1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended JUNE 30, 1996
or
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-------------- --------------
COMMISSION FILE NUMBER 0-25500
ADCO TECHNOLOGIES INC.
---------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER.)
Delaware 13-3715246
------------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4401 Page Avenue
P.O. Box 457
Michigan Center, MI 49254
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 517-764-0334
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days:
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT JUNE 30, 1996
------------------------------------------- ----------------------------
Common Stock, par value $.01 per share 5,150,000
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED) DECEMBER 31, 1995
------------- -----------------
Assets
Current assets:
Cash and short-term investments $ 3,558,264 $ 3,797,650
Trade accounts receivable, less allowances
($146,000 and $140,000 at June 30, 1996
and December 31, 1995, respectively) 7,601,085 4,672,127
Inventories:
Finished goods 2,563,322 2,735,782
Raw materials and packaging 3,218,307 2,332,430
----------- -----------
5,781,629 5,068,212
Refundable income taxes 0 176,969
Deferred income taxes 353,435 319,374
Other current assets 203,650 139,358
----------- -----------
Total current assets 17,498,063 14,173,690
Property, plant and equipment, net 9,075,418 8,895,851
Intangibles 7,894,360 8,034,994
Other assets 13,350 13,350
----------- -----------
$34,481,191 $31,117,885
=========== ===========
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable $ 2,054,388 $ 940,530
Accrued compensation and other expenses 1,922,476 1,992,608
Federal income and state taxes 383,260 130,982
----------- -----------
Total current liabilities 4,360,124 3,064,120
Deferred income taxes 1,031,275 1,006,570
Redeemable preferred stock of subsidiary 3,920,000 3,850,000
Stockholders' equity:
Preferred stock, par value $.01 per share--
Authorized 100,000; no shares issued and outstanding 0 0
Common stock, par value $.01 per share
Authorized 9,000,000; issued and outstanding
5,150,000 shares at June 30, 1996 and
December 31, 1995 51,500 51,500
Additional paid-in-capital - common 15,140,750 15,140,750
Less receivable from management shareholders (50,000) (150,000)
Retained earnings 10,027,542 8,154,945
----------- -----------
25,169,792 23,197,195
----------- -----------
$34,481,191 $31,117,885
=========== ===========
See notes to consolidated financial statements
3
ADCO TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1996 1995 1996 1995
------------- ------------- ------------- -------------
Net sales $13,995,266 $12,709,679 $24,953,992 $24,097,393
Cost of products sold 10,045,001 8,719,449 18,200,020 16,728,853
----------- ----------- ----------- -----------
Gross profit 3,950,265 3,990,230 6,753,972 7,368,540
Operating expenses:
Selling, general and administrative 1,424,159 1,449,499 2,780,472 2,928,840
Research and development 363,638 335,932 733,163 678,978
----------- ----------- ----------- -----------
Total operating expenses 1,787,797 1,785,431 3,513,635 3,607,818
----------- ----------- ----------- -----------
Operating income 2,162,468 2,204,799 3,240,337 3,760,722
Interest expense 0 0 0 105,020
Dividends on preferred stock of subsidiary 70,000 70,000 140,000 140,000
Other expense (income) - net (67,599) 13,838 (184,261) (16,753)
----------- ----------- ----------- -----------
Income before taxes 2,160,067 2,120,961 3,284,598 3,532,455
Income taxes 790,000 774,000 1,206,000 1,302,000
----------- ----------- ----------- -----------
Net income 1,370,067 1,346,961 2,078,598 2,230,455
=========== =========== =========== ===========
Net income per common and common
equivalent share $ 0.26 $ 0.26 $ 0.40 $ 0.45
=========== =========== =========== ===========
Weighted average shares outstanding 5,259,313 5,225,103 5,259,313 4,939,191
----------- ----------- ----------- -----------
See notes to consolidated financial statements
4
ADCO TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK OF
SUBSIDIARY AND STOCKHOLDERS' EQUITY
(UNAUDITED)
REDEEMABLE PREFERRED STOCK OF SUBSIDIARY
------------------------------------------------------------
ADDITIONAL
SERIES A SERIES B PAID-IN TOTAL
PREFERRED PREFERRED CAPITAL PREFERRED
STOCK STOCK PREFERRED STOCK
------------------------------------------------------------
Balance at December 31, 1995 $35 $350,000 $3,499,965 $3,850,000
Net income for the six month period
ended June 30, 1996
Repayment of management loan
Preferred stock dividend 70,000 $ 70,000
Dividends on common stock - $.04/share
--- -------- ---------- ----------
Balance at June 30, 1996 $35 $420,000 $3,499,965 $3,920,000
=== ======== ========== ==========
STOCKHOLDERS' EQUITY
--------------------------------------------------------------
ADDITIONAL RECEIVABLE
PAID-IN FROM TOTAL
COMMON CAPITAL MANAGEMENT RETAINED STOCKHOLDERS'
STOCK COMMON SHAREHOLDERS EARNINGS EQUITY
---------------------------------------------------------------
Balance at December 31, 1995 $51,500 $15,140,750 ($150,000) $ 8,154,945 $23,197,195
Net income for the six month period
ended June 30, 1996 2,218,597 $ 2,218,597
Repayment of management loan 100,000 $100,000
Preferred stock dividend (140,000) ($140,000)
Dividends on common stock - $.04/share (206,000) ($206,000)
------- ----------- ----------- ----------- -----------
Balance at June 30, 1996 $51,500 $15,140,750 ($50,000) $10,027,542 $25,169,792
======= =========== =========== =========== ===========
See notes to consolidated financial statements
5
ADCO TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
--------------------------------
1996 1995
---------- ----------
OPERATING ACTIVITIES
Net income $2,078,598 $2,230,455
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 653,440 597,817
Deferred income taxes (9,356) (81,760)
Changes in current assets and liabilities:
Trade accounts receivable (2,928,958) (1,923,997)
Inventories (713,417) (1,926,746)
Other current assets 112,677 (175,844)
Other assets --- (14,100)
Trade accounts payable 1,113,858 1,074,084
Taxes payable 252,278 411,128
Accrued salaries, wages and other expenses (70,132) 107,366
---------- --------
Net cash provided by operating activities 488,988 298,403
INVESTING ACTIVITIES
Purchases of property, plant and equipment (692,374) (698,898)
Purchase of patents --- ---
Other --- ---
---------- --------
Net cash used in investing activities (692,374) (698,898)
FINANCING ACTIVITIES
Repayment of management loan 100,000 ---
Payments of debt --- (6,008,076)
Issuance of preferred stock 70,000 70,000
Issuance of capital stock --- 6,877,250
Cash dividend paid on common stock (206,000) (77,250)
---------- --------
Net cash provided by (used in) financing activities (36,000) 861,924
---------- --------
Increase (decrease) in cash (239,386) 461,429
Cash at beginning of period 3,797,650 336,981
---------- --------
Cash at end of period $3,558,264 $798,410
========== ========
See notes to consolidated financial statements
6
ADCO TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six month period
ended June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996. For further information, refer
to the consolidated financial statements and footnotes thereto included in the
Adco Technologies Inc. annual report on Form 10-K for the year ended December
31, 1995.
The Company has adopted Statement of Financial Accounting Standards No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived Assets" effective
January 1, 1996. Based on current circumstances this adoption has no effect on
the Company's income statement.
2. INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the last in, first out (LIFO) method.
Current costs, based on the first in, first out (FIFO) method would have
resulted in reported amounts approximately $109,000 higher at June 30, 1996 and
approximately the same at December 31, 1995.
3. INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes".
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
4. LITIGATION AND REGULATION
There are judicial and administrative claims pending or contemplated against
the Company. Management believes that the resolution of these matters should
not have a material effect upon the Company's financial condition, results of
operations and cash flows.
The Environmental Protection Agency ("EPA") has notified the Company that it is
a Potentially Responsible Party ("PRP") at, and requested that the Company
provide information with respect to, two Superfund sites. Regarding the first
site, the Company has informed the EPA that it believes that it is not
responsible for any materials at the site and that the Company believes that
the previous owners of the property upon which the Company's facility is
located may be responsible for the materials in question located at this site.
The Company has not made and has not been requested to make any expenditures
toward the clean-up of this site, and has not been contacted further by the
EPA. At the second site, the Company has been notified by the EPA that it is
the source of a de minimis quantity of waste materials. The Company spent
approximately $6,000 in clean-up costs at this site and the Company does not
expect that its clean-up costs will exceed $10,000.
7
ADCO TECHNOLOGIES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. LITIGATION AND REGULATION (CONTINUED).
The Michigan Department of Natural Resources ("MDNR") has identified the
property on which the Company's plant is located as a site of environmental
contamination. The Company has recorded a reserve of $148,000 at
June 30, 1996, as an estimate of the amount of loss that is reasonably possible
to be incurred for this site. While management of the Company does not believe
that the Company's exposure in these matters will have a material adverse
effect on the business and financial condition of the Company, there can be no
assurance that the Company will not incur additional significant liabilities in
connection with these matters or that such liabilities will not have a material
adverse effect on the Company's business and financial condition.
Regarding each of the above-mentioned environmental matters, the Company has
notified Nalco Chemical Company ("Nalco") that Nalco may be responsible for
indemnifying ATI for expenditures made for the above matters. Pursuant to the
terms of an agreement entered into in connection with ATI's acquisition of
Adco, the Company is indemnified to a limited extent against certain
environmental liabilities by Nalco. In certain instances, the indemnification
is limited by a $100,000 deductible and a limitation on the amount of
indemnification's ranging from $341,600 to $3.5 million depending upon the type
of claim made, with an aggregate limitation of $3.5 million for all such claims
made.
5. SUBSEQUENT EVENTS
In July, the Company declared a quarterly dividend of $.02 per share, payable
on August 30, 1996, to the holders of common stock of record on August 15,
1996. The aggregate amount of the common stock dividend will be approximately
$103,000.
On July 12, 1996, the Company, Astor Corporation, a Delaware corporation (the
"Buyer") and AAC Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of the Buyer (the "Acquisition Company"), entered into an
Agreement and Plan of Merger (the "Merger Agreement") providing for the
Acquisition Company to merge with and into the Company (the "Merger") with the
Company continuing as the surviving corporation. In the Merger, each
outstanding share of common stock ("Common Stock") of the Company will be
converted into the right to receive $10.25 in cash (the "Merger Consideration")
and each option to purchase shares of Common Stock shall be converted into the
right to receive a net amount in cash equal to the Merger Consideration
allocable to the shares of Common Stock then subject to the option (the "Option
Shares") less the aggregate exercise price for the purchase of the Option
Shares.
Simultaneously with the execution and delivery of the Merger Agreement,
Bradford Venture Partners, LP, Overseas Equity Investors Partners, LP, Bradford
Mills, Robert Simon, Barbara Henagan, James McCowan, Philip Beery, David Fuchs,
Charles Sax and Brian Briddell (each a "Stockholder" and collectively the
"Stockholders"), each of whom is a Stockholder of the Company and certain of
whom are directors and executive officers of the Company, holding an aggregate
of 2,559,308 shares of Common Stock (equal to 49.75% of the outstanding voting
Common Stock as of July 12,1996) entered into Voting Agreements, dated as of
July 12, 1996 (the "Voting Agreements"), with the Buyer, which provide, among
other things, that each of the Stockholders will vote or will cause to be
voted, the shares of Common Stock owned by the Stockholder (i) in favor of the
adoption of the Merger Agreement and the approval of the Merger, (ii) against
the approval of any proposal relating to a competing merger or business
combination involving an acquisition of all or a substantial portion of the
capital stock, the
8
assets of the Company or the assets or stock of any subsidiary of the Company
by any person or entity other than the Buyer or Acquisition Company or an
affiliate of the Buyer or Acquisition Company, and (iii) against any
transaction which is inconsistent with the obligation of the Company to
consummate the Merger in accordance with the Merger Agreement. The Voting
Agreements also provide that each Stockholder will not, except as contemplated
by the terms of the Voting Agreements, sell or otherwise voluntarily dispose of
any of the shares of Common Stock owned by such Stockholder or take any
voluntary action which would have the effect of removing such Stockholder's
power to vote his shares or which would be inconsistent with the Voting
Agreements.
For further information regarding the proposed merger, refer to Item 5, Other
Information.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
THE THREE MONTH PERIOD ENDED JUNE 30, 1996 VS. THE THREE MONTH PERIOD ENDED
JUNE 30, 1995
Net sales for the quarter were $14.0 million, an increase of 10.1% compared
with $12.7 million for the second quarter of 1995. The sales increase was
mainly attributable to strong growth in the concrete pipe and vault, window
manufacturing, windshield replacement and roofing markets. Double digit
increases in the roofing, urethane and window manufacturing markets softened
the impact of the decline in automotive OEM sales as Ford Motor Company
continued its scale-back of production of the older F-series trucks.
Gross profit for the quarter was $3.9 million, down $40,000, or 1.0%, from $4.0
million for the same period last year. Gross profit as a percentage of sales
declined to 28.2% for the second quarter of 1996 from 31.4% in the year
earlier period. The decline in gross profit was due to increases in raw
material costs and a reduction in selling prices in the roofing market to meet
competitive pricing.
Selling, general and administrative expenses were $1.4 million, down 1.7% from
the second quarter of 1995. Lower advertising expenses and commissions to
outside sales representatives for the quarter helped soften the impact of the
decline in gross profit.
Research and development expenditures for the quarter were $364,000, an
increase of 8.2% compared to $336,000 in the year earlier period. The increase
was mainly the result of hiring additional research personnel.
Operating income decreased $42,000, or 1.9%, to $2.2 million for the second
quarter of 1996. Operating income as a percentage of sales declined to 15.5%
in the second quarter of 1996 from 17.3% in the second quarter of 1995.
Income taxes increased $16,000, or 2.1%, to $790,000 in the second quarter of
1996 from $774,000 in the second quarter of 1995. This was the result of the
increase in taxable income. The effective tax rate increased to 36.6% in the
second quarter of 1996 from 36.5% in the year earlier period.
Net income increased $23,000, or 1.7%, to $1,370,000 in the second quarter of
1996 from $1,347,000 in the same period last year. Net income as a percentage
of sales decreased to 9.8% in the second quarter of 1996 from 10.6% in the
second quarter of 1995.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION (CONTINUED)
THE SIX MONTH PERIOD ENDED JUNE 30, 1996 VS. THE SIX MONTH PERIOD ENDED JUNE
30, 1995
Net sales for the first six months of 1996 were $24.9 million, an increase of
$857,000, or 3.6%, over sales of $24.1 million for the first six months of
1995. The sales increase was primarily attributable to growth in the roofing
and construction markets, both of which recorded double digit sales increases
versus the first six months of 1995. The increase in the roofing market was
mainly due to double digit sales increases in the roofing tapes and primer
products. Window manufacturing and windshield replacement sales recorded
single digit sales increases versus the year earlier period.
Gross profit declined $615,000, or 8.3%, to $6.8 million in the first six
months of 1996 from $7.4 million in the first six months of 1995. Gross profit
as a percentage of sales decreased to 27.1% for the first six months of 1996
from 30.6% in the year earlier period. The decrease was mainly attributable to
increased raw material costs and a reduction in selling prices in the roofing
market to meet competitive pricing.
Selling, general and administrative expenses decreased $148,000, or 5.1%, to
$2.8 million in the first six months of 1996 from $2.9 million in the year
earlier period. The decrease was mainly attributable to lower salaries and
advertising expenditures.
Research and development costs increased $54,000, or 8.0%, to $733,000 for the
first six months of 1996 from $679,000 for the first six months of 1995. The
increase was mainly the result of increased salary expense for research
personnel hired in the second half of 1995.
Operating income decreased $520,000, or 13.8%, to $3.2 million in the first six
months of 1996 from $3.8 million in the year earlier period. Operating income
as a percentage of sales declined to 13.0% for the first six months of 1996
from 15.6% in the first six months of 1995.
There was no interest expense for the first six months of 1996. This is down
from $105,000 for the year earlier period. The decrease was attributable to
the repayment of all of the Company's outstanding bank debt from the proceeds
of the initial public offering of the Company's common stock in February, 1995.
Income taxes decreased $96,000, or 7.4%, to $1.2 million in the first six
months of 1996 from $1.3 million in the year earlier period. This was the
result of the decrease in taxable income. The effective tax rate decreased to
36.7% for the first six months of 1996 from 36.9% for the first six months of
1995.
Net income decreased $152,000, or 6.8%, to $2.1 million in the first six months
of 1996 from $2.2 million a year ago. Net income as a percentage of sales
decreased to 8.3% in the first six months of 1996 from 9.3% in the year earlier
period.
11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company had working capital of $13.1 million,
compared to $11.1 million at December 31, 1995. During the six month period,
trade accounts receivable increased $2.9 million and inventories increased
$713,000. Receivables increased due to the increase in sales. Subsequently,
the majority of these trade accounts receivable have been collected. Trade
accounts payable were $2.1 million at June 30, 1996, an increase of $1.1
million from December 31, 1995. Trade accounts payable were up compared to
December 31, 1995 due to normal purchasing patterns.
For the six month period ended June 30, 1996 capital expenditures were
$692,000. This compares to $699,000 in the year earlier period. The majority
of the expenditures were for efficiency and capacity improvements on current
equipment, production equipment for new products and construction in the plant
and offices.
The Company has paid common stock dividends totaling $206,000 for the six
months ended June 30, 1996. In February, 1996, and June, 1996 the Company paid
quarterly common stock dividends of $.02 per share, or $103,000.
CONTINGENT MATTERS
There are judicial and administrative claims pending or contemplated against
the Company. Management believes that the resolution of these matters should
not have a material effect upon the Company's business and financial condition,
results of operations or cash flows.
The EPA has notified the Company that it is a PRP at, and requested that the
Company provide information with respect to, two Superfund sites. Regarding the
first site, the Company has informed the EPA that it believes that it is not
responsible for any materials at the site and that the Company believes that
the previous owners of the property upon which the Company's facility is
located may be responsible for the materials in question located at this site.
The Company has not made and has not been requested to make any expenditures
toward the clean-up of this site, and has not been contacted further by the
EPA. At the second site, the Company has been notified by the EPA that it is
the source of a de minimis quantity of waste materials. The Company spent
approximately $6,000 in clean-up costs at this site and the Company does not
expect that its clean-up costs will exceed $10,000.
The Michigan Department of Natural Resources has identified the property on
which the Company's plant is located as a site of environmental contamination.
The Company has recorded a reserve of $148,000 at June 30, 1996, as an estimate
of the amount of loss that is reasonably possible to be incurred for this site.
While management of the Company does not believe that the Company's exposure
in these matters will have a material adverse effect on the business and
financial condition of the Company, there can be no assurance that the Company
will not incur additional significant liabilities in connection with these
matters or that such liabilities will not have a material adverse effect on the
Company's business and financial condition.
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION (CONTINUED)
CONTINGENT MATTERS (CONTINUED)
Regarding each of the above-mentioned environmental matters, the Company has
notified Nalco Chemical Company ("Nalco") that Nalco may be responsible for
indemnifying ATI for expenditures made for the above matters. Pursuant to the
terms of an agreement entered into in connection with ATI's acquisition of
Adco, the Company is indemnified to a limited extent against certain
environmental liabilities by Nalco. In certain instances, the indemnification
is limited by a $100,000 deductible and a limitation on the amount of
indemnification's, ranging from $341,600 to $3.5 million depending upon the
type of claim made, with an aggregate limitation of $3.5 million for all such
claims made.
NEW PRONOUNCEMENT
The Company has adopted Statement of Financial Accounting Standards No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived Assets" effective
January 1, 1996. Based on current circumstances this adoption has no effect on
the Company's income statement.
13
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On July 12, 1996, the Company, Astor Corporation, a Delaware corporation (the
"Buyer") and AAC Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of the Buyer (the "Acquisition Company"), entered into an
Agreement and Plan of Merger (the "Merger Agreement") providing for the
Acquisition Company to merge with and into the Company (the "Merger") with the
Company continuing as the surviving corporation. In the Merger, each
outstanding share of common stock ("Common Stock") of the Company will be
converted into the right to receive $10.25 in cash (the "Merger Consideration")
and each option to purchase shares of Common Stock shall be converted into the
right to receive a net amount in cash equal to the Merger Consideration
allocable to the shares of Common Stock then subject to the option (the "Option
Shares") less the aggregate exercise price for the purchase of the Option
Shares.
The consummation of the Merger is conditioned upon, among other things, (i) the
approval and adoption of the Merger Agreement by the stockholders of the
Company, (ii) certain regulatory approvals, including the expiration or
termination of any waiting period applicable to the consummation of the Merger
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
(iii) the clearance by the Securities and Exchange Commission of the Company's
proxy statement relating to the stockholders meeting to be called to approve
the Merger. The consummation of the Merger is expected to occur as soon as
practicable, but in any event after September 15, 1996 and within five business
days after the satisfaction or waiver of the conditions set forth in Sections
seven (7) and eight (8) of the Merger Agreement.
If the Merger is terminated for a reason not justified under the Merger
Agreement before the filing of a certificate of merger with the Delaware
Secretary of State (the "Effective Time"), then the breaching party will pay
the non-breaching party $2,000,000 plus expenses.
A copy of the Merger Agreement is attached hereto as Exhibit 2.1 and is
incorporated herein by reference.
Simultaneously with the execution and delivery of the Merger Agreement,
Bradford Venture Partners, LP, Overseas Equity Investors Partners, LP, Bradford
Mills, Robert Simon, Barbara Henagan, James McCowan, Philip Beery, David Fuchs,
Charles Sax and Brian Briddell (each a "Stockholder" and collectively the
"Stockholders"), each of whom is a Stockholder of the Company and certain of
whom are directors and executive officers of the Company, holding an aggregate
of 2,559,308 shares of Common Stock (equal to 49.75% of the outstanding voting
Common Stock as of July 12,1996) entered into Voting Agreements, dated as of
July 12, 1996 (the "Voting Agreements"), with the Buyer, which provide, among
other things, that each of the Stockholders will vote or will cause to be
voted, the shares of Common Stock owned by the Stockholder (i) in favor of the
adoption of the Merger Agreement and the approval of the Merger, (ii) against
the approval of any proposal relating to a competing merger or business
combination involving an acquisition of all or a substantial portion of the
capital stock, the assets of the Company or the assets or stock of any
subsidiary of the Company by any person or entity other than the Buyer or
Acquisition Company or an affiliate of the Buyer or Acquisition Company, and
(iii) against any transaction which is inconsistent with the obligation of the
Company to consummate the Merger in accordance with the Merger Agreement. The
Voting Agreements also provide that each Stockholder will not, except as
contemplated by the terms of the Voting Agreements, sell or otherwise
voluntarily dispose of any of the shares of Common Stock owned by such
Stockholder or take any voluntary action which would have the effect of
removing such Stockholder's power to vote his shares or which would be
inconsistent with the Voting Agreements.
The Stockholders Agreement is attached hereto as Exhibit 99.1 and is
incorporated herein by reference.
A related press release, dated July 12, 1996, is attached hereto as Exhibit
99.2 and is incorporated herein by reference.
14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Merger Agreement
10.1 Change of Control Agreement between Adco Technologies Inc. and
Brian J. Briddell dated February 13, 1996
10.2 Change of Control Agreement between Adco Technologies Inc. and
Philip D. Beery dated February 13, 1996
10.3 Change of Control Agreement between Adco Technologies Inc. and
David J. Fuchs dated February 13, 1996
10.4 Change of Control Agreement between Adco Technologies Inc. and
James R. McCowan dated February 13, 1996
11. Computation of Earnings per Share
27. Financial Data Schedule
99.1 Stockholder Agreement
99.2 Press Release
(b) Reports on Form 8-K - none
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADCO TECHNOLOGIES INC.
(Registrant)
Date August 8, 1996 /s/ Charles E. Sax
-------------- -----------------------------------------
Charles E. Sax
President and Chief Executive Officer
Date August 8, 1996 /s/ David J. Fuchs
-------------- ------------------------------------------
David J. Fuchs
Vice President and Chief Financial Officer
16
Exhibit Index
Exhibit
Number Description
2.1 Merger Agreement
10.1 Change of Control Agreement between Adco Technologies Inc. and
Brian J. Briddell dated February 13, 1996
10.2 Change of Control Agreement between Adco Technologies Inc. and
Philip D. Beery dated February 13, 1996
10.3 Change of Control Agreement between Adco Technologies Inc. and
David J. Fuchs dated February 13, 1996
10.4 Change of Control Agreement between Adco Technologies Inc. and
James R. McCowan dated February 13, 1996
11 Computation of Earnings per Share
27 Financial Data Schedule
99.1 Stockholder Agreement
99.2 Press Release