<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
HACH COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
[LOGO]
NOTICE AND AGENDA OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, SEPTEMBER 9, 1997
To the Stockholders:
The Annual Meeting of the Stockholders of HACH COMPANY, a Delaware
corporation, will be held on Tuesday, September 9, 1997, at 2:00 p.m. local
time, at the Company's facilities located at 100 Dayton Avenue, Ames, Iowa, for
the following purposes:
1. To elect a Board of seven directors.
2. To consider and act upon a proposal to amend Article Fourth of the
Company's Restated Certificate of Incorporation to: (i) authorize a new
class of common stock designated as Class A Common Stock, $1.00 par value
which would be non-voting (except in certain limited circumstances); (ii)
increase the number of authorized shares of capital stock from 25,000,000
to 45,000,000 consisting of 25,000,000 shares of Common Stock and
20,000,000 shares of Class A Common Stock; and (iii) establish the
rights, powers and limitations of the Class A Common Stock.
3. To transact such other business as may lawfully come before the Annual
Meeting or any adjournments thereof.
The Board of Directors has fixed July 24, 1997, at the close of business, as
the record date for the determination of stockholders entitled to receive notice
of and to vote at this Annual Meeting, or any adjourments thereof. All
stockholders are urged to attend the meeting. In order to assure the presence of
a quorum, whether you expect to be present personally or not, please sign, date
and mail immediately the enclosed proxy, since you have full power to revoke it
at any time before it is exercised.
<TABLE>
<S> <C>
By Order of the Board of Directors,
/s/ ROBERT O. CASE
----------------------------------------
Robert O. Case,
SECRETARY
</TABLE>
Loveland, Colorado
August , 1997
I M P O R T A N T
A Proxy Statement and Proxy Card are submitted with this Notice. All
stockholders are urged to read the Proxy Statement and to complete and mail the
Proxy Card promptly. The enclosed envelope for the return of the Proxy Card
requires no postage if mailed in the United States. A list of stockholders
entitled to vote at the Special Meeting will be available for inspection by any
stockholder for any purpose germane to the meeting during ordinary business
hours for a period of ten days prior to the meeting at the Company's facilities
at 100 Dayton Avenue, Ames, Iowa.
<PAGE>
HACH COMPANY
5600 Lindbergh Drive
Loveland, Colorado 80538
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD TUESDAY, SEPTEMBER 9, 1997
PROXY SOLICITATION
This Proxy Statement is furnished to stockholders of Hach Company (the
"Company") on or about August , 1997, in connection with solicitation of
proxies on behalf of the Board of Directors to be voted at the Anual Meeting of
Stockholders on Tuesday, September 9, at 2:00 p.m. local time, at the Company's
facilities located at 100 Dayton Avenue, Ames, Iowa, and at any adjournment of
such meeting. If the form of proxy which accompanies this Proxy Statement is
executed and returned, it may be revoked by the person giving it at any time
before the meeting by writing to the Secretary of the Company, at its principal
offices, by delivery of a later dated proxy or by attending the Special Meeting
and voting in person, in which case any prior proxy given will automatically be
revoked.
Properly executed proxies received prior to the meeting will be voted at the
meeting. If a stockholder designates how the proxy is to be voted, the signed
proxy will be voted in accordance with such designation. If a stockholder fails
to designate how his proxy should be voted, the signed proxy will be voted for
the election of the Directors named below and in favor of the Amendment (as
defined below).
The costs of this solicitation will be paid by the Company. Such costs
include preparation, printing and mailing of the Notice of Annual Meeting and a
form of proxy and Proxy Statement. The officers and employees of the Company and
its subsidiaries, without additional compensation, may solicit proxies
personally or by telephone and telegram. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries for proxy
material to be sent to the principals, and the Company will reimburse such
persons for their expenses.
VOTING AT THE ANNUAL MEETING
Stockholders of record owning the Company's common stock, $1.00 par value
("Common Stock"), at the close of business on July 24, 1997, will be entitled to
vote at the Annual Meeting. On that date, 8,221,752 shares of Common Stock were
outstanding. Each outstanding share of Common Stock entitles the holder to one
vote upon the matters presented at the Annual Meeting. The presence of the
holders of a majority of the outstanding shares of Common Stock, represented in
person or by proxy, will constitute a quorum at the Annual Meeting. Shares voted
as abstentions on any matter will be counted as shares that are present and
entitled to vote for purposes of determining the presence or absence of a quorum
at the meeting and as unvoted, although present and entitled to vote, for
purposes of determining the approval of the matter as to which the stockholder
has abstained. If a broker submits a proxy that indicates the broker does not
have discretionary authority as to certain shares to vote on the matter, those
shares will be
1
<PAGE>
counted as shares that are present and entitled to vote for purposes of
determining the presence or absence of a quorum at the meeting, but will not be
considered as present and entitled to vote with respect to the matter.
While the Notice of Annual Meeting calls for the transaction of such other
business as may properly come before the meeting, management has no knowledge of
any matters to be presented for action by the stockholders except as set forth
in this Proxy Statement. The enclosed proxy gives discretionary authority to the
person holding those proxies to vote in accordance with their best judgment as
to any other business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of July 10, 1997, certain information
with respect to each person who is known to the Company to own beneficially more
than 5% of the outstanding voting securities of the Company. This information
has been furnished by such persons to the Company.
<TABLE>
<CAPTION>
TITLE OF BENEFICIALLY PERCENT
CLASS NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS
- ---------- ------------------------------------------- ------------- ---------
<S> <C> <C> <C>
Common Kathryn Hach-Darrow 4,599,071(1) 54.76%
Hach Company
5600 Lindbergh Drive
Loveland, Colorado 80538
Common Hach Company Employee Stock 692,489(2) 8.25%
Ownership Plan and Trust
Hach Company
5600 Lindbergh Drive
Loveland, Colorado 80538
</TABLE>
The following table shows the amount of voting securities of the Company
beneficially owned by all officers and directors of the Company as a group (15
persons) on July 10, 1997.
<TABLE>
<CAPTION>
TITLE OF BENEFICIALLY PERCENT
CLASS OWNED OF CLASS
- ---------- ----------------- ---------
<S> <C> <C>
Common 5,086,153(3) 60.56%
</TABLE>
- ------------------------
(1) The shares listed in the table above opposite Kathryn Hach-Darrow's name
include 928,300 shares held in Mrs. Hach-Darrow's name. The shares listed
above also include 1,869,743 shares held by Mrs. Hach-Darrow as trustee and
beneficiary of the Kathryn C. Hach Marital Trust, 95,176 shares held by Mrs.
Hach-Darrow as the trustee and beneficiary of the Clifford C. Hach
Generation Skipping Trust and 73,635 shares held by the Clifford C. Hach
Family Trust, all three of which Trusts were created under an agreement
dated August 30, 1988 by Clifford C. Hach. Mrs. Hach-Darrow has the power to
vote and dispose of the shares held in the Marital, Generation Skipping and
Family Trusts. In addition, the shares listed above opposite Mrs.
Hach-Darrow's name include 1,511,415 shares owned by C&K Enterprises, Ltd.,
as to which Mrs. Hach-Darrow and the Kathryn C. Hach Marital Trust have
voting and investment powers and 120,782 shares owned by the Hach Scientific
Foundation, a charitable foundation. Mrs. Hach-Darrow is President and a
co-trustee of the Foundation and she shares voting and investment powers
with respect to the shares held by the Foundation. Finally, the shares
listed above include 20 shares which have been allocated to the account of
Mrs. Hach-Darrow
2
<PAGE>
under the Company's Employee Stock Ownership Plan (the "ESOP") and which
Mrs. Hach-Darrow has the right to direct the Plan trustee to vote.
(2) These shares are allocated to the accounts of the individual employees of
Hach Company who are participants in the ESOP, and who have the power to
vote the shares. The Trustees and the Company have investment power over the
stock held in the Plan.
(3) Includes the shares listed in the table above opposite Kathryn Hach Darrow's
name. Excludes (i) 124,244 shares held by the Company's 401(k) Plan for the
individual accounts of employees other than officers and directors of the
Company, (ii) 663,967 shares held by the Company's ESOP which are allocated
to the individual accounts of employees other than officers or directors of
the Company, (iii) 282,594 shares referred to in footnote 3 and the
aggregate of 32,648 shares referred to in footnote 5 to the table below
listing the shares beneficially owned by the directors and (iv) 94,047
shares held by a partnership composed of the children of Kathryn Hach-Darrow
and the late Clifford C. Hach and their spouses, as to which Bruce J. Hach,
the President and a Director of the Company, is a partner. If all the shares
referred to in the preceding sentence were included the shares beneficially
owned by officers and directors as a group would be 6,283,653 and the
percent of class would be 74.82%.
3
<PAGE>
ELECTION OF DIRECTORS
At the meeting seven directors are to be elected to hold office until the
next annual meeting and until their successors have been elected and qualified.
It is the intention of the persons named in the enclosed form of proxy, unless
the stockholder otherwise specifies therein, to vote for the election as
directors of the persons named in the table below. Directors are elected by a
plurality of the votes cast. Any shares not voted, whether by abstention,
withholding or a broker non-vote, have no effect on the election of directors
except to the extent a failure to vote for an individual results in another
individual receiving a larger number of votes. In case any such nominee should
be unavailable for any reason, the proxy holders reserve the right to substitute
another person of their choice in his or her place. The information concerning
the nominees and their security holdings has been furnished by them to the
Company.
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY
OWNED ON JULY 10, 1997
----------------------------
DIRECTOR PERCENT
NAME AGE PRINCIPAL OCCUPATION SINCE NUMBER OF SHARES OF CLASS
- ------------------------- --- ---------------------------------------- ----------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
Kathryn Hach-Darrow 74 Chairman of the Board and Chief 1951 4,599,071(1)(2) 54.76%
Executive Officer of the Company since
August 1988; other executive offices of
the Company, including President and
Chief Operating Officer for more than
the previous two years.
Bruce J. Hach 51 President and Chief Operating of the 1987 167,292(2)(3) 1.99%
Company since August 1988; a member of
senior management of the Company for
more than the previous two years.
Gary R. Dreher 44 Vice President and Chief Financial 1994 43,847(2)(4) *
Officer since November 1994; Vice
President and Treasurer of the Company
from August 1991 through November 1994;
Vice President and Controller of the
Company form August 1990 through August
1991; Controller of the Company from
September 1985 through August 1990.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY
OWNED ON JULY 10, 1997
----------------------------
DIRECTOR PERCENT
NAME AGE PRINCIPAL OCCUPATION SINCE NUMBER OF SHARES OF CLASS
- ------------------------- --- ---------------------------------------- ----------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
Joseph V. Schwan 60 Chief Operating Officer and Executive 1987 25,399(2)(5) *
Vice President Standard Register Company
since April 1997; Senior Vice President
and General Manager, Forms Division of
the Standard Register Company since
1995; Vice President, Forms Marketing
and Sales of the Standard Register
Company (a publicly-held manufacturer
and distributor of business forms) since
August 1991; Vice President Forms
Division of Rittenhouse, Inc., from
March 1990 to August 1991.
Fred W. Wenninger 58 Independent businessman since June 1997; 1990 8,162(2)(5) *
President and Chief Executive Officer,
Key Tronic Corporation (a publicly-held
manufacturer of computer keyboards) from
September 1995 to June; 1997;
Independent businessman, from January
1994 through August 1995; President,
Chief Executive Officer and Director,
Iomega Corporation (a publicly held
manufacturer of removable mass storage
products for computers) from May 1989
through December 1993.
John N. McConnell 58 Chairman and President of Labconco 1990 15,619(2)(5) *
Corporation (a laboratory equipment
manufacturer) since 1990; President of
Labconco since 1981.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY
OWNED ON JULY 10, 1997
----------------------------
DIRECTOR PERCENT
NAME AGE PRINCIPAL OCCUPATION SINCE NUMBER OF SHARES OF CLASS
- ------------------------- --- ---------------------------------------- ----------- ----------------- ---------
<S> <C> <C> <C> <C> <C>
Linda O. Doty 47 Certified Public Accountant, partner in 1991 16,505(2)(5) *
Doty & Associates, Certified Public
Accountants, since January 1, 1990; tax
partner with Coopers & Lybrand L.L.P.
for more than the previous three years.
</TABLE>
- ------------------------
* Less than 1%
(1) The Shares listed in the table above opposite Kathryn Hach-Darrow's name
include 928,300 shares held in Mrs. Hach-Darrow's name. The shares listed
above also include 1,869,743 shares held by Mrs. Hach-Darrow as trustee and
beneficiary of the Kathryn C. Hach Marital Trust, 95,176 shares held by Mrs.
Hach-Darrow as the trustee and beneficiary of the Clifford C. Hach
Generation Skipping Trust and 73,635 shares held by the Clifford C. Hach
Family Trust, all three of which Trusts were created under an agreement
dated August 30, 1988 by Clifford C. Hach. Mrs. Hach-Darrow has the power to
vote and dispose of the shares held in the Marital, Generation Skipping and
Family Trusts. In addition, the shares listed above opposite Mrs.
Hach-Darrow's name include 1,511,415 shares owned by C&K Enterprises, Ltd.,
as to which Mrs. Hach-Darrow and the Kathryn C. Hach Marital Trust have
voting and investment powers and 120,782 shares owned by the Hach Scientific
Foundation, a charitable foundation. Mrs. Hach-Darrow is President and a
co-trustee of the Foundation and she shares voting and investment powers
with respect to the shares held by the Foundation. Finally, the shares
listed above include 20 shares which have been allocated to the account of
Mrs. Hach-Darrow under the Company's Employee Stock Ownership Plan (the
"ESOP") and which Mrs. Hach-Darrow has the right to direct the Plan trustee
to vote.
(2) Excludes 128,567 shares owned by the Hach Company 401(k) Plan. The Company
through its Board of Directors has the power to vote such shares. In
addition, the co-trustees of the 401(k) Plan share investment power with
respect to those shares. Also excludes shares of the Company's ESOP, as to
which the Company through its Board of Directors and the ESOP's co-trustees,
have investment power. The co-trustees of each of the 401(k) Plan and the
ESOP are Randall A. Petersen, Gary R. Dreher and Loel J. Sirovy. The ESOP as
of June 30, 1997 held a total of 692,489 shares all of which were allocated
to the accounts of plan participants. Shares accrued to the individual
accounts of Kathryn Hach-Darrow, Bruce Hach and Gary Dreher are reflected in
the table above and the amounts of the shares being held in said individual
accounts are given in footnotes 1, 3 and 4 to the above table. See footnote
2, page 3, with reference to the power to vote ESOP shares.
(3) Excludes 64,644 shares held by Robert O. Case and Bruce J. Hach as
co-trustees of eight irrevocable trusts for the benefit of the grandchildren
of Kathryn Hach-Darrow. Robert O. Case and Bruce J. Hach have shared
investment and voting powers with respect to those shares. Three of the
beneficiaries of the trusts are the children of Bruce J. Hach. Also excludes
217,950 shares held in separate shares in an irrevocable trust for the
benefit of the grandchildren of Kathryn Hach-Darrow by Bank One - Loveland
under an agreement dated June 30, 1975, between Kathryn Hach-Darrow and the
late Clifford C. Hach as settlors and The Northern Trust Company, as initial
trustee. The Trust is being held for the benefit of the grandchildren of
Kathryn Hach-Darrow and the late Clifford C. Hach,
6
<PAGE>
three of whom are the children of Bruce J. Hach. Also excludes 94,047 shares
held by a partnership composed of the children of Kathryn Hach-Darrow and
their spouses. Includes 5,397 shares held by the ESOP which are accrued to
the account of Bruce J. Hach and which he has the right to direct the Plan
trustee to vote and options to purchase 14,000 shares of stock.
(4) Includes 3,733 shares held by the ESOP which are accrued to the account of
Mr. Dreher and which he has the right to direct the Plan trustee to vote and
options to purchase 24,000 shares of stock. Excludes an additional 688,756
shares owned by the ESOP, for which Gary R. Dreher as a co-trustee of the
ESOP shares investment power.
(5) Includes options to purchase 8,162 shares issued to this director under the
Director Stock Plan.
Kathryn Hach-Darrow may be considered to be a controlling person of the
Company. Kathryn Hach-Darrow is the mother of Bruce J. Hach.
The Board of Directors has an Audit Committee, an Executive Committee and a
Compensation Committee, but does not have a nominating committee. The members of
the Audit Committee are Linda O. Doty and Joseph V. Schwan. There were two
meetings of the Audit Committee during the last fiscal year. The Audit Committee
oversees implementation of the Company's financial and accounting systems,
recommends the appointment of the independent auditors for the Company and
reviews the adequacy and scope of the auditor's examination.
The Compensation Committee, which is composed of John N. McConnell
(Chairman), Joseph V. Schwan and Linda O. Doty, met on four (4) occasions during
the last fiscal year. Kathryn Hach-Darrow was a member of the Compensation
Committee prior to her resignation from the committee on November 22, 1996. The
Compensation Committee consults with management and makes recommendations to the
Board of Directors as to annual compensation, annual incentive compensation and
the award of stock options to, key personnel and such other compensation matters
as may be delegated to it by the Board of Directors.
The members of the Executive Committee are Kathryn Hach-Darrow (Chairman),
Bruce J. Hach and Fred W. Wenninger. The Executive Committee acts in lieu of the
Board of Directors, when necessary, on matters which require the authorization
of the Board of Directors and are within the Committee's powers as provided by
statute, the Company's by-laws and Board resolutions. The Executive Committee
did not meet during the last fiscal year.
The Board of Directors met nine (9) times during the last fiscal year.
During fiscal 1997, all incumbent directors of the Company attended at least 75%
of the total number of meetings of the Board of Directors and meetings of
committees of which they were members.
DIRECTOR REMUNERATION. The Company pays each Non-Employee Director for his
or her services as a director an annual retainer of $10,000 on the last day of
the Company's fiscal year, together with $1,000 for each board meeting and $750
for each board committee meeting which the Non-Employee Director attends in
person. Attendance at telephonic board or board committee meetings is not
compensated. Directors who are employees of the Company do not receive fees for
service on the board or any board committees. Under the 1995 Non-Employee
Director Stock Plan each Non-Employee Director may elect to receive Company
Common Stock or stock options, or a combination thereof, in lieu of all or a
portion of such Non-Employee Director's Annual Retainer. The number of shares
subject to an Option granted under the Plan is the number of whole shares equal
to (i) the product of four times the portion of the Annual Retainer which the
Non-Employee Director has elected to be paid in Options, divided by (ii) the
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<PAGE>
fair market value per share on the options grant date. During fiscal 1997, each
of the four Non-Employee Directors elected to receive stock options in lieu of
the Annual Retainer. Each Non-Employee Director received 2,162 options on
September 3, 1996 at an option price of $18.50 per share.
In addition, each year each Non-Employee Director is automatically granted
an option to purchase 1,000 shares of Company stock at an exercise price not
less than the fair market value on the date of the grant. On September 3, 1996,
each Non-Employee Director was granted an option to purchase 1,000 shares of
Company stock at $18.50 per share.
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
See "Executive Employment Agreements" and "Compensation Committee Interlocks
and Insider Participation" below for a description of certain transactions and
business relationships, involving management of the Company.
SUMMARY COMPENSATION TABLE
The following table provides summary information concerning compensation
paid by the Company to its Chief Executive Officer and each of the four other
most highly compensated executive officers of the Company (hereafter referred to
as the "named executive officers") for the fiscal years ended April 30, 1997,
1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS(2)
ANNUAL COMPENSATION --------------------------------
SECURITIES
-------------------- OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS COMPENSATION(5)
- --------------------------------------- --------- --------- --------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Kathryn Hach-Darrow 1997 $ 126,278 $ 0 $ 0 0 $ 21,324
Chairman of the Board and 1996 $ 126,089 $ 0 $ 0 0 $ 20,237
Chief Executive Officer 1995 $ 126,004 $ 0 $ 0 0 $ 18,049
Bruce J. Hach 1997 $ 176,181 $ 0 $ 0 8,000 $ 24,176
President and Chief 1996 $ 173,449 $ 0 $ 0 12,000 $ 20,004
Operating Officer 1995 $ 160,280 $ 0 $ 0 0 $ 17,513
Kenneth Ogan 1997 $ 150,666 $ 0 $ 17,449(4) 8,000 $ 23,968
Vice President and 1996 $ 31,154 $ 0 $ 0 12,000 $ 0
Chief Technical Officer (3) 1995 -- $ 0 $ 0 0 $ 0
Loel J. Sirovy 1997 $ 134,412 $ 15,750 $ 0 8,000 $ 27,824
Senior Vice President, 1996 $ 127,848 $ 0 $ 0 12,000 $ 21,512
Operations and Outbound Marketing 1995 $ 122,285 $ 0 $ 0 0 $ 18,312
Gary R. Dreher 1997 $ 128,585 $ 14,375 $ 0 8,000 $ 25,286
Vice President and 1996 $ 119,877 $ 0 $ 0 12,000 $ 18,397
Chief Financial Officer 1995 $ 109,774 $ 0 $ 0 0 $ 15,366
</TABLE>
- ------------------------------
(1) The aggregate amount of perquisites and other personal benefits did not
exceed the lesser of $50,000 or ten percent of the total annual salary and
bonuses reported for any of the named executive officers, and is therefore
not included.
(2) No named executive officer had any restricted stock holdings as of April 30,
1997. The Company has not granted any stock appreciation rights to any named
executive officer. Kathryn Hach-Darrow does not participate in the Company's
stock option plans.
8
<PAGE>
(3) Mr. Ogan became an executive officer of the Company in February 1996.
(4) Reimbursement for certain relocation expenses consistent with the Company's
practice for similarly situated employees.
(5) The amounts reported as "All Other Compensation" include the following
payments or accruals under the Company's benefit and incentive plans:
(i) Company contributions during fiscal 1997 under the Company's Profit
Sharing Plan (including Company contributions made pursuant to Section
401(k) of the Internal Revenue Code) as follows: K. Hach-Darrow $12,146
B. Hach $10,867, K. Ogan $10,867, L. Sirovy $13,867 and G. Dreher
$13,022. Under the Plan, all domestic full time employees of the Company
with six months of service are eligible to participate. The Company's
annual contribution (after allocation of the matching contribution
described below) is determined by the Board of Directors and is
proportionately allocated to participants' accounts based on their annual
compensation not in excess of $150,000. Participants' accounts
attributable to the Company's contribution vest at the rate of 10% for
each of the first four years of service and 20% for each of the next
three years of service. The Profit Sharing Plan includes a voluntary
salary reduction provision as authorized by Section 401(k) of the
Internal Revenue Code. All employee contributions and any contributions
by the Company that the Board of Directors determines are pursuant to
Section 401(k), vest immediately. The Plan provides for a matching
contribution in the form of company stock for all contributions by
employees with one or more years of service in an amount of 50% of the
employee's yearly contribution up to a maximum of 2% of the employee's
yearly compensation. Matching contributions by the Company vest at the
rate of 10% for each of the first four years of service and 20% for each
of the next three years of service. All vested amounts allocated to the
participants' accounts are distributable upon retirement at or after age
65, termination of employment, permanent disability or death.
(ii) Company contributions during fiscal 1997 to the Employee Stock
Ownership Plan ("ESOP") as follows: K. Hach-Darrow $4,079 B. Hach $4,657,
K. Ogan $4,657, L. Sirovy $4,657 and G. Dreher $4,373. All domestic full
time employees of the Company with six or more months of service are
eligible to participate in the ESOP. The Company's annual contribution to
the ESOP is determined by the Board of Directors and is proportionately
allocated to participants' accounts based on their annual compensation
not in excess of $150,000. Participants' accounts in the ESOP vest at the
rate of 10% for each of the participant's first four years of service
with the Company and 20% for each of the participant's next three years
of service. The ESOP invests primarily in Company stock. All amounts in
the participants' accounts in the ESOP are distributable upon retirement
at or after age 65, termination of employment, permanent disability or
death.
(iii) Imputed compensation under Group Term Life Insurance Program as
follows: K. Hach-Darrow $5,099, B. Hach $1,152, K. Ogan $944, L. Sirovy
$1,800 and G. Dreher $391. The program, which is generally available to
all employees, provides coverage during employment equal to twice salary
(with a maximum benefit of $250,000). The above amounts of premiums paid
by the Company on behalf of named executive officers under the program
represent amounts imputed as compensation to such executive officers
under the Internal Revenue Code of 1986, as amended.
(iv) Company contributions during the 1997 fiscal year to the Company's
Deferred Compensation Plan as follows: K. Hach-Darrow $0, B. Hach $7,500,
K. Ogan $7,500, L. Sirovy $7,500 and G. Dreher $7,500. Company
contributions on behalf of eligible key employees under the Deferred
Compensation Plan are determined on an annual basis in the sole
discretion of the Plan's administration committee, which is appointed by
the Board of Directors. The Deferred Compensation Plan also allows all
eligible key employees to defer up to 25% of their base compensation and
up to 100% of bonuses and certain other payments on a tax favored basis
into a tax exempt trust pursuant to Internal Revenue Service guidelines.
The employee accounts are invested by the Plan trustee in an investment
fund as directed by the administration committee. The Deferred
Compensation Plan is the result of March 1, 1995 amendment and
reconstitution of the Company's Supplemental Executive Benefits Plan
("SEBP"), which was first established in 1988. Compensation deferred
under the Deferred Compensation Plan at the election of the named
executives are included above in the category (e.g., salary, bonus) and
year it would otherwise have been reported had it not been deferred.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The Company maintains the 1993 Stock Option Plan (the "Option Plan"). The
Option Plan is administered by the Compensation Committee of the Company's Board
of Directors which, in its sole discretion, determines the persons from among
salaried, full-time employees owning less than five percent of the Company's
outstanding stock to whom options, either incentive or non-incentive as defined
in
9
<PAGE>
Section 422 of the Internal Revenue Code, will be granted and the terms and
conditions of each grant within the limits imposed by the Option Plan. The
following table provides information relating to options granted to the named
executive officers during fiscal 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
--------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR OPTION TERM
OPTIONS EMPLOYEES EXERCISE OR ------------------------------------
GRANTED IN FISCAL BASE PRICE EXPIRATION 0%
NAME (#) YEAR ($/SH) DATE -- 5% 10%
- ------------------------------- ------------- ----------- ------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Kathryn Hach-Darrow............ 0 -- -- -- -- -- --
Bruce J. Hach.................. 8,000 10.5% $ 16.50 11/22/2001 $ 0 $ 36,480 $ 80,560
Kenneth Ogan................... 8,000 10.5% $ 16.50 11/22/2001 $ 0 $ 36,480 $ 80,560
Loel J. Sirovy................. 8,000 10.5% $ 16.50 11/22/2001 $ 0 $ 36,480 $ 80,560
Gary R. Dreher................. 8,000 10.5% $ 16.50 11/22/2001 $ 0 $ 36,480 $ 80,560
All Shareholders' Potential
Realizable Value (2) $ 0 $50,621,000 $111,866,000
</TABLE>
- ------------------------------
(1) Based on 76,000 options granted to employees in fiscal 1997.
(2) The potential realizable value to all shareholders at the stated
appreciation rates is based on shares outstanding at November 22,
1996, assuming such shares were purchased for $16.50 on November 22, 1996
and held until November 22, 2001.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table shows information concerning the exercise of stock
options by each of the named executive officers during fiscal 1997 and the value
of all remaining exercisable options at April 30, 1997, on a pre-tax basis.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING OPTIONS AT OPTIONS AT
VALUE 4/30/97(#) 4/30/97 ($)(2)
SHARES ACQUIRED REALIZED ------------------------------ ---------------
NAME ON EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE
- ---------------------------------- ----------------- ------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Kathryn Hach-Darrow............... 0 $ 0 0 0 $ 0
Bruce J. Hach..................... 0 $ 0 18,000 12,000 $ 0
Kenneth Ogan...................... 0 $ 0 4,000 16,000 $ 0
Loel J. Sirovy.................... 0 $ 0 24,000 16,000 $ 0
Gary R. Dreher.................... 0 $ 0 24,000 16,000 $ 0
<CAPTION>
NAME UNEXERCISABLE
- ---------------------------------- -------------------
<S> <C>
Kathryn Hach-Darrow............... $ 0
Bruce J. Hach..................... $ 0
Kenneth Ogan...................... $ 0
Loel J. Sirovy.................... $ 0
Gary R. Dreher.................... $ 0
</TABLE>
- ------------------------------
(1) The value realized on exercise of stock options is calculated by subtracting
the exercise price from the market value of the Company's Common Stock as of
the exercise date.
(2) The value of unexercised in-the-money options is equal to the market value
of the Common Stock at April 30, 1997 ($14.50 per share) less the per share
option exercise price multiplied by the number of exercisable options, as
the case may be.
10
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENTS
Each of the executive officers identified below has an employment agreement
with the Company which comes into effect only upon a "Change of Control" of the
Company (as defined in the agreements), and thereafter provides for continued
employment of such individual for a three year term (which is automatically
renewed annually for one year unless either party gives six months prior written
notice of termination) (the "Employment Period") at an annual compensation rate,
and with such employment benefits, as in effect at the time of the commencement
of the Employment Period. The agreement, once triggered, further provides that
if the individual's employment is terminated by the Company (except for "cause"
as defined in the agreements) or if the individual should resign under certain
circumstances set forth in the agreements, the individual shall be entitled to
certain payments described below. The executive officers who have employment
contracts are Mesers. Hach, Sirovy, Churchill, Dreher, Peterson, Thompson,
Privette and Ogan, and their current annual compensation rates range from
$99,000 to $175,000.
The Board of Directors believes that the Agreements assure fair treatment of
the executive officers in relation to their careers with the Company by assuring
them of some financial security. The Agreements also protect the stockholders by
encouraging the executive officers to continue their attention to their duties
without distraction in a potentially disturbing circumstance and neutralizing
any bias they might have in evaluating proposals for the acquisition of the
Company.
Upon the death of an individual, the Company is obligated to make payments
to the beneficiary or representative of the deceased at a rate equal to one-half
of the annual compensation rate in effect on the date of death, until the end of
the term of the agreement (without reduction of any life insurance benefits
payable directly to the deceased's beneficiaries or estate).
If the individual's employment is terminated by the Company by reason of
such individual's disability, the Company is obligated to pay a salary to such
individual at the annual rate in effect upon termination for the remaining term
of the Agreement.
The agreements entitle an individual to resign during the Employment Period
if, without his consent in any circumstance other than his disability, his
office in the Company or the geographical area of his employment should be
changed. Upon such resignation, the individual is entitled to a lump sum payment
equal to the aggregate cash compensation (based on his or her annual
compensation rate at the time of termination) which would have been payable to
the individual over the remaining term of the agreement had it not been
terminated, plus any other benefits which would have been payable to him during
such period (including the fair market value of any stock options or other stock
rights granted him or her under any stock plans of the Company).
Each agreement includes a covenant by the individual providing that if the
individual's employment terminates for any reason he or she will not for a
period of twelve months following the termination of his or her employment
engage directly or indirectly in any competitive business, nor will he or she at
any time following the termination use the confidential information of the
Company.
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
reviewing and recommending the compensation and other remuneration afforded the
named executive officers of the Company, including the grants of stock options
under the Company's Stock Option Plans. All decisions by the Compensation
Committee relating to the compensation of the company's named executive officers
are reviewed and approved by the full Board.
In carrying out its responsibilities in fiscal 1997, the Compensation
Committee, as it has in prior years, considered the following:
- Financial performance of the Company as a whole on both a long-term and
short-term basis (including the increases in operating income, sales,
shareholder values, and returns on assets and equity achieved by the
Company in the prior fiscal year)
- The Company's evaluation of the executive officers with respect to overall
job performance, including, with respect to each individual executive
officer, the financial performance of that area of the Company, if any,
for which such executive officer is responsible
- The Company's policy and practices for compensation of employees generally
- Review of general compensation surveys prepared by executive compensation
consultants and available to the public
- Such other material information which the Compensation Committee deems
appropriate in the case of any particular individual
GENERAL COMPENSATION POLICY
The Committee's fundamental compensation policy is to make a substantial
portion of an executive's compensation contingent upon the financial performance
of the Company. Accordingly, in addition to each executive's base salary, the
Company offers bonuses and stock option awards which are tied to the Company's
and executive's performance goals. Prior to November 1995, executive
compensation consisted of salary, benefits and stock options. Effective
November, 1995, the Board of Directors approved a new compensation package for
key management which added an incentive compensation component. The Compensation
Committee believes that providing incentives to the executive officers benefits
stockholders by aligning the long-term interests of stockholders and employees.
There are four components of key management's compensation package:
- Salary
- Benefits, which include only medical, dental and life insurance and
participation in a profit sharing and 401(k) plan and a deferred
compensation plan
- Eligibility for equity purchase on more favorable terms than those
available to the outside common stockholder (through the 1993 Stock Option
Plan and through the Company's Employee Stock Purchase Plan)
- Eligibility for annual incentive compensation
12
<PAGE>
FACTORS
Several of the more important factors which were considered in establishing
the components of each executive officer's compensation package for the 1997
fiscal year are summarized below. Additional factors were also taken into
account, and the Compensation Committee may, in its discretion, apply entirely
different factors, particularly different measures of financial performance, in
setting executive compensation for future fiscal years. However, all
compensation decisions will be designed to further the general compensation
policy indicated above.
BASE SALARY
Except as provided below with respect to Mrs. Hach-Darrow, the base salary
for each executive officer is set on the basis of personal performance, the
salary levels in effect for comparable positions with the Company's principal
competitors and the Company's financial performance relative to such
competitors. Factors relating to individual performance that are assessed in
setting base compensation are based on the particular duties and areas of
responsibility of the individual executive officer. Factors relating to the
Company's financial performance that may be related to increasing or decreasing
base salary include revenues and earnings. The establishment of base
compensation involves a subjective assessment and weighing of the foregoing
criteria and is not based on any specific formula.
ANNUAL INCENTIVE COMPENSATION
In November, 1995, the Company established the Hach Company Officer
Incentive Bonus Plan (the "Incentive Bonus Plan") which is an annual incentive
plan that provides cash compensation up to a maximum percentage of annual base
salary based on the achievement of goals set by the Compensation Committee for
the Company and the elected executive officers that are designated on a
year-to-year basis by the Compensation Committee for participation. The
overriding principle of the Incentive Bonus Plan is to motivate and reward key
management to achieve above average results. The bonus element of the
participant's total compensation package is therefore, more results-oriented
than any other element.
There were seven participants in the Incentive Bonus Plan in fiscal year
1997. All named executive officers, other than Kathryn Hach-Darrow and Bruce
Hach were designated by the Compensation committee as eligible for fiscal year
1997 awards. The Incentive Bonus Plan is offered only to elected officers
because they can influence corporate results more than the other employee group.
The Incentive Bonus Plan is administered by the Compensation Committee. The
Compensation Committee may amend the Incentive Bonus Plan or discontinue the
Incentive Bonus Plan at any time.
For fiscal 1997, the Compensation Committee established corporate
performance goals for net sales growth, increases in net income as a percentage
of net sales and economic value added. Individual management goals were set for
each executive, depending on his or her particular responsibilities and
strategic objectives for the year. For fiscal 1997, the maximum percentage of
base salary which can be paid to an executive under the Incentive Bonus Plan was
set at 25%. As of the date of this report, the determination as to whether
performance goals under the Incentive Bonus Plan have been met has not been
completed and consequently, no awards have been paid under the Incentive Bonus
Plan based upon fiscal 1997 year performance. Bonuses paid in fiscal 1997 for
fiscal 1996 performance are included in the Summary Compensation Table.
13
<PAGE>
STOCK OPTIONS
All stock options are granted under the 1993 Plan and are intended to align
the interests of each officer-optionee with those of the stockholders and
provide them with a significant incentive to manage the Company from the
perspective of an owner with an equity interest in the success of the business.
The size of the option grant made to each executive officer under the 1993 Plan
is based upon that individual's current position with the Company, internal
comparability with option grants made to other Company executives and the
individual's potential for future responsibility and promotion over the option
term.
During fiscal year 1997, the Compensation Committee granted those stock
option awards to the named executive officers as are set forth in the option
grant table above under the heading "Executive Compensation-Stock Option Grants
in the Last Fiscal Year".
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Compensation Committee meets without Kathryn Hach-Darrow present to
evaluate her performance and to determine its recommendations to the Board of
Directors with respect to her compensation as the Chief Executive Officer. Mrs.
Hach-Darrow, other than by her participation in general employee benefit
programs, has been compensated by the Company almost solely through her annual
salary. She is not eligible to participate in the Company's Stock Option Plans,
Officer Incentive Bonus Plan or the Employee Stock Purchase Plan.
The Compensation Committee continues to believe that the compensation paid
to Kathryn Hach-Darrow does not adequately reflect the value of Mrs.
Hach-Darrow's contributions to the Company's performance and the returns
recognized by the Company's shareholders and has not been competitive with the
compensation paid to the chief executive officers of other manufacturing
companies of comparable size. Notwithstanding the position of the Compensation
Committee, Mrs. Hach-Darrow, as she has in most prior years, has again this year
declined the increases in her compensation recommended by the compensation
Committee. Consequently, Mrs. Hach-Darrow's fiscal 1997 base salary remained at
$125,000, the same amount she received in 1994, 1995 and 1996.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation over $1 million
paid to the named executive officers. Qualifying performance based compensation
is not subject to the deduction limit if certain requirements are met.
The Compensation Committee continues to monitor qualifying compensation paid
to its named executive officers for deductibility under the Section 162(m)
limits for executive salaries. Compensation paid to such persons did not exceed
this limitation in fiscal year 1997 and is not expected to do so in the
foreseeable future.
COMPLIANCE WITH SECTION 16(a) BENEFICIAL OWNERSHIP
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership of, and transactions in, the Company's securities with the Securities
and Exchange Commission ("SEC") and the Nasdaq Stock Market ("Nasdaq"). Such
directors, executive
14
<PAGE>
officers and ten-percent stockholders are also required to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms received by it, and on
written representations from certain reporting persons, the Company believes
that during fiscal 1997, all Section 16(a) filing requirements applicable to its
directors, officers and ten percent stockholders were complied with, with the
following exception: Bruce Hach, an officer of the Company, filed a late report
with respect to a stock sale by his daughter of shares held in joint tenancy. As
of the date of this Proxy Statement, the referenced transaction has been
reported to the SEC and Nasdaq.
SUMMARY
The compensation Committee believes that the policies and objectives of the
compensation programs at the Company serve to keep shareholder and management
interests in building value closely aligned and are consistent with programs
maintained by comparable industrial companies. The Company's senior leadership
team continues to move aggressively to position the organization for global
competition. Their efforts during fiscal 1997 have made the Company stronger and
well-positioned for world-wide opportunities.
COMPENSATION COMMITTEE
John N. McConnell, Chairman
Joseph V. Schwan
Linda O. Doty
15
<PAGE>
PERFORMANCE GRAPH
The following graph prepared by The NASDAQ Stock Market compares the
cumulative total shareholder return on the Common Stock of the Company from
April 30, 1992 through April 30, 1997, with the cumulative total shareholder
return for the Standard and Poor's 500 Index and the Company's Self-Determined
Peer Group (as defined below) over the same period, assuming the investment of
$100 on April 30, 1992 and the full reinvestment of all dividends. The companies
that comprise the Company's Self-Determined Peer Group are as follows: Betz
Laboratories, Inc.; Dionics Corporation; Ionics, Inc.; Isco, Inc.; Millipore
Corporation; OI Corporation; Osmonics, Inc.; Perkin Elmer Corporation; Thermo
Instrument Systems, and VWR Corporation.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR-
<S> <C> <C> <C>
Cumulative Total Returns
Dollar Value
Year
Hach S&P Peer
4/30/92 $100.0 $100.0 $100.0
4/30/93 98.5 106.1 102.5
4/30/94 73.5 108.7 110.0
4/30/95 82.0 124.0 122.0
4/30/96 89.6 157.6 186.4
4/30/97 76.4 193.1 206.0
</TABLE>
<TABLE>
<CAPTION>
LEGEND
----------------------------------------------------------------------------------------------------------
SYMBOL NASDAQ TOTAL RETURNS INDEX FOR: 04/30/92 04/30/93 04/30/94 04/30/95 04/30/96 04/30/97
- ----------- ----------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
/ / Hach Company............................. 100.0 98.5 73.5 82.0 89.6 76.4
- - S&P 500 Stocks........................... 100.0 106.1 108.7 124.0 157.6 193.1
TRIANGLE Self-Determined Peer Group............... 100.0 102.5 110.0 122.0 186.4 206.0
</TABLE>
- ------------------------------
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day,
the preceding trading day is used.
D. The index level for all series was set to $100.00 on 04/30/92.
16
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors served as members of the Compensation Committee of
the Company's Board of Directors during fiscal 1997: Kathryn Hach-Darrow, John
N. McConnell, Joseph V. Schwan and Linda O. Doty.
Kathryn Hach-Darrow is the Chief Executive Officer of the Company. Although
Mrs. Hach-Darrow served on the Compensation Committee during part of the year,
she did not participate in any decisions regarding her own compensation as an
executive officer other than as described in the last sentence of the
Compensation Committee's Report above. Mrs. Hach-Darrow resigned from the
Compensation Committee on November 22, 1996.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of the Company, acting upon the recommendation of the
Audit Committee, has selected the firm of Coopers & Lybrand L.L.P. as
independent certified public accountants of the Company and its subsidiaries for
the fiscal year 1998. Coopers & Lybrand L.L.P. also served as independent
certified public accountants during the fiscal year 1997. A representative of
Coopers & Lybrand L.L.P. is expected to be present at the meeting and will be
afforded the opportunity to make a statement if he or she desires to do so. He
or she will also respond to appropriate questions raised by the stockholders.
PROPOSAL TO AMEND THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
SUMMARY DESCRIPTION OF THE AMENDMENT AND THE STOCK DIVIDEND
At the Annual Meeting, the stockholders of the Company will be asked to
consider and vote upon an amendment in the form attached hereto as Exhibit A
(the "Amendment") to Article Fourth of the Company's Restated Certificate of
Incorporation to: (i) authorize a new class of common stock designated as Class
A Common Stock, $1.00 par value ("Class A Common Stock"), which would be
non-voting (except in certain limited circumstances); (ii) increase the number
of authorized shares of capital stock of the Company from 25,000,000 to
45,000,000, consisting of 25,000,000 shares of Common Stock and 20,000,000
shares of Class A Common Stock; and (iii) establish the rights, powers and
limitations of the Class A Common Stock. The Common Stock and Class A Common
Stock sometimes are referred to collectively in this Proxy Statement as the
"Common Stocks." As of July 24, 1997, 8,221,752 shares of the Common Stock were
outstanding, leaving 16,778,248 shares available for issuance.
If the Amendment is approved by the stockholders, the Board of Directors of
the Company intends to prepare and file a Certificate of Amendment to the
Company's Restated Certificate of Incorporation in accordance with the
Amendment, which will become effective (the "Effective Time") immediately upon
acceptance of filing by the Secretary of State of Delaware.
Although the Board of Directors presently intends to file the Amendment
promptly after it is approved by the stockholders, as permitted under Delaware
law, the Board of Directors may decline to file the Amendment even if the
Amendment is approved by the stockholders, if the Board of Directors determines
that such action would be in the best interests of the Company. The Company
currently knows of no reason why the Amendment would not be filed if adopted by
the stockholders. The Restated Certificate of Incorporation after the Effective
Time of the Amendment is referred to herein as the "Amended Restated
Certificate."
17
<PAGE>
The Board of Directors, subject to the approval and filing of the Amendment,
plans to authorize and distribute as a dividend, to be made shortly after the
Effective Time, of one share of Class A Common Stock for each share of Common
Stock outstanding on the record date for such dividend (the "Stock Dividend").
If the Stock Dividend is authorized, the record date for the Stock Dividend (the
"Stock Dividend Record Date") will be set by the Board of Directors promptly
following the Effective Time. The date of distribution of the Common Stock under
the Stock Dividend, if authorized, is expected promptly after the Stock Dividend
Record Date. Stockholder approval of the Stock Dividend is not required by
Delaware law and is not being solicited by this Proxy Statement.
Subject to the approval and filing of the Amendment and authorization of the
Stock Dividend, as soon as practicable after the Stock Dividend Record Date,
Harris Trust and Savings Bank, the Company's transfer agent and registrar, will
issue certificates representing the number of shares of Class A Common Stock
each stockholder is entitled to receive as a consequence of the Stock Dividend.
The Amendment makes no change to the terms of the Common Stock except to the
extent voting rights with regard to those shares would be affected by the Class
A Protection Provision described below. See "Description of the Class A Common
Stock and Common Stock--Class A Protection." As more fully described below, the
new shares of Class A Common Stock created by the Amendment will have certain
special characteristics. In particular, the holders of Class A Common Stock will
not be entitled to vote on any matters except as otherwise required by law and
in certain other limited circumstances. See "Description of the Class A Common
Stock and Common Stock--Additional Voting Rights of the Class A Common Stock."
If authorized and distributed, the Stock Dividend will cause no change in
the relative voting power or equity of any stockholder of the Company, including
members of the Hach family, because the Stock Dividend will be distributed to
each stockholder in proportion to the number of shares of Common Stock owned on
the Stock Dividend Record Date.
The Amendment has been unanimously approved by the Company's Board of
Directors, which includes a majority of directors who are neither a member of
the Hach family nor an officer or employee of the Company. The Board of
Directors believes that the Amendment and, if authorized and distributed, the
Stock Dividend are in the best interests of the Company and its stockholders and
recommends a vote FOR the approval and adoption of the Amendment. Each of the
members of the Company's Board of Directors, including Kathryn Hach-Darrow and
Bruce Hach, have indicated that they intend to vote all shares of Common Stock
controlled by them, representing 58.4% of the outstanding Common Stock as of the
record date, for the approval and adoption of the Amendment, meaning that the
Amendment will be approved regardless of the votes of the Company's Stockholders
other than those referred to immediately above.
BACKGROUND OF THE PROPOSED AMENDMENT
THE HACH FAMILY. The Company was founded in 1947 by Kathryn Hach-Darrow and
her late husband, Clifford C. Hach, and the Hach family has owned a very
substantial interest in the Company since that time. As of July 10, 1997,
members of the Hach family beneficially owned approximately 4.9 million shares
of the Common Stock, and together control approximately 59.6% of the voting
power of the Company. See "Security Ownership of Certain Beneficial Owners and
Management." For purposes of this Proxy Statement, the "Hach family" refers to
Kathryn Hach-Darrow, Bruce J. Hach, C&K Enterprises, Ltd., a corporation owned
by Mrs. Hach-Darrow and Bruce J. Hach, Paul Hach and Mary Hach Gibbs, her three
children, and the charitable foundation and trusts identified in footnote 1 to
the table included above
18
<PAGE>
under "Security Ownership of Certain Beneficial Owners and Management." The
stock ownership of the Hach family gives the Hach family voting control of the
Company with respect to matters which require the approval of a majority of the
Company's outstanding voting securities.
RETENTION OF LAZARD FRERES. On December 20, 1996 the Company retained
Lazard Freres & Co. L.L.C. ("Lazard Freres") as a financial advisor to advise
the Company generally with respect to strategic alternatives for enhancing
stockholder value. The Company and Lazard Freres have entered into a letter
agreement dated December 20, 1996 (the "Lazard Freres Engagement Letter")
relating to the services to be provided by Lazard Freres. Pursuant to the Lazard
Freres Engagement Letter, the Company has paid Lazard Freres a fee of $250,000
to act as the Company's financial advisor through December 1997. The Company has
also paid Lazard Freres an additional $250,000 in connection with the Company's
repurchase of 3,157,223 shares of Common Stock ("Lawter Block") from Lawter
International, Inc. on July 8, 1997 (the "Lawter Block Repurchase"). The Company
will also reimburse Lazard Freres for the fees and disbursements of Lazard
Freres' counsel and Lazard Freres' other out-of-pocket expenses and will
indemnify Lazard Freres against certain liabilities, including liabilities under
the federal securities laws. Lazard Freres had not provided any services to the
Company prior to being engaged as the Company's financial advisor on December
20, 1996.
In connection with its engagement, among other things, Lazard Freres spoke
with the Company's management and certain employees, and reviewed certain
financial and other information supplied by the Company, as well as market
information.
On January 13, 1997, Lazard Freres met with senior management of the Company
to review Lazard Freres' preliminary analysis of the Company's strategic
alternatives, which included the possible purchase of the Lawter Block and
implementation of a dual class capital structure.
Following the January 13, 1997 meeting, senior management of the Company
directed counsel for the Company to prepare for senior management's review a
proposal which would implement a dual class structure. The draft proposal as
contemplated by senior management would (i) create a new class of nonvoting
common stock to be initially distributed pro-rata to existing stockholders, (ii)
prevent persons from acquiring substantial voting positions without acquiring
corresponding non-voting positions, and (iii) provide the Board of Directors
with the ability to pay higher dividends to holders of non-voting common stock
in order to minimize any disparity in the market prices of the voting and
non-voting shares. Prior to the February 3, 1997 Board of Directors meeting,
counsel for the Company delivered a draft proposal to senior management for
their review.
CONSIDERATION OF THE AMENDMENT BY THE BOARD OF DIRECTORS AND THEIR
ADVISORS. At a special meeting of the Board of Directors held on February 3,
1997, all members of the Board of Directors, representatives of the Company's
financial advisors and counsel for the Company met to review in detail the
Company's strategic alternatives. The review included a discussion of the
Company's market valuation and liquidity, industry peer group financial and
stock performance, and the Company's growth objectives and its capital
structure. The review also included a discussion of general strategic
alternatives available to the Company, including: the possible purchase of the
Lawter Block; the implementation of a dual class capital structure; an
extraordinary cash dividend to stockholders; a significant repurchase offer made
equally available to all stockholders; a negotiated sale of the Company; and
taking the Company "private" (i.e., the repurchase of the Common Stock of all
stockholders other than the Hach family and other Company affiliates).
19
<PAGE>
The review of dual class capital structures, included a discussion of the
impact of similar proposals on aggregate market value of outstanding common
equity of companies with dual classes of common equity; the potential market
price differential between voting and nonvoting shares; the potential impact on
the Company's market liquidity; the reaction of institutional investors to
nonvoting stock structures; the impact on the Company's ability to raise
capital; and the market impact of various features of the nonvoting shares.
Counsel for the Company reviewed with the Board of Directors the provisions of
the proposed amendment previously reviewed and approved by senior management and
its effects on the current capital structure of the Company. Counsel then
outlined for the Board of Directors the legal aspects of a dual class capital
structure, The NASDAQ Stock Market rules regarding the listing of both the
voting and nonvoting shares, and the fiduciary responsibilities of the Board of
Directors with respect to considering and implementing a dual class proposal. In
connection with its review of the dual class capital structure alternative, the
Board of Directors considered its financial advisor's analysis of twenty-nine
New York Stock Exchange and NASDAQ listed companies that have both voting and
non-voting shares that trade publicly which the financial advisor considered to
be a representative group of such companies. The analysis addressed the
following issues: (i) voting rights of each class; (ii) relative dividend
yields; (iii) relative valuation; (iv) profile of controlling shareholders; and
(v) share performance over different time periods. Lazard Freres considered the
impact that similar capital structures in other public companies may have had on
total market value of outstanding common equity, potential market-price
differentials between voting and nonvoting shares, potential impact on
liquidity, reaction of institutional investors to nonvoting structures and the
ability to raise capital through the issuance of nonvoting common stock. Lazard
Freres gave its view that the adoption of a dual class capital structure does
not appear to have a material adverse effect upon market liquidity or the
ability of public companies to raise capital through an offering of either
classes of shares. Further, the information supported the conclusion that the
market does not appear to penalize, other things being equal, the price of
non-voting stocks based on the lack of voting rights. The Board also reviewed
additional information on the eighteen of the aforementioned companies that
subsequent to their initial public offering implemented a dual class structure
and the impact on market value of such implementation. This information
supported the conclusion that there does not appear to be a significant effect,
positive or negative, on most companies' stock price as a result of the
announcement and implementation of a dual class capital structure relative to
the market in general. Lazard Freres cautioned the Board of Directors, however,
that since the circumstances surrounding each company's situation is unique no
assurance can be given as to the market's reaction to a dual class capital
structure for a particular company, particularly one whose stock is as illiquid
as the Company's.
The Board of Directors then reviewed and discussed the specific terms of a
proposal to implement a dual class structure presented by counsel for the
Company, as well as the likely benefits and possible disadvantages of the
proposal. As originally proposed, the dual class structure was to be implemented
by way of an amendment to the Company's Restated Certificate which would effect
a recapitalization of the Company by creating two classes of common stock, one
voting and one non-voting (except in certain limited circumstances), and by
changing each share of the outstanding Common Stock into one-half share of new
voting common stock and one-half share of new non-voting common stock (the
"Recapitalization Proposal"). The Board of Directors noted that a dual class
capital structure would not preclude the Company from pursuing other strategic
alternatives in the future, including a purchase of the Lawter Block. Based on
the presentation of management and the Company's advisors, the Board of
Directors acknowledged that the Recapitalization Proposal was worthy of further
consideration, directed management and counsel to finalize a Recapitalization
Proposal for the Board of Directors' consideration and
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instructed management and counsel to submit the Recapitalization Proposal to The
NASDAQ Stock Market for its review in advance of any final approval by the Board
of Directors.
The Board also discussed with its advisors other strategic alternatives
available to the Company, but determined not to pursue them at the present time.
The February 3, 1997 special meeting was adjourned without further action by
Board of Directors.
The Board of Directors met again on March 3, 1997 in a special meeting with
all members present. Also present were representatives of the Company's
financial advisor and counsel. Prior to the meeting counsel to the Company
delivered to all directors a draft of the Recapitalization Proposal and a
written summary of the terms and conditions of the Recapitalization Proposal and
its effects on the current capital structure of the Company.
The Board of Directors then considered the Recapitalization Proposal as a
method to implement a dual class stock structure for the Company. The Board of
Directors was informed by counsel for the Company that a representative of The
NASDAQ Stock Market had advised the Company that the issuance of nonvoting
common stock pursuant to the Recapitalization Proposal would be permitted under
the rules and regulations of The NASDAQ Stock Market.
The Board of Directors discussed the Recapitalization Proposal in detail,
including, without limitation, reviewing substantially those same matters more
fully described below under "Reasons for the Amendment; Recommendation of the
Board of Directors." Following these discussions all members of the Board of
Directors present at the meeting, including the directors who are neither
members of the Hach family nor an officer or employee of the Company
(representing a majority of the full Board of Directors), voted to approve the
Recapitalization Proposal and to recommend it to the Company's stockholders.
The Board of Directors then called a special meeting of stockholders for
June 19, 1997 to consider the approval of Recapitalization Proposal, set a
record date of April 25, 1997 for the purpose of determining stockholders who
can vote at such special meeting and authorized the Company to file a proxy
statement with the Securities and Exchange Commission (the "Commission"),
relating to such special meeting.
Following the Company's filing of its preliminary proxy materials on April
8, 1997 with the Commission, the Commission staff contacted counsel for the
Company with respect to the statement in the preliminary proxy materials that
only a majority vote of stockholders was required to adopt the Recapitalization
Proposal. The Commission staff raised the issue of whether the change of the
Company's Common Stock into new voting and non-voting common stock as a result
of the Recapitalization Proposal could be properly characterized as an issuance
of more than 10% of the outstanding voting securities of the Company to persons,
like Mrs. Hach-Darrow, who own in excess of 5% of the Company's voting
securities, in exchange for securities, cash or other property. If the
Recapitalization Amendment were so characterized, Article Ninth of the Company's
Restated Certificate would require the affirmative vote of 80% of the holders of
the Company's Common Stock, rather than the majority vote described in the
preliminary proxy materials, in order to authorize such an issuance in
connection with the Recapitalization Proposal.
At the Board of Directors' regularly scheduled year-end meeting on April 28,
1997, the Board and the Company discussed the status of the Recapitalization
Proposal and the Commission's comments with respect to the Company's filed
preliminary proxy materials. The Company's legal advisors advised the Board of
Directors that, notwithstanding their belief that the eighty percent standard of
Article Ninth would not apply to the vote required to authorize the
Recapitalization Proposal, the Company's position would be strengthened if the
dual class structure previously discussed and approved by the Board of
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Directors were implemented by an alternative method. In addition, management
stated the view that it might be desirable in promoting liquidity to have
outstanding after implementation of the dual class structure as many shares of
each class of common stock as there presently are shares of Common Stock
outstanding. After further discussion, the Board of Directors concurred with the
position of the Company's legal advisors and management, and authorized the
Company's legal advisors to prepare a revised proposal which would implement a
dual class structure by means of (i) an amendment to the Company's Restated
Certificate which would create a new class of common stock which would be
nonvoting (except in certain limited circumstances) and (ii) a subsequent stock
dividend of one share of the new class of common stock for each share of Common
Stock outstanding.
On May 19, 1997, the Board of Directors again met telephonically with its
legal and financial advisors with respect to the Amendment and the Stock
Dividend. The Board of Directors discussed the Amendment and Stock Dividend in
detail, including, without limitation, reviewing matters generally described
below under "Reasons for the Amendment; Recommendation of the Board of
Directors."
Following these discussions all members of the Board of Directors present at
the meeting, including the directors who are neither members of the Hach family
nor an officer or employee of the Company (representing a majority of the full
Board of Directors), voted to approve the Amendment and recommend it to the
Company's stockholders and, upon authorization of the Amendment by the Company's
stockholders and the determination by the Board to file the Amendment, to
consider authorizing and distributing the Stock Dividend. The Board of Directors
then determined to reschedule the special meeting of stockholders to consider
the approval of the Amendment until Wednesday, July 23, 1997, to set a new
record date of June 12, 1997 for the purpose of determining stockholders who can
vote on the authorization of the Amendment at such special meeting, and
authorized the Company to file revised preliminary proxy materials with the
Commission with respect to the Amendment to be presented to the Company's
stockholders at such rescheduled special meeting.
As a result of the commitment of Company management's time and effort to
process of negotiating and consummating the Lawter Block Repurchase, and the
proximity of the Annual Meeting, the Board of Directors on June 25, 1997
postponed presentation of the Amendment to the Company's stockholders until the
Company's Annual Meeting.
REASONS FOR THE AMENDMENT;
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company believes, after careful consideration
of the potential advantages and disadvantages of the Amendment, that the
Amendment is in the best interest of the Company and its stockholders. The
material advantages and disadvantages of the Amendment considered by the Board
of Directors are set forth herein. The Board of Directors believes that a
capital structure which has two classes of common stock offers a number of
potential benefits to the Company and its stockholders, which are described
below. THEREFORE, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
RESOLUTION AUTHORIZING THE AMENDMENT.
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FINANCING AND ACQUISITION FLEXIBILITY. The Board of Directors believes that
the management of the Company by members of the Hach family has contributed
substantially to the growth and success of the Company and that maintaining the
relative voting power of the Hach family is in the best interests of the Company
and its stockholders. Because any sales of voting stock by the Company would
reduce the Hach family's voting power, the Board of Directors' goal of
preserving that voting power has limited the Company's ability to sell or issue
stock for financings, acquisitions or other purposes. In addition, the Board of
Directors is aware that the Hach family desires at the present time to retain
control of the Company and therefore would probably be opposed to the sale or
issuance of significant amounts of voting stock by the Company.
Implementation of the Amendment would provide the Company with increased
flexibility in the future to issue common equity in connection with acquisitions
and to raise equity capital or to issue convertible debt as a means to finance
future growth without diluting the voting power of the Company's existing
stockholders, including the Hach family. The Class A Common Stock may also be
used, rather than voting Common Stock, for the Company's stock benefit plans.
The Company has no present plans to issue additional equity or convertible
securities in any acquisition or financing arrangement, although the Company
continues to evaluate possible acquisition candidates.
STOCKHOLDER FLEXIBILITY AND LIQUIDITY. Once the Amendment is effective and
the Stock Dividend is distributed, stockholders who desire to maintain their
voting positions would be able to do so even if they decide to sell or otherwise
dispose of shares of Class A Common Stock (subject to the Class A protection
provisions discussed below). The Amendment and Stock Dividend, if it is
distributed, thus would give all stockholders, including members of the Hach
family, increased flexibility to dispose of a portion of their equity interest
in the Company for estate planning or other purposes without affecting their
relative voting power. In addition, because stockholders who are interested in
maintaining their voting interest in the Company may be more willing to sell
shares of the Company if such sale does not result in a decrease in their
relative voting power, the Amendment may result in increased trading of equity
securities of the Company, thereby increasing liquidity. It is anticipated that
the voting Common Stock will continue to be listed, and nonvoting Class A Common
Stock will be listed, on The NASDAQ Stock Market. The Company is unaware of any
current plans or arrangements on the part of the members of the Hach family to
sell their Common Stock except for possible sales of Company Common Stocks by
Mrs. Hach-Darrow to the Company's ESOP in a manner consistent with past
practices.
CONTINUITY. The adoption of the Amendment would enable the Company to issue
Class A Common Stock for financing, acquisition and other purposes without
immediate dilution of the voting power of the Company's existing stockholders,
although their percentage equity interests would be diluted. The adoption of the
Amendment and the Stock Dividend should reduce the risk of disruption in the
continuity of the Company's long-term plans and objectives that could otherwise
result if the members of the Hach family choose to sell a significant block of
Common Stock for diversification, for estate planning purposes or for other
reasons. Implementation of the proposal would allow members of the Hach family
to continue to exercise control over a substantial portion of the Company's
voting power even if members of the Hach family choose to reduce their total
equity position significantly, and allow members of the Hach family additional
estate planning flexibility to determine the succession of voting control
through gifts or bequests of Common Stock. Therefore, the Amendment and, if
authorized and distributed, the Stock Dividend should reduce the risk that the
Company could, at some future date, be compelled to consider a sale of the
Company in an environment that could be dictated to the Company and the Board of
Directors by the
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financial circumstances of the members of the Hach family or by third parties
who may be anticipating or speculating about such circumstances.
KEY EMPLOYEES. The Amendment and, if authorized and distributed, the Stock
Dividend should allow all employees of the Company to continue to concentrate on
their employment responsibilities without undue concern that the future of the
Company could be affected by real or perceived succession issues or by an
unsolicited takeover attempt that might otherwise be triggered by significant
sales of shares of the Company by members of the Hach family in the future. By
reducing these uncertainties, the Amendment and, if authorized and distributed,
the Stock Dividend may enhance the ability of the Company to attract and retain
highly qualified key employees. In addition, the Company's ability to issue
Class A Common Stock should increase the Company's flexibility in structuring
compensation plans and arrangements so that employees may continue to
participate in the growth of the Company without diluting the voting power of
existing stockholders.
BUSINESS RELATIONSHIPS. Implementation of the Amendment and the
distribution of the Stock Dividend may enhance the existing and potential
business relationships of the Company with suppliers, customers, and other
parties who may become concerned about changes in control of the Company in the
event the Hach family holdings are diluted.
CERTAIN POTENTIAL DISADVANTAGES OF THE AMENDMENT
While the Board of Directors has determined that implementation of the
Amendment and the distribution of the Stock Dividend is in the best interests of
the Company and its stockholders, the Board of Directors recognizes that the
implementation of the Amendment and the distribution of the Stock Dividend may
also be considered to have certain disadvantages, including the following and
those set forth under "Certain Effects of the Amendment."
CHANGE OF CONTROL IMPACT. The Hach family currently owns a significant
portion of the Common Stock. Historically, the ownership position of the Hach
family has prevented third parties from acquiring control of the Company.
Practically speaking, no attempt to obtain control of the Company is likely to
succeed without the consent of the Hach family. Currently, however, the members
of the Hach family can reduce their equity position in the Company only by
diluting their ownership of voting stock and increasing the possibility that a
third party could gain control of the Company over the objections of the Hach
family. Once effective, the Amendment and the Stock Dividend will allow members
of the Hach family to continue to exercise voting control even if some or all of
them choose to reduce their holdings of shares of Class A Common Stock. As a
result, implementation of the Amendment and the distribution of the Stock
Dividend is likely to limit the future circumstances in which a sale or transfer
of equity by the Hach family could lead to a merger proposal or tender offer
that is not acceptable to the Hach family or a proxy contest for the removal of
incumbent directors. Consequently, the Amendment and Stock Dividend, if
distributed, might reduce the possibility that stockholders of the Company may
sell their shares at a premium over prevailing market prices and make it more
difficult to replace the current Board of Directors and management of the
Company.
STATE STATUTES. Some state securities statutes contain provisions which,
due to the existence of the nonvoting Class A Common Stock, may restrict an
offering of equity securities by the Company or the secondary trading of its
equity securities in those states. However, assuming, as expected, that the
Common Stock will continue to be listed on, and the Class A Common Stock will be
listed on The NASDAQ Stock
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Market National Market System, the Securities Act of 1933 will provide an
exemption from such state regulations for the offering and secondary trading of
the Company's equity securities.
ACQUISITION ACCOUNTING. The Class A Common Stock may not be used to effect
a business combination intended to be accounted for using the "pooling of
interests" method. In order for such method to be used, the Company would be
required to issue shares of Common Stock as the consideration for the
combination. As a result, the Company's flexibility with respect to structuring
business combinations using Class A Common Stock could be restricted.
BROKERAGE COSTS; SECURITY FOR CREDIT. As is typical in connection with any
stock dividend, brokerage charges and stock transfer taxes, if any, may be
somewhat higher with respect to purchases and sales of Common Stock and Class A
Common Stock after the Stock Dividend, if distributed, assuming transactions of
the same dollar amount, because of the increased number of shares involved.
The Company does not expect that the adoption of the Amendment and the Stock
Dividend, if distributed, will affect the ability of holders to use the Common
Stock or Class A Common Stock as security for the extension of credit by
financial institutions, securities brokers, or dealers.
INVESTMENT BY INSTITUTIONS. Implementation of the Amendment and the
distribution of the Stock Dividend may affect the decision of certain
institutional investors that would otherwise consider investing in or retaining
the Common Stock. The holding of nonvoting shares may not be permitted by the
investment policies of certain institutional investors or may be less attractive
to managers of certain institutional investors. The Company is not aware of the
effect, if any, the implementation of the Amendment will have on the continued
holdings of those institutional investors who currently own Common Stock.
DESCRIPTION OF THE CLASS A COMMON STOCK AND
THE COMMON STOCK
As indicated above, the Amendment will create the Class A Common Stock as a
new class of common stock which will be nonvoting except under the limited
circumstances described below. The rights, powers and limitations of the Class A
Common Stock and the Common Stock are set forth in full in the proposed Article
Fourth of the Company's Restated Certificate of Incorporation. The full text of
Article Fourth as proposed to be amended and restated is set forth as Exhibit A
to this Proxy Statement and is incorporated herein by reference. The following
summary should be read in conjunction with, and is qualified in its entirety by
reference to, such Exhibit A.
GENERAL. Except as otherwise required by the Delaware General Corporation
Law ("DGCL") or as otherwise provided in the Company's Amended Restated
Certificate, each share of Class A Common Stock and each share of Common Stock
have identical powers, preferences and rights in all other respects. There are
no redemption or sinking fund provisions applicable to the Class A Common Stock
or the Common Stock. Holders of Class A Common Stock and Common Stock are not
subject to further calls or assessments by the Company. All outstanding shares
of Class A Common Stock and Common Stock, when validly issued, will be fully
paid and non-assessable.
VOTING. The holders of shares of Common Stock are entitled to one vote on
any matter to be voted on by the stockholders of the Company. There is no
provision in the Company's Amended Restated Certificate permitting cumulative
voting. The holders of shares of Class A Common Stock are not entitled
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to vote on any matter to be voted on by the stockholders of the Company, except
as required under the DGCL or the Company's Amended Restated Certificate.
Under the Amended Restated Certificate and the DGCL, only the affirmative
vote of the holders of a majority of the outstanding shares of Common Stocks
entitled to vote will be required to amend the Restated Certificate or to
authorize additional shares of Class A Common Stock or Common Stock; and the
affirmative vote of the holders of a majority of the outstanding shares of the
Common Stocks entitled to vote will be required to approve any merger or
consolidation of the Company with or into any other corporation or sale of
substantially all its assets or to approve the dissolution of the Company,
subject to the provisions of Article Ninth of the Company's Restated Certificate
that requires approval by the vote of the holders of at least 80% of the
outstanding voting capital stock of the Company in those circumstances described
below under "Certain Effects of the Amendment--Effect on Fair Price Provision.".
Except under limited circumstances described below, the holders of the Common
Stock will elect the entire Board of Directors. In addition, as permitted under
the DGCL, the Amended Restated Certificate will provide that the number of
authorized shares of either class may be increased or decreased, but not below
the number of shares then outstanding, by the affirmative vote of the holders of
a majority of the outstanding shares of the Common Stock entitled to vote.
Under the DGCL, the holders of Class A Common Stock will be entitled to vote
on proposals to change the par value of the Class A Common Stock or to alter or
change the powers, preferences or special rights of shares of Class A Common
Stock, including the Class A Protection Provision, which may affect them
adversely. Additionally, the Class A Common Stock will be entitled to certain
additional voting rights in those circumstances described below under
"Additional Voting Rights of the Class A Common Stock."
DIVIDENDS AND DISTRIBUTIONS. Each share of Class A Common Stock and Common
Stock will be equal in respect to dividends and other distributions in cash,
stock or property, including distributions in connection with any and upon
liquidation, dissolution, or winding up of the Company, except that (i) a
dividend or distribution in cash or property on a share of Class A Common Stock
may be greater than any dividend or distribution in cash or property on a share
of Common Stock, and (ii) dividends or other distributions payable on the Class
A Common Stock and Common Stock in shares of capital stock shall be made to all
holders of the Class A Common Stock and Common Stock and may be made (a) in
shares of Class A Common Stock to the holders of Class A Common Stock and in
shares of Common Stock to the holders of Common Stock, (b) in shares of Class A
Common Stock to the holders of Class A Common Stock and to holders of Common
Stock, or (c) in any other authorized class or series of capital stock to the
holders of Class A Common Stock and Common Stock. In no event will either the
Class A Common Stock or Common Stock be split, subdivided, or combined unless
the other is proportionately split, subdivided, or combined.
Although the Board of Directors would have authority under the Amended
Restated Certificate to pay dividends and make distributions on the Class A
Common Stock in amounts greater than on the Common Stock, the Board of Directors
currently intends that future dividends will be paid on both classes on an equal
per share basis.
MERGERS AND CONSOLIDATIONS. Each holder of Class A Common Stock and Common
Stock will be entitled to receive the same per share consideration in the event
of a merger or consolidation.
CLASS A PROTECTION. Once the Amendment becomes effective, voting rights
disproportionate to equity ownership could be acquired through acquisitions of
Common Stock without corresponding purchases of
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Class A Common Stock, and the Common Stock could therefore trade at a premium to
the Class A Common Stock under certain circumstances. In order to reduce or
eliminate the economic reasons for the Common Stock and Class A Common Stock to
trade at disparate market prices and to give holders of Class A Common Stock the
opportunity to participate in any premium paid in the future for a significant
block (15% or more) of the Common Stock by a buyer who has not acquired a
proportionate share of Class A Common Stock, the Board of Directors determined
that the Amendment would include a "Class A Protection Provision." The Class A
Protection Provision might have an anti-takeover effect by making the Company a
less attractive target for a takeover bid. As discussed below, there can be no
assurance that the Company will in all instances be able to readily identify
persons whose holdings subject them to the Class A Protection Provision.
The Class A Protection Provision provides that if any person or group (other
than the Company), acquires beneficial ownership of 15% or more of the then
outstanding shares of Common Stock after the Effective Time of the Amendment,
and such person or group (a "Significant Stockholder") does not immediately
after such acquisition beneficially own an equal or greater percentage of all
then outstanding shares of Class A Common Stock, such Significant Stockholder
must, within a 90-day period beginning the day after becoming a Significant
Stockholder, commence a public cash tender offer as described below to acquire
additional shares of Class A Common Stock (a "Class A Protection Transaction").
If a Significant Stockholder does not undertake the required Class A Protection
transaction, he would lose the right to vote those shares of Common Stock
acquired after the Effective Time. For example, if a stockholder owns 4% of the
Common Stock prior to the adoption of the Amendment and thereafter purchases an
additional 16% of the Common Stock without purchasing any additional Class A
Common Stock, such stockholder will not be allowed to vote the 16% of the Common
Stock acquired after the Effective Time of the Amendment unless he commences a
tender offer for an additional 16% of the Class A Common Stock at the prescribed
price. Alternatively, such stockholder could sell that number of shares equal to
2% of the outstanding Common Stock, thus dropping the percentage of Common Stock
acquired by him after the Effective Time of the Amendment to 14%, leaving him
with an aggregate of 18% of the Common Stock, all of which he could vote.
The 15% Common Stock ownership threshold which initially triggers a Class A
Protection Transaction may not be waived by the Board of Directors, nor may the
Board of Directors amend this threshold in the Amended Restated Certificate
without stockholder approval, including under the Amended Restated Certificate,
a majority vote of the outstanding Class A Common Stock voting separately as a
class.
In connection with the application of the Class A Protection Provision, the
following shares of the Company's Common Stock shall be excluded from any
determination of the shares of Common Stock owned by a person or group, but not
for the purpose of determining shares outstanding: (i) shares beneficially owned
at the Effective Time; (ii) shares acquired by will, by laws of descent and
distribution, by gift, or by foreclosure of a bona fide loan; (iii) shares
acquired from the Company; (iv) shares acquired by operation of law (including a
merger or consolidation effected for the purpose of recapitalizing or
reincorporating such person but not for the purpose of acquiring another
person); (v) shares acquired in exchange for shares of Class A Common Stock if
the Class A Common Stock were acquired by the exchanging party directly from the
Company in any stock split or as a dividend on Common Stock; and (vi) shares
acquired by or from a qualified employee benefit plan of the Company
(collectively the "Excluded Shares").
In each Class A Protection Transaction, the Significant Stockholder must
make a public tender offer to acquire at least that number of additional shares
of Class A Common Stock (the "Additional Shares")
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determined by (i) multiplying the percentage of the number of shares of
outstanding Common Stock beneficially owned and acquired after the Effective
Time by such Significant Stockholder by the total number of shares of Class A
Common Stock outstanding on the date such Person or group became a Significant
Stockholder; and (ii) subtracting therefrom the number of shares of Class A
Common Stock beneficially owned by such Significant Stockholder on the date such
Person became a Significant Shareholder which were acquired after the Effective
Time. The Significant Stockholder must acquire all Class A Common Stock validly
tendered or, if the number of shares tendered exceeds the number determined
pursuant to such formula, a pro-rata number of Class A Common Stock from each
tendering holder (based on the number of shares of Class A Common Stock tendered
by each tendering stockholder).
The offer price for any shares of Class A Common Stock required to be
purchased by the Significant Stockholder pursuant to this provision would be the
greatest of: (i) the highest price per share paid by the Significant Stockholder
for any share of Class A Common Stock or Common Stock in the six-month period
ending on the date such person or group became a Significant Stockholder (or
such shorter period after the Effective Time if the date such person or group
became a Significant Stockholder is not more than six months following the
Effective Time); (ii) the highest reported sale price of a share of Class A
Common Stock or Common Stock on The NASDAQ Stock Market National Market System
(or such other securities exchange or quotation system as is then the principal
trading market for such shares) during the thirty-day period preceding the date
such person or group became a Significant Stockholder; or (iii) the highest
reported sale price for a share of Class A Common Stock or a share of Common
Stock on The NASDAQ Stock Market National Market System (or such other
securities exchange or quotation system constituting the principal trading
market for such shares) on the business day preceding the date the Significant
Stockholder commences the required tender offer.
A Class A Protection Transaction would also be required of any Significant
Stockholder that acquires an additional amount of Common Stock equal to or
greater than the next higher multiple of 5% (e.g., 20%, 25%, 30%, etc.) of the
outstanding Common Stock (excluding Excluded Shares) after the Effective Time if
such Significant Stockholder does not then own an equal or greater percentage of
all then outstanding Class A Common Stock that such Significant Stockholder
acquired after the Effective Time. Such Significant Stockholder would be
required to make a public cash tender offer to buy that number of Additional
Shares determined in accordance with the formula set forth above in the second
preceding paragraph at the offer price described in the immediately preceding
paragraph, even if a previous Class A Protection Transaction resulted in fewer
shares of Class A Common Stock being tendered than the Significant Stockholder
was required to offer to purchase in the previous offer.
The requirement to engage in a Class A Protection Transaction will be
satisfied by making the requisite offer and purchasing validly tendered shares,
even if the number of shares tendered is less than the number of shares the
Significant Stockholder was required to offer to purchase. If any Significant
Stockholder fails to make the required tender offer, or to purchase shares
validly tendered (after proration, if any), the voting rights of all Common
Stock owned by such Significant Stockholder and acquired after the Effective
Time will be automatically suspended until consummation of an offer as required
by the terms of the Class A Protection feature or until divestiture of the
excess Common Stock that triggered the tender offer requirement. To the extent
that the voting power of any Common Stock is so suspended, such shares will not
be included in the determination of aggregate voting shares for any purpose.
Neither the Class A Protection Transaction requirement nor the related
possibility of suspension of voting rights applies to any increase in percentage
ownership of Common Stock resulting solely from a
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change in the total number of shares of Common Stock outstanding. All
calculations with respect to percentage ownership of outstanding shares of
either class of Common Stock shall be based upon the number of outstanding
shares reflected in either the records of or a certificate from the Company's
stock transfer agent or reported in the last to be filed of the Company's Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K
or definitive proxy statement.
Since the definition of Significant Stockholder is based on the beneficial
ownership percentage of Common Stock acquired after the Effective Time of the
Amendment, a person or group who is a stockholder of the Company at the
Effective Time will not become a Significant Stockholder unless such person or
group acquires an additional 15% of the then outstanding Common Stock,
regardless of the number of shares of Common Stock owned prior to the Effective
Time of the Amendment. For purposes of the Class A Protection feature, the terms
"beneficial ownership" and "group" generally have the same meanings as used in
Regulation 13D promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act"), subject to certain exceptions set forth therein.
The Class A Protection provision does not prevent any person or group from
acquiring a significant or controlling interest in the Company, provided such
person or group acquires a proportionate percentage of the Class A Common Stock,
undertakes a Class A Protection Transaction or incurs the suspension of the
voting rights of the Common Stock as provided by the Class A Protection feature.
If a Class A Protection Transaction is required, the purchase price to be paid
in such offer may be higher than the price at which a Significant Stockholder
might otherwise be able to acquire an identical number of Class A Common Stock.
Such requirement could make an acquisition of a significant or controlling
interest in the Company more expensive and, if the Class A Protection
Transaction is required, more time consuming, than if such requirement did not
exist. Consequently, a person or group might be deterred from acquiring a
significant or controlling interest in the Company as a result of such
requirement. See "Certain Potential Disadvantages of the Amendment--Change of
Control Impact." However, by restricting the ability of an acquiror to acquire a
significant interest in the Common Stock by paying a "control premium" for such
shares without acquiring, or paying a similar premium for, Class A Common Stock,
the Class A Protection feature is designed to help reduce or eliminate any
discount on either of these classes of Common Stocks.
There can be no assurance that the Company will be able to readily identify
a person or group as a Significant Stockholder. Although the Exchange Act
requires persons or groups holding 5% or more of the Common Stock or the Class A
Common Stock to file reports with the Commission and the Company specifying the
level of their ownership, there can be no assurance that a person or group will
comply with such law or that alternative methods of identifying such holders
will be available. As a result, the benefits of the Class A Protection feature
may be difficult to enforce.
ADDITIONAL VOTING RIGHTS OF CLASS A COMMON STOCK. Neither the Common Stock
nor the Class A Common Stock will be convertible into another class of common
stock or any other security of the Company. However, the holders of outstanding
Class A Common Stock will be entitled to one vote per share of Class A Common
Stock on all matters presented to the stockholders of the Company automatically
(i) at any time when the number of outstanding shares of Common Stock falls
below 10% of the aggregate number of outstanding Common Stock and Class A Common
Stock; and (ii) upon resolution of the Board of Directors if, as a result of the
existence of the Class A Common Stock, either the Common Stock or Class A Common
Stock or both, are excluded from trading on The NASDAQ Stock Market National
Market System and other comparable quotation systems then in use, and are
excluded from trading by the New York Stock Exchange, American Stock Exchange
and all other principal national securities exchanges then in use. Upon any such
change, the voting interests of the holders of outstanding
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<PAGE>
Common Stock would be diluted. In addition, to the extent that the market price
of the Common Stock is higher or lower than the market price of the Class A
Common Stock immediately prior to such change, the market price of the shares
held by particular holders may be adversely affected by the change.
PREEMPTIVE RIGHTS. None of the Common Stock or the Class A Common Stock
will carry any preemptive rights enabling a holder to subscribe for or receive
shares of the Company of any class or any other securities convertible into any
class of the Company's shares.
TRANSFERABILITY; TRADING MARKET. Like the Common Stock, the Class A Common
Stock will be freely transferable. The Common Stock is currently listed on The
NASDAQ Stock Market and the Company is filing an application with The NASDAQ
Stock Market to list the Class A Common Stock. It is expected that the Common
Stock will continue to be, and the Class A Common Stock will be, approved for
quotation on The NASDAQ Stock Market National Market System.
INCREASE IN AUTHORIZED CAPITAL STOCK. The current Restated Certificate of
Incorporation of the Company authorizes 25,000,000 shares of Common Stock. The
Amendment would increase the authorized number of shares of Common Stocks to
45,000,000, consisting of 20,000,000 shares of Class A Common Stock and
25,000,000 shares of Common Stock. After the effectiveness of the Amendment and
the Stock Dividend, approximately 11.4 million shares of each of the Common
Stock and Class A Common Stock would be issued and outstanding. Additional
Common Stock and Class A Common Stock would therefore be available for issuance
from time to time in the future for any proper corporate purpose, including
public and private equity offerings, stock splits, stock dividends,
acquisitions, stock option plans, and funding of employee benefit plans. No
further action or authorization by the stockholders would be necessary prior to
the issuance of the additional shares of Common Stocks authorized pursuant to
the Amendment unless applicable laws or regulations would require such approval
in a given instance. The future issuance by the Company of shares of Common
Stock and Class A Common Stock may dilute the equity ownership position of
current holders of Common Stock and Class A Common Stock.
The Board of Directors of the Company believes that it is desirable to have
the additional authorized shares of Common Stocks available for possible future
financings, acquisition transactions, and other general corporate purposes.
Having such additional authorized shares of Common Stocks available for issuance
in the future would give the Company greater flexibility and may allow such
shares to be issued without the expense and delay of a special stockholders'
meeting. At the date hereof, other than pursuant to the stock incentive plans of
the Company described below, the Company has no existing agreements,
understandings or plans for the issuance of additional shares of Common Stocks.
Unissued shares of Common Stocks could be issued in circumstances that would
serve to preserve control of the Company's then existing management. Absent the
special circumstances described above, the Company's Amended Restated
Certificate would permit the holders of a majority of the outstanding Common
Stock voting as a single class to amend the Amended Articles to increase the
number of authorized shares of any class of Common Stocks; the holders of Class
A Common Stock would have no right to participate in any such vote.
STOCKHOLDER INFORMATION. The Company would deliver to the holders of Class
A Common Stock the same proxy statements (without proxies except as required by
law), annual reports and other information and reports as it delivers to holders
of Common Stock.
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CERTAIN EFFECTS OF THE AMENDMENT
EFFECTS ON RELATIVE OWNERSHIP INTEREST AND VOTING POWER. Because the
Amendment does not affect the number of issued shares of Common Stock and
because the Stock Dividend, if distributed as planned, would be made in
proportion to the number of shares of Common Stock owned on the Stock Dividend
Record Date by each stockholder, the relative ownership interest and voting
power of each record holder of Common Stock would be unaffected by the Stock
Dividend. Consequently, assuming that the members of the Hach family retain
their shares of Common Stock, the Amendment and the Stock Dividend will not
alter the Hach family's majority voting position in the Company.
Stockholders who sell their Common Stock after the Stock Dividend Record
Date would lose a greater amount of voting power in proportion to equity than
they would have prior to such time. At the same time, stockholders desiring to
maintain a long-term investment in the Company will be free to continue to hold
the Common Stock and retain the benefits of the voting power attached to such
Common Stock.
As of the date of this Proxy Statement members of the Hach family owned an
aggregate of approximately 4.9 million shares or 59.6% of the Common Stock of
the Company. Accordingly, the Hach family will receive an aggregate of
approximately 4.9 million shares of Class A Common Stock as a result of the
Stock Dividend.
If the Hach family, following the Stock Dividend, if distributed as planned,
were to sell all of the shares of Class A Common Stock received as a result of
the Stock Dividend, the Hach family would still have approximately 59.6% of the
voting power assuming no other change. The foregoing is for illustrative
purposes only and is in no way intended to suggest that the Hach family has any
intention of selling any or all of its shares of Class A Common Stock or Common
Stock following the Stock Dividend, if it is distributed. The Company has been
advised that it is the present intention of members of the Hach family to hold
their shares of Common Stock and to dispose of shares of Class A Common Stock if
they were to dispose of any shares.
EFFECT ON MARKET PRICE. The market price of shares of Class A Common Stock
and Common Stock after the Stock Dividend, if distributed as planned, will
depend, as before the effectiveness of the Amendment and the Stock Dividend, on
many factors, including among others, the future performance of the Company,
general market conditions, and conditions relating to companies similar to the
Company in its business and industry in general. Accordingly, the Company cannot
predict the prices at which the Class A Common Stock and Common Stock will trade
following the effectiveness of the Amendment and the distribution of the Stock
Dividend or whether one class will trade at a premium over the other class. The
Company anticipates that any differential between the trading prices of the
Common Stock and Class A Common Stock will be modest, but there can be no
assurance as to the trading prices of either of them. On July 21, 1997 (the last
day on which a trade was made prior to July 24, 1997), the closing sale price of
the Common Stock as reported on The NASDAQ Stock Market was $21.50. As a result
of the Stock Dividend, if it is distributed, the market price of each of the
Common Stock and Class A Common Stock is expected to be approximately half the
market price of the Common Stock immediately prior to the distribution of the
Stock Dividend. However, there can be no assurance that the Stock Dividend, or
future issuances of either Common Stock or Class A Common Stock will not result
in a reduction of the market price of the Company's Common Stocks or adversely
affect the liquidity of the Company's Common Stocks. If the market price of the
Class A Common Stock were to drop significantly below the price of the Common
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<PAGE>
Stock, the potential benefits of the Amendment with respect to flexibility for
financings by the Company or resales by the stockholders may be limited.
It is possible that either the Class A Common Stock or Common Stock may
trade from time to time at a premium to the other. The Class A Protection
Provision and the flexibility afforded by the provision permitting the Board of
Directors, in its discretion, should it so determine in the future to declare
larger dividends on the Class A Common Stock are expected to reduce somewhat the
reasons for the Common Stock to trade at a premium compared to the Class A
Common Stock. Should a premium on either the Class A Common Stock or the Common
Stock develop, the Amendment permits the Board of Directors to issue and sell
authorized but unissued shares of either the Class A Common Stock or the Common
Stock even if the consideration which could be obtained by issuing or selling
shares of the other class may be greater. The Amendment also expressly permits
the Board of Directors to purchase shares of either the Class A Common Stock or
the Common Stock even if the consideration which would be paid for shares of
another class may be less.
Because the market price of the Common Stock is expected to be approximately
one-half of its price prior to the Stock Dividend (if it is distributed as
planned), it will be possible to acquire more voting Common Stock for a given
amount of consideration after the Stock Dividend. Therefore, subject to the
requirement to purchase a proportionate amount of Class A Common Stock under
certain circumstances pursuant to Class A Protection provision discussed above,
the Amendment and Stock Dividend, if distributed as planned would permit
stockholders, including the Hach family, to increase their relative voting
control at a lower cost. The Hach family has advised the Company that it has no
present plans to acquire any additional shares of Common Stock after the Stock
Dividend, if distributed as planned.
TRADING MARKET. Upon effectiveness of the Amendment, approximately 8.2
million shares of Common Stock will also be issued and outstanding. If the Stock
Dividend is distributed as planned, approximately 8.2 million shares of Class A
Common Stock will be issued and outstanding. To minimize dilution of voting
power to existing stockholders, the Company is more likely to issue additional
shares of Class A Common Stock than Common Stock in the future to raise equity
capital, finance acquisitions, or fund employee benefit plans. Furthermore,
members of the Hach family are more likely to dispose of Class A Common Stock
over time rather than Common Stock. Any such issuance of additional Class A
Common Stock by the Company or dispositions of Class A Common Stock by members
of the Hach family or other major stockholders may serve to further increase
market activity in the Class A Common Stock relative to the Common Stock.
Greater market activity may result in increased volatility in pricing and could
enlarge any price differential, either higher or lower, between the Class A
Common Stock and Common Stock.
BENEFIT PLANS. The incentive stock plans of the Company that will be
affected by the Amendment are the (i) 1993 Employee Stock Option Plan (the
"Employee Option Plan"), (ii) 1995 Non-Employee Directors Stock Plan (the
"Director Option Plan"), (iii) the Employee Stock Ownership Plan (the "ESOP"),
(iv) the Employee Stock Purchase Plan (the "Stock Purchase Plan") and (v) the
Employees' Profit Sharing Plan (the "Profit Sharing Plan").
With respect to the Employee Option Plan and the Director Option Plan (the
"Option Plans"), outstanding options will be adjusted appropriately to reflect
the Amendment and the Stock Dividend. In addition, the Board of Directors
anticipates amending the Option Plans to provide that options granted thereunder
after the Effective Time may relate solely to Common Stock, solely to Class A
Common Stock, or to a combination of the two, at the discretion of the committee
administering such plan, and will adjust the shares of Common Stocks reserved
for issuance under the Option Plans accordingly.
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The Board of Directors anticipates amending the Stock Purchase Plan to
provide that all purchases under the Stock Purchase Plan for the offering
periods beginning after the Effective Time will be for shares of Class A Common
Stock.
As with any stockholder of the Company, if the Stock Dividend is
distributed, the ESOP and the Profit Sharing Plan will receive one share of
Class A Common Stock for each share of Common Stock it holds as of the Stock
Dividend Record Date. As of July 10, 1997, the ESOP held an aggregate of 692,489
shares of Common Stock, and the Profit Sharing Plan held an aggregate of 128,567
shares of Common Stock. In addition, the Board of Directors anticipates amending
the Profit Sharing Plan to authorize the Company to make its required matching
contributions under the 401(k) component of the Profit Sharing Plan solely in
Common Stock, solely in Class A Common Stock, or in a combination of the two, at
the discretion of the Plan trustees.
BOOK VALUE AND EARNINGS PER SHARE. Although the interest of each
stockholder in the total equity of the Company will remain unchanged as a result
of the Stock Dividend, if it is distributed, the issuance of the Class A Common
Stock pursuant to the Stock Dividend will, like any stock dividend, cause the
book value and earnings per share of the Company to be adjusted to reflect the
increased number of shares outstanding. Although effected in the form of a
dividend, for accounting purposes, the Stock Dividend, if it is distributed,
will be treated as a two-for-one stock split effected in the form of a stock
dividend.
EFFECT ON FAIR PRICE PROVISION. Article Ninth of the Company's Restated
Articles, which was adopted in 1977, requires, subject to certain exceptions,
the affirmative vote of the holders of at least 80% of all outstanding shares of
capital stock of the Company entitled to vote on all matters that may come
before a meeting of stockholders in order to (i) effect a merger or
consolidation of the Company or any subsidiary with or into another corporation
or (ii) authorize the sale, lease, exchange or other disposition by the Company
or any subsidiary of all or a substantial part of the assets of the Company or
any subsidiary to any corporation, person or entity or (iii) authorize the
Company or its subsidiary to issue or transfer more than 10% of the Company's
outstanding voting securities or any securities of any subsidiary to any other
corporation, person or entity in exchange for securities, cash or other
property, if, in any of the above cases, such other corporation, person or
entity including its affiliates and associated persons, is the beneficial owner,
directly or indirectly, of 5% or more of the outstanding shares of capital stock
of the Company entitled to vote on all matters that may come before such meeting
of stockholders (an "Interested Party"). The requirement for approval by an 80%
vote is not applicable to any of the above referenced transactions if (i) the
Board of Directors by resolution has approved a memorandum of understanding with
the other party substantially consistent with such transaction prior to the time
such party became a holder of more than 5% of the capital stock of the Company
or (ii) the Company or any subsidiary is at the time of the consummation of such
transaction is the beneficial owner of (x) a majority, by vote, of the
outstanding shares of all classes of capital stock entitled to vote in elections
for directors of such other corporation or (y) a majority by voting interest in
the other entity when the transaction is consummated. Once the Amendment is
effective, the provisions of Article Ninth will continue to be generally
applicable to those transactions, and in the manner, described in Article Ninth,
except that, unless the Class A Common Stock becomes entitled to the additional
voting rights described above, (i) holders of Class A Common Stock will not be
entitled to vote on the approval of a proposed transaction with an Interested
Party and (ii) a person's ownership of Class A Common Stock will not be counted
in determining whether such person is an "Interested Party" under Article Ninth.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of
certain U.S. federal income tax consequences to the stockholders of the Company
resulting from the distribution of Class A Common Stock to the holders of Common
Stock. The following discussion is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), its legislative history,
administrative pronouncements, judicial decisions and Treasury Regulations, all
of which are subject to change, possibly with retroactive effect. The following
discussion assumes that the stockholders hold their Common Stock as a capital
asset. The following discussion does not purport to be a complete discussion of
all U.S. federal income tax considerations resulting from the distribution of
Class A Common Stock to the holders of Common Stock. The following discussion
also does not address the tax consequences resulting from the distribution of
Class A Common Stock to the holders of Common Stock under state, local or
non-U.S. tax laws. In addition, the following discussion may not apply, in whole
or in part, to particular categories of stockholders of the Company, such as
dealers in securities, insurance companies, foreign persons, tax-exempt
organizations, financial institutions and stockholders that acquired Common
Stock upon the exercise of compensatory stock options or otherwise as
compensation. No ruling on the federal, state or local tax considerations
resulting from the distribution of Class A Common Stock to holders of Common
Stock has been requested or is expected from the Internal Revenue Service or any
other taxing authority. THE FOLLOWING DISCUSSION IS INCLUDED FOR GENERAL
INFORMATION ONLY. ALL STOCKHOLDERS OF THE COMPANY ARE URGED TO CONSULT THEIR TAX
ADVISORS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES RESULTING FROM THE
DISTRIBUTION OF CLASS A COMMON STOCK TO HOLDERS OF COMMON STOCK INCLUDING ANY
STATE, LOCAL OR NON-U.S. TAX CONSEQUENCES.
A holder of Common Stock will recognize no income, gain or loss on the
receipt of Class A Common Stock from the Company. In addition, the Company will
recognize no income, gain or loss on the distribution of Class A Common Stock to
the holders of Common Stock.
A stockholder's aggregate tax basis in its Common Stock will be allocated
between its Class A Common Stock and its Common Stock in proportion to the fair
market value of each share of Class A Common Stock and Common Stock at time of
the distribution of the Stock Dividend. If a stockholder acquired its shares of
Common Stock in different lots at different prices, the basis of the shares of
Class A Common Stock received will be calculated separately with respect to each
lot of Common Stock on which Class A Common Stock is received, provided such
stockholder takes adequate steps to identify the shares of Class A Common Stock
received with respect to the different lots of Common Stock. A stockholder's
holding period for its Class A Common Stock will include such a stockholder's
holding period for its Common Stock.
A shareholder will recognize no income, gain or loss upon becoming entitled
to one vote per share of Class A Common Stock on all matters presented to
shareholders pursuant to the additional voting rights feature described above.
The tax basis and holding of the shares of Class A Common Stock will be
unchanged.
SECURITIES ACT OF 1933. No "offer," "offer to sell," "offer for sale," or
"sale" of a security within the meaning of Section 2(3) of the Securities Act
and Rule 145 thereunder will occur as a result of the Amendment. In addition,
the Stock Dividend, if distributed as planned, will not involve a "sale" of a
security under the Act or Rule 145. Consequently, the Company is not required to
register and has not registered the Class A Common Stock under the Act.
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Because the Amendment and Stock Dividend do not constitute a "sale" of the
Class A Common Stock, stockholders would not be deemed to have acquired such
shares separately from the Common Stock for purposes of the Securities Act and
Rule 144 thereunder. Class A Common Stock held immediately upon effectiveness of
the Amendment and the Stock Dividend, other than any such shares held by
affiliates of the Company within the meaning of the Securities Act, may be
offered for sale and sold in the same manner as the Common Stock without
registration under the Securities Act. Affiliates of the Company, including
certain members of the Hach Family, and holders of "restricted" shares would
continue to be subject to the restrictions specified in Rule 144 under the
Securities Act with respect to sales of shares of Class A Common Stock and
Common Stock.
THE NASDAQ STOCK MARKET CRITERIA. The Common Stock is currently traded on
The NASDAQ Stock Market National Market System and application is being made to
trade the Class A Common Stock on The NASDAQ Stock Market National Market
System. The NASDAQ Stock Market has advised the Company that the issuance of
nonvoting Class A Common Stock pursuant to the Amendment and the Stock Dividend
would not violate the rules and regulations of The NASDAQ Stock Market and would
be permitted thereunder. The Company presently anticipates that the Common Stock
will remain approved for trading, and the Class A Common Stock will be approved
for trading, on The NASDAQ Stock Market.
SUBSEQUENT AMENDMENTS. The Amendment would not prevent the Company from
taking any action, or otherwise affect the Company's ability, with the requisite
approval of its stockholders, to adopt any future amendments to the Amended
Restated Certificate for the purpose of further changing the Company's capital
structure or for any other lawful purpose.
INTERESTS OF CERTAIN PERSONS
Members of the Hach Family have an interest in the implementation of the
Amendment and Stock Dividend because, as noted above, they may retain their
current majority control of the Company, even if they dispose of some or all of
the Class A Common Stock received by them as a result of the implementation of
the Amendment and Stock Dividend, if it is distributed. Also, as a result of the
Amendment and Stock Dividend, members of the Hach Family will be able to
increase their voting power without increasing their equity investment by
selling Class A Common Stock and by purchasing Common Stock with the proceeds
(subject to the Class A Protection provision). In addition, Kathryn Hach-Darrow,
Bruce J. Hach and Gary R. Dreher are members of the Company's senior management,
as well as members of the Board of Directors. The Company is not aware of any
current plans of members of the Hach family or senior management to acquire any
additional shares of the Company's Common Stocks after the Effective Time of the
Amendment and the Stock Dividend (except to the extent such individuals may
participate in director and employee incentive and benefit plans of the
Company). For information related to the stock ownership of certain members of
the Hach family and the Company's officers and directors, see "Stock Ownership
of Certain Beneficial Owners."
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SELECTED TRADING ACTIVITY, MARKET PRICES AND DIVIDENDS
The Company's Common Stock is traded on The NASDAQ Stock Market (symbol:
HACH). The average daily trading volume for each quarter of the fiscal year
ended April 30, 1997, and the range of daily high and low last sale prices of
the Common Stock for the periods as reported by The National Quotations Bureau,
Inc., are as follows:
<TABLE>
<CAPTION>
LAST SALE PRICE
AVERAGE DAILY --------------------
FISCAL YEAR ENDED APRIL 30, 1997 VOLUME HIGH LOW
- -------------------------------------------------------------------------------- --------------- --------- ---------
<S> <C> <C> <C>
First Quarter................................................................... 2,450 $ 17.50 $ 14.50
Second Quarter.................................................................. 2,080 $ 20.00 $ 14.88
Third Quarter................................................................... 1,580 $ 19.00 $ 16.25
Fourth Quarter.................................................................. 1,908 $ 19.75 $ 14.50
</TABLE>
- ------------------------
As of July 21, 1997, there were approximately 800 holders of record of the
Company's Common Stock and the closing sales price of the Common Stock on that
date as reported on The NASDAQ Stock Market was $21.50.
During the fiscal year ended April 30, 1997, the Company declared cash
dividends of $.06 cents per share for each fiscal quarter. During the fiscal
year ended April 30, 1996, the Company declared cash dividends of $.05 cents per
share for each of the first two fiscal quarters and $.06 per share for each of
the third and fourth fiscal quarters.
EXPENSES
The costs of proceeding with the Amendment (such as transfer agent's fees,
printing and mailing costs, legal fees, financial advisory fees, and The NASDAQ
Stock Market fees) are estimated to be approximately $300,000, inclusive of fees
of financial and legal advisors.
VOTE REQUIRED
The affirmative vote of holders of a majority of the outstanding Common
Stock is needed to approve the Amendment. Consequently, abstentions and broker
non-votes will have the effect of a vote against approval of the Amendment.
Unless otherwise directed, proxies in the accompanying form will be voted "FOR"
the Amendment. AS NOTED ABOVE, THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENT.
1998 STOCKHOLDER PROPOSALS
In order for stockholder proposals for the 1998 Annual Meeting of the
Stockholders to be eligible for inclusion in the Company's proxy statement for
such meeting, they must be received by the Company at its principal office in
Loveland, Colorado prior to April 7, 1998.
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GENERAL
A copy of the Company's 1997 Annual Report to the United States Securities
and Exchange Commission on Form 10-K may be obtained without charge by writing
to the Company at P.O. Box 389, Loveland, Colorado 80539, attention Mr. Gary R.
Dreher, Vice President and Chief Financial Officer.
<TABLE>
<S> <C>
By Order of the Board of Directors,
/s/ ROBERT O. CASE
----------------------------------------
Robert O. Case,
SECRETARY
</TABLE>
August , 1997
37
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EXHIBIT A
ARTICLE FOURTH OF THE CERTIFICATE OF INCORPORATION
OF HACH COMPANY
AS PROPOSED TO BE AMENDED AND RESTATED
FOURTH: The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is forty-five million (45,000,000)
shares which shall be divided into two classes as follows:
(a) Twenty Million (20,000,000) shares of Class A Common Stock of the par
value of one dollar ($1.00) per share; and
(b) Twenty Five Million (25,000,000) shares of Common Stock of the par value
of one dollar ($1.00) per share.
The Class A Common Stock and Common Stock are hereinafter collectively
referred to as the "Common Stocks." The designations and powers, preferences and
rights, and the qualifications, limitations and restrictions thereof, of the
above classes of stock shall be as follows:
1. RIGHTS. Except as otherwise required by law or as otherwise provided in
this Article Fourth, each share of Class A Common Stock and each share of Common
Stock shall have identical powers, preferences, qualifications, limitations and
other rights.
2. DIVIDENDS. Subject to all of the rights of any class of stock authorized
after the effective date of this provision of Article Fourth ranking senior to
the Common Stocks as to dividends, dividends may be paid upon the Class A Common
Stock and the Common Stock as and when declared by the Board of Directors out of
funds and other assets legally available for the payment of dividends. If and
when dividends on the Class A Common Stock and the Common Stock are declared and
payable from time to time by the Board of Directors whether payable in cash, in
property or in shares of stock of the Corporation, the holders of the Class A
Common Stock and the holders of the Common Stock shall be entitled to share
equally, on a per share basis, in such dividends, except that (a) a dividend or
distribution in cash or property on a share of Class A Common Stock may be
greater than a dividend or distribution in cash or property on a share of Common
Stock, and (b) dividends or other distributions payable on the Common Stocks in
shares of any authorized class or series of capital stock of the Corporation may
be made (i) in shares of Class A Common Stock to the holders of Class A Common
Stock and in shares of Common Stock to the holders of Common Stock, (ii) in
shares of Class A Common Stock to the holders of Class A Common Stock and to the
holders of Common Stock, or (iii) in any other authorized class or series of
capital stock to the holders of both classes of Common Stocks.
3. LIQUIDATION. In the event of any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, and after the holders of
any class of stock authorized after the effective date of this provision of
Article Fourth ranking senior to the Common Stocks as to assets shall have been
paid in full the amounts to which such holders shall be entitled, or an amount
sufficient to pay the aggregate amount to which such holders shall be entitled
shall have been set aside for the benefit of the holders of such stock, the
remaining net assets of the Corporation shall be distributed PRO RATA to the
holders of both classes of Common Stocks.
4. MERGER AND CONSOLIDATION. In the event of a merger or consolidation of
the Corporation with or into another entity (whether or not the Corporation is
the surviving entity), the holders of
A-1
<PAGE>
Class A Common Stock shall be entitled to receive the same per share
consideration as the per share consideration, if any, received by any holder of
the Common Stock in such merger or consolidation.
5. VOTING.
(a) Except as otherwise expressly provided with respect to any other
class of stock and except as otherwise may be required by law or this
certificate, the Common Stock shall have the exclusive right to vote for the
election of directors and for all other purposes and each holder of Common
Stock shall be entitled to one vote for each share of Common Stock held.
Except as expressly provided in this certificate and except as otherwise
required by law, the Class A Common Stock shall have no voting rights.
(b) The Class A Common Stock shall be entitled to vote separately as a
class only with respect to (i) proposals to change the par value of the
Class A Common Stock, (ii) other amendments to this certificate that alter
or change the powers, preferences or special rights of the Class A Common
Stock so as to affect them adversely, and (iii) such other matters as may
require class voting under the Delaware General Corporation Law.
(c) The number of authorized shares of Class A Common Stock and Common
Stock may be increased or decreased (but not below the number of shares then
outstanding) by the affirmative vote of the holders of a majority of the
outstanding shares of Common Stocks entitled to vote.
6. STOCK SPLITS. The Corporation may not split, divide or combine the
shares of either class of Common Stocks unless, at the same time, the
Corporation splits, divides or combines, as the case may be, the shares of the
other class of Common Stocks in the same proportion and manner.
7. NO PRE-EMPTIVE RIGHTS. No stockholder of this Corporation shall by
reason of his holding shares of any class have any pre-emptive or preferential
right to purchase or subscribe to any shares of any class of this Corporation,
now or hereafter to be authorized, or any notes, debentures, bonds, or other
securities convertible into or carrying options or warrants to purchase shares
of any class, now or hereafter to be authorized, whether or not the issuance of
any such shares, or such notes, debentures, bonds or other securities, would
adversely affect the dividends or voting rights of such stockholder, other than
such rights, if any, as the Board of Directors, in its discretion from time to
time may grant and at such price as the Board of Directors in its discretion may
fix; and the Board of Directors may issue shares of any class of this
Corporation, or any notes, debentures, bonds, or other securities convertible
into or carrying options or warrants to purchase shares of any class, without
offering any such shares of any class, either in whole or in part, to the
existing stockholders of any class.
8. ISSUANCES AND REPURCHASES OF COMMON STOCKS.
(a) The Board of Directors shall have the power to issue and sell all or
any part of any class of stock herein or hereafter authorized to such
persons, firms, associations or corporations and for such consideration as
the Board of Directors shall from time to time, in its discretion,
determine, whether or not greater consideration could be received upon the
issue or sale of the same number of shares of another class, and as
otherwise permitted by law.
(b) The Board of Directors shall have the power to purchase any class of
stock herein or hereafter authorized from such persons, firms, associations
or corporations for such consideration as the Board of Directors shall from
time to time, in its discretion, determine, whether or not less
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consideration could be paid upon the purchase of the same number of shares
of another class, and as otherwise permitted by law.
(c) For purposes of this subsection 8 of this Article Fourth, the term
"persons" means a natural person, company, government, or any political
subdivision, agency or instrumentality of a government, or other entity.
9. CLASS A PROTECTION PROVISIONS.
(a) If, after the time that this Section 9 of Article Fourth becomes
effective (the "Effective Time"), a Person or group, each as defined in
Section 9(j) of this Article Fourth, acquires beneficial ownership of shares
representing 15% or more of the number of then outstanding shares of Common
Stock and such Person or group (a "Significant Stockholder") does not then
beneficially own an equal or greater percentage of all then outstanding
shares of the Class A Common Stock, all of which Class A Common Stock must
have been acquired by such Significant Stockholder after the Effective Time,
such Significant Stockholder must, within a ninety (90) day period beginning
the day after becoming a Significant Stockholder, make a public cash tender
offer in compliance with all applicable laws and regulations to acquire
additional shares of Class A Common Stock as provided in this Section 9 of
Article Fourth (a "Class A Protection Transaction").
(b) In each Class A Protection Transaction, the Significant Stockholder
must make a public tender offer to acquire that number of additional shares
of Class A Common Stock determined by (i) multiplying the percentage of the
number of outstanding shares of Common Stock beneficially owned and acquired
after the Effective Time by such Significant Stockholder by the total number
of shares of Class A Common Stock outstanding on the date such Person or
group became a Significant Stockholder, and (ii) subtracting therefrom the
number of shares of Class A Common Stock beneficially owned by such
Significant Stockholder on the date such Person or group became a
Significant Stockholder which were acquired after the Effective Time (as
adjusted for stock splits, stock dividends and similar events). The
Significant Stockholder must acquire all shares validly tendered; or if the
number of shares of Class A Common Stock tendered to the Significant
Stockholder exceeds the number of shares required to be acquired pursuant to
this Section 9(b), the number of shares of Class A Common Stock acquired
from each tendering holder shall be pro rata based on the percentage that
the number of shares tendered by such stockholder bears to the total number
of shares tendered by all tendering holders.
(c) The offer price for any Class A Common Stock required to be
purchased by the Significant Stockholder pursuant to Section 9 of this
Article Fourth shall be the greatest of (i) the highest price per share paid
by the Significant Stockholder for any Common Stock or Class A Common Stock
during the six month period ending on the date such Person or group became a
Significant Stockholder (or such shorter period if the date such Person or
group became a Significant Stockholder is not more than six months following
the Effective Time), (ii) the highest reported sale price of Common Stock or
Class A Common Stock on the National Association of Securities Dealers
Automated Quotation System--National Market System ("NASDAQ/NMS") during the
last five days that the Corporation's shares were traded prior to the
Effective Time (or such other securities exchange or quotation system as is
then the principal trading market for such shares) during the 30 day period
preceding such Person or group becoming a Significant Stockholder, and (iii)
the highest reported sale price of Common Stock or Class A Common Stock on
the NASDAQ/NMS (or such other securities exchange or quotation system as is
then the principal trading market for such shares)
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on the business day preceding the date the Significant Stockholder makes the
tender offer required by this Section 9 of this Article Fourth. For purposes
of Section 9(d) of this Article Fourth, the applicable date for each
calculation required by clauses (i) and (ii) of the preceding sentence shall
be the date on which the Significant Stockholder becomes required to engage
in the Class A Protection Transaction for which such calculation is
required. In the event that the Significant Stockholder has acquired Common
Stock or Class A Common Stock in the six month period ending on the date
such Person or group becomes a Significant Stockholder for consideration
other than cash, the value of such consideration per share of Common Stock
shall be as determined in good faith by the Board of Directors.
(d) A Class A Protection Transaction shall also be required to be
effected by any Significant Stockholder each time that the Significant
Stockholder acquires after the Effective Time beneficial ownership of
additional Common Stock in an amount equal to or greater than the next
higher multiple of 5% in excess of 15% (e.g., 20%, 25%, 30%, etc.) of the
number of outstanding shares of Common Stock if such Significant Stockholder
does not then own an equal or greater percentage of the Class A Common Stock
(all of which Class A Common Stock must have been acquired by such
Significant Stockholder after the Effective Time). Such Significant
Stockholder shall be required to make a public cash tender offer to acquire
that number of shares of Class A Common Stock prescribed by the formula set
forth in Section 9(b) of this Article Fourth, and must acquire all shares
validly tendered or a PRO RATA portion thereof, as specified in such Section
9(b), at the price determined pursuant to Section 9(c) of this Article
Fourth, even if a previous Class A Protection Transaction resulted in fewer
shares of Class A Common Stock being tendered than the Significant
Stockholder was required to offer to purchase in the previous offer.
(e) If any Significant Stockholder fails to make an offer required by
this Section 9 of this Article Fourth, or to purchase shares validly
tendered and not withdrawn (after proration, if any), such Significant
Stockholder shall not be entitled to vote any Common Stock beneficially
owned by such Significant Stockholder and acquired by such Significant
Stockholder after the Effective Time unless and until such requirements are
complied with or unless and until all shares of Common Stock causing such
offer requirement to be effective are no longer beneficially owned by such
Significant Stockholder. To the extent that the voting power of any shares
of Common Stock is so suspended, such shares shall not be included in the
determination of aggregate voting shares for any purpose under this Amended
Restated Certificate of Incorporation or the Delaware General Corporation
Law. The requirement to engage in a Class A Protection Transaction is
satisfied by the making of the requisite offer and purchasing validly
tendered shares pursuant to this Section 9 of this Article Fourth, even if
the number of shares tendered is less than the number of shares the
Significant Stockholder was required to offer to purchase.
(f) The Class A Protection Transaction requirement shall not apply to
any increase in percentage beneficial ownership of Common Stock resulting
solely from a change in the aggregate amount of Common Stock outstanding,
provided that any acquisition after such change which resulted in any Person
or group beneficially owning fifteen percent (15%) or more of the number of
outstanding shares of Common Stock (or an additional 5% or more of the
number of shares of the Common Stock after the last acquisition which
triggered the requirement for a Class A Protection Transaction) shall be
subject to any Class A Protection Transaction requirement that would be
imposed pursuant to this Section 9 of this Article Fourth.
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(g) In connection with Sections 9(a) through 9(d) of this Article
Fourth, the following shares of Common Stock shall be excluded for the
purpose of determining the shares of Common Stock beneficially owned by such
Person or group but not for the purpose of determining shares outstanding:
(i) shares beneficially owned by such Person or group at the
Effective Time;
(ii) shares acquired by will or by the laws of descent and
distribution, or by gift that is made in good faith and not for the
purpose of circumventing this Section 9 of Article Fourth or by
foreclosure of a bona fide loan;
(iii) shares acquired upon issuance or sale by the Corporation,
including shares issued by the Corporation in a merger or consolidation
involving the Corporation or a subsidiary;
(iv) shares acquired by operation of law (including a merger or
consolidation effected for the purpose of recapitalizing such Person or
reincorporating such Person in another jurisdiction but excluding a
merger or consolidation effected by such Person for the purpose of
acquiring another Person);
(v) shares acquired in exchange for Class A Common Stock by a holder
of Class A Common Stock (or by a parent, lineal descendant or donee of
such holder of Class A Common Stock who received such Class A Common
Stock from such holder) if the Class A Common Stock so exchanged were
acquired by such holder directly from the Corporation as a result of a
stock split or as a dividend on Common Stock; and
(vi) shares acquired by a plan of the Corporation qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended, or any
successor provision thereto, or acquired by reason of a distribution from
such a plan.
(h) In connection with Sections 9(a) through 9(b) of this Article
Fourth, for purposes of calculating the number of shares of Class A Common
Stock beneficially owned by any Persons or group:
(i) Class A Common Stock acquired by gift shall be deemed to be
beneficially owned by such Person or member of a group if such gift was
made in good faith and not for the purpose of circumventing the operation
of this Section 9 of this Article Fourth; and
(ii) only Class A Common Stock owned of record by such Person or
member of a group or held by others as nominees of such Person or member
of a group and identified as such to the Corporation shall be deemed to
be beneficially owned by such Person or group (provided that Class A
Common Stock with respect to which such Person or member of a group has
sole investment and voting power shall be deemed to be beneficially owned
thereby).
(i) All calculations with respect to percentage beneficial ownership of
either issued and outstanding Common Stock or Class A Common Stock will be
based upon the numbers of issued and outstanding shares reflected in either
the records of or a certification from the Corporation's stock transfer
agent or reported by the Corporation on the last to be filed of (i) the
Corporation's most recent Annual Report on Form 10-K, (ii) its most recent
Quarterly Report on Form 10-Q, (iii) its most recent Current Report on Form
8-K, and (iv) its most recent definitive proxy statement filed with the
Securities and Exchange Commission.
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(j) For purposes of this Section 9 of this Article Fourth, the term
"Person" means any individual, partnership, corporation, association, trust,
or other entity (other than the Corporation). Subject to Sections 9(g) and
9(h) of this Article Fourth, "beneficial ownership" shall be determined
pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "1934 Act"), or any successor regulation and the
formation or existence of a "group" shall be determined pursuant to Rule
13d-5(b) under the 1934 Act or any successor regulation, subject to the
following qualifications:
(i) relationships by blood or marriage between or among any Persons
will not constitute any of such Persons as a member of a group with such
other Person, absent affirmative attributes of concerted action; and
(ii) any Person acting in his official capacity as a director or
officer of the Corporation shall not be deemed to beneficially own shares
where such ownership exists solely by virtue of such Person's status as a
trustee (or similar position) with respect to shares held by plans or
trusts for the general benefit of employees or former employees of the
Corporation, and actions taken or agreed to be taken by a Person in such
Person's official capacity as an officer or director of the Corporation
will not cause such Person to become a member of a group with any other
Person.
10. ADDITIONAL VOTING RIGHTS OF CLASS A COMMON STOCK. Each share of Class A
Common Stock (whether or not then issued) shall be entitled to vote on all
matters presented to the stockholders of the Corporation (i) automatically at
the time the number of outstanding shares of Common Stock is less than 10% of
the aggregate number of outstanding shares of Common Stock and Class A Common
Stock; or (ii) upon resolution of the Board of Directors, if as a result of the
existence of the Class A Common Stock, either the Common Stock or Class A Common
Stock or both are, or will be, excluded from quotation on NASDAQ/NMS and other
comparable quotation systems then in use and are also, or will be, excluded from
trading on the New York Stock Exchange, the American Stock Exchange and all
other principal national securities exchanges then in use. The Board of
Directors shall have the power to determine whether the conditions set forth in
clauses (i) or (ii) above have occurred. In making its determination, the Board
of Directors may conclusively rely on information and documentation available to
it, including but not limited to, information or certification from its stock
transfer agent, filings made with the Securities and Exchange Commission, any
stock exchange, the National Association of Securities Dealers, Inc., or any
other national quotation system. The determination of the Board of Directors
that the conditions described in either (i) or (ii) have occurred shall be
conclusive and binding and the acquisition of voting rights by each share of
Class A Common Stock shall remain effective regardless of whether the conditions
described in (i) or (ii) have occurred in fact.
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<PAGE>
PROXY PROXY PROXY
HACH COMPANY
ANNUAL MEETING OF STOCKHOLDERS -- SEPTEMBER 9, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) KATHRYN HACH-DARROW, BRUCE J. HACH and
ROBERT O. CASE, and each of them, each with the power of substitution, as
proxies and agents ("Proxy Agents"), in the name of the undersigned to
represent and to vote as designated below all of the shares of Common Stock
of HACH COMPANY (the "Company"), held of record by the undersigned on
Thursday, July 24, 1997, at the Annual Meeting of Stockholders to be held on
Tuesday, September 9, 1997, and any adjournment(s) thereof, the undersigned
herewith ratifying all that the said Proxy Agents may so do. The undersigned
further acknowledges receipt of the Notice of Annual Meeting and the Proxy
Statement in support of the Board's solicitation of proxies.
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED TO THE COMPANY, WILL BE
VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE SEVEN
DIRECTORS IDENTIFIED ON THE REVERSE OF THIS PROXY CARD AND FOR THE APPROVAL
OF THE AMENDMENT TO ARTICLE FOURTH OF THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION IN THE FORM ATTACHED AS EXHIBIT A TO THE PROXY STATEMENT.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
(Continued and to be signed on reverse side)
<PAGE>
HACH COMPANY
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY /X/
1. ELECTION OF SEVEN DIRECTORS:
(INSTRUCTION: To withhold authority for FOR all the WITHHOLD
any individual nominee, strike a line nominees listed AUTHORITY
through the nominee's name in the list (except as marked to vote for all
below) to the contrary). nominees.
/ / / /
Kathryn Hach-Darrow, Bruce J. Hach,
Joseph V. Schwan, Fred W. Wenninger,
John N. McConnell, Linda O. Doty,
Gary R. Dreher
2. PROPOSAL TO APPROVE THE AMENDMENT OF ARTICLE FOURTH For Against Abstain
OF THE COMPANY'S RESTATED CERTIFICATE OF / / / / / /
INCORPORATION IN THE FORM ATTACHED AS EXHIBIT A
TO THE PROXY STATEMENT.
3. In their discretion, the Proxy Agents are authorized to vote upon
such other business as may properly come before the meeting.
Dated: ________________________________, 1997
Signature _____________________________________________
Signature _____________________________________________
PLEASE DATE AND SIGN exactly as name(s) appears hereon and return
promptly in the accompanying prepaid envelope. If shares are held by joint
tenants or as community property, both shareholders should sign.
