
IN WITNESS WHEREOF this Agreement has been executed and delivered by the
parties hereto on the date first above written.
/s/ SHAHROKH SEDAGHAT
- ------------------------ ------------------------------------
WITNESS SHAHROKH SEDAGHAT
CCL INDUSTRIES INC.
Per: /s/ CCL INDUSTRIES INC.
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT (g)(1)
Management's Responsibility for the Financial Statements
The accompanying consolidated financial statements and all information in this
Annual Report are the responsibility of management. These consolidated
financial statements have been prepared by management in accordance with
generally accepted accounting principles. Financial statements are not precise
since they include certain amounts based upon estimates and judgments. When
alternative accounting methods exist, management has chosen those it deems to
be most appropriate to ensure fair and consistent presentation. The financial
information presented elsewhere in this Annual Report is consistent with that in
the financial statements. CCL maintains financial and operating systems which
include appropriate and effective internal controls. Such systems are designed
to provide reasonable assurance that the financial information is reliable and
relevant, and that CCL's assets are appropriately accounted for and adequately
safeguarded. The Board of Directors is responsible for ensuring that management
fulfills its responsibilities for financial reporting and is ultimately
responsible for reviewing and approving the financial statements. The Board of
Directors carries out this responsibility principally through its Audit
Committee. The Audit Committee, comprised of outside directors, is appointed by
the Board of Directors and reviews the financial statements and Management's
Discussion and Analysis; considers the report of the external auditors; assesses
the adequacy of the internal controls of the Company; examines the fees and
expenses for audit services; and recommends to the Board of Directors the
independent auditors for appointment by the shareholders. The Audit Committee
reports its findings to the Board of Directors for consideration when approving
the annual financial statements for issuance to the shareholders. These
consolidated financial statements have been audited by KPMG, the external
auditors, in accordance with generally accepted auditing standards on behalf of
the shareholders. KPMG have full and free access to, and meet periodically
with, the Audit Committee.
/s/ W.M.E. McLeod /s/ M.H. Snider
W.M.E. McLeod M.H. Snider
President and Chief Executive Officer Senior Vice President Finance and
Administration
February 7, 1997
Auditors' Report
To the Shareholders of CCL Industries Inc.
We have audited the consolidated balance sheets of CCL Industries Inc. as at
December 31, 1996 and 1995, and the consolidated statements of income, retained
earnings, and changes in financial position for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. In our opinion, these consolidated financial statements present
fairly, in all material respects, the financial position of the Company as at
December 31, 1996 and 1995, and the results of its operations and the changes in
its financial position for the years then ended in accordance with generally
accepted accounting principles.
/s/ KPMG
KPMG Chartered Accountants
Toronto, Canada February 7, 1997
<PAGE>
Consolidated Statements of Income
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
(in thousands of dollars) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
SALES $1,151,546 $ 979,318
- -------------------------------------------------------------------------------
Income from operations before undernoted items 120,953 100,991
- -------------------------------------------------------------------------------
Depreciation 37,872 33,297
Amortization of goodwill and other assets 7,918 4,354
Interest (note 5) 18,653 11,952
- -------------------------------------------------------------------------------
64,443 49,603
- -------------------------------------------------------------------------------
Income before income taxes 56,510 51,388
Income taxes (note 8) 17,864 18,620
- -------------------------------------------------------------------------------
NET INCOME $ 38,646 $ 32,768
- -------------------------------------------------------------------------------
EARNINGS PER CLASS B SHARE (note 7) $ 1.13 $ .98
- -------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
Consolidated Balance Sheets
As at December 31, 1996 and 1995
<TABLE>
<CAPTION>
(in thousands of dollars) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and short-term investments $ 19,148 $ 8,210
Accounts receivable 170,883 150,519
Inventories (note 3) 134,078 115,685
- -------------------------------------------------------------------------------
324,109 274,414
Property, plant and equipment (note 4) 336,277 326,285
Other assets 21,236 19,737
Goodwill 171,380 171,176
- -------------------------------------------------------------------------------
$ 853,002 $ 791,612
- -------------------------------------------------------------------------------
LIABILITIES
Current liabilities
Bank advances (note 5) $ 9,656 $ 53,293
Accounts payable and accrued liabilities 179,899 160,709
Income and other taxes payable 1,090 427
Current portion of long-term debt (note 5) 76,814 2,274
- -------------------------------------------------------------------------------
267,459 216,703
- -------------------------------------------------------------------------------
Long-term debt (note 5) 167,122 195,491
- -------------------------------------------------------------------------------
Long-term liabilities (note 6) 15,188 18,182
- -------------------------------------------------------------------------------
Deferred income taxes 9,129 3,369
- -------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Capital stock (note 7) 146,789 139,432
Retained earnings 232,436 207,903
Foreign currency translation adjustment 14,879 10,532
- -------------------------------------------------------------------------------
394,104 357,867
- -------------------------------------------------------------------------------
$ 853,002 $ 791,612
- -------------------------------------------------------------------------------
</TABLE>
Approved by the Board
/s/ G.S. Lang /s/ W.M.E. McLeod
G.S. Lang, Director W.M.E. McLeod, Director
3
<PAGE>
Consolidated Statements of Retained Earnings
Years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
(in thousands of dollars) 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
BALANCE AT BEGINNING OF YEAR $ 207,903 $ 184,808
Net income 38,646 32,768
Settlement of exercised stock options (note 7) (4,571) --
Excess of purchase price over paid up capital
on repurchase of shares -- (299)
- -------------------------------------------------------------------------------
241,978 217,277
- -------------------------------------------------------------------------------
Dividends
Class A shares 575 596
Class B shares 8,967 8,778
- -------------------------------------------------------------------------------
9,542 9,374
- -------------------------------------------------------------------------------
BALANCE AT END OF YEAR $ 232,436 $ 207,903
- -------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
Consolidated Statements of Changes in Financial Position
Years ended Decembert 31, 1996 and 1995
<TABLE>
<CAPTION>
(in thousands of dollars) 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATIONS
Net income $ 38,646 $ 32,768
Items not requiring cash:
Depreciation and amortization 45,790 37,651
Deferred income taxes 6,718 6,261
- -------------------------------------------------------------------------------------------------------
91,154 76,680
Net change in non-cash operating working capital (22,207) (7,384)
- -------------------------------------------------------------------------------------------------------
Total cash provided by operations 68,947 69,296
- -------------------------------------------------------------------------------------------------------
FINANCING
Net long-term borrowings 46,001 114,237
Issue of shares 7,357 11,127
Settlement of exercised stock options (4,571) -
Repurchase of shares - (515)
Dividends (9,542) (9,374)
- -------------------------------------------------------------------------------------------------------
Total cash provided by financing 39,245 115,475
- -------------------------------------------------------------------------------------------------------
INVESTMENT
Additions to property, plant and equipment (39,083) (44,743)
Business acquisitions (note 2) (13,006) (135,046)
Translation adjustment, net non-monetary assets 3,410 (947)
Other (4,938) 1,229
- -------------------------------------------------------------------------------------------------------
Total cash used for investment (53,617) (179,507)
- -------------------------------------------------------------------------------------------------------
Increase in cash position 54,575 5,264
Bank advances at beginning of year (45,083) (50,347)
- -------------------------------------------------------------------------------------------------------
Cash position (bank advances) at end of year $ 9,492 $ (45,083)
- -------------------------------------------------------------------------------------------------------
Cash position comprises cash and short-term investments, net of bank advances.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
December 31, 1996 and 1995 (tabular amounts in thousands)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF CONSOLIDATION The consolidated financial statements include the
accounts of all subsidiary companies since dates of acquisition.
(b) FOREIGN CURRENCY TRANSLATION The Company records foreign currency
denominated transactions at the Canadian dollar equivalent at the date of the
transaction and translates foreign currency denominated monetary assets and
liabilities at year-end exchange rates. Exchange gains and losses are included
in income.
The Company's foreign subsidiaries are defined as self-sustaining. Revenue and
expense items, including depreciation and amortization, are translated at the
average rate for the year. All assets and liabilities are translated at year-end
exchange rates, and any resulting exchange gains or losses are included in
shareholders' equity and described as foreign currency translation adjustment.
Movement in the foreign currency translation adjustment during the year results
from changes in the value of the Canadian dollar in comparison to the U.S.
dollar, the British pound, the Australian dollar and the Mexican peso, and from
changes in foreign denominated net assets.
(c) INVENTORIES Raw materials and supplies are valued at the lower of cost
and replacement cost. Work in process and finished goods are valued at the lower
of cost and net realizable value.
(d) PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded
at cost, which includes interest and certain start-up costs during the
construction of major projects. Cost is reduced by applicable investment tax
credits. Depreciation is provided primarily on the straight-line basis using
rates varying from 2% to 10% on buildings, and from 6.7% to 33.3% on machinery
and equipment.
(e) GOODWILL Goodwill represents the excess of the purchase price over the
fair values of net assets acquired, and is being amortized on a straight-line
basis over a maximum of 40 years. On an ongoing basis, management reviews the
valuation and amortization of goodwill, taking into consideration any events and
circumstances which might have impaired the fair value. Goodwill is written down
to fair value when declines in value are considered to be other than temporary
based upon expected cash flows from the individual business units.
(f) ENVIRONMENTAL MATTERS The Company's operations are subject to
environmental laws and regulations adopted by various governmental authorities
in the jurisdictions in which the Company operates. Liabilities are recorded
when site restoration and environmental remediation obligations are either known
or considered probable and can be reasonably estimated.
(g) USE OF ESTIMATES The presentation of financial statements, in conformity
with generally accepted accounting principles, requires management to make
estimates and assumptions which affect the reported amounts of assets and
liabilities, and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses for the period reported.
Actual results could differ from these estimates.
(h) 1995 COMPARATIVE Certain of the 1995 figures have been restated to
conform with the presentation adopted for 1996.
<PAGE>
Notes to Consolidated Financial Statements (continued)
2. BUSINESS ACQUISITIONS
In January 1996, the Company purchased the assets of Imperial Cosmetics, a
contract manufacturer of cosmetics specializing in lipstick technology, located
in East Stroudsburg, Pennsylvania, for $8.5 million. Goodwill arising on the
transaction will be amortized over 20 years.
In November 1996, the Company expanded its ownership in its Mexican operation,
Alustar S.A. de C.V., an aluminum aerosol can manufacturer, to become the
controlling shareholder, for $4.5 million.
These acquisitions have been accounted for by the purchase method, and the
details of these transactions are as follows:
<TABLE>
<S> <C>
Working capital, non-cash $ 1,441
Non-current assets at assigned values 5,981
- -------------------------------------------------------------------------------
Net assets 7,422
Goodwill, being the excess of purchase price over the
net assets acquired 5,584
- -------------------------------------------------------------------------------
Total consideration $ 13,006
- -------------------------------------------------------------------------------
</TABLE>
In December 1995, the Company purchased certain North American pressure
sensitive label printing operations, and the North American label application
machinery business from Avery Dennison Corporation, for consideration of cash of
$135.0 million. Manufacturing facilities are located in Monrovia, California and
Cincinnati, Ohio in the United States, in Etobicoke, Ontario, Canada and Mexico
City, Mexico. The Company has consolidated some of its plants and rationalized
the sales force and other functions, and the related costs were provided for at
the time of acquisition.
The operating results of Avery have been consolidated with CCL from the date of
acquisition. Goodwill arising on the transaction will be amortized over 30
years. This acquisition has been accounted for by the purchase method, and the
details of this transaction are as follows:
<TABLE>
<S> <C>
Working capital, non-cash $ 13,778
Non-current assets at assigned values 26,664
- -------------------------------------------------------------------------------
Net assets 40,442
Goodwill, being the excess of purchase price over the
net assets acquired 94,604
- -------------------------------------------------------------------------------
Total consideration $ 135,046
- -------------------------------------------------------------------------------
</TABLE>
3. INVENTORIES
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies $ 83,631 $ 72,322
Work in process and finished goods 50,447 43,363
- -------------------------------------------------------------------------------
$ 134,078 $ 115,685
- -------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
4. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Land $ 11,607 $ 11,344
Buildings 108,987 102,234
Machinery and equipment 457,590 426,757
- -------------------------------------------------------------------------------
578,184 540,335
Accumulated depreciation (241,907) (214,050)
- -------------------------------------------------------------------------------
$ 336,277 $ 326,285
- -------------------------------------------------------------------------------
</TABLE>
5. TOTAL DEBT
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Bank advances $ 9,656 $ 53,293
Current portion of long-term debt 76,814 2,274
Long-term debt due after one year 167,122 195,491
- -------------------------------------------------------------------------------
Total debt outstanding $ 253,592 $ 251,058
- -------------------------------------------------------------------------------
</TABLE>
(a) The total borrowings at December 31, 1996 are denominated in the following
currencies:
<TABLE>
<CAPTION>
Local Canadian
Currency Currency Equivalent
- -------------------------------------------------------------------------------
<S> <C> <C>
Canadian dollars $ 78,471 $ 78,471
U.S. dollars US$ 126,173 172,935
U.K. sterling (Pounds) 931 2,186
- -------------------------------------------------------------------------------
$ 253,592
- -------------------------------------------------------------------------------
</TABLE>
(b) The short-term operating lines of credit provided to the Company and
included in bank advances at December 31 are:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Credit lines available $ 54,196 $ 98,401
Credit lines used $ 9,656 $ 53,293
- -------------------------------------------------------------------------------
</TABLE>
All operating facilities are unsecured and at interest rates varying with LIBOR
(London Interbank Offered Rate) or with the prime or base rate.
8
<PAGE>
Notes to Consolidated Financial Statements (continued)
(c) Total long-term debt is comprised of:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Unsecured senior notes ($120,000,000 U.S.) $ 164,474 $ --
Unsecured debentures 75,000 75,000
Bridge loan -- 115,946
Other loans 4,462 6,819
- -------------------------------------------------------------------------------
$ 243,936 $ 197,765
- -------------------------------------------------------------------------------
</TABLE>
The unsecured Canadian dollar debentures mature on January 2, 1997 and bear
interest at 10.35% payable semi-annually. In 1993, the Company entered into
cross-currency interest rate swaps which matured on January 2, 1997, the effect
of which was to convert the obligation to service the Canadian dollar
denominated debentures into U.S. dollar denominated debt of $58,480,000. Under
the terms of the swap agreements, interest was payable at LIBOR plus 3.2%. At
December 31, 1996, the effective interest rate on the debentures was 9.1%.
To finance the Avery acquisition in December 1995, the Company entered into a
nine-month bridge facility for $85,000,000 U.S. with a major Canadian bank.
On March 15, 1996, the Company borrowed from private U.S. institutional
investors $120,000,000 U.S., by issuing unsecured senior notes, for a 10-year
term at 6.66% to repay the bridge loan and to reduce other short-term
borrowings.
Other loans include Industrial Revenue Bonds and capital leases at various rates
and repayment terms.
(d) The overall weighed average interest rate on total long-term debt at
December 31, 1996, including the above noted interest rate swap agreements, was
7.4% (1995 -- 7.8%).
(e) Interest expense incurred:
<TABLE>
<CAPTION>
1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Current $ 9,415 $ 4,190
Long-term 10,361 8,847
- -------------------------------------------------------------------------------
19,776 13,037
Interest income (1,123) (1,085)
- -------------------------------------------------------------------------------
Net interest expense $ 18,653 $ 11,952
- -------------------------------------------------------------------------------
</TABLE>
(f) Long-term debt repayments are as follows:
<TABLE>
<S> <C>
1997 $ 76,814
1998 1,236
1999 311
2000 211
2001 244
2002 and beyond 165,120
- -------------------------------------------------------------------------------
$ 243,936
- -------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
(g) Fair value of financial instruments: The carrying value of cash, accounts
receivable, accounts payable and accrued liabilities and bank advances
approximates fair value due to the short-term maturities of these instruments.
Financial instruments with a carrying value on the financial statements
different from their fair value include long-term debt with a carrying value at
December 31, 1996 of $243,936,000 (1995 -- $197,765,000), and a fair value at
December 31, 1996 of $234,293,000 (1995 -- $200,643,000). Interest rate and
cross-currency swap agreements related to the $75 million Canadian debenture as
at December 31, 1996 had a fair value liability of $5,473,000 (1995 --
$4,606,000).
6. LONG-TERM LIABILITIES
Long-term liabilities relate primarily to environmental matters and represent
management's best estimate for site restoration costs. The actual timing of
payments against these reserves is unknown.
7. CAPITAL STOCK
The Company's authorized capital consists of an unlimited number of Class A
voting shares and an unlimited number of Class B non-voting shares.
(a) ISSUED
<TABLE>
<CAPTION>
CLASS A CLASS B
Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at January 1, 1995 3,425 $ 6,517 29,503 $122,004
Issued for cash under employee share plans -- -- 1,243 11,127
Repurchase of shares under Normal Course Issuer Bid process -- -- (50) (216)
Conversions from Class A to Class B shares (916) (1,743) 916 1,743
- ----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 2,509 4,774 31,612 134,658
Issued for cash under employee share plans -- -- 854 7,357
Conversions from Class A to Class B shares (11) (21) 11 21
- ----------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 2,498 $ 4,753 32,477 $142,036
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Total capital stock at December 31, 1996 was $146,789,000 (1995 --
$139,432,000).
(b) SHARE ATTRIBUTES
Class A
Class A shares carry full voting rights and are convertible at any time into
Class B shares. Dividends are currently set at 5 cents per share per annum less
than Class B shares.
Class B
Class B shares rank equally in all material respects with the Class A shares,
except as follows:
(i) They are entitled to receive material and attend, but not vote at, regular
shareholder meetings.
(ii) They are entitled to voting privileges when consideration for the Class A
shares, under a takeover bid when voting control has been acquired,
exceeds 115% of the market price of the Class B shares.
(iii) They are entitled to receive, or have set aside for payment, dividends as
declared by the Board of Directors from time to time.
10
<PAGE>
Notes to Consolidated Financial Statements (continued)
(c) EARNINGS PER SHARE
<TABLE>
<CAPTION>
1996 1995
Class A Class B Class A Class B
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 1.08 $ 1.13 $ .93 $ .98
- -------------------------------------------------------------------------------
</TABLE>
The weighted average number of shares issued and outstanding is 34,436,000 (1995
- -- 33,710,000).
Fully diluted earnings per Class B share in 1996 were $1.10 (1995 -- $.94).
This reflects the dilutive effect of the exercise of 1,362,400 share options
outstanding at December 31, 1996, assuming they had been exercised at the
beginning of the year.
(d) SHARE OPTIONS. As at December 31, 1996 present and former employees,
officers and directors of the Company hold options to purchase 1,362,400 Class B
non-voting shares pursuant to the Employee Stock Option Plan. The options
expire in the following years and are exercisable at the following prices:
<TABLE>
<CAPTION>
Class B
Exercise Non-Voting Shares
Year of Expiry Price Range Under Option
- -------------------------------------------------------------------------------
<S> <C> <C>
1997 $ 7.25 - $ 9.625 249
1999 $ 9.00 - $ 9.625 218
2000 $ 9.125 - $11.75 612
2001 $14.35 283
- -------------------------------------------------------------------------------
1,362
- -------------------------------------------------------------------------------
</TABLE>
The weighted average exercise price for the options outstanding at December 31,
1996 was $10.66.
During the year, certain holders of 782,600 stock options that were granted
under the Employee Stock Option Plan exercised their right to receive cash based
on the difference between the market value on the date of the exercise and the
exercise price of the options.
8. INCOME TAXES
<TABLE>
<CAPTION>
1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Combined Canadian federal and provincial income tax rate 35.23% 35.49%
- ---------------------------------------------------------------------------------------------------
Income before income taxes $ 56,510 $ 51,388
- ---------------------------------------------------------------------------------------------------
Expected income taxes $ 19,922 $ 18,238
Increase (decrease) resulting from:
Foreign tax rate differential (1,859) (450)
Utilization of prior years' U.K. operating losses (1,944) (690)
Non-deductible goodwill amortization 787 663
Other 958 859
- ---------------------------------------------------------------------------------------------------
Income taxes $ 17,864 $ 18,620
- ---------------------------------------------------------------------------------------------------
Effective income tax rate 31.6% 36.2%
- ---------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
9. COMMITMENTS AND CONTINGENCIES
The Company has commitments under various long-term operating lease agreements.
Future minimum payments under such lease obligations are due as follows:
<TABLE>
<S> <C>
1997 $ 6,650
1998 5,852
1999 4,727
2000 2,616
2001 and beyond 2,652
- -------------------------------------------------------------------------------
$ 22,497
- -------------------------------------------------------------------------------
</TABLE>
The Company utilizes futures contracts to hedge the cost of aluminum used in its
container manufacturing process against specific customer requirements. As at
December 31, 1996, future contracts for $18.7 million U.S. of aluminum purchase
commitments, extending into 1998, were outstanding.
In January 1996, the Company entered into a joint venture in Shanghai, China to
set up an aerosol and liquid filling operation. Construction began in 1996 and
is expected to be completed at the end of 1997. The Company's financial
commitment for 1997 is estimated at $2 million U.S.
The Company and its consolidated subsidiaries are defendants in actions brought
against them from time to time in connection with its operations. While it is
not possible to estimate the outcome of the various proceedings at this time,
the Company does not believe that it will incur any significant additional loss
or expense in excess of amounts provided.
10. PENSION PLANS
The Company maintains several defined benefit pension plans and three
supplemental retirement plans. The most recent actuarial valuations, prepared
during the year, indicated that the accrued benefit obligation for all plans was
$41,018,000, which includes $3,533,200 for the unfunded supplemental retirement
plans. The value of the assets in the defined benefit pension plans,
principally calculated at market related values, was $42,093,000 at December
31, 1996.
The Company provides benefits to certain retired employees. The expected costs
of these programs, which are not significant, are accrued over the employees'
years of service.
11. SUBSEQUENT EVENTS
In January 1997, the Company purchased the assets of Evi-Mex S.A. de C.V., the
only other producer of aluminum aerosol cans in Mexico, for approximately $5.5
million.
12
<PAGE>
Notes to Consolidated Financial Statements (continued)
12. SEGMENTED INFORMATION
(a) INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
Sales to Customers Operating Income
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Consumer Products $ 833,126 $ 740,549 $ 51,097 $ 45,548
Container 125,035 107,958 15,154 12,268
Label 193,385 130,811 17,031 12,152
- -------------------------------------------------------------------------------------------------------------------------------
$1,151,546 $ 979,318 83,282 69,968
- -------------------------------------------------------------------------------------------------------------------------------
Corporate expense 8,119 6,628
Interest expense 18,653 11,952
Income taxes 17,864 18,620
- -------------------------------------------------------------------------------------------------------------------------------
Net income $ 38,646 $ 32,768
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Identifiable Assets Depreciation & Amortization Capital Expenditures
1996 1995 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Consumer Products $ 420,705 $ 388,973 $ 22,792 $ 21,693 $ 21,198 $ 32,929
Container 173,122 159,956 9,506 8,501 8,217 5,794
Label 227,907 222,196 13,157 7,161 9,283 5,953
Corporate 31,268 20,487 335 296 385 67
- -------------------------------------------------------------------------------------------------------------------------------
Total $ 853,002 $ 791,612 $ 45,790 $ 37,651 $ 39,083 $ 44,743
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(b) GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
Sales to Customers Operating Income
1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Canada $ 267,899 $ 249,007 $ 29,941 $ 27,599
United States 706,994 596,015 47,431 39,248
United Kingdom 176,653 134,296 5,910 3,121
- -------------------------------------------------------------------------------------------------------------------------------
$1,151,546 $ 979,318 83,282 69,968
- -------------------------------------------------------------------------------------------------------------------------------
Corporate expense 8,119 6,628
Interest expense 18,653 11,952
Income taxes 17,864 18,620
- -------------------------------------------------------------------------------------------------------------------------------
Net income $ 38,646 $ 32,768
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Identifiable Assets Depreciation & Amortization Capital Expenditures
1996 1995 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Canada $ 195,922 $ 181,528 $ 10,389 $ 9,345 $ 9,215 $ 9,632
United States 533,437 504,479 30,401 24,039 24,465 23,139
United Kingdom 123,643 105,605 5,000 4,267 5,403 11,972
- -------------------------------------------------------------------------------------------------------------------------------
Total $ 853,002 $ 791,612 $ 45,790 $ 37,651 $ 39,083 $ 44,743
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
Eleven Year Financial Summary
(in thousands of dollars except per share and ratio data)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SALES AND NET INCOME
Sales $1,151,546 $ 979,318 $ 933,226 $ 830,264 $ 709,602 $ 596,377
Depreciation & amortization 45,790 37,651 35,448 33,035 28,910 26,447
Interest expense 18,653 11,952 8,884 10,899 15,777 19,487
Income (loss) from
continuing operations 38,646 32,768 28,035 6,103* 44,708** 185***
Net income (loss) 38,646 32,768 28,035 6,103 44,708 185
Net income (loss)
per Class B share:
From continuing operations 1.13 .98 .85 .19* 1.37** .01***
Net income 1.13 .98 .85 .19 1.37 .01
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Current assets $ 324,109 $ 274,414 $ 261,420 $ 297,670 $ 314,651 $ 164,742
Current liabilities 267,459 216,703 229,609 246,265 239,583 155,267
Working capital 56,650 57,711 31,811 51,405 75,068 9,475
Total assets 853,002 791,612 664,760 660,919 737,442 598,211
Net debt 234,444 242,848 133,875 66,739 248,792 198,317
Shareholders' equity 394,104 357,867 335,287 313,621 302,925 257,178
Net debt to equity ratio .59 .68 .40 .21 .82 .77
Net debt to total capitalization 37.3% 40.4% 28.5% 17.5% 45.1% 43.5%
- --------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
(in thousands)
Class A - December 31 2,498 2,509 3,425 3,560 3,678 3,882
Class B - December 31 32,477 31,612 29,503 30,292 29,229 29,151
Weighted average
for the year 34,436 33,710 33,313 33,246 32,879 32,784
- --------------------------------------------------------------------------------------------------------------------------
CASH FLOW
EBITDA (note 1) $ 120,953 $ 100,991 $ 89,180 $ 65,518 $ 63,210 $ 53,277
Cash provided by operations 68,947 69,296 53,241 19,799 27,781 17,440
Additions to property,
plant and equipment 39,083 44,743 49,235 62,253 41,786 35,146
Business acquisitions 13,006 135,046 10,045 -- 18,811 34,072
Dividends 9,542 9,374 9,156 9,175 9,024 8,989
Dividends per Class B share .28 .28 .28 .28 .28 .28
Cash flow per
Class B share (note 2) 2.45 2.09 1.91 1.44 1.29 .98
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1990 1989 1988 1997 1986
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SALES AND NET INCOME
Sales $ 473,778 $ 385,665 $ 357,851 $ 309,473 $ 269,237
Depreciation & amortization 19,347 13,487 12,740 10,454 8,824
Interest expense 12,959 12,731 10,994 6,719 6,150
Income (loss) from
continuing operations 8,957 (15,755)**** 4,583 4,748 6,305
Net income (loss) 18,982 78,495 22,083 (29,651) 18,170
Net income (loss)
per Class B share:
From continuing operations .28 (.49)**** .15 .15 .21
Net income .59 2.46 .71 (.95) .60
- -----------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Current assets $ 137,352 $ 242,352 $ 92,772 $ 82,797 $ 81,261
Current liabilities 116,171 189,867 99,442 118,418 77,876
Working capital 21,181 52,485 (6,670) (35,621) 3,385
Total assets 568,442 599,884 458,253 488,072 463,157
Net debt 200,425 82,967 216,626 258,795 214,319
Shareholders' equity 265,756 250,069 175,751 160,589 195,643
Net debt to equity ratio .75 .33 1.23 1.61 1.10
Net debt to total capitalization 43.0% 24.9% 55.2% 61.7% 52.3%
- -----------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
(in thousands)
Class A - December 31 3,996 4,020 4,114 4,118 4,133
Class B - December 31 28,862 28,455 27,705 27,062 26,603
Weighted average
for the year 32,621 31,961 31,456 31,027 30,546
- -----------------------------------------------------------------------------------------------------------
CASH FLOW
EBITDA (note 1) $ 47,163 $ 33,145 $ 32,171 $ 26,460 $ 26,728
Cash provided by operations 27,688 33,546 4,949 29,321 13,699
Additions to property,
plant and equipment 24,684 16,059 32,169 54,708 68,162
Business acquisitions 62,514 66,105 -- 29,172 15,732
Dividends 8,781 7,961 7,370 7,102 6,520
Dividends per Class B share .28 .26 .24 .24 .22
Cash flow per
Class B share (note 2) .89 .57 .56 .49 .50
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* After gain of $65.9 million on sale of Crown Cork & Seal shares and
asset write-down and provision for restructuring costs of $69.7 million.
** After gain of $48.2 million on sale of Crown Cork & Seal shares.
*** After provision of $30.0 million for decline in real estate values and
gain of $23.0 million on sale of Crown Cork & Seal shares.
**** After special reorganization expenses of $32.6 million.
Note 1 EBITDA defined as earnings before interest, income taxes, depreciation
and amortization.
Note 2 Cash flow defined as net income plus depreciation and amortization.
14
<PAGE>
EXHIBIT (g)(2)
[LOGO OF CCL INDUSTRIES INC.]
May 1, 1997
CCL'S EARNINGS GROWTH CONTINUES IN FIRST QUARTER
Dear Shareholder:
Net income for the first quarter of 1997 increased 12% to $10.3 million
from $9.2 million in the previous year. Earnings per Class B share were $0.30,
compared to $0.27 last year, and earnings per Class A share were $0.29, compared
to $0.26 in 1996. Total sales increased by 4.2% to $301.5 million from $289.4
million in the previous year, and cash flow per Class B share grew by 3.3% to
$0.63 from $0.61 in the previous year.
The improvement in the quarter parallels the moderate growth within North
America for non-durable consumer products. The current trend to consolidation of
marketers and their drive for increased market share will continue to create
increased demand for innovative packaging and creative labeling.
Strong operating cash flow and lower average interest rates have resulted
in lower interest expense. On January 2, 1997, the Company repaid its $75
million Canadian debentures by utilizing available bank lines of credit at
substantially lower interest rates. Currently over 60% of the Company's total
debt consists of the $120 million U.S. private notes at a 6.66% fixed interest
rate repayable in March 2006. The increase in working capital during the quarter
relates to the usual seasonal build-up in accounts receivable and inventory
compared to the lower levels on hand at year-end.
CONSUMER PRODUCTS
Custom Manufacturing Division
- -----------------------------
Sales increased to $183 million from $178 million, but operating income was
reduced slightly in the quarter compared to 1996. This reflects the
continuation of the 1996 trend of increased competitive pressure on our North
American business despite the focus on cost reductions. Some highlights for this
division were:
. Awarded a new 3-year contract with a major marketer.
. Strong demand from the North American personal care sector compared to
household products.
. Continued growth in the U.K. personal care market.
Kolmar Cosmetics Division
- -------------------------
Sales increased to $36 million from $31 million in the first quarter of
1996. Operating income increased marginally compared to 1996. The increase in
sales reflects a shift to a higher mix of full service contracts wherein the
division purchased more of the packaging and components for customers.
Generally sales represent only a fill fee for compounding and filling the
product. Trends during the first quarter were:
. Overall demand, while steady, is not growing at the rate of the past two
years.
. Sales leads from South America and Eastern Europe are positive for our
Mexican plant.
. Continued development of 'long wearing' make up applications.
<PAGE>
CONTAINER MANUFACTURING
Sales increased to $32 million from $31 million and our operating income
increased in line with the sales growth in the quarter compared to the same
quarter in 1996. This improvement in sales and income reflects a continued
strong demand for aluminum aerosol and tubes. The demand for aluminum tubes
remains strong and continues to exhaust our existing capacity thereby affecting
plant efficiencies. However, significant progress is being made in training new
crews and in sourcing additional equipment. Two European high speed tube lines
have now been sourced and will be operational by mid-year to respond to this
demand. Highlights for this division are:
. Customer promotional activity of existing personal care product lines is
strong.
. Plastic tube sales are improving with the commercialization of the recently
installed plastic tube line.
. The use of barrier packaging for select product lines continues to expand.
LABEL MANUFACTURING
Sales during the quarter exceeded $50 million, slightly higher than in
1996. Operating income increased marginally in the quarter compared to a year
earlier. Sales and operating income in the U.S. plants exceeded both first
quarter plans and 1996 levels. These positive results, however, were offset in
part by lower sales of label application equipment and the difficult market
conditions being experienced by our Etobicoke, Canada plant. However, these
operations are expected to improve based on strong order backlogs. Highlights
are:
. Demand for Expanded Content Labels in the pharmaceutical industry is
strong.
. A facility to produce Expanded Content Labels in Puerto Rico is expected to
be operational in mid-1997.
. Significant development focus continues on new products such as security,
time/temperature and linerless labels, and on new markets, including
pressure sensitive wine labels.
In looking forward, demand remains firm across all divisions and should
provide a continuation of improved results in 1997 compared to 1996.
Yours truly,
G.S. Lang
Chairman
<PAGE>
CCL INDUSTRIES INC.
CONSOLIDATED STATEMENTS OF CHANGES
IN FINANCIAL POSITION
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
($000's) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used for)
Net income $ 10,283 $ 9,157
Items not requiring cash:
Depreciation and amortization 11,878 11,694
Deferred income taxes 1,699 2,033
- --------------------------------------------------------------------------------
23,860 22,884
Net changes in non-cash operating working capital (28,026) (40,241)
- --------------------------------------------------------------------------------
Total cash used for operations (4,166) (17,357)
- --------------------------------------------------------------------------------
Financing
Net long-term debt borrowings (repayment) (73,732) 46,202
Issue of shares 333 523
Repurchase of shares (1,478) -
Dividends (2,419) (2,361)
- --------------------------------------------------------------------------------
Total cash provided by (used for) financing (77,296) 44,364
- --------------------------------------------------------------------------------
Investment
Additions to property, plant and equipment (5,926) (6,624)
Business acquisitions (8,488) (8,494)
Translation adjustment, net non-monetary assets (8,039) 174
Other (711) (1,946)
- --------------------------------------------------------------------------------
Total cash used for investment (23,164) (16,890)
- --------------------------------------------------------------------------------
Increase (decrease) in cash position (104,626) 10,117
Cash position (bank advances) at beginning of period 9,492 (45,083)
- --------------------------------------------------------------------------------
Bank advances at end of period $ (95,134) $ (34,966)
- --------------------------------------------------------------------------------
Total debt at end of period $(265,338) $(279,103)
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
CCL INDUSTRIES INC.
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
($000's) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales $301,515 $289,438
- --------------------------------------------------------------------------------
Income from operations before undernoted items 30,954 30,372
- --------------------------------------------------------------------------------
Depreciation 9,869 9,731
Amortization 2,009 1,963
Interest expense 3,939 4,773
- --------------------------------------------------------------------------------
15,817 16,467
- --------------------------------------------------------------------------------
Income before income taxes 15,137 13,905
Income taxes 4,854 4,748
- --------------------------------------------------------------------------------
Net income $ 10,283 $ 9,157
- --------------------------------------------------------------------------------
Weighted average earnings per Class B non-voting share $0.30 $0.27
- --------------------------------------------------------------------------------
</TABLE>
Notes:
. The weighted average earnings per Class A voting share is one cent less than
the earnings per Class B share stated above.
. Class A voting shares are convertible, at any time, on a one-for-one basis,
to Class B non-voting shares.
. Class A share dividends, as declared by the Board of Directors from time to
time, are currently set at five cents per annum less than the Class B shares.
. Class B non-voting shares are entitled to voting privileges when
consideration for the Class A shares, under a take-over bid when voting
control has been acquired, exceeds 115% of the market price of the Class B
shares.
. At March 31, the weighted average Class A and Class B shares outstanding was
34,968,861 (1996 - 34,162,861).
<PAGE>
CCL INDUSTRIES INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
AS AT MARCH 31
<TABLE>
<CAPTION>
($000's) 1997 1996
- ----------------------------------------------------------------------
ASSETS
- ------
<S> <C> <C>
Current assets $329,398 $307,527
Property, plant and equipment 338,516 322,729
Other assets 21,849 21,647
Goodwill 172,705 174,844
-------- --------
Total Assets $862,468 $826,747
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Bank advances and current portion of
long-term debt $ 96,909 $ 36,685
Other current liabilities 171,015 160,768
Long-term debt 168,429 242,418
Long-term liabilities 15,139 18,058
Deferred income taxes 10,780 5,471
Shareholders' equity 400,196 363,347
-------- --------
Total Liabilities and Shareholders' Equity $862,468 $826,747
======== ========
- ----------------------------------------------------------------------
Total debt $265,338 $279,103
======== ========
Total debt to equity 66.3% 76.8%
==== ====
Total debt to capitalization 39.9% 43.4%
==== ====
Book value per share $11.46 $10.63
====== ======
</TABLE>
<PAGE>
[LOGO OF CCL INDUSTRIES INC.]
Stock Symbol: TSE & ME - CCQ
For release: 4:00 p.m. Wednesday, May 1, 1997
CCL'S EARNINGS GROWTH CONTINUES IN FIRST QUARTER
<TABLE>
<CAPTION>
FIRST QUARTER
------------------------------
($ million, except per share) 1997 1996 % Change
---- ---- --------
<S> <C> <C> <C>
Sales $301.5 $289.4 4.2%
====== ====== ===
EBITDA 31.0 30.4 2.0%
Depreciation and amortization 11.9 11.7
Interest 3.9 4.8
---- ----
Income before income taxes 15.2 13.9 9.4%
Income taxes 4.9 4.7
---- ----
Net income $10.3 $9.2 12.0%
===== ==== ====
Earnings per Class B Share $0.30 $0.27 11.1%
===== ===== ====
Cash flow per Class B share $0.63 $0.61 3.3%
===== ===== ===
- -------------------------------------------------------------------------------
</TABLE>
Net income for the first quarter of 1997 increased 12% to $10.3 million
from $9.2 million in the previous year. Earnings per Class B share were $0.30,
compared to $0.27 last year, and earnings per Class A share were $0.29, compared
to $0.26 in 1996. Total sales increased by 4.2% to $301.5 million from $289.4
million in the previous year, and cash flow per Class B share grew by 3.3% to
$0.63 from $0.61 in the previous year.
The improvement in the quarter parallels the moderate growth within North
America for non-durable consumer products. The current trend to consolidation of
marketers and their drive for increased market share will continue to create
increased demand for innovative packaging and creative labeling. Strong
operating cash flow and lower average interest rates have resulted in lower
interest expense.
CCL Industries, with sales over one billion dollars, is a leading
international supplier of manufacturing services and specialty packaging
products for the non-durable consumer products market, with an international
network of 34 production facilities and over 6,700 employees. CCL provides
comprehensive formulation and manufacturing services, labels, and aluminum
specialty containers, to marketers of well known brand cosmetic, personal care,
pharmaceutical, household, and specialty food products.
For further information contact:
Mel Snider
Senior Vice-President
Finance and Administration
416-756-8508
