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EXHIBIT (c)(7)
SPARTECH CORPORATION
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October 30, 1995
CONFIDENTIAL
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Xx. Xxxxxxx Xxxxxxxx
CIMCO, Inc.
c/o PaineWebber, Incorporated
000 Xxxxx Xxxxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Gentlemen:
The purpose of this letter is to summarize our proposal to purchase
all of the outstanding common stock of CIMCO, Inc. This letter is not intended
to be a binding commitment on our part, but is intended to serve as the basis
for our further discussions with you.
We propose the following:
1. Structure. Spartech will acquire all of the outstanding common
stock of CIMCO for $10.00 per share payable 51% in stock of
Spartech (valued on the date of closing at the average closing
over the prior 15 trading days on the New York Stock Exchange) and
the remainder in cash. The cash and stock portion will be
adjusted upward or downward on a pro rata basis, based upon
CIMCO's adjusted income occurring after July 31, 1995, defined as
net income (loss), exclusive of any gain or loss on the sale of
the respiratory medical products group plus depreciation and
amortization, minus capital expenditures relating to CIMCO's
molding operations. The acquisition will be structured as a
merger, with CTI becoming part of Spartech's compounding group.
2. SEC Registration. The shares of Spartech common stock issued in
the transaction will be registered with the Securities and
Exchange Commission. Because of the nature of this partially
tax-free exchange, an S-4 registration statement will be needed.
We expect the timing between acceptance of this letter and closing
of the transaction to be approximately 90 days.
3. Continued Employment. Spartech will offer continued employment to
all existing management and full-time employees of the compounding
division. It is expected the remaining employees will be employed
by Xxxxxxx Xxxxxxx in connection with his purchase of the molding
assets from Spartech.
4. Conditions. Consummation of the transaction shall be subject to
the following:
(a) Satisfactory completion of an investigation of CIMCO's
financial condition, results of operations, business,
pending litigation, accounting, tax,
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Xx. Xxxxxxx Xxxxxxxx
October 30, 1995
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environmental, and other matters. We expect this to be
completed within three weeks from the date of acceptance of
this letter. Major issues not yet reviewed in detail
include a meeting with Hewlett Packard's personnel, a
review of the legal affairs of CIMCO by Spartech's outside
counsel, and a review of CIMCO's tax returns and the status
for any open Revenue Agent Reviews;
(b) Signing of a definitive agreement containing mutually
satisfactory representations, covenants, and conditions.
Negotiations of a definitive agreement will run concurrent
with the preparation of the S-4 Registration Statement;
(c) Receipt of all necessary consents and approvals from
directors, stockholders, lenders, governmental entities, and
other third parties; and
(d) Completion by CIMCO of the sale to a third party of the
assets of its respiratory medical products division in
consideration for at least $2.4 million in cash and the
assumption by the purchaser of at least $300,000 of accounts
payable.
If there is interest on CIMCO's part in proceeding with this
transaction, we are prepared to meet with you immediately to spell out our
proposal in greater detail and prepare the necessary legal documents.
I look forward to hearing from you. Please feel free to contact me at any
time.
Kindest regards,
SPARTECH CORPORATION
By:
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Xxxxxxx X. Xxxxxxxx
President and
Chief Executive Officer
