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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4) of the
Securities Exchange Act of 1934
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HEIN-WERNER CORPORATION
(Name of Subject Company)
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HEIN-WERNER CORPORATION
(Names of Person(s) Filing Statement)
COMMON STOCK, $1.00 PAR VALUE PER SHARE
(INCLUDING THE ASSOCIATED COMMON SHARE PURCHASE RIGHTS)
(Title of Class of Securities)
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423002 10 4
(CUSIP Number of Class of Securities)
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JOSEPH L. DINDORF
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HEIN-WERNER CORPORATION
2120 PEWAUKEE ROAD
WAUKESHA, WISCONSIN 53188
(414) 542-6611
(Name, address and telephone number of person
authorized to receive notices and communications on
behalf of the person(s) filing statement)
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WITH COPIES TO:
MAURICE J. MCSWEENEY
JAY O. ROTHMAN
RUSSELL E. RYBA
FOLEY & LARDNER
777 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202-5367
(414) 271-2400
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Hein-Werner Corporation, a Wisconsin
corporation (the "Company"). The address of the principal executive offices of
the Company is 2120 Pewaukee Road, Waukesha, Wisconsin 53188. The title of the
class of equity securities to which this Solicitation/Recommendation Statement
on Schedule 14D-9 (this "Schedule 14D-9") relates is the common stock, $1.00 par
value per share, of the Company (the "Common Stock"), including the associated
common share purchase rights (the "Rights") issued pursuant to the Rights
Agreement, dated as of May 9, 1989, as amended (the "Rights Agreement"), between
the Company and Firstar Trust Company (f/k/a First Wisconsin Trust Company), as
Rights Agent. Reference herein to the "Shares" means all outstanding shares of
the Common Stock and shall, unless the context requires otherwise, include the
associated Rights.
ITEM 2. TENDER OFFER OF PURCHASER.
This Statement relates to the cash tender offer by Snap-on Pace Company, a
Wisconsin corporation (the "Purchaser") and an indirect wholly-owned subsidiary
of Snap-on Incorporated, a Delaware corporation ("Parent"), as disclosed in the
Tender Offer Statement on Schedule 14D-1, dated May 4, 1998 (as amended or
supplemented, the "Schedule 14D-1"), to purchase all outstanding Shares at
$12.60 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Purchaser's Offer to Purchase, dated May 4, 1998
(the "Offer to Purchase"), and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
April 27, 1998 (the "Merger Agreement"), by and among Parent, the Purchaser and
the Company. Pursuant to the Merger Agreement, as soon as practicable after
completion of the Offer and satisfaction or waiver of all conditions to the
Merger (as defined below), the Purchaser will be merged with and into the
Company (the "Merger"), and the Company will continue as the surviving
corporation (the "Surviving Corporation") and become an indirect wholly-owned
subsidiary of Parent. At the effective time of the Merger (the "Effective
Time"), each Share then outstanding (other than Shares held by Parent, the
Purchaser, any wholly-owned subsidiary of Parent or the Purchaser, in the
treasury of the Company or by any wholly-owned subsidiary of the Company, and by
shareholders who perfect their dissenters' rights under Wisconsin law) will be
converted into the right to receive $12.60 in cash or any higher price per Share
paid in the Offer (the "Offer Price"), without interest thereon. The Merger
Agreement is summarized in Item 3 of this Schedule 14D-9.
Based on the information in the Schedule 14D-1, the principal executive
offices of Parent and the Purchaser are located at 10801 Corporate Drive,
Kenosha, Wisconsin 53141-1430.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above.
(b) The provisions of the Merger Agreement relating to the election and
designation of directors to the Board of Directors of the Company are subject to
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which requires the Company to mail to its shareholders an Information
Statement (the "Information Statement") containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
Reference is made to the information contained under the captions "General
Information Regarding the Company," "Directors and Executive Officers of the
Company -- Information Concerning the Board of Directors," "Executive
Compensation," "Certain Relationships and Related Transactions" and "Security
Ownership" in the Information Statement. The Information Statement is attached
as Schedule I hereto and is incorporated herein by reference. Except as
described herein or incorporated herein by reference, to the knowledge of the
Company, as of the date hereof, there are no material contracts, agreements,
arrangements or understandings or any actual or potential conflicts of interest
between the Company or its affiliates and (i) its executive officers, directors
or affiliates or (ii) Parent, the Purchaser, their executive officers, directors
or affiliates.
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COMPANY OPTION PLAN
The Merger Agreement provides that the Company will take all actions
necessary so that, pursuant to the terms of the Company's 1987 Stock Option and
Incentive Plan (the "Option Plan"), immediately following the date the Shares
are purchased by Parent or the Purchaser in the Offer (the "Acceptance Date"),
(i) each outstanding option to purchase Shares (an "Option") granted under the
Option Plan, whether or not then exercisable or vested, will become fully
exercisable and vested, (ii) each Option which is then outstanding will be
canceled and (iii) in consideration of such cancellation, and except to the
extent that Parent or the Purchaser and the holder of any such Option otherwise
agree, immediately following the Acceptance Date, the Company, pursuant to the
terms of the Option Plan, will promptly pay to such holders of Options an amount
in respect thereof equal to the product of (x) the excess of the Offer Price
over the exercise price thereof and (y) the number of Shares subject thereto
(such payment to be net of taxes required by law to be withheld with respect
thereto).
EMPLOYMENT AND CONSULTING AGREEMENT
Parent requested, as an inducement for Parent and the Purchaser to enter
into the Merger Agreement, that Joseph L. Dindorf, President and Chief Executive
Officer of the Company, enter into an Employment and Consulting Agreement (the
"Employment and Consulting Agreement") with Parent and the Company. Such
agreement, which was entered into on April 27, 1998, provides for Mr. Dindorf's
employment by the Company from the Acceptance Date until December 31, 1998 and
for Mr. Dindorf to serve as a consultant thereafter until December 31, 2000. Mr.
Dindorf is entitled to a base salary of $25,000 per month through December 31,
1998 and consulting fees at the annual rate of $250,000 for the year 1999 and at
the annual rate of $200,000 for the year 2000. Mr. Dindorf is also entitled to
certain fringe benefits. If there is a termination of Mr. Dindorf's services
under the Employment and Consulting Agreement by Mr. Dindorf for good reason or
by Parent other than by reason of (i) death, (ii) disability or (iii) for cause
(as such terms are defined in the Employment and Consulting Agreement), Mr.
Dindorf will be entitled to a severance payment equal to the aggregate of all
unpaid amounts he would have been entitled to receive under the Employment and
Consulting Agreement as if he had continued in the employ of the Company and/or
had continued to provide consulting services to the Company for the remainder of
the employment and/or consulting terms, and he will continue to be entitled to
receive the insurance coverage provided to him and his dependents prior to his
termination for a certain period.
The foregoing is a summary of certain provisions of the Employment and
Consulting Agreement. This summary is not a complete description of the terms
and conditions of the Employment and Consulting Agreement and is qualified in
its entirety by reference to the full text of the Employment and Consulting
Agreement, which is incorporated herein by reference and a copy of which has
been filed with the Securities and Exchange Commission (the "SEC") as an exhibit
to this Schedule 14D-9.
CHANGE OF CONTROL AGREEMENTS
Since 1984, the Company maintained a Change of Control Agreement with
Joseph L. Dindorf which provided for the payment of certain severance and other
benefits upon termination of the employment of Mr. Dindorf within one or two
years (depending on the circumstances) following a change of control of the
Company. On April 27, 1998, the Board of Directors of the Company approved the
offering to Mr. Dindorf of an amendment to his Change of Control Agreement, and
the Company and Mr. Dindorf subsequently entered into Amendment No. 1 to such
agreement. Pursuant to the amended Change of Control Agreement, Mr. Dindorf will
be entitled to receive a lump-sum cash payment of $995,000 immediately upon a
change of control of the Company. For purposes of this agreement, a change of
control is defined as the acquisition, by any person, organization or
association of persons or organizations of more than 30% of the Shares. The
amended Change of Control Agreement also provides that in the event any portion
of the benefits under the agreement or under any other agreement for Mr. Dindorf
would constitute an "excess parachute payment" for purposes of the Internal
Revenue Code of 1986, as amended (the "Code"), benefits will be reduced so that
Mr. Dindorf will be entitled to receive $1 less than the maximum amount which he
could receive without becoming subject to the 20% excise tax imposed by the Code
on certain excess payments, or which the Company may pay without loss of
deduction under the Code. The acquisition of more than 30% of the Shares
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pursuant to the Offer will constitute a change of control for purposes of the
agreement. In connection with the execution of Amendment No. 1 to the Change of
Control Agreement, the Company also established and funded a trust in favor of
Mr. Dindorf for the full amount payable under his amended Change of Control
Agreement.
In April 1998, the Company entered into Key Executive Employment and
Severance Agreements with seven officers of the Company (Messrs. Andreoli,
Barthelme, Koons, Liegel, Russell and Wilke and Ms. Kielich) to provide these
executives with a measure of security against changes in their relationship with
the Company in the event of a change in control of the Company. The agreements
provide that each officer covered by the agreements is entitled to benefits if,
within a period between one and two years (depending on which executive is
involved) after a change in control of the Company (as defined in the
agreements), the officer's employment is ended through (i) termination by the
Company, other than by reason of death or disability or for cause (as defined in
the agreements) or (ii) termination by the officer for good reason (as defined
in the agreements). The benefits provided under each agreement are: (i) a
lump-sum cash termination payment of between one and two times (depending on the
executive involved) the sum of the executive officer's annual salary and his or
her highest annual bonus during the three years before the termination or the
effective date of the agreement (or, if higher, the current year targeted bonus)
and (ii) continuation for up to two years of equivalent hospital, medical,
dental, disability and life insurance coverage as in effect at the time of
termination. The agreements also provide the foregoing benefits in connection
with certain terminations which are effected in anticipation of a change in
control. Each agreement provides that if any portion of the benefits under the
agreement or under any other agreement for the officer would constitute an
"excess parachute payment" for purposes of the Code, benefits will be reduced so
that the officer will be entitled to receive $1 less than the maximum amount
which he or she could receive without becoming subject to the 20% excise tax
imposed by the Code on certain excess payments, or which the Company may pay
without loss of deduction under the Code. The acquisition of more than 25% of
the Shares pursuant to the Offer will constitute a change in control for
purposes of the agreements.
The foregoing are summaries of certain provisions of the amended Change of
Control Agreement with Mr. Dindorf and the Key Executive Employment and
Severance Agreements with seven Company officers (collectively, the "Change of
Control Agreements"). These summaries are not complete descriptions of the terms
and conditions of the Change of Control Agreements and are qualified in their
entirety by reference to the full text of the Change of Control Agreements,
which are incorporated herein by reference and copies of which have been filed
with the SEC as exhibits to this Schedule 14D-9.
MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
of the Merger Agreement, which is incorporated herein by reference and a copy of
which has been filed with the SEC as an exhibit to this Schedule 14D-9.
Capitalized terms used but not defined in this summary of the Merger Agreement
have the meanings given to such terms in the Merger Agreement.
The Offer. The Merger Agreement provides that the Purchaser will, and
Parent will cause the Purchaser to, commence (within the meaning of Rule
14d-2(a) of the Exchange Act) as promptly as practicable, but in any event not
later than May 4, 1998, the Offer for any and all outstanding Shares not owned
by the Purchaser at the Offer Price applicable to such Shares, net to the seller
in cash. The initial expiration date for the Offer is the twentieth business day
from and after the date the Offer is commenced, including the date of
commencement as the first business day in accordance with Rule 14d-2 under the
Exchange Act (the "Expiration Date"). The obligation of Parent and the Purchaser
to accept for payment or pay for any Shares tendered pursuant to the Offer is
subject only to (i) there being validly tendered and not withdrawn prior to the
expiration of the Offer, that number of Shares which represents at least 66 2/3%
of the Shares outstanding on a fully diluted basis (without giving pro forma
effect to the potential issuance of any Shares issuable under the Stock Option
Agreement) (the "Minimum Condition") and (ii) the satisfaction or waiver of the
other conditions set forth in the conditions set forth in Annex I to the Merger
Agreement (together with the Minimum Condition, the "Conditions of the Offer").
Without the prior written consent of the Company, the Purchaser will not (i)
decrease the Offer Price or change the form of consideration payable in the
Offer,
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(ii) decrease the number of Shares sought to be purchased in the Offer or (iii)
amend any other term of the Offer in any manner adverse to the holders of any
Shares; provided, however, that if on the initial scheduled Expiration Date, the
sole condition remaining unsatisfied is the failure of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), to have expired or been terminated, the Purchaser shall, and Parent shall
cause the Purchaser to, extend the expiration date from time to time until two
business days after the expiration or termination of the waiting period under
the HSR Act.
Subject to the terms of the Offer and the Merger Agreement and the
satisfaction or waiver of all the Conditions of the Offer as of the Expiration
Date, the Purchaser will accept for payment and pay for all Shares validly
tendered and not withdrawn pursuant to the Offer as soon as practicable after
the Expiration Date.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof and in accordance with the applicable provisions of the WBCL,
at the Effective Time, the Purchaser will be merged with and into the Company.
Following the Merger, the separate corporate existence of the Purchaser will
cease and the Company will continue as the Surviving Corporation; provided,
however, that upon the mutual agreement of Parent and the Company, the Merger
may be structured so that the Company will be merged with and into the
Purchaser, with Purchaser continuing as the Surviving Corporation. The Merger
will be effected by the filing at the time of Closing of appropriate articles of
merger relating to the Merger with the Department of Financial Institutions of
the State of Wisconsin.
The Merger Agreement provides that, at the Effective Time, by virtue of the
Merger and without any action on the part of Parent, the Purchaser, the Company
or the holders thereof, the Shares will be converted into the right to receive
the Offer Price in cash, without interest thereon, as soon as is reasonably
practicable upon surrender of the certificate formerly representing such Shares
(other than any Shares held by Parent, the Purchaser, any wholly-owned
subsidiary of Parent or the Purchaser, in the treasury of the Company or by any
wholly-owned subsidiary of the Company, which Shares, by virtue of the Merger
and without any action on the part of the holder thereof, shall be cancelled and
retired and shall cease to exist with no payment being made with respect
thereto, and other than Dissenting Shares). At the Effective Time, each share of
common stock, par value $1.00 per share, of the Purchaser issued and outstanding
immediately prior to the Effective Time will, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into and
become one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation. Notwithstanding the foregoing, if Parent and the
Company agree to restructure the Merger (as described in the immediately
preceding paragraph), then the outstanding shares of the Purchaser's common
stock will not be affected in any manner by virtue of the Merger.
The Merger Agreement provides that the articles of incorporation of the
Purchaser, as in effect immediately prior to the Effective Time, will be the
articles of incorporation of the Surviving Corporation, until thereafter amended
in accordance with the provisions thereof and the WBCL. The by-laws of the
Purchaser in effect at the Effective Time will be the by-laws of the Surviving
Corporation, until thereafter amended in accordance with the provisions thereof
and the WBCL.
Vote Required to Approve the Merger. The Merger Agreement provides that if
required by the Company's articles of incorporation and/or applicable law in
order to consummate the Merger, the Company, acting through its Board of
Directors, will, in accordance with applicable law: (i) duly call, give notice
of, convene and hold a special meeting of the Company's shareholders as soon as
practicable following the Acceptance Date for the purpose of considering and
taking action upon the Merger Agreement; (ii) promptly prepare and file with the
SEC a preliminary information or proxy statement relating to the Merger and the
Merger Agreement and (x) obtain and furnish the information required to be
included by the SEC in the Proxy Statement (as hereinafter defined) and, after
consultation with Parent, respond promptly to any comments made by the SEC with
respect to the preliminary proxy statement and, subject to compliance with SEC
rules and regulations, cause a notice of a special meeting and a definitive
information or proxy statement (the "Proxy Statement") to be mailed to the
shareholders of the Company no later than the time required by applicable law
and the articles of incorporation and the by-laws of the Company, and (y) to
obtain the necessary approvals of the Merger and the Merger Agreement by the
shareholders of the Company; and (iii) subject to the provisions of the Merger
Agreement, include in the Proxy Statement the recommendation
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of the Board of Directors of the Company that the shareholders of the Company
vote in favor of the approval of the Merger and the adoption of the Merger
Agreement. Pursuant to the Stock Option Agreement, if the Purchaser owns at
least 66 2/3% but less than 90% of the outstanding Shares, the Purchaser may
exercise an irrevocable option to purchase from the Company at the Offer Price
newly issued Shares in an amount equal to the number of Shares that, when added
to the number of Shares owned by the Purchaser and its affiliates immediately
following consummation of the Offer, shall constitute 90% of the Shares then
outstanding on a fully diluted basis (giving effect to the issuance of the
Option Shares). If the Purchaser owns 90% of the outstanding Shares, approval of
the Merger can be obtained without the affirmative vote of any other shareholder
of the Company.
In the event that (i) Parent, the Purchaser or any other subsidiary of
Parent acquires in the aggregate at least 90% of the outstanding Shares pursuant
to the Offer (including as a result of the exercise of the Stock Option
Agreement) and prior transactions and (ii) Parent and the Company restructure
the Merger so that the Company will be merged with and into the Purchaser, the
parties to the Merger Agreement will, subject to certain conditions, take all
necessary and appropriate action to cause the Merger to become effective as soon
as practicable after the acceptance for payment of and payment for Shares by the
Purchaser pursuant to the Offer without a meeting of the shareholders of the
Company, in accordance with Section 180.1104 of the Wisconsin Business
Corporation Law (the "WBCL").
Conditions to the Merger. The respective obligations of Parent, the
Purchaser and the Company to consummate the Merger and the transactions
contemplated thereby, if the Offer shall have been consummated, are subject to
the satisfaction or waiver in writing, at or before the Effective Time, of
certain conditions, including: (i) to the extent required under the Company's
articles of incorporation or applicable law, the shareholders of the Company
shall have duly approved the transactions contemplated by the Merger Agreement;
(ii) the consummation of the Merger shall not be restrained, enjoined or
prohibited by any order, judgment, decree, injunction or ruling of a court of
competent jurisdiction or any Governmental Entity, and there shall not have been
any statute, rule or regulation enacted, promulgated or deemed applicable to the
Merger by any Governmental Entity which prevents the consummation of the Merger;
and (iii) the Purchaser shall have accepted for payment and paid for Shares
tendered pursuant to the Offer in accordance with the terms of the Merger
Agreement (however, this condition is not applicable to the obligations of
Parent or the Purchaser if the Purchaser fails to accept for payment or pay for
Shares tendered pursuant to the Offer in violation of the terms of the Offer).
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties. These include representations and
warranties by the Company with respect to, among other things, (i) organization,
qualification and subsidiaries, (ii) articles of incorporation and by-laws,
(iii) capitalization, (iv) authority, (v) no conflict, required filings and
consents, (vi) SEC reports and financial statements, (vii) information, (viii)
tax matters, (ix) no litigation, (x) compliance with applicable laws, (xi) labor
matters, (xii) employee benefit plans, (xiii) intellectual property, (xiv)
certain events, (xv) certain approvals, (xvi) brokers, (xvii) opinion of
financial advisor, (xviii) rights agreement, (xix) title to assets, (xx)
buildings and equipment, (xxi) vote required, (xxii) certain agreements, (xxiii)
applicability of articles of incorporation and (xiv) contracts.
Parent and the Purchaser also have made certain representations and
warranties with respect to, among other things, (i) organization and
qualification, (ii) authority, (iii) no conflict, required filings and consents,
(iv) information, (v) adequate financing, (vi) brokers, (vii) the Purchaser and
(viii) share ownership.
Directors. The Merger Agreement provides that promptly upon the payment by
the Purchaser for Shares pursuant to the Offer, and from time to time
thereafter, the Purchaser will be entitled to designate such number of
directors, rounded up to the next whole number, on the Board of Directors of the
Company as is equal to the product of the total number of directors on the Board
of Directors of the Company (determined after giving effect to the directors
designated by the Purchaser pursuant to this sentence) multiplied by the
percentage that the aggregate number of Shares beneficially owned by the
Purchaser or its affiliates bears to the total number of Shares then
outstanding, and the Company will, subject to compliance with Section 14(f)
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of the Exchange Act and Rule 14f-1 promulgated thereunder, upon request of the
Purchaser, promptly take all actions necessary to cause the Purchaser's
designees to be so elected, including, if necessary, promptly increasing the
size of the Board of Directors of the Company or seeking the resignations of one
or more existing directors, or both; provided, however, that prior to the
Effective Time, the Board of Directors of the Company will always have at least
two members who are neither officers, directors, shareholders or designees of
the Purchaser or any of its affiliates ("Purchaser Insiders"). If the number of
directors who are not Purchaser Insiders is reduced below two for any reason
prior to the Effective Time, then the remaining directors who are not Purchaser
Insiders (or if there is only one director who is not a Purchaser Insider, the
remaining director who is not a Purchaser Insider) will be entitled to designate
a person (or persons) to fill such vacancy (or vacancies) who is not an officer,
director, shareholder or designee of the Purchaser or any of its affiliates and
who will be a director not deemed to be a Purchaser Insider for all purposes of
the Merger Agreement. At such time, the Company will, if requested by the
Purchaser, also cause persons designated by the Purchaser to constitute at least
the same percentage (rounded up to the next whole number) as is on the Board of
Directors of the Company of each committee of the Board of Directors of the
Company; provided, however, that prior to the Effective Time each committee of
the Board of Directors of the Company shall have at least one member who is not
a Purchaser Insider. The Company's obligation to appoint the Purchaser's
designees to the Board of Directors of the Company is subject to Section 14(f)
of the Exchange Act and Rule 14f-1 thereunder. The Company will promptly take
all actions required pursuant to such Section and Rule in order to fulfill its
obligations. From and after the election or appointment of the Purchaser's
designees and prior to the Effective Time, any amendment or termination of the
Merger Agreement by the Company, any extension by the Company of the time for
the performance of any of the obligations or other acts of Parent or the
Purchaser or waiver of any of the Company's rights under the Merger Agreement,
or any other action taken by the Board of Directors of the Company in connection
with the Merger Agreement, will require the concurrence of a majority of the
directors of the Company then in office who are not Purchaser Insiders.
Indemnification and Insurance. The Merger Agreement provides as follows:
(a) The Purchaser and Parent agree that for a period of six years from
the Acceptance Date, the Purchaser will maintain all rights to
indemnification now existing in favor of the current or former directors,
officers, employees, fiduciaries and agents of the Company as provided in
the Company's articles of incorporation and by-laws or otherwise in effect
under any agreement on the date of the Merger Agreement. In addition, the
Purchaser and Parent agree that the articles of incorporation and by-laws
of the Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the Company's articles of incorporation and
by-laws on the date of the Merger Agreement, which provisions will not be
amended, repealed or otherwise modified for a period of six years after the
Acceptance Date in any manner that would adversely affect the rights
thereunder of individuals who at any time prior to the Effective Time were
directors or officers of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including without limitation,
the transactions contemplated by the Merger Agreement), unless such
modification is required by law. Notwithstanding the six-year period
specified in the foregoing sentences, in the event any claim or claims are
asserted or made within such six-year period, all rights to indemnification
in respect of any such claim or claims shall continue until disposition of
any and all such claims.
(b) The Surviving Corporation will at all times exercise the powers
granted to it by its articles of incorporation, its by-laws, and by
applicable law to indemnify and hold harmless to the fullest extent
possible present or former directors, officers, employees, fiduciaries and
agents of the Company against any threatened or actual claim, action, suit,
proceeding or investigation made against them arising from their service in
such capacities (or service in such capacities for another enterprise at
the request of the Company) prior to, and including the Acceptance Date,
including, without limitation, with respect to matters relating to the
Merger Agreement.
(c) In addition to the foregoing, Parent agrees that the Company and,
from and after the Acceptance Date, the Surviving Corporation shall cause
to be maintained in effect for not less than six years from the Acceptance
Date, the current policies of the directors' and officers' liability
insurance maintained by the Company with respect to matters occurring at or
prior to the Effective Time
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(including, without limitation, the transactions contemplated by the Merger
Agreement); provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions
which are no less advantageous and provided that such substitution shall
not result in any gaps or lapses in coverage with respect to matters
occurring prior to the Effective Time; and provided, further, that the
Surviving Corporation will not be required to pay an annual premium in
excess of 200% of the last annual premium paid by the Company prior to the
date of the Merger Agreement and if the Surviving Corporation is unable to
obtain the insurance required by this paragraph it will obtain as much
comparable insurance as possible for an annual premium equal to such
maximum amount.
Conditions to the Offer. Pursuant to the Merger Agreement, the Purchaser
will not be required to accept for payment or pay for any tendered Shares if (i)
any applicable waiting period under the HSR Act has not expired or terminated or
(ii) the Minimum Condition has not been satisfied, and the Purchaser may,
subject to the terms of the Merger Agreement, amend the Offer or postpone the
acceptance for payment of tendered Shares if at any time on or after the date of
the Merger Agreement and before the expiration of the Offer, any of the
following events shall occur:
(a) there is threatened or pending any suit, action or proceeding by a
Governmental Entity against the Purchaser, Parent or the Company (i)
seeking to prohibit or impose any material limitations on Parent's or the
Purchaser's ownership or operation (or that of Parent's subsidiaries or
affiliates) of any or a material portion of their or the Company's
businesses or assets, or to compel Parent or the Purchaser or Parent's
subsidiaries and affiliates to dispose of or hold separate any material
portion of the business or assets of the Company or Parent and Parent's
subsidiaries, in each case taken as a whole, (ii) challenging the
acquisition by Parent or the Purchaser of any Shares under the Offer,
seeking to restrain or prohibit the making or consummation of the Offer or
the Merger or the performance of any of the other transactions contemplated
by the Merger Agreement or the Stock Option Agreement, or seeking to obtain
from the Company, Parent or the Purchaser any damages that are material in
relation to the Company, (iii) seeking to impose material limitations on
the ability of the Purchaser, or render the Purchaser unable, to accept for
payment, pay for or purchase some or all of the Shares pursuant to the
Offer, the Merger or the Stock Option Agreement or (iv) seeking to impose
material limitations on the ability of the Purchaser or Parent effectively
to exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's shareholders; or
(b) any law is enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger or the transactions contemplated by
the Stock Option Agreement, or any other action is taken by any
Governmental Entity, other than the application to the Offer, the Merger or
the transactions contemplated by the Stock Option Agreement of applicable
waiting periods under the HSR Act, that results, directly or indirectly, in
any of the consequences referred to in paragraph (a) above; or
(c) (i) the Board of Directors of the Company or any committee thereof
withdraws or modifies in a manner adverse to Parent or the Purchaser its
approval or recommendation of the Offer, the Merger, the Merger Agreement
or the Stock Option Agreement or approves or recommends any Acquisition
Transaction or (ii) the Company enters into any agreement to consummate any
Acquisition Transaction; or
(d) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to Material Adverse Effect
(as defined in the Merger Agreement) are not true and correct, or any such
representations and warranties that are not so qualified are not true and
correct in any respect (when taken together with all other failures of such
representations and warranties to be true and correct) that would have a
Material Adverse Effect on the Company, in each case at the date of the
Merger Agreement or at the scheduled expiration of the Offer (as though
made as of such date, except that those representations and warranties that
address matters only as of a particular date shall remain true and correct
as of such date); or
(e) the Merger Agreement shall have been terminated in accordance with
its terms; or
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(f) the Company shall have failed to perform any obligation or to
comply with any agreement or covenant to be performed or complied with by
it under the Merger Agreement or the Stock Option Agreement other than any
failure which would not have, either individually or in the aggregate, a
Material Adverse Effect on the Company; or
(g) any person acquires beneficial ownership (as defined in Rule 13d-3
promulgated under the Exchange Act) of at least 20% of the outstanding
Shares (other than any person not required to file a Schedule 13D under the
rules promulgated under the Exchange Act or other than pursuant to the
Stock Option Agreement); or
(h) there shall have occurred, and continued to exist, (i) any general
suspension of, or limitation on prices for, trading in securities on the
New York Stock Exchange or the American Stock Exchange, (ii) a declaration
of a banking moratorium or any suspension of payments in respect of banks
in the United States, (iii) a commencement of a war, armed hostilities or
other national or international calamity directly involving the United
States (other than an action involving solely United Nations personnel or
support of United Nations' personnel) or (iv) in the case of any of the
events described in the foregoing clauses (i) through (iii) existing at the
time of the commencement of the Offer, a material acceleration or worsening
thereof.
Covenants. The Merger Agreement contains various covenants of the parties
thereto, including covenants as to, among other things, the conduct of the
business of the Company, as described in further detail below, during the period
from the date of the Merger Agreement to the Closing Date or termination of the
Merger Agreement.
Conduct of Business of the Company. Except as required by the Merger
Agreement or with the prior written consent of Parent, during the period from
the date of the Merger Agreement to the Effective Time, the Company will and
will cause each of its subsidiaries to conduct its operations only in the
ordinary course of business consistent with past practice and will use its
commercially reasonable efforts and will cause each of its subsidiaries to use
its commercially reasonable efforts, to preserve intact the business
organization of the Company and each of its subsidiaries, to use, operate,
maintain and repair all of its assets and properties in a normal business manner
consistent with past practice, to keep available the services of its and their
present officers and key employees and to preserve the goodwill of those having
business relationships with the Company and to conduct business with suppliers,
customers, creditors and others having business relationships with the Company
in the best interests of the Company. Without limiting the generality of the
foregoing, and except as otherwise required or contemplated by the Merger
Agreement or the Stock Option Agreement, the Company will not, and will not
permit any of its subsidiaries to, prior to the Effective Time, without the
prior written consent of Parent: (a) adopt any amendment to its charter or
by-laws or comparable organizational documents; (b) issue, reissue or sell or
authorize the issuance, reissuance or sale of additional shares of capital stock
of any class, or shares convertible into capital stock of any class, or any
rights, warrants or options to acquire any convertible shares or capital stock,
other than the issuance of Shares pursuant to Options outstanding on the date of
the Merger Agreement or pursuant to the Stock Option Agreement; (c) declare, set
aside or pay any dividend or other distribution (whether in cash, shares or
property or any combination thereof) in respect of any class or series of its
capital stock other than between any of the Company and any subsidiary which is
wholly-owned by the Company; (d) split, combine, subdivide, reclassify or
directly or indirectly redeem, purchase or otherwise acquire, recapitalize or
reclassify, or propose to redeem or purchase or otherwise acquire, any shares of
its capital stock or any of its other shares or liquidate in whole or in part;
(e) except for (i) increases in salary, wages and benefits of non-executive
officers or employees of the Company or its subsidiaries in the ordinary course
of business consistent with past practice, (ii) increases in salary, wages and
benefits granted to officers and employees of the Company or its subsidiaries in
conjunction with new hires in the ordinary course of business consistent with
past practice or (iii) increases in salary, wages and benefits to employees of
the Company or its subsidiaries pursuant to collective bargaining agreements
entered into in the ordinary course of business consistent with past practice,
(A) increase the compensation or fringe benefits payable or to become payable to
its directors, officers or key employees (whether from the Company or any of its
subsidiaries), (B) pay any benefit not required by any existing plan or
arrangement (including, without limitation, the granting of stock options, stock
appreciation rights, shares
8
<PAGE> 10
of restricted stock or performance units), (C) grant any severance or
termination pay to (except pursuant to existing agreements, plans or policies
and as required by such agreements, plans or policies) any director, officer or
other key employee of the Company or any of its subsidiaries, (D) enter into or
modify any employment or severance agreement with any director, officer or other
key employee of the Company or any of its subsidiaries or (E) establish, adopt,
enter into, or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock or company benefit plans for the
benefit or welfare of any directors, officers or current or former employees,
except in each case to the extent required by applicable law or regulation; (f)
(i) sell, lease, transfer or assign any of its assets, tangible or intangible,
other than for a fair consideration in the ordinary course of business and other
than the disposition of obsolete or unusable property, (ii) enter into any
contract (other than purchase and sales orders in the ordinary course of
business in accordance with past practice) involving more than $25,000 without
the consent of Parent (which consent shall not be unreasonably withheld), (iii)
accelerate, terminate, modify in any material respect, or cancel any contract
(other than purchase and sales orders and other than in the ordinary course of
business in accordance with past practice) involving more than $25,000 to which
the Company is a party or by which it is bound without the consent of Parent
(which consent shall not be unreasonably withheld), (iv) make any capital
expenditure (or series of related capital expenditures) involving either more
than $25,000 (unless such expenditure is identified in the current business plan
of the Company as disclosed to Parent) or outside the ordinary course of
business, (v) delay or postpone the payment of accounts payable and other
liabilities outside the ordinary course of business, (vi) cancel, compromise,
waive or release any right or claim (or series of related rights and claims) not
covered by the reserves or accruals relating to such claim in the Company's
December 31, 1997 consolidated balance sheet either involving more than $25,000
or outside the ordinary course of business without the consent of Parent (which
consent shall not be unreasonably withheld), (vii) grant any license or
sublicense of any rights under or with respect to any intellectual property
other than in the ordinary course of business or (viii) enter into any contract
or agreement with any affiliate of the Company, except for transactions in the
ordinary course of business upon commercially reasonable terms; (g) (i) incur,
assume or prepay any long-term debt or incur or assume any short-term debt,
except that the Company and its subsidiaries may incur, assume or prepay debt in
the ordinary course of business consistent with past practice under existing
lines of credit, (ii) pay, discharge, settle or satisfy any other claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than in the ordinary course of business
consistent with past practice, (iii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person or (iv) make any loans, advances or capital
contributions to, or investments in, any other person except in the ordinary
course of business consistent with past practice and except for loans, advances,
capital contributions or investments between any subsidiary wholly-owned by the
Company and the Company or another subsidiary wholly-owned by the Company; or
(h) agree in writing or otherwise to take any of the foregoing actions.
No Solicitation. Pursuant to the Merger Agreement, the Company covenanted
and agreed with Parent and the Purchaser that neither the Company nor any of its
subsidiaries has any agreement, arrangement or understanding with any potential
acquiror that, directly or indirectly, would be violated, or require any
payments, by reason of the execution, delivery and/or consummation of the Merger
Agreement and the Stock Option Agreement. The Company will, will cause its
subsidiaries to, and will use its commercially reasonable efforts to cause the
officers, directors, employees, investment bankers, attorneys and other agents
and representatives of the Company and its subsidiaries to, immediately cease
any existing activities, information exchanges, discussions or negotiations with
any person (including a "person" as defined in Section 13(d)(3) of the Exchange
Act) other than Parent or the Purchaser (a "Third Party") heretofore conducted
with respect to any Acquisition Transaction (as defined below). The Company
shall not, shall cause its subsidiaries not to, and shall use its commercially
reasonable efforts to cause the officers, directors, employees, investment
bankers, attorneys and other agents and representatives of the Company and its
subsidiaries not to, directly or indirectly, (x) solicit, initiate, continue,
facilitate or encourage (including by way of furnishing or disclosing non-public
information) any inquiries, proposals or offers from any Third Party with
respect to, or that could reasonably be expected to lead to, any acquisition or
purchase of all or any significant portion of the assets or business of, or any
significant equity interest in (including by way of a tender offer), or any
merger, consolidation or business combination with, or any similar transaction
involving, the Company or any of its
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<PAGE> 11
subsidiaries (the foregoing being referred to collectively as an "Acquisition
Transaction"), or (y) negotiate or otherwise communicate in any way with any
Third Party with respect to any Acquisition Transaction or enter into, approve
or recommend any agreement, arrangement or understanding requiring the Company
to abandon, terminate or fail to consummate the Offer and/or the Merger or any
other transaction contemplated thereby or by the Stock Option Agreement.
Notwithstanding anything to the contrary in the foregoing, the Company may in
response to an unsolicited written proposal with respect to an Acquisition
Transaction involving the acquisition of all of the Shares (or all or
substantially all of the assets of the Company and its subsidiaries) from a
Third Party, furnish or disclose non-public information to such Third Party and
negotiate or otherwise communicate with such Third Party, in each case only if
(A) the Board of Directors of the Company (after consultation with its outside
legal counsel and independent financial advisors) determines in good faith that
such proposal would reasonably be likely to be more favorable to the Company and
its shareholders than the transactions contemplated by the Merger Agreement (the
proposal with respect to an Acquisition Transaction meeting the requirements of
clause (A), a "Superior Proposal"), (B) prior to furnishing or disclosing any
non-public information to, or entering into discussions or negotiations with,
such Third Party, the Company receives from such Third Party a customary
confidentiality agreement similar in all material respects to the
confidentiality agreement between Parent and the Company, and (C) the Company
advises Parent of all such non-public information delivered to such Third Party
prior to such delivery; provided, however, that the Company shall not enter into
a definitive agreement with respect to a Superior Proposal unless the Company
first complies with the immediately following paragraph, including the last
sentence thereof, and then unless the Company concurrently terminates the Merger
Agreement in accordance with the terms thereof.
The Merger Agreement provides that the Company will promptly (but in any
event within one business day of the Company becoming aware of same) advise
Parent of the receipt by the Company, any of its subsidiaries or any of the
Company's investment bankers, attorneys or other agents or representatives of
any inquires or proposals relating to an Acquisition Transaction and any actions
taken pursuant to the immediately preceding paragraph. The Company shall
promptly (but in any event within one business day of the Company becoming aware
of same) provide Parent with a copy of any such inquiry or proposal in writing
and a written statement with respect to any such inquiries or proposals not in
writing, which statement shall include the identity of the parties making such
inquiries or proposal and the material terms thereof and will update Parent on
an ongoing basis, or upon Parent's reasonable request, of the status thereof;
provided, however, that the Company shall not be obligated to provide a copy of,
or a written statement with respect to, any such inquiry if the Board of
Directors of the Company determines in good faith, after consultation with
outside legal counsel, that not providing such copy or written statement is
necessary to allow the Board of Directors of the Company to fulfill its
fiduciary duties to the shareholders of the Company under applicable law. For
the avoidance of doubt, the Company has agreed that it will not terminate the
Merger Agreement and enter into any agreement with respect to an Acquisition
Transaction unless and until Parent has been given the opportunity at least two
business days prior to the entering into of such agreement to match the terms of
such agreement.
Termination. The Merger Agreement may be terminated and the Merger
contemplated thereby may be abandoned at any time prior to the Effective Time,
whether or not approval thereof by the shareholders of the Company has been
obtained:
(a) by the mutual written consent of Parent, the Purchaser and the
Company prior to the date on which Parent's designees constitute a majority
of the Board of Directors of the Company; or
(b) by the Company if the Company is not in material breach of any of
its representations, warranties, covenants or arrangements contained in the
Merger Agreement and the Stock Option Agreement and if (i) the Purchaser
fails to commence the Offer as provided in the Merger Agreement, (ii) the
Purchaser shall not have accepted for payment and paid for Shares pursuant
to the Offer in accordance with the terms thereof on or before August 31,
1998 or (iii) the Purchaser fails to purchase validly tendered Shares in
violation of the terms of the Offer or the Merger Agreement; or
(c) by Parent or the Company if the Offer expires or is terminated or
withdrawn pursuant to its terms without any Shares being purchased
thereunder; provided, however, that Parent may terminate the Merger
Agreement upon the termination or withdrawal of the Offer if Parent's or
the Purchaser's
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<PAGE> 12
termination or withdrawal of the Offer is not in violation of the terms of
the Merger Agreement or the Offer; or
(d) by Parent or the Company if any court or other governmental entity
shall have issued, enacted, entered, promulgated or enforced any order,
judgment, decree, injunction, or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
judgment, decree, injunction, ruling or other action is final and
nonappealable; or
(e) by the Company if, prior to the purchase of Shares pursuant to the
Offer in accordance with the terms of the Merger Agreement, (i) there
occurs, on the part of Parent or the Purchaser, a material breach of any
representation, warranty, covenant or agreement contained in the Merger
Agreement which is not curable or, if curable, is not cured within 30 days
after written notice of such breach is given by the Company to the party
committing the breach, except in any case, such failures which are not
reasonably likely to affect adversely Parent's or the Purchaser's ability
to complete the Offer or the Merger or (ii) the Company enters into a
definitive agreement with respect to a Superior Proposal as permitted under
the Merger Agreement and after complying with the provisions of the Merger
Agreement and making the payments described under "Fees and Expenses"
below; or
(f) by Parent if, prior to the purchase of Shares pursuant to the
Offer in accordance with the terms of the Merger Agreement, (i) there shall
have occurred, on the part of the Company, a breach of any representation,
warranty, covenant or agreement contained in the Merger Agreement which
individually, or in the aggregate, if not cured would be reasonably likely
to have a Material Adverse Effect on the Company and which is not curable
or, if curable, is not cured within the later of (x) 30 days after written
notice of such breach is given by Parent to the Company and (y) the
satisfaction of all conditions to the Offer not related to such breach or
(ii) the Board of Directors of the Company or committee thereof shall have
withdrawn or modified (or shall have resolved to withdraw or modify), in a
manner adverse to Parent, its approval or recommendation of the Merger
Agreement or any of the transactions contemplated thereby and the Board of
Directors of the Company and such committee shall not have fully reinstated
such approval or recommendations within three business days after a request
by Parent to so reinstate or shall have recommended (or resolved to
recommend) an Acquisition Transaction (other than the Offer and Merger) to
the shareholders of the Company; or
(g) by Parent if it is not in material breach of its obligation
hereunder or under the Offer and no Shares have been purchased pursuant to
the Offer on or before August 31, 1998.
Fees and Expenses. The Merger Agreement provides that, except as described
below, whether or not the Merger is consummated, all costs and expenses incurred
in connection with the Offer, the Merger Agreement, the Stock Option Agreement
and the transactions contemplated by the Merger Agreement and the Stock Option
Agreement will be paid by the party incurring such expenses.
Pursuant to the terms of the Merger Agreement, (i) in the event the Merger
Agreement is terminated pursuant to subsection (e)(ii) under "Termination" above
or (ii) in the event that (x) any person shall have publicly disclosed a
proposal regarding an Acquisition Transaction and (y) following such disclosure,
either (a) August 31, 1998 occurs without the shareholder approval of the Merger
being obtained (other than as a result of a material breach of the Merger
Agreement by Parent or the Purchaser that has not been cured within the time
period set forth in the Merger Agreement) or (b) the Company breaches (prior to
the time that the designees of the Purchaser constitute a majority of the Board
of Directors of the Company) any of its material obligations under the Merger
Agreement and does not cure such breach within the time period set forth in the
Merger Agreement or (c) the Merger Agreement is terminated pursuant to
subsection (f)(ii) under "Termination" above and (z) not later than twelve
months after any such termination the Company shall have entered into a
definitive agreement for an Acquisition Transaction, or an Acquisition
Transaction shall have been consummated, then the Company shall pay to an
account designated by Parent a termination fee, in immediately available funds,
of $1,000,000 (the "Termination Fee") and shall reimburse Parent for all
out-of-pocket fees and expenses (but in no event greater than $350,000)
reasonably incurred by Parent and the Purchaser in connection with the Merger
Agreement, the Offer and the Merger. The Termination Fee and any reimbursement
of expenses shall be paid prior to, and shall be a condition to the
effectiveness of, any termination of the Merger Agreement referred to in clause
(i) above or on the next business day after the
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<PAGE> 13
earlier of such Acquisition Transaction being consummated or a definitive
agreement for such Acquisition Transaction being entered into if such fee and
expenses are payable as a result of clause (ii) above.
Employee Benefit Arrangements. The Merger Agreement provides that:
(a) Following the Effective Time and through December 31, 1999, the
Purchaser will provide employee benefit plans and programs for the benefit
of employees of the Company and its subsidiaries (excluding plans or
programs which provide for issuance of Shares or options on Shares) that
are of reasonably equivalent value to such employees as compared with the
Company Benefit Plans (as defined in the Merger Agreement), subject to
applicable governmental rules and regulations. All service credited to each
employee by the Company or any of its subsidiaries through the Effective
Time shall be recognized by the Purchaser for purposes of eligibility and
vesting (but not benefit accrual) under any employee benefit plan provided
by the Purchaser for the benefit of the employees.
(b) Parent will cause the Surviving Corporation to honor (without
modification) and assume all written employment agreements with individual
employees, severance agreements with individual employees and other
comparable agreements with individual employees of the Company or any of
its subsidiaries, all as in effect on the date of the Merger Agreement.
(c) The Purchaser will maintain in effect the Company severance
plan/program (as specified in the employee handbook) for a period of two
years immediately following the Effective Time and the Company severance
plan/program will not be terminated or adversely amended during such
two-year period.
(d) The Company will cause the interest of each of the employees of
the Company and its subsidiaries as of the Acceptance Date in the
Hein-Werner Retirement and Savings Plan and Trust to be fully vested and
nonforfeitable as of the Acceptance Date.
(e) For a period of 18 months following the Effective Time, Parent
shall cause the Surviving Corporation to continue to provide medical
insurance, at COBRA premium rates, to O. Friend, a current director of the
Company.
STOCK OPTION AGREEMENT
The following is a summary of certain provisions of the Stock Option
Agreement, dated as of April 27, 1998, by and among Parent, the Purchaser and
the Company (the "Stock Option Agreement"). This summary is not a complete
description of the terms and conditions of the Stock Option Agreement and is
qualified in its entirety by reference to the full text of the Stock Option
Agreement, which is incorporated herein by reference and a copy of which has
been filed with the SEC as an exhibit to this Schedule 14D-9.
Purchase of Shares. On the terms and subject to the conditions set forth in
the Stock Option Agreement, the Company agreed to issue and sell to Parent that
number of newly issued Shares (the "Option Shares") equal to the number of
Shares that, when added to the number of Shares owned by the Purchaser and its
affiliates immediately following the consummation of the Offer, constitutes 90%
of the outstanding Shares on a fully-diluted basis (giving effect to the
issuance of the Option Shares), at a per share purchase price equal to the Offer
Price. The closing of such sale of Shares shall occur at any one time after the
acceptance for payment by Purchaser of the Shares constituting at least 66 2/3%
but less than 90% of the Shares then outstanding on a fully diluted basis but
prior to the earliest to occur of (x) the Effective Time and (y) the termination
of the Merger Agreement in accordance with the terms thereof.
Conditions to Closing. The obligation of the Company to deliver the Option
Shares upon the Purchaser's exercise of its option is subject to the following
conditions: (a) all waiting periods under the HSR Act applicable to the issuance
and delivery of the Option Shares pursuant to the Stock Option Agreement shall
have expired or been terminated and (b) there shall be no preliminary or
permanent injunction or other final, nonappealable judgment by any court of
competent jurisdiction restricting, preventing or prohibiting the issuance and
delivery of the Option Shares.
Covenants of the Company. Pursuant to the Stock Option Agreement, the
Company covenants and agrees to use its commercially reasonable efforts to take,
or cause to be taken, all appropriate action, and to do, or cause to be done,
all things necessary, proper or advisable under applicable laws to consummate
and make
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<PAGE> 14
effective the transactions contemplated thereunder, including, without
limitation, using all reasonable efforts to obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
entities.
Certain Representations and Warranties. In connection with the Stock Option
Agreement, the Company made certain customary representations and warranties to
Parent and the Purchaser, including with respect to (i) authorization,
reservation and validity of the issuance of the Option Shares pursuant to such
agreement and the absence of encumbrances on and in respect of such Shares and
(ii) the Company's due organization, valid existence and requisite corporate
powers. In connection with the Stock Option Agreement, Parent and the Purchaser
made certain customary representations and warranties to the Company, including
with respect to (i) authority to enter into and perform their obligations under
the Stock Option Agreement, (ii) due organization, valid existence and requisite
corporate powers and (iii) the investment intent of Parent and the Purchaser.
INDEMNIFICATION
Pursuant to the WBCL and the Company's by-laws, directors and officers of
the Company are entitled to mandatory indemnification from the Company against
certain liabilities and expenses (a) to the extent such officers or directors
are successful in the defense of a proceeding and (b) in proceedings in which
the director or officer is not successful in defense thereof, unless (in the
latter case only) it is determined that the director or officer breached or
failed to perform his or her duties to the Company and such breach or failure
constituted: (i) a willful failure to deal fairly with the Company or its
shareholders in connection with a matter in which the director or officer had a
material conflict of interest; (ii) a violation of the criminal law unless the
director or officer had reasonable cause to believe his or her conduct was
lawful or had no reasonable cause to believe his or her conduct was unlawful;
(iii) a transaction from which the director or officer derived an improper
personal profit; or (iv) willful misconduct. The WBCL specifically states that
it is the public policy of Wisconsin to require or permit indemnification,
allowance of expenses and insurance in connection with a proceeding involving
securities regulation, as described therein, to the extent required or permitted
as described above. Additionally, under the WBCL, directors of the Company are
not subject to personal liability to the Company, its shareholders or any person
asserting rights on behalf thereof for certain breaches or failures to perform
any duty resulting solely from their status as directors, except in
circumstances paralleling those in subparagraphs (i) through (iv) outlined
above.
In addition to the indemnification provisions under the WBCL and the
Company's by-laws, the Merger Agreement also provides for certain
indemnification rights as well as the provision of directors' and officers'
insurance. See Item 3(b) under the caption "Merger Agreement -- Indemnification
and Insurance" in this Schedule 14D-9.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
The Board of Directors of the Company has unanimously approved the Offer
and the Merger and determined that the terms of the Offer and the Merger are
fair to, and in the best interests of, the Company and its shareholders.
Accordingly, the Board of Directors of the Company unanimously recommends that
the shareholders of the Company accept the Offer and tender their Shares
pursuant thereto.
(b) Background of the Offer; Reasons for the Recommendation.
Background. From time to time over the last several years, Robert A.
Cornog, Chairman, President and Chief Executive Officer of Parent, contacted
Joseph L. Dindorf, President and Chief Executive Officer of the Company, to
express Parent's interest in exploring the possibility of a business combination
with the
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Company. On these occasions, Mr. Dindorf indicated that the Company was not then
considering a sale or other extraordinary corporate transaction.
In early 1996, Parent and the Company began preliminary discussions
regarding the possibility of a potential business combination and, in connection
therewith, entered into a confidentiality agreement under which Parent was
furnished with certain limited financial and business information concerning the
Company. During the period from November 1995 through April 1996,
representatives of Parent held various discussions with Mr. Dindorf during which
Mr. Dindorf responded to various questions from representatives of Parent. In
July 1996, the Company and Parent agreed to terminate these preliminary
discussions.
Prior to and following the termination of the foregoing discussions, the
Company analyzed various potential strategic options that might be available to
the Company, including possible divestitures of one or more of its operating
divisions and possible business combinations or alliances with other
manufacturing companies. In 1997, pursuant to the Company's long-range
restructuring plan, the Company sold its Great Bend Industries Division and its
Winona Van Norman Division, used the proceeds of such divestitures to pay off
virtually all of its debt and hired an outside consultant to assist the Company
with strategic planning and the evaluation of acquisition candidates.
On March 3, 1998, Mr. Cornog called Mr. Dindorf to express Parent's renewed
interest in exploring a possible business combination with the Company and his
willingness to meet and discuss the terms of such a possible transaction. Mr.
Dindorf reiterated that the Company was not considering a sale and declined to
meet with Mr. Cornog, but said he would discuss with the Board of Directors of
the Company the possibility of having a meeting. Following this conversation,
Mr. Cornog sent Mr. Dindorf a letter again expressing Parent's interest
regarding a potential business combination with the Company.
On March 12, 1998, a meeting of the Board of Directors of the Company was
held during which Mr. Dindorf informed the Company's Board of Directors of his
conversation with Mr. Cornog. After reviewing various matters, including the
Company's recent financial performance and its long-range strategic plan, the
Board of Directors of the Company directed Mr. Dindorf to advise Parent that the
Company was not currently interested in pursuing a business combination and that
the Board of Directors of the Company had determined that it was in the best
long-term interests of the Company's shareholders for the Company to carry out
its long-range restructuring plan. On March 19, 1998, Mr. Dindorf reported to
representatives of Parent the decision of the Company's Board of Directors.
On March 27, 1998, notwithstanding the Company's prior communication, Mr.
Cornog telephoned Mr. Dindorf and expressed a strong interest in Parent
effecting a business combination with the Company at a significant premium above
the Company's current market price. After discussing the matter with the
Company's directors, Mr. Dindorf agreed to a meeting with Mr. Cornog. On March
30, 1998, Messrs. Cornog and Dindorf met and discussed a variety of issues
regarding a possible business combination, including a preliminary range of
possible values. At the conclusion of the meeting, Mr. Dindorf agreed to convene
a meeting of the Company's Board of Directors to consider Parent's expression of
interest.
On April 3, 1998, the Company's Board of Directors received a letter from
Parent setting forth a preliminary proposal pursuant to which Parent would
acquire all of the shares of the Company for $11.75 per share in cash. On that
same day, the Board of Directors of the Company met and reviewed with management
and the Company's outside counsel, Foley & Lardner, the options available to the
Company. At the conclusion of the meeting, the Board of Directors of the Company
directed management to retain Credit Suisse First Boston Corporation ("CSFB") as
the Company's financial advisor to assist the Board in evaluating Parent's offer
and to explore the Company's strategic alternatives.
During the course of the next several days, CSFB met with the Company's
management to review various alternatives available to the Company and also
compiled, with the assistance of the Company's management, a list of entities
that, in addition to Parent, may have an interest in effecting a business
combination with the Company. Thereafter, CSFB contacted the various entities
identified by Company management and CSFB to determine their interest in
effecting a business combination with the Company. Following several preliminary
discussions, each of the entities contacted ultimately advised CSFB that it was
not presently interested in
14
<PAGE> 16
pursuing such a business combination. During this time, CSFB also engaged in
discussions with Parent's financial advisors regarding a potential transaction
with Parent.
On April 15, 1998, the Board of Directors of the Company met to discuss the
status of discussions with the various parties contacted by CSFB as well as the
discussions between Parent and the Company. CSFB and the Company's management
reviewed with the directors the steps taken to date. At this meeting, CSFB
reported to the Board of Directors on various financial analyses it had
undertaken, and Foley & Lardner reviewed with the directors their fiduciary
duties in connection with the consideration of a business combination. At the
conclusion of the meeting, the Board authorized the Company and its
representatives to pursue a negotiated transaction with Parent and Foley &
Lardner was directed to prepare a draft merger agreement for transmittal to
Parent providing for Parent's acquisition of the Company for cash. On April 17,
1998, a draft of such an agreement was provided to Parent. At the April 15
meeting, the Board of Directors also approved the extension of employment and
severance agreements to selected key employees of the Company.
Thereafter, representatives of Parent and representatives of the Company as
well as Parent's and the Company's respective legal and financial advisors
continued to discuss a possible business combination and negotiate the terms of
a definitive merger agreement. During this period, the Company's management kept
the Board of Directors of the Company informed of the ongoing discussions.
On April 22, 1998, the Board of Directors of the Company met and CSFB and
Foley & Lardner updated the Board on the status of discussions between
representatives of Parent and the Company. In addition, Foley & Lardner reviewed
with the Board the principal terms of the draft agreement that had been provided
to Parent.
Beginning on April 23, 1998 and through the afternoon of April 27, 1998,
representatives of the Company and the Company's legal advisors met with
representatives of Parent and Parent's legal advisors to negotiate the terms of
a definitive merger agreement and the related agreements. Following execution of
a confidentiality agreement, on April 23, 1998, representatives of Parent met
with certain members of senior management of the Company to discuss certain due
diligence matters. The negotiations among the parties culminated on April 27,
1998 in the Company and Parent agreeing upon a form of definitive merger
agreement and related agreements, subject to approval of the Company's Board of
Directors. On the same date, after agreement was reached on a definitive merger
agreement, Parent and Mr. Dindorf agreed upon the form of a definitive
employment and consulting agreement pursuant to which Mr. Dindorf would remain
employed by the Company following the consummation of the transactions
contemplated by the Merger Agreement.
Later on April 27, 1998, the Board of Directors of the Company met and
reviewed with counsel the final terms of the Merger Agreement, the Stock Option
Agreement and the Employment and Consulting Agreement. Counsel also reviewed
with the directors their fiduciary obligations in connection with the
consideration of a transaction such as the one proposed with Parent. At the
April 27 meeting, CSFB delivered its written opinion to the Company's Board of
Directors to the effect that, as of such date and based upon and subject to the
various considerations set forth in such opinion, the proposed cash purchase
price of $12.60 per share to be received by the shareholders of the Company in
the Offer and the Merger was fair to such shareholders from a financial point of
view. The Board then discussed the presentations it had received at this and
other Board meetings and unanimously approved the Merger Agreement and the Stock
Option Agreement and the transactions contemplated thereby, and authorized their
execution. The Board of Directors also unanimously approved the Employment and
Consulting Agreement as well as an amendment to the Change of Control Agreement
between the Company and Mr. Dindorf in order to facilitate Mr. Dindorf's
entering into the Employment and Consulting Agreement.
On April 27, 1998, the Merger Agreement, the Stock Option Agreement, the
Employment and Consulting Agreement and various other transaction documents were
executed.
Following execution of the foregoing documents, a joint press release
announcing the execution of the definitive agreements was issued by Parent and
the Company on April 28, 1998.
15
<PAGE> 17
Factors Considered by the Board. Prior to approving the Merger Agreement,
the Stock Option Agreement, the Offer and the Merger, and the other transactions
contemplated thereby, the Board of Directors of the Company held meetings on
March 12, April 3, April 15, April 22 and April 27. At its meeting on April 27,
1998, the Board of Directors of the Company received final reports from senior
management, legal counsel and CSFB and approved the Merger Agreement, the Stock
Option Agreement and the transactions contemplated thereby. In approving the
Merger Agreement, the Stock Option Agreement and the transactions contemplated
thereby and recommending that the shareholders of the Company tender their
Shares pursuant to the Offer, the Board of Directors of the Company considered a
number of factors, including:
(1) the financial and other terms of the Offer, the Merger and the
Merger Agreement;
(2) the trading price of the Shares over the last five years and that
the $12.60 per Share Offer Price represents a premium of 52.7% over the
closing sales price of the Shares on the American Stock Exchange on April
27, 1998, the last full trading day prior to the public announcement of the
execution of the Merger Agreement;
(3) presentations by senior management and CSFB (at such meeting and
at previous meetings of the Board of Directors) regarding the financial
condition, results of operations, business and prospects of the Company;
(4) the results of the process undertaken to identify and solicit
indications of interest from other third parties regarding a potential
business combination transaction;
(5) the terms and conditions of the Merger Agreement, including
provisions that (i) although prohibiting the Company and its
representatives from soliciting or initiating any Acquisition Transaction,
permit the Company and its representatives to furnish information to, and
negotiate and otherwise engage in discussions with, any third party in
response to an unsolicited written Superior Proposal and (ii) permit the
Company to terminate the Merger Agreement to enter into a definitive
agreement with respect to a Superior Proposal, subject to payment of a
termination fee of $1,000,000, plus reimbursement of out-of-pocket expenses
of Parent and the Purchaser of up to $350,000;
(6) Parent's financial condition and ability to cause the Purchaser to
meet its obligations under the Merger Agreement;
(7) the alternatives available to the Company in light of the
consideration proposed to be received for the Shares pursuant to the Offer
and the Merger, including continuing to maintain the Company as an
independent company or engaging in an extraordinary transaction;
(8) legal matters relating to the Offer and the Merger, including the
review provided for under the HSR Act with respect to the antitrust
implications of the Offer, and the terms of the Offer and the Merger
Agreement related thereto;
(9) the familiarity of the Board of Directors with the business,
results of operations, properties and financial condition of the Company
and the nature of the industry in which it operates;
(10) the written opinion of CSFB to the effect that as of the date of
such opinion, the $12.60 per Share cash consideration to be received by the
shareholders of the Company in the Offer and the Merger is fair to such
shareholders from a financial point of view. A copy of the written opinion
of CSFB dated April 27, 1998, which sets forth the factors considered,
assumptions made and limitations on the review conducted by CSFB, is
attached as Annex A hereto, and is incorporated herein by reference.
SHAREHOLDERS ARE ENCOURAGED TO READ THE OPINION OF CSFB CAREFULLY AND IN
ITS ENTIRETY; and
(11) the proposed structure of the Offer and the Merger involving an
immediate cash tender offer followed by a merger for the same consideration
and the fact that there is no financing or due diligence contingency to the
Offer. In this connection, the Board of Directors also considered the
likelihood that
16
<PAGE> 18
the proposed acquisition would be consummated, including the likelihood of
satisfaction of the conditions to the Offer and the Merger contained in the
Merger Agreement, and the risks to the Company if the acquisition were not
consummated.
The Board of Directors of the Company evaluated the factors listed above in
light of the directors' knowledge of the business and operations of the Company
and in their business judgment. In view of the variety of factors considered in
connection with its evaluation of the Merger Agreement and the Offer, the Board
of Directors did not find it practicable to, and did not, quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the Board of Directors may
have given different weights to different factors. The foregoing discussion of
the information and factors considered and given weight by the Board of
Directors is not intended to be exhaustive.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement, dated April 6, 1998 (the "Engagement
Letter"), between the Company and CSFB, the Company engaged CSFB to act as its
exclusive financial advisor to evaluate the Offer and to review financial and
strategic alternatives to maximize the Company's value and, if requested, to
render an opinion regarding the terms of any Sale (as defined in the Engagement
Letter) from a financial point of view. Pursuant to the Engagement Letter, the
Company will pay CSFB for its services in connection with the Offer and the
Merger a transaction fee of $1.0 million. In addition, the Company agreed to
reimburse CSFB for its out-of-pocket expenses, including reasonable fees and
expenses of its legal counsel, incurred by CSFB in connection with the
Engagement Letter and to indemnify CSFB against certain liabilities, including
liabilities arising under federal securities laws.
The Company retained CSFB based on its experience and expertise. CSFB is an
internationally recognized investment banking and advisory firm. CSFB, as part
of its investment banking business, is continuously engaged in the evaluation of
businesses and securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. In the ordinary course of its business, CSFB and its
affiliates may actively trade the debt and equity securities of both the Company
and Parent for its and its affiliates' own accounts and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the shareholders of the Company on its
behalf with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past 60 days, no transactions in the Shares have been
effected by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company, except on
April 1, 1998, the Company contributed 10,000 Shares to the Hein-Werner
Corporation Retirement and Savings Plan and Trust (a profit sharing plan).
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, all of the Company's executive
officers, directors and affiliates who own Shares presently intend to tender all
of their Shares to the Purchaser pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction such as a merger or reorganization,
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
17
<PAGE> 19
(b) Except as set forth herein, there are no transactions, Board of
Directors resolutions, agreements in principle or signed contracts in response
to the Offer that relate to or would result in one or more of the events
referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Short Form Merger. Under the WBCL, if (i) Purchaser acquires, pursuant to
the Offer, the Stock Option or otherwise, at least 90% of the outstanding Shares
and (ii) Parent and the Company mutually agree that the Merger will be
structured so that the Company will be merged with and into the Purchaser, with
the Purchaser continuing as the Surviving Corporation, the Purchaser will be
able to effect the Merger after consummation of the Offer without a vote of the
Company's shareholders. However, if either (i) the Purchaser does not acquire at
least 90% of the Shares pursuant to the Offer, the Stock Option or otherwise or
(ii) the Purchaser acquires at least 90% of the Shares but Parent and the
Company decide not to restructure the Merger as specified above, then a vote of
the Company's shareholders will be required under the WBCL and a significantly
longer period of time will be required to effect the Merger.
Rights Agreement. Each Right issued pursuant to the Rights Agreement
initially entitles the registered holder thereof to purchase one share of Common
Stock at a price of $65.00 per Share, subject to adjustment. The Rights become
exercisable if a person or group has acquired, or announced an intention to
acquire, 20% or more of the outstanding Shares (such person or group hereinafter
referred to as an "Acquiring Person"). Under certain circumstances, including
the existence of an Acquiring Person, each holder of a Right, other than the
Acquiring Person, will thereafter have the right to receive, upon exercise of a
Right, Common Stock having a market value of two times the exercise price of the
Right. For a description of the Rights Agreement, see the Company's Form 8-A,
dated May 19, 1989, as filed with the SEC and incorporated herein by reference.
On April 27, 1998, the Company entered into an amendment to the Rights
Agreement to make it inapplicable to the (i) Offer and the Merger and (ii) the
Stock Option Agreement and the transactions contemplated thereby.
Wisconsin Business Corporation Law. Sections 180.1140 through 180.1144 of
the WBCL (the "Wisconsin Business Combination Law") prohibit certain business
combinations between a resident domestic corporation (such as the Company) and
an "interested stockholder" (defined generally as any person who beneficially
owns, directly or indirectly, 10% or more of the outstanding voting stock of a
domestic corporation or who is an affiliate or associate of the corporation and
beneficially owned 10% or more of the voting stock within the last three years)
for a period of three years after the date on which the person became an
interested stockholder unless, among other exceptions, the acquisition of the
shares or the business combination has been approved by the board of directors
of the resident domestic corporation prior to the date on which the interested
stockholder became an interested stockholder. Although the acquisition of the
Shares pursuant to the Merger after the purchase of Shares in the Offer would
involve a business combination between a resident domestic corporation and an
interested stockholder, the Company's execution of the Merger Agreement, which
provides for the Offer and the Merger, was unanimously approved by the Board of
Directors of the Company prior to the date on which the Purchaser will become an
interested stockholder. Accordingly, the Wisconsin Business Combination Law is
inapplicable to the Offer and the Merger.
Section 180.1150 of the WBCL contains "Control Share" provisions limiting,
under certain circumstances, the voting power of a shareholder that holds in
excess of 20% of the voting power of certain corporations. As a result, Shares
held by the Purchaser that constitute in excess of 20% of the voting power in
the election of directors of the Company will be limited to 10% of the full
voting power of such Shares. However, pursuant to the Stock Option Agreement, if
the Purchaser owns at least 66 2/3% but less than 90% of the outstanding Shares,
the Purchaser may exercise an option to purchase from the Company at the Offer
Price newly issued Shares in an amount equal to the number of Shares that, when
added to the number of Shares owned by the Purchaser and its affiliates
immediately following consummation of the Offer, shall constitute 90% of the
Shares then outstanding on a fully diluted basis (giving effect to the issuance
of such
18
<PAGE> 20
Shares). As a result of the Purchaser's exercise of the Stock Option, the
Control Share provision of the WBCL will not effect the Purchaser's ability to
approve the Merger.
Sections 180.1130 through 180.1134 of the WBCL (the "Wisconsin Fair Price
Law") generally provide, with certain exceptions, that "business combinations"
involving an "issuing public corporation" (a Wisconsin corporation like the
Company which has a class of equity securities held of record by more than 500
persons and at least 100 shareholders of record who are residents of Wisconsin)
and a "significant shareholder" (defined generally as any person that is the
beneficial owner, either directly or indirectly, of 10% or more of the voting
power of the outstanding voting shares of the issuing public corporation) be
approved by the affirmative vote of at least 80% of the voting power of the
issuing public corporation's stock and at least 66 2/3% of the voting power of
the corporation's stock not beneficially owned by the significant shareholder,
in each case voting together as a group, unless certain "fair price" conditions
set forth in Section 180.1132 of the WBCL are satisfied. The amount to be paid
for each Share in both the Offer and pursuant to the Merger satisfies each of
the conditions of Section 180.1132 of the WBCL. Accordingly, the restrictions
contained in the Wisconsin Fair Price Law are not applicable to the Offer and
the Merger. Further, if the Merger is consummated as a short-form merger, the
Merger will not be a "business combination" under, and will not be subject to
the provisions of, the Wisconsin Fair Price Law.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1 Agreement and Plan of Merger, dated as of April 27, 1998, by
and among Snap-on Incorporated, Snap-On Pace Company and
Hein-Werner Corporation.
2 Stock Option Agreement, dated as of April 27, 1998, by and
among Snap-on Incorporated, Snap-on Pace Company and
Hein-Werner Corporation.
3 Employment and Consulting Agreement, dated April 27, 1998,
by and between Snap-on Incorporated, Hein-Werner Corporation
and Joseph L. Dindorf.
4* Letter to Shareholders of Hein-Werner Corporation, dated May
4, 1998.
5 Joint Press Release issued on April 28, 1998
6* Opinion of Credit Suisse First Boston Corporation, dated
April 27, 1998.
7 Change of Control Agreement, dated January 27, 1984, between
Hein-Werner Corporation and Joseph L. Dindorf (incorporated
by reference to Exhibit 10.1 to Hein-Werner Corporation's
Annual Report on Form 10-K for the year ended December 31,
1993).
8 Amendment No. 1, dated April 27, 1998, to the Change of
Control Agreement, dated January 27, 1984, between
Hein-Werner Corporation and Joseph L. Dindorf.
9 Trust Agreement, dated as of April 29, 1998, by and between
Hein-Werner Corporation and Firstar Trust Company.
10 Key Executive Employment and Severance Agreement, dated as
of April 15, 1998, by and between Hein-Werner Corporation
and Thomas F. Andreoli.
11 Key Executive Employment and Severance Agreement, dated as
of April 15, 1998, by and between Hein-Werner Corporation
and Jean-Paul Barthelme.
12 Key Executive Employment and Severance Agreement, dated as
of April 15, 1998, by and between Hein-Werner Corporation
and Mary L. Kielich.
13 Key Executive Employment and Severance Agreement, dated as
of April 15, 1998, by and between Hein-Werner Corporation
and Michael J. Koons.
14 Key Executive Employment and Severance Agreement, dated as
of April 15, 1998, by and between Hein-Werner Corporation
and Reinald D. Liegel.
15 Key Executive Employment and Severance Agreement, dated as
of April 15, 1998, by and between Hein-Werner Corporation
and Jeffrey V. Russell.
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
16 Key Executive Employment and Severance Agreement, dated as
of April 27, 1998, by and between Hein-Werner Corporation
and James A. Wilke.
17 Rights Agreement, dated as of May 9, 1989, by and between
Hein-Werner Corporation and Firstar Trust Company (f/k/a
First Wisconsin Trust Company) (incorporated by reference to
Exhibit 4.8 to Hein-Werner Corporation's Annual Report on
Form 10-K for the year ended December 31, 1993).
18 First Amendment to Rights Agreement, dated April 27, 1998,
by and between Hein-Werner Corporation and Firstar Trust
Company.
19 Hein-Werner Corporation 1987 Stock Option and Incentive Plan
(incorporated by reference to Exhibit 10.4 to Hein-Werner
Corporation's Annual Report on Form 10-K for the year ended
December 31, 1993).
20 Confidentiality Agreement by and between Hein-Werner
Corporation and Snap-on Incorporated.
</TABLE>
- ---------------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
20
<PAGE> 22
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
HEIN-WERNER CORPORATION
By: /s/ JOSEPH L. DINDORF
------------------------------------
Joseph L. Dindorf
President and Chief Executive
Officer
Dated: May 4, 1998
21
<PAGE> 23
SCHEDULE I
HEIN-WERNER CORPORATION
2120 PEWAUKEE ROAD
WAUKESHA, WISCONSIN 53188
------------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about May 4, 1998 as part
of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") to the holders of the common stock of Hein-Werner Corporation (the
"Company"). Capitalized terms used and not otherwise defined herein shall have
the meaning set forth in the Schedule 14D-9. You are receiving this Information
Statement in connection with the possible election of persons designated by the
Purchaser to a majority of the seats on the Board of Directors of the Company
(the "Board"). The Merger Agreement requires the Company to cause the
Purchaser's designees to be elected to the Board under the circumstances
described therein. This Information Statement is required by Section 14(f) of
the Exchange Act and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on May
4, 1998. The Offer is scheduled to expire at 12:00 midnight, New York City time,
on Monday, June 1, 1998, unless the Offer is extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent, the Purchaser and the
Purchaser Designees (as defined below) has been furnished to the Company by
either Parent or the Purchaser and the Company assumes no responsibility for the
accuracy or completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of April 27, 1998, there were 2,918,899
Shares issued and outstanding, 101,847 Shares reserved for issuance upon the
exercise of certain options outstanding and 3,110,746 Shares reserved for
issuance pursuant to the Rights Agreement. The Board currently consists of six
members, divided into three classes. Each director holds office until such
director's successor is duly elected and qualified or until such director's
earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASE DESIGNEES
Pursuant to the Merger Agreement, promptly upon the payment by the
Purchaser for Shares pursuant to the Offer, and from time to time thereafter,
the Purchaser will be entitled to designate such number of directors, rounded up
to the next whole number, on the Board (the "Purchaser Designees"), equal to the
product of the total number of directors on the Board (determined after giving
effect to the directors designated by the Purchaser pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by the Purchaser or its affiliates bears to the total number of Shares
then outstanding. The Company has agreed, upon the request of the Purchaser,
either to increase the size of the Board or secure the resignations of such
number of incumbent directors, or both, as is necessary to enable the Purchaser
Designees to be so elected to the Board. At such time, the Company has also
agreed, upon the request of the Purchaser, to cause persons designated by the
Purchaser to constitute at least the same percentage (rounded up to the next
whole number) as is on the Board of each committee of the Board. The
I-1
<PAGE> 24
Company's obligation to appoint such designees is subject to Section 14(f) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Company is required to take all action necessary to effect any such election and
to include in this Information Statement the information required by Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The foregoing
notwithstanding, the Merger Agreement further provides that at least two
directors who are neither officers, directors, shareholders or designees of the
Purchaser or any of its affiliates ("Purchaser Insiders") shall continue to
serve on the Board until the effectiveness of the Merger and each Committee of
the Board shall have at least one member who is not a Purchaser Insider.
The Purchaser has informed the Company that it will choose the Purchaser
Designees from the directors and executive officers listed in Schedule I to the
Offer to Purchase, a copy of which is being mailed to the Company's shareholders
together with the Schedule 14D-9. The Purchaser has informed the Company that
each of directors and executive officers listed in Schedule I to the Offer to
Purchase has consented to act as a director, if so designated. The information
on such Schedule I is incorporated herein by reference.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
CURRENT MEMBERS OF THE BOARD
The names of the Company's current directors, their ages as of March 27,
1998 and certain other information about them are set forth below. As indicated
above, some of the current directors may resign effective immediately following
the purchase of Shares by Parent pursuant to the Offer, which purchase cannot be
earlier than June 2, 1998.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED A POSITION WITH THE COMPANY OR PRINCIPAL
NAME OF DIRECTOR AGE DIRECTOR OCCUPATION DURING THE PAST FIVE YEARS
---------------- --- ---------- --------------------------------------
<S> <C> <C> <C>
J. S. Jones.......................... 60 1975 President, Gardner Industries, Inc., Horicon,
Wisconsin (manufacturer of original equipment
components).
M.J. McSweeney....................... 59 1982 Partner, Foley & Lardner, Milwaukee, Wisconsin
(law firm).
O. A. Friend......................... 68 1983 Former Chairman of National Teleservice, Inc.
(provider of long distance telephone service),
Winona, Minnesota; consultant to the Company
until June, 1990.
D. L. Krause......................... 58 1997 Senior Vice President and Corporate Controller
of Newell Co., Freeport, Illinois,
(manufacturer and marketer of consumer
products).
J. L. Dindorf........................ 57 1976 President and Chief Executive Officer of the
Company.
D. J. Schuetz........................ 73 1977 President and Chairman of the Board, Monark
Supply Company, Milwaukee, Wisconsin
(distributor of automotive parts and
supplies).
</TABLE>
Each of the directors has been engaged in the principal occupation(s)
described above during the past five years. There are no family relationships
among any of the directors or executive officers of the Company.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board has standing audit, compensation, and executive committees, but
does not have a standing nominating committee. The audit committee, which met
two times in 1997, is charged with the responsibilities of reviewing with the
Company's independent public accountants, the plan and scope of their audit and
findings and conclusions of their engagement; reviewing the Company's procedures
for internal auditing, the
I-2
<PAGE> 25
adequacy of its system of internal controls, and the accounting principles and
policies of the Company; reviewing and evaluating the independence of the
independent accountants and approving services rendered by such accountants; and
recommending to the Board the engagement, continuation, or discharge of the
Company's independent public accountants. The audit committee currently consists
of Messrs. Friend, Jones, and Krause. The principal function of the compensation
committee, which held one meeting in 1997, is to advise the Board on matters
relating to the compensation of the Company's officers. The compensation
committee currently consists of Messrs. Schuetz and McSweeney. The executive
committee is empowered to act on behalf of the Board on certain matters
including the election of the principal officers and the filling of vacancies on
the committees designated by the Board. The executive committee held one meeting
in 1997 and currently consists of Messrs. Dindorf, Jones, and Schuetz.
During 1997, the Board held eight meetings. No director failed to attend at
least 75% of the aggregate of (a) the total number of meetings of the Board and
(b) the total number of meetings held by all committees of the Board on which
the director served during 1997.
The Company's standard method of compensating directors is to pay each
director who is not also an officer of the Company a retainer of $8,000 per
year, payable quarterly. In addition, a director is entitled to a \fee of $650
for each Board meeting attended and $600 for each committee meeting attended.
Board members are also reimbursed for reasonable travel, lodging, and related
expenses incurred in connection with attendance at such meetings.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below is certain information concerning the executive officers of
the Company as of March 27, 1998:
<TABLE>
<CAPTION>
POSITIONS AND BUSINESS EXPERIENCE
NAME AGE DURING PAST FIVE YEARS
---- --- ---------------------------------
<S> <C> <C>
Joseph L. Dindorf................. 57 President and Chief Executive Officer (elected in 1976).
Reinald D. Liegel................. 55 Senior Vice President - Technology (elected June 1988).
Jean-Paul Barthelme............... 60 Vice President, and President of European Operations
(elected September 1988).
Michael J. Koons.................. 58 Vice President - Industrial Relations and Personnel
(elected in 1979).
Maurice J. McSweeney.............. 59 Secretary (elected March 1983). Partner, Foley & Lardner,
Milwaukee, Wisconsin (law firm).
</TABLE>
The officers of the Company are elected annually by the Board following the
annual meeting of shareholders and each officer holds office until his successor
has been duly elected and qualified or until his prior death, resignation or
removal.
I-3
<PAGE> 26
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation earned in each of the last three fiscal years by the Company's
Chief Executive Officer and each of its four other most highly compensated
executive officers (such persons are sometimes referred to as the "named
executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS PAYOUTS
------------------------------------ ----------------------- -------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (2)($) ($) (#) ($) (3)($)
------------------ ---- ------ ----- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph L. Dindorf,............... 1997 $275,000 $20,000 0 0 0 0 $289,400
President and Chief 1996 275,000 60,000 0 0 0 0 38,800
Executive Officer 1995 267,496 0 0 0 0 0 38,100
Jean-Paul Barthelme,............. 1997 $226,525(1) $ 0 0 0 0 0 $ 15,600
Vice President and President, 1996 226,525(1) 10,000 0 0 0 0 8,600
European Operations 1995 226,525(1) 0 0 0 0 0 2,600
Reinald D. Liegel,............... 1997 $125,000 $10,000 $26,034 0 0 0 $ 13,800
Senior Vice President-- 1996 125,000 20,000 0 0 0 0 6,700
Technology 1995 122,300 0 0 0 0 0 2,000
Michael J. Koons................. 1997 $ 86,500 $10,000 $22,394 0 0 0 $ 9,100
Vice President Industrial 1996 86,500 20,000 0 0 0 0 4,000
Relations and Personnel 1995 84,300 0 0 0 0 0 1,200
Jeffrey V. Russell............... 1997 $ 94,600 $10,000 0 0 0 0 $ 8,800
President, Collision 1996 91,300 10,000 0 0 0 0 4,400
Repair Equipment Group 1995 88,000 0 0 0 0 0 1,300
</TABLE>
- ---------------
(1) Mr. Barthelme's salary is paid in Swiss Francs. For each of the years 1997,
1996, and 1995 he was paid SFr 331,032. For comparison purposes, these
amounts have been converted to U.S. dollars using the exchange rate in
effect on December 31, 1997.
(2) Certain personal benefits provided by the Company to the named executive
officers are not included in the table. The aggregate amount of such
personal benefits for each named executive officer in each year reflected in
the table, with the exception of Messrs. Liegel and Koons for 1997 only, did
not exceed the lesser of $50,000 or 10% of the sum of such officer's salary
and bonus in such respective year. The amounts shown for 1997 for Messrs.
Liegel and Koons each include $15,000 for the purchase of an annuity
contract and $5,700 for a related income tax reimbursement.
(3) Consists solely of contributions by the Company to the Company's profit
sharing plan (the "Plan") for all of the named executives, except Mr.
Dindorf. Each year the Corporation may contribute between 5% and 16% of its
net income before taxes for the prior fiscal year if it is in excess of
various levels, which amount, if any, is allocated among participants by
means of a formula based on individual compensation and years of service
with the Company, subject to certain limits. The amounts reported for Mr.
Dindorf represent contributions by the Company to the Plan and the value of
annual insurance premiums paid by the Company with respect to life insurance
and disability insurance for the benefit of Mr. Dindorf, respectively, as
follows: 1997: $15,600, $9,500, and $11,500; 1996: $8,600, $18,700, and
$11,500; and 1995: $2,600, $24,000, and $11,500. In addition, the 1997
amount for Mr. Dindorf includes $172,600 for the value of a life insurance
policy transferred to him and $80,200 for a related income tax
reimbursement.
STOCK OPTIONS
The Company has in effect the 1987 Stock Option and Incentive Plan pursuant
to which options to purchase Common Stock may be granted to key employees of the
Company and its subsidiaries. No options were granted to any of the named
executive officers in fiscal year 1997. The following table sets forth
I-4
<PAGE> 27
information regarding the exercise of stock options by each of the named
executive officers during the 1997 fiscal year and the fiscal year-end value of
unexercised options held by such officers.
AGGREGATED OPTION EXERCISES IN 1997
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT FISCAL YEAR-END(#)(1) FISCAL YEAR-END($)(2)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
J. L. Dindorf.......... -- -- 51,051 -- $137,965 --
J. P. Barthelme........ -- -- 10,210 -- 27,593 --
R. D. Liegel........... -- -- 19,145 -- 51,739 --
M. J. Koons............ -- -- 6,381 -- 17,245 --
J. V. Russell.......... -- -- 6,381 -- 17,245 --
</TABLE>
- ---------------
(1) The number of securities underlying unexercised options reported does not
reflect the effect of the Company's 5% stock dividend which was paid on
January 23, 1998.
(2) The dollar values are calculated by determining the difference between the
fair market value of the underlying stock as of December 31, 1997 and the
exercise price of the options.
AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
The Company has entered into an amended Change of Control Agreement with
Mr. Dindorf and Key Executive Employment and Severance Agreements with seven
officers of the Company, including Messrs. Barthelme, Liegel, Koons and Russell.
In addition, the Company and Parent have entered into an Employment and
Consulting Agreement with Mr. Dindorf. Each of these agreements is described in
Item 3(b) of the Schedule 14D-9 accompanying this Information Statement and are
incorporated herein by reference.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 25, 1983, the Company acquired the business assets and
operations of the Winona Van Norman Division of Winvan, Inc. ("Winona Van
Norman"), from O. A. Friend. Mr. Friend was subsequently elected to the Board.
The Company is leasing Winona Van Norman's manufacturing facility from Mr.
Friend for annual rental payments of $198,988, adjusted every year for
inflation, and is subleasing a portion of the facility to a third party.
Pursuant to the terms of the lease, the Company is required to purchase the
facility from Mr. Friend for its fair market value on or before June 30, 2002.
M. J. McSweeney, a director and Secretary of the Company, is a partner of
Foley & Lardner, attorneys, Milwaukee, Wisconsin. Foley & Lardner has served as
legal counsel to the Company for many years.
I-5
<PAGE> 28
SECURITY OWNERSHIP
MANAGEMENT
The following table sets forth, as of March 27, 1998, the number of Shares
beneficially owned by each director, each of the executive officers named in the
Summary Compensation Table set forth above, and all of the directors and
executive officers as a group. Except as otherwise indicated in the footnotes,
all of the persons listed below have sole voting and investment power over the
Shares identified as beneficially owned.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------------ -------------------- ----------------
<S> <C> <C>
J.L. Dindorf............................................ 96,528(1)(2) 3.3%
O.A. Friend............................................. 59,095 2.0%
J.S. Jones.............................................. 21,173 *
M.J. McSweeney.......................................... 7,534 *
D.J. Schuetz............................................ 21,911 *
D.L. Krause............................................. 6,379(3) *
J.P. Barthelme.......................................... 11,165(2) *
R.D. Liegel............................................. 29,804(2)(4) 1.0
M.J. Koons.............................................. 8,245(2)(5) *
J.V. Russell............................................ 6,700(2) *
All directors and executive officers as a group (10
persons).............................................. 268,534(2) 9.2%
</TABLE>
- ---------------
* Less than one percent.
(1) Includes 42,924 shares held with Mr. Dindorf's wife. Mr. Dindorf shares
voting and investment power over these shares.
(2) Includes the following shares subject to stock options that are currently
exercisable: Mr. Dindorf, 53,604; Mr. Barthelme, 10,721; Mr. Liegel, 20,102;
Mr. Koons, 6,700; Mr. Russell, 6,700; and all directors and executive
officers as a group, 97,827.
(3) All 6,379 shares held with Mr. Krause's wife. Mr. Krause shares voting and
investment power over these shares.
(4) Includes 1,104 shares held by Mr. Liegel's wife. Mr. Liegel shares voting
and investment power over these shares.
(5) Includes 735 shares held with Mr. Koons' wife. Mr. Koons shares voting and
investment power over these shares.
OTHER BENEFICIAL OWNERS
The following table sets forth the number of Shares beneficially owned by
the persons known to the Company to own more than five percent (5%) of its
outstanding Shares as of December 31, 1997. The information is based on reports
on Schedules 13G and 13D filed with the SEC or other reliable information.
I-6
<PAGE> 29
The table indicates whether the person has sole or shared investment and voting
power with respect to such Shares.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-----------------------------------------
SOLE POWER SHARED POWER
---------- ------------ PERCENT
VOTING INVESTMENT VOTING INVESTMENT AGGREGATE OF CLASS
------ ---------- ------ ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Athey Products Corporation (2)
1839 South Main Street
Wake Forest, NC 27587
And
Orton/McCullough Crane(2).................... -- -- 369,396 369,396 369,396 12.7%
Company, Inc.
1211 West 22nd Street
Oak Brook, IL 60521
Mr. Marvin Schwartz(3)
c/o Neuberger & Berman, LLC
605 Third Avenue
New York, NY 10158-3698.................... 44,100(4) 44,100(4) 0 229,690(4) 273,790(4) 9.4%
Wanger Asset Management, L.P.(5)
Wanger Asset Management, Ltd.
Ralph Wanger
227 West Monroe
Suite 3000
Chicago, IL 60606.......................... -- -- 208,372(6) 208,372(6) 208,372(6) 7.2%
Acorn Investment Trust, Series
Designated Acorn Fund
227 West Monroe, Suite 3000
Chicago, IL 60606.......................... -- -- 208,372(6) 208,372(6) 208,372(6) 7.2%
Dimensional Fund Advisors Inc.(7)(8)
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401..................... 132,119 195,298 63,179 -- 195,298 6.7%
Mr. Luis Hernandez
3069 Misty Harbor
Las Vegas, NV 89117........................ 156,623 156,623 -- -- 156,623 5.4%
</TABLE>
- ---------------
(1) For purposes of calculating the percent of class owned by such person or
group, the Shares which may be acquired upon conversion of such person's or
group's Notes at the current conversion price and the Shares that may be
acquired upon the exercise of such person's or group's Option are deemed to
be outstanding.
(2) Athey Products Corporation ("Athey") and Orton/McCullough Crane Company,
Inc. ("Orton") are reported in the aggregate because they may be regarded as
a group for reporting purposes. John F. McCullough, the principal
shareholder and officer of Orton, is a director and the owner of 39.71% of
the voting stock of Athey. Of the 369,396 shares for which the parties have
reported as sharing voting and investment power, Athey has reported holding
241,406 shares and Orton has reported holding 127,990 shares.
(3) Mr. Schwartz is a principal in Neuberger & Berman, LLC, a registered
broker/dealer and investment advisor. All of the shares are held
individually by Mr. Schwartz and others. Neuberger & Berman has no voting or
investment power regarding any of the shares.
(4) Mr. Schwartz owns 44,100 shares for his personal account and has sole voting
and investment power over these shares. Mr. Schwartz is the beneficial owner
of 229,690 shares held in several accounts for the benefit of his family by
virtue of his shared investment power over these shares.
(5) Wanger Asset Management, Ltd. is the sole general partner of Wanger Asset
Management, L.P. and Ralph Wanger is the principal shareholder of Wagner
Asset Management, Ltd.
I-7
<PAGE> 30
(6) Wanger Asset Management, L.P. and Acorn Investment Trust, Series Designated
Acorn Fund share voting and investment power over 208,372 shares. Acorn
Investment Trust, Series Designated Acorn Fund is a registered investment
company. Wanger Asset Management, L.P. is the investment advisor of Acorn
Investment Trust, Series Designated Acorn Fund.
(7) The reported shares are held in the portfolios of advisory clients of
Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor. Dimensional disclaims beneficial ownership of such shares.
(8) Persons who are officers of Dimensional also serve as officers of DFA
Investment Dimensions Group Inc. (the "Fund") and The DFA Investment Trust
Company (the "Trust"), each a registered open-end management investment
company. In their capacity as officers of the Fund and the Trust, these
persons vote 41,080 additional shares which are owned by the Fund and 38,905
shares which are owned by the Trust. Dimensional has sole dispositive power
over such shares and they are included under such column.
Beneficial ownership of shares is reported in the foregoing tables and
footnotes in accordance with the beneficial ownership rules promulgated by the
Securities and Exchange Commission. The ownership information set forth in the
foregoing tables reflects the effects of the Corporation's 5% stock dividend
which was paid on January 23, 1998 to shareholders of record on January 2, 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company's executive officers and directors are required to file under
the Securities Exchange Act of 1934, as amended, reports concerning their
ownership of Company equity securities with the SEC and the Company. Based
solely upon information provided to the Company by individual directors and
executive officers, the Company believes that during the fiscal year ended
December 31, 1997 all filing requirements applicable to executive officers and
directors have been complied with, except that (i) Mr. Schuetz did not timely
file one Form 4 with respect to his sale of 2,107 shares of Common Stock, which
transaction occurred on December 15, 1997; and (ii) Mr. James Queenan, an
officer of the Company in 1997, did not timely file on Form 4 with respect to
the exercise of vested stock options to acquire 10,210 shares of Common Stock on
December 30, 1997.
I-8
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 27, 1998 (this
"Agreement"), by and among Snap-on Incorporated, a Delaware company ("Parent"),
Snap-on Pace Company, a Wisconsin corporation and a wholly-owned subsidiary of
Parent (the "Purchaser"), and Hein-Werner Corporation, a Wisconsin corporation
(the "Company").
WHEREAS, the respective Boards of Directors of Parent, the Purchaser
and the Company have approved the acquisition of the Company by the Purchaser
on the terms and subject to the conditions set forth in this Agreement; and
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
the Purchaser to make a tender offer (as it may be amended as permitted under
this Agreement, the "Offer") to purchase all of the issued and outstanding
shares of common stock, $1.00 par value per share, of the Company (the "Common
Shares" or "Shares") (including the associated Common Share Purchase Rights
(the "Rights") issued pursuant to the Rights Agreement, dated as of May 9,
1989, between the Company and Firstar Trust Company (f/k/a First Wisconsin
Trust Company), as Rights Agent (the "Rights Agreement")), at a price per
Common Share of $12.60 net to the seller in cash (such price, or any higher
price per Share paid in the Offer, the "Offer Price"); and
WHEREAS, the Board of Directors of the Company has approved this
Agreement, the Offer and the Merger (as hereinafter defined), has determined
that the Offer and the Merger are fair and in the best interests of the
Company's shareholders, and is recommending that the shareholders of the
Company accept the Offer and tender all their Shares; and
WHEREAS, the respective Boards of Directors of Parent, the Purchaser
and the Company have approved the merger of the Purchaser with and into the
Company, as set forth below (the "Merger"), in accordance with the Wisconsin
Business Corporation Law (the "WBCL") and upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
Share not owned directly or indirectly by Parent, the Purchaser or the Company
will be converted into the right to receive the Offer Price in cash; and
WHEREAS, as a further inducement to the parties to enter into this
Agreement, Parent, the Purchaser and the Company have entered into a Stock
Option Agreement, dated the date hereof (the "Stock Option Agreement"),
pursuant to which the Company has granted to the Purchaser an option to
purchase newly issued Common Shares under certain circumstances; and
WHEREAS, Parent, the Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Parent,
the Purchaser and the Company agree as follows:
<PAGE> 2
ARTICLE I
THE OFFER
SECTION 1.01 The Offer.
(a) So long as none of the events set forth in clauses (a) through
(h) of Annex I hereto shall have occurred or exist, the Purchaser shall, and
Parent shall cause the Purchaser to, commence (within the meaning of Rule
14d-2(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) as promptly as practicable after the date hereof, but in any event not
later than May 4, 1998, the Offer for any and all outstanding Shares not owned
by the Purchaser at the Offer Price applicable to such Shares, net to the
seller in cash. The initial expiration date for the Offer shall be the
twentieth business day from and after the date the Offer is commenced,
including the date of commencement as the first business day in accordance with
Rule 14d-2 under the Exchange Act (the "Expiration Date"). As promptly as
practicable, the Purchaser shall file with the Securities and Exchange
Commission (the "SEC") the Purchaser's Tender Offer Statement on Schedule 14D-1
(the "Schedule 14D-1" and together with the documents therein pursuant to which
the Offer will be made, and with any supplements or amendments thereto, the
"Offer Documents"), which shall contain (as an exhibit thereto) the Purchaser's
Offer to Purchase (the "Offer to Purchase") which shall be mailed to the
holders of Shares with respect to the Offer. The obligation of Parent and the
Purchaser to accept for payment or pay for any Shares tendered pursuant to the
Offer will be subject only to there being validly tendered and not withdrawn
prior to the expiration of the Offer, that number of Shares which represents at
least 66-2/3% of the Shares outstanding on a fully diluted basis (without
giving pro forma effect to the potential issuance of any Shares issuable under
the Stock Option Agreement) (the "Minimum Condition") and to the satisfaction
or waiver of the other conditions set forth in Annex I hereto ("fully diluted
basis" means issued and outstanding Shares and Shares subject to issuance under
outstanding employee stock options). Without the prior written consent of the
Company, the Purchaser shall not (i) decrease the Offer Price or change the
form of consideration payable in the Offer, (ii) decrease the number of Shares
sought to be purchased in the Offer, or (iii) amend any other term of the Offer
in any manner adverse to the holders of any Shares; provided, however, that if
on the initial scheduled Expiration Date, the sole condition remaining
unsatisfied is the failure of the waiting period under the HSR Act (as
hereinafter defined) to have expired or been terminated, the Purchaser shall,
and Parent shall cause the Purchaser to, extend the expiration date from time
to time until two business days after the expiration of the waiting period
under the HSR Act.
(b) Subject to the terms of the Offer and this Agreement and the
satisfaction or waiver of all the conditions of the Offer set forth in Annex I
hereto as of the Expiration Date, the Purchaser will accept for payment and pay
for all Shares validly tendered and not withdrawn pursuant to the Offer as soon
as practicable after the Expiration Date.
(c) The Offer Documents will comply in all material respects with
the provisions of applicable federal securities laws and, on the date filed
with the SEC and on the date first published, sent or given to the Company's
shareholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading,
-2-
<PAGE> 3
except that no representation is made by Parent or the Purchaser with respect
to information supplied by the Company in writing for inclusion in the Offer
Documents. No representation, warranty or covenant is made or shall be made
herein by the Company with respect to information contained in the Offer
Documents other than information supplied by the Company in writing expressly
for inclusion in the Offer Documents. Each of Parent and the Purchaser, on the
one hand, and the Company, on the other hand, agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall have become false or misleading in any material respect and the
Purchaser further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
the Company's shareholders, in each case as and to the extent required by
applicable federal securities laws. Each of Parent and the Purchaser agrees to
give the Company a reasonable opportunity to review and comment upon any Offer
Document to be filed with the SEC prior to any such filing and to provide in
writing any comments each may receive from the SEC or its staff with respect to
the Offer Documents promptly after the receipt of such comments.
SECTION 1.02 Company Actions.
(a) Currently with the commencement of the Offer, the Company
shall file with the SEC and mail to the holders of Shares a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (together with any amendments or supplements thereto, the "Schedule
14D-9"). The Schedule 14D-9 will set forth, and the Company hereby represents,
that the Board of Directors of the Company, at a meeting duly called and held,
has unanimously (i) determined that the Offer and the Merger are fair to and in
the best interests of the Company and its shareholders, (ii) approved this
Agreement, the Stock Option Agreement and the transactions contemplated hereby
and thereby, including the Offer and the Merger, in accordance with the
applicable provisions of the WBCL, and (iii) resolved to recommend that the
Company's shareholders accept the Offer, tender their Shares thereunder to the
Purchaser and approve and adopt this Agreement and the Merger; provided,
however, that such recommendation may be withdrawn, modified or amended to the
extent that the Board of Directors of the Company determines in good faith,
after consultation with outside counsel, that taking such action is necessary
in the exercise of its fiduciary obligations under applicable Law (as
hereinafter defined).
(b) The Schedule 14D-9 will comply in all material respects with
the provisions of applicable federal securities laws and, on the date filed
with the SEC and on the date first published, sent or given to the Company's
shareholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by the
Company with respect to information supplied by Parent or the Purchaser in
writing for inclusion in the Schedule 14D-9. No representation, warranty or
covenant is made or shall be made herein by Parent or the Purchaser with
respect to information contained in the Schedule 14D-9 other than information
supplied by Parent and/or the Purchaser in writing expressly for inclusion in
the Schedule 14D-9. Each of the Company, on the one hand, and Parent and the
Purchaser, on the other hand, agree promptly to correct any information
provided by either of them for use in the Schedule 14D-9 if and to the extent
that it shall have become false or misleading, and the Company further agrees
to take all steps necessary to cause the Schedule 14D-9 as so corrected to be
filed with the SEC and to be disseminated to the Shareholders, in each case as
-3-
<PAGE> 4
and to the extent required by applicable federal securities laws. The Company
agrees to give each of Parent and the Purchaser a reasonable opportunity to
review and comment upon the Schedule 14D-9 to be filed with the SEC prior to
such filing and to provide in writing any comments the Company may receive from
the SEC or its staff with respect to the Schedule 14D-9 promptly upon receipt
of such comments.
(c) In connection with the Offer, the Company will promptly
furnish the Purchaser with such information and assistance as the Purchaser or
its agents or representatives may reasonably request in connection with
communicating the Offer to the record and beneficial holders of the Shares,
including, without limitation, mailing labels, its shareholders list, security
position listings and non-objecting beneficial owners list, if any, or a
computer file containing the names and addresses of all recordholders of Common
Shares as of a recent date, and shall furnish the Purchaser with such
additional information (including, but not limited to, updated lists of holders
of Common Shares and their addresses, mailing labels and lists of security
positions). Subject to the requirements of applicable Law, and except for such
actions as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer and the Merger, Parent and the
Purchaser and each of their affiliates, associates, partners, employees, agents
and advisors shall hold in confidence the information contained in such labels,
shareholders list, security position listings, non-objecting beneficial owners
list and the information referred to in the preceding sentence, shall use such
information only in connection with the Offer and the Merger, and, if this
Agreement is terminated in accordance with its terms, shall deliver promptly to
the Company all copies of such information (and any copies, compilations or
extracts thereof or based thereon) then in their possession or under their
control.
SECTION 1.03 Directors.
(a) Promptly upon the payment by the Purchaser for Shares pursuant
to the Offer, and from time to time thereafter, the Purchaser shall be entitled
to designate such number of directors, rounded up to the next whole number, on
the Board of Directors of the Company as is equal to the product of the total
number of directors on the Board of Directors of the Company (determined after
giving effect to the directors designated by the Purchaser pursuant to this
sentence) multiplied by the percentage that the aggregate number of Shares
beneficially owned by the Purchaser or its affiliates bears to the total number
of Shares then outstanding, and the Company shall, subject to compliance with
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, upon
request of the Purchaser, promptly take all actions necessary to cause the
Purchaser's designees to be so elected, including, if necessary, promptly
increasing the size of the Board of Directors of the Company or seeking the
resignations of one or more existing directors, or both; provided, however,
that prior to the Effective Time (as defined in Section 2.02) the Board of
Directors of the Company shall always have at least two members who are neither
officers, directors, shareholders or designees of the Purchaser or any of its
affiliates ("Purchaser Insiders"). If the number of directors who are not
Purchaser Insiders is reduced below two for any reason prior to the Effective
Time, then the remaining directors who are not Purchaser Insiders (or if there
is only one director who is not a Purchaser Insider, the remaining director who
is not a Purchaser Insider) shall be entitled to designate a person (or
persons) to fill such vacancy (or vacancies) who is not an officer, director,
shareholder or designee of the Purchaser or any of its affiliates and who shall
be a director not deemed to be a Purchaser Insider for all purposes of this
Agreement. At such time, the Company
-4-
<PAGE> 5
shall, if requested by the Purchaser, also cause persons designated by the
Purchaser to constitute at least the same percentage (rounded up to the next
whole number) as is on the Board of Directors of the Company of each committee
of the Board of Directors of the Company; provided, however, that prior to the
Effective Time each committee of the Board of Directors of the Company shall
have at least one member who is not a Purchaser Insider.
(b) The Company's obligation to appoint the Purchaser's designees
to the Board of Directors of the Company shall be subject to Section 14(f) of
the Exchange Act and Rule 14f-1 thereunder. The Company shall promptly take
all actions required pursuant to such Section and Rule in order to fulfill its
obligations under this Section 1.03, including mailing to the shareholders of
the Company the information required by Section 14(f) and Rule 14f-1 as is
necessary to enable the Purchaser's designees to be elected to the Board of
Directors of the Company, and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under such Section and Rule in order to fulfill its obligations under
this Section 1.03. Parent will supply in writing any information with respect
to itself and its officers, directors and affiliates required by such Section
and Rule to the Company.
(c) From and after the election or appointment of the Purchaser's
designees pursuant to this Section 1.03 and prior to the Effective Time, any
amendment or termination of this Agreement by the Company, any extension by the
Company of the time for the performance of any of the obligations or other acts
of Parent or the Purchaser or waiver of any of the Company's rights hereunder,
or any other action taken by the Board of Directors of the Company in
connection with this Agreement, will require the concurrence of a majority of
the directors of the Company then in office who are not Purchaser Insiders.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the
satisfaction or waiver of the conditions hereof, and in accordance with the
applicable provisions of this Agreement and the WBCL, at the Effective Time (as
defined in Section 2.02) the Purchaser shall be merged with and into the
Company. Following the Merger, the separate corporate existence of the
Purchaser shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation"). Upon the mutual agreement of Parent
and the Company, the Merger may be structured so that the Company shall be
merged with and into the Purchaser, with the Purchaser continuing as the
Surviving Corporation; provided, however, that the Company shall be deemed not
to have breached any of its representations, warranties or covenants herein if
and to the extent such breach would have been attributable to such agreement.
SECTION 2.02 Effective Time; Closing. As soon as practicable after
the satisfaction or waiver of the conditions set forth in Article VII hereof,
the appropriate parties hereto shall execute in the manner required by the WBCL
and file with the Wisconsin Department of Financial Institutions appropriate
articles of merger relating to the Merger, and the parties shall take such
other and further actions as may be required by Law to make the Merger
effective. The time the Merger
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becomes effective in accordance with applicable Law is referred to as the
Effective Time. On the business day immediately preceding such filing, a
closing shall be held at the offices of Foley & Lardner, 777 East Wisconsin
Avenue, Milwaukee, WI 53202-5367, unless another date or place is agreed to in
writing by the parties hereto, for the purpose of confirming the satisfaction
or waiver, as the case may be, of the conditions set forth in Article VII.
SECTION 2.03 Effects of the Merger. The Merger shall have the
effects set forth in Section 180.1106 of the WBCL.
SECTION 2.04 Articles of Incorporation and By-Laws of the Surviving
Corporation.
(a) Subject to Section 6.11(a) hereof, the articles of
incorporation of the Purchaser, as in effect immediately prior to the Effective
Time, shall be the articles of incorporation of the Surviving Corporation until
thereafter amended in accordance with the provisions thereof and hereof and
applicable Law.
(b) Subject to Section 6.11(a) hereof, the by-laws of the
Purchaser in effect immediately prior to the Effective Time shall be the
by-laws of the Surviving Corporation until thereafter amended in accordance
with the provisions thereof and hereof and applicable Law.
SECTION 2.05 Directors. Subject to applicable Law, the directors of
the Purchaser immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
SECTION 2.06 Officers. The officers of the Company immediately prior
to the Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office until their respective successors are duly
elected and qualified, or their earlier death, resignation or removal.
SECTION 2.07 Additional Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that consistent
with the terms of this Agreement any further assignments or assurances in law
or any other acts are necessary or desirable (i) to vest, perfect or confirm,
of record or otherwise, in the Surviving Corporation, title to and possession
of any property or right of either the Company or its Subsidiaries (as
hereinafter defined) acquired or to be acquired by reason of, or as a result
of, the Merger, or (ii) otherwise to carry out the purposes of this Agreement,
then, subject to the terms and conditions of this Agreement, each of the
Company and its Subsidiaries, and their officers and directors shall be deemed
to have granted to the Surviving Corporation an irrevocable power of attorney
to execute and deliver all such deeds, assignments and assurances in law and to
do all acts necessary or proper to vest, perfect or confirm title to and
possession of such property or rights in the Surviving Corporation and
otherwise to carry out the purposes of this Agreement; and the officers and
directors of the Surviving Corporation are fully authorized in the name of
either the Company or its Subsidiaries to take any and all such action.
SECTION 2.08 Conversion of Shares. At the Effective Time, by virtue
of the Merger and without any action on the part of the holders thereof, each
Share issued and outstanding immediately prior to the Effective Time (other
than any Shares held by Parent, the Purchaser, any wholly-owned
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subsidiary of Parent or the Purchaser, in the treasury of the Company or by any
wholly-owned subsidiary of the Company, which Shares, by virtue of the Merger
and without any action on the part of the holder thereof, shall be canceled and
retired and shall cease to exist with no payment being made with respect
thereto, and other than Dissenting Shares (as defined in Section 3.01)) shall
be converted into the right to receive in cash the Offer Price (the "Merger
Price"), payable to the holder thereof, without interest thereon, in accordance
with Article III.
SECTION 2.09 Purchaser Common Stock. Each share of common stock, par
value $1.00 per share, of the Purchaser issued and outstanding immediately
prior to the Effective Time shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into one share of common
stock of the Surviving Corporation. Each certificate evidencing ownership of
any such shares shall, following the Merger, evidence ownership of the same
number of shares of common stock of the Surviving Corporation. Notwithstanding
the foregoing, if Parent and the Company agree to restructure the Merger as
provided in Section 2.01 hereof, then the Purchaser's common stock shall not be
affected in any manner by virtue of the Merger.
SECTION 2.10 Company Option Plan. The Company shall take all actions
necessary so that, immediately following the Acceptance Date (as defined in
Section 6.11), (a) each outstanding option to purchase Common Shares (an
"Option") granted under the Company's 1987 Stock Option and Incentive Plan (the
"Option Plan"), whether or not then exercisable or vested, shall become fully
exercisable and vested, (b) each Option which is then outstanding shall be
cancelled and (c) in consideration of such cancellation, and except to the
extent that Parent or the Purchaser and the holder of any such Option otherwise
agree, immediately following the Acceptance Date, the Company, pursuant to the
terms of the Option Plan, shall promptly pay to such holders of Options an
amount in respect thereof equal to the product of (i) the excess of the Offer
Price over the exercise price thereof and (ii) the number of Common Shares
subject thereto (such payment to be net of taxes required by Law to be withheld
with respect thereto).
SECTION 2.11 Shareholders' Meeting.
(a) If required by the Company's articles of incorporation and/or
applicable Law in order to consummate the Merger, the Company, acting through
its Board of Directors, shall, in accordance with applicable Law:
(i) duly call, give notice of, convene and hold a special
meeting of the Company's shareholders (the "Shareholders' Meeting") as
soon as practicable following the acceptance for payment of and
payment for Shares by the Purchaser pursuant to the Offer for the
purpose of considering and taking action upon this Agreement;
(ii) promptly prepare and file with the SEC a preliminary
information or proxy statement relating to the Merger and this
Agreement and (x) obtain and furnish the information required to be
included by the SEC in the Proxy Statement (as hereinafter defined)
and, after consultation with Parent, respond promptly to any comments
made by the SEC with respect to the preliminary information or proxy
statement and, subject to compliance with SEC rules and regulations,
cause a notice of a special meeting and a definitive information or
proxy statement (the "Proxy Statement") to be mailed to the
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shareholders of the Company no later than the time required by
applicable Law and the articles of incorporation and the by-laws of
the Company, and (y) to obtain the necessary approvals of the Merger
and this Agreement by the Shareholders; and
(iii) subject to Section 1.02(a), include in the Proxy
Statement the recommendation of the Board of Directors of the Company
that the shareholders of the Company vote in favor of the approval of
the Merger and the adoption of this Agreement.
(b) Parent and the Purchaser will furnish to the Company the
information relating to Parent and the Purchaser required under the Exchange
Act and the rules and regulations thereunder to be set forth in the Proxy
Statement.
(c) The Company shall consult with Parent and the Purchaser with
respect to the Proxy Statement (and any amendments or supplements thereto) and
shall afford Parent and the Purchaser reasonable opportunity to comment thereon
prior to its finalization. If, at any time prior to the Shareholder's Meeting,
any event shall occur relating to the Company or the transactions contemplated
by this Agreement which should be set forth in an amendment or a supplement to
the Proxy Statement, the Company will promptly notify in writing Parent and the
Purchaser of such event. In such case, the Company, with the cooperation of
Parent and the Purchaser, will promptly prepare and mail such amendment or
supplement and the Company shall consult with Parent and the Purchaser with
respect to such amendment or supplement and shall afford Parent and the
Purchaser reasonable opportunity to comment thereon prior to such mailing. The
Company agrees to notify Parent and the Purchaser at least three (3) days prior
to the mailing of the Proxy Statement (or any amendment or supplement thereto)
to the shareholders of the Company.
(d) Parent agrees that it will (i) vote, or cause to be voted, all
of the Shares then owned by it, the Purchaser or any of its other subsidiaries
in favor of the approval of the Merger and the adoption of this Agreement and
(ii) take or cause to be taken all additional corporate actions necessary for
the Purchaser to adopt and approve this Agreement and the transactions
contemplated hereby.
SECTION 2.12 Merger Without Meeting of Shareholders. Notwithstanding
Section 2.11, in the event that (i) Parent, the Purchaser or any other
subsidiary of Parent shall have acquired in the aggregate at least 90% of the
outstanding Shares pursuant to the Offer (including as a result of the exercise
of the Stock Option Agreement) and prior transactions and (ii) Parent and the
Company agree to restructure the Merger as provided in Section 2.01, the
parties hereto agree, subject to Article VII, to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the acceptance for payment of and payment for Shares by the
Purchaser pursuant to the Offer without a meeting of the Company's
shareholders, in accordance with Section 180.1104 of the WBCL.
SECTION 2.13 Earliest Consummation. Each party hereto shall use its
commercially reasonable efforts to consummate the Merger as soon as
practicable.
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ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.01 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares outstanding immediately prior to the
Effective Time and held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded payment for such shares in
accordance with Sections 180.1301 to 180.1331 of the WBCL, if such Sections
provide for dissenters' rights for such Shares in the Merger ("Dissenting
Shares"), shall not be converted into the right to receive the Merger Price as
provided in Section 2.07, unless and until such holder fails to perfect or
withdraws or otherwise loses his or her right to dissent and demand payment
under the WBCL. If, after the Effective Time, any such holder fails to perfect
or withdraws or loses his or her right to demand payment, then such Dissenting
Shares shall thereupon be treated as if they had been converted as of the
Effective Time into the right to receive the Merger Price, if any, to which
such holder is entitled, without interest or dividends thereon, and such Shares
shall no longer be Dissenting Shares. The Company shall give Parent prompt
notice of any demands received by the Company for payment of Shares and, prior
to the Effective Time, Parent shall have the right to participate in all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not, except with the prior written consent of
Parent, make any payment with respect to or settle or offer to settle, any such
demands.
SECTION 3.02 Payment for Shares.
(a) Prior to the commencement of the Offer, Purchaser shall
appoint a United States bank or trust company mutually acceptable to the
Company and Parent to act as paying agent (the "Paying Agent") for the payment
of the Offer Price and the Merger Price. Prior to the payment time thereof,
Parent shall deposit or shall cause to be deposited with the Paying Agent in a
separate fund established for the benefit of the holders of Shares, for payment
upon surrender of the certificates for exchange in accordance with this Article
III, through the Paying Agent (the "Payment Fund"), immediately available funds
in amounts necessary to make the payments pursuant to the Offer, Section 2.08
and this Section 3.02 to holders (other than Shares held by the Company or any
subsidiary of the Company or Parent, Purchaser or any other subsidiary of
Parent, or holders of Dissenting Shares). The Paying Agent shall pay the Offer
Price and the Merger Price out of the Payment Fund.
From time to time at or after the Effective Time, Parent shall take
all lawful action necessary to make the appropriate cash payments, if any, to
holders of Dissenting Shares. Prior to the Effective Time, Parent shall enter
into appropriate commercial arrangements to ensure effectuation of the
immediately preceding sentence. The Paying Agent shall invest the Payment Fund
as directed by Parent or the Purchaser in obligations of, or guaranteed by, the
United States of America, in commercial paper obligations rated A-1 or P-1 or
better by Moody's Investor Services or Standard & Poor's Corporation,
respectively, or in certificates of deposit, bank repurchase agreements or
bankers' acceptances of commercial banks with capital exceeding $200 million,
in each case with maturities not exceeding seven days. Parent shall cause the
Payment Fund to be promptly replenished to the extent of any losses incurred as
a result of the aforementioned investments. All
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earnings thereon shall inure to the benefit of Parent. If for any reason
(including losses) the Payment Fund is inadequate to pay the amounts to which
holders of Shares shall be entitled under Section 2.08 and this Section 3.02,
Parent shall in any event be liable for payment thereof. The Payment Fund
shall not be used for any purpose except as expressly provided in this
Agreement.
(b) Promptly after the Effective Time, the Paying Agent shall mail
to each record holder of certificates (the "Certificates") that immediately
prior to the Effective Time represented Shares entitled to payment of the
Merger Price pursuant to Section 2.08 (other than Certificates representing
Dissenting Shares and Certificates representing Shares held by Parent or the
Purchaser, any wholly-owned subsidiary of Parent or the Purchaser, in the
treasury of the Company or by any wholly-owned subsidiary of the Company) (i) a
form of letter of transmittal which shall (x) specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent, (y) contain a
representation in a form reasonably satisfactory to Parent as to the good and
marketable title of the Shares held by such holder free and clear of Lien (as
hereinafter defined), and (z) contain such other customary provisions as the
Company and Parent may reasonably specify; and (ii) instructions for use in
surrendering such Certificates and receiving the aggregate Merger Price, in
respect thereof. Upon the surrender of each such certificate and subject to
applicable withholding, the Paying Agent shall (subject to applicable abandoned
property, escheat and similar laws) pay the holder of such Certificate in
respect of Shares, the Merger Price multiplied by the number of Shares formerly
represented by such Certificate, and such Certificate shall forthwith be
cancelled. Until so surrendered, each such Certificate (other than
Certificates representing Dissenting Shares and Certificates representing
Shares held by Parent or the Purchaser, any wholly-owned subsidiary of Parent
or the Purchaser, in the treasury of the Company or by any wholly-owned
subsidiary of the Company) shall represent solely the right to receive the
aggregate Merger Price relating thereto. No interest or dividends shall be
paid or accrued on the Merger Price. If the Merger Price (or any portion
thereof) is to be delivered to any person other than the person in whose name
the Certificate formerly representing such Shares is registered, it shall be a
condition to such right to receive such Merger Price, as applicable, that the
Certificate so surrendered shall be properly endorsed or otherwise be in proper
form for transfer and that the person surrendering such Certificates shall pay
to the Paying Agent any transfer or other taxes required by reason of the
payment of the Merger Price to a person other than the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the Paying
Agent that such tax has been paid or is not applicable.
(c) Promptly following the first anniversary of the Effective
Time, the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing a Share may
surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in
consideration therefor the aggregate Merger Price, without any interest or
dividends thereon.
(d) After the Effective Time, there shall be no transfers on the
stock transfer books of the Surviving Corporation of any Shares, which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates formerly representing Shares are presented to the Surviving
Corporation or the Paying Agent, they shall be surrendered and cancelled in
return for the
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payment of the aggregate Merger Price relating thereto, as provided in this
Article III, subject to applicable law in the case of Dissenting Shares.
(e) Neither the Paying Agent nor any party to this Agreement shall
be liable to any shareholder of the Company or Option holder for any Shares,
any Options, the Merger Price or cash delivered to a public official pursuant
to and in accordance with any abandoned property, escheat or similar law.
(f) The Paying Agent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any
shareholder of the Company or Option holder such amounts as the Company
reasonably and in good faith determines are required to be deducted and
withheld with respect to the making of such payment under the Code (as
hereinafter defined), or any provision of state, local or foreign tax Law. To
the extent that amounts are so withheld by the Paying Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the shareholder or Option holder in respect of which such deduction and
withholding was made by the Paying Agent.
Section 3.03 No Further Rights or Transfers; Cancellation of Treasury
Shares. Except for the surrender of the certificate(s) representing the Common
Shares in exchange for the right to receive the Merger Price with respect to
each Common Share or the perfection of dissenters' rights with respect to the
Dissenting Shares, at and after the Effective Time, the holder of Common Shares
shall cease to have any rights as a shareholder of the Company, and no transfer
of Common Shares shall thereafter be made on the stock transfer books of the
Surviving Corporation. Each Common Share held in the Company's treasury
immediately prior to the Effective Time shall, by virtue of the Merger, be
canceled and retired and cease to exist without any conversion thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and the Purchaser
as follows (with such exceptions thereto as are set forth in the disclosure
statement delivered by the Company to Parent on the date hereof (the "Company
Disclosure Statement") in which each item is specifically referenced to the
Section of Article IV to which it refers):
SECTION 4.01 Organization and Qualification; Subsidiaries. The
Company is a corporation duly organized and validly existing under the laws of
the State of Wisconsin. Each of the Company's subsidiaries (the
"Subsidiaries") is a corporation duly organized and validly existing under the
laws of the jurisdiction of its incorporation. The Company and each of the
Subsidiaries has the requisite corporate power and authority to own, operate or
lease its properties and to carry on its business as it is now being conducted,
and is duly qualified or licensed to do business, and is in good standing, in
each jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary, except where the failures to have such power or authority, or the
failures to be so qualified, licensed or in good standing, individually, and in
the aggregate, would not have a Material Adverse Effect on the
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Company. The term "Material Adverse Effect on the Company", as used in this
Agreement, means any change in or effect on the business, results of
operations, assets, condition (financial or otherwise) or liabilities of the
Company or any of the Subsidiaries that is materially adverse to the Company
and the Subsidiaries taken as a whole.
SECTION 4.02 Articles of Incorporation and By-Laws. The Company has
heretofore made available to Parent and the Purchaser a complete and correct
copy of the Company's articles of incorporation and the by-laws, each as
amended to the date hereof and a copy of which is set forth in Schedule 4.02 of
the Company Disclosure Statement. Neither the Company nor the Subsidiaries are
in violation of any provision of their respective articles of incorporation or
equivalent organizational document.
SECTION 4.03 Capitalization. The authorized capital stock of the
Company consists of 20,000,000 Common Shares. As of the close of business on
April 24, 1998, there were 2,918,899 Common Shares issued and outstanding. The
Company has no shares of capital stock reserved for issuance, except that, as
of April 24, 1998, there were 101,847 Common Shares reserved for issuance
pursuant to Options granted pursuant to the Option Plan and 3,110,746 Common
Shares reserved for issuance pursuant to the Rights Agreement. No Shares are
held by the Company as treasury shares and no Shares have been acquired by the
Company that are subject to outstanding pledges to secure future payment of the
purchase price therefor. Except as set forth in Schedule 4.03 of the Company
Disclosure Statement, since December 31, 1997, the Company has not issued any
shares of capital stock except pursuant to the exercise of Options outstanding
as of such date and pursuant to other existing Company Benefit Plans (as
hereinafter defined), in each case in accordance with their terms. All the
outstanding Common Shares are, and all Common Shares which may be issued
pursuant to the exercise of outstanding Options and pursuant to the Stock
Option Agreement will be, when issued in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and nonassessable, except
as otherwise provided in Section 180.0622(2)(b) of the WBCL. There are no
bonds, debentures, notes or other indebtedness having general voting rights (or
convertible into Shares having such rights) ("Voting Debt") of the Company or
any of the Subsidiaries issued and outstanding. Except as set forth in this
Section 4.03 or Section 4.03 of the Company Disclosure Statement and except for
the Merger and the Stock Option Agreement, there are no existing options,
warrants, calls, subscriptions or other rights, agreements, arrangements or
commitments of any character, relating to the issued or unissued capital stock
of the Company or any of the Subsidiaries, obligating the Company or any of the
Subsidiaries to issue, transfer or sell or cause to be issued, transferred or
sold any shares of capital stock or Voting Debt of, or other equity interest
in, the Company or any of the Subsidiaries or securities convertible into or
exchangeable for such shares or equity interests or obligations of the Company
or any of the Subsidiaries to grant, extend or enter into any such option,
warrant, call, subscription or other right, agreement, arrangement or
commitment. Except (i) as contemplated by the Merger contemplated by this
Agreement, (ii) for the Company's obligations under the Option Plans and (iii)
for the Company's obligations under the Stock Option Agreement, there are no
outstanding contractual obligations of the Company or any of the Subsidiaries
to repurchase, redeem or otherwise acquire any Common Shares or the capital
stock of the Company or any of the Subsidiaries. Each of the outstanding
shares of capital stock of each of the Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable, except as otherwise provided in Section
180.0622(2)(b) of the WBCL, and was not issued in violation of any preemptive
rights, and such shares of the Subsidiaries are owned
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by the Company or by another Subsidiary free and clear of any lien, claim,
option, charge, security interest, limitation, encumbrance and restriction of
any kind (any of the foregoing being a "Lien"). To the knowledge of the
Company, there are no voting trusts, proxies or other agreements or
understandings with respect to the voting of the capital stock of the Company.
SECTION 4.04 Authority. The Company has all necessary corporate
power and authority to execute and deliver this Agreement and the Stock Option
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Stock Option Agreement by
the Company and the consummation by the Company of the transactions
contemplated hereby and thereby have been duly and validly authorized and
approved by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize or approve
this Agreement or the Stock Option Agreement or to consummate the transactions
contemplated hereby or thereby (other than, with respect to the Merger, the
approval and adoption of the Merger and this Agreement by holders of the Shares
to the extent required by the Company's articles of incorporation and by
applicable Law). This Agreement and the Stock Option Agreement have been duly
and validly executed and delivered by the Company and, assuming the due and
valid authorization, execution and delivery of this Agreement and the Stock
Option Agreement by Parent and the Purchaser, constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their respective terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (ii) is subject to
general principles of equity. The Board of Directors of the Company has, at a
meeting of such Board duly held on April 27, 1998, unanimously approved and
adopted this Agreement, the Stock Option Agreement, the Offer and the Merger
and the other transactions contemplated hereby and thereby, determined that the
Offer Price to be received by the holders of Shares pursuant to the Offer and
the Merger is fair to the holders of the Shares and recommends that the holders
of Shares tender their Shares pursuant to the Offer and approve and adopt this
Agreement and the Merger, subject to the Board's rights under Section 6.09
hereof.
SECTION 4.05 No Conflict; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement or the
Stock Option Agreement by the Company, the consummation by the Company of the
transactions contemplated hereby or thereby or the compliance by the Company
with any of the provisions hereof or thereof will (i) conflict with or violate
the articles of incorporation or by-laws of the Company or the comparable
organizational documents of any of the Subsidiaries, (ii) conflict with or
violate any statute, ordinance, rule, regulation, order, judgment or decree
applicable to the Company or the Subsidiaries, or by which any of them or any
of their respective properties or assets may be bound or affected, or (iii)
result in a violation or breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
or result in any loss of any material benefit, or the creation of any Lien on
any of the property or assets of the Company or any of the Subsidiaries (any of
the foregoing referred to in clause (ii) or this clause (iii) being a
"Violation") pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of the Subsidiaries is a party or by which the
Company or any of the Subsidiaries or any of their respective properties may be
bound or affected,
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except in the case of the foregoing clauses (ii) or (iii) for any Violation
which, individually and in the aggregate, would not have a Material Adverse
Effect on the Company or would not affect materially and adversely the ability
of the Company to consummate the Merger and the other transactions contemplated
by this Agreement.
(b) None of the execution and delivery of this Agreement or the
Stock Option Agreement by the Company, the consummation by the Company of the
transactions contemplated hereby or thereby or the compliance by the Company
with any of the provisions hereof or thereof will require any consent, waiver,
approval, authorization or permit of, or registration or filing with or
notification to (any of the foregoing being a "Consent"), any government or
subdivision thereof, or any administrative, governmental or regulatory
authority, agency, commission, tribunal or body, domestic, foreign or
supranational (a "Governmental Entity"), except for (i) compliance with any
applicable requirements of the Exchange Act, (ii) the filing of articles of
merger pursuant to the WBCL, (iii) compliance with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iv) such
filings and approvals as may be required by any applicable state securities,
"blue sky" or takeover Laws, and (v) other Consents or filings the failure of
which to obtain or make, individually and in the aggregate, would not have a
Material Adverse Effect on the Company or materially adversely affect the
ability of the Company to consummate the transactions contemplated by this
Agreement and the Stock Option Agreement.
SECTION 4.06 SEC Reports and Financial Statements.
(a) The Company has filed with the SEC all forms, reports,
schedules, registration statements and definitive proxy statements required to
be filed by the Company with the SEC from December 31, 1995 until the date
hereof (the "SEC Reports"). As of their respective dates or, if amended, as of
the date of the last such amendment, the SEC Reports, including, without
limitation, any financial statements or schedules included therein, complied in
all material respects with the requirements of the Exchange Act or the
Securities Act of 1933, as amended, and the rules and regulations of the SEC
promulgated thereunder applicable, as the case may be, to such SEC Reports, and
none of the SEC Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they were made, not misleading.
(b) The audited consolidated balance sheets as of December 31,
1997, 1996 and 1995 and the related consolidated statements of income,
shareholders' equity and cash flows for each of the four years in the period
ended December 31, 1997 (including the related notes and schedules thereto) of
the Company contained in the Company's Annual Reports on Form 10-K for the
years ended December 31, 1997 and 1996 included in the SEC Reports present
fairly, in all material respects, the consolidated financial position and the
consolidated results of operations and cash flows of the Company and its
consolidated subsidiaries as of the dates or for the periods presented therein
in conformity with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto).
(c) The accounting books and records of the Company and its
Subsidiaries: (i) are in all material respects correct and complete; (ii) are
current in a manner consistent with past practice; and (iii) to the knowledge
of the Company, have recorded therein all the properties, assets and
liabilities
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of the Company and its Subsidiaries (except where the failure to so record
would not violate GAAP as consistently applied by the Company).
SECTION 4.07 Information. None of the information supplied by the
Company in writing specifically for inclusion or incorporation by reference in
(i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the Proxy Statement or
(iv) any other document to be filed with the SEC or any other Governmental
Entity in connection with the transactions contemplated by this Agreement (the
"Other Filings") will, at the respective times filed with the SEC or other
Governmental Entity and, in addition, in the case of the Proxy Statement, at
the date it or any amendment or supplement is mailed to the shareholders of the
Company, at the time of the Shareholders' Meeting and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by the Company with respect
to statements made therein based on information supplied by Parent or the
Purchaser in writing specifically for inclusion in the Proxy Statement.
SECTION 4.08 Tax Matters.
(a) Tax Returns. For all years for which the applicable statutory
period of limitation has not expired, and except to the extent that failures,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company, (i) the Company has filed all Tax Returns (as hereinafter defined)
that it was required to file and all such Tax Returns were correct and complete
in all material respects, (ii) all Taxes (as hereinafter defined) owed by the
Company (whether or not shown on any Tax Return) have been paid, except for
Taxes as set forth on the balance sheet dated as of December 31, 1997 or which
have arisen after December 31, 1997 in the ordinary course of the Company's
trade or business and (iii) there are no Liens on any of the assets of the
Company that arose in connection with any failure (or alleged failure) to pay
any Tax. In particular, and without in any manner limiting the foregoing and
except to the extent that failures, individually or in the aggregate, would not
have a Material Adverse Effect on the Company, (i) none of the foregoing Tax
Returns contain any position which is or would be subject to penalties under
Section 6662 of the Internal Revenue Code of 1986, as amended (the "Code"), (or
any corresponding provision of state, local or foreign Tax law), (ii) no Tax
deficiencies have been proposed or assessed against the Company, (iii) to the
knowledge of the Company, no issue has been raised in any prior Tax audit of
the Company which, by application of the same or similar principles, could
reasonably be expected upon a future Tax audit of the Company to result in a
proposed deficiency for any period, and (iv) the Company is not liable for any
Taxes attributable to any other person, whether by reason of being a member of
another affiliated group, being a party to a tax sharing agreement, as a
transferee or successor, or otherwise. As used herein, the term "Tax" means
any federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits,
environmental, customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto; and the term "Tax Return" means any
return, declaration, report, claim for refund, or information return or
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statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
(b) Other Representations. Except as set forth in Schedule 4.08
of the Company Disclosure Statement, the Company has not (i) filed any consent
or agreement under Section 341(f) of the Code, (ii) applied for any tax ruling
within the last three years, (iii) entered into a closing agreement with any
taxing authority within the last three years, (iv) filed an election under
Section 338(g) or Section 338(h)(10) of the Code (nor has a deemed election
under Section 338(e) of the Code occurred), (v) made any payments, or been a
party to an agreement (including this Agreement) that under any circumstances
could obligate it to make payments, that will not be deductible because of
Section 280G of the Code, or (vi) been a party to any tax allocation or tax
sharing agreement for any year for which the applicable statutory period of
limitations has not expired. Company is not a "United States real property
holding company" within the meaning of Section 897 of the Code.
SECTION 4.09 No Litigation. Except as set forth in Schedule 4.09 of
the Company Disclosure Statement, as of the date hereof, there is no action,
suit, claim, workers compensation claim, arbitration, product warranty claim,
proceeding, investigation or inquiry, whether civil, criminal or administrative
("Litigation"), pending or, to the knowledge of the Company or the
Subsidiaries, threatened against the Company or the Subsidiaries, their
respective businesses or any of their assets, or, to the knowledge of the
Company and if and to the extent the Company is, through indemnity or
otherwise, liable therefor, any of the Company's current or former directors or
officers or any other person whom the Company has agreed to indemnify, as such,
nor does the Company or the Subsidiaries know, or have grounds to know, of any
basis for any Litigation, that would have in all of the cases above,
individually or in the aggregate, a Material Adverse Effect on the Company. As
of date hereof, there are no such actions, suits or proceedings pending or, to
the knowledge of the Company, threatened, against the Company by any person
which question the legality, validity or propriety of the transactions
contemplated by this Agreement. There are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against the Company,
any of its or its properties, assets or business, or, to the knowledge of the
Company, any of the Company's current or former directors or officers or any
other person whom the Company has agreed to indemnify, as such, that could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
SECTION 4.10 Compliance With Applicable Laws.
(a) Non-Environmental Matters. The Company and the Subsidiaries
are in compliance with all applicable laws, ordinances, rules or regulations
(collectively, "Laws") and orders, writs, injunctions, judgments, plans or
decrees (collectively, "Orders") (except, in each case, with respect to
environmental matters which are governed by Section 4.10(b) hereof) of any
Governmental Entity, except for such failures to so comply which, individually
and in the aggregate, would not have a Material Adverse Effect on the Company.
The business operations of the Company and the Subsidiaries are not being
conducted in violation of any Law or Order of any Governmental Entity (except,
in each case, with respect to environmental matters which are governed by
Section 4.10(b) hereof), except for possible violations which, individually or
in the aggregate, would not have a Material Adverse Effect on the Company.
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(b) Environmental Matters. Except for the matters identified in
Schedule 4.10 of the Company Disclosure Statement or except as would not
reasonably be expected to have a Material Adverse Effect on the Company, (i) no
real property currently or, to the knowledge of the Company, formerly owned,
leased, operated, managed or controlled by the Company or any Subsidiary has
been contaminated with any Hazardous Substances to an extent or in a manner or
condition now requiring investigation, removal, corrective action, or
remediation, or that could be reasonably likely to result in liability of, or
costs to, the Company or any of the Subsidiaries, under any Environmental Law
(as hereinafter defined), (ii) no judicial or administrative proceeding is
pending or, to the knowledge of the Company, threatened relating to liability
for any off-site disposal or contamination, (iii) there is currently no civil,
criminal, or administrative action, suit, demand, hearing, notice of violation,
investigation, notice or demand letter, or request for information pending, or,
to the knowledge of the Company, threatened, under any Environmental Law
against the Company or any of the Subsidiaries, the Company and the
Subsidiaries have not received in writing any claims or notices alleging
liability under any Environmental Law, and the Company has no knowledge of any
circumstances that would reasonably be expected to result in such claims, (iv)
the Company and each of the Subsidiaries are currently in compliance, and
within the period of applicable statutes of limitation, have complied, with all
applicable Environmental Laws, (v) no property or facility currently or, to the
Company's knowledge as of the date hereof, formerly owned, leased, operated,
managed or controlled by the Company or any of the Subsidiaries is listed or
proposed for listing on the National Priorities List or the Comprehensive
Environmental Response, Compensation and Liability Information System, both
promulgated under the Comprehensive Environmental Response, Compensation &
Liability Act, as amended, or on any comparable state or foreign list
established under any Environmental Law and (vi) each of the Company and its
Subsidiaries has obtained all environmental, health and safety permits and
governmental authorizations required for its operations, and such permits are
in good standing and each of the Company and its Subsidiaries is in substantial
compliance with all items and conditions thereof. "Environmental Law" means
any applicable federal, national, foreign, state or local Laws relating to
noise, odor, Hazardous Substances, pollution, human health and safety or the
protection of the environment. "Hazardous Substance" means any pollutant,
contaminant or toxic or hazardous substance or constituent that is defined or
regulated by or under authority of any Environmental Law, including without
limitation any petroleum products, asbestos or polychlorinated biphenyls, and
any other substance that can give rise to liability under any Environmental
Law.
SECTION 4.11 Labor Matters.
(a) Certain Agreements. Except as set forth in Schedule 4.11 of
the Company Disclosure Statement, neither the Company nor any Subsidiary is a
party to any collective bargaining agreement. The employment agreements that
have been entered into by either the Company or any Subsidiary are set forth in
Schedule 4.11 of the Company Disclosure Statement.
(b) Labor Disputes. Except as set forth in Schedule 4.11 of the
Company Disclosure Statement and except to the extent that failures,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company: (i) there are no pending or, to the knowledge of the Company,
threatened and unresolved claims by any person against the Company or its
Subsidiaries arising out of any statute, ordinance or regulation relating to
unfair labor practices, discrimination or to employees or employee practices or
occupational or safety and health standards; (ii) there is
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no pending, nor has the Company or its Subsidiaries experienced any, labor
dispute, strike or organized work stoppage within the last three years; and
(iii) to the knowledge of the Company, there is no threatened labor dispute,
strike or organized work stoppage against the Company or its Subsidiaries.
(c) Union Matters. As of the date hereof, except as set forth in
Schedule 4.11 of the Company Disclosure Statement: (i) to the knowledge of the
Company, no union organizing activities are in process or have been proposed or
threatened involving any employees of the Company or its Subsidiaries and (ii)
no petitions have been filed or, to the knowledge of the Company, have been
threatened or proposed to be filed, for union organization or representation or
employees of the Company or its Subsidiaries not presently organized.
SECTION 4.12 Employee Benefit Plans.
(a) Disclosure and Claims. Schedule 4.12 of the Company
Disclosure Statement lists each employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), each employment contract, stock option, profit sharing, stock
appreciation right, phantom stock, restricted stock, severance, vacation,
termination or other compensation plan, program, arrangement or understanding
maintained or contributed to by the Company or the Subsidiaries, or with
respect to which the Company or any Subsidiary or any Company ERISA Affiliate
(as defined below) could incur material liability (the "Company Benefit
Plans"). The Company has delivered or made available to Parent a true and
complete copy of each material Company Benefit Plan and the most recent Form
5500 (including all attached schedules) filed with respect to each applicable
Company Benefit Plan and the most recent actuarial or financial valuation
reports prepared with respect to any Company Benefit Plan. No Company Benefit
Plan is a "multiemployer plan" (as defined in Section 4001 of ERISA), and
neither the Company nor any Subsidiary has ever contributed nor been obligated
to contribute to any such multiemployer plan. There is no pending or, to the
knowledge of the Company, threatened dispute, controversy, investigation or
claim concerning the Company Benefit Plans other than that would not be
reasonably likely to have a Material Adverse Effect on the Company. "Company
ERISA Affiliate" shall mean any person which, together with the Company, would
be deemed a "single employer" within the meaning of Section 4001 of ERISA.
(b) Determination Letters. The Internal Revenue Service has
issued a favorable determination letter with respect to each Company Benefit
Plan, that is intended to be a "qualified plan" within the meaning of Section
401(a) of the Code, and as of the date thereof, to the knowledge of the
Company, there are no circumstances nor any events that have occurred that
would materially adversely affect the qualified status of any such plan or the
related trust.
(c) Compliance. The Company and the Subsidiaries and the Company
Benefit Plans are in compliance in all material respects with all provisions of
ERISA, the Code and all other laws and regulations applicable to the Company
Benefit Plans. There does not now exist, nor do any circumstances now exist
that could reasonably be expected to result in, any material liability of the
Company or any Subsidiary under (i) Title IV of ERISA, (ii) Section 302 of
ERISA, (iii) Sections 412 and 4971 of the Code, (iv) Section 4980B of the Code
or Sections 502 or 601-608 of ERISA, or (v) any other Laws or Orders with
respect to any Company Benefit Plan, other than claims for
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benefits under such plans. With respect to each Company Benefit Plan subject
to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code: (i)
there does not exist any accumulated funding deficiency within the meaning of
Section 412 of the Code or Section 302 of ERISA, whether or not waived, and
(ii) no reportable event within the meaning of Section 4043(c) of ERISA and no
event described in Section 4062 or 4063 of ERISA has occurred.
(d) Post-Retirement Benefits. No Company Benefit Plan provides
material benefits, including, without limitation, death or medical benefits
(whether or not insured), with respect to current or former employees of the
Company or any Subsidiary beyond their retirement or other termination of
service, other than (i) coverage mandated by applicable Laws, (ii) death
benefits or retirement benefits under any "employee pension benefit plan" as
defined in Section 3(2) of ERISA, (iii) deferred compensation benefits accrued
as liabilities on the books of the Company or a Subsidiary, (iv) benefits the
full cost of which is borne by the current or former employee (or his or her
beneficiary), or (v) medical and dental benefits for former employees (as set
forth in Schedule 4.12 of the Company Disclosure Schedule).
(e) Funding. Except with respect to the Hein-Werner Hourly and
Incentive-Rated Employees' Pension Plan (the "Hourly Plan"), the current value
of the assets of each of the Company Benefit Plans that is subject to Title IV
of ERISA, determined as of the date of the most recently completed actuarial
valuation, exceeds the actuarial present value of benefit obligations as of
such date based upon the actuarial assumptions presently used for funding
purposes in the most recent actuarial report prepared by such Company Benefit
Plan's actuary with respect to such Company Benefit Plan. According to the
most recently completed actuarial valuation with respect to the Hourly Plan, as
of the date of such valuation, the actuarial present value of benefit
obligations under the Hourly Plan exceeded the actuarial value of assets by
$389,902. All contributions or other amounts payable by the Company or its
Subsidiaries as of the Effective Time with respect to each Company Benefit Plan
in respect of current or prior plan years have been either paid or accrued on
the December 31, 1997 consolidated balance sheet of the Company. There are no
material pending or, to the knowledge of the Company, threatened or anticipated
claims (other than routine claims for benefits) by, on behalf of or against any
of the Company Benefit Plans or any trusts related thereto.
(f) Other Plan Obligations. To the knowledge of the Company,
neither the Company nor any of its Subsidiaries, nor any Company ERISA
Affiliate, nor any Company Benefit Plan, nor any trust created thereunder, nor
any trustee or administrator thereof has engaged in a transaction in connection
with which the Company or its Subsidiaries or any Company ERISA Affiliate, any
Company Benefit Plan, any such trust, or any trustee or administrator thereof,
or any party dealing with any Company Benefit Plan or any such trust could be
subject to either a civil penalty assessed pursuant to Section 409 or 502(i) of
ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code.
SECTION 4.13 Intellectual Property. Except for the matters
identified in Schedule 4.13 of the Company Disclosure Schedule or except as
would not, individually and in the aggregate, have a Material Adverse Effect on
the Company, (i) the Company and each of the Subsidiaries owns, has the right
to acquire or is licensed or otherwise has the right to use (in each case,
clear of any Liens), all Intellectual Property (as defined below) used in or
necessary for the conduct of its business as currently conducted, (ii) no
claims are pending or, to the knowledge of the Company, threatened that
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the Company or any of the Subsidiaries is infringing on or otherwise violating
the rights of any person with regard to any Intellectual Property and (iii) to
the knowledge of the Company, no person is infringing on or otherwise violating
any right of the Company or any of the Subsidiaries with respect to any
Intellectual Property owned by and/or licensed to the Company or the
Subsidiaries. For purposes of this Agreement, "Intellectual Property" shall
mean (i) any invention, United States and foreign patents, pending patent
applications, trade names, trade dress, logos, corporate names, trademarks,
service marks, trademark registrations, service mark registrations, pending
trademark applications, pending service mark applications, registered
copyrights, and pending copyright applications, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith; (ii) proprietary software; and (iii) all trade secrets
and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals).
SECTION 4.14 Certain Events.
(a) Since December 31, 1997, there has not been any Material
Adverse Effect on the Company. In addition, since December 31, 1997, except as
set forth in Schedule 4.14 of the Company Disclosure Statement, the Company and
the Subsidiaries have conducted their businesses only in the ordinary course of
business consistent with past practices and there has not been, directly or
indirectly:
(i) any payment or granting by the Company or any of the
Subsidiaries of any increase in compensation to any director or
executive officer of the Company or, except in the ordinary course of
business and consistent with past practice, any employee of the
Company or the Subsidiaries;
(ii) any granting by the Company or any of the Subsidiaries
to any such director, executive officer or employee of any increase in
severance or termination pay, except as required under employment,
severance or termination agreements or plans in effect prior to the
date of this Agreement;
(iii) any entry by the Company or any of the Subsidiaries
into any employment, severance or termination agreement with any such
director or executive officer;
(iv) any adoption or increase in payments to or benefits
under any Company Benefit Plans;
(v) any change in accounting methods, principles or practices
by the Company and the Subsidiaries, except insofar as may have been
required by a change in GAAP;
(vi) any declaration or payment of any dividend or any
distribution in respect of the capital stock of the Company or any
direct or indirect redemption, purchase or other acquisition of any
such stock of the Company; or
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(vii) any agreement or commitment to do any of the things
described in the preceding clauses (i) through (vi).
(b) Except as set forth in Schedule 4.14 of the Company Disclosure
Statement, since December 31, 1997 and through the date hereof:
(i) no party (including the Company and its Subsidiaries) has
accelerated, terminated, modified in any material respect, or
cancelled any Contract (other than purchase and sales orders in the
ordinary course of business in accordance with past practice)
involving more than $100,000 to which the Company or its Subsidiaries
is a party or by which any of them is bound;
(ii) neither the Company nor any of its Subsidiaries has
(other than in the ordinary course of business) granted any license or
sublicense of any rights under or with respect to any Intellectual
Property;
(iii) neither the Company nor any of Subsidiaries has
experienced any material damage, destruction, or loss (whether or not
covered by insurance) from fire or other casualty to its tangible
property; or
(iv) neither the Company nor any of its Subsidiaries has
entered into a binding commitment to any of the foregoing.
"Contracts" shall mean all of the contracts, agreements and
obligations, written or oral, to which the Company or its Subsidiaries are a
party or by which the Company or its Subsidiaries or any of their respective
assets are bound, including, without limitation, any loan, bond, mortgage,
indenture, lease instrument, franchise or license.
SECTION 4.15 Certain Approvals. The Board of Directors of the
Company has taken appropriate action such that, assuming the accuracy of
Parent's and the Purchaser's representations in Section 5.08 of this Agreement,
the provisions of Sections 180.1140 through 180.1144 of the WBCL will not apply
to any of the transactions contemplated by this Agreement and the Stock Option
Agreement.
SECTION 4.16 Brokers. Except for the engagement of Credit Suisse
First Boston Corporation ("CSFB"), none of the Company, the Subsidiaries, or
any of their respective officers, directors or employees has employed any
broker or finder or incurred any liability for any brokerage fees, commission
or finder's fees in connection with the transactions contemplated by this
Agreement or the Stock Option Agreement.
SECTION 4.17 Opinion of Financial Advisor. The Company has received
the written opinion of CSFB, dated April 27, 1998, to the effect that, as of
such date, the cash consideration to be received by the holders of the Common
Shares pursuant to the Offer and the Merger is fair to such holders from a
financial point of view.
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SECTION 4.18 Rights Agreement. Assuming the accuracy of Parent's and
the Purchaser's representations in Section 5.08 of this Agreement, neither the
execution nor the delivery of this Agreement nor commencement of the Offer will
result in a "Distribution Date" (as defined in the Rights Agreement). The
Company has irrevocably taken all actions necessary to make the Rights
inapplicable to (a) the Offer and the Merger and (b) the Stock Option Agreement
and the transactions contemplated thereby.
SECTION 4.19 Title to Assets. All of the material real property
owned or leased by each of the Company and its Subsidiaries are identified in
the SEC Reports (the "Real Estate"). Each of the Company and its Subsidiaries
owns fee simple or valid leasehold (as the case may be) title to the Real
Estate and has valid title to its other tangible assets and properties which it
owns, free and clear of any and all Liens, except for any such as would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company.
SECTION 4.20 Buildings and Equipment. Except as set forth in
Schedule 4.20 of the Company Disclosure Statement or except for any such as
would not have a Material Adverse Effect on the Company: (i) neither the
Company nor any of its Subsidiaries has received any written notice from any
Governmental Entity that any of the Buildings or Equipment (each as defined
below) fail to comply with any applicable building and zoning or other similar
Laws in effect at the date hereof which notice is still outstanding and (ii)
the continuation of the Company's and its Subsidiaries' businesses as currently
conducted will not result in the enforcement or the threat of enforcement of
any such Laws. "Buildings" shall mean all buildings, fixtures, structures and
improvements leased or owned by the Company or its Subsidiaries. "Equipment"
shall mean all machinery, equipment, boilers, furniture, fixtures, motor
vehicles, furnishings, parts, tools, office equipment, computers and other
items of tangible personal property owned or used by the Company or its
Subsidiaries.
SECTION 4.21 Vote Required. Assuming the accuracy of Parent's and
the Purchaser's representations in Section 5.08 of this Agreement and subject
to Sections 180.1130-180.1133 of the WBCL, the affirmative vote of the holders
of at least two-thirds (2/3rds) of the outstanding Common Shares entitled to
vote with respect to the Merger is the only vote of the holders of any class or
series of the Company's capital stock necessary to approve the Merger, this
Agreement and the transactions contemplated hereby.
SECTION 4.22 Certain Agreements. Except as set forth in Schedule
4.22 of the Company Disclosure Statement, neither the Company nor any of its
Subsidiaries is a party to any oral or written agreement or plan, including any
stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. Except as described in Schedule 4.22 of the
Company Disclosure Statement or except for any such as would not result in a
Material Adverse Effect on the Company, the transactions contemplated by this
Agreement will not constitute a "change of control" under, require the consent
from or the giving of notice to any third party pursuant to, or accelerate the
vesting or repurchase rights under, the terms, conditions or provisions of any
loan or credit agreement, note, bond, mortgage, indenture, license, lease,
contract, agreement or other instrument or obligation to which the Company or
its Subsidiaries is a party or by which
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any of them or any of their properties or assets may be bound. Except as set
forth in Schedule 4.22 of the Company Disclosure Statement, there are no
amounts payable by the Company or its Subsidiaries to any officers of the
Company or its Subsidiaries (in their capacity as officers) as a result of the
transactions contemplated by this Agreement and/or any subsequent employment
termination.
SECTION 4.23 Applicability of Articles of Incorporation. The Board
of Directors of the Company has taken such action as may be necessary to ensure
that the supermajority vote provision of Article VII of the Company's articles
of incorporation is inapplicable to the Offer or the Merger, or to this
Agreement or the transactions contemplated hereby.
SECTION 4.24 Contracts. Except as set forth in Section 4.24 of the
Company Disclosure Statement, the Company does not have any Contract in effect
as of the date hereof which purports to limit in any respect the manner in
which, or the localities in which, the Company, its Subsidiaries or any other
entity is entitled to conduct all or any portion of its business. There are no
existing breaches or defaults by the Company or its Subsidiaries, or, to the
knowledge of the Company, any other party to a Contract under any Contract the
effect of which would constitute a Material Adverse Effect on the Company and,
to the knowledge of the Company, no event has occurred which, with the passage
of time or the giving of notice or both, could reasonably be expected to
constitute such a breach or default.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser jointly and severally represent and warrant
to the Company as follows:
SECTION 5.01 Organization and Qualification. Parent is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. The Purchaser is a corporation duly organized and validly existing
under the laws of the State of Wisconsin. Each of Parent and the Purchaser has
the requisite corporate power and authority to own, operate or lease its
properties and to carry on its business as it is now being conducted, and is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary, except where the failure to have such power or authority, or the
failure to be so qualified, licensed or in good standing, would not have a
Material Adverse Effect on Parent. The term "Material Adverse Effect on
Parent", as used in this Agreement, means any change in or effect on the
business, results of operations, assets, condition (financial or otherwise) or
liabilities of Parent or any of its subsidiaries that would be materially
adverse to Parent and its subsidiaries taken as a whole, except for any change
or effect resulting from general economic or financial market conditions.
SECTION 5.02 Authority. Each of Parent and the Purchaser has all
necessary corporate power and authority to execute and deliver this Agreement
and the Stock Option Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this
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Agreement and the Stock Option Agreement by Parent and the Purchaser and the
consummation by Parent and the Purchaser of the transactions contemplated
hereby and thereby have been duly and validly authorized and approved by the
Boards of Directors of Parent and the Purchaser and by the sole shareholder of
the Purchaser and no other corporate proceedings on the part of Parent or the
Purchaser are necessary to authorize or approve this Agreement or the Stock
Option Agreement or to consummate the transactions contemplated hereby or
thereby. Each of this Agreement and the Stock Option Agreement has been duly
executed and delivered by each of Parent and the Purchaser and, assuming the
due and valid authorization, execution and delivery by the Company, constitutes
a valid and binding obligation of each of Parent and the Purchaser enforceable
against each of them in accordance with its respective terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to the enforcement of creditors'
rights generally and (ii) is subject to general principles of equity.
SECTION 5.03 No Conflict; Required Filings and Consents.
(a) None of the execution and delivery of this Agreement or the
Stock Option Agreement by Parent or the Purchaser, the consummation by Parent
or the Purchaser of the transactions contemplated hereby or thereby or the
compliance by Parent or the Purchaser with any of the provisions hereof or
thereof will (i) conflict with or violate the organizational documents of
Parent or the Purchaser, (ii) conflict with or violate any statute, ordinance,
rule, regulation, order, judgment or decree applicable to Parent or the
Purchaser, or any of their subsidiaries, or by which any of them or any of
their respective properties or assets may be bound or affected, or (iii) result
in a Violation pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or the Purchaser, or any of their respective subsidiaries, is a
party or by which any of their respective properties or assets may be bound or
affected, except in the case of the foregoing clauses (ii) and (iii) for any
such Violations which would not have a Material Adverse Effect on Parent or
materially adversely affect the ability of Parent or the Purchaser to
consummate the transactions contemplated by this Agreement and the Stock Option
Agreement.
(b) None of the execution and delivery of this Agreement or the
Stock Option Agreement by Parent and the Purchaser, the consummation by Parent
and the Purchaser of the transactions contemplated hereby or thereby or the
compliance by Parent and the Purchaser with any of the provisions hereof or
thereof will require any Consent of any Governmental Entity, except for (i)
compliance with any applicable requirements of the Exchange Act, (ii) the
filing of articles of merger pursuant to the WBCL, (iii) compliance with the
HSR Act, (iv) such filings and approvals as may be required by any applicable
state securities, "blue sky" or takeover Laws, and (v) other Consents or
filings the failure of which to obtain or make, individually and in the
aggregate, would not have a Material Adverse Effect on Parent or materially
adversely affect the ability of Parent or the Purchaser to consummate the
transactions contemplated by this Agreement or the Stock Option Agreement.
SECTION 5.04 Information. None of the information supplied or to be
supplied by Parent and the Purchaser in writing specifically for inclusion in
(i) the Offer Documents, (ii) the Schedule 14D-9, (iii) the Proxy Statement or
(iv) the Other Filings will, at the respective times filed with the SEC or such
other Governmental Entity and, in addition, in the case of the Proxy Statement,
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at the date it or any amendment or supplement is mailed to shareholders of the
Company, at the time of the Shareholders' Meeting and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
SECTION 5.05 Financing. Parent or the Purchaser has available the
funds necessary to consummate the Offer and the Merger and the transactions
contemplated hereby on a timely basis.
SECTION 5.06 Brokers. Except for the engagement of Merrill Lynch &
Co., none of Parent, the Purchaser, or any of their respective subsidiaries,
officers, directors or employees, has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement or the Stock
Option Agreement for or with respect to which the Company is or might be
liable.
SECTION 5.07 Purchaser.
(a) Parent owns all of the outstanding stock of Purchaser; at all
times prior to the Merger, no person other than Parent has owned, or will own,
any of the outstanding stock of Purchaser. Purchaser was formed by Parent
solely for the purpose of engaging in the transactions contemplated by this
Agreement.
(b) There are not as of the date of this Agreement, and there will
not be at the Effective Time, any outstanding or authorized options, warrants,
calls, rights, commitments or any other agreements of any character which
Purchaser is a party to, or may be bound by, requiring it to issue, transfer,
sell, purchase, redeem or acquire any shares of its capital stock or any
securities or rights convertible into, exchangeable for, or evidencing the
right to subscribe for or acquire, any shares of its capital stock.
(c) As of the date of this Agreement and the Effective Time,
except for obligations incurred in connection with this Agreement or the
transactions contemplated hereby, Purchaser has not and will not have incurred,
directly or indirectly through any other corporation, any obligations or
liabilities of any kind or engaged in any activities of any type or kind
whatsoever or entered into any arrangement or arrangements with any person or
entity.
SECTION 5.08 Share Ownership. During the period from September 10,
1987 to the date hereof, neither Parent, the Purchaser nor any of their
affiliates have owned 10% or more of the Shares.
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as required
by this Agreement or with the prior written consent of Parent, during the
period from the date of this Agreement to the Effective Time, the Company will
and will cause each of the Subsidiaries to conduct its operations
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only in the ordinary course of business consistent with past practice and will
use its commercially reasonable efforts and will cause each of the Subsidiaries
to use its commercially reasonable efforts, to preserve intact the business
organization of the Company and each of the Subsidiaries, to use, operate,
maintain and repair all of its assets and properties in a normal business
manner consistent with past practice, to keep available the services of its and
their present officers and key employees and to preserve the goodwill of those
having business relationships with it and to conduct business with suppliers,
customers, creditors and others having business relationships with the Company
in the best interests of the Company. Without limiting the generality to the
foregoing, and except as otherwise required or contemplated by this Agreement
or the Stock Option Agreement or as set forth in Section 6.01 of the Company
Disclosure Statement, the Company will not, and will not permit any of the
Subsidiaries to, prior to the Effective Time, without the prior written consent
of Parent:
(a) adopt any amendment to its charter or by-laws or comparable
organizational documents;
(b) issue, reissue or sell or authorize the issuance, reissuance
or sale of additional shares of capital stock of any class, or shares
convertible into capital stock of any class, or any rights, warrants or options
to acquire any convertible shares or capital stock, other than the issuance of
Shares pursuant to Options outstanding on the date of this Agreement or
pursuant to the Stock Option Agreement;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, shares or property or any combination thereof) in respect of
any class or series of its capital stock other than between any of the Company
and any Subsidiary which is wholly-owned by the Company;
(d) split, combine, subdivide, reclassify or directly or
indirectly redeem, purchase or otherwise acquire, recapitalize or reclassify,
or propose to redeem or purchase or otherwise acquire, any shares of its
capital stock, or any of its other shares or liquidate in whole or in part;
(e) except for (A) increases in salary, wages and benefits of
non-executive officers or employees of the Company or the Subsidiaries in the
ordinary course of business consistent with past practice, (B) increases in
salary, wages and benefits granted to officers and employees of the Company or
the Subsidiaries in conjunction with new hires in the ordinary course of
business consistent with past practice, or (C) increases in salary, wages and
benefits to employees of the Company or the Subsidiaries pursuant to collective
bargaining agreements entered into in the ordinary course of business
consistent with past practice, (i) increase the compensation or fringe benefits
payable or to become payable to its directors, officers or key employees
(whether from the Company or any of the Subsidiaries), (ii) pay any benefit not
required by any existing plan or arrangement (including, without limitation,
the granting of stock options, stock appreciation rights, shares of restricted
stock or performance units), (iii) grant any severance or termination pay to
(except pursuant to existing agreements, plans or policies and as required by
such agreements, plans or polices), (iv) enter into or modify any employment or
severance agreement with, any director, officer or other key employee of the
Company or any of the Subsidiaries or (v) establish, adopt, enter into, or
amend any collective bargaining, bonus, profit sharing, thrift, compensation,
stock option, restricted stock or Company Benefit Plans for the benefit or
welfare of any directors, officers
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or current or former employees, except in each case to the extent required by
applicable Law or regulation;
(f) (i) sell, lease, transfer or assign any of its assets, tangible
or intangible, other than for a fair consideration in the ordinary course of
business and other than the disposition of obsolete or unusable property; (ii)
enter into any Contract (other than purchase and sales orders in the ordinary
course of business in accordance with past practice) involving more than
$25,000 without the consent of Parent (which consent shall not be unreasonably
withheld); (iii) accelerate, terminate, modify in any material respect, or
cancel any Contract (other than purchase and sales orders and other than in the
ordinary course of business in accordance with past practice) involving more
than $25,000 to which the Company is a party or by which any of them is bound
without the consent of Parent (which consent shall not be unreasonably
withheld; (iv) make any capital expenditure (or series of related capital
expenditures) involving either more than $25,000 (unless such expenditure is
identified in the current business plan of the Company as disclosed to Parent)
or outside the ordinary course of business; (v) delay or postpone the payment
of accounts payable and other liabilities outside the ordinary course of
business; (vi) cancel, compromise, waive or release any right or claim (or
series of related rights and claims) not covered by the reserves or accruals
relating to such claim in the Company's December 31, 1997 consolidated balance
sheet either involving more than $25,000 or outside the ordinary course of
business without the consent of Parent (which consent shall not be unreasonably
withheld); (vii) grant any license or sublicense of any rights under or with
respect to any Intellectual Property other than in the ordinary course of
business; or (viii) enter into any contract or agreement with any affiliate of
the Company except for transactions in the ordinary course of business upon
commercially reasonable terms.
(g) (i) incur, assume or pre-pay any long-term debt or incur or
assume any short-term debt, except that the Company and the Subsidiaries may
incur, assume or pre-pay debt in the ordinary course of business consistent
with past practice under existing lines of credit, (ii) pay, discharge, settle
or satisfy as other claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than in the ordinary
course of business consistent with past practice, (iii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, or (iv)
make any loans, advances or capital contributions to, or investments in, any
other person except in the ordinary course of business consistent with past
practice and except for loans, advances, capital contributions or investments
between any Subsidiary wholly-owned by the Company and the Company or another
Subsidiary wholly-owned by the Company; or
(h) agree in writing or otherwise to take any of the foregoing
actions.
SECTION 6.02 Access to Information. From the date hereof until the
Effective Time, the Company will, and will cause the Subsidiaries, and each of
its and their respective officers, directors, employees, counsel, advisors and
representatives (collectively, the "Company Representatives") to, (i) provide
Parent and the Purchaser and their respective officers, employees, counsel,
advisors and representatives (collectively, the "Parent Representatives")
access, during normal business hours and upon reasonable notice, to the offices
and other facilities and to the books, records, financial statements and other
documents and materials relating to the financial condition, assets and
liabilities of the Company and the Subsidiaries, and will permit Parent and the
Purchaser to make inspections
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of such as either of them may reasonably require, (ii) cause the Company
Representatives and the Subsidiaries to furnish Parent, the Purchaser and the
Parent Representatives to the extent available with such other information with
respect to the business of the Company and the Subsidiaries as Parent and the
Purchaser may from time to time reasonably request and (iii) confer and consult
with the Parent Representatives, as Parent may reasonably request, to report on
operational matters, financial matters and the general status of ongoing
business operations of the Company; provided, however, that all requests for
such access, inspection, information or consultations pursuant to this Section
6.02 shall be made through the President and Chief Executive Officer of the
Company or such other person as he shall designate in writing to Parent.
Unless otherwise required by Law and except as is necessary to disseminate the
Offer Documents, Parent and the Purchaser will, and will cause the Parent
Representatives to hold any such information in confidence until such time as
such information otherwise becomes publicly available through no wrongful act
of Parent, the Purchaser or the Parent Representative, all as specifically
provided in the confidentiality agreement, dated April 21, 1998, between Parent
and the Company (the "Confidentiality Agreement").
SECTION 6.03 Commercially Reasonable Efforts. Subject to the terms
and conditions herein provided and to applicable legal requirements, so long as
this Agreement has not been terminated, each of the parties hereto agrees to
use its commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, consistent with the fiduciary duties of
such party's respective Board of Directors, and to assist and cooperate with
the other parties hereto in doing, as promptly as practicable, all things
necessary, proper or advisable under applicable Laws and regulations to ensure
that the conditions set forth in Annex I and Article VII are satisfied and to
consummate and make effective the transactions contemplated by the Offer, the
Merger, this Agreement and the Stock Option Agreement, including, without
limitation, to make promptly their respective filings and thereafter to make
any other submissions required under applicable Laws.
In addition, if at any time prior to the Effective Time any event or
circumstance relating to either the Company or Parent or the Purchaser or any
of their respective subsidiaries should be discovered by the Company or Parent,
as the case may be, and which should be set forth in an amendment to the Offer
Documents or Schedule 14D-9, the discovering party will promptly inform the
other party of such event or circumstance and promptly take all steps necessary
to cause the Offer Documents or the Schedule 14D-9, as the case may be, as so
corrected to be filed with the SEC and to be disseminated to the shareholders
of the Company, in each case as to the extent required by applicable Law. If
at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement or the Stock Option
Agreement, including the execution of additional instruments, the proper
officers and directors of each party to this Agreement or the Stock Option
Agreement, as the case may be, shall take all such necessary action.
SECTION 6.04 Consents.
(a) Subject to the terms and conditions herein provided, the
Company will (i) take all reasonable steps necessary or desirable, and proceed
diligently and in good faith and use all commercially reasonable efforts to
obtain all approvals required by any Contract to consummate the transactions
contemplated hereby, (ii) take all reasonable steps necessary or desirable, and
proceed diligently and in good faith and use all commercially reasonable
efforts to obtain all approvals, authorizations, and clearances of any
Governmental Entity required of the Company to permit the
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Company to consummate the transactions contemplated hereby, (iii) provide such
other information and communications to such Governmental Entity as such entity
may reasonably request, and (iv) cooperate with Parent in obtaining all
approvals, authorizations and clearances of Governmental Entities and others
required of Parent to consummate the transactions contemplated by this
Agreement or the Stock Option Agreement.
(b) Each of the parties will use its commercially reasonable
efforts to obtain as promptly as practicable all Consents of any Governmental
Entity or any other person required in connection with the consummation of the
transactions contemplated by the Offer, the Merger, this Agreement and the
Stock Option Agreement.
(c) Any party hereto shall promptly inform the others of any
material communication from the United States Federal Trade Commission, the
Department of Justice or any other domestic government or governmental
authority regarding any of the transactions contemplated by this Agreement or
the Stock Option Agreement. If any party or any affiliate thereof receives a
request for additional information or documentary material from any such
government or authority with respect to the transactions contemplated by this
Agreement or the Stock Option Agreement, then such party will endeavor in good
faith to make, or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in compliance with
such request. Parent will advise the Company promptly in respect of any
understandings, undertakings or agreements (oral or written) which Parent
proposes to make or enter into with the Federal Trade Commission, the
Department of Justice or any other domestic or foreign government or
governmental or multinational authority in connection with the transactions
contemplated by this Agreement or the Stock Option Agreement.
SECTION 6.05 Public Announcements. So long as this Agreement is in
effect, Parent, the Purchaser and the Company agree to consult with each other
before issuing any press release or otherwise making any public statement with
respect to the transactions contemplated by this Agreement.
SECTION 6.06 Employee Benefit Arrangements.
(a) Following the Effective Time and through December 31, 1999,
the Purchaser agrees to provide employee benefit plans and programs for the
benefit of employees of the Company and the Subsidiaries (excluding plans or
programs which provide for issuance of Shares or options on Shares) that are of
reasonably equivalent value to such employees as compared with the Company
Benefit Plans, subject to applicable governmental rules and regulations. All
service credited to each employee by the Company or any Subsidiary through the
Effective Time shall be recognized by the Purchaser for purposes of eligibility
and vesting (but not benefit accrual) under any employee benefit plan provided
by the Purchaser for the benefit of the employees.
(b) Parent shall cause the Surviving Corporation to honor (without
modification) and assume all written employment agreements with individual
employees, severance agreements with individual employees and other comparable
agreements with individual employees of the Company or any Subsidiary, all as
in effect on the date of this Agreement (including, without limitation, the
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Consulting Agreement between the Company and J. Queenan), all of which are
listed on Schedule 6.06 of the Company Disclosure Statement.
(c) The Purchaser shall maintain in effect the Company severance
plan/program (as specified in the employee handbook) for a period of two years
immediately following the Effective Time and the Company severance plan/program
shall not be terminated or adversely amended during such two-year period.
(d) The Company shall cause the interest of each of the employees
of the Company and the Subsidiaries as of the Acceptance Date (as hereinafter
defined) in the Hein-Werner Retirement and Savings Plan and Trust to be fully
vested and nonforfeitable as of the Acceptance Date.
(e) For a period of 18 months following the Effective Time, Parent
shall cause the Surviving Corporation to continue to provide medical insurance,
at COBRA premium rates, to O. Friend.
SECTION 6.07 Company Disclosure Statement. The Company has delivered
to Parent the Company Disclosure Statement which shall be accompanied by a
certificate signed by the President and the Secretary of the Company stating
that the Company Disclosure Schedule was delivered pursuant to this Agreement
and is the Company Disclosure Schedule referred to in this Agreement. The
Company Disclosure Schedule is deemed to constitute an integral part of this
Agreement and to modify, as specified, the representations, warranties,
covenants or agreements of the Company contained in this Agreement.
SECTION 6.08 Deliveries of Information. From time to time after the
date of this Agreement and prior to the Effective Time (unless this Agreement
is terminated), the Company shall furnish promptly to Parent:
(a) a copy of each report, schedule and other document filed by
the Company or received by the Company after the date of this Agreement
pursuant to the requirements of federal or state securities Laws promptly after
such documents are available; and
(b) the monthly consolidated financial statements of the Company
(as prepared by the Company in accordance with its normal accounting
procedures) promptly after such financial statements are available.
SECTION 6.09 No Solicitation.
(a) The Company represents and warrants to, and covenants and
agrees with, Parent and the Purchaser that neither the Company nor any of the
Subsidiaries has any agreement, arrangement or understanding with any potential
acquiror that, directly or indirectly, would be violated, or require any
payments, by reason of the execution, delivery and/or consummation of this
Agreement and the Stock Option Agreement. The Company shall, shall cause the
Subsidiaries to, and shall use its commercially reasonable efforts to cause the
officers, directors, employees, investment bankers, attorneys and other agents
and representatives of the Company and the Subsidiaries to, immediately cease
any existing activities, information exchanges, discussions or negotiations
with any person
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(including a "person" as defined in Section 13(d)(3) of the Exchange Act) other
than Parent or the Purchaser (a "Third Party") heretofore conducted with
respect to any Acquisition Transaction (as hereinafter defined). The Company
shall not, shall cause the Subsidiaries not to, and shall use its commercially
reasonable efforts to cause the officers, directors, employees, investment
bankers, attorneys and other agents and representatives of the Company and the
Subsidiaries not to, directly or indirectly, (x) solicit, initiate, continue,
facilitate or encourage (including by way of furnishing or disclosing
non-public information) any inquiries, proposals or offers from any Third Party
with respect to, or that could reasonably be expected to lead to, any
acquisition or purchase of all or any significant portion of the assets or
business of, or any significant equity interest in (including by way of a
tender offer), or any merger, consolidation or business combination with, or
any similar transaction involving, the Company or any of the Subsidiaries (the
foregoing being referred to collectively as an "Acquisition Transaction"), or
(y) negotiate or otherwise communicate in any way with any Third Party with
respect to any Acquisition Transaction or enter into, approve or recommend any
agreement, arrangement or understanding requiring the Company to abandon,
terminate or fail to consummate the Offer and/or the Merger or any other
transaction contemplated hereby or by the Stock Option Agreement.
Notwithstanding anything to the contrary in the foregoing, the Company may in
response to an unsolicited written proposal with respect to an Acquisition
Transaction involving the acquisition of all of the Shares (or all or
substantially all of the assets of the Company and the Subsidiaries) from a
Third Party furnish or disclose non-public information to such Third Party and
negotiate or otherwise communicate with such Third Party, in each case only if
(A) the Board of Directors of the Company (after consultation with its outside
legal counsel and independent financial advisors) determines in good faith that
such proposal would reasonably be likely to be more favorable to the Company
and its shareholders than the transactions contemplated hereby (the proposal
with respect to an Acquisition Transaction meeting the requirements of clause
(A), a "Superior Proposal"), (B) prior to furnishing or disclosing any
non-public information to, or entering into discussions or negotiations with,
such Third Party, the Company receives from such Third Party a customary
confidentiality agreement similar in all material respects to the
Confidentiality Agreement, and (C) the Company advises Parent of all such
non-public information delivered to such Third Party prior to such delivery;
provided, however, that the Company shall not enter into a definitive agreement
with respect to a Superior Proposal unless the Company first complies with
Section 6.09(b) hereof, including the last sentence thereof, and then unless
the Company concurrently terminates this Agreement in accordance with the terms
hereof.
(b) The Company shall promptly (but in any event within one
business day of the Company becoming aware of same) advise Parent of the
receipt by the Company, any of the Subsidiaries or any of the Company's
investment bankers, attorneys or other agents or representatives of any
inquiries or proposals relating to an Acquisition Transaction and any actions
taken pursuant to Section 6.09(a). The Company shall promptly (but in any
event within one business day of the Company becoming aware of same) provide
Parent with a copy of any such inquiry or proposal in writing and a written
statement with respect to any such inquiries or proposals not in writing, which
statement shall include the identity of the parties making such inquiries or
proposal and the material terms thereof and will update Parent on an ongoing
basis, or upon Parent's reasonable request, of the status thereof; provided,
however, that the Company shall not be obligated to provide a copy of, or a
written statement with respect to, any such inquiry if the Board of Directors
of the Company determines in good faith, after consultation with outside legal
counsel, that not providing such copy or written statement is necessary to
allow the Board of Directors of the
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Company to fulfill its fiduciary duties to the shareholders of the Company
under applicable Law. For the avoidance of doubt, the Company agrees that it
will not terminate this Agreement and enter into any agreement with respect an
Acquisition Transaction unless and until Parent has been given the opportunity
at least two business days prior to the entering into such agreement to match
the terms of such agreement.
(c) Nothing contained in this Section 6.09 shall prohibit the
Company from disclosing to its shareholders a position contemplated by Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to its shareholders if, in the good faith judgment of its Board of
Directors, after consultation with outside legal counsel, failure to so
disclose would result in a violation of applicable Law.
SECTION 6.10 Notification of Certain Matters. Parent and the Company
shall promptly notify each other of (a) the occurrence or non-occurrence of any
fact or event which would be reasonably likely (i) to cause any representation
or warranty contained in this Agreement or the Stock Option Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof
to the Effective Time or (ii) to cause any covenant, condition or agreement
hereunder or under the Stock Option Agreement not to be complied with or
satisfied in all material respects and (b) any failure of the Company, Parent
or the Purchaser, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder or
under the Stock Option Agreement in any material respect; provided, however,
that no such notification shall affect the representations or warranties of any
party or the conditions to the obligations of any party hereunder or under the
Stock Option Agreement.
SECTION 6.11 Indemnification and Insurance.
(a) The Purchaser and Parent agree that for a period of six years
from the date the Shares are purchased by Parent or the Purchaser in the Offer
(the "Acceptance Date"), the Purchaser will maintain all rights to
indemnification now existing in favor of the current or former directors,
officers, employees, fiduciaries and agents of the Company as provided in the
Company's articles of incorporation and by-laws or otherwise in effect under
any agreement on the date of this Agreement. In addition, the Purchaser and
Parent agree that the articles of incorporation and by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the Company's articles of incorporation and by-laws on the date
hereof, which provisions shall not be amended, repealed or otherwise modified
for a period of six years after the Acceptance Date in any manner that would
adversely affect the rights thereunder of individuals who at any time prior to
the Effective Time were directors or officers of the Company in respect of
actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement), unless
such modification is required by Law. Notwithstanding the six-year period
specified in the foregoing sentences, in the event any claim or claims are
asserted or made within such six-year period, all rights to indemnification in
respect of any such claim or claims shall continue until disposition of any and
all such claims.
(b) The Surviving Corporation will at all times exercise the
powers granted to it by its articles of incorporation, its by-laws, and by
applicable Law to indemnify and hold harmless to the fullest extent possible
present or former directors, officers, employees, fiduciaries and agents of the
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Company against any threatened or actual claim, action, suit, proceeding or
investigation made against them arising from their service in such capacities
(or service in such capacities for another enterprise at the request of the
Company) prior to, and including the Acceptance Date, including, without
limitation, with respect to matters relating to this Agreement.
(c) Parent agrees that the Company and, from and after the
Acceptance Date, the Surviving Corporation shall cause to be maintained in
effect for not less than six years from the Acceptance Date the current
policies of the directors' and officers' liability insurance maintained by the
Company with respect to matters occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement); provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which
are no less advantageous and provided that such substitution shall not result
in any gaps or lapses in coverage with respect to matters occurring prior to
the Effective Time; and provided, further, that the Surviving Corporation shall
not be required to pay an annual premium in excess of 200% of the last annual
premium paid by the Company prior to the date hereof and if the Surviving
Corporation is unable to obtain the insurance required by this Section 6.11(c)
it shall obtain as much comparable insurance as possible for an annual premium
equal to such maximum amount.
(d) This Section 6.11 is intended to benefit the current and
former directors, officers, employees, fiduciaries and agents of the Company
and shall be binding on all successors and assigns of Parent, the Purchaser,
the Company and the Surviving Corporation.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect the
Merger If the Offer Shall Have Been Consummated. The respective obligations of
Parent, the Purchaser and the Company to consummate the Merger if the Offer
shall have been consummated are subject to the satisfaction or waiver in
writing by each party hereto at or before the Effective Time, of each of the
following conditions:
(a) Shareholder Approval. The Shareholders shall have duly
approved the transactions contemplated by this Agreement, to the extent
required pursuant to the requirements of the Company's articles of
incorporation and applicable Law.
(b) Purchase of Shares. The Purchaser shall have accepted for
payment and paid for Shares pursuant to the Offer in accordance with the terms
hereof; provided, that this condition shall be deemed to have been satisfied
with respect to Parent and the Purchaser if the Purchaser fails to accept for
payment or pay for Shares pursuant to the Offer in violation of the terms of
the Offer.
(c) Injunctions; Illegality. The consummation of the Merger shall
not be restrained, enjoined or prohibited by any order, judgment, decree,
injunction or ruling of a court of competent jurisdiction or any Governmental
Entity, and there shall not have been any statute, rule or regulation
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enacted, promulgated or deemed applicable to the Merger by any Governmental
Entity that prevents the consummation of the Merger.
SECTION 7.02 Condition to Parent's and the Purchaser's Obligation to
Effect the Merger. The obligations of Parent and the Purchaser to consummate
the Merger are further subject to the fulfillment of the condition that all
actions contemplated by Section 2.10 hereto shall have been taken, which may be
waived in whole or in part by Parent or the Purchaser.
ARTICLE VIII
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, whether or not approval thereof by the shareholders of the Company has
been obtained:
(a) by the mutual written consent of Parent, the Purchaser and the
Company prior to the date on which Parent's designees constitute a majority of
the Board of Directors of the Company; or
(b) by the Company if the Company is not in material breach of any
of its representations, warranties, covenants or arrangements contained in this
Agreement and the Stock Option Agreement and if (i) the Purchaser fails to
commence the Offer as provided in Section 1.01 hereof, (ii) the Purchaser shall
not have accepted for payment and paid for Shares pursuant to the Offer in
accordance with the terms thereof on or before August 31, 1998 or (iii) the
Purchaser fails to purchase validly tendered Shares in violation of the terms
of the Offer or this Agreement; or
(c) by Parent or the Company if the Offer expires or is terminated
or withdrawn pursuant to its terms without any Shares being purchased
thereunder; provided, however, that Parent may terminate this Agreement
pursuant to this Section 8.01(c) upon the termination or withdrawal of the
Offer only if Parent's or the Purchaser's termination or withdrawal of the
Offer is not in violation of the terms of this Agreement or the Offer; or
(d) by Parent or the Company if any court or other Governmental
Entity shall have issued, enacted, entered, promulgated or enforced any order,
judgment, decree, injunction, or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, judgment, decree
injunction, ruling or other action shall have become final and nonappealable;
or
(e) by the Company if, prior to the purchase of Shares pursuant to
the Offer in accordance with the terms of this Agreement, (i) there shall have
occurred, on the part of Parent or the Purchaser, a material breach of any
representation, warranty, covenant or agreement contained in this Agreement
which is not curable or, if curable, is not cured within 30 days after written
notice of such breach is given by the Company to the party committing the
breach, except in any case, such failures which are not reasonably likely to
affect adversely Parent's or the Purchaser's ability to complete the Offer or
the Merger, or (ii) the Company enters into a definitive agreement with respect
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to a Superior Proposal as permitted under Section 6.09(a) hereof and after
complying with the provisions of Section 6.09(b) hereof and making the payments
referred to in Section 8.03(b) hereof; or
(f) by Parent if, prior to the purchase of Shares pursuant to the
Offer in accordance with the terms of this Agreement, (i) there shall have
occurred, on the part of the Company, a breach of any representation, warranty,
covenant or agreement contained in this Agreement which individually, or in the
aggregate, if not cured would be reasonably likely to have a Material Adverse
Effect on the Company and which is not curable or, if curable, is not cured
within the later of (x) 30 days after written notice of such breach is given by
Parent to the Company and (y) the satisfaction of all conditions to the Offer
not related to such breach or (ii) the Board of Directors of the Company or
committee thereof shall have withdrawn or modified (or shall have resolved to
withdraw or modify), in a manner adverse to Parent, its approval or
recommendation of this Agreement or any of the transactions contemplated hereby
and the Board of Directors of the Company and such committee shall not have
fully reinstated such approval or recommendations within three business days
after a request by Parent to so reinstate or shall have recommended (or
resolved to recommend) an Acquisition Transaction (other than the Offer and
Merger) to the shareholders of the Company; or
(g) by Parent if it is not in material breach of its obligation
hereunder or under the Offer and no Shares shall have been purchased pursuant
to the Offer on or before August 31, 1998.
SECTION 8.02 Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void and have no effect, without any liability on the part of any party
or its directors, officers or shareholders of the Company, other than the
provisions of this Section 8.02, Section 8.03 and the last sentence of Section
6.02, which shall survive any such termination. Nothing contained in this
Section 8.02 shall relieve any party from liability for any breach of this
Agreement or the Confidentiality Agreement.
SECTION 8.03 Fees and Expenses.
(a) Subject to Section 8.03(b), whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Offer, this
Agreement, the Stock Option Agreement and the transactions contemplated by this
Agreement and the Stock Option Agreement shall be paid by the party incurring
such expenses.
(b) Parent and the Company agree that (i) in the event this
Agreement is terminated pursuant to Section 8.01(e)(ii) or (ii) in the event
that (x) any person shall have publicly disclosed a proposal regarding an
Acquisition Transaction and (y) following such disclosure, either (a) August
31, 1998 occurs without the shareholder approval of the Merger being obtained
(other than as a result of a material breach hereof by Parent or the Purchaser
that has not been cured within the time period set forth in Article VIII of
this Agreement) or (b) the Company breaches (prior to the time that the
designees of the Purchaser constitute a majority of the Board of Directors of
the Company) any of its material obligations hereunder and does not cure such
breach within the time period set forth in Article VIII of this Agreement or
(c) the Agreement is terminated pursuant to Section 8.01(f)(ii), and (z) not
later than twelve months after any such termination the Company shall have
entered into a definitive agreement for an Acquisition Transaction, or an
Acquisition
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<PAGE> 36
Transaction shall have been consummated, then the Company shall pay to an
account designated by Parent a termination fee, in immediately available funds,
of $1,000,000 (the "Termination Fee") and shall reimburse Parent for
out-of-pocket fees and expenses (but in no event greater than $350,000)
reasonably incurred by Parent and the Purchaser in connection with this
Agreement, the Offer and the Merger. The Termination Fee and any reimbursement
of expenses shall be paid prior to, and shall be a condition to the
effectiveness of, any termination of this Agreement referred to in clause (i)
above or on the next business day after the earlier of such Acquisition
Transaction being consummated or a definitive agreement for such Acquisition
Transaction being entered into, if such fee and expenses are payable as a
result of clause (ii) above.
SECTION 8.04 Amendment. Subject to Section 1.03(c), this Agreement
may be amended by the Company, Parent and the Purchaser at any time before or
after any approval of this Agreement by the shareholders of the Company but,
after any such approval, no amendment shall be made which decreases the Merger
Price or which adversely affects the rights of the shareholders of the Company
hereunder without the requisite affirmative vote of such shareholders;
provided, however, that this Agreement shall not be amended after the time, if
ever, that the Purchaser's designees constitute a majority of the Board of
Directors of the Company. This Agreement may not be amended except by an
instrument in writing signed on behalf of all the parties.
SECTION 8.05 Extension; Waiver. Subject to Section 1.03(c), at any
time prior to the Effective Time, the parties hereto may (i) extend the time
for the performance of any of the obligations or other acts of any other party
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein by any other party or in any document, certificate or writing
delivered pursuant hereto by any other party or (iii) waive compliance with any
of the agreements of any other party or with any conditions to its own
obligations, it being understood that the other conditions set forth in Annex I
may be waived by Parent and the Purchaser without the consent of the Company.
Any agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Effective Time.
SECTION 9.02 Entire Agreement; Assignment.
(a) This Agreement (including the documents and the instruments
referred to herein) and the Confidentiality Agreement constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and
thereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior
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<PAGE> 37
written consent of the other party. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. This Agreement is not
intended to confer upon any person other than Parent, the Purchaser and the
Company any rights or remedies hereunder.
SECTION 9.03 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
SECTION 9.04 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered in person, by overnight courier or facsimile to
the respective parties as follows:
If to Parent or the Purchaser:
Snap-on Incorporated
10801 Corporate Drive
Kenosha, Wisconsin 53141
Attention: Susan F. Marrinan
Fax: (414) 656-5165
with a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Attention: William R. Kunkel
Fax: (312) 407-0411
If to the Company:
Hein-Werner Corporation
2020 Pewaukee Road
Waukesha, Wisconsin 53188
Attention: Joseph L. Dindorf
Fax: (414) 542-7890
with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Maurice J. McSweeney
Jay O. Rothman
Fax: (414) 297-4900
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<PAGE> 38
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.05 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Wisconsin, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.
SECTION 9.06 Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
SECTION 9.07 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 9.08 Obligation of Parent. Whenever this Agreement requires
the Purchaser or the Surviving Corporation to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent to cause the
Purchaser or the Surviving Corporation to take such action and a guarantee of
the performance thereof.
SECTION 9.09 Certain Definitions. As used in this Agreement:
(a) the term "affiliate", as applied to any person shall mean any
other person directly or indirectly controlling, controlled by, or under common
control with, that person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that person, whether through the
ownership of voting shares, by contract or otherwise;
(b) the term "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act); and
(c) the term "subsidiary" or "subsidiaries" means, with respect to
Parent, the Company or any other person, any corporation, partnership, joint
venture or other legal entity of which Parent, the Company or such other
person, as the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, stock or other equity interests the
holders of which are generally entitled to more than 50% of the vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
SECTION 9.10 SPECIFIC PERFORMANCE. THE PARTIES HERETO AGREE THAT
IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS
AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE
OTHERWISE BREACHED. IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE
ENTITLED TO AN INJUNCTION OR
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<PAGE> 39
INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY
THE TERMS AND PROVISIONS HEREOF IN ANY COURT OF THE UNITED STATES OR ANY STATE
HAVING JURISDICTION, THIS BEING IN ADDITION TO ANY OTHER REMEDY TO WHICH THEY
ARE ENTITLED AT LAW OR IN EQUITY.
SECTION 9.11 Interpretation. Unless the context requires otherwise,
all words used in this Agreement in the singular number shall extend to and
include the plural, all words in the plural number shall extend to and include
the singular, and all words in any gender shall extend to and include all
genders.
SECTION 9.12 No Third Party Beneficiary. Except as provided pursuant
to Section 6.11 hereof, the terms and provisions of this Agreement are intended
solely for the benefit of the parties hereto and their respective successors
and assigns and it is not the intention of the parties to confer third-party
beneficiary rights upon any other person.
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<PAGE> 40
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its respective officer thereunto duly authorized,
all as of the day and year first above written.
SNAP-ON INCORPORATED
("Parent")
By: /s/ Robert A. Cornog
----------------------------
Name: Robert A. Cornog
Title: Chairman, President and Chief
Executive Officer
SNAP-ON PACE COMPANY
(the "Purchaser")
By: /s/ Susan F. Marrinan
----------------------------
Name: Susan F. Marrinan
Title: Vice President and Secretary
HEIN-WERNER CORPORATION
(the "Company")
By: /s/ Joseph L. Dindorf
----------------------------
Name: Joseph L. Dindorf
Title: President and Chief Executive
Officer
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<PAGE> 41
ANNEX I
CONDITIONS TO THE OFFER. Notwithstanding any other provisions of the
Offer, the Purchaser shall not be required to accept for payment or pay for any
tendered Shares if (i) any applicable waiting period under the HSR Act has not
expired or terminated or (ii) the Minimum Condition has not been satisfied, and
the Purchaser may, subject to the terms of the Merger Agreement, amend the
Offer or postpone the acceptance for payment of tendered Shares if at any time
on or after the date of the Merger Agreement and before the expiration of the
Offer, any of the following events shall occur:
(a) there shall be threatened or pending any suit, action or
proceeding by a Governmental Entity against the Purchaser, Parent or the
Company (i) seeking to prohibit or impose any material limitations on Parent's
or the Purchaser's ownership or operation (or that of Parent's subsidiaries or
affiliates) of any or a material portion of their or the Company's businesses
or assets, or to compel Parent or the Purchaser or Parent's subsidiaries and
affiliates to dispose of or hold separate any material portion of the business
or assets of the Company or Parent and Parent's subsidiaries, in each case
taken as a whole, (ii) challenging the acquisition by Parent or the Purchaser
of any Shares under the Offer, seeking to restrain or prohibit the making or
consummation of the Offer or the Merger or the performance of any of the other
transactions contemplated by the Merger Agreement or the Stock Option
Agreement, or seeking to obtain from the Company, Parent or the Purchaser any
damages that are material in relation to the Company, (iii) seeking to impose
material limitations on the ability of the Purchaser, or render the Purchaser
unable, to accept for payment, pay for or purchase some or all of the Shares
pursuant to the Offer, the Merger or the Stock Option Agreement, or (iv)
seeking to impose material limitations on the ability of the Purchaser or
Parent effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by it on
all matters properly presented to the Company's shareholders; or
(b) any Law is enacted, entered, enforced, promulgated or deemed
applicable to the Offer or the Merger or the transactions contemplated by the
Stock Option Agreement, or any other action is taken by any Governmental
Entity, other than the application to the Offer, the Merger or the transactions
contemplated by the Stock Option Agreement of applicable waiting periods under
the HSR Act, that results, directly or indirectly, in any of the consequences
referred to in clauses (i) through (iv) of paragraph (a) above; or
(c) (i) the Board of Directors of the Company or any committee
thereof withdraws or modifies in a manner adverse to Parent or the Purchaser
its approval or recommendation of the Offer, the Merger, the Merger Agreement
or the Stock Option Agreement or approves or recommends any Acquisition
Transaction, or (ii) the Company enters into any agreement to consummate any
Acquisition Transaction; or
(d) any of the representations and warranties of the Company set
forth in the Merger Agreement that are qualified as to Material Adverse Effect
are not true and correct, or any such representations and warranties that are
not so qualified are not true and correct in any respect (when taken together
with all other failures of such representations and warranties to be true and
correct) that would have a Material Adverse Effect on the Company, in each case
at the date of the Merger Agreement or at the scheduled expiration of the Offer
(as though made as of such date, except that
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<PAGE> 42
those representations and warranties that address matters only as of a
particular date shall remain true and correct as of such date); or
(e) the Merger Agreement shall have been terminated in accordance
with its terms; or
(f) the Company shall have failed to perform any obligation or to
comply with any agreement or covenant to be performed or complied with by it
under the Merger Agreement or the Stock Option Agreement other than any failure
which would not have, either individually or in the aggregate, a Material
Adverse Effect on the Company; or
(g) any person acquires beneficial ownership (as defined in Rule
13d-3 promulgated under the Exchange Act) of at least 20% of the outstanding
Shares (other than any person not required to file a Schedule 13D under the
rules promulgated under the Exchange Act or other than pursuant to the Stock
Option Agreement); or
(h) there shall have occurred, and continued to exist, (i) any
general suspension of, or limitation on prices for, trading in securities on
the New York Stock Exchange or the American Stock Exchange, (ii) a declaration
of a banking moratorium or any suspension of payments in respect of banks in
the United States, (iii) a commencement of a war, armed hostilities or other
national or international calamity directly involving the United States (other
than an action involving solely United Nations personnel or support of United
Nations' personnel), or (iv) in the case of any of the events described in the
foregoing clauses (i) through (iii) existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of Parent and the Purchaser
and may be asserted by Parent or the Purchaser regardless of the circumstances
giving rise to any such condition (including any action or inaction by Parent
or the Purchaser not in violation of the Merger Agreement) and may be waived by
Parent or the Purchaser in whole or in part at any time and from time to time
in their sole discretion. The failure by Parent or the Purchaser at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
The capitalized terms used in this Annex I shall have the meanings set
forth in the Agreement to which it is annexed, except that the term "Merger
Agreement" shall be deemed to refer to the Agreement to which this Annex I is
appended.
I-2
<PAGE> 1
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 27, 1998 (this "Agreement"),
by and among Snap-on Incorporated, a Delaware corporation ("Parent"), Snap-on
Pace Company, a Wisconsin corporation and a wholly-owned subsidiary of Parent
(the "Purchaser"), and Hein-Werner Corporation, a Wisconsin corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, the Purchaser and the Company are entering into an Agreement
and Plan of Merger (as such agreement may hereafter be amended from time to
time, the "Merger Agreement"; capitalized terms used but not defined in this
Agreement shall have the meanings ascribed to them in the Merger Agreement),
which provides, upon the terms and subject to the conditions thereof, for (i)
the commencement by the Purchaser of a tender offer (the "Offer") to purchase,
among other things, all of the issued and outstanding shares of the common
stock, $1.00 par value, of the Company ("Common Stock") at a price per share
equal to the Offer Price and (ii) the subsequent merger of the Purchaser and
the Company (the "Merger"), whereby each share of Common Stock, other than
shares owned directly or indirectly by Parent, the Purchaser or the Company and
other than Dissenting Shares, will be converted into the right to receive in
cash the Offer Price applicable thereto; and
WHEREAS, as a condition to the willingness of the parties to enter
into the Merger Agreement, Parent and the Purchaser have required that the
Company agree, and in order to induce Parent and the Purchaser to enter into
the Merger Agreement, the Company has agreed, to grant the Purchaser an option
to purchase shares of Common Stock, upon the terms and subject to the
conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and in the Merger Agreement, the parties hereto agree as follows:
ARTICLE I
THE STOCK OPTION
SECTION 1.1. Grant of Stock Option. Subject to the terms and
conditions set forth herein, the Company hereby grants to the Purchaser an
irrevocable option (the "Stock Option") to purchase that number of newly issued
shares of Common Stock (the "Option Shares") equal to the number of shares of
Common Stock that, when added to the number of shares of Common Stock owned by
the Purchaser and its affiliates immediately following consummation of the
Offer, shall constitute 90%
<PAGE> 2
of the shares of Common Stock then outstanding on a fully diluted basis (giving
effect to the issuance of the Option Shares) at a purchase price per Option
Share equal to the Offer Price.
SECTION 1.2. Exercise of Stock Option. (a) Subject to the conditions
set forth in Section 2.1, the Stock Option may be exercised by the Purchaser,
in whole but not in part, at any one time after the occurrence of the Exercise
Event (as defined below) and prior to the Termination Date (as defined below).
(b) The "Exercise Event" shall occur for purposes of this Agreement
upon the Purchaser's acceptance for payment pursuant to the Offer of shares of
Common Stock constituting at least 66-2/3% but less than 90% of the shares of
Common Stock then outstanding on a fully diluted basis.
(c) Except as provided in the last sentence of this Section 1.2.(c),
the "Termination Date" shall occur for purposes of this Agreement upon the
earliest to occur of:
(i) the Effective Time; and
(ii) the termination of the Merger Agreement in accordance
with the terms and conditions thereof.
Notwithstanding the occurrence of the Termination Date, the Purchaser shall be
entitled to purchase the Option Shares if it has exercised the Stock Option in
accordance with the terms hereof prior to such occurrence, and the occurrence
of the Termination Date shall not affect any rights hereunder which by their
terms do not terminate or expire prior to or as of such date.
(d) In the event the Purchaser wishes to exercise the Stock Option,
the Purchaser shall send to the Company a written notice (an "Exercise Notice",
the date of which notice is referred to herein as the "Notice Date") specifying
the denominations of the certificate or certificates evidencing the Option
Shares which the Purchaser wishes to receive, the place for the closing of the
purchase and sale pursuant to the Stock Option (the "Closing") and a date not
earlier then three (3) business days nor later then ten (10) business days from
the Notice Date for the Closing (the "Closing Date"); provided, however, that
(i) if the Closing cannot be consummated by reason of any applicable Laws or
Orders, the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which such restriction on consummation has
expired or been terminated and (ii) without limiting the foregoing, if prior
notification to or approval of any Governmental Entity is required in
connection with such purchase, the Purchaser and the Company shall promptly
file the required notice or application for approval and shall cooperate in the
expeditious filing of such notice or application, and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date
on which, as the case may be, (A) any required notification period has expired
or been terminated or (B) any required approval has been obtained, and in
either event, any requisite waiting period has expired or been terminated. The
Company shall, within two (2) business days after receipt of the Exercise
Notice, deliver written notice to the Purchaser specifying the number of Option
Shares and the aggregate purchase price therefor.
2
<PAGE> 3
ARTICLE II
CLOSING
SECTION 2.1. Conditions to Closing. The obligation of the Company to
deliver Option Shares upon the exercise of the Stock Option is subject to the
following conditions:
(a) All waiting periods, if any, under the HSR Act applicable to the
issuance and delivery of the Option Shares hereunder shall have expired or have
been terminated; and
(b) There shall be no preliminary or permanent injunction or other
final, non-appealable judgment by a court of competent jurisdiction preventing
or prohibiting the exercise of the Stock Option or the issuance and delivery of
the Option Shares in respect of such exercise.
SECTION 2.2. Closing. (a) At the Closing, (i) the Company shall
deliver to the Purchaser a certificate or certificates evidencing the
applicable number of Option Shares (in the denominations specified in the
Exercise Notice), each such certificate or certificates being duly executed by
the Company and registered in the name of the Purchaser, and (ii) the Purchaser
shall purchase each such Option Share from the Company at the Offer Price.
Payment by the Purchaser of the Offer Price for each of the Option Shares shall
be made by wire transfer of immediately available funds to an account
designated by the Company, in an amount equal to the sum of the product of (i)
the Offer Price and (ii) the total number of Option Shares delivered at the
Closing.
(b) The Company shall pay all expenses, and any and all Federal,
state and local taxes and other charges, that may be payable in connection with
the preparation, issuance and delivery of stock certificates under this Section
2.2.
(c) Certificates evidencing Option Shares delivered hereunder may
include legends legally required including the legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
It is understood and agreed that the foregoing legend shall be removed by
delivery of substitute certificate(s) without such legend upon the sale of the
Option Shares pursuant to a registered public offering or Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), or any other sale as
a result of which such legend is no longer required.
SECTION 2.3. Adjustments Upon Changes in Capitalization. In the
event of any change in the number of issued and outstanding shares of Common
Stock by reason of any stock dividend, subdivision, merger, recapitalization,
combination, conversion or exchange of shares, or any other change in the
corporate or capital structure of the Company (including, without limitation,
the declaration or payment of an extraordinary dividend of cash or securities)
which would have the
3
<PAGE> 4
effect of diluting or otherwise adversely affecting the Purchaser's rights and
privileges under this Agreement, the number and kind of the Option Shares and
the consideration payable in respect of the Option Shares shall be
appropriately and equitably adjusted to restore to the Purchaser its rights and
privileges under this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and the Purchaser
(except as otherwise disclosed in writing on the date hereof) as follows:
SECTION 3.1. Organization; Authority Relative to this Agreement. The
Company is a corporation duly organized and validly existing under the laws of
the State of Wisconsin. The Company has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of the Company. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due and valid authorization, execution and delivery by Parent and
the Purchaser, constitutes a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally, and by general equitable principles.
SECTION 3.2. Authority to Issue Shares. The Company has taken all
necessary corporate action to authorize and reserve and permit it to issue, and
at all times from the date hereof through the Termination Date shall have
reserved, all the Option Shares issuable pursuant to this Agreement. All of the
shares of Common Stock issuable under the Stock Option, upon their issuance and
delivery in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable (except as otherwise
provided in Section 180.0622(2)(b) of the WBCL), will be delivered free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on the Purchaser's voting rights,
charges, adverse rights and other encumbrances of any nature whatsoever (other
than this Agreement) and will not be subject to any preemptive rights. Upon
the delivery to the Purchaser by the Company of a certificate or certificates
evidencing the Option Shares, the Purchaser will receive good, valid and
marketable title to the Option Shares.
ARTICLE IV
COVENANTS OF THE COMPANY
SECTION 4.1. Further Action. The Company shall use its commercially
reasonable efforts to take, or cause to be taken, all appropriate action, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate and make effective the
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transactions contemplated hereunder, including, without limitation, using all
reasonable efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Entities.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser hereby represent and warrant to the Company
as follows:
SECTION 5.1. Organization; Authority Relative to this Agreement.
Each of Parent and the Purchaser is a corporation duly organized and validly
existing under the laws of the jurisdiction of its incorporation. Each of
Parent and the Purchaser has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and the Purchaser and the consummation by Parent and
the Purchaser of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of Parent and
the Purchaser. This Agreement has been duly and validly executed and delivered
by Parent and the Purchaser and, assuming the due and valid authorization,
execution and delivery by the Company, constitutes a valid and binding
obligation of Parent and the Purchaser, enforceable against each of Parent and
the Purchaser in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally, and by general
equitable principles.
SECTION 5.2. Distribution. Any Option Shares the Purchaser purchases
pursuant to this Agreement are being purchased for investment purposes only and
not with a view to any public distribution thereof.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Amendment. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto.
SECTION 6.2. Waiver. Any party hereto may (a) extend the time for or
waive compliance with the performance of any obligation or other act of any
other party hereto or (b) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 6.3. Fees and Expenses. Except as otherwise provided herein
or in Section 8.03 of the Merger Agreement, all costs, fees and expenses
incurred in connection with this Agreement shall be paid by the party incurring
such expenses.
5
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SECTION 6.4. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by telecopy or by overnight courier (providing
proof of delivery) to the respective parties at their addresses as specified in
Section 9.04 of the Merger Agreement.
SECTION 6.5. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner to the fullest extent permitted by applicable Law in order
that the transactions contemplated hereby may be consummated as originally
contemplated to the fullest extent possible.
SECTION 6.6. Assignment; Binding Effect; Benefit. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned, in whole or in part, by operation of law or otherwise, by any of the
parties hereto without the prior written consent of the other parties. This
Agreement shall be binding upon, inure to the benefit of, and be enforceable
by, the parties hereto and their respective successors and permitted assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing
in this Agreement, express or implied, is intended to confer on any person
other than the parties hereto or their respective successors and permitted
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
SECTION 6.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Wisconsin, without giving
effect to the principles of conflicts of laws thereof.
SECTION 6.8. ENFORCEMENT. THE PARTIES AGREE THAT IRREPARABLE DAMAGE
WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT
PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED.
IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR
INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY
THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY COURT OF THE UNITED STATES OR
ANY STATE HAVING JURISDICTION, THIS BEING IN ADDITION TO ANY OTHER REMEDY TO
WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.
SECTION 6.9. Headings. The descriptive headings contained in this
Agreement are included for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 6.10. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each
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<PAGE> 7
of the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 6.11. Entire Agreement. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, all as of
the date first written above.
SNAP-ON INCORPORATED
("Parent")
By: /s/ Robert A. Cornog
--------------------------------
Name: Robert A. Cornog
Title: Chairman, President and
Chief Executive Officer
SNAP-ON PACE COMPANY
(the "Purchaser")
By: /s/ Susan F. Marrinan
--------------------------------
Name: Susan F. Marrinan
Title: Vice President and
Secretary
HEIN-WERNER CORPORATION
(the "Company")
By: /s/ Joseph L. Dindorf
--------------------------------
Name: Joseph L. Dindorf
Title: President and Chief
Excecutive Officer
8
<PAGE> 1
EMPLOYMENT AND CONSULTING AGREEMENT
THIS AGREEMENT, made of the 27th day of April, 1998, by and
between Snap-on Incorporated, a Delaware corporation ("SSS"), Hein-Werner
Corporation, a Wisconsin corporation ("HHH") and Joseph L. Dindorf (the
"Executive").
A. Contemporaneously with the execution of this
Agreement SSS and Snap-on Pace Company, a Wisconsin corporation ("Sub"), and a
wholly-owned subsidiary of SSS, are entering into an Agreement and Plan of
Merger (the "Merger Agreement") with HHH. The Merger Agreement provides for
the acquisition (the "Acquisition") by Sub of all of the issued and outstanding
shares of HHH.
B. Executive has been employed by HHH for many years and
is currently President and CEO of HHH. Executive's services are valuable to
the conduct of the business of HHH.
C. Because of, among other matters, Executive's
knowledge of HHH and the collision repair business, SSS desires that Executive
be available to SSS following the acquisition.
D. Executive is willing to be available to SSS and HHH
on the terms and conditions provided for herein.
E. Executive has previously entered into an agreement
with HHH dated January 27, 1984 (the "Agreement") pursuant to which Executive
would have been entitled, following the Acquisition and upon the termination of
Executive's employment with HHH, to a payment of approximately $1,200,000.
F. The Agreement has been recently amended by Amendment
No. 1 dated April 27, 1998 (the Agreement as amended is hereinafter referred to
as the "Employment Agreement") to provide that upon a "Change of Control of
Company" (as defined in the Employment Agreement), Executive will immediately
be entitled to receive a lump sum payment in the amount of $995,000.
In consideration of the covenants and agreements of the
parties herein contained, and subject to the condition that, pursuant to the
Merger Agreement, Sub shall acquire sufficient shares of HHH so that there is a
Change of Control of Company (the date of such acquisition being referred to
herein as the "SSS Acquisition Date"), the parties hereto agree as follows:
1. Employment of Executive
1.1. Employment and Duties. During the Employment Term
(as hereafter defined) HHH hereby agrees to employ Executive as President of
HHH, reporting directly to SSS's Senior Vice-President (presently Branko
Beronja), and Executive agrees to be so employed by HHH. In addition, without
any additional compensation to that provided hereunder,
<PAGE> 2
Executive shall assist in coordinating the collision repair business with other
businesses of SSS. Executive agrees during the Employment Term to devote
substantially his full business time and effort to the performance of his
duties hereunder, including, without limitation, cooperating in attracting and
retaining key employees of SSS and HHH, in accordance with such reasonable
standards expected of employees with comparable positions in SSS's organization
and as may be established from time to time by the Board of Directors of HHH.
SSS shall guarantee all HHH's monetary obligations under this Agreement.
1.2. Term. The term of Executive's employment hereunder
shall commence on the SSS Acquisition Date and shall continue until December
31, 1998 and may continue thereafter by mutual agreement of the parties (the
"Employment Term").
1.3. Compensation.
(a) Base Salary. As compensation for his
services hereunder, Executive shall receive a salary of
$25,000 per month, payable monthly.
(b) Fringe Benefits. Executive shall also be
entitled to receive all benefits presently received or
available to Executive as an executive of HHH, which include,
but are not limited to, the benefits set forth in Schedule I
hereto.
2. Consulting Services.
2.1. Services. During the Consulting Term (as hereinafter
defined) SSS agrees to retain Executive as a consultant to the collision repair
businesses of HHH and/or SSS. During the Consulting Term Executive agrees to
make himself available to consult with employees of SSS and its subsidiaries
with regard to the collision repair businesses upon reasonable notice and at
such reasonable times and places as shall be reasonably agreed to by Executive.
Executive shall not be required to perform consulting services for in excess of
1,500 hours during the 12- month period ending December 31, 1999 and for in
excess of 1,000 hours during the 12-month period ending December 31, 2000.
Executive shall not be required to provide consulting services during the
months of July or August.
2.2. Term. The term of Executive's service as a
consultant to SSS shall commence at the termination of the Employment Term and
shall continue until December 31, 2000 (the "Consulting Term").
2.3. Consulting Fees. As compensation for Executive's
services during the Consulting Term, consultant shall be entitled to receive a
monthly consulting fee equal to $20,835 per month each month of the Consulting
Term in the year 1999 (annually $250,000) and $16,670 per month for each month
of the Consulting Term in the year 2000 (annually $200,000). The monthly
consulting fee shall be pro-rated for any partial month. In addition, during
the Consulting Term SSS shall without cost to Executive provide to Executive
the benefits described in Schedule I, provided that Executive's continued
participation is possible under the
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<PAGE> 3
general terms and provisions of such benefit plans. In the event that
Executive's participation in any such plan is barred, SSS shall pay or cause to
be paid to Executive an amount equal to the total aggregate costs to SSS or
HHH, as applicable, of providing Executive with benefits under such plan were
his continued participation not barred.
3. Termination.
(a) Right to Terminate. During the Employment Term and
the Consulting Term (together the "Term"), (i) SSS shall be entitled to
terminate Executive's services hereunder (A) for Cause, (B) by reason of the
Executive's disability pursuant to Section 6, or (C) for any other reason, and
(ii) the Executive shall be entitled to terminate the Executive's services
hereunder (A) during the Employment Term only for Good Reason, or (B) during
the Consulting Term, for any reason. Any such termination shall be subject to
the procedures set forth in Section 7 and shall be subject to any consequences
of such termination set forth in this Agreement.
(b) Termination for Cause or Without Good Reason. If
there is a termination of Executive's services hereunder for Cause or due to
the Executive's voluntarily terminating Executive's services other than for
Good Reason, then the Executive shall be entitled to receive only Accrued
Benefits, and neither SSS nor HHH shall have any further obligations under this
Agreement.
(c) Termination Giving Rise to a Termination Payment. If
there is a termination of Executive's services hereunder by the Executive for
Good Reason, or by SSS other than by reason of (i) death, (ii) disability
pursuant to Section 6, or (iii) Cause, then the Executive shall be entitled to
receive, and SSS shall promptly pay, Accrued Benefits and, in lieu of further
base salary or consulting fees for periods following the Termination Date, as
liquidated damages and in consideration of the covenant of the Executive set
forth in Section 8(a), the Termination Payment pursuant to Section 4(a).
4. Payments Upon Termination.
(a) Termination Payment. (i) For purposes of this
Agreement, the "Termination Payment" shall be an amount equal to the
aggregate of (a) the product obtained by multiplying $25,000 by the
number of months, if any, remaining in the Employment Term following
the Termination Date, plus (b) the product obtained by multiplying
$20,835 by the number of months, if any, of the Consulting Term
remaining in the year 1999 following the Termination Date, plus (c)
the product obtained by multiplying $16,670 by the number of months,
if any, in the Consulting Term remaining in the year 2000 following
the Termination Date. The Termination Payment shall be paid to the
Executive in cash equivalent not later than ten business days after
the Termination Date. The Executive shall not be required to mitigate
the amount of the Termination Payment by securing other employment or
otherwise, nor will such Termination Payment be reduced by reason of
the Executive securing other employment
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<PAGE> 4
or for any other reason. The Termination Payment shall be in lieu of
any other severance payments, if any, to which the Executive may be
entitled under either SSS's or HHH's severance policies and practices.
(b) Additional Benefits. If there is a termination of
Executive's services hereunder and the Executive is entitled to Accrued
Benefits and the Termination Payment, then the Executive shall be entitled to
the following additional benefits: Until the end of the Consulting Term the
Executive shall continue to be covered, at the expense of SSS, by the most
favorable life insurance, hospitalization, medical and dental coverage and
other welfare benefits provided to the Executive and the Executive's family
immediately prior to the date Notice of Termination is given, provided that
Executive's continued participation is possible under the general terms and
provisions of such benefit plans. In the event that Executive's participation
in any such plan is barred, SSS shall pay or cause to be paid to Executive an
amount equal to the total aggregate costs to SSS or HHH as applicable, of
providing Executive with benefits under such plan were his continued
participation not barred.
5. Death. In the event of a termination of Executive's
services hereunder due to the Executive's death, the Executive's estate, heirs
and beneficiaries shall receive all the Executive's Accrued Benefits through
the Termination Date.
6. Termination for Disability. If, during the Term, as
a result of the Executive's disability due to physical or mental illness or
injury (regardless of whether such illness or injury is job-related), the
Executive shall have been absent from the Executive's duties hereunder on a
full-time basis for the entire period of 90 consecutive days, or for an
aggregate period of 182 days and, within thirty days after SSS notifies the
Executive in writing that it intends to terminate the Executive's services
(which notice shall not constitute the Notice of Termination contemplated
below), the Executive shall not have returned to the performance of the
Executive's duties hereunder on a full-time basis, then SSS may terminate
Executive services for purposes of this Agreement pursuant to a Notice of
Termination. If the Executive's services are terminated on account of the
Executive's disability in accordance with this Section, then the Executive
shall receive Accrued Benefits in accordance with Section 7(a) and shall remain
eligible for all benefits provided by any long term disability programs of SSS
or HHH in effect at the time SSS sends notice to the Executive of its intent to
terminate pursuant to this Section.
7. Termination Notice and Procedure. (a) Any
termination of Executive's services by SSS or the Executive shall be
communicated by written Notice of Termination to the Executive, if such Notice
is given by SSS, and to SSS, if such Notice is given by the Executive, all in
accordance with the following procedures and those set forth in Section 7:
(i) If such termination is for disability, Cause or Good
Reason, the Notice of Termination shall indicate in reasonable detail the facts
and circumstances alleged to provide a basis for such termination.
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<PAGE> 5
(ii) If the Notice is given by the Executive for Good
Reason, then the Executive may cease performing the Executive's services
hereunder on or after the date 15 days after the delivery of Notice of
Termination (unless the Notice of Termination is based upon clause (vii) of the
definition of "Good Reason" in Exhibit A, in which case the Executive may cease
performing his duties at the time the Executive's services are terminated) and
shall in any event cease services on the Termination Date, if any, arising from
the delivery of such Notice. If the Notice is given by SSS, then the Executive
may cease performing the services hereunder on the date of receipt of the
Notice of Termination, subject to the Executive's rights hereunder.
(iv) The recipient of any Notice of Termination shall
personally deliver or mail in accordance with Section 14 written notice of any
dispute relating to such Notice of Termination to the party giving such Notice
within fifteen days after receipt thereof. After the expiration of such fifteen
days, the contents of the Notice of Termination shall become final and not
subject to dispute.
8. Further Obligations of the Executive.
(a) Competition. In consideration of the continued
employment of Executive pursuant to this Agreement, Executive agrees that, in
the event that (i) SSS or HHH terminates Executive's services, or (ii)
Executive terminates his services for any reason, the Executive shall not, for
a period commencing on the SSS Acquisition Date and ending on the later of
December 31, 2000 or two years from the applicable Termination Date, engage in
any Competitive Activity.
(b) Confidentiality. During and following the Term
hereof, the Executive shall hold in confidence and not directly or indirectly
disclose or use or copy or make lists of any Confidential Information, except
to the extent authorized in writing by a Senior Executive Officer of SSS or
required by any court or administrative agency, other than to an employee of
SSS or a person to whom disclosure is reasonably necessary or appropriate in
connection with the performance by the Executive of services hereunder.
"Secret or Confidential Information" shall mean secret or confidential
information of SSS or HHH (including secret or confidential information of
subsidiaries and affiliates), including but not limited to lists of
distributors and customers; identity of distributors and customers; identity of
prospective distributors and customers; contract terms; bidding information and
strategies; pricing methods; computer software; computer software methods and
documentation; hardware; salary information with respect to employees; product
design information; business plans, methods of operation; the procedures, forms
and techniques used in serving distributors and customers; all Intellectual
Property (as defined in the Merger Agreement); and all other documents or
information which are required to be maintained in confidence for continued
business success, provided that secret or confidential information shall not
include information reasonably available to the general public. All records,
files, documents and materials, or copies thereof, relating to the business of
SSS and its subsidiaries and affiliates which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of SSS
and shall be promptly returned to SSS
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upon termination of this Agreement. SSS shall be entitled to specific
performance and injunctive relief to enforce this Section 8.
9. Severability. The provisions of this Agreement shall
be regarded as divisible, and if any of said provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, then
the validity and enforceability of the remainder of such provisions or parts
hereof and the applicability thereof shall not be affected thereby.
10. Amendment. This Agreement may not be amended or
modified at any time except by written instrument executed by SSS and the
Executive.
11. Withholding. SSS or HHH, as the case may be, shall
be entitled to withhold from amounts to be paid to the Executive hereunder any
federal, state or local withholding or other taxes or charges which it is from
time to time required to withhold; provided, that the amount so withheld shall
not exceed the minimum amount required to be withheld by law. SSS shall be
entitled to rely on an opinion of nationally recognized tax counsel if any
question as to the amount or requirement of any such withholding shall arise.
12. Certain Rules of Construction. No party shall be
considered as being responsible for the drafting of this Agreement for the
purpose of applying any rule construing ambiguities against the drafter or
otherwise. No draft of this Agreement shall be taken into account in
construing this Agreement. Any provision of this Agreement which requires an
agreement in writing shall be deemed to require that the writing in question be
signed by the Executive and an authorized representative of SSS.
13. Governing Law; Resolution of Disputes. (a) This
Agreement and the rights and obligations hereunder shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin
(excluding any choice of law rules that may direct the application of the laws
of another jurisdiction) except that Section 13(b) shall be construed in
accordance with the Federal Arbitration Act.
(b) Any dispute arising out of this Agreement shall be
determined by arbitration under the rules of the American Arbitration
Association then in effect (but subject to any evidentiary standards set forth
in this Agreement), in which case both parties shall be bound by the
arbitration award. The venue for the arbitration shall be Milwaukee, Wisconsin
or, at the Executive's election, if the Executive is no longer residing or
working in the Milwaukee, Wisconsin metropolitan area, in the judicial district
encompassing the city in which the Executive resides. The parties consent to
personal jurisdiction in each trial court in the selected venue having subject
matter jurisdiction notwithstanding their residence or situs, and each party
irrevocably consents to service of process in the manner provided hereunder for
the giving of notices.
14. Notice. Notices given pursuant to this Agreement
shall be in writing and, except as otherwise provided by Section 7(a)(iii),
shall be deemed given when actually received
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by the Executive or actually received by SSS's Secretary or any officer of SSS
other than the Executive. If mailed, such notices shall be mailed by United
States registered or certified mail, return receipt requested, addressee only,
postage prepaid, if to SSS, to SSS, Attention: Vice President and General
Counsel, 10801 Corporate Drive, P.O. Box 1430, Kenosha, Wisconsin 53141-1430,
or if to the Executive, at the address set forth below the Executive's
signature to this Agreement, or to such other address as the party to be
notified shall have theretofore given to the other party in writing.
15. Definitions. The following terms are used in this
Agreement as defined in Exhibit A:
Accrued Benefits
Cause
Competitive Activity
Good Reason
Person
Termination Date
16. No Waiver. The Executive's or SSS's failure to
insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or SSS may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
17. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of SSS and its successors and assigns and
Executive and his heirs, executors, administrators and legal representatives.
18. Headings. The headings herein contained are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
SNAP-ON INCORPORATED
By: /s/ Joseph L. Dindorf
----------------------------------------
President and Chief Executive Officer
Attest: /s/ Maurice J. McSweeney
----------------------------------------
Secretary
HEIN-WERNER CORPORATION
By: /s/Reinald D. Liegel
----------------------------------------
Senior Vice President
EXECUTIVE
/s/ Joseph L. Dindorf
------------------------------------------------
Joseph L. Dindorf
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<PAGE> 9
SCHEDULE I
HHH FRINGE BENEFITS
1. Health and Dental Insurance for the benefit of Executive and
Executive's Family.
2. Use of existing "company" automobile.
3. Term Life Insurance with death benefit of not less than $400,000
payable to Executive's estate or to such other beneficiary as
Executive shall from time to time designate in a notice to SSS.
4. Accidental Death and Disability Insurance in the amount of not less
than $400,000 payable in the event of Executive's death to Executive's
estate or such other beneficiary as Executive shall from time to time
designate in a notice to SSS.
5. Travel [Life] Insurance in the amount of not less than $375,000
payable to Executive's Estate or such other beneficiary as Executive
shall from time to time designate in a notice to SSS.
6. Long Term Disability Insurance providing for a monthly benefit of not
less than $14,000 per month for the remaining Term of this agreement
and on terms not less favorable to Executive than the Long Term
Disability Insurance Policy presently provided by HHH.
7. Reimbursement of authorized out-of-pocket expenses incurred by
Executive in the performance of services under this Agreement.
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Exhibit A
CERTAIN DEFINED TERMS
(a) Accrued Benefits. The term "Accrued Benefits" shall
include the following amounts, payable as described herein: (i) all earned and
unpaid base salary and consulting fees for the time period ending with the
Termination Date; (ii) reimbursement for any and all monies advanced in
connection with the Executive's services for reasonable and necessary expenses
incurred by the Executive on behalf of SSS or HHH and its Affiliates for the
time period ending with the Termination Date; (iii) any and all other base
salary and consulting fees earned through the Termination Date and deferred at
the election of the Executive or pursuant to any deferred compensation plan
then in effect; and (iv) all other payments and benefits to which the Executive
(or in the event of the Executive's death, the Executive's surviving spouse or
other beneficiary) may be entitled or under the terms of any benefit plan in
which Executive is entitled to participate through the Termination Date.
Payment of Accrued Benefits shall be made promptly in accordance with SSS's
prevailing practice with respect to clauses (i) and (ii) or, with respect to
clauses (iii) and (iv), pursuant to the terms of the benefit plan or practice
establishing such benefits.
(b) Cause. SSS may terminate the Executive's services
hereunder for "Cause" only if the conditions set forth in paragraphs (i) and
(ii) have been met and SSS otherwise complies with this Agreement:
(i) (A) the Executive has committed any act of
fraud, embezzlement or theft in connection with the Executive's duties
hereunder or in the course of performing duties for SSS hereunder; (B)
the Executive has grossly and repeatedly failed to perform the
Executive's duties hereunder (other than any such failure resulting
from incapacity due to physical or mental illness or injury,
regardless of whether such illness or injury is job-related), which
shall not have been remedied within 30 days after the Chief Executive
Officer of SSS has delivered a written notice from SSS specifying such
failure; (C) the Executive has willfully engaged in illegal conduct or
gross misconduct that is materially and demonstrably injurious to SSS;
(D) the Executive has willfully and wrongfully disclosed any
Confidential Information; or (E) the Executive has engaged in any
Competitive Activity.
For purposes of this provision, (1) no act or failure
to act on the part of the Executive shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or
omission was in the best interests of SSS and (2) any act, or failure
to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer of SSS or based upon the advice of counsel
for SSS shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of SSS.
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(ii) SSS terminates the Executive's employment by
delivering a Notice of Termination to the Executive.
(c) Competitive Activity. The Executive shall engage in
a "Competitive Activity" if the Executive (i) engages or becomes interested in
any capacity, directly or indirectly (whether as proprietor, stockholder,
director, partner, employee, consultant or any other capacity) in any business
enterprise worldwide that engages in substantial competition with the collision
repair business of SSS or HHH, or any of their subsidiaries; provided, however,
that owning stock or other securities of a competitor amounting to less than
one percent of the outstanding capital stock of such competitor shall not be a
"Competitive Activity" or (ii) recruits or solicits for employment any person
who is then employed by SSS or HHH.
(d) Good Reason. The Executive shall have a "Good
Reason" for termination of Executive's services hereunder if the Executive
determines in good faith that any of the following events has occurred:
(i) any material breach of this Agreement by SSS,
including specifically any breach by SSS of its agreements contained
in Section 1, Section 2 or Section 4, other than an isolated,
inadvertent failure not occurring in bad faith that if not remedied
within 30 days after receipt of notice thereof given by the Executive;
(ii) any reduction in the Executive's base salary
or consulting fees, or benefits (or payments in lieu thereof), to be
provided to Executive pursuant to this Agreement;
(iii) during the Employment Term, a material
adverse change, without the Executive's prior written consent, in the
assignment to Executive or any duties or responsibilities inconsistent
in any material respect with Executive's position, duties and
responsibilities set forth in Section 1.1 of this Agreement, but
excluding for this purpose an isolated, insubstantial and inadvertent
event not occurring in bad faith that SSS remedies within 30 days
after receipt of notice thereof given by the Executive;
(iv) the relocation of the Executive's principal
place of employment or performance of consulting services to a
location outside of Waukesha, Milwaukee or Kenosha Counties,
Wisconsin; or
(v) SSS requires the Executive to travel on SSS
or HHH business to a materially greater extent than was required
during the 180-day period prior to the date of this Agreement.
Any election by the Executive to terminate Executive's services hereunder for
Good Reason shall not be deemed a voluntary termination of Executive's services
hereunder by the Executive for purposes of any other benefit or other plan.
A-3
<PAGE> 12
(e) Person. The term "Person" shall have the meaning
given in Section 3(a)(9) of the Act.
(f) Termination Date. Except as otherwise provided in
the Agreement, the term "Termination Date" means (i) if the Executive's
services are terminated by the Executive's death, the date of death; (ii) if
the Executive's services are terminated for purposes of this Agreement by
reason of disability pursuant to Section 7, thirty days after the Notice of
Termination is given; (iv) if the Executive's services are terminated by the
Executive voluntarily (other than for Good Reason), the date the Notice of
Termination is given; and (v) if the Executive's employment is terminated by
SSS (other than by reason of disability pursuant to Section 7) or by the
Executive for Good Reason, thirty days after the Notice of Termination is
given. Notwithstanding the foregoing,
(A) If the Executive shall in good faith give a Notice of
Termination for Good Reason and SSS notifies the Executive that a dispute
exists concerning the termination within the fifteen-day period following
receipt thereof, then the Executive may elect to continue the Executive's
services hereunder during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that the Executive terminated the Executive's services
hereunder for Good Reason in accordance with this Agreement, then the
Termination Date shall be the earlier of (1) the date on which the dispute is
finally determined, either (x) by mutual written agreement of the parties or
(y) in accordance with Section 14 or (2) the date of the Executive's death. If
the Executive so elects and it is thereafter determined that the Executive did
not terminate the Executive's services hereunder for Good Reason in accordance
with this Agreement, then the services of the Executive hereunder shall
continue after such determination as if the Executive had not delivered the
Notice of Termination asserting Good Reason and there shall be no Termination
Date arising out of such Notice. In either case, this Agreement continues,
until the Termination Date, if any, as if the Executive had not delivered the
Notice of Termination except that, if it is finally determined that the
Executive terminated the Executive's services hereunder for Good Reason in
accordance with this Agreement, then the Executive shall in no case be denied
the benefits described in Section 8 (including a Termination Payment) based on
events occurring after the Executive delivered the Executive's Notice of
Termination.
(B) Except as provided in paragraph (A) above, if the
party receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof and it is finally determined that termination of the
Executive's services for the reason asserted in such Notice of Termination was
not in accordance with this Agreement, then (1) if such Notice was delivered by
the Executive, then the Executive will be deemed to have voluntarily terminated
the Executive's services hereunder other than for Good Reason by means of such
Notice and (2) if delivered by SSS, then SSS will be deemed to have terminated
the Executive's services hereunder other than by reason of death, disability or
Cause by means of such Notice.
A-4
<PAGE> 1
HEIN-WERNER LOGO
MAY 4, 1998
Dear Shareholders:
On behalf of the Board of Directors of Hein-Werner Corporation (the
"Company"), I am pleased to inform you that on April 27, 1998 the Company
entered into a definitive Agreement and Plan of Merger (the "Merger Agreement")
with Snap-on Incorporated ("Snap-on") and Snap-on Pace Company, an indirect
wholly-owned subsidiary of Snap-on ("Purchaser"), pursuant to which Purchaser
has today commenced a tender offer to purchase all of the outstanding shares
(the "Shares") of the common stock of the Company at $12.60 per Share in cash
(the "Offer").
Following the successful completion of the Offer, upon approval by a
shareholder vote, if required, Purchaser will be merged with the Company (the
"Merger"), and all Shares not purchased pursuant to the Offer will be converted
into the right to receive $12.60 per Share in cash without interest (except any
Shares as to which the holder has properly exercised dissenters' rights).
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER
AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN
THE BEST INTERESTS OF, THE COMPANY AND ITS SHAREHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER ALL
OF THEIR SHARES.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the enclosed
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being filed with the Securities and Exchange Commission, including,
among other things, the opinion, dated April 27, 1998, of Credit Suisse First
Boston Corporation, the Company's financial advisor, that as of such date, the
$12.60 per Share cash consideration to be received by the holders of Shares in
the Offer and the Merger is fair to such holders from a financial point of view.
In addition to the attached Schedule 14D-9, also enclosed is the Offer to
Purchase, dated May 4, 1998, together with related materials, including a Letter
of Transmittal, to be used for tendering your Shares in the Offer. These
documents state the terms and conditions of the Offer and the Merger and provide
instructions as to how to tender your Shares. I urge you to read these documents
carefully in making your decision with respect to tendering your shares pursuant
to the Offer.
I appreciate very much the opportunity I have had to serve as the President
and Chief Executive Officer of the Company for the past 22 years. I hope you are
as pleased as I am that your investment in the Company has led to the
opportunity afforded by the Offer.
Sincerely,
[Joseph L. Dindorf Sig.]
Joseph L. Dindorf
President and Chief Executive Officer
<PAGE> 1
Snap-on Incorporated to Acquire Hein-Werner for $12.60 per Share
KENOSHA, Wisconsin April 28, 1998--Snap-on Incorporated (NYSE:SNA) and
Hein-Werner Corporation (ASE:HNW) of Waukesha, WI, jointly announced today that
the two companies have signed a definitive merger agreement pursuant to which
Snap-on will acquire all of the outstanding common stock of Hein-Werner at a
price of $12.60 per share in cash, representing a transaction value of
approximately $36 million. The transaction has been approved unanimously by the
Boards of Directors of both companies.
Under the terms of the merger agreement, a subsidiary of Snap-on will
promptly commence a tender offer for all outstanding shares of Hein-Werner
stock at a net price of $12.60 per share in cash. Such subsidiary also entered
into an option to purchase from Hein-Werner newly issued shares at the offer
price in an amount that, together with the shares owned by Snap-on and its
affiliates immediately after the tender offer, represents at least 90 percent
of the outstanding shares of Hein-Werner on a fully diluted basis. The option
becomes exercisable upon the closing of the tender offer. Any shares not
purchased pursuant to the tender offer or such option will be acquired in a
subsequent merger at a price of $12.60 per share in cash as soon as practicable
after completion of the tender offer.
Completion of the tender offer is subject to customary conditions,
including the acquisition by Snap-on of 66-2/3rds percent of Hein-Werner common
shares on a fully-diluted basis (without giving effect to the stock purchase
agreement described above), receipt of necessary governmental approvals and the
expiration of applicable waiting periods under the Hart-Scott-Rodino Act. The
merger agreement is not subject to a financing contingency.
"The proposed transaction is an excellent strategic fit," said Robert A.
Cornog, Snap-on Incorporated chairman, president and chief executive officer.
"It offers compelling synergies to Snap-on, and provides fair value to
Hein-Werner shareholders. Hein-Werner markets collision repair products that
employ state-of-the-art technology. In addition, the company has excellent
relationships with vehicle manufacturers and enjoys a strong international
presence, with approximately half of its revenues generated outside the United
States. Hein-Werner would complement Snap-on's recent acquisition of NuTech
Industries, Inc. (Brewco) in the area of collision repair technology."
"We think the agreement benefits both Hein-Werner and Snap-on," said
Joseph L. Dindorf, president and chief executive officer of Hein-Werner. "I am
personally committed to contributing to the success of Snap-on's collision
repair businesses, and Hein-Werner's management is looking forward to being
part of the Snap-on team as together we pursue exciting new growth
opportunities."
Credit Suisse First Boston Corporation acted as Hein-Werner's financial
advisor in connection with transaction.
Snap-on Incorporated is a $1.7 billion leading global developer,
manufacturer, and distributor of tool and equipment solutions for professional
technicians, motor service shop owners, specialty repair centers, origianl
equipment manufacturers, and industrial tool users worldwide. Product lines
include hand and power tools, diagnostics and shop equipment, tool storage
products, diagnostics software, and other solutions for the automotive service
industry.
CONTACT: Media contact: or Investor relations contact:
Richard Secor Lynn McHugh
414/656-5561 414/656/6488
<PAGE> 1
CREDIT SUISSE FIRST BOSTON LOGO
CREDIT SUISSE FIRST BOSTON CORPORATION
227 West Monroe Street
Telephone 312 750 3000
Chicago, IL 60606-5018
ANNEX A
Board of Directors
Hein-Werner Corporation
2210 Pewaukee Road
Waukesha, Wisconsin 53188
April 27, 1998
Dear Sirs:
You have asked us to advise you with respect to the fairness to the
stockholders of Hein-Werner Corporation (the "Company") from a financial point
of view of the consideration to be received by such stockholders pursuant to the
terms of the draft Agreement and Plan of Merger, dated as of April 26, 1998 (the
"Merger Agreement"), among the Company, Snap-on Incorporated (the "Parent") and
Snap-on Pace Company (the "Purchaser"). The Merger Agreement provides for the
commencement by the Purchaser of a tender offer (the "Offer") to purchase all of
the issued and outstanding shares of common stock of the Company, par value
$1.00 per share, together with associated rights (together, the "Shares"), at a
price per Share of $12.60, net to the seller in cash, followed by a merger (the
"Merger") of the Purchaser with and into the Company pursuant to which the
Company will become a wholly owned subsidiary of the Parent, with each remaining
outstanding Share to be converted into the right to receive $12.60 in cash. The
Company has also granted an irrevocable option (the "Option") to the Purchaser
to acquire that number of Shares, at a price of $12.60 per share, required to
control 90% of the fully diluted Shares outstanding (assuming the issuance of
the Shares pursuant to the Option), provided that the Purchaser has accepted for
payment pursuant to the Offer at least 66 2/3% but less than 90% of the Shares
outstanding prior to the exercise of the Option.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company, as well as the
Merger Agreement and the draft Stock Option Agreement, dated as of April 26,
1998. We have also reviewed certain other information, including financial
forecasts, provided to us by the Company and have met with the Company's
management to discuss the business and prospects of the Company.
We have also considered certain financial and stock market data of the
Company, and we have compared those data with similar data for other publicly
held companies in businesses similar to the Company and we have considered the
financial terms of certain other business combinations and other transactions
which have recently been effected. We also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company. In
addition, we have not been requested to make, and have not made, an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company, nor have we been furnished with any such evaluations or
appraisals. Our opinion is necessarily based upon financial, economic, market
and other conditions as they exist and can be evaluated on the date hereof. In
connection with our engagement, we approached a limited number of third parties,
after approval by the Company, to solicit indications of interest in a possible
acquisition of the Company and held preliminary discussions with certain of
these parties prior to the date hereof.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger.
A-1
<PAGE> 2
In the ordinary course of our business, we and our affiliates may actively
trade the debt and equity securities of both the Company and the Parent for our
and such affiliates' own accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors in connection with its consideration of the Offer and the Merger, and
does not constitute a recommendation to any stockholder as to whether or not
such stockholder should tender shares pursuant to the Offer or vote in favor of
the Merger and is not to be quoted or referred to, in whole or in part, in any
registration statement, prospectus or proxy statement, or in any other document
used in connection with the offering or sale of securities, nor shall this
letter be used for any other purposes, without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the consideration to be received by the stockholders of the Company
in the Offer and the Merger is fair to such stockholders from a financial point
of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
A-2
<PAGE> 1
AMENDMENT NO. 1
TO
AGREEMENT
AMENDMENT NO. 1 dated April 27, 1997 to AGREEMENT made and entered
into the 27th day of January, 1984 (the "Agreement") by and between Hein Werner
Corporation, a Wisconsin corporation (herewith called the "Company") and Joseph
L. Dindorf, President, Chief Executive Officer and a director of the Company
(herewith called "Officer").
A. The parties have negotiated and reached agreement on certain
amendments to the Agreement.
B. The parties desire to set forth herein the amendments to the
Agreement. In consideration of the premises, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. Paragraph 2 of the Agreement is hereby amended so that as amended
Paragraph 2 shall read as follows:
Payment to the Officer. In the event that there shall be a Change of
Control of the Company at a time when the Officer shall be an active
director and employee of the Company, the Officer shall be entitled to
receive upon such Change of Control of Company the amount of $995,000
payable immediately in cash upon such Change of Control of the
Company.
2. The Agreement is further amended by adding Paragraph 6 to read as
follows:
Inadvertent Overpayments. The Company and Officer intend that any
payment made in accordance with Paragraph 2 of this Agreement not
result in an "excess parachute payment" under Section 280G of the
Internal Revenue Code of 1986, as amended ("Code") or any successor
provision of the Code (to the extent that Section 280G or any
successor provision are applicable to this Agreement). Accordingly,
and notwithstanding any other provision of this Agreement, if any
portion of a payment made in accordance with Paragraph 2 of this
Agreement, when considered in conjunction with any other payment or
benefit under any other agreement with or plan of the Company or an
affiliate of the Company (in the aggregate, "Total Payments") is
conclusively
<PAGE> 2
determined to constitute an "excess parachute payment", then the
maximum payment to which the Officer is entitled to under this
Agreement shall be reduced such that the value of the aggregate Total
Payments that the Officer is entitled to receive shall be One Dollar
($1) less than the maximum amount which the Officer could receive
without becoming subject to the tax imposed by Section 4999 of the
Code (or any successor provision) or which the Company may pay without
loss of deduction under Section 280G of the Code (or any successor
provision). The excess of the Total Payments over the maximum payment
described in the preceding sentence shall constitute a loan from the
Company to the Officer to be repaid to the Company with interest,
compounded semi-annually, at an annual rate equal to 120 percent of
the applicable Federal short-term rate under Section 1274 of the Code
as of the date on which the payment under Paragraph 2 of this
Agreement was made, or such other interest rate as the Internal
Revenue Service may require with respect to the repayment of
inadvertent overpayments.
3. Terms defined in the Agreement are used herein with their defined
meanings. Except as amended hereby the Agreement shall be and remain in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as
of the day and year first above written.
/s/ JOSEPH L. DINDORF
------------------------------------
Joseph L. Dindorf ("Officer")
HEIN WERNER CORPORATION ("Company")
By /s/ REINALD D. LIEGEL
---------------------------------
Senior Vice President
-2-
<PAGE> 1
TRUST AGREEMENT BY AND BETWEEN
HEIN-WERNER CORPORATION AND
FIRSTAR TRUST COMPANY
This Agreement is made this 29th day of April by and between
HEIN-WERNER CORPORATION ("Company") and FIRSTAR TRUST COMPANY ("Trustee"):
WHEREAS, the Company is a party to an Agreement dated January 27,
1984, as amended by Amendment No. 1 dated April 27, 1998 (the "Agreement") by
and between the Company and Joseph L. Dindorf, the Company's President and Chief
Executive Officer; and
WHEREAS, the Agreement provides, inter alia, for a payment by the
Company to Mr. Dindorf in the amount of $995,000 upon a Change of Control of the
Company (as defined in the Agreement); and
WHEREAS, the Company wishes to establish a trust (hereinafter called
"Trust") and to contribute to the Trust assets that shall be held therein,
subject to the claims of the Company's Insolvency, as herein defined, until paid
to Joseph L. Dindorf or his estate (collectively referred to as the
"Participant") in such manner and at such times as specified in the Agreement;
and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the
Agreement as an unfunded plan maintained for the purpose of providing deferred
compensation for a "select group of management or highly compensated employees"
within the meaning of Title I of the Employee Retirement Income Security Act of
1974; and
WHEREAS, it is the intention of the Company to make contributions to
the Trust to provide itself with a source of funds to assist it in the meeting
of its liabilities under the Plan;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust.
(a) The Company hereby deposits with Trustee in trust $995,000 which
shall become the initial principal of the Trust to be held, administered and
disposed of by Trustee as provided in this Trust Agreement.
<PAGE> 2
(b) Except as provided in Sections 3 and 4 hereof, the Trust hereby
established is irrevocable.
(c) The Trust is intended to be a grantor trust, of which the Company
is the grantor, within the meaning of subpart E, part I, subchapter J, chapter
1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be
construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be
held by the Trustee separate and apart from other funds of the Company and shall
be used exclusively for the purpose of providing benefits to Participant under
the Agreement and for the Company's general creditors as herein set forth.
Participant shall have no preferred claim on, or any beneficial ownership
interest in, any asset of the Trust until such amount or asset is distributed
from the Trust in accordance with Section 2 herein. Any rights created under the
Agreement and this Trust Agreement shall be mere unsecured contractual rights of
Participant against the Company. Any assets held by the Trust will be subject to
the claims of the Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
Section 2. Payments to Participant.
(a) Trustee shall make a lump sum cash payment to Participant in the
amount of $995,000 at such time as Participant shall provide the Trustee with a
signed statement certifying that there has been a Change of Control of Company.
The Trustee shall make provision for the reporting and withholding of any
federal, state or local taxes that may be required to be withheld with respect
to the payment, and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld and paid
by the Company. To the extent not provided by Participant, the Company shall
provide the Trustee with such information as is necessary for the Trustee to
comply with any and all federal, state or local tax laws.
(b) Participant's entitlement to payment from the Trust to benefits
shall be conclusively presumed upon delivery of the certificate described in
Section 2(a) to the Trustee. The Trustee shall be under no duty or obligation to
review or otherwise verify the Participant's entitlement to the payment provided
for herein.
(c) If the principal of the Trust, and any earnings thereon, are not
sufficient to provide payment of the amount certified by Participant as being
payable in accordance with the Agreement, the Company shall pay such difference
at the same time as the Trustee makes payment from the Trust. Trustee shall
notify the Company if principal and earnings are not sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust
Beneficiary When the Company is Insolvent.
(a) Trustee shall cease payment of benefits to Participant if the
Company is Insolvent. The Company shall be considered "Insolvent" for purposes
of this Trust Agreement
2
<PAGE> 3
if (i) the Company is unable to pay its debts as they become due, or (ii) the
Company is subject to a pending proceeding as a debtor under the United States
Bankruptcy Code.
(b) At all times during the continuance of this Trust, the principal
and income of the Trust shall be subject to claims of general creditors of the
Company under federal and state law as set forth below.
(1) The Board of Directors and the Chief Executive of the Company
shall have the duty to inform Trustee in writing of the the Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to Trustee that the Company has become Insolvent, Trustee shall
determine whether the Company is Insolvent and, pending such determination,
Trustee shall discontinue payment of benefits to Participant.
(2) Unless Trustee has actual knowledge of the Company's Insolvency,
or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, Trustee shall have no duty
to inquire whether the Company is Insolvent. Trustee may in all events rely
on such evidence concerning the Company's solvency as may be furnished to
Trustee and that provides Trustee with a reasonable basis for making a
determination concerning the Company's solvency.
(3) If at any time Trustee has determined that the Company is
Insolvent, Trustee shall discontinue payments to Participant and shall hold
the assets of the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any rights as
general creditors of the Company with respect to benefits due under the Plan
or otherwise.
(4) Trustee shall resume the payment of benefits to Participant in
accordance with Section 2 of this Trust Agreement only after Trustee has
determined that the Company is not Insolvent (or is no longer Insolvent).
Section 4. Payments to the Company.
Except as provided in Section 3 and this Section 4 hereof, the Company
shall have no right or power to direct Trustee to return to the Company or to
divert to others any of the Trust assets. Notwithstanding the foregoing, the
Company may revoke the Trust and direct the Trustee to return Trust assets to
the Company in the event that a Change of Control of the Company does not occur
within one hundred eighty (180) days following the date on which this Trust is
established. Furthermore, at any time following the date on which the Trustee
has made payment to Participant under Section 2(a), the Company may direct the
Trustee to return any surplus funds to it.
Section 5. Investment Authority.
The Trustee shall invest Trust assets in a money market fund or other fixed
income security as directed by the Company. In the event that the Company does
not provide appropriate
3
<PAGE> 4
investment direction, the Trustee shall invest Trust assets in a money market or
similar short-term investment fund for the investment of cash reserves.
Section 6. Disposition of Income.
During the term of this Trust, all income received by the Trust, net
of expenses and taxes, shall be accumulated and reinvested until distributed to
Participant or the Company in accordance with Section 2, 3 and 4 of the Trust.
Section 7. Accounting by Trustee.
Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and Trustee. Unless waived, within one hundred twenty (120) days
following the close of each calendar year and within one hundred twenty (120)
days after the removal or resignation of Trustee, Trustee shall deliver to the
Company a written account of its administration of the Trust during such year or
during the period from the close of the last preceding year to the date of such
removal or resignation, setting forth all investments, receipts, disbursements
and other transactions effected by it, including a description of all securities
and investments purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being shown separately),
and showing all cash, securities and other property held in the Trust at the end
of such year or as of the date of such removal or resignation, as the case may
be.
Section 8. Responsibility of Trustee.
(a) Trustee shall act with the care, skill, prudence, and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; provided, however, that
Trustee shall incur no liability to any person (including liability to the
Company) for any action taken pursuant to a direction, request or approval given
by the Company or by the Participant which is contemplated by, and in conformity
with, the terms of the Plan or this Trust and is given in writing by the
Company. In the event of a dispute concerning the administration and operation
of the Trust, the Trustee may apply to a court of competent jurisdiction to
resolve the dispute.
(b) Trustee may consult with legal counsel with respect to any of its
duties or obligations hereunder.
(c) Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(d) Trustee shall have, without exclusion, all powers conferred on
Trustees by applicable law, unless expressly provided otherwise herein;
provided, however, that if an insurance policy is held as an asset of the Trust,
Trustee shall have no power to name a
4
<PAGE> 5
beneficiary of the policy other than the Trust, to assign the policy (as
distinct from conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any borrowing
against such policy.
(e) Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code.
(f) The Company agrees to fully indemnify and hold harmless the
Trustee for any claims, losses, liabilities, obligations or expenses, (including
reasonable attorneys' fees associated with any such claim, loss, liability,
obligation or expense) arising out of the Trustee's good faith performance of
its duties under this Agreement, including, without limitation, its reliance on
the Participant's certification described in Section 2(a) of this document or as
a result of making payment in accordance with the terms of said certification.
The Company acknowledges that Trustee shall have no duty to question or verify
the calculations provided in said certification or to determine the authenticity
of said certification.
Section 9. Compensation and Expenses of Trustee.
The Company shall pay all Trustee's administrative fees and expenses.
Section 10. Resignation and Removal of Trustee.
(a) Trustee may resign at any time by written notice to the Company,
which shall be effective ninety (90) days after receipt of such notice unless
the Company and Trustee agree otherwise.
(b) Trustee may be removed by the Company on ninety (90) days' notice
or upon shorter notice accepted by Trustee; provided that upon a Change of
Control of the Company, as defined herein, Trustee may not be removed by the
Company or its successor for two (2) years.
(c) Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets shall subsequently be transferred to the successor
Trustee. The transfer shall be completed within ninety (90) days after receipt
of notice of resignation, removal or transfer.
Section 11. Appointment of Successor.
(a) If Trustee resigns or is removed in accordance with Section 10
hereof, the Company may appoint a trust company, bank trust department or other
independent third party that has been granted corporate trustee powers under
state law, as the successor trustee. The appointment shall be effective when
accepted in writing by the new Trustee, who shall have all of the rights and
powers of the former Trustee, including ownership rights in the
5
<PAGE> 6
Trustee assets. The former Trustee shall execute any instrument necessary or
reasonably requested by the Company or the successor Trustee to evidence the
transfer.
(b) The successor Trustee need not examine the records and acts of any
prior Trustee and may retain or dispose of existing Trust assets, subject to
Sections 7 and 8 hereof. The successor Trustee shall not be responsible for, and
the Company shall indemnify and defend the successor Trustee from, any claim or
liability resulting from any action or inaction of any prior Trustee or from any
other past event, or any condition existing at the time it becomes successor
Trustee.
Section 12. Amendment or Termination.
(a) Subject to Section 12(c) below, this Trust Agreement may be
amended by a written instrument executed by Trustee and the Company.
Notwithstanding the foregoing, no such amendment shall conflict with the terms
of the Plan or shall make the Trust revocable.
(b) The Trust shall not terminate until the date on which Participant
has received payment of all benefits to which Participant is or may become
entitled pursuant to the terms of the Plan. Upon termination of the Trust any
assets remaining in the Trust shall be returned to the Company.
(c) Sections 1 through 14 of this Trust Agreement may not be amended
by the Company for two (2) years following a Change of Control of the Company,
as defined herein.
Section 13. Miscellaneous.
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Participant under this Trust Agreement may not
be anticipated, assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy, execution or other
legal or equitable process.
(c) This Trust Agreement shall be governed by and construed in
accordance with the laws of Wisconsin.
(d) For purposes of this Trust, Change of Control of the Company shall
mean "Change of Control of the Company" as defined in Section 1.B. of the
Agreement.
(e) The terms of this Trust Agreement shall inure to the benefit of
and be binding upon the Company, Participant, the successors and assigns of the
Company (including, without limitation, any successor or assign by reason of
merger, consolidation or reorganization of the Company) and the estate, heirs,
successors and assigns of Participant.
Section 14. Effective Date.
6
<PAGE> 7
The Trust Agreement shall be effective immediately upon execution.
HEIN-WERNER CORPORATION
By: /s/ REINALD D. LIEGEL
--------------------------
Senior Vice President
Attest: /s/ JAMES WILKE
----------------------
Assistant Secretary
FIRSTAR TRUST COMPANY
By: /s/ WILLIAM CARUSO
--------------------------
Assistant Vice President
Attest: /s/ YVONNE SIIRA
----------------------
Assistant Secretary
7
<PAGE> 1
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 15th day of
April, 1998, by and between Hein-Werner Corporation, a Wisconsin corporation
(hereinafter referred to as the "Company"), and Thomas F. Andreoli (hereinafter
referred to as the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is currently employed by the Company in
a key capacity, and the Executive's services are valuable to the conduct of the
business of the Company;
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that circumstances may arise in which a change in control of the
Company occurs, through acquisition or otherwise, thereby causing uncertainty
about the Executive's future employment with the Company without regard to the
Executive's competence or past contributions, which uncertainty may result in
the loss of valuable services of the Executive to the detriment of the Company
and its shareholders, and the Company and the Executive wish to provide
reasonable security to the Executive against changes in the Executive's
relationship with the Company in the event of any such change in control;
WHEREAS, the Company and the Executive desire that any
proposal for a change in control or acquisition of the Company will be
considered by the Executive objectively and with reference only to the best
interests of the Company and its shareholders; and
WHEREAS, the Executive will be in a better position to
consider the Company's best interests if the Executive is afforded reasonable
security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisition.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
<PAGE> 2
1. Definitions. The following terms are used in this
Agreement as defined in Exhibit A:
Act Covered Termination
Accrued Benefits Effective Date
Affiliate and Associate Employer
Annual Cash Compensation Good Reason
Cause Normal Retirement Date
Change in Control Notice of Termination
Code Person
Competitive Activity Termination Date
2. Termination or Cancellation Prior to the Effective
Date. The Employer and the Executive shall each retain the right to terminate
the employment of the Executive at any time prior to the Effective Date. If
the Executive's employment is terminated prior to the Effective Date, then this
Agreement shall be terminated and cancelled and of no further force or effect
and any and all rights and obligations of the parties hereunder shall cease.
In addition, this Agreement shall terminate upon the Executive ceasing to be an
employee of the Employer prior to a Change in Control unless the Executive can
reasonably demonstrate that such change in status occurred under circumstances
described in clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective
Date" in Exhibit A.
3. Employment Period. If the Executive is employed by
the Employer on the Effective Date, then the Company will, or will cause the
Employer to, continue thereafter to employ the Executive during the Employment
Period (as hereinafter defined), and the Executive will remain in the employ of
the Employer, in accordance with and subject to the terms and provisions of
this Agreement. For purposes of this Agreement, the term "Employment Period"
means a period (i) commencing on the Effective Date, and (ii) ending at 11:59
p.m. Milwaukee Time on the earlier of the first anniversary of such date or the
Executive's Normal Retirement Date.
4. Duties. During the Employment Period, the Executive
shall, in the most significant capacities and positions held by the Executive
at any time during the 180-day period preceding the Effective Date or in such
other capacities and positions as may be agreed to by the Company and the
Executive in writing, devote the Executive's best efforts and all of the
Executive's business time, attention and skill to the business and affairs of
the Employer, as such business and affairs now exist and as they may hereafter
be conducted.
5. Compensation. During the Employment Period, the
Executive shall be compensated as follows:
(a) The Executive shall receive, at reasonable intervals
(but not less often than monthly) and in accordance with such standard policies
as may be in effect immediately prior to the Effective Date, an annual base
salary in cash equivalent of not less than twelve times the
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<PAGE> 3
Executive's highest monthly base salary (which shall include any amounts
credited to the Executive for the purchase of annuity contracts and related tax
offset bonuses) for the twelve-month period immediately preceding the month in
which the Effective Date occurs or, if higher, an annual base salary at the
rate in effect immediately prior to the Effective Date (which base salary
shall, unless otherwise agreed in writing by the Executive, include the current
receipt by the Executive of any amounts which, prior to the Effective Date, the
Executive had elected to defer, whether such compensation is deferred under
Section 401(k) of the Code or otherwise), subject to upward adjustment as
provided in Section 6 (such salary amount as adjusted upward from time to time
is hereafter referred to as the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least
equal in value to those provided for the Executive at any time during the
180-day period immediately preceding the Effective Date or, if more favorable
to the Executive, those provided generally at any time after the Effective Date
to any executives of the Company and its Affiliates of comparable status and
position to the Executive. The Executive shall be reimbursed, at such
intervals and in accordance with such standard policies that are most favorable
to the Executive that were in effect at any time during the 180-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to any
executives of the Company and its Affiliates of comparable status and position
to the Executive, for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Company and its Affiliates, including travel
expenses.
(c) The Executive and/or the Executive's family, as the
case may be, shall be included, to the extent eligible thereunder (which
eligibility shall not be conditioned on the Executive's salary grade or on any
other requirement that excludes executives of the Company and its Affiliates of
comparable status and position to the Executive unless such exclusion was in
effect for such plan or an equivalent plan on the date 180 days prior to the
Effective Date), in any and all welfare benefit plans, practices, policies and
programs providing benefits for the Company's salaried employees in general or,
if more favorable to the Executive, to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to group life insurance, hospitalization, medical and dental plans;
provided, that, (i) in no event shall the aggregate level of benefits under
such plans, practices, policies and programs in which the Executive is included
be less than the aggregate level of benefits under plans, practices, policies
and programs of the type referred to in this Section 5(c) in which the
Executive was participating at any time during the 180-day period immediately
preceding the Effective Date and (ii) in no event shall the aggregate level of
benefits under such plans, practices, policies and programs be less than the
aggregate level of benefits under plans, practices, policies and programs of
the type referred to in this Section 5(c) provided at any time after the
Effective Date to any executive of the Company and its Affiliates of comparable
status and position to the Executive.
(d) The Executive shall annually be entitled to not less
than the amount of paid vacation and not fewer than the number of paid holidays
to which the Executive was entitled
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<PAGE> 4
annually at any time during the 180-day period immediately preceding the
Effective Date or such greater amount of paid vacation and number of paid
holidays as may be made available annually to the Executive or any other
executive of the Company and its Affiliates of comparable status and position
to the Executive at any time after the Effective Date.
(e) The Executive shall be included in all plans providing
additional benefits to any executives of the Company and its Affiliates of
comparable status and position to the Executive, including but not limited to
deferred compensation, split-dollar life insurance, retirement, supplemental
retirement, stock option, stock appreciation, stock bonus and similar or
comparable plans; provided, that, (i) in no event shall the aggregate level of
benefits under such plans be less than the aggregate level of benefits under
plans of the type referred to in this Section 5(e) in which the Executive was
participating at any time during the 180-day period immediately preceding the
Effective Date; (ii) in no event shall the aggregate level of benefits under
such plans be less than the aggregate level of benefits under plans of the type
referred to in this Section 5(e) provided at any time after the Effective Date
to any executive of the Company and its Affiliates of comparable status and
position to the Executive; and (iii) the Company's obligation to include the
Executive in bonus or incentive compensation plans shall be determined by
Section 5(f).
(f) To assure that the Executive will have an opportunity
to earn incentive compensation after the Effective Date, the Executive shall be
included in a bonus plan of the Company that shall satisfy the standards
described below (the "Bonus Plan"). Bonuses under the Bonus Plan shall be
payable with respect to achieving such financial or other goals reasonably
related to the business of the Company as the Company shall establish (the
"Goals"), all of which Goals shall be attainable, prior to the end of the
Employment Period, with approximately the same degree of probability as the
goals under the Employer's annual incentive plan currently in effect, or the
successor to such plan, in the form most favorable to the Executive that was in
effect at any time during the 180-day period prior to the Effective Date (the
"Existing Plan") and in view of the Company's existing and projected financial
and business circumstances applicable at the time. The amount of the bonus
(the "Bonus Amount") that the Executive is eligible to earn under the Bonus
Plan shall be no less than the amount of the Executive's highest maximum
potential award under the Existing Plan at any time during the 180-day period
prior to the Effective Date or, if higher, any maximum potential award under
the Bonus Plan or any other bonus or incentive compensation plan in effect
after the Effective Date for the Executive or for any executive of the Company
and its Affiliates of comparable status and position to the Executive (such
bonus amount herein referred to as the "Targeted Bonus"), and if the Goals are
not achieved (and, therefore, the entire Targeted Bonus is not payable), then
the Bonus Plan shall provide for a payment of a Bonus Amount not less than a
portion of the Targeted Bonus reasonably related to that portion of the Goals
that were achieved. Payment of the Bonus Amount (i) shall be in cash, unless
otherwise agreed by the Executive, and (ii) shall not be affected by any
circumstance occurring subsequent to the end of the Employment Period,
including termination of the Executive's employment.
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<PAGE> 5
6. Annual Compensation Adjustments. During the
Employment Period, the Board of Directors of the Company (or an appropriate
committee thereof) will consider and appraise, at least annually, the
contributions of the Executive to the Employer, and in accordance with the
Company's practice prior to the Effective Date, due consideration shall be
given, at least annually, to the upward adjustment of the Executive's Annual
Base Salary (i) commensurate with increases generally given to other executives
of the Company and its Affiliates of comparable status and position to the
Executive, and (ii) as the scope of the Company's operations or the Executive's
duties expand.
7. Termination During Employment Period.
(a) Right to Terminate. During the Employment Period, (i)
the Company shall be entitled to terminate the Executive's employment (A) for
Cause, (B) by reason of the Executive's disability pursuant to Section 11, or
(C) for any other reason, and (ii) the Executive shall be entitled to terminate
the Executive's employment for any reason. Any such termination shall be
subject to the procedures set forth in Section 12 and shall be subject to any
consequences of such termination set forth in this Agreement. Any termination
of the Executive's employment during the Employment Period by the Employer
shall be deemed a termination by the Company for purposes of this Agreement.
(b) Termination for Cause or Without Good Reason. If
there is a Covered Termination for Cause or due to the Executive's voluntarily
terminating the Executive's employment other than for Good Reason, then the
Executive shall be entitled to receive only Accrued Benefits.
(c) Termination Giving Rise to a Termination Payment. If
there is a Covered Termination by the Executive for Good Reason, or by the
Company other than by reason of (i) death, (ii) disability pursuant to Section
11, or (iii) Cause, then the Executive shall be entitled to receive, and the
Company shall promptly pay, Accrued Benefits and, in lieu of further base
salary for periods following the Termination Date, as liquidated damages and
additional severance pay and in consideration of the covenant of the Executive
set forth in Section 13(a), the Termination Payment pursuant to Section 8(a).
8. Payments Upon Termination.
(a) Termination Payment. (i) Subject to the limits set
forth in Section 8(a)(ii), for purposes of this Agreement, the
"Termination Payment" shall be an amount equal to the Annual Cash
Compensation multiplied by the number of years or fractional portion
thereof remaining in the Employment Period determined as of the
Termination Date, except that the Termination Payment shall not be less
than the amount of Annual Cash Compensation. The Termination Payment
shall be paid to the Executive in cash equivalent not later than ten
business days after the Termination Date. The Executive shall not be
required to mitigate the amount of the Termination Payment by securing
other employment or otherwise, nor will such Termination Payment be
reduced
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<PAGE> 6
by reason of the Executive securing other employment or for any other
reason. The Termination Payment shall be in addition to any other
severance payments to which the Executive is entitled under the
Company's severance policies and practices in the form most favorable
to the Executive that were in effect at any time during the 180-day
period prior to the Effective Date.
(ii) Notwithstanding any other provision of this
Agreement, if any portion of the Termination Payment or any other
payment under this Agreement, or under any other agreement with or plan
of the Company or the Employer (in the aggregate "Total Payments"),
would constitute an "excess parachute payment," then the Total Payments
to be made to the Executive shall be reduced such that the value of the
aggregate Total Payments that the Executive is entitled to receive
shall be One Dollar ($1) less than the maximum amount which the
Executive may receive without becoming subject to the tax imposed by
Section 4999 of the Code (or any successor provision) or which the
Company may pay without loss of deduction under Section 280G(a) of the
Code (or any successor provision). For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall have
the meanings assigned to them in Section 280G of the Code (or any
successor provision), and such "parachute payments" shall be valued as
provided therein. Present value for purposes of this Agreement shall
be calculated in accordance with Section 1274(b)(2) of the Code (or any
successor provision). Within sixty days following delivery of the
Notice of Termination or notice by the Company to the Executive of its
belief that there is a payment or benefit due the Executive which will
result in an excess parachute payment as defined in Section 280G of the
Code (or any successor provision), the Executive and the Company, at
the Company's expense, shall obtain the opinion (which need not be
unqualified) of nationally recognized tax counsel selected by the
Company's independent auditors and acceptable to the Executive in the
Executive's sole discretion, which sets forth (A) the amount of the
Base Period Income, (B) the amount and present value of Total Payments
and (C) the amount and present value of any excess parachute payments
without regard to the limitations of this Section 8(a)(ii). As used in
this Section 8(a)(ii), the term "Base Period Income" means an amount
equal to the Executive's "annualized includible compensation for the
base period" as defined in Section 280G(d)(1) of the Code (or any
successor provision). For purposes of such opinion, the value of any
noncash benefits or any deferred payment or benefit shall be determined
by the Company's independent auditors in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code (or any successor
provisions), which determination shall be evidenced in a certificate of
such auditors addressed to the Company and the Executive. Such opinion
shall be dated as of the Termination Date and addressed to the Company
and the Executive and shall be binding upon the Company and the
Executive. If such opinion determines that there would be an excess
parachute payment, then the Termination Payment hereunder or any other
payment determined by such counsel to be includible in Total Payments
shall be reduced or eliminated as specified by the Executive in writing
delivered to the Company within thirty days of the Executive's receipt
of such opinion or, if the Executive fails to so notify the Company,
then as the Company shall reasonably determine, so that under
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<PAGE> 7
the bases of calculations set forth in such opinion there will be no
excess parachute payment. If such legal counsel so requests in
connection with the opinion required by this Section, the Executive and
the Company shall obtain, at the Company's expense, and the legal
counsel may rely on in providing the opinion, the advice of a firm of
recognized executive compensation consultants as to the reasonableness
of any item of compensation to be received by the Executive.
Notwithstanding the foregoing, the provisions of this Section 8(a)(ii),
including the calculations, notices and opinions provided for herein,
shall be based upon the conclusive presumption that the following are
reasonable: (1) the compensation and benefits provided for in Section 5
and (2) any other compensation, including but not limited to the
Accrued Benefits, earned prior to the Termination Date by the Executive
pursuant to the Company's compensation programs if such payments would
have been made in the future in any event, even though the timing of
such payment is triggered by the Change in Control or the Termination
Date. If the provisions of Sections 280G and 4999 of the Code (or any
successor provisions) are repealed without succession, then this
Section 8(a)(ii) shall be of no further force or effect.
(b) Additional Benefits. If there is a Covered
Termination and the Executive is entitled to Accrued Benefits and the
Termination Payment, then the Executive shall be entitled to the following
additional benefits:
(i) Until the earlier of the end of the
Employment Period or such time as the Executive has obtained new
employment and is covered by benefits which in the aggregate are at
least equal in value to the following benefits, the Executive shall
continue to be covered, at the expense of the Company, by the most
favorable life insurance, hospitalization, medical and dental coverage
and other welfare benefits provided to the Executive and the
Executive's family during the 180-day period immediately preceding the
Effective Date or at any time thereafter or, if more favorable to the
Executive, coverage as was required hereunder with respect to the
Executive immediately prior to the date Notice of Termination is given.
(ii) The Executive shall receive, at the expense
of the Company, outplacement services, on an individualized basis at a
level of service commensurate with the Executive's most senior status
with the Company during the 180-day period prior to the Effective Date
(or, if higher, at any time after the Effective Date), provided by a
nationally recognized executive placement firm selected by the Company
with the consent of the Executive, which consent will not be
unreasonably withheld; provided that the cost to the Company of such
services shall not exceed 15% of the Executive's Annual Base Salary.
(iii) The Company shall bear up to $10,000 in the
aggregate of fees and expenses of consultants and/or legal or
accounting advisors engaged by the Executive to advise the Executive as
to matters relating to the computation of benefits due and payable
under this Section 8.
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<PAGE> 8
9. Death. (a) Except as provided in Section 9(b), in
the event of a Covered Termination due to the Executive's death, the
Executive's estate, heirs and beneficiaries shall receive all the Executive's
Accrued Benefits through the Termination Date.
(b) If the Executive dies after a Notice of Termination is
given (i) by the Company or (ii) by the Executive for Good Reason, then the
Executive's estate, heirs and beneficiaries shall be entitled to the benefits
described in Section 9(a) and, subject to the provisions of this Agreement, to
such Termination Payment to which the Executive would have been entitled had
the Executive lived. In such event, the Termination Date shall be thirty days
following the giving of the Notice of Termination, subject to extension
pursuant to the definition of "Termination Date" in Exhibit A.
10. Retirement. If, during the Employment Period, the
Executive and the Employer shall execute an agreement providing for the early
retirement of the Executive from the Employer, or the Executive shall otherwise
give notice that the Executive is voluntarily choosing to retire early from the
Employer, then the Executive shall receive Accrued Benefits through the
Termination Date; provided, that if the Executive's employment is terminated by
the Executive for Good Reason or by the Company other than by reason of death,
disability or Cause and the Executive also, in connection with such
termination, elects voluntary early retirement, then the Executive shall also
be entitled to receive a Termination Payment pursuant to Section 8(a).
11. Termination for Disability. If, during the Employment
Period, as a result of the Executive's disability due to physical or mental
illness or injury (regardless of whether such illness or injury is
job-related), the Executive shall have been absent from the Executive's duties
hereunder on a full-time basis for a period of 182 days and, within thirty days
after the Company notifies the Executive in writing that it intends to
terminate the Executive's employment (which notice shall not constitute the
Notice of Termination contemplated below), the Executive shall not have
returned to the performance of the Executive's duties hereunder on a full-time
basis, then the Company may terminate the Executive's employment for purposes
of this Agreement pursuant to a Notice of Termination. If the Executive's
employment is terminated on account of the Executive's disability in accordance
with this Section, then the Executive shall receive Accrued Benefits in
accordance with Section 8(a) and shall remain eligible for all benefits
provided by any long term disability programs of the Employer in effect at the
time the Company sends notice to the Executive of its intent to terminate
pursuant to this Section.
12. Termination Notice and Procedure. (a) Any
termination of the Executive's employment during the Employment Period by the
Company or the Executive (other than a termination of the Executive's
employment referenced in the second sentence of the definition of "Effective
Date" in Exhibit A) shall be communicated by written Notice of Termination to
the Executive, if such Notice is given by the Company, and to the Company, if
such Notice is given by the Executive, all in accordance with the following
procedures and those set forth in Section 22:
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<PAGE> 9
(i) If such termination is for disability, Cause or Good
Reason, the Notice of Termination shall indicate in reasonable detail the facts
and circumstances alleged to provide a basis for such termination.
(ii) Any Notice of Termination by the Company shall have
been approved, prior to the giving thereof to the Executive, by a resolution
duly adopted by a majority of the directors of the Company (or any successor
corporation) then in office, a copy of which shall accompany the Notice.
(iii) If the Notice is given by the Executive for Good
Reason, then the Executive may cease performing the Executive's duties
hereunder on or after the date 15 days after the delivery of Notice of
Termination (unless the Notice of Termination is based upon clause (vii) of the
definition of "Good Reason" in Exhibit A, in which case the Executive may cease
performing his duties at the time the Executive's employment is terminated) and
shall in any event cease employment on the Termination Date, if any, arising
from the delivery of such Notice. If the Notice is given by the Company, then
the Executive may cease performing the Executive's duties hereunder on the date
of receipt of the Notice of Termination, subject to the Executive's rights
hereunder.
(iv) The recipient of any Notice of Termination shall
personally deliver or mail in accordance with Section 22 written notice of any
dispute relating to such Notice of Termination to the party giving such Notice
within fifteen days after receipt thereof. After the expiration of such fifteen
days, the contents of the Notice of Termination shall become final and not
subject to dispute.
Notwithstanding the foregoing, (A) if the Executive terminates the Executive's
employment after a Change in Control without complying with this Section 12,
then the Executive will be deemed to have voluntarily terminated the
Executive's employment other than for Good Reason and deemed to have delivered
a written Notice of Termination to that effect to the Company as of the date of
such termination and (B) if the Company terminates the Executive's employment
after a Change in Control without complying with this Section 12, then the
Company will be deemed to have terminated the Executive's employment other than
by reason of death, disability or Cause and the Company will be deemed to have
delivered a written Notice of Termination to that effect to the Executive as of
the date of such termination. Under circumstances described in clause (B)
above, the Executive may, but shall not be obligated to, also deliver a Notice
of Termination based upon clause (vii) of the definition of "Good Reason" in
Exhibit A for the purpose of subjecting such Notice to Section 12(a)(iv).
(b) If a Change in Control occurs and the Executive's
employment with the Employer terminates (whether by the Company, the Executive
or otherwise) within 180 days prior to the Change in Control, then the
Executive may assert that such termination is a Covered Termination by sending
a written Notice of Termination to the Company at any time prior to the first
anniversary of the Change in Control in accordance with the procedures set
forth in this Section 12(b) and those set forth in Section 22. If the
Executive asserts that the Executive
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<PAGE> 10
terminated the Executive's employment for Good Reason or that the Company
terminated the Executive's employment other than for disability or Cause, then
the Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such assertions. The Company
shall personally deliver or mail in accordance with Section 22 written notice
of any dispute relating to such Notice of Termination to the Executive within
fifteen days after receipt thereof. After the expiration of such fifteen days,
the contents of the Notice of Termination shall become final and not subject to
dispute.
13. Further Obligations of the Executive.
(a) Competition. The Executive agrees that, in the event
of any Covered Termination where the Executive is entitled to (and receives)
Accrued Benefits and the Termination Payment, the Executive shall not, for a
period of three months after the Termination Date, without the prior written
approval of the Company's Board of Directors, engage in any Competitive
Activity.
(b) Confidentiality. During and following the Executive's
employment by the Employer, the Executive shall hold in confidence and not
directly or indirectly disclose or use or copy or make lists of any
confidential information or proprietary data of the Company (including that of
the Employer), except to the extent authorized in writing by the Board of
Directors of the Company or required by any court or administrative agency,
other than to an employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Executive of duties as an executive of the Company or the Employer.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential
by persons engaged in the same business or a business similar to that of the
Company. All records, files, documents and materials, or copies thereof,
relating to the business of the Company which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Company and shall be promptly returned to the Company upon termination of
employment with the Employer.
14. Expenses and Interest. If, after the Effective Date,
(i) a dispute arises with respect to the enforcement of the Executive's rights
under this Agreement, (ii) any legal or arbitration proceeding shall be brought
to enforce or interpret any provision contained herein or to recover damages
for breach hereof, or (iii) any tax audit or proceeding is commenced that is
attributable in part to the application of Section 4999 of the Code, in any
case so long as the Executive is not acting in bad faith, then the Company
shall reimburse the Executive for any reasonable attorneys' fees and necessary
costs and disbursements incurred as a result of such dispute, legal or
arbitration proceeding or tax audit or proceeding ("Expenses"), and prejudgment
interest on any money judgment or arbitration award obtained by the Executive
calculated at the rate of interest announced by Firstar Bank Milwaukee, N.A.,
Milwaukee, Wisconsin, from time to time as its prime or base lending rate from
the date that payments to the Executive should have been made under this
Agreement. Within ten days after the Executive's written request therefor, the
Company shall pay to the Executive, or such other
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<PAGE> 11
person or entity as the Executive may designate in writing to the Company, the
Executive's reasonable Expenses in advance of the final disposition or
conclusion of any such dispute, legal or arbitration proceeding.
15. Payment Obligations Absolute. The Company's
obligation during and after the Employment Period to pay the Executive the
amounts and to make the benefit and other arrangements provided herein shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim, recoupment, defense or
other right which the Company may have against the Executive or anyone else.
Except as provided in Section 14, all amounts payable by the Company hereunder
shall be paid without notice or demand. Each and every payment made hereunder
by the Company shall be final, and the Company will not seek to recover all or
any part of such payment from the Executive, or from whomsoever may be entitled
thereto, for any reason whatsoever.
16. Successors. (a) If the Company sells, assigns or
transfers all or substantially all of its business and assets to any Person or
if the Company merges into or consolidates or otherwise combines (where the
Company does not survive such combination) with any Person (any such event, a
"Sale of Business"), then the Company shall assign all of its right, title and
interest in this Agreement as of the date of such event to such Person, and the
Company shall cause such Person, by written agreement in form and substance
reasonably satisfactory to the Executive, to expressly assume and agree to
perform from and after the date of such assignment all of the terms, conditions
and provisions imposed by this Agreement upon the Company. Failure of the
Company to obtain such agreement prior to the effective date of such Sale of
Business shall be a breach of this Agreement constituting "Good Reason"
hereunder, except that for purposes of implementing the foregoing, the date
upon which such Sale of Business becomes effective shall be deemed the
Termination Date. In case of such assignment by the Company and of assumption
and agreement by such Person, as used in this Agreement, "Company" shall
thereafter mean such Person which executes and delivers the agreement provided
for in this Section 16 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, and this Agreement shall
inure to the benefit of, and be enforceable by, such Person. The Executive
shall, in the Executive's discretion, be entitled to proceed against any or all
of such Persons, any Person which theretofore was such a successor to the
Company (as defined in the first paragraph of this Agreement) and the Company
(as so defined) in any action to enforce any rights of the Executive hereunder.
Except as provided in this Subsection, this Agreement shall not be assignable
by the Company. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.
(b) This Agreement and all rights of the Executive shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All
amounts payable to the Executive under Sections 7, 8, 9, 10, 11 and 14 if the
Executive had lived shall be paid, in the event of the Executive's death, to
the Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Employer, as such terms
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are in effect on the Effective Date, that expressly govern benefits under such
plan in the event of the Executive's death.
17. Severability. The provisions of this Agreement shall
be regarded as divisible, and if any of said provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, then
the validity and enforceability of the remainder of such provisions or parts
hereof and the applicability thereof shall not be affected thereby.
18. Amendment. This Agreement may not be amended or
modified at any time except by written instrument executed by the Company and
the Executive.
19. Withholding. The Employer shall be entitled to
withhold from amounts to be paid to the Executive hereunder any federal, state
or local withholding or other taxes or charges which it is from time to time
required to withhold; provided, that the amount so withheld shall not exceed
the minimum amount required to be withheld by law. The Employer shall be
entitled to rely on an opinion of nationally recognized tax counsel if any
question as to the amount or requirement of any such withholding shall arise.
20. Certain Rules of Construction. No party shall be
considered as being responsible for the drafting of this Agreement for the
purpose of applying any rule construing ambiguities against the drafter or
otherwise. No draft of this Agreement shall be taken into account in
construing this Agreement. Any provision of this Agreement which requires an
agreement in writing shall be deemed to require that the writing in question be
signed by the Executive and an authorized representative of the Company.
21. Governing Law; Resolution of Disputes. (a) This
Agreement and the rights and obligations hereunder shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin
(excluding any choice of law rules that may direct the application of the laws
of another jurisdiction) except that Section 21(b) shall be construed in
accordance with the Federal Arbitration Act if arbitration is chosen by the
Executive as the method of dispute resolution.
(b) Any dispute arising out of this Agreement shall, at
the Executive's election, be determined by arbitration under the rules of the
American Arbitration Association then in effect (but subject to any evidentiary
standards set forth in this Agreement), in which case both parties shall be
bound by the arbitration award, or by litigation. Whether the dispute is to be
settled by arbitration or litigation, the venue for the arbitration or
litigation shall be Milwaukee, Wisconsin or, at the Executive's election, if
the Executive is no longer residing or working in the Milwaukee, Wisconsin
metropolitan area, in the judicial district encompassing the city in which the
Executive resides; provided, that, if the Executive is not then residing in the
United States, the election of the Executive with respect to such venue shall
be either Milwaukee, Wisconsin or in the judicial district encompassing that
city in the United States among the thirty cities having the largest population
(as determined by the most recent United States Census data available at the
Termination Date) that is closest to the Executive's residence.
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The parties consent to personal jurisdiction in each trial court in the
selected venue having subject matter jurisdiction notwithstanding their
residence or situs, and each party irrevocably consents to service of process
in the manner provided hereunder for the giving of notices.
22. Notice. Notices given pursuant to this Agreement
shall be in writing and, except as otherwise provided by Section 12(a)(iii),
shall be deemed given when actually received by the Executive or actually
received by the Company's Secretary or any officer of the Company other than
the Executive. If mailed, such notices shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid, if to the Company, to Hein-Werner Corporation, Attention: Secretary
(or, if the Executive is then Secretary, to the Chief Executive Officer), 2120
Pewaukee Road, Waukesha, Wisconsin 53188, or if to the Executive, at the
address set forth below the Executive's signature to this Agreement, or to such
other address as the party to be notified shall have theretofore given to the
other party in writing.
23. Additional Payment. (a) If, notwithstanding the
provisions of Section 8(a)(ii), but subject to subsection (b), it is ultimately
determined by a court or pursuant to a final determination by the Internal
Revenue Service that any portion of Total Payments is subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (or any successor provision),
then the Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive after deduction of
any Excise Tax and any interest charges or penalties in respect of the
imposition of such Excise Tax (but not any federal, state or local income tax)
on the Total Payments, and any federal, state and local income tax and Excise
Tax upon the payment provided for by this Section 23 shall be equal to the
Total Payments. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of the Executive's
domicile for income tax purposes on the date the Gross-Up Payment is made, net
of the maximum reduction in federal income taxes that could be obtained from
deduction of such state and local taxes.
(b) If legislation is enacted that would require the
Company's shareholders to approve this Agreement, prior to a Change in Control,
due solely to the provision contained in subsection (a) of this Section 23,
then
(i) from and after such time as shareholder approval would
be required, until shareholder approval is obtained as required by such
legislation, subsection (a) shall be of no force and effect;
(ii) if the Company seeks shareholder approval of any other
agreement providing similar benefits to any other executive of the
Company, then the Company shall seek shareholder approval of this
Agreement at the same shareholders' meeting or meetings at which the
shareholders consider any such other agreement; and
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<PAGE> 14
(iii) the Company and the Executive shall use their best
efforts to consider and agree in writing upon an amendment to this
Section 23 such that, as amended, this Subsection would provide the
Executive with the benefits intended to be afforded to the Executive by
subsection (a) without requiring shareholder approval.
24. No Waiver. The Executive's or the Company's failure
to insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
25. Headings. The headings herein contained are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
HEIN-WERNER CORPORATION
By: /s/ J. L. Dindorf
------------------------------------
J. L. Dindorf
President and Chief Executive Officer
Attest: /s/ M. J. McSweeney
------------------------------------
M. J. McSweeney
Secretary
EXECUTIVE
/s/ Thomas F. Andreoli
-------------------------------------------
Thomas F. Andreoli
842 Log Lodge Court
Baraboo, Wisconsin 53913
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<PAGE> 15
Exhibit A
CERTAIN DEFINED TERMS
For purposes of this Agreement,
(a) Act. The term "Act" means the Securities Exchange
Act of 1934, as amended.
(b) Accrued Benefits. The term "Accrued Benefits" shall
include the following amounts, payable as described herein: (i) all base
salary for the time period ending with the Termination Date; (ii) reimbursement
for any and all monies advanced in connection with the Executive's employment
for reasonable and necessary expenses incurred by the Executive on behalf of
the Company and its Affiliates for the time period ending with the Termination
Date; (iii) any and all other cash earned through the Termination Date and
deferred at the election of the Executive or pursuant to any deferred
compensation plan then in effect; (iv) notwithstanding any provision of any
bonus or incentive compensation plan applicable to the Executive, a lump sum
amount, in cash, equal to the sum of (A) any bonus or incentive compensation
that has been allocated or awarded to the Executive for a fiscal year or other
measuring period under the plan that ends prior to the Termination Date but has
not yet been paid (pursuant to Section 5(f) or otherwise) and (B) a pro rata
portion to the Termination Date of the aggregate value of all contingent bonus
or incentive compensation awards to the Executive for all uncompleted periods
under the plan calculated as to each such award as if the Goals with respect to
such bonus or incentive compensation award had been attained; and (v) all other
payments and benefits to which the Executive (or in the event of the
Executive's death, the Executive's surviving spouse or other beneficiary) may
be entitled as compensatory fringe benefits or under the terms of any benefit
plan of the Employer, including severance payments under the Employer's
severance policies and practices in the form most favorable to the Executive
that were in effect at any time during the 180-day period prior to the
Effective Date. Payment of Accrued Benefits shall be made promptly in
accordance with the Employer's prevailing practice with respect to clauses (i)
and (ii) or, with respect to clauses (iii), (iv) and (v), pursuant to the terms
of the benefit plan or practice establishing such benefits.
(c) Affiliate and Associate. The terms "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations of the Act.
(d) Annual Cash Compensation. The term "Annual Cash
Compensation" shall mean the sum of (A) the Executive's Annual Base Salary,
plus (B) the highest of (1) the highest annual bonus or incentive compensation
award earned by the Executive under any cash bonus or incentive compensation
plan of the Company or any of its Affiliates during the three complete fiscal
years of the Company immediately preceding the Termination Date or, if more
favorable to the Executive, during the three complete fiscal years of the
Company immediately preceding
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the Effective Date; (2) the Executive's bonus or incentive compensation
Targeted Bonus for the fiscal year in which the Termination Date occurs; or (3)
the highest average annual bonus and/or incentive compensation earned during
the three complete fiscal years of the Company immediately preceding the
Termination Date (or, if more favorable to the Executive, during the three
complete fiscal years of the Company immediately preceding the Effective Date)
under any cash bonus or incentive compensation plan of the Company or any of
its Affiliates by the group of executives of the Company and its Affiliates
participating under such plan during such fiscal years at a status or position
comparable to that at which the Executive participated or would have
participated pursuant to the Executive's most senior position at any time
during the 180 days preceding the Effective Date or thereafter until the
Termination Date.
(e) Cause. The Company may terminate the Executive's
employment after the Effective Date for "Cause" only if the conditions set
forth in paragraphs (i) and (ii) have been met and the Company otherwise
complies with this Agreement:
(i) (A) the Executive has committed any act of fraud,
embezzlement or theft in connection with the Executive's duties as an
Executive or in the course of employment with the Company and/or its
subsidiaries; (B) the Executive has willfully and continually failed to
perform substantially the Executive's duties with the Company or any of
its Affiliates (other than any such failure resulting from incapacity
due to physical or mental illness or injury, regardless of whether such
illness or injury is job- related) for an appropriate period, which
shall not be less than 30 days, after the Chief Executive Officer of
the Company (or, if the Executive is then Chief Executive Officer, the
Board) has delivered a written demand for performance to the Executive
that specifically identifies the manner in which the Chief Executive
Officer (or the Board, as the case may be) believes the Executive has
not substantially performed the Executive's duties; (C) the Executive
has willfully engaged in illegal conduct or gross misconduct that is
materially and demonstrably injurious to the Company; (D) the Executive
has willfully and wrongfully disclosed any trade secret or other
confidential information of the Company or any of its Affiliates; or
(E) the Executive has engaged in any Competitive Activity; and in any
such case the act or omission shall have been determined by the Board
to have been materially harmful to the Company and its subsidiaries
taken as a whole.
For purposes of this provision, (1) no act or failure
to act on the part of the Executive shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad faith
or without reasonable belief that the Executive's action or omission
was in the best interests of the Company and (2) any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted
by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for
the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the
Company.
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(ii) (A) The Company terminates the Executive's
employment by delivering a Notice of Termination to the Executive, (B)
prior to the time the Company has terminated the Executive's employment
pursuant to a Notice of Termination, the Board, by the affirmative vote
of not less than three-quarters (3/4) of the entire membership of the
Board, has adopted a resolution finding that the Executive was guilty
of conduct set forth in this definition of Cause, and specifying the
particulars thereof in detail, at a meeting of the Board called and
held for the purpose of considering such termination (after reasonable
notice to the Executive and an opportunity for the Executive, together
with the Executive's counsel, to be heard before the Board) and (C) the
Company delivers a copy of such resolution to the Executive with the
Notice of Termination at the time the Executive's employment is
terminated.
In the event of a dispute regarding whether the Executive's employment has been
terminated for Cause, no claim by the Company that the Company has terminated
the Executive's employment for Cause in accordance with this Agreement shall be
given effect unless the Company establishes by clear and convincing evidence
that the Company has complied with the requirements of this Agreement to
terminate the Executive's employment for Cause.
(f) Change in Control. A "Change in Control" shall be
deemed to have occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (other than (A) the Company or any
of its subsidiaries, (B) a trustee or other fiduciary holding
securities under any employee benefit plan of the Company or any of its
subsidiaries, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities or (D) a corporation owned,
directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock in the
Company ("Excluded Persons")) is or becomes the "Beneficial Owner" (as
such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its Affiliates after January 1, 1998
pursuant to express authorization by the Board that refers to this
exception) representing 25% or more of either the then outstanding
shares of common stock of the Company or the combined voting power of
the Company's then outstanding voting securities; or
(ii) the following individuals cease for any
reason to constitute a majority of the number of directors then
serving: individuals who, on January 1, 1998, constituted the Board and
any new director (other than a director whose initial assumption of
office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the
election of directors of the Company, as such terms are used in Rule
14a-11 of Regulation 14A under the Act) whose appointment or election
by the Board or nomination for election by the Company's shareholders
was approved by a vote of at least two-thirds (2/3) of the directors
then still
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<PAGE> 18
in office who either were directors on January 1, 1998 or whose
appointment, election or nomination for election was previously so
approved; or
(iii) the shareholders of the Company approve a
merger, consolidation or share exchange of the Company with any other
corporation or approve the issuance of voting securities of the Company
in connection with a merger, consolidation or share exchange of the
Company (or any direct or indirect subsidiary of the Company) pursuant
to applicable stock exchange requirements, other than (A) a merger,
consolidation or share exchange which would result in the voting
securities of the Company outstanding immediately prior to such merger,
consolidation or share exchange continuing to represent (either by
remaining outstanding or by being converted into voting securities of
the surviving entity or any parent thereof) at least 50% of the
combined voting power of the voting securities of the Company or such
surviving entity or any parent thereof outstanding immediately after
such merger, consolidation or share exchange, or (B) a merger,
consolidation or share exchange effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person (other than an Excluded Person) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates after
January 1, 1998 pursuant to express authorization by the Board that
refers to this exception) representing 25% or more of either the then
outstanding shares of common stock of the Company or the combined
voting power of the Company's then outstanding voting securities; or
(iv) the shareholders of the Company approve a
plan of complete liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (in one transaction or a
series of related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity at least 75% of
the combined voting power of the voting securities of which are owned
by Persons in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity that owns all or substantially all of the assets or voting securities
of the Company immediately following such transaction or series of
transactions.
(g) Code. The term "Code" means the Internal Revenue Code
of 1986, including any amendments thereto or successor tax codes thereof.
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<PAGE> 19
(h) Competitive Activity. The Executive shall engage in a
"Competitive Activity" if the Executive participates in the management of, is
employed by or owns any interest in any business enterprise at a location
within the United States that engages in substantial competition with the
Company or its subsidiaries, where such enterprise's revenues from any
competitive activities amount to 10% or more of such enterprise's consolidated
net revenues and sales for its most recently completed fiscal year; provided,
however, that owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such competitor
shall not be a "Competitive Activity".
(i) Covered Termination. The term "Covered Termination"
means any termination of the Executive's employment during the Employment
Period where the Termination Date or the date Notice of Termination is
delivered is any date on or prior to the end of the Employment Period.
(j) Effective Date. The term "Effective Date" shall mean
the first date on which a Change in Control occurs. Anything in this Agreement
to the contrary notwithstanding, if (i) a Change in Control occurs, (ii) the
Executive's employment with the Employer terminates (whether by the Company,
the Executive or otherwise) within 180 days prior to the Change in Control and
(iii) it is reasonably demonstrated by the Executive that (A) any such
termination of employment by the Employer (1) was at the request of a third
party who has taken steps reasonably calculated to effect a Change in Control
or (2) otherwise arose in connection with or in anticipation of a Change in
Control, or (B) any such termination of employment by the Executive took place
subsequent to the occurrence of an event described in clause (ii), (iii), (iv)
or (v) of the definition of "Good Reason" which event (1) occurred at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or in anticipation
of a Change in Control, then for all purposes of this Agreement the term
"Effective Date" shall mean the day immediately prior to the date of such
termination of employment.
(k) Employer. The term "Employer" means the Company
and/or any subsidiary of the Company that employed the Executive immediately
prior to the Effective Date.
(l) Good Reason. The Executive shall have a "Good Reason"
for termination of employment on or after the Effective Date if the Executive
determines in good faith that any of the following events has occurred:
(i) any breach of this Agreement by the Company,
including specifically any breach by the Company of its agreements
contained in Section 4, Section 5 or Section 6, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith that
the Company remedies promptly after receipt of notice thereof given by
the Executive;
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<PAGE> 20
(ii) any reduction in the Executive's base salary,
percentage of base salary available as incentive compensation or bonus
opportunity or benefits, in each case relative to those most favorable
to the Executive in effect at any time during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date;
(iii) a material adverse change, without the
Executive's prior written consent, in the Executive's working
conditions or status with the Company or the Employer from such working
conditions or status in effect during the 180-day period prior to the
Effective Date or, to the extent more favorable to the Executive, those
in effect after the Effective Date, including but not limited to (A) a
material change in the nature or scope of the Executive's titles,
authority, powers, functions, duties, reporting requirements or
responsibilities, or (B) a material reduction in the level of support
services, staff, secretarial and other assistance, office space and
accoutrements, but excluding for this purpose an isolated,
insubstantial and inadvertent event not occurring in bad faith that the
Company remedies promptly after receipt of notice thereof given by the
Executive;
(iv) the relocation of the Executive's principal
place of employment to a location more than 35 miles from the
Executive's principal place of employment on the date 180 days prior to
the Effective Date;
(v) the Employer requires the Executive to travel
on Employer business to a materially greater extent than was required
during the 180-day period prior to the Effective Date;
(vi) failure by the Company to obtain the
agreement referred to in Section 16(a) as provided therein; or
(vii) the Company or the Employer terminates the
Executive's employment after a Change in Control without delivering a
Notice of Termination in accordance with Section 12;
provided that (A) any such event occurs following the Effective Date or (B) in
the case of any event described in clauses (ii), (iii), (iv) or (v) above, such
event occurs on or prior to the Effective Date under circumstances described in
clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective Date." In
the event of a dispute regarding whether the Executive terminated the
Executive's employment for "Good Reason" in accordance with this Agreement, no
claim by the Company that such termination does not constitute a Covered
Termination shall be given effect unless the Company establishes by clear and
convincing evidence that such termination does not constitute a Covered
Termination. Any election by the Executive to terminate the Executive's
employment for Good Reason shall not be deemed a voluntary termination of
employment by the Executive for purposes of any other employee benefit or other
plan.
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<PAGE> 21
(m) Normal Retirement Date. The term "Normal Retirement
Date" means the date the Executive reaches age 65.
(n) Notice of Termination. The term "Notice of
Termination" means a written notice as contemplated by Section 12.
(o) Person. The term "Person" shall have the meaning
given in Section 3(a)(9) of the Act, as modified and used in Sections 13(d) and
14(d) thereof.
(p) Termination Date. Except as otherwise provided in
Section 9(b) and Section 16(a), the term "Termination Date" means (i) if the
Executive's employment is terminated by the Executive's death, the date of
death; (ii) if the Executive's employment is terminated by reason of voluntary
early retirement, as agreed in writing by the Company and the Executive, the
date of such early retirement that is set forth in such written agreement;
(iii) if the Executive's employment is terminated for purposes of this
Agreement by reason of disability pursuant to Section 11, thirty days after the
Notice of Termination is given; (iv) if the Executive's employment is
terminated by the Executive voluntarily (other than for Good Reason), the date
the Notice of Termination is given; and (v) if the Executive's employment is
terminated by the Company (other than by reason of disability pursuant to
Section 11) or by the Executive for Good Reason, thirty days after the Notice
of Termination is given. Notwithstanding the foregoing,
(A) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Company notifies the Executive that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof, then the Executive may elect to continue the
Executive's employment during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that the Executive terminated the Executive's employment
for Good Reason in accordance with this Agreement, then the Termination Date
shall be the earlier of (1) the date on which the dispute is finally
determined, either (x) by mutual written agreement of the parties or (y) in
accordance with Section 21 or (2) the date of the Executive's death. If the
Executive so elects and it is thereafter determined that the Executive did not
terminate the Executive's employment for Good Reason in accordance with this
Agreement, then the employment of the Executive hereunder shall continue after
such determination as if the Executive had not delivered the Notice of
Termination asserting Good Reason and there shall be no Termination Date
arising out of such Notice. In either case, this Agreement continues, until
the Termination Date, if any, as if the Executive had not delivered the Notice
of Termination except that, if it is finally determined that the Executive
terminated the Executive's employment for Good Reason in accordance with this
Agreement, then the Executive shall in no case be denied the benefits described
in Section 8 (including a Termination Payment) based on events occurring after
the Executive delivered the Executive's Notice of Termination.
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<PAGE> 22
(B) If an opinion is required to be delivered pursuant to
Section 8(a)(ii) and such opinion shall not have been delivered, then the
Termination Date shall be the date on which such opinion is delivered.
(C) Except as provided in paragraph (A) above, if the
party receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof and it is finally determined that termination of the
Executive's employment for the reason asserted in such Notice of Termination
was not in accordance with this Agreement, then (1) if such Notice was
delivered by the Executive, then the Executive will be deemed to have
voluntarily terminated the Executive's employment other than for Good Reason by
means of such Notice and (2) if delivered by the Company, then the Company will
be deemed to have terminated the Executive's employment other than by reason of
death, disability or Cause by means of such Notice.
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<PAGE> 1
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 15th day of
April, 1998, by and between Hein-Werner Corporation, a Wisconsin corporation
(hereinafter referred to as the "Company"), and Jean-Paul Barthelme
(hereinafter referred to as the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is currently employed by the Company in
a key capacity, and the Executive's services are valuable to the conduct of the
business of the Company;
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that circumstances may arise in which a change in control of the
Company occurs, through acquisition or otherwise, thereby causing uncertainty
about the Executive's future employment with the Company without regard to the
Executive's competence or past contributions, which uncertainty may result in
the loss of valuable services of the Executive to the detriment of the Company
and its shareholders, and the Company and the Executive wish to provide
reasonable security to the Executive against changes in the Executive's
relationship with the Company in the event of any such change in control;
WHEREAS, the Company and the Executive desire that any
proposal for a change in control or acquisition of the Company will be
considered by the Executive objectively and with reference only to the best
interests of the Company and its shareholders; and
WHEREAS, the Executive will be in a better position to
consider the Company's best interests if the Executive is afforded reasonable
security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisition.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
<PAGE> 2
1. Definitions. The following terms are used in this
Agreement as defined in Exhibit A:
Act Covered Termination
Accrued Benefits Effective Date
Affiliate and Associate Employer
Annual Cash Compensation Good Reason
Cause Normal Retirement Date
Change in Control Notice of Termination
Code Person
Competitive Activity Termination Date
2. Termination or Cancellation Prior to the Effective
Date. The Employer and the Executive shall each retain the right to terminate
the employment of the Executive at any time prior to the Effective Date. If
the Executive's employment is terminated prior to the Effective Date, then this
Agreement shall be terminated and cancelled and of no further force or effect
and any and all rights and obligations of the parties hereunder shall cease.
In addition, this Agreement shall terminate upon the Executive ceasing to be an
employee of the Employer prior to a Change in Control unless the Executive can
reasonably demonstrate that such change in status occurred under circumstances
described in clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective
Date" in Exhibit A.
3. Employment Period. If the Executive is employed by
the Employer on the Effective Date, then the Company will, or will cause the
Employer to, continue thereafter to employ the Executive during the Employment
Period (as hereinafter defined), and the Executive will remain in the employ of
the Employer, in accordance with and subject to the terms and provisions of
this Agreement. For purposes of this Agreement, the term "Employment Period"
means a period (i) commencing on the Effective Date, and (ii) ending at 11:59
p.m. Milwaukee Time on the earlier of the first anniversary of such date or the
Executive's Normal Retirement Date.
4. Duties. During the Employment Period, the Executive
shall, in the most significant capacities and positions held by the Executive
at any time during the 180-day period preceding the Effective Date or in such
other capacities and positions as may be agreed to by the Company and the
Executive in writing, devote the Executive's best efforts and all of the
Executive's business time, attention and skill to the business and affairs of
the Employer, as such business and affairs now exist and as they may hereafter
be conducted.
5. Compensation. During the Employment Period, the
Executive shall be compensated as follows:
(a) The Executive shall receive, at reasonable intervals
(but not less often than monthly) and in accordance with such standard policies
as may be in effect immediately prior to the Effective Date, an annual base
salary in cash equivalent of not less than twelve times the
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Executive's highest monthly base salary (which shall include any amounts
credited to the Executive for the purchase of annuity contracts and related tax
offset bonuses) for the twelve-month period immediately preceding the month in
which the Effective Date occurs or, if higher, an annual base salary at the
rate in effect immediately prior to the Effective Date (which base salary
shall, unless otherwise agreed in writing by the Executive, include the current
receipt by the Executive of any amounts which, prior to the Effective Date, the
Executive had elected to defer, whether such compensation is deferred under
Section 401(k) of the Code or otherwise), subject to upward adjustment as
provided in Section 6 (such salary amount as adjusted upward from time to time
is hereafter referred to as the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least
equal in value to those provided for the Executive at any time during the
180-day period immediately preceding the Effective Date or, if more favorable
to the Executive, those provided generally at any time after the Effective Date
to any executives of the Company and its Affiliates of comparable status and
position to the Executive. The Executive shall be reimbursed, at such
intervals and in accordance with such standard policies that are most favorable
to the Executive that were in effect at any time during the 180-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to any
executives of the Company and its Affiliates of comparable status and position
to the Executive, for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Company and its Affiliates, including travel
expenses.
(c) The Executive and/or the Executive's family, as the
case may be, shall be included, to the extent eligible thereunder (which
eligibility shall not be conditioned on the Executive's salary grade or on any
other requirement that excludes executives of the Company and its Affiliates of
comparable status and position to the Executive unless such exclusion was in
effect for such plan or an equivalent plan on the date 180 days prior to the
Effective Date), in any and all welfare benefit plans, practices, policies and
programs providing benefits for the Company's salaried employees in general or,
if more favorable to the Executive, to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to group life insurance, hospitalization, medical and dental plans;
provided, that, (i) in no event shall the aggregate level of benefits under
such plans, practices, policies and programs in which the Executive is included
be less than the aggregate level of benefits under plans, practices, policies
and programs of the type referred to in this Section 5(c) in which the
Executive was participating at any time during the 180-day period immediately
preceding the Effective Date and (ii) in no event shall the aggregate level of
benefits under such plans, practices, policies and programs be less than the
aggregate level of benefits under plans, practices, policies and programs of
the type referred to in this Section 5(c) provided at any time after the
Effective Date to any executive of the Company and its Affiliates of comparable
status and position to the Executive.
(d) The Executive shall annually be entitled to not less
than the amount of paid vacation and not fewer than the number of paid holidays
to which the Executive was entitled
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<PAGE> 4
annually at any time during the 180-day period immediately preceding the
Effective Date or such greater amount of paid vacation and number of paid
holidays as may be made available annually to the Executive or any other
executive of the Company and its Affiliates of comparable status and position
to the Executive at any time after the Effective Date.
(e) The Executive shall be included in all plans
providing additional benefits to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to deferred compensation, split-dollar life insurance, retirement,
supplemental retirement, stock option, stock appreciation, stock bonus and
similar or comparable plans; provided, that, (i) in no event shall the
aggregate level of benefits under such plans be less than the aggregate level
of benefits under plans of the type referred to in this Section 5(e) in which
the Executive was participating at any time during the 180-day period
immediately preceding the Effective Date; (ii) in no event shall the aggregate
level of benefits under such plans be less than the aggregate level of benefits
under plans of the type referred to in this Section 5(e) provided at any time
after the Effective Date to any executive of the Company and its Affiliates of
comparable status and position to the Executive; and (iii) the Company's
obligation to include the Executive in bonus or incentive compensation plans
shall be determined by Section 5(f).
(f) To assure that the Executive will have an opportunity
to earn incentive compensation after the Effective Date, the Executive shall be
included in a bonus plan of the Company that shall satisfy the standards
described below (the "Bonus Plan"). Bonuses under the Bonus Plan shall be
payable with respect to achieving such financial or other goals reasonably
related to the business of the Company as the Company shall establish (the
"Goals"), all of which Goals shall be attainable, prior to the end of the
Employment Period, with approximately the same degree of probability as the
goals under the Employer's annual incentive plan currently in effect, or the
successor to such plan, in the form most favorable to the Executive that was in
effect at any time during the 180-day period prior to the Effective Date (the
"Existing Plan") and in view of the Company's existing and projected financial
and business circumstances applicable at the time. The amount of the bonus
(the "Bonus Amount") that the Executive is eligible to earn under the Bonus
Plan shall be no less than the amount of the Executive's highest maximum
potential award under the Existing Plan at any time during the 180-day period
prior to the Effective Date or, if higher, any maximum potential award under
the Bonus Plan or any other bonus or incentive compensation plan in effect
after the Effective Date for the Executive or for any executive of the Company
and its Affiliates of comparable status and position to the Executive (such
bonus amount herein referred to as the "Targeted Bonus"), and if the Goals are
not achieved (and, therefore, the entire Targeted Bonus is not payable), then
the Bonus Plan shall provide for a payment of a Bonus Amount not less than a
portion of the Targeted Bonus reasonably related to that portion of the Goals
that were achieved. Payment of the Bonus Amount (i) shall be in cash, unless
otherwise agreed by the Executive, and (ii) shall not be affected by any
circumstance occurring subsequent to the end of the Employment Period,
including termination of the Executive's employment.
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<PAGE> 5
6. Annual Compensation Adjustments. During the
Employment Period, the Board of Directors of the Company (or an appropriate
committee thereof) will consider and appraise, at least annually, the
contributions of the Executive to the Employer, and in accordance with the
Company's practice prior to the Effective Date, due consideration shall be
given, at least annually, to the upward adjustment of the Executive's Annual
Base Salary (i) commensurate with increases generally given to other executives
of the Company and its Affiliates of comparable status and position to the
Executive, and (ii) as the scope of the Company's operations or the Executive's
duties expand.
7. Termination During Employment Period.
(a) Right to Terminate. During the Employment Period,
(i) the Company shall be entitled to terminate the Executive's employment (A)
for Cause, (B) by reason of the Executive's disability pursuant to Section 11,
or (C) for any other reason, and (ii) the Executive shall be entitled to
terminate the Executive's employment for any reason. Any such termination
shall be subject to the procedures set forth in Section 12 and shall be subject
to any consequences of such termination set forth in this Agreement. Any
termination of the Executive's employment during the Employment Period by the
Employer shall be deemed a termination by the Company for purposes of this
Agreement.
(b) Termination for Cause or Without Good Reason. If
there is a Covered Termination for Cause or due to the Executive's voluntarily
terminating the Executive's employment other than for Good Reason, then the
Executive shall be entitled to receive only Accrued Benefits.
(c) Termination Giving Rise to a Termination Payment. If
there is a Covered Termination by the Executive for Good Reason, or by the
Company other than by reason of (i) death, (ii) disability pursuant to Section
11, or (iii) Cause, then the Executive shall be entitled to receive, and the
Company shall promptly pay, Accrued Benefits and, in lieu of further base
salary for periods following the Termination Date, as liquidated damages and
additional severance pay and in consideration of the covenant of the Executive
set forth in Section 13(a), the Termination Payment pursuant to Section 8(a).
8. Payments Upon Termination.
(a) Termination Payment. (i) Subject to the limits set
forth in Section 8(a)(ii), for purposes of this Agreement, the
"Termination Payment" shall be an amount equal to the Annual Cash
Compensation multiplied by the number of years or fractional portion
thereof remaining in the Employment Period determined as of the
Termination Date, except that the Termination Payment shall not be
less than the amount of Annual Cash Compensation. The Termination
Payment shall be paid to the Executive in cash equivalent not later
than ten business days after the Termination Date. The Executive
shall not be required to mitigate the amount of the Termination
Payment by securing other employment or otherwise, nor will such
Termination Payment be reduced
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<PAGE> 6
by reason of the Executive securing other employment or for any other
reason. The Termination Payment shall be in addition to any other
severance payments to which the Executive is entitled under the
Company's severance policies and practices in the form most favorable
to the Executive that were in effect at any time during the 180-day
period prior to the Effective Date.
(ii) Notwithstanding any other provision of this
Agreement, if any portion of the Termination Payment or any other
payment under this Agreement, or under any other agreement with or
plan of the Company or the Employer (in the aggregate "Total
Payments"), would constitute an "excess parachute payment," then the
Total Payments to be made to the Executive shall be reduced such that
the value of the aggregate Total Payments that the Executive is
entitled to receive shall be One Dollar ($1) less than the maximum
amount which the Executive may receive without becoming subject to the
tax imposed by Section 4999 of the Code (or any successor provision)
or which the Company may pay without loss of deduction under Section
280G(a) of the Code (or any successor provision). For purposes of
this Agreement, the terms "excess parachute payment" and "parachute
payments" shall have the meanings assigned to them in Section 280G of
the Code (or any successor provision), and such "parachute payments"
shall be valued as provided therein. Present value for purposes of
this Agreement shall be calculated in accordance with Section
1274(b)(2) of the Code (or any successor provision). Within sixty
days following delivery of the Notice of Termination or notice by the
Company to the Executive of its belief that there is a payment or
benefit due the Executive which will result in an excess parachute
payment as defined in Section 280G of the Code (or any successor
provision), the Executive and the Company, at the Company's expense,
shall obtain the opinion (which need not be unqualified) of nationally
recognized tax counsel selected by the Company's independent auditors
and acceptable to the Executive in the Executive's sole discretion,
which sets forth (A) the amount of the Base Period Income, (B) the
amount and present value of Total Payments and (C) the amount and
present value of any excess parachute payments without regard to the
limitations of this Section 8(a)(ii). As used in this Section
8(a)(ii), the term "Base Period Income" means an amount equal to the
Executive's "annualized includible compensation for the base period"
as defined in Section 280G(d)(1) of the Code (or any successor
provision). For purposes of such opinion, the value of any noncash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code (or any successor provisions),
which determination shall be evidenced in a certificate of such
auditors addressed to the Company and the Executive. Such opinion
shall be dated as of the Termination Date and addressed to the Company
and the Executive and shall be binding upon the Company and the
Executive. If such opinion determines that there would be an excess
parachute payment, then the Termination Payment hereunder or any other
payment determined by such counsel to be includible in Total Payments
shall be reduced or eliminated as specified by the Executive in
writing delivered to the Company within thirty days of the Executive's
receipt of such opinion or, if the Executive fails to so notify the
Company, then as the Company shall reasonably determine, so that under
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<PAGE> 7
the bases of calculations set forth in such opinion there will be no
excess parachute payment. If such legal counsel so requests in
connection with the opinion required by this Section, the Executive
and the Company shall obtain, at the Company's expense, and the legal
counsel may rely on in providing the opinion, the advice of a firm of
recognized executive compensation consultants as to the reasonableness
of any item of compensation to be received by the Executive.
Notwithstanding the foregoing, the provisions of this Section
8(a)(ii), including the calculations, notices and opinions provided
for herein, shall be based upon the conclusive presumption that the
following are reasonable: (1) the compensation and benefits provided
for in Section 5 and (2) any other compensation, including but not
limited to the Accrued Benefits, earned prior to the Termination Date
by the Executive pursuant to the Company's compensation programs if
such payments would have been made in the future in any event, even
though the timing of such payment is triggered by the Change in
Control or the Termination Date. If the provisions of Sections 280G
and 4999 of the Code (or any successor provisions) are repealed
without succession, then this Section 8(a)(ii) shall be of no further
force or effect.
(b) Additional Benefits. If there is a Covered
Termination and the Executive is entitled to Accrued Benefits and the
Termination Payment, then the Executive shall be entitled to the following
additional benefits:
(i) Until the earlier of the end of the
Employment Period or such time as the Executive has obtained new
employment and is covered by benefits which in the aggregate are at
least equal in value to the following benefits, the Executive shall
continue to be covered, at the expense of the Company, by the most
favorable life insurance, hospitalization, medical and dental coverage
and other welfare benefits provided to the Executive and the
Executive's family during the 180-day period immediately preceding the
Effective Date or at any time thereafter or, if more favorable to the
Executive, coverage as was required hereunder with respect to the
Executive immediately prior to the date Notice of Termination is
given.
(ii) The Executive shall receive, at the expense
of the Company, outplacement services, on an individualized basis at a
level of service commensurate with the Executive's most senior status
with the Company during the 180-day period prior to the Effective Date
(or, if higher, at any time after the Effective Date), provided by a
nationally recognized executive placement firm selected by the Company
with the consent of the Executive, which consent will not be
unreasonably withheld; provided that the cost to the Company of such
services shall not exceed 15% of the Executive's Annual Base Salary.
(iii) The Company shall bear up to $10,000 in the
aggregate of fees and expenses of consultants and/or legal or
accounting advisors engaged by the Executive to advise the Executive
as to matters relating to the computation of benefits due and payable
under this Section 8.
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9. Death. (a) Except as provided in Section 9(b), in
the event of a Covered Termination due to the Executive's death, the
Executive's estate, heirs and beneficiaries shall receive all the Executive's
Accrued Benefits through the Termination Date.
(b) If the Executive dies after a Notice of Termination
is given (i) by the Company or (ii) by the Executive for Good Reason, then the
Executive's estate, heirs and beneficiaries shall be entitled to the benefits
described in Section 9(a) and, subject to the provisions of this Agreement, to
such Termination Payment to which the Executive would have been entitled had
the Executive lived. In such event, the Termination Date shall be thirty days
following the giving of the Notice of Termination, subject to extension
pursuant to the definition of "Termination Date" in Exhibit A.
10. Retirement. If, during the Employment Period, the
Executive and the Employer shall execute an agreement providing for the early
retirement of the Executive from the Employer, or the Executive shall otherwise
give notice that the Executive is voluntarily choosing to retire early from the
Employer, then the Executive shall receive Accrued Benefits through the
Termination Date; provided, that if the Executive's employment is terminated by
the Executive for Good Reason or by the Company other than by reason of death,
disability or Cause and the Executive also, in connection with such
termination, elects voluntary early retirement, then the Executive shall also
be entitled to receive a Termination Payment pursuant to Section 8(a).
11. Termination for Disability. If, during the
Employment Period, as a result of the Executive's disability due to physical or
mental illness or injury (regardless of whether such illness or injury is
job-related), the Executive shall have been absent from the Executive's duties
hereunder on a full-time basis for a period of 182 days and, within thirty days
after the Company notifies the Executive in writing that it intends to
terminate the Executive's employment (which notice shall not constitute the
Notice of Termination contemplated below), the Executive shall not have
returned to the performance of the Executive's duties hereunder on a full-time
basis, then the Company may terminate the Executive's employment for purposes
of this Agreement pursuant to a Notice of Termination. If the Executive's
employment is terminated on account of the Executive's disability in accordance
with this Section, then the Executive shall receive Accrued Benefits in
accordance with Section 8(a) and shall remain eligible for all benefits
provided by any long term disability programs of the Employer in effect at the
time the Company sends notice to the Executive of its intent to terminate
pursuant to this Section.
12. Termination Notice and Procedure. (a) Any
termination of the Executive's employment during the Employment Period by the
Company or the Executive (other than a termination of the Executive's
employment referenced in the second sentence of the definition of "Effective
Date" in Exhibit A) shall be communicated by written Notice of Termination to
the Executive, if such Notice is given by the Company, and to the Company, if
such Notice is given by the Executive, all in accordance with the following
procedures and those set forth in Section 22:
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(i) If such termination is for disability, Cause or Good
Reason, the Notice of Termination shall indicate in reasonable detail the facts
and circumstances alleged to provide a basis for such termination.
(ii) Any Notice of Termination by the Company shall have
been approved, prior to the giving thereof to the Executive, by a resolution
duly adopted by a majority of the directors of the Company (or any successor
corporation) then in office, a copy of which shall accompany the Notice.
(iii) If the Notice is given by the Executive for Good
Reason, then the Executive may cease performing the Executive's duties
hereunder on or after the date 15 days after the delivery of Notice of
Termination (unless the Notice of Termination is based upon clause (vii) of the
definition of "Good Reason" in Exhibit A, in which case the Executive may cease
performing his duties at the time the Executive's employment is terminated) and
shall in any event cease employment on the Termination Date, if any, arising
from the delivery of such Notice. If the Notice is given by the Company, then
the Executive may cease performing the Executive's duties hereunder on the date
of receipt of the Notice of Termination, subject to the Executive's rights
hereunder.
(iv) The recipient of any Notice of Termination shall
personally deliver or mail in accordance with Section 22 written notice of any
dispute relating to such Notice of Termination to the party giving such Notice
within fifteen days after receipt thereof. After the expiration of such fifteen
days, the contents of the Notice of Termination shall become final and not
subject to dispute.
Notwithstanding the foregoing, (A) if the Executive terminates the Executive's
employment after a Change in Control without complying with this Section 12,
then the Executive will be deemed to have voluntarily terminated the
Executive's employment other than for Good Reason and deemed to have delivered
a written Notice of Termination to that effect to the Company as of the date of
such termination and (B) if the Company terminates the Executive's employment
after a Change in Control without complying with this Section 12, then the
Company will be deemed to have terminated the Executive's employment other than
by reason of death, disability or Cause and the Company will be deemed to have
delivered a written Notice of Termination to that effect to the Executive as of
the date of such termination. Under circumstances described in clause (B)
above, the Executive may, but shall not be obligated to, also deliver a Notice
of Termination based upon clause (vii) of the definition of "Good Reason" in
Exhibit A for the purpose of subjecting such Notice to Section 12(a)(iv).
(b) If a Change in Control occurs and the Executive's
employment with the Employer terminates (whether by the Company, the Executive
or otherwise) within 180 days prior to the Change in Control, then the
Executive may assert that such termination is a Covered Termination by sending
a written Notice of Termination to the Company at any time prior to the first
anniversary of the Change in Control in accordance with the procedures set
forth in this Section 12(b) and those set forth in Section 22. If the
Executive asserts that the Executive
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terminated the Executive's employment for Good Reason or that the Company
terminated the Executive's employment other than for disability or Cause, then
the Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such assertions. The Company
shall personally deliver or mail in accordance with Section 22 written notice
of any dispute relating to such Notice of Termination to the Executive within
fifteen days after receipt thereof. After the expiration of such fifteen days,
the contents of the Notice of Termination shall become final and not subject to
dispute.
13. Further Obligations of the Executive.
(a) Competition. The Executive agrees that, in the event
of any Covered Termination where the Executive is entitled to (and receives)
Accrued Benefits and the Termination Payment, the Executive shall not, for a
period of three months after the Termination Date, without the prior written
approval of the Company's Board of Directors, engage in any Competitive
Activity.
(b) Confidentiality. During and following the
Executive's employment by the Employer, the Executive shall hold in confidence
and not directly or indirectly disclose or use or copy or make lists of any
confidential information or proprietary data of the Company (including that of
the Employer), except to the extent authorized in writing by the Board of
Directors of the Company or required by any court or administrative agency,
other than to an employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Executive of duties as an executive of the Company or the Employer.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential
by persons engaged in the same business or a business similar to that of the
Company. All records, files, documents and materials, or copies thereof,
relating to the business of the Company which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Company and shall be promptly returned to the Company upon termination of
employment with the Employer.
14. Expenses and Interest. If, after the Effective Date,
(i) a dispute arises with respect to the enforcement of the Executive's rights
under this Agreement, (ii) any legal or arbitration proceeding shall be brought
to enforce or interpret any provision contained herein or to recover damages
for breach hereof, or (iii) any tax audit or proceeding is commenced that is
attributable in part to the application of Section 4999 of the Code, in any
case so long as the Executive is not acting in bad faith, then the Company
shall reimburse the Executive for any reasonable attorneys' fees and necessary
costs and disbursements incurred as a result of such dispute, legal or
arbitration proceeding or tax audit or proceeding ("Expenses"), and prejudgment
interest on any money judgment or arbitration award obtained by the Executive
calculated at the rate of interest announced by Firstar Bank Milwaukee, N.A.,
Milwaukee, Wisconsin, from time to time as its prime or base lending rate from
the date that payments to the Executive should have been made under this
Agreement. Within ten days after the Executive's written request therefor, the
Company shall pay to the Executive, or such other
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person or entity as the Executive may designate in writing to the Company, the
Executive's reasonable Expenses in advance of the final disposition or
conclusion of any such dispute, legal or arbitration proceeding.
15. Payment Obligations Absolute. The Company's
obligation during and after the Employment Period to pay the Executive the
amounts and to make the benefit and other arrangements provided herein shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim, recoupment, defense or
other right which the Company may have against the Executive or anyone else.
Except as provided in Section 14, all amounts payable by the Company hereunder
shall be paid without notice or demand. Each and every payment made hereunder
by the Company shall be final, and the Company will not seek to recover all or
any part of such payment from the Executive, or from whomsoever may be entitled
thereto, for any reason whatsoever.
16. Successors. (a) If the Company sells, assigns or
transfers all or substantially all of its business and assets to any Person or
if the Company merges into or consolidates or otherwise combines (where the
Company does not survive such combination) with any Person (any such event, a
"Sale of Business"), then the Company shall assign all of its right, title and
interest in this Agreement as of the date of such event to such Person, and the
Company shall cause such Person, by written agreement in form and substance
reasonably satisfactory to the Executive, to expressly assume and agree to
perform from and after the date of such assignment all of the terms, conditions
and provisions imposed by this Agreement upon the Company. Failure of the
Company to obtain such agreement prior to the effective date of such Sale of
Business shall be a breach of this Agreement constituting "Good Reason"
hereunder, except that for purposes of implementing the foregoing, the date
upon which such Sale of Business becomes effective shall be deemed the
Termination Date. In case of such assignment by the Company and of assumption
and agreement by such Person, as used in this Agreement, "Company" shall
thereafter mean such Person which executes and delivers the agreement provided
for in this Section 16 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, and this Agreement shall
inure to the benefit of, and be enforceable by, such Person. The Executive
shall, in the Executive's discretion, be entitled to proceed against any or all
of such Persons, any Person which theretofore was such a successor to the
Company (as defined in the first paragraph of this Agreement) and the Company
(as so defined) in any action to enforce any rights of the Executive hereunder.
Except as provided in this Subsection, this Agreement shall not be assignable
by the Company. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.
(b) This Agreement and all rights of the Executive shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All
amounts payable to the Executive under Sections 7, 8, 9, 10, 11 and 14 if the
Executive had lived shall be paid, in the event of the Executive's death, to
the Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Employer, as such terms
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are in effect on the Effective Date, that expressly govern benefits under such
plan in the event of the Executive's death.
17. Severability. The provisions of this Agreement shall
be regarded as divisible, and if any of said provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, then
the validity and enforceability of the remainder of such provisions or parts
hereof and the applicability thereof shall not be affected thereby.
18. Amendment. This Agreement may not be amended or
modified at any time except by written instrument executed by the Company and
the Executive.
19. Withholding. The Employer shall be entitled to
withhold from amounts to be paid to the Executive hereunder any federal, state
or local withholding or other taxes or charges which it is from time to time
required to withhold; provided, that the amount so withheld shall not exceed
the minimum amount required to be withheld by law. The Employer shall be
entitled to rely on an opinion of nationally recognized tax counsel if any
question as to the amount or requirement of any such withholding shall arise.
20. Certain Rules of Construction. No party shall be
considered as being responsible for the drafting of this Agreement for the
purpose of applying any rule construing ambiguities against the drafter or
otherwise. No draft of this Agreement shall be taken into account in
construing this Agreement. Any provision of this Agreement which requires an
agreement in writing shall be deemed to require that the writing in question be
signed by the Executive and an authorized representative of the Company.
21. Governing Law; Resolution of Disputes. (a) This
Agreement and the rights and obligations hereunder shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin
(excluding any choice of law rules that may direct the application of the laws
of another jurisdiction) except that Section 21(b) shall be construed in
accordance with the Federal Arbitration Act if arbitration is chosen by the
Executive as the method of dispute resolution.
(b) Any dispute arising out of this Agreement shall, at
the Executive's election, be determined by arbitration under the rules of the
American Arbitration Association then in effect (but subject to any evidentiary
standards set forth in this Agreement), in which case both parties shall be
bound by the arbitration award, or by litigation. Whether the dispute is to be
settled by arbitration or litigation, the venue for the arbitration or
litigation shall be Milwaukee, Wisconsin or, at the Executive's election, if
the Executive is no longer residing or working in the Milwaukee, Wisconsin
metropolitan area, in the judicial district encompassing the city in which the
Executive resides; provided, that, if the Executive is not then residing in the
United States, the election of the Executive with respect to such venue shall
be either Milwaukee, Wisconsin or in the judicial district encompassing that
city in the United States among the thirty cities having the largest population
(as determined by the most recent United States Census data available at the
Termination Date) that is closest to the Executive's residence.
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<PAGE> 13
The parties consent to personal jurisdiction in each trial court in the
selected venue having subject matter jurisdiction notwithstanding their
residence or situs, and each party irrevocably consents to service of process
in the manner provided hereunder for the giving of notices.
22. Notice. Notices given pursuant to this Agreement
shall be in writing and, except as otherwise provided by Section 12(a)(iii),
shall be deemed given when actually received by the Executive or actually
received by the Company's Secretary or any officer of the Company other than
the Executive. If mailed, such notices shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid, if to the Company, to Hein-Werner Corporation, Attention: Secretary
(or, if the Executive is then Secretary, to the Chief Executive Officer), 2120
Pewaukee Road, Waukesha, Wisconsin 53188, or if to the Executive, at the
address set forth below the Executive's signature to this Agreement, or to such
other address as the party to be notified shall have theretofore given to the
other party in writing.
23. Additional Payment. (a) If, notwithstanding the
provisions of Section 8(a)(ii), but subject to subsection (b), it is ultimately
determined by a court or pursuant to a final determination by the Internal
Revenue Service that any portion of Total Payments is subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (or any successor provision),
then the Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive after deduction of
any Excise Tax and any interest charges or penalties in respect of the
imposition of such Excise Tax (but not any federal, state or local income tax)
on the Total Payments, and any federal, state and local income tax and Excise
Tax upon the payment provided for by this Section 23 shall be equal to the
Total Payments. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of the Executive's
domicile for income tax purposes on the date the Gross-Up Payment is made, net
of the maximum reduction in federal income taxes that could be obtained from
deduction of such state and local taxes.
(b) If legislation is enacted that would require the
Company's shareholders to approve this Agreement, prior to a Change in Control,
due solely to the provision contained in subsection (a) of this Section 23,
then
(i) from and after such time as shareholder approval
would be required, until shareholder approval is obtained as required
by such legislation, subsection (a) shall be of no force and effect;
(ii) if the Company seeks shareholder approval of any
other agreement providing similar benefits to any other executive of
the Company, then the Company shall seek shareholder approval of this
Agreement at the same shareholders' meeting or meetings at which the
shareholders consider any such other agreement; and
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<PAGE> 14
(iii) the Company and the Executive shall use their best
efforts to consider and agree in writing upon an amendment to this
Section 23 such that, as amended, this Subsection would provide the
Executive with the benefits intended to be afforded to the Executive
by subsection (a) without requiring shareholder approval.
24. No Waiver. The Executive's or the Company's failure
to insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
25. Headings. The headings herein contained are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
HEIN-WERNER CORPORATION
By: /s/ J. L. Dindorf
-------------------------------------------
J. L. Dindorf
President and Chief Executive Officer
Attest: /s/ M. J. McSweeney
-------------------------------------------
M. J. McSweeney
Secretary
EXECUTIVE
/s/ Jean-Paul Barthelme
---------------------------------------------------
Jean-Paul Barthelme
2 Ch. De la Chenaie
CH-1293 BELLEVUE (Geneva)
SWITZERLAND
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<PAGE> 15
Exhibit A
CERTAIN DEFINED TERMS
For purposes of this Agreement,
(a) Act. The term "Act" means the Securities Exchange
Act of 1934, as amended.
(b) Accrued Benefits. The term "Accrued Benefits" shall
include the following amounts, payable as described herein: (i) all base
salary for the time period ending with the Termination Date; (ii) reimbursement
for any and all monies advanced in connection with the Executive's employment
for reasonable and necessary expenses incurred by the Executive on behalf of
the Company and its Affiliates for the time period ending with the Termination
Date; (iii) any and all other cash earned through the Termination Date and
deferred at the election of the Executive or pursuant to any deferred
compensation plan then in effect; (iv) notwithstanding any provision of any
bonus or incentive compensation plan applicable to the Executive, a lump sum
amount, in cash, equal to the sum of (A) any bonus or incentive compensation
that has been allocated or awarded to the Executive for a fiscal year or other
measuring period under the plan that ends prior to the Termination Date but has
not yet been paid (pursuant to Section 5(f) or otherwise) and (B) a pro rata
portion to the Termination Date of the aggregate value of all contingent bonus
or incentive compensation awards to the Executive for all uncompleted periods
under the plan calculated as to each such award as if the Goals with respect to
such bonus or incentive compensation award had been attained; and (v) all other
payments and benefits to which the Executive (or in the event of the
Executive's death, the Executive's surviving spouse or other beneficiary) may
be entitled as compensatory fringe benefits or under the terms of any benefit
plan of the Employer, including severance payments under the Employer's
severance policies and practices in the form most favorable to the Executive
that were in effect at any time during the 180-day period prior to the
Effective Date. Payment of Accrued Benefits shall be made promptly in
accordance with the Employer's prevailing practice with respect to clauses (i)
and (ii) or, with respect to clauses (iii), (iv) and (v), pursuant to the terms
of the benefit plan or practice establishing such benefits.
(c) Affiliate and Associate. The terms "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations of the Act.
(d) Annual Cash Compensation. The term "Annual Cash
Compensation" shall mean the sum of (A) the Executive's Annual Base Salary,
plus (B) the highest of (1) the highest annual bonus or incentive compensation
award earned by the Executive under any cash bonus or incentive compensation
plan of the Company or any of its Affiliates during the three complete fiscal
years of the Company immediately preceding the Termination Date or, if more
favorable to the Executive, during the three complete fiscal years of the
Company immediately preceding
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the Effective Date; (2) the Executive's bonus or incentive compensation
Targeted Bonus for the fiscal year in which the Termination Date occurs; or (3)
the highest average annual bonus and/or incentive compensation earned during
the three complete fiscal years of the Company immediately preceding the
Termination Date (or, if more favorable to the Executive, during the three
complete fiscal years of the Company immediately preceding the Effective Date)
under any cash bonus or incentive compensation plan of the Company or any of
its Affiliates by the group of executives of the Company and its Affiliates
participating under such plan during such fiscal years at a status or position
comparable to that at which the Executive participated or would have
participated pursuant to the Executive's most senior position at any time
during the 180 days preceding the Effective Date or thereafter until the
Termination Date.
(e) Cause. The Company may terminate the Executive's
employment after the Effective Date for "Cause" only if the conditions set
forth in paragraphs (i) and (ii) have been met and the Company otherwise
complies with this Agreement:
(i) (A) the Executive has committed any act of
fraud, embezzlement or theft in connection with the Executive's duties
as an Executive or in the course of employment with the Company and/or
its subsidiaries; (B) the Executive has willfully and continually
failed to perform substantially the Executive's duties with the
Company or any of its Affiliates (other than any such failure
resulting from incapacity due to physical or mental illness or injury,
regardless of whether such illness or injury is job-related) for an
appropriate period, which shall not be less than 30 days, after the
Chief Executive Officer of the Company (or, if the Executive is then
Chief Executive Officer, the Board) has delivered a written demand for
performance to the Executive that specifically identifies the manner
in which the Chief Executive Officer (or the Board, as the case may
be) believes the Executive has not substantially performed the
Executive's duties; (C) the Executive has willfully engaged in illegal
conduct or gross misconduct that is materially and demonstrably
injurious to the Company; (D) the Executive has willfully and
wrongfully disclosed any trade secret or other confidential
information of the Company or any of its Affiliates; or (E) the
Executive has engaged in any Competitive Activity; and in any such
case the act or omission shall have been determined by the Board to
have been materially harmful to the Company and its subsidiaries taken
as a whole.
For purposes of this provision, (1) no act or failure
to act on the part of the Executive shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or
omission was in the best interests of the Company and (2) any act, or
failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company.
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(ii) (A) The Company terminates the Executive's
employment by delivering a Notice of Termination to the Executive, (B)
prior to the time the Company has terminated the Executive's
employment pursuant to a Notice of Termination, the Board, by the
affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board, has adopted a resolution finding that the
Executive was guilty of conduct set forth in this definition of Cause,
and specifying the particulars thereof in detail, at a meeting of the
Board called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before
the Board) and (C) the Company delivers a copy of such resolution to
the Executive with the Notice of Termination at the time the
Executive's employment is terminated.
In the event of a dispute regarding whether the Executive's employment has been
terminated for Cause, no claim by the Company that the Company has terminated
the Executive's employment for Cause in accordance with this Agreement shall be
given effect unless the Company establishes by clear and convincing evidence
that the Company has complied with the requirements of this Agreement to
terminate the Executive's employment for Cause.
(f) Change in Control. A "Change in Control" shall be
deemed to have occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (other than (A) the Company or any
of its subsidiaries, (B) a trustee or other fiduciary holding
securities under any employee benefit plan of the Company or any of
its subsidiaries, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities or (D) a corporation owned,
directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock in the
Company ("Excluded Persons")) is or becomes the "Beneficial Owner" (as
such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its Affiliates after January 1, 1998
pursuant to express authorization by the Board that refers to this
exception) representing 25% or more of either the then outstanding
shares of common stock of the Company or the combined voting power of
the Company's then outstanding voting securities; or
(ii) the following individuals cease for any
reason to constitute a majority of the number of directors then
serving: individuals who, on January 1, 1998, constituted the Board
and any new director (other than a director whose initial assumption
of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating
to the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A under the Act) whose appointment or
election by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still
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in office who either were directors on January 1, 1998 or whose
appointment, election or nomination for election was previously so
approved; or
(iii) the shareholders of the Company approve a
merger, consolidation or share exchange of the Company with any other
corporation or approve the issuance of voting securities of the
Company in connection with a merger, consolidation or share exchange
of the Company (or any direct or indirect subsidiary of the Company)
pursuant to applicable stock exchange requirements, other than (A) a
merger, consolidation or share exchange which would result in the
voting securities of the Company outstanding immediately prior to such
merger, consolidation or share exchange continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least 50%
of the combined voting power of the voting securities of the Company
or such surviving entity or any parent thereof outstanding immediately
after such merger, consolidation or share exchange, or (B) a merger,
consolidation or share exchange effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person (other than an Excluded Person) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates after
January 1, 1998 pursuant to express authorization by the Board that
refers to this exception) representing 25% or more of either the then
outstanding shares of common stock of the Company or the combined
voting power of the Company's then outstanding voting securities; or
(iv) the shareholders of the Company approve a
plan of complete liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (in one transaction or a
series of related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity at least 75% of
the combined voting power of the voting securities of which are owned
by Persons in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity that owns all or substantially all of the assets or voting securities
of the Company immediately following such transaction or series of
transactions.
(g) Code. The term "Code" means the Internal Revenue
Code of 1986, including any amendments thereto or successor tax codes thereof.
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<PAGE> 19
(h) Competitive Activity. The Executive shall engage in
a "Competitive Activity" if the Executive participates in the management of, is
employed by or owns any interest in any business enterprise at a location
within the United States that engages in substantial competition with the
Company or its subsidiaries, where such enterprise's revenues from any
competitive activities amount to 10% or more of such enterprise's consolidated
net revenues and sales for its most recently completed fiscal year; provided,
however, that owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such competitor
shall not be a "Competitive Activity".
(i) Covered Termination. The term "Covered Termination"
means any termination of the Executive's employment during the Employment
Period where the Termination Date or the date Notice of Termination is
delivered is any date on or prior to the end of the Employment Period.
(j) Effective Date. The term "Effective Date" shall mean
the first date on which a Change in Control occurs. Anything in this Agreement
to the contrary notwithstanding, if (i) a Change in Control occurs, (ii) the
Executive's employment with the Employer terminates (whether by the Company,
the Executive or otherwise) within 180 days prior to the Change in Control and
(iii) it is reasonably demonstrated by the Executive that (A) any such
termination of employment by the Employer (1) was at the request of a third
party who has taken steps reasonably calculated to effect a Change in Control
or (2) otherwise arose in connection with or in anticipation of a Change in
Control, or (B) any such termination of employment by the Executive took place
subsequent to the occurrence of an event described in clause (ii), (iii), (iv)
or (v) of the definition of "Good Reason" which event (1) occurred at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or in anticipation
of a Change in Control, then for all purposes of this Agreement the term
"Effective Date" shall mean the day immediately prior to the date of such
termination of employment.
(k) Employer. The term "Employer" means the Company
and/or any subsidiary of the Company that employed the Executive immediately
prior to the Effective Date.
(l) Good Reason. The Executive shall have a "Good
Reason" for termination of employment on or after the Effective Date if the
Executive determines in good faith that any of the following events has
occurred:
(i) any breach of this Agreement by the Company,
including specifically any breach by the Company of its agreements
contained in Section 4, Section 5 or Section 6, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith that the Company remedies promptly after receipt of notice
thereof given by the Executive;
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<PAGE> 20
(ii) any reduction in the Executive's base salary,
percentage of base salary available as incentive compensation or bonus
opportunity or benefits, in each case relative to those most favorable
to the Executive in effect at any time during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date;
(iii) a material adverse change, without the
Executive's prior written consent, in the Executive's working
conditions or status with the Company or the Employer from such
working conditions or status in effect during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date, including but not
limited to (A) a material change in the nature or scope of the
Executive's titles, authority, powers, functions, duties, reporting
requirements or responsibilities, or (B) a material reduction in the
level of support services, staff, secretarial and other assistance,
office space and accoutrements, but excluding for this purpose an
isolated, insubstantial and inadvertent event not occurring in bad
faith that the Company remedies promptly after receipt of notice
thereof given by the Executive;
(iv) the relocation of the Executive's principal
place of employment to a location more than 35 miles from the
Executive's principal place of employment on the date 180 days prior
to the Effective Date;
(v) the Employer requires the Executive to travel
on Employer business to a materially greater extent than was required
during the 180-day period prior to the Effective Date;
(vi) failure by the Company to obtain the
agreement referred to in Section 16(a) as provided therein; or
(vii) the Company or the Employer terminates the
Executive's employment after a Change in Control without delivering a
Notice of Termination in accordance with Section 12;
provided that (A) any such event occurs following the Effective Date or (B) in
the case of any event described in clauses (ii), (iii), (iv) or (v) above, such
event occurs on or prior to the Effective Date under circumstances described in
clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective Date." In
the event of a dispute regarding whether the Executive terminated the
Executive's employment for "Good Reason" in accordance with this Agreement, no
claim by the Company that such termination does not constitute a Covered
Termination shall be given effect unless the Company establishes by clear and
convincing evidence that such termination does not constitute a Covered
Termination. Any election by the Executive to terminate the Executive's
employment for Good Reason shall not be deemed a voluntary termination of
employment by the Executive for purposes of any other employee benefit or other
plan.
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<PAGE> 21
(m) Normal Retirement Date. The term "Normal Retirement
Date" means the date the Executive reaches age 65.
(n) Notice of Termination. The term "Notice of
Termination" means a written notice as contemplated by Section 12.
(o) Person. The term "Person" shall have the meaning
given in Section 3(a)(9) of the Act, as modified and used in Sections 13(d) and
14(d) thereof.
(p) Termination Date. Except as otherwise provided in
Section 9(b) and Section 16(a), the term "Termination Date" means (i) if the
Executive's employment is terminated by the Executive's death, the date of
death; (ii) if the Executive's employment is terminated by reason of voluntary
early retirement, as agreed in writing by the Company and the Executive, the
date of such early retirement that is set forth in such written agreement;
(iii) if the Executive's employment is terminated for purposes of this
Agreement by reason of disability pursuant to Section 11, thirty days after the
Notice of Termination is given; (iv) if the Executive's employment is
terminated by the Executive voluntarily (other than for Good Reason), the date
the Notice of Termination is given; and (v) if the Executive's employment is
terminated by the Company (other than by reason of disability pursuant to
Section 11) or by the Executive for Good Reason, thirty days after the Notice
of Termination is given. Notwithstanding the foregoing,
(A) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Company notifies the Executive that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof, then the Executive may elect to continue the
Executive's employment during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that the Executive terminated the Executive's employment
for Good Reason in accordance with this Agreement, then the Termination Date
shall be the earlier of (1) the date on which the dispute is finally
determined, either (x) by mutual written agreement of the parties or (y) in
accordance with Section 21 or (2) the date of the Executive's death. If the
Executive so elects and it is thereafter determined that the Executive did not
terminate the Executive's employment for Good Reason in accordance with this
Agreement, then the employment of the Executive hereunder shall continue after
such determination as if the Executive had not delivered the Notice of
Termination asserting Good Reason and there shall be no Termination Date
arising out of such Notice. In either case, this Agreement continues, until
the Termination Date, if any, as if the Executive had not delivered the Notice
of Termination except that, if it is finally determined that the Executive
terminated the Executive's employment for Good Reason in accordance with this
Agreement, then the Executive shall in no case be denied the benefits described
in Section 8 (including a Termination Payment) based on events occurring after
the Executive delivered the Executive's Notice of Termination.
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<PAGE> 22
(B) If an opinion is required to be delivered pursuant to
Section 8(a)(ii) and such opinion shall not have been delivered, then the
Termination Date shall be the date on which such opinion is delivered.
(C) Except as provided in paragraph (A) above, if the
party receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof and it is finally determined that termination of the
Executive's employment for the reason asserted in such Notice of Termination
was not in accordance with this Agreement, then (1) if such Notice was
delivered by the Executive, then the Executive will be deemed to have
voluntarily terminated the Executive's employment other than for Good Reason by
means of such Notice and (2) if delivered by the Company, then the Company will
be deemed to have terminated the Executive's employment other than by reason of
death, disability or Cause by means of such Notice.
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<PAGE> 1
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 15th day of
April, 1998, by and between Hein-Werner Corporation, a Wisconsin corporation
(hereinafter referred to as the "Company"), and Mary L. Kielich (hereinafter
referred to as the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is currently employed by the Company in
a key capacity, and the Executive's services are valuable to the conduct of the
business of the Company;
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that circumstances may arise in which a change in control of the
Company occurs, through acquisition or otherwise, thereby causing uncertainty
about the Executive's future employment with the Company without regard to the
Executive's competence or past contributions, which uncertainty may result in
the loss of valuable services of the Executive to the detriment of the Company
and its shareholders, and the Company and the Executive wish to provide
reasonable security to the Executive against changes in the Executive's
relationship with the Company in the event of any such change in control;
WHEREAS, the Company and the Executive desire that any
proposal for a change in control or acquisition of the Company will be
considered by the Executive objectively and with reference only to the best
interests of the Company and its shareholders; and
WHEREAS, the Executive will be in a better position to
consider the Company's best interests if the Executive is afforded reasonable
security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisition.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
<PAGE> 2
1. Definitions. The following terms are used in this
Agreement as defined in Exhibit A:
Act Covered Termination
Accrued Benefits Effective Date
Affiliate and Associate Employer
Annual Cash Compensation Good Reason
Cause Normal Retirement Date
Change in Control Notice of Termination
Code Person
Competitive Activity Termination Date
2. Termination or Cancellation Prior to the Effective
Date. The Employer and the Executive shall each retain the right to terminate
the employment of the Executive at any time prior to the Effective Date. If
the Executive's employment is terminated prior to the Effective Date, then this
Agreement shall be terminated and cancelled and of no further force or effect
and any and all rights and obligations of the parties hereunder shall cease.
In addition, this Agreement shall terminate upon the Executive ceasing to be an
employee of the Employer prior to a Change in Control unless the Executive can
reasonably demonstrate that such change in status occurred under circumstances
described in clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective
Date" in Exhibit A.
3. Employment Period. If the Executive is employed by
the Employer on the Effective Date, then the Company will, or will cause the
Employer to, continue thereafter to employ the Executive during the Employment
Period (as hereinafter defined), and the Executive will remain in the employ of
the Employer, in accordance with and subject to the terms and provisions of
this Agreement. For purposes of this Agreement, the term "Employment Period"
means a period (i) commencing on the Effective Date, and (ii) ending at 11:59
p.m. Milwaukee Time on the earlier of the first anniversary of such date or the
Executive's Normal Retirement Date.
4. Duties. During the Employment Period, the Executive
shall, in the most significant capacities and positions held by the Executive
at any time during the 180-day period preceding the Effective Date or in such
other capacities and positions as may be agreed to by the Company and the
Executive in writing, devote the Executive's best efforts and all of the
Executive's business time, attention and skill to the business and affairs of
the Employer, as such business and affairs now exist and as they may hereafter
be conducted.
5. Compensation. During the Employment Period, the
Executive shall be compensated as follows:
(a) The Executive shall receive, at reasonable intervals
(but not less often than monthly) and in accordance with such standard policies
as may be in effect immediately prior to the Effective Date, an annual base
salary in cash equivalent of not less than twelve times the
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<PAGE> 3
Executive's highest monthly base salary (which shall include any amounts
credited to the Executive for the purchase of annuity contracts and related tax
offset bonuses) for the twelve-month period immediately preceding the month in
which the Effective Date occurs or, if higher, an annual base salary at the
rate in effect immediately prior to the Effective Date (which base salary
shall, unless otherwise agreed in writing by the Executive, include the current
receipt by the Executive of any amounts which, prior to the Effective Date, the
Executive had elected to defer, whether such compensation is deferred under
Section 401(k) of the Code or otherwise), subject to upward adjustment as
provided in Section 6 (such salary amount as adjusted upward from time to time
is hereafter referred to as the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least
equal in value to those provided for the Executive at any time during the
180-day period immediately preceding the Effective Date or, if more favorable
to the Executive, those provided generally at any time after the Effective Date
to any executives of the Company and its Affiliates of comparable status and
position to the Executive. The Executive shall be reimbursed, at such
intervals and in accordance with such standard policies that are most favorable
to the Executive that were in effect at any time during the 180-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to any
executives of the Company and its Affiliates of comparable status and position
to the Executive, for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Company and its Affiliates, including travel
expenses.
(c) The Executive and/or the Executive's family, as the
case may be, shall be included, to the extent eligible thereunder (which
eligibility shall not be conditioned on the Executive's salary grade or on any
other requirement that excludes executives of the Company and its Affiliates of
comparable status and position to the Executive unless such exclusion was in
effect for such plan or an equivalent plan on the date 180 days prior to the
Effective Date), in any and all welfare benefit plans, practices, policies and
programs providing benefits for the Company's salaried employees in general or,
if more favorable to the Executive, to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to group life insurance, hospitalization, medical and dental plans;
provided, that, (i) in no event shall the aggregate level of benefits under
such plans, practices, policies and programs in which the Executive is included
be less than the aggregate level of benefits under plans, practices, policies
and programs of the type referred to in this Section 5(c) in which the
Executive was participating at any time during the 180-day period immediately
preceding the Effective Date and (ii) in no event shall the aggregate level of
benefits under such plans, practices, policies and programs be less than the
aggregate level of benefits under plans, practices, policies and programs of
the type referred to in this Section 5(c) provided at any time after the
Effective Date to any executive of the Company and its Affiliates of comparable
status and position to the Executive.
(d) The Executive shall annually be entitled to not less
than the amount of paid vacation and not fewer than the number of paid holidays
to which the Executive was entitled
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annually at any time during the 180-day period immediately preceding the
Effective Date or such greater amount of paid vacation and number of paid
holidays as may be made available annually to the Executive or any other
executive of the Company and its Affiliates of comparable status and position
to the Executive at any time after the Effective Date.
(e) The Executive shall be included in all plans
providing additional benefits to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to deferred compensation, split-dollar life insurance, retirement,
supplemental retirement, stock option, stock appreciation, stock bonus and
similar or comparable plans; provided, that, (i) in no event shall the
aggregate level of benefits under such plans be less than the aggregate level
of benefits under plans of the type referred to in this Section 5(e) in which
the Executive was participating at any time during the 180-day period
immediately preceding the Effective Date; (ii) in no event shall the aggregate
level of benefits under such plans be less than the aggregate level of benefits
under plans of the type referred to in this Section 5(e) provided at any time
after the Effective Date to any executive of the Company and its Affiliates of
comparable status and position to the Executive; and (iii) the Company's
obligation to include the Executive in bonus or incentive compensation plans
shall be determined by Section 5(f).
(f) To assure that the Executive will have an opportunity
to earn incentive compensation after the Effective Date, the Executive shall be
included in a bonus plan of the Company that shall satisfy the standards
described below (the "Bonus Plan"). Bonuses under the Bonus Plan shall be
payable with respect to achieving such financial or other goals reasonably
related to the business of the Company as the Company shall establish (the
"Goals"), all of which Goals shall be attainable, prior to the end of the
Employment Period, with approximately the same degree of probability as the
goals under the Employer's annual incentive plan currently in effect, or the
successor to such plan, in the form most favorable to the Executive that was in
effect at any time during the 180-day period prior to the Effective Date (the
"Existing Plan") and in view of the Company's existing and projected financial
and business circumstances applicable at the time. The amount of the bonus
(the "Bonus Amount") that the Executive is eligible to earn under the Bonus
Plan shall be no less than the amount of the Executive's highest maximum
potential award under the Existing Plan at any time during the 180-day period
prior to the Effective Date or, if higher, any maximum potential award under
the Bonus Plan or any other bonus or incentive compensation plan in effect
after the Effective Date for the Executive or for any executive of the Company
and its Affiliates of comparable status and position to the Executive (such
bonus amount herein referred to as the "Targeted Bonus"), and if the Goals are
not achieved (and, therefore, the entire Targeted Bonus is not payable), then
the Bonus Plan shall provide for a payment of a Bonus Amount not less than a
portion of the Targeted Bonus reasonably related to that portion of the Goals
that were achieved. Payment of the Bonus Amount (i) shall be in cash, unless
otherwise agreed by the Executive, and (ii) shall not be affected by any
circumstance occurring subsequent to the end of the Employment Period,
including termination of the Executive's employment.
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6. Annual Compensation Adjustments. During the
Employment Period, the Board of Directors of the Company (or an appropriate
committee thereof) will consider and appraise, at least annually, the
contributions of the Executive to the Employer, and in accordance with the
Company's practice prior to the Effective Date, due consideration shall be
given, at least annually, to the upward adjustment of the Executive's Annual
Base Salary (i) commensurate with increases generally given to other executives
of the Company and its Affiliates of comparable status and position to the
Executive, and (ii) as the scope of the Company's operations or the Executive's
duties expand.
7. Termination During Employment Period.
(a) Right to Terminate. During the Employment Period,
(i) the Company shall be entitled to terminate the Executive's employment (A)
for Cause, (B) by reason of the Executive's disability pursuant to Section 11,
or (C) for any other reason, and (ii) the Executive shall be entitled to
terminate the Executive's employment for any reason. Any such termination
shall be subject to the procedures set forth in Section 12 and shall be subject
to any consequences of such termination set forth in this Agreement. Any
termination of the Executive's employment during the Employment Period by the
Employer shall be deemed a termination by the Company for purposes of this
Agreement.
(b) Termination for Cause or Without Good Reason. If
there is a Covered Termination for Cause or due to the Executive's voluntarily
terminating the Executive's employment other than for Good Reason, then the
Executive shall be entitled to receive only Accrued Benefits.
(c) Termination Giving Rise to a Termination Payment. If
there is a Covered Termination by the Executive for Good Reason, or by the
Company other than by reason of (i) death, (ii) disability pursuant to Section
11, or (iii) Cause, then the Executive shall be entitled to receive, and the
Company shall promptly pay, Accrued Benefits and, in lieu of further base
salary for periods following the Termination Date, as liquidated damages and
additional severance pay and in consideration of the covenant of the Executive
set forth in Section 13(a), the Termination Payment pursuant to Section 8(a).
8. Payments Upon Termination.
(a) Termination Payment. (i) Subject to the limits set
forth in Section 8(a)(ii), for purposes of this Agreement, the
"Termination Payment" shall be an amount equal to the Annual Cash
Compensation multiplied by the number of years or fractional portion
thereof remaining in the Employment Period determined as of the
Termination Date, except that the Termination Payment shall not be
less than the amount of Annual Cash Compensation. The Termination
Payment shall be paid to the Executive in cash equivalent not later
than ten business days after the Termination Date. The Executive
shall not be required to mitigate the amount of the Termination
Payment by securing other employment or otherwise, nor will such
Termination Payment be reduced
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by reason of the Executive securing other employment or for any other
reason. The Termination Payment shall be in addition to any other
severance payments to which the Executive is entitled under the
Company's severance policies and practices in the form most favorable
to the Executive that were in effect at any time during the 180-day
period prior to the Effective Date.
(ii) Notwithstanding any other provision of this
Agreement, if any portion of the Termination Payment or any other
payment under this Agreement, or under any other agreement with or
plan of the Company or the Employer (in the aggregate "Total
Payments"), would constitute an "excess parachute payment," then the
Total Payments to be made to the Executive shall be reduced such that
the value of the aggregate Total Payments that the Executive is
entitled to receive shall be One Dollar ($1) less than the maximum
amount which the Executive may receive without becoming subject to the
tax imposed by Section 4999 of the Code (or any successor provision)
or which the Company may pay without loss of deduction under Section
280G(a) of the Code (or any successor provision). For purposes of
this Agreement, the terms "excess parachute payment" and "parachute
payments" shall have the meanings assigned to them in Section 280G of
the Code (or any successor provision), and such "parachute payments"
shall be valued as provided therein. Present value for purposes of
this Agreement shall be calculated in accordance with Section
1274(b)(2) of the Code (or any successor provision). Within sixty
days following delivery of the Notice of Termination or notice by the
Company to the Executive of its belief that there is a payment or
benefit due the Executive which will result in an excess parachute
payment as defined in Section 280G of the Code (or any successor
provision), the Executive and the Company, at the Company's expense,
shall obtain the opinion (which need not be unqualified) of nationally
recognized tax counsel selected by the Company's independent auditors
and acceptable to the Executive in the Executive's sole discretion,
which sets forth (A) the amount of the Base Period Income, (B) the
amount and present value of Total Payments and (C) the amount and
present value of any excess parachute payments without regard to the
limitations of this Section 8(a)(ii). As used in this Section
8(a)(ii), the term "Base Period Income" means an amount equal to the
Executive's "annualized includible compensation for the base period"
as defined in Section 280G(d)(1) of the Code (or any successor
provision). For purposes of such opinion, the value of any noncash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code (or any successor provisions),
which determination shall be evidenced in a certificate of such
auditors addressed to the Company and the Executive. Such opinion
shall be dated as of the Termination Date and addressed to the Company
and the Executive and shall be binding upon the Company and the
Executive. If such opinion determines that there would be an excess
parachute payment, then the Termination Payment hereunder or any other
payment determined by such counsel to be includible in Total Payments
shall be reduced or eliminated as specified by the Executive in
writing delivered to the Company within thirty days of the Executive's
receipt of such opinion or, if the Executive fails to so notify the
Company, then as the Company shall reasonably determine, so that under
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the bases of calculations set forth in such opinion there will be no
excess parachute payment. If such legal counsel so requests in
connection with the opinion required by this Section, the Executive
and the Company shall obtain, at the Company's expense, and the legal
counsel may rely on in providing the opinion, the advice of a firm of
recognized executive compensation consultants as to the reasonableness
of any item of compensation to be received by the Executive.
Notwithstanding the foregoing, the provisions of this Section
8(a)(ii), including the calculations, notices and opinions provided
for herein, shall be based upon the conclusive presumption that the
following are reasonable: (1) the compensation and benefits provided
for in Section 5 and (2) any other compensation, including but not
limited to the Accrued Benefits, earned prior to the Termination Date
by the Executive pursuant to the Company's compensation programs if
such payments would have been made in the future in any event, even
though the timing of such payment is triggered by the Change in
Control or the Termination Date. If the provisions of Sections 280G
and 4999 of the Code (or any successor provisions) are repealed
without succession, then this Section 8(a)(ii) shall be of no further
force or effect.
(b) Additional Benefits. If there is a Covered
Termination and the Executive is entitled to Accrued Benefits and the
Termination Payment, then the Executive shall be entitled to the following
additional benefits:
(i) Until the earlier of the end of the
Employment Period or such time as the Executive has obtained new
employment and is covered by benefits which in the aggregate are at
least equal in value to the following benefits, the Executive shall
continue to be covered, at the expense of the Company, by the most
favorable life insurance, hospitalization, medical and dental coverage
and other welfare benefits provided to the Executive and the
Executive's family during the 180-day period immediately preceding the
Effective Date or at any time thereafter or, if more favorable to the
Executive, coverage as was required hereunder with respect to the
Executive immediately prior to the date Notice of Termination is
given.
(ii) The Executive shall receive, at the expense
of the Company, outplacement services, on an individualized basis at a
level of service commensurate with the Executive's most senior status
with the Company during the 180-day period prior to the Effective Date
(or, if higher, at any time after the Effective Date), provided by a
nationally recognized executive placement firm selected by the Company
with the consent of the Executive, which consent will not be
unreasonably withheld; provided that the cost to the Company of such
services shall not exceed 15% of the Executive's Annual Base Salary.
(iii) The Company shall bear up to $10,000 in the
aggregate of fees and expenses of consultants and/or legal or
accounting advisors engaged by the Executive to advise the Executive
as to matters relating to the computation of benefits due and payable
under this Section 8.
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9. Death. (a) Except as provided in Section 9(b), in
the event of a Covered Termination due to the Executive's death, the
Executive's estate, heirs and beneficiaries shall receive all the Executive's
Accrued Benefits through the Termination Date.
(b) If the Executive dies after a Notice of Termination
is given (i) by the Company or (ii) by the Executive for Good Reason, then the
Executive's estate, heirs and beneficiaries shall be entitled to the benefits
described in Section 9(a) and, subject to the provisions of this Agreement, to
such Termination Payment to which the Executive would have been entitled had
the Executive lived. In such event, the Termination Date shall be thirty days
following the giving of the Notice of Termination, subject to extension
pursuant to the definition of "Termination Date" in Exhibit A.
10. Retirement. If, during the Employment Period, the
Executive and the Employer shall execute an agreement providing for the early
retirement of the Executive from the Employer, or the Executive shall otherwise
give notice that the Executive is voluntarily choosing to retire early from the
Employer, then the Executive shall receive Accrued Benefits through the
Termination Date; provided, that if the Executive's employment is terminated by
the Executive for Good Reason or by the Company other than by reason of death,
disability or Cause and the Executive also, in connection with such
termination, elects voluntary early retirement, then the Executive shall also
be entitled to receive a Termination Payment pursuant to Section 8(a).
11. Termination for Disability. If, during the
Employment Period, as a result of the Executive's disability due to physical or
mental illness or injury (regardless of whether such illness or injury is
job-related), the Executive shall have been absent from the Executive's duties
hereunder on a full-time basis for a period of 182 days and, within thirty days
after the Company notifies the Executive in writing that it intends to
terminate the Executive's employment (which notice shall not constitute the
Notice of Termination contemplated below), the Executive shall not have
returned to the performance of the Executive's duties hereunder on a full-time
basis, then the Company may terminate the Executive's employment for purposes
of this Agreement pursuant to a Notice of Termination. If the Executive's
employment is terminated on account of the Executive's disability in accordance
with this Section, then the Executive shall receive Accrued Benefits in
accordance with Section 8(a) and shall remain eligible for all benefits
provided by any long term disability programs of the Employer in effect at the
time the Company sends notice to the Executive of its intent to terminate
pursuant to this Section.
12. Termination Notice and Procedure. (a) Any
termination of the Executive's employment during the Employment Period by the
Company or the Executive (other than a termination of the Executive's
employment referenced in the second sentence of the definition of "Effective
Date" in Exhibit A) shall be communicated by written Notice of Termination to
the Executive, if such Notice is given by the Company, and to the Company, if
such Notice is given by the Executive, all in accordance with the following
procedures and those set forth in Section 22:
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(i) If such termination is for disability, Cause or Good
Reason, the Notice of Termination shall indicate in reasonable detail the facts
and circumstances alleged to provide a basis for such termination.
(ii) Any Notice of Termination by the Company shall have
been approved, prior to the giving thereof to the Executive, by a resolution
duly adopted by a majority of the directors of the Company (or any successor
corporation) then in office, a copy of which shall accompany the Notice.
(iii) If the Notice is given by the Executive for Good
Reason, then the Executive may cease performing the Executive's duties
hereunder on or after the date 15 days after the delivery of Notice of
Termination (unless the Notice of Termination is based upon clause (vii) of the
definition of "Good Reason" in Exhibit A, in which case the Executive may cease
performing his duties at the time the Executive's employment is terminated) and
shall in any event cease employment on the Termination Date, if any, arising
from the delivery of such Notice. If the Notice is given by the Company, then
the Executive may cease performing the Executive's duties hereunder on the date
of receipt of the Notice of Termination, subject to the Executive's rights
hereunder.
(iv) The recipient of any Notice of Termination shall
personally deliver or mail in accordance with Section 22 written notice of any
dispute relating to such Notice of Termination to the party giving such Notice
within fifteen days after receipt thereof. After the expiration of such fifteen
days, the contents of the Notice of Termination shall become final and not
subject to dispute.
Notwithstanding the foregoing, (A) if the Executive terminates the Executive's
employment after a Change in Control without complying with this Section 12,
then the Executive will be deemed to have voluntarily terminated the
Executive's employment other than for Good Reason and deemed to have delivered
a written Notice of Termination to that effect to the Company as of the date of
such termination and (B) if the Company terminates the Executive's employment
after a Change in Control without complying with this Section 12, then the
Company will be deemed to have terminated the Executive's employment other than
by reason of death, disability or Cause and the Company will be deemed to have
delivered a written Notice of Termination to that effect to the Executive as of
the date of such termination. Under circumstances described in clause (B)
above, the Executive may, but shall not be obligated to, also deliver a Notice
of Termination based upon clause (vii) of the definition of "Good Reason" in
Exhibit A for the purpose of subjecting such Notice to Section 12(a)(iv).
(b) If a Change in Control occurs and the Executive's
employment with the Employer terminates (whether by the Company, the Executive
or otherwise) within 180 days prior to the Change in Control, then the
Executive may assert that such termination is a Covered Termination by sending
a written Notice of Termination to the Company at any time prior to the first
anniversary of the Change in Control in accordance with the procedures set
forth in this Section 12(b) and those set forth in Section 22. If the
Executive asserts that the Executive
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<PAGE> 10
terminated the Executive's employment for Good Reason or that the Company
terminated the Executive's employment other than for disability or Cause, then
the Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such assertions. The Company
shall personally deliver or mail in accordance with Section 22 written notice
of any dispute relating to such Notice of Termination to the Executive within
fifteen days after receipt thereof. After the expiration of such fifteen days,
the contents of the Notice of Termination shall become final and not subject to
dispute.
13. Further Obligations of the Executive.
(a) Competition. The Executive agrees that, in the event
of any Covered Termination where the Executive is entitled to (and receives)
Accrued Benefits and the Termination Payment, the Executive shall not, for a
period of three months after the Termination Date, without the prior written
approval of the Company's Board of Directors, engage in any Competitive
Activity.
(b) Confidentiality. During and following the
Executive's employment by the Employer, the Executive shall hold in confidence
and not directly or indirectly disclose or use or copy or make lists of any
confidential information or proprietary data of the Company (including that of
the Employer), except to the extent authorized in writing by the Board of
Directors of the Company or required by any court or administrative agency,
other than to an employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Executive of duties as an executive of the Company or the Employer.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential
by persons engaged in the same business or a business similar to that of the
Company. All records, files, documents and materials, or copies thereof,
relating to the business of the Company which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Company and shall be promptly returned to the Company upon termination of
employment with the Employer.
14. Expenses and Interest. If, after the Effective Date,
(i) a dispute arises with respect to the enforcement of the Executive's rights
under this Agreement, (ii) any legal or arbitration proceeding shall be brought
to enforce or interpret any provision contained herein or to recover damages
for breach hereof, or (iii) any tax audit or proceeding is commenced that is
attributable in part to the application of Section 4999 of the Code, in any
case so long as the Executive is not acting in bad faith, then the Company
shall reimburse the Executive for any reasonable attorneys' fees and necessary
costs and disbursements incurred as a result of such dispute, legal or
arbitration proceeding or tax audit or proceeding ("Expenses"), and prejudgment
interest on any money judgment or arbitration award obtained by the Executive
calculated at the rate of interest announced by Firstar Bank Milwaukee, N.A.,
Milwaukee, Wisconsin, from time to time as its prime or base lending rate from
the date that payments to the Executive should have been made under this
Agreement. Within ten days after the Executive's written request therefor, the
Company shall pay to the Executive, or such other
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person or entity as the Executive may designate in writing to the Company, the
Executive's reasonable Expenses in advance of the final disposition or
conclusion of any such dispute, legal or arbitration proceeding.
15. Payment Obligations Absolute. The Company's
obligation during and after the Employment Period to pay the Executive the
amounts and to make the benefit and other arrangements provided herein shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim, recoupment, defense or
other right which the Company may have against the Executive or anyone else.
Except as provided in Section 14, all amounts payable by the Company hereunder
shall be paid without notice or demand. Each and every payment made hereunder
by the Company shall be final, and the Company will not seek to recover all or
any part of such payment from the Executive, or from whomsoever may be entitled
thereto, for any reason whatsoever.
16. Successors. (a) If the Company sells, assigns or
transfers all or substantially all of its business and assets to any Person or
if the Company merges into or consolidates or otherwise combines (where the
Company does not survive such combination) with any Person (any such event, a
"Sale of Business"), then the Company shall assign all of its right, title and
interest in this Agreement as of the date of such event to such Person, and the
Company shall cause such Person, by written agreement in form and substance
reasonably satisfactory to the Executive, to expressly assume and agree to
perform from and after the date of such assignment all of the terms, conditions
and provisions imposed by this Agreement upon the Company. Failure of the
Company to obtain such agreement prior to the effective date of such Sale of
Business shall be a breach of this Agreement constituting "Good Reason"
hereunder, except that for purposes of implementing the foregoing, the date
upon which such Sale of Business becomes effective shall be deemed the
Termination Date. In case of such assignment by the Company and of assumption
and agreement by such Person, as used in this Agreement, "Company" shall
thereafter mean such Person which executes and delivers the agreement provided
for in this Section 16 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, and this Agreement shall
inure to the benefit of, and be enforceable by, such Person. The Executive
shall, in the Executive's discretion, be entitled to proceed against any or all
of such Persons, any Person which theretofore was such a successor to the
Company (as defined in the first paragraph of this Agreement) and the Company
(as so defined) in any action to enforce any rights of the Executive hereunder.
Except as provided in this Subsection, this Agreement shall not be assignable
by the Company. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.
(b) This Agreement and all rights of the Executive shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All
amounts payable to the Executive under Sections 7, 8, 9, 10, 11 and 14 if the
Executive had lived shall be paid, in the event of the Executive's death, to
the Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Employer, as such terms
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are in effect on the Effective Date, that expressly govern benefits under such
plan in the event of the Executive's death.
17. Severability. The provisions of this Agreement shall
be regarded as divisible, and if any of said provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, then
the validity and enforceability of the remainder of such provisions or parts
hereof and the applicability thereof shall not be affected thereby.
18. Amendment. This Agreement may not be amended or
modified at any time except by written instrument executed by the Company and
the Executive.
19. Withholding. The Employer shall be entitled to
withhold from amounts to be paid to the Executive hereunder any federal, state
or local withholding or other taxes or charges which it is from time to time
required to withhold; provided, that the amount so withheld shall not exceed
the minimum amount required to be withheld by law. The Employer shall be
entitled to rely on an opinion of nationally recognized tax counsel if any
question as to the amount or requirement of any such withholding shall arise.
20. Certain Rules of Construction. No party shall be
considered as being responsible for the drafting of this Agreement for the
purpose of applying any rule construing ambiguities against the drafter or
otherwise. No draft of this Agreement shall be taken into account in
construing this Agreement. Any provision of this Agreement which requires an
agreement in writing shall be deemed to require that the writing in question be
signed by the Executive and an authorized representative of the Company.
21. Governing Law; Resolution of Disputes. (a) This
Agreement and the rights and obligations hereunder shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin
(excluding any choice of law rules that may direct the application of the laws
of another jurisdiction) except that Section 21(b) shall be construed in
accordance with the Federal Arbitration Act if arbitration is chosen by the
Executive as the method of dispute resolution.
(b) Any dispute arising out of this Agreement shall, at
the Executive's election, be determined by arbitration under the rules of the
American Arbitration Association then in effect (but subject to any evidentiary
standards set forth in this Agreement), in which case both parties shall be
bound by the arbitration award, or by litigation. Whether the dispute is to be
settled by arbitration or litigation, the venue for the arbitration or
litigation shall be Milwaukee, Wisconsin or, at the Executive's election, if
the Executive is no longer residing or working in the Milwaukee, Wisconsin
metropolitan area, in the judicial district encompassing the city in which the
Executive resides; provided, that, if the Executive is not then residing in the
United States, the election of the Executive with respect to such venue shall
be either Milwaukee, Wisconsin or in the judicial district encompassing that
city in the United States among the thirty cities having the largest population
(as determined by the most recent United States Census data available at the
Termination Date) that is closest to the Executive's residence.
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The parties consent to personal jurisdiction in each trial court in the
selected venue having subject matter jurisdiction notwithstanding their
residence or situs, and each party irrevocably consents to service of process
in the manner provided hereunder for the giving of notices.
22. Notice. Notices given pursuant to this Agreement
shall be in writing and, except as otherwise provided by Section 12(a)(iii),
shall be deemed given when actually received by the Executive or actually
received by the Company's Secretary or any officer of the Company other than
the Executive. If mailed, such notices shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid, if to the Company, to Hein-Werner Corporation, Attention: Secretary
(or, if the Executive is then Secretary, to the Chief Executive Officer), 2120
Pewaukee Road, Waukesha, Wisconsin 53188, or if to the Executive, at the
address set forth below the Executive's signature to this Agreement, or to such
other address as the party to be notified shall have theretofore given to the
other party in writing.
23. Additional Payment. (a) If, notwithstanding the
provisions of Section 8(a)(ii), but subject to subsection (b), it is ultimately
determined by a court or pursuant to a final determination by the Internal
Revenue Service that any portion of Total Payments is subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (or any successor provision),
then the Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive after deduction of
any Excise Tax and any interest charges or penalties in respect of the
imposition of such Excise Tax (but not any federal, state or local income tax)
on the Total Payments, and any federal, state and local income tax and Excise
Tax upon the payment provided for by this Section 23 shall be equal to the
Total Payments. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of the Executive's
domicile for income tax purposes on the date the Gross-Up Payment is made, net
of the maximum reduction in federal income taxes that could be obtained from
deduction of such state and local taxes.
(b) If legislation is enacted that would require the
Company's shareholders to approve this Agreement, prior to a Change in Control,
due solely to the provision contained in subsection (a) of this Section 23,
then
(i) from and after such time as shareholder approval
would be required, until shareholder approval is obtained as required
by such legislation, subsection (a) shall be of no force and effect;
(ii) if the Company seeks shareholder approval of any
other agreement providing similar benefits to any other executive of
the Company, then the Company shall seek shareholder approval of this
Agreement at the same shareholders' meeting or meetings at which the
shareholders consider any such other agreement; and
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<PAGE> 14
(iii) the Company and the Executive shall use their best
efforts to consider and agree in writing upon an amendment to this
Section 23 such that, as amended, this Subsection would provide the
Executive with the benefits intended to be afforded to the Executive
by subsection (a) without requiring shareholder approval.
24. No Waiver. The Executive's or the Company's failure
to insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
25. Headings. The headings herein contained are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
HEIN-WERNER CORPORATION
By: /s/ J. L. Dindorf
------------------------------------------
J. L. Dindorf
President and Chief Executive Officer
Attest: /s/ M. J. McSweeney
------------------------------------------
M. J. McSweeney
Secretary
EXECUTIVE
/s/ Mary L. Kielich
--------------------------------------------------
Mary L. Kielich
270 E. Highland Avenue - Apt. #1016
Milwaukee, Wisconsin 53202
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<PAGE> 15
Exhibit A
CERTAIN DEFINED TERMS
For purposes of this Agreement,
(a) Act. The term "Act" means the Securities Exchange
Act of 1934, as amended.
(b) Accrued Benefits. The term "Accrued Benefits" shall
include the following amounts, payable as described herein: (i) all base
salary for the time period ending with the Termination Date; (ii) reimbursement
for any and all monies advanced in connection with the Executive's employment
for reasonable and necessary expenses incurred by the Executive on behalf of
the Company and its Affiliates for the time period ending with the Termination
Date; (iii) any and all other cash earned through the Termination Date and
deferred at the election of the Executive or pursuant to any deferred
compensation plan then in effect; (iv) notwithstanding any provision of any
bonus or incentive compensation plan applicable to the Executive, a lump sum
amount, in cash, equal to the sum of (A) any bonus or incentive compensation
that has been allocated or awarded to the Executive for a fiscal year or other
measuring period under the plan that ends prior to the Termination Date but has
not yet been paid (pursuant to Section 5(f) or otherwise) and (B) a pro rata
portion to the Termination Date of the aggregate value of all contingent bonus
or incentive compensation awards to the Executive for all uncompleted periods
under the plan calculated as to each such award as if the Goals with respect to
such bonus or incentive compensation award had been attained; and (v) all other
payments and benefits to which the Executive (or in the event of the
Executive's death, the Executive's surviving spouse or other beneficiary) may
be entitled as compensatory fringe benefits or under the terms of any benefit
plan of the Employer, including severance payments under the Employer's
severance policies and practices in the form most favorable to the Executive
that were in effect at any time during the 180-day period prior to the
Effective Date. Payment of Accrued Benefits shall be made promptly in
accordance with the Employer's prevailing practice with respect to clauses (i)
and (ii) or, with respect to clauses (iii), (iv) and (v), pursuant to the terms
of the benefit plan or practice establishing such benefits.
(c) Affiliate and Associate. The terms "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations of the Act.
(d) Annual Cash Compensation. The term "Annual Cash
Compensation" shall mean the sum of (A) the Executive's Annual Base Salary,
plus (B) the highest of (1) the highest annual bonus or incentive compensation
award earned by the Executive under any cash bonus or incentive compensation
plan of the Company or any of its Affiliates during the three complete fiscal
years of the Company immediately preceding the Termination Date or, if more
favorable to the Executive, during the three complete fiscal years of the
Company immediately preceding
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the Effective Date; (2) the Executive's bonus or incentive compensation
Targeted Bonus for the fiscal year in which the Termination Date occurs; or (3)
the highest average annual bonus and/or incentive compensation earned during
the three complete fiscal years of the Company immediately preceding the
Termination Date (or, if more favorable to the Executive, during the three
complete fiscal years of the Company immediately preceding the Effective Date)
under any cash bonus or incentive compensation plan of the Company or any of
its Affiliates by the group of executives of the Company and its Affiliates
participating under such plan during such fiscal years at a status or position
comparable to that at which the Executive participated or would have
participated pursuant to the Executive's most senior position at any time
during the 180 days preceding the Effective Date or thereafter until the
Termination Date.
(e) Cause. The Company may terminate the Executive's
employment after the Effective Date for "Cause" only if the conditions set
forth in paragraphs (i) and (ii) have been met and the Company otherwise
complies with this Agreement:
(i) (A) the Executive has committed any act of
fraud, embezzlement or theft in connection with the Executive's duties
as an Executive or in the course of employment with the Company and/or
its subsidiaries; (B) the Executive has willfully and continually
failed to perform substantially the Executive's duties with the
Company or any of its Affiliates (other than any such failure
resulting from incapacity due to physical or mental illness or injury,
regardless of whether such illness or injury is job-related) for an
appropriate period, which shall not be less than 30 days, after the
Chief Executive Officer of the Company (or, if the Executive is then
Chief Executive Officer, the Board) has delivered a written demand for
performance to the Executive that specifically identifies the manner
in which the Chief Executive Officer (or the Board, as the case may
be) believes the Executive has not substantially performed the
Executive's duties; (C) the Executive has willfully engaged in illegal
conduct or gross misconduct that is materially and demonstrably
injurious to the Company; (D) the Executive has willfully and
wrongfully disclosed any trade secret or other confidential
information of the Company or any of its Affiliates; or (E) the
Executive has engaged in any Competitive Activity; and in any such
case the act or omission shall have been determined by the Board to
have been materially harmful to the Company and its subsidiaries taken
as a whole.
For purposes of this provision, (1) no act or failure
to act on the part of the Executive shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or
omission was in the best interests of the Company and (2) any act, or
failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company.
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(ii) (A) The Company terminates the Executive's
employment by delivering a Notice of Termination to the Executive, (B)
prior to the time the Company has terminated the Executive's
employment pursuant to a Notice of Termination, the Board, by the
affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board, has adopted a resolution finding that the
Executive was guilty of conduct set forth in this definition of Cause,
and specifying the particulars thereof in detail, at a meeting of the
Board called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before
the Board) and (C) the Company delivers a copy of such resolution to
the Executive with the Notice of Termination at the time the
Executive's employment is terminated.
In the event of a dispute regarding whether the Executive's employment has been
terminated for Cause, no claim by the Company that the Company has terminated
the Executive's employment for Cause in accordance with this Agreement shall be
given effect unless the Company establishes by clear and convincing evidence
that the Company has complied with the requirements of this Agreement to
terminate the Executive's employment for Cause.
(f) Change in Control. A "Change in Control" shall be
deemed to have occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (other than (A) the Company or any
of its subsidiaries, (B) a trustee or other fiduciary holding
securities under any employee benefit plan of the Company or any of
its subsidiaries, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities or (D) a corporation owned,
directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock in the
Company ("Excluded Persons")) is or becomes the "Beneficial Owner" (as
such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its Affiliates after January 1, 1998
pursuant to express authorization by the Board that refers to this
exception) representing 25% or more of either the then outstanding
shares of common stock of the Company or the combined voting power of
the Company's then outstanding voting securities; or
(ii) the following individuals cease for any
reason to constitute a majority of the number of directors then
serving: individuals who, on January 1, 1998, constituted the Board
and any new director (other than a director whose initial assumption
of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating
to the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A under the Act) whose appointment or
election by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still
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<PAGE> 18
in office who either were directors on January 1, 1998 or whose
appointment, election or nomination for election was previously so
approved; or
(iii) the shareholders of the Company approve a
merger, consolidation or share exchange of the Company with any other
corporation or approve the issuance of voting securities of the
Company in connection with a merger, consolidation or share exchange
of the Company (or any direct or indirect subsidiary of the Company)
pursuant to applicable stock exchange requirements, other than (A) a
merger, consolidation or share exchange which would result in the
voting securities of the Company outstanding immediately prior to such
merger, consolidation or share exchange continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least 50%
of the combined voting power of the voting securities of the Company
or such surviving entity or any parent thereof outstanding immediately
after such merger, consolidation or share exchange, or (B) a merger,
consolidation or share exchange effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person (other than an Excluded Person) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates after
January 1, 1998 pursuant to express authorization by the Board that
refers to this exception) representing 25% or more of either the then
outstanding shares of common stock of the Company or the combined
voting power of the Company's then outstanding voting securities; or
(iv) the shareholders of the Company approve a
plan of complete liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (in one transaction or a
series of related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity at least 75% of
the combined voting power of the voting securities of which are owned
by Persons in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity that owns all or substantially all of the assets or voting securities
of the Company immediately following such transaction or series of
transactions.
(g) Code. The term "Code" means the Internal Revenue
Code of 1986, including any amendments thereto or successor tax codes thereof.
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<PAGE> 19
(h) Competitive Activity. The Executive shall engage in
a "Competitive Activity" if the Executive participates in the management of, is
employed by or owns any interest in any business enterprise at a location
within the United States that engages in substantial competition with the
Company or its subsidiaries, where such enterprise's revenues from any
competitive activities amount to 10% or more of such enterprise's consolidated
net revenues and sales for its most recently completed fiscal year; provided,
however, that owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such competitor
shall not be a "Competitive Activity".
(i) Covered Termination. The term "Covered Termination"
means any termination of the Executive's employment during the Employment
Period where the Termination Date or the date Notice of Termination is
delivered is any date on or prior to the end of the Employment Period.
(j) Effective Date. The term "Effective Date" shall mean
the first date on which a Change in Control occurs. Anything in this Agreement
to the contrary notwithstanding, if (i) a Change in Control occurs, (ii) the
Executive's employment with the Employer terminates (whether by the Company,
the Executive or otherwise) within 180 days prior to the Change in Control and
(iii) it is reasonably demonstrated by the Executive that (A) any such
termination of employment by the Employer (1) was at the request of a third
party who has taken steps reasonably calculated to effect a Change in Control
or (2) otherwise arose in connection with or in anticipation of a Change in
Control, or (B) any such termination of employment by the Executive took place
subsequent to the occurrence of an event described in clause (ii), (iii), (iv)
or (v) of the definition of "Good Reason" which event (1) occurred at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or in anticipation
of a Change in Control, then for all purposes of this Agreement the term
"Effective Date" shall mean the day immediately prior to the date of such
termination of employment.
(k) Employer. The term "Employer" means the Company
and/or any subsidiary of the Company that employed the Executive immediately
prior to the Effective Date.
(l) Good Reason. The Executive shall have a "Good
Reason" for termination of employment on or after the Effective Date if the
Executive determines in good faith that any of the following events has
occurred:
(i) any breach of this Agreement by the Company,
including specifically any breach by the Company of its agreements
contained in Section 4, Section 5 or Section 6, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith that the Company remedies promptly after receipt of notice
thereof given by the Executive;
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<PAGE> 20
(ii) any reduction in the Executive's base salary,
percentage of base salary available as incentive compensation or bonus
opportunity or benefits, in each case relative to those most favorable
to the Executive in effect at any time during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date;
(iii) a material adverse change, without the
Executive's prior written consent, in the Executive's working
conditions or status with the Company or the Employer from such
working conditions or status in effect during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date, including but not
limited to (A) a material change in the nature or scope of the
Executive's titles, authority, powers, functions, duties, reporting
requirements or responsibilities, or (B) a material reduction in the
level of support services, staff, secretarial and other assistance,
office space and accoutrements, but excluding for this purpose an
isolated, insubstantial and inadvertent event not occurring in bad
faith that the Company remedies promptly after receipt of notice
thereof given by the Executive;
(iv) the relocation of the Executive's principal
place of employment to a location more than 35 miles from the
Executive's principal place of employment on the date 180 days prior
to the Effective Date;
(v) the Employer requires the Executive to travel
on Employer business to a materially greater extent than was required
during the 180-day period prior to the Effective Date;
(vi) failure by the Company to obtain the
agreement referred to in Section 16(a) as provided therein; or
(vii) the Company or the Employer terminates the
Executive's employment after a Change in Control without delivering a
Notice of Termination in accordance with Section 12;
provided that (A) any such event occurs following the Effective Date or (B) in
the case of any event described in clauses (ii), (iii), (iv) or (v) above, such
event occurs on or prior to the Effective Date under circumstances described in
clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective Date." In
the event of a dispute regarding whether the Executive terminated the
Executive's employment for "Good Reason" in accordance with this Agreement, no
claim by the Company that such termination does not constitute a Covered
Termination shall be given effect unless the Company establishes by clear and
convincing evidence that such termination does not constitute a Covered
Termination. Any election by the Executive to terminate the Executive's
employment for Good Reason shall not be deemed a voluntary termination of
employment by the Executive for purposes of any other employee benefit or other
plan.
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<PAGE> 21
(m) Normal Retirement Date. The term "Normal Retirement
Date" means the date the Executive reaches age 65.
(n) Notice of Termination. The term "Notice of
Termination" means a written notice as contemplated by Section 12.
(o) Person. The term "Person" shall have the meaning
given in Section 3(a)(9) of the Act, as modified and used in Sections 13(d) and
14(d) thereof.
(p) Termination Date. Except as otherwise provided in
Section 9(b) and Section 16(a), the term "Termination Date" means (i) if the
Executive's employment is terminated by the Executive's death, the date of
death; (ii) if the Executive's employment is terminated by reason of voluntary
early retirement, as agreed in writing by the Company and the Executive, the
date of such early retirement that is set forth in such written agreement;
(iii) if the Executive's employment is terminated for purposes of this
Agreement by reason of disability pursuant to Section 11, thirty days after the
Notice of Termination is given; (iv) if the Executive's employment is
terminated by the Executive voluntarily (other than for Good Reason), the date
the Notice of Termination is given; and (v) if the Executive's employment is
terminated by the Company (other than by reason of disability pursuant to
Section 11) or by the Executive for Good Reason, thirty days after the Notice
of Termination is given. Notwithstanding the foregoing,
(A) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Company notifies the Executive that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof, then the Executive may elect to continue the
Executive's employment during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that the Executive terminated the Executive's employment
for Good Reason in accordance with this Agreement, then the Termination Date
shall be the earlier of (1) the date on which the dispute is finally
determined, either (x) by mutual written agreement of the parties or (y) in
accordance with Section 21 or (2) the date of the Executive's death. If the
Executive so elects and it is thereafter determined that the Executive did not
terminate the Executive's employment for Good Reason in accordance with this
Agreement, then the employment of the Executive hereunder shall continue after
such determination as if the Executive had not delivered the Notice of
Termination asserting Good Reason and there shall be no Termination Date
arising out of such Notice. In either case, this Agreement continues, until
the Termination Date, if any, as if the Executive had not delivered the Notice
of Termination except that, if it is finally determined that the Executive
terminated the Executive's employment for Good Reason in accordance with this
Agreement, then the Executive shall in no case be denied the benefits described
in Section 8 (including a Termination Payment) based on events occurring after
the Executive delivered the Executive's Notice of Termination.
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<PAGE> 22
(B) If an opinion is required to be delivered pursuant to
Section 8(a)(ii) and such opinion shall not have been delivered, then the
Termination Date shall be the date on which such opinion is delivered.
(C) Except as provided in paragraph (A) above, if the
party receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof and it is finally determined that termination of the
Executive's employment for the reason asserted in such Notice of Termination
was not in accordance with this Agreement, then (1) if such Notice was
delivered by the Executive, then the Executive will be deemed to have
voluntarily terminated the Executive's employment other than for Good Reason by
means of such Notice and (2) if delivered by the Company, then the Company will
be deemed to have terminated the Executive's employment other than by reason of
death, disability or Cause by means of such Notice.
A-8
<PAGE> 1
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 15th day of
April, 1998, by and between Hein-Werner Corporation, a Wisconsin corporation
(hereinafter referred to as the "Company"), and Michael J. Koons (hereinafter
referred to as the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is currently employed by the Company in
a key capacity, and the Executive's services are valuable to the conduct of the
business of the Company;
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that circumstances may arise in which a change in control of the
Company occurs, through acquisition or otherwise, thereby causing uncertainty
about the Executive's future employment with the Company without regard to the
Executive's competence or past contributions, which uncertainty may result in
the loss of valuable services of the Executive to the detriment of the Company
and its shareholders, and the Company and the Executive wish to provide
reasonable security to the Executive against changes in the Executive's
relationship with the Company in the event of any such change in control;
WHEREAS, the Company and the Executive desire that any
proposal for a change in control or acquisition of the Company will be
considered by the Executive objectively and with reference only to the best
interests of the Company and its shareholders; and
WHEREAS, the Executive will be in a better position to
consider the Company's best interests if the Executive is afforded reasonable
security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisition.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
<PAGE> 2
1. Definitions. The following terms are used in this
Agreement as defined in Exhibit A:
Act Covered Termination
Accrued Benefits Effective Date
Affiliate and Associate Employer
Annual Cash Compensation Good Reason
Cause Normal Retirement Date
Change in Control Notice of Termination
Code Person
Competitive Activity Termination Date
2. Termination or Cancellation Prior to the Effective
Date. The Employer and the Executive shall each retain the right to terminate
the employment of the Executive at any time prior to the Effective Date. If
the Executive's employment is terminated prior to the Effective Date, then this
Agreement shall be terminated and cancelled and of no further force or effect
and any and all rights and obligations of the parties hereunder shall cease.
In addition, this Agreement shall terminate upon the Executive ceasing to be an
employee of the Employer prior to a Change in Control unless the Executive can
reasonably demonstrate that such change in status occurred under circumstances
described in clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective
Date" in Exhibit A.
3. Employment Period. If the Executive is employed by
the Employer on the Effective Date, then the Company will, or will cause the
Employer to, continue thereafter to employ the Executive during the Employment
Period (as hereinafter defined), and the Executive will remain in the employ of
the Employer, in accordance with and subject to the terms and provisions of
this Agreement. For purposes of this Agreement, the term "Employment Period"
means a period (i) commencing on the Effective Date, and (ii) ending at 11:59
p.m. Milwaukee Time on the earlier of the eighteen-month anniversary of such
date or the Executive's Normal Retirement Date.
4. Duties. During the Employment Period, the Executive
shall, in the most significant capacities and positions held by the Executive
at any time during the 180-day period preceding the Effective Date or in such
other capacities and positions as may be agreed to by the Company and the
Executive in writing, devote the Executive's best efforts and all of the
Executive's business time, attention and skill to the business and affairs of
the Employer, as such business and affairs now exist and as they may hereafter
be conducted.
5. Compensation. During the Employment Period, the
Executive shall be compensated as follows:
(a) The Executive shall receive, at reasonable intervals
(but not less often than monthly) and in accordance with such standard policies
as may be in effect immediately prior to the Effective Date, an annual base
salary in cash equivalent of not less than twelve times the
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<PAGE> 3
Executive's highest monthly base salary (which shall include any amounts
credited to the Executive for the purchase of annuity contracts and related tax
offset bonuses) for the twelve-month period immediately preceding the month in
which the Effective Date occurs or, if higher, an annual base salary at the
rate in effect immediately prior to the Effective Date (which base salary
shall, unless otherwise agreed in writing by the Executive, include the current
receipt by the Executive of any amounts which, prior to the Effective Date, the
Executive had elected to defer, whether such compensation is deferred under
Section 401(k) of the Code or otherwise), subject to upward adjustment as
provided in Section 6 (such salary amount as adjusted upward from time to time
is hereafter referred to as the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least
equal in value to those provided for the Executive at any time during the
180-day period immediately preceding the Effective Date or, if more favorable
to the Executive, those provided generally at any time after the Effective Date
to any executives of the Company and its Affiliates of comparable status and
position to the Executive. The Executive shall be reimbursed, at such
intervals and in accordance with such standard policies that are most favorable
to the Executive that were in effect at any time during the 180-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to any
executives of the Company and its Affiliates of comparable status and position
to the Executive, for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Company and its Affiliates, including travel
expenses.
(c) The Executive and/or the Executive's family, as the
case may be, shall be included, to the extent eligible thereunder (which
eligibility shall not be conditioned on the Executive's salary grade or on any
other requirement that excludes executives of the Company and its Affiliates of
comparable status and position to the Executive unless such exclusion was in
effect for such plan or an equivalent plan on the date 180 days prior to the
Effective Date), in any and all welfare benefit plans, practices, policies and
programs providing benefits for the Company's salaried employees in general or,
if more favorable to the Executive, to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to group life insurance, hospitalization, medical and dental plans;
provided, that, (i) in no event shall the aggregate level of benefits under
such plans, practices, policies and programs in which the Executive is included
be less than the aggregate level of benefits under plans, practices, policies
and programs of the type referred to in this Section 5(c) in which the
Executive was participating at any time during the 180-day period immediately
preceding the Effective Date and (ii) in no event shall the aggregate level of
benefits under such plans, practices, policies and programs be less than the
aggregate level of benefits under plans, practices, policies and programs of
the type referred to in this Section 5(c) provided at any time after the
Effective Date to any executive of the Company and its Affiliates of comparable
status and position to the Executive.
(d) The Executive shall annually be entitled to not less
than the amount of paid vacation and not fewer than the number of paid holidays
to which the Executive was entitled
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<PAGE> 4
annually at any time during the 180-day period immediately preceding the
Effective Date or such greater amount of paid vacation and number of paid
holidays as may be made available annually to the Executive or any other
executive of the Company and its Affiliates of comparable status and position
to the Executive at any time after the Effective Date.
(e) The Executive shall be included in all plans
providing additional benefits to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to deferred compensation, split-dollar life insurance, retirement,
supplemental retirement, stock option, stock appreciation, stock bonus and
similar or comparable plans; provided, that, (i) in no event shall the
aggregate level of benefits under such plans be less than the aggregate level
of benefits under plans of the type referred to in this Section 5(e) in which
the Executive was participating at any time during the 180-day period
immediately preceding the Effective Date; (ii) in no event shall the aggregate
level of benefits under such plans be less than the aggregate level of benefits
under plans of the type referred to in this Section 5(e) provided at any time
after the Effective Date to any executive of the Company and its Affiliates of
comparable status and position to the Executive; and (iii) the Company's
obligation to include the Executive in bonus or incentive compensation plans
shall be determined by Section 5(f).
(f) To assure that the Executive will have an opportunity
to earn incentive compensation after the Effective Date, the Executive shall be
included in a bonus plan of the Company that shall satisfy the standards
described below (the "Bonus Plan"). Bonuses under the Bonus Plan shall be
payable with respect to achieving such financial or other goals reasonably
related to the business of the Company as the Company shall establish (the
"Goals"), all of which Goals shall be attainable, prior to the end of the
Employment Period, with approximately the same degree of probability as the
goals under the Employer's annual incentive plan currently in effect, or the
successor to such plan, in the form most favorable to the Executive that was in
effect at any time during the 180-day period prior to the Effective Date (the
"Existing Plan") and in view of the Company's existing and projected financial
and business circumstances applicable at the time. The amount of the bonus
(the "Bonus Amount") that the Executive is eligible to earn under the Bonus
Plan shall be no less than the amount of the Executive's highest maximum
potential award under the Existing Plan at any time during the 180-day period
prior to the Effective Date or, if higher, any maximum potential award under
the Bonus Plan or any other bonus or incentive compensation plan in effect
after the Effective Date for the Executive or for any executive of the Company
and its Affiliates of comparable status and position to the Executive (such
bonus amount herein referred to as the "Targeted Bonus"), and if the Goals are
not achieved (and, therefore, the entire Targeted Bonus is not payable), then
the Bonus Plan shall provide for a payment of a Bonus Amount not less than a
portion of the Targeted Bonus reasonably related to that portion of the Goals
that were achieved. Payment of the Bonus Amount (i) shall be in cash, unless
otherwise agreed by the Executive, and (ii) shall not be affected by any
circumstance occurring subsequent to the end of the Employment Period,
including termination of the Executive's employment.
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6. Annual Compensation Adjustments. During the
Employment Period, the Board of Directors of the Company (or an appropriate
committee thereof) will consider and appraise, at least annually, the
contributions of the Executive to the Employer, and in accordance with the
Company's practice prior to the Effective Date, due consideration shall be
given, at least annually, to the upward adjustment of the Executive's Annual
Base Salary (i) commensurate with increases generally given to other executives
of the Company and its Affiliates of comparable status and position to the
Executive, and (ii) as the scope of the Company's operations or the Executive's
duties expand.
7. Termination During Employment Period.
(a) Right to Terminate. During the Employment Period,
(i) the Company shall be entitled to terminate the Executive's employment (A)
for Cause, (B) by reason of the Executive's disability pursuant to Section 11,
or (C) for any other reason, and (ii) the Executive shall be entitled to
terminate the Executive's employment for any reason. Any such termination
shall be subject to the procedures set forth in Section 12 and shall be subject
to any consequences of such termination set forth in this Agreement. Any
termination of the Executive's employment during the Employment Period by the
Employer shall be deemed a termination by the Company for purposes of this
Agreement.
(b) Termination for Cause or Without Good Reason. If
there is a Covered Termination for Cause or due to the Executive's voluntarily
terminating the Executive's employment other than for Good Reason, then the
Executive shall be entitled to receive only Accrued Benefits.
(c) Termination Giving Rise to a Termination Payment. If
there is a Covered Termination by the Executive for Good Reason, or by the
Company other than by reason of (i) death, (ii) disability pursuant to Section
11, or (iii) Cause, then the Executive shall be entitled to receive, and the
Company shall promptly pay, Accrued Benefits and, in lieu of further base
salary for periods following the Termination Date, as liquidated damages and
additional severance pay and in consideration of the covenant of the Executive
set forth in Section 13(a), the Termination Payment pursuant to Section 8(a).
8. Payments Upon Termination.
(a) Termination Payment. (i) Subject to the limits set
forth in Section 8(a)(ii), for purposes of this Agreement, the
"Termination Payment" shall be an amount equal to the Annual Cash
Compensation multiplied by the number of years or fractional portion
thereof remaining in the Employment Period determined as of the
Termination Date, except that the Termination Payment shall not be
less than the amount of Annual Cash Compensation. The Termination
Payment shall be paid to the Executive in cash equivalent not later
than ten business days after the Termination Date. The Executive
shall not be required to mitigate the amount of the Termination
Payment by securing other employment or otherwise, nor will such
Termination Payment be reduced
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by reason of the Executive securing other employment or for any other
reason. The Termination Payment shall be in addition to any other
severance payments to which the Executive is entitled under the
Company's severance policies and practices in the form most favorable
to the Executive that were in effect at any time during the 180-day
period prior to the Effective Date.
(ii) Notwithstanding any other provision of this
Agreement, if any portion of the Termination Payment or any other
payment under this Agreement, or under any other agreement with or
plan of the Company or the Employer (in the aggregate "Total
Payments"), would constitute an "excess parachute payment," then the
Total Payments to be made to the Executive shall be reduced such that
the value of the aggregate Total Payments that the Executive is
entitled to receive shall be One Dollar ($1) less than the maximum
amount which the Executive may receive without becoming subject to the
tax imposed by Section 4999 of the Code (or any successor provision)
or which the Company may pay without loss of deduction under Section
280G(a) of the Code (or any successor provision). For purposes of
this Agreement, the terms "excess parachute payment" and "parachute
payments" shall have the meanings assigned to them in Section 280G of
the Code (or any successor provision), and such "parachute payments"
shall be valued as provided therein. Present value for purposes of
this Agreement shall be calculated in accordance with Section
1274(b)(2) of the Code (or any successor provision). Within sixty
days following delivery of the Notice of Termination or notice by the
Company to the Executive of its belief that there is a payment or
benefit due the Executive which will result in an excess parachute
payment as defined in Section 280G of the Code (or any successor
provision), the Executive and the Company, at the Company's expense,
shall obtain the opinion (which need not be unqualified) of nationally
recognized tax counsel selected by the Company's independent auditors
and acceptable to the Executive in the Executive's sole discretion,
which sets forth (A) the amount of the Base Period Income, (B) the
amount and present value of Total Payments and (C) the amount and
present value of any excess parachute payments without regard to the
limitations of this Section 8(a)(ii). As used in this Section
8(a)(ii), the term "Base Period Income" means an amount equal to the
Executive's "annualized includible compensation for the base period"
as defined in Section 280G(d)(1) of the Code (or any successor
provision). For purposes of such opinion, the value of any noncash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code (or any successor provisions),
which determination shall be evidenced in a certificate of such
auditors addressed to the Company and the Executive. Such opinion
shall be dated as of the Termination Date and addressed to the Company
and the Executive and shall be binding upon the Company and the
Executive. If such opinion determines that there would be an excess
parachute payment, then the Termination Payment hereunder or any other
payment determined by such counsel to be includible in Total Payments
shall be reduced or eliminated as specified by the Executive in
writing delivered to the Company within thirty days of the Executive's
receipt of such opinion or, if the Executive fails to so notify the
Company, then as the Company shall reasonably determine, so that under
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the bases of calculations set forth in such opinion there will be no
excess parachute payment. If such legal counsel so requests in
connection with the opinion required by this Section, the Executive
and the Company shall obtain, at the Company's expense, and the legal
counsel may rely on in providing the opinion, the advice of a firm of
recognized executive compensation consultants as to the reasonableness
of any item of compensation to be received by the Executive.
Notwithstanding the foregoing, the provisions of this Section
8(a)(ii), including the calculations, notices and opinions provided
for herein, shall be based upon the conclusive presumption that the
following are reasonable: (1) the compensation and benefits provided
for in Section 5 and (2) any other compensation, including but not
limited to the Accrued Benefits, earned prior to the Termination Date
by the Executive pursuant to the Company's compensation programs if
such payments would have been made in the future in any event, even
though the timing of such payment is triggered by the Change in
Control or the Termination Date. If the provisions of Sections 280G
and 4999 of the Code (or any successor provisions) are repealed
without succession, then this Section 8(a)(ii) shall be of no further
force or effect.
(b) Additional Benefits. If there is a Covered
Termination and the Executive is entitled to Accrued Benefits and the
Termination Payment, then the Executive shall be entitled to the following
additional benefits:
(i) Until the earlier of the end of the
Employment Period or such time as the Executive has obtained new
employment and is covered by benefits which in the aggregate are at
least equal in value to the following benefits, the Executive shall
continue to be covered, at the expense of the Company, by the most
favorable life insurance, hospitalization, medical and dental coverage
and other welfare benefits provided to the Executive and the
Executive's family during the 180-day period immediately preceding the
Effective Date or at any time thereafter or, if more favorable to the
Executive, coverage as was required hereunder with respect to the
Executive immediately prior to the date Notice of Termination is
given.
(ii) The Executive shall receive, at the expense
of the Company, outplacement services, on an individualized basis at a
level of service commensurate with the Executive's most senior status
with the Company during the 180-day period prior to the Effective Date
(or, if higher, at any time after the Effective Date), provided by a
nationally recognized executive placement firm selected by the Company
with the consent of the Executive, which consent will not be
unreasonably withheld; provided that the cost to the Company of such
services shall not exceed 15% of the Executive's Annual Base Salary.
(iii) The Company shall bear up to $10,000 in the
aggregate of fees and expenses of consultants and/or legal or
accounting advisors engaged by the Executive to advise the Executive
as to matters relating to the computation of benefits due and payable
under this Section 8.
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<PAGE> 8
9. Death. (a) Except as provided in Section 9(b), in
the event of a Covered Termination due to the Executive's death, the
Executive's estate, heirs and beneficiaries shall receive all the Executive's
Accrued Benefits through the Termination Date.
(b) If the Executive dies after a Notice of Termination
is given (i) by the Company or (ii) by the Executive for Good Reason, then the
Executive's estate, heirs and beneficiaries shall be entitled to the benefits
described in Section 9(a) and, subject to the provisions of this Agreement, to
such Termination Payment to which the Executive would have been entitled had
the Executive lived. In such event, the Termination Date shall be thirty days
following the giving of the Notice of Termination, subject to extension
pursuant to the definition of "Termination Date" in Exhibit A.
10. Retirement. If, during the Employment Period, the
Executive and the Employer shall execute an agreement providing for the early
retirement of the Executive from the Employer, or the Executive shall otherwise
give notice that the Executive is voluntarily choosing to retire early from the
Employer, then the Executive shall receive Accrued Benefits through the
Termination Date; provided, that if the Executive's employment is terminated by
the Executive for Good Reason or by the Company other than by reason of death,
disability or Cause and the Executive also, in connection with such
termination, elects voluntary early retirement, then the Executive shall also
be entitled to receive a Termination Payment pursuant to Section 8(a).
11. Termination for Disability. If, during the
Employment Period, as a result of the Executive's disability due to physical or
mental illness or injury (regardless of whether such illness or injury is
job-related), the Executive shall have been absent from the Executive's duties
hereunder on a full-time basis for a period of 182 days and, within thirty days
after the Company notifies the Executive in writing that it intends to
terminate the Executive's employment (which notice shall not constitute the
Notice of Termination contemplated below), the Executive shall not have
returned to the performance of the Executive's duties hereunder on a full-time
basis, then the Company may terminate the Executive's employment for purposes
of this Agreement pursuant to a Notice of Termination. If the Executive's
employment is terminated on account of the Executive's disability in accordance
with this Section, then the Executive shall receive Accrued Benefits in
accordance with Section 8(a) and shall remain eligible for all benefits
provided by any long term disability programs of the Employer in effect at the
time the Company sends notice to the Executive of its intent to terminate
pursuant to this Section.
12. Termination Notice and Procedure. (a) Any
termination of the Executive's employment during the Employment Period by the
Company or the Executive (other than a termination of the Executive's
employment referenced in the second sentence of the definition of "Effective
Date" in Exhibit A) shall be communicated by written Notice of Termination to
the Executive, if such Notice is given by the Company, and to the Company, if
such Notice is given by the Executive, all in accordance with the following
procedures and those set forth in Section 22:
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<PAGE> 9
(i) If such termination is for disability, Cause or Good
Reason, the Notice of Termination shall indicate in reasonable detail the facts
and circumstances alleged to provide a basis for such termination.
(ii) Any Notice of Termination by the Company shall have
been approved, prior to the giving thereof to the Executive, by a resolution
duly adopted by a majority of the directors of the Company (or any successor
corporation) then in office, a copy of which shall accompany the Notice.
(iii) If the Notice is given by the Executive for Good
Reason, then the Executive may cease performing the Executive's duties
hereunder on or after the date 15 days after the delivery of Notice of
Termination (unless the Notice of Termination is based upon clause (vii) of the
definition of "Good Reason" in Exhibit A, in which case the Executive may cease
performing his duties at the time the Executive's employment is terminated) and
shall in any event cease employment on the Termination Date, if any, arising
from the delivery of such Notice. If the Notice is given by the Company, then
the Executive may cease performing the Executive's duties hereunder on the date
of receipt of the Notice of Termination, subject to the Executive's rights
hereunder.
(iv) The recipient of any Notice of Termination shall
personally deliver or mail in accordance with Section 22 written notice of any
dispute relating to such Notice of Termination to the party giving such Notice
within fifteen days after receipt thereof. After the expiration of such fifteen
days, the contents of the Notice of Termination shall become final and not
subject to dispute.
Notwithstanding the foregoing, (A) if the Executive terminates the Executive's
employment after a Change in Control without complying with this Section 12,
then the Executive will be deemed to have voluntarily terminated the
Executive's employment other than for Good Reason and deemed to have delivered
a written Notice of Termination to that effect to the Company as of the date of
such termination and (B) if the Company terminates the Executive's employment
after a Change in Control without complying with this Section 12, then the
Company will be deemed to have terminated the Executive's employment other than
by reason of death, disability or Cause and the Company will be deemed to have
delivered a written Notice of Termination to that effect to the Executive as of
the date of such termination. Under circumstances described in clause (B)
above, the Executive may, but shall not be obligated to, also deliver a Notice
of Termination based upon clause (vii) of the definition of "Good Reason" in
Exhibit A for the purpose of subjecting such Notice to Section 12(a)(iv).
(b) If a Change in Control occurs and the Executive's
employment with the Employer terminates (whether by the Company, the Executive
or otherwise) within 180 days prior to the Change in Control, then the
Executive may assert that such termination is a Covered Termination by sending
a written Notice of Termination to the Company at any time prior to the first
anniversary of the Change in Control in accordance with the procedures set
forth in this Section 12(b) and those set forth in Section 22. If the
Executive asserts that the Executive
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<PAGE> 10
terminated the Executive's employment for Good Reason or that the Company
terminated the Executive's employment other than for disability or Cause, then
the Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such assertions. The Company
shall personally deliver or mail in accordance with Section 22 written notice
of any dispute relating to such Notice of Termination to the Executive within
fifteen days after receipt thereof. After the expiration of such fifteen days,
the contents of the Notice of Termination shall become final and not subject to
dispute.
13. Further Obligations of the Executive.
(a) Competition. The Executive agrees that, in the event
of any Covered Termination where the Executive is entitled to (and receives)
Accrued Benefits and the Termination Payment, the Executive shall not, for a
period of six months after the Termination Date, without the prior written
approval of the Company's Board of Directors, engage in any Competitive
Activity.
(b) Confidentiality. During and following the
Executive's employment by the Employer, the Executive shall hold in confidence
and not directly or indirectly disclose or use or copy or make lists of any
confidential information or proprietary data of the Company (including that of
the Employer), except to the extent authorized in writing by the Board of
Directors of the Company or required by any court or administrative agency,
other than to an employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Executive of duties as an executive of the Company or the Employer.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential
by persons engaged in the same business or a business similar to that of the
Company. All records, files, documents and materials, or copies thereof,
relating to the business of the Company which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Company and shall be promptly returned to the Company upon termination of
employment with the Employer.
14. Expenses and Interest. If, after the Effective Date,
(i) a dispute arises with respect to the enforcement of the Executive's rights
under this Agreement, (ii) any legal or arbitration proceeding shall be brought
to enforce or interpret any provision contained herein or to recover damages
for breach hereof, or (iii) any tax audit or proceeding is commenced that is
attributable in part to the application of Section 4999 of the Code, in any
case so long as the Executive is not acting in bad faith, then the Company
shall reimburse the Executive for any reasonable attorneys' fees and necessary
costs and disbursements incurred as a result of such dispute, legal or
arbitration proceeding or tax audit or proceeding ("Expenses"), and prejudgment
interest on any money judgment or arbitration award obtained by the Executive
calculated at the rate of interest announced by Firstar Bank Milwaukee, N.A.,
Milwaukee, Wisconsin, from time to time as its prime or base lending rate from
the date that payments to the Executive should have been made under this
Agreement. Within ten days after the Executive's written request therefor, the
Company shall pay to the Executive, or such other
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<PAGE> 11
person or entity as the Executive may designate in writing to the Company, the
Executive's reasonable Expenses in advance of the final disposition or
conclusion of any such dispute, legal or arbitration proceeding.
15. Payment Obligations Absolute. The Company's
obligation during and after the Employment Period to pay the Executive the
amounts and to make the benefit and other arrangements provided herein shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim, recoupment, defense or
other right which the Company may have against the Executive or anyone else.
Except as provided in Section 14, all amounts payable by the Company hereunder
shall be paid without notice or demand. Each and every payment made hereunder
by the Company shall be final, and the Company will not seek to recover all or
any part of such payment from the Executive, or from whomsoever may be entitled
thereto, for any reason whatsoever.
16. Successors. (a) If the Company sells, assigns or
transfers all or substantially all of its business and assets to any Person or
if the Company merges into or consolidates or otherwise combines (where the
Company does not survive such combination) with any Person (any such event, a
"Sale of Business"), then the Company shall assign all of its right, title and
interest in this Agreement as of the date of such event to such Person, and the
Company shall cause such Person, by written agreement in form and substance
reasonably satisfactory to the Executive, to expressly assume and agree to
perform from and after the date of such assignment all of the terms, conditions
and provisions imposed by this Agreement upon the Company. Failure of the
Company to obtain such agreement prior to the effective date of such Sale of
Business shall be a breach of this Agreement constituting "Good Reason"
hereunder, except that for purposes of implementing the foregoing, the date
upon which such Sale of Business becomes effective shall be deemed the
Termination Date. In case of such assignment by the Company and of assumption
and agreement by such Person, as used in this Agreement, "Company" shall
thereafter mean such Person which executes and delivers the agreement provided
for in this Section 16 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, and this Agreement shall
inure to the benefit of, and be enforceable by, such Person. The Executive
shall, in the Executive's discretion, be entitled to proceed against any or all
of such Persons, any Person which theretofore was such a successor to the
Company (as defined in the first paragraph of this Agreement) and the Company
(as so defined) in any action to enforce any rights of the Executive hereunder.
Except as provided in this Subsection, this Agreement shall not be assignable
by the Company. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.
(b) This Agreement and all rights of the Executive shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All
amounts payable to the Executive under Sections 7, 8, 9, 10, 11 and 14 if the
Executive had lived shall be paid, in the event of the Executive's death, to
the Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Employer, as such terms
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are in effect on the Effective Date, that expressly govern benefits under such
plan in the event of the Executive's death.
17. Severability. The provisions of this Agreement shall
be regarded as divisible, and if any of said provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, then
the validity and enforceability of the remainder of such provisions or parts
hereof and the applicability thereof shall not be affected thereby.
18. Amendment. This Agreement may not be amended or
modified at any time except by written instrument executed by the Company and
the Executive.
19. Withholding. The Employer shall be entitled to
withhold from amounts to be paid to the Executive hereunder any federal, state
or local withholding or other taxes or charges which it is from time to time
required to withhold; provided, that the amount so withheld shall not exceed
the minimum amount required to be withheld by law. The Employer shall be
entitled to rely on an opinion of nationally recognized tax counsel if any
question as to the amount or requirement of any such withholding shall arise.
20. Certain Rules of Construction. No party shall be
considered as being responsible for the drafting of this Agreement for the
purpose of applying any rule construing ambiguities against the drafter or
otherwise. No draft of this Agreement shall be taken into account in
construing this Agreement. Any provision of this Agreement which requires an
agreement in writing shall be deemed to require that the writing in question be
signed by the Executive and an authorized representative of the Company.
21. Governing Law; Resolution of Disputes. (a) This
Agreement and the rights and obligations hereunder shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin
(excluding any choice of law rules that may direct the application of the laws
of another jurisdiction) except that Section 21(b) shall be construed in
accordance with the Federal Arbitration Act if arbitration is chosen by the
Executive as the method of dispute resolution.
(b) Any dispute arising out of this Agreement shall, at
the Executive's election, be determined by arbitration under the rules of the
American Arbitration Association then in effect (but subject to any evidentiary
standards set forth in this Agreement), in which case both parties shall be
bound by the arbitration award, or by litigation. Whether the dispute is to be
settled by arbitration or litigation, the venue for the arbitration or
litigation shall be Milwaukee, Wisconsin or, at the Executive's election, if
the Executive is no longer residing or working in the Milwaukee, Wisconsin
metropolitan area, in the judicial district encompassing the city in which the
Executive resides; provided, that, if the Executive is not then residing in the
United States, the election of the Executive with respect to such venue shall
be either Milwaukee, Wisconsin or in the judicial district encompassing that
city in the United States among the thirty cities having the largest population
(as determined by the most recent United States Census data available at the
Termination Date) that is closest to the Executive's residence.
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The parties consent to personal jurisdiction in each trial court in the
selected venue having subject matter jurisdiction notwithstanding their
residence or situs, and each party irrevocably consents to service of process
in the manner provided hereunder for the giving of notices.
22. Notice. Notices given pursuant to this Agreement
shall be in writing and, except as otherwise provided by Section 12(a)(iii),
shall be deemed given when actually received by the Executive or actually
received by the Company's Secretary or any officer of the Company other than
the Executive. If mailed, such notices shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid, if to the Company, to Hein-Werner Corporation, Attention: Secretary
(or, if the Executive is then Secretary, to the Chief Executive Officer), 2120
Pewaukee Road, Waukesha, Wisconsin 53188, or if to the Executive, at the
address set forth below the Executive's signature to this Agreement, or to such
other address as the party to be notified shall have theretofore given to the
other party in writing.
23. Additional Payment. (a) If, notwithstanding the
provisions of Section 8(a)(ii), but subject to subsection (b), it is ultimately
determined by a court or pursuant to a final determination by the Internal
Revenue Service that any portion of Total Payments is subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (or any successor provision),
then the Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive after deduction of
any Excise Tax and any interest charges or penalties in respect of the
imposition of such Excise Tax (but not any federal, state or local income tax)
on the Total Payments, and any federal, state and local income tax and Excise
Tax upon the payment provided for by this Section 23 shall be equal to the
Total Payments. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of the Executive's
domicile for income tax purposes on the date the Gross-Up Payment is made, net
of the maximum reduction in federal income taxes that could be obtained from
deduction of such state and local taxes.
(b) If legislation is enacted that would require the
Company's shareholders to approve this Agreement, prior to a Change in Control,
due solely to the provision contained in subsection (a) of this Section 23,
then
(i) from and after such time as shareholder approval
would be required, until shareholder approval is obtained as required
by such legislation, subsection (a) shall be of no force and effect;
(ii) if the Company seeks shareholder approval of any
other agreement providing similar benefits to any other executive of
the Company, then the Company shall seek shareholder approval of this
Agreement at the same shareholders' meeting or meetings at which the
shareholders consider any such other agreement; and
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(iii) the Company and the Executive shall use their best
efforts to consider and agree in writing upon an amendment to this
Section 23 such that, as amended, this Subsection would provide the
Executive with the benefits intended to be afforded to the Executive
by subsection (a) without requiring shareholder approval.
24. No Waiver. The Executive's or the Company's failure
to insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
25. Headings. The headings herein contained are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
HEIN-WERNER CORPORATION
By: /s/ J.L. DINDORF
-------------------------------------
J. L. Dindorf
President and Chief Executive Officer
Attest: /s/ M.J. MCSWEENEY
---------------------------------
M. J. McSweeney
Secretary
EXECUTIVE
/s/ MICHAEL J. KOONS
-----------------------------------------
Michael J. Koons
650 Dunleith Circle - Apt. #1
Elm Grove, Wisconsin 53122
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Exhibit A
CERTAIN DEFINED TERMS
For purposes of this Agreement,
(a) Act. The term "Act" means the Securities Exchange
Act of 1934, as amended.
(b) Accrued Benefits. The term "Accrued Benefits" shall
include the following amounts, payable as described herein: (i) all base
salary for the time period ending with the Termination Date; (ii) reimbursement
for any and all monies advanced in connection with the Executive's employment
for reasonable and necessary expenses incurred by the Executive on behalf of
the Company and its Affiliates for the time period ending with the Termination
Date; (iii) any and all other cash earned through the Termination Date and
deferred at the election of the Executive or pursuant to any deferred
compensation plan then in effect; (iv) notwithstanding any provision of any
bonus or incentive compensation plan applicable to the Executive, a lump sum
amount, in cash, equal to the sum of (A) any bonus or incentive compensation
that has been allocated or awarded to the Executive for a fiscal year or other
measuring period under the plan that ends prior to the Termination Date but has
not yet been paid (pursuant to Section 5(f) or otherwise) and (B) a pro rata
portion to the Termination Date of the aggregate value of all contingent bonus
or incentive compensation awards to the Executive for all uncompleted periods
under the plan calculated as to each such award as if the Goals with respect to
such bonus or incentive compensation award had been attained; and (v) all other
payments and benefits to which the Executive (or in the event of the
Executive's death, the Executive's surviving spouse or other beneficiary) may
be entitled as compensatory fringe benefits or under the terms of any benefit
plan of the Employer, including severance payments under the Employer's
severance policies and practices in the form most favorable to the Executive
that were in effect at any time during the 180-day period prior to the
Effective Date. Payment of Accrued Benefits shall be made promptly in
accordance with the Employer's prevailing practice with respect to clauses (i)
and (ii) or, with respect to clauses (iii), (iv) and (v), pursuant to the terms
of the benefit plan or practice establishing such benefits.
(c) Affiliate and Associate. The terms "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations of the Act.
(d) Annual Cash Compensation. The term "Annual Cash
Compensation" shall mean the sum of (A) the Executive's Annual Base Salary,
plus (B) the highest of (1) the highest annual bonus or incentive compensation
award earned by the Executive under any cash bonus or incentive compensation
plan of the Company or any of its Affiliates during the three complete fiscal
years of the Company immediately preceding the Termination Date or, if more
favorable to the Executive, during the three complete fiscal years of the
Company immediately preceding
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the Effective Date; (2) the Executive's bonus or incentive compensation
Targeted Bonus for the fiscal year in which the Termination Date occurs; or (3)
the highest average annual bonus and/or incentive compensation earned during
the three complete fiscal years of the Company immediately preceding the
Termination Date (or, if more favorable to the Executive, during the three
complete fiscal years of the Company immediately preceding the Effective Date)
under any cash bonus or incentive compensation plan of the Company or any of
its Affiliates by the group of executives of the Company and its Affiliates
participating under such plan during such fiscal years at a status or position
comparable to that at which the Executive participated or would have
participated pursuant to the Executive's most senior position at any time
during the 180 days preceding the Effective Date or thereafter until the
Termination Date.
(e) Cause. The Company may terminate the Executive's
employment after the Effective Date for "Cause" only if the conditions set
forth in paragraphs (i) and (ii) have been met and the Company otherwise
complies with this Agreement:
(i) (A) the Executive has committed any act of
fraud, embezzlement or theft in connection with the Executive's duties
as an Executive or in the course of employment with the Company and/or
its subsidiaries; (B) the Executive has willfully and continually
failed to perform substantially the Executive's duties with the
Company or any of its Affiliates (other than any such failure
resulting from incapacity due to physical or mental illness or injury,
regardless of whether such illness or injury is job-related) for an
appropriate period, which shall not be less than 30 days, after the
Chief Executive Officer of the Company (or, if the Executive is then
Chief Executive Officer, the Board) has delivered a written demand for
performance to the Executive that specifically identifies the manner
in which the Chief Executive Officer (or the Board, as the case may
be) believes the Executive has not substantially performed the
Executive's duties; (C) the Executive has willfully engaged in illegal
conduct or gross misconduct that is materially and demonstrably
injurious to the Company; (D) the Executive has willfully and
wrongfully disclosed any trade secret or other confidential
information of the Company or any of its Affiliates; or (E) the
Executive has engaged in any Competitive Activity; and in any such
case the act or omission shall have been determined by the Board to
have been materially harmful to the Company and its subsidiaries taken
as a whole.
For purposes of this provision, (1) no act or failure
to act on the part of the Executive shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or
omission was in the best interests of the Company and (2) any act, or
failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company.
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(ii) (A) The Company terminates the Executive's
employment by delivering a Notice of Termination to the Executive, (B)
prior to the time the Company has terminated the Executive's
employment pursuant to a Notice of Termination, the Board, by the
affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board, has adopted a resolution finding that the
Executive was guilty of conduct set forth in this definition of Cause,
and specifying the particulars thereof in detail, at a meeting of the
Board called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before
the Board) and (C) the Company delivers a copy of such resolution to
the Executive with the Notice of Termination at the time the
Executive's employment is terminated.
In the event of a dispute regarding whether the Executive's employment has been
terminated for Cause, no claim by the Company that the Company has terminated
the Executive's employment for Cause in accordance with this Agreement shall be
given effect unless the Company establishes by clear and convincing evidence
that the Company has complied with the requirements of this Agreement to
terminate the Executive's employment for Cause.
(f) Change in Control. A "Change in Control" shall be
deemed to have occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (other than (A) the Company or any
of its subsidiaries, (B) a trustee or other fiduciary holding
securities under any employee benefit plan of the Company or any of
its subsidiaries, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities or (D) a corporation owned,
directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock in the
Company ("Excluded Persons")) is or becomes the "Beneficial Owner" (as
such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its Affiliates after January 1, 1998
pursuant to express authorization by the Board that refers to this
exception) representing 25% or more of either the then outstanding
shares of common stock of the Company or the combined voting power of
the Company's then outstanding voting securities; or
(ii) the following individuals cease for any
reason to constitute a majority of the number of directors then
serving: individuals who, on January 1, 1998, constituted the Board
and any new director (other than a director whose initial assumption
of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating
to the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A under the Act) whose appointment or
election by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still
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in office who either were directors on January 1, 1998 or whose
appointment, election or nomination for election was previously so
approved; or
(iii) the shareholders of the Company approve a
merger, consolidation or share exchange of the Company with any other
corporation or approve the issuance of voting securities of the
Company in connection with a merger, consolidation or share exchange
of the Company (or any direct or indirect subsidiary of the Company)
pursuant to applicable stock exchange requirements, other than (A) a
merger, consolidation or share exchange which would result in the
voting securities of the Company outstanding immediately prior to such
merger, consolidation or share exchange continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least 50%
of the combined voting power of the voting securities of the Company
or such surviving entity or any parent thereof outstanding immediately
after such merger, consolidation or share exchange, or (B) a merger,
consolidation or share exchange effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person (other than an Excluded Person) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates after
January 1, 1998 pursuant to express authorization by the Board that
refers to this exception) representing 25% or more of either the then
outstanding shares of common stock of the Company or the combined
voting power of the Company's then outstanding voting securities; or
(iv) the shareholders of the Company approve a
plan of complete liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (in one transaction or a
series of related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity at least 75% of
the combined voting power of the voting securities of which are owned
by Persons in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity that owns all or substantially all of the assets or voting securities
of the Company immediately following such transaction or series of
transactions.
(g) Code. The term "Code" means the Internal Revenue
Code of 1986, including any amendments thereto or successor tax codes thereof.
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(h) Competitive Activity. The Executive shall engage in
a "Competitive Activity" if the Executive participates in the management of, is
employed by or owns any interest in any business enterprise at a location
within the United States that engages in substantial competition with the
Company or its subsidiaries, where such enterprise's revenues from any
competitive activities amount to 10% or more of such enterprise's consolidated
net revenues and sales for its most recently completed fiscal year; provided,
however, that owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such competitor
shall not be a "Competitive Activity".
(i) Covered Termination. The term "Covered Termination"
means any termination of the Executive's employment during the Employment
Period where the Termination Date or the date Notice of Termination is
delivered is any date on or prior to the end of the Employment Period.
(j) Effective Date. The term "Effective Date" shall mean
the first date on which a Change in Control occurs. Anything in this Agreement
to the contrary notwithstanding, if (i) a Change in Control occurs, (ii) the
Executive's employment with the Employer terminates (whether by the Company,
the Executive or otherwise) within 180 days prior to the Change in Control and
(iii) it is reasonably demonstrated by the Executive that (A) any such
termination of employment by the Employer (1) was at the request of a third
party who has taken steps reasonably calculated to effect a Change in Control
or (2) otherwise arose in connection with or in anticipation of a Change in
Control, or (B) any such termination of employment by the Executive took place
subsequent to the occurrence of an event described in clause (ii), (iii), (iv)
or (v) of the definition of "Good Reason" which event (1) occurred at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or in anticipation
of a Change in Control, then for all purposes of this Agreement the term
"Effective Date" shall mean the day immediately prior to the date of such
termination of employment.
(k) Employer. The term "Employer" means the Company
and/or any subsidiary of the Company that employed the Executive immediately
prior to the Effective Date.
(l) Good Reason. The Executive shall have a "Good
Reason" for termination of employment on or after the Effective Date if the
Executive determines in good faith that any of the following events has
occurred:
(i) any breach of this Agreement by the Company,
including specifically any breach by the Company of its agreements
contained in Section 4, Section 5 or Section 6, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith that the Company remedies promptly after receipt of notice
thereof given by the Executive;
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(ii) any reduction in the Executive's base salary,
percentage of base salary available as incentive compensation or bonus
opportunity or benefits, in each case relative to those most favorable
to the Executive in effect at any time during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date;
(iii) a material adverse change, without the
Executive's prior written consent, in the Executive's working
conditions or status with the Company or the Employer from such
working conditions or status in effect during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date, including but not
limited to (A) a material change in the nature or scope of the
Executive's titles, authority, powers, functions, duties, reporting
requirements or responsibilities, or (B) a material reduction in the
level of support services, staff, secretarial and other assistance,
office space and accoutrements, but excluding for this purpose an
isolated, insubstantial and inadvertent event not occurring in bad
faith that the Company remedies promptly after receipt of notice
thereof given by the Executive;
(iv) the relocation of the Executive's principal
place of employment to a location more than 35 miles from the
Executive's principal place of employment on the date 180 days prior
to the Effective Date;
(v) the Employer requires the Executive to travel
on Employer business to a materially greater extent than was required
during the 180-day period prior to the Effective Date;
(vi) failure by the Company to obtain the
agreement referred to in Section 16(a) as provided therein; or
(vii) the Company or the Employer terminates the
Executive's employment after a Change in Control without delivering a
Notice of Termination in accordance with Section 12;
provided that (A) any such event occurs following the Effective Date or (B) in
the case of any event described in clauses (ii), (iii), (iv) or (v) above, such
event occurs on or prior to the Effective Date under circumstances described in
clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective Date." In
the event of a dispute regarding whether the Executive terminated the
Executive's employment for "Good Reason" in accordance with this Agreement, no
claim by the Company that such termination does not constitute a Covered
Termination shall be given effect unless the Company establishes by clear and
convincing evidence that such termination does not constitute a Covered
Termination. Any election by the Executive to terminate the Executive's
employment for Good Reason shall not be deemed a voluntary termination of
employment by the Executive for purposes of any other employee benefit or other
plan.
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(m) Normal Retirement Date. The term "Normal Retirement
Date" means the date the Executive reaches age 65.
(n) Notice of Termination. The term "Notice of
Termination" means a written notice as contemplated by Section 12.
(o) Person. The term "Person" shall have the meaning
given in Section 3(a)(9) of the Act, as modified and used in Sections 13(d) and
14(d) thereof.
(p) Termination Date. Except as otherwise provided in
Section 9(b) and Section 16(a), the term "Termination Date" means (i) if the
Executive's employment is terminated by the Executive's death, the date of
death; (ii) if the Executive's employment is terminated by reason of voluntary
early retirement, as agreed in writing by the Company and the Executive, the
date of such early retirement that is set forth in such written agreement;
(iii) if the Executive's employment is terminated for purposes of this
Agreement by reason of disability pursuant to Section 11, thirty days after the
Notice of Termination is given; (iv) if the Executive's employment is
terminated by the Executive voluntarily (other than for Good Reason), the date
the Notice of Termination is given; and (v) if the Executive's employment is
terminated by the Company (other than by reason of disability pursuant to
Section 11) or by the Executive for Good Reason, thirty days after the Notice
of Termination is given. Notwithstanding the foregoing,
(A) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Company notifies the Executive that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof, then the Executive may elect to continue the
Executive's employment during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that the Executive terminated the Executive's employment
for Good Reason in accordance with this Agreement, then the Termination Date
shall be the earlier of (1) the date on which the dispute is finally
determined, either (x) by mutual written agreement of the parties or (y) in
accordance with Section 21 or (2) the date of the Executive's death. If the
Executive so elects and it is thereafter determined that the Executive did not
terminate the Executive's employment for Good Reason in accordance with this
Agreement, then the employment of the Executive hereunder shall continue after
such determination as if the Executive had not delivered the Notice of
Termination asserting Good Reason and there shall be no Termination Date
arising out of such Notice. In either case, this Agreement continues, until
the Termination Date, if any, as if the Executive had not delivered the Notice
of Termination except that, if it is finally determined that the Executive
terminated the Executive's employment for Good Reason in accordance with this
Agreement, then the Executive shall in no case be denied the benefits described
in Section 8 (including a Termination Payment) based on events occurring after
the Executive delivered the Executive's Notice of Termination.
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(B) If an opinion is required to be delivered pursuant to
Section 8(a)(ii) and such opinion shall not have been delivered, then the
Termination Date shall be the date on which such opinion is delivered.
(C) Except as provided in paragraph (A) above, if the
party receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof and it is finally determined that termination of the
Executive's employment for the reason asserted in such Notice of Termination
was not in accordance with this Agreement, then (1) if such Notice was
delivered by the Executive, then the Executive will be deemed to have
voluntarily terminated the Executive's employment other than for Good Reason by
means of such Notice and (2) if delivered by the Company, then the Company will
be deemed to have terminated the Executive's employment other than by reason of
death, disability or Cause by means of such Notice.
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<PAGE> 1
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 15th day of
April, 1998, by and between Hein-Werner Corporation, a Wisconsin corporation
(hereinafter referred to as the "Company"), and Reinald D. Liegel (hereinafter
referred to as the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is currently employed by the Company in
a key capacity, and the Executive's services are valuable to the conduct of the
business of the Company;
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that circumstances may arise in which a change in control of the
Company occurs, through acquisition or otherwise, thereby causing uncertainty
about the Executive's future employment with the Company without regard to the
Executive's competence or past contributions, which uncertainty may result in
the loss of valuable services of the Executive to the detriment of the Company
and its shareholders, and the Company and the Executive wish to provide
reasonable security to the Executive against changes in the Executive's
relationship with the Company in the event of any such change in control;
WHEREAS, the Company and the Executive desire that any
proposal for a change in control or acquisition of the Company will be
considered by the Executive objectively and with reference only to the best
interests of the Company and its shareholders; and
WHEREAS, the Executive will be in a better position to
consider the Company's best interests if the Executive is afforded reasonable
security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisition.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
<PAGE> 2
1. Definitions. The following terms are used in this
Agreement as defined in Exhibit A:
Act Covered Termination
Accrued Benefits Effective Date
Affiliate and Associate Employer
Annual Cash Compensation Good Reason
Cause Normal Retirement Date
Change in Control Notice of Termination
Code Person
Competitive Activity Termination Date
2. Termination or Cancellation Prior to the Effective
Date. The Employer and the Executive shall each retain the right to terminate
the employment of the Executive at any time prior to the Effective Date. If
the Executive's employment is terminated prior to the Effective Date, then this
Agreement shall be terminated and cancelled and of no further force or effect
and any and all rights and obligations of the parties hereunder shall cease.
In addition, this Agreement shall terminate upon the Executive ceasing to be an
employee of the Employer prior to a Change in Control unless the Executive can
reasonably demonstrate that such change in status occurred under circumstances
described in clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective
Date" in Exhibit A.
3. Employment Period. If the Executive is employed by
the Employer on the Effective Date, then the Company will, or will cause the
Employer to, continue thereafter to employ the Executive during the Employment
Period (as hereinafter defined), and the Executive will remain in the employ of
the Employer, in accordance with and subject to the terms and provisions of
this Agreement. For purposes of this Agreement, the term "Employment Period"
means a period (i) commencing on the Effective Date, and (ii) ending at 11:59
p.m. Milwaukee Time on the earlier of the second anniversary of such date or
the Executive's Normal Retirement Date.
4. Duties. During the Employment Period, the Executive
shall, in the most significant capacities and positions held by the Executive
at any time during the 180-day period preceding the Effective Date or in such
other capacities and positions as may be agreed to by the Company and the
Executive in writing, devote the Executive's best efforts and all of the
Executive's business time, attention and skill to the business and affairs of
the Employer, as such business and affairs now exist and as they may hereafter
be conducted.
5. Compensation. During the Employment Period, the
Executive shall be compensated as follows:
(a) The Executive shall receive, at reasonable intervals
(but not less often than monthly) and in accordance with such standard policies
as may be in effect immediately prior to the Effective Date, an annual base
salary in cash equivalent of not less than twelve times the
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Executive's highest monthly base salary (which shall include any amounts
credited to the Executive for the purchase of annuity contracts and related tax
offset bonuses) for the twelve-month period immediately preceding the month in
which the Effective Date occurs or, if higher, an annual base salary at the
rate in effect immediately prior to the Effective Date (which base salary
shall, unless otherwise agreed in writing by the Executive, include the current
receipt by the Executive of any amounts which, prior to the Effective Date, the
Executive had elected to defer, whether such compensation is deferred under
Section 401(k) of the Code or otherwise), subject to upward adjustment as
provided in Section 6 (such salary amount as adjusted upward from time to time
is hereafter referred to as the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least
equal in value to those provided for the Executive at any time during the
180-day period immediately preceding the Effective Date or, if more favorable
to the Executive, those provided generally at any time after the Effective Date
to any executives of the Company and its Affiliates of comparable status and
position to the Executive. The Executive shall be reimbursed, at such
intervals and in accordance with such standard policies that are most favorable
to the Executive that were in effect at any time during the 180-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to any
executives of the Company and its Affiliates of comparable status and position
to the Executive, for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Company and its Affiliates, including travel
expenses.
(c) The Executive and/or the Executive's family, as the
case may be, shall be included, to the extent eligible thereunder (which
eligibility shall not be conditioned on the Executive's salary grade or on any
other requirement that excludes executives of the Company and its Affiliates of
comparable status and position to the Executive unless such exclusion was in
effect for such plan or an equivalent plan on the date 180 days prior to the
Effective Date), in any and all welfare benefit plans, practices, policies and
programs providing benefits for the Company's salaried employees in general or,
if more favorable to the Executive, to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to group life insurance, hospitalization, medical and dental plans;
provided, that, (i) in no event shall the aggregate level of benefits under
such plans, practices, policies and programs in which the Executive is included
be less than the aggregate level of benefits under plans, practices, policies
and programs of the type referred to in this Section 5(c) in which the
Executive was participating at any time during the 180-day period immediately
preceding the Effective Date and (ii) in no event shall the aggregate level of
benefits under such plans, practices, policies and programs be less than the
aggregate level of benefits under plans, practices, policies and programs of
the type referred to in this Section 5(c) provided at any time after the
Effective Date to any executive of the Company and its Affiliates of comparable
status and position to the Executive.
(d) The Executive shall annually be entitled to not less
than the amount of paid vacation and not fewer than the number of paid holidays
to which the Executive was entitled
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annually at any time during the 180-day period immediately preceding the
Effective Date or such greater amount of paid vacation and number of paid
holidays as may be made available annually to the Executive or any other
executive of the Company and its Affiliates of comparable status and position
to the Executive at any time after the Effective Date.
(e) The Executive shall be included in all plans
providing additional benefits to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to deferred compensation, split-dollar life insurance, retirement,
supplemental retirement, stock option, stock appreciation, stock bonus and
similar or comparable plans; provided, that, (i) in no event shall the
aggregate level of benefits under such plans be less than the aggregate level
of benefits under plans of the type referred to in this Section 5(e) in which
the Executive was participating at any time during the 180-day period
immediately preceding the Effective Date; (ii) in no event shall the aggregate
level of benefits under such plans be less than the aggregate level of benefits
under plans of the type referred to in this Section 5(e) provided at any time
after the Effective Date to any executive of the Company and its Affiliates of
comparable status and position to the Executive; and (iii) the Company's
obligation to include the Executive in bonus or incentive compensation plans
shall be determined by Section 5(f).
(f) To assure that the Executive will have an opportunity
to earn incentive compensation after the Effective Date, the Executive shall be
included in a bonus plan of the Company that shall satisfy the standards
described below (the "Bonus Plan"). Bonuses under the Bonus Plan shall be
payable with respect to achieving such financial or other goals reasonably
related to the business of the Company as the Company shall establish (the
"Goals"), all of which Goals shall be attainable, prior to the end of the
Employment Period, with approximately the same degree of probability as the
goals under the Employer's annual incentive plan currently in effect, or the
successor to such plan, in the form most favorable to the Executive that was in
effect at any time during the 180-day period prior to the Effective Date (the
"Existing Plan") and in view of the Company's existing and projected financial
and business circumstances applicable at the time. The amount of the bonus
(the "Bonus Amount") that the Executive is eligible to earn under the Bonus
Plan shall be no less than the amount of the Executive's highest maximum
potential award under the Existing Plan at any time during the 180-day period
prior to the Effective Date or, if higher, any maximum potential award under
the Bonus Plan or any other bonus or incentive compensation plan in effect
after the Effective Date for the Executive or for any executive of the Company
and its Affiliates of comparable status and position to the Executive (such
bonus amount herein referred to as the "Targeted Bonus"), and if the Goals are
not achieved (and, therefore, the entire Targeted Bonus is not payable), then
the Bonus Plan shall provide for a payment of a Bonus Amount not less than a
portion of the Targeted Bonus reasonably related to that portion of the Goals
that were achieved. Payment of the Bonus Amount (i) shall be in cash, unless
otherwise agreed by the Executive, and (ii) shall not be affected by any
circumstance occurring subsequent to the end of the Employment Period,
including termination of the Executive's employment.
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6. Annual Compensation Adjustments. During the
Employment Period, the Board of Directors of the Company (or an appropriate
committee thereof) will consider and appraise, at least annually, the
contributions of the Executive to the Employer, and in accordance with the
Company's practice prior to the Effective Date, due consideration shall be
given, at least annually, to the upward adjustment of the Executive's Annual
Base Salary (i) commensurate with increases generally given to other executives
of the Company and its Affiliates of comparable status and position to the
Executive, and (ii) as the scope of the Company's operations or the Executive's
duties expand.
7. Termination During Employment Period.
(a) Right to Terminate. During the Employment Period,
(i) the Company shall be entitled to terminate the Executive's employment (A)
for Cause, (B) by reason of the Executive's disability pursuant to Section 11,
or (C) for any other reason, and (ii) the Executive shall be entitled to
terminate the Executive's employment for any reason. Any such termination
shall be subject to the procedures set forth in Section 12 and shall be subject
to any consequences of such termination set forth in this Agreement. Any
termination of the Executive's employment during the Employment Period by the
Employer shall be deemed a termination by the Company for purposes of this
Agreement.
(b) Termination for Cause or Without Good Reason. If
there is a Covered Termination for Cause or due to the Executive's voluntarily
terminating the Executive's employment other than for Good Reason, then the
Executive shall be entitled to receive only Accrued Benefits.
(c) Termination Giving Rise to a Termination Payment. If
there is a Covered Termination by the Executive for Good Reason, or by the
Company other than by reason of (i) death, (ii) disability pursuant to Section
11, or (iii) Cause, then the Executive shall be entitled to receive, and the
Company shall promptly pay, Accrued Benefits and, in lieu of further base
salary for periods following the Termination Date, as liquidated damages and
additional severance pay and in consideration of the covenant of the Executive
set forth in Section 13(a), the Termination Payment pursuant to Section 8(a).
8. Payments Upon Termination.
(a) Termination Payment. (i) Subject to the limits set
forth in Section 8(a)(ii), for purposes of this Agreement, the
"Termination Payment" shall be an amount equal to the Annual Cash
Compensation multiplied by the number of years or fractional portion
thereof remaining in the Employment Period determined as of the
Termination Date, except that the Termination Payment shall not be
less than the amount of Annual Cash Compensation. The Termination
Payment shall be paid to the Executive in cash equivalent not later
than ten business days after the Termination Date. The Executive
shall not be required to mitigate the amount of the Termination
Payment by securing other employment or otherwise, nor will such
Termination Payment be reduced
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by reason of the Executive securing other employment or for any other
reason. The Termination Payment shall be in addition to any other
severance payments to which the Executive is entitled under the
Company's severance policies and practices in the form most favorable
to the Executive that were in effect at any time during the 180-day
period prior to the Effective Date.
(ii) Notwithstanding any other provision of this
Agreement, if any portion of the Termination Payment or any other
payment under this Agreement, or under any other agreement with or
plan of the Company or the Employer (in the aggregate "Total
Payments"), would constitute an "excess parachute payment," then the
Total Payments to be made to the Executive shall be reduced such that
the value of the aggregate Total Payments that the Executive is
entitled to receive shall be One Dollar ($1) less than the maximum
amount which the Executive may receive without becoming subject to the
tax imposed by Section 4999 of the Code (or any successor provision)
or which the Company may pay without loss of deduction under Section
280G(a) of the Code (or any successor provision). For purposes of
this Agreement, the terms "excess parachute payment" and "parachute
payments" shall have the meanings assigned to them in Section 280G of
the Code (or any successor provision), and such "parachute payments"
shall be valued as provided therein. Present value for purposes of
this Agreement shall be calculated in accordance with Section
1274(b)(2) of the Code (or any successor provision). Within sixty
days following delivery of the Notice of Termination or notice by the
Company to the Executive of its belief that there is a payment or
benefit due the Executive which will result in an excess parachute
payment as defined in Section 280G of the Code (or any successor
provision), the Executive and the Company, at the Company's expense,
shall obtain the opinion (which need not be unqualified) of nationally
recognized tax counsel selected by the Company's independent auditors
and acceptable to the Executive in the Executive's sole discretion,
which sets forth (A) the amount of the Base Period Income, (B) the
amount and present value of Total Payments and (C) the amount and
present value of any excess parachute payments without regard to the
limitations of this Section 8(a)(ii). As used in this Section
8(a)(ii), the term "Base Period Income" means an amount equal to the
Executive's "annualized includible compensation for the base period"
as defined in Section 280G(d)(1) of the Code (or any successor
provision). For purposes of such opinion, the value of any noncash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code (or any successor provisions),
which determination shall be evidenced in a certificate of such
auditors addressed to the Company and the Executive. Such opinion
shall be dated as of the Termination Date and addressed to the Company
and the Executive and shall be binding upon the Company and the
Executive. If such opinion determines that there would be an excess
parachute payment, then the Termination Payment hereunder or any other
payment determined by such counsel to be includible in Total Payments
shall be reduced or eliminated as specified by the Executive in
writing delivered to the Company within thirty days of the Executive's
receipt of such opinion or, if the Executive fails to so notify the
Company, then as the Company shall reasonably determine, so that under
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the bases of calculations set forth in such opinion there will be no
excess parachute payment. If such legal counsel so requests in
connection with the opinion required by this Section, the Executive
and the Company shall obtain, at the Company's expense, and the legal
counsel may rely on in providing the opinion, the advice of a firm of
recognized executive compensation consultants as to the reasonableness
of any item of compensation to be received by the Executive.
Notwithstanding the foregoing, the provisions of this Section
8(a)(ii), including the calculations, notices and opinions provided
for herein, shall be based upon the conclusive presumption that the
following are reasonable: (1) the compensation and benefits provided
for in Section 5 and (2) any other compensation, including but not
limited to the Accrued Benefits, earned prior to the Termination Date
by the Executive pursuant to the Company's compensation programs if
such payments would have been made in the future in any event, even
though the timing of such payment is triggered by the Change in
Control or the Termination Date. If the provisions of Sections 280G
and 4999 of the Code (or any successor provisions) are repealed
without succession, then this Section 8(a)(ii) shall be of no further
force or effect.
(b) Additional Benefits. If there is a Covered
Termination and the Executive is entitled to Accrued Benefits and the
Termination Payment, then the Executive shall be entitled to the following
additional benefits:
(i) Until the earlier of the end of the
Employment Period or such time as the Executive has obtained new
employment and is covered by benefits which in the aggregate are at
least equal in value to the following benefits, the Executive shall
continue to be covered, at the expense of the Company, by the most
favorable life insurance, hospitalization, medical and dental coverage
and other welfare benefits provided to the Executive and the
Executive's family during the 180-day period immediately preceding the
Effective Date or at any time thereafter or, if more favorable to the
Executive, coverage as was required hereunder with respect to the
Executive immediately prior to the date Notice of Termination is
given.
(ii) The Executive shall receive, at the expense
of the Company, outplacement services, on an individualized basis at a
level of service commensurate with the Executive's most senior status
with the Company during the 180-day period prior to the Effective Date
(or, if higher, at any time after the Effective Date), provided by a
nationally recognized executive placement firm selected by the Company
with the consent of the Executive, which consent will not be
unreasonably withheld; provided that the cost to the Company of such
services shall not exceed 15% of the Executive's Annual Base Salary.
(iii) The Company shall bear up to $10,000 in the
aggregate of fees and expenses of consultants and/or legal or
accounting advisors engaged by the Executive to advise the Executive
as to matters relating to the computation of benefits due and payable
under this Section 8.
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<PAGE> 8
9. Death. (a) Except as provided in Section 9(b), in
the event of a Covered Termination due to the Executive's death, the
Executive's estate, heirs and beneficiaries shall receive all the Executive's
Accrued Benefits through the Termination Date.
(b) If the Executive dies after a Notice of Termination
is given (i) by the Company or (ii) by the Executive for Good Reason, then the
Executive's estate, heirs and beneficiaries shall be entitled to the benefits
described in Section 9(a) and, subject to the provisions of this Agreement, to
such Termination Payment to which the Executive would have been entitled had
the Executive lived. In such event, the Termination Date shall be thirty days
following the giving of the Notice of Termination, subject to extension
pursuant to the definition of "Termination Date" in Exhibit A.
10. Retirement. If, during the Employment Period, the
Executive and the Employer shall execute an agreement providing for the early
retirement of the Executive from the Employer, or the Executive shall otherwise
give notice that the Executive is voluntarily choosing to retire early from the
Employer, then the Executive shall receive Accrued Benefits through the
Termination Date; provided, that if the Executive's employment is terminated by
the Executive for Good Reason or by the Company other than by reason of death,
disability or Cause and the Executive also, in connection with such
termination, elects voluntary early retirement, then the Executive shall also
be entitled to receive a Termination Payment pursuant to Section 8(a).
11. Termination for Disability. If, during the
Employment Period, as a result of the Executive's disability due to physical or
mental illness or injury (regardless of whether such illness or injury is
job-related), the Executive shall have been absent from the Executive's duties
hereunder on a full-time basis for a period of 182 days and, within thirty days
after the Company notifies the Executive in writing that it intends to
terminate the Executive's employment (which notice shall not constitute the
Notice of Termination contemplated below), the Executive shall not have
returned to the performance of the Executive's duties hereunder on a full-time
basis, then the Company may terminate the Executive's employment for purposes
of this Agreement pursuant to a Notice of Termination. If the Executive's
employment is terminated on account of the Executive's disability in accordance
with this Section, then the Executive shall receive Accrued Benefits in
accordance with Section 8(a) and shall remain eligible for all benefits
provided by any long term disability programs of the Employer in effect at the
time the Company sends notice to the Executive of its intent to terminate
pursuant to this Section.
12. Termination Notice and Procedure. (a) Any
termination of the Executive's employment during the Employment Period by the
Company or the Executive (other than a termination of the Executive's
employment referenced in the second sentence of the definition of "Effective
Date" in Exhibit A) shall be communicated by written Notice of Termination to
the Executive, if such Notice is given by the Company, and to the Company, if
such Notice is given by the Executive, all in accordance with the following
procedures and those set forth in Section 22:
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<PAGE> 9
(i) If such termination is for disability, Cause or Good
Reason, the Notice of Termination shall indicate in reasonable detail the facts
and circumstances alleged to provide a basis for such termination.
(ii) Any Notice of Termination by the Company shall have
been approved, prior to the giving thereof to the Executive, by a resolution
duly adopted by a majority of the directors of the Company (or any successor
corporation) then in office, a copy of which shall accompany the Notice.
(iii) If the Notice is given by the Executive for Good
Reason, then the Executive may cease performing the Executive's duties
hereunder on or after the date 15 days after the delivery of Notice of
Termination (unless the Notice of Termination is based upon clause (vii) of the
definition of "Good Reason" in Exhibit A, in which case the Executive may cease
performing his duties at the time the Executive's employment is terminated) and
shall in any event cease employment on the Termination Date, if any, arising
from the delivery of such Notice. If the Notice is given by the Company, then
the Executive may cease performing the Executive's duties hereunder on the date
of receipt of the Notice of Termination, subject to the Executive's rights
hereunder.
(iv) The recipient of any Notice of Termination shall
personally deliver or mail in accordance with Section 22 written notice of any
dispute relating to such Notice of Termination to the party giving such Notice
within fifteen days after receipt thereof. After the expiration of such fifteen
days, the contents of the Notice of Termination shall become final and not
subject to dispute.
Notwithstanding the foregoing, (A) if the Executive terminates the Executive's
employment after a Change in Control without complying with this Section 12,
then the Executive will be deemed to have voluntarily terminated the
Executive's employment other than for Good Reason and deemed to have delivered
a written Notice of Termination to that effect to the Company as of the date of
such termination and (B) if the Company terminates the Executive's employment
after a Change in Control without complying with this Section 12, then the
Company will be deemed to have terminated the Executive's employment other than
by reason of death, disability or Cause and the Company will be deemed to have
delivered a written Notice of Termination to that effect to the Executive as of
the date of such termination. Under circumstances described in clause (B)
above, the Executive may, but shall not be obligated to, also deliver a Notice
of Termination based upon clause (vii) of the definition of "Good Reason" in
Exhibit A for the purpose of subjecting such Notice to Section 12(a)(iv).
(b) If a Change in Control occurs and the Executive's
employment with the Employer terminates (whether by the Company, the Executive
or otherwise) within 180 days prior to the Change in Control, then the
Executive may assert that such termination is a Covered Termination by sending
a written Notice of Termination to the Company at any time prior to the first
anniversary of the Change in Control in accordance with the procedures set
forth in this Section 12(b) and those set forth in Section 22. If the
Executive asserts that the Executive
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<PAGE> 10
terminated the Executive's employment for Good Reason or that the Company
terminated the Executive's employment other than for disability or Cause, then
the Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such assertions. The Company
shall personally deliver or mail in accordance with Section 22 written notice
of any dispute relating to such Notice of Termination to the Executive within
fifteen days after receipt thereof. After the expiration of such fifteen days,
the contents of the Notice of Termination shall become final and not subject to
dispute.
13. Further Obligations of the Executive.
(a) Competition. The Executive agrees that, in the event
of any Covered Termination where the Executive is entitled to (and receives)
Accrued Benefits and the Termination Payment, the Executive shall not, for a
period of six months after the Termination Date, without the prior written
approval of the Company's Board of Directors, engage in any Competitive
Activity.
(b) Confidentiality. During and following the
Executive's employment by the Employer, the Executive shall hold in confidence
and not directly or indirectly disclose or use or copy or make lists of any
confidential information or proprietary data of the Company (including that of
the Employer), except to the extent authorized in writing by the Board of
Directors of the Company or required by any court or administrative agency,
other than to an employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Executive of duties as an executive of the Company or the Employer.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential
by persons engaged in the same business or a business similar to that of the
Company. All records, files, documents and materials, or copies thereof,
relating to the business of the Company which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Company and shall be promptly returned to the Company upon termination of
employment with the Employer.
14. Expenses and Interest. If, after the Effective Date,
(i) a dispute arises with respect to the enforcement of the Executive's rights
under this Agreement, (ii) any legal or arbitration proceeding shall be brought
to enforce or interpret any provision contained herein or to recover damages
for breach hereof, or (iii) any tax audit or proceeding is commenced that is
attributable in part to the application of Section 4999 of the Code, in any
case so long as the Executive is not acting in bad faith, then the Company
shall reimburse the Executive for any reasonable attorneys' fees and necessary
costs and disbursements incurred as a result of such dispute, legal or
arbitration proceeding or tax audit or proceeding ("Expenses"), and prejudgment
interest on any money judgment or arbitration award obtained by the Executive
calculated at the rate of interest announced by Firstar Bank Milwaukee, N.A.,
Milwaukee, Wisconsin, from time to time as its prime or base lending rate from
the date that payments to the Executive should have been made under this
Agreement. Within ten days after the Executive's written request therefor, the
Company shall pay to the Executive, or such other
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<PAGE> 11
person or entity as the Executive may designate in writing to the Company, the
Executive's reasonable Expenses in advance of the final disposition or
conclusion of any such dispute, legal or arbitration proceeding.
15. Payment Obligations Absolute. The Company's
obligation during and after the Employment Period to pay the Executive the
amounts and to make the benefit and other arrangements provided herein shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim, recoupment, defense or
other right which the Company may have against the Executive or anyone else.
Except as provided in Section 14, all amounts payable by the Company hereunder
shall be paid without notice or demand. Each and every payment made hereunder
by the Company shall be final, and the Company will not seek to recover all or
any part of such payment from the Executive, or from whomsoever may be entitled
thereto, for any reason whatsoever.
16. Successors. (a) If the Company sells, assigns or
transfers all or substantially all of its business and assets to any Person or
if the Company merges into or consolidates or otherwise combines (where the
Company does not survive such combination) with any Person (any such event, a
"Sale of Business"), then the Company shall assign all of its right, title and
interest in this Agreement as of the date of such event to such Person, and the
Company shall cause such Person, by written agreement in form and substance
reasonably satisfactory to the Executive, to expressly assume and agree to
perform from and after the date of such assignment all of the terms, conditions
and provisions imposed by this Agreement upon the Company. Failure of the
Company to obtain such agreement prior to the effective date of such Sale of
Business shall be a breach of this Agreement constituting "Good Reason"
hereunder, except that for purposes of implementing the foregoing, the date
upon which such Sale of Business becomes effective shall be deemed the
Termination Date. In case of such assignment by the Company and of assumption
and agreement by such Person, as used in this Agreement, "Company" shall
thereafter mean such Person which executes and delivers the agreement provided
for in this Section 16 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, and this Agreement shall
inure to the benefit of, and be enforceable by, such Person. The Executive
shall, in the Executive's discretion, be entitled to proceed against any or all
of such Persons, any Person which theretofore was such a successor to the
Company (as defined in the first paragraph of this Agreement) and the Company
(as so defined) in any action to enforce any rights of the Executive hereunder.
Except as provided in this Subsection, this Agreement shall not be assignable
by the Company. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.
(b) This Agreement and all rights of the Executive shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All
amounts payable to the Executive under Sections 7, 8, 9, 10, 11 and 14 if the
Executive had lived shall be paid, in the event of the Executive's death, to
the Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Employer, as such terms
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<PAGE> 12
are in effect on the Effective Date, that expressly govern benefits under such
plan in the event of the Executive's death.
17. Severability. The provisions of this Agreement shall
be regarded as divisible, and if any of said provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, then
the validity and enforceability of the remainder of such provisions or parts
hereof and the applicability thereof shall not be affected thereby.
18. Amendment. This Agreement may not be amended or
modified at any time except by written instrument executed by the Company and
the Executive.
19. Withholding. The Employer shall be entitled to
withhold from amounts to be paid to the Executive hereunder any federal, state
or local withholding or other taxes or charges which it is from time to time
required to withhold; provided, that the amount so withheld shall not exceed
the minimum amount required to be withheld by law. The Employer shall be
entitled to rely on an opinion of nationally recognized tax counsel if any
question as to the amount or requirement of any such withholding shall arise.
20. Certain Rules of Construction. No party shall be
considered as being responsible for the drafting of this Agreement for the
purpose of applying any rule construing ambiguities against the drafter or
otherwise. No draft of this Agreement shall be taken into account in
construing this Agreement. Any provision of this Agreement which requires an
agreement in writing shall be deemed to require that the writing in question be
signed by the Executive and an authorized representative of the Company.
21. Governing Law; Resolution of Disputes. (a) This
Agreement and the rights and obligations hereunder shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin
(excluding any choice of law rules that may direct the application of the laws
of another jurisdiction) except that Section 21(b) shall be construed in
accordance with the Federal Arbitration Act if arbitration is chosen by the
Executive as the method of dispute resolution.
(b) Any dispute arising out of this Agreement shall, at
the Executive's election, be determined by arbitration under the rules of the
American Arbitration Association then in effect (but subject to any evidentiary
standards set forth in this Agreement), in which case both parties shall be
bound by the arbitration award, or by litigation. Whether the dispute is to be
settled by arbitration or litigation, the venue for the arbitration or
litigation shall be Milwaukee, Wisconsin or, at the Executive's election, if
the Executive is no longer residing or working in the Milwaukee, Wisconsin
metropolitan area, in the judicial district encompassing the city in which the
Executive resides; provided, that, if the Executive is not then residing in the
United States, the election of the Executive with respect to such venue shall
be either Milwaukee, Wisconsin or in the judicial district encompassing that
city in the United States among the thirty cities having the largest population
(as determined by the most recent United States Census data available at the
Termination Date) that is closest to the Executive's residence.
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The parties consent to personal jurisdiction in each trial court in the
selected venue having subject matter jurisdiction notwithstanding their
residence or situs, and each party irrevocably consents to service of process
in the manner provided hereunder for the giving of notices.
22. Notice. Notices given pursuant to this Agreement
shall be in writing and, except as otherwise provided by Section 12(a)(iii),
shall be deemed given when actually received by the Executive or actually
received by the Company's Secretary or any officer of the Company other than
the Executive. If mailed, such notices shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid, if to the Company, to Hein-Werner Corporation, Attention: Secretary
(or, if the Executive is then Secretary, to the Chief Executive Officer), 2120
Pewaukee Road, Waukesha, Wisconsin 53188, or if to the Executive, at the
address set forth below the Executive's signature to this Agreement, or to such
other address as the party to be notified shall have theretofore given to the
other party in writing.
23. Additional Payment. (a) If, notwithstanding the
provisions of Section 8(a)(ii), but subject to subsection (b), it is ultimately
determined by a court or pursuant to a final determination by the Internal
Revenue Service that any portion of Total Payments is subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (or any successor provision),
then the Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive after deduction of
any Excise Tax and any interest charges or penalties in respect of the
imposition of such Excise Tax (but not any federal, state or local income tax)
on the Total Payments, and any federal, state and local income tax and Excise
Tax upon the payment provided for by this Section 23 shall be equal to the
Total Payments. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of the Executive's
domicile for income tax purposes on the date the Gross-Up Payment is made, net
of the maximum reduction in federal income taxes that could be obtained from
deduction of such state and local taxes.
(b) If legislation is enacted that would require the
Company's shareholders to approve this Agreement, prior to a Change in Control,
due solely to the provision contained in subsection (a) of this Section 23,
then
(i) from and after such time as shareholder approval
would be required, until shareholder approval is obtained as required
by such legislation, subsection (a) shall be of no force and effect;
(ii) if the Company seeks shareholder approval of any
other agreement providing similar benefits to any other executive of
the Company, then the Company shall seek shareholder approval of this
Agreement at the same shareholders' meeting or meetings at which the
shareholders consider any such other agreement; and
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(iii) the Company and the Executive shall use their best
efforts to consider and agree in writing upon an amendment to this
Section 23 such that, as amended, this Subsection would provide the
Executive with the benefits intended to be afforded to the Executive
by subsection (a) without requiring shareholder approval.
24. No Waiver. The Executive's or the Company's failure
to insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
25. Headings. The headings herein contained are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
HEIN-WERNER CORPORATION
By: /s/ J. L. Dindorf
----------------------------------------
J. L. Dindorf
President and Chief Executive Officer
Attest: /s/ M. J. McSweeney
----------------------------------------
M. J. McSweeney
Secretary
EXECUTIVE
/s/ Reinald D. Liegel
------------------------------------------------
Reinald D. Liegel
2100 Laura Lane
Waukesha, Wisconsin 53186
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Exhibit A
CERTAIN DEFINED TERMS
For purposes of this Agreement,
(a) Act. The term "Act" means the Securities Exchange
Act of 1934, as amended.
(b) Accrued Benefits. The term "Accrued Benefits" shall
include the following amounts, payable as described herein: (i) all base
salary for the time period ending with the Termination Date; (ii) reimbursement
for any and all monies advanced in connection with the Executive's employment
for reasonable and necessary expenses incurred by the Executive on behalf of
the Company and its Affiliates for the time period ending with the Termination
Date; (iii) any and all other cash earned through the Termination Date and
deferred at the election of the Executive or pursuant to any deferred
compensation plan then in effect; (iv) notwithstanding any provision of any
bonus or incentive compensation plan applicable to the Executive, a lump sum
amount, in cash, equal to the sum of (A) any bonus or incentive compensation
that has been allocated or awarded to the Executive for a fiscal year or other
measuring period under the plan that ends prior to the Termination Date but has
not yet been paid (pursuant to Section 5(f) or otherwise) and (B) a pro rata
portion to the Termination Date of the aggregate value of all contingent bonus
or incentive compensation awards to the Executive for all uncompleted periods
under the plan calculated as to each such award as if the Goals with respect to
such bonus or incentive compensation award had been attained; and (v) all other
payments and benefits to which the Executive (or in the event of the
Executive's death, the Executive's surviving spouse or other beneficiary) may
be entitled as compensatory fringe benefits or under the terms of any benefit
plan of the Employer, including severance payments under the Employer's
severance policies and practices in the form most favorable to the Executive
that were in effect at any time during the 180-day period prior to the
Effective Date. Payment of Accrued Benefits shall be made promptly in
accordance with the Employer's prevailing practice with respect to clauses (i)
and (ii) or, with respect to clauses (iii), (iv) and (v), pursuant to the terms
of the benefit plan or practice establishing such benefits.
(c) Affiliate and Associate. The terms "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations of the Act.
(d) Annual Cash Compensation. The term "Annual Cash
Compensation" shall mean the sum of (A) the Executive's Annual Base Salary,
plus (B) the highest of (1) the highest annual bonus or incentive compensation
award earned by the Executive under any cash bonus or incentive compensation
plan of the Company or any of its Affiliates during the three complete fiscal
years of the Company immediately preceding the Termination Date or, if more
favorable to the Executive, during the three complete fiscal years of the
Company immediately preceding
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<PAGE> 16
the Effective Date; (2) the Executive's bonus or incentive compensation
Targeted Bonus for the fiscal year in which the Termination Date occurs; or (3)
the highest average annual bonus and/or incentive compensation earned during
the three complete fiscal years of the Company immediately preceding the
Termination Date (or, if more favorable to the Executive, during the three
complete fiscal years of the Company immediately preceding the Effective Date)
under any cash bonus or incentive compensation plan of the Company or any of
its Affiliates by the group of executives of the Company and its Affiliates
participating under such plan during such fiscal years at a status or position
comparable to that at which the Executive participated or would have
participated pursuant to the Executive's most senior position at any time
during the 180 days preceding the Effective Date or thereafter until the
Termination Date.
(e) Cause. The Company may terminate the Executive's
employment after the Effective Date for "Cause" only if the conditions set
forth in paragraphs (i) and (ii) have been met and the Company otherwise
complies with this Agreement:
(i) (A) the Executive has committed any act of
fraud, embezzlement or theft in connection with the Executive's duties
as an Executive or in the course of employment with the Company and/or
its subsidiaries; (B) the Executive has willfully and continually
failed to perform substantially the Executive's duties with the
Company or any of its Affiliates (other than any such failure
resulting from incapacity due to physical or mental illness or injury,
regardless of whether such illness or injury is job-related) for an
appropriate period, which shall not be less than 30 days, after the
Chief Executive Officer of the Company (or, if the Executive is then
Chief Executive Officer, the Board) has delivered a written demand for
performance to the Executive that specifically identifies the manner
in which the Chief Executive Officer (or the Board, as the case may
be) believes the Executive has not substantially performed the
Executive's duties; (C) the Executive has willfully engaged in illegal
conduct or gross misconduct that is materially and demonstrably
injurious to the Company; (D) the Executive has willfully and
wrongfully disclosed any trade secret or other confidential
information of the Company or any of its Affiliates; or (E) the
Executive has engaged in any Competitive Activity; and in any such
case the act or omission shall have been determined by the Board to
have been materially harmful to the Company and its subsidiaries taken
as a whole.
For purposes of this provision, (1) no act or failure
to act on the part of the Executive shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or
omission was in the best interests of the Company and (2) any act, or
failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company.
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(ii) (A) The Company terminates the Executive's
employment by delivering a Notice of Termination to the Executive, (B)
prior to the time the Company has terminated the Executive's
employment pursuant to a Notice of Termination, the Board, by the
affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board, has adopted a resolution finding that the
Executive was guilty of conduct set forth in this definition of Cause,
and specifying the particulars thereof in detail, at a meeting of the
Board called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before
the Board) and (C) the Company delivers a copy of such resolution to
the Executive with the Notice of Termination at the time the
Executive's employment is terminated.
In the event of a dispute regarding whether the Executive's employment has been
terminated for Cause, no claim by the Company that the Company has terminated
the Executive's employment for Cause in accordance with this Agreement shall be
given effect unless the Company establishes by clear and convincing evidence
that the Company has complied with the requirements of this Agreement to
terminate the Executive's employment for Cause.
(f) Change in Control. A "Change in Control" shall be
deemed to have occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (other than (A) the Company or any
of its subsidiaries, (B) a trustee or other fiduciary holding
securities under any employee benefit plan of the Company or any of
its subsidiaries, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities or (D) a corporation owned,
directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock in the
Company ("Excluded Persons")) is or becomes the "Beneficial Owner" (as
such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its Affiliates after January 1, 1998
pursuant to express authorization by the Board that refers to this
exception) representing 25% or more of either the then outstanding
shares of common stock of the Company or the combined voting power of
the Company's then outstanding voting securities; or
(ii) the following individuals cease for any
reason to constitute a majority of the number of directors then
serving: individuals who, on January 1, 1998, constituted the Board
and any new director (other than a director whose initial assumption
of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating
to the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A under the Act) whose appointment or
election by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still
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in office who either were directors on January 1, 1998 or whose
appointment, election or nomination for election was previously so
approved; or
(iii) the shareholders of the Company approve a
merger, consolidation or share exchange of the Company with any other
corporation or approve the issuance of voting securities of the
Company in connection with a merger, consolidation or share exchange
of the Company (or any direct or indirect subsidiary of the Company)
pursuant to applicable stock exchange requirements, other than (A) a
merger, consolidation or share exchange which would result in the
voting securities of the Company outstanding immediately prior to such
merger, consolidation or share exchange continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least 50%
of the combined voting power of the voting securities of the Company
or such surviving entity or any parent thereof outstanding immediately
after such merger, consolidation or share exchange, or (B) a merger,
consolidation or share exchange effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person (other than an Excluded Person) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates after
January 1, 1998 pursuant to express authorization by the Board that
refers to this exception) representing 25% or more of either the then
outstanding shares of common stock of the Company or the combined
voting power of the Company's then outstanding voting securities; or
(iv) the shareholders of the Company approve a
plan of complete liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (in one transaction or a
series of related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity at least 75% of
the combined voting power of the voting securities of which are owned
by Persons in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity that owns all or substantially all of the assets or voting securities
of the Company immediately following such transaction or series of
transactions.
(g) Code. The term "Code" means the Internal Revenue
Code of 1986, including any amendments thereto or successor tax codes thereof.
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(h) Competitive Activity. The Executive shall engage in
a "Competitive Activity" if the Executive participates in the management of, is
employed by or owns any interest in any business enterprise at a location
within the United States that engages in substantial competition with the
Company or its subsidiaries, where such enterprise's revenues from any
competitive activities amount to 10% or more of such enterprise's consolidated
net revenues and sales for its most recently completed fiscal year; provided,
however, that owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such competitor
shall not be a "Competitive Activity".
(i) Covered Termination. The term "Covered Termination"
means any termination of the Executive's employment during the Employment
Period where the Termination Date or the date Notice of Termination is
delivered is any date on or prior to the end of the Employment Period.
(j) Effective Date. The term "Effective Date" shall mean
the first date on which a Change in Control occurs. Anything in this Agreement
to the contrary notwithstanding, if (i) a Change in Control occurs, (ii) the
Executive's employment with the Employer terminates (whether by the Company,
the Executive or otherwise) within 180 days prior to the Change in Control and
(iii) it is reasonably demonstrated by the Executive that (A) any such
termination of employment by the Employer (1) was at the request of a third
party who has taken steps reasonably calculated to effect a Change in Control
or (2) otherwise arose in connection with or in anticipation of a Change in
Control, or (B) any such termination of employment by the Executive took place
subsequent to the occurrence of an event described in clause (ii), (iii), (iv)
or (v) of the definition of "Good Reason" which event (1) occurred at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or in anticipation
of a Change in Control, then for all purposes of this Agreement the term
"Effective Date" shall mean the day immediately prior to the date of such
termination of employment.
(k) Employer. The term "Employer" means the Company
and/or any subsidiary of the Company that employed the Executive immediately
prior to the Effective Date.
(l) Good Reason. The Executive shall have a "Good
Reason" for termination of employment on or after the Effective Date if the
Executive determines in good faith that any of the following events has
occurred:
(i) any breach of this Agreement by the Company,
including specifically any breach by the Company of its agreements
contained in Section 4, Section 5 or Section 6, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith that the Company remedies promptly after receipt of notice
thereof given by the Executive;
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(ii) any reduction in the Executive's base salary,
percentage of base salary available as incentive compensation or bonus
opportunity or benefits, in each case relative to those most favorable
to the Executive in effect at any time during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date;
(iii) a material adverse change, without the
Executive's prior written consent, in the Executive's working
conditions or status with the Company or the Employer from such
working conditions or status in effect during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date, including but not
limited to (A) a material change in the nature or scope of the
Executive's titles, authority, powers, functions, duties, reporting
requirements or responsibilities, or (B) a material reduction in the
level of support services, staff, secretarial and other assistance,
office space and accoutrements, but excluding for this purpose an
isolated, insubstantial and inadvertent event not occurring in bad
faith that the Company remedies promptly after receipt of notice
thereof given by the Executive;
(iv) the relocation of the Executive's principal
place of employment to a location more than 35 miles from the
Executive's principal place of employment on the date 180 days prior
to the Effective Date;
(v) the Employer requires the Executive to travel
on Employer business to a materially greater extent than was required
during the 180-day period prior to the Effective Date;
(vi) failure by the Company to obtain the
agreement referred to in Section 16(a) as provided therein; or
(vii) the Company or the Employer terminates the
Executive's employment after a Change in Control without delivering a
Notice of Termination in accordance with Section 12;
provided that (A) any such event occurs following the Effective Date or (B) in
the case of any event described in clauses (ii), (iii), (iv) or (v) above, such
event occurs on or prior to the Effective Date under circumstances described in
clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective Date." In
the event of a dispute regarding whether the Executive terminated the
Executive's employment for "Good Reason" in accordance with this Agreement, no
claim by the Company that such termination does not constitute a Covered
Termination shall be given effect unless the Company establishes by clear and
convincing evidence that such termination does not constitute a Covered
Termination. Any election by the Executive to terminate the Executive's
employment for Good Reason shall not be deemed a voluntary termination of
employment by the Executive for purposes of any other employee benefit or other
plan.
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<PAGE> 21
(m) Normal Retirement Date. The term "Normal Retirement
Date" means the date the Executive reaches age 65.
(n) Notice of Termination. The term "Notice of
Termination" means a written notice as contemplated by Section 12.
(o) Person. The term "Person" shall have the meaning
given in Section 3(a)(9) of the Act, as modified and used in Sections 13(d) and
14(d) thereof.
(p) Termination Date. Except as otherwise provided in
Section 9(b) and Section 16(a), the term "Termination Date" means (i) if the
Executive's employment is terminated by the Executive's death, the date of
death; (ii) if the Executive's employment is terminated by reason of voluntary
early retirement, as agreed in writing by the Company and the Executive, the
date of such early retirement that is set forth in such written agreement;
(iii) if the Executive's employment is terminated for purposes of this
Agreement by reason of disability pursuant to Section 11, thirty days after the
Notice of Termination is given; (iv) if the Executive's employment is
terminated by the Executive voluntarily (other than for Good Reason), the date
the Notice of Termination is given; and (v) if the Executive's employment is
terminated by the Company (other than by reason of disability pursuant to
Section 11) or by the Executive for Good Reason, thirty days after the Notice
of Termination is given. Notwithstanding the foregoing,
(A) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Company notifies the Executive that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof, then the Executive may elect to continue the
Executive's employment during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that the Executive terminated the Executive's employment
for Good Reason in accordance with this Agreement, then the Termination Date
shall be the earlier of (1) the date on which the dispute is finally
determined, either (x) by mutual written agreement of the parties or (y) in
accordance with Section 21 or (2) the date of the Executive's death. If the
Executive so elects and it is thereafter determined that the Executive did not
terminate the Executive's employment for Good Reason in accordance with this
Agreement, then the employment of the Executive hereunder shall continue after
such determination as if the Executive had not delivered the Notice of
Termination asserting Good Reason and there shall be no Termination Date
arising out of such Notice. In either case, this Agreement continues, until
the Termination Date, if any, as if the Executive had not delivered the Notice
of Termination except that, if it is finally determined that the Executive
terminated the Executive's employment for Good Reason in accordance with this
Agreement, then the Executive shall in no case be denied the benefits described
in Section 8 (including a Termination Payment) based on events occurring after
the Executive delivered the Executive's Notice of Termination.
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<PAGE> 22
(B) If an opinion is required to be delivered pursuant to
Section 8(a)(ii) and such opinion shall not have been delivered, then the
Termination Date shall be the date on which such opinion is delivered.
(C) Except as provided in paragraph (A) above, if the
party receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof and it is finally determined that termination of the
Executive's employment for the reason asserted in such Notice of Termination
was not in accordance with this Agreement, then (1) if such Notice was
delivered by the Executive, then the Executive will be deemed to have
voluntarily terminated the Executive's employment other than for Good Reason by
means of such Notice and (2) if delivered by the Company, then the Company will
be deemed to have terminated the Executive's employment other than by reason of
death, disability or Cause by means of such Notice.
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<PAGE> 1
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 15th day of
April, 1998, by and between Hein-Werner Corporation, a Wisconsin corporation
(hereinafter referred to as the "Company"), and Jeffrey V. Russell (hereinafter
referred to as the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is currently employed by the Company in
a key capacity, and the Executive's services are valuable to the conduct of the
business of the Company;
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that circumstances may arise in which a change in control of the
Company occurs, through acquisition or otherwise, thereby causing uncertainty
about the Executive's future employment with the Company without regard to the
Executive's competence or past contributions, which uncertainty may result in
the loss of valuable services of the Executive to the detriment of the Company
and its shareholders, and the Company and the Executive wish to provide
reasonable security to the Executive against changes in the Executive's
relationship with the Company in the event of any such change in control;
WHEREAS, the Company and the Executive desire that any
proposal for a change in control or acquisition of the Company will be
considered by the Executive objectively and with reference only to the best
interests of the Company and its shareholders; and
WHEREAS, the Executive will be in a better position to
consider the Company's best interests if the Executive is afforded reasonable
security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisition.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
<PAGE> 2
1. Definitions. The following terms are used in this
Agreement as defined in Exhibit A:
Act Covered Termination
Accrued Benefits Effective Date
Affiliate and Associate Employer
Annual Cash Compensation Good Reason
Cause Normal Retirement Date
Change in Control Notice of Termination
Code Person
Competitive Activity Termination Date
2. Termination or Cancellation Prior to the Effective
Date. The Employer and the Executive shall each retain the right to terminate
the employment of the Executive at any time prior to the Effective Date. If
the Executive's employment is terminated prior to the Effective Date, then this
Agreement shall be terminated and cancelled and of no further force or effect
and any and all rights and obligations of the parties hereunder shall cease.
In addition, this Agreement shall terminate upon the Executive ceasing to be an
employee of the Employer prior to a Change in Control unless the Executive can
reasonably demonstrate that such change in status occurred under circumstances
described in clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective
Date" in Exhibit A.
3. Employment Period. If the Executive is employed by
the Employer on the Effective Date, then the Company will, or will cause the
Employer to, continue thereafter to employ the Executive during the Employment
Period (as hereinafter defined), and the Executive will remain in the employ of
the Employer, in accordance with and subject to the terms and provisions of
this Agreement. For purposes of this Agreement, the term "Employment Period"
means a period (i) commencing on the Effective Date, and (ii) ending at 11:59
p.m. Milwaukee Time on the earlier of the first anniversary of such date or the
Executive's Normal Retirement Date.
4. Duties. During the Employment Period, the Executive
shall, in the most significant capacities and positions held by the Executive
at any time during the 180-day period preceding the Effective Date or in such
other capacities and positions as may be agreed to by the Company and the
Executive in writing, devote the Executive's best efforts and all of the
Executive's business time, attention and skill to the business and affairs of
the Employer, as such business and affairs now exist and as they may hereafter
be conducted.
5. Compensation. During the Employment Period, the
Executive shall be compensated as follows:
(a) The Executive shall receive, at reasonable intervals
(but not less often than monthly) and in accordance with such standard policies
as may be in effect immediately prior to the Effective Date, an annual base
salary in cash equivalent of not less than twelve times the
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<PAGE> 3
Executive's highest monthly base salary (which shall include any amounts
credited to the Executive for the purchase of annuity contracts and related tax
offset bonuses) for the twelve-month period immediately preceding the month in
which the Effective Date occurs or, if higher, an annual base salary at the
rate in effect immediately prior to the Effective Date (which base salary
shall, unless otherwise agreed in writing by the Executive, include the current
receipt by the Executive of any amounts which, prior to the Effective Date, the
Executive had elected to defer, whether such compensation is deferred under
Section 401(k) of the Code or otherwise), subject to upward adjustment as
provided in Section 6 (such salary amount as adjusted upward from time to time
is hereafter referred to as the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least
equal in value to those provided for the Executive at any time during the
180-day period immediately preceding the Effective Date or, if more favorable
to the Executive, those provided generally at any time after the Effective Date
to any executives of the Company and its Affiliates of comparable status and
position to the Executive. The Executive shall be reimbursed, at such
intervals and in accordance with such standard policies that are most favorable
to the Executive that were in effect at any time during the 180-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to any
executives of the Company and its Affiliates of comparable status and position
to the Executive, for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Company and its Affiliates, including travel
expenses.
(c) The Executive and/or the Executive's family, as the
case may be, shall be included, to the extent eligible thereunder (which
eligibility shall not be conditioned on the Executive's salary grade or on any
other requirement that excludes executives of the Company and its Affiliates of
comparable status and position to the Executive unless such exclusion was in
effect for such plan or an equivalent plan on the date 180 days prior to the
Effective Date), in any and all welfare benefit plans, practices, policies and
programs providing benefits for the Company's salaried employees in general or,
if more favorable to the Executive, to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to group life insurance, hospitalization, medical and dental plans;
provided, that, (i) in no event shall the aggregate level of benefits under
such plans, practices, policies and programs in which the Executive is included
be less than the aggregate level of benefits under plans, practices, policies
and programs of the type referred to in this Section 5(c) in which the
Executive was participating at any time during the 180-day period immediately
preceding the Effective Date and (ii) in no event shall the aggregate level of
benefits under such plans, practices, policies and programs be less than the
aggregate level of benefits under plans, practices, policies and programs of
the type referred to in this Section 5(c) provided at any time after the
Effective Date to any executive of the Company and its Affiliates of comparable
status and position to the Executive.
(d) The Executive shall annually be entitled to not less
than the amount of paid vacation and not fewer than the number of paid holidays
to which the Executive was entitled
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<PAGE> 4
annually at any time during the 180-day period immediately preceding the
Effective Date or such greater amount of paid vacation and number of paid
holidays as may be made available annually to the Executive or any other
executive of the Company and its Affiliates of comparable status and position
to the Executive at any time after the Effective Date.
(e) The Executive shall be included in all plans
providing additional benefits to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to deferred compensation, split-dollar life insurance, retirement,
supplemental retirement, stock option, stock appreciation, stock bonus and
similar or comparable plans; provided, that, (i) in no event shall the
aggregate level of benefits under such plans be less than the aggregate level
of benefits under plans of the type referred to in this Section 5(e) in which
the Executive was participating at any time during the 180-day period
immediately preceding the Effective Date; (ii) in no event shall the aggregate
level of benefits under such plans be less than the aggregate level of benefits
under plans of the type referred to in this Section 5(e) provided at any time
after the Effective Date to any executive of the Company and its Affiliates of
comparable status and position to the Executive; and (iii) the Company's
obligation to include the Executive in bonus or incentive compensation plans
shall be determined by Section 5(f).
(f) To assure that the Executive will have an opportunity
to earn incentive compensation after the Effective Date, the Executive shall be
included in a bonus plan of the Company that shall satisfy the standards
described below (the "Bonus Plan"). Bonuses under the Bonus Plan shall be
payable with respect to achieving such financial or other goals reasonably
related to the business of the Company as the Company shall establish (the
"Goals"), all of which Goals shall be attainable, prior to the end of the
Employment Period, with approximately the same degree of probability as the
goals under the Employer's annual incentive plan currently in effect, or the
successor to such plan, in the form most favorable to the Executive that was in
effect at any time during the 180-day period prior to the Effective Date (the
"Existing Plan") and in view of the Company's existing and projected financial
and business circumstances applicable at the time. The amount of the bonus
(the "Bonus Amount") that the Executive is eligible to earn under the Bonus
Plan shall be no less than the amount of the Executive's highest maximum
potential award under the Existing Plan at any time during the 180-day period
prior to the Effective Date or, if higher, any maximum potential award under
the Bonus Plan or any other bonus or incentive compensation plan in effect
after the Effective Date for the Executive or for any executive of the Company
and its Affiliates of comparable status and position to the Executive (such
bonus amount herein referred to as the "Targeted Bonus"), and if the Goals are
not achieved (and, therefore, the entire Targeted Bonus is not payable), then
the Bonus Plan shall provide for a payment of a Bonus Amount not less than a
portion of the Targeted Bonus reasonably related to that portion of the Goals
that were achieved. Payment of the Bonus Amount (i) shall be in cash, unless
otherwise agreed by the Executive, and (ii) shall not be affected by any
circumstance occurring subsequent to the end of the Employment Period,
including termination of the Executive's employment.
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6. Annual Compensation Adjustments. During the
Employment Period, the Board of Directors of the Company (or an appropriate
committee thereof) will consider and appraise, at least annually, the
contributions of the Executive to the Employer, and in accordance with the
Company's practice prior to the Effective Date, due consideration shall be
given, at least annually, to the upward adjustment of the Executive's Annual
Base Salary (i) commensurate with increases generally given to other executives
of the Company and its Affiliates of comparable status and position to the
Executive, and (ii) as the scope of the Company's operations or the Executive's
duties expand.
7. Termination During Employment Period.
(a) Right to Terminate. During the Employment Period,
(i) the Company shall be entitled to terminate the Executive's employment (A)
for Cause, (B) by reason of the Executive's disability pursuant to Section 11,
or (C) for any other reason, and (ii) the Executive shall be entitled to
terminate the Executive's employment for any reason. Any such termination
shall be subject to the procedures set forth in Section 12 and shall be subject
to any consequences of such termination set forth in this Agreement. Any
termination of the Executive's employment during the Employment Period by the
Employer shall be deemed a termination by the Company for purposes of this
Agreement.
(b) Termination for Cause or Without Good Reason. If
there is a Covered Termination for Cause or due to the Executive's voluntarily
terminating the Executive's employment other than for Good Reason, then the
Executive shall be entitled to receive only Accrued Benefits.
(c) Termination Giving Rise to a Termination Payment. If
there is a Covered Termination by the Executive for Good Reason, or by the
Company other than by reason of (i) death, (ii) disability pursuant to Section
11, or (iii) Cause, then the Executive shall be entitled to receive, and the
Company shall promptly pay, Accrued Benefits and, in lieu of further base
salary for periods following the Termination Date, as liquidated damages and
additional severance pay and in consideration of the covenant of the Executive
set forth in Section 13(a), the Termination Payment pursuant to Section 8(a).
8. Payments Upon Termination.
(a) Termination Payment. (i) Subject to the limits set
forth in Section 8(a)(ii), for purposes of this Agreement, the
"Termination Payment" shall be an amount equal to the Annual Cash
Compensation multiplied by the number of years or fractional portion
thereof remaining in the Employment Period determined as of the
Termination Date, except that the Termination Payment shall not be
less than the amount of Annual Cash Compensation. The Termination
Payment shall be paid to the Executive in cash equivalent not later
than ten business days after the Termination Date. The Executive
shall not be required to mitigate the amount of the Termination
Payment by securing other employment or otherwise, nor will such
Termination Payment be reduced
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<PAGE> 6
by reason of the Executive securing other employment or for any other
reason. The Termination Payment shall be in addition to any other
severance payments to which the Executive is entitled under the
Company's severance policies and practices in the form most favorable
to the Executive that were in effect at any time during the 180-day
period prior to the Effective Date.
(ii) Notwithstanding any other provision of this
Agreement, if any portion of the Termination Payment or any other
payment under this Agreement, or under any other agreement with or
plan of the Company or the Employer (in the aggregate "Total
Payments"), would constitute an "excess parachute payment," then the
Total Payments to be made to the Executive shall be reduced such that
the value of the aggregate Total Payments that the Executive is
entitled to receive shall be One Dollar ($1) less than the maximum
amount which the Executive may receive without becoming subject to the
tax imposed by Section 4999 of the Code (or any successor provision)
or which the Company may pay without loss of deduction under Section
280G(a) of the Code (or any successor provision). For purposes of
this Agreement, the terms "excess parachute payment" and "parachute
payments" shall have the meanings assigned to them in Section 280G of
the Code (or any successor provision), and such "parachute payments"
shall be valued as provided therein. Present value for purposes of
this Agreement shall be calculated in accordance with Section
1274(b)(2) of the Code (or any successor provision). Within sixty
days following delivery of the Notice of Termination or notice by the
Company to the Executive of its belief that there is a payment or
benefit due the Executive which will result in an excess parachute
payment as defined in Section 280G of the Code (or any successor
provision), the Executive and the Company, at the Company's expense,
shall obtain the opinion (which need not be unqualified) of nationally
recognized tax counsel selected by the Company's independent auditors
and acceptable to the Executive in the Executive's sole discretion,
which sets forth (A) the amount of the Base Period Income, (B) the
amount and present value of Total Payments and (C) the amount and
present value of any excess parachute payments without regard to the
limitations of this Section 8(a)(ii). As used in this Section
8(a)(ii), the term "Base Period Income" means an amount equal to the
Executive's "annualized includible compensation for the base period"
as defined in Section 280G(d)(1) of the Code (or any successor
provision). For purposes of such opinion, the value of any noncash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code (or any successor provisions),
which determination shall be evidenced in a certificate of such
auditors addressed to the Company and the Executive. Such opinion
shall be dated as of the Termination Date and addressed to the Company
and the Executive and shall be binding upon the Company and the
Executive. If such opinion determines that there would be an excess
parachute payment, then the Termination Payment hereunder or any other
payment determined by such counsel to be includible in Total Payments
shall be reduced or eliminated as specified by the Executive in
writing delivered to the Company within thirty days of the Executive's
receipt of such opinion or, if the Executive fails to so notify the
Company, then as the Company shall reasonably determine, so that under
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the bases of calculations set forth in such opinion there will be no
excess parachute payment. If such legal counsel so requests in
connection with the opinion required by this Section, the Executive
and the Company shall obtain, at the Company's expense, and the legal
counsel may rely on in providing the opinion, the advice of a firm of
recognized executive compensation consultants as to the reasonableness
of any item of compensation to be received by the Executive.
Notwithstanding the foregoing, the provisions of this Section
8(a)(ii), including the calculations, notices and opinions provided
for herein, shall be based upon the conclusive presumption that the
following are reasonable: (1) the compensation and benefits provided
for in Section 5 and (2) any other compensation, including but not
limited to the Accrued Benefits, earned prior to the Termination Date
by the Executive pursuant to the Company's compensation programs if
such payments would have been made in the future in any event, even
though the timing of such payment is triggered by the Change in
Control or the Termination Date. If the provisions of Sections 280G
and 4999 of the Code (or any successor provisions) are repealed
without succession, then this Section 8(a)(ii) shall be of no further
force or effect.
(b) Additional Benefits. If there is a Covered
Termination and the Executive is entitled to Accrued Benefits and the
Termination Payment, then the Executive shall be entitled to the following
additional benefits:
(i) Until the earlier of the end of the
Employment Period or such time as the Executive has obtained new
employment and is covered by benefits which in the aggregate are at
least equal in value to the following benefits, the Executive shall
continue to be covered, at the expense of the Company, by the most
favorable life insurance, hospitalization, medical and dental coverage
and other welfare benefits provided to the Executive and the
Executive's family during the 180-day period immediately preceding the
Effective Date or at any time thereafter or, if more favorable to the
Executive, coverage as was required hereunder with respect to the
Executive immediately prior to the date Notice of Termination is
given.
(ii) The Executive shall receive, at the expense
of the Company, outplacement services, on an individualized basis at a
level of service commensurate with the Executive's most senior status
with the Company during the 180-day period prior to the Effective Date
(or, if higher, at any time after the Effective Date), provided by a
nationally recognized executive placement firm selected by the Company
with the consent of the Executive, which consent will not be
unreasonably withheld; provided that the cost to the Company of such
services shall not exceed 15% of the Executive's Annual Base Salary.
(iii) The Company shall bear up to $10,000 in the
aggregate of fees and expenses of consultants and/or legal or
accounting advisors engaged by the Executive to advise the Executive
as to matters relating to the computation of benefits due and payable
under this Section 8.
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<PAGE> 8
9. Death. (a) Except as provided in Section 9(b), in
the event of a Covered Termination due to the Executive's death, the
Executive's estate, heirs and beneficiaries shall receive all the Executive's
Accrued Benefits through the Termination Date.
(b) If the Executive dies after a Notice of Termination
is given (i) by the Company or (ii) by the Executive for Good Reason, then the
Executive's estate, heirs and beneficiaries shall be entitled to the benefits
described in Section 9(a) and, subject to the provisions of this Agreement, to
such Termination Payment to which the Executive would have been entitled had
the Executive lived. In such event, the Termination Date shall be thirty days
following the giving of the Notice of Termination, subject to extension
pursuant to the definition of "Termination Date" in Exhibit A.
10. Retirement. If, during the Employment Period, the
Executive and the Employer shall execute an agreement providing for the early
retirement of the Executive from the Employer, or the Executive shall otherwise
give notice that the Executive is voluntarily choosing to retire early from the
Employer, then the Executive shall receive Accrued Benefits through the
Termination Date; provided, that if the Executive's employment is terminated by
the Executive for Good Reason or by the Company other than by reason of death,
disability or Cause and the Executive also, in connection with such
termination, elects voluntary early retirement, then the Executive shall also
be entitled to receive a Termination Payment pursuant to Section 8(a).
11. Termination for Disability. If, during the
Employment Period, as a result of the Executive's disability due to physical or
mental illness or injury (regardless of whether such illness or injury is
job-related), the Executive shall have been absent from the Executive's duties
hereunder on a full-time basis for a period of 182 days and, within thirty days
after the Company notifies the Executive in writing that it intends to
terminate the Executive's employment (which notice shall not constitute the
Notice of Termination contemplated below), the Executive shall not have
returned to the performance of the Executive's duties hereunder on a full-time
basis, then the Company may terminate the Executive's employment for purposes
of this Agreement pursuant to a Notice of Termination. If the Executive's
employment is terminated on account of the Executive's disability in accordance
with this Section, then the Executive shall receive Accrued Benefits in
accordance with Section 8(a) and shall remain eligible for all benefits
provided by any long term disability programs of the Employer in effect at the
time the Company sends notice to the Executive of its intent to terminate
pursuant to this Section.
12. Termination Notice and Procedure. (a) Any
termination of the Executive's employment during the Employment Period by the
Company or the Executive (other than a termination of the Executive's
employment referenced in the second sentence of the definition of "Effective
Date" in Exhibit A) shall be communicated by written Notice of Termination to
the Executive, if such Notice is given by the Company, and to the Company, if
such Notice is given by the Executive, all in accordance with the following
procedures and those set forth in Section 22:
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<PAGE> 9
(i) If such termination is for disability, Cause or Good
Reason, the Notice of Termination shall indicate in reasonable detail the facts
and circumstances alleged to provide a basis for such termination.
(ii) Any Notice of Termination by the Company shall have
been approved, prior to the giving thereof to the Executive, by a resolution
duly adopted by a majority of the directors of the Company (or any successor
corporation) then in office, a copy of which shall accompany the Notice.
(iii) If the Notice is given by the Executive for Good
Reason, then the Executive may cease performing the Executive's duties
hereunder on or after the date 15 days after the delivery of Notice of
Termination (unless the Notice of Termination is based upon clause (vii) of the
definition of "Good Reason" in Exhibit A, in which case the Executive may cease
performing his duties at the time the Executive's employment is terminated) and
shall in any event cease employment on the Termination Date, if any, arising
from the delivery of such Notice. If the Notice is given by the Company, then
the Executive may cease performing the Executive's duties hereunder on the date
of receipt of the Notice of Termination, subject to the Executive's rights
hereunder.
(iv) The recipient of any Notice of Termination shall
personally deliver or mail in accordance with Section 22 written notice of any
dispute relating to such Notice of Termination to the party giving such Notice
within fifteen days after receipt thereof. After the expiration of such fifteen
days, the contents of the Notice of Termination shall become final and not
subject to dispute.
Notwithstanding the foregoing, (A) if the Executive terminates the Executive's
employment after a Change in Control without complying with this Section 12,
then the Executive will be deemed to have voluntarily terminated the
Executive's employment other than for Good Reason and deemed to have delivered
a written Notice of Termination to that effect to the Company as of the date of
such termination and (B) if the Company terminates the Executive's employment
after a Change in Control without complying with this Section 12, then the
Company will be deemed to have terminated the Executive's employment other than
by reason of death, disability or Cause and the Company will be deemed to have
delivered a written Notice of Termination to that effect to the Executive as of
the date of such termination. Under circumstances described in clause (B)
above, the Executive may, but shall not be obligated to, also deliver a Notice
of Termination based upon clause (vii) of the definition of "Good Reason" in
Exhibit A for the purpose of subjecting such Notice to Section 12(a)(iv).
(b) If a Change in Control occurs and the Executive's
employment with the Employer terminates (whether by the Company, the Executive
or otherwise) within 180 days prior to the Change in Control, then the
Executive may assert that such termination is a Covered Termination by sending
a written Notice of Termination to the Company at any time prior to the first
anniversary of the Change in Control in accordance with the procedures set
forth in this Section 12(b) and those set forth in Section 22. If the
Executive asserts that the Executive
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<PAGE> 10
terminated the Executive's employment for Good Reason or that the Company
terminated the Executive's employment other than for disability or Cause, then
the Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such assertions. The Company
shall personally deliver or mail in accordance with Section 22 written notice
of any dispute relating to such Notice of Termination to the Executive within
fifteen days after receipt thereof. After the expiration of such fifteen days,
the contents of the Notice of Termination shall become final and not subject to
dispute.
13. Further Obligations of the Executive.
(a) Competition. The Executive agrees that, in the event
of any Covered Termination where the Executive is entitled to (and receives)
Accrued Benefits and the Termination Payment, the Executive shall not, for a
period of three months after the Termination Date, without the prior written
approval of the Company's Board of Directors, engage in any Competitive
Activity.
(b) Confidentiality. During and following the
Executive's employment by the Employer, the Executive shall hold in confidence
and not directly or indirectly disclose or use or copy or make lists of any
confidential information or proprietary data of the Company (including that of
the Employer), except to the extent authorized in writing by the Board of
Directors of the Company or required by any court or administrative agency,
other than to an employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Executive of duties as an executive of the Company or the Employer.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential
by persons engaged in the same business or a business similar to that of the
Company. All records, files, documents and materials, or copies thereof,
relating to the business of the Company which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Company and shall be promptly returned to the Company upon termination of
employment with the Employer.
14. Expenses and Interest. If, after the Effective Date,
(i) a dispute arises with respect to the enforcement of the Executive's rights
under this Agreement, (ii) any legal or arbitration proceeding shall be brought
to enforce or interpret any provision contained herein or to recover damages
for breach hereof, or (iii) any tax audit or proceeding is commenced that is
attributable in part to the application of Section 4999 of the Code, in any
case so long as the Executive is not acting in bad faith, then the Company
shall reimburse the Executive for any reasonable attorneys' fees and necessary
costs and disbursements incurred as a result of such dispute, legal or
arbitration proceeding or tax audit or proceeding ("Expenses"), and prejudgment
interest on any money judgment or arbitration award obtained by the Executive
calculated at the rate of interest announced by Firstar Bank Milwaukee, N.A.,
Milwaukee, Wisconsin, from time to time as its prime or base lending rate from
the date that payments to the Executive should have been made under this
Agreement. Within ten days after the Executive's written request therefor, the
Company shall pay to the Executive, or such other
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<PAGE> 11
person or entity as the Executive may designate in writing to the Company, the
Executive's reasonable Expenses in advance of the final disposition or
conclusion of any such dispute, legal or arbitration proceeding.
15. Payment Obligations Absolute. The Company's
obligation during and after the Employment Period to pay the Executive the
amounts and to make the benefit and other arrangements provided herein shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim, recoupment, defense or
other right which the Company may have against the Executive or anyone else.
Except as provided in Section 14, all amounts payable by the Company hereunder
shall be paid without notice or demand. Each and every payment made hereunder
by the Company shall be final, and the Company will not seek to recover all or
any part of such payment from the Executive, or from whomsoever may be entitled
thereto, for any reason whatsoever.
16. Successors. (a) If the Company sells, assigns or
transfers all or substantially all of its business and assets to any Person or
if the Company merges into or consolidates or otherwise combines (where the
Company does not survive such combination) with any Person (any such event, a
"Sale of Business"), then the Company shall assign all of its right, title and
interest in this Agreement as of the date of such event to such Person, and the
Company shall cause such Person, by written agreement in form and substance
reasonably satisfactory to the Executive, to expressly assume and agree to
perform from and after the date of such assignment all of the terms, conditions
and provisions imposed by this Agreement upon the Company. Failure of the
Company to obtain such agreement prior to the effective date of such Sale of
Business shall be a breach of this Agreement constituting "Good Reason"
hereunder, except that for purposes of implementing the foregoing, the date
upon which such Sale of Business becomes effective shall be deemed the
Termination Date. In case of such assignment by the Company and of assumption
and agreement by such Person, as used in this Agreement, "Company" shall
thereafter mean such Person which executes and delivers the agreement provided
for in this Section 16 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, and this Agreement shall
inure to the benefit of, and be enforceable by, such Person. The Executive
shall, in the Executive's discretion, be entitled to proceed against any or all
of such Persons, any Person which theretofore was such a successor to the
Company (as defined in the first paragraph of this Agreement) and the Company
(as so defined) in any action to enforce any rights of the Executive hereunder.
Except as provided in this Subsection, this Agreement shall not be assignable
by the Company. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.
(b) This Agreement and all rights of the Executive shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All
amounts payable to the Executive under Sections 7, 8, 9, 10, 11 and 14 if the
Executive had lived shall be paid, in the event of the Executive's death, to
the Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Employer, as such terms
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<PAGE> 12
are in effect on the Effective Date, that expressly govern benefits under such
plan in the event of the Executive's death.
17. Severability. The provisions of this Agreement shall
be regarded as divisible, and if any of said provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, then
the validity and enforceability of the remainder of such provisions or parts
hereof and the applicability thereof shall not be affected thereby.
18. Amendment. This Agreement may not be amended or
modified at any time except by written instrument executed by the Company and
the Executive.
19. Withholding. The Employer shall be entitled to
withhold from amounts to be paid to the Executive hereunder any federal, state
or local withholding or other taxes or charges which it is from time to time
required to withhold; provided, that the amount so withheld shall not exceed
the minimum amount required to be withheld by law. The Employer shall be
entitled to rely on an opinion of nationally recognized tax counsel if any
question as to the amount or requirement of any such withholding shall arise.
20. Certain Rules of Construction. No party shall be
considered as being responsible for the drafting of this Agreement for the
purpose of applying any rule construing ambiguities against the drafter or
otherwise. No draft of this Agreement shall be taken into account in
construing this Agreement. Any provision of this Agreement which requires an
agreement in writing shall be deemed to require that the writing in question be
signed by the Executive and an authorized representative of the Company.
21. Governing Law; Resolution of Disputes. (a) This
Agreement and the rights and obligations hereunder shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin
(excluding any choice of law rules that may direct the application of the laws
of another jurisdiction) except that Section 21(b) shall be construed in
accordance with the Federal Arbitration Act if arbitration is chosen by the
Executive as the method of dispute resolution.
(b) Any dispute arising out of this Agreement shall, at
the Executive's election, be determined by arbitration under the rules of the
American Arbitration Association then in effect (but subject to any evidentiary
standards set forth in this Agreement), in which case both parties shall be
bound by the arbitration award, or by litigation. Whether the dispute is to be
settled by arbitration or litigation, the venue for the arbitration or
litigation shall be Milwaukee, Wisconsin or, at the Executive's election, if
the Executive is no longer residing or working in the Milwaukee, Wisconsin
metropolitan area, in the judicial district encompassing the city in which the
Executive resides; provided, that, if the Executive is not then residing in the
United States, the election of the Executive with respect to such venue shall
be either Milwaukee, Wisconsin or in the judicial district encompassing that
city in the United States among the thirty cities having the largest population
(as determined by the most recent United States Census data available at the
Termination Date) that is closest to the Executive's residence.
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The parties consent to personal jurisdiction in each trial court in the
selected venue having subject matter jurisdiction notwithstanding their
residence or situs, and each party irrevocably consents to service of process
in the manner provided hereunder for the giving of notices.
22. Notice. Notices given pursuant to this Agreement
shall be in writing and, except as otherwise provided by Section 12(a)(iii),
shall be deemed given when actually received by the Executive or actually
received by the Company's Secretary or any officer of the Company other than
the Executive. If mailed, such notices shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid, if to the Company, to Hein-Werner Corporation, Attention: Secretary
(or, if the Executive is then Secretary, to the Chief Executive Officer), 2120
Pewaukee Road, Waukesha, Wisconsin 53188, or if to the Executive, at the
address set forth below the Executive's signature to this Agreement, or to such
other address as the party to be notified shall have theretofore given to the
other party in writing.
23. Additional Payment. (a) If, notwithstanding the
provisions of Section 8(a)(ii), but subject to subsection (b), it is ultimately
determined by a court or pursuant to a final determination by the Internal
Revenue Service that any portion of Total Payments is subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (or any successor provision),
then the Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive after deduction of
any Excise Tax and any interest charges or penalties in respect of the
imposition of such Excise Tax (but not any federal, state or local income tax)
on the Total Payments, and any federal, state and local income tax and Excise
Tax upon the payment provided for by this Section 23 shall be equal to the
Total Payments. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of the Executive's
domicile for income tax purposes on the date the Gross-Up Payment is made, net
of the maximum reduction in federal income taxes that could be obtained from
deduction of such state and local taxes.
(b) If legislation is enacted that would require the
Company's shareholders to approve this Agreement, prior to a Change in Control,
due solely to the provision contained in subsection (a) of this Section 23,
then
(i) from and after such time as shareholder approval
would be required, until shareholder approval is obtained as required
by such legislation, subsection (a) shall be of no force and effect;
(ii) if the Company seeks shareholder approval of any
other agreement providing similar benefits to any other executive of
the Company, then the Company shall seek shareholder approval of this
Agreement at the same shareholders' meeting or meetings at which the
shareholders consider any such other agreement; and
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(iii) the Company and the Executive shall use their best
efforts to consider and agree in writing upon an amendment to this
Section 23 such that, as amended, this Subsection would provide the
Executive with the benefits intended to be afforded to the Executive
by subsection (a) without requiring shareholder approval.
24. No Waiver. The Executive's or the Company's failure
to insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
25. Headings. The headings herein contained are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
HEIN-WERNER CORPORATION
By: /s/ J. L. Dindorf
-------------------------------------
J. L. Dindorf
President and Chief Executive Officer
Attest: /s/ M. J. McSweeney
---------------------------------
M. J. McSweeney
Secretary
EXECUTIVE
/s/ Jeffrey V. Russell
-----------------------------------------
Jeffrey V. Russell
109 S. Oakshire Drive
Oconomowoc, Wisconsin 53066
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<PAGE> 15
Exhibit A
CERTAIN DEFINED TERMS
For purposes of this Agreement,
(a) Act. The term "Act" means the Securities Exchange
Act of 1934, as amended.
(b) Accrued Benefits. The term "Accrued Benefits" shall
include the following amounts, payable as described herein: (i) all base
salary for the time period ending with the Termination Date; (ii) reimbursement
for any and all monies advanced in connection with the Executive's employment
for reasonable and necessary expenses incurred by the Executive on behalf of
the Company and its Affiliates for the time period ending with the Termination
Date; (iii) any and all other cash earned through the Termination Date and
deferred at the election of the Executive or pursuant to any deferred
compensation plan then in effect; (iv) notwithstanding any provision of any
bonus or incentive compensation plan applicable to the Executive, a lump sum
amount, in cash, equal to the sum of (A) any bonus or incentive compensation
that has been allocated or awarded to the Executive for a fiscal year or other
measuring period under the plan that ends prior to the Termination Date but has
not yet been paid (pursuant to Section 5(f) or otherwise) and (B) a pro rata
portion to the Termination Date of the aggregate value of all contingent bonus
or incentive compensation awards to the Executive for all uncompleted periods
under the plan calculated as to each such award as if the Goals with respect to
such bonus or incentive compensation award had been attained; and (v) all other
payments and benefits to which the Executive (or in the event of the
Executive's death, the Executive's surviving spouse or other beneficiary) may
be entitled as compensatory fringe benefits or under the terms of any benefit
plan of the Employer, including severance payments under the Employer's
severance policies and practices in the form most favorable to the Executive
that were in effect at any time during the 180-day period prior to the
Effective Date. Payment of Accrued Benefits shall be made promptly in
accordance with the Employer's prevailing practice with respect to clauses (i)
and (ii) or, with respect to clauses (iii), (iv) and (v), pursuant to the terms
of the benefit plan or practice establishing such benefits.
(c) Affiliate and Associate. The terms "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations of the Act.
(d) Annual Cash Compensation. The term "Annual Cash
Compensation" shall mean the sum of (A) the Executive's Annual Base Salary,
plus (B) the highest of (1) the highest annual bonus or incentive compensation
award earned by the Executive under any cash bonus or incentive compensation
plan of the Company or any of its Affiliates during the three complete fiscal
years of the Company immediately preceding the Termination Date or, if more
favorable to the Executive, during the three complete fiscal years of the
Company immediately preceding
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<PAGE> 16
the Effective Date; (2) the Executive's bonus or incentive compensation
Targeted Bonus for the fiscal year in which the Termination Date occurs; or (3)
the highest average annual bonus and/or incentive compensation earned during
the three complete fiscal years of the Company immediately preceding the
Termination Date (or, if more favorable to the Executive, during the three
complete fiscal years of the Company immediately preceding the Effective Date)
under any cash bonus or incentive compensation plan of the Company or any of
its Affiliates by the group of executives of the Company and its Affiliates
participating under such plan during such fiscal years at a status or position
comparable to that at which the Executive participated or would have
participated pursuant to the Executive's most senior position at any time
during the 180 days preceding the Effective Date or thereafter until the
Termination Date.
(e) Cause. The Company may terminate the Executive's
employment after the Effective Date for "Cause" only if the conditions set
forth in paragraphs (i) and (ii) have been met and the Company otherwise
complies with this Agreement:
(i) (A) the Executive has committed any act of
fraud, embezzlement or theft in connection with the Executive's duties
as an Executive or in the course of employment with the Company and/or
its subsidiaries; (B) the Executive has willfully and continually
failed to perform substantially the Executive's duties with the
Company or any of its Affiliates (other than any such failure
resulting from incapacity due to physical or mental illness or injury,
regardless of whether such illness or injury is job-related) for an
appropriate period, which shall not be less than 30 days, after the
Chief Executive Officer of the Company (or, if the Executive is then
Chief Executive Officer, the Board) has delivered a written demand for
performance to the Executive that specifically identifies the manner
in which the Chief Executive Officer (or the Board, as the case may
be) believes the Executive has not substantially performed the
Executive's duties; (C) the Executive has willfully engaged in illegal
conduct or gross misconduct that is materially and demonstrably
injurious to the Company; (D) the Executive has willfully and
wrongfully disclosed any trade secret or other confidential
information of the Company or any of its Affiliates; or (E) the
Executive has engaged in any Competitive Activity; and in any such
case the act or omission shall have been determined by the Board to
have been materially harmful to the Company and its subsidiaries taken
as a whole.
For purposes of this provision, (1) no act or failure
to act on the part of the Executive shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or
omission was in the best interests of the Company and (2) any act, or
failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company.
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<PAGE> 17
(ii) (A) The Company terminates the Executive's
employment by delivering a Notice of Termination to the Executive, (B)
prior to the time the Company has terminated the Executive's
employment pursuant to a Notice of Termination, the Board, by the
affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board, has adopted a resolution finding that the
Executive was guilty of conduct set forth in this definition of Cause,
and specifying the particulars thereof in detail, at a meeting of the
Board called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before
the Board) and (C) the Company delivers a copy of such resolution to
the Executive with the Notice of Termination at the time the
Executive's employment is terminated.
In the event of a dispute regarding whether the Executive's employment has been
terminated for Cause, no claim by the Company that the Company has terminated
the Executive's employment for Cause in accordance with this Agreement shall be
given effect unless the Company establishes by clear and convincing evidence
that the Company has complied with the requirements of this Agreement to
terminate the Executive's employment for Cause.
(f) Change in Control. A "Change in Control" shall be
deemed to have occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (other than (A) the Company or any
of its subsidiaries, (B) a trustee or other fiduciary holding
securities under any employee benefit plan of the Company or any of
its subsidiaries, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities or (D) a corporation owned,
directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock in the
Company ("Excluded Persons")) is or becomes the "Beneficial Owner" (as
such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its Affiliates after January 1, 1998
pursuant to express authorization by the Board that refers to this
exception) representing 25% or more of either the then outstanding
shares of common stock of the Company or the combined voting power of
the Company's then outstanding voting securities; or
(ii) the following individuals cease for any
reason to constitute a majority of the number of directors then
serving: individuals who, on January 1, 1998, constituted the Board
and any new director (other than a director whose initial assumption
of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating
to the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A under the Act) whose appointment or
election by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still
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<PAGE> 18
in office who either were directors on January 1, 1998 or whose
appointment, election or nomination for election was previously so
approved; or
(iii) the shareholders of the Company approve a
merger, consolidation or share exchange of the Company with any other
corporation or approve the issuance of voting securities of the
Company in connection with a merger, consolidation or share exchange
of the Company (or any direct or indirect subsidiary of the Company)
pursuant to applicable stock exchange requirements, other than (A) a
merger, consolidation or share exchange which would result in the
voting securities of the Company outstanding immediately prior to such
merger, consolidation or share exchange continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least 50%
of the combined voting power of the voting securities of the Company
or such surviving entity or any parent thereof outstanding immediately
after such merger, consolidation or share exchange, or (B) a merger,
consolidation or share exchange effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person (other than an Excluded Person) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates after
January 1, 1998 pursuant to express authorization by the Board that
refers to this exception) representing 25% or more of either the then
outstanding shares of common stock of the Company or the combined
voting power of the Company's then outstanding voting securities; or
(iv) the shareholders of the Company approve a
plan of complete liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (in one transaction or a
series of related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity at least 75% of
the combined voting power of the voting securities of which are owned
by Persons in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity that owns all or substantially all of the assets or voting securities
of the Company immediately following such transaction or series of
transactions.
(g) Code. The term "Code" means the Internal Revenue
Code of 1986, including any amendments thereto or successor tax codes thereof.
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(h) Competitive Activity. The Executive shall engage in
a "Competitive Activity" if the Executive participates in the management of, is
employed by or owns any interest in any business enterprise at a location
within the United States that engages in substantial competition with the
Company or its subsidiaries, where such enterprise's revenues from any
competitive activities amount to 10% or more of such enterprise's consolidated
net revenues and sales for its most recently completed fiscal year; provided,
however, that owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such competitor
shall not be a "Competitive Activity".
(i) Covered Termination. The term "Covered Termination"
means any termination of the Executive's employment during the Employment
Period where the Termination Date or the date Notice of Termination is
delivered is any date on or prior to the end of the Employment Period.
(j) Effective Date. The term "Effective Date" shall mean
the first date on which a Change in Control occurs. Anything in this Agreement
to the contrary notwithstanding, if (i) a Change in Control occurs, (ii) the
Executive's employment with the Employer terminates (whether by the Company,
the Executive or otherwise) within 180 days prior to the Change in Control and
(iii) it is reasonably demonstrated by the Executive that (A) any such
termination of employment by the Employer (1) was at the request of a third
party who has taken steps reasonably calculated to effect a Change in Control
or (2) otherwise arose in connection with or in anticipation of a Change in
Control, or (B) any such termination of employment by the Executive took place
subsequent to the occurrence of an event described in clause (ii), (iii), (iv)
or (v) of the definition of "Good Reason" which event (1) occurred at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or in anticipation
of a Change in Control, then for all purposes of this Agreement the term
"Effective Date" shall mean the day immediately prior to the date of such
termination of employment.
(k) Employer. The term "Employer" means the Company
and/or any subsidiary of the Company that employed the Executive immediately
prior to the Effective Date.
(l) Good Reason. The Executive shall have a "Good
Reason" for termination of employment on or after the Effective Date if the
Executive determines in good faith that any of the following events has
occurred:
(i) any breach of this Agreement by the Company,
including specifically any breach by the Company of its agreements
contained in Section 4, Section 5 or Section 6, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith that the Company remedies promptly after receipt of notice
thereof given by the Executive;
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(ii) any reduction in the Executive's base salary,
percentage of base salary available as incentive compensation or bonus
opportunity or benefits, in each case relative to those most favorable
to the Executive in effect at any time during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date;
(iii) a material adverse change, without the
Executive's prior written consent, in the Executive's working
conditions or status with the Company or the Employer from such
working conditions or status in effect during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date, including but not
limited to (A) a material change in the nature or scope of the
Executive's titles, authority, powers, functions, duties, reporting
requirements or responsibilities, or (B) a material reduction in the
level of support services, staff, secretarial and other assistance,
office space and accoutrements, but excluding for this purpose an
isolated, insubstantial and inadvertent event not occurring in bad
faith that the Company remedies promptly after receipt of notice
thereof given by the Executive;
(iv) the relocation of the Executive's principal
place of employment to a location more than 35 miles from the
Executive's principal place of employment on the date 180 days prior
to the Effective Date;
(v) the Employer requires the Executive to travel
on Employer business to a materially greater extent than was required
during the 180-day period prior to the Effective Date;
(vi) failure by the Company to obtain the
agreement referred to in Section 16(a) as provided therein; or
(vii) the Company or the Employer terminates the
Executive's employment after a Change in Control without delivering a
Notice of Termination in accordance with Section 12;
provided that (A) any such event occurs following the Effective Date or (B) in
the case of any event described in clauses (ii), (iii), (iv) or (v) above, such
event occurs on or prior to the Effective Date under circumstances described in
clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective Date." In
the event of a dispute regarding whether the Executive terminated the
Executive's employment for "Good Reason" in accordance with this Agreement, no
claim by the Company that such termination does not constitute a Covered
Termination shall be given effect unless the Company establishes by clear and
convincing evidence that such termination does not constitute a Covered
Termination. Any election by the Executive to terminate the Executive's
employment for Good Reason shall not be deemed a voluntary termination of
employment by the Executive for purposes of any other employee benefit or other
plan.
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<PAGE> 21
(m) Normal Retirement Date. The term "Normal Retirement
Date" means the date the Executive reaches age 65.
(n) Notice of Termination. The term "Notice of
Termination" means a written notice as contemplated by Section 12.
(o) Person. The term "Person" shall have the meaning
given in Section 3(a)(9) of the Act, as modified and used in Sections 13(d) and
14(d) thereof.
(p) Termination Date. Except as otherwise provided in
Section 9(b) and Section 16(a), the term "Termination Date" means (i) if the
Executive's employment is terminated by the Executive's death, the date of
death; (ii) if the Executive's employment is terminated by reason of voluntary
early retirement, as agreed in writing by the Company and the Executive, the
date of such early retirement that is set forth in such written agreement;
(iii) if the Executive's employment is terminated for purposes of this
Agreement by reason of disability pursuant to Section 11, thirty days after the
Notice of Termination is given; (iv) if the Executive's employment is
terminated by the Executive voluntarily (other than for Good Reason), the date
the Notice of Termination is given; and (v) if the Executive's employment is
terminated by the Company (other than by reason of disability pursuant to
Section 11) or by the Executive for Good Reason, thirty days after the Notice
of Termination is given. Notwithstanding the foregoing,
(A) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Company notifies the Executive that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof, then the Executive may elect to continue the
Executive's employment during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that the Executive terminated the Executive's employment
for Good Reason in accordance with this Agreement, then the Termination Date
shall be the earlier of (1) the date on which the dispute is finally
determined, either (x) by mutual written agreement of the parties or (y) in
accordance with Section 21 or (2) the date of the Executive's death. If the
Executive so elects and it is thereafter determined that the Executive did not
terminate the Executive's employment for Good Reason in accordance with this
Agreement, then the employment of the Executive hereunder shall continue after
such determination as if the Executive had not delivered the Notice of
Termination asserting Good Reason and there shall be no Termination Date
arising out of such Notice. In either case, this Agreement continues, until
the Termination Date, if any, as if the Executive had not delivered the Notice
of Termination except that, if it is finally determined that the Executive
terminated the Executive's employment for Good Reason in accordance with this
Agreement, then the Executive shall in no case be denied the benefits described
in Section 8 (including a Termination Payment) based on events occurring after
the Executive delivered the Executive's Notice of Termination.
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(B) If an opinion is required to be delivered pursuant to
Section 8(a)(ii) and such opinion shall not have been delivered, then the
Termination Date shall be the date on which such opinion is delivered.
(C) Except as provided in paragraph (A) above, if the
party receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof and it is finally determined that termination of the
Executive's employment for the reason asserted in such Notice of Termination
was not in accordance with this Agreement, then (1) if such Notice was
delivered by the Executive, then the Executive will be deemed to have
voluntarily terminated the Executive's employment other than for Good Reason by
means of such Notice and (2) if delivered by the Company, then the Company will
be deemed to have terminated the Executive's employment other than by reason of
death, disability or Cause by means of such Notice.
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<PAGE> 1
KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 27th day of
April, 1998, by and between Hein-Werner Corporation, a Wisconsin corporation
(hereinafter referred to as the "Company"), and J.A. Wilke (hereinafter
referred to as the "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is currently employed by the Company in
a key capacity, and the Executive's services are valuable to the conduct of the
business of the Company;
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that circumstances may arise in which a change in control of the
Company occurs, through acquisition or otherwise, thereby causing uncertainty
about the Executive's future employment with the Company without regard to the
Executive's competence or past contributions, which uncertainty may result in
the loss of valuable services of the Executive to the detriment of the Company
and its shareholders, and the Company and the Executive wish to provide
reasonable security to the Executive against changes in the Executive's
relationship with the Company in the event of any such change in control;
WHEREAS, the Company and the Executive desire that any
proposal for a change in control or acquisition of the Company will be
considered by the Executive objectively and with reference only to the best
interests of the Company and its shareholders; and
WHEREAS, the Executive will be in a better position to
consider the Company's best interests if the Executive is afforded reasonable
security, as provided in this Agreement, against altered conditions of
employment which could result from any such change in control or acquisition.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
<PAGE> 2
1. Definitions. The following terms are used in this
Agreement as defined in Exhibit A:
Act Covered Termination
Accrued Benefits Effective Date
Affiliate and Associate Employer
Annual Cash Compensation Good Reason
Cause Normal Retirement Date
Change in Control Notice of Termination
Code Person
Competitive Activity Termination Date
2. Termination or Cancellation Prior to the Effective
Date. The Employer and the Executive shall each retain the right to terminate
the employment of the Executive at any time prior to the Effective Date. If
the Executive's employment is terminated prior to the Effective Date, then this
Agreement shall be terminated and cancelled and of no further force or effect
and any and all rights and obligations of the parties hereunder shall cease.
In addition, this Agreement shall terminate upon the Executive ceasing to be an
employee of the Employer prior to a Change in Control unless the Executive can
reasonably demonstrate that such change in status occurred under circumstances
described in clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective
Date" in Exhibit A.
3. Employment Period. If the Executive is employed by
the Employer on the Effective Date, then the Company will, or will cause the
Employer to, continue thereafter to employ the Executive during the Employment
Period (as hereinafter defined), and the Executive will remain in the employ of
the Employer, in accordance with and subject to the terms and provisions of
this Agreement. For purposes of this Agreement, the term "Employment Period"
means a period (i) commencing on the Effective Date, and (ii) ending at 11:59
p.m. Milwaukee Time on the earlier of the first anniversary of such date or the
Executive's Normal Retirement Date.
4. Duties. During the Employment Period, the Executive
shall, in the most significant capacities and positions held by the Executive
at any time during the 180-day period preceding the Effective Date or in such
other capacities and positions as may be agreed to by the Company and the
Executive in writing, devote the Executive's best efforts and all of the
Executive's business time, attention and skill to the business and affairs of
the Employer, as such business and affairs now exist and as they may hereafter
be conducted.
5. Compensation. During the Employment Period, the
Executive shall be compensated as follows:
(a) The Executive shall receive, at reasonable intervals
(but not less often than monthly) and in accordance with such standard policies
as may be in effect immediately prior to the Effective Date, an annual base
salary in cash equivalent of not less than twelve times the
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<PAGE> 3
Executive's highest monthly base salary (which shall include any amounts
credited to the Executive for the purchase of annuity contracts and related tax
offset bonuses) for the twelve-month period immediately preceding the month in
which the Effective Date occurs or, if higher, an annual base salary at the
rate in effect immediately prior to the Effective Date (which base salary
shall, unless otherwise agreed in writing by the Executive, include the current
receipt by the Executive of any amounts which, prior to the Effective Date, the
Executive had elected to defer, whether such compensation is deferred under
Section 401(k) of the Code or otherwise), subject to upward adjustment as
provided in Section 6 (such salary amount as adjusted upward from time to time
is hereafter referred to as the "Annual Base Salary").
(b) The Executive shall receive fringe benefits at least
equal in value to those provided for the Executive at any time during the
180-day period immediately preceding the Effective Date or, if more favorable
to the Executive, those provided generally at any time after the Effective Date
to any executives of the Company and its Affiliates of comparable status and
position to the Executive. The Executive shall be reimbursed, at such
intervals and in accordance with such standard policies that are most favorable
to the Executive that were in effect at any time during the 180-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to any
executives of the Company and its Affiliates of comparable status and position
to the Executive, for any and all monies advanced in connection with the
Executive's employment for reasonable and necessary expenses incurred by the
Executive on behalf of the Company and its Affiliates, including travel
expenses.
(c) The Executive and/or the Executive's family, as the
case may be, shall be included, to the extent eligible thereunder (which
eligibility shall not be conditioned on the Executive's salary grade or on any
other requirement that excludes executives of the Company and its Affiliates of
comparable status and position to the Executive unless such exclusion was in
effect for such plan or an equivalent plan on the date 180 days prior to the
Effective Date), in any and all welfare benefit plans, practices, policies and
programs providing benefits for the Company's salaried employees in general or,
if more favorable to the Executive, to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to group life insurance, hospitalization, medical and dental plans;
provided, that, (i) in no event shall the aggregate level of benefits under
such plans, practices, policies and programs in which the Executive is included
be less than the aggregate level of benefits under plans, practices, policies
and programs of the type referred to in this Section 5(c) in which the
Executive was participating at any time during the 180-day period immediately
preceding the Effective Date and (ii) in no event shall the aggregate level of
benefits under such plans, practices, policies and programs be less than the
aggregate level of benefits under plans, practices, policies and programs of
the type referred to in this Section 5(c) provided at any time after the
Effective Date to any executive of the Company and its Affiliates of comparable
status and position to the Executive.
(d) The Executive shall annually be entitled to not less
than the amount of paid vacation and not fewer than the number of paid holidays
to which the Executive was entitled
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<PAGE> 4
annually at any time during the 180-day period immediately preceding the
Effective Date or such greater amount of paid vacation and number of paid
holidays as may be made available annually to the Executive or any other
executive of the Company and its Affiliates of comparable status and position
to the Executive at any time after the Effective Date.
(e) The Executive shall be included in all plans
providing additional benefits to any executives of the Company and its
Affiliates of comparable status and position to the Executive, including but
not limited to deferred compensation, split-dollar life insurance, retirement,
supplemental retirement, stock option, stock appreciation, stock bonus and
similar or comparable plans; provided, that, (i) in no event shall the
aggregate level of benefits under such plans be less than the aggregate level
of benefits under plans of the type referred to in this Section 5(e) in which
the Executive was participating at any time during the 180-day period
immediately preceding the Effective Date; (ii) in no event shall the aggregate
level of benefits under such plans be less than the aggregate level of benefits
under plans of the type referred to in this Section 5(e) provided at any time
after the Effective Date to any executive of the Company and its Affiliates of
comparable status and position to the Executive; and (iii) the Company's
obligation to include the Executive in bonus or incentive compensation plans
shall be determined by Section 5(f).
(f) To assure that the Executive will have an opportunity
to earn incentive compensation after the Effective Date, the Executive shall be
included in a bonus plan of the Company that shall satisfy the standards
described below (the "Bonus Plan"). Bonuses under the Bonus Plan shall be
payable with respect to achieving such financial or other goals reasonably
related to the business of the Company as the Company shall establish (the
"Goals"), all of which Goals shall be attainable, prior to the end of the
Employment Period, with approximately the same degree of probability as the
goals under the Employer's annual incentive plan currently in effect, or the
successor to such plan, in the form most favorable to the Executive that was in
effect at any time during the 180-day period prior to the Effective Date (the
"Existing Plan") and in view of the Company's existing and projected financial
and business circumstances applicable at the time. The amount of the bonus
(the "Bonus Amount") that the Executive is eligible to earn under the Bonus
Plan shall be no less than the amount of the Executive's highest maximum
potential award under the Existing Plan at any time during the 180-day period
prior to the Effective Date or, if higher, any maximum potential award under
the Bonus Plan or any other bonus or incentive compensation plan in effect
after the Effective Date for the Executive or for any executive of the Company
and its Affiliates of comparable status and position to the Executive (such
bonus amount herein referred to as the "Targeted Bonus"), and if the Goals are
not achieved (and, therefore, the entire Targeted Bonus is not payable), then
the Bonus Plan shall provide for a payment of a Bonus Amount not less than a
portion of the Targeted Bonus reasonably related to that portion of the Goals
that were achieved. Payment of the Bonus Amount (i) shall be in cash, unless
otherwise agreed by the Executive, and (ii) shall not be affected by any
circumstance occurring subsequent to the end of the Employment Period,
including termination of the Executive's employment.
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6. Annual Compensation Adjustments. During the
Employment Period, the Board of Directors of the Company (or an appropriate
committee thereof) will consider and appraise, at least annually, the
contributions of the Executive to the Employer, and in accordance with the
Company's practice prior to the Effective Date, due consideration shall be
given, at least annually, to the upward adjustment of the Executive's Annual
Base Salary (i) commensurate with increases generally given to other executives
of the Company and its Affiliates of comparable status and position to the
Executive, and (ii) as the scope of the Company's operations or the Executive's
duties expand.
7. Termination During Employment Period.
(a) Right to Terminate. During the Employment Period,
(i) the Company shall be entitled to terminate the Executive's employment (A)
for Cause, (B) by reason of the Executive's disability pursuant to Section 11,
or (C) for any other reason, and (ii) the Executive shall be entitled to
terminate the Executive's employment for any reason. Any such termination
shall be subject to the procedures set forth in Section 12 and shall be subject
to any consequences of such termination set forth in this Agreement. Any
termination of the Executive's employment during the Employment Period by the
Employer shall be deemed a termination by the Company for purposes of this
Agreement.
(b) Termination for Cause or Without Good Reason. If
there is a Covered Termination for Cause or due to the Executive's voluntarily
terminating the Executive's employment other than for Good Reason, then the
Executive shall be entitled to receive only Accrued Benefits.
(c) Termination Giving Rise to a Termination Payment. If
there is a Covered Termination by the Executive for Good Reason, or by the
Company other than by reason of (i) death, (ii) disability pursuant to Section
11, or (iii) Cause, then the Executive shall be entitled to receive, and the
Company shall promptly pay, Accrued Benefits and, in lieu of further base
salary for periods following the Termination Date, as liquidated damages and
additional severance pay and in consideration of the covenant of the Executive
set forth in Section 13(a), the Termination Payment pursuant to Section 8(a).
8. Payments Upon Termination.
(a) Termination Payment. (i) Subject to the limits set
forth in Section 8(a)(ii), for purposes of this Agreement, the
"Termination Payment" shall be an amount equal to the Annual Cash
Compensation multiplied by the number of years or fractional portion
thereof remaining in the Employment Period determined as of the
Termination Date, except that the Termination Payment shall not be
less than the amount of Annual Cash Compensation. The Termination
Payment shall be paid to the Executive in cash equivalent not later
than ten business days after the Termination Date. The Executive
shall not be required to mitigate the amount of the Termination
Payment by securing other employment or otherwise, nor will such
Termination Payment be reduced
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<PAGE> 6
by reason of the Executive securing other employment or for any other
reason. The Termination Payment shall be in addition to any other
severance payments to which the Executive is entitled under the
Company's severance policies and practices in the form most favorable
to the Executive that were in effect at any time during the 180-day
period prior to the Effective Date.
(ii) Notwithstanding any other provision of this
Agreement, if any portion of the Termination Payment or any other
payment under this Agreement, or under any other agreement with or
plan of the Company or the Employer (in the aggregate "Total
Payments"), would constitute an "excess parachute payment," then the
Total Payments to be made to the Executive shall be reduced such that
the value of the aggregate Total Payments that the Executive is
entitled to receive shall be One Dollar ($1) less than the maximum
amount which the Executive may receive without becoming subject to the
tax imposed by Section 4999 of the Code (or any successor provision)
or which the Company may pay without loss of deduction under Section
280G(a) of the Code (or any successor provision). For purposes of
this Agreement, the terms "excess parachute payment" and "parachute
payments" shall have the meanings assigned to them in Section 280G of
the Code (or any successor provision), and such "parachute payments"
shall be valued as provided therein. Present value for purposes of
this Agreement shall be calculated in accordance with Section
1274(b)(2) of the Code (or any successor provision). Within sixty
days following delivery of the Notice of Termination or notice by the
Company to the Executive of its belief that there is a payment or
benefit due the Executive which will result in an excess parachute
payment as defined in Section 280G of the Code (or any successor
provision), the Executive and the Company, at the Company's expense,
shall obtain the opinion (which need not be unqualified) of nationally
recognized tax counsel selected by the Company's independent auditors
and acceptable to the Executive in the Executive's sole discretion,
which sets forth (A) the amount of the Base Period Income, (B) the
amount and present value of Total Payments and (C) the amount and
present value of any excess parachute payments without regard to the
limitations of this Section 8(a)(ii). As used in this Section
8(a)(ii), the term "Base Period Income" means an amount equal to the
Executive's "annualized includible compensation for the base period"
as defined in Section 280G(d)(1) of the Code (or any successor
provision). For purposes of such opinion, the value of any noncash
benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code (or any successor provisions),
which determination shall be evidenced in a certificate of such
auditors addressed to the Company and the Executive. Such opinion
shall be dated as of the Termination Date and addressed to the Company
and the Executive and shall be binding upon the Company and the
Executive. If such opinion determines that there would be an excess
parachute payment, then the Termination Payment hereunder or any other
payment determined by such counsel to be includible in Total Payments
shall be reduced or eliminated as specified by the Executive in
writing delivered to the Company within thirty days of the Executive's
receipt of such opinion or, if the Executive fails to so notify the
Company, then as the Company shall reasonably determine, so that under
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<PAGE> 7
the bases of calculations set forth in such opinion there will be no
excess parachute payment. If such legal counsel so requests in
connection with the opinion required by this Section, the Executive
and the Company shall obtain, at the Company's expense, and the legal
counsel may rely on in providing the opinion, the advice of a firm of
recognized executive compensation consultants as to the reasonableness
of any item of compensation to be received by the Executive.
Notwithstanding the foregoing, the provisions of this Section
8(a)(ii), including the calculations, notices and opinions provided
for herein, shall be based upon the conclusive presumption that the
following are reasonable: (1) the compensation and benefits provided
for in Section 5 and (2) any other compensation, including but not
limited to the Accrued Benefits, earned prior to the Termination Date
by the Executive pursuant to the Company's compensation programs if
such payments would have been made in the future in any event, even
though the timing of such payment is triggered by the Change in
Control or the Termination Date. If the provisions of Sections 280G
and 4999 of the Code (or any successor provisions) are repealed
without succession, then this Section 8(a)(ii) shall be of no further
force or effect.
(b) Additional Benefits. If there is a Covered
Termination and the Executive is entitled to Accrued Benefits and the
Termination Payment, then the Executive shall be entitled to the following
additional benefits:
(i) Until the earlier of the end of the
Employment Period or such time as the Executive has obtained new
employment and is covered by benefits which in the aggregate are at
least equal in value to the following benefits, the Executive shall
continue to be covered, at the expense of the Company, by the most
favorable life insurance, hospitalization, medical and dental coverage
and other welfare benefits provided to the Executive and the
Executive's family during the 180-day period immediately preceding the
Effective Date or at any time thereafter or, if more favorable to the
Executive, coverage as was required hereunder with respect to the
Executive immediately prior to the date Notice of Termination is
given.
(ii) The Executive shall receive, at the expense
of the Company, outplacement services, on an individualized basis at a
level of service commensurate with the Executive's most senior status
with the Company during the 180-day period prior to the Effective Date
(or, if higher, at any time after the Effective Date), provided by a
nationally recognized executive placement firm selected by the Company
with the consent of the Executive, which consent will not be
unreasonably withheld; provided that the cost to the Company of such
services shall not exceed 15% of the Executive's Annual Base Salary.
(iii) The Company shall bear up to $10,000 in the
aggregate of fees and expenses of consultants and/or legal or
accounting advisors engaged by the Executive to advise the Executive
as to matters relating to the computation of benefits due and payable
under this Section 8.
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9. Death. (a) Except as provided in Section 9(b), in
the event of a Covered Termination due to the Executive's death, the
Executive's estate, heirs and beneficiaries shall receive all the Executive's
Accrued Benefits through the Termination Date.
(b) If the Executive dies after a Notice of Termination
is given (i) by the Company or (ii) by the Executive for Good Reason, then the
Executive's estate, heirs and beneficiaries shall be entitled to the benefits
described in Section 9(a) and, subject to the provisions of this Agreement, to
such Termination Payment to which the Executive would have been entitled had
the Executive lived. In such event, the Termination Date shall be thirty days
following the giving of the Notice of Termination, subject to extension
pursuant to the definition of "Termination Date" in Exhibit A.
10. Retirement. If, during the Employment Period, the
Executive and the Employer shall execute an agreement providing for the early
retirement of the Executive from the Employer, or the Executive shall otherwise
give notice that the Executive is voluntarily choosing to retire early from the
Employer, then the Executive shall receive Accrued Benefits through the
Termination Date; provided, that if the Executive's employment is terminated by
the Executive for Good Reason or by the Company other than by reason of death,
disability or Cause and the Executive also, in connection with such
termination, elects voluntary early retirement, then the Executive shall also
be entitled to receive a Termination Payment pursuant to Section 8(a).
11. Termination for Disability. If, during the
Employment Period, as a result of the Executive's disability due to physical or
mental illness or injury (regardless of whether such illness or injury is
job-related), the Executive shall have been absent from the Executive's duties
hereunder on a full-time basis for a period of 182 days and, within thirty days
after the Company notifies the Executive in writing that it intends to
terminate the Executive's employment (which notice shall not constitute the
Notice of Termination contemplated below), the Executive shall not have
returned to the performance of the Executive's duties hereunder on a full-time
basis, then the Company may terminate the Executive's employment for purposes
of this Agreement pursuant to a Notice of Termination. If the Executive's
employment is terminated on account of the Executive's disability in accordance
with this Section, then the Executive shall receive Accrued Benefits in
accordance with Section 8(a) and shall remain eligible for all benefits
provided by any long term disability programs of the Employer in effect at the
time the Company sends notice to the Executive of its intent to terminate
pursuant to this Section.
12. Termination Notice and Procedure. (a) Any
termination of the Executive's employment during the Employment Period by the
Company or the Executive (other than a termination of the Executive's
employment referenced in the second sentence of the definition of "Effective
Date" in Exhibit A) shall be communicated by written Notice of Termination to
the Executive, if such Notice is given by the Company, and to the Company, if
such Notice is given by the Executive, all in accordance with the following
procedures and those set forth in Section 22:
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(i) If such termination is for disability, Cause or Good
Reason, the Notice of Termination shall indicate in reasonable detail the facts
and circumstances alleged to provide a basis for such termination.
(ii) Any Notice of Termination by the Company shall have
been approved, prior to the giving thereof to the Executive, by a resolution
duly adopted by a majority of the directors of the Company (or any successor
corporation) then in office, a copy of which shall accompany the Notice.
(iii) If the Notice is given by the Executive for Good
Reason, then the Executive may cease performing the Executive's duties
hereunder on or after the date 15 days after the delivery of Notice of
Termination (unless the Notice of Termination is based upon clause (vii) of the
definition of "Good Reason" in Exhibit A, in which case the Executive may cease
performing his duties at the time the Executive's employment is terminated) and
shall in any event cease employment on the Termination Date, if any, arising
from the delivery of such Notice. If the Notice is given by the Company, then
the Executive may cease performing the Executive's duties hereunder on the date
of receipt of the Notice of Termination, subject to the Executive's rights
hereunder.
(iv) The recipient of any Notice of Termination shall
personally deliver or mail in accordance with Section 22 written notice of any
dispute relating to such Notice of Termination to the party giving such Notice
within fifteen days after receipt thereof. After the expiration of such fifteen
days, the contents of the Notice of Termination shall become final and not
subject to dispute.
Notwithstanding the foregoing, (A) if the Executive terminates the Executive's
employment after a Change in Control without complying with this Section 12,
then the Executive will be deemed to have voluntarily terminated the
Executive's employment other than for Good Reason and deemed to have delivered
a written Notice of Termination to that effect to the Company as of the date of
such termination and (B) if the Company terminates the Executive's employment
after a Change in Control without complying with this Section 12, then the
Company will be deemed to have terminated the Executive's employment other than
by reason of death, disability or Cause and the Company will be deemed to have
delivered a written Notice of Termination to that effect to the Executive as of
the date of such termination. Under circumstances described in clause (B)
above, the Executive may, but shall not be obligated to, also deliver a Notice
of Termination based upon clause (vii) of the definition of "Good Reason" in
Exhibit A for the purpose of subjecting such Notice to Section 12(a)(iv).
(b) If a Change in Control occurs and the Executive's
employment with the Employer terminates (whether by the Company, the Executive
or otherwise) within 180 days prior to the Change in Control, then the
Executive may assert that such termination is a Covered Termination by sending
a written Notice of Termination to the Company at any time prior to the first
anniversary of the Change in Control in accordance with the procedures set
forth in this Section 12(b) and those set forth in Section 22. If the
Executive asserts that the Executive
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<PAGE> 10
terminated the Executive's employment for Good Reason or that the Company
terminated the Executive's employment other than for disability or Cause, then
the Notice of Termination shall indicate in reasonable detail the facts and
circumstances alleged to provide a basis for such assertions. The Company
shall personally deliver or mail in accordance with Section 22 written notice
of any dispute relating to such Notice of Termination to the Executive within
fifteen days after receipt thereof. After the expiration of such fifteen days,
the contents of the Notice of Termination shall become final and not subject to
dispute.
13. Further Obligations of the Executive.
(a) Competition. The Executive agrees that, in the event
of any Covered Termination where the Executive is entitled to (and receives)
Accrued Benefits and the Termination Payment, the Executive shall not, for a
period of three months after the Termination Date, without the prior written
approval of the Company's Board of Directors, engage in any Competitive
Activity.
(b) Confidentiality. During and following the
Executive's employment by the Employer, the Executive shall hold in confidence
and not directly or indirectly disclose or use or copy or make lists of any
confidential information or proprietary data of the Company (including that of
the Employer), except to the extent authorized in writing by the Board of
Directors of the Company or required by any court or administrative agency,
other than to an employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Executive of duties as an executive of the Company or the Employer.
Confidential information shall not include any information known generally to
the public or any information of a type not otherwise considered confidential
by persons engaged in the same business or a business similar to that of the
Company. All records, files, documents and materials, or copies thereof,
relating to the business of the Company which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of the
Company and shall be promptly returned to the Company upon termination of
employment with the Employer.
14. Expenses and Interest. If, after the Effective Date,
(i) a dispute arises with respect to the enforcement of the Executive's rights
under this Agreement, (ii) any legal or arbitration proceeding shall be brought
to enforce or interpret any provision contained herein or to recover damages
for breach hereof, or (iii) any tax audit or proceeding is commenced that is
attributable in part to the application of Section 4999 of the Code, in any
case so long as the Executive is not acting in bad faith, then the Company
shall reimburse the Executive for any reasonable attorneys' fees and necessary
costs and disbursements incurred as a result of such dispute, legal or
arbitration proceeding or tax audit or proceeding ("Expenses"), and prejudgment
interest on any money judgment or arbitration award obtained by the Executive
calculated at the rate of interest announced by Firstar Bank Milwaukee, N.A.,
Milwaukee, Wisconsin, from time to time as its prime or base lending rate from
the date that payments to the Executive should have been made under this
Agreement. Within ten days after the Executive's written request therefor, the
Company shall pay to the Executive, or such other
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<PAGE> 11
person or entity as the Executive may designate in writing to the Company, the
Executive's reasonable Expenses in advance of the final disposition or
conclusion of any such dispute, legal or arbitration proceeding.
15. Payment Obligations Absolute. The Company's
obligation during and after the Employment Period to pay the Executive the
amounts and to make the benefit and other arrangements provided herein shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any setoff, counterclaim, recoupment, defense or
other right which the Company may have against the Executive or anyone else.
Except as provided in Section 14, all amounts payable by the Company hereunder
shall be paid without notice or demand. Each and every payment made hereunder
by the Company shall be final, and the Company will not seek to recover all or
any part of such payment from the Executive, or from whomsoever may be entitled
thereto, for any reason whatsoever.
16. Successors. (a) If the Company sells, assigns or
transfers all or substantially all of its business and assets to any Person or
if the Company merges into or consolidates or otherwise combines (where the
Company does not survive such combination) with any Person (any such event, a
"Sale of Business"), then the Company shall assign all of its right, title and
interest in this Agreement as of the date of such event to such Person, and the
Company shall cause such Person, by written agreement in form and substance
reasonably satisfactory to the Executive, to expressly assume and agree to
perform from and after the date of such assignment all of the terms, conditions
and provisions imposed by this Agreement upon the Company. Failure of the
Company to obtain such agreement prior to the effective date of such Sale of
Business shall be a breach of this Agreement constituting "Good Reason"
hereunder, except that for purposes of implementing the foregoing, the date
upon which such Sale of Business becomes effective shall be deemed the
Termination Date. In case of such assignment by the Company and of assumption
and agreement by such Person, as used in this Agreement, "Company" shall
thereafter mean such Person which executes and delivers the agreement provided
for in this Section 16 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, and this Agreement shall
inure to the benefit of, and be enforceable by, such Person. The Executive
shall, in the Executive's discretion, be entitled to proceed against any or all
of such Persons, any Person which theretofore was such a successor to the
Company (as defined in the first paragraph of this Agreement) and the Company
(as so defined) in any action to enforce any rights of the Executive hereunder.
Except as provided in this Subsection, this Agreement shall not be assignable
by the Company. This Agreement shall not be terminated by the voluntary or
involuntary dissolution of the Company.
(b) This Agreement and all rights of the Executive shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All
amounts payable to the Executive under Sections 7, 8, 9, 10, 11 and 14 if the
Executive had lived shall be paid, in the event of the Executive's death, to
the Executive's estate, heirs and representatives; provided, however, that the
foregoing shall not be construed to modify any terms of any benefit plan of the
Employer, as such terms
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<PAGE> 12
are in effect on the Effective Date, that expressly govern benefits under such
plan in the event of the Executive's death.
17. Severability. The provisions of this Agreement shall
be regarded as divisible, and if any of said provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, then
the validity and enforceability of the remainder of such provisions or parts
hereof and the applicability thereof shall not be affected thereby.
18. Amendment. This Agreement may not be amended or
modified at any time except by written instrument executed by the Company and
the Executive.
19. Withholding. The Employer shall be entitled to
withhold from amounts to be paid to the Executive hereunder any federal, state
or local withholding or other taxes or charges which it is from time to time
required to withhold; provided, that the amount so withheld shall not exceed
the minimum amount required to be withheld by law. The Employer shall be
entitled to rely on an opinion of nationally recognized tax counsel if any
question as to the amount or requirement of any such withholding shall arise.
20. Certain Rules of Construction. No party shall be
considered as being responsible for the drafting of this Agreement for the
purpose of applying any rule construing ambiguities against the drafter or
otherwise. No draft of this Agreement shall be taken into account in
construing this Agreement. Any provision of this Agreement which requires an
agreement in writing shall be deemed to require that the writing in question be
signed by the Executive and an authorized representative of the Company.
21. Governing Law; Resolution of Disputes. (a) This
Agreement and the rights and obligations hereunder shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin
(excluding any choice of law rules that may direct the application of the laws
of another jurisdiction) except that Section 21(b) shall be construed in
accordance with the Federal Arbitration Act if arbitration is chosen by the
Executive as the method of dispute resolution.
(b) Any dispute arising out of this Agreement shall, at
the Executive's election, be determined by arbitration under the rules of the
American Arbitration Association then in effect (but subject to any evidentiary
standards set forth in this Agreement), in which case both parties shall be
bound by the arbitration award, or by litigation. Whether the dispute is to be
settled by arbitration or litigation, the venue for the arbitration or
litigation shall be Milwaukee, Wisconsin or, at the Executive's election, if
the Executive is no longer residing or working in the Milwaukee, Wisconsin
metropolitan area, in the judicial district encompassing the city in which the
Executive resides; provided, that, if the Executive is not then residing in the
United States, the election of the Executive with respect to such venue shall
be either Milwaukee, Wisconsin or in the judicial district encompassing that
city in the United States among the thirty cities having the largest population
(as determined by the most recent United States Census data available at the
Termination Date) that is closest to the Executive's residence.
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<PAGE> 13
The parties consent to personal jurisdiction in each trial court in the
selected venue having subject matter jurisdiction notwithstanding their
residence or situs, and each party irrevocably consents to service of process
in the manner provided hereunder for the giving of notices.
22. Notice. Notices given pursuant to this Agreement
shall be in writing and, except as otherwise provided by Section 12(a)(iii),
shall be deemed given when actually received by the Executive or actually
received by the Company's Secretary or any officer of the Company other than
the Executive. If mailed, such notices shall be mailed by United States
registered or certified mail, return receipt requested, addressee only, postage
prepaid, if to the Company, to Hein-Werner Corporation, Attention: Secretary
(or, if the Executive is then Secretary, to the Chief Executive Officer), 2120
Pewaukee Road, Waukesha, Wisconsin 53188, or if to the Executive, at the
address set forth below the Executive's signature to this Agreement, or to such
other address as the party to be notified shall have theretofore given to the
other party in writing.
23. Additional Payment. (a) If, notwithstanding the
provisions of Section 8(a)(ii), but subject to subsection (b), it is ultimately
determined by a court or pursuant to a final determination by the Internal
Revenue Service that any portion of Total Payments is subject to the tax (the
"Excise Tax") imposed by Section 4999 of the Code (or any successor provision),
then the Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive after deduction of
any Excise Tax and any interest charges or penalties in respect of the
imposition of such Excise Tax (but not any federal, state or local income tax)
on the Total Payments, and any federal, state and local income tax and Excise
Tax upon the payment provided for by this Section 23 shall be equal to the
Total Payments. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of the Executive's
domicile for income tax purposes on the date the Gross-Up Payment is made, net
of the maximum reduction in federal income taxes that could be obtained from
deduction of such state and local taxes.
(b) If legislation is enacted that would require the
Company's shareholders to approve this Agreement, prior to a Change in Control,
due solely to the provision contained in subsection (a) of this Section 23,
then
(i) from and after such time as shareholder approval
would be required, until shareholder approval is obtained as required
by such legislation, subsection (a) shall be of no force and effect;
(ii) if the Company seeks shareholder approval of any
other agreement providing similar benefits to any other executive of
the Company, then the Company shall seek shareholder approval of this
Agreement at the same shareholders' meeting or meetings at which the
shareholders consider any such other agreement; and
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(iii) the Company and the Executive shall use their best
efforts to consider and agree in writing upon an amendment to this
Section 23 such that, as amended, this Subsection would provide the
Executive with the benefits intended to be afforded to the Executive
by subsection (a) without requiring shareholder approval.
24. No Waiver. The Executive's or the Company's failure
to insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason, shall not be deemed to be a waiver of such
provision or right or any other provision or right of this Agreement.
25. Headings. The headings herein contained are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
HEIN-WERNER CORPORATION
By: /s/ J. L. Dindorf
----------------------------------------
J. L. Dindorf
President and Chief Executive Officer
Attest: /s/ M. J. McSweeney
----------------------------------------
M. J. McSweeney
Secretary
EXECUTIVE
/s/ J.A. Wilke
------------------------------------------------
J.A. Wilke
S76 W12620 McShane Drive
Muskego, Wisconsin 53150
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<PAGE> 15
Exhibit A
CERTAIN DEFINED TERMS
For purposes of this Agreement,
(a) Act. The term "Act" means the Securities Exchange
Act of 1934, as amended.
(b) Accrued Benefits. The term "Accrued Benefits" shall
include the following amounts, payable as described herein: (i) all base
salary for the time period ending with the Termination Date; (ii) reimbursement
for any and all monies advanced in connection with the Executive's employment
for reasonable and necessary expenses incurred by the Executive on behalf of
the Company and its Affiliates for the time period ending with the Termination
Date; (iii) any and all other cash earned through the Termination Date and
deferred at the election of the Executive or pursuant to any deferred
compensation plan then in effect; (iv) notwithstanding any provision of any
bonus or incentive compensation plan applicable to the Executive, a lump sum
amount, in cash, equal to the sum of (A) any bonus or incentive compensation
that has been allocated or awarded to the Executive for a fiscal year or other
measuring period under the plan that ends prior to the Termination Date but has
not yet been paid (pursuant to Section 5(f) or otherwise) and (B) a pro rata
portion to the Termination Date of the aggregate value of all contingent bonus
or incentive compensation awards to the Executive for all uncompleted periods
under the plan calculated as to each such award as if the Goals with respect to
such bonus or incentive compensation award had been attained; and (v) all other
payments and benefits to which the Executive (or in the event of the
Executive's death, the Executive's surviving spouse or other beneficiary) may
be entitled as compensatory fringe benefits or under the terms of any benefit
plan of the Employer, including severance payments under the Employer's
severance policies and practices in the form most favorable to the Executive
that were in effect at any time during the 180-day period prior to the
Effective Date. Payment of Accrued Benefits shall be made promptly in
accordance with the Employer's prevailing practice with respect to clauses (i)
and (ii) or, with respect to clauses (iii), (iv) and (v), pursuant to the terms
of the benefit plan or practice establishing such benefits.
(c) Affiliate and Associate. The terms "Affiliate" and
"Associate" shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations of the Act.
(d) Annual Cash Compensation. The term "Annual Cash
Compensation" shall mean the sum of (A) the Executive's Annual Base Salary,
plus (B) the highest of (1) the highest annual bonus or incentive compensation
award earned by the Executive under any cash bonus or incentive compensation
plan of the Company or any of its Affiliates during the three complete fiscal
years of the Company immediately preceding the Termination Date or, if more
favorable to the Executive, during the three complete fiscal years of the
Company immediately preceding
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the Effective Date; (2) the Executive's bonus or incentive compensation
Targeted Bonus for the fiscal year in which the Termination Date occurs; or (3)
the highest average annual bonus and/or incentive compensation earned during
the three complete fiscal years of the Company immediately preceding the
Termination Date (or, if more favorable to the Executive, during the three
complete fiscal years of the Company immediately preceding the Effective Date)
under any cash bonus or incentive compensation plan of the Company or any of
its Affiliates by the group of executives of the Company and its Affiliates
participating under such plan during such fiscal years at a status or position
comparable to that at which the Executive participated or would have
participated pursuant to the Executive's most senior position at any time
during the 180 days preceding the Effective Date or thereafter until the
Termination Date.
(e) Cause. The Company may terminate the Executive's
employment after the Effective Date for "Cause" only if the conditions set
forth in paragraphs (i) and (ii) have been met and the Company otherwise
complies with this Agreement:
(i) (A) the Executive has committed any act of
fraud, embezzlement or theft in connection with the Executive's duties
as an Executive or in the course of employment with the Company and/or
its subsidiaries; (B) the Executive has willfully and continually
failed to perform substantially the Executive's duties with the
Company or any of its Affiliates (other than any such failure
resulting from incapacity due to physical or mental illness or injury,
regardless of whether such illness or injury is job-related) for an
appropriate period, which shall not be less than 30 days, after the
Chief Executive Officer of the Company (or, if the Executive is then
Chief Executive Officer, the Board) has delivered a written demand for
performance to the Executive that specifically identifies the manner
in which the Chief Executive Officer (or the Board, as the case may
be) believes the Executive has not substantially performed the
Executive's duties; (C) the Executive has willfully engaged in illegal
conduct or gross misconduct that is materially and demonstrably
injurious to the Company; (D) the Executive has willfully and
wrongfully disclosed any trade secret or other confidential
information of the Company or any of its Affiliates; or (E) the
Executive has engaged in any Competitive Activity; and in any such
case the act or omission shall have been determined by the Board to
have been materially harmful to the Company and its subsidiaries taken
as a whole.
For purposes of this provision, (1) no act or failure
to act on the part of the Executive shall be considered "willful"
unless it is done, or omitted to be done, by the Executive in bad
faith or without reasonable belief that the Executive's action or
omission was in the best interests of the Company and (2) any act, or
failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company.
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(ii) (A) The Company terminates the Executive's
employment by delivering a Notice of Termination to the Executive, (B)
prior to the time the Company has terminated the Executive's
employment pursuant to a Notice of Termination, the Board, by the
affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board, has adopted a resolution finding that the
Executive was guilty of conduct set forth in this definition of Cause,
and specifying the particulars thereof in detail, at a meeting of the
Board called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard before
the Board) and (C) the Company delivers a copy of such resolution to
the Executive with the Notice of Termination at the time the
Executive's employment is terminated.
In the event of a dispute regarding whether the Executive's employment has been
terminated for Cause, no claim by the Company that the Company has terminated
the Executive's employment for Cause in accordance with this Agreement shall be
given effect unless the Company establishes by clear and convincing evidence
that the Company has complied with the requirements of this Agreement to
terminate the Executive's employment for Cause.
(f) Change in Control. A "Change in Control" shall be
deemed to have occurred if the event set forth in any one of the following
paragraphs shall have occurred:
(i) any Person (other than (A) the Company or any
of its subsidiaries, (B) a trustee or other fiduciary holding
securities under any employee benefit plan of the Company or any of
its subsidiaries, (C) an underwriter temporarily holding securities
pursuant to an offering of such securities or (D) a corporation owned,
directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock in the
Company ("Excluded Persons")) is or becomes the "Beneficial Owner" (as
such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its Affiliates after January 1, 1998
pursuant to express authorization by the Board that refers to this
exception) representing 25% or more of either the then outstanding
shares of common stock of the Company or the combined voting power of
the Company's then outstanding voting securities; or
(ii) the following individuals cease for any
reason to constitute a majority of the number of directors then
serving: individuals who, on January 1, 1998, constituted the Board
and any new director (other than a director whose initial assumption
of office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation, relating
to the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A under the Act) whose appointment or
election by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still
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in office who either were directors on January 1, 1998 or whose
appointment, election or nomination for election was previously so
approved; or
(iii) the shareholders of the Company approve a
merger, consolidation or share exchange of the Company with any other
corporation or approve the issuance of voting securities of the
Company in connection with a merger, consolidation or share exchange
of the Company (or any direct or indirect subsidiary of the Company)
pursuant to applicable stock exchange requirements, other than (A) a
merger, consolidation or share exchange which would result in the
voting securities of the Company outstanding immediately prior to such
merger, consolidation or share exchange continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity or any parent thereof) at least 50%
of the combined voting power of the voting securities of the Company
or such surviving entity or any parent thereof outstanding immediately
after such merger, consolidation or share exchange, or (B) a merger,
consolidation or share exchange effected to implement a
recapitalization of the Company (or similar transaction) in which no
Person (other than an Excluded Person) is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any
securities acquired directly from the Company or its Affiliates after
January 1, 1998 pursuant to express authorization by the Board that
refers to this exception) representing 25% or more of either the then
outstanding shares of common stock of the Company or the combined
voting power of the Company's then outstanding voting securities; or
(iv) the shareholders of the Company approve a
plan of complete liquidation or dissolution of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets (in one transaction or a
series of related transactions within any period of 24 consecutive
months), other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity at least 75% of
the combined voting power of the voting securities of which are owned
by Persons in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity that owns all or substantially all of the assets or voting securities
of the Company immediately following such transaction or series of
transactions.
(g) Code. The term "Code" means the Internal Revenue
Code of 1986, including any amendments thereto or successor tax codes thereof.
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(h) Competitive Activity. The Executive shall engage in
a "Competitive Activity" if the Executive participates in the management of, is
employed by or owns any interest in any business enterprise at a location
within the United States that engages in substantial competition with the
Company or its subsidiaries, where such enterprise's revenues from any
competitive activities amount to 10% or more of such enterprise's consolidated
net revenues and sales for its most recently completed fiscal year; provided,
however, that owning stock or other securities of a competitor amounting to
less than five percent of the outstanding capital stock of such competitor
shall not be a "Competitive Activity".
(i) Covered Termination. The term "Covered Termination"
means any termination of the Executive's employment during the Employment
Period where the Termination Date or the date Notice of Termination is
delivered is any date on or prior to the end of the Employment Period.
(j) Effective Date. The term "Effective Date" shall mean
the first date on which a Change in Control occurs. Anything in this Agreement
to the contrary notwithstanding, if (i) a Change in Control occurs, (ii) the
Executive's employment with the Employer terminates (whether by the Company,
the Executive or otherwise) within 180 days prior to the Change in Control and
(iii) it is reasonably demonstrated by the Executive that (A) any such
termination of employment by the Employer (1) was at the request of a third
party who has taken steps reasonably calculated to effect a Change in Control
or (2) otherwise arose in connection with or in anticipation of a Change in
Control, or (B) any such termination of employment by the Executive took place
subsequent to the occurrence of an event described in clause (ii), (iii), (iv)
or (v) of the definition of "Good Reason" which event (1) occurred at the
request of a third party who has taken steps reasonably calculated to effect a
Change in Control or (2) otherwise arose in connection with or in anticipation
of a Change in Control, then for all purposes of this Agreement the term
"Effective Date" shall mean the day immediately prior to the date of such
termination of employment.
(k) Employer. The term "Employer" means the Company
and/or any subsidiary of the Company that employed the Executive immediately
prior to the Effective Date.
(l) Good Reason. The Executive shall have a "Good
Reason" for termination of employment on or after the Effective Date if the
Executive determines in good faith that any of the following events has
occurred:
(i) any breach of this Agreement by the Company,
including specifically any breach by the Company of its agreements
contained in Section 4, Section 5 or Section 6, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith that the Company remedies promptly after receipt of notice
thereof given by the Executive;
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(ii) any reduction in the Executive's base salary,
percentage of base salary available as incentive compensation or bonus
opportunity or benefits, in each case relative to those most favorable
to the Executive in effect at any time during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date;
(iii) a material adverse change, without the
Executive's prior written consent, in the Executive's working
conditions or status with the Company or the Employer from such
working conditions or status in effect during the 180-day period prior
to the Effective Date or, to the extent more favorable to the
Executive, those in effect after the Effective Date, including but not
limited to (A) a material change in the nature or scope of the
Executive's titles, authority, powers, functions, duties, reporting
requirements or responsibilities, or (B) a material reduction in the
level of support services, staff, secretarial and other assistance,
office space and accoutrements, but excluding for this purpose an
isolated, insubstantial and inadvertent event not occurring in bad
faith that the Company remedies promptly after receipt of notice
thereof given by the Executive;
(iv) the relocation of the Executive's principal
place of employment to a location more than 35 miles from the
Executive's principal place of employment on the date 180 days prior
to the Effective Date;
(v) the Employer requires the Executive to travel
on Employer business to a materially greater extent than was required
during the 180-day period prior to the Effective Date;
(vi) failure by the Company to obtain the
agreement referred to in Section 16(a) as provided therein; or
(vii) the Company or the Employer terminates the
Executive's employment after a Change in Control without delivering a
Notice of Termination in accordance with Section 12;
provided that (A) any such event occurs following the Effective Date or (B) in
the case of any event described in clauses (ii), (iii), (iv) or (v) above, such
event occurs on or prior to the Effective Date under circumstances described in
clause (iii)(B)(1) or (iii)(B)(2) of the definition of "Effective Date." In
the event of a dispute regarding whether the Executive terminated the
Executive's employment for "Good Reason" in accordance with this Agreement, no
claim by the Company that such termination does not constitute a Covered
Termination shall be given effect unless the Company establishes by clear and
convincing evidence that such termination does not constitute a Covered
Termination. Any election by the Executive to terminate the Executive's
employment for Good Reason shall not be deemed a voluntary termination of
employment by the Executive for purposes of any other employee benefit or other
plan.
A-6
<PAGE> 21
(m) Normal Retirement Date. The term "Normal Retirement
Date" means the date the Executive reaches age 65.
(n) Notice of Termination. The term "Notice of
Termination" means a written notice as contemplated by Section 12.
(o) Person. The term "Person" shall have the meaning
given in Section 3(a)(9) of the Act, as modified and used in Sections 13(d) and
14(d) thereof.
(p) Termination Date. Except as otherwise provided in
Section 9(b) and Section 16(a), the term "Termination Date" means (i) if the
Executive's employment is terminated by the Executive's death, the date of
death; (ii) if the Executive's employment is terminated by reason of voluntary
early retirement, as agreed in writing by the Company and the Executive, the
date of such early retirement that is set forth in such written agreement;
(iii) if the Executive's employment is terminated for purposes of this
Agreement by reason of disability pursuant to Section 11, thirty days after the
Notice of Termination is given; (iv) if the Executive's employment is
terminated by the Executive voluntarily (other than for Good Reason), the date
the Notice of Termination is given; and (v) if the Executive's employment is
terminated by the Company (other than by reason of disability pursuant to
Section 11) or by the Executive for Good Reason, thirty days after the Notice
of Termination is given. Notwithstanding the foregoing,
(A) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Company notifies the Executive that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof, then the Executive may elect to continue the
Executive's employment during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that the Executive terminated the Executive's employment
for Good Reason in accordance with this Agreement, then the Termination Date
shall be the earlier of (1) the date on which the dispute is finally
determined, either (x) by mutual written agreement of the parties or (y) in
accordance with Section 21 or (2) the date of the Executive's death. If the
Executive so elects and it is thereafter determined that the Executive did not
terminate the Executive's employment for Good Reason in accordance with this
Agreement, then the employment of the Executive hereunder shall continue after
such determination as if the Executive had not delivered the Notice of
Termination asserting Good Reason and there shall be no Termination Date
arising out of such Notice. In either case, this Agreement continues, until
the Termination Date, if any, as if the Executive had not delivered the Notice
of Termination except that, if it is finally determined that the Executive
terminated the Executive's employment for Good Reason in accordance with this
Agreement, then the Executive shall in no case be denied the benefits described
in Section 8 (including a Termination Payment) based on events occurring after
the Executive delivered the Executive's Notice of Termination.
A-7
<PAGE> 22
(B) If an opinion is required to be delivered pursuant to
Section 8(a)(ii) and such opinion shall not have been delivered, then the
Termination Date shall be the date on which such opinion is delivered.
(C) Except as provided in paragraph (A) above, if the
party receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof and it is finally determined that termination of the
Executive's employment for the reason asserted in such Notice of Termination
was not in accordance with this Agreement, then (1) if such Notice was
delivered by the Executive, then the Executive will be deemed to have
voluntarily terminated the Executive's employment other than for Good Reason by
means of such Notice and (2) if delivered by the Company, then the Company will
be deemed to have terminated the Executive's employment other than by reason of
death, disability or Cause by means of such Notice.
A-8
<PAGE> 1
FIRST AMENDMENT TO RIGHTS AGREEMENT
AMENDMENT made and entered into as of the 27th day of April,
1998, by and between Hein-Werner Corporation (the "Company") and Firstar Trust
Company (f/k/a First Wisconsin Trust Company) (the "Rights Agent"), under the
Rights Agreement, dated as of May 9, 1989, by and between the Company and the
Rights Agent (the "Agreement").
WHEREAS, the Company and the Rights Agent have heretofore
executed and entered into the Rights Agreement; and
WHEREAS, pursuant to Section 27 of the Rights Agreement, the
Company may from time to time prior to the Distribution Date (as defined
therein) supplement or amend the Rights Agreement in accordance with the
provisions of Section 27 thereof; and
WHEREAS, it is proposed that the Company enter into an
Agreement and Plan of Merger (the "Merger Agreement") and a Stock Option
Agreement (the "Stock Option Agreement"), among the Company, Snap-on
Incorporated ("Parent") and Snap-on Pace Company, a wholly-owned subsidiary of
Parent; and
WHEREAS, the Board of Directors of the Company has determined
that the transactions contemplated by the Merger Agreement and the Stock Option
Agreement are fair to and in the best interests of the Company and its
shareholders; and
WHEREAS, the Board of Directors has determined that it is in
the best interests of the Company and its shareholders to amend the Agreement
to exempt the Merger Agreement and the Stock Option Agreement and the
transactions contemplated thereby from the application of the Rights Agreement.
NOW THEREFORE, the Company and the Rights Agent hereby amend
the Rights Agreement as follows:
A. Section 1(c) of the Agreement is hereby amended by
adding the following at the end of such Section:
Notwithstanding the foregoing, for purposes of this Agreement,
neither Snap-on Incorporated ("Parent") nor Snap-on Pace
Company, a wholly-owned subsidiary of Parent (collectively,
the "Permitted Purchasers"), shall be deemed to be the
Beneficial Owner of or to beneficially own any Common Shares
if and so long as (i) that certain Agreement and Plan of
Merger (the "Merger Agreement"), dated as of April 27, 1998,
among the Company and the Permitted Purchasers, has been fully
executed, is in effect and has not been terminated by any
party thereto, and (ii) no Permitted Purchaser has acquired
any
<PAGE> 2
Common Shares other than pursuant to the terms of the Merger
Agreement and/or the Stock Option Agreement (the "Stock Option
Agreement"), dated as of April 27, 1998, among the Company and
the Permitted Purchasers.
B. The Agreement is hereby further amended to add a new
Section 34 to the Agreement which shall read in its entirety as follows:
Section 34. Excluded Transactions. Nothing in this Agreement
shall be construed to create or cause a Distribution Date or
Shares Acquisition Date or to constitute a Section 11(a)(ii)
Event or Section 13 Event or give any holder of Rights or any
other Person any legal or equitable rights, remedy or claim
under the Agreement solely as a result of or in connection
with the execution of the Merger Agreement and/or the Stock
Option Agreement or the commencement or consummation of the
transactions contemplated by the Merger Agreement and/or the
Stock Option Agreement.
C. This Amendment shall be deemed to be a contract made
under the laws of the State of Wisconsin and for all purposes shall be governed
by and construed in accordance with the laws of such state applicable to
contracts to be made and performed entirely within such state.
D. This Amendment may be executed in any number of
counterparts, each of which shall for all purposes be deemed an original, and
all of which together shall constitute but one and the same instrument.
E. Except as expressly set forth herein, this Amendment shall
not by implication or otherwise alter, modify, amend or in any way affect any
of the terms, conditions, obligations, covenants or agreements contained in the
Agreement, all of which are ratified and affirmed in all respects and shall
continue in full force and effect.
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Amendment to
be duly executed as of the date first above written.
Attest: HEIN-WERNER CORPORATION
By: /s/ MAURICE J. MCSWEENEY By: /s/ JOSEPH L. DINDORF
----------------------------- ---------------------------
Name: Maurice J. McSweeney Name: Joseph L. Dindorf
Title: Secretary Title: President and Chief
Executive Officer
Attest: FIRSTAR TRUST COMPANY
By: /s/ AMY E. NOBLE By: /s/ WILLIAM CARUSO
----------------------------- ---------------------------
Name: Amy E. Noble Name: William Caruso
Title: Assistant Secretary Title: Assistant Vice President
3
<PAGE> 4
HEIN-WERNER CORPORATION
OFFICER'S CERTIFICATE PURSUANT TO
SECTION 27 OF THE RIGHTS AGREEMENT
The undersigned, the President and Chief Executive Officer of
Hein-Werner Corporation, a Wisconsin corporation (the "Company"), pursuant to
Section 27 of the Rights Agreement, dated as of May 9, 1989 (the "Agreement"),
between the Company and Firstar Trust Company (f/k/a First Wisconsin Trust
Company), as Rights Agent, does hereby certify on behalf of the Company that
the amendment to the Agreement contained in the attached First Amendment to
Rights Agreement, dated as of April 27, 1998, is in compliance with the terms
of Section 27 of the Agreement.
IN WITNESS WHEREOF, the undersigned has set his hand hereunto.
HEIN-WERNER CORPORATION
By: /s/ JOSEPH L. DINDORF
-----------------------------
Name: Joseph L. Dindorf
Title: President and Chief
Executive Officer
<PAGE> 1
[CREDIT SUISSE FIRST BOSTON CORPORATION LETTERHEAD]
Ms. Susan F. Marrinan
Vice President, Secretary, and General Counsel
Snap-on Incorporated
10801 Corporate Drive
P.O. Box 1430
Kenosha, WI 53141-1430
April 21, 1998
Dear Ms. Marrinan:
You have expressed interest in pursuing a transaction (the "Transaction")
involving the capital stock of Hein-Werner Corporation (the "Company"). You
understand that prior to or during the course of negotiations in respect of the
Transaction, certain confidential information concerning the Company and/or the
Company's affiliates, including, without limitation, financial forecasts and
strategic plans, may be disclosed to you or your directors, officers,
employees, affiliates and advisors ("your Representatives"), either in written
form or orally (the "Evaluation Material"). In consideration of the Company
agreeing to make the Evaluation Material available to you or your
Representatives, you agree as follows:
1. The fact that the Company is providing Evaluation Material to you, the fact
that the parties have had, are having or may have discussions concerning
the Transaction, and any negotiations that may occur between you and the
Company shall also be deemed Evaluation Material and treated in
accordance with the provisions hereof. All Evaluation Material will be held
in complete confidence and, without the Company's prior written consent,
will not be disclosed, in whole or in part, to any other person (other than
such of your Representatives who need access to any such materials or
information for purposes of your evaluating or negotiating the
Transaction), nor will any Evaluation Material be used in any way directly
or indirectly detrimental to the Company or its affiliates or for any
purpose other than your evaluation or negotiation of the Transaction. The
term "Evaluation Material" does not include any information:
(a) Which at the time of disclosure to you or your Representatives is in
the public domain or which after such disclosure comes into the public
domain through no fault of you or your Representatives;
<PAGE> 2
Page 2
(b) which was available to you on a non-confidential basis from a source
other than the Company or its advisors, provided that such source is
not and was not bound by a confidentiality agreement with the
Company; or
(c) after notifying the Company pursuant to paragraph 5, the disclosure of
which is required by applicable law or regulation.
2. You shall be responsible for ensuring that your Representatives adhere to
the terms of the undertakings of this agreement as if such persons were
original parties hereto.
3. You and your Representatives will return to the Company or destroy upon
demand, or in the event you cease to be interested in pursuing the
Transaction, any Evaluation Material provided to you or your
Representatives, including all copies thereof which may have been made
by or on behalf of you or your Representatives, and you shall destroy, or
cause to be destroyed, all notes or memoranda or other stored information
of any kind prepared by you or your Representatives relating to the
Evaluation Material or negotiations generally.
4. If you or your Representatives become (or if it is reasonably likely that
you or they shall become) legally compelled to disclose any Evaluation
Material, immediate notice of such fact shall be given to the Company so
that any appropriate action may be taken by the Company.
5. Without prejudice to any other rights or remedies the Company may have, you
acknowledge and agree that money damages would not be an adequate remedy
for any breach of this agreement and that the Company shall be entitled to
the remedies of injunction, specific performance and other equitable
relief for any threatened or actual breach of this agreement.
6. You acknowledge that, except as may be set forth in a definitive, written
purchase agreement in respect of the Transaction, neither the Company nor
any of its directors, officers, employees, affiliates or advisors shall have
been deemed to make, or shall be responsible for, any representations or
warranties, express or implied, with respect to the accuracy or
completeness of the Evaluation Material supplied under this agreement.
Further, it is acknowledged hereby by you that only those representations
and warranties made by the Company in a definitive, written purchase
agreement in respect of the Transaction shall have any force or effect.
7. During the period of one year commencing on the date hereof, you shall not
directly solicit to hire any person who during such period is employed by
the
<PAGE> 3
Page 3
Company, whether or not such person would commit any breach of such
person's contract of service in leaving such employment.
8. You acknowledge and confirm that no information provided, or statements
made, to you or your Representatives prior to, in the course of or for the
purpose of negotiations, will constitute an offer by the Company or on the
Company's behalf, nor will any such information or statements form the
basis of any contract or agreement (including, without limitation, an
agreement in principle), to sell the Company or any of its capital stock
or assets.
9. You acknowledge that the Company and the Company's advisors shall be free
to conduct the process in respect of the Transaction as they in their
sole discretion shall determine, including, without limitation,
negotiating with any prospective or interested parties.
10. No failure or delay by the Company in exercising any right, power or
privilege under this agreement shall operate as a waiver thereof, and no
modification hereof shall be effective, unless in writing and signed by an
officer of the Company or other authorized person on its behalf.
11. The illegality, invalidity or unenforceability of any provision hereof
under the laws of any jurisdiction shall not affect its legality, validity
or enforceability under the laws of any other jurisdiction, nor the
legality, validity or enforceability of any other provision.
12. This Agreement shall terminate two years from the date hereof.
This Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without regard to the conflicts of law
principles thereof.
Very truly yours,
HEIN-WERNER CORPORATION
By CREDIT SUISSE FIRST BOSTON CORPORATION, solely as Company's
representative
By: Joseph T. Lower
-----------------------------------
Name: Joseph T. Lower
Title: Vice President
Accepted and agreed to as of the date hereof:
SNAP-ON INCORPORATED
By: Susan F. Marrinan
-----------------------------------
Name: Susan F. Marrinan
Title: Vice President, Secretary, and General Counsel
