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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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SCHEDULE 14D-9
(RULE 14D-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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American Precision Industries Inc.
(Name of Subject Company)
American Precision Industries Inc.
(Name of Persons Filing Statement)
Common Stock, $.66 2/3 par value per share
(Title of Class of Securities)
029069 10 1
(CUSIP Number of Class Securities)
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Kurt Wiedenhaupt
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, NY 14225-4748
(716) 684-9700
(Name, Address, and telephone numbers of person authorized to receive
notices and communications on behalf of the persons filing statement)
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With a copy to:
James J. Tanous, Esq.
Jaeckle Fleischmann & Mugel, LLP
800 Fleet Bank Building
Twelve Fountain Plaza
Buffalo, New York 14202
(716) 856-0600
[_]Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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Item 1. Subject Company Information.
The name of the subject company is American Precision Industries Inc., a
Delaware corporation (the "Company"), and the address of the principal
executive offices of the Company is 2777 Walden Avenue, Buffalo, NY 14225-4748.
The telephone number of the principal executive offices of the Company is (716)
684-9700. The title of the class of equity securities to which this Statement
relates is the common stock, par value $.66 2/3 per share, of the Company (the
"Common Stock"). As of February 18, 2000, there were 6,889,322 shares of Common
Stock outstanding.
Item 2. Identity and Background of Filing Persons.
(a) The name, address and telephone number of the Company, the person filing
this Statement, are as set forth in Item 1 above.
(b) This Statement relates to the tender offer by Alpha Acquisition I Corp.,
a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Danaher
Corporation, a Delaware corporation ("Parent"), disclosed in a Tender Offer
Statement on Schedule TO (the "Schedule TO"), dated February 24, 2000 and filed
with the Securities and Exchange Commission (the "Commission"), to purchase all
outstanding shares of Common Stock at a price of $19.25 per share (the "Offer
Price"), net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated February 24, 2000 (the
"Offer to Purchase") and in the related Letter of Transmittal (the "Letter of
Transmittal") (which, together with any amendments and supplements thereto,
collectively constitute the "Offer") included in the Schedule TO.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
February 15, 2000 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Merger Agreement provides that, among other things, as soon as
practicable after consummation of the Offer and the satisfaction of the other
conditions set forth in the Merger Agreement, and in accordance with the
relevant provisions of the General Corporation Law of the State of Delaware,
Purchaser will be merged with and into the Company (the "Merger"), with the
Company continuing as the surviving corporation (the "Surviving Corporation").
According to the Schedule TO, the address of the principal executive office
of Purchaser and Parent is 1250 24th Street, N.W., Suite 800, Washington, D.C.
20037. All information contained in this Statement or incorporated by reference
concerning Purchaser, Parent or their affiliates, or actions or events with
respect to any of them, was provided by Purchaser or Parent, and the Company
assumes no responsibility therefor.
Item 3. Past Contacts, Transactions, Negotiations and Agreements.
Conflicts of Interest
Certain contracts, agreements, arrangements or understandings and any actual
or potential conflicts of interest between the Company or its affiliates and
(i) the Company's executive officers, directors or affiliates, or (ii) Parent,
Purchaser, or their respective executive officers, directors or affiliates are
described below. See also "Background of the Offer; Contacts with API" and
"Purpose of the Offer; the Merger Agreement; the Support Agreements; the
Consulting Agreement; Statutory Requirements; Appraisal Rights; Plans for API;
"Going Private" Transactions" in the Offer to Purchase for a description of
certain such contracts, agreements, arrangements, understandings or conflicts
of interest. For a description of the background of the transaction and recent
contacts among Parent, Purchaser and the Company, see Item 4 below.
The Merger Agreement
The summary of the Merger Agreement contained in the Offer to Purchase is
incorporated herein by reference. Such summary should be read in its entirety
for a description of the terms and provisions of the
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Merger Agreement. In addition, some of the information set forth below
summarizes certain portions of the Merger Agreement and related agreements that
relate to arrangements between the Company, Parent and/or the Company's
executive officers and directors. The summary of the Merger Agreement contained
in the Offer to Purchase and the summary set forth below are qualified in their
entirety by reference to the Merger Agreement, a copy of which is attached
hereto as Exhibit 5 and is incorporated herein by reference.
Stock Options
The Merger Agreement provides that immediately prior to the effective time
of the Merger, the Company will accelerate the vesting of all outstanding stock
options (the "Options") detailed on the disclosure schedule attached to the
Merger Agreement, and each then vested Option will no longer be exercisable but
will entitle each holder of such an Option, in cancellation and settlement
therefor, to a payment in cash by the Company (subject to any applicable
withholding taxes), at the effective time, equal to the product of (i) the
total number of shares of Common Stock of the Company subject to such vested
Option and (ii) the excess of $19.25 over the exercise price per share of
Common Stock subject to such vested Option. All stock option or similar plans
of the Company and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any subsidiary will terminate as of the effective time of the
Merger. Pursuant to the Merger Agreement, prior to the effective time of the
Merger, the Company's board of directors (or, if appropriate, any committee of
the board) will adopt appropriate resolutions and take all other actions
necessary to provide for the cancellation, effective at the effective time of
the Merger, of all Options previously granted under any stock option or similar
plans of the Company, without any payment therefor except as described above.
As of February 18, 2000, directors and executive officers of the Company
held, in the aggregate, 953,686 Options to purchase Common Stock (including
unvested Options that will be accelerated at the effective time of the Merger
pursuant to the terms of the Merger Agreement) pursuant to the 1989, 1993, 1995
and 1998 Employees Stock Option Plans, the 1995 Directors Stock Option Plan,
the 1997 Officers Stock Option Plan, and an Option contained in the Employment
Agreement between the Company and Kurt Wiedenhaupt each of which is an Exhibit
to this Schedule 14D-9 and is incorporated herein by reference (collectively,
the "Stock Option Plans"), including 513,923 Options and 50,000 tandem Stock
Appreciation Rights held by Kurt Wiedenhaupt, the Company's President and Chief
Executive Officer, 47,500 Options held by Bruce McH. Kirchner, the Company's
Vice President and Chief Financial Officer, 56,987 Options held by James W.
Bingel, Vice President of the Company and President of API Delevan Inc., a
wholly-owned subsidiary of the Company, 9,500 Options held by Bradley J.
Holcomb, Vice President, Supply Chain Management and Operational Excellence of
the Company, 61,300 Options held by Craig J. VanTine, Vice President of the
Company and President of API Heat Transfer Inc., a wholly-owned subsidiary of
the Company, and 104,000 Options held by Richard S. Warzala, Vice President of
the Company and President of API Motion Inc., a wholly-owned subsidiary of the
Company.
Employment Arrangements
Parent and Mr. Wiedenhaupt have entered into a Consulting Agreement (the
"Consulting Agreement") dated February 15, 2000. The Consulting Agreement
provides that Mr. Wiedenhaupt will provide consulting services to Parent for
the period commencing on the date of termination of his employment with the
Company and ending on the earlier of (i) the fifth anniversary of such date and
(ii) the date the Consulting Agreement is terminated by Parent for certain
specified reasons or Mr. Wiedenhaupt upon 30 days' advance written notice (the
"Consulting Period"). In exchange for his services, Mr. Wiedenhaupt will
receive a consulting fee of $400,000 per year for each year of the Consulting
Period. The Consulting Agreement also imposes certain confidentiality
restrictions on Mr. Wiedenhaupt and contains a two-year non-competition
covenant after the Consulting Period. Mr. Wiedenhaupt and Parent also have an
arrangement whereby Mr. Wiedenhaupt may be entitled to certain additional
payments and an acceleration of certain of his consulting fees upon a sale of
the Company's heat transfer business during the Consulting Period.
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The foregoing summary is qualified in its entirety by the provisions of the
Consulting Agreement filed as Exhibit 8, that is incorporated herein by
reference.
Certain executive officers of the Company may receive payments under
existing change in control agreements with the Company as a result of the Offer
and/or the Merger. See "Compensation of Executive Officers--Employment
Contract; Supplemental Benefit Programs; and Change of Control Arrangements" in
the attached Information Statement pursuant to Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 thereunder for a description of these
arrangements.
Support Agreements
On February 15, 2000, Parent entered into Support Agreements (the "Support
Agreements") with each of Kurt Wiedenhaupt and Holger Hjelm (the "Principal
Stockholders"), with respect to 22,072 shares of Common Stock owned by Mr.
Wiedenhaupt (representing approximately 0.26% of the outstanding Common Stock,
giving effect to the conversion of the Series B Seven Percent (7%) Cumulative
Convertible Preferred Stock ("Series B Preferred Stock") of the Company that is
currently outstanding) and 1,236,337 shares of Series B Preferred Stock that
are convertible into shares of Common Stock and an additional 260,000 shares of
Common Stock both of which are owned by InterScan Holding Ltd. and any other
entities directly or indirectly controlled by Mr. Hjelm (representing
approximately 21.3% of the outstanding Common Stock giving effect to the
conversion of the Series B Preferred Stock).
Pursuant to the Support Agreements, the Principal Stockholders agreed to
tender (or cause the record owner of such shares to validly tender) and not to
withdraw, pursuant to and in accordance with the Offer, but, in the case of Mr.
Hjelm, in no event earlier than March 3, 2000 or later than the then scheduled
expiration date of the Offer, and in the case of Mr. Wiedenhaupt, as soon as
possible but in no event later than the then scheduled expiration date of the
Offer, all of the shares of Common Stock and Series B Preferred Stock owned by
the Principal Stockholders (collectively, the "Tender Shares"). The Principal
Stockholders further agreed that, during the term of the Support Agreements, at
any meeting of stockholders of the Company the Principal Stockholders will (i)
vote the Tender Shares in favor of the Merger; (ii) vote the Tender Shares
against any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement; and (iii) vote the Tender Shares against any action
or agreement (other than the Merger Agreement or the transactions contemplated
thereby) that would impede, interfere with, delay, postpone or attempt to
discourage the Merger or the Offer, including, but not limited to: (a) any
extraordinary corporate transaction, such as a merger, consolidation or other
business combination involving the Company or any of its subsidiaries; (b) a
sale or transfer of a material amount of assets of the Company or any of its
subsidiaries or a reorganization, recapitalization or liquidation of the
Company and its subsidiaries; (c) any change in the management or board of
directors of the Company, except as otherwise agreed to in writing by the
Purchaser; (d) any material change in the present capitalization or dividend
policy of the Company; or (e) any other material change in the Company's
corporate structure or business. The term of Mr. Hjelm's Support Agreement ends
on the date that the Merger Agreement is terminated under Section 8.1(e) and
Mr. Wiedenhaupt's ends 30 days after such date.
The Principal Stockholders agreed that they would not, and would not permit
or authorize any of their affiliates, representatives or agents to, directly or
indirectly, encourage, solicit, explore, participate in or initiate discussions
or negotiations with, or provide or disclose any information to, any
corporation, partnership, person or other entity or group (other than Parent,
the Purchaser or any of their affiliates or representatives) concerning any
Acquisition Transaction (as defined in the Merger Agreement) or enter into any
agreement, arrangement or understanding requiring the Company to abandon,
terminate or fail to consummate the Merger or any other transactions
contemplated by the Merger Agreement. The Principal Stockholders agreed to
cease any existing
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activities, discussions or negotiations with any parties conducted prior to the
date of the Support Agreements with respect to any Acquisition Transaction and
agreed to notify Parent, in writing, of the receipt, directly or indirectly, of
any inquiries, discussions, negotiations or proposals relating to an
Acquisition Transaction, identifying the offeror and furnish Parent with a copy
of any such proposal or inquiry, if in writing, or a written summary of any
oral proposal or inquiry relating to an Acquisition Transaction, and agreed to
further advise Parent with respect to any developments relating to such
proposal, including the results of any discussions or negotiations with respect
thereto.
Mr. Hjelm's Support Agreement further provides that upon accepting for
payment the shares in the Offer, Purchaser will pay in cash an amount for the
Series B Preferred Stock equal to the product of the number of shares of Common
Stock to be issued upon conversion of the Series B Preferred Stock, calculated
in accordance with the terms of the Series B Preferred Stock, multiplied by the
greater of (i) the Offer Price and (ii) the amount per share of Common Stock
paid by Purchaser in the Offer. Also pursuant to Mr. Hjelm's Support Agreement,
the Company agreed that the Support Agreement does not violate the Shareholder
Agreement between InterScan Holding Ltd. and the Company dated July 8, 1997
(the "Shareholder Agreement"), in any respect. The Company also agreed that as
long as it has the right to vote with respect to Tender Shares, it will take
all action in its capacity as proxy holder under the Shareholder Agreement
consistent with the Support Agreement and the transactions contemplated
thereby, including voting the Tender Shares as described above.
Mr. Wiedenhaupt, in his Support Agreement, granted certain officers of
Parent his irrevocable proxy and attorney-in-fact (with full power of
substitution), to vote the Tender Shares in favor of the Merger and other
transactions contemplated by the Merger Agreement, against any Acquisition
Transaction and otherwise as contemplated by the Support Agreement, as
described above.
The Support Agreements also contain customary representations and warranties
of the Principal Stockholders including representations relating to title and
ownership of the Tender Shares.
The foregoing summary is qualified in its entirety by reference to the
Support Agreements filed as Exhibits 6 and 7 hereto, that are incorporated
herein by reference.
Indemnification and Insurance
Pursuant to the Merger Agreement, the Certificate of Incorporation and
Bylaws of the Surviving Corporation will contain the provisions with respect to
indemnification and exculpation from liability set forth in the Company's
Certificate of Incorporation and Bylaws and those provisions will not be
amended, repealed or otherwise modified in any manner for a period of six years
from the effective time of the Merger. Parent has agreed not to cancel the
Company's existing directors' and officers' liability insurance policy, which
expires on April 30, 2002.
Item 4. The Solicitation or Recommendation.
(a) RECOMMENDATION. THE BOARD OF DIRECTORS OF THE COMPANY, BY THE UNANIMOUS
APPROVAL OF ALL DIRECTORS PRESENT AT A SPECIAL MEETING HELD ON FEBRUARY 15,
2000, APPROVED THE MERGER AGREEMENT, 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'S STOCKHOLDERS, AND RECOMMENDED ACCEPTANCE OF THE
OFFER AND APPROVAL AND ADOPTION OF THE MERGER AGREEMENT BY THE COMPANY'S
STOCKHOLDERS.
(b) Background; Reasons for the Board's Recommendation.
Background of the Offer
Since 1992 the Company has been pursuing a growth strategy centered on
increasing the Company's sales and earnings. This strategy has been implemented
through a combination of the introduction of new products,
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the expansion of the Company's distribution channels through the appointment of
specialized sales representatives and distributors, and the acquisition of
complementary businesses in the motion and heat transfer industries, with a
goal being to consolidate a significant portion of the electronic and
electromechanical motion control segment of the motion control industry and
industrial heat transfer industry.
During this period, the Company has acquired two heat transfer businesses.
Ketema, a manufacturer of shell and tube heat exchangers, refrigeration
condensers and packaged chillers based in Grand Prairie, Texas, was acquired
for cash in April 1996, and Schmidt-Bretten, a manufacturer of plate and frame
heat exchangers based in Germany, was acquired for cash in January 1997. These
acquisitions, when combined with the Company's historical heat transfer
operations of Basco, based in Buffalo, New York, and Airtech, based in Arcade,
New York, have enabled the Company's heat transfer business to grow from
$27,354,000 in sales in 1991 to $90,586,000 in sales in 1999.
At the same time that the Company was expanding its presence in the heat
transfer business, it was engaged in an aggressive acquisition program on the
motion side of its operations with four acquisitions between 1994 and 1999.
Harowe, a manufacturer of fractional horsepower motors and feedback devices
with operations in West Chester, Pennsylvania, and St. Kitts, West Indies, was
acquired for cash in June 1994; Gettys, a motor company located in Racine,
Wisconsin was acquired for cash in April 1996; Portescap, a micro-motor company
headquartered in Switzerland, was acquired primarily for shares of Series B
Preferred Stock in July 1997; and Elmo, a Swedish manufacturer of induction and
servo motors, was acquired for cash in January 1999. These acquisitions, when
combined with the Company's historical motion operations of Controls, Deltran,
Delevan and SMD located in the Buffalo, New York area, have enabled the
Company's motion control business to grow from $23,267,000 in sales in 1991 to
$145,747,000 in sales in 1999.
The financial results of the Company's growth strategy from 1991 to 1999
were an increase in consolidated net sales from $50,621,000 in 1991 to
$236,333,000 in 1999, and an increase in net earnings from $3,600,000 in 1991
to $8,100,000 in 1999 (before dividends on the Series B Preferred Stock).
In order to fund this growth, the Company increased its primary unsecured
bank line of credit from $20,000,000 to $100,000,000 in 1998. Also, as part of
its growth strategy, the Company eliminated its cash dividend on its Common
Stock effective the first quarter of 1997, thereby allowing the Company to
utilize those funds in its operations and for acquisitions.
A key goal of the Company's growth strategy was to achieve annual
consolidated sales in the range of $225,000,000 to $250,000,000 through
internal growth and acquisitions, using primarily cash to pay for the
acquisitions. Once that level of sales was achieved, the Company's goal was to
seek a major acquisition or strategic combination using the Company's Common
Stock to fund that process. As indicated above, the Company has been successful
in achieving its sales goal. However, in the past 18 months a combination of
circumstances have prevented the Company, to date, from achieving its goal to
expand through a major acquisition, namely the increased efforts by competitors
substantially larger than the Company to consolidate the motion industry
through acquisitions and the low value placed on the Company's Common Stock in
the public stock markets.
It was in this environment that the Company was approached in the latter
half of 1998 by a private investment partnership which was interested in
exploring a possible investment in or acquisition of the Company. After
agreeing to a confidentiality and standstill agreement, that party conducted a
limited review of the Company and ultimately determined that its partners'
investment return requirements precluded it from making any offer that would
value the Company's stock at any appreciable premium over its then market
price. In the process of holding these discussions, the Company's Board of
Directors appointed a Special Committee of independent Directors, consisting of
Klaus Oertel, Victor A. Rice and Jerre L. Stead (the "Special Committee") and
retained the investment banking firm of McDonald Investments Inc. ("McDonald")
to assist it in evaluating any proposal that this party might make.
Upon learning that this investment partnership would not make any proposal,
the Company's Board authorized management with the assistance of McDonald,
under the direction of the Special Committee, to
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selectively examine on a confidential basis other possible strategic
initiatives while at the same time continuing the Company's strategy of growth
through internal expansion and acquisition.
Acting pursuant to this authorization from the Board, from time to time
throughout 1999 management and McDonald contacted, and responded to inquiries
from, financial investors and strategic buyers in the motion control business
and, to a more limited extent, the heat transfer business. Included in this
process were discussions between the Company and one of its competitors in the
motion control industry concerning a possible merger or other combination of
the two companies; preliminary discussion on this topic had taken place in June
1998. However, these discussions have not progressed and the parties have not
had any discussions since November 1999.
In furtherance of its growth strategy, the Company held discussions during
the first half of 1999 with a large publicly traded European company concerning
the Company's interest in purchasing part of the European company's controls
business. However, the European company ultimately sold that business to
Parent.
In June 1999, ING Barings LLC held a conference for companies in the motion
control industry at which the president of Company made a presentation. The
Company subsequently learned that a representative of Parent also attended the
conference and heard the presentation. Following that conference, a
representative of ING Barings, as financial adviser to Parent, contacted the
Company's president and indicated that the president of Parent would be
interested in meeting with him. The Company's president responded that he would
be interested in discussing with Parent the possible acquisition by the Company
of certain operations of the European company's controls business recently
acquired by Parent. The ING Barings representative responded that Parent viewed
itself as a buyer and not a seller. After discussing this situation with
members of the Special Committee, the Company's president agreed to meet with
Parent's president.
A meeting was held in Buffalo, New York between the Company's president and
Parent's president on September 10, 1999. At that meeting, Parent's president
indicated that Parent would be interested in discussing with the Company a
possible acquisition of the Company by Parent. The Company's president reported
this discussion to the members of the Special Committee and received
authorization to continue the discussion with Parent if Parent agreed to enter
into a confidentiality and standstill agreement, particularly in view of the
fact that its Pacific Scientific subsidiary was both a customer and a
competitor of the Company's motion group. Parent signed a confidentiality and
standstill agreement on September 20, 1999, and requested a meeting at its
offices in Washington, D.C. The Company's president reported these events to
the Special Committee at a meeting of that Committee on October 1, 1999, and
received authorization to proceed with the meeting with Parent.
A meeting was held at Parent's offices in Washington, D.C. on October 8,
1999, which was attended by the Company's president, two other officers and two
management personnel of the Company and a representative of McDonald, and
Parent's president and six other representatives of Parent and a representative
from ING Barings. Both companies made presentations concerning their businesses
at that meeting. Over the next several weeks following that meeting there were
occasional telephone conversations between representatives of McDonald, on
behalf of the Company, and representatives of ING Barings, on behalf of Parent,
concerning the level of interest of Parent in making an offer to purchase the
Company. In one of those telephone conversations in late October 1999, the ING
Barings representative indicated that, based on the information available,
Parent might be willing to consider making an offer in the range of $15.00 to
$18.00 per share.
At the same time that this was occurring the Company and McDonald, with
authorization from the Special Committee, contacted other possible strategic
buyers on a confidential basis. These potential strategic buyers conducted
limited investigation with respect to the Company's business. On November 19,
1999, a representative of McDonald met with a strategic buyer; this led to a
meeting in Buffalo, New York on November 29 and 30, 1999 between officers and
representatives of the Company and officers of that company. The Company
received from that party an indication that it might be willing to consider
pursuing an acquisition
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of the Company for a price in the range of $15.00 to $17.00 per share. On
December 17, 1999, the same party indicated to McDonald that it might consider
a price of $18.00 per share, subject to its satisfaction that there were
parties interested in possibly purchasing the Company's heat transfer business.
Based on this information, the Company advised Parent, through McDonald,
that the Company's Board had not made a decision to sell the Company. Parent
was further advised that its range of value did not adequately reflect the
Company's intrinsic value, and, in addition, the Company had received a
comparable expression of interest from another interested party. There was
sporadic contact between the Company and Parent and their respective advisers
over the next few weeks. A representative of McDonald met with a representative
of ING Barings in New York City on December 9, 1999, at which time the ING
Barings representative indicated that Parent might be willing to increase its
possible offer. ING Barings then contacted the Company on January 17, 2000 and
requested a meeting. After receiving approval from the Chairman of the Special
Committee, the Company's president met with Parent's president on January 20,
2000 at which time Parent's president indicated that Parent was interested in
pursuing a purchase of the Company for $19.00 per share. The Company's
president responded that he would need a higher offer to recommend action to
the Company's Board. Parent's president, after discussion with Parent's Board
members, offered $19.25 per share on a preliminary basis.
Following those conversations, a special telephonic meeting of the Board was
held on January 24, 2000 for the purpose of informing the directors about the
discussions with Parent and other parties and determining an appropriate course
of action. This meeting was also attended by members of the Company's
management, the Company's regular legal counsel, Jaeckle Fleischmann & Mugel,
LLP ("JF&M") and McDonald. At this meeting, management reviewed with the Board
the history and content of the discussions with Parent and the interest other
companies had expressed in discussing a possible acquisition of the Company.
The Board discussed various strategic alternatives available to the Company,
including continuing on the Company's present course as a stand-alone company,
increasing the Company's emphasis on strategic acquisitions, and exploring the
possible sale of the Company. The Board discussed the competitive environment
in the Company's industries, and the strategic and competitive challenges and
opportunities that these various alternatives might present. The Board
expressed concern that even if the Company were successful in executing its
business plans, there was risk that the value of its Common Stock might not be
reflected in higher trading prices for its stock. The Board also discussed
recent acquisition activity in the motion business, noting that such
acquisitions had been consummated at attractive valuations.
At this meeting, the Board determined that it should explore the possibility
of a sale of the Company. The Board then discussed the appropriate process to
follow in exploring a possible sale, and JF&M advised the Board as to its
duties and responsibilities in that regard. The Board discussed the possible
different approaches that might be followed, including pursuing discussions
only with the Parent and broadening the discussion to other parties. McDonald
also reviewed with the Board various valuation methodologies that would be
utilized in connection with its financial analysis of any offers the Company
might receive.
The Board discussed the merits of the Parent's interest in pursuing a cash
tender offer for all outstanding shares at $19.25 per share of Common Stock,
subject to expeditious completion of specified items of due diligence,
execution of the Support Agreements, and other customary conditions. The Board
considered this to be attractive from the perspective of its valuation and the
relative certainty of consummation. In light of the length of time a sale
process could take and the risks of delay, the Board believed that it was in
the best interests of the Company and its stockholders to proceed quickly with
the process. The Board decided to proceed promptly with Parent if Parent were
willing to move expeditiously with due diligence and contract negotiations. The
Board instructed the Company's legal and financial advisors to pursue
discussions with Parent, but to consider discussions with other interested
parties if negotiations with Parent faltered.
At a meeting held in Buffalo, New York on January 27, 2000, the Company and
Parent entered into an agreement that granted Parent the exclusive right to
negotiate a transaction with the Company through February 21, 2000. Over the
course of the next several days, as instructed by the Board, management and
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JF&M permitted Parent to conduct a due diligence review of all of the Company's
operations, and negotiated the terms of the Merger Agreement. From January 27,
2000 to February 14, 2000, Parent finalized its due diligence review.
Concurrently with this review, the Company, the Principal Stockholders, Parent,
and their respective legal and financial advisors negotiated the final terms of
the Merger Agreement, the Support Agreements, and related documents.
On February 14, 2000, all due diligence issues were addressed in a manner
acceptable to Parent and Parent indicated that it was prepared to enter into
the Merger Agreement as it had been negotiated by the parties and their
counsel. On the evening of February 14, Mr. Oertel, the Chairman of the Special
Committee, and another Director met with the Company's president and the senior
officers of the Company and representatives of JF&M and McDonald to review
Parent's offer and the terms of the Merger Agreement and related documents. On
the morning of February 15, 2000, the Company's Directors held a special
telephonic Board meeting to receive an update on the status of the discussions
and negotiations. At that meeting, McDonald reviewed with the Board its
financial analysis of Parent's offer, and JF&M reported on the status of the
discussions with respect to the Merger Agreement and related documents. JF&M
indicated that it believed that the terms of the Merger Agreement and the
related documents were satisfactory from a legal point of view and consistent
with the directors' duties. McDonald rendered to the Board an oral opinion
(which opinion was confirmed by delivery of a written opinion dated February
15, 2000, the date of execution of the Merger Agreement) as to the fairness,
from a financial point of view, to the holders of shares of Common Stock of the
$19.25 per share cash consideration to be received in the Offer and the Merger.
After discussions, the six members of the Company's eight person Board of
Directors who were in attendance at this meeting unanimously voted to approve
the Merger Agreement and the related documents and transactions, for the
reasons described below. The two Directors who were not able to attend the
meeting both expressed their support of the Board's decision in separate
telephone conversations with the Company's president. The details of the Offer
and Merger, and related documents, were agreed upon throughout the balance of
the day on February 15, 2000. The Merger Agreement and the Support Agreements
were signed and delivered in the evening of February 15, 2000, and the parties
issued a press release announcing the transaction on the morning of February
16, 2000.
Reasons for the Board's Recommendation
The Board has approved the Merger Agreement and the Offer, and recommends
that stockholders tender their shares of Common Stock in the Offer. In reaching
this determination, the Board consulted with the Company's senior officers and
legal and financial advisors, and considered the following important factors
that supported the Board's recommendations:
. The Board's knowledge of the Company's business and earnings prospects,
its needs for funds to achieve future plans, near term and long term
business risks, historical stock prices, the competitive business
environment in which the Company operates, and business and valuation
trends in the Company's industries.
. Developments in the Company's industries, including the entry of large
motion companies into the business either through the launch of new
products or the acquisition of competitors of the Company. In addition,
the Board considered the senior officers' view that the motion business
is likely to require substantially increased capital and resources for
marketing and product development, which could pose a significant
strategic and competitive challenge to the Company.
. The extensive discussions with other potential buyers undertaken before
the signing of the Merger Agreement, as described under "Background of
the Offer."
. The per share price of $19.25 to be paid in the Offer and the Merger,
which represents a premium of approximately 68% over the per share
closing price of $ 11.4375 on February 15, 2000, the last trading day
before the announcement of the execution of the Merger Agreement, and
approximately
9
<PAGE>
92.5% over the closing price of $10.00 on September 10, 1999, the date
when the Company held its first meeting with Parent.
. The opinion of McDonald dated February 15, 2000 to the effect that, as
of such date and based upon and subject to certain matters stated in
such opinion, the $19.25 per share cash consideration to be received in
the Offer and the Merger by holders of shares was fair, from a financial
point of view, to such holders. The full text of McDonald's written
opinion dated February 15, 2000, is attached hereto as Annex A and is
incorporated herein by reference. McDonald's opinion is directed only to
the fairness, from a financial point of view, of the $19.25 per share
cash consideration to be received in the Offer and the Merger by holders
of shares and is not intended to constitute, and does not constitute, a
recommendation as to whether any stockholder should tender shares
pursuant to the Offer or as to any other matter relating to the Offer or
the Merger. Holders of shares are urged to read such opinion carefully
in its entirety.
. The Board's belief that Parent is a highly attractive, interested
acquirer of the Company, with the ability to complete the Offer and the
Merger promptly without a financing contingency.
. The terms and conditions of the Merger Agreement and the Support
Agreements, including the limitations they impose on the Company's
ability to seek alternative transactions with other parties.
. The fact that the Principal Stockholders were in favor of the
transactions and willing to sign the Support Agreements.
. Possible alternatives to the Offer, including continuing to operate as
an independent public company, increasing the Company's emphasis on
strategic acquisitions, or continuing to seek a sale of the Company to
another party, and the effect, benefits and risks, short term and long
term, of such alternatives on the value of the Common Stock.
The foregoing discussion of the information and factors considered by the
Board is not meant to be exhaustive, but summarizes the material factors
considered by the Board. The Board did not quantify or attach any particular
weight to the various factors, or determine that any particular factors were
of primary importance. Rather, the Board made its determination that the
Merger Agreement and the Offer are fair to, and in the best interests of, the
Company and its stockholders based on the totality of the information
presented to and considered by the Board. Individual members of the Board may
have given different weight to these different factors.
Item 5. Person/Assets, Retained, Employed, Compensated or Used.
The Company retained McDonald to act as its financial advisor in connection
with the Offer and the Merger. Pursuant to the terms of McDonald's engagement,
the Company has agreed to pay McDonald a transaction fee of .50% of the
Transaction Value (as defined below) up to $200,000,000, 1.00% of the
Transaction Value between $200,000,000 and $250,000,000 and 3.00% of the
Transaction Value above $250,000,000. For purposes of the Offer and the
Merger, "Transaction Value" means the total amount of cash paid, directly or
indirectly, for the Common Stock, Series B Preferred Stock, Options or other
equity interests of the Company. The Company has also retained McDonald to
provide a fairness opinion with respect to the Offer and the Merger, and
McDonald's $400,000 fee for rendering the fairness opinion is credited against
the transaction fee. The Company also has agreed to reimburse McDonald for
reasonable travel and other out-of-pocket expenses, including the reasonable
fees and disbursements of its legal counsel, and to indemnify McDonald and
related parties against certain liabilities, including liabilities under the
federal securities laws, arising out of McDonald's engagement. In the ordinary
course of business, McDonald and its affiliates (including KeyCorp and its
affiliates) may actively trade or hold the securities of the Company and
Parent for their own account or for the account of customers and, accordingly,
may at any time hold a long or short position in such securities.
10
<PAGE>
Neither the Company nor any person acting on its behalf has employed or
retained or will compensate any other person to make solicitations or
recommendations to stockholders on behalf of the Company with respect to the
Offer or the Merger.
Item 6. Interest in Securities of the Subject Company.
(a) Other than the Support Agreements, no transactions in the shares of
Common Stock have been effected during the past 60 days by the Company or, to
the best of the Company's knowledge, by any executive officer, director,
affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, each of the Company's executive
officers, directors and affiliates who own shares of Common Stock presently
intend to tender such shares of Common Stock pursuant to the Offer, except for
shares of Common Stock purchaseable upon exercise of existing stock options to
the extent such existing stock options will be cancelled in exchange for cash
payments pursuant to the Merger Agreement as referenced in Item 3 above.
Pursuant to the Support Agreements, the Principal Stockholders have agreed to
(i) tender all shares of Common Stock and Series B Preferred Stock covered
thereby into the Offer, (ii) vote such shares in favor of the Merger, (iii)
vote such shares against any action or agreement that would result in a breach
of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Merger Agreement, and (iv) vote such shares
against any action or agreement (other than the Merger Agreement or the
transactions contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger or the Offer. The shares that are
the subject of the Support Agreements represent, in the aggregate,
approximately 21.6% of the outstanding shares of Common Stock giving effect to
the conversion of the Series B Preferred Stock. See "Support Agreements" under
Item 3 above.
Item 7. Purposes of the Transaction and Plans or Proposals.
(a) Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by the Company in response to the Offer which relate
to, or would result in, (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary of the Company, (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company, (iii) a tender offer for or other acquisition of
securities by the Company, any of its subsidiaries, or any other person, or
(iv) any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Company.
(b) Except as indicated in Items 3 and 4 above, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer which relate to or would result in one or more of the matters
referred to in this Item 7.
Item 8. Additional Information.
The information contained in all of the Exhibits referred to in Item 9 below
is incorporated herein by reference.
Item 9. Exhibits.
The following exhibits are filed with this Schedule 14D-9:
<TABLE>
<S> <C>
Exhibit 1 Press Release of the Company dated February 16, 2000.
Exhibit 2 Press Release of Parent dated February 16, 2000 (incorporated by
reference to Exhibit (a)(6) to the Schedule TO).
Exhibit 3 Offer to Purchase (incorporated by reference to Exhibit (a)(1) to
the Schedule TO).*
Exhibit 4 Letter of Transmittal (incorporated by reference to Exhibit (a)(2)
to the Schedule TO).*
</TABLE>
11
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<TABLE>
<S> <C>
Exhibit 5 Agreement and Plan of Merger, dated February 15, 2000, by and among
the Company, Parent and Purchaser (incorporated by reference to
Exhibit (d)(1) to Schedule TO).
Exhibit 6 Support Agreement between Parent and Kurt Wiedenhaupt dated
February 15, 2000 (incorporated by reference to Exhibit (d)(4) to
the Schedule TO).
Exhibit 7 Support Agreement among Parent, Holger Hjelm and the Company dated
February 15, 2000 (incorporated by reference to Exhibit (d)(3) to
the Schedule TO).
Exhibit 8 Consulting Agreement between Parent and Kurt Wiedenhaupt dated as
of February 15, 2000.
Exhibit 9 Confidentiality Agreement dated as of September 20, 1999 between
Parent and the Company.
Exhibit 10 Letter to the stockholders of the Company, dated February 24,
2000.*
Exhibit 11 Opinion of McDonald Investments Inc. (attached to this Schedule
14D-9 as Annex A).*
Exhibit 12 Restated Certificate of Incorporation dated October 29, 1986 and
filed with the Secretary of State of Delaware on November 6, 1986
(incorporated by reference to Exhibit 4(a) in the Registration
Statement on Form S-8, No. 33-31315, filed September 28, 1989).
Exhibit 13 Restated By-Laws, as amended on June 16, 1992 (incorporated by
reference to Exhibits B(i) -(ii) in Form 10-Q for fiscal quarter
ended October 1, 1993).
Exhibit 14 Form of Agreement relating to the Directors Supplemental Death
Benefit and Fee Continuation Plan, as amended March 11, 1991
(incorporated by reference to Exhibit 10A in Form 10-K for fiscal
year ended December 28, 1990).
Exhibit 15 Form of Indemnification Agreement with directors dated February 25,
1991 (incorporated by reference to Exhibit 10C in Form 10-K for
fiscal year ended December 28, 1990).
Exhibit 16 Form of Indemnification Agreement with officers dated February 25,
1991 (incorporated by reference to Exhibit 10D in Form 10-K for
fiscal year ended December 28, 1990).
Exhibit 17 1989 Stock Option Plan (incorporated by reference to Exhibit A in
definitive Proxy Statement dated March 15, 1989).
Exhibit 18 Amendment to 1989 Stock Option Plan (incorporated by reference to
Exhibit C(B) in the definitive Proxy Statement dated March 24,
1995).
Exhibit 19 Amendment No. 2 to the American Precision Industries Inc. 1989
Employees Stock Option Plan (incorporated by reference to Exhibit
10F in Form 10-Q for fiscal quarter ended September 30, 1998).
Exhibit 20 1993 Employees Stock Option Plan (incorporated by reference to
Exhibit A in the definitive Proxy Statement dated March 22, 1993).
Exhibit 21 Amendment to 1993 Employees Stock Option Plan (incorporated by
reference to Exhibit C(A) in the definitive Proxy Statement dated
March 24, 1995).
Exhibit 22 Amendment No. 2 to the American Precision Industries Inc. 1993
Employees Stock Option Plan (incorporated by reference to Exhibit
10E in Form 10-Q for fiscal quarter ended September 30, 1998).
Exhibit 23 1995 Employees Stock Option Plan (incorporated by reference to
Exhibit A in the definitive Proxy Statement dated March 24, 1995).
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
Exhibit 24 Amendment to the American Precision Industries Inc. 1995 Employees
Stock Option Plan (incorporated by reference to Exhibit 10B in Form
10-Q for fiscal quarter ended June 30, 1998).
Exhibit 25 Amendment No. 2 to the American Precision Industries Inc. 1995
Employees Stock Option Plan (incorporated by reference to Exhibit
10D in Form 10-Q for fiscal quarter ended September 30, 1998).
Exhibit 26 1995 Directors Stock Option Plan (incorporated by reference to
Exhibit B in the definitive Proxy Statement dated March 24, 1995).
Exhibit 27 1995 Directors Stock Option Plan, as amended and restated
(incorporated by reference to Annex C in the definitive Proxy
Statement dated March 25, 1998).
Exhibit 28 Amendment No. 1 to the American Precision Industries Inc. 1995
Directors Stock Option Plan (incorporated by reference to Exhibit
10B in Form 10-Q for fiscal quarter ended September 30, 1998).
Exhibit 29 1997 Officers Stock Option Plan (incorporated by reference to Annex
B in the definitive Proxy Statement dated March 25, 1998).
Exhibit 30 Amendment No. 1 to the American Precision Industries Inc. 1997
Officers Stock Option Plan (incorporated by reference to Exhibit
10A in Form 10-Q for fiscal quarter ended September 30, 1998).
Exhibit 31 1998 Employees Stock Option Plan (incorporated by reference to
Annex A in the definitive Proxy Statement dated March 25, 1998).
Exhibit 32 Amendment No. 1 to the American Precision Industries Inc. 1998
Employees Stock Option Plan (incorporated by reference to Exhibit
10A in Form 10-Q for fiscal quarter ended June 30, 1998).
Exhibit 33 Amendment No. 2 to the American Precision Industries Inc. 1998
Employees Stock Option Plan (incorporated by reference to Exhibit
10C in Form 10-Q for fiscal quarter ended September 30, 1998).
Exhibit 34 Stock Option and Tandem Stock Appreciation Rights Agreement dated
June 16, 1992 between Kurt Wiedenhaupt and American Precision
Industries Inc. (incorporated by reference to Exhibit 10(ii) in
Form 10-Q for fiscal quarter ended July 3, 1992).
Exhibit 35 First Amendment to American Precision Industries Inc. Grant of
Restricted Stock and Bonus to Kurt Wiedenhaupt dated July 1, 1996
(incorporated by reference to Exhibit 10(iv) in Form 10-Q for
fiscal quarter ended September 27, 1996).
Exhibit 36 Executive Employment Agreement effective as of July 1, 1997 between
Kurt Wiedenhaupt and American Precision Industries Inc.
(incorporated by reference to Exhibit 10(ii) in Form 10-Q for
fiscal quarter ended October 3, 1997).
Exhibit 37 Change in Control Agreement between American Precision Industries
Inc. and Kurt Wiedenhaupt dated July 1, 1996 (incorporated by
reference to Exhibit 10(ii) in Form 10-Q for fiscal quarter ended
September 27, 1996.)
Exhibit 38 Amendment to Change in Control Agreement between American Precision
Industries Inc. and Kurt Wiedenhaupt dated as of October 15, 1999.
Exhibit 39 Form of Change in Control Agreement between American Precision
Industries Inc. and James W. Bingel, Bruce McH. Kirchner, Craig J.
VanTine, Richard S. Warzala and Bradley Holcomb (incorporated by
reference to Exhibit 10(i) in Form 10-Q for fiscal quarter ended
September 27, 1996).
Exhibit 40 Amendment to Change in Control Agreement between American Precision
Industries Inc. and Bruce McH. Kirchner dated as of October 15,
1999.
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Exhibit 41 Amendment to Change in Control Agreement between American Precision
Industries Inc. and Craig J. VanTine dated as of October 15, 1999.
Exhibit 42 Amendment to Change in Control Agreement between American Precision
Industries Inc. and Richard S. Warzala dated as of October 15,
1999.
Exhibit 43 Change in Control Agreement between American Precision Industries
Inc. and Deborah K. Pawlowski dated as of October 15, 1999.
Exhibit 44 Change in Control Agreement between American Precision Industries
Inc. and Mark E. Wood dated as of October 15, 1999.
Exhibit 45 Executive Supplemental Retirement Plan (as restated) between
American Precision Industries Inc. and Kurt Wiedenhaupt dated July
1, 1996 (incorporated by reference to Exhibit 10(v) in Form 10-Q
for fiscal quarter ended September 27, 1996).
Exhibit 46 Amendment to Executive Supplemental Retirement Plan between
American Precision Industries Inc. and Kurt Wiedenhaupt dated as of
February 19, 1999 and Schedule A thereto (incorporated by reference
to Exhibit 10-A in Form 10-Q for fiscal quarter ended June 30,
1999).
Exhibit 47 Executive Supplemental Retirement Plan (as restated) between
American Precision Industries Inc. and Kurt Wiedenhaupt, first
dated as of July 1, 1992, as amended and restated as of July 1,
1996, and Schedule A thereto as amended effective February 19, 1999
(incorporated by reference to Exhibit 10-B in Form 10-Q for fiscal
quarter ended June 30, 1999).
Exhibit 48 Life Insurance Split-Dollar Agreement (as restated) between
American Precision Industries Inc. and Kurt Wiedenhaupt dated July
1, 1996 (incorporated by reference to Exhibit 10(vii) in Form 10-Q
for fiscal quarter ended September 27, 1996).
Exhibit 49 Amendment to Life Insurance Split-Dollar Agreement between American
Precision Industries Inc. and Kurt Wiedenhaupt dated as of February
19, 1999 and Schedule A thereto (incorporated by reference to
Exhibit 10-C in Form 10-Q for fiscal quarter ended June 30, 1999).
Exhibit 50 Life Insurance Split-Dollar Agreement (Second Restatement) between
American Precision Industries Inc. and Kurt Wiedenhaupt, first
dated August 26, 1992, as amended and restated as of February 19,
1999, and Schedule A thereto (incorporated by reference to Exhibit
10-D in Form 10-Q for fiscal quarter ended June 30, 1999).
Exhibit 51 Executive Supplemental Retirement Plan (as restated) between
American Precision Industries Inc. and James W. Bingel dated as of
October 15, 1999.
Exhibit 52 Amendment to Executive Supplemental Retirement Plan between
American Precision Industries Inc. and James W. Bingel dated as of
December 1, 1999.
Exhibit 53 Executive Supplemental Retirement Plan (as restated) between
American Precision Industries Inc. and Bruce McH. Kirchner dated as
of October 15, 1999.
Exhibit 54 Executive Supplemental Retirement Plan (as restated) between
American Precision Industries Inc. and Craig J. VanTine dated as of
October 15, 1999.
Exhibit 55 Executive Supplemental Retirement Plan (as restated) between
American Precision Industries and Richard S. Warzala first dated as
of June 1, 1983, as amended and restated as of January 4, 1997.
Exhibit 56 Amendment to Executive Supplemental Retirement Plan between
American Precision Industries Inc. and Richard S. Warzala dated as
of April 24, 1998.
Exhibit 57 Form of Life Insurance Split-Dollar Agreement between American
Precision Industries Inc. and James J. Bingel, Bruce McH. Kirchner
and Richard S. Warzala (incorporated by reference to Exhibit 10-
D(ii) in Form 10-K for fiscal year ended December 31, 1998).
</TABLE>
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* Included with Schedule 14D-9 mailed to Stockholders.
14
<PAGE>
SIGNATURE
After due 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.
/s/ Kurt Wiedenhaupt
-------------------------------------
Kurt Wiedenhaupt, President
Dated: February 24, 2000
15
<PAGE>
EXHIBIT 1
API LETTERHEAD
FOR IMMEDIATE RELEASE
CONTACTS: Deborah K. Pawlowski Patrick W. Allender
Director, Investor Relations and Corporate Chief Financial Officer
Communications Danaher Corporation
American Precision Industries Inc. (202) 828-0850
(716) 684-9700, ext. 251
AMERICAN PRECISION INDUSTRIES ANNOUNCES AGREEMENT TO BE
ACQUIRED BY DANAHER CORPORATION FOR $19.25 PER SHARE
Buffalo, NY, February 16, 2000 - American Precision Industries ("API")
(NYSE:APR) announced today that it has entered into a definitive merger
agreement with Danaher Corporation (NYSE:DHR) whereby Danaher will acquire all
of the outstanding shares of API at a cash price of $19.25 per share. The
transaction has a total value of approximately $250 million, including
assumption of debt. The directors of both companies have approved the merger
agreement.
API, headquartered in Buffalo, New York, is a $235 million revenue manufacturer
of motion products and heat transfer equipment. Motion products include
brushless DC servo motors, miniature motors, drives, feedback devices and power
transmission components. Heat transfer, which represents approximately 40% of
revenues, manufactures heat exchangers and related equipment. Danaher indicated
that, while a final decision has not been made, it would more likely than not
seek to find a buyer for the heat transfer business.
George M. Sherman, President and Chief Executive Officer of Danaher Corporation,
stated, "API's technology and products are highly complementary to our existing
motion business and greatly enhance our ability to provide motion control
solutions to a wider customer base. We look forward to working with the API
management team and associates."
Kurt Wiedenhaupt, Chairman, President and CEO of API, stated, "I am very excited
for all stakeholders in API. The similarity in strategy and values of both
companies makes this an ideal combination for the creation of value for all.
The considerable financial strength of Danaher will allow API to continue its
success in the ongoing consolidation in its industries."
Under the merger agreement, Danaher will commence a tender offer for API's
outstanding shares, which will be subject to certain conditions, including at
least a majority of API's outstanding shares, on a fully diluted basis, being
tendered without withdrawal prior to the expiration of the offer, and clearance
of the transaction under applicable antitrust laws being obtained. Shareholders
who own more than 20 percent of API's outstanding shares on a fully diluted
basis have executed agreements with Danaher to tender their shares.
(continued .........)
<PAGE>
American Precision Industries Inc. is a multi-domestic producer of products
for the motion control and heat transfer industries. (www.apicorporate.com)
Danaher Corporation is a leading manufacturer of Process/Environmental
Controls and Tools and Components. (www.danaher.com)
All stockholders should read the tender offer statement concerning the
tender offer that will be filed by Danaher, and the solicitation/recommendation
statement that will be filed by API, with the Securities and Exchange Commission
(SEC) and mailed to stockholders. These statements will contain important
information that stockholders should consider before making any decision
regarding tendering their shares. Stockholders will be able to obtain these
statements, as well as other filings containing information about Danaher and
API, without charge, at the SEC's Internet site (www.sec.gov). Copies of the
tender offer and the solicitation/recommendation statements and other SEC
filings can also be obtained, without charge, from Danaher's Corporate
Secretary.
# # #
<PAGE>
EXHIBIT 8
CONSULTING AGREEMENT
--------------------
AGREEMENT by and between Danaher Corporation, a Delaware corporation
(the "Company") and Kurt Wiedenhaupt (the "Consultant"), dated as of the 15th
day of February, 2000.
WHEREAS, pursuant to that certain Agreement and Plan of Merger (the
"Merger Agreement") dated of even date herewith by and among the Company, Alpha
Acquisition I Corp., a Delaware corporation and wholly owned subsidiary of the
Company, and American Precision Industries Inc., a Delaware corporation ("API"),
the operations of API and the Company will be combined (the "Merger"); and
WHEREAS, prior to consummation of the Merger, the Consultant will
continue to serve as Chief Executive Officer of API; and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the Consultant will be removed as Chief Executive Officer of API
immediately upon a consummation of the Merger and it is in the best interests of
the Company to retain the services of the Consultant on the terms and conditions
set forth below, and the Consultant is willing to render such services;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Consulting Period. The Consultant shall make himself available to
-----------------
render consulting services, on the terms and conditions set forth in this
Agreement, for the period beginning on the date of termination of his employment
with API (the "Effective Date"), and ending on the earlier of (i) the fifth
anniversary thereof and (ii) the date this Agreement is
<PAGE>
terminated by the Company or the Consultant upon 30 days' advance written notice
(the "Consulting Period"); provided, however, that this Agreement shall not be
-------- -------
terminable by the Company for any reason other than the death or permanent
disability of the Consultant or a continued material breach by the Consultant of
the provisions hereof, which breach is (if curable) not cured by the Consultant
within thirty days after delivery to him by the Company of a written notice
setting forth the nature of such breach in reasonable detail.
2. Consulting Services. During the Consulting Period, the Consultant
-------------------
shall render such services as may be reasonably requested from time to time by
the Board and/or the Chief Executive Officer of the Company, including, but not
limited to, assisting with the integration of API into the Company and
facilitating a "Sale" (as such term is defined in the Side Letter being entered
into between the Company and the Consultant in connection with this Agreement).
The Consultant's services shall be performed at such times and locations as
shall be mutually convenient to the Consultant and the Company.
3. Consulting Fee. In consideration of the foregoing, the Company shall
--------------
pay the Consultant a consulting fee of $400,000 per year for each year of the
Consulting Period, payable monthly in arrears.
4. Restrictive Covenants. (a) During the Consulting Period and at all
---------------------
times thereafter, the Consultant shall not disclose to anyone who is not
employed by the Company or an affiliate thereof (which will include, after the
Effective Date, API), or to any employee of the Company or an affiliate who, to
the knowledge of the Consultant, is not authorized to receive such information,
any confidential information of the Company or any of its affiliates or any
confidential information relating to the former or present customers or
potential customers of the
<PAGE>
Company or any of its affiliates of which the Consultant became aware during his
employment by the Company of any of its affiliates or of which he becomes aware
during the Consulting Period. The Consultant shall hold in a fiduciary capacity
for the benefit of the Company or any of its affiliates, as applicable, all
secret or confidential information, knowledge or data relating to the Company or
any of its affiliates and their respective businesses that the Consultant
obtained during his employment by the Company or any of its affiliates or that
he obtains during the Consulting Period and that is not public knowledge (other
than as a result of the Consultant's violation of this Section 4(a))
("Confidential Information"). The Consultant shall not communicate, divulge or
disseminate Confidential Information at any time during or after the Consulting
Period, except with the prior written consent of the Company or as otherwise
required by law or legal process.
(b) During the Consulting Period and for two years thereafter (the
"Noncompetition Period"), the Consultant shall not, directly or indirectly,
without the prior written consent of the Board, engage in or become
associated with a Competitive Activity anywhere in Europe or North America
except as may be required in the course of the Consultant's performance of
services hereunder. For purposes of this Section 4: (i) a "Competitive
Activity" means any business or other endeavor that engages primarily in
the motion control or heat transfer business or consulting with respect
thereto; and (ii) the Consultant shall be considered to have become
"associated with a Competitive Activity" if he becomes directly or
indirectly involved as an owner, principal, employee, officer, director,
independent contractor, agent, partner, advisor, representative,
stockholder, financial backer, lender or in any other capacity calling for
the rendition of the Consultant's personal services, with any individual,
partnership, corporation or other organization that is primarily engaged in
a Competitive
<PAGE>
Activity. Notwithstanding the foregoing, the Consultant may make and
retain investments during the Noncompetition Period in less than one
percent of the equity of any entity that is listed on a national securities
exchange or regularly traded in an over-the-counter market.
(c) During the Noncompetition Period, the Consultant will not,
directly or indirectly, on behalf of the Consultant or any other person,
solicit for employment by other than the Company or any of its affiliates
any person who is at that time, or has within 12 months of that time, been
employed by the Company or any of its affiliates.
(d) The Consultant acknowledges and agrees that: (i) the purpose of
the foregoing covenants, including without limitation the noncompetition
covenant of Section 4(b), is to protect the goodwill, trade secrets and
other confidential information of the Company; (ii) because of the nature
of the business in which the Company and its affiliates are engaged and
because of the nature of the confidential information to which the
Consultant has access, it would be impractical and excessively difficult to
determine the actual damages of the Company and its affiliates in the event
the Consultant breached any of the covenants of this Section 4; and (iii)
remedies at law (such as monetary damages) for any breach of the
Consultant's obligations under this Section 4 would be inadequate. The
Consultant therefore agrees and consents that if he commits any breach of a
covenant under this Section 4 or threatens to commit any such breach, the
Company shall have the right (in addition to, and not in lieu of, any other
right to remedy that may be available to it) to temporary and permanent
injunctive relief from a court of competent jurisdiction, without posting
any bond or other security and without the necessity of proof of actual
damage. With respect to any provision of this Section 4 finally determined
by a court of competent jurisdiction to be unenforceable, the Consultant
and the Company hereby
<PAGE>
agree that such court shall have jurisdiction to reform this Agreement or
any provision hereof so that it is enforceable to the maximum extent
permitted by law, and the parties agree to abide by such court's
determination. If any of the covenants of this Section 4 are determined to
be wholly or partially unenforceable in any jurisdiction, such
determination shall not be a bar to or in any way diminish the Company's
right to enforce any such covenant in any other jurisdiction.
(e) Any termination of the Consultant's provision of consulting
services or of this Agreement shall have no effect on the continuing
operation and enforceability of this Section 4.
5. Successors. (a) This Agreement is personal to the Consultant and,
----------
without the prior written consent of the Company, shall not be assignable by the
Consultant otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Consultant's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
6. Miscellaneous. (a) This Agreement shall be governed by, and construed
-------------
in accordance with, the laws of the State of Delaware, without reference to
principles of conflict of laws. In addition, each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(iii) agrees that it will not bring any action relating to this Agreement or any
of the transactions contemplated by this Agreement in any
<PAGE>
court other than a Federal or state court sitting in the State of Delaware, and
(iv) irrevocably waives any and all rights to trial by jury in any legal
proceeding arising out of or related to this Agreement or the transactions
contemplated hereby.
(b) The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
(c) This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto or their respective successors and
legal representatives.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(e) The Consultant acknowledges that his services hereunder are to be
rendered as an independent contractor, and that he is solely responsible
for the payment of all Federal, state, local and foreign taxes that are
required by applicable laws or regulations to be paid with respect to the
Consulting Fee, the "Acceleration Amount" (if any) and the "Success
Payment" (if any) as such terms are defined in the Side Letter being
entered into between the Consultant and the Company in connection with this
Agreement. Notwithstanding the preceding sentence, during the Consulting
Period the Company may withhold from amounts payable under this Agreement
all federal, state, local and foreign taxes that are required to be
withheld by applicable laws or regulations.
(f) The Consultant and the Company acknowledge that this Agreement
supersedes any other agreement between them concerning the subject matter
hereof;
provided, however, that this Agreement shall in no way supercede, replace,
-------- -------
or otherwise affect in any
<PAGE>
manner any rights which the Consultant has under any agreements between
Consultant and API in respect of his employment by API, termination of such
employment or otherwise.
(g) Notwithstanding any other provision of this Agreement, this
Agreement shall be null and void and of no effect if the Merger is not
consummated.
<PAGE>
IN WITNESS WHEREOF, the Consultant has hereunto set his hand and, pursuant to
the authorization of its Board, the Company has caused this Agreement to be
executed in its name on its behalf, all as of the day and year first above
written.
/s/ Kurt Wiedenhaupt
----------------------
KURT WIEDENHAUPT
DANAHER CORPORATION
By: /s/ Daniel L. Comas
------------------------
<PAGE>
EXHIBIT 9
API LETTERHEAD
September 20, 1999
Mr. Daniel L. Comas
Vice President, Corporate Development
Danaher Corporation
1250 24/th/ Street, N.W.
Washington, D.C. 20037
Dear Mr. Comas:
It has been brought to both of our attention that it may be in the
best interests of our respective companies, Danaher Corporation ("DHR") and
American Precision Industries Inc. ("API"), to explore the possibility of
engaging in a business transaction with each other. To assist DHR and API in
reaching a mutual decision concerning such a possible transaction, each of DHR
and API agrees that it may deliver to the other certain information which is
nonpublic, confidential or proprietary in nature (the "Evaluation Material").
API and DHR both agree that their respective delivery and the other
party's use of the Evaluation Material is subject to the terms of this letter
agreement as follows:
1. Each of API and DHR, directly or through its representatives, may
disclose such Evaluation Material to the other party as it deems advisable in
connection with the other party's evaluation of a possible business transaction.
Each of API and DHR shall accept and hold such Evaluation Material in strict
confidence in accordance with the provisions of this letter agreement.
2. Each party agrees that the other party reserves the right, in its
sole and absolute discretion, to reject any or all proposals, to decline to
furnish further Evaluation Material and to terminate discussions and
negotiations with the other party at any time. The exercise by either party of
these rights shall not affect the enforceability of any provision of this letter
agreement. Each party further understands and agrees that unless and until a
definitive Transaction Agreement has been executed and delivered, no contract or
agreement providing for a transaction between the parties shall be deemed to
exist between the parties, and neither party will be under any legal obligation
of any kind whatsoever with respect to such transaction by virtue of this or any
written or oral expression thereof, except in the case of this letter agreement,
for the matters specifically agreed to herein. For purposes of this letter
agreement, the term "definitive Transaction Agreement" shall mean a binding,
fully negotiated final agreement with respect to a business transaction, but
does not include an
<PAGE>
Mr. Daniel L. Comas
Vice President, Corporate Development
Danaher Corporation
September 20, 1999
Page 2.
executed letter of intent or any other preliminary written agreement, nor does
it include any verbal acceptance of any offer made by either party.
3. The Evaluation Material shall be deemed to include, without
limitation: (a) information provided prior to, on or following the date hereof;
(b) all analyses, compilations, forecasts, studies or other documents prepared
by either API or DHR, their respective agents, representatives (including
attorneys, accountants and financial advisers) or employees which contain or
otherwise reflect such information; and (c) all nonpublic information furnished
to either API or DHR, whether disclosed in writing or orally or obtained by
either API or DHR through their observation of the other party's facilities.
4. The Evaluation Material will be kept strictly confidential and,
without the prior written consent of either API or DHR, as the case may be, the
party to whom such Evaluation Material was disclosed (and its directors,
officers, employees, agents and representatives) shall not: (a) distribute or
disclose the Evaluation Material to any third party; or (b) use the Evaluation
Material for any purpose other than in connection with evaluating a possible
business transaction with the other party. Each of API and DHR also agrees to
transmit the Evaluation Material only to those individuals who are actively and
directly participating in the evaluation of a business transaction and who are
informed of and who have agreed to comply with the terms of this letter
agreement and who are instructed not to make use of the Evaluation Material in a
manner inconsistent herewith. The party to whom such Evaluation Material was
disclosed shall be responsible for any breach of the terms of this letter
agreement by such individuals.
5. The Evaluation Material shall not include information which the
party to whom such Evaluation Material was disclosed can demonstrate: (a) is or
becomes generally available to the public other than by breach by such party of
its agreements herein contained; (b) was prior to disclosure hereunder, or
thereafter becomes, known to such party on a nonconfidential basis; (c) is known
to the recipient prior to the date of disclosure; or (d) is independently
developed by recipient as shown by its written records and without breach of any
obligation under this letter agreement.
6. Each of API and DHR when requested in writing by the other party
shall immediately return or destroy (and confirm in writing to the other party
such fact) the Evaluation Material, including all notes, copies, reproductions,
summaries, analyses or extracts thereof, then in the possession or under the
control of the party to whom such Evaluation Material was disclosed either
furnished by the other party hereunder or prepared by or on behalf of the party
to whom such Evaluation Material was disclosed. Such return or destruction
shall not abrogate the continuing obligations of the party to whom such
Evaluation Material was disclosed under this letter agreement.
<PAGE>
Mr. Daniel L. Comas
Vice President, Corporate Development
Danaher Corporation
September 20, 1999
Page 3.
7. Neither API nor DHR will disclose to any person or entity the
fact that discussions, investigations or negotiations are taking place
concerning a possible business transaction between API and DHR; provided,
however, that nothing in this letter agreement shall preclude or prohibit either
party from making public disclosures that in the opinion of its independent
legal counsel are required by the Securities Act of 1933, the Securities
Exchange Act of 1934 or the rules or regulations adopted pursuant thereto, or by
rules or regulations of any exchange or market self-regulatory organization that
provides a trading market for such party's securities. Prior to such disclosure
the party making such disclosure will use its best efforts to communicate fully
with the other party concerning the need for and content of any public
disclosure.
8. In the event that either party is requested or required (by
interrogatories, requests for information or documents, subpoena, civil
investigative demand or similar process) to disclose any of the Evaluation
Material, including the fact that discussions, investigations or negotiations
are taking place concerning a possible business transaction, such party shall
provide the other party with prompt written notice so that it may seek a
protective order or other appropriate remedy. In the event such protection or
other remedy is not obtained, either API or DHR, as the case may be, shall
furnish only that portion of Evaluation Material which it is advised by
independent legal counsel is legally required and shall exercise best efforts to
obtain assurance that confidential treatment will be accorded to such Evaluation
Material.
9. It is understood that this letter agreement does not constitute
an agreement to enter into a business transaction and does not obligate API or
DHR to enter into any further discussions or agreements, or to refrain from
conducting discussions or investigations with any other parties regarding
possible business transactions with those other parties.
10. DHR, on behalf of itself and each of its affiliates (as defined
in Rule 12b-2 under the Securities Exchange Act of 1934), agrees that until the
expiration of two (2) years from the date of this letter agreement, it and its
affiliates will not, directly or indirectly, without the prior written approval
of API (a) in any manner acquire, agree to acquire or make any public or private
proposal or offer to acquire, directly or indirectly, any securities, assets or
property of API or any of its subsidiaries, whether such agreement, proposal or
offer is with or to API or any of its subsidiaries or with or to a third party,
(b) propose to enter into, directly or indirectly, any tender or exchange offer,
recapitalization, merger or other business combination involving API or any of
its subsidiaries, (c) make, or in any way participate, directly or indirectly,
in any "solicitation" of "proxies" (as such terms are used in the proxy rules of
the Securities and Exchange Commission) to vote, or seek to advise or influence
any person with respect to the voting of, any voting securities of API, (d)
submit any shareholder proposal for consideration or approval at API's
shareholders' meeting, (e) form, join or in any
<PAGE>
Mr. Daniel L. Comas
President and Chief Executive Officer
Danaher Corporation
September 20, 1999
Page 4.
way participate as a "syndicate" or "group" with a "person" (within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934) with respect to any
voting securities of API, (f) otherwise act, alone or in concert with others, to
seek to control or influence the management, board of directors or policies of
API, (g) disclose any intention, plan or arrangement inconsistent with the
foregoing, or (h) advise, encourage, provide assistance (including financial
assistance) to or hold discussions with any other persons in connection with any
of the foregoing. If at any time during such period DHR or any of its affiliates
is approached by any third party concerning its or such third party's
participation or intentions with respect to any of the above, DHR shall promptly
inform API of the nature of such contact and the parties thereto.
11. Until the earlier of (a) the execution by the parties of a
definitive Transaction Agreement or (b) two (2) years from the date of this
letter agreement, each party agrees not to solicit or make offers of employment
to any of the executive officers or other management level employees of the
other party or any of its subsidiaries without the prior written consent of the
other party; provided, however, that the foregoing shall not (i) prohibit a
party from hiring any such persons who respond to a national advertisement for
employment placed by such party, or (ii) prohibit such party from hiring any
such person who, without solicitation by such party, contacts such party
regarding employment.
12. Each party hereby acknowledges that it is aware, and that it has
advised or will advise its directors, officers, employees, agents and advisers
who are informed as to the matters which are the subject of this letter
agreement, that the United States securities laws prohibit any person who has
material, nonpublic information concerning the matters which are the subject of
this letter agreement from purchasing or selling securities of a company which
may be a party to a transaction of the type contemplated by this letter
agreement or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell such securities.
13. The terms of this letter agreement shall inure to the benefit of,
and be binding upon, each of API and DHR and their respective successors and
assigns. Without prejudice to the other rights and remedies otherwise available
at law or in equity, each of API and DHR and their respective agents and
representatives shall be entitled to equitable relief by way of injunction if
the other party or any of its agents or representatives breach or threaten to
breach any of the provisions of this letter agreement.
14. It is understood and agreed that no failure or delay by either
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
<PAGE>
Mr. Daniel L. Comas
President and Chief Executive Officer
Danaher Corporation
September 20, 1999
Page 5.
15. Should any provision of this letter agreement be held to be void,
invalid, unenforceable or illegal by a court of competent jurisdiction, the
validity and enforceability of the other provisions shall not be affected
thereby.
16. This letter agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The parties hereby agree to have any dispute
hereunder tried in the State Courts of New York or in the Federal District Court
of the United States that sit in Erie County, New York, and each party hereby
submits to the jurisdiction of those courts.
17. This letter agreement may be executed in counterparts, each of
which shall be deemed to be an original, but both of which shall constitute one
and the same agreement.
Please indicate DHR's acceptance of and agreement to the terms of this
letter agreement by signing the enclosed copy of the same and returning it to
me, whereupon this will become a binding agreement between DHR and API.
Very truly yours,
AMERICAN PRECISION INDUSTRIES INC.
By: /s/ Kurt Wiedenhaupt
Kurt Wiedenhaupt
Chairman of the Board, President
and Chief Executive Officer
Acknowledged and agreed to
this day of 1999
DANAHER CORPORATION
By /s/ Daniel L. Comas
---------------------------------
Daniel L. Comas
Vice President, Corporate Development
<PAGE>
EXHIBIT 10
[LOGO OF API]
February 24, 2000
To Our Stockholders:
I am pleased to inform you that American Precision Industries Inc. ("API")
has entered into an Agreement and Plan of Merger dated February 15, 2000 (the
"Merger Agreement") providing for the acquisition of API by Alpha Acquisition I
Corp. ("Purchaser"), which is a newly formed Delaware corporation wholly-owned
by Danaher Corporation ("Danaher"), a New York Stock Exchange listed company.
Pursuant to the Merger Agreement, Purchaser has today commenced a tender offer
(the "Offer") to purchase all of the outstanding shares of API's Common Stock
at a cash price of $19.25 per share. Following consummation of the Offer and
subject to certain conditions, Purchaser will be merged into API (the
"Merger"). In the Merger, each share of API's Common Stock not acquired in the
Offer will be converted into the right to receive $19.25 in cash. The Offer is
currently scheduled to expire at 12:00 midnight, New York City time, on March
22, 2000.
Your Board of Directors has unanimously approved the Offer and the Merger
and has determined that the Offer and the Merger are fair to, and in the best
interests of, the stockholders of API, and unanimously recommends that
stockholders accept the Offer and tender their shares of Common Stock pursuant
to the Offer.
In separate agreements, InterScan Holdings Ltd. and I have agreed with
Danaher to tender into the Offer our shares of Common Stock or Series B
Preferred Stock representing, in the aggregate, approximately 21.6% of the
outstanding shares of Common Stock (assuming conversion of the Series B
Preferred Stock) and otherwise to support the Merger.
Purchaser's Offer to Purchase and related materials, including a Letter of
Transmittal to be used for tendering your shares, are enclosed with this
letter. These documents set forth in detail the terms and conditions of the
Offer and the Merger and provide instructions on how to tender your shares. I
urge you to read the enclosed materials carefully.
Attached to this letter is a copy of API's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Recommendation") filed with the Securities
and Exchange Commission, which includes information regarding the factors
considered by your Board of Directors in its deliberations, and certain other
information regarding the Offer and the Merger. Included as Annex A to the
Recommendation is a copy of the written opinion, dated February 15, 2000, of
McDonald Investments Inc., API's financial advisor, to the effect that, as of
such date and based upon and subject to certain matters stated therein, the
$19.25 per share cash consideration to be received in the Offer and the Merger
by holders of shares was fair, from a financial point of view, to such holders.
You are urged to read such opinion carefully in its entirety.
On behalf of the Board of Directors, I thank you for your continued support.
/s/ Kirt Wiedenhaupt
Kurt Wiedenhaupt
President and Chief Executive
Officer
<PAGE>
EXHIBIT 11
McDonald Investments Inc. Letterhead
February 15, 2000
PERSONAL AND CONFIDENTIAL
- -------------------------
Board of Directors
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, NY 14225
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of American Precision Industries Inc. (the
"Company") of the Consideration (as defined below) to be received by the Company
pursuant to the Agreement and Plan of Merger dated as of February 15, 2000 (the
"Agreement") by and among Danaher Corporation ("Danaher"), API Acquisition
Corporation, a wholly-owned subsidiary of Danaher ("Merger Sub") and the
Company.
Pursuant to the Agreement, and subject to the terms and conditions set
forth therein, Danaher will promptly cause Merger Sub to commence a tender offer
(the "Offer") for all of the Company's issued and outstanding shares of Common
Stock, par value $.66 2/3 per share (the "Common Stock") together with
associated preferred share purchase rights issued pursuant to an Amended and
Restated Rights Agreement dated as of January 29, 1999 at a price of $19.25 per
share in cash (the "Offer Price"). Upon completion of the Offer, and subject to
the terms and conditions set forth in the Agreement, Merger Sub will be merged
with and into the Company (the "Merger"), all issued and outstanding shares
(except shares held in treasury, shares owned by Danaher or Merger Sub and
shares as to which appraisal rights have been perfected in accordance with
applicable provisions of Delaware law) will be converted into the right to
receive a cash payment in the amount of $19.25 per share (the "Merger Price,"
and, collectively with the Offer Price, the "Consideration").
McDonald Investments Inc., as part of its investment banking business, is
customarily engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
<PAGE>
Board of Directors
February 15, 2000
Page 2
In connection with rendering this opinion, we have reviewed and analyzed,
among other things, the following: i the Agreement, including the exhibits and
schedules thereto; ii certain publicly available information concerning the
Company, including Annual Reports on Form 10-K of the Company for the years
ended December 31, 1995, 1996, 1997 and 1998 and the Quarterly Reports on Form
10-Q of the Company for the quarters ended September 30, 1998, March 31, 1999,
June 30, 1999 and September 30, 1999; (iii) certain other internal information,
primarily financial in nature, including projections, concerning the business
and operations of API furnished to us by management for the purposes of our
analysis; (iv) certain publicly available information with respect to certain
other companies that we believe to be comparable to API and the trading markets
for certain of such other companies' securities; (v) visited selected Company
manufacturing and development facilities as well as interviewed members of the
Company's senior management team and (vi) certain publicly available information
concerning the nature and terms of certain other transactions that we consider
relevant to our inquiry. We have also met with certain officers and employees
of the Company to discuss the business and prospects of the Company, as well as
other matters we believe relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided us or publicly available and have assumed and relied upon
the representations and warranties of the Company and Danaher contained in the
Agreement. We have not been engaged to, and have not independently attempted
to, verify any of such information. We have also relied upon the management of
the Company as to the reasonableness and achievability of the financial and
operating projections (and the assumptions and bases thereof) provided to us
and, with your consent, we have assumed that such projections reflect the best
currently available estimates and judgements of the Company's management. We
have not been engaged to assess the reasonableness or achievability of such
projections or the assumptions on which they were based and express no view as
to such projections or assumptions. In addition, we have not conducted a
physical inspection or appraisal of any of the assets, properties or facilities
of the Company nor have we been furnished with any such evaluation or appraisal.
We have also assumed that the conditions to the transaction as set forth in the
Agreement would be satisfied and that the transaction would be consummated on a
timely basis in the manner contemplated by the Agreement.
It should be noted that this opinion is based on economic and market
conditions and other circumstances existing on, and information made available
as of, the date hereof and does not address any matters subsequent to such date.
In addition, our opinion is, in any event, limited to the fairness, as of the
date hereof, from a financial point of view, to the holders of the Company's
Common Stock of the Consideration and does not address the Company's underlying
business decision to effect the transactions contemplated by the Agreement or
any other terms thereof.
We have acted as financial advisor to the Company in connection with the
transactions contemplated by the Agreement and will receive from the Company a
fee for our services, a significant portion of which is contingent upon the
consummation of the transactions
<PAGE>
Board of Directors
February 15, 2000
Page 3
contemplated thereby, as well as the Company's agreement to indemnify us under
certain circumstances. We will also receive a fee for rendering this opinion.
In the ordinary course of our business, we may actively trade securities of
the Company and Danaher for our own account 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 opinion is directed to the Board of Directors of
the Company and may not be disclosed, summarized, excerpted from or otherwise
publicly referred to without our prior written consent. Our opinion does not
constitute a recommendation to any stockholder of the Company as to whether such
shareholder should tender or refrain from tendering shares of Common Stock
pursuant to the Offer or as to how such shareholder should vote at the
stockholders' meeting held in connection with the Merger.
Based upon and subject to the foregoing and such other matters as we
consider relevant, it is our opinion that as of the date hereof, the
Consideration to be received in the Offer and the Merger, considered as a single
transaction, is fair, from a financial point of view, to the holders of the
Company's Common Stock.
Very truly yours,
/s/ McDonald Investments Inc.
McDONALD INVESTMENTS INC.
<PAGE>
EXHIBIT 38
AMENDMENT TO
------------
CHANGE IN CONTROL AGREEMENT
---------------------------
AGREEMENT by and between American Precision Industries Inc., a
Delaware corporation (the "Company"), with offices at 2777 Walden Avenue,
Buffalo, New York 14225 and KURT WIEDENHAUPT (the "Executive"), an individual
residing at 280 Carnoustie Road, East Aurora, New York 14052, dated as of the
15/th/ day of October 1999.
WITNESSETH
WHEREAS, the Company and the Executive entered into an agreement
entitled Change in Control Agreement, dated as of the 1/st/ day of July 1996,
and
WHEREAS, the Board of Directors of the Company has authorized the
following amendment to the Change in Control Agreement, and the Executive has
agreed to this amendment,
NOW, THEREFORE, the Company and the Executive agree as follows:
1. The Change in Control Agreement is amended by the addition of the
following new Section 3(h) at the end of Section 3, effective October 15, 1999:
(h) If Paragraph 5(b) of the Life Insurance Split-Dollar
Agreement between the Company and Executive, as amended and restated as of
February 19, 1999, (the "Split-Dollar Agreement") effects a transfer from the
Company to the Executive of all or a portion of the Company's interest in the
cash surrender value of the Policy that is the subject of the Split-Dollar
Agreement, by reason of an increase in the Executive's and a corresponding
decrease in the Company's interest in the cash surrender value of the Policy
upon the termination of the Executive's employment, then the Company shall pay
to the Executive an additional amount that is equal to 75% of the Potential
Income Tax Gross-Up described in the next sentence. For the purposes of this
Section 3(h), the Potential Income Tax Gross-Up is an amount such that, if it
were paid to the Executive together with the amount of the cash surrender value
transferred to the Executive pursuant to Paragraph 5(b) of the Split-Dollar
Agreement, the Executive would retain, after payment of taxes at the marginal
rate described in Schedule A of the Split-Dollar Agreement, the amount of the
transferred cash surrender value, provided that, in the definition of marginal
rate, there shall be substituted the date immediately preceding the date of the
termination of the Executive's employment for the premium payment date. The
Accounting Firm, as defined in Section 6(b) of this Agreement, that would make
any determination regarding the Excise Tax under Section 6 of this Agreement
shall determine the amount of the Potential Income Tax Gross-Up.
<PAGE>
2. The Change in Control Agreement shall in all other respects
remain in effect.
IN WITNESS WHEREOF, the Executive has executed this Agreement, and the
Company, pursuant to the authorization of its Board of Directors, has caused
this Agreement to be executed, as of the day and year first written above.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ Bruce McH. Kirchner
-------------------------------------
Bruce McH. Kirchner,
Vice President and Chief Financial Officer
/s/ James J. Tanous
---------------------------------------
James J. Tanous, Secretary
/s/ Kurt Wiedenhaupt
---------------------------------------
Kurt Wiedenhaupt, individually
-2-
<PAGE>
EXHIBIT 40
AMENDMENT TO
------------
CHANGE IN CONTROL AGREEMENT
---------------------------
AGREEMENT by and between American Precision Industries Inc., a
Delaware corporation (the "Company"), with offices at 2777 Walden Avenue,
Buffalo, New York 14225 and Bruce McH. Kirchner (the "Executive"), an individual
residing at 172 Castlebrooke Lane, Williamsville, New York 14221, dated as of
the 15/th/ day of October 1999.
WITNESSETH
WHEREAS, the Company and the Executive entered into an agreement
entitled Change in Control Agreement, dated as of the 25th day of February 1997,
and
WHEREAS, the Board of Directors of the Company has authorized the
following amendment to the Change in Control Agreement, and the Executive has
agreed to this amendment,
NOW, THEREFORE, the Company and the Executive agree as follows:
1. The first sentence of Section 3(c) of the Change in Control
Agreement is hereby amended to increase the lump sum severance payment
percentage from 100% to 120%, so that the sentence shall now read as follows:
A lump sum severance payment in an amount equal to 120% of the
Executive's "Annual Compensation."
2. The Change in Control Agreement shall in all other respects
remain in effect.
IN WITNESS WHEREOF, the Executive has executed this Agreement, and the
Company, pursuant to the authorization of its Board of Directors, has caused
this Agreement to be executed, as of the day and year first written above.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ Kurt Wiedenhaupt
-------------------------------------------
Kurt Wiedenhaupt,
President and Chief Executive Officer
EXECUTIVE
/s/ Burce McH. Kirchner
---------------------------------------------
Bruce McH. Kirchner
<PAGE>
EXHIBIT 41
AMENDMENT TO
------------
CHANGE IN CONTROL AGREEMENT
---------------------------
AGREEMENT by and between American Precision Industries Inc., a
Delaware corporation (the "Company"), with offices at 2777 Walden Avenue,
Buffalo, New York 14225 and Craig J. Van Tine (the "Executive"), an individual
residing at 6270 Creekbend Court, Clarence Center, New York 14032, dated as of
the 15/th/ day of October 1999.
WITNESSETH
WHEREAS, the Company and the Executive entered into an agreement
entitled Change in Control Agreement, dated as of the 21st day of October 1996,
and
WHEREAS, the Board of Directors of the Company has authorized the
following amendment to the Change in Control Agreement, and the Executive has
agreed to this amendment,
NOW, THEREFORE, the Company and the Executive agree as follows:
1. The first sentence of Section 3(c) of the Change in Control
Agreement is hereby amended to increase the lump sum severance payment
percentage from 100% to 120%, so that the sentence shall now read as follows:
A lump sum severance payment in an amount equal to 120% of the
Executive's "Annual Compensation."
2. The Change in Control Agreement shall in all other respects
remain in effect.
IN WITNESS WHEREOF, the Executive has executed this Agreement, and the
Company, pursuant to the authorization of its Board of Directors, has caused
this Agreement to be executed, as of the day and year first written above.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ Kurt Wiedenhaupt
----------------------------------------------
Kurt Wiedenhaupt,
President and Chief Executive Officer
EXECUTIVE
/s/ Craig J. Van Tine
----------------------------------------------
Craig J. Van Tine
<PAGE>
EXHIBIT 42
AMENDMENT TO
------------
CHANGE IN CONTROL AGREEMENT
---------------------------
AGREEMENT by and between American Precision Industries Inc., a
Delaware corporation (the "Company"), with offices at 2777 Walden Avenue,
Buffalo, New York 14225 and Richard S. Warzala (the "Executive"), an individual
residing at 102 Southwedge Drive, Amherst, New York 14068, dated as of the
15/th/ day of October 1999.
WITNESSETH
WHEREAS, the Company and the Executive entered into an agreement
entitled Change in Control Agreement, dated as of the 21st day of October 1996,
and
WHEREAS, the Board of Directors of the Company has authorized the
following amendment to the Change in Control Agreement, and the Executive has
agreed to this amendment,
NOW, THEREFORE, the Company and the Executive agree as follows:
1. The first sentence of Section 3(c) of the Change in Control
Agreement is hereby amended to increase the lump sum severance payment
percentage from 100% to 200%, so that the sentence shall now read as follows:
A lump sum severance payment in an amount equal to 200% of the
Executive's "Annual Compensation."
2. The Change in Control Agreement shall in all other respects
remain in effect.
IN WITNESS WHEREOF, the Executive has executed this Agreement, and the
Company, pursuant to the authorization of its Board of Directors, has caused
this Agreement to be executed, as of the day and year first written above.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ Kurt Wiedenhaupt
-------------------------------------------
Kurt Wiedenhaupt,
President and Chief Executive Officer
EXECUTIVE
/s/ Richard S. Warzala
--------------------------------------------
Richard S. Warzala
<PAGE>
EXHIBIT 43
CHANGE IN CONTROL AGREEMENT
---------------------------
AGREEMENT by and between American Precision Industries Inc., a
Delaware corporation (the "Company"), with offices at 2777 Walden Avenue,
Buffalo, New York 14225 and DEBORAH K. PAWLOWSKI (the "Executive"), an
individual residing at 8310 Manchester Place, East Amherst, New York 14051,
dated as of the 15th day of October, 1999.
WHEREAS, the Company recognizes that the current business environment
makes it difficult to attract and retain highly qualified executives unless a
certain degree of security can be offered to such individuals against
organizational and personnel changes which frequently follow changes in control
of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause executives
to consider major career changes in an effort to assure financial security for
themselves and their families; and
WHEREAS, the Company desires to assure fair treatment of its
executives in the event of a Change in Control (as defined below) and to allow
them to make critical career decisions without undue time pressure and financial
uncertainty, thereby increasing their willingness to remain with the Company
notwithstanding the outcome of a possible Change in Control transaction; and
WHEREAS, the Company recognizes that its executives will be involved
in evaluating or negotiating any offers, proposals or other transactions which
could result in Changes in Control of the Company and believes that it is in the
best interest of the Company and its stockholders for such executives to be in a
position, free from personal financial and employment considerations, to be able
to assess objectively and pursue aggressively the interests of the Company's
stockholders in making these evaluations and carrying on such negotiations; and
WHEREAS, the Board of Directors (the "Board") of the Company believes
it is essential to provide the Executive with compensation arrangements upon a
Change in Control which provide the Executive with individual financial security
and which are competitive with those of other corporations, and in order to
accomplish these objectives, the Board has caused the Company to enter into this
Agreement.
NOW THEREFORE, the parties, for good and valuable consideration and
intending to be legally bound, agree as follows:
1. Operation and Term of Agreement. This Agreement shall be
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effective immediately upon its execution. This Agreement may be terminated by
the Company upon
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twenty-four (24) months' advance written notice to the Executive; provided,
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however, that after a Change in Control of the Company during the term of this
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Agreement, this Agreement shall remain in effect until all of the obligations of
the parties hereunder are satisfied and the Protection Period has expired. Prior
to a Change in Control this Agreement shall immediately terminate upon
termination of the Executive's employment or upon the Executive's ceasing to be
an elected officer of the Company, except in the case of such termination under
circumstances set forth in Section 2(e) below.
2. Certain Definitions. For purposes of this Agreement, the
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following words and phrases shall have the following meanings:
(a) "Cause" shall mean (i) the continued failure by the Executive to
perform his material responsibilities and duties hereunder (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness), (ii) the engaging by the Executive in willful or reckless conduct
which is demonstrably injurious to the Company monetarily or otherwise, (iii)
the conviction of the Executive of a felony, or (iv) the commission or omission
of any act by the Executive that is materially inimical to the best interests of
the Company and that constitutes on the part of the Executive common law fraud
or malfeasance, misfeasance or nonfeasance of duty; provided, however, that
"cause" shall not include the Executive's lack of professional qualifications.
For purposes of this Agreement, an act, or failure to act, on the Executive's
part shall be considered "willful" or "reckless" only if done, or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company. The Executive's employment
shall not be deemed to have been terminated for "cause" unless the Company shall
have given or delivered to the Executive (A) reasonable notice setting forth the
reasons for the Company's intention to terminate the Executive's employment for
"cause," (B) a reasonable opportunity, at any time during the thirty-day period
after the Executive's receipt of such notice, for the Executive, together with
his counsel, to be heard before the Board, and (C) a Notice of Termination (as
defined in Section 9 below) stating that, in the good faith opinion of not less
than a majority of the entire membership of the Board, the Executive was guilty
of the conduct set forth in clauses (i), (ii), (iii) or (iv) of the first
sentence of this Section 2(a).
(b) "Change in Control" shall mean:
(i) on or after the date of execution of this Agreement, any person
(which, for all purposes hereof, shall include, without limitation, an
individual, sole proprietorship, partnership, unincorporated association,
unincorporated syndicate, unincorporated organization, trust, body corporate and
a trustee, executor, administrator or other legal representative) (a "Person")
or any group of two or more Persons acting in concert who or which becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing, or acquires the right to control or direct, or to acquire through
the conversion of securities or the exercise of warrants or other rights to
acquire securities, 25% or more of the combined voting power of the Company's
then outstanding securities; provided that for the purposes of this Agreement,
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(A) "voting power" means the right to vote for the election of directors, and
(B) any determination of percentage combined voting power shall be
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made on the basis that (x) all securities beneficially owned by the Person or
group or over which control or direction is exercised by the Person or group
which are convertible into securities carrying voting rights have been converted
(whether or not then convertible) and all options, warrants or other rights
which may be exercised to acquire securities beneficially owned by the Person or
group or over which control or direction is exercised by the Person or group
have been exercised (whether or not then exercisable), and (y) no such
convertible securities have been converted by any other Person and no such
options, warrants or other rights have been exercised by any other Person; or
(ii) at any time subsequent to the date of execution of this
Agreement there shall be elected or appointed to the Board any director or
directors whose appointment or election to the Board or nomination for election
by the Company's stockholders was not approved by a vote of at least a majority
of the directors then in office who were either directors on the date of
execution of this Agreement or whose election or appointment or nomination for
election was previously so approved; or
(iii) a reorganization, merger, consolidation, combination,
corporate restructuring or similar transaction (an "Event"), in each case, in
respect of which the beneficial owners of the outstanding Company voting
securities immediately prior to such Event do not, following such Event,
beneficially own, directly or indirectly, more than 50% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the Company and any resulting Parent in
substantially the same proportions as their ownership, immediately prior to such
Event, of the outstanding Company voting securities; or
(iv) an Event involving the Company as a result of which 33%
or more of the members of the board of directors of the Parent or the Company
are not persons who were members of the Board immediately prior to the earlier
of (x) the Event, (y) execution of an agreement the consummation of which would
result in the Event, or (z) announcement by the Company of an intention to
effect the Event.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Disability," for purposes of this Agreement, shall mean total
disability as defined in any long-term disability plan sponsored by the Company
in which the Executive participates, or, if there is no such plan or it does not
define such term, then it shall mean the physical or mental incapacity of the
Executive which prevents him from substantially performing the duties of the
office or position to which he was elected or appointed by the Board for a
period of at least 180 days and the incapacity is expected to be permanent and
continuous through the Executive's 65th birthday.
(e) The "Change in Control Date" shall be any date during the term of
this Agreement on which a Change in Control occurs. Anything in this Agreement
to the contrary notwithstanding, if the Executive's employment or status as an
elected officer with
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the Company is terminated within six months prior to the date on which a Change
in Control occurs, and it is reasonably demonstrated that such termination (i)
was at the request of a third party who has taken steps reasonably calculated or
intended to effect a Change in Control or (ii) otherwise arose in connection
with or anticipation of a Change in Control, then for all purposes of this
Agreement the "Change in Control Date" shall mean the date immediately prior to
the date of such termination.
(f) "Good Reason" means:
(i) the assignment to the Executive within the Protection
Period of any duties inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements, authority, duties
or responsibilities), or any other action which results in a diminution in such
position, authority, duties or responsibilities excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) a reduction by the Company in the Executive's base
salary in effect immediately before the beginning of the Protection Period or as
increased from time to time thereafter;
(iii) a failure by the Company to maintain plans providing
benefits at least as beneficial as those provided by any benefit or compensation
plan (including, without limitation, any incentive compensation plan, bonus plan
or program, retirement, pension or savings plan, life insurance plan, health and
dental plan or disability plan) in which the Executive is participating
immediately before the beginning of the Protection Period, or any action taken
by the Company which would adversely affect the Executive's participation in or
reduce the Executive's opportunity to benefit under any of such plans or deprive
the Executive of any material fringe benefit enjoyed by him immediately before
the beginning of the Protection Period; provided, however, that a reduction in
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benefits under the Company's tax-qualified retirement, pension or savings plans
or its life insurance plan, health and dental plan, disability plans or other
insurance plans which reduction applies equally to all participants in the plans
and has a de minimis effect on the Executive shall not constitute "Good Reason"
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for termination by the Executive;
(iv) the Company's requiring the Executive, without the
Executive's written consent, to be based at any office or location in excess of
50 miles from his office location immediately before the beginning of the
Protection Period, except for travel reasonably required in the performance of
the Executive's responsibilities;
(v) any purported termination by the Company of the Executive's
employment for Cause otherwise than as referred to in Section 9 of this
Agreement; or
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(vi) any failure by the Company to obtain the assumption of
the obligations contained in this Agreement by any successor as contemplated in
Section 8(c) of this Agreement.
(g) "Parent" means any entity which directly or indirectly through one
or more other entities owns or controls more than 50% of the voting stock or
common stock of the Company.
(h) "Protection Period" means the period beginning on the Change in
Control Date and ending on the last day of the thirty-sixth (36th) calendar
month following the Change in Control Date.
(i) "Subsidiary" means a company 50% or more of the voting securities
of which are owned, directly or indirectly, by the Company.
3. Benefits Upon Termination Within a Protection Period. If, during
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a Protection Period, the Executive's employment is terminated by the Company
other than for Cause or Disability or other than as a result of the Executive's
death or the Executive terminates his employment for Good Reason, the Company
shall pay to the Executive in a lump sum in cash within 10 days after the date
of termination the aggregate of the following amounts and shall provide the
following benefits:
(a) The Executive's full base salary and vacation pay (for vacation
not taken) accrued but unpaid through the date of termination at the rate in
effect at the time of the termination plus an amount equal to the product of the
Executive's normative bonus under the applicable bonus plan for the fiscal year
including the date of termination and a fraction, the numerator of which is the
number of days in such fiscal year through the date of termination and the
denominator of which is 365; and
(b) The amount in the "bonus bank" for the Executive under all
bonus plans in which the Executive participates; and
(c) A lump sum severance payment in an amount equal to 50% of the
Executive's "Annual Compensation." For purposes of this Agreement, "Annual
Compensation" shall be an amount equal to the aggregate of the Executive's
annual base salary from the Company and its Subsidiaries as set by the Board and
in effect immediately prior to the date of termination or Change in Control
(whichever is greater) plus the highest bonus accrued by the Company for the
Executive in any of the Company's three fiscal years preceding the date of
termination or Change in Control (whichever is greater); and
(d) Within 30 days of the date of termination, upon surrender by the
Executive of his outstanding options to purchase common shares of the Company
("Common Shares") granted to the Executive by the Company (the "Outstanding
Options") and any stock appreciation rights ("SARs"), an amount in respect of
each Outstanding Option and SAR (whether vested or not) equal to the difference
between the exercise price of such Outstanding
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Options and SARs and the higher of (x) the fair market value of the Common
Shares at the time of such termination (but not less than the closing price for
the Common Shares on the New York Stock Exchange, or such other national stock
exchange on which such shares may be listed, on the last trading day such shares
traded prior to the date of termination), and (y) the highest price paid for
Common Shares or, in the cases of securities convertible into Common Shares or
carrying a right to acquire Common Shares, the highest effective price (based on
the prices paid for such securities) at which such securities are convertible
into Common Shares or at which Common Shares may be acquired, by any person or
group whose acquisition of voting securities has resulted in a Change in Control
of the Company; provided, however, that this Section 3(d) shall not apply to the
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surrender of any Outstanding Option that is an incentive stock option (within
the meaning of Section 422 of the Code); and
(e) A lump sum payment equal to 25% of the Executive's Annual
Compensation, such payment representing an agreed substitute for three years'
additional entitlement to (A) benefits and service credit for benefits (or
similar payments) under any pension, savings, defined contribution and other
deferred compensation plans maintained by the Company and (B) any medical
insurance, life insurance, health and accident, disability and other employee
benefit plans, programs and arrangements with the Company (including, without
limitation, provision of, or payment in lieu of, an automobile); and
(f) All of the Executive's benefits accrued under the supplemental
retirement plans, excess retirement plans and deferred compensation plans
maintained by the Company or any of its Subsidiaries shall become immediately
vested in full; and
(g) All of the Executive's Outstanding Options shall become
immediately vested and exercisable in full.
4. Non-exclusivity of Rights. Nothing in this Agreement shall
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prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, practices, policies or programs
provided by the Company or any of its Subsidiaries and for which the Executive
may qualify, nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any stock option or other agreements with the
Company or any of its Subsidiaries. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan, practice, policy
or program of the Company or any of its Subsidiaries at or subsequent to the
date of termination shall be payable in accordance with such plan, practice,
policy or program; provided, however, that the Executive shall not be entitled
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to severance pay, or benefits similar to severance pay, under any plan,
practice, policy, or program generally applicable to employees of the Company or
any of its Subsidiaries.
5. Full Settlement; No Obligation to Seek Other Employment; Legal
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Expenses. The Company's obligation to make the payments provided for in this
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Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek
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other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement. The
Company agrees to pay, upon written demand therefor by the Executive, all legal
fees and expenses which the Executive may reasonably incur as a result of any
dispute or contest (regardless of the outcome thereof) by or with the Company or
others regarding the validity or enforceability of, or liability under, any
provision of this Agreement. In any such action brought by the Executive for
damages or to enforce any provisions of this Agreement, he shall be entitled to
seek both legal and equitable relief and remedies, including, without
limitation, specific performance of the Company's obligations hereunder, in his
sole discretion.
6. Certain Additional Payments by the Company.
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(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution made, or
benefit provided (including, without limitation, the acceleration of any
payment, distribution or benefit and the acceleration of exercisability of any
stock option or stock appreciation right), by the Company to or for the benefit
of the Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 6) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code (or any
similar excise tax) or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any Excise Tax, income tax or payroll tax) imposed upon the
Gross-Up Payment and any interest or penalties imposed with respect to such
taxes, the Executive retains from the Gross-Up Payment an amount equal to the
Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 6(c), all determinations
required to be made under this Section 6, including determination of whether a
Gross-Up Payment is required and of the amount of any such Gross-Up Payment,
shall be made by the independent public accounting firm which is then retained
by the Company to audit its financial statements (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the date of termination, if applicable, or
such earlier time as is requested by the Company, provided that any
determination that an Excise Tax is payable by the Executive shall be made on
the basis of substantial authority. The initial Gross-Up Payment, if any, as
determined pursuant to this Section 6(b), shall be paid to the Executive within
five business days of the receipt of the Accounting Firm's determination. If
the Accounting Firm determines that no Excise Tax is payable by the Executive,
it shall furnish the Executive with a written opinion that he has substantial
authority not to report any Excise Tax on his Federal income tax return. Any
determination by the Accounting Firm meeting the requirements of this Section
6(b) shall be binding upon the Company and the Executive; subject only to
payments pursuant to the following sentence based on a determination that
additional Gross-Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such
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additional payments, including any interest and penalties, are referred to
herein as the "Gross-Up Underpayment"). In the event that the Company exhausts
its remedies pursuant to Section 6(c) and the Executive thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Gross-Up Underpayment that has occurred and any such Gross-Up
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive. The fees and disbursements of the Accounting Firm shall be paid by
the Company.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but not later than ten business days after the Executive receives
written notice of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which he gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim and that it will bear the costs and
provide the indemnification as required by this sentence, the Executive shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company and reasonably
satisfactory to the Executive,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
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expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax, income tax or payroll tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 6(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial
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jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
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such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax, income tax
or payroll tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
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limitations relating to the payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due shall
be limited solely to such contested amount, unless the Executive agrees
otherwise. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 6(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 6(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 6(c) a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then any obligation of the Executive to repay such advance shall
be forgiven and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
7. Confidential Information. The Executive shall hold in a
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fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
Subsidiaries, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
Subsidiaries and which shall not be or become public knowledge (other than by
acts of the Executive or his representatives in violation of this Agreement).
After the date of termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 7 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
8. Successors.
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(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of
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and be enforceable by the Executive's legal representatives or successor(s) in
interest. The Executive may designate a successor (or successors) in interest to
receive any and all amounts due the Executive in accordance with this Agreement
should the Executive be deceased at any time of payment. Such designation of
successor(s) in interest shall be made in writing and signed by the Executive,
and delivered to the Company pursuant to Section 12(b) hereof. Any such
designation may be made to any legal person, persons, trust or the Executive's
estate as he shall determine in his sole discretion. In the event any
designation shall be incomplete, or in the event the Executive shall fail to
designate a successor in interest, his estate shall be deemed to be his
successor in interest to receive such portion of all of the payments due
hereunder. The Executive may amend, change or revoke any such designation at any
time and from time to time, in the same manner. This Section 8(a) shall not
supersede any designation of beneficiary or successor in interest made by the
Executive, or separately covered, under any other plan, practice, policy or
program of the Company.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company and any Parent of
the Company or any successor and without regard to the form of transaction
utilized to acquire the business or assets of the Company, to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession or
parentage had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid (and any Parent of the Company or any successor) which is required
by this clause to assume and agree to perform this Agreement or which otherwise
assumes and agrees to perform this Agreement.
9. Notice of Termination. Any termination of the Executive's
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employment by the Company for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 12(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated and (iii) if the date of termination is other than the date of receipt
of such notice, specifies the termination date (which date shall be not more
than 15 days after the giving of such notice). The failure by the Executive to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.
10. Requirements and Benefits if Executive is Employee of Subsidiary
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of Company. If the Executive is an employee of any Subsidiary of the Company,
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he shall be entitled to all of the rights and benefits of this Agreement as
though he were an employee of the Company and the term "Company" as used herein
shall be deemed to include the
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Subsidiary by whom the Executive is employed. The Company hereby unconditionally
and irrevocably guarantees the performance of its Subsidiary hereunder.
11. Arbitration. The Company and the Executive shall attempt to
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resolve between them any dispute which arises hereunder. If they cannot agree
within ten (10) days after either party submits a demand for arbitration to the
other party, then the issue shall be submitted to arbitration with each party
having the right to appoint one (1) arbitrator and those two (2) arbitrators
mutually selecting a third arbitrator. The rules of the American Arbitration
Association for the arbitration of commercial disputes shall apply and the
decision of 2 of the 3 arbitrators shall be final. The arbitrators must reach a
decision within sixty (60) days after the selection of the third arbitrator.
The arbitration shall take place in Buffalo, New York. The arbitrators shall
apply Delaware law.
12. Miscellaneous.
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(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, to the addresses for
each party as first written above or to such other address as either party shall
have furnished to the other in writing in accordance herewith. Notices and
communications to the Company shall be addressed to the attention of the
Company's Corporate Secretary. Notice and communications shall be effective
when actually received by the addressee.
(c) Whenever reference is made herein to any specific plan or program
of the Company, to the extent that the Executive is not a participant therein or
has no benefit accrued thereunder, whether vested or contingent, as of the
Change in Control Date, then such reference herein shall be null and void and of
no effect, and the Executive shall acquire no additional benefit as a result of
such reference.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(e) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
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(f) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(g) Except in the case of termination of employment or elected officer
status under the circumstances set forth in Section 2(e) above, upon a
termination of the Executive's employment or upon the Executive's ceasing to be
an elected officer of the Company, in each case, prior to the Change in Control
Date, there shall be no further rights under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from the Board, the Company has caused this
Agreement to be executed as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ Kurt Wiedenhaupt
---------------------------------------
Kurt Wiedenhaupt, President
and Chief Executive Officer
EXECUTIVE
/s/ Deborah K. Pawlowski
---------------------------------------
Deborah K. Pawlowski
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<PAGE>
EXHIBIT 44
CHANGE IN CONTROL AGREEMENT
---------------------------
AGREEMENT by and between American Precision Industries Inc., a
Delaware corporation (the "Company"), with offices at 2777 Walden Avenue,
Buffalo, New York 14225 and MARK E. WOOD (the "Executive"), an individual
residing at 15 Squire Court, Getzville, New York 14068, dated as of the 15th day
of October, 1999.
WHEREAS, the Company recognizes that the current business environment
makes it difficult to attract and retain highly qualified executives unless a
certain degree of security can be offered to such individuals against
organizational and personnel changes which frequently follow changes in control
of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause executives
to consider major career changes in an effort to assure financial security for
themselves and their families; and
WHEREAS, the Company desires to assure fair treatment of its
executives in the event of a Change in Control (as defined below) and to allow
them to make critical career decisions without undue time pressure and financial
uncertainty, thereby increasing their willingness to remain with the Company
notwithstanding the outcome of a possible Change in Control transaction; and
WHEREAS, the Company recognizes that its executives will be involved
in evaluating or negotiating any offers, proposals or other transactions which
could result in Changes in Control of the Company and believes that it is in the
best interest of the Company and its stockholders for such executives to be in a
position, free from personal financial and employment considerations, to be able
to assess objectively and pursue aggressively the interests of the Company's
stockholders in making these evaluations and carrying on such negotiations; and
WHEREAS, the Board of Directors (the "Board") of the Company believes
it is essential to provide the Executive with compensation arrangements upon a
Change in Control which provide the Executive with individual financial security
and which are competitive with those of other corporations, and in order to
accomplish these objectives, the Board has caused the Company to enter into this
Agreement.
NOW THEREFORE, the parties, for good and valuable consideration and
intending to be legally bound, agree as follows:
1. Operation and Term of Agreement. This Agreement shall be
-------------------------------
effective immediately upon its execution. This Agreement may be terminated by
the Company upon twenty-four (24) months' advance written notice to the
Executive; provided, however, that
------------------
<PAGE>
after a Change in Control of the Company during the term of this Agreement, this
Agreement shall remain in effect until all of the obligations of the parties
hereunder are satisfied and the Protection Period has expired. Prior to a Change
in Control this Agreement shall immediately terminate upon termination of the
Executive's employment or upon the Executive's ceasing to be an elected officer
of the Company, except in the case of such termination under circumstances set
forth in Section 2(e) below.
2. Certain Definitions. For purposes of this Agreement, the
-------------------
following words and phrases shall have the following meanings:
(a) "Cause" shall mean (i) the continued failure by the Executive to
perform his material responsibilities and duties hereunder (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness), (ii) the engaging by the Executive in willful or reckless conduct
which is demonstrably injurious to the Company monetarily or otherwise, (iii)
the conviction of the Executive of a felony, or (iv) the commission or omission
of any act by the Executive that is materially inimical to the best interests of
the Company and that constitutes on the part of the Executive common law fraud
or malfeasance, misfeasance or nonfeasance of duty; provided, however, that
"cause" shall not include the Executive's lack of professional qualifications.
For purposes of this Agreement, an act, or failure to act, on the Executive's
part shall be considered "willful" or "reckless" only if done, or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company. The Executive's employment
shall not be deemed to have been terminated for "cause" unless the Company shall
have given or delivered to the Executive (A) reasonable notice setting forth the
reasons for the Company's intention to terminate the Executive's employment for
"cause," (B) a reasonable opportunity, at any time during the thirty-day period
after the Executive's receipt of such notice, for the Executive, together with
his counsel, to be heard before the Board, and (C) a Notice of Termination (as
defined in Section 9 below) stating that, in the good faith opinion of not less
than a majority of the entire membership of the Board, the Executive was guilty
of the conduct set forth in clauses (i), (ii), (iii) or (iv) of the first
sentence of this Section 2(a).
(b) "Change in Control" shall mean:
(i) on or after the date of execution of this Agreement, any
person (which, for all purposes hereof, shall include, without limitation, an
individual, sole proprietorship, partnership, unincorporated association,
unincorporated syndicate, unincorporated organization, trust, body corporate and
a trustee, executor, administrator or other legal representative) (a "Person")
or any group of two or more Persons acting in concert who or which becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing, or acquires the right to control or direct, or to acquire through
the conversion of securities or the exercise of warrants or other rights to
acquire securities, 25% or more of the combined voting power of the Company's
then outstanding securities; provided that for the purposes of this Agreement,
-------------
(A) "voting power" means the right to vote for the election of directors, and
(B) any determination of percentage combined voting power shall be made on the
basis that (x) all securities beneficially owned by the Person or group or over
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<PAGE>
which control or direction is exercised by the Person or group which are
convertible into securities carrying voting rights have been converted (whether
or not then convertible) and all options, warrants or other rights which may be
exercised to acquire securities beneficially owned by the Person or group or
over which control or direction is exercised by the Person or group have been
exercised (whether or not then exercisable), and (y) no such convertible
securities have been converted by any other Person and no such options, warrants
or other rights have been exercised by any other Person; or
(ii) at any time subsequent to the date of execution of this
Agreement there shall be elected or appointed to the Board any director or
directors whose appointment or election to the Board or nomination for election
by the Company's stockholders was not approved by a vote of at least a majority
of the directors then in office who were either directors on the date of
execution of this Agreement or whose election or appointment or nomination for
election was previously so approved; or
(iii) a reorganization, merger, consolidation, combination,
corporate restructuring or similar transaction (an "Event"), in each case, in
respect of which the beneficial owners of the outstanding Company voting
securities immediately prior to such Event do not, following such Event,
beneficially own, directly or indirectly, more than 50% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the Company and any resulting Parent in
substantially the same proportions as their ownership, immediately prior to such
Event, of the outstanding Company voting securities; or
(iv) an Event involving the Company as a result of which 33%
or more of the members of the board of directors of the Parent or the Company
are not persons who were members of the Board immediately prior to the earlier
of (x) the Event, (y) execution of an agreement the consummation of which would
result in the Event, or (z) announcement by the Company of an intention to
effect the Event.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Disability," for purposes of this Agreement, shall mean total
disability as defined in any long-term disability plan sponsored by the Company
in which the Executive participates, or, if there is no such plan or it does not
define such term, then it shall mean the physical or mental incapacity of the
Executive which prevents him from substantially performing the duties of the
office or position to which he was elected or appointed by the Board for a
period of at least 180 days and the incapacity is expected to be permanent and
continuous through the Executive's 65th birthday.
(e) The "Change in Control Date" shall be any date during the term of
this Agreement on which a Change in Control occurs. Anything in this Agreement
to the contrary notwithstanding, if the Executive's employment or status as an
elected officer with the Company is terminated within six months prior to the
date on which a Change in Control
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<PAGE>
occurs, and it is reasonably demonstrated that such termination (i) was at the
request of a third party who has taken steps reasonably calculated or intended
to effect a Change in Control or (ii) otherwise arose in connection with or
anticipation of a Change in Control, then for all purposes of this Agreement the
"Change in Control Date" shall mean the date immediately prior to the date of
such termination.
(f) "Good Reason" means:
(i) the assignment to the Executive within the Protection
Period of any duties inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements, authority, duties
or responsibilities), or any other action which results in a diminution in such
position, authority, duties or responsibilities excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) a reduction by the Company in the Executive's base
salary in effect immediately before the beginning of the Protection Period or as
increased from time to time thereafter;
(iii) a failure by the Company to maintain plans providing
benefits at least as beneficial as those provided by any benefit or compensation
plan (including, without limitation, any incentive compensation plan, bonus plan
or program, retirement, pension or savings plan, life insurance plan, health and
dental plan or disability plan) in which the Executive is participating
immediately before the beginning of the Protection Period, or any action taken
by the Company which would adversely affect the Executive's participation in or
reduce the Executive's opportunity to benefit under any of such plans or deprive
the Executive of any material fringe benefit enjoyed by him immediately before
the beginning of the Protection Period; provided, however, that a reduction in
------------------
benefits under the Company's tax-qualified retirement, pension or savings plans
or its life insurance plan, health and dental plan, disability plans or other
insurance plans which reduction applies equally to all participants in the plans
and has a de minimis effect on the Executive shall not constitute "Good Reason"
----------
for termination by the Executive;
(iv) the Company's requiring the Executive, without the
Executive's written consent, to be based at any office or location in excess of
50 miles from his office location immediately before the beginning of the
Protection Period, except for travel reasonably required in the performance of
the Executive's responsibilities;
(v) any purported termination by the Company of the Executive's
employment for Cause otherwise than as referred to in Section 9 of this
Agreement; or
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<PAGE>
(vi) any failure by the Company to obtain the assumption of
the obligations contained in this Agreement by any successor as contemplated in
Section 8(c) of this Agreement.
(g) "Parent" means any entity which directly or indirectly through one
or more other entities owns or controls more than 50% of the voting stock or
common stock of the Company.
(h) "Protection Period" means the period beginning on the Change in
Control Date and ending on the last day of the thirty-sixth (36th) calendar
month following the Change in Control Date.
(i) "Subsidiary" means a company 50% or more of the voting securities
of which are owned, directly or indirectly, by the Company.
3. Benefits Upon Termination Within a Protection Period. If, during
----------------------------------------------------
a Protection Period, the Executive's employment is terminated by the Company
other than for Cause or Disability or other than as a result of the Executive's
death or the Executive terminates his employment for Good Reason, the Company
shall pay to the Executive in a lump sum in cash within 10 days after the date
of termination the aggregate of the following amounts and shall provide the
following benefits:
(a) The Executive's full base salary and vacation pay (for vacation
not taken) accrued but unpaid through the date of termination at the rate in
effect at the time of the termination plus an amount equal to the product of the
Executive's normative bonus under the applicable bonus plan for the fiscal year
including the date of termination and a fraction, the numerator of which is the
number of days in such fiscal year through the date of termination and the
denominator of which is 365; and
(b) The amount in the "bonus bank" for the Executive under all
bonus plans in which the Executive participates; and
(c) A lump sum severance payment in an amount equal to 50% of the
Executive's "Annual Compensation." For purposes of this Agreement, "Annual
Compensation" shall be an amount equal to the aggregate of the Executive's
annual base salary from the Company and its Subsidiaries as set by the Board and
in effect immediately prior to the date of termination or Change in Control
(whichever is greater) plus the highest bonus accrued by the Company for the
Executive in any of the Company's three fiscal years preceding the date of
termination or Change in Control (whichever is greater); and
(d) Within 30 days of the date of termination, upon surrender by the
Executive of his outstanding options to purchase common shares of the Company
("Common Shares") granted to the Executive by the Company (the "Outstanding
Options") and any stock appreciation rights ("SARs"), an amount in respect of
each Outstanding Option and SAR (whether vested or not) equal to the difference
between the exercise price of such Outstanding
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<PAGE>
Options and SARs and the higher of (x) the fair market value of the Common
Shares at the time of such termination (but not less than the closing price for
the Common Shares on the New York Stock Exchange, or such other national stock
exchange on which such shares may be listed, on the last trading day such shares
traded prior to the date of termination), and (y) the highest price paid for
Common Shares or, in the cases of securities convertible into Common Shares or
carrying a right to acquire Common Shares, the highest effective price (based on
the prices paid for such securities) at which such securities are convertible
into Common Shares or at which Common Shares may be acquired, by any person or
group whose acquisition of voting securities has resulted in a Change in Control
of the Company; provided, however, that this Section 3(d) shall not apply to the
-----------------
surrender of any Outstanding Option that is an incentive stock option (within
the meaning of Section 422 of the Code); and
(e) A lump sum payment equal to 25% of the Executive's Annual
Compensation, such payment representing an agreed substitute for three years'
additional entitlement to (A) benefits and service credit for benefits (or
similar payments) under any pension, savings, defined contribution and other
deferred compensation plans maintained by the Company and (B) any medical
insurance, life insurance, health and accident, disability and other employee
benefit plans, programs and arrangements with the Company (including, without
limitation, provision of, or payment in lieu of, an automobile); and
(f) All of the Executive's benefits accrued under the supplemental
retirement plans, excess retirement plans and deferred compensation plans
maintained by the Company or any of its Subsidiaries shall become immediately
vested in full; and
(g) All of the Executive's Outstanding Options shall become
immediately vested and exercisable in full.
4. Non-exclusivity of Rights. Nothing in this Agreement shall
-------------------------
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plans, practices, policies or programs
provided by the Company or any of its Subsidiaries and for which the Executive
may qualify, nor shall anything herein limit or otherwise affect such rights as
the Executive may have under any stock option or other agreements with the
Company or any of its Subsidiaries. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan, practice, policy
or program of the Company or any of its Subsidiaries at or subsequent to the
date of termination shall be payable in accordance with such plan, practice,
policy or program; provided, however, that the Executive shall not be entitled
-----------------
to severance pay, or benefits similar to severance pay, under any plan,
practice, policy, or program generally applicable to employees of the Company or
any of its Subsidiaries.
5. Full Settlement; No Obligation to Seek Other Employment; Legal
--------------------------------------------------------------
Expenses. The Company's obligation to make the payments provided for in this
- --------
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek
-6-
<PAGE>
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement. The
Company agrees to pay, upon written demand therefor by the Executive, all legal
fees and expenses which the Executive may reasonably incur as a result of any
dispute or contest (regardless of the outcome thereof) by or with the Company or
others regarding the validity or enforceability of, or liability under, any
provision of this Agreement. In any such action brought by the Executive for
damages or to enforce any provisions of this Agreement, he shall be entitled to
seek both legal and equitable relief and remedies, including, without
limitation, specific performance of the Company's obligations hereunder, in his
sole discretion.
6. Certain Additional Payments by the Company.
------------------------------------------
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution made, or benefit
provided (including, without limitation, the acceleration of any payment,
distribution or benefit and the acceleration of exercisability of any stock
option or stock appreciation right), by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code (or any similar
excise tax) or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any Excise Tax, income tax or payroll tax) imposed upon the Gross-Up
Payment and any interest or penalties imposed with respect to such taxes, the
Executive retains from the Gross-Up Payment an amount equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 6(c), all determinations
required to be made under this Section 6, including determination of whether a
Gross-Up Payment is required and of the amount of any such Gross-Up Payment,
shall be made by the independent public accounting firm which is then retained
by the Company to audit its financial statements (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the date of termination, if applicable, or
such earlier time as is requested by the Company, provided that any
determination that an Excise Tax is payable by the Executive shall be made on
the basis of substantial authority. The initial Gross-Up Payment, if any, as
determined pursuant to this Section 6(b), shall be paid to the Executive within
five business days of the receipt of the Accounting Firm's determination. If
the Accounting Firm determines that no Excise Tax is payable by the Executive,
it shall furnish the Executive with a written opinion that he has substantial
authority not to report any Excise Tax on his Federal income tax return. Any
determination by the Accounting Firm meeting the requirements of this Section
6(b) shall be binding upon the Company and the Executive; subject only to
payments pursuant to the following sentence based on a determination that
additional Gross-Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such
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<PAGE>
additional payments, including any interest and penalties, are referred to
herein as the "Gross-Up Underpayment"). In the event that the Company exhausts
its remedies pursuant to Section 6(c) and the Executive thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Gross-Up Underpayment that has occurred and any such Gross-Up
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive. The fees and disbursements of the Accounting Firm shall be paid by
the Company.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but not later than ten business days after the Executive receives
written notice of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which he gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim and that it will bear the costs and
provide the indemnification as required by this sentence, the Executive shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company and reasonably
satisfactory to the Executive,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
- ------------------
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax, income tax or payroll tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 6(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial
-8-
<PAGE>
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
-----------------
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax, income tax
or payroll tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
--------------------
limitations relating to the payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due shall
be limited solely to such contested amount, unless the Executive agrees
otherwise. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 6(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 6(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 6(c) a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then any obligation of the Executive to repay such advance shall
be forgiven and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
7. Confidential Information. The Executive shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
Subsidiaries, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
Subsidiaries and which shall not be or become public knowledge (other than by
acts of the Executive or his representatives in violation of this Agreement).
After the date of termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it. In no event shall an asserted
violation of the provisions of this Section 7 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
8. Successors.
----------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of
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<PAGE>
and be enforceable by the Executive's legal representatives or successor(s) in
interest. The Executive may designate a successor (or successors) in interest to
receive any and all amounts due the Executive in accordance with this Agreement
should the Executive be deceased at any time of payment. Such designation of
successor(s) in interest shall be made in writing and signed by the Executive,
and delivered to the Company pursuant to Section 12(b) hereof. Any such
designation may be made to any legal person, persons, trust or the Executive's
estate as he shall determine in his sole discretion. In the event any
designation shall be incomplete, or in the event the Executive shall fail to
designate a successor in interest, his estate shall be deemed to be his
successor in interest to receive such portion of all of the payments due
hereunder. The Executive may amend, change or revoke any such designation at any
time and from time to time, in the same manner. This Section 8(a) shall not
supersede any designation of beneficiary or successor in interest made by the
Executive, or separately covered, under any other plan, practice, policy or
program of the Company.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company and any Parent of
the Company or any successor and without regard to the form of transaction
utilized to acquire the business or assets of the Company, to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession or
parentage had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid (and any Parent of the Company or any successor) which is required
by this clause to assume and agree to perform this Agreement or which otherwise
assumes and agrees to perform this Agreement.
9. Notice of Termination. Any termination of the Executive's
---------------------
employment by the Company for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 12(b) of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated and (iii) if the date of termination is other than the date of receipt
of such notice, specifies the termination date (which date shall be not more
than 15 days after the giving of such notice). The failure by the Executive to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right of the
Executive hereunder or preclude the Executive from asserting such fact or
circumstance in enforcing his rights hereunder.
10. Requirements and Benefits if Executive is Employee of Subsidiary
----------------------------------------------------------------
of Company. If the Executive is an employee of any Subsidiary of the Company,
- ----------
he shall be entitled to all of the rights and benefits of this Agreement as
though he were an employee of the Company and the term "Company" as used herein
shall be deemed to include the
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<PAGE>
Subsidiary by whom the Executive is employed. The Company hereby unconditionally
and irrevocably guarantees the performance of its Subsidiary hereunder.
11. Arbitration. The Company and the Executive shall attempt to
-----------
resolve between them any dispute which arises hereunder. If they cannot agree
within ten (10) days after either party submits a demand for arbitration to the
other party, then the issue shall be submitted to arbitration with each party
having the right to appoint one (1) arbitrator and those two (2) arbitrators
mutually selecting a third arbitrator. The rules of the American Arbitration
Association for the arbitration of commercial disputes shall apply and the
decision of 2 of the 3 arbitrators shall be final. The arbitrators must reach a
decision within sixty (60) days after the selection of the third arbitrator.
The arbitration shall take place in Buffalo, New York. The arbitrators shall
apply Delaware law.
12. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, to the addresses for
each party as first written above or to such other address as either party shall
have furnished to the other in writing in accordance herewith. Notices and
communications to the Company shall be addressed to the attention of the
Company's Corporate Secretary. Notice and communications shall be effective
when actually received by the addressee.
(c) Whenever reference is made herein to any specific plan or program
of the Company, to the extent that the Executive is not a participant therein or
has no benefit accrued thereunder, whether vested or contingent, as of the
Change in Control Date, then such reference herein shall be null and void and of
no effect, and the Executive shall acquire no additional benefit as a result of
such reference.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(e) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
-11-
<PAGE>
(f) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(g) Except in the case of termination of employment or elected officer
status under the circumstances set forth in Section 2(e) above, upon a
termination of the Executive's employment or upon the Executive's ceasing to be
an elected officer of the Company, in each case, prior to the Change in Control
Date, there shall be no further rights under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from the Board, the Company has caused this
Agreement to be executed as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ Kurt Wiedenhaupt
-------------------------------------
Kurt Wiedenhaupt, President
and Chief Executive Officer
EXECUTIVE
/s/ Mark E. Wood
---------------------------------------
Mark E. Wood
-12-
<PAGE>
EXHIBIT 51
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
(as restated)
AGREEMENT by and between AMERICAN PRECISION INDUSTRIES INC. (the "Company),
a Delaware corporation with its principal office at 2777 Walden Avenue, Buffalo,
New York 14225, and James W. Bingel ("Employee"), residing at 1 Hummingbird
Court, Orchard Park, New York 14127, dated as of October 15, 1999.
WITNESSETH:
WHEREAS, the Employee is currently employed by the Company in the capacity
of Vice President; and
WHEREAS, the Company desires to continue to provide the Employee with
additional incentive in connection with his employment by the Company; and
WHEREAS, the Employee is a member of a select management group of the
Company;
NOW, THEREFORE, the parties agree as follows:
1. Conditions.
----------
(a) The payment of benefits to the Employee or designated beneficiaries
under this Agreement is conditioned upon the Employee's compliance with the
terms of the this Agreement.
(b) The Company shall withhold Federal, state, and local taxes with
respect to all payments and benefits under this Agreement to the extent required
by law.
2. Normal Retirement.
-----------------
(a) If the Employee retires from employment with the Company on or
after his 65/th/ birthday or if the Employee becomes totally and permanently
disabled while employed by the Company, the Company shall pay to the Employee
the amount specified under paragraph I in Schedule A to this Agreement (the
"Normal Retirement Benefit"), reduced in accordance with Section 7.
(b) Subject to Section 8, such amount shall be paid in 180 equal monthly
installments, the first of which shall be paid within thirty days after
<PAGE>
the Employee ceases to be employed by the Company, and the balance of which
shall be paid on or about the first business day of each following month for 179
months.
(c) If the Employee dies after becoming entitled to payment under this
Section 2, but before all of the payments provided for have been made, the
unpaid balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
3. Involuntary Termination.
-----------------------
(a) If the Employee's employment is terminated involuntarily (that is,
by the Company) before age 65, he will receive the percentage of the Normal
Retirement Benefit determined in accordance with the following vesting schedule,
reduced in accordance with Section 7:
<TABLE>
<CAPTION>
Full Years of Service Percentage
Vested
<S> <C>
Less than ten 0
Ten 50
Eleven 55
Twelve 60
Thirteen 65
Fourteen 70
Fifteen 75
Sixteen 80
Seventeen 85
Eighteen 90
Nineteen 95
Twenty or more 100
===================================
</TABLE>
(b) Subject to Section 8, the amount so determined shall be paid in
180 equal monthly installments, the first of which shall be paid within thirty
2
<PAGE>
days after the Employee ceases to be employed by the Company, and the balance of
which shall be paid on or about the first business day of each following month
for 179 months.
(c) If the Employee dies after becoming entitled to payment under this
Section 3, but before all of the payments provided for have been made, the
unpaid balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
4. Voluntary Termination.
---------------------
If the Employee voluntarily resigns from employment with the Company
before age 65 he shall forfeit all benefits under this Agreement.
5. Early Retirement.
----------------
(a) If the Employee voluntarily retires early, the Board of Directors
of the Company shall determine, in its discretion, whether the Employee shall be
entitled to any benefit under this Agreement.
(b) If the Employee retires early on an involuntary basis, Section 3,
Involuntary Termination, shall apply to determine the benefit, if any, to which
the Employee shall be entitled under this Agreement.
6. Change in Control.
-----------------
(a) As used in Section 6, the terms "Change in Control", "Protection
Period", "Company", "Cause", and "Good Reason" shall have the meanings given to
them in the Change in Control Agreement entered into by and between the Company
and the Employee as of October 21, 1996.
(b) If, during a Protection Period, the Employee's employment is
terminated by the Company other than for Cause or if the Employee terminates his
employment for Good Reason, then the Company shall pay to the Employee the
amount of the Normal Retirement Benefit under the provisions of this Section 6,
notwithstanding any conflicting provisions of Sections 2, 3, 4, or 5, but
reduced in accordance with Section 7.
(c) Subject to Section 8, such amount shall be paid in 180 equal monthly
installments, the first of which shall be paid within thirty days after the
Employee ceases to be employed by the Company and the balance of which
3
<PAGE>
shall be paid on or about the first business day of each following month for 179
months.
(d) If the Employee dies after becoming entitled to payment under this
Section 6, but before all the payments provided for have been made, the unpaid
balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
7. Reduction of Benefits.
---------------------
(a) The Company and the Employee have entered into a Life Insurance
Split-Dollar Agreement dated as of May 1, 1997, pursuant to which beneficiaries
of the Employee may receive a death benefit if the Employee dies while employed
by the Company and the Employee may own an interest in the cash surrender value
of a life insurance policy (the "Policy") at the time his employment with the
Company terminates by retirement or otherwise. Notwithstanding any contrary
provision of this Agreement, the benefits the Company is otherwise obligated to
pay to the Employee pursuant to Sections 2, 3, 5, or 6 shall be reduced in the
manner provided in Paragraph (b) below by the amount of the Employee's interest
in the cash surrender value of the Policy on the date the Employee ceases to be
employed by the Company.
(b) The reduction to which Paragraph (a) above refers shall be
calculated as described in (i) through (v) below as of the date on which the
Employee ceases to be employed by the Company:
(i) Calculate the monthly benefit under Sections 2, 3, 5, or
6, as the case may be.
(ii) Convert the monthly benefit (from (i) above) into an
after-tax monthly benefit, using the after-tax rate specified under paragraph II
in Schedule A to this Agreement (the "After-Tax Rate").
(ii) Calculate the monthly annuity amount that would be
payable to the Employee monthly for 180 months if an amount equal to the
Employee's interest in the cash surrender value of the Policy were converted
into an annuity with a term certain of 180 months using an interest rate equal
to the applicable annual interest rate specified under paragraph III in Schedule
A to this Agreement (the "Applicable Annual Rate").
(iv) Convert the monthly annuity amount (from (iii) above)
into an after-tax monthly annuity amount, using the After-Tax Rate, but
4
<PAGE>
applying the After-Tax Rate only to that part of the monthly annuity amount that
would not represent the return of the Employee's investment in the Policy.
(v) Subtract the after-tax monthly annuity amount (from (iv)
above) from the after-tax monthly benefit (from (ii) above). Divide the
remainder, if any, by the After-Tax Rate; the quotient is, notwithstanding the
provisions of Sections 2, 3, 5, and 6, the monthly benefit payable for 180
months in accordance with the terms of the relevant section of this Agreement.
8. Acceleration of Payments; Frequency of Payments.
-----------------------------------------------
(a) At the Company's option or, if amounts become payable on a Change
in Control pursuant to Section 6 of this Agreement, at the Employee's option,
amounts payable under this Agreement may be paid in a lump sum rather than over
a period of years, discounted at the Applicable Annual Rate in effect as of the
date the Employee ceases to be employed by the Company. Should the Employee
exercise the foregoing option, the Company shall make the lump sum payment to
the Employee within thirty days after he notifies the Company of the exercise of
the option.
(b) The Company may, at is option, but subject to Paragraph (a) above,
divide any amount due under this Agreement in any month into two or more
installments to be paid during that month at times corresponding to the
Company's regular pay dates for executive employee. The Company's exercise of
the foregoing option shall not be cause for an adjustment of the amount
otherwise payable under this Agreement.
9. Claims Procedure.
----------------
(a) The administrator for purposes of the claims procedure under this
Agreement is the Chief Financial Officer of the Company. The business address
and telephone number of the claims administrator is: 2777 Walden Avenue,
Buffalo, New York 14225; telephone: (716) 684-9700.
(b) The Company shall have the right to change the claims
administrator. The Company shall also have the right to change the address and
telephone number of the claims administrator. The Company shall give the
Employee written notice of any of the foregoing changes.
(c) Benefits shall be paid in accordance with the provisions of this
Agreement.
5
<PAGE>
(d) The claims administrator shall present any disputed claim for
benefits to the Compensation Committee for review. The Compensation Committee
in conjunction with the Board of Directors shall determine the disposition of
the disputed claim.
(e) If the claim is denied, either wholly or partially, notice of the
decision shall be mailed to the claimant within 90 days after the receipt of the
claim by the claims administrator.
(f) The claims administrator shall provide a written notice to any
claimant who is denied a claim for benefits under this Agreement. The notice
shall set forth the following information:
(i) the specific reasons for denial;
(ii the specific reference to pertinent provisions of the
Agreement on which the denial is based;
(ii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(iv) appropriate information and an explanation of the
claims procedure under this Agreement to permit the claimant to submit his claim
for review.
All of this information shall be set forth in the notice in
a manner calculated to be understood by the claimant.
(g) The claims procedure under this Agreement shall allow the claimant
a reasonable opportunity to appeal a denied claim and to get a full and fair
review of that decision from the claims administrator. The claimant shall
exercise his right of appeal by submitting a written request for a review of the
denied claim to the claims administrator.
This written request for review must be submitted to the claims
administrator within sixty days after receipt by the claimant of the written
notice of denial. The claimant shall have the following rights under this
appeal procedure:
(i) to request a review upon written application to the
claims administrator;
6
<PAGE>
(ii) to review pertinent documents with regard to this
Agreement;
(iii) to submit issues and comments in writing;
(iv) to request an extension of time to make a written
submission of issues and comments; and
(v) to request that a hearing be held to consider
claimant's appeal.
(h) The claims administrator shall notify the claimant in writing of
the decision on review of the denied claim within 60 days after the receipt of
the request for review if no hearing was held, or within 120 days after the
receipt of the request for review, if an extension of time is necessary in order
to hold a hearing. If an extension of time is necessary in order to hold a
hearing, the claims administrator shall give the claimant written notice of the
extension of time and of the hearing. This notice shall be given prior to any
extension. The written notice of extension shall indicate that an extension of
time will occur in order to hold a hearing on the claimant's appeal.
The notice shall also specify the place, date, and time of that
hearing and the claimant's opportunity to participate in the hearing. It may
also include any other information the claims administrator believes may be
important or useful to the claimant in connection with the appeal.
(i) The decision to hold a hearing to consider the claimant's appeal
of the denied claim shall be within the sole discretion of the claims
administrator, whether or not the claimant requests such a hearing.
(j) The written decision on review required by Paragraph (h) above
shall contain the following information:
(i) the decisions;
(ii) the reasons for the decisions; and
(iii) specific references to the provisions of the Agreement
on which the decisions are based.
All of this information shall be written in a manner
calculated to be understood by the claimant.
7
<PAGE>
(k) The claims administrator shall be entitled to retain and rely on
the advice of experts (including without limitation attorneys and accountants
retained by the Company) in taking or refraining from taking any action or
making any decision pursuant to this Section 9. All fees and expenses of such
experts shall be paid by the Company.
10. Nature of Company's Obligation.
------------------------------
The Company's obligation under this Agreement shall be an unfunded and
unsecured promise to pay. Any assets which the Company may acquire to help
support its financial liabilities are and remain general assets of the Company
subject to the claims of its creditors. The Company does not give, nor does
this Agreement create nor the Employee receive, any beneficial ownership
interest in any asset of the Company. The Employee understands and agrees that
his participation in the acquisition of any general asset that the Company may
acquire or use to help support its financial obligations under this Agreement
shall not constitute a representation to the Employee, his designated
beneficiary, or any person claiming through the Employee that any of them has a
special or beneficial interest in such general asset.
11. No Employment Rights.
--------------------
This Agreement shall not be deemed to constitute a contract of
employment between the Company and Employee. Nothing contained in this
Agreement shall be deemed to give the Employee the right to be retained in the
employ of the Company or to interfere with the right of the Company to discharge
the Employee, nor shall it be determined to give the Company the right to
require the Employee to remain in its employ, nor shall it interfere with
Employee's right to terminate his employment.
12. Independence of Benefits.
------------------------
The benefits payable under this Agreement shall be independent of, and
in addition to, any other benefits or compensation, whether by salary, or bonus
or otherwise, payable under any other employment agreements that now or may in
the future exist between the Company and the Employee. This Agreement between
the Company and the Employee does not involve a reduction in salary or foregoing
of an increase in the future salary by the Employee. This Agreement shall not
affect or reduce the existing and future compensation and other benefits of the
Employee.
8
<PAGE>
13. Assignability.
-------------
Except insofar as this provision may be contrary to applicable law, no
sale, transfer, alienation, assignment, pledge, collateralization, or attachment
of any benefits under this Agreement shall be valid or recognized by the
Company.
14. Payment Due Incompetents, Minors, Etc.
-------------------------------------
If it shall be found that any person to whom a payment is due under
this Agreement is unable to care for his affairs because of physical or mental
disability, or that such person is a minor, the Company shall have the authority
to cause the payments becoming due to such person to be made to the spouse,
brother, sister, or other individual with whom the person to whom the payment is
due is living, or any other individual deemed by the Company to have incurred
expense for such person otherwise entitled to payment (unless prior claim shall
have been made by a duly qualified guardian or other legal representative),
without responsibility of the Company to see the application of such payments.
Payments made pursuant to such power shall operate as a discharge of the
obligation of the Company under this Agreement to the extent of such payments.
15. Employee Waiver.
---------------
The Employee acknowledges and agrees that if the Agreement and the
benefits described in the Agreement constitute an employee benefit plan or part
of an employee benefit plan for purposes of Title I of the Employee Retirement
Income Security Act, as amended ("ERISA"), (a) such plan is an unfunded plan,
(b) the Employee belongs to a select group of management or highly compensated
employees, and, therefore, (c) such plan is exempt from the participation,
vesting, benefit accrual, joint and survivor and preretirement survivor annuity,
minimum funding, fiduciary responsibility, and other requirements of Title I of
ERISA. The Employee further agrees that, should the Agreement and the benefits
described in the Agreement be construed as a funded plan or part of a funded
plan for purposes of Title I of ERISA, the Employee irrevocably waives on behalf
of himself and any spouse to whom he may now or in the future be married, any
rights and claims the Employee or his spouse or both of them may have now or in
the future under Title I of ERISA with respect to such plan. The Employee
acknowledges that he has had sufficient opportunity to review this waiver with
counsel.
9
<PAGE>
16. Designation of Beneficiary.
--------------------------
The Employee may designate a beneficiary to receive any amounts due
under Sections 2(a), 3(c), or 6(d) of this Agreement after his death. A
designation of a beneficiary shall be made in writing, signed by the Employee,
and delivered to the Company. If the Employee is married and elects to
designate someone other than his spouse as beneficiary, the spouse's written
consent shall be required. If the Employee has not designated a beneficiary,
payment of such amounts shall be made to the Employee's surviving spouse or, if
there be none, to his estate. This Section 16 shall not supersede any
designation of beneficiary made by the Employee pursuant to or provided for
under any other plan or program of the Company.
17. Amendment.
---------
During the lifetime of the Employee, this Agreement may be amended or
terminated at any time, in whole or in part, by a written agreement of the
parties; provided, however, that this Agreement may not be amended in a manner
that would materially increase the cost to the Company without the approval of
the Board of Directors.
18. Plan Administrator.
------------------
The plan administrator shall be the Compensation Committee of the
Board of Directors of the Company. The plan administrator shall administer this
Agreement, construe its terms, and make all determinations necessary under this
Agreement and shall have complete discretion in doing so.
19. Requirements and Benefits if Executive Is Employee of Subsidiary.
----------------------------------------------------------------
If the Employee is an employee of any subsidiary of the Company, he
shall be entitled to all of the rights and benefits of this Agreement as though
he were an employee of the Company, and the term "Company" as used in this
Agreement shall be construed to include the subsidiary by which the Employee is
employed. The Company guarantees the performance of its subsidiary under this
Agreement.
20. Notices.
-------
All notices, requests, demands and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
10
<PAGE>
deemed duly given upon their delivery or mailing, as the case may be, if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid:
(a) If to the Company, to:
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, New York 14225
Attention: Chairman, Compensation Committee
(b) If to the claims administrator, to:
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, New York 14225
Attention: Chief Financial Officer
(c) If to the Employee or claimant, to:
James W. Bingel
1 Hummingbird Court
Orchard Park, New York 14127
or to such other address as any of the foregoing shall have specified by notice
given in said manner to each of the others.
21. Miscellaneous.
-------------
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter of this Agreement. This Agreement shall be
governed by the laws of the State of New York, except to the extent Federal law
supersedes. This Agreement is solely between the Company and the Employee.
However, it shall be binding upon the designated recipients, beneficiaries,
heirs, executors, and administrators of the Employee and upon the successors and
assigns of the Company. Headings in this Agreement are for reference purposes
only and shall not be deemed to have any substantive effect.
11
<PAGE>
IN WITNESS WHEREOF, the Employee has executed this Agreement, and the
Company, pursuant to the authorization of its Board of Directors, has caused
this Agreement to be executed, as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ Kurt Wiedenhaupt
---------------------
/s/ James W. Bingel
---------------------
James W. Bingel
12
<PAGE>
SCHEDULE A
Effective as of October 15, 1999
I. Normal Retirement Benefit
-------------------------
The Normal Retirement Benefit is an amount equal to three times the
Employee's current annual base salary.
II. After-Tax Rate
--------------
The After-Tax Rate is the percentage that is the remainder after the
subtraction from (i) 100 percent of (ii) the effective marginal tax rate
applicable to the Employee on the date as of which a calculation is being
made. The Company shall determine the effective marginal tax rate
applicable to the Employee as of the calculation date, taking into account
federal, state, and local income tax rates; the hospital insurance tax rate
under the Federal Insurance Contribution Act; the deduction (for income tax
purposes) for state and local income taxes; and no income other than income
attributable to the Company. An amount shall be converted to an after-tax
amount by multiplying it by the After-Tax Rate in effect for the
calculation date.
iii. Applicable Annual Rate
----------------------
The Applicable Annual Rate is the annual rate of interest determined for a
given calendar year as follows: For each calendar year, the Company shall
obtain quotes from the Guardian Life Insurance Company and two other A+
rated life insurance companies on the single premium that would be required
in January of that year to purchase an immediate annuity policy paying a
fixed monthly benefit for a term certain of 180 months. The premiums
quoted shall be translated into discount rates. The highest of the three
discount rates shall be the Applicable Annual Rate in effect for
calculations made as of any date during the given calendar year.
13
<PAGE>
EXHIBIT 52
AMENDMENT TO
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
AGREEMENT by and between AMERICAN PRECISION INDUSTRIES INC., a
Delaware corporation with its principal office at 2777 Walden Avenue, Buffalo,
New York 14225 (the "Company"), and JAMES W. BINGEL (the "Employee"), residing
at 1 Hummingbird Court, Orchard Park, New York 14127, dated as of December 1,
1999.
W I T N E S S E T H
WHEREAS, the Company and the Employee entered into an agreement
entitled the Executive Supplemental Retirement Plan (the "Plan") as of October
15, 1999; and
WHEREAS, the Company has authorized the following amendment to the
Plan, and the Employee has agreed to the amendment,
NOW, THEREFORE, the Plan is amended as follows, effective December 1,
1999:
1. Paragraph (a) of Section 3 is amended to read as follows:
(a) If the Employee's employment is terminated involuntarily (that is,
by the Company) before age 65, he will receive the percentage of the Normal
Retirement Benefit determined in accordance with the following vesting schedule,
reduced in accordance with Section 7:
Full Years of Service Percentage Vested
--------------------- -----------------
Less than seven 0
Seven or more 100
IN WITNESS WHEREOF, the Employee has executed this Agreement, and the
Company, pursuant to the authorization of its Board of Directors, has caused
this Agreement to be executed, as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ Kurt Wiedenhaupt
----------------------------------------------------
Kurt Wiedenhaupt,
President and Chief Executive Officer
/s/ James W. Bingel
-----------------------------------------------------
James W. Bingel, individually
<PAGE>
EXHIBIT 53
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
(as restated)
AGREEMENT by and between AMERICAN PRECISION INDUSTRIES INC. (the
"Company), a Delaware corporation with its principal office at 2777 Walden
Avenue, Buffalo, New York 14225, and Bruce McH. Kirchner ("Employee"), residing
at 172 Castlebrook Lane, Williamsville, New York 14221, dated as of October 15,
1999.
WITNESSETH:
WHEREAS, the Employee is currently employed by the Company in the
capacity of Vice President and Chief Financial Officer; and
WHEREAS, the Company desires to continue to provide the Employee with
additional incentive in connection with his employment by the Company; and
WHEREAS, the Employee is a member of a select management group of the
Company;
NOW, THEREFORE, the parties agree as follows:
1. Conditions.
----------
(a) The payment of benefits to the Employee or designated
beneficiaries under this Agreement is conditioned upon the Employee's compliance
with the terms of the this Agreement.
(b) The Company shall withhold Federal, state, and local taxes
with respect to all payments and benefits under this Agreement to the extent
required by law.
2. Normal Retirement.
-----------------
(a) If the Employee retires from employment with the Company on
or after his 65/th/ birthday or if the Employee becomes totally and permanently
disabled while employed by the Company, the Company shall pay to the Employee
the amount specified under paragraph I in Schedule A to this Agreement (the
"Normal Retirement Benefit"), reduced in accordance with Section 7.
(b) Subject to Section 8, such amount shall be paid in 180 equal
monthly installments, the first of which shall be paid within thirty days after
<PAGE>
the Employee ceases to be employed by the Company, and the balance of which
shall be paid on or about the first business day of each following month for 179
months.
(c) If the Employee dies after becoming entitled to payment under this
Section 2, but before all of the payments provided for have been made, the
unpaid balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
3. Involuntary Termination.
-----------------------
(a) If the Employee's employment is terminated involuntarily
(that is, by the Company) before age 65, he will receive the percentage of the
Normal Retirement Benefit determined in accordance with the following vesting
schedule, reduced in accordance with Section 7:
==========================================================
Percentage
Full Years of Service Vested
- ----------------------------------------------------------
Less than ten 0
- ----------------------------------------------------------
Ten 50
- ----------------------------------------------------------
Eleven 55
- ----------------------------------------------------------
Twelve 60
- ----------------------------------------------------------
Thirteen 65
- ----------------------------------------------------------
Fourteen 70
- ----------------------------------------------------------
Fifteen 75
- ----------------------------------------------------------
Sixteen 80
- ----------------------------------------------------------
Seventeen 85
- ----------------------------------------------------------
Eighteen 90
- ----------------------------------------------------------
Nineteen 95
- ----------------------------------------------------------
Twenty or more 100
==========================================================
(b) Subject to Section 8, the amount so determined shall be paid in
180 equal monthly installments, the first of which shall be paid within thirty
2
<PAGE>
days after the Employee ceases to be employed by the Company, and the balance of
which shall be paid on or about the first business day of each following month
for 179 months.
(c) If the Employee dies after becoming entitled to payment under this
Section 3, but before all of the payments provided for have been made, the
unpaid balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
4. Voluntary Termination.
---------------------
If the Employee voluntarily resigns from employment with the
Company before age 65 he shall forfeit all benefits under this Agreement.
5. Early Retirement.
----------------
(a) If the Employee voluntarily retires early, the Board of
Directors of the Company shall determine, in its discretion, whether the
Employee shall be entitled to any benefit under this Agreement.
(b) If the Employee retires early on an involuntary basis,
Section 3, Involuntary Termination, shall apply to determine the benefit, if
any, to which the Employee shall be entitled under this Agreement.
6. Change in Control.
-----------------
(a) As used in Section 6, the terms "Change in Control",
"Protection Period", "Company", "Cause", and "Good Reason" shall have the
meanings given to them in the Change in Control Agreement entered into by and
between the Company and the Employee as of February 25, 1997.
(b) If, during a Protection Period, the Employee's employment is
terminated by the Company other than for Cause or if the Employee terminates his
employment for Good Reason, then the Company shall pay to the Employee the
amount of the Normal Retirement Benefit under the provisions of this Section 6,
notwithstanding any conflicting provisions of Sections 2, 3, 4, or 5, but
reduced in accordance with Section 7.
(c) Subject to Section 8, such amount shall be paid in 180 equal
monthly installments, the first of which shall be paid within thirty days after
the Employee ceases to be employed by the Company and the balance of which
3
<PAGE>
shall be paid on or about the first business day of each following month for 179
months.
(d) If the Employee dies after becoming entitled to payment under
this Section 6, but before all the payments provided for have been made, the
unpaid balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
7. Reduction of Benefits.
---------------------
(a) The Company and the Employee have entered into a Life
Insurance Split-Dollar Agreement dated as of May 1, 1997, pursuant to which
beneficiaries of the Employee may receive a death benefit if the Employee dies
while employed by the Company and the Employee may own an interest in the cash
surrender value of a life insurance policy (the "Policy") at the time his
employment with the Company terminates by retirement or otherwise.
Notwithstanding any contrary provision of this Agreement, the benefits the
Company is otherwise obligated to pay to the Employee pursuant to Sections 2, 3,
5, or 6 shall be reduced in the manner provided in Paragraph (b) below by the
amount of the Employee's interest in the cash surrender value of the Policy on
the date the Employee ceases to be employed by the Company.
(b) The reduction to which Paragraph (a) above refers shall be
calculated as described in (i) through (v) below as of the date on which the
Employee ceases to be employed by the Company:
(i) Calculate the monthly benefit under Sections 2, 3, 5,
or 6, as the case may be.
(ii) Convert the monthly benefit (from (i) above) into an
after-tax monthly benefit, using the after-tax rate specified under paragraph II
in Schedule A to this Agreement (the "After-Tax Rate").
(iii) Calculate the monthly annuity amount that would be
payable to the Employee monthly for 180 months if an amount equal to the
Employee's interest in the cash surrender value of the Policy were converted
into an annuity with a term certain of 180 months using an interest rate equal
to the applicable annual interest rate specified under paragraph III in Schedule
A to this Agreement (the "Applicable Annual Rate").
(iv) Convert the monthly annuity amount (from (iii) above)
into an after-tax monthly annuity amount, using the After-Tax Rate, but
4
<PAGE>
applying the After-Tax Rate only to that part of the monthly annuity amount that
would not represent the return of the Employee's investment in the Policy.
(v) Subtract the after-tax monthly annuity amount (from (iv)
above) from the after-tax monthly benefit (from (ii) above). Divide the
remainder, if any, by the After-Tax Rate; the quotient is, notwithstanding the
provisions of Sections 2, 3, 5, and 6, the monthly benefit payable for 180
months in accordance with the terms of the relevant section of this Agreement.
8. Acceleration of Payments; Frequency of Payments.
-----------------------------------------------
(a) At the Company's option or, if amounts become payable on a
Change in Control pursuant to Section 6 of this Agreement, at the Employee's
option, amounts payable under this Agreement may be paid in a lump sum rather
than over a period of years, discounted at the Applicable Annual Rate in effect
as of the date the Employee ceases to be employed by the Company. Should the
Employee exercise the foregoing option, the Company shall make the lump sum
payment to the Employee within thirty days after he notifies the Company of the
exercise of the option.
(b) The Company may, at is option, but subject to Paragraph (a)
above, divide any amount due under this Agreement in any month into two or more
installments to be paid during that month at times corresponding to the
Company's regular pay dates for executive employee. The Company's exercise of
the foregoing option shall not be cause for an adjustment of the amount
otherwise payable under this Agreement.
9. Claims Procedure.
----------------
(a) The administrator for purposes of the claims procedure under
this Agreement is the Chief Financial Officer of the Company. The business
address and telephone number of the claims administrator is: 2777 Walden Avenue,
Buffalo, New York 14225; telephone: (716) 684-9700.
(b) The Company shall have the right to change the claims
administrator. The Company shall also have the right to change the address and
telephone number of the claims administrator. The Company shall give the
Employee written notice of any of the foregoing changes.
(c) Benefits shall be paid in accordance with the provisions of
this Agreement.
5
<PAGE>
(d) The claims administrator shall present any disputed claim for
benefits to the Compensation Committee for review. The Compensation Committee
in conjunction with the Board of Directors shall determine the disposition of
the disputed claim.
(e) If the claim is denied, either wholly or partially, notice of
the decision shall be mailed to the claimant within 90 days after the receipt of
the claim by the claims administrator.
(f) The claims administrator shall provide a written notice to
any claimant who is denied a claim for benefits under this Agreement. The notice
shall set forth the following information:
(i) the specific reasons for denial;
(ii) the specific reference to pertinent provisions of the
Agreement on which the denial is based;
(iii) a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why such material or information is necessary; and
(iv) appropriate information and an explanation of the
claims procedure under this Agreement to permit the claimant to submit his claim
for review.
All of this information shall be set forth in the notice in
a manner calculated to be understood by the claimant.
(g) The claims procedure under this Agreement shall allow the
claimant a reasonable opportunity to appeal a denied claim and to get a full and
fair review of that decision from the claims administrator. The claimant shall
exercise his right of appeal by submitting a written request for a review of the
denied claim to the claims administrator.
This written request for review must be submitted to the claims
administrator within sixty days after receipt by the claimant of the written
notice of denial. The claimant shall have the following rights under this appeal
procedure:
(i) to request a review upon written application to the
claims administrator;
6
<PAGE>
(ii) to review pertinent documents with regard to this
Agreement;
(iii) to submit issues and comments in writing;
(iv) to request an extension of time to make a written
submission of issues and comments; and
(v) to request that a hearing be held to consider
claimant's appeal.
(h) The claims administrator shall notify the claimant in writing of
the decision on review of the denied claim within 60 days after the receipt of
the request for review if no hearing was held, or within 120 days after the
receipt of the request for review, if an extension of time is necessary in order
to hold a hearing. If an extension of time is necessary in order to hold a
hearing, the claims administrator shall give the claimant written notice of the
extension of time and of the hearing. This notice shall be given prior to any
extension. The written notice of extension shall indicate that an extension of
time will occur in order to hold a hearing on the claimant's appeal.
The notice shall also specify the place, date, and time of that
hearing and the claimant's opportunity to participate in the hearing. It may
also include any other information the claims administrator believes may be
important or useful to the claimant in connection with the appeal.
(i) The decision to hold a hearing to consider the claimant's appeal
of the denied claim shall be within the sole discretion of the claims
administrator, whether or not the claimant requests such a hearing.
(j) The written decision on review required by Paragraph (h)
above shall contain the following information:
(i) the decisions;
(ii) the reasons for the decisions; and
(iii) specific references to the provisions of the Agreement
on which the decisions are based.
All of this information shall be written in a manner calculated to
be understood by the claimant.
7
<PAGE>
(k) The claims administrator shall be entitled to retain and rely
on the advice of experts (including without limitation attorneys and accountants
retained by the Company) in taking or refraining from taking any action or
making any decision pursuant to this Section 9. All fees and expenses of such
experts shall be paid by the Company.
10. Nature of Company's Obligation.
------------------------------
The Company's obligation under this Agreement shall be an
unfunded and unsecured promise to pay. Any assets which the Company may acquire
to help support its financial liabilities are and remain general assets of the
Company subject to the claims of its creditors. The Company does not give, nor
does this Agreement create nor the Employee receive, any beneficial ownership
interest in any asset of the Company. The Employee understands and agrees that
his participation in the acquisition of any general asset that the Company may
acquire or use to help support its financial obligations under this Agreement
shall not constitute a representation to the Employee, his designated
beneficiary, or any person claiming through the Employee that any of them has a
special or beneficial interest in such general asset.
11. No Employment Rights.
--------------------
This Agreement shall not be deemed to constitute a contract of
employment between the Company and Employee. Nothing contained in this Agreement
shall be deemed to give the Employee the right to be retained in the employ of
the Company or to interfere with the right of the Company to discharge the
Employee, nor shall it be determined to give the Company the right to require
the Employee to remain in its employ, nor shall it interfere with Employee's
right to terminate his employment.
12. Independence of Benefits.
------------------------
The benefits payable under this Agreement shall be independent
of, and in addition to, any other benefits or compensation, whether by salary,
or bonus or otherwise, payable under any other employment agreements that now or
may in the future exist between the Company and the Employee. This Agreement
between the Company and the Employee does not involve a reduction in salary or
foregoing of an increase in the future salary by the Employee. This Agreement
shall not affect or reduce the existing and future compensation and other
benefits of the Employee.
8
<PAGE>
13. Assignability.
-------------
Except insofar as this provision may be contrary to applicable
law, no sale, transfer, alienation, assignment, pledge, collateralization, or
attachment of any benefits under this Agreement shall be valid or recognized by
the Company.
14. Payment Due Incompetents, Minors, Etc.
-------------------------------------
If it shall be found that any person to whom a payment is due
under this Agreement is unable to care for his affairs because of physical or
mental disability, or that such person is a minor, the Company shall have the
authority to cause the payments becoming due to such person to be made to the
spouse, brother, sister, or other individual with whom the person to whom the
payment is due is living, or any other individual deemed by the Company to have
incurred expense for such person otherwise entitled to payment (unless prior
claim shall have been made by a duly qualified guardian or other legal
representative), without responsibility of the Company to see the application of
such payments. Payments made pursuant to such power shall operate as a discharge
of the obligation of the Company under this Agreement to the extent of such
payments.
15. Employee Waiver.
---------------
The Employee acknowledges and agrees that if the Agreement and
the benefits described in the Agreement constitute an employee benefit plan or
part of an employee benefit plan for purposes of Title I of the Employee
Retirement Income Security Act, as amended ("ERISA"), (a) such plan is an
unfunded plan, (b) the Employee belongs to a select group of management or
highly compensated employees, and, therefore, (c) such plan is exempt from the
participation, vesting, benefit accrual, joint and survivor and preretirement
survivor annuity, minimum funding, fiduciary responsibility, and other
requirements of Title I of ERISA. The Employee further agrees that, should the
Agreement and the benefits described in the Agreement be construed as a funded
plan or part of a funded plan for purposes of Title I of ERISA, the Employee
irrevocably waives on behalf of himself and any spouse to whom he may now or in
the future be married, any rights and claims the Employee or his spouse or both
of them may have now or in the future under Title I of ERISA with respect to
such plan. The Employee acknowledges that he has had sufficient opportunity to
review this waiver with counsel.
9
<PAGE>
16. Designation of Beneficiary.
--------------------------
The Employee may designate a beneficiary to receive any amounts
due under Sections 2(a), 3(c), or 6(d) of this Agreement after his death. A
designation of a beneficiary shall be made in writing, signed by the Employee,
and delivered to the Company. If the Employee is married and elects to designate
someone other than his spouse as beneficiary, the spouse's written consent shall
be required. If the Employee has not designated a beneficiary, payment of such
amounts shall be made to the Employee's surviving spouse or, if there be none,
to his estate. This Section 16 shall not supersede any designation of
beneficiary made by the Employee pursuant to or provided for under any other
plan or program of the Company.
17. Amendment.
---------
During the lifetime of the Employee, this Agreement may be
amended or terminated at any time, in whole or in part, by a written agreement
of the parties; provided, however, that this Agreement may not be amended in a
manner that would materially increase the cost to the Company without the
approval of the Board of Directors.
18. Plan Administrator.
------------------
The plan administrator shall be the Compensation Committee of the
Board of Directors of the Company. The plan administrator shall administer this
Agreement, construe its terms, and make all determinations necessary under this
Agreement and shall have complete discretion in doing so.
19. Requirements and Benefits if Executive Is Employee of Subsidiary.
----------------------------------------------------------------
If the Employee is an employee of any subsidiary of the Company,
he shall be entitled to all of the rights and benefits of this Agreement as
though he were an employee of the Company, and the term "Company" as used in
this Agreement shall be construed to include the subsidiary by which the
Employee is employed. The Company guarantees the performance of its subsidiary
under this Agreement.
20. Notices.
-------
All notices, requests, demands and other communications required
or permitted to be given under this Agreement shall be in writing and shall
10
<PAGE>
be deemed duly given upon their delivery or mailing, as the case may be, if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid:
(a) If to the Company, to:
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, New York 14225
Attention: Chairman, Compensation Committee
(b) If to the claims administrator, to:
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, New York 14225
Attention: Chief Financial Officer
(c) If to the Employee or claimant, to:
Bruce McH. Kirchner
172 Castlebrook Lane
Williamsville, New York 14221
or to such other address as any of the foregoing shall have specified by notice
given in said manner to each of the others.
21. Miscellaneous.
-------------
This Agreement constitutes the entire agreement between the
parties with respect to the subject matter of this Agreement. This Agreement
shall be governed by the laws of the State of New York, except to the extent
Federal law supersedes. This Agreement is solely between the Company and the
Employee. However, it shall be binding upon the designated recipients,
beneficiaries, heirs, executors, and administrators of the Employee and upon the
successors and assigns of the Company. Headings in this Agreement are for
reference purposes only and shall not be deemed to have any substantive effect.
11
<PAGE>
IN WITNESS WHEREOF, the Employee has executed this Agreement, and the
Company, pursuant to the authorization of its Board of Directors, has caused
this Agreement to be executed, as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/Kurt Wiedenhaupt
-----------------------------------------
/s/Bruce McH. Kirchner
-------------------------------------------
Bruce McH. Kirchner
12
<PAGE>
SCHEDULE A
Effective as of October 15, 1999
I. Normal Retirement Benefit
-------------------------
The Normal Retirement Benefit is an amount equal to three times the
Employee's current annual base salary.
II. After-Tax Rate
--------------
The After-Tax Rate is the percentage that is the remainder after the
subtraction from (i) 100 percent of (ii) the effective marginal tax rate
applicable to the Employee on the date as of which a calculation is being
made. The Company shall determine the effective marginal tax rate
applicable to the Employee as of the calculation date, taking into account
federal, state, and local income tax rates; the hospital insurance tax rate
under the Federal Insurance Contribution Act; the deduction (for income tax
purposes) for state and local income taxes; and no income other than income
attributable to the Company. An amount shall be converted to an after-tax
amount by multiplying it by the After-Tax Rate in effect for the
calculation date.
III. Applicable Annual Rate
----------------------
The Applicable Annual Rate is the annual rate of interest determined for a
given calendar year as follows: For each calendar year, the Company shall
obtain quotes from the Guardian Life Insurance Company and two other A+
rated life insurance companies on the single premium that would be required
in January of that year to purchase an immediate annuity policy paying a
fixed monthly benefit for a term certain of 180 months. The premiums
quoted shall be translated into discount rates. The highest of the three
discount rates shall be the Applicable Annual Rate in effect for
calculations made as of any date during the given calendar year.
<PAGE>
EXHIBIT 54
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
(as restated)
AGREEMENT by and between AMERICAN PRECISION INDUSTRIES INC. (the
"Company), a Delaware corporation with its principal office at 2777 Walden
Avenue, Buffalo, New York 14225, and Craig J. VanTine ("Employee"), residing at
6270 Creekbend Court, Clarence Center, New York 14032, dated as of October 15,
1999.
WITNESSETH:
WHEREAS, the Employee is currently employed by the Company in the
capacity of Vice President; and
WHEREAS, the Company desires to continue to provide the Employee with
additional incentive in connection with his employment by the Company; and
WHEREAS, the Employee is a member of a select management group of the
Company;
NOW, THEREFORE, the parties agree as follows:
1. Conditions.
----------
(a) The payment of benefits to the Employee or designated
beneficiaries under this Agreement is conditioned upon the Employee's compliance
with the terms of the this Agreement.
(b) The Company shall withhold Federal, state, and local taxes with
respect to all payments and benefits under this Agreement to the extent required
by law.
2. Normal Retirement.
-----------------
(a) If the Employee retires from employment with the Company on or
after his 65/th/ birthday or if the Employee becomes totally and permanently
disabled while employed by the Company, the Company shall pay to the Employee
the amount specified under paragraph I in Schedule A to this Agreement (the
"Normal Retirement Benefit"), reduced in accordance with Section 7.
(b) Subject to Section 8, such amount shall be paid in 180 equal
monthly installments, the first of which shall be paid within thirty days after
<PAGE>
the Employee ceases to be employed by the Company, and the balance of which
shall be paid on or about the first business day of each following month for 179
months.
(c) If the Employee dies after becoming entitled to payment under this
Section 2, but before all of the payments provided for have been made, the
unpaid balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
3. Involuntary Termination.
-----------------------
(a) If the Employee's employment is terminated involuntarily (that is,
by the Company) before age 65, he will receive the percentage of the Normal
Retirement Benefit determined in accordance with the following vesting schedule,
reduced in accordance with Section 7:
===================================
Percentage
Full Years of Service Vested
- -----------------------------------
Less than ten 0
- -----------------------------------
Ten 50
- -----------------------------------
Eleven 55
- -----------------------------------
Twelve 60
- -----------------------------------
Thirteen 65
- -----------------------------------
Fourteen 70
- -----------------------------------
Fifteen 75
- -----------------------------------
Sixteen 80
- -----------------------------------
Seventeen 85
- -----------------------------------
Eighteen 90
- -----------------------------------
Nineteen 95
- -----------------------------------
Twenty or more 100
===================================
(b) Subject to Section 8, the amount so determined shall be paid in
180 equal monthly installments, the first of which shall be paid within thirty
2
<PAGE>
days after the Employee ceases to be employed by the Company, and the balance of
which shall be paid on or about the first business day of each following month
for 179 months.
(c) If the Employee dies after becoming entitled to payment under this
Section 3, but before all of the payments provided for have been made, the
unpaid balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
4. Voluntary Termination.
---------------------
If the Employee voluntarily resigns from employment with the Company
before age 65 he shall forfeit all benefits under this Agreement.
5. Early Retirement.
----------------
(a) If the Employee voluntarily retires early, the Board of Directors
of the Company shall determine, in its discretion, whether the Employee shall be
entitled to any benefit under this Agreement.
(b) If the Employee retires early on an involuntary basis, Section 3,
Involuntary Termination, shall apply to determine the benefit, if any, to which
the Employee shall be entitled under this Agreement.
6. Change in Control.
-----------------
(a) As used in Section 6, the terms "Change in Control", "Protection
Period", "Company", "Cause", and "Good Reason" shall have the meanings given to
them in the Change in Control Agreement entered into by and between the Company
and the Employee as of October 21, 1996.
(b) If, during a Protection Period, the Employee's employment is
terminated by the Company other than for Cause or if the Employee terminates his
employment for Good Reason, then the Company shall pay to the Employee the
amount of the Normal Retirement Benefit under the provisions of this Section 6,
notwithstanding any conflicting provisions of Sections 2, 3, 4, or 5, but
reduced in accordance with Section 7.
(c) Subject to Section 8, such amount shall be paid in 180 equal
monthly installments, the first of which shall be paid within thirty days after
the Employee ceases to be employed by the Company and the balance of which
3
<PAGE>
shall be paid on or about the first business day of each following month for 179
months.
(d) If the Employee dies after becoming entitled to payment under this
Section 6, but before all the payments provided for have been made, the unpaid
balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
7. Reduction of Benefits.
---------------------
(a) The Company and the Employee have entered into a Life Insurance
Split-Dollar Agreement dated as of May 1, 1999, pursuant to which beneficiaries
of the Employee may receive a death benefit if the Employee dies while employed
by the Company and the Employee may own an interest in the cash surrender value
of a life insurance policy (the "Policy") at the time his employment with the
Company terminates by retirement or otherwise. Notwithstanding any contrary
provision of this Agreement, the benefits the Company is otherwise obligated to
pay to the Employee pursuant to Sections 2, 3, 5, or 6 shall be reduced in the
manner provided in Paragraph (b) below by the amount of the Employee's interest
in the cash surrender value of the Policy on the date the Employee ceases to be
employed by the Company.
(b) The reduction to which Paragraph (a) above refers shall be
calculated as described in (i) through (v) below as of the date on which the
Employee ceases to be employed by the Company:
(i) Calculate the monthly benefit under Sections 2, 3,
5, or 6, as the case may be.
(ii) Convert the monthly benefit (from (i) above) into an
after-tax monthly benefit, using the after-tax rate specified under paragraph II
in Schedule A to this Agreement (the "After-Tax Rate").
(iii) Calculate the monthly annuity amount that would be
payable to the Employee monthly for 180 months if an amount equal to the
Employee's interest in the cash surrender value of the Policy were converted
into an annuity with a term certain of 180 months using an interest rate equal
to the applicable annual interest rate specified under paragraph III in Schedule
A to this Agreement (the "Applicable Annual Rate").
(iv) Convert the monthly annuity amount (from (iii)
above) into an after-tax monthly annuity amount, using the After-Tax Rate, but
4
<PAGE>
applying the After-Tax Rate only to that part of the monthly annuity amount that
would not represent the return of the Employee's investment in the Policy.
(v) Subtract the after-tax monthly annuity amount (from
(iv) above) from the after-tax monthly benefit (from (ii) above). Divide the
remainder, if any, by the After-Tax Rate; the quotient is, notwithstanding the
provisions of Sections 2, 3, 5, and 6, the monthly benefit payable for 180
months in accordance with the terms of the relevant section of this Agreement.
8. Acceleration of Payments; Frequency of Payments.
-----------------------------------------------
(a) At the Company's option or, if amounts become payable on a Change
in Control pursuant to Section 6 of this Agreement, at the Employee's option,
amounts payable under this Agreement may be paid in a lump sum rather than over
a period of years, discounted at the Applicable Annual Rate in effect as of the
date the Employee ceases to be employed by the Company. Should the Employee
exercise the foregoing option, the Company shall make the lump sum payment to
the Employee within thirty days after he notifies the Company of the exercise of
the option.
(b) The Company may, at is option, but subject to Paragraph (a) above,
divide any amount due under this Agreement in any month into two or more
installments to be paid during that month at times corresponding to the
Company's regular pay dates for executive employee. The Company's exercise of
the foregoing option shall not be cause for an adjustment of the amount
otherwise payable under this Agreement.
9. Claims Procedure.
----------------
(a) The administrator for purposes of the claims procedure under this
Agreement is the Chief Financial Officer of the Company. The business address
and telephone number of the claims administrator is: 2777 Walden Avenue,
Buffalo, New York 14225; telephone: (716) 684-9700.
(b) The Company shall have the right to change the claims
administrator. The Company shall also have the right to change the address and
telephone number of the claims administrator. The Company shall give the
Employee written notice of any of the foregoing changes.
(c) Benefits shall be paid in accordance with the provisions of this
Agreement.
5
<PAGE>
(d) The claims administrator shall present any disputed claim for
benefits to the Compensation Committee for review. The Compensation Committee
in conjunction with the Board of Directors shall determine the disposition of
the disputed claim.
(e) If the claim is denied, either wholly or partially, notice of the
decision shall be mailed to the claimant within 90 days after the receipt of the
claim by the claims administrator.
(f) The claims administrator shall provide a written notice to any
claimant who is denied a claim for benefits under this Agreement. The notice
shall set forth the following information:
(i) the specific reasons for denial;
(ii) the specific reference to pertinent provisions of
the Agreement on which the denial is based;
(iii) a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why such material or information is necessary; and
(iv) appropriate information and an explanation of the
claims procedure under this Agreement to permit the claimant to submit his claim
for review.
All of this information shall be set forth in the notice in
a manner calculated to be understood by the claimant.
(g) The claims procedure under this Agreement shall allow the claimant
a reasonable opportunity to appeal a denied claim and to get a full and fair
review of that decision from the claims administrator. The claimant shall
exercise his right of appeal by submitting a written request for a review of the
denied claim to the claims administrator.
This written request for review must be submitted to the claims
administrator within sixty days after receipt by the claimant of the written
notice of denial. The claimant shall have the following rights under this
appeal procedure:
(i) to request a review upon written application to the
claims administrator;
6
<PAGE>
(ii) to review pertinent documents with regard to this
Agreement;
(iii) to submit issues and comments in writing;
(iv) to request an extension of time to make a written
submission of issues and comments; and
(v) to request that a hearing be held to consider
claimant's appeal.
(h) The claims administrator shall notify the claimant in writing of
the decision on review of the denied claim within 60 days after the receipt of
the request for review if no hearing was held, or within 120 days after the
receipt of the request for review, if an extension of time is necessary in order
to hold a hearing. If an extension of time is necessary in order to hold a
hearing, the claims administrator shall give the claimant written notice of the
extension of time and of the hearing. This notice shall be given prior to any
extension. The written notice of extension shall indicate that an extension of
time will occur in order to hold a hearing on the claimant's appeal.
The notice shall also specify the place, date, and time of that
hearing and the claimant's opportunity to participate in the hearing. It may
also include any other information the claims administrator believes may be
important or useful to the claimant in connection with the appeal.
(i) The decision to hold a hearing to consider the claimant's appeal
of the denied claim shall be within the sole discretion of the claims
administrator, whether or not the claimant requests such a hearing.
(j) The written decision on review required by Paragraph (h) above
shall contain the following information:
(i) the decisions;
(ii) the reasons for the decisions; and
(iii) specific references to the provisions of the
Agreement on which the decisions are based.
All of this information shall be written in a manner
calculated to be understood by the claimant.
7
<PAGE>
(k) The claims administrator shall be entitled to retain and rely on
the advice of experts (including without limitation attorneys and accountants
retained by the Company) in taking or refraining from taking any action or
making any decision pursuant to this Section 9. All fees and expenses of such
experts shall be paid by the Company.
10. Nature of Company's Obligation.
------------------------------
The Company's obligation under this Agreement shall be an unfunded and
unsecured promise to pay. Any assets which the Company may acquire to help
support its financial liabilities are and remain general assets of the Company
subject to the claims of its creditors. The Company does not give, nor does
this Agreement create nor the Employee receive, any beneficial ownership
interest in any asset of the Company. The Employee understands and agrees that
his participation in the acquisition of any general asset that the Company may
acquire or use to help support its financial obligations under this Agreement
shall not constitute a representation to the Employee, his designated
beneficiary, or any person claiming through the Employee that any of them has a
special or beneficial interest in such general asset.
11. No Employment Rights.
--------------------
This Agreement shall not be deemed to constitute a contract of
employment between the Company and Employee. Nothing contained in this
Agreement shall be deemed to give the Employee the right to be retained in the
employ of the Company or to interfere with the right of the Company to discharge
the Employee, nor shall it be determined to give the Company the right to
require the Employee to remain in its employ, nor shall it interfere with
Employee's right to terminate his employment.
12. Independence of Benefits.
------------------------
The benefits payable under this Agreement shall be independent of, and
in addition to, any other benefits or compensation, whether by salary, or bonus
or otherwise, payable under any other employment agreements that now or may in
the future exist between the Company and the Employee. This Agreement between
the Company and the Employee does not involve a reduction in salary or foregoing
of an increase in the future salary by the Employee. This Agreement shall not
affect or reduce the existing and future compensation and other benefits of the
Employee.
8
<PAGE>
13. Assignability.
-------------
Except insofar as this provision may be contrary to applicable law, no
sale, transfer, alienation, assignment, pledge, collateralization, or attachment
of any benefits under this Agreement shall be valid or recognized by the
Company.
14. Payment Due Incompetents, Minors, Etc.
-------------------------------------
If it shall be found that any person to whom a payment is due under
this Agreement is unable to care for his affairs because of physical or mental
disability, or that such person is a minor, the Company shall have the authority
to cause the payments becoming due to such person to be made to the spouse,
brother, sister, or other individual with whom the person to whom the payment is
due is living, or any other individual deemed by the Company to have incurred
expense for such person otherwise entitled to payment (unless prior claim shall
have been made by a duly qualified guardian or other legal representative),
without responsibility of the Company to see the application of such payments.
Payments made pursuant to such power shall operate as a discharge of the
obligation of the Company under this Agreement to the extent of such payments.
15. Employee Waiver.
---------------
The Employee acknowledges and agrees that if the Agreement and the
benefits described in the Agreement constitute an employee benefit plan or part
of an employee benefit plan for purposes of Title I of the Employee Retirement
Income Security Act, as amended ("ERISA"), (a) such plan is an unfunded plan,
(b) the Employee belongs to a select group of management or highly compensated
employees, and, therefore, (c) such plan is exempt from the participation,
vesting, benefit accrual, joint and survivor and preretirement survivor annuity,
minimum funding, fiduciary responsibility, and other requirements of Title I of
ERISA. The Employee further agrees that, should the Agreement and the benefits
described in the Agreement be construed as a funded plan or part of a funded
plan for purposes of Title I of ERISA, the Employee irrevocably waives on behalf
of himself and any spouse to whom he may now or in the future be married, any
rights and claims the Employee or his spouse or both of them may have now or in
the future under Title I of ERISA with respect to such plan. The Employee
acknowledges that he has had sufficient opportunity to review this waiver with
counsel.
9
<PAGE>
16. Designation of Beneficiary.
--------------------------
The Employee may designate a beneficiary to receive any amounts due
under Sections 2(a), 3(c), or 6(d) of this Agreement after his death. A
designation of a beneficiary shall be made in writing, signed by the Employee,
and delivered to the Company. If the Employee is married and elects to
designate someone other than his spouse as beneficiary, the spouse's written
consent shall be required. If the Employee has not designated a beneficiary,
payment of such amounts shall be made to the Employee's surviving spouse or, if
there be none, to his estate. This Section 16 shall not supersede any
designation of beneficiary made by the Employee pursuant to or provided for
under any other plan or program of the Company.
17. Amendment.
---------
During the lifetime of the Employee, this Agreement may be amended or
terminated at any time, in whole or in part, by a written agreement of the
parties; provided, however, that this Agreement may not be amended in a manner
that would materially increase the cost to the Company without the approval of
the Board of Directors.
18. Plan Administrator.
------------------
The plan administrator shall be the Compensation Committee of the
Board of Directors of the Company. The plan administrator shall administer this
Agreement, construe its terms, and make all determinations necessary under this
Agreement and shall have complete discretion in doing so.
19. Requirements and Benefits if Executive Is Employee of Subsidiary.
----------------------------------------------------------------
If the Employee is an employee of any subsidiary of the Company, he
shall be entitled to all of the rights and benefits of this Agreement as though
he were an employee of the Company, and the term "Company" as used in this
Agreement shall be construed to include the subsidiary by which the Employee is
employed. The Company guarantees the performance of its subsidiary under this
Agreement.
20. Notices.
-------
All notices, requests, demands and other communications required or
permitted to be given under this Agreement shall be in writing and shall
10
<PAGE>
be deemed duly given upon their delivery or mailing, as the case may be, if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid:
(a) If to the Company, to:
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, New York 14225
Attention: Chairman, Compensation Committee
(b) If to the claims administrator, to:
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, New York 14225
Attention: Chief Financial Officer
(c) If to the Employee or claimant, to:
Craig G. VanTine
6270 Creekbend Court
Clarence Center, New York 14032
or to such other address as any of the foregoing shall have specified by notice
given in said manner to each of the others.
21. Miscellaneous.
-------------
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter of this Agreement. This Agreement shall be
governed by the laws of the State of New York, except to the extent Federal law
supersedes. This Agreement is solely between the Company and the Employee.
However, it shall be binding upon the designated recipients, beneficiaries,
heirs, executors, and administrators of the Employee and upon the successors and
assigns of the Company. Headings in this Agreement are for reference purposes
only and shall not be deemed to have any substantive effect.
11
<PAGE>
IN WITNESS WHEREOF, the Employee has executed this Agreement, and the
Company, pursuant to the authorization of its Board of Directors, has caused
this Agreement to be executed, as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ Kurt Wiedenhaupt
--------------------------------------
/s/ Craig J. VanTine
---------------------------------------
Craig J. VanTine
12
<PAGE>
SCHEDULE A
Effective as of October 15, 1999
I. Normal Retirement Benefit
-------------------------
The Normal Retirement Benefit is an amount equal to three times the
Employee's current annual base salary.
II. After-Tax Rate
--------------
The After-Tax Rate is the percentage that is the remainder after the
subtraction from (i) 100 percent of (ii) the effective marginal tax rate
applicable to the Employee on the date as of which a calculation is being
made. The Company shall determine the effective marginal tax rate
applicable to the Employee as of the calculation date, taking into account
federal, state, and local income tax rates; the hospital insurance tax rate
under the Federal Insurance Contribution Act; the deduction (for income tax
purposes) for state and local income taxes; and no income other than income
attributable to the Company. An amount shall be converted to an after-tax
amount by multiplying it by the After-Tax Rate in effect for the
calculation date.
III. Applicable Annual Rate
----------------------
The Applicable Annual Rate is the annual rate of interest determined for a
given calendar year as follows: For each calendar year, the Company shall
obtain quotes from the Guardian Life Insurance Company and two other A+
rated life insurance companies on the single premium that would be required
in January of that year to purchase an immediate annuity policy paying a
fixed monthly benefit for a term certain of 180 months. The premiums
quoted shall be translated into discount rates. The highest of the three
discount rates shall be the Applicable Annual Rate in effect for
calculations made as of any date during the given calendar year.
<PAGE>
EXHIBIT 55
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
(as restated)
AGREEMENT by and between AMERICAN PRECISION INDUSTRIES INC. (the
"Company), a Delaware corporation with its principal office at 2777 Walden
Avenue, Buffalo, New York 14225, and Richard S. Warzala("Employee"), residing at
102 Southwedge Drive, Amherst, New York 14068, dated as of June 1, 1983, as
amended and restated as of January 4, 1997.
WITNESSETH:
WHEREAS, the Employee is currently employed by the Company in the
capacity of Vice President; and
WHEREAS, the Company desires to continue to provide the Employee with
additional incentive in connection with his employment by the Company; and
WHEREAS, the Employee is a member of a select management group of the
Company;
NOW, THEREFORE, the parties agree as follows:
1. Conditions.
----------
(a) The payment of benefits to the Employee or designated
beneficiaries under this Agreement is conditioned upon the Employee's compliance
with the terms of the this Agreement.
(b) The Company shall withhold Federal, state, and local taxes
with respect to all payments and benefits under this Agreement to the extent
required by law.
2. Normal Retirement.
-----------------
(a) If the Employee retires from employment with the Company on
or after his 65/th/ birthday or if the Employee becomes totally and permanently
disabled while employed by the Company, the Company shall pay to the Employee
the amount specified under paragraph I in Schedule A to this Agreement (the
"Normal Retirement Benefit"), reduced in accordance with Section 7.
(b) Subject to Section 8, such amount shall be paid in 180 equal
monthly installments, the first of which shall be paid within thirty days after
<PAGE>
the Employee ceases to be employed by the Company, and the balance of which
shall be paid on or about the first business day of each following month for 179
months.
(c) If the Employee dies after becoming entitled to payment under this
Section 2, but before all of the payments provided for have been made, the
unpaid balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
3. Involuntary Termination.
-----------------------
(a) If the Employee's employment is terminated involuntarily (that is,
by the Company) before age 65, he will receive the percentage of the Normal
Retirement Benefit determined in accordance with the following vesting schedule,
reduced in accordance with Section 7:
===================================
Percentage
Full Years of Service Vested
-----------------------------------
Less than ten 0
-----------------------------------
Ten 50
-----------------------------------
Eleven 55
-----------------------------------
Twelve 60
-----------------------------------
Thirteen 65
-----------------------------------
Fourteen 70
-----------------------------------
Fifteen 75
-----------------------------------
Sixteen 80
-----------------------------------
Seventeen 85
-----------------------------------
Eighteen 90
-----------------------------------
Nineteen 95
-----------------------------------
Twenty or more 100
-----------------------------------
(b) Subject to Section 8, the amount so determined shall be paid in
180 equal monthly installments, the first of which shall be paid within thirty
2
<PAGE>
days after the Employee ceases to be employed by the Company, and the balance of
which shall be paid on or about the first business day of each following month
for 179 months.
(c) If the Employee dies after becoming entitled to payment under this
Section 3, but before all of the payments provided for have been made, the
unpaid balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
4. Voluntary Termination.
---------------------
If the Employee voluntarily resigns from employment with the Company
before age 65 he shall forfeit all benefits under this Agreement.
5. Early Retirement.
----------------
(a) If the Employee voluntarily retires early, the Board of Directors
of the Company shall determine, in its discretion, whether the Employee shall be
entitled to any benefit under this Agreement.
(b) If the Employee retires early on an involuntary basis, Section 3,
Involuntary Termination, shall apply to determine the benefit, if any, to which
the Employee shall be entitled under this Agreement.
6. Change in Control.
-----------------
(a) As used in Section 6, the terms "Change in Control", "Protection
Period", "Company", "Cause", and "Good Reason" shall have the meanings given to
them in the Change in Control Agreement entered into by and between the Company
and the Employee as of October 21, 1996.
(b) If, during a Protection Period, the Employee's employment is
terminated by the Company other than for Cause or if the Employee terminates his
employment for Good Reason, then the Company shall pay to the Employee the
amount of the Normal Retirement Benefit under the provisions of this Section 6,
notwithstanding any conflicting provisions of Sections 2, 3, 4, or 5, but
reduced in accordance with Section 7.
(c) Subject to Section 8, such amount shall be paid in 180 equal
monthly installments, the first of which shall be paid within thirty days after
the Employee ceases to be employed by the Company and the balance of which
3
<PAGE>
shall be paid on or about the first business day of each following month for 179
months.
(d) If the Employee dies after becoming entitled to payment under this
Section 6, but before all the payments provided for have been made, the unpaid
balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
7. Reduction of Benefits.
---------------------
(a) The Company and the Employee have entered into a Life Insurance
Split-Dollar Agreement dated as of May 1, 1992, pursuant to which beneficiaries
of the Employee may receive a death benefit if the Employee dies while employed
by the Company and the Employee may own an interest in the cash surrender value
of a life insurance policy (the "Policy") at the time his employment with the
Company terminates by retirement or otherwise. Notwithstanding any contrary
provision of this Agreement, the benefits the Company is otherwise obligated to
pay to the Employee pursuant to Sections 2, 3, 5, or 6 shall be reduced in the
manner provided in Paragraph (b) below by the amount of the Employee's interest
in the cash surrender value of the Policy on the date the Employee ceases to be
employed by the Company.
(b) The reduction to which Paragraph (a) above refers shall be
calculated as described in (i) through (v) below as of the date on which the
Employee ceases to be employed by the Company:
(i) Calculate the monthly benefit under Sections 2, 3, 5,
or 6, as the case may be.
(ii) Convert the monthly benefit (from (i) above) into an
after-tax monthly benefit, using the after-tax rate specified under paragraph II
in Schedule A to this Agreement (the "After-Tax Rate").
(iii) Calculate the monthly annuity amount that would be
payable to the Employee monthly for 180 months if an amount equal to the
Employee's interest in the cash surrender value of the Policy were converted
into an annuity with a term certain of 180 months using an interest rate equal
to the applicable annual interest rate specified under paragraph III in Schedule
A to this Agreement (the "Applicable Annual Rate").
(iv) Convert the monthly annuity amount (from (iii) above)
into an after-tax monthly annuity amount, using the After-Tax Rate, but
4
<PAGE>
applying the After-Tax Rate only to that part of the monthly annuity amount that
would not represent the return of the Employee's investment in the Policy.
(v) Subtract the after-tax monthly annuity amount (from
(iv) above) from the after-tax monthly benefit (from (ii) above). Divide the
remainder, if any, by the After-Tax Rate; the quotient is, notwithstanding the
provisions of Sections 2, 3, 5, and 6, the monthly benefit payable for 180
months in accordance with the terms of the relevant section of this Agreement.
8. Acceleration of Payments; Frequency of Payments.
-----------------------------------------------
(a) At the Company's option or, if amounts become payable on a Change
in Control pursuant to Section 6 of this Agreement, at the Employee's option,
amounts payable under this Agreement may be paid in a lump sum rather than over
a period of years, discounted at the Applicable Annual Rate in effect as of the
date the Employee ceases to be employed by the Company. Should the Employee
exercise the foregoing option, the Company shall make the lump sum payment to
the Employee within thirty days after he notifies the Company of the exercise of
the option.
(b) The Company may, at is option, but subject to Paragraph (a) above,
divide any amount due under this Agreement in any month into two or more
installments to be paid during that month at times corresponding to the
Company's regular pay dates for executive employee. The Company's exercise of
the foregoing option shall not be cause for an adjustment of the amount
otherwise payable under this Agreement.
9. Claims Procedure.
----------------
(a) The administrator for purposes of the claims procedure under this
Agreement is the Chief Financial Officer of the Company. The business address
and telephone number of the claims administrator is: 2777 Walden Avenue,
Buffalo, New York 14225; telephone: (716) 684-9700.
(b) The Company shall have the right to change the claims
administrator. The Company shall also have the right to change the address and
telephone number of the claims administrator. The Company shall give the
Employee written notice of any of the foregoing changes.
(c) Benefits shall be paid in accordance with the provisions of this
Agreement .
5
<PAGE>
(d) The claims administrator shall present any disputed claim for
benefits to the Compensation Committee for review. The Compensation Committee
in conjunction with the Board of Directors shall determine the disposition of
the disputed claim.
(e) If the claim is denied, either wholly or partially, notice of the
decision shall be mailed to the claimant within 90 days after the receipt of the
claim by the claims administrator.
(f) The claims administrator shall provide a written notice to any
claimant who is denied a claim for benefits under this Agreement. The notice
shall set forth the following information:
(i) the specific reasons for denial;
(ii) the specific reference to pertinent provisions of the
Agreement on which the denial is based;
(iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(iv) appropriate information and an explanation of the claims
procedure under this Agreement to permit the claimant to submit his claim for
review.
All of this information shall be set forth in the notice in a
manner calculated to be understood by the claimant.
(g) The claims procedure under this Agreement shall allow the claimant
a reasonable opportunity to appeal a denied claim and to get a full and fair
review of that decision from the claims administrator. The claimant shall
exercise his right of appeal by submitting a written request for a review of the
denied claim to the claims administrator.
This written request for review must be submitted to the claims
administrator within sixty days after receipt by the claimant of the written
notice of denial. The claimant shall have the following rights under this
appeal procedure:
(i) to request a review upon written application to the claims
administrator;
6
<PAGE>
(ii) to review pertinent documents with regard to this
Agreement;
(iii) to submit issues and comments in writing;
(iv) to request an extension of time to make a written
submission of issues and comments; and
(v) to request that a hearing be held to consider
claimant's appeal.
(h) The claims administrator shall notify the claimant in writing of
the decision on review of the denied claim within 60 days after the receipt of
the request for review if no hearing was held, or within 120 days after the
receipt of the request for review, if an extension of time is necessary in order
to hold a hearing. If an extension of time is necessary in order to hold a
hearing, the claims administrator shall give the claimant written notice of the
extension of time and of the hearing. This notice shall be given prior to any
extension. The written notice of extension shall indicate that an extension of
time will occur in order to hold a hearing on the claimant's appeal.
The notice shall also specify the place, date, and time of that
hearing and the claimant's opportunity to participate in the hearing. It may
also include any other information the claims administrator believes may be
important or useful to the claimant in connection with the appeal.
(i) The decision to hold a hearing to consider the claimant's appeal
of the denied claim shall be within the sole discretion of the claims
administrator, whether or not the claimant requests such a hearing.
(j) The written decision on review required by Paragraph (h) above
shall contain the following information:
(i) the decisions;
(ii) the reasons for the decisions; and
(iii) specific references to the provisions of the
Agreement on which the decisions are based.
All of this information shall be written in a manner
calculated to be understood by the claimant.
7
<PAGE>
(k) The claims administrator shall be entitled to retain and rely on
the advice of experts (including without limitation attorneys and accountants
retained by the Company) in taking or refraining from taking any action or
making any decision pursuant to this Section 9. All fees and expenses of such
experts shall be paid by the Company.
10. Nature of Company's Obligation.
------------------------------
The Company's obligation under this Agreement shall be an unfunded and
unsecured promise to pay. Any assets which the Company may acquire to help
support its financial liabilities are and remain general assets of the Company
subject to the claims of its creditors. The Company does not give, nor does
this Agreement create nor the Employee receive, any beneficial ownership
interest in any asset of the Company. The Employee understands and agrees that
his participation in the acquisition of any general asset that the Company may
acquire or use to help support its financial obligations under this Agreement
shall not constitute a representation to the Employee, his designated
beneficiary, or any person claiming through the Employee that any of them has a
special or beneficial interest in such general asset.
11. No Employment Rights.
--------------------
This Agreement shall not be deemed to constitute a contract of
employment between the Company and Employee. Nothing contained in this
Agreement shall be deemed to give the Employee the right to be retained in the
employ of the Company or to interfere with the right of the Company to discharge
the Employee, nor shall it be determined to give the Company the right to
require the Employee to remain in its employ, nor shall it interfere with
Employee's right to terminate his employment.
12. Independence of Benefits.
------------------------
The benefits payable under this Agreement shall be independent of, and
in addition to, any other benefits or compensation, whether by salary, or bonus
or otherwise, payable under any other employment agreements that now or may in
the future exist between the Company and the Employee. This Agreement between
the Company and the Employee does not involve a reduction in salary or foregoing
of an increase in the future salary by the Employee. This Agreement shall not
affect or reduce the existing and future compensation and other benefits of the
Employee.
8
<PAGE>
13. Assignability.
-------------
Except insofar as this provision may be contrary to applicable law, no
sale, transfer, alienation, assignment, pledge, collateralization, or attachment
of any benefits under this Agreement shall be valid or recognized by the
Company.
14. Payment Due Incompetents, Minors, Etc.
-------------------------------------
If it shall be found that any person to whom a payment is due under
this Agreement is unable to care for his affairs because of physical or mental
disability, or that such person is a minor, the Company shall have the authority
to cause the payments becoming due to such person to be made to the spouse,
brother, sister, or other individual with whom the person to whom the payment is
due is living, or any other individual deemed by the Company to have incurred
expense for such person otherwise entitled to payment (unless prior claim shall
have been made by a duly qualified guardian or other legal representative),
without responsibility of the Company to see the application of such payments.
Payments made pursuant to such power shall operate as a discharge of the
obligation of the Company under this Agreement to the extent of such payments.
15. Employee Waiver.
---------------
The Employee acknowledges and agrees that if the Agreement and the
benefits described in the Agreement constitute an employee benefit plan or part
of an employee benefit plan for purposes of Title I of the Employee Retirement
Income Security Act, as amended ("ERISA"), (a) such plan is an unfunded plan,
(b) the Employee belongs to a select group of management or highly compensated
employees, and, therefore, (c) such plan is exempt from the participation,
vesting, benefit accrual, joint and survivor and preretirement survivor annuity,
minimum funding, fiduciary responsibility, and other requirements of Title I of
ERISA. The Employee further agrees that, should the Agreement and the benefits
described in the Agreement be construed as a funded plan or part of a funded
plan for purposes of Title I of ERISA, the Employee irrevocably waives on behalf
of himself and any spouse to whom he may now or in the future be married, any
rights and claims the Employee or his spouse or both of them may have now or in
the future under Title I of ERISA with respect to such plan. The Employee
acknowledges that he has had sufficient opportunity to review this waiver with
counsel.
9
<PAGE>
16. Designation of Beneficiary.
--------------------------
The Employee may designate a beneficiary to receive any amounts due
under Sections 2(a), 3(c), or 6(d) of this Agreement after his death. A
designation of a beneficiary shall be made in writing, signed by the Employee,
and delivered to the Company. If the Employee is married and elects to
designate someone other than his spouse as beneficiary, the spouse's written
consent shall be required. If the Employee has not designated a beneficiary,
payment of such amounts shall be made to the Employee's surviving spouse or, if
there be none, to his estate. This Section 16 shall not supersede any
designation of beneficiary made by the Employee pursuant to or provided for
under any other plan or program of the Company.
17. Amendment.
---------
During the lifetime of the Employee, this Agreement may be amended or
terminated at any time, in whole or in part, by a written agreement of the
parties; provided, however, that this Agreement may not be amended in a manner
that would materially increase the cost to the Company without the approval of
the Board of Directors.
18. Plan Administrator.
------------------
The plan administrator shall be the Compensation Committee of the
Board of Directors of the Company. The plan administrator shall administer this
Agreement, construe its terms, and make all determinations necessary under this
Agreement and shall have complete discretion in doing so.
19. Requirements and Benefits if Executive Is Employee of Subsidiary.
----------------------------------------------------------------
If the Employee is an employee of any subsidiary of the Company, he
shall be entitled to all of the rights and benefits of this Agreement as though
he were an employee of the Company, and the term "Company" as used in this
Agreement shall be construed to include the subsidiary by which the Employee is
employed. The Company guarantees the performance of its subsidiary under this
Agreement.
20. Notices.
-------
All notices, requests, demands and other communications required or
permitted to be given under this Agreement shall be in writing and shall
10
<PAGE>
be deemed duly given upon their delivery or mailing, as the case may be, if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid:
(a) If to the Company, to:
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, New York 14225
Attention: Chairman, Compensation Committee
(b) If to the claims administrator, to:
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, New York 14225
Attention: Chief Financial Officer
(c) If to the Employee or claimant, to:
Richard S. Warzala
102 Southwedge Drive
Amherst, New York 14068
or to such other address as any of the foregoing shall have specified by notice
given in said manner to each of the others.
21. Miscellaneous.
-------------
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter of this Agreement. This Agreement shall be
governed by the laws of the State of New York, except to the extent Federal law
supersedes. This Agreement is solely between the Company and the Employee.
However, it shall be binding upon the designated recipients, beneficiaries,
heirs, executors, and administrators of the Employee and upon the successors and
assigns of the Company. Headings in this Agreement are for reference purposes
only and shall not be deemed to have any substantive effect.
11
<PAGE>
IN WITNESS WHEREOF, the Employee has executed this Agreement, and the
Company, pursuant to the authorization of its Board of Directors, has caused
this Agreement to be executed, as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ John M. Murray
-----------------------------------
V.P. - Finance
/s/ Richard S. Warzala
-----------------------------------
12
<PAGE>
SCHEDULE A
Effective as of January 4,1997
I. Normal Retirement Benefit
-------------------------
The Normal Retirement Benefit is an amount equal to three times the
Employee's current annual base salary.
II. After-Tax Rate
--------------
The After-Tax Rate is the percentage that is the remainder after the
subtraction from (i) 100 percent of (ii) the effective marginal tax rate
applicable to the Employee on the date as of which a calculation is being
made. The Company shall determine the effective marginal tax rate
applicable to the Employee as of the calculation date, taking into account
federal, state, and local income tax rates; the hospital insurance tax rate
under the Federal Insurance Contribution Act; the deduction (for income tax
purposes) for state and local income taxes; and no income other than income
attributable to the Company. An amount shall be converted to an after-tax
amount by multiplying it by the After-Tax Rate in effect for the
calculation date.
III. Applicable Annual Rate
----------------------
The Applicable Annual Rate is the annual rate of interest determined for a
given calendar year as follows: For each calendar year, the Company shall
obtain quotes from the Guardian Life Insurance Company and two other A+
rated life insurance companies on the single premium that would be required
in January of that year to purchase an immediate annuity policy paying a
fixed monthly benefit for a term certain of 180 months. The premiums
quoted shall be translated into discount rates. The highest of the three
discount rates shall be the Applicable Annual Rate in effect for
calculations made as of any date during the given calendar year.
13
<PAGE>
EXHIBIT 56
AMENDMENT TO
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
AGREEMENT by and between AMERICAN PRECISION INDUSTRIES INC., a
Delaware corporation with its principal office at 2777 Walden Avenue, Buffalo,
New York 14225 (the "Company"), and RICHARD S. WARZALA (the "Employee"),
residing at 102 Southwedge Drive, Amherst, New York 14068, dated as of April 24,
1998.
W I T N E S S E T H
WHEREAS, the Company and the Employee entered into an agreement entitle
the Executive Supplemental Retirement Plan (the "Plan") as of June 1, 1983, and
entered into an agreement amending and restating the Plan as of January 4, 1997;
and
WHEREAS, the Board of Directors of the Company has authorized the
following amendment to the Plan as so amended and restated, and the Employee has
agreed to the amendment,
NOW, THEREFORE, the Plan is amended as follows, effective April 24, 1998:
1. The first two lines of Schedule A to the Plan are amended to read as
follows:
SCHEDULE A
As Amended Effective as of April 24, 1998
2. Part I of Schedule A is deleted and the following paragraph is
substituted in its place:
I. Normal Retirement Benefit. The Normal Retirement Benefit as in
-------------------------
effect on May 1, 1998, is $1,200,000. The Normal Retirement Benefit shall be
adjusted automatically as of May 1 of each year after 1998 to reflect changes in
the cost of living, using the following procedure:
The Normal Retirement Benefit in effect as of the immediately
preceding May 1 shall be increased or decreased by a factor derived from the
Consumer Price Index for All Urban Consumers (1982-84 = 100) published by the
United States Bureau of Labor Statistics for the month of April preceding the
date as of which the adjustment is being made. The Normal
<PAGE>
Retirement Benefit to be used as the basis for the calculation of any benefit
payable under this Agreement is the Normal Retirement Benefit in effect as of
the May 1 preceding (of, if applicable coincident with) the date the Employee
ceases to be employed by the Company.
3. The Schedule A appended to this Agreement, which has been restated to
include the amendments described above, shall be executed and attached to the
Plan in place of the Schedule A that was designated "Effective as of January 4,
1997."
IN WITNESS WHEREOF, the Employee has executed this Agreement, and the
Company, pursuant to the authorization of its Board of Directors, has caused
this Agreement to be executed, as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ Bruce McH. Kirchner
-----------------------------------------------
Bruce McH. Kirchner
Vice President and Chief Financial Officer
/s/ Richard S. Warzala
------------------------------------------------
Richard S. Warzala, individually
-2-
<PAGE>
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
SCHEDULE A
As Amended Effective as of April 24, 1998
IV. Normal Retirement Benefit.
-------------------------
The Normal Retirement Benefit as in effect on May 1, 1998, is $1,200,000.
The Normal Retirement Benefit shall be adjusted automatically as of May 1
of each year after 1998 to reflect changes in the cost of living, using the
following procedure:
The Normal Retirement Benefit in effect as of the immediately preceding May
1 shall be increased or decreased by a factor derived from the Consumer
Price Index for All Urban Consumers (1982-84 = 100) published by the United
States Bureau of Labor Statistics for the month of April preceding the date
as of which the adjustment is being made. The Normal Retirement Benefit to
be used as the basis for the calculation of any benefit payable under this
Agreement is the Normal Retirement Benefit in effect as of the May 1
preceding (of, if applicable coincident with) the date the Employee ceases
to be employed by the Company.
V. After-Tax Rate
--------------
The After-Tax Rate is the percentage that is the remainder after the
subtraction from (i) 100 percent of (ii) the effective marginal tax rate
applicable to the Employee on the date as of which a calculation is being
made. The Company shall determine the effective marginal tax rate
applicable to the Employee as of the calculation date, taking into account
federal, state, and local income tax rates; the hospital insurance tax rate
under the Federal Insurance Contribution Act; the deduction (for income tax
purposes) for state and local income taxes; and no income other than income
attributable to the Company. An amount shall be converted to an after-tax
amount by multiplying it by the After-Tax Rate in effect for the
calculation date.
VI. Applicable Annual Rate
----------------------
The Applicable Annual Rate is the annual rate of interest determined for a
given calendar year as follows: For each calendar year, the Company shall
obtain quotes from the Guardian Life Insurance Company and two other A+
rated life insurance companies on the single premium that would be required
in January of that year to purchase an
<PAGE>
immediate annuity policy paying a fixed monthly benefit for a term certain
of 180 months. The premiums quoted shall be translated into discount rates.
The highest of the three discount rates shall be the Applicable Annual Rate
in effect for calculations made as of any date during the given calendar
year.
AMERICAN PRECISION INDUSTRIES INC.
by /s/ Bruce McH. Kirchner
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Bruce McH. Kirchner,
Vice President and Chief Financial
Officer
/s/ Richard S. Warzala
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Richard S. Warzala
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