SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section(a) of the Securities Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only(as permitted by Rule
14a-6(3)(2))
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c ) or Section
240.14a-12
Edison Control Corporation
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11(set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
EDISON CONTROL CORPORATION
W60 N151 CARDINAL AVENUE
P.O. BOX 326
CEDARBURG, WI 53012
NOTICE OF 1997 ANNUAL MEETING OF SHAREHOLDERS
June 10, 1997
TO THE SHAREHOLDERS OF EDISON CONTROL CORPORATION
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
of Edison Control Corporation (the "Company") which will be held on Tuesday,
June 10, 1997 at 10:00 A.M. Central Time, at W60 N151 Cardinal Avenue,
Cedarburg, WI 53012.
The meeting and any adjournment thereof will consider and take action upon
the following matters:
(1) To elect six directors to serve until the next annual meeting of
shareholders;
(2) To ratify the issuance to William Finneran of a ten-year warrant to
purchase 500,000 shares of the Company's Common Stock; and
(3) To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 30, 1997 as
the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
YOU ARE EARNESTLY REQUESTED, WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE
MEETING, TO COMPLETE, DATE, SIGN AND RETURN PROMPTLY THE ACCOMPANYING
PROXY, TO WHICH NO POSTAGE NEED BE AFFIXED. IF YOU ATTEND THE MEETING IN
PERSON, YOU MAY REVOKE THE PROXY AND VOTE YOUR OWN SHARES.
By order of the Board of Directors.
Jay R. Hanamann
Secretary
Cedarburg, WI
May 1, 1997
EDISON CONTROL CORPORATION
PROXY STATEMENT
1997 ANNUAL MEETING OF SHAREHOLDERS
June 10, 1997
This Proxy Statement is first being mailed to shareholders on or about May 1,
1997 in connection with the solicitation of proxies for use at the 1997
Annual Meeting of Shareholders (the "Annual Meeting") of Edison Control
Corporation (the "Company"), to be held on June 10, 1997 at 10:00 A. M.,
Central Time, at W60 N151 Cardinal Avenue, Cedarburg, WI 53012 or at any
adjournments or postponements thereof.
The enclosed proxy is solicited by the Board of Directors of the Company. Each
proxy properly executed and returned by a shareholder and not revoked will be
voted in accordance with the shareholder's instructions thereon. Any proxy
may be revoked at any time before it is voted at the meeting by providing the
Secretary of the Company with notice to such effect or a duly executed proxy
bearing a later date. If no instructions are indicated, a proxy will be
voted "For" the election of all nominees for directors, "For" ratification of
Mr. Finneran's warrant issuance and otherwise in accordance with the best
judgment of the proxies named in the proxy card. The persons named as
proxies intend to vote in accordance with their discretion on any other
matters which may properly come before the Annual Meeting. Execution of a
proxy given in response to this solicitation will not affect a shareholder's
right to attend the Annual Meeting and vote. Stockholders who are present
at the Annual Meeting may revoke their proxies and vote in person if they so
desire.
Only holders of record of the Company's Common Stock, $.01 par value, at the
close of business April 30, 1997 are entitled to notice of and to vote at the
Annual Meeting. On that date, there were issued and outstanding 2,275,933
shares of Common Stock of the Company. Each outstanding share is entitled to
one vote at the Annual Meeting.
<PAGE>
SHARE OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 31, 1997, the number of shares of
Common Stock beneficially owned by (i) each director of the Company, (ii)
each of the executive officers named in the Summary Compensation Table set
forth below, (iii) all directors and executive officers of the Company as a
group, and (iv) each person known to the Company to be the beneficial owner
of more than 5% of the Common Stock.
<TABLE>
<CAPTION>
Name and Address of Number of Shares Percent
Beneficial Owner Owned of Class
<S> <C> <C>
Robert L. Cooney 2,500 .1%
Cramer Rosenthal McGlynn, Inc. 168,300 (6) 7.4%
520 Madison Avenue
New York, NY 10022
John J. Delucca 28,000 (2) 1.2%
EDCO Partners LLLP 195,053 (6) 8.6%
4605 Denice Drive
Englewood, CO 80111
William B. Finneran 1,365,045 (1)(6) 48.6%
World Financial Center
34th Floor
New York, NY 10281
Jay R. Hanamann 81,944 (4) 3.5%
Alan J. Kastelic 163,889 (5) 6.9%
Mary E. McCormack 200,000 (3) 8.1%
Jay J. Miller 18,000 (2) .8%
All directors and executive
officers as a group
(7 in number) 1,859,378 (7) 57.9%
<FN>
(1) Includes a warrant to purchase 500,000 shares of Common Stock and
currently exercisable stock options to purchase 35,000 shares which options
expire June 4, 1998, but does not include 4,740 shares owned by two Uniform
Gifts to Minors Act accounts, each for the benefit of one of Mr. Finneran's
children; Mr. Finneran disclaims beneficial ownership of these shares for
purposes of Section 16 of the Securities Exchange Act of 1934, as amended,
or otherwise.
(2) Includes currently exercisable stock options to purchase 18,000 shares
of Common Stock.
(3) Includes a currently exercisable stock option to purchase 200,000 shares
of Common Stock.
(4) Includes stock option to purchase 48,611 shares which vests on June 21,
1997.
(5) Includes stock option to purchase 97,222 shares which vests on June 21,
1997.
(6) Based on information set forth in indicated party's Schedule 13D or 13G
as filed with the Securities and Exchange Commission and the Company in 1996.
(7) Assumes the exercise of certain options and the warrant which would
increase the outstanding shares to 3,210,766 shares.
</TABLE>
<PAGE>
ELECTION OF DIRECTORS
General
Assuming the presence of a quorum (a majority of the total issued and
outstanding shares of Common Stock of the Company), the favorable vote of the
holders of a plurality of the shares of the Company's common stock present
and voting at the Annual Meeting for the election of each nominee is required
for his or her election. For this purpose, "plurality" means the individuals
receiving the largest number of votes are elected as directors, up to the
maximum number of directors to be chosen at the Annual Meeting. Therefore,
any shares of Common Stock which are not voted on this matter at the Annual
Meeting, whether by abstention, broker non-vote or otherwise, will have no
effect on the election of directors at the Annual Meeting.
The Board of Directors has fixed the number of directors to be elected at the
Annual Meeting at six. The shares represented by proxies submitted will be
voted for the election as directors of the persons named below unless
authority to do so is withheld. The directors elected will hold office until
the Compnay's next annual meeting of shareholders or until their respective
successors are duly elected. If any nominee is unable to serve as a director
prior to the Annual Meeting, then all submitted proxies will be voted for a
substitute nominee selected by the Board and the others named below, unless
authority to vote for such replaced director or all directors was withheld.
<TABLE>
<CAPTION>
Director
Name Company Office(s) Since Age
<S> <S> <S> <C>
William B. Finneran Chairman of the Board and Director 1991 56
Robert L. Cooney Director Nominee - 63
John J. Delucca Director (1) 1991 53
Alan J. Kastelic Director Nominee, President and Chief - 53
Executive, Officer of Construction
Forms, Inc.
Mary E. McCormack President, Chief Executive Officer 1995 43
and Director
Jay J. Miller Director (1) 1991 64
<FN>
(1) Member of the Compensation Committee and Audit Committee.
</TABLE>
William B. Finneran is a Managing Director of Oppenheimer & Co., Inc., an
investment banking firm, with which he has been associated since 1972. Mr.
Finneran is a Director of National Planning Association, a non-profit
advisory board and Covenant House, a non-profit charitable institution. Mr.
Finneran was elected Chairman of the Board of the Company in November 1991.
Robert L. Cooney is a Partner of Cooney, Schroeder & Co., a consulting firm
which he co-founded in February 1997. Mr. Cooney was a Managing Director-
Equity Capital Markets at CS First Boston from 1977 to January 1997. Prior
to joining CS First Boston, he was a Senior Vice President, Director and
Equity Sales Manager at Wertheim & Co. from 1973 to 1977 and Vice President,
Director and Equity Sales Manager at Mitchell, Hutchins & Co. from 1967 to
1973. Mr. Cooney began his career at The First Boston Corporation where he
was an Assistant Vice President in the government securities department from
1962 to 1967. He also served as a Lieutenant in the United States Navy.
John J. Delucca is Senior Vice President and Treasurer of RJR Nabisco. Mr.
Delucca was Chief Financial Officer of the Hascoe Association, a private
investment company, from January 1991 to September 1993, President and Chief
Financial Officer for The Lexington Group from October 1990 to January 1991,
Senior Vice President of Finance and Managing Director of the Trump Group
from May 1988 to October 1990, and Senior Vice President of Finance for
International Controls Corporation from April 1986 to May 1988. Mr. Delucca
is a Director of Enzo Biochem, Inc., a genetic research/testing company.
Alan J. Kastelic was appointed President and Chief Executive Officer of
Construction Forms, Inc. on June 21, 1996 when Construction Forms, Inc. was
acquired by the Company. Mr. Kastelic had previously been Executive Vice
President and Chief Operating Officer of Construction Forms, Inc. which he
joined in 1977. Prior to joining Construction Forms, Mr. Kastelic was
Manufacturing Manager at Badger Dynamics and Chief Cost Accountant, Material
Control Manager and Manager of Manufacturing at the PCM Division of Koehring
Corporation.
Mary E. McCormack was appointed President and Chief Executive Officer of the
Company on February 1, 1995. Prior to joining the Company, Ms. McCormack was
a Managing Director of Beechtree Capital Partners, Inc. a boutique merchant
banking firm which she co-founded in 1989. From 1983 to 1989, she served in
a variety of capacities for the investment banking and brokerage firm of
Advest, Inc., most recently as Vice President-Corporate Finance. Ms.
McCormack is a Director of Star International Holdings, Inc., a manufacturer
of commercial cooking appliances, and the Junior League of Central
Westchester, a non-profit charitable institution.
Jay J. Miller has been a practicing attorney in the State of New York for
more than 30 years. Mr. Miller is a director of Total-Tel USA
Communications, Inc., a provider of long distance telephone service, and
Vestro Natural Foods, Inc., a specialty food manufacturer and distributor.
He is currently serving as Chairman of the Board of AmTrust Pacific Ltd., a
New Zealand property company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ELECTION OF ALL DIRECTOR
NOMINEES SET FORTH ABOVE.
Committees, Meetings and Attendance
The Board of Directors of the Company has two standing committees: an Audit
Committee and a Compensation Committee. The Board of Directors does not have
a Nominating Committee; the Board as a whole performs this function.
The Audit Committee, which met once during the year ended January 31, 1997,
recommends to the Board of Directors independent auditors for selection by
the Company, discusses with the independent auditors the scope and results of
audits, and approves and reviews any nonaudit services performed by the
Company's independent auditing firm.
The Compensation Committee, which met once during the year ended January 31,
1997, establishes all forms of compensation for the officers of the Company,
administers the Company's benefit plans and responds to Securities and
Exchange Commission requirements on compensation committee reports.
The Board of Directors of the Company held four meetings during the year
ended January 31, 1997. Each director who as a director during the year
ended January 31, 1997 attended all of the meetings of the Board of Directors
and committees on which he or she serves.
Director Compensation
Directors who are not executive officers of the Company each received an
annual retainer of $5,000 through December 1996. The annual retainer was
increased to $15,000 in January 1997. Directors of the Company do not
receive additional compensation for attendance at Board of Director meetings
or committee meetings. Mr. Finneran, Chairman of the Board, is not a full
time employee of the Company; however, he has devoted considerable time to
portfolio management, the search for an acquisition and consideration of the
Company's current business operation. For 1996, Mr. Finneran received
compensation of $50,000. The Compensation Committee believes Mr. Finneran's
compensation is low given his experience and the results achieved.
Accordingly, Mr. Finneran's compensation was increased to $100,000 beginning
January 1, 1997. See also "Ratification of Stock Warrant Issued" below for
information on a stock warrant issued in 1996 to Mr. Finneran, dependent upon
the shareholders' ratification of such issuance at the Annual Meeting.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the annual and long-term compensation for the
Company's Chief Executive Officer and other named executives who earned in
excess of $100,000 in fiscal 1996, as well as the total compensation paid to
each named executive for the Company's two previous fiscal years:
<TABLE>
<CAPTION>
Other Options
Name and Principal Annual Granted
Principal Position Year Salary($) Bonus($) Compensation (shares)
<S> <S> <C> <C> <C> <C>
Mary E. McCormack 1996 150,000 25,000 0 0
President and Chief 1995 136,731 0 0 200,000
Executive Officer 1994 0 0 0 0
Alan J. Kastelic(1) 1996 145,000 60,000 4,520 (2) 97,222
President and Chief 1995 0 0 0 0
Executive Officer of 1994 0 0 0 0
Construction Forms, Inc.
Jay R. Hanamann(1) 1996 84,000 40,000 3,720 (2) 48,611
Secretary, Treasurer 1995 0 0 0 0
and Chief Financial 1994 0 0 0 0
Officer
<FN>
(1) Executives of acquired companies; compensation shown for the fiscal year
ended January 31, 1997. Jay R. Hanamann became Chief Financial Officer and
Treasurer of the Company on July 1, 1996 and became Secretary on December 3,
1996. Alan J. Kastelic was appointed President and Chief Executive Officer
of Construction Forms, Inc. on June 21, 1996.
(2) Represents the Company matching amount to the 401(k) Plan.
</TABLE>
Option Grants in Last Fiscal Year
In connection with the acquisition of Construction Forms, Inc. and related
entities, the Company granted ten year options to purchase an aggregate of
167,611 shares of Common Stock exercisable at $3.00 per share to the key
management personnel, including Alan Kastelic and Jay Hanamann. Such options
vest fully on June 21, 1997, the first anniversary of the closing of the
acquisition. On the date of grant, the closing price for the Company's
Common Stock was $7.50 per share.
Also in connection with the acquisition of Construction Forms, the Company
issued to Mr. Finneran a ten year warrant to purchase 500,000 shares of the
Company's Common Stock exercisable at $1.60 per share. See "Ratification of
Stock Warrant Issued" section below for more information.
The following table sets forth information concerning the grant of stock
options during fiscal 1996 to the named executive officers:
<TABLE>
<CAPTION>
Percentage of
Total
Shares Options
Underlying Granted to Grant Date
Options All Employees Exercise Expiration Present
Name Granted In 1996 Price (1) Date Value(2)
<S> <C> <C> <C> <S> <S>
Mary E. McCormack -- -- -- -- --
Alan J. Kastelic 97,222 52.5% $3.00 6/21/06 $5.65
Jay R. Hanamann 48,611 26.3% $3.00 6/21/06 $5.65
<FN>
(1) The exercise price of options is may be paid in cash, by delivering
previously issued shares of Common Stock or any combination thereof.
(2) The option values presented are based on the Black-Scholes option
pricing model adapted for use in valuing options. The actual value, if any,
that an optionee may realize upon exercise will depend on the excess of the
market price of the Common Stock over the option exercise price on the date
the option is exercised. There is no assurance that the actual value
realized by an optionee upon the exercise of an option will be at or near the
value estimated under the Black-Scholes model. The estimated values under
the Black-Scholes model are based on arbitrary assumptions as to variables
such as interest rates, stock price volatility and future dividend yield,
including the following: an assumed United States Treasury bond rate of
6.65%; stock price volatility of 53%; and a current dividend yield of 0%.
</TABLE>
Option Exercised in Fiscal 1996 and Fiscal Year End Option Values
The following table summarizes options exercised during fiscal 1996 and
presents the value of unexercised options held by the named executive
officers at January 31, 1997. No options were exercised in fiscal 1996
by the named executive officers.
<TABLE>
<CAPTION>
Number of Value of
unexercised unexercised
options option
Shares at fiscal year at fiscal year
Acquired Value end (shares) end ($)
on realized Exercisable (E)/ Exercisable (E)/
Name exercise ($) Unexercisable (U) Unexercisable (U)
<S> <C> <C> <C> <C>
Jay R. Hanamann 0 0 48,611 U 72,917 U (1)
Alan J. Kastelic 0 0 97,222 U 145,833 U (1)
Mary E. McCormack 0 0 133,334 E 66,667 E (1)
66,667 U 33,333 U (1)
<FN>
(1) Value was calculated by subtracting the respective option exercise price
from the fair market value of the Common Stock on January 31, 1997 which was
the closing sale price of $4.50 per share as reported by NASDAQ.
</TABLE>
Benefit Plans
The Company has a noncontributory defined benefit pension plan, which relates
to the acquired companies, covering substantially all full-time employees.
The plan provides for benefits based on years of service and compensation.
The following table shows the estimated straight-life annuity benefit payable
under the qualified retirement program to employees with the specified
Maximum Average Salary(average salary during the five consecutive years that
compensation was the highest within the last 10 years) and specified years of
service upon retirement at age 65, after giving effect to adjustments for
Covered Compensation:
<TABLE>
<CAPTION>
Maximum Years of Service
Average Salary(1) 15 20 25 30 35
<C> <C> <C> <C> <C> <C>
125,000 8,613 11,484 14,354 17,225 17,225
150,000 10,863 14,484 18,104 21,725 21,725
175,000 11,763 15,684 19,604 23,525 23,525
200,000 11,763 15,684 19,604 23,525 23,525
<FN>
(1) Section 401(a)(17) of the Internal Revenue Code limits the annual
compensation which can be recognized in a qualified plan. The current limit
for 1996 is $160,000.
(2) Section 414 of the Internal Revenue Code currently limits the annual
benefits to $120,000 (estimated) for retirement under the Plan after December
31, 1993.
</TABLE>
The 1996 compensation used to calculate the Maximum Average Salary and the
number of years of credited service for Alan Kastelic were $144,000 and 20
years, respectively, and for Jay Hanamann were $83,000 and 6 years,
respectively. All the other officers or directors are not covered by the
Plan.
The Company also has a retirement savings and thrift plan (401(k) plan), which
relates to the acquired companies, covering substantially all of its employees.
For each employee contribution to the Plan of no more than 6% of the
employee's compensation for a year, the Company matches one half of the
employee 401(k) contribution.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors to file reports concerning the ownership of
the Company Common Stock with the Securities and Exchange Commission and the
Company. The Company believes that Mr. Alan J. Kastelic inadvertently failed
to file a Form 3 report with the Securities and Exchange Commission and the
Company after his June 21, 1996 appointment as the President and Chief
Executive Officer of ConForms. Mr. Kastelic has subsequently filed such
report. The Company does not believe that any other director or executive
officer of the Company has failed to timely file reports required by Section
16(a).
Compensation Committee Report on Executive Compensation
The Compensation Committee has submitted the following report for fiscal
year 1996:
Ms. Mary E. McCormack was appointed President and Chief Executive Officer of
the Company effective February 1, 1995, the date on which she was employed
by the Company, under a three year employment agreement. In addition to cash
compensation, Ms. McCormack received an option to purchase an aggregate of
200,000 shares of the Company's Common Stock under the 1986 Stock Option Plan
exercisable at $4.00 per share, of which 33% was vested on the date of grant
and 33% each on February 1, 1996 and February 1, 1997, respectively. At the
1995 Annual Meeting, the shareholders approved the grant.
Ms. McCormack's compensation package was heavily weighted to the incentive
stock option to better identify her interests with those of the shareholders.
Her cash compensation is considered to be in line with chief executive
officers of comparably sized businesses. Her principal activities were
identifying and negotiating an acquisition for the Company which was a
successfully achieved in June 1996 with the acquisition of Construction
Forms, Inc. and its affiliates. A bonus of $25,000 was paid to Ms. McCormack
for her work in connection with the acquisition in fiscal 1996.
Employment and stock option agreements were negotiated with Alan J. Kastelic
and Jay R. Hanamann at the time of the ConForm's acquisition. The two-year
employment agreements provide for a minimum salary and bonus, as set forth in
"Summary Compensation Table", and terms and conditions on which their
employment can be terminated. The stock option agreements, as described
above, were intended to provide such key personnel with a propriety interest
in the Company and to better identify their interests with those of the
Company's shareholders.
Other than with respect to shareholder approved stock options and warrants,
the Committee does not anticipate taking any action to conform the Company's
executive compensation policies with Internal Revenue Code Section 162(m).
Respectfully submitted,
John J. Delucca
Jay J. Miller
STOCK PERFORMANCE GRAPH
The graph in Exhibit 1 and the table below sets forth the cumulative total
shareholder return (assuming reinvestment of dividends) to the Company's
shareholders during the five fiscal years ended January 31, 1997, as well as
an overall stock market index (S&P 500 Index) and the Company's peer group
indices for the periods covered (S & P Diversified Manufacturers Index and
S&P Electrical Equipment Industry Index). With the ConForm's acquisition,
the peer group index was changed to the S & P Diversified Manufacturers
Index because it more appropriately reflects the Company's core business.
<TABLE>
<CAPTION>
Annual Return Percentage
Years Ending
Company/Index Jan93 Jan94 Jan95 Jan96 Jan97
<S> <C> <C> <C> <C> <C>
Edison Control Corporation 3.25 237.50 (25.93) (5.00) (5.26)
S&P 500 Index 10.58 12.88 0.53 38.67 26.34
Electrical Equipment-500 10.85 22.48 0.77 47.08 33.88
Manufacturing(Divers)-500 7.45 23.73 (0.13) 46.57 32.34
<CAPTION>
Base Indexed Returns
Period Years Ending
Company/Index Jan92 Jan93 Jan94 Jan95 Jan96 Jan97
<S> <C> <C> <C> <C> <C> <C>
Edison Control Corporation 100 103.25 348.48 258.13 245.22 232.32
S&P 500 Index 100 110.58 124.82 125.48 174.00 219.83
Electrical Equipment-500 100 110.85 135.77 136.82 201.24 269.42
Manufacturing(Divers)-500 100 107.45 132.95 132.78 194.61 257.55
<FN>
Table prepared by Standard & Poor's Compustat Custom Business Unit
</TABLE>
RATIFICATION OF STOCK WARRANT ISSUED
In June, 1996, the Company borrowed $6,800,000 from Bank Audi USA of New York
("Bank Audi"). The proceeds of the Bank Audi loan, together with the
Company's own resources and a loan from LaSalle National Bank of Milwaukee
("LaSalle"), to consummate the Company's acquisition of all of the issued
and outstanding stock of Construction Forms, Inc. and its affiliates. The
Bank Audi loan is a long-term facility which is subordinated to the LaSalle
borrowing. In connection with the Bank Audi loan, Mr. William Finneran,
Chairman of the Board and a principal shareholder of the Company, provided
collateral to Bank Audi to support his guarantee of repayment of the
principal and interest on the loan. Mr. Finneran's guarantee is limited to
the value of the collateral. This arrangement was made by Mr. Finneran, at
the Company's request, to reduce the Company's cost of borrowed funds from
that which would have otherwise been available from an unaffiliated
"mezzanine" lender. In consideration of his providing the guarantee, the
Company issued to Mr. Finneran a ten-year warrant to purchase 500,000 shares
of the Company's Common Stock exercisable at $1.60 per share (See Exhibit 2).
At the time the transaction was negotiated in April 1996, the Company's
Common Stock was $4.00 per share and on the date the acquisition was
consummated on June 21, 1996, the closing price in said market for the
Company's Common Stock was $7.50 per share. In approving the transaction,
the Board of Directors received an opinion of Commonwealth Associates, an
independent investment banking firm, that the Warrant issued to Mr. Finneran
for the limited guarantee and collateral was fair, from a financial point of
view, to the holders of the Company's Common Stock. Shareholders of the
Company are being asked to ratify and approve the grant of the warrant to Mr.
Finneran. Prior to such approval, the warrant will not be exercised by Mr.
Finneran and, if the shareholders of the Company do not ratify the issuance,
the warrant will be canceled. In the event the warrant is canceled, the
Company intends to negotiate in good faith with Mr. Finneran to provide
substitute compensation for his guarantee, the amount and method of payment
of which are not now known.
The granting of the warrant did not produce taxable income to Mr. Finneran or
a tax deduction for the Company. Taxable ordinary income will be recognized
by the holder at the time of exercise in an amount equal to the excess of
fair market value of the warrant purchased at the time of such exercise over
the aggregate warrant price. The Company will be entitled to a corresponding
tax deduction. Upon a subsequent taxable disposition of the shares, a
taxable capital gain or loss will be recognized Mr. Finneran. The taxable
income resulting from the exercise of the warrant will constitute wages
subject to the withholding of income tax.
For accounting and financial reporting purposes, the difference between the
warrant exercise price and the fair market value of the Common Stock at the
time the transaction was negotiated multiplied by the number of shares
subject to acquisition is being amortized over the three year term of the
subordinated debt.
Mr. Finneran will vote his shares in the same proportions that the other
shareholders of the Company vote their shares on this proposal. Accordingly,
a favorable vote by a majority of the votes cast by shareholders other than
Mr. Finneran is necessary for approval of this proposal.
THE BOARD OF DIRECTORS BELIEVES THAT THE ISSUANCE OF THE WARRANT TO MR.
FINNERAN WAS BENEFICIAL TO THE COMPANY AND FAIR TO THE SHAREHOLDERS AND,
ACCORDINGLY, RECOMMENDS A VOTE "FOR" RATIFICATION OF THE ISSUANCE OF THE
WARRANT AS DESCRIBED ABOVE.
GENERAL
Proposals of shareholders intended to be presented for action at the 1998
Annual Meeting of Shareholders must be received at the Company's offices no
later than January 2, 1998 to be considered for inclusion in the Company's
Proxy Statement and form of proxy relating to the meeting. The terms and
conditions of Rule 14a-8 under the Securities Exchange Act of 1934 will
apply to any such submission.
The Annual Report of the Company for the fiscal year ended January 31, 1997,
including financial statements (the "Annual Report"), and Form 10-K(Without
Exhibits) was mailed to shareholders together with this Proxy Statement on or
about May 1, 1997. No part of such Annual Report shall be regarded as proxy
soliciting material or a communication by means of which any solicitation was
being or is to be made.
On November 15, 1996, following consultation with the Board of Directors of the
Company, management of the Company dismissed the Company's independent
auditors, Ernst and Young LLP ("E & Y"), effective as of such date. On the
same date, management of the Company engaged Deloittee & Touche LLP
("D & T"), the acquired companies auditors, as the Company's independent
auditors.
The E & Y reports on the Company's financial statements for the fiscal years
ended December 31, 1995 and December 31, 1994 did not contain an adverse
opinion or disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope or accounting principles. During the fiscal years
ended December 31, 1995 and 1994 and the subsequent interim period preceding
dismissal, the Company has not had any disagreements with E & Y on any matter
of accounting principle or practices, financial statement disclosure or
auditing scope of procedures which, if not resolved to the satisfaction of
E & Y, would have caused it to make reference to the subject matter of the
disagreements in connection with its report.
D & T, which firm has served as auditor for the Company's fiscal year ended
January 31, 1997 and the one month transition period ended January 31, 1996,
has indicated that it expects to have a representative present at the Annual
Meeting. The representative will be afforded the opportunity to make a
statement, if he desires, and will be available to appropriate shareholder
questions.
The solicitation of proxies in the accompanying form is made by the Board of
Directors, and the cost thereof will be borne by the Company. The Company
may solicit proxies by mail, telephone or telegraph. Brokerage firms,
custodians, banks, trustees, nominees or other persons holding shares in
their names, will be reimbursed for their reasonable expenses in forwarding
proxy material to their principals.
As of the date of this Proxy Statement, the Board of Directors is not aware
of any other matters to be presented at the meeting, but if any other matters
properly come before the meeting, it is intended that the persons voting the
accompany proxy will vote the shares represented thereby in accordance with
their best judgment.
It is important that proxies be returned promptly. Therefore, whether or not
you plan to attend in person, you are urged to execute and return your proxy,
to which no postage need be affixed if mailed in the United States.
By Order of the Board of Directors.
Jay R. Hanamann
Secretary
May 1, 1997
<PAGE>
EDISON CONTROL CORPORATION
1997 ANNUAL MEETING OF SHAREHOLDERS - JUNE 10, 1997
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Terri Lopez and Jean Helm, and each of or
either of them as proxies, each with the power to appoint his/her substitute,
and hereby authorizes each or either of them to represent and to vote, as
designated below, all the shares of Common Stock of Edison Control Corporation
held of record by the undersigned on April 30, 1997 at the 1997 Annual Meeting
of Shareholders scheduled to be held on June 10, 1997 and any adjournment
thereof.
1. Election of Directors
[ ] FOR all nominees listed below (except as marked to the contrary)
[ ] WITHHOLD authority to vote for all nominees listed below
William B. Finneran, Robert L. Cooney, John J. Delucca, Alan J. Kastelic,
Mary E. McCormack and Jay J. Miller
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided.
2. Ratification of warrant issued to William B. Finneran
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. In their discrection, upon such other business as may properly come before
the meeting and at any adjourment thereof.
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, this proxy will be
voted FOR the specified director nominee, FOR ratifiction of the warrant
issuance to William B. Finneran, and on such other business as may properly
come before the meeting in accordance with the best judgement of the proxies
named herein.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
and accompanying Proxy Statement relating to the Company's 1997 Annual Meeting
of Shareholders, and the Company's 1996 Annual Report.
Dated ,1997
Signed
(Signature(s) of Shareholder(s))
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREON. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title as such.
If a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Please mark, sign, date and return this proxy card immediately using the
enclosed envelope.
Exhibit 2
This security has not been registered under the Securities Act of 1933, as
amended (the "Securities Act"), or any state securities law and may not be
transferred, sold or offered for sale unless registered pursuant to the
Securities Act and any applicable state securities law or unless an
exemption from such registration is available.
EDISON CONTROL CORPORATION
WARRANT
THIS IS TO CERTIFY THAT, in consideration for financial advisory and
consulting services and arranging certain financing and the issuance of a
guarantee, for value received, William B. Finneran (the "Holder") is entitled
to purchase from EDISON CONTROL CORPORATION, a New Jersey corporation (the
"Company") a total of 500,000 shares (the "Shares") of Common Stock, $.01
par value per share, of the Company (the "Common Stock"), at the price
determined as provided herein, and in all respects subject to the terms,
definitions and provisions of this Warrant.
1. Exercise Price.
The exercise price (the "Exercise Price") is $1.60 for each share of Common
Stock.
2. Exercise of Warrant.
Subject to Section 5 hereof, this Warrant shall be exercisable during its
term as follows:
(i) Right to Exercise.
The right to purchase Shares shall be immediately exercisable, with
respect to all or a part of the Shares.
(ii) Method of Exercise.
This Warrant shall be exercisable from time to time by written notice
which shall state the number of Shares in respect of which this Warrant
is being exercised, shall be signed by Holder and shall be delivered
in person or by certified mail to the Secretary of the Company. The
written notice shall be accompanied by payment of the exercise price.
No Shares will be issued pursuant to the exercise of this Warrant unless such
issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed.
(iii) Number of Shares Exercisable.
Each exercise of the purchase rights hereunder shall reduce, pro tanto,
the total number of Shares that may thereafter be purchased under this
Warrant.
3. Holder's Representations.
In the event the Shares purchasable pursuant to the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended
("Securities Act"), at the time this Warrant is exercised, Holder shall,
concurrently with the exercise of all or any portion of this Warrant,
deliver to the Company his Investment Representation Statement in the form
attached hereto as Exhibit A.
4. Method of Payment.
Payment of the exercise price shall be by any of the following, or a
combination thereof:
(i) cash or certified check; or
(ii) surrender to the Company of other shares of Common Stock of the
Company or Warrants which are not the subject of the exercise in
question having a fair market value on the date of surrender equal
to the aggregate exercise price of the Shares as to which this Warrant
is being exercised. The fair market value ("Fair Market Value") of
(x) the Warrants so surrendered shall be equal to the difference between
their exercise price and the Fair Market Value of the Shares underlying
such Warrants on the date of exercise and (y) the shares so surrendered
shall be determined by the Board in its sole discretion; provided,
however, that where there is a public market for the Common Stock, the
value per Share shall be the mean of the bid and asked prices of the
Common Stock on the last business day prior to the date of exercise,
as reported on the date of exercise in The Wall Street Journal (or,
if not so reported, as otherwise reported in the National Association
of Securities Dealers Automated Quotation (NASDAQ) System) or, in the
event the Common Stock is listed on a stock exchange, the value per
Share shall be the mean of the highest and lowest sales price of the
Common Stock on such exchange on the last business day prior to the
date of exercise, as reported in The Wall Street Journal.
5. COMPANY'S ACKNOWLEDGMENT OF OBLIGATIONS.
The Company will, at the time of any exercise of Warrants, upon the request
of the Holder, acknowledge in writing its continuing obligation to afford to
the Holder all rights to which the Holder shall continue to be entitled afte
such exercise in accordance with the provisions of this Warrant; provided,
however, that, if the Holder shall fail to make any such request, such
failure shall not affect the continuing obligation of the Company to afford
to the Holder any such rights.
6. Certain Adjustments.
The Exercise Price at which Shares may be purchased hereunder, and the number
of Shares to be purchased upon exercise hereof, are subject to change or
adjustment as follows:
6.1 The number of Shares purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend in shares of Common Stock or
make a distribution in shares of Common Stock (ii) subdivide its outstanding
shares of Common Stock into a greater number of shares of Common Stock, (iii)
combine its outstanding shares of Common Stock into a smaller number of
shares of Common Stock or (iv) issue by reclassification of its shares of
Common Stock other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which the
Company is the surviving corporation), the number of Shares purchasable upon
exercise of this Warrant shall be adjusted so that the Holder shall be
entitled to receive in addition to the Shares, the kind and number of Shares
or other securities of the Company which he would have owned or have been
entitled to receive after the happening of any of the events described above,
had this Warrant been exercised immediately prior to the happening of such
event or any record date with respect thereto. An adjustment made pursuant
to this paragraph (a) shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
(b) In case the Company shall issue rights, options or warrants to all
holders of its outstanding Common Stock, without any charge to such holders,
entitling them to subscribe for or purchase shares of Common Stock at a price
per share which is lower at the record date for the determination of
stockholders entitled to receive such rights, options or warrants than the
then current market price per share of Common Stock (as defined in paragraph
(d) of this subsection 6.1), the number of Shares thereafter purchasable upon
the exercise of this Warrant shall be determined by multiplying the number of
Shares theretofore purchasable upon exercise of this Warrant by a fraction, of
which the numerator shall be the number of shares of Common Stock outstanding
on the date of issuance of such rights, options or warrants plus the number
of additional shares of Common Stock offered for subscription or purchase,
and of which the denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights, options or warrants plus
the number of shares which the aggregate offering price of the total number
of shares of Common Stock so offered would purchase at the current market
price per share of Common Stock at such record date. Such adjustment shall
be made whenever such rights, options or warrants are issued, and shall
become effective immediately after such record date.
(c) In case the Company shall distribute to all holders of its shares of
Common Stock evidences of its indebtedness or assets (excluding cash
dividends or distributions payable out of consolidated earnings or earned
surplus and dividends or distribution referred to in paragraph (a) of this
section 6.1) or rights, options or warrants, or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of
Common Stock (excluding those referred to in paragraph (b) of this subsection
6.1), then in each case the number of Shares thereafter purchasable upon the
exercise of this Warrant shall be determined by multiplying the number of
Shares theretofore purchasable upon the exercise of this Warrant by a
fraction, of which the numerator shall be the then current market price per
share of Common Stock (as defined in paragraph (d) of this subsection 6.1)
on the date of such distribution, and of which the denominator shall be the
then current market price per share of Common Stock, less the then fair value
(as determined by the Board of Directors of the Company, whose determination
shall be conclusive) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights, options or
warrants, or of such convertible or exchangeable securities applicable to one
share of Common Stock. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for the determination of shareholders entitled
to receive such distribution.
(d) For the purpose of any computation under paragraphs (b) and (c) of this
subsection 6.1, the current market price per share of Common Stock at any
date shall be the average of the daily closing prices for 20 consecutive
trading days immediately preceding the date as of which such computation is
required to be made. The closing price for each day shall be the last such
reported sales price regular way or, in case no such reported sale takes
place on such day, the average of the closing bid and asked prices regular
way for such day, in each case on the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading or, if
not listed or admitted to trading on any national securities exchange, such
closing price or average on the Nasdaq National Market, or, if it is not
quoted thereon, the average of the closing bid and asked prices of the
Common Stock in the over-the-counter market as reported by Nasdaq or any
comparable system. In the absence of one or more such quotations, the
Company shall determine the current market price on the basis of such
quotations as it considers appropriate.
(e) No adjustment in the number of Shares purchasable hereunder shall be
required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the number of Shares purchasable upon the exercise
of the Warrant; provided, however, that any adjustments which by reason of
this paragraph (e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations shall be
made to the nearest one-thousandth of a share.
(f) Whenever the number of Shares purchasable upon the exercise of the
Warrant is adjusted, as herein provided, the Exercise Price payable upon the
exercise of this Warrant shall be adjusted by multiplying such Exercise Price
immediately prior to such adjustment by a fraction, of which the numerator
shall be the number of Shares purchasable upon the exercise of the Warrant
immediately prior to such adjustment, and of which the denominator shall be
the number of Shares purchasable immediately thereafter.
(g) No adjustment in the number of Shares purchasable upon the exercise of
this Warrant need be made under paragraphs (b) and (c) of this subsection
6.1 (i) if the Company issues or distributes to the Holder the rights,
options, warrants, or convertible or exchangeable securities, or evidences of
indebtedness or assets referred to in those paragraphs which the Holder would
have been entitled to receive had this Warrant been exercised prior to the
happening of such event or the record date with respect thereto; or (ii) for
sales of Common Stock pursuant to a Company plan for reinvestment of
dividends or interest; or (iii) for changes in the par value of the Shares,
or from par value to no par value or from no par value to par value.
(h) For the purpose of this subsection 6.1, the term "shares of Common Stock"
shall mean (i) the class of stock designated as the Common Stock of the
Company at the date of this Warrant, or (ii) any other class of stock
resulting from successive changes or reclassifications of such shares
consisting solely of changes in par value, or from par value to no par value,
or from no par value to par value. In the event that at any time, as a
result of an adjustment made pursuant to paragraph (a) of this subsection
6.1, the Holder shall become entitled to purchase any securities of the
Company other than shares of Common Stock, thereafter the number of such
other shares so purchasable upon exercise of this Warrant, and the Exercise
Price of such shares, shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
with respect to the Shares contained in paragraphs (a) through (g) inclusive,
of this subsection 6.1, and subsections 6.2 and 6.3, inclusive, with respect
to the Shares, shall apply on like terms to any such other securities.
6.2 Notice of Adjustment.
Whenever the number of Shares or the Exercise Price of such Shares is
adjusted, as herein provided, the Company shall promptly mail first class,
postage prepaid, to the Holder, notice of such adjustment or adjustments
setting forth the number of Shares and the Exercise Price of such Shares
after such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made. Such
certificate shall be conclusive evidence of the correctness of such
adjustment. If a dispute shall at any time arise with respect to the
failure of the Company to make any adjustments of the Exercise Price or the
number of Shares issuable pursuant to this Warrant, such dispute shall be
conclusively determined by the Company's independent public accountants.
Any such determinations shall be binding upon the Company and the Holder.
6.3 No Adjustment for Cash Dividends.
No adjustment in respect of any cash dividends shall be made during the term
of this Warrant or upon the exercise of this Warrant.
6.4 Preservation of Purchase Rights Upon Merger, Consolidation, etc. In case
of any consolidation of the Company with or merger of the Company into another
corporation or in case of any sale, transfer or lease to another corporation
of all or substantially all of the property of the Company, the Company or
such successor or purchasing corporation, as the case may be, shall execute
with the Holder an agreement that the Holder shall have the right thereafter
upon payment of the Exercise Price in effect immediately prior to such
action to purchase upon exercise of this Warrant the kind and amount of
shares and other securities and property which the Holder would have owned
or have been entitled to receive after the happening of such consolidation,
merger, sale, transfer or lease had this Warrant been exercised immediately
prior to such action; provided, however, that no adjustment in respect of
cash dividends, interest or other income on or from such shares or other
securities and property shall be made during the term of this Warrant or
upon the exercise of this Warrant. Such agreement shall provide for
adjustments, which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 6. The provisions of this
subsection 6.4 shall apply similarly to successive consolidations, mergers,
sales, transfers or leases.
7. Registration Rights.
7.1 Demand Registration Rights.
The Company hereby covenants and agrees with the Holder that within ninety
(90) days after receipt of a written notice from the Holder that the Holder
desires to register all or a portion of the Shares pursuant to a public
offering, within the meaning of the Securities Act, the Company shall file a
registration statement (and thereafter use its best efforts to cause such
registration statement to become effective under the Securities Act) with
respect to the offering and sale or other disposition of such Shares. The
Company shall have no obligation to comply with the foregoing provisions of
this subsection 7.1 if in the opinion of counsel to the Company reasonably
acceptable to the Holder, registration under the Securities Act is not
required for the transfer of the Shares or that a post-effective amendment
to an existing registration statement would be legally sufficient for such
transfer. The Company shall not be required (i) to honor any such request to
register the Shares if the request is received after the Expiration Date (as
hereinafter defined); (ii) to maintain the effectiveness of the registration
statement beyond the period necessary to comply with the Securities Act
(otherwise than pursuant to Rule 415 or any similar regulation permitting
"shelf registration") nor to file any "shelf registration" with respect to
distribution of the Shares; or (iii) to cause to become effective more than
one registration statement pursuant to which any Shares may be sold under
this subsection 7.1. In connection with the demand registration rights
provided for in this subsection 7.1, the Company agrees that all of the
expenses incurred in registering the Shares shall be borne by the Company,
provided that the Holder shall be responsible for the fees and expenses of
his counsel and that underwriting discounts attributable to the Shares shall
be borne by the Holder.
7.2 Piggy-Back Registration Rights.
(a) The Company hereby covenants and agrees with the Holder that, in the event
the Company proposes to file a registration statement under the Securities
Act (other than in connection with an exchange offer, a "rights" offering
to shareholders, a registration statement on Form S-8 or Form S-4 or any
successor forms relating to employee benefit plans, an acquisition of another
entity or in connection with a dividend reinvestment plan, an employee
benefit plan, the conversion of any convertible securities, or a stand-by
underwriting with respect to the call of a warrant, option, right or
convertible security for redemption) with respect to shares of Common Stock,
then the Company shall in each case give written notice of such proposed
filing to the Holder at least ten (10) calendar days before the anticipated
filing date of such registration statement or, in the event that the Company
has not formulated its intent to file such registration statement at least
ten (10) calendar days before the anticipated filing date of the registration
statement, as soon as practicable upon the formation by the Company of such
intent. Such notice shall offer to the Holder the opportunity to include in
such registration statement such number of Shares as the Holder may request.
The Company shall not be required to honor any such request (i) if, in the
opinion of counsel to the Company reasonably acceptable to the Holder,
registration under the Securities Act is not required for the transfer of
the Shares in the manner proposed by such Holder; (ii) to register Warrant
Shares if the request is received after the Expiration Date; or (iii) if any
such request is made more than ten (10) calendar days after written notice
is given to the Holder. The Company shall permit, or shall use its best
efforts to cause the managing underwriter of a proposed offering to permit,
the Holder's Shares requested to be included in the registration (the "Piggy-
back Shares") to include such Piggy-Back Shares in the proposed offering on
the same terms and conditions as applicable to the shares of Common Stock
offered by the Company and for the account of any person other than the
Company, as the case may be.
(b) Notwithstanding the foregoing, if any such managing underwriter shall
advise the Company in writing that, in its opinion, the distribution of all
or a portion of the Shares requested to be included in the registration
concurrently with the shares of Common Stock being registered by the Company
would materially adversely affect the distribution of such securities by the
Company for its own account, or for the account of any person or persons
other than the Company that have asserted, with respect to such registration,
registration rights under any other agreement, then such requested Shares
shall be excluded from the registration. If the managing underwriter elects
to include a portion of the Piggy-Back Shares, then such inclusion of Piggy-
Back Shares shall be made pro rata among the aggregate of the Piggy-Back
Shares for which a proper request was made under this subsection 7.2 and any
other securities properly requested to be included in the registration by
other holders pursuant to registration rights under any other agreement.
The Company shall not be required to maintain in effect the registration
statement as it relates to the Piggy-Back Shares beyond the period necessary
to comply with the Securities Act (otherwise than pursuant to Rule 415 or any
similar regulation permitting "shelf registration") with respect to the
distribution of the Piggy-Back Shares and shall not be required to file any
"shelf registration." All expenses incident to such registration shall be
borne by the Company, except that underwriting discounts attributable to the
Shares and expenses of separate counsel for the Holder shall be borne by the
Holder of such Warrant Shares.
7.3 Company Discretion.
In connection with the registration of Shares in accordance with subsections
7.1 and 7.2, the Company shall have sole control in connection with the
preparation, filing, amending and supplementing of any registration
statement, including the right to withdraw the same or delay the
effectiveness thereof when, in the sole judgment of the Board of Directors
of the Company, the pendency of such registration statement or the
effectiveness thereof would impose an undue burden upon the ability of the
Company to proceed with any other material financing for its own account or
any material corporate transaction, including, but not limited to, a
reorganization, recapitalization, merger, consolidation or material
acquisition of the securities or assets of another firm or corporation;
provided, however, that the Company's exercise of any such right of
withdrawal or delay shall not be deemed a waiver of the rights of the Holder
to require registration pursuant to the provisions of subsection 7.1, and the
Company shall be required to file a new registration statement or to proceed
with such actions as reasonably may be required to cause the registration
statement to become effective within a reasonable time after the consummation
of the event or transaction which required such withdrawal or delay.
7.4 Indemnification.
(a) The Company hereby indemnifies and holds harmless the Holder and each
officer, director and controlling person of the Holder against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out
of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other
document incident to any registration, qualification or compliance relating
to the Shares (or in any related registration statement, notification or the
like) or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of any rule or regulation
promulgated under the Securities Act or any state securities law applicable
to the Company and relating to any action required of or inaction by the
Company in connection with any such registration, qualification or
compliance, and will reimburse the Holder and each such officer, director and
controlling person for any legal and any other expenses incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that the Company will not be liable
to the Holder in any such case to the extent that any such claim, loss,
damage or liability or arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company in an
instrument duly executed by the Holder and stated to be specifically for use
in the document containing such untrue statement of a material fact or
omitting to state the material fact required to be stated herein.
(b) Each party entitled to indemnification hereunder (each an "indemnified
party") shall give notice to the Company promptly after such indemnified
party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Company (at its expense) to assume the defense of any
claim or any litigation resulting therefrom, provided that counsel for the
Company who shall conduct the defense of such claim or litigation shall be
reasonably satisfactory to the indemnified party. The indemnified party may
participate in such defense, but only at such indemnified party's expense.
The omission by any indemnified party to give notice as provided herein shall
not relieve the Company of its obligations under this Section 5.7(b) except
to the extent that the omission results in a failure of actual notice to the
Company and the Company is damaged solely as a result of the failure to give
notice. The Company shall not, in the defense of any such claim or
litigation, except with the consent of each indemnified party, consent to
entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such claim
or litigation.
(c) The reimbursement required by this Section shall be made by periodic
payments during the course of the investigation or defense, as and when bills
are received or expenses incurred.
(d) To the extent any indemnification by the Company is prohibited or limited
by law, the Company agrees to make the maximum contribution permitted by
applicable law with respect to any amounts for which it would otherwise be
liable under Section 7.4(a).
(e) The Company will enter into indemnification and contribution arrangements
with the Holder, any other participating securityholders and the Underwriters
that are usual and customary and/or reasonable under the circumstances in
connection with any underwritten offering to be effected pursuant to this
Section.
7.5 Rule 144 Requirements.
At all times and from time to time, the Company shall undertake to make
publicly available and available to the Holder, pursuant to Rule 144 of the
Commission under the Securities Act, such information as is necessary to
enable the Holder to make sales of shares pursuant to that Rule. The Company
shall furnish to the Holder, upon request, a written statement executed by
the Company as to the steps it has taken to comply with the current public
information requirements of Rule 144. Notwithstanding the foregoing, the
Company shall have no further obligations under this Section at such time as
all then outstanding Registrable Securities may be sold pursuant to paragraph
(k) of Rule 144, as determined by, and set forth in an opinion of, counsel to
the Company who is reasonably acceptable to the Holder.
8. Exchange and Non-Transferability.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Holder to the Company for a new Warrant of like tenor, representing in the
aggregate the right to purchase the number of Shares purchasable hereunder,
each of such new Warrant Certificates to represent the right to purchase such
number of shares of Common Stock as shall be designated by the Holder at the
time of such surrender. This Warrant may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or
by the laws of descent or distribution and may be exercised during the
lifetime of Holder only by him. The terms of this Warrant shall be binding
upon the executors, administrators, heirs and successors of Holder.
9. Term of Warrant. This Warrant may not be exercised more than ten (10)
years from the date of grant of this Warrant (the "Expiration Date"), and may
be exercised during such term only in accordance with the terms of this
Warrant; provided, however, that if this Warrant may not be exercised for a
period of time as a result of any applicable federal or state securities or
other law or regulation as contemplated in Section 5 hereof, the Expiration
Date shall be extended for a period of time equal to the period during which
such restriction on exercise was in effect.
10. Loss, Theft, Destruction of Warrant.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant, and in the case of any such loss,
theft or destruction, upon receipt of indemnity or security satisfactory to
the Company, or in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company will make and deliver, in lieu
of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like
tenor and representing the right to purchase the same aggregate number of
shares of Common Stock.
11. Withholding Taxes.
11.1 Whenever Shares are to be issued upon the exercise of this Warrant, the
Company shall have the right to require the Holder to remit to the Company in
cash an amount sufficient to satisfy federal, state and local withholding tax
requirements, if any, prior to the delivery of any certificate or
certificates for such Shares.
11.2 Notwithstanding Section (i) of this Section 11, at the election of a
Holder, subject to the approval of the Board of Directors of the Company,
when Shares are to be issued upon the exercise of this Warrant, the Holder
may tender to the Company a number of Shares, or the Company shall withhold
a number of such Shares, the Fair Market Value of which is sufficient to
satisfy the federal, state, and local tax requirements, if any, attributable
to such exercise or occurrence.
11.3 The Company and the Holder each agree that this Warrant for all income
tax purposes as a non-qualified stock option, without a readily ascertainable
fair market value, pursuant to Treas. Reg. Section 1.83-7 and to take no
action or make any disclosure, inconsistent with the foregoing
characterization or treatment.
12. SPECIAL COVENANTS OF THE COMPANY.
The Company covenants and agrees that:
(a) The Company will not, by amendment of its Certificate of Incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action,
directly or indirectly, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of
the Holder against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (i) will not increase the par value
of the Shares above the Exercise Price payable therefor upon such exercise,
or take any other action that would cause the Exercise Price to be less than
the par value of the Shares, (ii) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and non-assessable Shares upon the exercise of all Warrants
from time to time outstanding.
(b) If any shares of Common Stock required to be reserved for the purpose of
exercising this Warrant require registration with or approval of any
governmental authority under any federal law (other than the Securities Act)
or under any state law before such shares may be issued upon exercise of the
Warrants, the Company will, at its expense, as expeditiously as possible,
use its best efforts to cause such shares to be duly registered or approved,
as the case may be.
13. NOTIFICATION BY THE COMPANY.
In case at any time:
(i) the Company shall declare any dividend or any other distribution upon its
Common Stock;
(ii) the Company shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or any Convertible
Securities or Options;
(iii) the Board of Directors of the Company shall authorize any capital
reorganization or reclassification of the capital stock of the Company, or a
sale or conveyance of all or substantially all of the assets of the Company,
or a consolidation or merger of the Company with or into another Person;
(iv) actions or proceedings shall be authorized or commenced for a voluntary
or involuntary dissolution, liquidation or winding-up of the Company; or
(v) the Company shall propose to take any other action that would require a
vote of the Company's stockholders;
then, in any one or more of such cases, the Company shall give written notice
to the Holder, at the earliest time legally practicable (and not less than 30
days before any record date or other date set for definitive action) of the
date on which (A) the books of the Company shall close or a record shall be
taken with respect to such dividend, distribution, subscription rights or
options or (B) such reorganization, reclassification, sale, conveyance,
consolidation, merger, dissolution, liquidation, winding-up or other action
shall take place or be voted on by the stockholders of the Company, as the
case may be. Such notice shall also specify the date as of which the holders
of Common Stock of record shall participate in said dividend, distribution,
subscription rights or Options or shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such reorganization,
reclassification, sale, conveyance, consolidation, merger, dissolution,
liquidation or winding-up, as the case may be. If the action in question or
the record date is subject to the effectiveness of a registration statement
under the Securities Act or to a favorable vote of stockholders, the notice
required by this Section shall so state.
14. AMENDMENT AND WAIVER.
Except as otherwise provided herein, the provisions of this Warrant may be
amended and the Company may take action herein prohibited, or omit to
perform any act herein required to be performed by it, only if the Company
has obtained the prior written consent of the Holders.
15. RESERVATION OF SHARES.
The Company will authorize, reserve and keep available at all times, free
from preemptive rights, a sufficient number of shares of Common Stock or other
securities, if so required, to satisfy the exercise of the Warrants.
16. NOTICES.
All notices, requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been made when delivered or mailed
first-class postage prepaid:
(i) if to the Holder, at Oppenheimer & Co., Inc., 200 Liberty Street, New
York, New York, or at such other address as may have been furnished to the
Company in writing by the Holder; and
(ii) if to the Company, at Edison Control Corporation, 140 West Ethel Road,
Piscataway, N.J. 08854, or at such other address as may have been furnished
to the Holder in writing by the Company.
17. GOVERNING LAW.
This Warrant Certificate shall be governed by, and construed in accordance
with, the laws of the State of New York, without regard to the principles of
conflicts of laws of such State.
18. BINDING EFFECT.
The terms and provisions of this Warrant shall inure to the benefit of the
Holder and its successors and permitted assigns and shall be binding upon the
Company and its successors and permitted assigns, including, without
limitation, any Person succeeding to the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets.
DATE OF GRANT: June 21, 1996
EDISON CONTROL CORPORATION,
a New Jersey corporation
By: /s/ Mary E. McCormack
Name: Mary E. McCormack
Title: President, Chief Executive
Officer and Director
Agreed to this 21st day of
June, 1996.
By: /s/ William B. Finneran
Name: William B. Finneran
<PAGE>
EXHIBIT A
INVESTMENT REPRESENTATION STATEMENT
PURCHASE: William B. Finneran
SELLE: EDISON CONTROL CORPORATION
COMPANY: EDISON CONTROL CORPORATION
SECURITIES: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Seller and to the Company, the following:
(a) I am aware of the Company's business affairs and financial condition, and
have acquired all such information about the Company as I deem necessary and
appropriate to enable me to reach an informed and knowledgeable decision to
acquire the Securities. I am purchasing these Securities for my own account
for investment and not with a view to, or for the resale in connection with,
any "distribution" thereof for purposes of the Securities Act of 1933, as
amended ("Securities Act").
(b) I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein.
(c) I further understand that the Securities may not be sold publicly and
must be held indefinitely unless they are subsequently registered under the
Securities Act or unless an exemption from registration is available. I am
able, without impairing my financial condition, to hold the Securities for
an indefinite period of time and to suffer a complete loss on my investment.
I understand that the Company is under no obligation to register the
Securities except as otherwise provided in the Company's Warrant relating to
the Securities. In addition, I understand that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer
of the Securities unless they are registered or such registration is not
required in the opinion of counsel for the Company.
(d) I am familiar with the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permits limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering
subject to the satisfaction of certain conditions, including, among other
things: (1) the availability of certain public information about the Company;
(2) the resale occurring not less than two years after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-
affiliate who has held the securities less than three years (3) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold
during any three month period not exceeding the specified limitations stated
therein, if applicable.
(e) I further understand that at the time I wish to sell the Securities there
may be no public market upon which to make such a sale, and that, even if
such a public market then exists, the Company may not be satisfying the
current public information requirements of Rule 144, and that, in such event,
I would be precluded from selling the Securities under Rule 144 even if the
two-year minimum holding period had been satisfied. I understand that the
Company is under no obligation to make Rule 144 available.
(f) I further understand that in the event all of the applicable requirements
of Rule 144 are not satisfied, registration under the Securities Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive,
the Staff of the Securities and Exchange Commission has expressed its opinion
that persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from
registration is available for such offers or sales, and that such person and
their respective brokers who participate in such transactions do so at their
own risk.
Signature of Purchaser:
Date: , 19 _
