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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d) (4) OF THE SECURITIES EXCHANGE ACT OF 1934
SEDA SPECIALTY PACKAGING CORP.
(NAME OF SUBJECT COMPANY)
SEDA SPECIALTY PACKAGING CORP.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $0.001 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
81517R106
(CUSIP NUMBER OF CLASS OF SECURITIES)
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SHAHROKH "SHAWN" SEDAGHAT
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
SEDA SPECIALTY PACKAGING CORP.
2501 WEST ROSECRANS BOULEVARD
LOS ANGELES, CA 90059-3510
(310) 635-4444
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF PERSON(S) FILING STATEMENT)
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COPIES TO:
<TABLE>
<S> <C> <C>
BRIAN HOFFMANN PAUL T. TOSETTI LEIB ORLANSKI
MCDERMOTT, WILL & EMERY MICHAEL W. STURROCK FRESHMAN, MARANTZ, ORLANSKI,
50 ROCKEFELLER PLAZA LATHAM & WATKINS COOPER & KLEIN
NEW YORK, NEW YORK 10020-1605 633 WEST FIFTH STREET, SUITE 4000 9100 WILSHIRE BOULEVARD
(212) 547-5400 LOS ANGELES, CALIFORNIA 90071-2007 BEVERLY HILLS, CALIFORNIA 90212-3480
(213) 485-1234 (310) 273-1870
</TABLE>
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is SEDA Specialty Packaging Corp., a
Delaware corporation (the "Company"), and the address of the principal
executive offices of the Company is 2501 West Rosecrans Boulevard, Los
Angeles, California 90059-3510. The title of the class of equity securities to
which this statement relates is the Common Stock of the Company, $0.001 par
value per share (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the cash tender offer (the "Offer") disclosed in a
Tender Offer Statement on Schedule 14D-1, dated June 23, 1997 (the "Schedule
14D-1"), of Seawolf Acquisition Corporation ("Purchaser"), a Delaware
corporation and an indirect wholly owned subsidiary of CCL Industries Inc., a
Canadian corporation ("Parent"), to purchase all of the outstanding Shares at
a price of $29.00 per Share, net to the seller in cash without interest (the
"Offer Price"), subject to certain conditions set forth therein. The Offer is
being made by Purchaser pursuant to the Agreement and Plan of Merger and
Reorganization, dated as of June 16, 1997 (the "Merger Agreement"), among the
Company, Parent and Purchaser, a copy of which is filed as Exhibit 1 hereto
and incorporated herein by reference. Subject to certain terms and conditions
of the Merger Agreement, Purchaser will be merged with and into the Company
(the "Merger") as soon as practicable after the expiration of the Offer with
the Company as the corporation surviving the Merger (the "Surviving
Corporation"). The Schedule 14D-1 states that the address of the principal
executive offices of Parent and Purchaser is 105 Gordon Baker Road,
Willowdale, Ontario, Canada M2H 3P8. A copy of the press release issued by the
Company and Parent on June 17, 1997, is filed as Exhibit 2 hereto and
incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the entity filing
this statement, are set forth in Item 1 above.
(b) Except as described or referred to below, there exists on the date
hereof no material contract, agreement, arrangement or understanding and no
actual or potential conflict of interest between the Company or its affiliates
and (i) the Company's executive officers, directors or affiliates or (ii) the
executive officers, directors or affiliates of Parent or Purchaser.
ARRANGEMENTS WITH DIRECTORS, EXECUTIVE OFFICERS, OR AFFILIATES OF THE COMPANY
Certain contracts, agreements, arrangements and understandings between the
Company and certain of its directors, executive officers and affiliates,
including a description of the Company's employment and severance arrangements
with its executive officers, are described in the Company's Information
Statement in sections entitled "BOARD OF DIRECTORS--Directors Compensation"
and "CERTAIN RELATIONSHIPS, TRANSACTIONS AND ARRANGEMENTS" and "EXECUTIVE
OFFICER COMPENSATION." The Information Statement is attached hereto as Annex A
and incorporated herein by reference.
In connection with the transactions contemplated by the Merger, the
following agreements were entered into: the Merger Agreement; the Letter
Agreement, dated June 16, 1997, by and among Parent, Purchaser and the persons
listed on Schedule A thereto (the "Tender Agreement"); the Memorandum of
Agreement, dated June 16, 1997, by and among Shahrokh Sedaghat (the
"Executive"), Parent and the Company (the "Sedaghat Employment Agreement");
the Option Agreement dated as of June 16, 1997, by and between the Executive
and Parent (the "Rollover Option Agreement") and the Incentive Option
Agreement, dated as of June 16, 1997, by and between the Executive and Parent
(the "Incentive Option Agreement" and, together with the Rollover Option
Agreement, the "Option Agreements"); the Non-Competition Agreement, dated June
16, 1997, by and between Shapour Sedaghat and the Company (the "Non-
Competition Agreement"); and the Qualification and Listing of Shares
Agreement, dated June 16, 1997, between Parent and the Executive (the
"Qualification and Listing of Shares Agreement") (collectively, the
"Agreements").
A summary of each of the Agreements follows. These summaries are qualified
in their entirety by reference to the complete text of the Agreements, which
are filed and incorporated herein by reference.
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MERGER AGREEMENT
The Offer is being made pursuant to the Merger Agreement, which is filed as
Exhibit 1 hereto. The Merger Agreement provides that without the prior written
consent of the Company, Purchaser will not (and Parent will not cause
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 set forth in Annex A to the Merger
Agreement (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 Parent, 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 of the Offer (the "Expiration
Date"); provided, however, that the Expiration Date may be extended from time
to time at the sole discretion of Purchaser: (x) in order to comply with any
provision of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (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 will not be extended beyond September 2, 1997.
The Merger Agreement provides that, if Purchaser purchases the Shares
pursuant to the Offer, Purchaser will be merged with and into the Company as
soon as practicable after the satisfaction or waiver of certain conditions.
The Merger will be effective upon the filing of a certificate of merger with
the Secretary of State of Delaware pursuant to the General Corporation Law of
the State of Delaware (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 Purchaser or any Affiliate of Purchaser;
(ii) the 517,713 Shares (the "Remaining Shares") held by the Executive which
will be acquired by Purchaser pursuant to an option (the "Stockholder
Option"), if the Stockholder Option has not been exercised; (iii) Shares held
in the treasury of the Company; and (iv) Shares held by stockholders who have
perfected appraisal rights pursuant to the DGCL, will, by virtue of the
Merger, and without any action on the part of the holder thereof, be converted
into the right to receive, without interest, an amount in cash equal to $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 following terms, (x)
if, and only if, EBITDA (as defined in 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 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 will 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 "Shareholder Merger
Consideration"). All such Remaining Shares, by virtue of the Merger and
without any action on the part of the Executive, will no longer be
outstanding, will be cancelled and retired and will cease to exist, and the
Executive will thereafter cease to have any rights with respect to such
Remaining Shares, except the right to receive the Shareholder Merger
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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 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 time. The
rate of interest applicable to amounts payable pursuant to clause (ii) will
vary with each change in such prime rate.
The Participating Exchangeable Stock will 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 Purchaser, whether voluntary or involuntary, or
any other distribution of the property or assets of 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 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 3.1 to the Merger Agreement), a
holder of Participating Exchangeable Stock will be entitled to require
Purchaser to redeem the Participating Exchangeable Stock registered in the
name of such holder for 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 non-voting shares of Parent (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 (collectively, 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 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 anti-dilution
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 Purchaser or any Affiliate of
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, will no longer be outstanding,
will be cancelled and retired without payment of any consideration therefor
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.
Each share of capital stock of Purchaser issued and outstanding immediately
prior to the Effective Time will 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
Purchaser immediately prior to the Effective Time.
Shares that are outstanding immediately prior to the Effective Time and
which are held by stockholders who have not voted in favor of the Merger or
consented thereto in writing and who have demanded properly in writing
appraisal for such Shares in accordance with Section 262 of the DGCL
(collectively, the "Dissenting Shares") will not be converted into or
represent the right to receive the Merger Consideration. Such stockholders
instead will 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 have withdrawn or lost their rights to appraisal of
such Shares under such Section 262 will 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.
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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") will continue to be
outstanding and, upon payment of the exercise price then in effect with
respect to such Warrant, the holder of such Warrant will 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 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 By-Laws 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 By-Laws 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 Purchaser or its Affiliates will be
voted in favor of the Merger Agreement and the Merger. If permitted by 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,
Purchaser and Parent 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.
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 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 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 (as hereinafter defined) 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 will (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, the Company will consult with Parent and 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
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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 will 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 will 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, will not exceed $750,000; (g) neither it,
nor any of its subsidiaries will 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 will, 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 will 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 subsidiaries will, 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 will 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 will 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 will 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, following the receipt of 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 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 Purchaser obtaining,
through acceptance for payment and payment by Purchaser for the Shares,
pursuant to the Offer or otherwise (with the consent of the Company),
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actual ownership of at least a majority of the issued and outstanding Shares
on a fully diluted basis, Purchaser will be entitled to designate at least
such number of directors to 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 will, at such time, promptly cause Purchaser's
designees to be so elected. Purchaser expects to designate for this purpose,
among others, persons named in Schedule I to the Schedule 14D-9. 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. Purchaser will promptly furnish to the
Company any information in its possession requested by the Company in
connection therewith. In the event that 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
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
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 By-Laws needed to cause Purchaser's designees to be so elected,
including increasing the number of directors. The directors designated by
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 the 802,000
Shares 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, as amended, 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 actions as may be necessary such that at the
Effective Time, the 545,000 Company Options granted to the Executive will be
cancelled and entitle the Executive to: (i) options (the "Rollover Options")
to acquire 545,000 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) receive from
Parent or Purchaser in immediately available funds U.S. $5,491,997; provided
that if the 10 Day Average is less than Cdn. $10.35, then the Executive will
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 Rollover Options shall be
substantially in the form of Exhibit 7.6(a) to the Merger Agreement.
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
Parent's Employee Stock Option Plan, in the amount and for the exercise price
set forth in such Schedule I; provided that Parent will not be in breach of
such covenant with respect to any such employee, if such employee will not
execute his Employment Agreement.
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Parent will cause the Surviving Corporation to honor the arrangements
(including without limitation the indemnity and payment arrangements) with
Crowell, Weedon & Co. ("CWC") and F.M. Roberts & Company, Inc. ("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.
Parent and 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 By-Laws 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, Parent and Purchaser will cause the Company to, and after the
Effective Time, 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 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 will 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 will 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 Parent and 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 has been duly
approved by the holders of a majority of the Shares in accordance with
applicable law and the Certificate of Incorporation and By-Laws of the
Company; (ii) Purchaser, or any Affiliate of Purchaser, has purchased Shares
pursuant to the Offer, provided that this condition will be deemed satisfied
if 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 has expired or
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 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
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United States or state court or governmental or regulatory authority of
competent jurisdiction has 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 Purchaser and the Company; or (ii) by 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 or other competent jurisdiction preventing the
consummation of the Merger has 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.
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 has failed to commence the Offer within the time required in Section
1.1 of the Merger Agreement, or the Offer has 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 will 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 Shapour and Parvindokht Sedaghat ("Mr. & Mrs.
Sedaghat"), the Sedaghat Charitable Remainder Unitrust (the "Sedaghat Trust")
and the Executive (collectively, the "Principal Stockholders") and their
respective Affiliates, has become the beneficial owner of 20% or more of the
Shares or the Board of Directors has publicly withdrawn or adversely modified
its recommendation of acceptance of the Offer, other than as a result of
Purchaser's or Parent's material breach of the Merger Agreement, and has
recommended to the stockholders another offer or has resolved to do so; (ii)
the Company terminates the Merger Agreement pursuant to Section 9.4(ii)
thereof (relating to Acquisition Proposals); or (iii) Purchaser has 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 will 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 will not be paid if: (x)
either Parent or Purchaser has breached its material obligations under the
Merger Agreement, or if any of Parent's or Purchaser's representations and
warranties in the Merger Agreement were incorrect in any material respect when
made, or have since ceased to be true and correct in any material respect; or
(y) Purchaser has not terminated the Offer.
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TENDER AGREEMENT
Pursuant to the Tender Agreement, which is filed as Exhibit 3 hereto, each
of Mr. & Mrs. Sedaghat, both individually and as co-trustees under the
Sedaghat Trust, and the Executive (collectively, the "Principal Stockholders")
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 any statutory or other rights
of withdrawal such Principal Stockholder may otherwise have, unless: (a)
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) 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 to the Offer, 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 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 will be paid the Shareholder Merger
Consideration.
Pursuant to the Tender Agreement, the Executive has granted to Purchaser the
Stockholder Option to acquire all, but not less than all, of the Remaining
Shares for the Shareholder Merger Consideration (except the Participating
Exchangeable Stock would be issued by 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 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 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.
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
Company Options to purchase Shares.
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 Parent, 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,
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discussions or negotiations with any person, other than Parent, 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 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 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 will not take any
action, the result of which could be reasonably expected to prevent or delay
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; and 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 will cooperate
with Purchaser and 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 will 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 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 will terminate on the first to occur of: (a) 11:59 p.m.
Pacific Daylight Time, on June 23, 1997, if 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 18 months thereafter sells, transfers or assigns any of its or his
Shares to, or agrees to any of
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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 defined below), then such Principal
Stockholder will pay to 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
Parent, 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
Purchaser will 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 Purchaser will be that portion of each
component of non-cash consideration in such Alternative Transaction that
equals the Excess Percentage. The "Excess Percentage" will 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 will be determined by the mutual
agreement of 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 will 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 Purchaser. The fees and expenses of such investment banking
firm will be split evenly among the Principal Stockholders participating in
such Alternative Transaction, on the one hand, and Purchaser, on the other
hand.
ANCILLARY AGREEMENTS
Sedaghat Employment Agreement. The Company has entered into the Sedaghat
Employment Agreement, filed as Exhibit 4 hereto, with the Executive for a
three-year term commencing on the day the Offer is consummated. Pursuant to
the Sedaghat Employment Agreement, the Executive will serve as President of
the Company and will carry out such duties and functions as are vested in him
by the Company's By-laws and its Board of Directors. The Executive will 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 will also be entitled to a
performance bonus of 100% of his salary based on achieving a target of 20%
EBITDA growth over the prior year. For EBITDA growth over 20%, a bonus of 10%
of salary will be paid for each 1% of excess growth. Such bonus will be
adjusted so that, if EBITDA growth is between 15% and 20%, the bonus is 50% of
salary plus 10% of salary for each 1% above 15%. The Executive will also be
granted options (the "Incentive Options") to acquire 500,000 Class B Shares at
a 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.
If the Company elects to terminate the Sedaghat Employment Agreement without
cause, or the Executive dies, is disabled, or terminates his employment for
good reason, the salary and benefits payable thereunder are
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paid out over the remaining term, the retention bonus and non-competition
payment is paid in a lump sum and the performance bonus and the Incentive
Options are paid for the year of termination.
The Executive is also subject to a non-competition covenant and non-
solicitation obligations for one year after termination of employment with an
option of the Company to extend the covenant and such obligations for an
additional year upon the payment of $500,000.
Option Agreements. The Option Agreements are effective upon the consummation
of the Offer. Under the Rollover Option Agreement, which is filed as Exhibit 5
hereto, the Executive is entitled to receive Rollover Options to acquire
545,000 Class B Shares at an exercise price equal to the 10 Day Average less
Cdn. $10.35 per share; provided, however, that, upon exercise of such options,
Parent will pay to the Executive an amount in cash equal to the number of
Rollover Options in respect of which the Rollover Options are to be exercised
multiplied by the amount by which the Rollover Option exercise price (less
Cdn. $10.35) exceeds Cdn. $6.0225. The Rollover Options are exercisable at any
time until June 16, 2003 and are fully vested. Under the Incentive Option
Agreement, filed as Exhibit 6 hereto, the Executive is entitled to receive
Incentive Options to acquire 500,000 Class B Shares at an exercise price equal
to the 10 Day Average. The Incentive 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 Incentive Options for that year will be forfeited.
Non-Competition Agreement. Pursuant to the Non-Competition Agreement, filed
as Exhibit 7 hereto, Shapour Sedaghat has agreed not to compete with the
Company for a two-year period and has agreed to be bound by certain
confidentiality obligations.
Qualification and Listing of Shares Agreement. Pursuant to the Qualification
and Listing of Shares Agreement, which is filed as Exhibit 8 hereto, Parent
has agreed, among other things, to cause at its own expense any Class B Shares
issuable to the Executive in connection with the Participating Exchangeable
Stock or upon any exercise by the Executive of the Incentive Options or the
Rollover Options to be unconditionally listed upon the TSE and issued to him
in such a manner that such shares are not subject to, among other things, any
restrictions on resale by him in the Province of Ontario, Canada, and to
indemnify him for any loss suffered by him for its failure to do so.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation. The Board at a special meeting held on June 16, 1997,
unanimously determined that the Offer and the Merger are fair to, and in the
best interests of, the Company and its stockholders, and approved the Offer,
the Merger Agreement and the Merger, and recommended that holders of Shares of
the Company accept the Offer and tender their shares pursuant to the Offer. A
copy of the Company's letter to stockholders dated June 23, 1997, is filed
hereto as Exhibit 9 and incorporated herein by reference.
(b) Background; Reasons for the Board's Conclusions.
Background. Early in 1996, in response to its recognition that the market
price of the Shares did not adequately reflect the Company's operating
performance, growth potential and intrinsic value, the Board of Directors
determined that it should take action to consider the Company's available
strategic alternatives to realize its full value in the public market.
Accordingly, a review of the business and financial condition of the Company
was initiated and the Company retained FMRC, an investment banking firm, to
assist in the process. Pursuant to an engagement letter entered into in
January 1996, FMRC advised and assisted the Company in developing and refining
a comprehensive strategic plan, introduced and participated in several
meetings with securities analysts and institutional investors, evaluated
potential strategic acquisitions, attended and participated in various board
meetings and strategic planning sessions and provided other general financial
consulting services to the Company.
In conducting its review for the purpose of making recommendations to the
Board, FMRC held discussions with Company management, reviewed the Company's
operating statements, analyzed the results of the
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Company's operations in comparison with its competitors, evaluated potential
acquisition targets of the Company and the Company's ability to effect such
acquisitions and made preliminary contact with potential strategic investors
and targets. Strategic alternatives reviewed and analyzed by FMRC included
continuing the business as an independent company, issuing additional equity
securities of the Company, selling the Company or the formation of a joint
venture between the Company and another party. This summary of the FMRC
analysis does not purport to be a complete description of the work undertaken
by FMRC on behalf of the Company.
As a result of this review, the Board of Directors concluded that the
Company's interests would be best served by pursuing strategic acquisitions
and/or a sale of the Company. To that end, the Company entered into a second
engagement letter with FMRC in December 1996 to retain FMRC specifically to
investigate, evaluate and advise the Company about potential strategic
acquisitions and the possibility of a sale of the Company. The January and
December 1996 engagement letters, as amended, are referred to herein as the
"FMRC Engagement Letters."
Upon the advice and assistance of FMRC, the Company pursued contacts with a
number of parties, including Parent, regarding a potential strategic
transaction. No formal offers were received from parties other than Parent,
and attempts to negotiate an acquisition with parties other than Parent ceased
as of June 16, 1997 when Parent and the Company entered into the Merger
Agreement. The background to the Company's discussions with Parent follows (to
the extent any of the following information described events to which neither
the Company nor its advisors were a party, it is based on information provided
by Parent).
In mid-summer of 1996, the Senior Vice-President of Corporate Development of
Parent, Larry A. 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 Parent had similar
strategic objectives and that further discussions would be appropriate.
On January 29, 1997, Wayne McLeod, the President and Chief Executive Officer
of Parent, Mr. Eddy and Rami Younes, President of the Container Division of
Parent, met with the Executive and Mr. Fredric M. Roberts of FMRC to initiate
discussions concerning possible transactions involving Parent's and the
Company's tube manufacturing operations. Although no definitive agreement was
reached at that time, following those discussions, Parent decided to pursue a
possible transaction with the Company. On March 5, 1997, Parent entered into a
confidentiality agreement with the Company and, as a result, the Company
provided 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, a representative of
Parent's financial advisor, met in Chicago with Mr. Roberts to continue
discussions concerning a possible transaction involving Parent and the
Company. Although productive, no firm proposals resulted from this meeting. On
March 26, 1997, Mr. McLeod met with the Executive in Los Angeles to further
pursue a possible transaction and to discuss a variety of alternatives but no
firm decisions were reached in this regard. On April 7, 1997, Mr. McLeod
invited the Executive to Toronto to meet certain members of Parent's board of
directors and certain of 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 30, 1997 discussions continued in Los Angeles among Mr. McLeod, Mr.
John Herrmann, another representative of Parent's financial advisor, the
Executive and Mr. Roberts with respect to a proposed acquisition of the
Company by Parent. 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 Parent in considering an acquisition, certain additional financial data
concerning the Company were disclosed. The meeting did not, however, result in
any agreement with respect to an acquisition or any other transaction between
the Company and 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 Parent and a senior partner of
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Lang Michener, counsel to Parent. At this meeting, the framework of a
transaction involving the acquisition of the Company by Parent was outlined
(including price and terms), with such potential transaction being subject to
the entering into of legally binding definitive agreements and board of
directors approval of 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.
Commencing in early June, 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 Parent's management and its board. On June 6, 1997, Parent
delivered the first draft of the definitive documents to the Company.
Negotiations, due diligence and document preparation continued between June 8
and June 16.
During the week of June 9, the full Board of Directors of the Company
convened two special meetings, and the independent directors of the Company
convened one special meeting, to consider Parent's proposal as well as various
other strategic and financial alternatives. Representatives of the Company's
legal and financial advisors, including FMRC, attended these meetings. During
that time, the Company also engaged CWC to render a fairness opinion relating
to the potential acquisition of the Company by Parent. On June 16, 1997, the
full Board of Directors of the Company held a special meeting and unanimously
approved the Offer and the Merger. The transaction was publicly announced on
the morning of June 17, 1997 and on June 23, 1997, Purchaser commenced the
Offer.
Reasons for the Board's Conclusions. In reaching the determination described
in paragraph (a) above, the Board considered a number of factors, including,
without limitation, the following:
(i) The financial condition, results of operations, business and
strategic objectives of the Company, as well as the risks involved in
achieving those objectives;
(ii) A review of the possible alternatives to the Offer and the Merger
including the possibilities of continuing to operate the Company as an
independent entity, entering into one or more strategic joint ventures, a
sale or partial sale of the Company through a merger or by other means,
various financing alternatives involving the possible sale of the Company's
equity; and, in respect of each alternative, the range of possible benefits
to the Company's stockholders of such alternative and the timing and the
likelihood of actually accomplishing such alternative;
(iii) An oral report from FMRC, financial advisor to the Company,
regarding the likelihood of other potential offers for the Company on terms
more favorable to the stockholders of the Company than the Offer and the
results of its efforts on behalf of the Company seeking indications of
interest in other possible alternatives;
(iv) The financial and valuation analyses presented orally to the Board
by FMRC, including market prices and financial data relating to other
companies engaged in businesses considered comparable to the Company and
the prices and premiums paid in recent selected acquisitions of companies
engaged in businesses considered comparable to those of the Company;
(v) The relationship of the Offer price to historical market prices of
the Shares and to the Company's book value and liquidation value per Share;
(vi) The written opinion of CWC that, based on certain assumptions and
subject to certain limitations, the consideration to be received by the
Company's public stockholders in the Offer and Merger is fair from a
financial point of view to such holders. A copy of the written opinion of
CWC, which set forth the assumptions made, matters considered and basis of
its review, is filed as Exhibit 10 hereto and incorporated herein by
reference.
(vii) The terms and conditions of the Merger Agreement and related
agreements;
14
<PAGE>
(viii) The likelihood that the proposed acquisition would be consummated,
including the experience, reputation and financial condition of Parent and
the risks to the Company if the acquisition were not consummated;
(ix) The fact that the holders of over 60% of the Shares were prepared to
endorse the Merger Agreement and the transactions contemplated thereby;
(x) The fact that the Offer and the Merger are not subject to a condition
that Parent have available financing; and
(xi) The availability of dissenters' rights in the Merger under
applicable law.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weights to
the specific factors considered in reaching its respective determinations.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company engaged FMRC, pursuant to the FMRC Engagement Letters, to assist
the Board in evaluating strategic alternatives, financing sources and other
potential transactions. For such services, the Company agreed to pay FMRC an
advisory fee of $200,000 per annum and to grant FMRC 15,000 Company Options,
and if the transaction contemplated by the Merger Agreement is consummated, a
total fee of approximately $5.3 million, against which any advisory fee
previously paid will be credited. In addition to the foregoing compensation,
the Company has agreed to reimburse FMRC for its reasonable out-of-pocket
expenses and to indemnify FMRC against certain liabilities arising out of or
in connection with its engagement, including liabilities under federal
securities laws.
The Company has also engaged CWC to render a fairness opinion in connection
with the Offer and the Merger. The Company agreed to pay CWC a fee of $110,000
upon delivery of such opinion letter. In addition to the foregoing
compensation, the Company also agreed to reimburse CWC for its reasonable out-
of-pocket expenses not to exceed $10,000 and to indemnify CWC against certain
liabilities arising out of or in connection with its engagement, including
liabilities under federal securities laws.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Except for the transfer of 500,000 Shares by Mr. & Mrs. Sedaghat to the
Sedaghat Trust in June 1997, no transactions in the Shares have been effected
during the past 60 days by the Company or, to the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) Except as described in Item 3, to the best of the Company's knowledge,
all of its executive officers, directors, affiliates or subsidiaries currently
intend to tender all Shares which are held of record or beneficially owned by
such persons pursuant to the Offer, other than Shares, if any, held by such
persons which, if tendered, could cause such person to incur liability under
the provisions of Section 16(b) of the Securities Exchange Act of 1934, as
amended.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Prior to entering into the Merger Agreement, the Company had preliminary
contacts with other entities that had expressed interest in the Company. Upon
execution of the Merger Agreement, the Company ceased contacts with such other
entities. No discussions are underway or are being undertaken by the Company
in response to the Offer that relate to or would result in (1) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any of its subsidiaries; (2) a purchase, sale or transfer of a
material
15
<PAGE>
amount of assets by the Company or any of its subsidiaries; (3) a tender offer
for or other acquisition of securities by or of the Company; or (4) any
material change in the present capitalization or dividend policy of the
Company.
(b) There is no transaction, board resolution, agreement in principle or
signed contract in response to the tender offer other than as disclosed in
Item 3(b) and Item 4(a) of this statement, that relates to or would result in
(1) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any of its subsidiaries; (2) a purchase, sale or
transfer of a material amount of assets by the Company or any of its
subsidiaries; (3) a tender offer for or other acquisition of securities by or
of the Company; or (4) any material change in the present capitalization of
dividend policy of the Company.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached as Annex A hereto is being furnished in
connection with the possible designation by Purchaser, pursuant to the Merger
Agreement, of certain persons to be appointed to the Company's Board of
Directors other than at a meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<C> <S>
Exhibit 1. Agreement and Plan of Merger and Reorganization, dated June 16,
1997, by and among Seawolf Acquisition Corporation, CCL Industries
Inc. and SEDA Specialty Packaging Corp.
Exhibit 2. Press Release issued by the Company and Parent on June 17, 1997.
Exhibit 3. Letter Agreement, dated June 16, 1997, by and among CCL Industries
Inc., Seawolf Acquisition Corporation and the persons listed on
Schedule A thereto.
Exhibit 4. Memorandum of Agreement, dated June 16, 1997, by and among
Shahrokh Sedaghat, CCL Industries Inc. and SEDA Specialty
Packaging Corp.
Exhibit 5. Option Agreement, dated as of June 16, 1997, by and between
Shahrokh Sedaghat and CCL Industries Inc.
Exhibit 6. Incentive Option Agreement, dated as of June 16, 1997, by and
between Shahrokh Sedaghat and CCL Industries Inc.
Exhibit 7. Non-Competition Agreement, dated June 16, 1997, by and between
Shapour Sedaghat and SEDA Specialty Packaging Corp.
Exhibit 8. Qualification and Listing of Shares Agreement, dated June 16,
1997, between CCL Industries Inc. and Shahrokh Sedaghat.
Exhibit 9. Copy of Letter to Stockholders, dated June 23, 1997.*
Exhibit 10. Opinion of Crowell, Weedon & Co. dated June 16, 1997.*
</TABLE>
- --------
* Included in materials being distributed to stockholders of the Company.
16
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: June 23, 1997 SEDA Specialty Packaging Corp.
By: /s/ Shahrokh Sedaghat
----------------------------------
Shahrokh Sedaghat
Chairman, President and
Chief Executive Officer
17
<PAGE>
ANNEX A
[LOGO OF SEDA SPECIALTY PACKAGING]
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about June 23, 1997, as
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") to the holders of record at the close of business on
June 16, 1997 of the Shares (the "Record Date"). Capitalized terms used and
not otherwise defined herein shall have the meaning ascribed to them in the
Schedule 14D-9. You are receiving this Information Statement in connection
with the possible election of persons designated by Parent to a majority of
the seats on the Board of Directors of the Company (the "Board"). The Merger
Agreement requires the Company, after purchase by Purchaser pursuant to the
Offer of such number of shares that satisfies the Minimum Condition, to use
its reasonable best efforts to cause Parent's designees (the "Designees") to
be elected to a majority of the seats on the Company's Board. This Information
Statement is required by Section 14(f) of the Securities Exchange Act of 1934
(the "Exchange Act") and Rule 14f-1 thereunder. You are urged to read this
Information Statement carefully. However, you are not required to take any
action.
Pursuant to the Merger Agreement, on June 23, 1997, Parent commenced the
Offer. The Offer is scheduled to expire on July 21, 1997.
The information contained in this Information Statement (including
information listed in Schedule I attached hereto) concerning Parent, Purchaser
and Designees has been furnished to the Company by Parent and Purchaser, and
the Company assumes no responsibility for the accuracy or completeness of such
information.
The Company Stock, $0.001 par value per share ("Common Stock"), is the only
class of voting securities of the Company outstanding. Each share of Common
Stock has one vote. As of the Record Date, there were 5,264,874 shares of
Common Stock outstanding.
BOARD OF DIRECTORS
GENERAL
The Board currently consists of five members. Members of the Board are
elected to serve one-year terms and each director holds office until his
successor is elected and qualified or until his earlier death, resignation or
removal.
BUYER DESIGNEES
Pursuant to the Merger Agreement, promptly upon the acquisition by Purchaser
pursuant to the Offer of such number of Shares that satisfies the Minimum
Condition and from time to time thereafter, Parent is entitled
<PAGE>
to have its Designees hold a majority of the seats on the Company's Board.
Upon the purchase of such number of Shares pursuant to the Offer, the Company
will use its reasonable best efforts to cause the Designees to be elected or
appointed to the Board.
Parent has informed the Company that it will choose the Designees from the
directors and executive officers listed in Schedule I attached hereto. Parent
has informed the Company that each of the directors and executive officers
listed in Schedule I has consented to act as a director, if so designated. The
business address of Parent and Purchaser is 105 Gordon Baker Road, Willowdale,
Ontario, Canada M2H 3P8.
It is expected that the Designees may assume office at any time following
the purchase by Purchaser pursuant to the Offer of such number of Shares that
satisfies the Minimum Condition, which purchase cannot be earlier than July
21, 1997, and that upon assuming office, the Designees will thereafter
constitute at least a majority of the Board.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The names, ages and principal occupation for the past five years and
directorships of the Company's directors and executive officers are as
follows:
Directors
SHAHROKH "SHAWN" SEDAGHAT, age 31, was elected President of the Company in
November 1992 and Chairman of the Board and Chief Executive Officer of the
Company in February 1995. From March 1985 to November 1992, Mr. Sedaghat held
various positions with the Company including machine operator, assembly
supervisor, molding supervisor, quality control manager and general manager.
RONALD W. JOHNSON, age 49, has been Vice President of Finance and Chief
Financial Officer of the Company since November 1992. From July 1983 until
joining the Company, he was employed by McDonnell Douglas Information Systems
Company in various executive positions with various subsidiaries and divisions
of such company, including Vice President of Finance and Administration of
McDonnell Douglas Computer Systems Company, Vice President of Financial
Planning and Analysis of McDonnell Douglas Information Systems Group and Vice
President of Finance and Chief Financial Officer of Microdata Corporation.
From 1978 to 1983 he was Corporate Controller and Chief Accounting Officer of
Electronic Memories and Magnetics Corporation, and from 1972 to 1978 he was
employed by Price Waterhouse. Mr. Johnson is a Certified Public Accountant.
DANN V. ANGELOFF, age 61, became a director of the Company in September
1993. Since 1976 Mr. Angeloff has been the President of The Angeloff Company,
a corporate financial advisory firm. Mr. Angeloff serves on the Board of
Directors of Compensation Resource Group, Eagle Lifestyle Nutrition, Inc.,
Leslie's Poolmart, Nicholas/Applegate Growth Equity Fund, Nicholas/Applegate
Investment Trust, Public Storage, Inc., Ready Pac Produce, Inc., and Royce
Medical Company. Mr. Angeloff is a former Trustee of the University of
Southern California and is a University Counselor to the President of the
University of Southern California.
ROBERT H. KING, age 75, became a director of the Company in February 1995.
Mr. King has served as President of Consumer Marketing International, Inc., a
consumer product marketing company, since 1984. From 1978 to 1984, he served
as Chairman, President, Chief Executive Officer and Chief Operating Officer of
World Book, Inc. a publisher of reference books. From 1968 - 1978, he served
as President to Time-Life Libraries, Inc., a publishing subsidiary of Time-
Life, Inc.
ALFRED E. OSBORNE, JR., Ph.D., age 51, became a director of the Company in
November 1993. He currently serves as Associate Professor of Business
Economics and the Director of the Harold Price Center for Entrepreneurial
Studies in the Anderson Graduate School of Management at U.C.L.A., where he
has held several management and teaching positions since 1972. Dr. Osborne
currently serves on the Board of Directors of Greyhound Lines, Inc.,
Nordstrom, Inc., The Times Mirror Company and United States Filter
Corporation. He has authored numerous articles, reports and other publications
with respect to capital market issues confronting small and growing
enterprises and is a member of the Council of Economic Advisors for
California.
A-2
<PAGE>
Executive Officers
DENNIS CAMARA, age 41, has been Vice President of Operations, Injection
Molding since May 1993. Prior to that, he was Plant Manager of the Closure
Division from May 1991 to May 1993. Prior to joining the Company, Mr. Camara
was employed by Witco Corporations (Plastics) from 1989 to 1991 as Production
Manager where he directed activities of the manufacturing department. From
1986 to 1989 he was employed by Newport Plastics, Inc. as a plant manager.
From 1976 to 1986, Mr. Camara was employed by JSN Industries as a Vice
President of Manufacturing.
EDWARD F. CSASZAR, age 45, became Vice President of Sales and Marketing of
the Company in August 1993. Mr. Csaszar has served as President of General Kap
Corporation, a company involved in the development and licensing of
proprietary closures, since February 1986. From June 1988 to August 1993, he
was the owner of Co-Pak Group, a manufacturer's representative for plastics
manufacturers to the packaging industry.
EDWARD S. DOMBROSKI, age 53, has been Vice President and General Manager
since October of 1994. From April 1993 to October 1994, he was the Company's
Vice President of Quality and Graphic Arts. He joined the Company in March
1992 as a manufacturing manager. Prior to joining the Company he was employed
by Peerless Tube Co. since 1970 where he worked as a plant manager until 1992
when he became Director of Manufacturing.
ANDREAS ISELI, age 38, has been Vice President of Operations, Tube Division
since March 1993. Prior to that time, Mr. Iseli was the Company's Plant
Manager, Tube Division from February 1990 to March 1993. Prior to joining the
Company, Mr. Iseli was employed by Asia, Switzerland, a packaging machinery
manufacturer, as Assistant Department Manager in Engineering from July 1987 to
February 1990.
DANIEL E. WIENEKE, age 48, has been the President of the Company's American
Safety Closure subsidiary since August 1995. Before joining SEDA, Mr. Wieneke
served as Vice President of Operations for E.T. Brown Drug Company, Inc. He
was previously a Vice President of Hayward Laboratories, a drug manufacturer.
Prior to those positions, he served in senior management positions with
Nestle-Lemur Company, Contract Packaging Corporation and Shield Packaging
Company, where he was National Sales Manager.
There are no family relationships between any of the directors and executive
officers of the Company.
The Board of Directors held four meetings during 1996. Each director
attended at least 75% of the aggregate of all meetings held by the Board in
1996 during his tenure as a director.
COMMITTEES AND BOARD MEETINGS
The Compensation Committee of the Board of Directors reviews and approves
the Company's compensation programs. See "Compensation Committee Report." Dann
V. Angeloff, Chairman, and Alfred E. Osborne, Jr. are the current members of
the Company's Compensation Committee which was formed in September 1993. The
Compensation Committee held two meetings during 1996 and each member attended
the meetings.
The Audit Committee of the Board of Directors consists of Messrs. Osborne,
Chairman, and Angeloff. It met two times in 1996 and each member attended the
meetings. The Board of Directors presently has no Nominating Committee.
DIRECTORS COMPENSATION
For 1996, outside directors were entitled to: (i) an annual payment of
$10,000, payable in equal quarterly installments of $2,500, (ii) $750 per
meeting of the Board of Directors or any committee thereof that is attended in
person, (iii) $500 per attended telephonic Board meeting, and (iv) $750 per
Committee meeting for serving as a Committee Chairman. These amounts were pro
rated for the time served by the outside directors. In 1997, the directors'
compensation was increased by 20%.
A-3
<PAGE>
In addition, each outside Board member was granted stock options exercisable
for 15,000 shares at a per share price equal to the market price of the
Company's Common Stock on the date such person became a member of the Board,
vesting at the rate of 25% a year. For each year after the first year of Board
membership, an outside director may be granted additional options at the then-
market price on the date of grant. The Company may change this policy in the
future. In October 1994, the Company issued each of Dann V. Angeloff and
Alfred E. Osborne, Jr., stock options for 5,000 shares at a per share exercise
price of $12.50. In February 1995, the Company issued each of Dann V.
Angeloff, Alfred E. Osborne, Jr. and Robert H. King stock options for 15,000
shares at a per share exercise price of $11.1875.
A-4
<PAGE>
STOCK OWNERSHIP INFORMATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the Record Date by (i) each
person known by the Company to own beneficially 5% or more of the Common
Stock, (ii) each current director of the Company, (iii) each executive officer
listed in the Summary Compensation Table under "Executive Compensation" below
and (iv) all current directors and executive officers as a group. The
percentage of ownership in the following chart is based on 5,264,874 shares of
the Common Stock outstanding as of the Record Date and does not give effect to
any shares that may be issued upon exercise of outstanding stock options:
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS(1) OWNED(2) OF CLASS
- ------------------- ------------ --------
<S> <C> <C>
Shapour and Pamela Sedaghat, as joint tenants and co-
trustees(3)............................................. 2,185,967 41.5
Shawn Sedaghat(4)........................................ 1,598,333 30.4
Edward F. Csaszar(5)..................................... 35,750 *
Edward S. Dombroski(6)................................... 21,000 *
Andreas Iseli(7)......................................... 26,750 *
Ronald W. Johnson(6)..................................... 30,000 *
Daniel E. Wieneke(6)..................................... 1,125 *
Dann V. Angeloff(8)...................................... 35,000 *
Alfred E. Osborne, Jr.(8)................................ 36,000 *
Robert H. King(6)........................................ 11,250 *
All Directors and Executive Officers as a Group (10
persons)(9)............................................. 1,826,258 34.7
Fidelity Capital Appreciation Fund(10)................... 327,000 6.2
82 Devonshire Street
Boston, MA 02109
Verissimo Research and Management, Inc.(10).............. 282,700 5.4
775 Baywood Drive
Petaluma, CA 94954
</TABLE>
- --------
*Less than one percent.
(1) Each of such persons may be reached through the Company at 2501 West
Rosecrans Boulevard, Los Angeles, California 90059-3510 unless otherwise
stated.
(2) The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by such
person, subject to applicable community property laws.
(3) Includes 500,000 shares beneficially owned by the Sedaghat Charitable
Remainder Unitrust for which Shapour and Pamela serve as co-trustees.
(4) Includes 545,000 shares issuable pursuant to stock options exercisable
within 60 days of the Record Date Excludes 10,800 shares beneficially owned
by Shawn Sedaghat's wife, which Mr. Sedaghat disclaims.
(5) Includes 27,750 shares issuable pursuant to stock options exercisable
within 60 days of the Record Date.
(6) Represents shares issuable pursuant to stock options exercisable within 60
days of the Record Date.
(7) Includes 21,750 shares issuable pursuant to stock options issuable within
60 days of Record Date.
(8) Includes 30,000 shares issuable pursuant to stock options exercisable
within 60 days of the Record Date.
(9) Includes 734,375 shares issuable pursuant to stock options exercisable
within 60 days of the Record Date.
(10) Based on publicly available information.
A-5
<PAGE>
CERTAIN RELATIONSHIPS, TRANSACTIONS AND ARRANGEMENTS
Pacific Atlantic Brokerage, Inc. ("Pacific Atlantic"), a corporation
majority owned by Shawn Sedaghat, provides freight forwarding services to the
Company. The cost of the services provided by Pacific Atlantic to the Company
in 1996, and charged to operations was $1,243,000. The Company's Audit
Committee periodically reviews the freight forwarding services and terms under
which those services are provided to the Company by Pacific Atlantic. To the
extent that such freight forwarding services are not competitive in terms of
price and otherwise with those that could be obtained from independent
sources, the Committee would consider modifying the relationship accordingly
or associating with another freight forwarding company. As of December 31,
1996, in the aggregate, the Company owed $90,000 to Pacific Atlantic. The
Company believes that the terms of the transactions referenced in this section
were on terms as favorable to the Company as would have been received in
transactions negotiated at arms-length.
A-6
<PAGE>
EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain summary information regarding
compensation paid by the Company for services rendered during the fiscal years
ended December 31, 1996, 1995 and 1994 to the Company's Chief Executive
Officer and its most highly paid executive officers other than the Chief
Executive Officer whose compensation exceeded $100,000 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------- ---------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS OPTION($)
- ------------------ ---- --------- -------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Shawn Sedaghat.......... 1996 345,427 345,000 15,336(1) -- --
Chairman, President and 1995 300,150(2) 125,000 17,796(1) -- 250,000
Chief Executive Officer 1994 193,167 60,000 11,550(1) -- 60,000
Edward F. Csaszar....... 1996 207,150 -- 10,275(1) -- --
Vice President of Sales 1995 174,821 -- 10,256(1) -- 15,000
and Marketing 1994 150,123 5,000 9,600(1) -- 2,000
Edward S. Dombroski..... 1996 100,200 25,000 5,153(1) -- --
Vice President and 1995 98,153 25,000 6,155(1) -- 15,000
General Manager 1994 86,634 5,000 5,152(1) -- 5,000
Andreas Iseli........... 1996 142,300 -- 7,338(1) -- --
Vice President 1995 92,049 -- 7,509(1) -- 15,000
Operations, 1994 68,769 -- 6,534(1) -- 4,000
Tube Division
Ronald W. Johnson....... 1996 105,200 50,000 8,319(1) -- --
Vice President of 1995 100,259 40,000 7,093(1) -- 15,000
Finance, Chief 1994 100,415 30,000 1,200(1) -- 5,000
Financial Officer and
Secretary
Daniel E. Wieneke....... 1996 227,019 10,000 10,800(1) -- 500
President of American 1995 71,388(3) -- 4,000(1) -- 2,000
Safety Closure Corp. 1994 -- -- -- -- --
</TABLE>
- --------
(1) Primarily represents automobile expenses or allowances paid by the
Company.
(2) Shawn Sedaghat was elected Chairman of the Board and Chief Executive
Officer effective February 28, 1995.
(3) Mr. Wieneke joined the Company in August 1995.
STOCK OPTION PLAN
A total of 1,000,000 shares of the Company's Common Stock have been reserved
for issuance under the Company's 1993 Incentive Stock Option Plan and
Nonstatutory Stock Option Plan, as amended (the "Option Plan"), which expires
by its own terms in 2003. A total of 807,000 options were outstanding at
December 31, 1996, 775,000 of which had been granted to executive officers and
directors of the Company. The total options outstanding at December 31, 1996
are exercisable at the following prices:
<TABLE>
<CAPTION>
PRICE SHARES PRICE SHARES
-------- ------- ------ -------
<S> <C> <C> <C>
$10.00 237,000 $12.31 180,000
11.1875 125,000 12.50 36,000
11.96 70,000 13.75 60,000
12.00 83,500 14.00 15,000
19.50 500
</TABLE>
A-7
<PAGE>
The Option Plan provides for the grant of "incentive stock options" within
the meaning of Section 442 of the Internal Revenue Code of 1986, as amended,
and nonqualified stock options to employees, officers, directors and
consultants of the Company. Incentive stock options may be granted only to
employees. The Option Plan is administered by a committee appointed by the
Board, which determines the terms of options granted, including the exercise
price, the number of shares subject to the option, and the option's
exercisability.
The exercise price of all options granted under the Option Plan must be at
least equal to the fair market value of such shares on the date of grant. The
maximum term of options granted under the Option Plan is ten years. With
respect to any participant who owns stock representing more than 10% of the
voting rights of the Company's outstanding capital stock, the exercise price
of any option must be at least equal to 110% of the fair market value on the
date of grant.
EMPLOYMENT AGREEMENTS
None of the Named Executive Officers has an employment contract except for
Mr. Wieneke. Effective August 1995, Mr. Wieneke entered into a two year
employment contract. Under his contract, he receives a salary of $225,000 per
year subject to cost of living increases and bonuses of 5% of the net income
of American Safety Closure Corp.
The following stock options were granted by the Company to the Named
Executive Officers during the fiscal year ended December 31, 1996:
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1996
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF POTENTIAL REALIZABLE
SECURITIES TOTAL OPTIONS EXERCISE VALUE AT ASSUMED
UNDERLYING GRANTED TO OR ANNUAL RATES OF STOCK
OPTIONS EMPLOYEES BASE EXPIRATION PRICE APPRECIATION FOR
NAME GRANTED IN FISCAL YEAR PRICE ($/SH) DATE OPTION TERM(1)
---- ---------- -------------- ------------ --------------- -----------------------
5% ($) 10% ($)
----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shawn Sedaghat.......... -- -- -- -- -- --
Edward F. Csaszar....... -- -- -- -- -- --
Edward S. Dombroski..... -- -- -- -- -- --
Andreas Iseli........... -- -- -- -- -- --
Ronald W. Johnson....... -- -- -- -- -- --
Daniel E. Wieneke....... 500 100% $19.50 October 2, 2001 $2,695 $ 5,950
</TABLE>
- --------
(1) The dollar amounts under these columns are the result of calculations at
the 5% and 10% annual rates of stock appreciation prescribed by the
Securities and Exchange Commission and are not intended to forecast
possible future appreciation, if any, of the Company's stock price. No
gain to the optionees is possible without an increase in the price of the
Company's stock, which will benefit all stockholders commensurately.
A-8
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED DECEMBER 31, 1996 DECEMBER 31, 1996
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED($) EXERCISABLE/ UNEXERCISABLE(1) EXERCISABLE/ UNEXERCISABLE(2)
---- -------- ----------- ----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Shawn Sedaghat.......... -0- -- 545,000/0 $ 2,764,500/$0
Edward F. Csaszar....... -0- -- 24,000/8,000 $113,344/$41,844
Edward S. Dombroski..... -0- -- 17,250/8,750 $ 81,844/$44,844
Andreas Iseli........... -0- -- 18,000/8,500 $ 85,594/$43,844
Ronald W. Johnson....... -0- -- 26,250/8,750 $122,344/$44,844
Daniel E. Wieneke....... -0- -- 1,125/1,375 $ 6,500/$6,500
</TABLE>
- --------
(1) For a description of the terms of such options, see "Option Plan."
(2) Based on a price per share of $16.50, which was the price of a share of
Common Stock as quoted on the Nasdaq National Market at the close of
business on December 31, 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee (the "Committee") was formed by the Board of
Directors in 1993 to set and administer the policies governing the Company's
compensation programs, including stock option plans. The Committee receives
and evaluates information regarding compensation practices for comparable
business in similar industries, and considers this information in determining
base salaries, bonuses and stock-based compensation. The Committee is
authorized to engage or employ such outside professional consultants or other
services as in its discretion may be required to fulfill its responsibilities.
The Committee also discusses and considers executive compensation matters and
makes decisions thereon.
The Company's compensation policies are structured to link the compensation
to the Chief Executive Officer, the Named Executive Officers and other
executives of the Company with corporate performance. Through the
establishment of compensation programs, the Company has attempted to align the
financial interests of its executives with the results of the Company's
performance, which is designed to put the Company in a competitive position
regarding executive compensation and to ensure corporate performance, which
will then enhance stockholder value.
The Company's executive compensation philosophy is to set base salaries in
accordance with those of comparable business, and then to provide performance-
based variable compensation, such as bonuses, as determined by the
Compensation Committee according to factors such as the Company's earnings as
well as value received by stockholders. This philosophy allows total
compensation to fluctuate from year to year. As a result, the Named Executive
Officers' actual compensation levels in any particular year may be above or
below those of the Company's competitors, depending upon the evaluation of the
compensation factors described above by the Compensation Committee.
COMPENSATION COMMITTEE REPORT
For fiscal 1996 the base salary amounts and bonuses for the Named Executive
Officers was determined by conducting an informal survey of salaries and
bonuses of comparable companies, taking into account performance of the other
companies as compared to the Company and the individual accomplishments of the
Named Executive Officers and their role in achieving the financial results
attained by the Company for the year.
To the extent readily determinable and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to the Company and to the executives of various compensation.
Some types of compensation and their deductibility depend upon the timing of
an executive's
A-9
<PAGE>
vesting or exercise of previously granted rights. Further interpretations of
and changes in the tax laws also affect the deductibility of compensation. To
the extent reasonably practicable and to the extent it is within the
Committee's control, the Committee intends to limit executive compensation in
ordinary circumstances to that deductible under Section 162(m) of the Internal
Revenue Code of 1986, as amended. In doing so, the Committee may utilize
alternatives (such as deferring compensation) for qualifying executive
compensation for deductibility and may rely on grandfathering provisions with
respect to existing contractual commitments.
The Committee believes that its overall executive compensation program has
been successful in providing competitive compensation appropriate to attract
and retain highly qualified executives and also to encourage increased
performance from the executive group which should create added stockholder
value.
COMPENSATION COMMITTEE
Dann V. Angeloff--Chairman
Alfred E. Osborne, Jr.
A-10
<PAGE>
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
TOTAL RETURN TO STOCKHOLDERS
REINVESTED DIVIDENDS
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG SEDA SPECIALTY, S&P 500 INDEX AND PEER GROUP
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period SEDA S&P
(Fiscal Year Covered) SPECIALTY 500 INDEX PEER GROUP
- --------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 10/26/93 $100 $100 $100
FYE 12/93 $152 $101 $ 99
FYE 12/94 $ 84 $119 $102
FYE 12/95 $ 88 $127 $141
FYE 12/96 $188 $123 $173
</TABLE>
Set forth above is a performance graph comparing the cumulative total
stockholder returns on the Company's Common Stock, the S&P 500 Stock Index and
an index average of the Company's peer group, composed of comparable publicly
traded companies in the plastics packaging business, as selected by the
Company. Such peer group includes: Aptargroup, Inc., Kerr Group, Inc., Liqui-
Box Corp., Sealright Co., Inc., Sun Coast Industries, Inc. and Tuscarora, Inc.
The performance graph covers the period commencing October 26, 1993 (the
effective date of the Company's initial public offering) and ended December
31, 1996, and assumes $100 invested on October 26, 1993 in the Company's
Common Stock, S&P 500 Stock Index and the stock index of the peer group.
A-11
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND PURCHASER
As of the date of this Information Statement, Parent has not determined who
will be Designees. However, such Designees will be selected from the following
list of directors and executive officers of Parent and Purchaser upon the
purchase by Purchaser pursuant to the Offer of such number of shares that
satisfies the Minimum Condition. The information contained herein concerning
Parent and Purchaser and their respective directors and executive officers has
been furnished by Parent and Purchaser. The Company assumes no responsibility
for the accuracy or completeness of such information.
1. Parent. The name, business address, present principal occupation or
employment and five-year employment history of each director and executive
officer of 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 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 Parent nor any director or executive officer of 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 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 Parent since
1990. Director since May 26, 1982. Also Chairman of
Executive Committee.
Senior Vice President, Corporate Development of Parent
Larry A. Eddy(54) since March 1, 1988.
Meldon H. Snider(56) Senior Vice President, Finance and Administration of
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 Parent
for more than 5 years.
Robert C. Broad(63) Vice President of Parent since 1989; President of CCL
Label, a division of Parent, since January 1994;
previously Vice President, Investor Relations of
Parent.
Christopher Denney(52) Vice President of Parent and President of Kolmar
Laboratories, a division of Parent, since August 1994;
President of Kolmar Laboratories from January to
August 1994; Chief Executive of CCL Custom
Manufacturing United Kingdom, a division of Parent, to
December 1993; previously Operations Director of CCL
Custom Manufacturing United Kingdom until December
1992.
L. George Inman(42) Vice President of Parent and Senior Vice President,
Finance and Administration of CCL Custom
Manufacturing, a division of Parent, since December
1992; previously Vice President of Parent and Vice
President, Finance and Administration, CCL Consumer
Products Group of Parent.
Steven W. Lancaster(48) Vice President and Treasurer of Parent since 1991.
</TABLE>
A-12
<PAGE>
<TABLE>
<CAPTION>
NAME (AGE) EMPLOYMENT HISTORY
---------- ------------------
<C> <S>
Donald G. Lang(42) Vice President of Parent and President, CCL Custom
Manufacturing, a division of Parent since January 1993;
previously President, Aerosol Division, CCL Custom
Manufacturing, a division of Parent.
Stuart W. Lang(46) President of CCL Label Canada, a division of Parent
since October 1991. Director of Parent since May 23,
1991. Also Chairman of Nominating and Governance
Committee.
Mary T. Roy(40) Vice President, Environmental and Regulatory Services
of Parent since January 1995; previously Director of
Environmental and Regulatory Services of Parent.
Ronald N. Terin(49) Vice President of Parent and Vice President, Finance of
CCL Label since November 1995; previously Vice
President & Corporate Controller of Parent and Vice
President, Finance of CCL Label since June 1994;
previously Vice President & Corporate Controller of
Parent.
Rami E. Younes(46) Vice President of Parent and President and Chief
Executive Officer of CCL Container Manufacturing, a
division of Parent, since November 1993; previously
President and Chief Executive Officer, CCL Container
Manufacturing division.
Assistant Secretary and General Counsel of Parent since
Bohdan I. Sirota(46) 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 Parent since May 23,
1991. Also Chairman of Human Resources Committee.
Arnold Englander(59) Partner, Lang Michener (Barristers & Solicitors) since
1974. Director of 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 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 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 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 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 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>
A-13
<PAGE>
2. Purchaser. The name, business address, present principal occupation or
employment and five-year employment history of each director and executive
officer of 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 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
Purchaser nor any director or executive officer of 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>
A-14
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT INDEX
- ------- -------------
<C> <S>
Exhibit 1. Agreement and Plan of Merger and Reorganization, dated June 16,
1997, by and among Seawolf Acquisition Corporation, CCL Industries
Inc. and SEDA Specialty Packaging Corp.
Exhibit 2. Press Release issued by the Company and Parent on June 17, 1997.
Exhibit 3. Letter Agreement, dated June 16, 1997, by and among CCL Industries
Inc., Seawolf Acquisition Corporation and the persons listed on
Schedule A thereto.
Exhibit 4. Memorandum of Agreement, dated June 16, 1997, by and among
Shahrokh Sedaghat, CCL Industries Inc. and SEDA Specialty
Packaging Corp.
Exhibit 5. Option Agreement, dated as of June 16, 1997, by and between
Shahrokh Sedaghat and CCL Industries Inc.
Exhibit 6. Incentive Option Agreement, dated as of June 16, 1997, by and
between Shahrokh Sedaghat and CCL Industries Inc.
Exhibit 7. Non-Competition Agreement, dated June 16, 1997, by and between
Shapour Sedaghat and SEDA Specialty Packaging Corp.
Exhibit 8. Qualification and Listing of Shares Agreement, dated June 16,
1997, between CCL Industries Inc. and Shahrokh Sedaghat.
Exhibit 9. Copy of Letter to Stockholders, dated June 23, 1997.*
Exhibit 10. Opinion of Crowell, Weedon & Co. dated June 16, 1997.*
</TABLE>
- ------------
* Included in materials being distributed to stockholders of the Company.
<PAGE>
EXHIBIT 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
----------
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.
5
<PAGE>
2.2 Effective Time. As soon as practicable after all conditions set forth in
--------------
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.
---------------------------------------
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.
6
<PAGE>
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
-------
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.
7
<PAGE>
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,
8
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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
12
<PAGE>
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.
13
<PAGE>
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
---------------------------------------------
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
14
<PAGE>
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
<PAGE>
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.
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<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
-10-
<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.
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<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).
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<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
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<PAGE>
EXHIBIT 2
[CCL INDUSTRIES INC. LETTERHEAD]
CCL INDUSTRIES INC. (TORONTO)
Stock Symbol: TSE & ME - CCQ
for release: June 17, 1997
CCL TO ACQUIRE SEDA SPECIALTY PACKAGING
FOR $255 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 $255 (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."
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 of 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.
<PAGE>
FOR FURTHER INFORMATION:
Mel Snider
Senior Vice-President, Finance and Administration
(416) 756-8508
<PAGE>
EXHIBIT 3
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>
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(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 4
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>
Page 5
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;
<PAGE>
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
<PAGE>
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
<PAGE>
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>
Page 13
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
<PAGE>
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
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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.
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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.
<PAGE>
Page 17
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.
<PAGE>
Page 18
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>
- S1 -
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>
-2-
(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>
-3-
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>
-4-
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 5
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 6
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 7
NON-COMPETITION AGREEMENT made as of the 16th day of June, 1997.
B E T W E E N:
SHAPOUR SEDAGHAT,
of the City of Los Angeles,
in the State of California,
(hereinafter called the "Founder"),
OF THE FIRST PART,
- and -
SEDA SPECIALTY PACKAGING CORP.,
a corporation reincorporated under the
laws of Delaware,
(hereinafter called the "Corporation")
OF THE SECOND PART.
WHEREAS:
1. The Founder is the founder, principal shareholder and a consultant to the
Corporation.
2. Pursuant to an Agreement and Plan of Merger and Reorganization dated the
date hereof, Seawolf Acquisition Corporation ("Seawolf"), a wholly-owned
indirect subsidiary of CCL Industries Inc. ("CCL"), 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 substantially 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.
3. Pursuant to a Lock-Up Agreement (the "Lock-Up Agreement") dated June 16th,
1997 with CCL, and Seawolf the Founder, amongst others, has agreed, subject to
certain conditions, to tender and not withdraw all of his Common Shares into the
Offer.
4. The aggregate value of the consideration paid or payable by Seawolf to the
Founder for the Common Shares of the Corporation to be acquired by Seawolf
pursuant to the Offer will be at least $24 million.
<PAGE>
-2-
5. The Corporation was founded in 1984 by the Founder who had extensive prior
experience in the specialty plastics packaging industry. Since 1984 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 Founder, in the course of carrying out his responsibilities to the
Corporation in the past, 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.
7. The Founder has been an important representative of the Corporation to
customers and suppliers of the Business and has been responsible for maintaining
those relations and the Corporation's goodwill and has been 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 Founder is a fundamental and
material inducement to Seawolf making the Offer and completing the Merger.
<PAGE>
-3-
10. This Agreement shall take effect upon the completion of the Offer in
accordance with its terms (the "Effective Time").
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 Founder and for other good and valuable consideration
it is hereby agreed as follows:
1. ACKNOWLEDGMENT - The Founder acknowledges that the recitals to this
Agreement are true and correct. In addition, the Founder 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 in the past 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 Period of Restriction (as hereafter
defined), 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 Founder further acknowledges that in the course of
performing his obligations to the Corporation he has been an important
representative of the Corporation and as such has been responsible for
maintaining or enhancing the goodwill of the Corporation. The Founder
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.
2. CONFIDENTIALITY - Accordingly, the Founder covenants and agrees with the
Corporation that he will not, during the Period of Restriction (as hereafter
defined) or at any time thereafter disclose any of such Confidential Information
to any person other than to the officers of the Corporation and the Board of the
Directors of the Corporation (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 Founder or which the Founder 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
<PAGE>
-4-
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
Founder will exercise his reasonable best efforts to obtain a protective order
or other reasonable assurance that confidential treatment will be accorded the
Confidential Information.
3. NON-COMPETITION - Accordingly, the Founder covenants and agrees with the
Corporation that he will not, for a period of two (2) years from the Effective
Time (the "Period of Restriction") 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 subsections (a) through (e) are each separate
and distinct covenants, severable one from the other and the most restrictive of
subsections (a) through (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.
4. PERMITTED INVESTMENTS - Nothing herein shall restrict or prevent the
Founder 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.
<PAGE>
-5-
5. NON-SOLICITATION - The Founder hereby covenants and agrees with the
Corporation that he will not at any time during the Period of Restriction,
directly or indirectly, solicit or attempt to induce, procure, encourage or
direct away from the Corporation any customer, supplier or employee of the
Corporation.
6. REMEDIAL RIGHTS - Nothing contained in this Agreement shall be deemed to
affect or impair the otherwise lawful rights of the Corporation to enforce its
legal remedies against the Founder at any time hereafter to prevent the Founder
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 Agreement.
7. ACKNOWLEDGMENTS BY FOUNDER - The Founder hereby acknowledges and agrees
that: (a) based on the Corporation's Business, business plans and prospects,
the provision and restrictions in this Agreement 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,
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 this Agreement; (d) any violation of
any provision of this Agreement 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 Founder
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 Founder from any fiduciary or other obligation, duty or
responsibility he may have to the Corporation under any other agreement or
implied at law.
8. TERMS - The terms "customer" and "supplier" as used in this Agreement means
those persons, who supplied or were supplied by or whose business was actively
sought by the Corporation in the eighteen (18) months immediately prior to the
date hereof or during the Period of Restriction. The term "employee" means a
person employed by the Corporation or otherwise
<PAGE>
-6-
in a management position at the Corporation in the eighteen (18) months
immediately prior to the date hereof or during the Period of Restriction.
9. 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 Founder hereby agrees that all covenants and provisions
contained in this Agreement 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.
10. 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 Founder:
Mr. Shapour Sedaghat
2501 West Rosecrans Avenue
Los Angeles, CA
90059-3510
Telecopier: (310) 635-4133
If to the Corporation
105 Gordon Baker Road
Willowdale, Ontario
M2H 3P8
Attention: President
Telecopier: (416) 256-8555
<PAGE>
-7-
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.
11.0 GENERAL
11.1 PREVIOUS AGREEMENTS - Any and all previous agreements, written or oral,
between the parties hereto or on their behalf relating to the subject matter of
this Agreement, 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.
11.2 GOVERNING LAW AND CONSENT TO JURISDICTION - 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>
-8-
11.3 ENUREMENT - The provisions hereof, where the context permits, shall
enure to the benefit of and be binding upon the Founder and his heirs,
executors, administrators and legal personal representatives and the Corporation
and its successors and assigns.
11.4 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.
11.5 LEGAL ADVICE - The Founder 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.
11.6 CURRENCY - Unless otherwise stated, all dollar amounts herein are in
U.S. Dollars.
11.7 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 Founder 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.
11.8 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>
- S1 -
11.9 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 Founder has hereunto set his hand and seal.
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/ SHAPOUR SEDAGHAT l/s
) -----------------------------------
SHAPOUR SEDAGHAT
<PAGE>
EXHIBIT 8
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 9
[LOGO OF SEDA SPECIALTY PACKAGING]
June 23, 1997
Dear Stockholder:
As you may be aware, on June 16, 1997, SEDA Specialty Packaging Corp.
("SEDA") entered into a merger agreement with CCL Industries Inc. ("CCL") and
its indirect wholly owned subsidiary, Seawolf Acquisition Corporation
("Purchaser"), pursuant to which Purchaser agreed to commence as promptly as
practicable a tender offer for SEDA Common Stock for a cash price of $29.00
per share. The agreement provides that, following completion of the offer, CCL
will cause Purchaser to merge into SEDA and any SEDA shares that are not
acquired through the tender offer will be converted in the merger into the
right to receive the same consideration as is paid in the tender offer.
THE BOARD OF DIRECTORS UNANIMOUSLY HAS DETERMINED THAT THE OFFER AND THE
MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS, HAS APPROVED THE OFFER, THE MERGER AGREEMENT AND THE MERGER AND
RECOMMENDS THAT YOU ACCEPT THE OFFER AND TENDER YOUR SHARES PURSUANT TO THE
OFFER.
In arriving at its recommendation, the Board gave careful consideration to a
number of factors as described in the enclosed Schedule 14D-9, including the
opinion of Crowell, Weedon & Co. that, based on certain assumptions and
subject to certain limitations, the consideration to be received by SEDA's
public stockholders in the tender offer and merger is fair from a financial
point of view to such holders. We urge you to read the enclosed Schedule 14D-9
and the related tender offer materials carefully.
On behalf of SEDA's Board of Directors, I thank you for the support you have
given to SEDA over the years.
Sincerely,
/s/ Shahrokh "Shawn" Sedaghat
Shahrokh "Shawn" Sedaghat
Chairman, President and Chief
Executive Officer
<PAGE>
EXHIBIT 10
[LETTERHEAD OF CROWELL, WEEDON & CO.]
June 16, 1997
The Board of Directors
SEDA Specialty Packaging Corp.
2501 West Rosecrans Avenue
Los Angeles, California 90059-3510
Gentlemen:
SEDA Specialty Packaging Corp. ("SEDA" or the "Company"), CCL Industries Inc.
("CCL") and Seawolf Acquisition Corporation ("SEAWOLF"), an indirect wholly
owned subsidiary of CCL, contemplate entering into a merger agreement (the
"Merger Agreement") and certain related agreements providing for the
acquisition of 100% of the Company's common stock and 100% of its outstanding
options and warrants to purchase common stock of the Company by SEAWOLF,
through a tender offer (the "Tender Offer") and subsequent merger of SEAWOLF
into the Company (such merger, collectively with the Tender Offer, the
"Transaction"), pursuant to which (a) the shareholders of the issued and
outstanding shares of common stock (the "Common Shares") of SEDA, other than
Mr. Shawn Sedaghat, would receive US$29.00 per share in cash, (b) the holders
of SEDA's outstanding options and warrants, other than Mr. Shawn Sedaghat,
would receive the cash difference between US$29.00 per share and the respective
per share exercise price of such options and warrants and (c) SEDA would become
a wholly owned subsidiary of CCL.
We understand that it is contemplated that Mr. Shawn Sedaghat would receive
for his Common Shares in the Transaction: (a) consideration equal to US$26.00
per share payable: (i) in part, by the issue of securities of SEAWOLF
exchangeable under certain circumstances for an aggregate of 1,000,000 Class B
non-voting shares of CCL as valued on the Toronto Stock Exchange (the "TSE")
for the 20 trading days prior to the announcement of the Transaction (the
current trading price of the Class B shares is approximately Cdn$17.00); and
(ii) as to the balance, by cash; and (b) the right to earn additional
consideration for his shares (the "Top-Up") as follows: (i) US$1,579,999.50 if
SEDA achieves 1997 EBITDA of US$20 million (i.e. US$1.50 per share x 1,053,333
= US$1,579,999.50) plus interest on this amount from the closing date of the
Transaction payable at a rate equal to the prime rate of interest quoted by
CCL's U.S. Bankers (the "CCL Reference Rate"), (ii) US$1,579,999.50 if 1998
EBITDA is the greater of US$24 million or 20% higher than 1997 actual EBITDA,
plus interest on such amounts from the closing date of the Transaction until
any such amount is paid, payable at the CCL Reference Rate and
(iii) US$1,579,999.50 if and only if the payment described in (i) was not
received and if the aggregate EBITDA for the two fiscal years ended December
31, 1998 is at least US$44 million, plus interest on such amounts from the
closing date of the Transaction until any such amount is paid, payable at the
CCL Reference Rate. Mr. Shawn Sedaghat will also be subject to separate
arrangements with respect to his options to purchase the Company's Common
Shares and will enter into a written employment arrangement pursuant to which
he will be engaged as the surviving company's Chief Executive Officer.
You have requested our opinion (the "Opinion") as investment bankers as to
the fairness, from a financial point of view, of the consideration (the
"Consideration") to be received by the holders of the Common Shares (the
"Public Shareholders") in the Transaction. As used herein, Public Shareholders
means all holders of the Common Shares other than officers and directors of the
Company (including Mr. Shawn Sedaghat),
<PAGE>
Mr. Shapour Sedaghat and Mrs. Pamela Sedaghat. You have not requested, and we
therefore do not express, any opinion with respect to the consideration to be
received in this Transaction by Mr. Shawn Sedaghat, Mr. Shapour Sedaghat, Mrs.
Pamela Sedaghat or any other person or entity other than the Public
Shareholders.
Crowell, Weedon & Co. ("Crowell"), as part of its investment banking
business, is regularly engaged in the valuation of businesses and their
securities in connection with mergers, acquisitions, private placements and
valuations for estate, corporate and other purposes. In the ordinary course of
our business as broker-dealer, we may actively trade the securities of SEDA
for our own account or for the accounts of our customers and, accordingly, at
any time hold a long or short position in such securities.
In arriving at our Opinion, we have, among other things, read, reviewed and
analyzed: the Merger Agreement; SEDA's Annual Reports on Form 10-K for the
three fiscal years ended December 31, 1996; and SEDA's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1997. In addition, we held
discussions with certain members of the senior management of SEDA concerning
its past and current business operations, present financial condition and
future prospects. These discussions included a review of the condition and
prospects of the plastic packaging industry in general. We also held
discussions with representatives of SEDA's independent certified public
accountants, and performed such other inquiries and analyses as we deemed
appropriate. In addition, we reviewed the price and volume trading history of
the Common Shares; compared the financial position and operations of SEDA with
those of certain public companies in the packaging industry which we deemed to
be relevant; and reviewed the financial terms of certain recent business
combinations in the packaging industry.
In connection with our Opinion, we have assumed and relied upon the accuracy
and completeness of all the financial and other information provided or made
available to us by SEDA and other parties for the purpose of this Opinion and
do not assume any responsibility for independent verification of such
information. We have not conducted nor had conducted for us any evaluation or
appraisal of the assets of SEDA. We have also taken into account our
assessment of general economic, market and financial conditions and our
experience in other transactions, as well as our experience in securities
valuation and our knowledge of the plastic packaging industry generally. Our
Opinion is necessarily based upon conditions as they exist and can be
evaluated on the date hereof and the information made available to us through
the date hereof. We have also assumed that there have been no material changes
in the assets, financial condition, results of operations, business or
prospects of SEDA since the date of the most recent financial statements that
SEDA has made available to us.
Our Opinion as to fairness is limited to the fairness of the Consideration,
from a financial point of view, to the Public Shareholders, and we are not
opining in any other respect whatsoever on the terms of the Transaction.
This Opinion is delivered to you based on your understanding that it is for
the benefit and use of the Board of Directors of SEDA in considering the
Transaction and that SEDA will not use this Opinion for any other purpose and
will not reproduce, disseminate or refer to this Opinion without our prior
written consent; provided, however, that this Opinion may be reproduced in
full in the filings with the Securities and Exchange Commission and in Tender
Offer and proxy materials relating to the Transaction submitted to the
Company's shareholders.
Based upon our review and subject to the foregoing and such other matters as
we consider relevant, and in reliance thereon, it is our opinion, as
investment bankers, that as of the date hereof the Consideration to be
received in the Transaction is fair, from a financial point of view, to the
Public Shareholders.
Very truly yours,
/s/ Crowell, Weedon & Co.
Crowell, Weedon & Co.
2
