As filed with the Securities and Exchange Commission on April 21, 1998
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
---------------
Hosokawa Micron International Inc.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 3560 13-3366823
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
780 Third Avenue
New York, New York 10017
(212) 826-3830
</TABLE>
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
Corporate Trust Company
Corporate Trust Center
1209 Orange Street
Wilmington, Delaware 19801
(302) 658-7581
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies of Communications to:
<TABLE>
<S> <C>
Robert A. Cantone, Esq. David W. Ambrosia, Esq.
Proskauer Rose LLP Winthrop, Stimson, Putnam & Roberts
1585 Broadway One Battery Park Plaza
New York, New York 10036-8299 New York, New York 10004-1490
(212) 969-3000 (212) 858-1000
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effectiveness of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. -
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. -
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. - -------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. -
---------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Amount of
Title of each class of Amount to be Proposed maximum Proposed maximum registration
securities to be registered registered(1) offering price per unit(2) aggregate offering price(2) fee
- ---------------------------------------- ------------- ---------------------------- ----------------------------- ---------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 3,933,000 shares $ 15.50 $60,961,500 $ 17,985.00
</TABLE>
- --------------------------------------------------------------------------------
(1) Includes 513,000 shares of Common Stock, which the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
This Registration Statement contains two forms of prospectus: one to be
used in connection with an underwritten offering in the United States and Canada
(the "U.S. Prospectus") and one to be used in a concurrent international
offering (the "International Prospectus") of the common stock, par value $.01
per share, of Hosokawa Micron International Inc. The U.S. Prospectus for the
offering in the United States and Canada follows immediately after this
Explanatory Note. After the U.S. Prospectus are the alternate pages for the
International Prospectus: a front cover page, a table of contents page and a
"Subscription and Sale" section. A copy of the complete U.S. Prospectus and
International Prospectus in the exact forms in which they are to be used after
effectiveness will be filed with the Securities and Exchange Commission pursuant
to Rule 424(b).
<PAGE>
SUBJECT TO COMPLETION DATED , 1998
3,420,000 Shares
[HOSAKAWA MICRON LOGO] HOSOKAWA MICRON INTERNATIONAL INC.
Common Stock
($.01 par value)
------------
Of the 3,420,000 shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby, 2,670,000 shares are being sold by Hosokawa Micron
International Inc. ("Hosokawa" or the "Company") and 750,000 shares are being
sold by Hosokawa Micron Corporation ("HMC" or the "Selling Stockholder"). See
"Principal Stockholders and Selling Stockholder." Upon closing of the Offering
(as defined below), the Selling Stockholder will own 70.4% of the outstanding
Common Stock (67.5%, if the over-allotment option is exercised in full). The
Company will not receive any proceeds from
the sale of the shares by the Selling Stockholder.
Of the 3,420,000 shares of Common Stock being offered, 2,736,000 shares (the
"U.S. Shares") are initially being offered in the United States and Canada by
the U.S. Underwriters (the "U.S. Offering") and 684,000 shares (the
"International Shares") are initially being concurrently offered outside the
United States and Canada by the Managers (the "International Offering" and,
together with the U.S. Offering, the "Offering"). The offering price and
underwriting discounts and commissions of the U.S. Offering and the
International Offering are identical.
Prior to the Offering, there has been no public market for the Common Stock of
the Company. It is currently anticipated that the initial public offering price
will be between $13.50 and $15.50 per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public
offering price.
Application will be made to list the Common Stock on the New York Stock
Exchange under the symbol "HOS."
The Common Stock Offered Hereby Involves a High Degree of Risk. See "Risk
Factors" Beginning on Page 8 of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds
Price to Discounts and Proceeds to to Selling
Public Commissions Company (1)(2) Stockholder (1)(2)
---------- --------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Per Share ......... $ $ $ $
Total (2) ......... $ $ $ $
</TABLE>
- ----------------
(1) Before deducting expenses of the Offering payable by the Company and by the
Selling Stockholder estimated to be $1,130,456 and $317,544, respectively.
(2) The Company has granted the U.S. Underwriters and the Managers an option,
exercisable by Credit Suisse First Boston Corporation within 30 days of the
date hereof, to purchase up to a maximum of 513,000 additional shares to
cover over-allotments, if any. If all such additional shares are purchased,
the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting."
The U.S. Shares are offered by the several U.S. Underwriters when, as and
if delivered to and accepted by them, and subject to their right to reject
orders in whole or in part. It is expected that the U.S. Shares will be ready
for delivery on or about , 1998, against payment in immediately available funds.
Credit Suisse First Boston PaineWebber Incorporated
Prospectus dated , 1998
[red herring]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
[end red herring]
<PAGE>
[PICTURES]
The information in the captions above is presented as of ____________, 1998
and is subject to change.
----------------
Alpine, Bepex, Vrieco-Nauta, Schugi, Stott, Mikro, Strong-Scott, K-G, Hutt,
Kreuter, Ter Braak, Filtex, MikroPul, Menardi-Criswell, MikroPulverizer,
Rotoplex, MikroCut, PEAC, Rietz, MikroACM, Solidaire, Pharmapaktor, Kompaktor,
MikroPulsaire, Mikrotex and Pop-Top are trademarks or registered trademarks of
the Company and affiliated Companies.
Micron, Hosokawa Micron and the Hosokawa Micron logo are registered
trademarks of HMC and Hosokawa Micron B.V., a wholly owned Dutch subsidiary of
the Company.
"PolyQuest" is a registered service mark of Hosokawa Bepex Corporation, a
subsidiary of the Company. "Process Technologies For Tomorrow" and "Hosokawa
Pharma-Tech Center" are service marks of the Company.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus, including information
under "Risk Factors". Except as otherwise noted, all information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option and a
.899 for 1.0 reverse stock split to be effective upon consummation of the
Offering. Unless otherwise indicated, all references to "Hosokawa" or the
"Company" refer collectively to Hosokawa Micron International Inc. and its
subsidiaries, and all references to "HMC" refer collectively to Hosokawa Micron
Corporation and its subsidiaries other than the Company.
The Company
The Company is a global leader in designing, engineering and manufacturing
powder and particle, plastics and confectionery processing equipment and systems
and product recovery equipment and systems. Through its extensive array of
brandname products and industry expertise, the Company provides custom-designed
technological solutions to its customers' specific requirements. The Company's
customers include a diverse group of leading multinational industrial, chemical,
pharmaceutical, film extrusion and plastics, minerals, metals and food
companies. In the fiscal year ended September 30, 1997, approximately 37.9% of
the Company's sales were in North America, approximately 44.2% were in Europe
and approximately 17.9% were in the rest of the world. The Company believes that
its diverse customer base, geographic markets served and product lines have
contributed to consistent sales and operating profit growth over the last three
years. Between the fiscal year ended September 30, 1994 and the fiscal year
ended September 30, 1997, the Company's net sales increased at a 9.8% compound
annual growth rate ("CAGR"), from $272.2 million to $360.5 million, and its
operating profit increased at a 25.0% CAGR, from $7.5 million to $14.6 million.
Hosokawa's goal is to be the primary supplier of highly-engineered,
state-of-the-art process technology systems to the industries it serves. In
order to achieve this goal, the Company has adopted several business strategies,
the principal elements of which are:
[bullet] Research and Development. Research and development, a significant
source of growth for the Company, focuses on product innovation
and new product development. The Company has over 35 products
currently under development, 10 of which have been introduced in
the first six months of the fiscal year ending September 30,
1998. Management believes that research and development will
continue to be a significant source of growth for the Company.
[bullet] Acquisitions. In the last 10 fiscal years, the Company has
successfully completed seven acquisitions to enhance its position
as a supplier of integrated processing and product recovery
technology solutions. For the fiscal year ended September 30,
1997, 54.8% of net sales were attributable to acquisitions
completed since fiscal year 1988. Hosokawa expects to continue
growing through acquisitions.
[bullet] Penetrating New Markets. Hosokawa believes that there is
substantial opportunity to grow by increasing its presence in new
markets, including emerging markets. The Company expects to
expand into new geographic markets by servicing existing core
clients and by targeting new markets where opportunities arise.
Between the fiscal year ended September 30, 1994 and the fiscal
year ended September 30, 1997, the Company's net sales in new
markets increased at a 13.5% CAGR, from $34.1 million to $49.9
million.
[bullet] Product Integration. Hosokawa will continue integrating existing
products into flexible systems specifically designed to solve a
customer's processing needs. For example, the Company was able to
design a system to manufacture expanded glass using existing
products from a number of the Company's operating subsidiaries.
This enabled the Company to secure the order and increase its
gross margin on the existing products for such order. The Company
believes that this strategy will continue to increase margins.
[bullet] Product Repositioning. Hosokawa will continue to focus
on broadening the applications of its existing products, with
minimal modifications, for expansion into new applications in
markets that the Company believes may have higher margins. For
example, the Company's Bepex Compactor, currently used for
compaction and forming powders in the chemical industry, has
potential application for the production of medicinal chewing
gums for the pharmaceutical industry.
3
<PAGE>
[bullet] Cost Reductions. Hosokawa will also continue its efforts to
reduce costs as a percentage of costs of goods sold in order to
increase margins, such as through increased productivity,
expanded subcontracting of manufacturing, improved monitoring of
worldwide purchasing costs and improved working capital
management.
The Company designs, engineers, manufactures and installs its equipment and
systems through the following four product lines:
The powder and particle processing product line provides, among other
products, separators, mixers, dryers, agglomerators and compacting equipment and
systems used in applications where precise particle size and structure are
critical. For the fiscal year ended September 30, 1997, this product line's net
sales and percentage contribution to the Company's total net sales was $168.5
million and 46.7%, respectively.
The plastics processing product line provides plastic film blowing and
extrusion equipment and systems for the manufacture of single- and multi-layer
plastic films used primarily in the packaging and bag-making industries. For the
fiscal year ended September 30, 1997, this product line's net sales and
percentage contribution to the Company's total net sales was $66.6 million and
18.5%, respectively.
The confectionery processing product line provides a full line of equipment
and systems for the production of hard, soft and chewy candies, granola, health
and candy bars and convenience foods and breakfast bars. For the fiscal year
ended September 30, 1997, this product line's net sales and percentage
contribution to the Company's total net sales was $25.5 million and 7.1%,
respectively.
The product recovery product line provides product recovery and dust
collection equipment and systems and filter media. For the fiscal year ended
September 30, 1997, this product lines's net sales and percentage contribution
to the Company's total net sales was $99.9 million and 27.7%, respectively.
Background
The Company is a 98.0%-owned subsidiary of HMC, a publicly-traded Japanese
corporation headquartered in Osaka, Japan and listed on the Osaka and Tokyo
stock exchanges. HMC was founded in Osaka, Japan in 1916. In 1986, HMC
reorganized all of its non-Japanese operations under the umbrella of Hosokawa.
The Company was incorporated in Delaware in 1986. See "Business--History of the
Company."
HMC currently engages in generally the same businesses as the Company
except for the plastics and confectionery processing product lines. For the
fiscal year ended September 30, 1997, HMC had net sales of $484.5 million, of
which $357.1 million were attributable to net sales of the Company (excluding
intercompany sales).
The Company, in the normal course of business, conducts business with HMC
and its affiliated companies other than the Company. For the fiscal year ended
September 30, 1997, $3.4 million of net sales of the Company were to HMC and its
other affiliated companies and $0.5 million in net sales of HMC and its other
affiliated companies were to the Company. The Company also operates as licensor
and licensee under various license agreements with HMC. Under such license
agreements, the Company and HMC have allocated between them the rights (in
certain cases on an exclusive basis and in others on a non-exclusive basis) to
manufacture, sell and service certain products in certain geographic regions.
See "Certain Transactions."
HMC, after completion of the Offering, will own 70.4% of the outstanding
Common Stock (67.5%, if the Underwriters' over-allotment option is exercised in
full). See "Risk Factors -- Control of the Company." In addition, four members
of the Company's Board of Directors are members of HMC's senior management. See
"Management--Directors and Executive Officers."
The Company's principal executive offices are located at 780 Third Avenue,
Suite 3201, New York, New York 10017. Its telephone number is (212) 826-3830.
4
<PAGE>
The Offering
<TABLE>
<S> <C>
Common Stock offered by:
The Company ........................... 2,670,000 shares
The Selling Stockholder ............... 750,000 shares
Total ............................... 3,420,000 shares
Common Stock offered for sale in:
The U.S. Offering ..................... 2,736,000 shares
The International Offering ............ 684,000 shares
Total ............................... 3,420,000 shares
Common Stock to be outstanding
after the Offering .................... 12,165,517 shares(1)(2)
Use of proceeds by the Company ......... To reduce existing short-term indebtedness, including
under promissory notes issued to various banks and
indebtedness incurred under a commercial paper
program. See "Use of Proceeds."
Proposed NYSE symbol ................... "HOS"
</TABLE>
- ----------------
(1) On April 16, 1998, the Board of Directors authorized and the Selling
Stockholder approved a 0.89904874 for 1.0 reverse stock split of the Common
Stock, effective upon consummation of the Offering.
(2) Excludes 87,657 shares of Common Stock reserved for issuance upon the
exercise of outstanding options granted pursuant to the Company's 1997 Stock
Option Plan at an exercise price of $9.89 per share and excludes 890,058
shares of Common Stock reserved for issuance under the Company's Stock
Incentive Plan. See "Management--Stock Option Plan" and "--Stock Incentive
Plan."
5
<PAGE>
Summary Consolidated Financial Data
The following summary consolidated financial data with respect to the
Company's results of operations for the years ended September 30, 1995, 1996 and
1997, has been derived from the audited consolidated financial statements of the
Company included elsewhere in this Prospectus. The summary consolidated
financial information with respect to the Company's results of operations for
the years ended September 30, 1993 and 1994, has been derived from the audited
consolidated financial statements of the Company which are not included in this
Prospectus. The information for the interim periods is unaudited; however, in
the opinion of management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such information have been
included. The interim results of operations may not be indicative of the results
for the full year. The summary consolidated financial data presented below
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
(Dollars in thousands except per share data)
---------------------------------------------------------------------
Year Ended
September 30,
---------------------------------------------------------------------
1993 1994 1995 1996(1) 1997
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ................................. $ 283,311 $ 272,225 $ 339,048 $ 371,710 $ 360,472
Cost of sales ............................. 196,385 185,587 236,904 259,316 247,022
---------- ----------- ----------- ----------- -----------
Gross profit .............................. 86,926 86,638 102,144 112,394 113,450
Selling, general and administrative
expenses ................................. 81,550 69,767 82,989 85,690 85,355
Research and development expenses ......... 8,637 8,489 11,019 12,610 12,152
Amortization of intangibles ............... 2,291 2,171 2,281 2,336 2,228
Restructuring(2) .......................... 20,131 0 (3,239) 0 247
Other (income) ............................ (404) (1,258) (763) (493) (1,110)
---------- ----------- ----------- ----------- -----------
Operating (loss) income ................... (25,279) 7,469 9,857 12,251 14,578
Interest expense, net ..................... 5,288 4,292 6,656 6,100 5,573
Other expense (income), net ............... (236) 207 (3,393) 416 756
---------- ----------- ----------- ----------- -----------
(Loss) income before taxes on income (30,331) 2,970 6,594 5,735 8,249
Provision for income taxes ................ 382 1,669 1,828 2,931 3,996
---------- ----------- ----------- ----------- -----------
(Loss) income before minority interest (30,713) 1,301 4,766 2,804 4,253
Minority interest ......................... (643) (283) 0 0 0
Net (loss) income before cumulative
effect of change in accounting
principle ................................ (31,356) 1,018 4,766 2,804 4,253
Cumulative effect at October 1, 1993
of change in accounting principle ........ 0 310 0 0 0
---------- ----------- ----------- ----------- -----------
Net (loss) income ......................... $ (31,356) $ 1,328 $ 4,766 $ 2,804 $ 4,253
========== =========== =========== =========== ===========
(Loss) earnings per common share:
Basic (3) ................................. $ (21.56) $ (1.64) $ 0.49 $ (0.73) $ 0.25
Diluted ................................... $ (21.35) $ (1.63) $ 0.49 $ (0.72) $ 0.25
Shares used in computing earnings per
common share:
Basic ..................................... 1,604,877 1,607,346 1,607,346 1,607,346 2,264,694
Diluted ................................... 1,621,290 1,623,759 1,623,759 1,623,759 2,281,107
Pro forma interest expense(4) ............. $ 3,585
Pro forma net income(4) ................... $ 6,013
Pro forma earnings per share(4):
Basic ..................................... $ 0.47
Diluted ................................... $ 0.47
Shares used in computing pro forma
earnings per common share(4):
Basic ..................................... 4,934,694
Diluted ................................... 4,951,107
Other Data:
EBITDA(5) ................................. $ (13,728) $ 17,632 $ 20,991 $ 24,494 $ 27,031
Backlog ................................... 94,312 111,883 120,153 130,976 115,495
<CAPTION>
(Dollars in thousands except
per share data)
----------------------------
Six Months Ended
March 31,
----------------------------
1997 1998
------------- --------------
<S> <C> <C>
Statement of Operations Data: (unaudited)
Net sales ................................. $ 183,750 $ 178,856
Cost of sales ............................. 126,945 122,469
------------ ------------
Gross profit .............................. 56,805 56,387
Selling, general and administrative
expenses ................................. 44,337 41,344
Research and development expenses ......... 6,256 6,023
Amortization of intangibles ............... 1,136 1,092
Restructuring(2) .......................... 0 0
Other (income) ............................ (645) (384)
------------ ------------
Operating (loss) income ................... 5,721 8,312
Interest expense, net ..................... 2,756 2,686
Other expense (income), net ............... 718 407
------------ ------------
(Loss) income before taxes on income 2,247 5,219
Provision for income taxes ................ 1,088 1,743
------------ ------------
(Loss) income before minority interest 1,159 3,476
Minority interest ......................... 0 0
Net (loss) income before cumulative
effect of change in accounting
principle ................................ 1,159 3,476
Cumulative effect at October 1, 1993
of change in accounting principle ........ 0 0
------------ ------------
Net (loss) income ......................... $ 1,159 $ 3,476
============ ============
(Loss) earnings per common share:
Basic (3) ................................. $ (0.51) $ 0.37
Diluted ................................... $ (0.51) $ 0.37
Shares used in computing earnings per
common share:
Basic ..................................... 1,607,346 9,495,517
Diluted ................................... 1,623,759 9,511,930
Pro forma interest expense(4) ............. $ 1,762 $ 1,609
Pro forma net income(4) ................... $ 2,039 $ 4,439
Pro forma earnings per share(4):
Basic ..................................... $ 0.01 $ 0.37
Diluted ................................... $ 0.01 $ 0.36
Shares used in computing pro forma
earnings per common share(4):
Basic ..................................... 4,277,346 12,165,517
Diluted ................................... 4,293,759 12,181,930
Other Data:
EBITDA(5) ................................. $ 11,926 $ 14,030
Backlog ................................... 130,407 129,019
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
March 31, 1998
-----------------------------
Pro Forma,
Actual As Adjusted(6)
------------- ---------------
(Dollars in thousands)
<S> <C> <C>
Balance Sheet Data:
Working capital ......................... $ (49,265) $ (14,708)
Total assets ............................ 286,820 286,820
Short-term debt including current
portion of long term debt .............. 83,361 48,804
Long-term debt less current portion ..... 15,229 15,229
Stockholders equity ..................... 59,056 93,613
</TABLE>
- ----------------
(1) Includes the results of Kreuter GmbH and Ter Braak B.V. from March 1996.
(2) Restructuring includes costs recognized by the Company in connection with
the liquidation of an Italian subsidiary and the restructuring of its
manufacturing operations within the United States. In fiscal 1995, the
Company substantially completed its restructuring program. Since the actual
costs associated with the restructuring were less than originally provided
for in fiscal 1993, such amount was reversed into income in fiscal 1995. In
addition, in fiscal 1997 the Company recorded a charge of $843 (the charge
was allocated as follows: cost of sales, $90 and restructuring, $753). This
charge was partially offset by a reversal of a prior restructuring charge in
the amount of $506 as actual restructuring costs were lower than
anticipated.
(3) Basic earnings per share is calculated by dividing net income after
deduction of preferred stock dividends by the weighted average number of
common shares outstanding. Diluted earnings per share is calculated using
the weighted average number of common shares outstanding adjusted for the
incremental shares attributed to outstanding options to purchase Common
Stock.
(4) Gives effect to the sale of 2,670,000 shares of common stock to be sold by
the Company in the Offering at an estimated public offering price of $14.50
per share (the midpoint of the estimated range), and the application of the
estimated net proceeds therefrom to repay debt, as if the transaction had
occurred at the beginning of each period presented.
See "Use of Proceeds."
(5) EBITDA consists of operating (loss) income plus depreciation and
amortization of intangibles. Adjusted EBITDA is defined as EBITDA adjusted
to exclude the impact of restructuring activities resulting in adjustments
in fiscal 1993, 1995 and 1997 of $20,131, $(3,239) and $337, respectively.
For fiscal years ended September 30, 1993, 1995 and 1997, Adjusted EBITDA
was $6,403, $17,752 and $27,368, respectively. The Company does not consider
EBITDA and Adjusted EBITDA, nor should they be considered, as alternative
measures of operating results or cash flows from operating activities as
determined in accordance with generally accepted accounting principles.
Instead, the Company includes them because they are widely used financial
measures of the potential capacity of a company to incur and service debt.
The presentation of EBITDA and Adjusted EBITDA may not be comparable to
similarly titled measures used by other companies.
(6) Gives effect to the sale of 2,670,000 shares of Common Stock to be sold by
the Company in the Offering at an estimated public offering price of $14.50
per share (the midpoint of the estimated range), and the application of the
estimated net proceeds therefrom to repay debt, as if the transactions had
occurred as of March 31, 1998. See "Use of Proceeds."
7
<PAGE>
RISK FACTORS
An investment in the shares of Common Stock involves a high degree of
risk. In addition to the other information in this Prospectus, prospective
investors should carefully consider the following factors in evaluating the
Company and its business before purchasing any shares of Common Stock.
Fluctuating Results of Operations
Historically, the Company's results of operations have fluctuated
materially both annually and quarterly. These fluctuations have resulted from
several factors, including, among others, changes in the exchange rate of the
U.S. dollar against other currencies (in particular, the German mark and the
Dutch guilder), the timing of new products and systems introductions by the
Company and its competitors, acquisitions, certain nonrecurring expenses
related to the Company's restructuring in 1993, competitive pressures,
fluctuations in volume of shipments and recognition of unanticipated warranty
claims on large product recovery projects. In addition, the unit price of
certain of the Company's systems and products can exceed $3.0 million.
Accordingly, a delay in or a cancellation of the delivery of a limited number
of orders and shipments can constitute a meaningful percentage of the Company's
revenue in any one period and can have a material impact on the Company's
revenues in any one quarter or year. The Company believes that it will continue
to experience fluctuations in its results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Exposure to Exchange Rate Fluctuations
Although the Company reports its results in U.S. dollars, a substantial
portion of its net sales, expenses and indebtedness are denominated in other
currencies, in particular, the German mark and the Dutch guilder. As a result,
the Company is significantly exposed to fluctuations in the exchange rate of
the U.S. dollar against such currencies. For the fiscal year ended September
30, 1997, approximately 64.0% of net sales and approximately 70.0% of expenses
were denominated in foreign currencies. Any appreciation in the value of the
U.S. dollar against such currencies may be expected to adversely affect the
Company's results of operations. While management will continue to monitor the
Company's exposure to currency fluctuations and to enter into foreign exchange
contracts to hedge firm foreign currency commitments based on firm orders and
shipments, in an attempt to minimize the effect of these fluctuations, there
can be no assurance that exchange rate fluctuations will not have a material
adverse effect on the Company's results of operations or financial condition,
or that any hedging strategies, if employed, will be successful. The Company
does not hold or issue derivative financial instruments for trading or
speculative purposes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations and "Notes to Consolidated Financial
Statements--(1) Summary of Significant Accounting Policies."
Risks Associated with International Operations
The Company operates manufacturing, sales and other facilities in sixteen
countries on six continents and sells its products and systems in over 115
countries. In the fiscal year ended September 30, 1997, net sales of the
Company's products outside the United States totaled approximately $241.7
million, representing approximately 67.0% of the Company's net sales for that
fiscal year. As a result of its international operations, the Company is
subject to risks associated with operating in foreign countries, including
devaluations and revaluations of currencies, imposition of limitations on
conversion of foreign currencies into dollars or remittance of dividends and
other payments by foreign subsidiaries, imposition or increase of withholding
and other taxes on remittances and other payments by foreign subsidiaries,
hyperinflation, imposition of or changes in investment regulations by foreign
governments, availability of suitable export financing, barriers to trade,
export license requirements, tariff regulations, and other United States and
foreign regulations that may apply to the export or import of the Company's
products, components and systems, as well as the generally greater difficulties
of doing business abroad. In addition, the Company may be directly affected by
economic, political and military conditions in the countries in which it
operates, particularly in emerging markets such as South America, India, South
Africa, Asia and Eastern Europe. Such risks have not had a material adverse
effect on the Company, although no assurance can be given that such risks will
not have a material adverse effect on the Company in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
Cyclical End Markets
The markets for certain of the Company's systems and products are
cyclical. During periods of expansion in capital investment, the Company
generally has benefitted from increased demand for its systems and products.
Conversely, during recessionary times, the Company has been adversely affected
by declines in demand for such
8
<PAGE>
systems and products. There can be no assurance that growth in the markets for
the Company's systems and products will occur or that such growth will result
in increased demand for the Company's systems and products. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
Risks Related to Intellectual Property Protection
The Company relies primarily upon a combination of copyright and trademark
laws, patents, trade secrets, confidentiality procedures and contractual
arrangements to protect its proprietary rights. The Company also relies upon
unpatented proprietary and trade secret technology, particularly with respect
to certain products in its powder and particle processing and product recovery
product lines, and some of the Company's competitors in the past have used such
technologies to manufacture and market copies of the Company's products. To the
extent that the Company has proprietary rights to these technologies, such as
through copyright protection in the United Kingdom, it has taken appropriate
steps to enforce its rights. Despite the Company's efforts to protect its
proprietary rights, there can be no assurance that the steps taken by the
Company will be adequate to deter misappropriation of its proprietary
information, that the Company will be able to detect unauthorized use and take
appropriate steps to enforce its intellectual property rights or that the
Company's competitors will not independently develop similar technology.
To date, the Company has received only two claims that its intellectual
property rights infringe on the rights of others and management does not
believe their disposition will have a material adverse effect on the Company.
There can be no assurance, however, that any additional claims will not be
asserted against the Company in the future, that the assertion of such a claim
will not result in litigation or that the Company would prevail in such
litigation or be able to obtain a license for the use of any alleged infringed
intellectual property from a third party on commercially reasonable terms. The
risk of infringement claims against the Company may increase if other parties
are able to successfully obtain patents for products and processes related to
the Company's business. Any such claims, regardless of their outcome, could
result in substantial cost to the Company, require the Company to modify the
manner in which it provides products and services and divert management's
attention from the Company's operations, any of which could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business--Intellectual Property Rights."
Dependence Upon New Systems and Products
The Company's results of operations depend, to a significant extent, upon
its ability to develop and commercialize new systems and products in response
to the competitive dynamics within the powder and particle, confectionery and
plastics processing and product recovery equipment industries. The Company's
ability to achieve growth in revenues and profitability depends in part on its
being among the first companies to introduce new systems and products. While
the Company believes its product development pipeline will allow it to compete
effectively, no assurance can be given that any of the systems and products in
development will be successful and generate significant revenues and
profitability. See "-- Competition," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business."
Risk of Product Liability Claims; No Assurance of Adequate Insurance
The sale of the Company's systems and products involves a risk of product
liability claims and the adverse publicity that may accompany such claims. The
Company is a defendant in a number of product liability cases, the outcome of
which the Company believes should not materially adversely affect the Company's
business or its financial condition. Although the Company maintains what it
believes to be an adequate amount of product liability insurance coverage,
there can be no assurance that the Company's existing product liability
insurance will cover all current and future claims or that the Company will be
able to maintain existing coverage or obtain, if it determines to do so,
insurance providing additional coverage at reasonable rates. No assurance can
be given that one or more of the claims arising under any pending or future
product liability cases, whether or not covered by insurance, will not have a
material adverse effect on the Company's business or financial position. See
"Business -- Legal Proceedings" and "Business--Product Liability; Insurance."
Potential Liability to Clients
Much of the Company's business involves projects that are critical to the
operations of its clients' businesses and provide benefits that may be
difficult to quantify. Any failure in a client's system could result in a claim
for substantial damages against the Company, regardless of the Company's
responsibility for such failure. While the
9
<PAGE>
Company attempts to contractually limit its liability for damages arising from
its products and systems, there can be no assurance the limitations of
liability set forth in its purchase contracts will be enforceable in all
instances or would otherwise protect the Company from liability for damages.
While the Company currently maintains general liability insurance, there can be
no assurance that the Company will avoid significant claims and attendant
publicity. Furthermore, there can be no assurance that the Company's insurance
coverage will be adequate or that such coverage will remain available at
acceptable costs. Successful claims brought against the Company in excess of
its insurance coverage could have a material adverse effect on the Company's
business, operating results and financial condition.
Indebtedness of the Company
After giving effect to the completion of the Offering, the Company had
outstanding on a pro forma basis as of March 31, 1998, long-term and short-term
debt of approximately $64.0 million, $48.8 million of which bears interest at
variable rates. The Company's growth strategy contemplates acquiring companies
with complementary products or technologies. All or a portion of such
acquisitions may be financed through additional indebtedness. A substantial
amount of indebtedness could have adverse consequences on the Company,
including the following: (i) an inability to obtain additional financing for
working capital, capital expenditures, acquisitions, general corporate purposes
or other purposes; (ii) the dedication of a substantial portion of the
Company's cash flow from operations to the payment of principal and interest on
its indebtedness, thereby reducing the funds available to the Company for other
purposes; (iii) an exposure to the risk of increased interest rates as certain
of the Company's borrowings are and will continue to be at variable rates of
interest; (iv) a competitive disadvantage, since the Company may be
substantially more leveraged than certain of its competitors; (v) a reduced
ability to adjust rapidly to changing market conditions and increased
vulnerability in the event of a downturn in general economic conditions or its
business.
As of March 31, 1998, approximately 29.6 million German marks ($16.0
million) were outstanding with three German banks under agreements that require
a subsidiary of the Company to reach and maintain specified financial ratios
and satisfy certain financial tests. The Company's subsidiary's ability to meet
such financial tests may be affected by events beyond its control, and there
can be no assurance that such subsidiary will meet such tests. A breach of
financial tests could result in an event of default under such debt, in which
case the lenders could elect to declare all liabilities and obligations
thereunder to be immediately due and payable and to terminate all commitments
under such debt. If such debt were to be accelerated, there can be no assurance
that the Company would be able to repay in full such indebtedness and other
indebtedness of the Company, and in such event the equity holders could lose
their entire investment. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
Competition
The powder and particle, confectionery and plastics processing and product
recovery equipment and systems industries are competitive. The Company competes
with numerous companies in each industry, and within the product recovery
industry generally and the filter media segment of that industry specifically,
the competition is particularly intense. In addition, the Company may encounter
competition from new market entrants, particularly within the market for
product recovery equipment. Furthermore, because of the relatively low rate of
technological obsolescence in the pulverizing machinery market, there exists a
large supply of used pulverizing machinery which can result in substantial
price competition for orders. Some of the Company's competitors have
significantly greater financial resources than the Company and, therefore, may
spend more than the Company on research, product development and marketing.
Finally, there can be no assurance that competitors will not take actions,
including developing new systems and products and reducing prices, which could
adversely affect the Company's sales and operating results. See
"Business--Industry Background and Competition."
Dependence on Key Personnel
The Company's success is largely dependent upon the continued
contributions of its key management and operating personnel. Many of the
Company's key personnel, particularly its key engineers, would be difficult to
replace and are not subject to employment agreements. However, such personnel
have entered into non-competition and assignment of invention agreements.
The Company's growth and future success will depend in large part upon its
ability to attract and retain highly qualified engineering, sales and marketing
personnel. Competition for such personnel from other companies,
10
<PAGE>
academic institutions, government entities and other organizations is intense.
Although the Company has been successful to date in recruiting and retaining
key personnel, there can be no assurance that the Company will be successful in
attracting and retaining the personnel it requires in order to continue to grow
and operate profitably. Also, there can be no assurance that management skills
which have been appropriate for the Company in the past will continue to be
appropriate if the Company continues to grow and diversify.
The Company's success also depends to a significant extent upon its
President and Chief Executive Officer, Isao Sato. The loss of the services of
Mr. Sato could have a material adverse effect on the Company. The Company has
entered into an employment contract with Mr. Sato, but does not maintain key
person life insurance on Mr. Sato and does not intend to obtain such insurance.
See "Management--Directors and Executive Officers" and "-- Executive
Compensation."
Risks Associated with Potential Acquisitions
As part of its operating history and growth strategy, the Company has
consummated and seeks to consummate the acquisition of other businesses. The
Company continually seeks acquisition candidates in selected markets and from
time to time engages in exploratory discussions with suitable candidates. There
can be no assurance, however, that the Company will be able to identify and
acquire targeted businesses or obtain financing for such acquisitions on
satisfactory terms. The process of integrating acquired businesses into the
Company's operations may result in unforeseen difficulties and may require a
significant amount of resources and management attention. Future acquisitions
may be financed through the issuance of Common Stock, which may dilute the
ownership of the Company's shareholders, or through the incurrence of
additional indebtedness which could result in the use of a significant portion
of the Company's debt capacity. In addition, there can be no assurance that
competition for acquisition candidates will not escalate, thereby increasing
the costs of making acquisitions or making suitable acquisitions unattainable.
Furthermore, there can be no assurance that any acquired products or technology
will gain acceptance in the Company's markets. Should the Company's management
fail to respond effectively to these challenges, future acquisitions could have
a material adverse effect on the Company's business, operating results and
financial condition.
Environmental Matters
The Company's operations are subject to federal, state, local and foreign
laws and regulations concerning pollution and protection of the environment,
including those relating to the storage, handling, generation, treatment,
emission, release, discharge and disposal of certain substances, materials and
wastes (collectively, the "Environmental Laws"). While the Company believes it
is currently in material compliance with the Environmental Laws, there can be
no assurance that the Company will not incur significant costs in the future to
cure any violations thereof, remediate any contamination attributable to its
operations or to maintain compliance in response to changes in the
Environmental Laws.
Dependence on Component Availability, Subcontractor Performance and Key
Suppliers
The Company's ability to deliver its products and systems to customers on
a timely basis is dependent in part upon the availability of and timely
delivery by subcontractors and suppliers of the components and subsystems that
are used by the Company in manufacturing its products and systems. The Company
does not, in most areas, maintain a substantial inventory of components and
subsystems. The Company obtains certain components and subsystems from a
limited number of sources, but believes that most components and subsystems are
available from alternative suppliers and subcontractors. A significant
interruption in the delivery of such items, however, could have a material
adverse effect on the Company's business and results of operations. See
"Business--Manufacturing and Other Facilities."
No Prior Public Market; Possible Share Price Volatility
Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market will develop
or be sustained after the Offering. The public offering price of the Common
Stock will be determined by negotiations among the Company, the Selling
Stockholder and the representatives of the Underwriters. The stock market,
including the New York Stock Exchange, on which the Company is applying to list
the Common Stock, has from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. In addition, the market price of the Common Stock, like
the stock prices of many publicly traded companies, may be highly volatile.
Announcements of new systems
11
<PAGE>
or products by the Company or its competitors and economic and other external
factors, as well as period-to-period fluctuations in financial results, among
other factors, may significantly influence the market price of the Common
Stock. See "Underwriting."
Control of the Company
Following the completion of this Offering, HMC will own an aggregate 70.4%
(or approximately 67.5% if the Underwriters exercise in full the over-allotment
option granted by the Company) of the outstanding Common Stock. As a result of
its stock ownership, HMC will be able to elect all of the directors of the
Company and to control the Company's affairs following the Offering. Currently,
four members of the board of directors of the Company are members of senior
management of HMC. See "Management--Directors and Executive Officers."
In addition, the stock ownership described above may also have the effect
of either delaying or preventing a change of control of the Company and could
limit the price that certain investors might be willing to pay in the future
for shares of Common Stock. See "Principal Stockholders and Selling
Stockholder."
Related Party Transactions
The Company, in the normal course of business, conducts business with HMC
and its affiliated companies other than the Company. For the fiscal year ended
September 30, 1997, $3.4 million of net sales of the Company were made to HMC
and its other affiliated companies and $0.5 million of net sales of HMC and its
other affiliated companies were made to the Company. The Company operates as
licensor and licensee under various license agreements with HMC. Royalty income
of $0.3 million and $0.4 million were received from HMC and royalty payments of
$0.1 million and $0.1 million were paid to HMC under the license agreements, in
fiscal years ended September 30, 1997 and 1996, respectively. The Company's
licensing agreements with HMC granting HMC the right to manufacture, use and
sell certain products in the Company's powder and particle processing and
product recovery product lines on an exclusive basis in Japan and on a
non-exclusive basis in all other Asian countries, including the countries which
comprised the former USSR (but excluding India and all countries west of
India), may limit the Company's ability to expand its markets to include such
regions or products or limit its ability to increase its sales of such products
in those regions.
The Company has also entered into marketing agreements with HMC, whereby
all of the Company's subsidiaries and divisions can access HMC's Asian sales
and marketing network. Total fees paid under such agreements were $1.0 million
for the fiscal years ended September 30, 1997 and 1996. HMC has also guaranteed
certain obligations of the Company with respect to the commercial paper program
and certain other indebtedness of the Company. Guarantee fees paid to HMC with
respect to its commercial paper guarantee were $0.1 million for the fiscal
years ended September 30, 1997 and 1996. Beginning October 1, 1997, the amounts
to be paid for these services and guarantees were revised. The loss of any of
these guarantees could have a material adverse impact on the Company's ability
to secure financing or force the Company to secure such financing on terms
which are less favorable to the Company than currently exist. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Certain Transactions."
Anti-Takeover Provisions
Certain provisions of the Company's Restated Certificate of Incorporation
and Bylaws, as well as the Delaware General Corporation Law (the "Delaware
GCL"), could discourage a third party from attempting to acquire, or make it
more difficult for a third party to acquire, control of the Company without
approval of the Company's Board of Directors. Such provisions could also limit
the price that certain investors might be willing to pay in the future for
shares of Common Stock. Such provisions allow the Board of Directors to
authorize the issuance of preferred stock with rights superior to those of the
Common Stock. Moreover, certain provisions of the Company's Restated
Certificate of Incorporation or Bylaws (i) require that certain business
combination transactions and other specified transactions entered into with
stockholders of the Company beneficially owning more than 10% of the Company's
voting power be approved by the affirmative vote of not less than 80% of the
outstanding voting power or by a two-thirds vote of the Company's incumbent
directors, (ii) generally permit removal of directors with cause only by a
majority vote of the stockholders of the Company, (iii) classify the Board of
Directors into three classes, (iv) require that stockholder actions taken
without an annual or special meeting be taken by written consent of all
stockholders entitled to vote, (v) require that the provisions of the Restated
Certificate of Incorporation regarding the classified Board, certain business
combination transactions and the unanimous stockholder consent be amended,
12
<PAGE>
altered or repealed only by the affirmative vote of not less than 80% of the
outstanding stock, and (vi) require the Company's Board of Directors, Chairman
of the Board, the President or the Secretary at the request of the Chairman or
President, to call a special meeting of the stockholders. See "Description of
Capital Stock."
Shares Eligible for Future Sale
In addition to the 3,420,000 shares offered hereby, approximately
8,745,517 shares of Common Stock constituting 71.9% of the shares outstanding
after completion of the Offering will be eligible for sale in the public market
pursuant to Rule 144 under the Securities Act immediately after the Offering.
The sale of any substantial number of shares of Common Stock may have an
adverse effect on the market price for the Common Stock and could impair the
Company's ability to raise capital through an offering of its equity
securities. However, holders of 8,610,812 shares of Common Stock have entered
into lock-up agreements in which such holders have agreed not to offer or sell
publicly or otherwise dispose of such shares without the consent of Credit
Suisse First Boston Corporation for 180 days after the effective date of this
Prospectus. See "Principal Stockholders and Selling Stockholder," "Shares
Eligible for Future Sale" and "Underwriting."
Dilution
The public offering price is substantially higher than the net tangible
book value per share of Common Stock. Investors purchasing shares of Common
Stock in the Offering will therefore incur immediate, substantial dilution
estimated to be $12.94 per share (based on an estimated offering price of
$14.50 per share, the midpoint of the estimated range, and after deducting
underwriting discounts and offering expenses). See "Dilution."
Broad Discretion in Use of Proceeds
All of the net proceeds to be received by the Company in connection with
this Offering will be used to reduce existing short-term indebtedness,
including under promissory notes issued to various banks and a commercial paper
program. Accordingly, management of the Company will be able to incur
additional indebtedness by issuing additional promissory notes or increasing
borrowings under the commercial paper program and will have broad discretion
with respect to the expenditure of the funds resulting from such additional
indebtedness. In particular, the Company could use a portion of these funds for
the acquisition of complementary businesses, products and technologies. The
Company has signed a letter of intent with respect to the acquisition of
certain assets and the assumption of certain liabilities in the United States
for a purchase price of approximately $2.7 million. There can be no assurance
that the Company will successfully deploy these proceeds in a manner that
enhances shareholder value. See "-- Risks Associated with Potential
Acquisitions" and "Use of Proceeds."
Restrictions on the Payment of Dividends
At its March 19, 1998 meeting, the Board of Directors adopted a policy for
the Company to pay an annual dividend of $0.42 per share of Common Stock,
payable quarterly, subject to the Company's results of operations, financial
condition, contractual restrictions, availability of assets out of which to pay
such dividends under applicable law and other factors deemed relevant by the
Board of Directors. At the same meeting, the Board of Directors of the Company
declared a dividend of $0.21 per share payable to holders of record of Common
Stock on March 31, 1998, which represents the aggregate dividend for the first
two quarters of the 1998 fiscal year in accordance with the policy adopted at
such meeting. Therefore, following completion of the Offering and subject to
the foregoing limitations, the two quarterly dividends equal to $0.105 per
share to be declared by the Board of Directors for the remainder of fiscal year
1998 in accordance with such policy will be payable, if so declared, to holders
of record of Common Stock on June 15, 1998 and September 15, 1998,
respectively. The Board of Directors may revoke or modify such policy at any
time in the future at its sole discretion. In addition, as a holding company,
the ability of the Company to pay dividends depends upon the receipt of
dividends or other payments from its subsidiaries. Furthermore, the Company's
subsidiaries, from time to time, may be subject to restrictions on their
ability to make distributions to the Company, including as a result of
restrictive covenants in loan agreements, restrictions on the conversion of
local currency into U.S. dollars or other hard currency and other regulatory
restrictions. See "Dividend Policy" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
13
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby, after deducting underwriting discounts and commissions and estimated
offering expenses of $4.2 million, will be approximately $34.6 million,
assuming a public offering price of $14.50 per share (the midpoint of the
estimated range), ($41.5 million, if the Underwriters' over-allotment option is
exercised in full). The Company intends to use such net proceeds to repay
short-term indebtedness under promissory notes issued to banks, which bear
interest as of March 31, 1998 at an average rate of 6.9% and a portion of the
Commercial Paper Notes issued under the Company's commercial paper program,
which bear interest as of March 31, 1998 at an average implied rate of 6.0%.
The determination of which indebtedness to repay and to what extent will depend
upon a number of factors at the time of repayment, including the interest rates
then in effect. The Company will receive no proceeds from shares sold by the
Selling Stockholder. See "Capitalization" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
DIVIDEND POLICY
At its March 19, 1998 meeting, the Board of Directors adopted a policy for
the Company to pay an annual dividend of $0.42 per share of Common Stock,
payable quarterly, subject to the Company's results of operations, financial
condition, contractual restrictions, availability of assets out of which to pay
such dividends under applicable law and other factors deemed relevant by the
Board of Directors. At the same meeting, the Board of Directors of the Company
declared a dividend of $0.21 per share payable to holders of record of Common
Stock on March 31, 1998, which represents the aggregate dividend for the first
two quarters of the 1998 fiscal year in accordance with the policy adopted at
such meeting. Therefore, following completion of the Offering and subject to
the foregoing limitations, the two quarterly dividends equal to $0.105 per
share to be declared by the Board of Directors for the remainder of fiscal year
1998 in accordance with such policy will be payable, if so declared, to holders
of record of Common Stock on June 15, 1998 and September 15, 1998,
respectively. The Board of Directors may revoke or modify such policy at any
time in the future at its sole discretion. In addition, the ability of the
Company to pay dividends depends upon the receipt of dividends or other
payments from its subsidiaries. Furthermore, the Company's subsidiaries, from
time to time, may be subject to restrictions on their ability to make
distributions to the Company, including as a result of restrictive covenants in
loan agreements, restrictions on the conversion of local currency into U.S.
dollars or other hard currency and other regulatory restrictions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998 (i) on a historical basis, and (ii) pro forma, as adjusted to
give effect to the receipt and application of the estimated net proceeds of the
sale of 2,670,000 shares of Common Stock offered by the Company in the
Offering, assuming a public offering price of $14.50 per share (the midpoint of
the estimated range). This table should be read in conjunction with the
Consolidated Financial Statements of the Company and the notes thereto included
elsewhere in this Prospectus. See "Use of Proceeds."
<TABLE>
<CAPTION>
March 31, 1998
------------------------------
Pro Forma
Actual As Adjusted(1)
------------ ---------------
(Dollars in thousands)
<S> <C> <C>
Notes payable to banks ................................... $ 34,111 $ 24,111
========= =========
Commercial paper ......................................... 49,250 24,693
========= =========
Notes payable to banks--long term ........................ 15,229 15,229
========= =========
Stockholders equity
Common stock ($.01 par value, 12,500,000 shares authorized
at March 31, 1998; issued and outstanding: 9,495,517 at
March 31, 1998) ......................................... 95 122
Additional paid-in capital ............................... 103,665 138,195
Accumulated deficit ...................................... (45,746) (45,746)
Unrealized loss in marketable securities ................. (110) (110)
Cumulative translation adjustment ........................ 1,152 1,152
--------- ---------
Total stockholders' equity ............................ $ 59,056 $ 93,613
--------- ---------
Total capitalization .................................. $ 157,646 $ 157,646
========= =========
</TABLE>
- --------------------
(1) Excludes 87,657 shares of Common Stock reserved for issuance upon the
exercise of outstanding options granted pursuant to the Company's 1997
Stock Option Plan at an exercise price of $9.89 per share and excludes
890,058 shares of Common Stock reserved for issuance under the Company's
Stock Incentive Plan. See "Management--Stock Option Plan" and "-- Stock
Incentive Plan."
15
<PAGE>
DILUTION
The consolidated net tangible book value of the Company as of March 31,
1998 was approximately negative $15.6 million, or negative $1.64 per share.
Consolidated net tangible book value per share is equal to the Company's total
tangible assets less its total liabilities, divided by 9,511,930, the total
number of shares of Common Stock and common equivalents outstanding, in each
case as of March 31, 1998.
Dilution per share represents the difference between the amount per share
paid by purchasers of shares of Common Stock offered by the Company in the
Offering and the pro forma consolidated net tangible book value per share of
Common Stock immediately after completion of the Offering. After giving effect
to the sale of 2,670,000 shares of Common Stock offered by the Company in the
Offering at an assumed initial public offering price of $14.50 (the midpoint of
the estimated range) per share and after deducting underwriting discounts and
commissions and estimated offering expenses of $4.2 million payable by the
Company, the pro forma consolidated net tangible book value of the Company as
of March 31, 1998 would have been $19.0 million, or $1.56 per share. This
represents an immediate increase in net tangible book value of $3.20 per share
to existing stockholders and an immediate dilution in net tangible book value
of $12.94 per share to purchasers of Common Stock in the Offering, as
illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share .......................... $ 14.50
Consolidated net tangible book value per share before the Offering ....... $ (1.64)
Increase per share attributable to new investors ......................... 3.20
----------
Pro forma consolidated net tangible book value per share after
the Offering ............................................................ 1.56
--------
Dilution per share to new investors ..................................... $ (12.94)
========
</TABLE>
The following table summarizes, as of March 31, 1998, the number of shares
of Common Stock purchased from the Company, the total consideration paid and
the average price paid per share by the existing stockholders and by new
investors (at an assumed initial public offering price of $14.50 per share and
before deducting underwriting discounts and commissions and estimated offering
expenses of $4.2 million payable by the Company):
<TABLE>
<CAPTION>
Shares Purchased(1) Total Consideration(1)
------------------------------ --------------------------- Average Price
Number Percent Amount Percent Per Share
------------------ --------- --------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders ......... 9,495,517(2) 78.1% $103,760,000 72.8% $ 10.93
New investors ................. 2,670,000 21.9 38,715,000 27.2 14.50
----------- ----- ------------ -----
Total ........................ 12,165,517 100.0% 142,475,000 100.0%
============ ===== ============ =====
</TABLE>
- ----------------
(1) Assuming the Underwriters' over-allotment option is exercised in full,
sales of Common Stock by the Company in the Offering will reduce the
percentage of shares of Common Stock and Common Stock equivalents held by
existing stockholders to 74.4% of the total shares of Common Stock and
Common Stock equivalents to be outstanding after the Offering, and will
increase the percentage of shares held by new investors to 25.6% of the
total number of shares of Common Stock and Common Stock equivalents to be
outstanding after the Offering. See "Principal Stockholders and Selling
Stockholder."
(2) Excludes 87,657 shares of Common Stock reserved for issuance upon the
exercise of outstanding options granted pursuant to the Company's 1997
Stock Option Plan at an exercise price of $9.89 per share and excludes
890,058 shares of Common Stock reserved for issuance under the Company's
Stock Incentive Plan. See "Management--Stock Option Plan" and "-- Stock
Incentive Plan."
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data with respect to the
Company's financial position as of September 30, 1996 and 1997, and its results
of operations for the years ended September 30, 1995, 1996 and 1997, has been
derived from the audited consolidated financial statements of the Company
included elsewhere in this Prospectus. The selected consolidated financial
information with respect to the Company's financial position at September 30,
1993, 1994 and 1995, and its results of operations for the years ended
September 30, 1993 and 1994, has been derived from the audited consolidated
financial statements of the Company which are not included in this Prospectus.
The information for the interim periods is unaudited; however, in the opinion
of management, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such information have been
included. The interim results of operations may not be indicative of the
results for the full year. The selected consolidated financial data presented
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
(Dollars in thousands except per share data)
---------------------------------------------------------------------
Year Ended
September 30,
---------------------------------------------------------------------
1993 1994 1995 1996(1) 1997
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ........................................... $ 283,311 $ 272,225 $ 339,048 $ 371,710 $ 360,472
Cost of sales ....................................... 196,385 185,587 236,904 259,316 247,022
---------- ----------- ----------- ----------- -----------
Gross profit ........................................ 86,926 86,638 102,144 112,394 113,450
Selling, general and administrative
expenses ........................................... 81,550 69,767 82,989 85,690 85,355
Research and development expenses ................... 8,637 8,489 11,019 12,610 12,152
Amortization of intangibles ......................... 2,291 2,171 2,281 2,336 2,228
Restructuring(2) .................................... 20,131 0 (3,239) 0 247
Other (income) ...................................... (404) (1,258) (763) (493) (1,110)
---------- ----------- ----------- ----------- -----------
Operating (loss) income ............................. (25,279) 7,469 9,857 12,251 14,578
Interest expense, net ............................... 5,288 4,292 6,656 6,100 5,573
Other expense (income), net ......................... (236) 207 (3,393) 416 756
---------- ----------- ----------- ----------- -----------
(Loss) income before taxes on income ................ (30,331) 2,970 6,594 5,735 8,249
Provision for income taxes .......................... 382 1,669 1,828 2,931 3,996
---------- ----------- ----------- ----------- -----------
(Loss) income before minority interest .............. (30,713) 1,301 4,766 2,804 4,253
Minority interest ................................... (643) (283) 0 0 0
---------- ----------- ----------- ----------- -----------
Net (loss) income before cumulative
effect of change in accounting principle ........... (31,356) 1,018 4,766 2,804 4,253
Cumulative effect at October 1, 1993 of change in
accounting principle ............................... 0 310 0 0 0
---------- ----------- ----------- ----------- -----------
Net (loss) income ................................... $ (31,356) $ 1,328 $ 4,766 $ 2,804 $ 4,253
========== =========== =========== =========== ===========
(Loss) earnings per common share:
Basic (3) ........................................... $ (21.56) $ (1.64) $ 0.49 $ (0.73) $ 0.25
Diluted ............................................. $ (21.35) $ (1.63) $ 0.49 $ (0.72) $ 0.25
Shares used in computing earnings per common
share:
Basic ............................................... 1,604,877 1,607,346 1,607,346 1,607,346 2,264,694
Diluted ............................................. 1,621,290 1,623,759 1,623,759 1,623,759 2,281,107
Pro forma interest expense(4) ....................... $ 3,585
Pro forma net income(4) ............................. $ 6,013
Pro forma earnings per share(4):
Basic ............................................... $ 0.47
Diluted ............................................. $ 0.47
Shares used in computing pro forma earnings per
common share(4):
Basic ............................................... 4,934,694
Diluted ............................................. 4,951,107
Other Data:
EBITDA(5) ........................................... $ (13,728) $ 17,632 $ 20,991 $ 24,494 $ 27,031
Backlog ............................................. 94,312 111,883 120,153 130,976 115,495
<CAPTION>
(Dollars in thousands
except per share data)
----------------------------
Six Months Ended
March 31,
----------------------------
1997 1998
------------- --------------
Statement of Operations Data: (unaudited)
<S> <C> <C>
Net sales ........................................... $ 183,750 $ 178,856
Cost of sales ....................................... 126,945 122,469
----------- ------------
Gross profit ........................................ 56,805 56,387
Selling, general and administrative
expenses ........................................... 44,337 41,344
Research and development expenses ................... 6,256 6,023
Amortization of intangibles ......................... 1,136 1,092
Restructuring(2) .................................... 0 0
Other (income) ...................................... (645) (384)
----------- ------------
Operating (loss) income ............................. 5,721 8,312
Interest expense, net ............................... 2,756 2,686
Other expense (income), net ......................... 718 407
----------- ------------
(Loss) income before taxes on income ................ 2,247 5,219
Provision for income taxes .......................... 1,088 1,743
----------- ------------
(Loss) income before minority interest .............. 1,159 3,476
Minority interest ................................... 0 0
----------- ------------
Net (loss) income before cumulative
effect of change in accounting principle ........... 1,159 3,476
Cumulative effect at October 1, 1993 of change in
accounting principle ............................... 0 0
----------- ------------
Net (loss) income ................................... $ 1,159 $ 3,476
=========== ============
(Loss) earnings per common share:
Basic (3) ........................................... $ (0.51) $ 0.37
Diluted ............................................. $ (0.51) $ 0.37
Shares used in computing earnings per common
share:
Basic ............................................... 1,607,346 9,495,517
Diluted ............................................. 1,623,759 9,511,930
Pro forma interest expense(4) ....................... $ 1,762 $ 1,609
Pro forma net income(4) ............................. $ 2,039 $ 4,439
Pro forma earnings per share(4):
Basic ............................................... $ 0.01 $ 0.37
Diluted ............................................. $ 0.01 $ 0.36
Shares used in computing pro forma earnings per
common share(4):
Basic ............................................... 4,277,346 12,165,517
Diluted ............................................. 4,293,759 12,181,930
Other Data:
EBITDA(5) ........................................... $ 11,926 $ 14,030
Backlog ............................................. 130,407 129,019
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
(Dollars in thousands)
---------------------------------------------------------------------
Year Ended
September 30,
---------------------------------------------------------------------
1993 1994 1995 1996(1) 1997
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital ............................. $ (42,370) $ (37,568) $ (70,547) $ (53,583) $ (51,687)
Total assets ................................ 308,672 319,646 302,204 307,630 283,890
Short-term debt including current
portion of long term debt .................. 58,914 66,998 92,471 75,096 77,922
Long-term debt less current portion ......... 24,872 26,166 0 23,786 17,546
Stockholders equity ......................... 62,445 63,355 63,390 60,958 58,688
<CAPTION>
(Dollars in thousands)
---------------------------
Six Months Ended
March 31,
---------------------------
1997 1998
------------- -------------
<S> <C> <C>
Balance Sheet Data:
Working capital ............................. $ (54,447) $ (49,265)
Total assets ................................ 295,089 286,820
Short-term debt including current
portion of long term debt .................. 87,255 83,361
Long-term debt less current portion ......... 17,671 15,229
Stockholders equity ......................... 58,741 59,056
</TABLE>
- ----------------
(1) Includes the results of Kreuter GmbH and Ter Braak B.V. from March 1996.
(2) Restructuring includes costs recognized by the Company in connection with
the liquidation of an Italian subsidiary and the restructuring of its
manufacturing operations within the United States. In fiscal 1995, the
Company substantially completed its restructuring program. Since the
actual costs associated with the restructuring were less than originally
provided for in fiscal 1993, such amount was reversed into income in
fiscal 1995. In addition, in fiscal 1997 the Company recorded a charge of
$843 (the charge was allocated as follows: cost of sales, $90 and
restructuring, $753). This charge was partially offset by a reversal of a
prior restructuring charge in the amount of $506 as actual restructuring
costs were lower than anticipated.
(3) Basic earnings per share is calculated by dividing net income after
deduction of preferred stock dividends by the weighted average number of
common shares outstanding. Diluted earnings per share is calculated using
the weighted average number of common shares outstanding adjusted for the
incremental shares attributed to outstanding options to purchase Common
Stock.
(4) Gives effect to the sale of 2,670,000 shares of common stock to be sold by
the Company in the Offering at an estimated public offering price of
$14.50 per share (the midpoint of the estimated range), and the
application of the estimated net proceeds therefrom to repay debt, as if
the transaction had occurred at the beginning of each period presented.
See "Use of Proceeds."
(5) EBITDA consists of operating (loss) income plus depreciation and
amortization of intangibles. Adjusted EBITDA is defined as EBITDA adjusted
to exclude the impact of restructuring activities resulting in adjustments
in fiscal 1993, 1995 and 1997 of $20,131, $(3,239) and $337, respectively.
For fiscal years ended September 30, 1993, 1995 and 1997, Adjusted EBITDA
was $6,403, $17,752 and $27,368, respectively. The Company does not consider
EBITDA and Adjusted EBITDA, nor should they be considered, as alternative
measures of operating results or cash flows from operating activities as
determined in accordance with generally accepted accounting principles.
Instead, the Company includes them because they are widely used financial
measures of the potential capacity of a company to incur and service debt.
The presentation of EBITDA and Adjusted EBITDA may not be comparable to
similarly titled measures used by other companies.
(6) Gives effect to the sale of 2,670,000 shares of Common Stock to be sold by
the Company in the Offering at an estimated public offering price of
$14.50 per share (the midpoint of the estimated range), and the
application of the estimated net proceeds therefrom to repay debt, as if
the transactions had occurred as of March 31, 1998. See "Use of Proceeds."
18
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Unaudited Pro Forma condensed consolidated financial
statements have been derived from the Company's historical condensed
consolidated financial statements. The Unaudited Pro Forma Condensed
Consolidated Statements of Income give effect to the Offering as if it occurred
on October 1, 1996 and 1997. The Unaudited Pro Forma Condensed Consolidated
Balance Sheet gives effect to the Offering as if it occurred on March 31, 1998.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable under the circumstances.
The unaudited pro forma condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements of the Company
and the related notes, and other financial information included elsewhere [in
this Prospectus]. This unaudited pro forma financial information is provided for
informational purposes only and does not purport to be indicative of the results
of the Company's future operations. In the opinion of management, all
adjustments necessary to present fairly such pro forma condensed consolidated
financial statements have been made.
19
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated
Balance Sheet
(Dollars in thousands)
<TABLE>
<CAPTION>
Adjusted
March 31, Pro Forma March 31,
1998 Adjustments 1998
----------- ------------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................ $ 9,442 $ 9,442
Marketable securities ................................ 222 222
Accounts and notes receivable, less
allowance for doubtful accounts of $2,636 ........... 64,725 64,725
Due from parent and affiliates ....................... 2,568 2,568
Costs and estimated earnings in excess of
billings on uncompleted contracts ................... 12,801 12,801
Inventories .......................................... 39,553 39,553
Prepaid expenses and other assets .................... 6,106 6,106
--------- ---------
Total current assets ............................... 135,417 135,417
Property, plant and equipment, net ................... 76,469 76,469
Cost in excess of net assets acquired, less
accumulated amortization of $15,826 ................. 70,521 70,521
Other assets ......................................... 4,413 4,413
--------- ---------
Total assets ....................................... $ 286,820 $ 286,820
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks ............................... $ 34,111 (10,000)(1) $ 24,111
Commercial paper ..................................... 49,250 (24,557)(1) 24,693
Accounts payable ..................................... 40,505 40,505
Current taxes payable ................................ 2,272 2,272
Deferred income taxes ................................ 1,948 1,948
Contract advances .................................... 17,344 17,344
Accrued liabilities .................................. 36,016 36,016
Due to parent and affiliates ......................... 3,236 3,236
--------- --------- ---------
Total current liabilities .......................... 184,682 (34,557) 150,125
Notes payable to banks-long term ..................... 15,229 15,229
Pension liabilities .................................. 14,426 14,426
Other long-term liabilities .......................... 1,136 1,136
Deferred income taxes ................................ 12,291 12,291
--------- --------- ---------
Total liabilities .................................. 227,764 (34,557) 193,207
Stockholders' equity:
Common stock ......................................... 95 27(2) 122
Additional paid-in capital ........................... 103,665 34,530(3) 138,195
Accumulated deficit .................................. (45,746) (45,746)
Unrealized loss in marketable securities ............. (110) (110)
Cumulative translation adjustment .................... 1,152 1,152
--------- --------- ---------
Total stockholders' equity ......................... 59,056 34,557 93,613
--------- ---------
Total liabilities and stockholders' equity ......... $ 286,820 $ 286,820
========= =========
</TABLE>
See accompanying notes to the Unaudited
Pro Forma Condensed Consolidated financial statements.
20
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Unaudited Pro Forma Condensed Consolidated Statements of Income
(Dollars in thousands)
Six Months Ended March 31, 1998
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
------------ ------------- ------------
<S> <C> <C> <C>
Sales to third parties ............................... $175,267 $175,267
Related party sales .................................. 3,589 3,589
-------- --------
Net sales ............................................ 178,856 178,856
Cost of sales ........................................ 122,469 122,469
-------- --------
Gross profit ......................................... 56,387 56,387
Selling, general and administrative expenses ......... 41,344 160(4) 41,504
Research and development expenses .................... 6,023 6,023
Amortization of intangibles .......................... 1,092 1,092
Other income (loss) .................................. (384) (384)
-------- --------
Operating income ..................................... 8,312 (160) 8,152
Interest expense, net ................................ 2,686 (1,077)(1) 1,609
Other (income) expense ............................... 407 (46)(5) 361
-------- --------
Income before provision for income taxes ............. 5,219 963 6,182
Provision for income taxes ........................... 1,743 1,743
-------- ------ --------
Net income ........................................... $ 3,476 963 $ 4,439
======== ====== ========
</TABLE>
Six Months Ended March 31, 1997
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
------------ ------------- ----------
<S> <C> <C> <C>
Sales to third parties ............................... $181,793 $181,793
Related party sales .................................. 1,957 1,957
Net sales ............................................ 183,750 183,750
Cost of sales ........................................ 126,945 126,945
Gross profit ......................................... 56,805 56,805
Selling, general and administrative expenses ......... 44,337 160(4) 44,497
Research and development expenses .................... 6,256 6,256
Amortization of intangibles .......................... 1,136 1,136
Other income ......................................... (645) (645)
Operating income (loss) .............................. 5,721 (160) 5,561
Interest expense, net ................................ 2,756 (994)(1) 1,762
Other (income) expense ............................... 718 (46)(5) 672
Income before provision for income taxes ............. 2,247 880 3,127
Provision for income taxes ........................... 1,088 1,088
------- ----- -------
Net income ........................................... $ 1,159 880 $ 2,039
======== ===== ========
</TABLE>
See accompanying notes to the Unaudited
Pro Forma Condensed Consolidated financial statements.
21
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Unaudited Pro forma Condensed Consolidated Statement of Income
(Dollars in thousands)
Year Ended September 30, 1997
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
------------ ------------- ------------
<S> <C> <C> <C>
Sales to third parties ............................... $357,076 $357,076
Related party sales .................................. 3,396 3,396
-------- --------
Net sales ............................................ 360,472 360,472
Cost of sales ........................................ 247,022 247,022
-------- --------
Gross profit ......................................... 113,450 113,450
Selling, general and administrative expenses ......... 85,355 320(4) 85,675
Research and development expenses .................... 12,152 12,152
Amortization of intangibles .......................... 2,228 2,228
Restructuring ........................................ 247 247
Other income ......................................... (1,110) (1,110)
-------- --------
Operating income ..................................... 14,578 (320) 14,258
Interest expense, net ................................ 5,573 (1,988)(1) 3,585
Other (income) expense ............................... 756 (92)(5) 664
Income before provision for income taxes ............. 8,249 1,760 10,009
Provision for income taxes ........................... 3,996 3,996
-------- ------ --------
Net income ........................................... $ 4,253 1,760 $ 6,013
======== ====== ========
</TABLE>
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(1) The Company intends to use the proceeds from the Offering to repay
short-term indebtedness under promissory notes issued to banks. Interest
during the year ended September 30, 1997 (including the six months ended
March 31, 1997) and six months ended March 31, 1998 were calculated at
average effective rates of 6.1% and 6.9%, respectively. A portion of the
Commercial Paper notes issued under the Company's commercial paper program,
which bear interest during the year ended September 30, 1997 (including the
six months ended March 31, 1997) and six months ended March 31, 1998 were
calculated at average effective interest rates of 5.6% and 6.0%,
respectively.
(2) Represents the issuance of 2,670,000 shares of common stock at par value of
$0.01.
(3) Represents the additional paid-in capital of $14.49 per share on the
issuance of 2,670,000 shares of common stock, less the total estimated
offering costs of $4,158,000.
(4) Reflects anticipated continuing costs related to quarterly and annual SEC
filing requirements and other general and administrative ongoing costs of
being a public entity.
(5) Represents the decrease in letter of credit fees related to the Company's
commercial paper program at a rate of 0.375%.
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Consolidated Financial
Statements of the Company and Notes thereto included elsewhere in this
Prospectus.
Overview
The Company is a global leader in designing, engineering, manufacturing
and servicing powder and particle, plastics and confectionery processing
equipment and systems and product recovery equipment and systems. Through its
extensive array of brandname products and industry expertise, the Company
provides custom-designed technological solutions to its customers' specific
requirements. The Company's customers include a diverse group of leading
multinational industrial, chemical, pharmaceutical, film extrusion and
plastics, minerals, metals, and food companies.
The Company sells its products and systems to its customers through a
number of contractual arrangements, although most of the Company's sales are
governed by individual purchase orders. The Company generally requires an
advance payment of approximately 20.0% of the total purchase price for all
orders except with regard to filter media and spare parts and thereafter
receives periodic progress payments from the customer during the completion
phase of the product or system. This arrangement generally results in the
Company receiving about 90.0% of the purchase price by the time of shipment or
the Company having a letter of credit to secure payment of the balance of the
purchase price. For all other orders, the Company bills the customer when the
equipment is shipped. See "Business--Sales and Marketing--Contracting."
Some of the Company's sales can take a year or longer from initial
discussions through project development and the placement of orders. Typically,
larger contracts are secured after the customer has successfully tested its
product and/or developed the process expertise together with the Company at the
Company's Technical Centers. Even after a sale is made, the execution of the
order can extend for up to 18 months, depending on the size and complexity of
the order and the customers' project requirements. Order values vary from the
sale of components to complex turnkey systems which historically can exceed
$3.0 million in value. Although the customer is subject to certain financial
penalties for cancellation of orders, a delay in or a cancellation of the
delivery of, a limited number of orders and shipments can have a material
impact on the Company's revenues in any one quarter or year. In addition, the
Company's contracts generally contain performance guarantees for one year and
the Company's results can be affected by recognition of unanticipated warranty
claims on large product recovery projects, for example. The Company's results
are also impacted by acquisitions made over the last ten years. For the fiscal
year ended September 30, 1997, 54.8% of net sales were attributable to such
acquisitions.
The Company's results of operations have fluctuated both annually and
quarterly due to several factors. One external factor is that, although the
Company reports its results in U.S. dollars, a substantial portion of its net
sales, expenses and indebtedness are denominated in other currencies, in
particular, the German mark and the Dutch guilder. As a result, the Company is
significantly exposed to fluctuations in the exchange rate of the U.S. dollar
against such currencies. For the fiscal year ended September 30, 1997,
approximately 64.0% of net sales and approximately 70.0% of expenses were
denominated in foreign currencies. Any appreciation in the value of the U.S.
dollar against such currencies may be expected to adversely affect the
Company's results of operations. Other factors relating to the Company's
business include the timing of new products and systems introductions by the
Company and its competitors, competitive pressures and fluctuations in volume
of shipments.
An important element of the Company's strategy has been to develop a
balanced group of businesses serving diverse markets. In the fiscal year ended
September 30, 1997, approximately 37.9% of the Company's net sales were in
North America, approximately 44.2% were in Europe and approximately 17.9% were
in the rest of the world.
In 1993, the Company initiated a major review of its business units and
cost structure which resulted in the following restructuring: (A) The Italian
Flexographic printing subsidiary (Omal srl) was put in liquidation and a
reserve was established for the estimated costs to liquidate the operation; (B)
The manufacturing operations based in Summit, New Jersey, United States were
closed and the manufacturing was relocated to Santa Rosa, California, United
States; and (C) The product recovery division in New Jersey, United States was
relocated from leased premises to a facility owned by the Company. In addition,
provisions were made to cover the costs to exit from
23
<PAGE>
the leases on a number of other facilities which had been vacated and for
severance costs for the reduction of personnel at several operations both in
the United States and Europe. This restructuring program was substantially
completed by the end of fiscal 1995. As a result of these actions, the Company
recorded a restructuring charge of $20.1 million in fiscal 1993 but was able to
reverse $3.2 million in fiscal 1995 as the actual costs of the restructuring
program was less than originally estimated. The results, among others, of the
restructuring were cost savings estimated at $6.5 million annually beginning in
fiscal 1994.
Six Months Ended March 31, 1998 Compared to Six Months Ended March 31, 1997
Net sales. Net sales of $178.9 million in the six months ended March 31,
1998 represented a decrease of $4.9 million or 2.7% from $183.8 million in the
six months ended March 31, 1997. This decline is primarily the result of
foreign currency translation (approximately $13.8 million) partially offset by
price and sales volume increases.
Gross profit. Gross profit decreased slightly, to $56.4 million in the six
months ended March 31, 1998, from $56.8 million in the six months ended March
31, 1997. However, the gross profit margin improved from 30.9% in the six
months ended March 31, 1997 to 31.5% in the six months ended March 31, 1998.
The gross profit decreased by approximately $4.3 million due to foreign
currency translation significantly offset by price and sales volume increases.
Gross profit margin increased due primarily to an improvement in gross margins
in the product recovery product line following changes in management in fiscal
1997.
Selling, general and administrative expense. Selling, general and
administrative expense for the six months ended March 31, 1998 decreased by
$3.0 million primarily due to foreign currency translation. Expenses were
essentially unchanged from the corresponding prior year period after allowing
for foreign currency translation.
Operating income. Operating income increased by $2.6 million, from $5.7
million to $8.3 million as a result of a relatively unchanged gross profit and
lower selling, general and administrative expense.
Tax rates. The Company's effective tax rate of 33.4% for the six months
ended March 31, 1998 represents a decrease from the 48.4% rate in the first six
months of fiscal 1997. The reduction in the effective rate largely reflects the
anticipated utilization of a portion of the net operating loss carryforward in
the United States, the Netherlands and the U.K. in fiscal 1998.
1997 Compared to 1996
Net Sales. Net sales of $360.5 million in fiscal 1997 represented a
decrease of $11.2 million or 3.0%, from $371.7 million in fiscal 1996. The
decline in sales resulted primarily from foreign currency translations
(approximately $24.7 million) partially offset by increased sales attributable
to the two acquisitions described below completed in fiscal 1996 and for which
only seven-month results in the amount of $10.3 million are included in fiscal
1996 revenues. In March 1996, the Company acquired Ter Braak B.V. in Holland
for a total consideration of $3.1 million and acquired certain assets and
assumed certain liabilities of Kreuter GmbH in Germany for a nominal amount.
These companies are part of the Company's confectionery product line and had
annual sales of approximately $17.3 million in fiscal 1997.
Gross profit. Gross profit increased in fiscal 1997 by $1.1 million, from
$112.4 million in fiscal 1996 to $113.5 million, and gross profit margins
increased from 30.2% to 31.5%. The Company derives a significant portion of its
sales and incurs a significant portion of its expenses from overseas
operations. The gross profit in 1997 was significantly reduced by the continued
appreciation in the U.S. dollar versus certain European currencies,
particularly the German mark and the Dutch guilder. As a result, gross profit
in U.S. dollars was reduced by approximately $8.2 million. Plastics processing
gross profit increased by $5.0 million or 30.7% over the prior year and
confectionery processing gross profit increased by $2.6 million or 39.8% over
the prior year. These improvements are largely volume related. Powder and
particle processing gross profit was lower in absolute dollars due to a decline
in sales volume and currency exchange fluctuations; however, gross profit
margins improved as the Company benefitted from the consolidation of its United
States manufacturing operations. The consolidation of manufacturing for the
powder and particle product line within the United States was completed in
fiscal 1996 and has resulted in significantly lower manufacturing costs for
this product line, with annual savings estimated at $1.5 million. Competitive
pressure and unanticipated warranty claims resulted in lower gross profit in
the product recovery product line. As a result, management has refocused the
business to pursue higher margin value-added business while reorganizing
management and reducing personnel at its product recovery facilities in the
United States and France.
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Selling, general and administrative expense. Selling, general and
administrative expense remained generally unchanged in fiscal 1997 and in
fiscal 1996. This is primarily the result of the favorable impact of foreign
currency translations offset by the inclusion of Kreuter GmbH and Ter Braak
B.V. for a full fiscal year.
Operating income. Fiscal 1997 operating income of $14.6 million
represented an increase of $2.3 million (or 18.7%) over fiscal 1996 operating
income of $12.3 million, due primarily to the factors discussed above.
Interest expense. Interest expense, net, decreased by approximately 8.2%,
from $6.1 million in fiscal 1996 to $5.6 million in fiscal 1997 primarily as a
result of lower interest rates achieved by refinancing a portion of the
Company's short-term debt in fiscal 1996. In February 1996, the Company
refinanced 38.0 million German marks ($25.8 million) in short-term German
borrowings carrying an average interest rate of 9.0%, with a long-term facility
provided by three German banks at an average interest rate of 5.4%. This
resulted in annual interest savings of approximately $0.9 million. The average
interest rate for all debt of the Company decreased from 6.4% to 5.9%,
representing a decrease of 7.8%, on average debt outstanding for fiscal 1997 of
approximately $105.0 million.
Tax rates. The Company's effective tax rate of 48.4% in fiscal 1997
represented a decrease from the 51.1% rate in fiscal 1996. The effective tax
rates largely reflect that the Company's German income is subject to full
taxation and that only minor amounts of significant tax loss carry forwards
available to offset tax due on income earned in the United States and the
Netherlands were utilized in fiscal 1997 while none were utilized in fiscal
1996.
1996 Compared to 1995
Net sales. Net sales of $371.7 million in fiscal 1996 represented an
increase of $32.7 million or 9.6% compared to fiscal 1995 net sales of $339.0
million. The increase was primarily attributable to an increase in sales over
all product lines and was also attributable to net sales from the two companies
acquired in fiscal 1996 described above.
Gross profit. Gross profit increased to $112.4 million, or $10.3 million
over gross profit of $102.1 million in fiscal 1995. Fiscal 1996 gross margin of
30.2% was essentially even with fiscal 1995 gross margin of 30.1%. While the
confectionery product line showed a dramatic improvement due to higher sales
volume from the acquisition of Ter Braak B.V. and Kreuter GmbH described above,
competitive pressures at the powder and particle processing product line eroded
margins slightly. The product recovery product line showed an improvement as a
result of resolving manufacturing issues arising from relocation of the filter
media operations to Trenton, South Carolina, United States.
Selling, general and administrative expense. Selling, general and
administrative expense in fiscal 1996 of $85.7 million represented an increase
of $2.7 million, from $83.0 million during the prior year. The increase
primarily reflected the selling, general and administrative expense associated
with the companies acquired in fiscal 1996 partially offset by the one-time
benefit in 1996 on the termination of the Bepex Defined Benefit Retirement Plan
which was achieved at a cost significantly less than the amount reserved.
However, as a percentage of sales, selling, general and administrative expense
declined from 24.5% in fiscal 1995 to 23.1% in fiscal 1996 as selling, general
and administrative expense did not grow as fast as sales.
Research and development. Research and development expense increased in
fiscal 1996 by $1.6 million, from $11.0 million to $12.6 million. The increase
was primarily the result of a corporate initiative to increase research and
development efforts for longer-term projects. The Company established the
Advanced Technology Committee ("ATC"), comprised of its key researchers, whose
mission is to develop future-oriented products and technologies, and to
introduce new product applications which can open new markets for the Company's
products worldwide. See "Business--Research and Development."
Operating income. Operating income increased by $2.4 million, from $9.9
million to $12.3 million as a result of the above-mentioned factors. Excluding
the impact of the restructuring charge reversals in fiscal 1995, operating
income increased from $6.7 million in fiscal 1995 to $12.3 million in fiscal
1996, or $5.6 million. As described above in "--Overview", the Company
established restructuring reserves in fiscal 1993 totaling approximately $20.1
million. The restructuring was substantially completed by the end of fiscal
1995. Since the actual costs associated with the restructuring were less than
originally provided for in fiscal 1993, such amount was reversed into income in
fiscal 1995.
Interest expense. Interest expense, net, decreased by approximately 8.9%,
from $6.7 million in fiscal 1995 to $6.1 million in fiscal 1996 primarily as a
result of lower interest rates achieved by refinancing the short-term
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German borrowings described above, which reduced interest expense by $0.5
million in the seven months from the date of refinancing. The average interest
rate for all debt of the Company decreased from 6.9% to 6.4%, representing a
decrease of 7.2%, on average debt outstanding for fiscal 1996 of approximately
$103.0 million.
Other expense (income). Other expense (income) net, increased from income
of $3.4 million in fiscal 1995 to expense of $0.4 million in fiscal 1996. The
increase is attributable to the divestiture of the Company's interest in fiscal
1995 of a majority owned finance subsidiary, as a result of this transaction,
the Company realized a $1.7 million gain. In addition, an exchange gain of $1.8
million was recognized from favorable foreign currency movements on loans
receivable.
Tax rates. The Company's effective tax rate of 51.1% in fiscal 1996
compared with an effective tax rate of 27.7% in fiscal 1995. The increase in
the effective tax rate for fiscal 1996 resulted from the inability of the
Company to utilize net operating loss carryforwards while the Company lowered
its effective tax rate in fiscal 1995 by utilizing net operating loss
carryforwards in the United States to apply against the net proceeds of the
stock redemption in fiscal 1995 referred to above.
Liquidity and Capital Resources
Historically, the Company has financed its business operations, including
paying dividends, primarily through short-term borrowings from banks and a
commercial paper program, and has funded acquisitions with short-term bank
financing which on occasion has been converted into long-term bank debt. The
Company plans to use the proceeds of the Offering to reduce its short-term
borrowings from banks and indebtedness incurred under the commercial paper
program. See "Use of Proceeds." The commercial paper program and certain of
such indebtedness is summarized below.
Commercial Paper Program
In December 1991, the Company entered into a $75.0 million commercial
paper program under a letter of credit agreement (the "Letter of Credit
Agreement") supported by an irrevocable direct-draw letter of credit ("Letter
of Credit") provided by Bank of Tokyo-Mitsubishi, Limited, New York Branch (the
"Bank"). Under the program, which extends through December 16, 1998, the
Company issues Commercial Paper Notes (the "Notes") with maturities of up to
270 days. The Notes are sold on a discount basis only in an aggregate face
amount not to exceed $75.0 million outstanding at any one time.
The discount rate on the Notes is mutually agreed upon at the time of
issuance between the Company and Merrill Lynch Money Markets Inc., the parties
to the commercial paper dealer agreement. In fiscal 1997, the implied interest
rate averaged 5.6%.
As consideration to the Bank for issuing the Letter of Credit, the Company
pays the Bank a fee of 0.375% per annum of the average face amount of the Notes
outstanding during the calendar quarter immediately preceeding the date the fee
is due. HMC issued an irrevocable and unconditional guaranty (the "Guaranty")
for any and all liabilities of the Company to the Bank arising under the Letter
of Credit Agreement and the Letter of Credit.
The Letter of Credit Agreement contains a number of significant customary
covenants that, among other things, require consent from the Bank if the
Company changes its capitalization, liquidates, dissolves, issues or redeems
any of its capital stock, or merges or disposes of all or any material portion
of its assets.
There are several customary events that trigger an event of default under
the Letter of Credit Agreement including, among others, the failure to pay any
amount due under any Note or under the Letter of Credit Agreement, breach of a
representation or warranty made by the Company, failure to perform any term,
covenant, or agreement contained in the Letter of Credit Agreement or the
depositary agreement, failure of the guarantor to perform under the Guaranty,
attachment or execution issued or levied against the Company or property of the
Company involving a liability in excess of $5.0 million or $25.0 million
against the guarantor, and failure of the Company to pay any amount due with
respect to any other indebtedness for borrowed money in an aggregate amount
equal to not less than $1.0 million or by the Guarantor for not less than $5.0
million.
As of March 31, 1998, approximately $49.3 million was outstanding under
the commercial paper program.
Other Indebtedness
The Company and its subsidiaries have other outstanding long-term loans
with various banks in Europe which as of March 31, 1998 totals approximately
$15.2 million, which bear interest rates ranging from 5.3% to 5.4% and which
have maturity dates ranging from the year 2000 to 2001. The Company and its
subsidiaries have other
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outstanding short-term loans with other banks in the United States and Europe
which as of March 31, 1998 totals approximately $34.1 million, which bear
interest rates ranging from 4.5% to 6.9% and which have maturity dates ranging
from 30 days to 120 days from the date of incurrence of such debt. The Company
has historically renewed some of these short-term loans, with substantially the
same terms and conditions at interest rates negotiated between the respective
bank and the Company at the time of such renewal.
One of the short-term loans in the United States is secured by the assets
of the borrower and such loan and several of the other short-term and long-term
loans contain provisions requiring the borrower to satisfy customary covenants
and certain financial ratio tests and provide for events of default in the
event the borrower fails to satisfy such requirements or upon the occurrence of
certain other specified events affecting the borrower or any guarantor of the
borrower's obligation. In addition, with respect to a portion of such
short-term loans, HMC and in certain instance where the borrower is a
subsidiary of the Company, the Company, have agreed to guarantee the borrower's
obligations, including in the event of an occurence of an event of default by
the borrower.
The Company's subsidiaries also maintain additional lines of credit with
various banks primarily to support outstanding letters of credit and, to a
lesser extent, to finance their operations.
Net Cash and Working Capital
Operating activities. Net cash provided by operating activities for the
six months ended March 31, 1998 was $2.5 million, compared to net cash used in
operating activities of $6.4 million for the six month period ended March 31,
1997. The increase in net cash provided by operating activities was primarily
driven by an increase in receivables and unbilled receivables of $13.2 million,
offset by increases in accounts payable and contract advances of $7.8 million,
a reduction in inventory of $1.6 million and non-cash items, principally
depreciation of $5.7 million. Net cash used in operating activities in fiscal
1997 resulted primarily from a reduction in accounts payable and contract
advances. Net cash provided by operating activities in fiscal 1996 was $13.8
million, compared to $1.9 million of net cash used in operating activities in
fiscal 1995. The net cash provided by operating activities in fiscal 1996
resulted primarily from better management of receivables and higher contract
advances and the net cash used in operating activities in fiscal 1995 resulted
primarily from a significant increase in the level of receivables partially
offset by an increase in payables.
Investing activities. Net cash used in investing activities for the six
month period ended March 31, 1998, was $5.1 million, compared to net cash used
in investing activities of $3.4 million for the six month period ended March
31, 1997. The increase in net cash used in investing activities was due to the
investment in the new facility in Summit, NJ and an extension to facilities in
the United Kingdom. Net cash used in investing activities in fiscal 1997 was
$9.4 million, compared to net cash used in investing activities of $13.1
million in fiscal 1996. The decrease in net cash used in investing activities
was due primarily to the inclusion in fiscal 1996 of the purchase of Ter Braak
B.V. for $3.1 million in cash. Net cash used in investing activities in fiscal
1996 was $13.1 million, as compared to $9.6 million used in investing
activities in fiscal 1995. The increase in net cash used in investing
activities was due to the inclusion in fiscal 1996 of such purchase.
Financing activities. Net cash used in financing activities for the six
months ended March 31, 1998 was $1.3 million, compared to net cash provided by
financing activities of $7.4 million for the six month period ended March 31,
1997. The decrease in net cash provided by financing activities was due to
improved cash from operations which reduced the need for borrowings. Net cash
used in financing activities in fiscal 1997 was $2.1 million, compared to net
cash provided by financing activities of $1.9 million in fiscal 1996. Net cash
used in financing activities in fiscal 1997 was primarily due to the payment of
dividends on preferred stock and net cash provided by financing activities in
fiscal 1996 was due primarily to borrowings used to fund the acquisition of Ter
Braak B.V. in fiscal 1996. Net cash provided by financing activities in fiscal
1996 was $1.9 million, compared to net cash used in financing activities of
$7.4 million in fiscal 1995. Net cash used in financing activities in fiscal
1995 was due to the reduction in fiscal 1995 of short-term debt utilizing
available cash.
Working capital. Negative working capital at March 31, 1998 was $49.3
million, compared to negative working capital of $54.5 million at March 31,
1997. The increase in working capital was due primarily to a reduction in the
level of bank borrowings and related party loans. Negative working capital at
September 30, 1996 was $53.6 million, compared to negative working capital of
$70.5 million at September 30, 1995. The increase in working capital was due to
primarily the refinancing of certain short-term debt in Germany in fiscal 1996.
Working capital
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is negative throughout such periods due to the existence of average short-term
borrowings of approximately $82.2 million which were used to finance a number
of acquisitions.
The Company believes that its existing credit facilities and cash expected
to be generated from operations are sufficient to finance its current level of
operations and currently contemplated capital expenditures.
In the event the Company makes any significant acquisitions, it may be
required to raise additional funds, through the issuance of additional debt or
equity securities. There can be no assurance that such funds, if required,
would be available on terms acceptable to the Company.
Inflation
Management does not believe inflation had a material adverse effect on the
financial statements for the periods presented.
Effect of Recently Issued Accounting Standards
The Financial Accounting Standards Board recently issued three new
accounting standards that will have an impact on the Company's financial
statements when adopted in a future period.
Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"),
Reporting Comprehensive Income, establishes standards for reporting and display
of comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS No. 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements.
Statement of Accounting Standards No. 131 ("SFAS No. 131"), Disclosures
about Segments of an Enterprise and Related Information, establishes standards
for the way that public enterprises report information about operating segments
in annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. Generally,
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and for deciding how to allocate
resources to segments.
Statement of Accounting Standards No. 132 ("SFAS No. 132"), Employers
Disclosures about Pensions and Other Post Retirement Benefits. SFAS No. 132
revises employers' disclosures about pension and other postretirement benefit
plans. It does not change the measurement or recognition of those plans.
All of these new standards are effective for financial statements for
periods beginning after December 15, 1997 and require comparative information
for earlier years to be restated. Results of operations and financial position
will be unaffected by implementation of these new standards.
Risk Management
Concentration of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's customer
base, the diverse industries served and the international nature of the
Company's business. As of March 31, 1998, the Company had no significant
concentrations of credit risk. The Company is not dependent on any one supplier
of raw materials, components or subsystems, although it does obtain certain
components and subsystems from a limited number of sources.
The Company considers its investment in international subsidiaries to be
both long-term and strategic. As a result, the Company does not hedge the
long-term translation exposure to its balance sheet. While the Company's
results of operations have fluctuated materially both annually and quarterly
due to, among other things, changes in the exchange rate of the U.S. dollar
against other currencies, in particular the German mark and the Dutch guilder,
the cumulative foreign currency translation adjustments as of March 31, 1998
have not been material.
Operating Loss Carryforwards
At March 31, 1998, the Company had United States and Dutch net operating
loss carryforwards of approximately $21.4 million and $23.1 million,
respectively, of which approximately $1.8 million is subject to restricted
utilization rules. The United States net operating loss carryforwards expire
between 2002 and 2012 and the Dutch net operating loss
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carryforwards do not expire. The Company also had other foreign net operating
loss carryforwards amounting to approximately $3.1 million available for local
tax purposes, a significant portion of which is not subject to expiration.
Certain events, including any sales by the Company of shares of its stock,
including pursuant to this Offering, transfers of a substantial number of
shares of Common Stock by the current stockholders, and/or the discontinuance
of certain product lines in the United Kingdom, may partially restrict the
ability of the Company to utilize its net operating loss carryforwards or could
result in the loss of such net operating loss carryforwards in the United
Kingdom.
Year 2000 Compliance
The Company is modifying its computer systems to be year 2000 compliant.
The Company does not expect that the cost of modifying such systems will be
material. The Company believes it will achieve Year 2000 compliance in advance
of the year 2000, and does not anticipate any material disruption in its
operations as the result of any failure by the Company to be in compliance. The
Company does not have any information concerning the Year 2000 compliance
status of its suppliers and customers. The Company guarantees to an increasing
number of its customers that its equipment and systems are Year 2000 compliant.
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BUSINESS
General
The Company is a global leader in designing, engineering and manufacturing
powder and particle, plastics and confectionery processing equipment and
systems and product recovery equipment and systems. Through its extensive array
of brandname products and industry expertise, the Company provides
custom-designed technological solutions to its customers' specific requirements
covering a broad range of industrial and consumer products. The Company's
customers include a diverse group of leading multinational industrial,
chemical, pharmaceutical, film extrusion and plastics, minerals, metals and
food companies such as Bayer, Novartis, Degussa, BASF, Hoechst, W.R. Grace, Dow
Chemical, Dupont, Hershey, Nestle, Procter & Gamble, Mannesmann, Shell and
Xerox. The Company's products and systems components are manufactured, marketed
and sold to customers on six continents through its own sales personnel and
independent sales representatives. In the fiscal year ended September 30, 1997,
approximately 37.9% of the Company's sales were in North America, approximately
44.2% were in Europe and approximately 17.9% were in the rest of the world. The
Company's brand names such as Alpine, Stott, Mikro, Vrieco-Nauta, Bepex, Micron
(licensed from HMC), Rietz, Schugi, Ter Braak, Kreuter, Hutt, Menardi-Criswell,
MikroPul, K-G and Filtex are recognized globally for their broad product lines,
advanced technologies and quality in the industries the Company serves.
The Company's broad product offerings coupled with the diverse end-markets
served enhances the Company's financial performance by limiting the effects of
any single operating unit or end-market on the Company. The Company believes
that its diverse customer base, geographic markets served and product lines
have contributed to consistent sales and operating profit growth over the last
three years. Between the fiscal year ended September 30, 1994 and the fiscal
year ended September 30, 1997, the Company's net sales increased at a 9.8%
compound annual growth rate ("CAGR"), from $272.2 million to $360.5 million,
and its operating profit increased at a 25.0% CAGR, from $7.5 million to $14.6
million.
The Company provides its equipment and systems through the following four
product lines:
Powder and Particle Processing Product Line--This product line designs,
engineers, manufactures and installs pulverizers, separators, mixers, dryers,
agglomeration, hygienic filling, weighing and discharge systems, compacting
equipment and systems and thermal processing systems used in applications where
precise particle size and structure are critical. The powder and particle
processing product line services a broad range of different industries
including pharmaceutical, chemical, food, minerals and metals. For the fiscal
year ended September 30, 1997, the powder and particle processing product
line's net sales and percentage contribution to the Company's total net sales
was $168.5 million and 46.7%, respectively.
Plastics Processing Product Line--This product line designs, engineers,
manufactures and installs plastic film blowing and extrusion equipment and
systems for the manufacture of single- and multi-layer plastic films used
primarily in the packaging and bag-making industries. For the fiscal year ended
September 30, 1997, the plastics processing product line's net sales percentage
contribution to the Company's total net sales was $66.6 million and 18.5%,
respectively.
Confectionery Processing Product Line--This product line designs,
engineers, manufactures and installs a full line of mass preparation,
preheating, cooking, aerating, cooling, extrusion, forming, cutting, coating
and tempering equipment and systems for the confectionery and convenience snack
food industries including equipment and systems for the production of hard,
soft and chewy candies, granola, health and candy bars and convenience foods
and breakfast bars. The confectionery processing product line markets its
products and systems to major international manufacturers of confectionery and
food products. For the fiscal year ended September 30, 1997, the confectionery
product line's net sales and percentage contribution to the Company's total net
sales was $25.5 million and 7.1%, respectively.
Product Recovery Product Line--This product line designs, engineers,
manufactures, installs and services product recovery and dust collection
equipment and systems and scrubbing systems used in a broad range of industrial
applications and also manufactures a wide range of filter media. The product
recovery product line serves a broad range of industries including the
pharmaceutical, chemical, plastic, mineral and metal (including carbon black
and titanium dioxide), detergent, paint, cement, petrochemical and food
companies. For the fiscal year ended September 30, 1997, the product recovery
product lines's net sales and percentage contribution to the Company's total
net sales was $99.9 million and 27.7%, respectively.
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Business Strategies
Hosokawa's goal is to be the primary supplier of highly-engineered,
state-of-the-art process technology systems to the industries it serves. In
order to achieve this goal, Hosokawa has adopted business strategies that may
be grouped into the following three categories: continuing growth, increasing
margins and enhancing customer satisfaction. The principal elements of the
Company's business strategies are described below:
Continuing Growth
[bullet] Research and Development. Research and development, a significant
source of growth for the Company, focuses on product innovation,
new product development and advanced research leading to
breakthrough technologies and their subsequent commercialization.
The Company has over 35 products currently under development, 10
of which have been introduced in the first six months of the
fiscal year ending September 30, 1998. Such research also allows
Hosokawa to constantly upgrade and service existing customer
systems. In addition, the Company's Technical Centers engage in
original research and development work, analysis and testing of a
customer's materials, process simulation of the customer's
production process, process design configuration, and
demonstrations of the Company's products, equipment and systems.
See "--Research and Development." Management believes that
research and development will continue to be a significant source
of growth for the Company.
[bullet] Acquisitions. Hosokawa participates in a fragmented industry which
management believes provides many strategic acquisition
opportunities. In the last ten years Hosokawa has successfully
purchased and integrated seven acquisitions and such acquisitions
have played a significant role in its evolution into a supplier of
integrated processing and product recovery technology solutions.
For example, in 1996 Hosokawa acquired Ter Braak B.V. and certain
assets of Kreuter GmbH whose confectionery equipment and systems,
when combined with the Company's existing Hutt line of
confectionery operations, gave Hosokawa the ability to provide
totally integrated single-source processing solutions for
confectionery producers. This ability has resulted in several
orders that management believes might have otherwise gone to
competitors. This type of integration and turnkey focus is a core
component of management's strategic plan going forward. For the
fiscal year ended September 30, 1997, 54.8% of net sales were
attributable to acquisitions completed since fiscal year 1988.
Hosokawa expects to continue growing through strategic
acquisitions that can provide complementary operations or
acquiring specific companies whose operations, products and
capabilities are superior in a particular area. See
"--Acquisitions."
[bullet] Penetrating New Markets. Hosokawa also believes there is
substantial opportunity to grow by increasing its presence in new
markets, including emerging markets. Management believes that as
developing countries in South America, Asia, Africa and Eastern
Europe evolve into manufacturing and consumption-oriented
societies and Hosokawa's customers expand into these regions,
Hosokawa will grow as its customers develop additional
manufacturing facilities. This strategy enables the Company to
enter new geographic markets with an established customer base and
book of business and should reduce the risks normally associated
with entering new markets. Independent of its existing customers,
the Company also anticipates developing additional business with
local companies in new markets. Between the fiscal year ended
September 30, 1994 and the fiscal year ended September 30, 1997,
the Company's net sales in new markets increased at a 13.5% CAGR,
from $34.1 million to $49.9 million.
Increasing Margins
[bullet] Product Integration. Hosokawa will continue integrating existing
products into flexible systems specifically designed to solve a
customer's processing and product recovery needs. For example, the
Company was able to design a system to manufacture expanded glass
using existing products from a number of the Company's operating
subsidiaries. This enabled the Company to secure the order and
increase its gross margin on the existing products for such order.
The Company believes that this strategy will continue to increase
margins.
[bullet] Product Repositioning. Hosokawa will continue to focus on
broadening the applications of its existing products, with minimal
modifications, for expansion into new applications in markets that
the Company believes may have higher margins. For example, a
potential application for the Company's Alpine Film Extruder, used
currently for the extrusion of packaging film, is barrier film
extrusion for food and medical
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applications. In addition, the Company's Bepex Compactor,
currently used for compaction and forming powder in the chemical
industry, has potential application for the production of
medicinal chewing gums for the pharmaceutical industry; the
Company's Vrieco-Nauta Mixer, currently used to mix powders, may
be used to sterilize bulk materials; and its Mikro ACM Mill,
currently used for size reduction, may be used to control the
length and diameter of fibrous materials.
[bullet] Technological Leadership; Product Offering Range and Quality;
Global Recognition. Hosokawa believes that the continuing
development of its technological advantage, its wide range of
product offerings, the quality of its equipment and systems and
its globally-recognized brand names will enable it to increase
margins by better managing pricing on its products and systems.
[bullet] Cost Reductions. Hosokawa will also continue its efforts to reduce
costs as a percentage of costs of goods sold in order to increase
margins, such as through increased productivity, expanded
subcontracting of manufacturing, improved monitoring of worldwide
purchasing costs of materials, supplies and components and
improved working capital management.
Enhancing Customer Satisfaction
The Company's goal is to provide seamless customer service from concept
development, sales, equipment and system production and installation to
after-market service. To achieve this goal:
[bullet] Hosakawa has developed a customer-focused program designed to
reach the top management of its clients. Key management personnel
at Hosokawa have been assigned to each core client and are
responsible for maintaining the relationship with the client.
[bullet] In partnership with its customers, Hosokawa has developed
cost-saving service programs to increase customers' profitability.
Additionally, the Company continuously provides its employees with
training to reinforce the importance of responsiveness to customer
needs.
[bullet] The Company continues to manufacture, assemble, install and
service its products and systems in various regions around the
world, thereby enhancing customer service.
Products and Technologies
The Powder and Particle and Plastics Processing Product Lines
Powder and particle processing technologies are used to manufacture
pharmaceuticals, chemicals, foods, polymers, paper coatings, cosmetics and
paint. Powder and particle processing is the modification of a material to
produce the optimum particle form for its intended use. This is achieved
through the following process steps which are applied sequentially or in
combination depending on the respective material and the customer's
specifications: size reduction, disintegration, classification (sorting),
drying, crystallization, separating, mixing and size enlargement (agglomeration
or compaction). Powder technologies play a key role in a number of
technologically-advanced industries, including microelectronics, fine ceramics,
toner for paper copiers, products for the delivery of micro-capsules and
fine-powdered aerosols and energy sources for thermal-generated electric power.
The Company's brand names in powder and particle processing include Alpine,
Bepex, Micron (licensed from HMC), Vrieco-Nauta, Schugi, Stott, Mikro, Rietz,
Strong-Scott and K-G.
Plastics processing technology transforms a raw material such as
polyolefines from a granular form into films with specific mechanical and
physical properties which result in an intermediate or final product such as
plastic film for food packaging. The Company's brand name in plastics
processing is Alpine.
The technologies and equipment offered by Hosokawa's powder and particle
and plastics processing product lines include:
[bullet] Mixing Equipment and Systems. Hosokawa produces equipment and
systems for powder mixing applications and processes to ensure the
proper consistency and uniformity of products. Applications
include: penicillin, antacids, vitamin supplements, spices and dry
soup mixes.
[bullet] Drying Equipment and Systems. Hosokawa's equipment and systems
allow food and chemical manufacturers to achieve exact moisture
content specifications for the materials they process and produce.
Applications include: aspartame, coffee and pigments.
32
<PAGE>
[bullet] Size Reduction and Separating Equipment and Systems. Hosokawa's
equipment and systems can produce particle size as fine as 5
microns. For example, an average human hair is 80 to 100 microns
in diameter. Fine particles are required to manufacture, among
other products, pharmaceuticals, fillers and fine-grade chemicals.
Hosokawa also develops and manufactures separating systems for
fine particles which permit the user to attain exact particle size
specifications. Particle size distributions of such precision are
required for the manufacture of pharmaceuticals, toner, powder
paint, fine ceramic powders, chemicals, mineral fillers and
resins.
[bullet] Compaction Equipment and Systems. Hosokawa's equipment and systems
are used in the high pressure production of briquettes, pellets
and flakes. Through the use of compaction equipment, product
enhancement characteristics can be imparted to the processed
material. Such product enhancements include modification of
density, flow characteristics, time release properties, particle
size and composition uniformity. The result is a final product or
an intermediate product ready for further processing to produce
end products in the form of tablets, briquettes, or ingredients
for capsules used in a variety of applications including:
pharmaceuticals, chemicals, food and minerals.
[bullet] Agglomeration Equipment and Systems. Hosokawa's equipment and
systems are used for the continuous mixing and binding of powders
with one or more liquids. The results are homogenous granules
consistent in grain size, solubility, moisture levels and bulk
density. The agglomeration process takes place as powders are
introduced in a turbulent air stream to which one or more liquids
of varying viscosity is added. Applications include: milk
substitutes, detergents and instant drink mixes.
[bullet] Hygienic Filling, Weighing and Discharge Systems. Hosokawa's
equipment and systems permit dust free, hygienic packaging for
powders and are primarily used in the pharmaceutical, chemical and
food processing industries.
[bullet] Thermal Processing Systems. Hosokawa's systems use heat and
mechanical action to effect a chemical change in solids, removing
the need for melting or vaporizing the solid. Principal customers
for thermal processing equipment and systems are in the plastics
and food processing industries. Hosokawa has developed and
marketed thermal processing systems for Solid Phase Polymerization
("SPP"). SPP is the process of treating polymers to improve their
physical qualities at temperatures below their melting points, to
achieve stronger and more durable materials and finished goods.
Applications include: resins for the production of plastic
bottles, industrial fibers, tire cord and specialty starches.
[bullet] Plastics Film Blowing and Extrusion Equipment and Systems.
Hosokawa's equipment and systems produce both mono- and
multi-layer plastic blown film from pelletized polymers.
Multi-layer structures contain different resins to impart various
qualities such as tensile strength, tear resistance, improved
barrier properties and the ability to produce these materials with
a thinner gauge. Applications for these technologies range from
the production of retail carry out bags, trash can liners, lawn
and leaf bags, to plastic film for packaging meats, produce, and
microwave products as well as for medical packaging.
Confectionery Processing Product Line
Hosokawa's confectionery processing technologies and equipment assist the
confectionery and convenience snack food (processed or baked bar) industries
worldwide from the recipe formulation up to packaging. The Company's
confectionery brand names Hutt, Kreuter and Ter Braak are known worldwide in
these industries. The integration of these brand names into the recently formed
confectionery processing product line makes Hosokawa a single-source provider
to this market. Major products and systems include:
[bullet] Mass Preparation and Processing of Confectionery Products. The
Company's Ter Braak products are used for the mass preparation,
cooking and processing of candy products such as hard, soft and
soft chew-aerated and gelatin based products or products known as
hard candy, caramels, nougats and gummi bears. The Company
specializes in providing pre-mix preparation equipment for
weighing and mixing of raw materials used in a variety of
confectionery products and equipment for preheating, dissolving,
cooking, mixing, aerating and cooling of sugar confectionery
syrups and masses.
[bullet] Extrusion, Forming, Cooling and Cutting Systems. The Hutt line
offers sophisticated systems for extruding, forming, cooling and
cutting operations. The Company's technologies assure weight and
shape accuracy for its clients' food products such as candy,
granola, health and breakfast bars.
33
<PAGE>
[bullet] Cooling Tunnels, Coating and Tempering Machines. The Company's
Kreuter products and systems provide the confectionery and
specialized food industries with cooling tunnels, coating
(chocolate, compound or caramel) and tempering machines. Auxiliary
equipment for coating lines is also available from the Company.
Product Recovery Product Line
The Company's product recovery product line evolved in response to
industry's needs to capture the fine particles produced from powder and
particle processing equipment and systems. Hosokawa developed the first
patented pulse jet dust collector used for this process in 1956. Since then,
Hosokawa has enjoyed a leading position as a provider of product recovery and
dust collection equipment and systems. Hosokawa's installed base of over
175,000 systems demonstrates the widespread acceptance and application of the
Company's technology.
The Company's product recovery systems allow processors of high-value
materials to collect product from primary processing equipment and material
transport and handling systems. Product recovery technologies play a key role
in the pharmaceuticals, chemicals, food, detergents, polymers and plastics,
pigments, carbon black, metals and minerals industries.
The Company's product recovery equipment, systems, filtration products and
aftermarket services are marketed globally under the Filtex, MikroPul and
Menardi-Criswell brand names which have strong brand recognition throughout the
world. Major product lines include:
[bullet] Clean In-Place Filter Collectors. These product collectors permit
rapid production changeovers, allowing a single manufacturing line
the flexibility to produce many different materials. Applications
include: pharmaceuticals, pigments, food products and drink mixes.
[bullet] Sanitary Filter Collectors. These product collectors are designed
to prevent product contamination, eliminate bacterial growth and
protect human and animal health. Applications include: dry milk,
whey, and egg products.
[bullet] High Pressure Design Collectors. These product collectors are
engineered to withstand high process pressures and/or to prevent
explosions. Applications include: plastic resins and
petrochemicals and coal and coke combustion processes.
[bullet] High-Temperature Filter Collectors. These product collectors are
temperature-resistant filters used in special ultra-high
temperature filter applications. Applications include: catalyst
recovery, carbon black and titanium dioxide.
[bullet] Filter Media. Hosokawa supplies a broad range of liquid and dry
filter media for process industries. Hosokawa is recognized for
its state-of-the-art high temperature filter media products.
Hosokawa develops media and advanced media treatments used for
dust collection and management believes that it is the only
vertically integrated manufacturer with operations for applying
chemical finishes to the filter material. The Company also offers
complete field services including: retrofits, process optimization
analyses and baghouse upgrades. Applications include: food and
beverage, alumina refining, mineral and mining and pharmaceutical
and chemical processing.
[bullet] Nuisance Dust and Dust Collector Systems. These dust collection
systems are utilized for a wide variety of applications in product
recovery, fugitive dust collection and pollution abatement.
Applications include: starch, fertilizers, cocoa, spices, cement,
grains, metal powders and waste incineration.
[bullet] Wet and Dry Scrubbing Systems. Hosokawa's wet and dry scrubbing
systems are used to remove the corrosive pollutant gases exhausted
from various production and combustion processes. These systems
are designed to use the plant's raw materials to reclaim chemicals
used in the scrubbing process and to minimize waste disposal while
operating at up to 99.9% collection efficiency. Applications
include: aluminum production and metallurgical processes.
34
<PAGE>
The following table sets forth the Company's net sales and percentages
attributable to its powder and particle processing, plastics processing,
confectionery processing and product recovery equipment and systems product
lines, respectively:
<TABLE>
<CAPTION>
Net Sales
(Dollars in millions, except percentages)
Six Months
Year Ended September 30, Ended March 31,
--------------------------------------------------------------------------- ---------------------
1995 1996 1997 1998
----------------------- ----------------------- --------------------------- ---------------------
Product Lines $ % $ % $ % $ %
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Powder and Particle ......... $ 180.1 53.1% $ 188.1 50.6% $ 168.5(1) 46.7% $ 85.4 47.7%
Plastics .................... 53.3 15.7 59.6 16.0 66.6 18.5 26.3 14.7
Confectionery ............... 7.5 2.3 18.9 5.1 25.5 7.1 15.3 8.5
Product Recovery ............ 98.1 28.9 105.1 28.3 99.9 27.7 51.9 29.1
--------- ----- --------- ----- ------------ ----- ------- -----
Total ...................... $ 339.0 100.0% $ 371.7 100.0% $ 360.5 100.0% $ 178.9 100.0%
========= ===== ========= ===== ============ ===== ======= =====
</TABLE>
- ----------------
(1) The decline in sales in this product line resulted primarily from foreign
currency translations (approximately $15.0 million).
Industry Background and Competition
In the powder and particle processing product line, the competition is
fragmented and the Company is not aware of any other company that offers the
range of products and technologies provided by the Company for this product
line. The competitors in this product line compete primarily on the basis of
product performance and price. The Company's principal competitors in certain
technologies are: Condux-Netsch (air classifier mills), Pallman (impact mills),
Krauss Maffei (mixers and dryers), Koppern (compaction equipment), and Buhler
(SPP systems). However, there are many smaller companies that compete within
this product line with respect to certain products. Additionally, there exists
a large supply of used equipment which can result in price competition for
certain older products (pulverizers).
The Company has relatively few competitors in the confectionary product
line and the Company competes with them on the basis of product performance and
service. The Company believes that its ability to provide systems capabilities
is a competitive advantage in serving this market. The Company's recent
acquisitions of Ter Braak B.V. and certain assets of Kreuter GmbH have
positioned the Company for additional growth by expanding its systems'
capabilities. The Company's principal competitors are Sollich, Robert Bosch,
APV Baker and Klockner-Haensel.
There are numerous competitors in the product recovery product line. The
Company believes that one of its competitive strengths lies in its extensive
application experience. Additionally, the Company believes there is a
competitive advantage to being both provider of equipment and systems and a
manufacturer of filter media. The Company is not aware of any other company
that is a totally integrated provider of equipment, systems and filter media.
There are about 10 to 15 major companies, including BHA Holdings, Inc, AAF
International, ABB Environmental Systems Division and Wheelabrator Air
Pollution Control, that compete in this product line. The competition is
intense in the product recovery product line with a number of small companies
that compete on price (e.g., nuisance collectors).
The manufacture of filtration media within the product recovery product
line can be further divided into three product offerings. In membrane laminate
technologies, the Company competes primarily with W.L. Gore and Associates,
Inc. and BHA Holdings, Inc. In its core filtration business, the Company
encounters competition from MFRI, Inc., BHA and a number of regionalized
competitors. In its liquid filtration product line, the Company competes with
National Filter Media Corporation, SCAPA Filtration, and CROS-IBLE, Inc..
Management of the Company believes that the sales of approximately twenty
companies (including the Company) represent 80.0 to 90.0% of the total sales in
the plastics processing product line. Each of the major companies have
strengths in one or more particular extrusion technologies, and the competition
varies depending on the products and technologies and is based primarily upon
product performance, reliability and technology. Major competitors include:
Battenfield Gloucester Engineering Co., Inc, Davis Standard, Brampton
Engineering, Kiefel, Inc., and Macchi S.r.l.
35
<PAGE>
Research and Development
Company Research and Development
Hosokawa recognizes that maintaining its leadership role in advanced
processing and product recovery technologies is essential to sustaining growth.
Research and development at Hosokawa focuses on product innovation, new product
development and advanced research leading to breakthrough technologies and
their subsequent commercialization. The general research and development
philosophy of Hosokawa is to continuously improve existing products and
technologies to meet market requirements and to aggressively develop new
equipment and technologies to meet future market requirements. Guiding
parameters for all research and development are to reduce both the Company's
and the customer's operating costs, to facilitate the customer's development of
new processes while complying with applicable regulatory laws and to
standardize product design for global markets.
Hosokawa has two separate and distinct research and development programs.
The first program is traditional research and development of new products and
processes and is funded at the operating company level. A second and distinct
research and development program is funded at the corporate level by Hosokawa.
This corporate program is overseen and carried out by the Advanced Technology
Committee ("ATC"), which is comprised of the Company's key researchers, whose
mission is to develop future-oriented products and technologies, to introduce
new product applications and to open new markets for the Company's products
worldwide. While most of the technologies being developed by the ATC are
several years away from commercial use, the Company believes that the
principles learned from and breakthroughs achieved by this advanced research
will assist the Company to remain a leading manufacturer of powder and
particle, plastics and confectionery processing equipment and systems and
product recovery equipment and systems. The Company has in place management
policies which cover the initiation, approval and monitoring of research and
development projects both at the operating unit level and the ATC level. Among
the criteria for review are cost benefit and market analysis and whether
established milestones are attained.
Hosokawa maintains 17 Technical Centers in seven countries, including the
United States, Germany and the Netherlands. Each has fully operational pilot
and/or production lines that are able to produce sample batches of product and
to perform limited contract manufacturing. These Technical Centers are equipped
and operated for a variety of functions which can include conducting original
research work, demonstrating various processing systems, on-site testing of
end-product, analysis and testing of a customer's materials, process simulation
of a customer's production process, process design configuration and
custom-processing of the customer's product. The Technical Centers and Pharma
Lab provide customers with a demonstration of the Company's processing systems
using the customer's raw materials followed by on-site testing of the
characteristics of the end-product deemed essential by the customer, e.g.,
physical properties of powders such as particle size, density, dryness and
flowability. The Company also has a wide range of rental equipment to be used
for field trials in cases where actual operating conditions cannot be
reproduced in the Technical Centers.
The Hosokawa Pharma Tech Center in Summit, New Jersey, United States is
expected to open in May 1998. This facility is designed to meet the needs of
the pharmaceutical industry. The Company's management anticipates that this
facility will be validated as a "current Good Manufacturing Practices" ("cGMP")
facility for pilot testing and analysis, contract processing, milling and
micronization, compacting and agglomeration, classification and pharmaceutical
product development. This capability is also an important aspect of the
Company's marketing efforts directed at the pharmaceutical industry. See
"--Sales and Marketing."
The Company's PolyQuest Polymer Development Center in Minneapolis,
Minnesota, United States, which allows customers to take theoretical
information about polymer processing from concept development to pilot testing,
for the design of full-scale polymer processing plants. The PolyQuest
Development Center provides customers with the ability to design production
plants using the most flexible flow designs available worldwide, with up to 96
combinations of process flow variations for test configurations. The PolyQuest
Development Center is equipped with one of the most advanced analytical
laboratories available and includes a scanning electron microscope,
thermogravimetric analyzer, "fines" content analyzer and other devices.
For the fiscal year ended September 30, 1997, research and development
expenditures were approximately 3.4% of sales. Total research and development
expenditures for the fiscal years ended September 30, 1997, 1996 and 1995 were
$12.2 million, $12.6 million and $11.0 million, respectively, and the fiscal
year 1998 research and
36
<PAGE>
development budget is approximately $14.0 million. Research and development
expenditures for fiscal year ended September 30, 1997 were allocated as
follows: 37.0% to operating unit research and development, 54.0% to the
Technical Center research and development, and 9.0% to the Advanced Technology
Committee (ATC).
Examples of principal research and development projects which were
undertaken in the past and now account for significant sales are set forth in
the table below:
<TABLE>
<CAPTION>
Year Fiscal 1997 Sales
Products Introduced Needs/Benefits (Dollars in millions)
- --------------------------------- ------------ --------------------------------------------------- ----------------------
<S> <C> <C> <C>
Powder and Particle Processing Product Line
Fluidised Bed Opposed Jet 1995 Easy clean, advanced system controls, modular $7.4
Mill (sanitary design) design, bed level control
Ultra-fine particle separators 1995 Ultrafine separation in combination with 3.1
high capacity
Plastics Processing Product Line
Plate Dies 1996 Coextrusion of plastics of more than three layers 1.8
High-performance extruders 1995 High quality film at high output rates 3.7
Confectionery Processing Product Line
Flexible production system 1995 Production of white caramel 0.7
Electronically-controlled 1995 Increased reliability, lower maintenance, more 1.9
forming and cutting devices precise cutting
Product Recovery Product Line
SDF (Surface Densified 1997 Advanced finishing technology to achieve 0.5
Finish) improved efficiencies
MikroTex 1996 High efficiency membrane technology to reduce 2.2
(Glass/Liquid/Specialty operating expense
Substrates)
</TABLE>
Examples of principal research and development projects currently underway
are set forth in the table below:
<TABLE>
<CAPTION>
Initiative Objective Timing
- ----------------------- --------------------------------------------------- --------------------------------
<S> <C> <C>
Rapid expansion of Particle formation through high pressure, Early stage. Tests for
supercritical supersaturation and decompression to produce customers expected in 1998,
solutions ultra-fine, high-purity particles. Nano-fine commercialization expected
additions are more efficient and react more in 1999.
quickly. Targeted markets are pharmaceutical,
food and agriculture industries.
MikroTemp brand of Wet chemical method to produce new materials Research for ceramic coating
ceramic coating and nano-sized particles. Fields of application of filter media completed.
are ceramic coating on filter media to increase Market introduction expected
temperature and chemical resistance and ceramic in 1998, including potential
coating and protection of metal surfaces to sale of technology to a third
improve corrosion resistance. party with a license for use of
technology on filter media.
Flame synthesis with Create particles from gas phase and charge Pilot line operating.
electrical charging electrically to better control size, distribution Cooperative agreements with
(bi-polar technology) and morphology. Technology helps to upgrade customers concluded with
quality of flame reacted metal oxides such as options for licenses. Market
silicon dioxide and carbon black, and also introduction expected in 1999.
allows production of ceramic powders in the
low nano-size range.
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Initiative Objective Timing
- --------------------- ----------------------------------------------- ----------------------------------
<S> <C> <C>
Unique classifier Specific applications with maximum Concepts completed and
classification efficiency and yield. design initiated, customer
testing expected in late 1998,
commercialization expected
in 1999.
Mill and Classifier Low-energy mill for a wide range of Trials with first prototype
applications. started, customer testing
expected in mid-1998,
commercialization expected
in 1999.
Long gap mill Development of a high-speed fine impact mill. Prototype completed, customer
testing expected in late
1998, commercialization
expected in 1999.
Barrier Film System Produce multilayer film with application Technology ready for market
specific properties. introduction in United States
in 1998. Pilot line in operation.
Cooperative agreements with
one customer concluded and
others under discussion.
</TABLE>
Research Partnerships
Hosokawa often provides its powder processing and product recovery
equipment to universities in exchange for Hosokawa-sponsored research and
development work. This has resulted in the formation of research partnerships
with a number of universities. These research partnerships, among other things,
have led to the development of new products and processes which incorporate
Hosokawa's products such as a new type of Wet Electrostatic Precipitator,
electro cyclone, bi-polar technology for nano powders, fermentation process,
ceramic fabric coating process, and inline particle size measurement products.
These partnerships increase the Company's name recognition in the research
community as well as in the industries the Company serves. Partnership
universities are set forth in the table below:
Europe: Germany Netherlands
University of Cottbus University of Delft
University of Karlsruhe University of Wageningen
University of Munich
University of Saarbrucken
U.S.: New Jersey Institute of Technology
Pennsylvania State University
State University of New York (Stony Brook)
University of Arkansas
University of Florida
Hosokawa also provides a forum for publication and discussion of the most
up-to-date research in its field by funding, along with HMC, the Hosokawa
Powder Technology Foundation, which publishes a journal entitled "KONA Powder
and Particle" (KONA is Japanese for "powder"). KONA's mission is to publish
research findings and papers covering a broad spectrum of powder sciences and
technology, discussing both fundamental principles and practical applications.
All research papers published in KONA are reviewed by its Editorial Committee
prior to publication. The KONA Editorial Committee is comprised of over 30
prominent researchers from world leading universities in particle and science
technology. Through these initiatives, the Company accomplishes the following:
(i) establishes and maintains Hosokawa's relationship with these leading
academicians which contributes to attracting noted research partners for the
Company's advanced technical development programs; (ii) reinforces its
reputation as a leader in the field of particle science research, and (iii)
informs the Company of new developments in the academic arena.
38
<PAGE>
Acquisitions
Hosokawa participates in a fragmented industry which management believes
provides many strategic acquisition opportunities. In the past, the Company
grew through strategic acquisitions and mergers with companies whose businesses
were related to the Company's businesses. See "--History of the Company." This
acquisition strategy helped the Company to evolve into a primary supplier of
highly engineered, state of the art integrated processing and product recovery
technology solutions. Hosokawa expects to continue growing through strategic
acquisitions that can provide complementary operations or acquiring specific
companies whose operations, products and capabilities are superior in a
particular area. Hosokawa has purchased seven companies and selected assets of
another company since fiscal 1988. The following acquisitions contributed 54.8%
to the Company's net sales in fiscal 1997, as set forth in the table below:
<TABLE>
<CAPTION>
Fiscal
Year (Dollars
Acquired Company Product Lines Countries in millions)
- ---------- ------------------ ------------------------------------ --------------------- -------------
<S> <C> <C> <C> <C>
1988 Alpine AG powder and particle processing, US, UK, France, $ 115.4
plastics processing Germany, Italy
1989 Filter Tubes product recovery France 9.7
E.u.r.l.
1990 Omal srl plastics processing Italy (subsequently N.A.
discontinued)
1992 Bepex powder and particle processing and US, UK, Germany, 51.5
Corporation confectionery processing Netherlands
1995 Procequipo S.A. powder and particle processing Mexico 0.1
de C.V. (distribution)
1996 Ter Braak B.V. confectionery processing Netherlands 8.5
1996 Kreuter GmbH confectionery processing Germany 8.8
(selected assets)
1997 L.E. Stott Ltd. powder and particle processing UK 3.7
--------
$ 197.7
========
</TABLE>
The Company's acquisition in 1996 of Ter Braak B.V. and certain assets of
Kreuter GmbH, for example, allowed the Company to combine the confectionery
equipment and systems of those two companies with the Company's existing Hutt
line of confectionery operations which gave the Company the ability to provide
totally integrated processing solutions for confectionery producers. This
capability has resulted in several orders that management believes might have
otherwise gone to competitors. The Company's acquisition in 1997 of L.E. Stott
Ltd. gave the Company sophisticated hygenic packaging technology which
complemented the Company's powder and particle processing product line with a
significant presence in the pharmaceutical industry.
Customers
Hosokawa's core customers include many industrial and consumer products
companies in the chemical, pharmaceutical, film extrusion and plastics,
minerals, metals and food industries, most of which have a global presence.
Management believes that, as developing countries in Asia, Africa, South
America and Eastern Europe evolve into manufacturing and consumption-oriented
societies and Hosokawa's customers expand into these regions, Hosokawa will
grow as its customers develop additional manufacturing facilities and thus have
increased need for the Company's equipment. The top twenty-five customers by
sales accounted for 17.0% of the Company's total net sales for the fiscal year
ended September 30, 1997. In fiscal 1997, no single customer accounted for more
than 2.0% of the Company's net sales. The table below sets forth a
representative list of Hosokawa's customers, grouped by industry:
39
<PAGE>
<TABLE>
<S> <C>
Chemicals: Industrial and Other:
Agfa Gaevert Cabot
BASF Exxon
Degussa Kerr-McGee
Dow Chemical Shell
DuPont Sonoco Products
PPG Xerox
W.R. Grace
Minerals and Metals:
Consumer Products: Alcoa (Aluminum Company of America)
Kingsford ECC (English China Clay)
Procter & Gamble Hoogovens
Huber
Food: Mannesmann Demag
Hershey
Kellogg's Pharmaceuticals:
Nestle Bayer
G.D. Searle
Hoechst AG
Merck
Novartis
Zeneca
</TABLE>
Intellectual Property
Patents and other proprietary rights are important to the Company's
business. It is the Company's policy to seek patent protection for its
inventions, and also to rely upon trade secrets, know-how, continuing
technological innovations, and licensing opportunities to develop and maintain
its competitive position. For example, the Company has entered into an
exclusive licensing arrangement with the University of Karlsruhe for the
manufacture and sale of electrocyclones with spray electrodes for separating
fine particles from a stream of gas. Additionally, the Company has entered into
an exclusive licensing arrangement with the Technology Licensing Bureau (TLB)
of the Higher Education Institutions in Baden Wurttemberg and others for
bi-polar technology, specifically flame synthesis with electrical charging.
The Company owns over 50 United States and foreign patents and presently
has over 20 patent applications pending. These patents expire at various times
over the next 15-17 years. While these patents and patent applications are
important in the aggregate to the Company's competitive position, no single
patent or patent application is material to the Company. The Company has also
developed a number of proprietary components that form part of its delivered
equipment and systems. Hosokawa Micron and the Hosokawa Micron logo are
registered trademarks of HMC and are licensed to the Company for an annual fee
of $50,000. Alpine, Bepex, MikroPul, MikroPulverizer, Rotoplex, MikroCut, PEAC,
Rietz, MikroACM, Solidaire, Pharmapaktor, Schugi, Kreuter, Kompaktor, Stott,
Vrieco-Nauta, Mikro, MikroPulsaire, Mikrotex and Pop-Top, are among the over
150 trademarks or registered trademarks of the Company and affiliated
companies. "PolyQuest" is a registered service mark of Hosokawa Bepex
Corporation. "Process Technologies For Tomorrow" and "Hosokawa Pharma-Tech
Center" are service marks of the Company. See "Certain Transactions."
History of the Company
The Company is a 98.0%-owned subsidiary of HMC, a publicly-traded Japanese
corporation headquartered in Osaka, Japan and listed on the Osaka and Tokyo
stock exchanges. HMC was founded in Osaka, Japan in 1916 under the name
Hosokawa Iron Works. In 1960, Hosokawa Iron Works established its first
overseas sales office in the United Kingdom, began licensing arrangements with
Pulverizing Machinery Co. in the United States in 1962 and opened offices in
Cologne, Germany in 1970. In 1980, Hosokawa Iron Works changed its name to
Hosokawa Micron Corporation.
In 1982 to 1983, HMC acquired Nauta, Vrieco and Isem in Holland and in
1985 acquired US Filter Systems, Inc. and its worldwide subsidiaries, which
included Pulverizing Machinery Co. In 1986, the Company was incorporated in
Delaware and HMC reorganized all of its non-Japanese operations under the
umbrella of Hosokawa.
40
<PAGE>
Since fiscal year 1987, the Company has acquired seven companies and the
selected assets of another company. See "--Acquisitions."
HMC currently engages in generally the same businesses as the Company
except for the plastics and confectionery processing product lines. For the
fiscal year ended September 30, 1997, HMC had net sales of $484.5, of which
$357.1 were attributable to net sales of the Company (excluding intercompany
sales). For a description of certain transactions between the Company and HMC,
see "Certain Transactions."
HMC, after completion of the Offering, will own 70.4% of the outstanding
Common Stock (67.5%, if the Underwriters' over-allotment option is exercised in
full) and continue to exert substantial control over the affairs of the
Company. See "Risk Factors--Control of the Company." In addition, four members
of the board of directors of the Company are members of HMC's senior management
and one member of the Company's board of directors is on HMC's board of
directors. See "Management--Directors and Executive Officers."
Manufacturing and Other Facilities
The Company achieves high-quality manufacturing through increasing levels
of automation, continuous improvement in production processes and employee
training. The Company operates 17 manufacturing facilities and 17 Technical
Centers. Nine of the Company's major manufacturing and engineering units have
achieved the International Standards Organization's ISO 9001 or 9002
certification and others are in the process of securing such certification. The
ISO series is an internationally recognized quality system which addresses all
areas of quality assurance, including sales, technical support, operations and
management.
The following table indicates the location, activity and size, and whether
it is owned or leased, of each of the Company's principal facilities:
<TABLE>
<CAPTION>
Own or Lease
Location Activity(1) Lease Square Feet Expiration
- -------------------------------------------- ----------------- -------- ------------- -----------
<S> <C> <C> <C> <C>
Minneapolis, Minnesota, USA SM, TC, E, A Owned 48,600
New York, New York, USA A Leased 6,900 2001
Santa Rosa, California, USA M, E, A Owned 139,500
Trenton, South Carolina, USA M, SM, TC, E, A Leased 96,000 2008
Natick, Massachusetts, USA SM, TC, E, A Owned 27,000
Summit, New Jersey, USA SM, TC, E, A Owned 158,100
Brampton, Ontario, Canada M, SM, TC, E, A Leased 18,490 2001
Augsburg, Germany M, SM, TC, E, A Owned 285,000
Cologne, Germany M, SM, TC, E, A Owned 204,275
Leingarten-Heilbronn, Germany M, SM, TC, E, A Owned 72,350
Hamburg, Germany M, SM, E, A Leased 49,400 2004
Rotterdam, Netherlands M, SM, TC, E, A Owned 21,500
Doetinchem, Netherlands M, SM, TC, E, A Owned 339,800
Runcorn, England M, SM, TC, E, A Owned 20,800
Bacup, England M, SM, E, A Leased 10,600 2001
Pontcharra, France M, A Owned 24,100
Wetherill Park, New South Wales, Australia SM, E, TC, Owned 10,200
</TABLE>
- ----------------
(1) M is manufacturing and assembly; SM is sales and marketing; TC is Technical
Center; E is engineering; and A is administrative and corporate.
The Company's stand-alone equipment and components for its systems are
either wholly manufactured at one of the Company's manufacturing facilities or
supplied by third-party vendors and made to the Company's specifications. The
determination of whether components of the Company's systems are manufactured
by the
41
<PAGE>
Company or by subcontractors is determined on a case-by-case basis, based
largely on the size and complexity of the equipment or systems ordered by the
customer, and whether or not it contains proprietary technology of the Company.
With respect to product recovery systems only, such determination is based
largely on the region where the customer's order will be delivered and whether
or not the customer has specified sole source suppliers for components of the
Company's custom-designed systems. In addition, certain components which are
used in the Company's manufacture and assembly of product recovery equipment
and systems such as diagnostic equipment and valves are made to the Company's
specifications by unaffiliated vendors and suppliers.
The principal raw materials, components and subsystems used in the
manufacturing of the Company's equipment and systems include stainless and
carbon steel, electronic components, pumps, compressors, motors, fans,
programmable logic controls, hydraulic components, visual and mechanical
sensors, bearings, lasers, plastic film rolling equipment ("winders"),
conveyers and gearboxes. The Company is not dependent on any one supplier of
raw materials, components or subsystems, although it does obtain certain
components and subsystems from a limited number of sources. See "Risk
Factors--Dependence on Component Availability, Subcontractor Performance and
Key Suppliers." Although the Company does not, in most areas, maintain a
substantial inventory of raw materials, components or subsystems, it believes
that there are adequate alternative sources of supply of sufficient quality and
quantity. In addition, equipment manufactured at several of the Company's
facilities is often used by another operating subsidiary as a component in the
assembly of its systems such as the manufacture of classifiers and mills in the
Company's Doetinchem, Netherlands facility for sale by certain European
operations.
A number of processes are undertaken at the Company's manufacturing
facilities depending upon the equipment and systems being produced such as:
forming of sheet metal, computer numeric control ("CNC") machining, turning and
milling and the plasma arc cutting of steel used in the construction of
vessels, augers and metal housings. The Company also engages in the heat
treating of certain materials to increase their durability. The interface
between the Company's computer aided design and CNC operations assure accuracy,
precision manufacturing and increased production. Additionally, the Company
employs advanced techniques such as robotic welding technology for increased
fabrication efficiency.
Sales and Marketing
General
The Company markets and sells its equipment and systems directly to
customers in the industries it serves and to engineering firms which provide
entire systems to end-users. The Company's powder and particle processing,
plastics processing and product recovery equipment and systems are sold through
the Company's direct sales force and sales representatives. The Company's
confectionery equipment is sold primarily through sales representatives. In
addition, the Company has assigned in-house technical sales engineers to the
confectionery product line who have responsibility for support of confectionery
sales in each territory.
Contracting
The Company does business with its customers through a number of
contractual arrangements, although most of the Company's sales are governed by
individual purchase orders. The Company generally requires an advance payment
of approximately 20.0% of the total order purchase price for all orders except
with regard to filter media and spare parts and thereafter receives periodic
progress payments from the customer during the completion phase of the product
or system. This generally results either in the Company receiving about 90.0%
of the order purchase price by the time of shipment or the Company having a
letter of credit to secure payment of the balance of the purchase price. For
all other orders, the Company bills the customer when the equipment is shipped.
The Company also sells its products under confirmed letters of credit on export
sales which secure up to 100% of the purchase price. The Company's contracts
generally contain performance guarantees for one year.
The Company promotes and sells its products and systems by emphasizing its
expertise, through advertising and promotion and through its Technical Centers,
including the Hosokawa Pharma Tech Center and the PolyQuest Polymer Development
Center, as follows:
Expertise
Sales of the Company's equipment and systems require the Company's sales
personnel to have a high degree of technical expertise and extensive knowledge
of the industries served. Almost all of the Company's sales personnel are
trained in engineering, including a large proportion with mechanical or
chemical engineering degrees.
42
<PAGE>
Furthermore, because the Company markets its products in large part through
direct contact with its customers, the Company's sales personnel have extensive
knowledge of their customer's needs and processing requirements.
Advertising and Promotion
The Company employs a number of strategies to maintain its strong brand
name recognition and to market its products. In addition to advertising in
industry trade journals and directories, the Company relies heavily on direct
contact with its customers in each market through face-to-face meetings with
customers, seminars, trade shows, industry conferences, and targeted direct
mail. For instance, the Company conducts in-house seminars for its customers
with invited industry speakers, members of academia and in-house product
specialists. In face-to-face meetings with its customers, the Company promotes
its products and systems generally by emphasizing product quality, potential
reduction of customers' costs, process know-how, ease of maintenance, and the
timely completion and installation of systems. In connection with the Company's
highly engineered systems, in particular, the Company's sales personnel are
often in direct contact with its customers' more senior production and
management personnel due to the sophisticated specifications required of such
systems and the relatively large costs involved.
The Company regularly participates in the largest trade shows around the
world including: National Plastics Exhibition (NPE), ACHEMA, Powder and Bulks
Solids Exhibition, AAPS, Interphex, International Baking Industry Exposition
(IBIE), Internationale Susswaren Messe (ISM), POWTECH, the K-Show, and the
Chemical Processing Industry Exposition where the Company updates its customers
about new product introductions, product innovations and new or improved
technologies. Additionally, the Company participates in smaller trade shows and
conferences structured for regionalized markets.
The Company also promotes its products and systems by emphasizing its
ability to manufacture, assemble, install and service them in various regions
around the world. In particular, the Company's global presence has provided a
competitive advantage with the ability to serve customers from regional
locations.
Additionally, the Company's personnel present technical papers regarding
the Company's products and technologies in recognized industry conferences such
as the Imaging Materials Seminar hosted by the Diamond Research Corporation.
The awareness of the Company's technical leadership is enhanced through the
publication of technical articles in trade journals. The Company partners with
leading universities such as Penn State and the University of Florida for the
purpose of co-sponsoring international symposiums on powder sciences and
technologies. See "-- Research and Development."
Technical Centers, Hosokawa Pharma Tech Center and PolyQuest Polymer
Development Center
The Company also promotes its products and systems through its Technical
Centers located in a number of countries including the United States, Germany,
and the Netherlands, and through the Hosokawa Pharma Tech Center in Summit, New
Jersey, United States and the PolyQuest Polymer Development Center in
Minneapolis, Minnesota, United States. See "-- Research and Development" and
"-- Manufacturing and Other Facilities." These Technical Centers and the Pharma
Tech Center are equipped and operated for the purpose of conducting original
research work, demonstrating various processing systems, on-site testing of
end-product and custom processing of customers' products. The Technical Centers
and Pharma Tech Center provide customers with a demonstration of the Company's
processing systems using the customer's raw materials followed by on-site
testing of the characteristics of the end-product deemed essential by the
customer, e.g., physical properties of powders such as particle size, density,
dryness and flowability. Successful testing also allows the Company to provide
certain guarantees for the end product. Finally, the Technical Centers provide
technical support for customers' development of new products and their
manufacture. In addition to providing a source of revenue to the Company, the
Technical Centers are an important component of the Company's marketing
efforts.
Backlog
The Company's backlog was as follows as of the dates indicated (dollars in
millions):
<TABLE>
<CAPTION>
March 31, 1997 March 31, 1998
---------------- ---------------
<S> <C>
$ 130.4 $ 129.0
</TABLE>
The Company expects that approximately 7.0% of the Company's backlog as of
March 31, 1998 will not be filled before the end of the Company's 1998 fiscal
year.
43
<PAGE>
Health, Safety and Environmental Requirements
The Company is subject to various federal, state, local and foreign laws
and regulations governing health, safety and the environment. These laws and
regulations, generally administered by the United States Environmental
Protection Agency, the Occupational Safety and Health Administration and
various other federal, foreign, state and local environmental and health and
safety agencies, impose requirements on the Company's manufacturing operations,
including standards governing worker health and safety, hazardous materials
storage and management, hazardous waste generation, handling and disposal, and
air and water emissions. Based on the Company's periodic review of its
environmental management policies and practices, the Company believes that it
is currently in material compliance with the applicable health, safety and
environmental laws and regulations. Notwithstanding such compliance, if damage
to persons or contamination of the environment has been or is caused in the
conduct of the Company's business or by hazardous substances or wastes used in,
generated or disposed of by the Company, the Company may be held liable for
such damages and be required to pay the cost of investigation and remediation
of such contamination. Moreover, changes in federal, foreign or state laws or
regulations or the discovery of unknown environmental conditions could require
additional expenditures by the Company. There can be no assurances that any
such contamination or evolving environmental requirements will not require the
Company to make material expenditures in the future.
Product Liability; Insurance
The manufacturing and sale of the Company's products involve a risk of
product liability claims. The Company is currently subject to five product
liability claims, all but two of which relate to a discontinued product line of
the Company. Pursuant to the Company's various insurance policies, the Company
is self-insured up to the first $0.2 million of claims for each policy year and
$1.0 million in the aggregate. For the discontinued product line, the Company
is self-insured up to the first $1.0 million of claims for each policy year and
$1.0 million in the aggregate. Although no assurance can be given, the Company
believes that its product liability insurance is adequate. Product liability
insurance, however, could cease to be available or could cease to be available
on acceptable terms, either as a function of the market for product liability
insurance for companies like the Company or the Company's own claims
experience. See "Risk Factors--Risk of Product Liability Claims; No Assurance
of Adequate Insurance."
Employees
At March 31, 1998, the Company had approximately 2,000 employees, of which
900 were engaged in manufacturing, 300 were engaged in engineering, 200 were
engaged in administration, finance and human resources, 100 were engaged in
research and product development, and 500 were engaged in sales and marketing
(including 240 of which are engineers). The employees of the facility in Santa
Rosa, California are represented by a union. Employees in each of the European
facilities are represented by a worker's counsel and are members of a national
union which negotiates not with the Company directly, but with the appropriate
national industry association, for resolution of issues that affect the
employees. The Company as a member of the national industry association is
bound by the results of the negotiations between the national industry
association and the national union. The Company has not experienced a work
stoppage in the last five years. Management believes its relationship with its
employees is good.
Legal Proceedings
The Company is a defendant in several product liability cases typical for
a company in the powder and particle, confectionery and plastics processing
equipment and product recovery equipment industries. The Company also is
involved in other proceedings and claims of various types, including Equal
Employment Opportunity Commission investigations relating to claims of alleged
discrimination and reverse discrimination and claims asserting trademark
infringement. The Company also is plaintiff in a copyright infringement
proceeding in the United Kingdom. Management believes the disposition of these
matters will not have a material adverse effect on the Company's financial
position. See "Certain Risks--Risks Related to Intellectual Property
Protection."
44
<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table sets forth information regarding the executive
officers, directors and other key employees of the Company.
<TABLE>
<CAPTION>
Name Age Positions
- ------------------------------------ ----- ---------------------------------------------------
<S> <C> <C>
Masuo Hosokawa ..................... 73 Chairman of the Board of Directors and Director
Yoshio Hosokawa .................... 46 Vice Chairman of the Board of Directors
and Director
Isao Sato(3) ....................... 55 President and Chief Executive Officer and Director
William J. Brennan(3)(4) ........... 57 Executive Vice President, Chief Financial Officer
and Director
Dietmar Mayerhauser(3) ............. 58 Vice President and President--
Powder and Particle Processing
Gordon E. Ettie(3) ................. 59 Vice President and President--Product Recovery
Dieter Hummel ...................... 58 Vice President and President--Confectionery
Achim Vogel ........................ 57 Vice President and President--Plastics Processing
Gerhard Kappeler(3) ................ 65 Vice President--Technology
Simon H. Baker(3)(4) ............... 54 Vice President--Taxes, General Counsel and
Secretary
Yoshizo Yamanokuchi ................ 59 Director
Fumio Sawamura ..................... 50 Director
Yoshiyuki Kawashima(1)(2) .......... 62 Director
David J.W. Grant(2) ................ 61 Director
Paul J. Powers(1)(2) ............... 63 Director
</TABLE>
- ----------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Executive Committee.
(4) Member of the Retirement Plans Committee.
Masuo Hosokawa is Chairman of the Board of Directors and a Director of the
Company. He has held such position since the Company was founded in 1986. He
was also President of the Company from 1986 to 1990. Mr. Hosokawa is Chairman
of the Board of Directors of HMC. Mr. Masuo Hosokawa is the father of Yoshio
Hosokawa and the father-in-law of Fumio Sawamura.
Yoshio Hosokawa is Vice Chairman of the Board of Directors and a Director
of the Company. He has been a Director since 1986. Mr. Hosokawa has held the
positions of Representative Director and President of HMC since December, 1995.
Mr. Hosokawa was Executive Vice President of the Company from 1992 to 1996. Mr.
Yoshio Hosokawa is the son of Mr. Masuo Hosokawa and the brother-in-law of Mr.
Fumio Sawamura.
Isao Sato is President and Chief Executive Officer of the Company. He
became President in 1990 and was elected CEO of the Company in 1996. Mr. Sato
was President of the European Block of the Company from the establishment of
the Company's European operations to 1995. He has been a Director of the
Company since 1986 and is a Director of HMC. Mr. Sato graduated from the Osaka
Institute of Technology with a B.A. in Mechanical Engineering.
William J. Brennan is Executive Vice President and Chief Financial Officer
of the Company. Mr. Brennan previously served in several executive positions
and was promoted to his current position in 1997. He has served as a Director
of the Company since 1990. Mr. Brennan graduated from Bryant College with a
BSBA.
Dietmar Mayerhauser is a Vice-President of the Company and was elected
President of Powder and Particle Processing on January 1, 1998. Mr. Mayerhauser
joined the Company in 1964 and held various management positions at the
Company's Hosokawa Alpine AG subsidiary, becoming President in 1992. He served
as President
45
<PAGE>
of the Company's European operations from 1995 to 1997. Mr. Mayerhauser
graduated from the Technical University of Munich in 1964 with an Engineering
Degree.
Gordon E. Ettie is a Vice-President of the Company and was elected
President of Product Recovery January 1, 1998. Mr. Ettie joined the Company in
1994, and was elected a President of the Company's Hosokawa Bepex Corporation
subsidiary. In 1996, he was appointed President of the Americas Powder and
Particle Processing operations. Mr. Ettie is a graduate of the University of
Florida with a Bachelor's Degree in Chemical Engineering. He has also
participated in the Tuck Executive Program at Dartmouth College and is a member
of the Process Equipment Manufacturers Association.
Yoshiyuki Kawashima was elected a Director of the Company in 1997. Mr.
Kawashima retired from Mitsui in 1997, after 37 years. He served on the Board
of Bioproducts Inc., United Grain Corporation and Intermodal Terminal, Inc.,
subsidiaries of Mitsui and currently is an advisor to Mitsui & Co. (USA) Inc.,
Chemical Division. Mr. Kawashima is also a member of the Board of Directors of
various civic organizations including the Mitsui USA Foundation, the Keimei
Fund, Walter Hoving Home, the External Board of Texas A&M University and the
International Advisory Board of the University of Houston. A graduate of Tokyo
University, Mr. Kawashima holds a B.A. in Law. He also attended Columbia
University in New York and participated in the Advanced Management Program at
Harvard School of Business in Boston.
David J.W. Grant was elected a Director of the Company on April 15, 1998.
Dr. Grant is a Professor of Pharmaceutics, College of Pharmacy, University of
Minnesota, Minneapolis. He graduated Oxford University in the UK with a B.A. in
Chemistry in 1960 and a D. Phil. in Physical Chemistry in 1963. He received an
M.A. from Keble College in 1963, and D.Sc. for recognized published research on
the physical chemistry of pharmaceutical systems in 1990. Dr. Grant was
appointed to the Endowed Chair in Pharmaceutics, University of Minnesota in
1988. In January 1994, he became an Associate Editor of the Journal of
Pharmaceutical Sciences and is author or coauthor of over 120 scientific
articles and reviews. Dr. Grant is a Fellow of AAPS and the Royal Society of
Chemistry, and a member of AACP, ACA, ACS AIChE and APhA.
Paul J. Powers was elected a Director of the Company on April 15, 1998.
Mr. Powers is the Chairman of the Board and Chief Executive Officer of
Commercial Intertech. He joined Commercial Intertech in 1984 as President,
Chief Operating Officer and Director. Mr. Powers serves on the Board of
Directors of First Energy Corporation, Twin Disc Incorporated, Global Marine
Inc. and serves as the Chairman of CUNO Inc. Mr. Powers holds a B.A. in
Economics from Merrimack College in North Andover, Massachusetts and an M.A. in
Business Administration from George Washington University in Washington, D.C.
Dieter Hummel was elected a Vice-President and President of Confectionary
Processing on January 1, 1998. Mr. Hummel joined the Company in 1964 and has
held a number of management positions in both American and European operations.
Mr Hummel graduated from the State Engineering School of Machine Design with a
Degree in Mechanical Engineering. He is a member of VDMA and VMI.
Achim Vogel was elected a Vice-President and President of Plastics
Processing on January 1, 1998. Mr. Vogel joined the Company in 1968 and he held
various management positions within Hosokawa Alpine AG including the position
of General Manager of the Technical Division from 1985 to 1992. He was
Executive Vice President and a Member of the Management Board from 1992 to 1995
before becoming President in 1995. Mr. Vogel graduated from the University of
Karlsruhe with an Engineering Degree in Mechanical and Chemical Processing
Technology.
Gerhard Kappeler was appointed Vice President of Technology of the Company
in 1994. He previously held the position of Managing Director of Hosokawa
MikroPul GmbH. Mr. Kappeler joined the Company in 1961. A member of the German
Engineering Association, he graduated in 1956 from the University of Stuttgart
with a Degree in Mechanical Engineering.
Simon H. Baker was appointed Vice-President Taxes and General Counsel of
the Company in 1997. He previously held the position of Vice President Tax and
Legal Affairs. Mr. Baker joined the Company in 1989. He is a graduate of
Brooklyn College where he received a B.A. in Economics, Syracuse University
College of Law where he attained a JD degree and of New York University School
of Law where he received a Masters of Law in Taxation (LLM). Mr. Baker is also
Secretary of the Company.
Yoshizo Yamanokuchi has served as a Director of the Company since 1994.
Mr. Yamanokuchi held the position of President of the Asian Block from 1994 to
1996. He is a Managing Director of HMC, which he joined in 1990,
46
<PAGE>
after over 25 years of service with The Sanwa Bank Ltd., where from 1987 to
1990, he held the position of President of The Canada Sanwa Bank Ltd.
Fumio Sawamura served as Vice Chairman of the Company from 1992 to 1996.
He held various executive positions with the Company since its founding in
1986. Mr. Sawamura is a Senior Managing Director of HMC and has served as a
Director of the Company since 1986. Mr. Fumio Sawamura is the son-in-law of Mr.
Masuo Hosokawa and the brother-in-law of Mr. Yoshio Hosokawa.
Board of Directors
The Company's certificate of incorporation divides the board of directors
into three classes, with each class holding office for staggered three-year
terms. The terms of Masuo Hosokawa, Yoshiyuki Kawashima and Paul J. Powers are
scheduled to expire at the annual meeting of stockholders in 1998; the terms of
Isao Sato, Fumio Sawamura and William J. Brennan are scheduled to expire at the
annual meeting of stockholders in 1999; and the terms of Yoshio Hosokawa,
Yoshizo Yamanokuchi and David J.W. Grant are scheduled to expire at the annual
meeting of stockholders in 2000. At each annual election, the successors to the
class of directors whose term expires at that time will be elected to hold
office for a term of three years to succeed those directors whose term expires,
so that the term of one class of directors will expire each year. The
classification of directors has the effect of making it more difficult to
change the composition of the Board of Directors in a relatively short period.
In addition, the classified board provision could discourage a third party from
attempting to obtain control of the Company, even though such an attempt might
be beneficial to the Company and its stockholders or could delay, defer or
prevent a change in control of the Company.
The Company's officers are elected by the Board of Directors for one-year
terms and serve at the discretion of the Board of Directors. The Company's
independent directors are compensated at the rate of $15,000 per year plus
$1,000 per meeting of the Board of Directors or any committee thereof plus
reimbursement of reasonable expenses incurred in attending such meetings. See
"Principal Stockholders and Selling Stockholder," "Risk Factors--Control of the
Company," "--Anti-Takeover Provisions" and "Description of Capital Stock."
Committees of the Board of Directors
The Board of Directors of the Company has an Audit Committee, an Executive
Committee, a Retirement Plans Committee and a Compensation Committee.
The Company's Board of Directors has appointed at least two directors who
are "non-employee" directors to the Audit Committee. The functions of the Audit
Committee are to meet with the independent public accountants of the Company,
to review the audit plan for the Company, to review the annual audit of the
Company with the accountants, together with any other reports or
recommendations made by the accountants, to recommend whether the auditors
should be continued as auditors for the Company and if other auditors are to be
selected, to recommend the auditors to be selected, to meet with the internal
auditors for the Company and to review with them and the auditors for the
Company the adequacy of the Company's internal controls, and to perform such
other duties as shall be delegated to the Audit Committee by the Board of
Directors.
The functions of the Executive Committee are to exercise all the authority
of the Board of Directors whenever the Board of Directors shall not be meeting
except for those functions assigned to other committees of the Board, provided,
however, that the Executive Committee does not have the power to amend or
repeal any resolution of the Board of Directors that by its terms is not
subject to amendment or repeal by the Executive Committee, and the Executive
Committee does not have the authority of the Board of Directors in reference to
any action which, by the statutes governing corporations of the Company's state
of incorporation, may be taken only by the Board of Directors or the
shareholders.
The functions of the Retirement Plans Committee are to administer all
pension, profit-sharing and other tax-qualified retirement plans for the
Company and its U.S. subsidiaries, including establishment of investment
policies, the review of investment managers, the recommendation on the
appointment of investment managers and trustees to the Board of Directors, the
appointment of plan administrators and other service providers to the plans and
the overall review and administration of plan benefits. The Retirement Plans
Committee is to be the named fiduciary for all of the Company's and its U.S.
subsidiaries' tax-qualified retirement plans and programs.
The Company's Board of Directors has appointed a Compensation Committee
which is required to be comprised of two or more directors all of whom are
intended to qualify as "outside directors" under Section 162(m) of the Internal
47
<PAGE>
Revenue Code of 1986, as amended (the "Code"), and "non-employee" directors
under Rule 16b-3 of the Exchange Act. The functions of the Compensation
Committee are to recommend to the Board of Directors policies and plans
concerning salaries, bonuses and other compensation arrangements for the
Company; recommend bonuses and other forms of additional compensation;
establish and review policies regarding management prerequisites; award and
administer salaries, bonuses and other forms of additional compensation for the
Company, including senior executives; to administer any supplemental executive
retirement programs; to carry out all acts permitted or required to be
performed under terms of any and all stock incentive and stock option plans
including the granting of options to eligible persons
Limitations on Liability
The Company's Restated Certificate of Incorporation contains a provision
that, subject to certain exceptions, limits the personal liability of the
Company's directors for monetary damages to the Company and its stockholders
for breaches of fiduciary duty owed to the Company or its stockholders.
In addition, the Company expects to enter into agreements with its
directors and officers providing for indemnification of those individuals under
certain circumstances.
The Company has obtained director and officer liability insurance that
insures the Company's directors and officers against certain liabilities.
Executive Compensation
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company to or on behalf of the Company's
Chief Executive Officer and each of the Company's remaining executive officers
(the "Named Executive Officers") for the fiscal year ended September 30, 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
-------------
Annual Compensation(1) Awards
------------------------------------------- -------------
Other Annual Securities
Compensation Underlying All Other
Name and Principal Position Salary ($) Bonus ($) ($) Options Compensation ($)
- ----------------------------------------- ------------ ----------- -------------- ------------- --------------------
<S> <C> <C> <C> <C> <C>
Isao Sato, President &
Chief Executive Officer ................ 270,000 120,000 23,974 8,990 8,242(2)(3)
William J. Brennan,
Executive Vice President &
Chief Financial Officer ................ 248,004 100,000 6,433 6,743 10,500(2)(4)
Dietmar Mayerhauser,
Vice President & President--
Powder & Particle Processing ........... 233,533 84,130 19,107 6,743 62,129(5)
Dieter Hummel, Vice President &
President--Confectionery ............... 248,498 50,458 4,456 0 54,607(5)
Gordon E. Ettie, Vice President &
President--Product Recovery ............ 190,046 90,000 1,561 6,743 10,650(2)(4)
Achim Vogel, Vice President &
President--Plastics Processing ......... 232,326 79,526 8,252 1,798 63,490(5)
</TABLE>
- ----------------
(1) The compensation described in this table does not include medical, group
life insurance or other benefits available generally to all salaried
employees of the Company, as well as certain perquisites and other
personal benefits, the value of which does not exceed the lesser of
$50,000 or 10.0% of the named executive officer's total salary and bonus
reported in this table.
(2) Includes premiums on $300,000 of life insurance provided to each executive
under the Company's Executive Group Term Life Insurance Plan. The Company
provides Messrs. Sato, Brennan and Ettie with executive life
48
<PAGE>
insurance which is paid by the Company. This coverage equals
two-and-one-half times annual base salary to a maximum of $300,000 for
corporate officers and unit managers.
(3) Represents the amount of contributions by HMC to the governmental Social
Welfare Pension on behalf of the executive.
(4) Company contributions to the Company's Section 401(k) Savings and
Retirement Plan.
(5) Company contributions to the retirement plans maintained by the Company's
European subsidiaries which are generally available to the employees of
such subsidiaries and to retirement programs maintained by these
subsidiaries for the benefit of the Named Executive Officer.
49
<PAGE>
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at
Assumed Annual Rates
of Stock
Price Appreciation
Individual Grants for Option Term
-------------------------------------------------------------------- -------------------
Number of % of Total
Securities Options Granted Exercise
Underlying Options to Employees in price per
Name Granted (#) 1997 (%) share ($) Expiration Date 5% ($) 10% ($)
- ----------------------------- -------------------- ----------------- ----------- ----------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Isao Sato ................... 8,990 10.3 9.89 2007 55,918 141,682
William Brennan ............. 6,743 7.7 9.89 2007 41,941 106,270
Dieter Hummel ............... 0 0 -- -- 0 0
Dietmar Mayerhauser ......... 6,743 7.7 9.89 2007 41,941 106,270
Achim Vogel ................. 1,798 2.1 9.89 2007 11,184 28,336
Gordon Ettie ................ 6,743 7.7 9.89 2007 41,941 106,270
</TABLE>
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying
Unexercised at Fiscal Value of Unexercised In-the-Money
Year-End Options at Fiscal Year-End
----------------------------- --------------------------------
Shares Acquired Value Realized Exercisable Unexercisable Unexercisable
Name on Exercise (#) ($) (#) (#) Exercisable ($) ($)
- ----------------------------- ----------------- ---------------- ------------- --------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Iaso Sato ................... 0 0 0 8,990 0 0
William Brennan ............. 0 0 0 6,743 0 0
Dieter Hummel ............... 0 0 0 0 0 0
Dietmar Mayerhauser ......... 0 0 0 6,743 0 0
Achim Vogel ................. 0 0 0 1,798 0 0
Gordon Ettie ................ 0 0 0 6,743 0 0
</TABLE>
Employment Agreements
The Company has entered into several senior executive employment
agreements dated April 15, 1998 pursuant to which Isao Sato serves as President
and Chief Executive Officer; William J. Brennan serves as Executive Vice
President and Chief Financial Officer; Gordon E. Ettie serves as Vice President
and President--Product Recovery; and Simon H. Baker serves as Vice
President--Taxes, General Counsel and Secretary. Under the agreements, Mr. Sato
receives $290,000, Mr. Brennan receives $265,000, Mr. Ettie receives $215,000
and Mr. Baker receives $205,000 as base annual salary that may be increased
annually, commencing on October 1, 1998, by an amount to be determined by the
Company, in its sole discretion. Those executives are entitled to incentive
compensation pursuant to the terms of the Company's Management Incentive Plan.
The executives are also entitled to participate in all benefit, pension,
retirement, savings, welfare and other employee benefit plans and policies in
which members of the Company's senior management are entitled to participate.
In addition, the Company provides these executives with the use of an
automobile and payments of related expenses, life insurance, long term
disability coverage, medical and dental insurance and other benefits. In the
event of the death of the executive, the Company will have no obligations
except to pay to the estate of the executive any unpaid base salary for the
period prior the executive's death, any awarded but unpaid incentive
compensation, and any other employee benefits under other employee benefit
fringe benefit or incentive plans in accordance with their respective terms.
Each agreement has an initial term of four years commencing on April 15,
1998 and terminating on April 14, 2002. The employment term is automatically
renewed for successive two-year terms unless notice of non-renewal is given by
the Company at least six months prior to the end of the then current term or by
the executive 120 days prior to the effective date of such termination. The
agreements provide for payment in the event of termination by the executive for
good reason or by the Company without cause or non-renewal of the agreement by
the Company. Good reason for termination by the executive includes a Change in
Control of the Company as defined in Section 9.2 of the Company's 1997 Stock
Option Plan, a material demotion, a requirement to perform services outside the
employment site or a breach of the agreement by the Company not cured after 30
days written notice. The severance payments made are equal to the greater of
two times salary plus bonus or the executive's ending compensation for the
remainder of the employment term. No severance payments are made in the event
of termination (i) for cause, (ii) by the executive without good reason or
(iii) after notice, if the executive becomes incapable of performing his
material duties for a period of not less than 180 days.
50
<PAGE>
The agreements also require that no later than five years after the date
the Company's common stock is listed on a United States stock exchange, at all
times during the executive's employment by the Company, the executive must own,
directly or beneficially, the common stock of the Company with an aggregate
fair market value equal (i) one times his base salary; or (ii) such greater
amount as is required under the current ownership guidelines, if any, as
established by the Board of Directors, but in either case no more than three
times the executive's base salary. The Company may assist the executive in
obtaining financing to effectuate the purchases of common stock.
Hosokawa Alpine Aktiengesellschaft ("Alpine"), a wholly owned subsidiary
of the Company, entered into employment agreements with Achim Vogel dated June
19, 1995 and Dietmar Mayerhauser dated July 1, 1995, pursuant to which they
both serve as Co-Chairman of the Management Board of Alpine. Under these
agreements, the term of Mr. Vogel's appointment commenced on June 19, 1995 and
terminates on November 7, 2000 and Mr. Mayerhauser's appointment was renewed on
March 30, 1995 and terminates on June 30, 2000, unless with three months
notice, such employee's appointment as a member of the Management Board is
rescinded by the Supervisory Board of Alpine for any valid reason. If the
agreement is canceled, a severance equal to twice his annual salary (including
Christmas pay, vacation pay and bonus payments), based on the preceding
calendar year, will be paid. Severance will not be paid if (i) cancellation is
the result of actions of a criminal nature, (ii) cancellation is after such
employee has reached 65, or (iii) if he takes early retirement, resigns or does
not renew the agreement. The severance will be paid at the termination of the
agreement if it is not renewed by Alpine. In the event that such employee
should become permanently unable to perform his duties during the period of the
agreement, the agreement will end on the calendar quarter during which the
permanent disability was determined and he will be entitled to his salary for
12 months thereafter, and in the event such employee becomes temporarily unable
to perform his duties, he will be entitled to his salary for the lesser of 12
months or the remaining term of the agreement. In the event of the death of
such employee, his widow and/or minor children will receive his salary for the
month in which the death occurs and for the lesser of 3 months thereafter and
the remaining term of the agreement. Extension of the agreement must occur no
later than three months prior to its expiration by written agreement between
such employee and Alpine. Under the agreements, Mr. Vogel receives a fixed
salary of 23,000 German marks ($12,443) per month and Mr. Mayerhauser receives
a fixed salary of 24,310 German marks ($13,152) per month, in each case subject
to an annual review and appraisal by the Supervisory Board. A bonus may be paid
at the discretion of the presidential committee of the Supervisory Board,
taking into account the financial results of Alpine and the contribution of
such employee. Such employee is also covered by Alpine's pension plan for
members of the Management Board. Alpine also pays the premium on Alpine's
portion of a government pension plan. Alpine also provides certain insurance
and automobile benefits to each such employee.
Mr. Mayerhauser also entered into an employment agreement with Hosokawa
Micron International B.V., a wholly owned subsidiary of the Company in the
Netherlands ("HMI BV"), dated July 1, 1996, to serve as the Managing
Director--European Block. Under the agreement, the term of Mr. Mayerhauser
commenced June 1, 1996 and continues indefinitely except that both HMI BV and
Mr. Mayerhauser have the right to terminate the agreement in accordance with
Dutch law on 2 months' prior notice. Mr. Mayerhauser's salary, bonus, benefits
and other employment arrangements are governed by his employment agreement with
Alpine as described above, and any salary paid, benefits provided and other
arrangements provided by HMI BV under its agreement reduce such amounts to be
paid to Mr. Mayerhauser under the agreement with Alpine, except that all
pension obligations to Mr. Mayerhauser are paid by Alpine and reimbursed to
Alpine by HMI BV based on the portion of Mr. Mayerhauser's salary paid by HMI
BV.
Stock Option Plan
Background; Purpose; Eligibility. On July 11, 1997, the Board of Directors
of the Company approved the establishment of the Company's 1997 Stock Option
Plan (the "Stock Option Plan"), which was approved by the stockholders of the
Company on July 29, 1997. The following description of the Stock Option Plan is
intended only as a summary and is qualified in its entirety by reference to the
Stock Option Plan. The purpose of the Stock Option Plan is to enhance the
profitability and value of the Company and its affiliates for the benefit of
their stockholders by enabling the Company to grant stock options to purchase
shares of Common Stock to employees of the Company and its affiliates and to
non-employee directors thereby attracting, retaining and rewarding such
individuals and strengthening the mutuality of interests between such
individuals and the Company's stockholders.
Administration. The Stock Option Plan is administered by the Compensation
Committee, except that with respect to awards to non-employee directors and
except if there is no Compensation Committee, the Stock Option
51
<PAGE>
Plan is administered by the Board of Directors. If for any reason the appointed
Compensation Committee does not meet the requirements of Rule 16b-3 of the
Exchange Act and if such rule is applicable, the validity of the awards,
grants, interpretation or other actions of the Compensation Committee will not
be affected. The Compensation Committee will have full authority to select
those individuals eligible to receive stock options. Terms and conditions of
each stock option will be set forth in written grant agreements, the terms of
which will be consistent with the terms of the Stock Option Plan. Awards under
the Stock Option Plan may not be made on or after the tenth anniversary of the
date of its adoption, but awards granted prior to such date may extend beyond
that date.
Types of Awards under the Plan. Options granted under the Stock Option
Plan are not intended to be incentive stock options. The Compensation Committee
(or the Board of Directors in the case of stock options granted to non-employee
directors) will, with regard to each stock option, determine the number of
shares subject to the option, the term of the option (which shall not exceed
ten years), the exercise price per share of stock subject to the option, the
vesting schedule, and the other material terms of the option. Each stock option
will initially become exercisable six months from the date of grant (but only
in the absence of any provision by the Compensation Committee with respect to
stock options other than stock options granted to non-employee directors). No
stock option may have an exercise price less than the fair market value (as
defined in the Stock Option Plan) of the Common Stock at the time of grant.
The exercise price upon exercise may be paid such form, or such other
arrangement for the satisfaction of the purchase price, as determined by the
Compensation Committee (or the Board of Directors in the case of stock options
granted to non-employee directors) at or after the time of grant (including,
without limitation, cash or shares of Common Stock owned by the participant for
at least six months and for which the participant has good title free and clear
of any liens or encumbrances). The Compensation Committee (or the Board of
Directors in the case of stock options granted to non-employee directors) may
modify, extend or renew outstanding stock options granted under the Stock
Option Plan without changing the original exercise price of the stock options.
Amendment and Termination. The Stock Option Plan provides that it may be
amended, in whole or in part, suspended or terminated by the Board of
Directors, except that no such amendment, suspension or termination, without
stockholder approval to the extent such approval is required by applicable
state law and the provisions of Rule 16b-3 of the Exchange Act, may increase
the aggregate number of shares of Common Stock reserved for awards, change the
classification of employees and non-employee directors eligible to receive
awards, decrease the minimum exercise price of any stock option, extend the
maximum option period under the Stock Option Plan, change any rights under the
Stock Option Plan with regard to non-employee directors, or to make any other
amendment that would require stockholder approval under Rule 16b-3 of the
Exchange Act or the rules of any exchange or system on which the Company's
securities are listed or traded.
Share Limitations. A maximum of 89,905 shares of Common Stock may be
issued pursuant to the Stock Option Plan, subject to adjustment upon the
occurrence of certain corporate events. In general, upon the termination,
cancellation or expiration of an award, the unissued shares of Common Stock
subject to such awards will again be available for awards under the Stock
Option Plan.
On August 12, 1997, the Compensation Committee granted options to purchase
87,657 shares under the Stock Option Plan at an exercise price of $9.89 per
share. These options become vested on the earlier of (i) August 12, 1998 and
(ii) the effective date of an initial public offering of the Common Stock of
the Company.
Change in Control. Unless determined otherwise by the Compensation
Committee at the time of grant, upon a Change in Control (as defined in the
Stock Option Plan), any unvested awards will automatically become 100% vested.
However, unless otherwise determined by the Compensation Committee at the time
of grant or thereafter, no acceleration of exercisability shall occur with
regard to certain stock options that the Compensation Committee reasonably
determines in good faith prior to a Change in Control will be honored or
assumed or new rights substituted therefor by a participant's employer
immediately following the Change in Control. The Compensation Committee may
also, in its sole discretion, provide for accelerated vesting of an award at
any time.
Stock Incentive Plan
Background; Purpose; Eligibility. On March 19, 1998, the Board of
Directors of the Company approved the establishment of the Company's Stock
Incentive Plan (the "Stock Incentive Plan"), which was approved by the
stockholders of the Company on the same date. The Board of Directors approved
an amendment to the Stock
52
<PAGE>
Incentive Plan at a meeting of the Board of Directors on , 1998, which was
approved by the stockholders of the Company on , 1998. The following
description of the Stock Incentive Plan, as amended, is intended only as a
summary and is qualified in its entirety by reference to the Stock Incentive
Plan. The purpose of the Stock Incentive Plan is to enhance the profitability
and value of the Company and its affiliates for the benefit of their
stockholders by enabling the Company to offer employees of the Company and its
affiliates, stock based incentives and other equity interests in the Company
and to make equity based awards to non-employee directors of the Company in
order to attract, retain and reward such individuals and strengthen the
mutuality of interests between such individuals and the Company's stockholders.
Administration. The Stock Incentive Plan is administered by the
Compensation Committee (or the Board of Directors in the case of stock options
granted to non-employee directors). If for any reason the appointed
Compensation Committee does not meet the requirements of Rule 16b-3 of the
Exchange Act or Section 162(m) of the Code, the validity of the awards, grants,
interpretation or other actions of the Compensation Committee will not be
affected. Except with regard to non-employee directors, the Compensation
Committee will have full authority to select those individuals eligible to
receive awards and the amount and type of awards. With regard to grants to
non-employee directors, the Board of Directors will administer and interpret the
Stock Incentive Plan. Terms and conditions of awards will be set forth in
written grant agreements, the terms of which will be consistent with the terms
of the Stock Incentive Plan. Awards under the Stock Incentive Plan may not be
made on or after the tenth anniversary of the date of its adoption, but awards
granted prior to such date may extend beyond that date.
Stock Options. Except with regard to non-employee directors, options may
be in the form of incentive stock options or non-qualified stock options.
Options granted to non-employee directors of the Company may only be
non-qualified stock options and are automatic as described below. The
Compensation Committee will, with regard to each stock option, determine the
number of shares subject to the option, the term of the option (which shall not
exceed ten years, provided, however, that the term of an incentive stock option
granted to a 10% stockholder of the Company shall not exceed five years), the
exercise price per share of stock subject to the option, the vesting schedule,
and the other material terms of the option. In the absence of any provision by
the Compensation Committee, each stock option will initially become exercisable
six months from the date of grant. No stock option may have an exercise price
less than the fair market value (as defined in the Stock Incentive Plan) of the
Common Stock at the time of grant (or, in the case of an incentive stock option
granted to a 10% stockholder of the Company, 110% of the fair market value of
the Common Stock).
The exercise price upon exercise may be paid in such form, or such other
arrangement for the satisfaction of the purchase price, as determined by the
Compensation Committee (or the Board of Directors in the case of stock options
granted to non-employee directors of the Company) at or after the time of grant
(including, without limitation, cash, shares of Common Stock owned by the
participant for at least six months and for which the participant has good
title free and clear of any liens or encumbrances or, if the Common Stock is
traded on a national securities exchange, through the delivery of irrevocable
instructions to a broker to deliver to the Company an amount equal to the
exercise price). Except with regard to stock options granted to non-employee
directors of the Company, the Compensation Committee may modify, extend or
renew outstanding stock options granted under the Stock Incentive Plan without
changing the original exercise price of the stock option. Except with regard to
stock options granted to non-employee directors of the Company, the
Compensation Committee may also provide, at the time of grant, that the shares
to be issued upon the exercise of a stock option be in the form of restricted
stock or may, in the stock option agreement, reserve a right to do so after the
time of grant.
Non-Employee Director Stock Options. Each non-employee director
automatically granted stock options to purchase 5,000 shares of Common Stock as
of the date the non-employee director begins service as a non-employee director
of the Company and to purchase 2,000 shares of Common Stock at each annual
anniversary of his or her becoming a non-employee director of the Company,
provided he or she has not, as of such annual anniversary ceased to be a
director of the Company. Non-employee directors are not eligible to receive any
other awards under the Stock Incentive Plan other than the automatic grants of
stock options.
Stock Appreciation Rights ("SARs"). The Stock Incentive Plan authorizes
the Compensation Committee to grant to eligible employees SARs with a stock
option. A SAR is a right to receive a payment either in cash or Common Stock as
the Compensation Committee may determine, equal in value to the excess of the
fair market value of a share of Common Stock on the date of exercise over the
reference price per share of Common Stock established in connection with the
grant of the SAR. The reference price per share covered by a SAR will be the
per share exercise price of the related option.
53
<PAGE>
A SAR may be granted at the time of the grant of the related stock option
or, if the related stock option is a non-qualified stock option, at any time
thereafter during the term of the stock option. A SAR may be exercised only
upon a Change in Control (as defined in the Stock Incentive Plan). A SAR is
exercised by surrendering the same portion of the related stock option. A SAR
expires upon the termination or exercise of the related stock option.
Restricted Stock. Except with regard to stock options granted to
non-employee directors of the Company, the Stock Incentive Plan authorizes the
Compensation Committee to award shares of restricted stock to eligible
employees. A recipient of restricted stock may be required to pay the par value
of such shares to receive such restricted stock. Upon the award of restricted
stock, the recipient has all rights of a stockholder with respect to the
shares, including, without limitation, the right to receive dividends, the
right to vote such shares and, subject to and conditioned upon the full vesting
of the shares of restricted stock, the right to tender such shares. Unless
otherwise determined by the Compensation Committee at grant, the payment of
dividends, if any, shall be deferred until the date that the relevant share of
restricted stock vests.
Recipients of restricted stock are required to enter into a restricted
stock award agreement with the Company which states that the restrictions to
which the shares are subject and the criteria or date or dates on which such
restrictions will lapse. Within these limits, based on service, attainment of
performance goals, and such other factors as the Compensation Committee may
determine in its sole discretion, or a combination thereof, the Compensation
Committee may provide for the lapse of such restrictions in installments in
whole or in part or may accelerate or waive such restrictions at any time.
If the lapse of the relevant restriction is based on the attainment of
performance goals, the Compensation Committee shall establish the goals,
formulae or standards and the applicable vesting percentage for the restricted
stock awards applicable to participants. These performance goals shall be based
on one or more of the following criteria with respect to the Company, a
subsidiary, division or other operational unit of the Company: (i) after-tax or
pre-tax profits; (ii) operational cash flow; (iii) level of, reduction of, or
other specified objectives with regard to the Company's bank debt or other
long-term or short-term public or private debt or other similar financial
obligations; (iv) earnings per share or earnings per share from continuing
operations; (v) revenues, net income, earnings before income tax, earnings
before interest, taxes, depreciation and amortization; (vi) return on invested
capital, return on investment return on assets or return on total capital;
(vii) after-tax or pre-tax return on stockholders' equity; (viii) level of or a
reduction in, selling, general and administrative expense; (ix) economic value
added targets; (x) fair market value of the shares of Common Stock; and (xi)
the growth in the value of an investment in the Common Stock assuming the
reinvestment of dividends. In addition, such performance goals may be based
upon the attainment of specified levels of Company (or subsidiary, division or
other operational unit of the Company) performance under one or more of the
measures described above relative to the performance of other corporations. To
the extent permitted under the Code, the Compensation Committee may: (i)
designate additional business criteria on which the performance goals may be
based; or (ii) adjust, modify or amend the aforementioned business criteria.
Performance Units and Performance Shares. Under the Stock Incentive Plan,
the Compensation Committee may grant performance shares to eligible employees
entitling them to receive share certificates (including, without limitation,
restricted stock) and/or the cash equivalent value thereof, as determined by
the Compensation Committee, based on a specified performance period. Unless
otherwise determined by the Compensation Committee at the time of any award of
performance shares, amounts equal to any dividends declared during the
performance period with respect to the number of shares of Common Stock covered
by the performance shares will not be paid.
The Compensation Committee may also grant performance units to eligible
employees entitling them to receive a value payable in cash and/or share
certificates (including, without limitation, restricted stock) of an equivalent
value, as determined by the Compensation Committee, for a specified performance
cycle.
The Compensation Committee may condition the grant or vesting of any
performance share or performance unit upon the attainment of specified
performance goals (from among those set forth above with regard to restricted
stock) or such other factors or criteria as determined by the Compensation
Committee. The Compensation Committee may also, at or after grant, accelerate
the vesting of all or any part of any performance shares or performance units
and/or waive the deferral limitations for all or any part of any award.
Amendment and Termination. The Stock Incentive Plan provides that it may
be amended, in whole or in part, suspended or terminated by the Board of
Directors, except that no such amendment, suspension or termination, without
stockholder approval to the extent such approval is required by applicable
state law, the applicable
54
<PAGE>
provisions of Rule 16b-3 of the Exchange Act or for the exception for
performance-based compensation under Section 162(m) of the Code or to the
extent applicable to incentive stock options, Section 422 of the Code, may
increase the aggregate number of shares of Common Stock reserved for awards or
the maximum individual limits, change the classification of employees eligible
to receive awards, decrease the minimum exercise price of any stock option,
extend the maximum option period under the Stock Incentive Plan or to make any
other amendment that would require stockholder approval under the Code, Rule
16b-3 of the Exchange Act or the rules of any exchange or system on which the
Company's securities are listed or traded.
Share and Other Limitations. A maximum of 809,144 shares of Common Stock
may be issued or used for reference purposes pursuant to the Stock Incentive
Plan and a maximum of 80,914 shares of Common Stock may be issued as restricted
stock pursuant to the Stock Incentive Plan. In general, upon the termination,
cancellation or expiration of an award, the unissued shares of Common Stock
subject to such awards will again be available for awards under the Stock
Incentive Plan, but will still count against any specified individual limits.
The maximum number of shares of Common Stock subject to stock options or
stock appreciation right that may be granted to any individual under the Stock
Incentive Plan shall be 53,943 for any fiscal year of the Company during the
term of the Stock Incentive Plan. A stock appreciation right granted in tandem
with a stock option shall apply against the individual limits for both stock
options and stock appreciation rights, but only once against the maximum number
of shares available under the Stock Incentive Plan.
The maximum number of shares of restricted stock for which the lapse of
restrictions is subject to the attainment of performance goals which may be
granted under this Stock Incentive Plan to any individual shall be 44,952
shares during any fiscal year of the Company. There are no annual individual
participant limitations on restricted stock for which the lapse of the relevant
restrictions is not subject to attainment of preestablished performance goals.
The maximum value at grant of performance units which may be awarded under
the Stock Incentive Plan to any individual shall be $100,000 during any fiscal
year of the Company. Growth in performance units shall be based on the growth
in the referenced Common Stock, each unit being referenced to one share of
Common Stock. A performance unit shall be charged against available shares
under the Stock Incentive Plan at the time the unit dollar value measurement is
converted to a referenced number of shares of Common Stock.
The maximum number of performance shares which may be awarded under the
Stock Incentive Plan to any individual shall be 44,952 during any fiscal year
of the Company.
Change in Control. Unless determined otherwise by the Compensation
Committee at the time of grant, upon a Change in Control (as defined in the
Stock Incentive Plan), all vesting and forfeiture conditions, restrictions and
limitations in effect with respect to any outstanding award will immediately
lapse and any unvested awards will automatically become 100% vested. However,
unless otherwise determined by the Compensation Committee at the time of grant
or thereafter, no acceleration of exercisability shall occur with regard to
certain stock options that the Compensation Committee reasonably determines in
good faith prior to a Change in Control will be honored or assumed or new
rights substituted therefor by a participant's employer immediately following
the Change in Control. The Compensation Committee may also, in its sole
discretion, provide for accelerated vesting of an award at any time.
Certain Other Employee Benefit Plans
The Supplemental Executive Retirement Plan of the Company ("SERP")
provides certain executive officers of the Company annually, upon retirement,
48.0% of final average salary for the three highest consecutive years in the
last ten years of the executive's credited service. Early retirement benefits
may be elected prior to the participants' attainment of age 61. The
participant's early retirement benefit will be the actuarial equivalent of the
normal retirement benefit. Normal retirement benefits commence when the
participant reaches age 65. These vested benefits are payable on termination of
employment subject to a graded 15 year vesting schedule. The estimated credited
years of service for each of the Named Executive Officers is as follows: Mr.
Sato 50.0, Mr. Brennan 18.0, Mr. Baker 19.0, and Mr. Ettie 9.9. Messrs.
Mayerhauser, Hummel and Vogel do not participate in the SERP.
55
<PAGE>
<TABLE>
<CAPTION>
Completed Years of Service
----------------------------------------------------
Assumed Final
Average Salary* Less than 5 5 10 15+
- ----------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
$ 100,000 $0 $12,000 $24,000 $ 48,000
150,000 0 18,000 36,000 72,000
200,000 0 24,000 48,000 98,000
250,000 0 30,000 60,000 120,000
300,000 0 36,000 72,000 144,000
</TABLE>
- ----------------
* Average of a participant's salary received in any three consecutive calendar
years in the last ten full calendar years before the participants' last day
of service that produce the highest average.
Isao Sato, Masuo Hosokawa, Yoshio Hosokawa and Fumio Sawamura are members
of the supervisory board of a subsidiary of the Company and receive annually
$14,405, $9,603, $6,002 and $6,002, respectively, for their services as members
of such board.
56
<PAGE>
CERTAIN TRANSACTIONS
Preferred Stock Exchange with HMC
In December 1992, the Company issued 240,000 shares of previously
authorized 5.5% Cumulative Subordinated Preferred Stock (the "5.5% Preferred
Stock") to HMC at $200 per share. Annual dividends were $11.00 per share,
payable semiannually. In fiscal year 1992, the Company issued 200,000 shares of
4.44% Cumulative Preferred Stock (the "4.44% Preferred Stock") to HMC at $150
per share. Annual dividends were $6.66 per share payable semiannually. Current
year dividends on both issues of stock were made on a semiannual basis and were
payable on issued shares up to the effective date of exchange. In fiscal years
1997 and 1996, the Company paid preferred dividends of $3,683,000 and
$3,972,000, respectively, to HMC. Effective September 3, 1997, all of the
issued shares for both classes of preferred stock were exchanged for Common
Stock as follows:
(A) All 240,000 shares of 5.5% Preferred Stock were exchanged at the rate
of 20.2261 shares of Common Stock for each share of 5.5% Preferred
Stock, for a total of 4,854,259 shares of Common Stock.
(B) All 200,000 shares of 4.44% Preferred Stock were exchanged at the rate
of 15.1695 shares of Common Stock for each share of 4.44% Preferred
Stock, for a total of 3,033,912 shares of Common Stock.
Licensing Agreements, Cost Sharing Agreement, Asian Marketing Agreements,
Management Service Contract, Intercompany Sales and Guarantees with HMC and its
Affiliates
Licensing and Cost Sharing Agreements
Beginning in October 1986, the Company or one of its subsidiaries and HMC
entered into licensing agreements, with the Company or its subsidiary as
licensor or licensee depending on the agreement, for the manufacture, sale and
service by the licensee of numerous products throughout the world and the grant
to the licensee of exclusive and non-exclusive rights to use such products and
the associated patents, trademarks and related know-how. The agreements were
effective for terms of three, five, ten or fifteen years with automatic
renewals for additional one or five year terms. In fiscal years 1997 and 1996,
royalty income of $0.3 million and $0.4 million, respectively, were received
from HMC while royalty payments of $0.1 million and $0.1 million respectively,
were paid to HMC under such licensing agreements.
In 1996, in an effort to standardize its licensing agreements, the Company
entered into a series of new licensing agreements redefining the licensed
products, territory and royalty rates providing for the manufacture, use and
sale of the licensed products.
Generally, if the licensed product has been on the market for less than
four years, the royalty rate is 4.0% of net sales and if the licensed product
has been on the market for more than four years, the royalty rate is 2.5% of
net sales. Except for a few products from the product recovery product line,
the licensed products are primarily from the powder and particle processing
product line. The licensor grants to the licensee rights to the licensed
product on an exclusive or non-exclusive basis for a particular country. In
agreements with HMC as licensor and the Company as licensee, exclusive
territory includes North, Central and South America with no non-exclusive
territory. In agreements with HMC as licensor and a European or Australian
subsidiary of the Company as licensee, the country of the licensee is exclusive
territory and all other European countries, Africa, the Middle East, India, and
all Asian countries west of India are non-exclusive territories. In agreements
with a subsidiary of the Company as licensor and HMC as licensee, Japan is the
exclusive territory and all other Asian countries including the countries which
comprised the former U.S.S.R., but excluding India and all countries west of
India and Australia and New Zealand are non-exclusive territories.
The licensing agreements are effective from October 1, 1997 to September
30, 1998, and are automatically renewed and continued from year to year, unless
and until notice is given by either party of its intention to terminate the
agreement at the expiration of any term, except that the agreement between
Hosokawa Alpine Aktiengesellschaft, as licensor, and HMC, as licensee, is
effective March 31, 1998. In all the agreements, if either party fails,
neglects, or refuses to perform any obligation under the agreement, if any
warranty or representation made by either party proves to be false or
misleading, the other party may terminate the agreement with prior written
notice. Additionally, the licensor may terminate by giving written notice in
the event the licensee is liquidated or put in receivership or if there is a
change of control with respect to the licensee. The licensees under each
agreement may enter into sublicenses of the licensed products provided that the
terms of such agreements are at least as restrictive on the
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<PAGE>
sublicensee as the terms of the original licensing agreement upon which the
sublicense is based and provided that the sublicensee shall not have the right
to sublicense. Governing law under each licensing agreement is the law of
jurisdiction where the licensee resides.
Effective October 1, 1996, the Company licensed to HMC approximately ten
"Mikropul" products in a trademark licensing agreement on substantially similar
terms to the licensing agreements. The trademark royalty in this agreement
ranges from 0.3% to 1.0%. Also effective October 1, 1997, HMC licensed to the
Company in a trademark licensing agreement exclusive use of the Hosokawa Micron
name and logo in the Western Hemisphere for an annual fixed fee of $50,000 plus
the cost of maintaining such trademarks in the licensed territories. The term
of the agreement is for three years and is automatically renewed and continued
from year to year, unless and until notice is given by either party of its
intention to terminate the agreement at the expiration of any term. In both
trademark licensing agreements, the licensee may not sublicense without prior
consent of the licensor.
In addition to the licensing agreements, on September 30, 1987, the
Company, as licensor, entered into a sublicense agreement with HMC, as
licensee, to manufacture, use or sell the E-SPART (as described in United
States Patent No. 4,633,714), along with the patent rights and proprietary
information relating to the above patent in Japan, Australia, New Zealand, the
countries that comprise the former Soviet Union, all Asian and Middle Eastern
countries. The sublicense agreement runs for a term of fifteen years which
terminates under certain conditions if prior notice is given. In the sublicense
agreement, the licensee pays to the licensor a royalty of 5.0% of net sales of
the licensed product.
For the first six months of fiscal 1998, royalty income of $0.2 million
was received from HMC while royalty payments of $0.1 million was paid to HMC in
the same period.
The Company and HMC have entered into a cost sharing agreement effective
January 1, 1998 which provides that the parties will share the risks and
rewards for research and development on new powder and particle product line
products ("Program"). The agreement runs for a term of five years or for so
long as a research project designated in the exhibits to the agreement is in
existence, whichever is later. HMC and the Company are each responsible for its
proportional share of the costs of each research project as determined by
taking the net sales of each party for the powder and particle products line
for the preceding fiscal year divided by the combined net sales for the powder
and particle products line of the Company and HMC, respectively, in the same
fiscal year. The agreement provides that HMC will have the exclusive right to
use, license and assign intangible property developed under the Program for
manufacturing, marketing and other purposes for Japan, and the Company will
have the same exclusive rights for North, Central and South America, Europe,
South Africa, the Middle East, Australia, New Zealand, India and all Asian
countries west of India. The agreement provides that the Company and HMC must
agree annually on the Program including establishing guidelines on when
individual projects under the Program will be started, reviewed, completed or
terminated. There has been no activity under this agreement through the period
ended March 31, 1998.
The Company is the exclusive worldwide licensee of bi-polar technology
from a German university and certain researchers. A Japanese chemical company
has expressed interest in further development of a particular field of use and
is working exclusively with HMC. If the development program moves forward, the
Company may sublicense to HMC such field of use for the bi-polar technology.
The Company also has certain other arrangements with HMC, including
marketing agreements, guarantees and other agreements, which are described
below.
Asian Marketing Agreements
On October 1, 1994, the Company, HMC and Hosokawa Micron International
B.V. ("HMI BV"), a wholly owned subsidiary of the Company, entered into an
Asian marketing agreement in which HMC made available to the Company and to HMI
BV its international sales department (the "ISD") and provided approximately
30.0% of its facilities and capacity for the promotion of the Company's and HMI
BV's products in Asia. Asia was defined in the agreement to include all
countries east of India, including China and the new republics of the former
U.S.S.R., but excluding Japan, Australia, and New Zealand. The Company and HMI
BV engaged in the marketing and sale of its products in Asia, utilizing the ISD
without obtaining any approvals or consents from HMC. In consideration for such
services and for the suspension of all of HMC's rights in Asia, the Company and
HMI BV paid 30.0%
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of HMC's fiscal year costs for the ISD operation, not to exceed $0.6 million.
This agreement was terminated effective October 1, 1997 and effective the same
date, the Company and HMI BV entered into a substantially similar agreement,
except that in consideration for HMC's provision of its ISD, the Company and
HMI BV will pay to HMC commissions based upon actual sales into Asia as defined
above.
On April 1, 1995, HMC, and three of the Company's wholly owned
subsidiaries, HMI Unternehmens-Holding GmbH, Hosokawa Alpine AG and Hosokawa
Bepex GmbH ("German Subsidiaries"), entered into another Asian marketing
agreement on substantially similar terms except that the ISD will provide
approximately 20.0% of its facilities and capacity for the promotion of the
subsidiaries' products and the subsidiaries will pay 20.0% of HMC's fiscal year
costs for the ISD operation, not to exceed $0.4 million.
For the fiscal years ending September 30, 1997 and 1996, the Company and
its subsidiaries paid to HMC $1.0 million under these Asian marketing
agreements. For the current outstanding Asian marketing agreement with the
Company and HMI BV, the Company and HMI BV paid $0.1 to HMC under such
agreement for the six months ended March 31, 1998. For the current outstanding
Asian marketing agreement with the German Subsidiaries, such subsidiaries paid
$0.2 million to HMC under such agreement for the six months ended March 31,
1998.
Management Service Contract
The Company also had a management service contract with HMC entered into
in March 1986, amended in October 1986, and terminated effective October 1,
1997. Under the contract, HMC provided the Company with managerial services,
including but not limited to, consulting, advisory, administrative, financial
and accounting services. The annual fee of $0.4 million was paid to HMC under
the contract for each of the years ended September 30, 1997 and 1996.
Intercompany Sales
The Company, in the normal course of business, conducts business with HMC
and its affiliated companies other than the Company. For the fiscal year ended
September 30, 1997, $3.4 million in net sales of the Company were to HMC and
its other affiliated companies and $0.5 million in net sales of HMC and its
other affiliated companies were to the Company. For the six months ended March
31, 1998, $3.6 million in net sales of the Company were to HMC and its other
affiliated companies and $0.2 million in net sales of HMC and its other
affiliated companies were made to the Company.
Guarantees
HMC has guaranteed certain obligations of the Company with respect to the
commercial paper program. Guarantee fees paid to HMC were $0.1 million for the
years ending September 30, 1997 and 1996 and for the six months ended March 31,
1998. Effective October 1, 1997, the Company and HMC have entered into a new
fee arrangement with respect to such guaranty. Under this arrangement, the
Company pays HMC an annual fee equal to 37.5 basis points on the average
outstanding balance under the commercial paper program and 18.75 basis points
on the unused portion of such commercial paper program. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations
- --Liquidity and Capital Resources--Commercial Paper Program."
HMC also provides guarantees for the Company and a wholly owned subsidiary
in connection with their short-term loans with certain other banks and also
agreements to provide guarantees upon the happening of certain specified
events. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources--Other Indebtedness."
Other
Effective from December 31, 1997, HMC acquired two Japanese patents owned
by Hosokawa Stott Ltd., a United Kingdom subsidiary of the Company. The
purchase price was approximately $0.2 million.
The Company participates in the excess umbrella liability insurance
program issued to HMC by a Japanese insurance carrier. This program provides
the Company with excess general liability insurance coverage for amounts over
$5.0 million. The Company reimburses HMC for the premiums paid for such
coverage. In fiscal 1996, the Company paid HMC $0.2 million, and in fiscal
1997, the Company paid HMC $0.1 million. For the first six months ended March
31, 1998, the Company paid HMC $0.1 million for this excess general liability
coverage.
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The Company's Hosokawa Alpine AG--Japan Branch ("Branch") leases 3,700
square feet of space at HMC's facility in Hirakata, Japan for sales and
marketing, technical center, engineering and administrative offices. The Branch
paid HMC $0.1 million in both fiscal 1996 and fiscal 1997 for the lease of
these premises. For the period ended March 31, 1998, the Branch paid HMC $0.1
for the lease of these premises.
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PRINCIPAL STOCKHOLDERS AND SELLING STOCKHOLDER
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of March 31, 1998,
immediately prior to and immediately after the Offering by (i) each person (or
affiliated group of persons) known by the Company to own beneficially more than
5.0% of the Company's Common Stock, (ii) each director of the Company,
(iii) each of the Named Executive Officers, (iv) all directors and executive
officers of the Company as a group and (v) the Selling Stockholder.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior Shares of Common After
to the Offering(2)(3) Stock to be Offered the Offering(2)(4)
----------------------- --------------------- -----------------------
Beneficial Owner(1) Number Percent Number Percent
- ------------------------------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Hosokawa Micron Corporation ........ 9,308,667 98.03% 750,000 8,558,667 70.35%
5-14, 2-chome, Kawaramachi
Chuo-ku, Osaka 541, Japan(5)(6)
Isao Sato(7) ....................... 11,688 * -- 11,688 *
William Brennan(7) ................. 6,743 * -- 6,743 *
Dieter Hummel(7) ................... -- -- -- --
Dietmar Mayerhauser(7) ............. 6,743 * -- 6,743 *
Achim Vogel(7) ..................... 1,798 * -- 1,798 *
Gordon Ettie(7) .................... 6,743 * -- 6,743 *
Yoshio Hosokawa .................... 9,799 * -- 9,799 *
Directors and Executive Officers
as Group (11 persons)(7)(8) ....... 78,576 * 78,576 *
</TABLE>
- ----------------
* Denotes less than 1.0%.
(1) Unless otherwise indicated, the address for each person is c/o Hosokawa
Micron International Inc., 780 Third Avenue, New York, New York 10017.
(2) The persons and entities named in the table have sole voting and
investment powers with respect to all of the Common Stock shown as
beneficially owned by them, except as noted below.
(3) The 9,583,174 shares of Common Stock deemed outstanding prior to the
Offering includes:
(a) 9,495,517 shares of Common Stock outstanding; and
(b) 87,657 shares of Common Stock issuable pursuant to the exercise
of options held by the respective person or group, which may be
exercised within 60 days after the date of this Prospectus.
(4) The number of shares of Common Stock deemed outstanding after the
Offering includes:
(a) an additional 2,670,000 shares of Common Stock which are being
offered for sale by the Company in the Offering and assumes no
exercise of the over-allotment option; and
(b) 87,657 shares of Common Stock issuable pursuant to the exercise
of options held by the respective person or group, which may be
exercised within 60 days after the date of this Prospectus.
(5) Masuo Hosokawa, Chairman of the Board and a director of the Company, is
the Chairman of the Board of HMC and is the beneficial owner of 4,061,822
shares or 15.0% of the total outstanding voting stock of HMC. Yoshio
Hosokawa, Vice Chairman and a director of the Company, is Masuo
Hosokawa's son and President of HMC and beneficially owns 991,541 shares
or 3.7% of the total outstanding voting stock of HMC. Isao Sato,
President and Chief Executive Officer of the Company, and a director of
HMC, is the beneficial owner of 10,937 shares or less than 1.0% of the
total outstanding voting stock of HMC, and Yoshizo Yamanokuchi, a
director of the Company and a Managing Director of HMC, is the beneficial
owner of 3,300 shares or less than 1.0% of the total outstanding voting
stock of HMC. Fukiko Sawamura, who is a daughter of Masuo
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<PAGE>
Hosokawa and married to Fumio Sawamura, a director of the Company and a
Senior Managing Director of HMC, beneficially owns 461,596 shares or 1.7%
of the total outstanding voting stock of HMC. Fumio Sawamura beneficially
owns 135,233 shares or 0.5% of the oustanding voting stock of HMC. Fumio
Sawamura disclaims beneficial ownership of the shares of HMC owned by
Fukiko Sawamura. The directors and executive officers of the Company as a
group therefore beneficially owns a total of 5,664,429 shares or 21.0% of
the total outstanding voting stock of HMC. The information set forth above
is as of March 31, 1998.
(6) Toho Sangyo K.K., a Japanese corporation ("Toho Sangyo"), is the
beneficial owner of 5,111,216 shares or 18.8% of the total outstanding
voting stock of HMC. Masuo Hosokawa, the Chairman of the Board and a
director of the Company and Chairman of the Board of HMC, beneficially
owns 16,000 shares or 20.0% of the total outstanding voting stock of Toho
Sangyo. Yoshio Hosokawa, Vice Chairman and a director of the Company and
President of HMC and a son of Masuo Hosokawa, beneficially owns 10,000
shares or 12.5% of the total outstanding voting stock of Toho Sangyo.
Fukiko Sawamura, who is a daughter of Masuo Hosokawa, beneficially owns
10,000 shares or 12.5% of the total outstanding voting stock of Toho
Sangyo, and is married to Fumio Sawamura who beneficially owns 5,000
shares or 6.3% of the outstanding voting stock of Toho Sangyo and who is
a Senior Managing Director of HMC and a director of the Company. Fumio
Sawamura disclaims beneficial ownership of the shares of Toho Sangyo
owned by Fukiko Sawamura. The directors and executive officers of the
Company as a group as described above therefore beneficially owns a total
of 41,000 shares or 51.3% of the total outstanding voting stock of Toho
Sangyo. The information set forth above is as of March 31, 1998.
(7) Except for 2,697 shares of Common Stock owned by Isao Sato, includes
shares of Common Stock issuable pursuant to the exercise of options held
by the respective person or group, which may be exercised within 60 days
after the date of this Prospectus.
(8) Does not include the shares of Common Stock beneficially owned by HMC.
See footnotes (5) and (6) for a description of the beneficial ownership
of the voting stock of HMC by certain executive officers and directors of
the Company.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
12,165,517 shares of Common Stock and 899,049 shares of Common Stock reserved
for issuance upon the exercise of employee stock options pursuant to the Stock
Option Plan and the Stock Incentive Plan. The 2,670,000 shares of Common Stock
sold by the Company in the Offering will be immediately freely tradeable
without restriction under the Securities Act, except for any shares purchased
by an "affiliate" of the Company (as that term is defined under the rules and
regulations of the Securities Act), which will be subject to the resale
limitations of Rule 144 under the Securities Act. The remaining 8,745,517
outstanding shares of Common Stock, which were issued by the Company in private
transactions not involving a public offering (and any shares issued upon
exercise of employee stock options granted pursuant to the Stock Option Plan),
are "Restricted Securities" for purposes of Rule 144 and may not be resold in a
public distribution, except in compliance with the registration requirements of
the Securities Act or pursuant to Rule 144. The share numbers in this section
assume the Underwriters' over-allotment options are not exercised.
Prior to the Offering, there has been no public market for the Common
Stock. The Company cannot predict the effect, if any, sales of shares of Common
Stock or the availability of shares for sale will have on the market price from
time to time. Nevertheless, sales of substantial amounts of Common Stock in the
public market could adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities.
The Company, Isao Sato, HMC and Bank of Tokyo-Mitsubishi Ltd., who
immediately following the Offering will in the aggregate hold 8,610,812
outstanding shares of Common Stock, have agreed, subject to certain limited
exceptions, not, directly or indirectly, to offer, sell, assign, transfer,
encumber, contract to sell or otherwise dispose of any outstanding shares held
by them for a period of 180 days after the date of this Prospectus without the
prior written consent (which consent may be given without notice to the
Company's shareholders or other public announcement) of the Representative of
the Underwriters. The Representative of the Underwriters has advised the
Company that it has no present intention of releasing any of the Company's
shareholders or option holders from such lock-up agreements until the
expiration of such 180-day period.
Pursuant to the Stock Incentive Plan, 809,144 shares of Common Stock are
available for grant, of which the Company plans to grant _____ shares of Common
Stock immediately before completion of the Offering. See "Management--Stock
Incentive Plan."
Rule 701 under the Securities Act provides that the shares of Common Stock
acquired upon the exercise of outstanding options may be resold by persons
other than affiliates beginning 90 days after the date of this Prospectus,
subject only to the manner of sale provisions of Rule 144, and by affiliates
under Rule 144 without compliance with its one-year minimum holding period,
subject to certain limitations. The Company intends to file one or more
registration statements on Form S-8 under the Securities Act to register all
shares of Common Stock subject to outstanding stock options and Common Stock
issuable pursuant to the Stock Option Plan and the Stock Incentive Plan which
do not qualify for an exemption under Rule 701 from the registration
requirements of the Securities Act. The Company expects to file these
registration statements after the closing of the Offering, and such
registration statements are expected to become effective upon filing. Shares of
Common Stock covered by these registration statements will thereupon be
eligible for sale in the public markets, subject to the Lock-up Agreements, if
applicable.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, par value $.01 per share and 440,000 shares of Preferred
Stock, par value $.01 per share (the "Preferred Stock"). Immediately prior to
the Offering, there were 9,495,517 shares of Common Stock outstanding held of
record by 16 stockholders.
The holders of shares of Common Stock are (i) entitled to one vote per
share on all matters to be voted on by stockholders; (ii) not entitled to
cumulate their votes in elections for directors, which means holders of more
than half the outstanding shares of Common Stock can elect all the directors of
the Company; and (iii) entitled to receive such dividends as may be declared
from time to time by the Board of Directors in its discretion from any assets
legally available for that purpose, after payment of dividends (subject to
restrictions imposed by terms of indebtedness) required to be paid on
outstanding shares of Preferred Stock, if any. In the event of the dissolution
of the Company, whether voluntary or involuntary, if any, after distribution to
the holders of Preferred Stock, if any, of amounts to which they may be
preferentially entitled, the holders of Common Stock are entitled to share
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<PAGE>
ratably in the assets of the Company legally available for distribution to its
stockholders. The holders of Common Stock have no preemptive, subscription,
conversion or redemption rights, and are not subject to further calls or
assessments, or rights of redemption, by the Company. The Common Stock
currently outstanding, and the Common Stock issued in the Offering, is and will
be validly issued, fully paid and non-assessable. See "Dividend Policy."
Preferred Stock
The Board of Directors of the Company is authorized, without further
stockholder action, to divide any or all shares of the authorized Preferred
Stock into one or more classes or series and to fix and determine the
designations, preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions thereon, of any
classes or series so established, including voting powers, dividend rights,
liquidation preferences, redemption rights and conversion privileges. Although
the Company has no present intention to issue shares of Preferred Stock, the
issuance of shares of Preferred Stock or the issuance of rights to purchase
such shares may have the effect of delaying, deferring or preventing a change
in control of the Company or an unsolicited acquisition proposal. For instance,
the issuance of a series of Preferred Stock might impede a business combination
by including class voting rights that would enable the holder to block such a
transaction. In addition, under certain circumstances, the issuance of
Preferred Stock could adversely affect the voting power of the holders of the
Common Stock. Although the Board of Directors is required to make any
determination to issue such stock based on its judgment as to the best
interests of the stockholders of the Company, the Board of Directors could act
in a manner that would discourage an acquisition attempt or other transaction
that some, or a majority, of the stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock over
the then market price of the stock. The Board of Directors does not intend to
seek stockholder approval prior to any issuance of currently authorized
Preferred Stock, unless otherwise required by law.
The Delaware Business Combination Act
The Company is incorporated under the Delaware GCL. Section 203 of the
Delaware GCL (the "Delaware Business Combination Act") imposes a three-year
moratorium on business combinations between a Delaware corporation and an
"interested stockholder" (in general, a stockholder owning 15% or more of a
corporation's outstanding voting stock) or an affiliate or associate of an
interested stockholder, unless (i) prior to an interested stockholder becoming
an interested stockholder, the board of directors of the corporation approved
either the business combination or the transaction resulting in the interested
stockholder becoming an interested stockholder; (ii) upon consummation of the
transaction resulting in an interested stockholder becoming an interested
stockholder, the interested stockholder owned 85% or more of the voting stock
outstanding at the time the transaction commenced (excluding, from the
calculation of outstanding shares, shares beneficially owned by directors who
are also officers and certain employee stock plans); or (iii) on or after an
interested stockholder became an interested stockholder, the business
combination is approved by (A) the board of directors and (B) holders of at
least 66 2/3% of the outstanding shares (other than those shares beneficially
owned by the interested stockholder) at a meeting of stockholders.
The Delaware Business Combination Act applies to certain corporations
incorporated in Delaware, unless, among other things, the corporation expressly
elects not to be governed by the legislation and sets forth that election in an
amendment to the corporation's certificate of incorporation or by-laws as
approved by (in addition to any other vote required by law) a majority of the
shares entitled to vote (however, the amendment would not be effective until 12
months after the date of its adoption and would not apply to any business
combination between the corporation and any person who became an interested
stockholder on or prior to the adoption of the amendment). The Company has not
made such an election and, upon completion of the Offering, will be subject to
the Delaware Business Combination Act.
The Delaware Business Combination Act may discourage other persons from
making a tender offer for or acquisitions of substantial amounts of the Common
Stock. This could have the incidental effect of inhibiting changes in
management and may also prevent temporary fluctuations in the market price of
the Common Stock that often result from actual or rumored takeover attempts. In
addition, the limited liability provisions in the Company's Restated
Certificate of Incorporation with respect to directors and the indemnification
provisions in the Company's by-laws may discourage stockholders from bringing a
lawsuit against directors for breach of their fiduciary duty and may also have
the effect of reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if successful, might
otherwise have benefitted the Company and its stockholders. Furthermore, a
stockholder's investment in the Company may be adversely affected to the extent
the Company pays
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the costs of settlement and damage awards against the Company's directors and
officers pursuant to the indemnification provisions in the Company's by-laws.
Antitakeover Effect of Provisions of the Restated Certificate of Incorporation
and By-Laws
Certain provisions of the Restated Certificate of Incorporation and
by-laws could discourage potential acquisition proposals and could delay or
prevent a change in control of the Company. These provisions are intended to
enhance the likelihood of continuity and stability in the composition of the
Board of Directors and in the policies formulated by the Board of Directors and
to discourage certain types of transactions that may involve an actual or
threatened change of control of the Company, such as an unsolicited acquisition
proposal. Because these provisions could have the effect of discouraging
potential acquisition proposals, they may inhibit fluctuations in the market
price of shares of Common Stock that could otherwise result from actual or
rumored takeover attempts. These provisions also may have the effect of
preventing changes in the management of the Company.
The Restated Certificate of Incorporation of the Company provides that the
Board of Directors is divided into three classes of directors with each class
holding office for staggered three-year terms. The classification of directors
will have the effect of making it more difficult to change the composition of
the Board of Directors, because at least two annual meetings of stockholders,
instead of one, generally will be required to effect a change in the majority
of the Board of Directors. Under Delaware law, unless the certificate of
incorporation otherwise provides, a director on a classified board may be
removed by the stockholders only with cause. The Restated Certificate of
Incorporation of the Company provides that a director of the Company may be
removed with cause at any time by the vote of at least a majority of the
outstanding shares of the Company. See "Management--Board of Directors."
The Restated Certificate of Incorporation also provides that a vacancy in
the Board of Directors occurring from an increase in the number of directors or
otherwise may be filled by the vote of a majority of the directors then in
office.
The provisions of Delaware law and the Restated Certificate of
Incorporation and by-laws of the Company relating to the removal of directors
and the filling of vacancies on the Board of Directors preclude a third party
from removing incumbent directors without cause and simultaneously gaining
control of the Board of Directors by filling, with its own nominees, the
vacancies created by removal. These provisions also reduce the power of
stockholders generally, even those with a majority of the voting power in the
Company, to remove incumbent directors and to fill vacancies on the Board of
Directors without the support of the incumbent directors.
In addition, the Restated Certificate of Incorporation provides that no
action required to be taken at any annual or special meeting of stockholders
may be taken by written consent without a meeting except by a consent signed by
all the stockholders entitled to vote. This effectively limits the ability of
the Company's stockholders to conduct any form of consent solicitation
requiring less than unanimous consent. The Restated Certificate of
Incorporation and by-laws of the Company also do not permit stockholders of the
Company to call special meetings of stockholders. See "Principal Stockholders
and Selling Stockholder."
The Company's Restated Certificate of Incorporation also provides that the
Company shall not enter into any Transaction (as hereinafter defined) with or
benefitting any Interested Stockholder (as hereinafter defined) unless (a) the
Transaction has been approved by the affirmative vote of not less than 80% of
the aggregate voting power of the outstanding stock or (b) the Continuing
Directors (as hereinafter defined) by a two-thirds vote thereof have expressly
approved the Transaction. For these purposes:
(1) The term "Continuing Director" means a director who is not
affiliated with an Interested Stockholder and either (i) was a member of
the Board of Directors of the Company immediately prior to the time that
the Interested Stockholder, if any, became an Interested Stockholder or
(ii) was elected by or recommended for election by a majority of the then
Continuing Directors in office at the time such director was elected or
nominated for election.
(2) The term "Interested Stockholder" shall mean any person or group
(other than a trustee of an employee benefit plan of the Company or of an
employee benefit plan of an affiliate of the Company and other than a
person owning beneficially more than ten percent of the stock of the
Company on January 1, 1989) who is the beneficial owner of more than ten
percent of the voting power of the Company (those of the foregoing terms
which are defined in the rules under Section 13 of the Securities Exchange
Act of 1934 shall have the same meanings as set forth in such rules).
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(3) The term "Transaction," when used in reference to the Company and
any Interested Stockholder, means: (i) any merger or consolidation of the
Company or any direct or indirect majority-owned subsidiary of the Company
(A) with the Interested Stockholder or (B) with any other corporation if
the merger or consolidation is caused by the Interested Stockholder; (ii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition
(in one transaction or a series of transactions) except proportionately as
a stockholder of the company, to or with the Interested Stockholder,
whether as part of a dissolution or otherwise, of assets of the Company or
of any direct or indirect majority-owned subsidiary of the Company which
assets have an aggregate market value equal to ten percent or more of
either the aggregate market value of all the assets of the Company
determined on a consolidated basis or the aggregate market value of all
the outstanding stock of the Company; (iii) any transaction involving the
Company or any direct or indirect majority-owned subsidiary of the Company
which has the effect, directly or indirectly, of increasing the
proportionate share of the stock of any class or series, or securities
convertible into stock of any class or series, of the Company or of any
such subsidiary which is owned by the Interested Stockholder, with certain
exceptions; or (iv) any receipt by the Interested Stockholder of the
benefit, directly or indirectly, of any loans, advances, guarantees,
pledges or other financial benefits (other than those expressly permitted
in subparagraph (iii) above) provided by or through the Company or any
direct or indirect majority-owned subsidiary.
Transfer Agent and Registrar
The transfer agent and registrar for the Common Stock is Bank of New York.
66
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement, dated , 1998 (the "U.S. Underwriting Agreement"), the underwriters
named below (the "U.S. Underwriters"), for whom Credit Suisse First Boston
Corporation and PaineWebber Incorporated are acting as representatives (the
"Representatives"), have severally but not jointly agreed to purchase from the
Company and the Selling Stockholder the following respective numbers of U.S.
Shares (as defined below):
<TABLE>
<CAPTION>
Number of
Underwriter U.S. Shares
- -------------------------------------------------------- ------------
<S> <C>
Credit Suisse First Boston Corporation ......... [ ]
PaineWebber Incorporated ....................... [ ]
Total ....................................... [ ]
============
</TABLE>
Of the 3,420,000 shares of common stock being offered, 2,736,000 shares (the
"U.S. Shares") are initially being offered by the U.S. Underwriters in the
United States and Canada (the "U.S. Offering") and 684,000 shares (the
"International Shares") are initially being concurrently offered by the
Managers (the "Managers") outside the United States and Canada (the
"International Offering").
The U.S. Underwriting Agreement provides that the obligations of the U.S.
Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all the U.S. Shares offered hereby
(other than those shares covered by the over-allotment option described below)
if any are purchased. The U.S. Underwriting Agreement provides that, in the
event of a default by a U.S. Underwriter, in certain circumstances the purchase
commitments of non-defaulting U.S. Underwriters may be increased or the U.S.
Underwriting Agreement may be terminated.
The Company and the Selling Stockholder have entered into a Subscription
Agreement (the "Subscription Agreement") with the Managers of the International
Offering providing for the concurrent offer and sale of the International
Shares outside the United States and Canada. The closing of the U.S. Offering
is a condition to the closing of the International Offering and vice versa.
The Company has granted to the U.S. Underwriters and the Managers an
option, exercisable by Credit Suisse First Boston Corporation, expiring at the
close of business on the 30th day after the date of this Prospectus, to
purchase up to 513,000 additional shares at the initial public offering price,
less the underwriting discounts and commissions, all as set forth on the cover
page of this Prospectus. Such option may be exercised only to cover
over-allotments, if any, in the sale of the shares of Common Stock offered
hereby. To the extent that this option to purchase is exercised, each U.S.
Underwriter and each Manager will become obligated, subject to certain
conditions, to purchase approximately the same percentage of additional shares
being sold to the U.S. Underwriters and the Managers as the number of U.S.
Shares set forth next to such U.S. Underwriter's name in the preceding table
and as the number set forth next to such Manager's name in the corresponding
table in the prospectus relating to the International Offering bears to the sum
of the total number of shares in such tables.
The Company and the Selling Stockholder have been advised by the
Representatives that the U.S. Underwriters propose to offer the U.S. Shares in
the United States to the public, and in Canada on a private placement basis,
initially at the offering price set forth on the cover page of this Prospectus
and, through the Representatives, to certain dealers at such price less a
concession of $ per share, and the U.S. Underwriters and such dealers may
allow a discount of $ per share on sales to certain other dealers. After the
initial public offering, the public offering price and concession and discount
to dealers may be changed by the Representatives.
The public offering price, the aggregate underwriting discounts and
commissions per share and the per share concession and discount to dealers for
the U.S. Offering and the concurrent International Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and the Managers (the
"Intersyndicate Agreement") relating to the Offering, changes in the public
offering price, the aggregate underwriting discounts and commissions per share
and the per share concession and discount to dealers will be made only upon the
mutual agreement of Credit Suisse First Boston Corporation, on behalf of the
U.S. Underwriters, and Credit Suisse First Boston (Europe) Limited ("CSFBL"),
on behalf of the Managers.
Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters
has agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or
67
<PAGE>
sell, directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock to any person outside the United States
or Canada or to any other dealer who does not so agree. Each of the Managers
has agreed or will agree that, as part of the distribution of the International
Shares and subject to certain exceptions, it has not offered or sold, and will
not offer or sell, directly or indirectly, any shares of Common Stock or
distribute any prospectus relating to the Common Stock in the United States or
Canada or to any other dealer who does not so agree. The foregoing limitations
do not apply to stabilization transactions or to transactions between the U.S.
Underwriters and the Managers pursuant to the Intersyndicate Agreement. As used
herein, "United States" means the United States of America (including the
States and the District of Columbia), its territories, possessions and other
areas subject to its jurisdiction. "Canada" means Canada, its provinces,
territories, possessions and other areas subject to its jurisdiction, and an
offer or sale shall be in the United States or Canada if it is made to (i) any
individual resident in the United States or Canada; or (ii) any corporation,
partnership, pension, profit-sharing or other trust or other entity (including
any such entity acting as an investment adviser with discretionary authority)
whose office most directly involved with the purchase is located in the United
States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
U.S. Underwriters and the Managers of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold will be the public
offering price, less such amount as may be mutually agreed upon by Credit
Suisse First Boston Corporation, on behalf of the U.S. Underwriters, and CSFBL,
on behalf of the Managers, but not exceeding the selling concession applicable
to such shares. To the extent there are sales between the U.S. Underwriters and
the Managers pursuant to the Intersyndicate Agreement, the number of shares of
Common Stock initially available for sale by the U.S. Underwriters or by the
Managers may be more or less than the amount appearing on the cover page of
this Prospectus. Neither the U.S. Underwriters nor the Managers are obligated
to purchase from the other any unsold shares of Common Stock.
The Company, Isao Sato, HMC and Bank of Tokyo-Mitsubishi Ltd. have agreed
that they will not offer, sell, contract to sell, announce an intention to
sell, pledge or otherwise dispose of, directly or indirectly, or file or cause
to be filed with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any additional shares of the
Company's common stock or securities or other rights convertible into or
exchangeable or exercisable for any shares of the Company's common stock, or
disclose the intention to make any such offer, sale, pledge, disposal or
filing, without the prior written consent of Credit Suisse First Boston
Corporation, until 180 days after the date of the Offering. With respect to the
Company, such agreement excepts grants of employee stock options pursuant to
the terms of a plan in effect as of the date of the U.S. Underwriting
Agreement, issuance of shares pursuant to the exercise of such options or the
exercise of any other employee stock options outstanding as of the date of the
U.S. Underwriting Agreement.
The Company and the Selling Stockholder have agreed to indemnify the U.S.
Underwriters and the Managers against certain liabilities, including civil
liabilities under the Securities Act, or to contribute to payments that the
U.S. Underwriters and the Managers may be required to make in respect thereof.
The Representatives and the Managers have informed the Company and the
Selling Stockholder that they do not expect discretionary sales by the U.S.
Underwriters and the Managers to exceed 5% of the number of shares offered
hereby.
Prior to the Offering, there has been no public market for the shares. The
initial public offering price for the shares will be determined by negotiations
among the Company, the Selling Stockholder and the Representatives. In
determining such price, consideration will be given to various factors,
including market conditions for initial public offerings, the history of and
prospects for the Company's business, the past and present operations of the
Company, the past and present earnings and current financial position of the
Company, an assessment of the Company's management, the market for securities
of companies in businesses similar to those of the Company, the general
condition of the securities markets and other relevant factors. There can be no
assurance that the initial public offering price will correspond to the price
at which the shares will trade in the public market subsequent to the Offering
or that an active trading market for the shares will develop and continue after
the Offering.
The Representatives, on behalf of the U.S. Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934, as amended. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long
68
<PAGE>
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the shares in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the Representatives to reclaim a selling concession from a
syndicate member when the shares originally sold by such syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the shares to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on the New York Stock Exchange or otherwise and, if commenced, may be
discontinued at any time.
69
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company and the
Selling Stockholder prepare and file a prospectus with the securities
regulatory authorities in each province where trades of Common Stock are
effected. Accordingly, any resale of the Common Stock in Canada must be made in
accordance with applicable securities laws which will vary depending on the
relevant jurisdiction, and which may require resales to be made in accordance
with available statutory exemptions or pursuant to a discretionary exemption
granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Common Stock.
Representations of Purchasers
Each purchaser of Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company and, the Selling
Stockholder and the dealer from whom such purchase confirmation is received
that (i) such purchaser is entitled under applicable provincial securities laws
to purchase such Common Stock without the benefit of a prospectus qualified
under such securities laws, (ii) where required by law, that such purchaser is
purchasing as principal and not as agent, and (iii) such purchaser has reviewed
the text above under "Resale Restrictions".
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein and the Selling Stockholder may be located outside of Canada and, as a
result, it may not be possible for Canadian purchasers to effect service of
process within Canada upon the issuer or such persons. All or a substantial
portion of the assets of the issuer and such persons may be located outside of
Canada and, as a result, it may not be possible to satisfy a judgment against
the issuer or such persons in Canada or to enforce a judgment obtained in
Canadian courts against such issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of Common Stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock for investment by the purchaser under relevant Canadian
Legislation.
VALIDITY OF SHARES
The validity of the shares of Common Stock being sold in the Offering is
being passed upon for the Company by Proskauer Rose LLP, New York, New York.
Certain legal matters in connection with the Offering will be passed upon for
the Underwriters by Winthrop, Stimson, Putnam & Roberts.
70
<PAGE>
EXPERTS
The consolidated financial statements and schedule of Hosokawa Micron
International Inc. and subsidiaries as of September 30, 1997 and 1996, and for
each of the years in the three-year period ended September 30, 1997 have been
included herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in auditing
and accounting.
71
<PAGE>
INDEX TO FINANCIAL STATEMENTS
HOSOKAWA MICRON INTERNATIONAL INC. AND SUBSIDIARIES
Consolidated Financial Statements
<TABLE>
<S> <C>
Independent Auditors' Report ............................................................. F-2
Consolidated Balance Sheets as of September 30, 1996, September 30, 1997 ................. F-3
Consolidated Statements of Income for each of the fiscal years ended September 30, 1995,
1996 and 1997 ........................................................................... F-5
Consolidated Statements of Stockholders' Equity for each of the fiscal years ended
September 30, 1995, 1996 and 1997 ....................................................... F-6
Consolidated Statements of Cash Flows for each of the fiscal years ended
September 30, 1995, 1996 and 1997 ....................................................... F-7
Notes to Consolidated Financial Statements ............................................... F-9
Unaudited Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of September 30, 1997
and March 31, 1998 (unaudited) .......................................................... F-25
Condensed Consolidated Statement of Income for the six month periods ended
March 31, 1997 (Unaudited) and March 31, 1998 (Unaudited)................................ F-26
Condensed Consolidated Statement of Cash Flows for the six month periods ended
March 31, 1997 (Unaudited) and March 31, 1998 (Unaudited) ............................... F-27
Notes to Unaudited Condensed Consolidated Financial Statements ........................... F-29
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Hosokawa Micron International Inc.:
We have audited the accompanying consolidated balance sheets of Hosokawa
Micron International Inc. (a majority owned subsidiary of Hosokawa Micron
Corporation) and subsidiaries as of September 30, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the three-year period ended September 30, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hosokawa
Micron International Inc. and subsidiaries as of September 30, 1997 and 1996,
and the results of their operations and their cash flows for each of the years
in the three-year period ended September 30, 1997 in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
NEW YORK, NEW YORK
November 3, 1997,
except for note 22,
which is as of April 16, 1998
F-2
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands)
<TABLE>
<CAPTION>
September 30, September 30,
1996 1997
ASSETS --------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................ $ 12,405 $ 13,455
Marketable securities ................................ 332 303
Accounts and notes receivable, less
allowance for doubtful accounts of
$3,210 and $2,898 in 1996 and
1997, respectively ................................. 57,307 59,341
Due from parent and affiliates ....................... 998 1,035
Costs and estimated earnings in excess of
billings on uncompleted contracts .................. 12,490 6,897
Inventories .......................................... 49,359 42,198
Prepaid expenses and other assets .................... 5,562 5,285
-------- --------
Total current assets ............................ 138,453 128,514
Property, plant and equipment, net ................... 85,977 77,921
Cost in excess of net assets acquired, less
accumulated amortization of $13,837 and $15,078 in
1996 and 1997, respectively ........................ 78,313 72,818
Other assets ......................................... 4,887 4,637
-------- --------
Total assets .................................... $307,630 $283,890
======== ========
</TABLE>
(continued)
F-3
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Consolidated Balance Sheets
(Amounts in thousands)
<TABLE>
<CAPTION>
September 30, September 30,
1996 1997
LIABILITIES AND STOCKHOLDERS' EQUITY --------------- --------------
<S> <C> <C>
Current liabilities:
Notes payable to banks ............................... $ 32,460 $ 35,535
Commercial paper ..................................... 42,636 42,387
Accounts payable ..................................... 38,415 37,329
Current taxes payable ................................ 3,619 3,250
Deferred income taxes ................................ 2,479 1,886
Contract advances .................................... 19,176 14,371
Accrued liabilities .................................. 44,697 37,954
Pension liabilities .................................. 945 --
Due to parent and affiliates ......................... 7,609 7,489
--------- ---------
Total current liabilities ....................... 192,036 180,201
Notes payable to banks--long term .................... 23,786 17,546
Pension liabilities .................................. 16,338 14,722
Other long-term liabilities .......................... 550 564
Deferred income taxes ................................ 13,951 12,169
--------- ---------
Total liabilities ............................... 246,661 225,202
--------- ---------
Commitments and contingencies
Minority interest ..................................... 11 --
Stockholders' equity:
Preferred stock:
5.5% cumulative subordinated preferred
stock ($.01 par value, 240,000 shares
authorized at September 30, 1996 and 1997) ......... 2 --
4.44% cumulative preferred stock ($.01 par
value, 200,000 shares authorized at
September 30, 1996 and 1997) ....................... 2 --
Common stock ($.01 par value, 3,800,000
and 12,500,000 shares authorized at
September 30, 1996 and 1997, respectively;
issued and outstanding: 1,607,346 and
9,495,517 at September 30, 1996 and 1997,
respectively) ...................................... 16 95
Additional paid-in capital ........................... 103,740 103,665
Accumulated deficit .................................. (47,785) (47,215)
Unrealized loss in marketable securities ............. -- (28)
Cumulative translation adjustment .................... 4,983 2,171
--------- ---------
Total stockholders' equity ........................... 60,958 58,688
--------- ---------
Total liabilities and stockholders' equity ........... $ 307,630 $ 283,890
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands except per share data)
<TABLE>
<CAPTION>
Years Ended
--------------------------------------
September September September
1995 1996 1997
----------- ----------- ----------
<S> <C> <C> <C>
Sales to third parties ............................... $334,573 $364,683 $357,076
Related party sales .................................. 4,475 7,027 3,396
-------- ------- -------
Net sales ............................................ 339,048 371,710 360,472
Cost of sales ........................................ 236,904 259,316 247,022
-------- ------- -------
Gross profit ......................................... 102,144 112,394 113,450
Selling, general and administrative expenses ......... 82,989 85,690 85,355
Research and development expenses .................... 11,019 12,610 12,152
Amortization of intangibles .......................... 2,281 2,336 2,228
Restructuring ........................................ (3,239) 0 247
Other income ......................................... (763) (493) (1,110)
-------- ------- -------
Operating income ..................................... 9,857 12,251 14,578
Interest expense, net ................................ 6,656 6,100 5,573
Other (income) expense ............................... (3,393) 416 756
-------- ------- -------
Income before provision for income taxes ............. 6,594 5,735 8,249
Provision for income taxes ........................... 1,828 2,931 3,996
-------- ------- -------
Net income ........................................... $ 4,766 $2,804 $4,253
======== ======= =======
Earnings/(Loss) per common share:
Basic ................................................ $ 0.49 $(0.73) $ 0.25
Diluted .............................................. 0.49 (0.72) 0.25
Shares used in computing earnings per common share:
Basic ................................................ 1,607 1,607 2,265
Diluted .............................................. 1,624 1,624 2,281
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended September 30, 1995, 1996 and 1997
(In thousands, except number of shares)
<TABLE>
<CAPTION>
Cumulative Preferred Stock
---------------------------------------------
4.44% 5.5% Common stock
---------------------- ---------------------- --------------------
Shares Amount Shares Amount Shares Amount
------------- -------- ------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at
September 30, 1994 200,000 $ 2 240,000 $ 2 1,607,346 $16
Net income -- -- -- -- -- --
Dividends paid -- -- -- -- -- --
Translation adjustment -- -- -- -- -- --
------- ---- ------- --- --------- ---
Balance at
September 30, 1995 200,000 2 240,000 2 1,607,346 16
Net income -- -- -- -- -- --
Dividends paid -- -- -- -- -- --
Translation adjustment -- -- -- -- -- --
------- ---- ------- --- --------- ---
Balance at
September 30, 1996 200,000 2 240,000 2 1,607,346 16
Shares (exchanged) issued (200,000) (2) (240,000) (2) 7,888,171 79
Unrealized loss on
marketable securities -- -- -- -- -- --
Net income -- -- -- -- -- --
Dividends paid -- -- -- -- -- --
Translation adjustment -- -- -- -- -- --
-------- ------ -------- ----- --------- ---
Balance at
September 30, 1997 -- -- -- -- 9,495,517 $95
======== ====== ======== ===== ========= ===
<CAPTION>
Unrealized
Additional Loss on Cumulative
Paid-in Accumulated Marketable translation
capital Deficit securities adjustment Total
------------ ------------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at
September 30, 1994 $ 103,740 $ (46,875) -- $ 6,470 $ 63,355
Net income -- 4,766 -- -- 4,766
Dividends paid -- (4,508) -- -- (4,508)
Translation adjustment -- -- -- (223) (223)
--------- ---------- -- -------- --------
Balance at
September 30, 1995 103,740 (46,617) -- 6,247 63,390
Net income -- 2,804 -- -- 2,804
Dividends paid -- (3,972) -- -- (3,972)
Translation adjustment -- -- -- (1,264) (1,264)
--------- ---------- -- -------- --------
Balance at
September 30, 1996 103,740 (47,785) -- 4,983 60,958
Shares (exchanged) issued (75) -- -- -- --
Unrealized loss on
marketable securities -- -- (28) -- (28)
Net income -- 4,253 -- -- 4,253
Dividends paid -- (3,683) -- -- (3,683)
Translation adjustment -- -- -- (2,812) (2,812)
--------- ---------- --- -------- --------
Balance at
September 30, 1997 $ 103,665 $ (47,215) $ (28) $ 2,171 $ 58,688
========= ========== ===== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
<TABLE>
<CAPTION>
September 30,
----------------------------------------
1995 1996 1997
----------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ................................................... $ 4,766 $ 2,804 $ 4,253
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ............................... 11,134 12,243 12,453
Deferred income taxes ....................................... (334) (934) (1,232)
Net loss on marketable securities ........................... 65 83 --
Unrealized exchange (gain) loss on loan ..................... (3,094) 1,468 2,129
Provision for doubtful accounts receivable .................. 1,184 (233) 87
Gain from disposal of property, plant and equipment ......... (285) (87) (516)
Reserve for liquidated business ............................. (1,671) -- --
Change in assets and liabilities, net of effects from
purchased businesses:
Accounts and notes receivable .............................. (15,769) 5,588 (4,869)
Costs and estimated earnings in excess of billings
on uncompleted contracts ................................. (1,867) (2,121) 4,324
Inventories ................................................ (3,930) (4,689) 3,505
Prepaid expenses and other assets .......................... 698 1,611 576
Accounts payable ........................................... 10,210 (343) 1,019
Contract advances .......................................... 210 2,561 (3,301)
Accrued liabilities ........................................ (4,365) (3,516) (5,279)
Current taxes payable ...................................... (437) 1,029 (34)
Due to parent and affiliates ............................... 1,288 (557) 224
Pension liabilities ........................................ (40) (734) (369)
Minority interest and other ................................ 355 (342) 87
--------- ------ ------
Net cash (used) provided by
operating activities .................................... (1,882) 13,831 13,057
--------- ------ ------
Cash flows from investing activities:
Payment for acquisitions ..................................... (686) (3,138) (1,018)
Additions to property, plant and equipment ................... (9,222) (11,215) (10,092)
Proceeds from disposal of property, plant and
equipment .................................................. 2,725 1,410 1,910
Other ........................................................ (2,445) (161) (159)
--------- ------- -------
Net cash used in investing activities ..................... (9,628) (13,104) (9,359)
--------- ------- -------
</TABLE>
(Continued)
F-7
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Amounts in thousands)
<TABLE>
<CAPTION>
September 30,
---------------------------------------------
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from bank borrowings .............................. $ 200,447 $ 200,370 $202,386
Repayments of bank borrowings .............................. (212,816) (197,478) (200,590)
Proceeds from issuance of commercial paper ................. 393,974 427,000 232,000
Repayments of commercial paper ............................. (384,499) (424,000) (232,249)
Dividends paid ............................................. (4,508) (3,972) (3,683)
-------- -------- --------
Net cash (used in) provided by
financing activities ................................. (7,402) 1,920 (2,136)
-------- -------- --------
Effect of exchange rate changes on cash .................... 1,229 (387) (512)
Net increase (decrease) in cash ........................ (17,683) 2,260 1,050
Cash and cash equivalents at beginning of year ............. 27,828 10,145 12,405
-------- -------- --------
Cash and cash equivalents at end of year ................... $ 10,145 $ 12,405 $ 13,455
========== ======== ========
Supplemental disclosures of cash flow information: .........
Cash paid during the year for: ...........................
Interest ............................................... $ 7,543 $ 8,901 $ 6,292
========== ======== ========
Income taxes ........................................... $ 1,794 $ 2,450 $ 4,841
========== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
The Company and Principles of Consolidation
Hosokawa Micron International Inc. and subsidiaries (the "Company") is a
major supplier of powder processing systems and equipment, product recovery,
confectionery and plastics systems and equipment. The Company's products
provide custom-designed technical solutions to its customers' specific
processing and product recovery requirements used in manufacturing and
processing a broad range of industrial and consumer products. The Company is a
majority owned subsidiary of Hosokawa Micron Corporation (the "Parent") based
in Japan.
The Company conducts its operations primarily in two geographic regions,
namely North America and Europe (See Geographic Information, Note 20). All of
the Company's operations are conducted in the processing equipment industry.
The Company had negative working capital at September 30, 1997 amounting
to $51,687,000. This includes short term bank and commercial paper borrowings
of $77,922,000. These borrowings have been renewed on an annual basis over the
past several years and management believes they will continue to be renewed on
an ongoing basis. In addition, the Company had unused lines of credit amounting
to $89,424,000 at September 30, 1997.
The accompanying consolidated financial statements include the accounts of
the Company and all its subsidiaries. All significant intercompany amounts and
transactions have been eliminated in the consolidation of these financial
statements.
Cash and cash equivalents
Cash and cash equivalents include certificates of deposit with maturities
of less than 3 months.
Marketable Securities
Marketable securities include equity securities that are classified as
available-for-sale. Accordingly, the marketable securities are valued at
market. Net unrealized losses on these investments are recorded in
shareholders' equity. As of September 30, 1996 and 1997, cost amounted to
$490,327.
In calculating gain or loss on sales of securities, cost is determined by
specific identification.
Accounts and Notes Receivable
Included in accounts and notes receivable are amounts held under retention
clauses in a number of sales contracts. This amounted to $3,102,000 and
$825,000 for fiscal years ended September 30, 1996 and 1997, respectively.
These amounts are all due within a one year period.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
by either the specific identification or average cost method.
F-9
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Property, Plant and Equipment
Depreciation and amortization of property, plant and equipment are
provided primarily on a straight-line basis over the estimated useful lives of
the assets as follows:
<TABLE>
<S> <C>
Machinery and equipment 4-10 years
Buildings and improvements 15-50 years
Office furniture and equipment 4-10 years
Vehicles 4-5 years
Leasehold improvements 4-10 years or life of lease
(whichever is shorter)
</TABLE>
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
The Company has not provided for U.S. income taxes on unremitted earnings
for certain of its foreign subsidiaries as such earnings have been or are
expected to be permanently reinvested in the foreign operations. The cumulative
amount of unremitted foreign earnings for which the Company has not provided
U.S. income taxes amounted to approximately $20,142,000, $22,658,000 and
$24,172,000 at September 30, 1995, 1996 and 1997, respectively.
Foreign Currency
Assets and liabilities of operations denominated in foreign currencies are
translated into U.S. dollars using exchange rates in effect at the end of the
period, while revenues and expenses are translated at average exchange rates.
Translation gains and losses are recorded as a separate component of
stockholders' equity and are not included in net income.
Realized and unrealized gains and losses from foreign currency
transactions are included in net income for the period. Net transaction gains
(losses) were $1,968,000, $329,000 and ($112,000) for the three years ended
September 30, 1995, 1996 and 1997, respectively. These are included in other
income/expense, in the accompanying consolidated statements of operations.
Accounting for Contracts
Earnings on significant long-term contracts are generally recognized on
the percentage-of-completion method in the ratio that costs incurred to date
bear to total estimated costs at completion. In all other cases, the completed
contract method is used. Revenues and costs on contracts are subject to
revision throughout the terms of the contracts and any required adjustments are
made in the periods in which revisions are determinable. Provisions are made
for any anticipated losses in the periods in which they are first determinable.
Costs and estimated earnings in excess of billings on uncompleted
contracts consist of revenues recognized on contracts for which billings have
not been presented to the customer at the consolidated balance sheet date. Such
revenues are expected to be billed and collected generally within one year.
Billings in excess of costs and estimated earnings on uncompleted contracts are
included in contract advances.
F-10
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired (goodwill) is being amortized on a
straight line basis over a 40-year period.
The Company continually evaluates whether events or circumstances have
occurred which may impact the Company's assessment of the appropriateness of
the remaining estimated useful life of goodwill. The Company compares its
estimate of the acquired business' undiscounted future cash flow to the
carrying value of goodwill to determine if an impairment write-off is
necessary.
Other Assets
Other assets include intangible assets, which are being amortized on a
straight-line basis over the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Patents 5-15 years
Trademarks 5 years
Manufacturing drawings 10-12 years
License rights 5 years
</TABLE>
Product Warranty
The Company currently provides for the estimated cost to repair or replace
products sold under warranties. Such warranties generally cover a twelve-month
period.
Earnings (Loss) per Common Share
Effective for periods beginning after December 15, 1997, Financial
Accounting Standard No. 128 ("SFAS No. 128") "Earning Per Share" requires dual
presentation of earnings per share--basic and diluted. As SFAS 128 requires
retroactive restatement of financial data, accordingly, all prior period
earnings per share data has been restated to conform with the provisions of
this pronouncement. Basic earnings per common share has been computed by
dividing net income, less preferred stock dividends in fiscal years 1995, 1996
and 1997 of $3,972,000, $3,972,000 and $3,683,000, respectively, by the
weighted average number of common shares outstanding of 1,607,000 in 1995,
1,607,000 in 1996 and 2,265,000 in 1997. Diluted earnings per share have been
computed by dividing net income, less preferred stock dividends, by the
weighted average number of common shares outstanding, including the effects of
additional shares relating to stock options of 16,413 for the years ending
1995, 1996 and 1997, respectively.
Foreign Exchange Agreements/Derivatives
The Company enters into foreign exchange contracts to hedge firm foreign
currency commitments only. The Company does not hold or issue derivative
financial instruments for trading or speculative purposes. Gains and losses on
foreign exchange contracts that are hedges of foreign currency commitments are
recognized as part of the specific transactions hedged.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Stock Compensation
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation." As permitted under
SFAS No. 123, the Company elected not to adopt the fair value-based method of
accounting for its stock-based compensation plans, but will account for such
compensation under
F-11
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
the provisions of Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. The
Company has, however, complied with the disclosure requirements of SFAS No.
123.
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board recently issued
three new accounting standards that will have an impact on the Company's
financial statements when adopted in a future period.
Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"),
Reporting Comprehensive Income, establishes standards for reporting and display
of comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners. Among other disclosures,
SFAS No. 130 requires that all items that are required to be recognized under
current accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as other
financial statements.
Statement of Accounting Standards No. 131 ("SFAS No. 131"), Disclosures
about Segments of an Enterprise and Related Information, establishes standards
for the way that public enterprises report information about operating segments
in annual financial statements and requires reporting of selected information
about operating segments in interim financial statements issued to the public.
It also establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and is assessing performance. Generally,
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and for deciding how to allocate
resources to segments.
Statement of Accounting Standards No. 132 ("SFAS No. 132"), Employers
Disclosures About Pensions and Other Postretirement Benefits. SFAS No. 132
revises employers' disclosures about pension and other postretirement benefit
plans. It does not change the measurement or recognition of those plans.
All of these new standards are effective for financial statements for
periods beginning after December 15, 1997 and require comparative information
for earlier years to be restated. Results of operations and financial position
will be unaffected by implementation of these new standards.
(2) Acquisitions
In February 1996, the Company acquired all of the outstanding shares of
Ter Braak B.V., for cash of approximately $3,100,000. The acquisition was
accounted for under the purchase method of accounting. Cost in excess of the
net assets acquired is being amortized over a period of 40 years. The purchase
was funded primarily through bank borrowings.
In March 1996, the Company acquired for a nominal amount, assets with a
value of approximately $2,000,000, and established liabilities totaling
approximately $3,550,000 with respect to Kreuter GmbH.
Both Ter Braak B.V. and Kreuter GmbH are engaged in the business of
manufacturing equipment for the confectionery industry.
In December 1996, the Company acquired all of the outstanding shares of
L.E. Stott Limited for $1,018,000. The acquisition was accounted for under the
purchase method of accounting. The purchase price was allocated to acquire
tangible assets and liabilities. There was no excess over such values. L.E.
Stott Ltd. is engaged in the design and manufacture of weighing and filling
equipment used primarily in the pharmaceutical industry.
The accompanying consolidated financial statements include the results of
these companies from the dates of acquisition. The results of these operations
are not material to the consolidated results.
F-12
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts
<TABLE>
<CAPTION>
September 30,
-----------------------------
1996 1997
------------- -------------
(Amounts in thousands)
<S> <C> <C>
Costs and estimated earnings recognized
on uncompleted contracts ........................................ $ 27,686 $ 24,606
Less billings to date:
Percentage-of-completion method ................................... (16,871) (20,293)
Completed contract method ......................................... (17,501) (11,787)
Billings in excess of costs and estimated earnings
on uncompleted contracts ........................................ $ (6,686) $ (7,474)
========= =========
Included in the accompanying consolidated balance sheets: .........
Costs and estimated earnings in excess of billings
on uncompleted contracts ........................................ 12,490 6,897
--------- ---------
Billings in excess of costs and estimated earnings
on uncompleted contracts ........................................ (1,675) (2,584)
Contract advances on contracts using completed
contract method ................................................. (17,501) (11,787)
--------- ---------
Contract advances ................................................. $ (19,176) $ (14,371)
--------- ---------
$ (6,686) $ (7,474)
========= =========
</TABLE>
(4) Inventories
Inventories consists of the following:
<TABLE>
<CAPTION>
September 30,
-----------------------
1996 1997
---------- ----------
(Amounts in thousands)
<S> <C> <C>
Raw Materials ........... $12,300 $12,294
Work in process ......... 23,463 19,946
Finished goods .......... 13,596 9,958
------- -------
$49,359 $42,198
======= =======
</TABLE>
F-13
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Property, Plant and Equipment
Property, plant and equipment, at cost, less accumulated depreciation and
amortization consist of:
<TABLE>
<CAPTION>
September 30,
-----------------------
1996 1997
---------- ----------
(Amounts in thousands)
<S> <C> <C>
Machinery and equipment ....................... $ 59,027 $ 57,927
Land, building and improvements ............... 70,314 65,176
Office furniture and equipment ................ 12,991 14,044
Vehicles ...................................... 1,729 1,660
Leasehold improvements ........................ 624 741
-------- --------
144,685 139,548
Less accumulated depreciation and
amortization ................................ 58,708 61,627
-------- --------
85,977 77,921
======== ========
Depreciation and amortization expense ......... $ 9,026 $ 9,345
======== ========
</TABLE>
(6) Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
September 30,
-----------------------
1996 1997
---------- ----------
(Amounts in thousands)
<S> <C> <C>
Patents and trademarks, less accumulated
amortization of $6,560 and $6,317 in 1996
and 1997, respectively ................................. $ 2,069 $ 2,126
Manufacturing drawings, less accumulated
amortization of $2,465 and $2,318 in 1996
and 1997, respectively ................................. 1,877 1,354
License rights, less accumulated amortization
of $315 and $510 in 1996 and 1997, respectively......... 212 205
Other .................................................... 729 952
------- -------
$ 4,887 $ 4,637
======= =======
</TABLE>
(7) Notes Payable to Banks
Notes payable to banks consist primarily of unsecured notes payable with
an average interest rate of 5.7% and 6.1% in 1996 and 1997, respectively.
Borrowings are on a short-term basis and are typically renewed as they become
due. Included in short term borrowings is the current portion of long term
debt, amounting to $3,094,000.
The Company has unused lines of credit with various banks totaling
approximately $89,424,000 at September 30, 1997.
(8) Commercial Paper
The company has a $75 million commercial paper program supported by an
irrevocable direct-pay letter of credit provided by a major international bank,
for which the Company pays a fee. Under the program, which extends through
December 16, 1997, the Company issues Commercial Paper Notes (the "Notes") with
maturities of up to 270 days. The Notes, which bears credit ratings of A-1 +
/P-1, are sold on a discount basis only and in an aggregate
F-14
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
face amount not to exceed $75 million outstanding at any one time. Interest on
the Notes, which averaged 5.6% in fiscal 1997, is determined at the time of
issue based on the dealer agreement. The Company is required to pay a fee of
3/8% of the average balance outstanding each quarter for the letter of credit.
(9) Notes Payable to Banks--Long Term
Notes payable to banks--long term include a loan received in fiscal 1996,
payable in Deutsche marks, in the amount of $15,628,000 (DM27,500,000) with an
interest rate of 5.35%. The Company is required to pay $2,387,000 (DM4,200,000)
per annum over the next four years. At the end of this period, the Company has
the option to extend the repayment of the remaining loan balance for a further
five years.
At September 30, 1997, a wholly owned subsidiary of the Company maintained
several loans payable in Dutch guilders in the amount of $3,710,000
(Dfl7,350,000) with an average interest rate of 4.42%. Approximately $1,918,000
of these loans are due in the year 1999 and beyond and, accordingly, have been
classified as notes payable to banks--long term. The agreement stipulates that
$3,224,000 of these loans will be secured by accounts receivable of the Company
if certain covenants are not complied with. At September 30, 1997, such
covenants have been complied with.
The current schedule of principal payments on long-term debt is as
follows:
<TABLE>
<CAPTION>
At September 30, Amount
- ------------------------- ---------------
(in thousands)
<S> <C>
1998 $ 3,094
1999 3,094
2000 3,094
2001 10,790
2002 568
--------
20,640
Less--current portion (3,094)
--------
$ 17,546
========
</TABLE>
(10) Income Taxes
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
September 30, September 30, September 30,
1995 1996 1997
--------------- --------------- --------------
(Amounts in thousands)
<S> <C> <C> <C>
Current:
State and local .......... $ 216 $ -- $ 76
Foreign .................. 1,946 3,865 5,152
------ -------- --------
Total current .......... 2,162 3,865 5,228
------ -------- --------
Deferred: ................
Federal .................. 324 374 (16)
Foreign .................. (658) (1,308) (1,216)
------ -------- --------
Total deferred ......... (334) (934) (1,232)
------ -------- --------
Total .................. $1,828 $ 2,931 $ 3,996
====== ======== ========
</TABLE>
F-15
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The components of the temporary differences that gave rise to significant
portions of the deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
September 30, September 30,
1996 1997
--------------- --------------
(Amounts in thousands)
<S> <C> <C>
Net operating losses ......................................... $ 20,523 $21,142
Foreign tax credits .......................................... 7,223 7,495
Pension accrual .............................................. 4,175 3,789
Reserves, primarily warranty and inventory ................... 4,537 6,768
--------- ------
Gross deferred tax assets .................................. 36,458 39,194
Valuation allowance .......................................... (28,964) (29,451)
--------- -------
Net deferred tax assets .................................... 7,494 9,743
Accumulated depreciation ..................................... 19,092 18,824
Percentage of completion ..................................... 1,009 701
Reserves, primarily for unremitted Pre-Acquisition earnings of
foreign subsidiaries ....................................... 3,823 4,273
--------- -------
Gross deferred tax liabilities ............................. 23,924 23,798
--------- -------
Net deferred tax liability ................................. $ 16,430 $14,055
========= =======
</TABLE>
Total net deferred tax liabilities shown above included current and
noncurrent portions.
The valuation allowance for deferred tax assets as of October 1, 1995 and
1996 was $22,187,000 and $28,964,000, respectively. The net change in the total
valuation allowance for the years ended September 30, 1996 and 1997 was an
increase of approximately $6,777,000 and $487,000, respectively. In assessing
the realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets will
not be realized. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies in
making the assessment. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income in the periods in which
those temporary differences become deductible. Based upon projections for
future taxable income, management believes it is more likely than not the
company will realize the benefits of these deferred tax assets.
U.S. operating loss carryforwards of $344,000 were utilized for the fiscal
year ended September 30, 1997. No operating loss carryforwards were utilized in
the fiscal year ended September 30, 1995 or 1996. Such carryforwards resulted
in no tax benefits in 1995 and 1996 and a tax benefit of $141,000 in 1997 which
is included as a reduction of income tax expense. Foreign operating loss
carryforwards of $1,138,000, $1,104,000 and $663,000 were utilized for the
fiscal years ended September 30, 1995, 1996 and 1997, respectively. At
September 30, 1997, the Company had domestic net operating loss carryforwards
available of approximately $23,062,000, of which $1,782,000 is subject to
restricted utilization rules, expiring between 2002 and 2012. The Company also
had foreign net operating loss carryforwards amounting to $26,262,000 available
for local tax purposes, a significant portion of which is not subject to
expiration.
In addition to the operating loss carryforwards, the Company has foreign
tax credit carryovers of approximately $7,495,000 that will expire from 1998 to
2002.
The major elements contributing to the differences between the U.S.
Federal statutory tax and the effective tax are a result of the following
factors:
F-16
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
September 30, September 30, September 30,
1995 1996 1997
-------------- --------------- ---------------
(Amounts in thousands)
<S> <C> <C> <C>
Domestic operations .............................. $ (1,001) $ 259 $ 514
Foreign operations ............................... 7,595 5,476 7,735
-------- ------ ------
Income before income taxes ....................... $ 6,594 $5,735 $8,249
======== ====== ======
Federal statutory tax ............................ $ 2,242 $1,950 $2,805
Foreign tax rate differential .................... (1,670) 488 1,121
Change in beginning-of-year-U.S.
valuation allowance for
deferred tax assets allocated to
income tax expense ............................. 1,582 104 (416)
Disposal of foreign ownership interest ........... (973) -- --
State and local income taxes, net of
Federal tax benefit ............................ 216 -- 76
Permanent differences including goodwill ......... 55 183 225
Foreign withholding tax .......................... 376 206 185
-------- ------ ------
Income tax provision ............................. $ 1,828 $2,931 $3,996
======== ====== ======
</TABLE>
(11) Stockholders' Equity
In fiscal year 1992, the Company issued 200,000 shares of 4.44% Cumulative
Preferred Stock to the Parent at $150 per share. Annual dividends were $6.66
per share payable quarterly, semiannually or annually at the discretion of the
Board of Directors. The liquidation preference of this series over the common
stock and over the 5.5% Cumulative Subordinated Preferred Stock issued in
December 1992 was $150 per share plus accrued dividends.
In December, 1992, the Company issued 240,000 shares of previously
authorized 5.5% Cumulative Subordinated Preferred Stock to the Parent at $200
per share. Annual dividends were $11.00 per share, payable quarterly,
semiannually or annually at the discretion of the Board of Directors. The
liquidation preference of this series was preferred over common stock but was
subordinate to the 4.44% Cumulative Preferred Stock stockholders, at $200 per
share plus accrued dividends.
On August 1, 1997, the authorized common stock was increased to 12,500,000
shares.
Effective September 3, 1997, all of the issued shares for both classes of
preferred stock were exchanged for common stock as follows:
(A) 240,000 shares of 5.5% Cumulative Subordinated Preferred Stock were
exchanged at the rate of 20.2261 shares of common stock for each share
of preferred stock, for a total of 4,854,259 common shares.
(B) 200,000 shares of 4.44% Cumulative Preferred Stock were exchange at the
rate of 15.1695 shares of common stock for each share of preferred
stock, for a total of 3,033,912 common shares.
(C) Current year dividends were made on a semiannual basis and were payable
on issued shares up to the effective date of exchange. In fiscal years
1995, 1996 and 1997, the Company paid preferred dividends of
$3,972,000, $3,972,000 and $3,683,000, respectively. In addition, a
common stock dividend of $536,000 was paid in fiscal 1995.
F-17
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) Related Party Transactions
The Company, in the normal course of business, transacts business with the
Parent and various other affiliated companies of the Parent. The accompanying
consolidated financial statements include the following transactions:
(a) Management Services Contract, Royalty, Marketing and Guarantee
Agreements
The Company has a management services contract and operates under
various license agreements with the Parent. Management fees of $400,000
were paid under the agreements for each of the years ended September 30,
1995, 1996, and 1997, and are included in other income/expense in the
accompanying consolidated statements of operations.
Royalty income of approximately $393,000, $398,000 and $345,000 was
received from the Parent in fiscal years 1995, 1996 and 1997, respectively.
Royalty expense paid to the parent was $65,000, $75,000 and $65,000 for the
fiscal years ended 1995, 1996 and 1997, respectively.
Total fees paid under marketing agreements with the Parent, whereby all
of the Company's subsidiaries and divisions can avail themselves of the
Parent's Asian sales and marketing network, was $800,000 for the year ended
September 30, 1995 and $1,000,000 for the years ending September 30, 1996
and 1997.
The Parent company has guaranteed certain obligations of the Company
with respect to the commercial paper program. Guarantee fees paid to the
Parent were $100,000 for each of the three years ended September 30, 1997.
These fees are included within other, net in the accompanying consolidated
financial statements.
The Company leases space from one of the Parent's facilities in Japan.
The Company has paid approximately $110,000, $96,000, and $86,000 in 1995,
1996, and 1997, respectively, related to the lease.
(b) Due to/from Affiliates
Included in due to/from affiliates are trade receivables and payables
that represent normal business transactions with the Parent or its
affiliates.
Included in due to affiliates at September 30, 1997 and 1996 is a loan
denominated in Dutch Guilders of approximately $3,941,000 and $3,950,000,
respectively, payable to an affiliate with an average interest rate of
5.0%. Interest expense on this loan amounted to approximately $774,000,
$167,000 and $167,000 for each of the years ended September 30, 1995, 1996
and 1997, respectively.
(c) Insurance program
The Company participates in the excess umbrella liability insurance
program issued to its Parent by a Japanese insurance carrier. The Company
reimburses its Parent for the premiums made for such coverage. Amounts
reimbursed to the Parent were $173,000, $166,000 and $148,000 in 1995, 1996
and 1997, respectively.
(d) Divestiture
During fiscal 1995, the Company divested its 84% ownership interest in
Hosokawa Finance International B.V. to the Parent. The Company recorded a
gain of $1,711,000 on the divestiture including $1,626,000 in foreign
translation gains, which is recorded in other (income) expense.
(13) Retirement Plans
The Company has several pension and 401(k) plans covering substantially
all of its employees. Pension expense amounted to approximately $4,757,000,
$4,553,000 and $5,194,000 for the years ended September 30, 1995, 1996 and
1997, respectively.
U.S. Plans
The Company had one tax qualified noncontributory defined pension plan
during fiscal year 1996, which covered certain nonunion employees at a wholly
owned subsidiary.
F-18
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
In December 1995, the Board of Directors of the subsidiary authorized the
termination of the pension plan. Termination was effective on December 31,
1995, and all participants became fully vested in the plan. The Company
recognized a curtailment gain of approximately $919,000 in fiscal 1996 as a
result of the plan termination. The pension plan was settled during fiscal 1997
with the payment of lump sums and the purchase of an annuity contract for all
eligible employees.
Prior to the plan termination, pension benefits were based on years of
service and participants compensation, and the Company's policy was to
contribute such amounts recommended by the Company's consulting actuaries to
satisfy the funding requirements under the Employee Retirement Income Security
Act of 1974 ("ERISA").
Net periodic pension cost for the domestic defined benefit pension plan
was comprised of the following:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(Amounts in
thousands)
<S> <C> <C>
Service cost .......................... $ 284 $ 73
Interest cost ......................... 378 315
Actual return on assets ............... (731) (250)
Net amortization and deferral ......... 434 (74)
------ ------
$ 365 $ 64
====== ======
</TABLE>
The domestic defined benefit plan was funded to accumulate sufficient
assets to provide for all accrued benefits. Pension plan benefits were based
primarily on participants' compensation and years of credited service. The
funded status of the Company's domestic defined benefit pension plans was as
follows:
<TABLE>
<CAPTION>
1996
------------
(Amounts in
thousands)
<S> <C>
Accumulated benefit obligation:
Vested .............................................................. $ (4,175)
Nonvested ........................................................... --
--------
Accumulated benefit obligation ....................................... $ (4,175)
========
Projected benefit obligation ......................................... (4,175)
Fair value of plan assets, primarily equity and bond commingled funds 4,131
--------
Assets less than projected benefit obligation ........................ (44)
Unrecognized net gain ................................................ (901)
--------
Accrued pension costs recognized in the consolidated balance sheet in
pension liabilities ................................................ $ (945)
========
</TABLE>
The Company has three defined contribution plans, which are structured as
Section 401(k) type plans under the Internal Revenue Code, covering
substantially all employees in the U.S. For two of the plans, Company
contributions are based on employee contributions or compensation. The other
plan does not require Company contributions.
The aggregate amounts provided under the foregoing defined contribution
plans were $719,000, $805,000 and $848,000 for the years ended September 30,
1995, 1996 and 1997, respectively.
Foreign Plans
Certain of the Company's foreign subsidiaries have noncontributory,
defined benefit pension agreements covering substantially all employees with
varying terms and amounts dependent upon salary levels and length of service.
Pension plans of the Company's international operations are influenced
principally by social legislation of the countries in which these operations
are located.
F-19
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Net periodic pension cost for the foreign defined benefit pension plans
consisted of the following:
<TABLE>
<CAPTION>
1995 1996 1997
-------- ---------- ---------
(Amounts in thousands)
<S> <C> <C> <C>
Service cost .......................... $ 523 $ 608 $ 493
Interest cost ......................... 1,287 1,322 1,122
Net amortization and deferral ......... 37 (46) (276)
------ ------ ------
$1,847 $1,884 $1,339
====== ====== ======
</TABLE>
Pension plan benefits are based primarily on participants' compensation
and years of credited service. The funded status of the Company's foreign
defined benefit pension plans is as follows:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
(Amounts in thousands)
<S> <C> <C>
Accumulated benefit obligation:
Vested .......................................................... $ (15,268) $ (13,557)
Nonvested ....................................................... (4,385) (2,104)
--------- ---------
Accumulated benefit obligation ................................... $ (19,653) $ (15,661)
========= =========
Projected benefit obligation ..................................... (20,507) (17,328)
Fair value of plan assets, primarily insurance contracts ......... 5,222 4,058
--------- ---------
Assets less than projected benefit obligation .................... (15,285) (13,270)
Unrecognized net gain ............................................ (630) (1,131)
Unrecognized net transition asset at October 1, 1989
being amortized over a period of 15 years ...................... (423) (321)
--------- ---------
Accrued pension costs recognized in the
accompanying consolidated balance sheets in
pension liabilities ............................................ $ (16,338) $ (14,722)
========= =========
The assumptions are as follows: ..................................
1996 1997
--------- ---------
Discount rate .................................................... 7.0% 7.0%
Expected return on assets ........................................ 7.0% 7.0%
Average salary increase .......................................... 3.0% 4.0%
</TABLE>
(14) Employee Stock Plan
On July 29, 1997, the stockholders approved the establishment of the
Hosokawa Micron International Inc. 1997 Stock Option Plan (the "Plan") to
attract and retain key employees and directors. The Plan provides for the grant
of options to purchase up to 89,905 shares of the Company's common stock at an
exercise price of $9.89 per share, which is equal to the fair market value at
the date of the grant. Fair market value was determined by applying a Price
Earnings Multiple, for a similar industry, as discounted for a private company,
to projected earnings for the Company in the year the options were granted. On
August 12, 1997, the Company granted 87,657 options at an exercise price of
$9.89 per share. These options become vested to the employees on the earlier of
(i) the twelve-month anniversary of the grant of the option or (ii) the
effective date of an initial public offering. These options may be exercised
the earlier of the effective date of an initial public offering or from August
12, 1998 to August 11, 2007. During the year ended September 30, 1997, no
shares were exercised.
F-20
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The Company applies APB No. 25 and related interpretations in accounting
for its stock-based compensation plan. Accordingly, as the exercise price at
the date of grant equaled the estimated fair value of a common share, no
compensation cost has been recognized in connection with the Plan. The Company
has adopted the disclosure-only option under SFAS No. 123. If the accounting
provisions of SFAS No. 123 had been adopted, the Company's net income for the
year ended September 30, 1997 would have been decreased on a pro forma basis to
$4,197,000 or by $0.02 per share. The effects of applying this statement for
either recognizing compensation cost or pro-forma disclosures may not be
representative of the effects on reported net income for future years.
(15) Interest Expense, Net
Interest expense net consists of the following:
<TABLE>
<CAPTION>
September 30,
---------------------------------
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Interest Expense .............. $7,570 $6,703 $6,238
Interest Income ............... (914) (603) (665)
------ ------ ------
Interest Expense, Net ......... $6,656 $6,100 $5,573
====== ====== ======
</TABLE>
(16) Commitments and Contingencies
Leases
The Company leases various facilities and equipment under operating lease
arrangements. Many leases contain renewal options and some contain escalation
clauses. Rental commitments under noncancellable operating leases, as of
September 30, 1997, are as follows:
<TABLE>
<CAPTION>
Year ending September 30 Amount
- ---------------------------------------- ---------------
(in thousands)
<S> <C>
1998 $ 2,546
1999 2,172
2000 1,874
2001 1,427
2002 1,033
Beyond 3,237
--------
Total minimum payments $ 12,289
========
</TABLE>
Rental expense for the years ended September 30, 1995, 1996 and 1997 was
approximately $1,947,000, $2,375,000 and $2,650,000, respectively.
Contingencies
Various suits and claims are pending against the Company and its
subsidiaries, including several product liability suits. Although the outcome
of such suits and claims cannot be predicted with certainty, the disposition
thereof will not, in the opinion of the management of the Company, result in a
material adverse effect on the consolidated financial position of the Company.
At September 30, 1997, the Company has letters of credit and guaranty
outstanding totaling $23,124,000.
F-21
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(17) Financial Instruments
The Company enters into forward exchange contracts to hedge foreign
currency transactions for periods consistent with its committed exposures. The
Company's foreign exchange contracts are designed to offset exchange rate
movements on the assets, liabilities and transactions being hedged.
At September 30, 1997, the Company had $19,439,000 of forward foreign
exchange contracts outstanding to hedge against currency fluctuations. The
Company's risk that counterparties to these contracts may be unable to perform
is minimized by limiting the counterparties to major international banks. The
Company does not expect any losses as a result of counterparty default.
(18) Restructuring Costs
During the years ended September 30, 1995, 1996 and 1997, the Company
utilized $2,775,000, $1,902,000 and $485,000, respectively, relating to its
1993 restructuring program. In addition, the Company credited $3,239,000 and
$506,000 to the income statement in 1995 and 1997, respectively, which remained
from completed restructuring activities. A severance reserve of $843,000 was
recorded in September 1997 to cover the costs of eliminating 25 positions
(actual terminations) throughout the Company resulting from the rationalization
of certain manufacturing operations in the United States and France. These
amounts are included in selling, general and administrative expenses ($753,000)
and in cost of sales ($90,000) in the accompanying consolidated financial
statements. As of September 30, 1996 and 1997, the Company had a remaining
liability of $1,321,000 and $1,173,000, respectively.
The remaining liability at September 30, 1997 primarily consists of the
$843,000 severance reserve recorded in 1997 and is expected to be substantially
utilized in fiscal 1998.
(19) Disclosures about the Fair Value of Financial Instruments
Marketable securities are stated at market value. The carrying amount of
accounts and notes receivable, notes payable, accounts payable, due to/from
affiliates, current taxes payable, contract advances and accrued liabilities
approximates fair value because of their short maturities.
At September 30, 1997, the estimated fair value of long-term debt was
approximately equal to the carrying amount of such debt on the consolidated
balance sheet, as the current market rates available to the company for similar
debt approximates the rates on these loans.
(20) Geographic Financial Information
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
(Amounts in thousands)
<S> <C> <C> <C>
Sales to Unaffiliated Customers
North America ................. $131,454 $137,577 $136,693
Europe ........................ 164,559 176,180 159,465
Other ......................... 38,560 50,926 60,918
-------- -------- --------
$334,573 $364,683 $357,076
======== ======== ========
Inter Area Sales
North America ................. $ 3,158 $ 7,411 $ 7,533
Europe ........................ 1,031 1,339 650
Other ......................... 25,815 38,683 43,465
-------- -------- --------
$ 30,004 $ 47,433 $ 51,648
=================================== ======== ======== ========
</TABLE>
F-22
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
1995 1996 1997
--------------- ----------- ---------------
(Amounts in thousands)
<S> <C> <C> <C>
Operating Income
North America ............... $ (1,931) $ 3,718 $ 5,438(2)
Europe ...................... 11,177(1) 8,585 9,232(2)
Other ....................... 611 (52) (92)
----------- -------- ----------
$ 9,857 $ 12,251 $ 14,578
=========== ======== ==========
Total Assets
North America ............... $ 125,290 $118,995 $125,957
Europe ...................... 171,683 182,111 153,115
Other ....................... 5,230 6,524 4,818
----------- -------- ----------
$ 302,203 $307,630 $283,890
=========== ======== ==========
Depreciation and Amortization
North America ............... $ 4,174 $ 4,553 $ 4,811
Europe ...................... 6,802 7,547 7,333
Other ....................... 158 143 309
----------- -------- ----------
$ 11,134 $ 12,243 $ 12,453
=========== ======== ==========
Capital Spending
North America ............... $ 3,425 $ 4,736 $ 2,566
Europe ...................... 5,505 5,383 7,128
Other ....................... 292 1,096 398
----------- -------- ----------
$ 9,222 $ 11,215 $ 10,092
=========== ======== ==========
</TABLE>
- ----------------
(1) Includes reversal of restructuring reserve of $3,239,000.
(2) Includes the reversal of a restructuring reserve of $506,000 in Europe and
the impact of restructuring charges totalling $300,000 and $543,000 in
North America and Europe, respectively.
(21) Concentrations of Credit Risk
Concentrations of credit risk with respect to the trade accounts
receivable are limited due to the large number of entities comprising the
Company's customer base and their dispersion across many different industries
and countries. As of September 30, 1997, the Company had no significant
concentrations of credit risk. The Company's production materials are readily
available, and the Company is not dependent on a single supplier or only a few
suppliers.
(22) Subsequent Event
On April 16, 1998, the board of directors authorized and the Parent
approved a 0.89904874 for 1.0 reverse stock split of the Company's common
stock, to be effective upon consummation of a proposed initial public offering.
In connection with the reverse split, par value of the common stock remains at
$0.01 per share as a result of transferring $10,662 to common stock from
additional paid-in capital, representing the aggregate par value of the shares
issued under the reverse stock split. All references throughout the
consolidated financial statements to number of shares, per share amounts, and
stock option data of the Company's common stock have been restated.
F-23
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Amounts in thousands)
<TABLE>
<CAPTION>
September 30, March 31,
1997 1998
ASSETS --------------- ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ..................................... $ 13,455 $ 9,442
Marketable securities ......................................... 303 222
Accounts and notes receivable, less
allowance for doubtful accounts of
$2,898 and $2,636 in 1997 and 1998, respectively............. 59,341 64,725
Due from parent and affiliates ................................ 1,035 2,568
Costs and estimated earnings in excess of
billings on uncompleted contracts ........................... 6,897 12,801
Inventories ................................................... 42,198 39,553
Prepaid expenses and other assets ............................. 5,285 6,106
-------- --------
Total current assets ......................................... 128,514 135,417
Property, plant and equipment, net ............................ 77,921 76,469
Cost in excess of net assets acquired, less
accumulated amortization of $15,078 and $15,826 in 1997 and
1998, respectively .......................................... 72,818 70,521
Other assets .................................................. 4,637 4,413
-------- --------
Total assets ................................................. $283,890 $286,820
======== ========
</TABLE>
(continued)
F-24
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
<TABLE>
<CAPTION>
September 30, March 31,
1997 1998
LIABILITIES AND STOCKHOLDERS' EQUITY --------------- ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Notes payable to banks ................................. $ 35,535 $ 34,111
Commercial paper ....................................... 42,387 49,250
Accounts payable ....................................... 37,329 40,505
Current taxes payable .................................. 3,250 2,272
Deferred income taxes .................................. 1,886 1,948
Contract advances ...................................... 14,371 17,344
Accrued liabilities .................................... 37,954 36,016
Due to parent and affiliates ........................... 7,489 3,236
--------- ------
Total current liabilities .......................... 180,201 184,682
Notes payable to banks--long term ....................... 17,546 15,229
Pension liabilities ..................................... 14,722 14,426
Other long-term liabilities ............................. 564 1,136
Deferred income taxes ................................... 12,169 12,291
--------- -------
Total liabilities .................................. 225,202 227,764
--------- -------
Commitments and contingencies
Stockholders' equity
Common stock ($.01 par value, 12,500,000
shares authorized at September 30, 1997, and
March 31, 1998, respectively, issued and
outstanding 9,495,517) ............................... 95 95
Additional paid-in capital ............................. 103,665 103,665
Accumulated deficit .................................... (47,215) (45,746)
Unrealized loss in marketable securities ............... (28) (110)
Cumulative translation adjustment ...................... 2,171 1,152
--------- -------
Total stockholders' equity ......................... 58,688 59,056
--------- -------
Total liabilities and stockholders' equity ......... $ 283,890 $286,820
========= =======
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-25
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Condensed Consolidated Statement of Income
(In thousands except per share data)
<TABLE>
<CAPTION>
Six Months Ended March,
------------------------
1997 1998
----------- ----------
(Unaudited)
<S> <C> <C>
Sales to third parties ............................... $181,793 $175,267
Related party sales .................................. 1,957 3,589
------- -------
Net sales ............................................ 183,750 178,856
Cost of sales ........................................ 126,945 122,469
------- -------
Gross profit ......................................... 56,805 56,387
Selling, general and administrative expenses ......... 44,337 41,344
Research and development expenses .................... 6,256 6,023
Amortization of intangibles .......................... 1,136 1,092
Other income ......................................... (645) (384)
------- -------
Operating income ..................................... 5,721 8,312
Interest expense, net ................................ 2,756 2,686
Other expense ........................................ 718 407
------- -------
Income before provision for income taxes ............. 2,247 5,219
Provision for income taxes ........................... 1,088 1,743
------- -------
Net income ........................................... $ 1,159 $ 3,476
------- -------
(Loss)/earnings per common share:
Basic ................................................ $ (0.51) $ 0.37
Diluted .............................................. (0.51) 0.37
Shares used in computing earnings per common share:
Basic ................................................ 1,607 9,496
Diluted .............................................. 1,624 9,512
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-26
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Six months ended March 31, 1997 and 1998
(Amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
-------------------------
1997 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income .................................................... $ 1,159 $ 3,476
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ................................. 6,205 5,718
Unrealized exchange loss on loan .............................. 1,501 762
Provision for doubtful accounts receivable .................... (95) (183)
Gain from disposal of property, plant and equipment ........... (532) (195)
Change in assets and liabilities, net of effects from purchased
businesses:
Accounts and notes receivable ............................... (4,238) (6,747)
Costs and estimated earnings in excess of billings on
uncompleted contracts ..................................... 3,681 (6,411)
Inventories ................................................. 102 1,596
Prepaid expenses and other assets ........................... (1,051) (1,904)
Accounts payable ............................................ (5,803) 4,403
Contract advances ........................................... (1,451) 3,357
Accrued liabilities ......................................... (3,651) (650)
Current taxes payable ....................................... 215 (795)
Due to parent and affiliates ................................ (755) (1,888)
Pension liabilities ......................................... (148) 293
Other ....................................................... (1,533) 1,678
------ ------
Net cash (used) provided by operating activities ........... (6,394) 2,510
------ ------
</TABLE>
(continued)
F-27
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Years ended September 30, 1996 and 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
Six Months Ended March 31,
-----------------------------
1997 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Cash flows from investing activities:
Payment for acquisitions .................................... $ (1,018) $ --
Additions to property, plant and equipment .................. (3,729) (5,486)
Proceeds from disposal of property, plant and
equipment ................................................. 1,369 433
------ ------
Net cash used in investing activities ..................... (3,378) (5,053)
------ ------
Cash flows from financing activities:
Proceeds from bank borrowings ............................... 85,868 112,414
Repayments of bank borrowings ............................... (78,248) (114,801)
Proceeds from issuance of commercial paper .................. 129,808 103,766
Repayments of commercial paper .............................. (128,000) (96,903)
Intercompany loan ........................................... -- (3,782)
Dividends paid .............................................. (1,986) (2,007)
-------- --------
Net cash provided by (used in) financing activities ......... 7,442 (1,313)
-------- --------
Effect of exchange rate changes on cash ...................... (341) (157)
Net (decrease) increase in cash ............................. (2,671) 4,013
Cash and cash equivalents at beginning of year ............... 12,405 13,455
-------- --------
Cash and cash equivalents at end of period ................... $ 9,734 $ 9,442
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
F-28
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
(A Majority Owned Subsidiary of Hosokawa Micron Corporation)
AND SUBSIDIARIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
include the accounts of Hosokawa Micron International, Inc. and its
wholly-owned subsidiaries (the "Company"). All significant intercompany
balances and transactions have been eliminated in consolidation.
The consolidated balance sheet as of March 31, 1998 and the consolidated
statements of operations and cash flows for the six months ended March 31, 1997
and March 31, 1998 have been prepared by the Company and have not been audited.
In the opinion of management, all adjustments, consisting of only normal
recurring adjustments, necessary for a fair presentation of the financial
position of the Company, the results of its operations and cash flows have been
made.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Consolidated Financial Statements for the year ended September 30,
1997.
The results of operations for the six months ended March 31, 1998 are not
necessarily indicative of the operating results for the full fiscal year.
Effective for periods beginning after December 15, 1997, Financial
Accounting Standard No. 128 ("SFAS No. 128") "Earning Per Share" requires dual
presentation of earnings per share--basic and diluted. As SFAS 128 requires
retroactive restatement of financial data, accordingly, all prior period
earnings per share data has been restated to conform with the provisions of
this pronouncement.
Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1997 1998
--------------- ----------
(Amounts in thousands)
<S> <C> <C>
Raw materials ........... $12,294 $13,018
Work in process ......... 19,946 17,123
Finished goods .......... 9,958 9,412
------- -------
$42,198 $39,553
======= =======
</TABLE>
Subsequent Events
On April 16, 1998, the Board of Directors authorized and the Parent
approved a 0.89904874 for 1.0 reverse stock split of the Company's common
stock, to be effective upon consummation of a proposed initial public offering.
In connection with the reverse split, par value of the common stock remains at
$0.01 per share as a result of transferring $10,662 to common stock from
additional paid-in capital, representing the aggregate par value of the shares
issued under the reverse stock split. All references throughout the
consolidated financial statements to number of shares, per share amounts, and
stock option data of the Company's common stock have been restated.
On April 14, 1998, the Company adopted a Supplemental Executive Retirement
Plan which provides certain executives of the Company annually, upon
retirement, 48% of final average salary for the three highest consecutive years
in the last ten yeas of the executive's credited service.
F-29
<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesperson, or other person has been authorized to give any
to make any representation not contained in this Prospectus and, if given or
made, such information or representation must not be relied upon as having been
authorized by the Company, the Selling Stockholder or any Underwriter. This
Prospectus does not constitute an offer to sell or a solicitation of an offer
to buy any of the securities to which it relates in any jurisdiction to any
person to whom it is unlawful to make such offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in the affairs of the Company since such date.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----------
<S> <C>
Prospectus Summary ............................. 3
Risk Factors ................................... 8
Use of Proceeds ................................ 14
Dividend Policy ................................ 14
Capitalization ................................. 15
Dilution ....................................... 16
Selected Consolidated Financial Data ........... 17
Unaudited Pro Forma Condensed
Consolidated Financial Statements ........... 19
Management's Discussion and Analysis
of Financial Condition and
Results of Operations ....................... 23
Business ....................................... 30
Management ..................................... 45
Certain Transactions ........................... 57
Principal Stockholders and
Selling Stockholder ......................... 61
Shares Eligible For Future Sale ................ 63
Description of Capital Stock ................... 63
Underwriting ................................... 67
Notice to Canadian Residents ................... 70
Validity of Shares ............................. 70
Experts ........................................ 70
Index to Consolidated Financial Statements...... F-1
</TABLE>
--------------------------
Until , 1998 (25 days after the date of this Prospectus), all dealers
effecting transactions in the Common Stock, whether or not participating in
this distribution, may be required to deliver a Prospectus. This is in addition
to the obligation of dealers to deliver a Prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
[HOSOKAWA LOGO] HOSOKAWA
MICRON INTERNATIONAL INC.
3,420,000 Shares
Common Stock
($.01 par value)
PROSPECTUS
Credit Suisse First Boston
PaineWebber Incorporated
<PAGE>
SUBJECT TO COMPLETION DATED , 1998
3,420,000 Shares
[HOSOKAWA MICRON LOGO] HOSOKAWA MICRON INTERNATIONAL INC.
Common Stock
($.01 par value)
------------
Of the 3,420,000 shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby, 2,670,000 shares are being sold by Hosokawa Micron
International Inc. ("Hosokawa" or the "Company") and 750,000 shares are being
sold by Hosokawa Micron Corporation ("HMC" or the "Selling Stockholder"). See
"Principal Stockholders and Selling Stockholder." Upon closing of the Offering
(as defined below), the Selling Stockholder will own 70.4% of the outstanding
Common Stock (67.5%, if the over-allotment option is exercised in full). The
Company will not receive any proceeds from
the sale of the shares by the Selling Stockholder.
Of the 3,420,000 shares of Common Stock being offered, 684,000 shares (the
"International Shares") are initially being offered outside the United States
and Canada by the Managers (the "International Offering") and 2,736,000 shares
(the "U.S. Shares") are being concurrently offered in the United
States and Canada by the U.S. Underwriters (the "U.S. Offering" and, together
with the International Offering, the "Offering"). The offering price and
underwriting discounts and commissions of the International Offering and the
U.S. Offering are identical.
Prior to the Offering, there has been no public market for the Common Stock of
the Company. It is currently anticipated that the initial public offering price
will be between $13.50 and $15.50 per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public
offering price.
Application will be made to list the Common Stock on the New York Stock
Exchange under the symbol "HOS."
The Common Stock Offered Hereby Involves a High Degree of Risk. See "Risk
Factors" Beginning on Page 8 of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds
Price to Discounts and Proceeds to to Selling
Public Commissions Company (1)(2) Stockholder (1)(2)
---------- --------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Per Share ......... $ $ $ $
Total (2) ......... $ $ $ $
</TABLE>
- ----------------
(1) Before deducting expenses of the Offering payable by the Company and by the
Selling Stockholder estimated to be $1,130,456 and $317,544, respectively.
(2) The Company has granted the Managers and the U.S. Underwriters an option,
exercisable by Credit Suisse First Boston Corporation within 30 days of the
date hereof, to purchase up to a maximum of 513,000 additional shares to
cover over-allotments, if any. If all such additional shares are purchased,
the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $ , $ and $ , respectively. See
"Underwriting."
The International Shares are offered by the several Managers when, as and
if delivered to and accepted by the Managers, and subject to their right to
reject orders in whole or in part. It is expected that the International Shares
will be ready for delivery on or about , 1998, against payment in immediately
available funds.
Credit Suisse First Boston PaineWebber International
Prospectus dated , 1998
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company, the Selling Stockholder or any Manager.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such an offer in such jurisdiction.
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that the information herein is
correct as of any time subsequent to the date hereof or that there has been no
change in the affairs of the Company since such date.
In this Prospectus, references to "dollars" and "$" are to United States
dollars.
There are restrictions on the offer and sale of the Common Stock in the
United Kingdom. All applicable provisions of the Financial Services Act of 1986
and the Public Offers of Securities Regulations 1995 with respect to anything
done by any person in relation to the Common Stock, in, from or otherwise
involving the United Kingdom must be complied with. See "Subscription and
Sale."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "SUBSCRIPTION AND SALE."
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
Prospectus Summary .................................. 3
Risk Factors ........................................ 8
Use of Proceeds ..................................... 14
Dividend Policy ..................................... 14
Capitalization ...................................... 15
Dilution ............................................ 16
Selected Consolidated Financial Data ................ 17
Unaudited Pro Forma Condensed
Consolidated Financial Statements ................ 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ....................................... 23
</TABLE>
<TABLE>
<CAPTION>
Page
------
<S> <C>
Business ............................................ 30
Management .......................................... 45
Certain Transactions ................................ 57
Principal Stockholders and Selling
Stockholder ...................................... 61
Shares Eligible for Future Sale ..................... 63
Description of Capital Stock ........................ 63
Subscription and Sale ............................... 70
Validity of Shares .................................. 70
Experts ............................................. 70
Index to Consolidated Financial Statements .......... F-1
</TABLE>
----------------
<PAGE>
SUBSCRIPTION AND SALE
Under the terms and subject to the conditions contained in a Subscription
Agreement, dated , 1998 (the "Subscription Agreement"), the institutions named
below (the "Managers") have severally but not jointly agreed to purchase from
the Company and the Selling Stockholder the following respective numbers of
International Shares (as defined below):
<TABLE>
<CAPTION>
Number of
Manager International Shares
- -------------------------------------------------------- ---------------------
<S> <C>
Credit Suisse First Boston (Europe) Limited ......... [ ]
PaineWebber International (U.K.) Ltd ................ [ ]
---------------------
Total .............................................. [ ]
=====================
</TABLE>
Of the 3,420,000 shares of Common Stock being offered, 684,000 shares (the
"International Shares") are initially being offered by the Managers outside the
United States and Canada (the "International Offering") and 2,736,000 shares
(the "U.S. Shares") are initially being concurrently offered by the U.S.
Underwriters (the "U.S. Underwriters"), for whom Credit Suisse First Boston
Corporation and PaineWebber Incorporated are acting as representatives (the
"Representatives"), in the United States and Canada (the "U.S. Offering").
The Subscription Agreement provides that the obligations of the Managers
are subject to certain conditions precedent and that the Managers will be
obligated to purchase all the International Shares offered hereby (other than
those shares covered by the over-allotment option described below) if any are
purchased. The Subscription Agreement provides that, in the event of a default
by a Manager, in certain circumstances the purchase commitments of
non-defaulting Managers may be increased or the Subscription Agreement may be
terminated.
The Company and the Selling Stockholder have entered into an Underwriting
Agreement with the U.S. Underwriters providing for the concurrent offer and sale
of the U.S. Shares in the United States and Canada. The closing of the U.S.
Offering is a condition to the closing of the International Offering and vice
versa.
The Company has granted to the Managers and the U.S. Underwriters an
option, exercisable by Credit Suisse First Boston Corporation, on behalf of the
U.S. Underwriters, expiring at the close of business on the 30th day after the
date of this Prospectus, to purchase up to 513,000 additional shares at the
initial public offering price, less the underwriting discounts and commissions,
all as set forth on the cover page of this Prospectus. Such option may be
exercised only to cover over-allotments, if any, in the sale of the shares
offered hereby. To the extent that this option to purchase is exercised, each
Manager and each U.S. Underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of additional shares
being sold to the Managers and the U.S. Underwriters as the number of
International Shares set forth next to such Manager's name in the preceding
table and as the number set forth next to such U.S. Underwriter's name in the
corresponding table in the Prospectus relating to the U.S. Offering bears to the
sum of the total number of shares of Common Stock in such tables.
The Company and the Selling Stockholder have been advised by Credit Suisse
First Boston (Europe) Limited, on behalf of the Managers, that the Managers
propose to offer the International Shares outside the United States and Canada
initially at the public offering price set forth on the cover page of this
Prospectus and, through the Managers, to certain dealers at such price less a
concession of $ per share, and the Managers and such dealers may reallow a
commission of $ per share on sales to certain other dealers. After the initial
public offering, the public offering price and commission and re-allowance to
dealers may be changed by the Managers.
The public offering price and the aggregate underwriting discounts and
commissions per share and per share to dealers for the International Offering
and the concurrent U.S. Offering will be identical. Pursuant to an Agreement
between the U.S. Underwriters and Managers (the "Intersyndicate Agreement")
relating to the Common Stock Offering, changes in the public offering price and
the aggregate underwriting discounts and commissions per share and the per share
to dealers will be made only upon the mutual agreement of Credit Suisse First
Boston (Europe) Limited, on behalf of the Managers, and Credit Suisse First
Boston Corporation, on behalf of the U.S. Underwriters.
Pursuant to the Intersyndicate Agreement, each of the Managers has agreed
that, as part of the distribution of the International Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any prospectus
relating to the Common Stock in the United States or Canada or to any other
dealer who does not so agree. Each of the U.S. Underwriters has agreed that, as
part of the distribution of the U.S. Shares and subject to certain exceptions,
it has not offered or sold, and
A-1
<PAGE>
will not offer or sell, directly or indirectly, any shares of Common Stock or
distribute any prospectus relating to the Common Stock in the United States or
Canada or to any other dealer who does not so agree. The foregoing limitations
do not apply to stabilization transactions or to transactions between the
Managers and the U.S. Underwriters pursuant to the Intersyndicate Agreement. As
used herein, "United States" means the United States of America (including the
States and the District of Columbia), its territories, possessions and other
areas subject to its jurisdiction. "Canada" means Canada, its provinces,
territories, possessions and other areas subject to its jurisdiction, and an
offer or sale shall be in the United States or Canada if it is made to (i) any
individual resident in the United States or Canada; or (ii) any corporation,
partnership, pension, profit-sharing or other trust or other entity (including
any such entity acting as an investment adviser with discretionary authority)
whose office most directly involved with the purchase is located in the United
States or Canada.
Pursuant to the Intersyndicate Agreement, sales may be made between the
Managers and the U.S. Underwriters of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold will be the public
offering price, less such amount as may be mutually agreed upon by Credit Suisse
First Boston (Europe) Limited, on behalf of the Managers, and Credit Suisse
First Boston Corporation, on behalf of the U.S. Underwriters, but not exceeding
the selling concession applicable to such shares. To the extent there are sales
between the Managers and the U.S. Underwriters pursuant to the Intersyndicate
Agreement, the number of shares of Common Stock initially available for sale by
the Managers or by the U.S. Underwriters may be more or less than the amount
appearing on the cover page of this Prospectus. Neither the Managers nor the
U.S. Underwriters are obligated to purchase from the other any unsold shares of
Common Stock.
Each of the Managers and the U.S. Underwriters severally represents and
agrees that: (1) it has not offered or sold and prior to the date six months
after the date of issue of the Common Stock will not offer or sell any shares to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act of 1986 with respect to
anything done by it in relation to the shares in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the issue of the shares to a person who is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.
Purchasers of shares of common stock outside the United States may be
required to pay stamp taxes and other charges in accordance with the laws and
practices of the country of purchase in addition to the public offering price
set forth on the cover page of this Prospectus.
The Company, Isao Sato, HMC, and The Bank of Tokyo-Mitsubishi Ltd. have
agreed that they will not offer, sell, contract to sell, announce an intention
to sell, pledge or otherwise dispose of, directly or indirectly, and the Company
has agreed that it will not file or cause to be filed with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any additional shares of its Common Stock or securities or other rights
convertible into or exchangeable or exercisable for any shares of the Company's
Common Stock, without the prior written consent of Credit Suisse First Boston
Corporation, until 180 days after the date of the Offering. With respect to the
Company, such agreement excepts grants of employee stock options pursuant to the
terms of a plan in effect as of the date of the Subscription Agreement, issuance
of shares pursuant to the exercise of such options or the exercise of any other
employee stock options outstanding as of the date of the Subscription Agreement.
The Company and the Selling Stockholder have agreed to indemnify the
Managers and the U.S. Underwriters against certain liabilities, or to contribute
to payments that the Managers and the U.S. Underwriters may be required to make
in respect thereof.
The Managers and the Representatives have informed the Company and the
Selling Stockholder that they do not expect discretionary sales by the Managers
and the U.S. Underwriters to exceed 5.0% of the number of shares offered hereby.
A-2
<PAGE>
Prior to the Offering, there has been no public market for the shares. The
initial public offering price for the shares will be determined by negotiations
among the Company, the Selling Stockholder and Credit Suisse First Boston
Corporation, on behalf of the U.S. Underwriters, and Credit Suisse First Boston
Limited, on behalf of the Managers. In determining such price, consideration
will be given to various factors, including market conditions for initial public
offerings, the history of and prospects for the Company's business, the past and
present operations of the Company, the past and present earnings and current
financial position of the Company, an assessment of the Company's management,
the market for securities of companies in businesses similar to those of the
Company, the general condition of the securities markets and other relevant
factors. There can be no assurance that the initial public offering price will
correspond to the price at which the shares will trade in the public market
subsequent to the Offering or that an active trading market for the shares will
develop and continue after the Offering.
VALIDITY OF SHARES
The validity of the shares of Common Stock being sold in the Offering is
being passed upon for the Company by Proskauer Rose LLP, New York , New York.
Certain legal matters in connection with the Offering will be passed upon for
the Managers by Winthrop, Stimson, Putnam & Roberts, New York, New York.
A-3
<PAGE>
Part II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the estimated expenses and costs (other than
underwriting discounts and commissions) expected to be incurred by the Company
in connection with the issuance and distribution of the securities being
registered under this registration statement. Except for the SEC and NYSE filing
fees, all expenses have been estimated and are subject to future contingencies.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee ................................... $ 17,985.00
-----------
NYSE fee ...............................................
Legal fees and expenses ................................
Federal and State taxes ................................
NYSE Entry Fee .........................................
Printing and engraving expenses ........................
Accounting fees and expenses ...........................
Transfer agent and registrar fees and expenses .........
Miscellaneous ..........................................
Total .................................................. $
===========
</TABLE>
Item 14. Indemnification of Directors and Officers
Article 5.03 of the Company's By-laws provides that the Company shall
indemnify and hold harmless, to the fullest extent authorized by the Delaware
General Corporation Law, its officers and directors against all expenses,
liability and loss actually and reasonably incurred in connection with any
civil, criminal, administrative or investigative action, suit or proceeding. The
By-laws also extend indemnification to those serving at the request of the
Company as directors, officers, employees or agents of other enterprises.
In addition, Article SIXTH of the Company's Restated Certificate of
Incorporation provides that no director shall be personally liable for monetary
damages for any breach of fiduciary duty as director. Article SIXTH does not
eliminate a director's liability (i) for a breach of his or her duty of loyalty
to the Company or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of the law, (iii)
under Section 174 of the Delaware General Corporation Law or (iv) for any
transactions from which the director derived an improper personal benefit.
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation to indemnify its directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlements
actually and reasonably incurred by them in connection with any action, suit or
proceeding brought by third parties, if such directors or officers acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reason to believe their conduct was unlawful. In a derivative
action, i.e., one by or in the right of the corporation, indemnification may be
made only for expenses (including attorneys' fees) actually and reasonably
incurred by directors and officers in connection with the defense or settlement
of an action or suit, and only with respect to a matter as to which they shall
have acted in good faith and in a manner they reasonably believed to be in or
not opposed to the best interest of the corporation, except that no
indemnification shall be made if such person shall have been adjudged liable to
the corporation, unless and only to the extent that the court in which the
action or suit was brought shall determine upon application that the defendant
officers or directors are reasonably entitled to indemnity for such expenses
despite such adjudication of liability.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a corporation may eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the
II-1
<PAGE>
director derived an improper personal benefit. No such provision shall eliminate
or limit the liability of a director for any act or omission occurring prior to
the date when such provision becomes effective.
The Underwriting Agreement and Subscription Agreement provide for
indemnification of directors and officers of the Company by the Underwriters and
the Managers against certain liabilities.
Pursuant to Section 145 of the DGCL and the Restated Certificate of
Incorporation and the By-laws of the Company, the Company maintains directors'
and officers' liability insurance coverage.
Item 15. Recent Sales of Unregistered Securities
Pursuant to Section 4(2) of the Securities Act of 1933, in December 1992,
the Company issued 240,000 shares of previously authorized 5.5% Cumulative
Subordinated Preferred Stock (the "5.5% Preferred Stock") to Hosokawa Micron
Corporation ("HMC"), a 98.0% shareholder of the Company, at $200 per share. In
fiscal year 1992, the Company issued 200,000 shares of 4.44% Cumulative
Preferred Stock (the "4.44% Preferred Stock") to HMC at $150 per share.
Effective September 3, 1997, all of the issued shares for both classes of
preferred stock were exchanged for Common Stock as follows:
(A) All 240,000 shares of 5.5% Preferred Stock were exchanged at the rate of
20.2261 shares of Common Stock for each share of 5.5% Preferred Stock,
for a total of 4.8 million shares of Common Stock.
(B) All 200,00 shares of 4.44% Preferred Stock were exchanged at the rate of
15.1695 shares of Common Stock for each share of 4.44% Preferred Stock,
for a total of 3.0 million shares of Common Stock.
Item 16. Exhibits
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement*
1.2 Form of Subscription Agreement*
3.1 Restated Certificate of Incorporation of the Company (including all amendments)
3.2 By-Laws of the Company
5 Opinion of Proskauer Rose LLP re: validity of securities*
10.1 Employment Agreement between Hosokawa Alpine AG and Achim Vogel
10.2 Employment Agreements between Dietmar Mayerhauser and Hosokawa Alpine AG and Hosokawa
Micron International B.V.
10.3 Consulting Services Agreement between the Company and Gerhard Kappeler
10.4 Employment Agreement between the Company and Isao Sato dated April 15, 1998
10.5 Employment Agreement between the Company and William Brennan*
10.6 Employment Agreement between the Company and Gordon Ettie*
10.7 Employment Agreement between the Company and Simon H. Baker*
10.8 Pension Agreement for Achim Vogel, Dietmar Mayerhauser and Dieter Hummel*
10.9 1997 Stock Option Plan
10.10 Stock Incentive Plan
10.11 Licensing Agreements between the Company or its subsidiaries and HMC
10.12 Asian Marketing Agreements between the Company or its subsidiaries and HMC
10.13 Commercial Paper Program dated December 16, 1991, among The Mitsubishi Bank, Limited, New
York Branch et. al. and the Company, including the Letter of Credit Agreement, Depositary
Agreement, Commercial Paper Dealer Agreement, Commercial Paper Master Note, Direct Draw
Letter of Credit, Commercial Paper Certificate Agreement, Eleventh Amendment to the Letter of
Credit Agreement (previous amendments not filed), and Guaranty
10.14 Lease Agreement, dated June 23, 1993, for the Trenton, South Carolina,
USA property between the Company and South Carolina Real Estate
Development Company, Inc.
10.15 Lease Agreement, dated April 30, 1980, for the Brampton, Canada
property between Hosokawa Micron Limited and Bramalea Limited (as
amended 4/11/91)
10.16 Lease Agreement, dated February 16, 1996, for the Hamburg, Germany
property between Hosokawa Kreuter GmbH and Verwatungsgesellschaft
Kreuter mbH (as amended December 9, 1997) (English summary translation)
10.17 Form of Indemnification Agreement between the Company and directors of the Company
</TABLE>
- ----------------
* To be filed by amendment
II-2
<PAGE>
<TABLE>
<S> <C>
10.18 Cost Sharing Agreement between HMC and the Company dated January 1, 1998
10.19 Collective Bargaining Agreement between Hosokawa Bepex Corporation and International
Association of Machinists and Aerospace Workers, AFL-CIO District
Lodge #190 effective October 1, 1995*
10.20 Supplemental Executive Retirement Plan of the Company effective as of April 14, 1998*
10.21 Form of Patent Assignment Agreement between Hosokawa Stott Limited and Hosokawa Micron
Corporation dated _________, 1998
10.22 Company 401(k) Retirement Plan
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Proskauer Rose LLP (contained in opinion to be filed as Exhibit 5)
24.1 Power of Attorney (set forth on page II-4)
27.1 Financial Data Schedule
</TABLE>
- ----------------
* To be filed by amendment
Item 17. Undertakings
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement (filed herewith as Exhibit 1.1)
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
registrant certifies that it has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York, State of New York, on the 20th day of April, 1998.
Hosokawa Micron International Inc.
By: /s/ Isao Sato
Isao Sato, President and Chief
Executive Officer
SIGNATURES AND POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below hereby constitutes and appoints Isao Sato, William J.
Brennan and Simon H. Baker, or any of them, as his true and lawful
attorney-in-fact and agent, with full power of substitution, to sign on his
behalf individually and in any and all capacities (until revoked in writing),
any and all amendments (including post-effective amendments) to this
Registration Statement on Form S-1, and any registration statement to relating
to the same offering as this Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) and the Securities Act of 1933, to file the same
with all exhibits thereto and all other documents in connection therewith with
the Securities and Exchange Commission, granting to such attorneys-in-fact and
agents, and each of them, full power and authority to do all such other acts and
things requisite or necessary to be done, and to execute all such other
documents as they, or either of them, may deem necessary or desirable in
connection with the foregoing, as fully as the undersigned might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents, or either of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------- ------------------------------------------- ---------------
<S> <C> <C>
/s/ Isao Sato President, Chief Executive Officer April 20, 1998
- ------------------------ and Director (Principal Executive Officer)
Isao Sato
/s/ William J. Brennan Executive Vice President, Chief April 20, 1998
- ------------------------ Financial Officer and Director
William J. Brennan (Principal Financial Officer)
/s/ James Keane Controller (Controller or Principal April 20, 1998
- ------------------------ Accounting Officer)
James Keane
/s/ Masuo Hosokawa Director April 20, 1998
- ------------------------
Masuo Hosokawa
/s/ Yoshio Hosokawa Director April 20, 1998
- ------------------------
Yoshio Hosokawa
/s/ Fumio Sawamura Director April 20, 1998
- ------------------------
Fumio Sawamura
/s/ Yoshizo Yamanokuchi Director April 20, 1998
- ------------------------
Yoshizo Yamanokuchi
/s/ Yoshiyuki Kawashima Director April 20, 1998
- ------------------------
Yoshiyuki Kawashima
/s/ David J.W. Grant Director April 20, 1998
- ------------------------
David J.W. Grant
/s/ Paul J. Powers Director April 20, 1998
- ------------------------
Paul J. Powers
</TABLE>
II-4
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
Years ended September 30, 1995, 1996, 1997
<TABLE>
<CAPTION>
Balance at Charged to
beginning Costs and Currency
of period Expenses Deductions Adjustment Acquisitions Balance
------------ ----------- ------------ ------------ -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts
Year Ended September 30, 1995 2,031 1,385 201 99 -- 3,314
Year Ended September 30, 1996 3,314 323 556 (34) 163 3,210
Year Ended September 30, 1997 3,210 816 729 (399) -- 2,898
</TABLE>
<TABLE>
<CAPTION>
Change in
Gross Def-Tax Asset
Balance at Charged to Balance at
beginning Costs and end
of period Expenses Deductions of period
------------ -------------------- ------------ -----------
<S> <C> <C> <C> <C>
Valuation Allowance
Year Ended September 30, 1995 18,139 4,591 543 22,187
Year Ended September 30, 1996 22,187 9,389 2,612 28,964
Year Ended September 30, 1997 28,964 2,736 2,249 29,451
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1 Form of Underwriting Agreement*
1.2 Form of Subscription Agreement*
3.1 Restated Certificate of Incorporation of the Company (including all amendments)
3.2 By-Laws of the Company
5 Opinion of Proskauer Rose LLP re: validity of securities*
10.1 Employment Agreement between Hosokawa Alpine AG and Achim Vogel
10.2 Employment Agreements between Dietmar Mayerhauser and Hosokawa Alpine AG and Hosokawa
Micron International B.V.
10.3 Consulting Services Agreement between the Company and Gerhard Kappeler
10.4 Employment Agreement between the Company and Isao Sato dated April 15, 1998
10.5 Employment Agreement between the Company and William Brennan*
10.6 Employment Agreement between the Company and Gordon Ettie*
10.7 Employment Agreement between the Company and Simon H. Baker*
10.8 Pension Agreement for Achim Vogel, Dietmar Mayerhauser and Dieter Hummel*
10.9 1997 Stock Option Plan
10.10 Stock Incentive Plan
10.11 Licensing Agreements between the Company or its subsidiaries and HMC
10.12 Asian Marketing Agreements between the Company or its subsidiaries and HMC
10.13 Commercial Paper Program dated December 16, 1991, among The Mitsubishi Bank, Limited, New
York Branch et. al. and the Company, including the Letter of Credit Agreement, Depositary
Agreement, Commercial Paper Dealer Agreement, Commercial Paper Master Note, Direct Draw
Letter of Credit, Commercial Paper Certificate Agreement, Eleventh Amendment to the Letter of
Credit Agreement (previous amendments not filed), and Guaranty
10.14 Lease Agreement, dated June 23, 1993, for the Trenton, South Carolina,
USA property between the Company and South Carolina Real Estate
Development Company, Inc.
10.15 Lease Agreement, dated April 30, 1980, for the Brampton, Canada
property between Hosokawa Micron Limited and Bramalea Limited (as
amended 4/11/91)
10.16 Lease Agreement, dated February 16, 1996, for the Hamburg, Germany
property between Hosokawa Kreuter GmbH and Verwatungsgesellschaft
Kreuter mbH (as amended December 9, 1997) (English summary translation)
10.17 Form of Indemnification Agreement between the Company and directors of the Company
10.18 Cost Sharing Agreement between HMC and the Company dated January 1, 1998
10.19 Collective Bargaining Agreement between Hosokawa Bepex Corporation and International
Association of Machinists and Aerospace Workers, AFL-CIO District
Lodge #190 effective October 1, 1995*
10.20 Supplemental Executive Retirement Plan of the Company effective as of April 14, 1998*
10.21 Form of Patent Assignment Agreement between Hosokawa Stott Limited and Hosokawa Micron
Corporation dated _________, 1998
10.22 Company 401(k) Retirement Plan
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Proskauer Rose LLP (contained in opinion to be filed as Exhibit 5)
24.1 Power of Attorney (set forth on page II-4)
27.1 Financial Data Schedule
</TABLE>
- ----------------
* To be filed by amendment
RESTATED CERTIFICATE OF INCORPORATION
OF
HOSOKAWA MICRON INTERNATIONAL INC.
This Restated Certificate of Incorporation of Hosokawa Micron
International Inc. was duly adopted by its Board of Directors and stockholders
in accordance with the provisions of Section 245 of the General Corporation Law
of the State of Delaware. The date of filing of the original Certificate of
Incorporation with the Secretary of State of the State of Delaware was September
23, 1986. The Certificate of Incorporation is restated and amended to read as
follows:
FIRST: The name of the Corporation is Hosokawa Micron International Inc.
SECOND: The address of the Corporation's registered office is 1209
Orange Street, City of Wilmington, County of New Castle, State of Delaware, and
the name of its registered agent at that address is The Corporation Trust
Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 8,000,000, consisting of 1,000,000
shares of Preferred Stock, par value $.01 per share ("Preferred Stock") and
7,000,000 shares of Common Stock, par value $.01 per share ("Common Stock").
Authority is hereby expressly granted to the Board of Directors to
authorize the issue from time to time of one or more classes or series of
Preferred Stock and with respect to each such class or series to fix by
resolution or resolutions, subject to the provisions hereof, the voting powers,
full or limited, or no voting powers, of the shares of such class or series and
the designations, preferences and relative, participating, optional or other
special rights and
<PAGE>
2
qualifications, limitations or restrictions thereof, to the fullest extent
permitted to the Board of Directors by the Delaware General Corporation Law.
FIFTH: The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation.
SIXTH: No director shall be personally liable to the Corporation or any
stockholder for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
under Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived an improper personal benefit. If the
Delaware General Corporation Law is amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of directors of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment or repeal of the foregoing provisions nor adoption of any
provision of this Restated Certificate of Incorporation or the By-Laws of the
Corporation which is inconsistent with the foregoing provisions shall adversely
affect any right or protection of a director of the Corporation existing at the
time of such amendment, repeal or adoption.
SEVENTH: The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors.
(1) The Board of Directors shall consist of not less than six nor
more than twelve directors (excluding directors elected by the holders of
any class or series of Preferred Stock, voting separately as a class or
series), the exact number of directors to be determined from time to time
solely by a resolution adopted by an affirmative vote of a majority of the
entire Board of Directors.
(2) The Board of Directors shall be divided into three classes, with
the term of office of one class expiring each year. The initial directors
of each class shall be those chosen by the stockholders at the time of
their approval of this Restated Certificate of
<PAGE>
3
Incorporation or (as to any directors added by increase in the number of
directors subsequent thereto and prior to the first annual meeting of
stockholders following the filing of this Restated Certificate of
Incorporation) by the Board of Directors. The directors of the first class
shall be elected to hold office for a term expiring at the annual meeting
of stockholders following the filing of this Restated Certificate of
Incorporation, the directors of the second class shall be elected to hold
office for a term expiring at the second annual meeting of stockholders
following the filing of this Restated Certificate of Incorporation and the
directors of the third class shall be elected to hold office for a term
expiring at the third annual meeting of stockholders following the filing
of this Restated Certificate of Incorporation. Commencing with the first
annual meeting of stockholders following the filing of this Restated
Certificate of Incorporation, the directors of each class whose term shall
then expire shall be elected to hold office for a three-year term. In case
of any increase in the number of directors, the number of directors in
each class shall be as nearly equal as possible.
(3) Newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal
from office or other cause shall be filled solely by the Board of
Directors, acting by not less than a majority of the directors then in
office. Any director so chosen shall hold office until the next election
of the class for which such director shall have been chosen. No decrease
in the number of directors shall shorten the term of any incumbent
director.
(4) Any director or the entire Board of Directors may be removed
only for cause. At any annual meeting of stockholders of the Corporation
or at any special meeting of stockholders of the Corporation the notice of
which shall state that the removal of a director or directors is among the
purposes of
<PAGE>
4
the meeting, the holders of capital stock entitled to vote thereon,
present in person or by proxy, by vote or a majority of the outstanding
shares thereof, may remove such director or directors for cause.
(5) Notwithstanding the foregoing, whenever the holders of any one
or more classes or series of Preferred Stock shall have the right, voting
separately by class or series, to elect any director, the election, term
of office, filling of vacancies and other features of such directorship
shall be governed by the terms of this Restated Certificate of
Incorporation applicable thereto and such director so elected shall not be
assigned to any class.
EIGHTH: The Corporation shall not enter into any Transaction (as
hereinafter defined) with or benefitting any Interested Stockholder (as
hereinafter defined) unless (a) the Transaction has been approved by the
affirmative vote of not less than 80% of the aggregate voting power of the
outstanding stock or (b) the Continuing Directors (as hereinafter defined) by a
two-thirds vote thereof have expressly approved the Transaction. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required or that a lesser percentage may be specified by law, the rules of any
national securities exchange or otherwise. For these purposes:
(1) The term "Continuing Director" shall mean a director who is not
affiliated with an Interested Stockholder and either (i) was a member of
the Board of Directors of the Corporation immediately prior to the time
that the Interested Stockholder, if any, became an Interested Stockholder
or (ii) was elected by or recommended for election by a majority of the
then Continuing Directors in office at the time such director was elected
or nominated for election.
(2) The term "Interested Stockholder" shall mean any person or group
(other than a trustee of an employee benefit plan of the Corporation or of
an employee benefit plan of an affiliate of the Corporation and other than
a person owning beneficially more than ten percent of the stock of the
Corporation on January 1, 1989) who is the beneficial owner of more than
ten percent of the voting power of the Corporation (those of the foregoing
terms which are defined in the rules under Section 13 of the
<PAGE>
5
Securities Exchange Act of 1934 shall have the same meanings as set forth
in such rules).
(3) The term "Transaction," when used in reference to the
Corporation and any Interested Stockholder, shall mean:
(i) any merger or consolidation of the Corporation or any
direct or indirect majority-owned subsidiary of the Corporation (A)
with the Interested Stockholder or (B) with any other corporation if
the merger or consolidation is caused by the Interested Stockholder;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions)
except proportionately as a stockholder of the Corporation, to or
with the Interested Stockholder, whether as part of a dissolution or
otherwise, of assets of the Corporation or of any direct or indirect
majority-owned subsidiary of the Corporation which assets have an
aggregate market value equal to ten percent or more of either the
aggregate market value of all the assets of the Corporation
determined on a consolidated basis or the aggregate market value
of all the outstanding stock of the Corporation;
(iii) any transaction involving the Corporation or any direct
or indirect majority-owned subsidiary of the Corporation which has
the effect, directly or indirectly, of increasing the proportionate
share of the stock of any class or series, or securities convertible
into the stock of any class or series, of the Corporation or of any
such subsidiary which is owned by the Interested Stockholder, except
(A) as a result of immaterial changes due to fractional share
adjustments or (B) as a result of any purchase or redemption of any
shares of stock not caused, directly or indirectly, by the
Interested Stockholder or (C) pursuant to the exercise, exchange or
conversion of securities exercisable for, exchangeable for or
convertible into stock of the Corporation or any such subsidiary
which securities were outstanding prior to the time that the
Interested Stockholder became such; or
<PAGE>
6
(iv) any receipt by the Interested Stockholder of the benefit,
directly or indirectly (except proportionately as a stockholder of
such corporation) of any loans, advances, guarantees, pledges or
other financial benefits (other than those expressly permitted in
subparagraph (iii) above) provided by or through the Corporation or
any direct or indirect majority-owned subsidiary.
NINTH: Following the date the Corporation first has a class of securities
registered under Section 12 of the Securities Exchange Act of 1934, no action
required to be taken at any annual or special meeting of stockholders of the
Corporation may be taken by written consent without a meeting, except by a
consent signed by all the stockholders of the Corporation entitled to vote
thereon.
TENTH: Articles SEVENTH, EIGHTH and NINTH shall be amended, altered or
repealed, and any provision inconsistent therewith shall be adopted, only by the
affirmative vote of not less than 80% of the aggregate voting power of the
outstanding stock.
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate
of Incorporation to be signed by its Chairman of the Board and President and
attested by its Secretary, this 18th day of January, 1989.
HOSOKAWA MICRON INTERNATIONAL INC.
By: [Illegible]
-----------------------------------------
Vice President
Attest:
/s/ [Illegible]
- -----------------------
Secretary
<PAGE>
BOOK 847 PAGE 243
PAGE 1
State of Delaware
Office of Secretary of State
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF HOSOKAWA MICRON INTERNATIONAL INC. FILED IN THIS OFFICE ON THE
TWENTY-SEVENTH DAY OF MARCH, A.D. 1989, AT 10 O'CLOCK A.M.
/s/ Michael Harkins
---------------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: 12117980
DATE: 03/27/1989
[Seal of the
Department of State
Delaware
Office of the Secretary of State]
<PAGE>
BOOK 847 PAGE 244
FILED
MAR 27 1989
[ILLEGIBLE]
SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
OF
THE RESTATED CERTIFICATE OF INCORPORATION
OF
HOSOKAWA MICRON INTERNATIONAL INC.
HOSOKAWA MICRON INTERNATIONAL INC., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY
as follows:
FIRST: The Restated Certificate of Incorporation of the Corporation is
hereby amended by the deletion of Article FOURTH thereof and the substitution
therefor of a new Article FOURTH to read in its entirety as follows:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 20,000,000, consisting of
2,000,000 shares of Preferred Stock, par value $.01 per share ("Preferred
Stock"), and 18,000,000 shares of Common Stock, par value $.01 per share
("Common Stock").
Authority is hereby expressly granted to the Board of Directors to
authorize the issue from time to time of one or more classes or series of
Preferred Stock and with respect to each such class or series to fix by
resolution or resolutions, subject to the provisions hereof, the voting
powers, full or limited, or no voting powers, of the shares of such class
or series and the designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof, to the fullest extent permitted to the Board of
Directors by the Delaware General Corporation Law.
SECOND: The aforesaid amendment to the Restated Certificate of
Incorporation of the Corporation has been duly adopted in accordance with the
applicable provisions of Section 242 and Section 228 of the General Corporation
Law of the State of Delaware, the Board of Directors of the Corporation having
duly adopted a resolution setting forth such amendment and declaring its
advisability, and, in lieu of a meeting and vote of stockholders, all of the
stockholders of the Corporation who would have been entitled to vote upon such
amendment if a meeting of stockholders were held having duly consented in
writing to its adoption.
THIRD: This Certificate of Amendment of the Restated Certificate of
Incorporation has been executed and acknowledged and shall be filed and recorded
in accordance with Section 103 of the General Corporation Law of the State of
Delaware.
<PAGE>
BOOK 847 PAGE 245
2
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Richard E. Love, its Vice President, and to be attested by Fumio
Sawamura, its Assistant Secretary, this 23rd day of March, 1989.
HOSOKAWA MICRON INTERNATIONAL INC.
By: /s/ Richard E. Love
-------------------------------
Richard E. Love
Vice President
Attested By:
/s/ Fumio Sawamura
- ---------------------
Fumio Sawamura
Assistant Secretary
RECEIVED FOR RECORD
MAR 28 1989
William M. Honey, Recorder
.<PAGE>
FILED
AUG 9 1990
/s/ Michael Harkins
-------------------
SECRETARY OF STATE
3:15 PM
CERTIFICATE OF AMENDMENT
OF
THE RESTATED CERTIFICATE OF INCORPORATION
OF
HOSOKAWA MICRON INTERNATIONAL INC.
HOSOKAWA MICRON INTERNATIONAL INC., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY as follows:
FIRST: The Restated Certificate of Incorporation of the Corporation is
hereby amended by the deletion of Article FOURTH thereof and the substitution
therefor of a new Article FOURTH to read in its entirety as follows:
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 4,000,000, consisting of
200,000 shares of Preferred Stock, par value $.01 per share ("Preferred
Stock"), and 3,800,000 shares of Common Stock, par value $.01 per share
("Common Stock").
Authority is hereby expressly granted to the Board of Directors to
authorize the issue from time to time of one or more classes or series of
Preferred Stock and with respect to each such class or series to fix by
resolution or resolutions, subject to the provisions hereof, the voting
powers, full or limited, or no voting powers, of the shares of such class
or series and the designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof, to the fullest extent permitted to the Board of
Directors by the Delaware General Corporation law.
SECOND: The aforesaid amendment to the Restated Certificate of
Incorporation of the Corporation has been duly adopted in accordance with the
applicable provisions of Sections 242 and 228 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Corporation having duly
adopted a resolution setting forth such amendment and declaring its
advisability, and, in lieu of a meeting and vote of stockholders, a majority of
the stockholders of the Corporation have given written consent to said amendment
in accordance with the provisions of Section 228 of the General Corporation Law
of the State of Delaware and the written notice of the adoption of the amendment
has been given as provided in Section 22B of the General Corporation Law of the
State of Delaware to every stockholder entitled to such notice.
-9-
<PAGE>
THIRD: This Certificate of Amendment of the Restated Certificate of
Incorporation has been executed and acknowledged and shall be filed and recorded
in accordance with Section 103 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Fumio Sawamura, its Executive Vice President, and to be attested by
Simon H. Baker, its Secretary, this 9th day of August, 1990.
HOSOKAWA MICRON INTERNATIONAL INC.
By: /s/ Fumio Sawamura
------------------------------
Fumio Sawamura
Executive Vice President
Attested By:
/s/ Simon H. Baker
- ------------------------------
Simon H. Baker
Secretary
<PAGE>
[State of Delaware Secretary of State Letterhead]
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF HOSOKAWA MICRON INTERNATIONAL INC. FILED IN THIS OFFICE ON THE NINTH DAY OF
AUGUST, A.D. 1990, AT 3:15 O'CLOCK P.M.
/s/ Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
AUTHENTICATION: 12757288
DATE: 08/09/1990
[SEAL OF DEPARTMENT OF STATE,
OFFICE OF THE SECRETARY OF STATE,
DELAWARE]
730221022
<PAGE>
STATE OF DELAWARE
[SEAL]
Office of Secretary of State
I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
STOCK DESIGNATION OF "HOSOKAWA MICRON INTERNATIONAL INC." FILED IN THIS OFFICE
ON THE NINTH DAY OF OCTOBER, A.D. 1992, AT 10 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
* * * * * * * * * *
[SEAL OF DEPARTMENT OF STATE
OFFICE OF THE SECRETARY OF STATE
DELAWARE]
722283050 /s/ Michael Ratchford
-------------------------------------
Michael Ratchford, Secretary of State
AUTHENTICATION: *3620244
DATE: 10/09/1992
<PAGE>
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER
SPECIAL RIGHTS AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, OF THE PREFERRED STOCK
OF
HOSOKAWA MICRON INTERNATIONAL INC., a corporation organized and
existing under the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation of said corporation, and pursuant to
the provisions of Section 151 of Title 8 of the Delaware Code of 1953, said
Board of Directors, at a meeting duly held on January 28, 1992 approved of the
issuance of preferred stock and at a meeting on May 19, 1992, the following
resolution:
NOW, THEREFORE, BE IT RESOLVED, that there is hereby confirmed
authorization of such series of Preferred Stock on the terms and with the
provisions herein set forth:
1. Designation. The designation of the series of 4.44% Preferred
Stock authorized by this resolution shall be "Cumulative Preferred Stock, $.01
par value per share" (the "Cumulative Preferred Stock"). The total number of
shares of Cumulative Preferred Stock shall be 200,000.
2. Rank. The Cumulative Preferred Stock shall, with respect to
dividend rights and rights on liquidation, winding up and dissolution, rank
prior to all classes of common stock and all other classes or series of stock
including other classes or series of preferred stock of the Corporation,
including, without limitation, the Common Stock, par value $.01 per share. All
equity securities of the Corporation to which the Cumulative Preferred Stock
ranks prior are collectively referred to herein as the "Junior Securities." So
long as any shares of Cumulative Preferred Stock are outstanding, the
Corporation may not authorize, create or issue any class or series of stock
which ranks prior to, or on a parity with, the Cumulative Preferred Stock with
respect to either dividend rights or rights on liquidation, winding up or
dissolution.
3. Dividends. (a) The holders of the shares of Cumulative
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of the funds legally available for the payment of
dividends, cumulative cash dividends at the annual rate of $6.66 per share for
each calendar year and no more. Such dividends shall be declared semi-annually
on the last business day of March and September ("the dividend declaration
date") and shall
<PAGE>
be payable in cash not more than 60 days after declaration (each of such dates
being a "dividend payment date"), commencing with the first such dividend
declaration date following the issuance of the Cumulative Preferred Stock, in
preference to dividends on the Junior Securities. Such dividend shall be paid to
the holders of record at the close of business on the dates specified above.
Dividends payable on shares of Cumulative Preferred Stock shall be fully
cumulative and shall accrue (whether or not earned or declared) from the date of
original issue of such shares.
(b) All dividends paid with respect to shares of the
Cumulative Preferred Stock pursuant to paragraph 3(a) shall be paid pro rata to
the holders entitled thereto.
(c) The Corporation shall not declare, pay or set apart for
payment any dividend on any of the Junior Securities or make any distribution in
respect thereof, either directly or indirectly, and whether in cash, obligations
or shares of the Corporation or other property (other than distributions or
dividends in Junior Securities) and shall not permit any corporation or other
entity directly or indirectly controlled by the Corporation to do so unless
prior to or concurrently with such declaration, as the case may be, all accrued
and unpaid dividends, if any, on shares of the Cumulative Preferred Stock not
paid on the dates provided for in paragraph 3(a) hereof shall have been or be
paid. So long as any shares of Cumulative Preferred Stock are outstanding, the
Corporation shall not make any payment on account of, or set apart for payment
money for a sinking fund or other similar fund for, the purchase, redemption,
retirement or other acquisition for value of, or redeem, purchase, retire or
otherwise acquire for value any of the Junior Securities or any warrants,
rights, calls or options exercisable for or convertible into any Junior
Securities and shall not permit any corporation or other entity directly or
indirectly controlled by the Corporation to purchase, redeem or otherwise
acquire for value any of the Junior Securities or any warrants, rights, calls or
options exercisable for or convertible into any of the Junior Securities, except
that (a) the Corporation may repurchase capital stock of the Corporation from
directors, officers, and employees of the Corporation or its subsidiaries and
affiliates whose employment has been terminated; provided, however, that the
aggregate amount of all such repurchases in any fiscal year shall not exceed
$1,000,000 and (b) the Corporation may repurchase shares of its Common Stock
from holders of the Common Stock who do not own more than 50 percent of the
total outstanding shares of Common Stock of the Corporation.
(d) Subject to the foregoing provisions of this paragraph 3
and to the provisions of paragraph 4, the Board of Directors may declare and the
Corporation may pay or set apart for payment dividends and other distributions
on any of the Junior Securities, and may purchase or otherwise redeem any of the
Junior Securities or any warrants, rights or options exercisable for or
convertible into any of the Junior Securities, and the holders of the shares of
the Cumulative Preferred Stock shall not be entitled to share therein.
<PAGE>
4. L
. (a) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of shares of Cumulative Preferred Stock then
outstanding shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders an amount in cash equal to $150
for each share outstanding, plus an amount in cash equal to all accrued but
unpaid dividends (whether or not earned or declared) thereon to the date fixed
for liquidation, dissolution or winding up before any payment shall be made or
any assets distributed to the holders of any of the Junior Securities. Except as
provided in the preceding sentence, holders of Cumulative Preferred Stock shall
not be entitled to any distribution in the event of liquidation, dissolution or
winding up of the affairs of the Corporation. If the assets of the Corporation
are not sufficient to pay in full the liquidation payments payable to the
holders of outstanding shares of the Cumulative Preferred Stock, then the
holders of all such shares shall share ratably in such distribution of assets in
accordance with the amount which would be payable on such distribution if the
amounts to which the holders of outstanding shares of Cumulative Preferred Stock
are entitled were paid in full.
(b) For the purposes of this paragraph 4, neither the
voluntary sale, lease, conveyance, exchange or transfer (for cash, shares of
stock, securities or other consideration) of all or substantially all of the
property or assets of the Corporation nor the consolidation or merger of the
Corporation with one or more other corporations shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, unless such
voluntary sale, lease, conveyance, exchange or transfer shall be in connection
with a plan of liquidation, dissolution or winding up of the Corporation.
5. Redemption. (a) To the extent the Corporation shall have funds
legally available for such redemption, the Corporation may redeem at its option,
at any time and from time to time commencing June 1, 1992, the Cumulative
Preferred Stock, in whole or in part, at a redemption price of $155.00 per share
during the period June 1, 1992 through and including March 31, 1993, at a
redemption price of $154.00 per share during the period April 1, 1993 through
and including March 31, 1994, at a redemption price of $153.00 per share during
the period April 1, 1994 through and including March 31, 1995, at a redemption
price of $152.00 per share during the period April 1, 1995 through and including
March 31, 1996, at a redemption price of $151.00 per share during the period
April 1, 1996 through and including March 31, 1997, and at a redemption price of
$150.00 per share thereafter, in cash, plus in each case an amount in cash equal
to all accrued and unpaid dividends (whether or not earned or declared) thereon
to the date fixed for redemption, without interest.
(b) Shares of Cumulative Preferred Stock which have been
issued and reacquired in any manner, including shares purchased or redeemed,
shall (upon compliance with any applicable provisions of the laws of the State
of Delaware) have the status of authorized and unissued shares of the class of
Preferred Stock
<PAGE>
undesignated as to series and may be redesignated and reissued as part of any
series of the Preferred Stock; provided, however, that no such issued and
reacquired shares of Cumulative Preferred Stock shall be reissued or sold as
Cumulative Preferred Stock.
(c) Notwithstanding the foregoing provisions of paragraph
5(a), unless full cumulative dividends on all outstanding shares of Cumulative
Preferred Stock shall have been paid or contemporaneously are declared and paid
for all past dividend periods, none of the shares of Cumulative Preferred Stock
shall be redeemed pursuant to paragraph 5(a) unless all outstanding shares of
Cumulative Preferred Stock are simultaneously redeemed.
6. Conversion. The Cumulative Preferred Stock shall not be
convertible into shares of Common Stock of the Corporation or any other class or
series of stock of the Corporation.
7. Procedure for Redemption. (a) In the event that fewer than all
the outstanding shares of Convertible Preferred Stock are to be redeemed, the
number of shares to be redeemed shall be determined, subject to the provisions
of paragraph 5 hereof, by the Board of Directors and the shares to be redeemed
shall be selected by lot or pro rata as may be determined by the Board of
Directors.
(b) In the event the Corporation shall redeem shares of
Convertible Preferred Stock, notice of such redemption shall be given by first
class mail, postage prepaid, and mailed not less than 30 days nor more than 60
days prior to the redemption date, to each holder of record of the shares to be
redeemed at such holder's address as the same appears on the stock register of
the Corporation, provided, however, that no failure to give such notice nor any
defect therein shall affect the validity of the proceeding for the redemption of
any shares of Convertible Preferred Stock to be redeemed except as to the holder
to whom the Corporation has failed to give said notice or except as to the
holder whose notice was defective. Each such notice shall state: (a) the
redemption date; (b) the number of shares of Convertible Preferred Stock to be
redeemed; and, if less than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed; (c) the redemption price;
(d) the place of places where certificates for such shares are to be surrendered
for payment of the redemption price; and (e) that dividends on the shares to be
redeemed will cease to accrue on such redemption date.
(c) Notice having been mailed as aforesaid and provided that
on or before the redemption date specified in such notice all funds necessary
for such redemption shall have been set aside by the Corporation, separate and
apart from its other funds with a trust company (having capital and surplus of
not less than $ 100,000,000) in the borough of Manhattan, City of New York, in
trust for the pro rata benefit of the holders of the shares so called for
redemption, so as to be and to continue to be available therefor, then, from and
after the redemption date
<PAGE>
dividends on the shares of Cumulative Preferred Stock so called for redemption
shall cease to accrue, and said shares shall no longer be deemed to be
outstanding for any purpose and shall not have the status of shares of
Cumulative Preferred Stock, and all rights of the holders thereof as
stockholders of the Corporation (except the right to receive from the
Corporation the redemption price without interest) shall cease. In case fewer
than all the shares represented by any such certificate are redeemed, a new
certificate or certificates shall be issued representing the unredeemed shares
without cost to the holder thereof. Any funds deposited and unclaimed at the end
of one year from the date fixed for redemption shall be repaid to the
Corporation upon its request, after which repayment the holders of shares called
for redemption shall look only to the Corporation for payment.
8. Voting Rights. (a) The holders of record of shares of
Cumulative Preferred Stock shall be entitled to the same voting rights as is
provided to holders of Common Stock of the Corporation. Each share of Cumulative
Preferred Stock par value $.01 shall be entitled to one vote and shall be
included with (and not as a separate class except as provided in paragraph 8(b))
with the votes of the holders of the Common Stock.
(b) Notwithstanding paragraph 8(a), if at any time (i) any
dividend payable on Cumulative Preferred Stock shall be in arrears and unpaid
for six (6) months, then the number of directors constituting the Board of
Directors, without further action, shall be increased by two (2) directors and
the holders of Cumulative Preferred Stock shall have the exclusive right, voting
separately as a class, to elect the director(s) of the Corporation to fill such
newly created directorship(s) ("Additional Voting Right"), the remaining
directors to be elected by the class or classes of stock entitled to vote
therefor, at each meeting of stockholders held for the purpose of electing
directors.
(c) At any time when an Additional Voting Right shall have
vested in the holders of Cumulative Preferred Stock and if such right shall not
already have been initially exercised, a proper officer of the Corporation
shall, upon the written request of any holder of record of Cumulative Preferred
Stock then outstanding, addressed to the Secretary of the Corporation, call a
special meeting of holders of Cumulative Preferred Stock. Such meeting shall be
held at the earliest practicable date upon the notice required for annual
meetings of stockholders at the place for holding annual meetings of
stockholders of the Corporation or, if none, at a place designated by the
Secretary of the Corporation. If such meeting shall not be called by the proper
officers of the Corporation within 30 days after the personal service of such
written request upon the Secretary of the Corporation, or within 30 days after
mailing the same within the United States, by registered mail, addressed to the
Secretary of the Corporation at its principal office (such mailing to be
evidenced by the registry receipt issued by the postal authorities), then the
holders of record of 10% of the shares of Cumulative Preferred Stock then
outstanding may designate in writing a holder of Cumulative Preferred Stock to
call such
<PAGE>
meeting at the expense of the Corporation, and such meeting may be called by
such person so designated upon the notice required for annual meetings of
stockholders and shall be held at the same place as is elsewhere provided in
this paragraph (c) or at such other place as is selected by such person so
designated. Any holder of Cumulative Preferred Stock which would be entitled to
vote at any such meeting shall have access to the stock books of the Corporation
for the purpose of causing a meeting of stockholders to be called pursuant to
the provisions of this paragraph. Notwithstanding the provisions of this
paragraph, however, no such special meeting shall be called during a period
within 90 days immediately preceding the date fixed for the next annual meeting
of the stockholders.
(d) At any meeting held for the purpose of electing
directors at which the holders of Cumulative Preferred Stock shall have the
right to elect directors as provided in paragraph (b) hereof, the presence in
person or by proxy of the holders of the lesser of (i) a majority of the then
outstanding shares of Cumulative Preferred Stock or (ii) a percentage of the
then outstanding shares of Cumulative Preferred Stock which percentage is equal
to the percentage of the then outstanding shares of Common Stock then required
to constitute a quorum for the election of directors by holders of Common Stock
shall be required and be sufficient to constitute a quorum of the holders of
Cumulative Preferred Stock. At any such meeting or adjournment thereof (x) the
absence of a quorum of the holders of Cumulative Preferred Stock shall not
prevent the election of directors other than those to be elected by the holders
of stock of such class and the absence of a quorum or quorums of the holders of
capital stock entitled to elect such other directors shall not prevent the
election of directors to be elected by the holders of Cumulative Preferred Stock
and (y) in the absence of a quorum of the holders of Cumulative Preferred Stock
entitled to vote for the election of directors, a majority of the holders
present in person or by proxy of such class shall have the power to adjourn the
meeting for the election of directors which the holders of such class are
entitled to elect, from time to time, without notice (except as required by law)
other than announcement at the meeting, until a quorum shall be present.
(e) The term of office of all directors elected by the
holders of Cumulative Preferred Stock pursuant hereto in office at any time when
the aforesaid Additional Voting Rights are vested in the holders of Cumulative
Preferred Stock shall terminate upon the election of their successors at any
meeting of stockholders for the purpose of electing directors. Upon any
termination of the aforesaid Additional Voting Rights in accordance with
paragraph 8(c), the term of office of all directors elected by the holders of
Cumulative Preferred Stock then in office shall thereupon terminate and upon
such termination the number of directors constituting the board of directors
shall, without further action, be reduced by two (2), subject always to the
increase of the number of directors pursuant to paragraph 8(b) in case of the
future right of the holders of Cumulative Preferred Stock to elect additional
directors as provided herein.
<PAGE>
(f) In case of any vacancy occurring among the directors
elected by the holders of Cumulative Preferred Stock, the remaining director who
shall have been so elected may appoint a successor to hold office for the
unexpired term of the director whose place shall be vacant. If all directors so
elected by the holders of Cumulative Preferred Stock shall cease to serve as
directors before their terms shall expire, the holders of Cumulative Preferred
Stock then outstanding may, at a special meeting of the holders called as
provided above, elect successors to hold office for the unexpired terms of the
directors whose places shall be vacant.
(g) So long as any shares of Cumulative Preferred Stock are
outstanding, the Corporation shall not, either directly or indirectly or through
merger or consolidation with or into any other corporation, (i) amend, alter or
repeal the Restated Certificate of Incorporation of the Corporation if such
amendment, alteration or repeal would alter or change the powers, preferences or
special rights of the Cumulative Preferred Stock without the consent or
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Cumulative Preferred Stock, voting as a separate class, or (ii) authorize,
issue or create, or increase the authorized amount of any preferred stock
ranking senior to or on a parity with the Cumulative Preferred Stock or any
additional shares of Cumulative Preferred Stock without the consent or
affirmative vote of the holders of at least two thirds of the outstanding shares
of Cumulative Preferred Stock, voting as a separate class.
IN WITNESS WHEREOF, said Hosokawa Micron International Inc. has
caused this Certificate to be signed by William J. Brennan, its Senior
Vice-President and attested by Simon H. Baker, its Secretary this 6th day of
October, 1992.
---------------------------
by: /s/ William J. Brennan
---------------------------
Senior Vice President
ATTEST:
By: /s/ Simon H. Baker
---------------------------
Secretary
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "HOSOKAWA MICRON INTERNATIONAL INC." FILED IN THIS OFFICE ON THE
TWENTY-SIXTH DAY OF APRIL, A.D. 1993, AT 10 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ William T. Quillen
--------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: *3873033
DATE: 04/26/1993
[GREAT SEAL OF
THE STATE OF DELAWARE]
723116074
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
HOSOKAWA MICRON INTERNATIONAL INC.
Hosokawa Micron International Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by the unanimous
written consent of its members, filed with the Minutes of the Board, adopted a
resolution proposing and declaring advisable the following amendment to the
Restated Certificate of Incorporation of said corporation:
RESOLVED, that the Restated Certificate of Incorporation of Hosokawa
Micron International Inc. be amended by changing the Fourth Article
thereof so that, as amended, said Article shall be and read as follows:
"FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 4,240,000 consisting of
440,000 shares of Preferred Stock, par value $.01 per share ("Preferred
Stock"), and 3,800,000 shares of Common Stock, par value $.01 per share
("Common Stock").
Authority is hereby expressly granted to the Board of Directors to
authorize the issue from time to time of one or more classes or series of
Preferred Stock and with respect to each such class or series to fix by
resolution or resolutions, subject to the provisions hereof, the voting
powers, full or limited, or no voting powers, of the shares of such class
or series and the designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof, to the fullest extent permitted to the Board of
Directors by the Delaware General Corporation Law."
<PAGE>
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given written consent to said amendment in accordance with the
provisions of Section 228 of the General Corporation Law of the State of
Delaware and written notice of the adoption of the amendment has been given as
provided in Section 228 of the General Corporation Law of the State of Delaware
to every shareholder entitled to such notice.
THIRD: That the aforesaid amendment was duly adopted in accordance with
the applicable provisions of Sections 242 and 228 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, said Hosokawa Micron International Inc. has caused
this certificate to be signed by Isao Sato, its President and Chief Operating
Officer and attested by Simon H. Baker, its Secretary, this 12th day of April,
1993.
HOSOKAWA MICRON INTERNATIONAL INC.
By: /s/ Isao Sato
-------------------------------------
Isao Sato
President and Chief Operating Officer
ATTEST:
By: /s/ Simon H. Baker
------------------
Secretary
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
STOCK DESIGNATION OF "HOSOKAWA MICRON INTERNATIONAL INC." FILED IN THIS OFFICE
ON THE FIFTEENTH DAY OF JUNE, A.D. 1993, AT 2 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[GREAT SEAL OF THE STATE OF DELAWARE]
/s/ William T. Quillen
--------------------------------------
William T. Quillen, Secretary of State
[SECRETARY'S SEAL]
723166089
AUTHENTICATION: *3940234
Date: 06/16/1993
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS OF 5.5% CUMULATIVE SUBORDINATED PREFERRED STOCK
AND QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF
-------------------------------------------
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
HOSOKAWA MICRON INTERNATIONAL INC. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify that pursuant to the provisions of Section 151 of
the General Corporation Law of the State of Delaware, the Board of Directors of
the Corporation by unanimous written consent dated December 27, 1992 approved of
the issuance of an additional series of subordinated cumulative preferred stock
and by unanimous written consent dated January 25, 1992 adopted the following
resolution, which resolution remains in full force and effect as of the date
hereof:
WHEREAS, the Board of Directors of the Corporation is authorized, within
the limitations and restrictions stated in the Restated Certificate of
Incorporation, to fix by resolution or resolutions the designation of each
series of Preferred Stock of the Corporation (the "Preferred Stock") and the
powers, preferences and relative participating, optional or other special rights
and the qualifications, limitations or restrictions thereof, including without
limiting the generality of the foregoing, such provisions as may be desired
concerning voting, redemption, dividends, dissolution or distribution of assets,
conversion or exchange, and such other subjects or matters as may be fixed by
resolutions of the Board of Directors under the General Corporation Law of
Delaware; and
WHEREAS, it is the desire of the Board of Directors of the Corporation,
pursuant to its authority as aforesaid, to confirm authorization and the fixing
of the terms of a series of Preferred Stock and the number of shares
constituting such series as provided for by unanimous written consent of the
Board of Directors (the "Board") dated December 27, 1992.
NOW, THEREFORE, BE IT RESOLVED, that there is hereby confirmed
authorization of such series of Preferred Stock on the terms and with the
provisions herein set forth:
-1-
<PAGE>
1. Designation. The designation of the series of Preferred Stock
authorized by this resolution shall be "Cumulative Subordinated Preferred Stock,
$.01 par value per share" (the "New Series"). The maximum number of shares of
the New Series shall be 240,000.
2. Rank. The New Series shall, with respect to dividend rights and
rights of liquidation, winding up and dissolution, rank prior to all classes of
common stock including, with limitation, the Common Stock, par value $.01 per
share but will rank after the Corporation's 4.44% Cumulative Preferred Stock
issued in accordance with the terms of the Certificate of Designation,
Preferences and Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions Thereof adopted
by the Board of Directors of the Corporation on May 19, 1992. All equity
securities of the Corporation to which the New Series ranks prior are
collectively referred to herein as the "Junior Securities." All equity
Securities of the Corporation to which the New Series ranks after are
collectively referred to herein as the "Senior Securities."
3. Dividends. (a) The holders of the shares of the New Series shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the funds legally available for the payment of dividends, cumulative cash
dividends at the annual rate of $11.00 per share for each calendar year and no
more. Such dividends shall be declared semi-annually on the last business day of
March and September ("the dividend declaration date") and shall be payable in
cash not more than 60 days after declaration (each of such dates being a
"dividend payment date"), commencing with the first such dividend declaration
date following the issuance of the New Series in preference to dividends on the
Junior Securities but in no event shall a dividend on the New Series be declared
and paid unless and until any and all dividend obligations with regard to all
Senior Securities have been or will be met concurrent with the payment of the
dividend on the New Series. Such dividend shall be paid to the holders of record
at the close of business on the dates specified above. Dividends payable on
shares of the New Series shall be fully cumulative and shall accrue (whether or
not earned or declared) from the date of original issue of such shares.
(b) All dividends paid with respect to shareS of the New Series
pursuant to paragraph 3(a) shall be paid pro rata to the holders entitled
thereto.
(c) The Corporation shall not declare, pay or set apart for
payment any dividend on any of the Junior Securities or make any distribution in
respect thereof, either directly or indirectly, and whether in cash, obligations
or shares of the Corporation or other property (other than distributions or
dividends in Junior Securities) and shall not permit any corporation or other
entity directly or indirectly controlled by the Corporation to do so unless
prior to or concurrently with such declaration, as the case may be, all accrued
and unpaid dividends, if any, on shares
-2-
<PAGE>
of the New Series not paid on the dates provided for in paragraph 3(a) hereof
shall have been or be paid. So long as any shares of the New Series are
outstanding, the Corporation shall not make any payment on account of, or set
apart for payment money for a sinking fund or other similar fund for, the
purchase, redemption, retirement or other acquisition for value of, or redeem,
purchase, retire or otherwise acquire for value any of the Junior Securities or
any warrants, rights, calls or options exercisable for or convertible into any
Junior Securities and shall not permit any corporation or other entity directly
or indirectly controlled by the Corporation to purchase, redeem or otherwise
acquire for value any of the Junior Securities or any warrants, rights, call or
options exercisable for or convertible into any of the Junior Securities, except
that (a) the Corporation may repurchase capital stock for the Corporation from
directors, officers, and employees of the Corporation or its subsidiaries and
affiliates whose employment has been terminated; provided, however, that the
aggregate amount of such repurchases in any fiscal year shall not exceed
$1,000,000 and (b) the Corportation may repurchase shares of its Common Stock
from holders of the Common Stock who do not own more than 50 percent of the
total outstanding shares of Common Stock of the Corporation.
(d) Subject to the foregoing provisions of this paragraph 3 and to
the provisions of paragraph 4, the Board of Directors may declare and the
Corporation may pay or set apart for payment dividends and other distributions
on any of the Junior Securities, and may purchase or otherwise redeem any of
the Junior Securities or any warrants, rights or options exercisable for or
convertible into any of the Junior Securities, and the holders of the share of
the New Series shall not be entitled to share therein.
4. Liquidation Preference. (a) In the event of any voluntary or
involuntary liquidations, dissolution or winding up of the affairs of the
Corporation, the holders of share of the New Series then outstanding shall be
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders an amount in cash equal to $200.00 for each
share outstanding, plus an amount in cash equal to all accrued but unpaid
dividends (whether or not earned or declared) thereon to the date fixed for
liquidation, dissolution or winding up before any payment shall be made or any
assets distributed to the holders of any of the Junior Securities but only after
all required payments are made on all Senior Securities. Except as provided in
the preceding sentence, holders of the New Series shall not be entitled to any
distribution in the event of liquidation, dissolution or winding up of the
affairs of the Corporation. If the assets of the Corporation are not sufficient
to pay in full the liquidation payments payable to the holders of outstanding
shares of the new Series after the payment of all amounts required to be paid to
all holders of the Corporation's Senior Securities, then the holders of all such
shares shall share ratably in such distribution of assets in accordance with the
amount which would be payable on such
-3-
<PAGE>
distribution if the amounts to which the holders of outstanding shares of the
New Series are entitled were paid in full.
(b) For the purposes of this paragraph 4, neither the voluntary
sale, lease, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
or assets of the Corporation nor the consolidation or merger of the Corporation
with one or more other corporations shall be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, unless such voluntary sale,
lease, conveyance, exchange or transfer shall be in connection with a plan of
liquidation, dissolution or winding up of the Corporation.
5. Redemption. (a) To the extent the Corporation shall have funds
legally available for such redemption, the Corporation may redeem at its option,
at any time and from time to time commencing January 25, 1993, the New Series in
whole or in part, at a redemption price of $204.00 per share during the period
January 25, 1993 through and including January 24, 1994, at a redemption price
of $202.00 per share during the period January 25, 1994 through and including
January 24, 1995, and at a redemption price of $200.00 per share thereafter, in
cash, plus in each case an amount in cash equal to all accrued and unpaid
dividends (whether or not earned or declared) thereon to the date fixed for
redemption, without interest.
(b) Shares of the New Series which have been issued and reacquired
in any manner, including shares purchased or redeemed, shall (upon compliance
with any applicable provisions of the laws of the State of Delaware) have the
status of authorized and unissued shares of the class of Preferred Stock
undesignated as to series and may be redesignated and reissued as part of any
series of Preferred Stock; provided, however, that no such issued and
reacquired shares of the New Series shall be reissued or sold as the New Series.
(c) Notwithstanding the foregoing provisions of paragraph 5(a),
unless full cumulative dividends on all outstanding shares of the New Series
shall have been paid or contemporaneously are declared and paid for all past
dividend periods and full cumulative dividends shall have or will simultaneously
be paid on all Senior Securities, none of the shares of the New Series shall be
redeemed pursuant to paragraph 5(a).
6. Conversion. The New Series shall not be convertible into shares of
Common Stock of the Corporation or any other class or series of stock of the
Corporation.
7. Procedure for Redemption. (a) In the event that fewer than all the
outstanding shares of the New Series are to be redeemed, the number of shares to
be redeemed shall be determined, subject to the provisions of paragraph 5
hereof, by
-4-
<PAGE>
the Board of Directors and the shares to be redeemed shall be selected by lot or
pro rata as may be determined by the Board of Directors.
(b) In the event the Corporation shall redeem shares of the New
Series, notice of such redemption shall be given by first class mail, postage
prepaid, and mailed not less than 30 days nor more than 60 days prior to the
redemption date, to each holder of record of the shares to be redeemed at such
holder's address as the same appears on the stock register of the Corporation,
provided, however, that no failure to give such notice nor any defect therein
shall affect the validity of the proceeding for the redemption of any shares of
the New Series to be redeemed except as to the holder to whom the Corporation
has failed to five said notice or except as to the holder whose notice was
defective. Each such notice shall state: (a) the redemption date; (b) the number
of shares of the New Series to be redeemed; and, if less than all the shares
held by such holder are to be redeemed, the number of such shares to be
redeemed; (c) the redemption price; (d) the place or places where certificates
for such shares are to be surrendered for payment of the redemption price; and
(e) that dividends on the shares to be redeemed will cease to accrue on such
redemption date.
(c) Notice having been mailed as aforesaid and provided that on or
before the redemption date specified in such notice all funds necessary for such
redemption shall have been set aside by the Corporation, separate and apart from
its other funds with a trust company (having capital and surplus of not less
than $100,000,000) in the borough of Manhattan, City of New York, in trust for
the pro rata benefit of the holders of the shares so called for redemption, so
as to be and to continue to be available therefor, then from and after the
redemption date dividends on the shares of the New Series so called for
redemption shall cease to accrue, and said shares shall no longer be deemed to
be outstanding for any purpose and shall not have the status of shares of the
New Series and all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation the redemption
price without interest) shall cease. In case fewer than all the shares
represented by any such certificate are redeemed, a new certificate or
certificates shall be issued representing the unredeemed shares without cost to
the holder thereof. Any funds deposited and unclaimed at the end of one year
from the date fixed for redemption shall be repaid to the Corporation upon its
request, after which repayment the holders of shares called for redemption shall
look only to the Corporation for payment.
8. Voting Rights. (a) The holders of record of shares of the New Series
shall not be entitled to any voting rights except or hereinafter provided.
(b) Notwithstanding paragraph 8(a), if at any time (i) any
dividend payable on the New Series shall be in arrears and unpaid for six (6)
months, then the
-5-
<PAGE>
number of directors constituting the Board of Directors, without further action,
shall be increased by two (2) directors and the holders of the New Series shall
have the exclusive right, voting separately as a class, to elect the director(s)
of the Corporation to fill such newly created directorship(s) ("Voting Right"),
the remaining directors to be elected by the class of classes of stock entitled
to vote therefor, at each meeting of stockholders held for the purpose of
electing directors.
(c) At any time when a Voting Right shall have vested in the
holders of the New Series and if such right shall not already have been
initially exercised, a proper officer of the Corporation shall, upon the written
request of any holder of record of the New Series then outstanding, addressed to
the Secretary of the Corporation, call a special meeting of holders of the New
Series. Such meeting shall be held at the earliest practicable date upon the
notice required for annual meetings of stockholders at the place for holding
annual meetings of stockholders of the Corporation or, if none, at a place
designated by the Secretary of the Corporation. If such meeting shall not be
called by the proper officers of the Corporation within 30 days after the
personal service of such written request upon the Secretary of the Corporation,
or within 30 days after mailing the same within the United States, by registered
mail, addressed to the Secretary of the Corporation at its principal office
(such mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of 10% of the shares of the New Series
then outstanding may designate in writing a holder of the New Series to call
such meeting at the expense of the Corporation, and such meeting may be called
by such person so designated upon the notice required for annual meetings of
stockholders and shall be held at the same place as is elsewhere provided in
this paragraph (c) or at such other place as is selected by such person so
designated. Any holder of the New Series which would be entitled to vote at any
such meeting shall have access to the stock books of the Corporation for the
purpose of causing a meeting of stockholders to be called pursuant to the
provisions of this paragraph. Notwithstanding the provisions of this paragraph,
however, no such special meeting shall be called during a period of 90 days
immediately preceding the date fixed for the next annual meeting of the
stockholders.
(d) At any meeting held for the purpose of electing directors at
which the holders of the New Series shall have the right to elect directors as
provided in paragraph (b) hereof, the presence in person or by proxy of the
holders of the lesser of (i) a majority of the then outstanding shares of the
New Series or (ii) a percentage of the then outstanding shares of the New Series
which percentage is equal to the percentage of the then outstanding shares of
Common Stock then required to constitute a quorum for the election of directors
by holders of Common Stock shall be required and be sufficient to constitute a
quorum of the holders of the New Series. At any such meeting on adjournment
thereof (x) the absence of a quorum of the holders of the New Series shall not
prevent the election of directors other than those
-6-
<PAGE>
to be elected by the holders of stock of such class and the absence of a quorum
or quorums of the holders of capital stock entitled to elect such other
directors shall not prevent the election of directors to be elected by the
holders of the New Series and (y) in the absence of a quorum of the holders of
the New Series entitled to vote for the election of directors, a majority of the
holders present in person or by proxy of such class shall have the power to
adjourn the meeting for the election of directors which the holders of such
class are entitled to elect, from time to time, without notice (except as
required by law) other than announcement at the meeting, until a quorum shall be
present.
(e) The term of office of all directors elected by the holders of
the New Series pursuant hereto in office at any time when the aforesaid Voting
Rights are vested in the holders of the New Series shall terminate upon the
election of their successors at any meeting of stockholders for the purpose of
electing directors. Upon any termination of the aforesaid Voting Rights in
accordance with paragraph 8(c), the term of office of all directors elected by
the holders of the New Series then in office shall thereupon terminate and upon
such termination the number of directors constituting the board of directors
shall, without further action, be reduced by two (2), subject always to the
increase of the number of directors pursuant to paragraph 8(b) in case of the
future right of the holders of the New Series to elect additional directors as
provided herein.
(f) In case of any vacancy occurring among the directors elected by
the holders of the New Series, the remaining director who shall have been so
elected may appoint a successor to hold office for the unexpired term of the
direct or whose place shall be vacant. If all directors so elected by the
holders of the New Series shall cease to serve as directors before their terms
shall expire, the holders of the New Series then outstanding may, at a special
meeting of the holders called as provided above, elect successors to hold office
for the unexpired terms of the directors whose places shall be vacant.
(g) So long as any shares of the New Series are outstanding, the
Corporation shall not, either directly or indirectly or through merger or
consolidation with or into any other corporation, (i) amend, alter or repeal the
Restated Certificate of Incorporation of the Corporation if such amendment,
alteration or repeal would alter or change the powers, preferences or special
rights of the New Series without the consent or affirmative vote of the holders
of at least two-thirds of the outstanding shares of the New Series, voting as a
separate class, or (ii) authorize, issue or create, or increase the authorized
amount of any preferred stock ranking senior to or on a parity with the New
Series or any additional shares of the New Series without the consent or
affirmative vote of the holders of at least two thirds of the outstanding shares
of the New Series, voting as a separate class.
-7-
<PAGE>
(h)(i) The creation, authorization of issuance of any shares of
any Junior Securities, provided that the terms of such Junior Securities are not
inconsistent, or in any way conflict, with the terms of the New Series, or the
creations, authorization or issuance of any obligation or security convertible
into or evidencing the right to purchase any Junior Securities, (ii) the
creation of any indebtedness of any kind of the Corporation, or (iii) the
increase or decrease in the amount of authorized Junior Securities of any class,
or any increase, decrease or change in the liquidation preferences, dividend,
voting or other rights or decrease in the par value of any such class in a
manner which does not result in such Junior Securities ceasing to be Junior
Securities shall not be deemed to alter, change or affect adversely the powers,
preferences, and special rights of shares of the New Series and may be effected
without the consent of holders thereof.
IN WITNESS WHEREOF, Hosokawa Micron International Inc. has caused
this certificate to be made under the seal of the Corporation signed by its
Senior Vice President and Secretary, respectively, this 27th day of December
1992.
/s/ William J. Brennan
----------------------
Senior Vice President
/s/ Simon H. Baker
----------------------
Secretary
[SEAL]
-8-
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "HOSOKAWA MICRON INTERNATIONAL INC.", FILED IN THIS OFFICE ON THE SEVENTH DAY
OF AUGUST, A.D. 1996, AT 10 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
[SEAL OF SECRETARY'S OFFICE,
DELAWARE]
2102316 8100 AUTHENTICATION: 8059545
960229887 DATE: 08-08-96
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
HOSOKAWA MICRON INTERNATIONAL INC.
- --------------------------------------------------------------------------------
Hosokawa Micron International Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY as follows:
FIRST: The Restated Certificate of Incorporation of the Corporation is hereby
amended by the deletion of Article FOURTH thereof and the substitution therefore
of a new Article FOURTH to read in its entirety as follows:
"FOURTH: The total number of shares of all classes of
stock which the Corporation shall have authority to
issue is 10,440,000, consisting of 440,000 shares of
Preferred Stock, par value of $.01 per share ("Preferred
Stock"), and 10,000,000 shares of Common Stock, par
value of $.01 per share ("Common Stock").
Authority is hereby expressly granted to the Board of
Directors to authorize the issue, from time to time, of
one or more classes or series of Preferred Stock and
with respect to each such class or series to fix by
resolution or resolutions, subject to the provisions
hereof, the voting powers, full or limited, or no voting
powers, of the shares of such class or series and the
designations, preferences and relative, participating,
optional or other special rights and qualifications,
limitations or restrictions thereof, to the fullest
extent permitted to the Board of Directors by the
Delaware General Corporation law."
SECOND: The aforesaid amendment to the Restated Certificate of
Incorporation of the Corporation has been duly adopted in accordance
with the applicable provisions of Section 242 of the General
Corporation Law of the State of Delaware, the Board of Directors of
the Corporation having duly adopted a resolution setting forth such
amendment and declaring its advisability and a majority of the
outstanding stock entitled to vote thereon at the regularly
scheduled annual meeting of the stockholders having voted in favor
of the amendment.
Page 1 of 2
<PAGE>
amendment.
THIRD: This Certificate of Amendment of the Restated Certificate of
Incorporation has been executed and acknowledged and shall be filed and recorded
in accordance with Section 103 of the General Corporation Laws of the State of
Delaware.
IN WITNESS WHEREOF, said Hosokawa Micron International Inc. has caused this
certificate to be signed by Isao Sato, its President and Chief Executive Officer
and to be attested by Simon H. Baker, its Secretary, this 6th day of August,
1996.
HOSOKAWA MICRON INTERNATIONAL INC.
By: /s/ Isao Sato
-------------------------------------
Isao Sato
President and Chief Executive Officer
ATTEST:
By: /s/ Simon H. Baker
-------------------------------------
Simon H. Baker
Secretary
Page 2 of 2
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "HOSOKAWA MICRON INTERNATIONAL INC.", FILED IN THIS OFFICE ON THE FIRST DAY
OF AUGUST, A.D. 1997, AT 4:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
[SEAL OF SECRETARY'S OFFICE
DELAWARE]
2102316 8100 AUTHENTICATION: 8591119
971258387 DATE: 08-05-97
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
HOSOKAWA MICRON INTERNATIONAL INC.
- --------------------------------------------------------------------------------
Hosokawa Micron International Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY as follows:
FIRST: The Restated Certificate of Incorporation of the Corporation is hereby
amended by the deletion of Article FOURTH thereof and the substitution therefore
of a new Article FOURTH to read in its entirety as follows:
"FOURTH: The total number of shares of all classes of stock
which the Corporation shall have authority to issue is
12,940,000, consisting of 440,000 shares of Preferred Stock,
par value of $.01 per share ("Preferred Stock"), and
12,500,000 shares of Common Stock, par value of $.01 per share
("Common Stock").
Authority is hereby expressly granted to the Board of
Directors to authorize the issue, from time to time, of one or
more classes or series of Preferred Stock and with respect to
each such class or series to fix by resolution or resolutions,
subject to the provisions hereof, the voting powers, full or
limited, or no voting powers, of the shares of such class or
series and the designations, preferences and relative,
participating, optional or other special rights and
qualifications, limitations or restrictions thereof, to the
fullest extent permitted to the Board of Directors by the
Delaware General Corporation law."
SECOND: The aforesaid amendment to the Restated Certificate of Incorporation of
the Corporation has been duly adopted in accordance with the applicable
provisions of Section 242 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation having duly adopted a
resolution setting forth such amendment and declaring its advisability and a
majority of the outstanding stock entitled to vote thereon at the regularly
scheduled annual meeting of the stockholders having voted in favor of the
amendment.
Page 1 of 2
<PAGE>
THIRD: This Certificate of Amendment of the Restated Certificate of
Incorporation has been executed and acknowledged and shall be filed and recorded
in accordance with Section 103 of the General Corporation Laws of the State of
Delaware.
IN WITNESS WHEREOF, said Hosokawa Micron International Inc. has caused this
certificate to be signed by Isao Sato, its President and Chief Executive Officer
and to be attested by Simon H. Baker, its Secretary, this 30 day of July, 1997.
HOSOKAWA MICRON INTERNATIONAL INC.
By: /s/ Isao Sato
-------------------------------------
Isao Sato
President and Chief Executive Officer
ATTEST:
By: /s/ Simon H. Baker
-------------------------
Simon H. Baker
Secretary
Page 2 of 2
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "HOSOKAWA MICRON INTERNATIONAL INC.", FILED IN THIS OFFICE ON THE
SIXTEENTH DAY OF OCTOBER, A.D. 1997, AT 2:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
[SEAL OF SECRETARY'S OFFICE
DELAWARE]
2102316 8100 AUTHENTICATION: 8709509
971351134 DATE: 10-20-97
<PAGE>
CERTIFICATE ELIMINATING REFERENCE TO
4.44% PREFERRED STOCK FROM THE
RESTATED CERTIFICATE OF INCORPORATION
OF
HOSOKAWA MICRON INTERNATIONAL INC.
- --------------------------------------------------------------------------------
Pursuant to Section 151(g)
of the General Corporation Law of the State of Delaware
- --------------------------------------------------------------------------------
HOSOKAWA MICRON INTERNATIONAL INC. (hereinafter called the "corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify:
1. The name of the corporation is HOSOKAWA MICRON INTERNATIONAL INC.
2. The designation of the series of preferred stock of the corporation to
which this certificate relates is the 4.44% Preferred Stock
3. The voting powers, designations, preferences, and the relative,
participating, optional, and other special rights, and the qualifications,
limitations, or restrictions thereof of the 4.44% Preferred Stock were
provided for in a resolution adopted by the Board of Directors of the
corporation pursuant to authority expressly vested in it by the provisions
of the restated certificate of incorporation of the corporation. A
certificate setting forth the said resolution has been heretofore filed
with the Secretary of State of the State of Delaware pursuant to the
provisions of Section 151 of the General Corporation Law of the State of
Delaware.
4. The Board of Directors of the corporation has adopted the following
resolution by written unanimous consent dated September 3, 1997:
RESOLVED, that none of the authorized shares of 4.44% Preferred Stock of
the corporation of the series designated are outstanding; and
FURTHER RESOLVED, that none of the said series of the preferred shares of
stock of the corporation will be issued; and
FURTHER RESOLVED, that the proper officers of the Corporation be and
hereby are authorized and directed to file a certificate setting forth
this resolution with the Secretary of State of the State of Delaware
pursuant to the provisions of Section 151(g) of the General Corporation
Law of the State of Delaware for the purpose of eliminating from the
restated certificate of incorporation of the corporation all reference to
the said series of shares of
Page 1 of 2
<PAGE>
preferred stock.
IN WITNESS WHEREOF, Hosokawa Micron International Inc. has caused this
certificate to be made under the seal of the corporation and signed by its
president and secretary, respectively this 22nd day of September, 1997.
/s/ Isao Sato
-------------------------------------
President and Chief Executive Officer
Isao Sato
/s/ Simon H. Baker
-------------------------------------
Secretary
Simon H. Baker
Page 2 of 2
<PAGE>
PAGE 1
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
DESIGNATION OF "HOSOKAWA MICRON INTERNATIONAL INC.", FILED IN THIS OFFICE ON THE
SIXTEENTH DAY OF OCTOBER, A.D. 1997, AT 2:31 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
-----------------------------------
Edward J. Freel, Secretary of State
[SEAL OF SECRETARY'S OFFICE
DELAWARE]
2102316 8100 AUTHENTICATION: 8709529
971351139 DATE: 10-20-97
<PAGE>
CERTIFICATE ELIMINATING REFERENCE TO
5.5% CUMULATIVE SUBORDINATED
PREFERRED STOCK FROM THE
RESTATED CERTIFICATE OF INCORPORATION
OF
HOSOKAWA MICRON INTERNATIONAL INC.
- --------------------------------------------------------------------------------
Pursuant to Section 151 (g)
of the General Corporation Law of the State of Delaware
- --------------------------------------------------------------------------------
HOSOKAWA MICRON INTERNATIONAL INC. (hereinafter called the "corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify:
1. The name of the corporation is HOSOKAWA MICRON INTERNATIONAL INC.
2. The designation of the series of preferred stock of the corporation to
which this certificate relates is the 5.5% Cumulative Subordinated
Preferred Stock
3. The voting powers, designations, preferences, and the relative,
participating, optional, and other special rights, and the qualifications,
limitations, or restrictions thereof of the 5.5% Cumulative Subordinated
Preferred Stock were provided for in a resolution adopted by the Board of
Directors of the corporation pursuant to authority expressly vested in it
by the provisions of the restated certificate of incorporation of the
corporation. A certificate setting forth the said resolution has been
heretofore filed with the Secretary of State of the State of Delaware
pursuant to the provisions of Section 151 of the General Corporation Law
of the State of Delaware.
4. The Board of Directors of the corporation has adopted the following
resolution by written unanimous consent dated September 3, 1997:
RESOLVED, that none of the authorized shares of 5.5% Cumulative
Subordinated Preferred Stock of the corporation of the series designated
are outstanding; and
FURTHER RESOLVED, that none of the said series of the preferred shares of
stock of the corporation will be issued; and
FURTHER RESOLVED, that the proper officers of the Corporation be and
hereby are authorized and directed to file a certificate setting forth
this resolution with the Secretary of State of the State of Delaware
pursuant to the provisions of Section 151 (g) of the General Corporation
Law of the State
Page 1 of 2
<PAGE>
of Delaware for the purpose of eliminating from the restated certificate
of incorporation of the corporation all reference to the said series of
shares of preferred stock.
IN WITNESS WHEREOF, Hosokawa Micron International Inc. has caused this
certificate to be made under the seal of the corporation and signed by its
president and secretary, respectively this 22nd day of September, 1997.
/s/ Isao Sato
-------------------------------------
President
Isao Sato
/s/ Simon H. Baker
-------------------------------------
Secretary
Simon H. Baker
Page 2 of 2
<PAGE>
Page 1 of 11
Adopted January 10, 1989
Amended October 26, 1992
BY-LAWS
OF
HOSOKAWA MICRON INTERNATIONAL INC.
(a Delaware Corporation)
ARTICLE I
STOCKHOLDERS
Section 1.01 Annual Meeting. The annual meeting of the stockholders,
for the purpose of electing directors and transacting such other business as may
come before it, shall be held on such date and at such time and place, either
within or without the State of Delaware, as may be specified by the Board of
Directors.
Section 1.02 Special Meetings. Special meetings of the stockholders for
any purpose or purposes may be called at any time by the Chairman of the Board,
if any, by the President or by the Secretary at the request of the Chairman of
the Board or the President or by the Board of Directors; but they may not be
called by any other person or persons. At a special meeting of the stockholders,
no business shall be transacted which is not related to the purpose or purposes
stated in the notice of meeting.
Any special meeting of the stockholders shall be held on such date and
at such time and place, either within or without the State of Delaware, as may
be specified by the person or persons calling the meeting.
Section 1.03 Notice of Meetings. Written notice of each stockholder's
meeting, stating the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes thereof, shall be given to each
stockholder entitled to vote at the meeting not less than ten nor more than
sixty days before the date of the meeting.
Section 1.04 Quorum. Except as otherwise provided in the Certificate of
Incorporation or by law, at any meeting of the stockholders a majority of the
shares entitled to vote, present in person or represented by proxy, shall
constitute a quorum.
<PAGE>
Page 2 of 11
Section 1.05 Conduct of Meetings. The chief executive officer shall
preside at any meeting of the stockholders. In such person's absence, such other
person as shall have been designated by the chief executive officer or the Board
of Directors shall preside. The order of business at any meeting shall be as
determined by the presiding officer.
The presiding officer shall have the power to prescribe such rules,
regulations and procedures and to do all such things as in his judgment may be
necessary or desirable for the proper conduct of the meeting, including, without
limitation, the establishment of procedures for the maintenance of order and
safety, limitations on the time allotted to questions or comments, restrictions
on entry to the meeting after the time scheduled for the commencement thereof
and the opening and closing of the voting polls.
If present, the Secretary shall act as secretary of any meeting of the
stockholders. In the Secretary's absence, such other person as the presiding
officer shall designate shall act as secretary of the meeting.
It shall be the duty of the Secretary to prepare and make, at least
ten days before every meeting of the stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order and
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 1.06 Voting. Except as otherwise provided in the Certificate
of Incorporation or by law, (i) every holder of capital stock which is entitled
to vote shall be entitled to one vote for each share of such stock registered in
the name of such stockholder, (ii) directors shall be elected by a plurality of
the votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors and (iii) any other corporate
action shall be authorized by the affirmative vote of the majority of shares
present in person or represented by proxy at the meeting and entitled to vote on
the matter.
Section 1.07 Record Date. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of the stockholders
or any adjournment thereof or to consent to corporate action in writing without
a meeting or to receive payment of any dividend or other distribution or
allotment of any rights or to exercise any rights in respect of any change,
conversion or
<PAGE>
Page 3 of 11
exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date (i) shall not be more than sixty nor less than
ten days before the date of such meeting, (ii) in the case of action by consent
shall not be more than ten days after the date upon which the resolution fixing
the record date is adopted by the Board of Directors and (iii) shall not be more
than sixty days prior to such dividend, distribution, allotment, exercise or
other action.
Section 1.08 Notification of Stockholder Business. All business
properly brought before an annual meeting shall be transacted at such meeting.
Business shall be deemed properly brought only if it is (i) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (ii) otherwise properly brought before the meeting by or
at the direction of the Board or (iii) brought before the meeting by a
stockholder of record entitled to vote at such meeting if written notice of such
stockholder's intent to bring such business before such meeting is delivered to,
or mailed, postage prepaid, and received by, the Secretary of the Corporation at
the principal place of business of the Corporation not later than 90 days prior
to the anniversary date of the immediately preceding annual meeting (provided,
however, that if the date of the annual meeting is more than 30 days after the
anniversary date of the immediately preceding annual meeting, written notice of
such stockholder's intent to bring such business before the meeting must instead
be delivered to or received by the Secretary of the Corporation not later than
the close of business on the tenth day following the date on which the
Corporation first makes public disclosure of the date of the annual meeting).
Each notice given by such stockholder shall set forth: (i) a brief description
of the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting; (ii) the name and address of the
stockholder who intends to propose such business; (iii) a representation that
the stockholder is a holder of record of stock of the Corporation entitled to
vote at such meeting (of if the record date for such meeting is subsequent to
the date required for such stockholder notice, a representation that the
stockholder is a holder of record at the time of such notice and intends to be a
holder of record on the record date for such meeting), setting forth the number
and class of shares so held, and intends to appear in person or by proxy at such
meeting to propose such business; and (iv) any material interest of the
stockholder in such business. The Chairman of the meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section
1.08; and, if the Chairman should so determine and declare, any such business
not properly brought before the meeting shall not be transacted.
Section 1.09 Notification of Nominations. Subject to the rights of
the holders of any one or more series of Preferred Stock then outstanding,
<PAGE>
Page 4 of 11
nominations for the election of directors may be made by the Board of Directors
(or a Nominating Committee of the Board) or by any stockholder entitled to vote
for the election of directors. Any stockholder entitled to vote for the election
of directors at an annual meeting or a special meeting called for the purpose of
electing directors may nominate persons for election as directors at such
meeting only if written notice of such stockholder's intent to make such
nomination is delivered to, or mailed, postage prepaid, and received by, the
Secretary of the Corporation at the principal place of business of the
Corporation not later than (i) in the case of an annual meeting, 90 days prior
to the anniversary date of the immediately preceding annual meeting, (provided,
however, that if the date of the annual meeting is more than 30 days after the
anniversary date of the immediately preceding annual meeting, written notice of
such stockholder's intent to make such nomination must instead be delivered to
or received by the Secretary of the Corporation not later than the close of
business on the tenth day following the date on which the Company first makes
public disclosure of the date of the annual meeting) and (ii) in the case of a
special meeting, the close of business on the tenth day following the date on
which the Company first makes public disclosure of the date of the special
meeting. Each notice given by such stockholder shall set forth: (i) the name and
address of the stockholder who intends to make the nomination and of the person
or persons to be nominated; (ii) a representation that the stockholder is a
holder of record of stock of the Corporation entitled to vote at such meeting
(or if the record date for such meeting is subsequent to the date required for
such stockholder notice, a representation that the stockholder is a holder of
record at the time of such notice and intends to be a holder of record on the
record date for such meeting), setting forth the number and class of shares so
held, and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (iii) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (iv) such other
information regarding each nominee proposed by such stockholder as would have
been required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each nominee been nominated,
or intended to be nominated, by the Board; and (v) the consent of each nominee
to serve as a director of the Corporation if so elected. The Chairman of the
meeting shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the provisions of this Section 1.09;
and, if the Chairman should so determine and declare, the defective nomination
shall be disregarded.
<PAGE>
Page 5 of 11
ARTICLE II
BOARD OF DIRECTORS
Section 2.01 Number. Subject to the provisions of the Certificate of
Incorporation, the number of directors shall be the number fixed from time to
time by the Board of Directors.
Section 2.02 Election and Term. At each annual meeting of the
stockholders, directors shall be elected to hold office as provided in the
Certificate of Incorporation.
Section 2.03 Meetings of the Board. Regular meetings of the Board of
Directors shall be held at such times and places as the Board shall determine.
Special meetings of the Board shall be held whenever called by the Chairman of
the Board, if any, by the President or by the Secretary at the request of the
Chairman of the Board or the President, or by a majority of the directors in
office at the time.
Section 2.04 Notice of Meetings. No notice need be given of any
regular meeting of the Board of Directors or of any adjourned meeting of the
Board. Nor need notice be given to any director who signs a written waiver
thereof or who attends the meeting without protesting the lack of notice.
Notices need not state the purpose of the meeting.
Notice of each special meeting of the Board shall be given to each
director either by first class mail at least five days before the meeting or by
telecopy, telegram, telex, cable or like transmission, personal written delivery
or telephone at least one day before the meeting. Any notice given by telephone
shall be immediately confirmed by telecopy, telegram, telex, cable or like
transmission. Notices are deemed to have been given: by mail, when deposited in
the mail with postage prepaid, by telecopy, telegram, telex, cable or like
transmission, at the time of sending; and by personal delivery or telephone, at
the time of delivery. Written notices shall be sent to a director at the address
designated by him for that purpose, or, if none has been so designated, at his
last known residence or business address.
Section 2.05 Quorum and Vote of Directors. Except as otherwise
provided in the Certificate of Incorporation or by law, a majority of the entire
Board of Directors shall constitute a quorum for the transaction of business or
of any specified item of business and the vote of a majority of the directors
present at a meeting at the time of such vote, if a quorum is then present,
shall be the act of the Board. As used in this Article, "entire Board of
Directors" shall mean the total number of directors which the corporation would
have if there were no vacancies.
<PAGE>
Page 6 of 11
Section 2.06 Conduct of Meetings. The Chairman of the Board, if any,
shall preside at any meeting of the Board of Directors. In the absence of the
Chairman of the Board, a chairman of the meeting shall be elected from the
directors present. If present, the Secretary shall act as secretary of any
meeting of the Board. In the absence of the Secretary, the chairman of the
meeting may appoint any person to act as secretary of the meeting.
Section 2.07 Resiqnations of Directors. Any director may resign at
any time by giving written notice to the Board of Directors or to the Secretary
of the Corporation. Such resignation shall take effect at the time specified
therein or, if such time is not specified therein, then upon receipt thereof;
and unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Section 2.08 Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation.
The Board may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not constituting a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of any such absent or
disqualified member.
Any such committee, to the extent provided in the resolution of the
Board but subject to the limitation of Section 141 (c) of the Delaware General
Corporation Law, shall have and may exercise all the powers and authority of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it.
The provisions of Section 2.04 for notice of meetings of the Board
shall apply also to meetings of committees, unless different notice procedures
shall be prescribed by the Board.
Each such committee shall serve at the pleasure of the Board. It shall
keep minutes of its meetings and report the same to the Board and shall observe
such other procedures as are prescribed by the Board.
Section 2.09 Compensation of Directors. Each director shall be
entitled to receive as compensation for his services as director or committee
member or for attendance at meetings of the Board of Directors or committees, or
<PAGE>
Page 7 of 11
both, such amounts (if any) as shall be fixed from time to time by the Board.
Each director shall be entitled to reimbursement for reasonable traveling
expenses incurred by him in attending any such meeting. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 2.10 Telephonic Meetings. Any one or more members of the
Board of Directors or any committee thereof may participate in a meeting of such
Board or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting by such means shall constitute
presence in person at such meeting.
Section 2.11 Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board or
the committee consent thereto in writing and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
ARTICLE III
OFFICERS
Section 3.01 Officers. The officers of the Corporation shall include a
President, a Treasurer and a Secretary and may also include a Chairman of the
Board, a Vice Chairman of the Board, one or more Vice Presidents (who may be
further classified by such descriptions as "executive," "senior" or "group" as
determined by the Board of Directors), a Controller, Assistant Vice Presidents,
Assistant Treasurers, Assistant Secretaries, Assistant Controllers and other
officers, as the Board may deem necessary or desirable.
Each officer shall have such authority and perform such duties, in
addition to those specified in these By-Laws, as may be prescribed by the Board
from time to time. The Board may from time to time authorize any officer to
appoint and remove any other officer or agent and to prescribe such person's
authority and duties. Any person may hold at one time two or more offices.
Section 3.02. Term of Office, Resignation and Removal. Each officer
shall hold office for the term for which elected or appointed by the Board of
Directors, and until the person's successor has been elected or appointed and
qualified or until his earlier resignation or removal.
Any officer may resign at any time by giving written notice to the
Board or to the Secretary of the Corporation. Such resignation shall take effect
at
<PAGE>
Page 8 of 11
the time specified therein or, if such time is not specified therein, then upon
receipt thereof; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Any officer may be removed by the Board, with or without cause. The
election or appointment of an officer shall not of itself create contract
rights.
Section 3.03 Chairman of the Board. The Chairman of the Board shall be
a member of the Board of Directors. The Chairman of the Board shall preside at
all meetings of the stockholders and the Board of Directors and, if so
designated by the Board, shall be the chief executive officer of the
Corporation.
Section 3.04 Vice Chairman of the Board. The Vice Chairman of the
Board shall be a member of the Board of Directors (the "Vice Chairman"). The
Vice Chairman shall preside at all meetings of the stockholders and the Board of
Directors in the absence of the Chairman of the Board. The Vice Chairman, if so
designated by the Board, shall be the chief executive officer of the Corporation
provided that the Chairman of the Board has not been so designated. Subject to
the control of the Board, the Vice Chairman (if designated chief executive
officer) shall be responsible for the day-to-day management of the business and
affairs of the Corporation and shall enjoy all of the powers commonly incident
to the office.
Section 3.05 President. Unless there shall be a Chairman of the Board
or a Vice Chairman of the Board designated by the Board of Directors as the
chief executive officer of the Corporation, the President shall be the chief
executive officer of the Corporation. In the event that the Chairman of the
Board or the Vice Chairman of the Board is designated as the chief executive
officer of the Corporation, the President, if so designated by the Board, shall
be the chief operating officer of the Corporation. Subject to the control of the
Board and in the absence of a Vice Chairman of the Board who is designated as
the chief executive officer, the President (if designated chief executive
officer) shall be responsible for the day-to-day management of the business and
affairs of the Corporation and shall enjoy all other powers commonly incident to
the office.
Section 3.06 Vice Presidents. Each of the Vice Presidents shall have
such authority and perform such duties as may be prescribed from time to time.
Section 3.07 Treasurer and Assistant Treasurers. The Treasurer shall
have the care and custody of all funds and securities of the Corporation, keep
accounts of receipts and disbursements and of deposit or custody of moneys and
other valuables and enjoy all powers commonly incident to the office.
In the case of the absence or inability to act of the Treasurer, any
Assistant Treasurer may act in the Treasurer's place.
<PAGE>
Page 9 of 11
Section 3.08 Secretary and Assistant Secretaries. The Secretary shall
keep the minutes of the meetings of the stockholders and the Board of Directors
and give notice of such meetings, have custody of the corporate seal and affix
and attest such seal to any instrument to be executed under seal and enjoy all
powers commonly incident to the office.
In the case of the absence or inability to act of the Secretary, any
Assistant Secretary may act in the Secretary's place.
Section 3.09 Controller and Assistant Controllers. The Controller
shall have control of all books of account of the Corporation (other than those
to be kept by the Treasurer), render accounts of the financial condition of the
Corporation and enjoy all powers commonly incident to the office.
In the absence or inability to act of the Controller, any Assistant
Controller may act in the Controller's place.
Section 3.10 Compensation. Compensation of officers, agents and
employees of the Corporation shall be fixed from time to time by, or under
authority of, the Board of Directors.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Form of Certificates. Unless otherwise provided by
resolution of the Board of Directors, the shares of stock of the Corporation
shall be represented by certificates which shall be in such form as is
prescribed by law and approved by the Board.
Section 4.02 Transfer of Shares. Transfers of shares of stock of the
Corporation shall be registered on its records maintained for such purpose (i)
upon surrender to the Corporation or a transfer agent of a certificate of
certificates representing the shares requested to be transferred, with proper
endorsement on the certificate or certificates or on a separate accompanying
document, together with such evidence of the payment of transfer taxes and
compliance with other provisions of law as the Corporation or its transfer agent
may require or (ii) if shares are not represented by certificates, upon
compliance with such transfer procedures as may be approved by the Board or
prescribed by applicable law.
The Corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof,
<PAGE>
Page 10 of 11
except as expressly provided by law.
Section 4.03 Regulations. The Board of Directors shall have authority
to make such rules and regulations as it may deem expedient concerning the
issue, transfer and registration of shares of stock of the Corporation,
including without limitation such rules and regulations as may be deemed
expedient concerning the issue of certificates in lieu of certificates claimed
to have been lost, destroyed, stolen or mutilated.
ARTICLE V
GENERAL PROVISIONS
Section 5.01 Corporate Seal. The Board of Directors may adopt a
corporate seal, alter such seal at its pleasure and authorize it to be used by
causing it or a facsimile to be affixed or impressed or reproduced in any other
manner.
Section 5.02 Fiscal Year. The fiscal year of the Corporation shall be
such period as may be fixed by the Board of Directors from time to time.
Section 5.03 Indemnification. The Corporation shall indemnify, to the
fullest extent permitted by the laws of the State of Delaware, each person who
is or was a party or is threatened to be made a party to, or otherwise requires
representation by counsel in connection with, any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, trustee or administrator of another
corporation, partnership, joint venture, trust or other enterprise or employee
benefit plan, or by reason of any action alleged to have been taken or omitted
in such capacity or in any other capacity while serving in such capacity at the
request of the corporation. The right to indemnification conferred by this
Section shall also include the right of such persons to be paid in advance by
the Corporation for their expenses to the fullest extent permitted by the laws
of the State of Delaware. The right to indemnification conferred on persons by
this Section shall be a contract right.
The Corporation may, if and to the extent authorized by the Board of
Directors of the Corporation in a specific case, indemnify employees or agents
of the Corporation or of any such enterprise or plan in the same manner and to
the same extent. The indemnification obligations set forth herein shall inure to
the benefit of heirs, executors, administrators and personal representatives of
those entitled to indemnification and shall be binding upon any successor to the
Corporation to the fullest extent permitted by the laws of the State of
Delaware.
<PAGE>
Page 11 of 11
The rights to indemnification and to the advancement of expenses
conferred in this Section shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation of these By-Laws, agreement, vote of stockholders
or disinterested directors or otherwise. References in this Section to the laws
of the State of Delaware shall mean such laws as from time to time in effect
(but, in the case of any amendment to such laws, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
permitted prior thereto).
The Corporation shall have the power to purchase and maintain
insurance to indemnify (i) itself for any obligation which it incurs as a result
of the indemnification of directors and officers and (ii) directors and officers
in all instances, whether or not such indemnification is otherwise provided for
by law or the foregoing provisions of this Section 5.03, subject to any specific
limitations of law.
Neither any amendment or repeal of the foregoing provisions of this
Section nor adoption of any provision of the Certificate of Incorporation or
these By-Laws which is inconsistent with the foregoing provisions of this
Section shall adversely affect any right or protection for a person existing at
the time of such amendment, repeal or adoption.
Section 5.04 Voting Upon Stocks. Unless otherwise ordered by the Board
of Directors, the chief executive officer of the Corporation, or any other
officer of the Corporation designated by the chief executive officer of the
Corporation, shall have full power and authority on behalf of the Corporation to
attend and to act and to vote in person or by proxy at any meeting of the
holders of securities of any corporation in which the Corporation may own or
hold stock or other securities, and at any such meeting shall possess and may
exercise in person or by proxy any and all rights, powers and privileges
incident to the ownership of such stock or other securities which the
Corporation, as the owner or holder thereof, might have possessed and exercised
if present. The chief executive officer of the Corporation, or any other officer
of the Corporation designated by the chief executive officer of the Corporation,
may also execute and deliver on behalf of the Corporation powers of attorney,
proxies, waivers of notice and other instruments relating to the stocks or
securities owned or held by the Corporation. The Board of Directors may, from
time to time, confer like powers upon any other person or persons.
Section 5.05 Amendments. These By-Laws and any amendments hereof may
be amended or repealed, and new By-Laws may be adopted, either by the
stockholders or by vote of a majority of all of the Board of Directors.
AGREEMENT
BETWEEN
Hosokawa Alpine Aktiengesellschaft
Peter-Dorfler-Strasse 13-25
86199 Augsburg
represented by the Chairman of it's Supervisory Board, Mr. Isao Sato
- hereinafter referred to as "Alpine" -
AND
Mr. Achim Vogel
hereinafter referred to as "Mr. Vogel" -
PREAMBLE
Mr. Vogel has been employed by Alpine AG since January 22, 1968. With
effect from September 3, 1992, Mr. Vogel was appointed as a member of
the Alpine Management Board (Vorstand) by the Supervisory Board
(Aufsichtsrat) of Alpine.
This Agreement between Alpine and Mr. Vogel is as follows:
1. Position
1.1 Mr. Vogel is the Chairman of the Management Board of Alpine.
The appointment is extended, this date, for a period of
5 years and expires on November 7, 2000.
1.2 Mr. Vogel shall represent the company with his single
signature in accordance with the Standing Orders of the
Management Board and the policies of the shareholders as
provided for in the policy manual attached hereto.
1.3 Mr. Vogel shall conduct the business of Alpine in accordance
with Statutory Law, the Articles of Association of Alpine and
it's Standing Orders for the Management Board and the policies
of the shareholders as provided for in the policy manual
attached hereto. He shall dedicate his activities exclusively
to Alpine. The performance of other activities of a
professional nature - irrespective of whether they are
performed on a honorary or pecuniary basis - requires the
prior written consent of the Chairman of the Supervisory
Board, which consent may be revoked at any time. This shall
apply in particular to the acceptance of Supervisory Board
membership mandates and similar offices and - to the extent
that interests of Alpine could be affected - to opinions,
publications and lectures.
<PAGE>
1.4 For the duration of this Service Agreement, Mr. Vogel will
not take a financial interest in an enterprise which competes
against Alpine or its affiliates or which maintains more than
an insubstantial amount of business relation with Alpine or
its affiliates and associated enterprise. Shareholdings of up
to 5% do not rate as interest for the purpose of this clause.
1.5 The Statute on Employee Inventions shall apply to inventions
made by Mr. Vogel during the period of this Agreement. The use
of technical or organizational improvement proposals by Mr.
Vogel shall accrue to Alpine without separate consideration.
1.6 Mr. Vogel shall keep business information, documents and
papers secret at all times and surrender said documents and
papers at any time on request and without request at such time
when this Agreement ends to the Management Board or its
representative. There shall be no right of retention in such
documents and papers. The secrecy obligation with regard to
business information shall survive this Agreement.
2. Compensation
2.1 Mr. Vogel shall receive as compensation for his activities for
Alpine a fixed salary of DM 23,000 per month, payable by
Alpine at the end of each month from November 8, 199 subject
to an annual review and appraisal by the Supervisory Board.
Vacation pay and Christmas pay are not included in the monthly
salary figure.
A bonus may be paid at the discretion of the presidential
committee of the Supervisory Board, taking into account the
financial results of Alpine and the contribution of Mr. Vogel.
2.2 Any bonus for the preceding fiscal year shall be due payable
within no more than 6 months following the end of that Fiscal
Year. In the event that this Service Agreement should
terminate before the end of a fiscal year, any bonus awarded
shall be calculated and paid pro-rata.
2.3 Mr. Vogel shall be entitled to additional holiday pay in
accordance with standard Alpine AG practice, In addition, Mr.
Vogel shall be entitled to Christmas money in accordance with
standard Alpine AG Practice.
2.4 Alpine shall make available to Mr. Vogel a car, the type of
which is commensurate with his position for private and
official use.
2.5 Expenses for business activities and travel will be reimbursed
to Mr. Vogel on the basis of individual evidence of
expenditure in accordance with tax regulations and with Alpine
policies.
2.6 Alpine shall continue to pay the premium on Alpine's part of
the Government Pension Plan. Alpine shall contribute towards
private health insurance of Mr. Vogel at the monthly premiums
stipulated by the insurance company for the type and extent of
private health insurance enjoyed by Mr. Vogel at the moment
(annual premium approximately 4,632.00
<PAGE>
DM) and include Mr. Vogel in a general insurance plan
providing coverage for liability and travel insurance.
2.7 Mr. Vogel shall pay tax on the above elements of compensation
(except for those mentioned in Sec.2 subsec. 2.6) as provided
for and determined in tax law and by tax regulations.
3. Vacation
Mr. Vogel is entitled to an annual vacation of 35 working
days. The timing of vacation should be agreed with the
commercial interests of Alpine and the vacation periods of
other members of the Management Board and senior executives.
4. Illness
4.1 In case of temporary inability to work due to illness,
accident or for any other cause for which Mr. Vogel is not
responsible, the compensation according to Sec. 2 subsec. 2.1
shall continue for a period of 12 months, but no longer than
to the contractually agreed expiration of this Agreement.
4.2 In the event that Mr. Vogel should die during the period of
this Agreement, his widow and/or minor children shall continue
to receive the compensation according to Sec.2 Subsec. 2.1 for
the month of death and the following 3 months, but no longer
than to the contractually agreed expiration of this Agreement.
4.3 Mr. Vogel is prepared to subject himself to a thorough medical
examination once a year and to report to the Chairman of the
Supervisory Board on the result of such examination. Cost of
examination to be paid by the company.
5. Pension
5.1 Mr. Vogel will be covered by the applicable company pension
plan for a member of the Management Board.
6. Duration
6.1 This Service Agreement shall terminate on November 7, 2000.
6.2 A prolongation of this Agreement should be agreed no later
than 3 months prior to its termination by a written agreement
of Mr. Vogel and Alpine.
6.3 In the event that Mr. Vogel should become permanently unable
to perform his duties during the period of this Agreement,
this Agreement shall end upon the end of the calendar quarter
during which the permanent inability was determined.
Compensation will continue after the termination of the
agreement for 12 months. Permanent inability for the purposes
of this clause shall exist, if Mr. Vogel should for reasons of
health most likely not be in a position permanently to meet
the responsibilities incumbent on a member of the Management
Board in accordance with its Standing Orders and distribution
of responsibilities.
<PAGE>
6.4 This agreement can be terminated with 3 months notice if Mr.
Vogel's appointment as a member of the Board of Management
is rescinded (cancelled) by the supervisory Board for any
valid reason. If this agreement is cancelled a severance
will be paid of 2 annual salaries (including Christmas pay,
vacation pay and bonus payments) of the full preceding
calendar year. The severance will not apply if the
appointment as a member of the Board of Management is
cancelled by the Supervisory Board for actions of a criminal
nature. The severance will apply at the termination of this
agreement if it is not renewed by Alpine. Severance will not
apply after Mr. Vogel reached age 65, takes early
retirement, resigns or the agreement is not renewed by Mr.
Vogel.
7. General
7.1 This Agreement states the entire agreement between Mr. Vogel
and Alpine and all companies affiliated with Alpine.
7.2 In the event that any clause or clauses of this Agreement
should be or become wholly or partially invalid, this shall
not affect the validity of the remaining clauses. In place of
the invalid clauses such reasonable valid clauses shall apply,
which are commercially closest to what the contracting parties
would have agreed had they considered the invalidity. This
will also apply in the event that the invalidity of a clause
should be by reference to specific terms of periods provided
for in this Agreement; in this case such legal admissible
extent or period shall be deemed agreed which is as close as
possible to what the parties intended.
7.3 Place of performance for all services under this Agreement is
the principal offices of Alpine located in Augsburg.
7.4 Any amendments to this Agreement shall only be valid if in
writing and signed both by Alpine and Mr. Vogel.
<PAGE>
7.5 This Service Agreement shall be governed by German Law.
Augsburg, this 19th day of June, 1995
/s/ Isao Sato
-----------------------------------------
Isao Sato
Chairman of the Supervisory Board
of Hosokawa Alpine AG
Agreed to and Accepted:
/s/ Achim Vogel
-----------------------------------------
Achim Vogel
AGREEMENT
July 1, 1995
BETWEEN
Hosokawa Alpine Aktiengesellschaft
Peter-Dorfler-Str. 13-25
8900 Augsburg 22
represented by the Chairman of its Supervisory Board, Mr. Isao Sato
- - hereinafter referred to as "Alpine" -
AND
Dietmar Mayerhauser
- - hereinafter referred to as "Mr. Mayerhauser" -
PREAMBLE
Mr. Mayerhauser has been employed by Alpine AG since May 1, 1964. With effect
from October 10, 1990, Mr. Mayerhauser was appointed as a member of the Alpine
Management Board (Vorstand) by the Supervisory Board (Aufsichtsrat) of Alpine.
This Agreement between Alpine and Mr. Mayerhauser is as follow:
1. POSITION
1.1 Mr. Mayerhauser is the Chairman of the Management Board of Alpine. The
appointment is extended, this date, for a period of 5 years and expires
on June 30, 2000.
1.2 Mr. Mayerhauser shall represent the company with his single signature in
accordance with the Standing Orders of the Management Board and the
policies of the shareholders as provided for in the policy manual
attached hereto.
<PAGE>
1.3 Mr. Mayerhauser shall conduct the business of Alpine in accordance with
Statutory Law, the Articles of Association of Alpine and its Standing
Orders for the Management Board and the policies of the shareholders as
provided for in the policy manual attached hereto. He shall dedicate his
activities exclusively to Alpine. The performance of other activities of
a professional nature - irrespective of whether they are performed on a
honorary of pecuniary basis - requires the prior written consent of the
Chairman of the Supervisory Board, which consent may be revoked at any
time. This shall apply in particular to the acceptance of Supervisory
Board membership mandates and similar offices and - to the extent that
interests of Alpine could be affected - to opinions, publications and
lectures.
1.4 For the duration of this Service Agreement, Mr. Mayerhauser will not
take a financial interest in an enterprise which competes against Alpine
or its affiliates or which maintains more than an insubstantial amount
of business relation with Alpine or its affiliates and associated
enterprises. Shareholdings of up to 5% do not rate as interest for the
purpose of this clause.
1.5 The Statute on Employee Inventions shall apply to inventions made by Mr.
Mayerhauser during the period of this Agreement. The use of technical or
organizational improvement proposals by Mr. Mayerhauser shall accrue to
Alpine without separate consideration.
1.6 Mr. Mayerhauser shall keep business information, documents and papers
secret at all times and surrender said documents and papers at any time
on request and without request at such time when this Agreement ends to
the Management Board or its representative. There shall be no right of
retention in such documents and papers. The secrecy obligation with
regard to business information shall survive this Agreement.
2. COMPENSATION
2.1 Mr. Mayerhauser shall receive as compensation for his activities for
Alpine a fixed salary of DM 24,310 per month, payable by Alpine at the
end of each month from July 1, 1995, subject to an annual review and
appraisal by the Supervisory Board. Vacation pay and Christmas pay is
not included in the monthly salary figure.
<PAGE>
A bonus may be paid at the discretion of the presidential committee of
the Supervisory Board, taking into account the financial results of
Alpine and the contribution of Mr. Mayerhauser.
2.2 Any bonus for the preceding fiscal year shall be due payable within no
more than 6 months following the end of the Fiscal Year. In the event
that this Service Agreement should terminate before the end of a fiscal
year, any bonus awarded shall be calculated and paid pro-rata.
2.3 Mr. Mayerhauser shall be entitled to additional holiday pay in
accordance with standard Alpine practice. In addition, Mr. Mayerhauser
shall be entitled to Christmas money in accordance with standard Alpine
practice.
2.4 Alpine shall make available to Mr. Mayerhauser a car, the type of which
is commensurate with his position for private and official use.
2.5 Expenses for business activities and travel will be reimbursed to Mr.
Mayerhauser on the basis of individual evidence of expenditure in
accordance with tax regulations and with Alpine policies.
2.6 Alpine shall continue to pay the premium on Alpine's part of the
Government Pension Plan. Alpine shall contribute towards private health
insurance of Mr. Mayerhauser at the monthly premiums stipulated by the
insurance company for the type and extent of private health insurance
enjoyed by Mr. Mayerhauser at the moment (annual premium approximately
4,281 DM) and include Mr. Mayerhauser in a general insurance plan
providing coverage for liability and travel insurance.
2.7 Mr. Mayerhauser shall pay tax on the above elements of compensation
(except for those mentioned in Sec. 2 subsec. 2.6) as provided for and
determined in tax law and by tax regulations.
3. VACATION
3.1 Mr. Mayerhauser is entitled to an annual vacation of 35 working days.
The timing of vacation should be agreed with the commercial interests of
Alpine and the vacation periods of other members of the Management Board
and senior executives.
<PAGE>
4. ILLNESS
4.1 In case of temporary inability to work due to illness, accident or for
any other cause for which Mr. Mayerhauser is not responsible, the
compensation according to Sec. 2 subsec. 2.1 shall continue for a period
of 12 months, but no longer than to the contractually agreed expiration
of this Agreement.
4.2 In the event that Mr. Mayerhauser should die during the period of this
Agreement, his widow and/or minor children shall continue to receive
the compensation according to Sec. 2 subsec. 2.1 for the month of death
and the following 3 months, but no longer that to the contractually
agreed expiration of this Agreement.
4.3 Mr. Mayerhauser is prepared to subject himself to a thorough medical
examination once a year and to report to the Chairman of the Supervisory
Board on the result of such examination. Cost of examination to be paid
by the company.
5. PENSION
5.1 Mr. Mayerhauser will be covered by the applicable company pension plan
for a member of the Management Board.
6. DURATION
6.1 This Service Agreement shall terminate on June 30, 2000.
6.2 A prolongation of this Agreement should be agreed no later than 3 months
prior to its termination by a written agreement of Mr. Mayerhauser and
Alpine.
<PAGE>
6.3 In the event that Mr. Mayerhauser should become permanently unable to
perform his duties during the period of this Agreement, this Agreement
shall end upon the end of the calendar quarter during which the
permanent inability was determined. Compensation will continue after the
termination of the agreement for 12 months. Permanent inability for the
purposes of this clause shall exist, if Mr. Mayerhauser should for
reasons of health most likely not be in a position permanently to meet
the responsibilities incumbent on a member of the Management Board in
accordance with its Standing Orders and distribution of
responsibilities.
6.4 This agreement can be terminated with 3 months notice if Mr.
Mayerhauser's appointment as a member of the Board of Management is
rescinded (cancelled) by the Supervisory Board for any valid reason. If
this agreement is cancelled a severance will be paid of 2 annual
salaries (including Christmas pay, vacation pay and bonus payments) of
the full preceding calendar year. The severance will not apply if the
appointment as a member of the Board of Management in cancelled by the
Supervisory Board for actions of a criminal nature. The severance will
apply at the termination of this agreement if it is not renewed by
Alpine. Severance will not apply after Mr. Mayerhauser reached age 65,
takes early retirement, resigns or the agreement is not renewed by Mr.
Mayerhauser.
7. GENERAL
7.1 This Agreement states the entire agreement between Mr. Mayerhauser and
Alpine and all companies affiliated with Alpine.
7.2 In the event that any clause or clauses of this Agreement should be or
become wholly or partially invalid, this shall not affect the validity
of the remaining clauses. In place of the invalid clauses such
reasonable valid clauses shall apply, which are commercially closest to
what the contracting parties would have agreed had they considered the
invalidity. This will also apply in the event that the invalidity of a
clause should be by reference to specific terms of periods provided for
in this Agreement; in this case such legal admissible extent or period
shall be deemed agreed which is as close as possible to what the parties
intended.
7.3 Place of performance for all services under this Agreement is the
principal offices of Alpine located in Augsburg.
<PAGE>
7.4 Any amendments to this Agreement shall only be valid if in writing and
signed both by Alpine and Mr. Mayerhauser.
7.5 This Service Agreement shall be governed by German Law.
Augsburg, this 30th day or March 1995
Chairman of Supervisory
Board of Alpine AG
/s/ ISAO SATO
--------------------------------------
Isao Sato
Agreed to and Accepted
/s/ DIETMAR MAYERHAUSER
- ------------------------------------
Dietmar Mayerhauser
<PAGE>
[GRAPHIC LOGO OMITTED]
EMPLOYMENT AGREEMENT
The undersigned
Hosokawa Micron International B.V., established at Amsterdam, The Netherlands,
for the purpose of this agreement represented by Mr. I. Sato, further to be
called Employer
and
Mr. D.E. Mayerhauser, born on December 31, 1939, further to be called Employee
hereby declare to have entered into an employment agreement subject to the
following conditions and ruled by the following articles:
ARTICLE 1. COMMENCING DATE, DURATION AND TERM OF NOTICE
1.1 This agreement will commence on June 1, 1996 and is entered by the
parties for an indefinite period of time.
1.2 During the validity of this agreement both the employer and the employee
have, under all circumstances, the right to terminate this employment
contract, provided termination is in line with Dutch legal requirements.
Term of notice of this contract is 2 months, whereas termination can
only become effective as for the last day of a calendar month.
ARTICLE 2. POSITION
2.1 The employee serves in the position of Managing Director European Block.
2.2 The employee commits himself to reasonably fulfill all duties and
responsibilities belonging to the position of Managing Director European
Block as well as those duties which, in the opinion of the employer,
belong to this position.
2.3 The employee is aware of the tasks and responsibilities of the position
and, if necessary, will receive further detailed explanation in
consultation with the employer.
2.4 The employer is, at all times, entitled to alter unilaterally, within
reason and after consultation with the employee, the position being
filled by the Managing Director Europe and/or duties and
responsibilities belonging to this position.
1
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ARTICLE 3. PERFORMANCE OF DUTIES
3.1 With regard to this position the employee is not allowed to accept,
stipulate or gain any direct profit from third parties for his own
benefit, in whatever way or by whatever title, according to the known
and signed Manual on Standards of Business Conduct of HMI Inc.
ARTICLE 4. SALARY AND COMMISSION SCHEME
4.1 As of June 1, 1996 the employee will receive a monthly gross salary of
Dfl. 25.000,=. The monthly gross salary will be reviewed every year in
January.
4.2 The employee is entitled to 8% holiday pay, based on 12 times the gross
monthly salary stated in article 4.1, which will be paid in May of each
year.
4.3 The employee is, in addition to his base monthly gross salary, entitled
to an annual bonus. The amount of the bonus is at the discretion of the
employer and will be paid in June of each year.
ARTICLE 5. FRINGE BENEFITS
5.1 The employee is entitled to 25 working days holiday, based on a full
calendar year's employment, provided the employee will take his holiday
after having obtained the agreement of the employer.
5.2 The employee is entitled to 13 rosterfree days (A.D.V.) per year.
5.3 The employer will contribute on a 60 % basis to the premium of the
pension scheme (Bedrijfspensionfonds voor de Metaalindustrie).
5.4 The employer will contribute on a 60 % basis to the premium of the early
retirement scheme (V.U.T.) with the Stichting Uittreden Metaal.
5.5 The employer will give the employee a fixed expense allowance of Dfl.
500,= per month, for expenditures for representation purposes and out of
pocket expenses.
2
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5.6 The employer will reimburse all costs of the employee's private
telephone.
5.7 Cost incurred by the employee for the sake of the employer will be
reimbursed on a cost basis after submission of the proper vouchers.
5.8 The employer will reimburse all other travel expenses related to
business activities on a cost basis after submission of the proper
vouchers.
ARTICLE 6. ADDITIONAL
This agreement shall be governed by Dutch law.
Any dispute arising from this agreement will be judged by the competent Courts
of the Netherlands.
Agreed and signed in duplicate:
Place and date: Place and date:
/s/ A'deur, June 1, 1996
Employer: Employee:
/s/ M.J. Stroop
/s/ I. Sato
3
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HOSOKAWA MICRON INTERNATIONAL B.V.
WORLD TRADE CENTER
Strawinskylaan 249, 1077 XX Amsterdam / Holland,
Tel. (020) 673 55 71/ Fax (020) 676 20 61
MEMO
To : D. Mayerhauser
From : M.J. Stroop Date : 4 March 1997
Ref. : MJS/6632/cvr Copy : B. Derksen
I. Sato
Subj.: Labor Agreement - Salary per January 1, 1997
STRICTLY PRIVATE & CONFIDENTIAL
In addition to the Labor agreement as signed with you on July 15 and 16, 1996,
following amendments are made:
Article 4.1
Monthly salary Dfl. 9.225,--, 50 including holiday pay Dfl. 119.556,--.
Article 5.5
Fixed Expense Allowance of Dfl. 1.012,50 of which Dfl. 500,-- is tax free, plus
a taxable variable allowance of Dfl. 168,75 a day when working in Amsterdam.
Details of which to be sent on a monthly basis to Payroll department HM BV.
Article 5.3/5.4
Pensions are paid under a German pensions agreement. HMI BV will pay that part
which relates to Dutch salary.
Agreed:
For HMI BV For D. Mayerhauser
/s/ M.J. Stroop /s/ D. Mayerauser
Date: 4/03/1997 Date: 4/03/97
<PAGE>
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Agreement by and among,
Hosokawa Alpine A. G. (HAAG), Peter-Dorfler-Strasse 13-25, 86199 Augsburg,
Germany, a company registered under German law and represented by its Managing
Director, Mr. Achim Vogel;
Hosokawa Micron International B.V. (HMI BV), Strawinskylaan 249,1077 XX
Amsterdam, the Netherlands, a company registered under Dutch law and represented
by Mr. M. J. Stroop, Director; and
Mr. Dietmar Mayerhauser (DM), Hohenweg 19, 86497 Horgau-Auerbach, Germany,
representing himself.
WHEREAS, HAAG and DM have entered into an employment agreement
effective from June 30, '95 which provides for salary and benefits
under the assumption that DM will devote all of his time and activities
to HAAG.
WHEREAS, with the approval of HAAG, DM has assumed duties at HMI BV and
has entered into an employment agreement effective July 15, 96 with HMI
BV which also assumes that DM will devote full time to activities and
duties for HMI BV.
WHEREAS, it is accepted that DM will now devote his time to duties and
activities for both HMI BV and HAAG and, with their consent, other
companies;
WHEREAS, HAAG, HMI BV and DM recognize that arrangements must be agreed
to to insure appropriate salary and benefits are paid to DM based on
time and effort.
NOW, THEREFORE, the parties agree as follows:
1. DM's salary, bonus, benefits and other employment arrangements will be
governed by the terms, conditions and requirements of the employment
agreement between DM and HAAG. All payments to DM (whether from HMI BV
and/or HAAG) may not exceed the amounts specified in the agreement between
DM and HAAG.
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<PAGE>
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2. Any and all salary paid, benefits provided and other employment
arrangements agreed to and provided under terms of the employment
agreement between DM and HMI BV shall go to reduce, D Mark for D Mark and
item for item, the salary, benefits and other employment arrangements
provided for under the employment agreement between DM and HAAG subject
only to the exceptions provided for in section 3 for pension payments.
3. Pension arrangements for and on behalf of DM are provided for in the
employment agreement between DM and HAAG. This pension arrangement shall
be based on the salary provided for in the HAAG agreement irrespective of
and not withstanding the fact that a portion of this salary will not
actually be paid by HAAG to DM as payments to DM by HMI BV, as provided
for in section 2, shall offset HAAG's salary obligation to DM but not
HAAG's obligation to fund all pension arrangements.
4. HMI BV shall pay to HAAG an amount to reimburse HAAG for the costs of DM's
pension arrangement equal to that portion of HAAG's pension cost for DM
which is based on the salary paid to DM by HMI BV and which must be
included in DM's pension arrangement as per section 3. HAAG shall invoice
HMI BV in D Marks for this cost annually and shall include all information
reasonably necessary to support the claim.
5. HMI BV will provide a monthly accounting (by the 20th of the subsequent
month; attention: Finance Director) to HAAG for all payments made and
benefits provided to DM by HMI BV.
6. Adjustment in the amounts paid and/or benefits provided to DM by HAAG for
amounts and benefits provided to DM by HMI BV shall be made by HAAG as
soon as practicable after receipt of information per section 5. HAAG shall
provide DM with all reasonable documentation requested to support such
adjustments.
7. This agreement shall remain in effect so long as DM's duties and time is
split between HAAG and HMI BV and there are employment agreements in
effect by and among DM and HAAG and DM and HAAG.
8. This agreement shall remain confidential among the parties, except that DM
may disclose the arrangement to his tax/financial advisor(s) and HMI BV
and HAAG may
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disclose the agreement to their auditors and tax authorities, if required
or requested.
9. This agreement shall be effective from the date first above written.
10. The agreement is written in the English language and this English version
shall govern.
11. Should any of the terms or conditions of this agreement be deemed
unenforceable or void, then such term shall be deemed null and void and
the other provisions of the agreement shall remain if full force and
effect except that if section 2 of the agreement is held to be void, then
the agreement shall be deemed terminated.
Agreed to this 11th day of March, 1997.
HOSOKAWA ALPINE AG
by Achim Vogel
/s/ ACHIM VOGEL
---------------------------------------
Achim Vogel
Title
HOSOKAWA MICRON INTERNATIONAL BV
by Maurice J. Stroop
/s/ MAURICE J. STROOP
----------------------------------------
Maurice J. Stroop
Title Director of Finance
/s/ DIETMAR MAYERHAUSER
----------------------------------------
Dietmar Mayerhauser
Page 3 of 3
CONSULTING SERVICES AGREEMENT
This Consulting Services Agreement made this 1st day of DECEMBER, 1997, by and
between Hosokawa Micron International Inc., a Delaware corporation, with
principal offices at 780 Third Avenue, New York, New York 10017 ("HOSOKAWA"),
and Gerhard Kappeler, residing at 51467 Bergisch Gladbach, Weidenbuscher Weg 45,
Germany ("Consultant").
1. CONSULTING AND ADVISORY SERVICES. Consultant shall render to HOSOKAWA the
consulting services set forth in ATTACHMENT A to this Agreement, which shall be
deemed an integral part of this Agreement and the performance of any other
similar work that may be assigned to him by HOSOKAWA's senior management or
their delegates ("Services"). Consultant shall be identified as the Vice
President - Technology of HOSOKAWA, but Consultant's authority to bind HOSOKAWA
shall be subject to the provisions of Section 8. Consultant and HOSOKAWA agree
that the services set forth in Attachment A may be changed, modified or altered
at any time upon mutual agreement of the parties.
Notwithstanding the above, it is understood and agreed that Consultant is
essentially free to arrange his activities, specify his hours of work and
determine his place of work. However, Consultant will consider the wishes and
interests of HOSOKAWA to the fullest extent possible and shall complete all
assignments as scheduled.
2. NON-COMPETITION. Consultant shall not at any time prior to the termination
of this Agreement, as provided for in Section 4, hereof, directly or indirectly,
engage in or have any interest in any person, firm, corporation or business that
engages in any activity which activity is the same as, similar to, or
competitive with an activity engaged in, or is on the date hereof proposed to be
engaged in by HOSOKAWA.
3. COMPENSATION AND EXPENSES. HOSOKAWA shall pay to Consultant as full
compensation for his Services a fee of German deutsch marks 323,922 per year,
payable in twelve (12) equal monthly installments of DM 26,993.50 per
<PAGE>
month. Fees shall be payable within 15 days after the end of each calendar
month. The monthly fee, paid in arrears, shall be wire transferred to the
account designated by Consultant per Section 11.
HOSOKAWA shall reimburse Consultant for all reasonable and necessary
out-of-pocket expenses actually incurred by Consultant and attributable to
Services performed hereunder. All such reimbursements shall be made upon
presentation to HOSOKAWA of Consultant's appropriate substantiating
documentation for all expense reimbursements due. Where possible and
practicable, HOSOKAWA shall make all travel plans and pay directly or arrange
for a Hosokawa subsidiary to pay directly Consultant's reasonable and necessary
expenses. HOSOKAWA shall also make available to Consultant the following:
a) an automobile, similar to a BMW 730i, and including insurance, fuel,
repairs and any other ordinary and customary expenses. This automobile will
be provided to Consultant by HOSOKAWA or one of HOSOKAWA's subsidiary
operations, in accordance with arrangements to be concluded between HOSOKAWA
and said subsidiary; and
b) appropriate office space and clerical help at a suitable location.
4. TERM. This Agreement shall commence on the date hereof and shall expire on
November 30, 1999. This Agreement shall automatically terminate if Consultant,
for any consecutive thirty (30) day period is unable, for any reason, to perform
the Services hereunder. In addition, either party may terminate this Agreement
upon giving 90 days prior written notice to the other party, provided that
HOSOKAWA may not terminate this Agreement with effect prior to November 30,
1998, except upon the inability of Consultant to perform the Services hereunder
for any period of thirty (30) consecutive days.
5. CONFIDENTIALITY. Consultant acknowledges that all information including but
not limited to all information relating to trade secrets, secret processes,
know-
2
<PAGE>
how, customer lists, recipes, formulas and personnel information of HOSOKAWA, or
any related company, disclosed by HOSOKAWA or its affiliates, to Consultant in
connection with this Agreement, or which comes to the attention of Consultant in
connection with the activities of Consultant as contemplated by this Agreement
(including without limitation any information relating to the businesses or
products or proposed businesses or products of HOSOKAWA or its affiliates) is
confidential and constitutes a valuable asset of HOSOKAWA. Consultant shall not
disclose such confidential information for any purpose except in connection with
the performance of his obligations hereunder.
Consultant shall further take all reasonable steps necessary to ensure that
no disclosure or use prohibited by this Section 5 is made, including without
limitation those steps which Consultant takes to protect his own information,
data or other tangible or intangible property which he regards as proprietary or
confidential. "Confidential Information" comprises any technical, economic,
financial, legal, marketing or other information which is not common knowledge
among competitors or among other companies, organizations or individuals who may
like to possess such confidential information or may find it useful. Not
withstanding the foregoing, the term "confidential information" as used herein
shall not include information which at the time of disclosure to Consultant was
in the public domain through no fault of Consultant. All Confidential
Information provided to or otherwise in Consultant's possession at the
termination of that Agreement shall be returned to HOSOKAWA and or destroyed by
Consultant and Consultant shall certify to HOSOKAWA that Consultant has returned
or destroyed all Confidential Information. The rights and obligations of
Consultant under this Section 5 shall survive termination of this Agreement in
whole or in part.
6. INDEMNIFICATION. HOSOKAWA shall indemnify and hold harmless the Consultant
from and against any and all claims, damages or liability, including attorneys'
fees and the cost and expense of any legal actions resulting from any claims,
demands or proceedings asserted against Consultant by reason of Consultant's
actions pursuant to and in accordance with the express terms and
3
<PAGE>
provisions of this Agreement except for Consultant's gross negligence or
misconduct.
7. INSURANCE. HOSOKAWA shall provide Consultant with travel accident insurance
in an amount of US$ 300,000, which shall be in effect during the period
Consultant is providing services to HOSOKAWA other than at Consultant's or
HOSOKAWA's location identified above or at Hosokawa's subsidiary operations in
Cologne, Germany.
8. INDEPENDENT CONTRACTOR RELATIONSHIP. The relationship of Consultant to
HOSOKAWA is that of an independent contractor and nothing contained in this
Agreement shall be construed to create the relationship of employer and employee
or principal and agent between HOSOKAWA and Consultant. Consultant is not a
partner or joint venturer with HOSOKAWA and nothing contained in this Agreement
shall be construed so as to make such parties partners or joint ventures or to
impose any liability as such on either of them. Consultant shall not have any
authority to make any contract, or incur any obligation, or make any commitment,
or create any liability, or take any other action or do any other thing, on
behalf of HOSOKAWA, except as may otherwise be authorized in writing by
HOSOKAWA. Consultant shall exercise due care in all dealings with parties
unrelated to HOSOKAWA to advise and put them on notice as to the limits and
scope of Consultant's relationship with HOSOKAWA and the requirement for
HOSOKAWA approval and/or ratification of Consultant's actions. It is understood
and agreed that Consultant's duties and obligations to HOSOKAWA are fully
expressed by and limited to the terms hereof.
9. BINDING EFFECT. This Agreement shall be binding upon the parties and their
respective executors, administrators, successors, and assigns.
10. ENTIRE AGREEMENT. This Agreement supersedes all agreements previously made
between the parties relating to its subject matter. There are no other
understandings or agreements.
4
<PAGE>
11. NOTICES AND COMMUNICATIONS. Any notice, payment, request, instruction, or
other document to be delivered under this Agreement shall be in writing and
delivered personally or mailed by certified mail, postage prepaid, to HOSOKAWA
at 780 Third Ave., NY, NY 10017, Attn.: S. Baker G.C. and to Consultant at 51467
Bergisch Gladbach, Weidenbuscher Weg 45/Germany, or to any changed address that
the parties may designate by like notice. The effective date of such notice
shall be its mailing date.
12. NON-WAIVER. No delay or failure by either party in exercising any right
under this Agreement, and no partial or single exercise of that right, shall
constitute a waiver of that or any other right.
13. HEADINGS. Headings in this Agreement are for convenience only and shall not
be used to interpret or construe its provisions.
14. NUMBER AND GENDER. Whenever required by the context, the singular number
shall include the plural, the plural shall include the singular, and the gender
of any pronoun shall include all genders.
15. GOVERNING LAW. This Agreement shall be construed in accordance with and
governed by the laws of the State of New York. The parties agree to the
jurisdiction of the courts of the State of New York in all matters which may
arise under this Agreement and, in particular, to bring suit in and be subject
to the jurisdiction of the Supreme Court of the State of New York.
16. SEVERABILITY. In the event that any provision of this Agreement is found
invalid or unenforceable, the remainder of this Agreement shall remain valid and
enforceable according to its terms.
5
<PAGE>
17. ASSIGNABILITY. This Agreement and the rights and obligations hereunder are
personal with respect to Consultant and may not be assigned by any act of
Consultant or by operation of law.
18. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
*
*
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
this 3rd day of December, 1997.
CONSULTANT:
/s/ G. Kappeler
---------------------------------
Name
HOSOKAWA MICRON
INTERNATIONAL INC.
by /s/ ISAO SATO
---------------------------------
ISAO SATO
---------------------------------
(Officer's name)
President, C.E.O.
---------------------------------
(Officer's title)
6
<PAGE>
Attachment A to Consultant Agreement
between
Hosokawa Micron International Inc. (HMII)
and
Gerhard Kappeler (Consultant)
dated as of December 1, 1997
General Description of Services
1. Participate at Hosokawa Micron International Inc. Management and Executive
Committee meetings to advise on all R&D activities. Also serve on other
management-type committees as agreed and assigned.
2. Advise and review on all technical and technology matters and related
concerns for HMII.
3. Recommend research and development activities with focus on market needs,
customer requirements and competition.
4. Support the President in the review and evaluation of Advanced Technology
Committee (ATC) projects and administration as head of ATC activities.
5. Participate in the review and selection of new R&D executives for HMII and
the ATC. Train all personnel appointed to R&D and ATC positions.
6. Provide recommendations regarding Hosokawa Micron test facilities with the
object of reviewing if centers have state-of-the-art test and analytical
capabilities.
7 Develop and submit programs to assure use of common designs, standards and
technologies within HMII.
8. Evaluate ideas and proposals and consult on whether such should be patented.
9. Develop and submit programs to assure for worldwide protection of HMII
technologies.
10. Review, evaluate and recommend actions on agreements and projects involving
the use, transfer and/or sale of technologies.
11 Review and evaluate products, technologies and associated areas of potential
acquisition candidates.
12. Develop access and good relationships with universities and research
institutions to aid in company efforts and in coordination with ATC
activities and programs.
13. As requested, support HMII in establishing and maintaining relationships
with selected
<PAGE>
customers and/or industries.
14. Advise on industry, customer and institutional contacts and relationships to
enable HMII to become aware of customer needs and industry and institutional
developments as early as possible regarding possible new technologies.
15. Such other services as shall be directed by the President and CEO of HMII as
are consistent with expertise and those activities described above.
16. Prepare and submit monthly reports to the President and CEO of HMII on all
activities for the period.
SENIOR EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT made as of the 15th day of April, 1998, by and between HOSOKAWA MICRON
INTERNATIONAL INC., a Delaware corporation with its corporate offices at 780
Third Avenue, New York, New York 10017 (hereinafter called the "Company"), and
Isao Sato, residing at 15 Bowman Drive South, Greenwich, Connecticut
(hereinafter called the "Executive").
WITNESSETH:
-----------
WHEREAS, the Executive has served the Company as its President and Chief
Executive Officer;
WHEREAS, the Company desires to continue to employ the Executive in such
capacity and the Executive is willing to continue to serve the Company in such
capacity;
WHEREAS, the Company and the Executive desire to set forth the terms and
conditions of such employment.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements herein contained, the Company and the Executive agree as follows:
1. Employment. The Company hereby agrees to continue to employ the Executive,
and the Executive agrees to be employed by the Company, on the terms and
conditions herein contained.
2. Term. Except as otherwise provided in this Agreement, the Executive shall be
employed under this Agreement for an initial four-year term commencing on
the date hereof. The period during which the Executive is employed hereunder
is referred to as the "Employment Term." The Employment Term shall be
automatically renewed for successive two-year terms unless the Company shall
give the Executive written notice of non-renewal at least six months prior
to the end of the then current term. The Executive may, at any time,
terminate the Employment Term by giving the Company 120 days prior written
notice of the effective date of such termination. Upon the effective date of
a termination of the Employment Term per the preceding sentence, the Company
shall have no obligation to the Executive hereunder other than to pay or
provide the Entitlements.
3. Duties. The Executive shall serve as the Company's President and Chief
Executive Officer, and as such, will be responsible for the overall
profitability, growth and performance of the Company. The Executive shall
perform his duties hereunder at the
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<PAGE>
Company's facilities located at 780 Third Avenue, New York, New York USA
(the "Employment Site") and shall be available to travel, as may be required
in connection with the performance of his duties hereunder. In no event will
the Executive be required to undertake any duties or perform any tasks which
are inconsistent with his status in the Company. During the Employment Term,
the Executive shall devote substantially all of his business time,
attention, skill and efforts to the performance of his duties hereunder;
provided, however, that the Executive may serve as director of other
corporations, if such service does not conflict in any material respect with
his duties hereunder or his fiduciary duty to the Company, and provided the
Executive has prior written approval from the Company. Nothing herein shall
prevent the Executive from managing his personal investments and
participating in charitable and civic endeavors, so long as such activities
do not materially interfere with the Executive's performance of his duties
hereunder.
4. Base Salary. During the Employment Term, the Company shall pay the
Executive, in accordance with its normal payroll practices and subject to
required withholding, a base salary which, shall be at the annual rate of
$290,000. The base salary may be increased annually, commencing on October
1, 1998, by an amount to be determined by the Company, in its sole
discretion. Once increased, the base salary hereunder may not be decreased.
The base salary, as increased from time to time, is hereinafter referred to
as the "Base Salary."
5. Incentive Compensation. During the Employment Term, the Executive shall be
entitled to incentive compensation ("Incentive Compensation") pursuant to
the terms of the Company's incentive compensation plan, a copy of which is
attached hereto as Exhibit A and any other annual programs or plans
hereafter adopted by the Company.
6. Certain Other Compensation and Benefits. During the Employment Term, the
Executive shall be entitled to:
(a) participation in all benefit, pension, retirement, savings, welfare and
other employee benefit plans and policies in which members of the
Company's senior management generally are entitled to participate
(collectively, the "Benefit Plans"), in accordance with their respective
terms as in effect from time to time and as listed in Exhibit B.
(b) vacation each year in accordance with the Company's policies for members
of senior management in effect from time to time, but in no event less
than twenty days paid vacation for each calendar year (twenty-five days
after fifteen years of employment with the Company and/or any of its
Affiliates) (for purposes of this Agreement, the term "Affiliate" means
an entity controlled by, in control of, or under common control with,
the Company);
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<PAGE>
(c) use of an automobile and the costs of fuel, maintenance, repairs and
insurance associated with such automobile pursuant to the terms of the
Company's policy concerning senior executives' automobiles, as such
policy is in effect from time to time, and in the absence of any such
policy, as such policy was last in effect.
(d) life insurance, in addition to any provided to employees of the Company
generally, on the life of the Executive for the benefit of the
Executive's designated beneficiaries as detailed in Exhibit C.
(e) long-term disability coverage for the Executive under the plan or policy
per Exhibit D.
(f) medical and dental insurance for the Executive, his spouse, and his
dependents as detailed in Exhibit E.
(g) such other benefits as the Executive is currently provided and noted in
Exhibit F.
7. Death Prior to Termination of Employment. If the Executive shall die during
the Employment Term, the Company shall have no liability or further
obligation except as follows:
(a) The Company shall pay the Executive's estate, when otherwise due, any
unpaid Base Salary for the period prior to the Executive's death, any
declared or awarded but unpaid Incentive Compensation and any other
unpaid amounts due the Executive under any other Benefit Plans
(collectively, the "Entitlements").
(b) The Executive's estate shall have such rights, if any, under employee
benefit, fringe benefit or incentive plans as may be provided in such
plans and any grants thereunder in accordance with their respective
terms.
8. Common Stock Ownership. No later than five (5) years after the date the
Company's Common Stock is listed on a United States stock exchange and at
all times thereafter during the Executive's employment by the Company, the
Executive must own, directly or beneficially, Common Stock of the Company
with an aggregate fair market value equal to (i) one times his Base Salary;
or (ii) such greater amount as is required under the current ownership
guidelines, if any, as may be established by the Board of Directors of the
Company, provided, however, that in no event shall the Executive be required
to own Common Stock having a value equal to more than three (3) times his
Base Salary. To the extent permitted under applicable law and subject to
agreement between the Executive and the Company, the Company may assist the
Executive in obtaining financing to effectuate the purchases of Common Stock
necessary to meet
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<PAGE>
the requirements of this section which may include Company guarantees and
adjustment of incentive and bonus programs to provide that up to fifty
percent (50%) of any awards may be paid in Common Stock to an Executive who
does not meet the requirements of this section.
9. Disability. If the Executive shall be physically or mentally incapable of
performing his material duties as provided in Section 3 of this Agreement
during a period of not less than one hundred eighty (180) consecutive days,
the Company may, at its election at any time thereafter while the Executive
remains incapable of performing his material duties hereunder, terminate the
Executive's employment hereunder, effective immediately, by giving the
Executive written notice of such termination. In such event, the Company
shall have no other obligation to the Executive or his dependents hereunder
other than the obligation to pay or provide the Entitlements.
10. Cause. The Company may terminate the Executive's employment hereunder for
Cause by giving the Executive written notice of immediate termination. For
purposes of this Agreement, "Cause" shall mean (a) the Executive's
dishonesty, misappropriation, willful breach of fiduciary duty or fraud with
regard to the Company or any of its assets or businesses which has a
material adverse effect on the Company; (b) the Executive's conviction of or
pleading of nolo contendere with regard to a felony (other than traffic
violations) or any other crime involving moral turpitude; or (c) any other
breach by the Executive of a material provision of this Agreement that
remains uncured for thirty (30) days after written notice thereof is given
to the Executive. If the Executive's employment hereunder is terminated by
the Company for Cause, the Company shall have no other obligation to the
Executive hereunder other than the obligation to pay or provide the
Entitlements.
11. Good Reason. The Executive may terminate his employment hereunder for Good
Reason provided that there has first occurred a Change in Control of the
Company as defined in Section 9.2 of the Company's 1997 Stock Option Plan
and provided that the Executive provides written notice to the Company. For
purposes of this Agreement, "Good Reason" shall mean the occurrence or
failure to cause the occurrence of any of the following events without the
Executives express prior written consent after a Change in Control: (a) any
material demotion of the Executive, any material reduction of the
Executive's authority or responsibility or any other change in the terms of
the Executive's authority or responsibility or any other change in the terms
of the Executive's employment which is inconsistent with Section 3 hereof;
(b) the Company requiring the Executive to perform services hereunder at any
location outside a 60-mile radius from the Employment Site or the Company
requiring the Executive to work in an office of substantially inferior
characteristics or without the personnel assistance and support currently
provided the Executive; or (c) any breach by the Company of any provision of
this Agreement which is not cured by the Company within 30 days after notice
thereof from the Executive. If the Executive's
Page 4 of 8
<PAGE>
employment hereunder is terminated by the Executive without Good Reason, the
Company shall have no other obligation to the Executive hereunder other than
the obligation to pay or provide the Entitlements.
12. Termination of Employment by the Executive for Good Reason after a Change in
Control or by the Company Without Cause: Non-renewal of Agreement. In the
event; (i) the Executive terminates his employment for Good Reason pursuant
to Section 11 hereof; or, (ii) the Company terminates the Executive's
employment other than for Cause or due to a disability pursuant to Section 9
hereof; or, (iii) the Executive's employment hereunder terminates due to the
non-renewal hereof following notice of such non-renewal given by the
Company, then, in any such event, the Company shall be deemed to have
breached this Agreement, and the Executive shall be entitled to the
following:
(a) in a lump sum (to the extent such obligations are capable of being paid
in a lump sum under the terms of the plan with respect to which such
obligation arose) in cash within thirty business days after the date of
termination, and, otherwise, in accordance with the terms of the
applicable plan or applicable law, any and all Entitlements as of the
date of termination of employment; and
(b) as severance pay, within thirty business days after the date of
termination, a lump sum in an amount equal to the greater of (A) the
Executive's Ending Compensation, hereinafter defined, multiplied by the
number of years (including any fraction of a year) in the period from
the date of termination of employment to the date the Employment Term
would have otherwise expired pursuant to Section 2 hereof (the
"Remaining Term"); or (B) the Executive's Ending Compensation multiplied
by two. For purposes of this Agreement, the Executive's Ending
Compensation means the sum of (A) one year's Base Salary at the annual
rate in effect immediately prior to such termination of employment; and
(B) the average of the Incentive Compensation paid or payable to the
Executive in respect of the three full years preceding the date of
termination of employment.
13. Non-Competition: Confidential Information.
(a) The Executive agrees that, if he terminates his employment hereunder
other than for Good Reason pursuant to Section 11 hereof, or if his
employment hereunder is terminated for Cause, he will not for a period
of two years after such termination of employment with the Company, in
any manner, directly or indirectly (or have a substantial ownership in,
manage, operate, or control any entity which shall directly or
indirectly) (i) perform, or cause to be performed, or solicit or aid, in
any manner, solicitation of, any work of a type performed by the Company
for any firm, corporation, or other entity ("Customer") with which, at
any time during
Page 5 of 8
<PAGE>
the twelve (12) month period prior to termination of the Employment
Term, the Company or any subsidiary conducted any business; or (ii)
induce any personnel to leave the service of the Company or of any
subsidiary of the Company. Within two weeks of a written request of the
Executive following termination of the Employment Term, the Company
shall deliver to the Executive a list of Customers and the Executive
shall within two weeks after such delivery on reasonable prior notice
have the right during normal business hours to examine such books and
records of the Company as shall be reasonably necessary to confirm that
only the names of Customers are set forth on the list.
(b) 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 and its subsidiaries, and their respective
businesses, (i) obtained by the Executive during his employment by the
Company or any of its subsidiaries; and (ii) not otherwise public
knowledge or known within the Company's industry. After termination of
the Executive's employment with the Company, the Executive shall not,
without prior written consent of the Company, unless compelled pursuant
to a court order, communicate or divulge any such information, knowledge
or data to anyone other than the Company and those designated by it.
(c) After termination of the Executive's employment with the Company, the
Executive shall refrain from disparaging, whether orally, in writing or
in other media, the Company, its subsidiaries and Affiliates, the
officers, directors and employees of each of them, and the products and
services of each of them.
(d) The Executive agrees that the remedy at law for any breach by him of the
foregoing shall be inadequate and that the Company shall be entitled to
injunctive relief. This Section constitutes an independent and separable
covenant that shall be enforceable notwithstanding any right or remedy
that the Company may have under any other provision of this Agreement or
otherwise.
14. No Mitigation; No Set-Off. The Company agrees that if the Executive's
employment with the Company is terminated for any reason whatsoever, the
Executive is not required to seek other employment or to attempt in any way
to reduce any amounts payable to the Executive by the Company pursuant to
this Agreement. Further, the amount of any payment or benefit provided for
in this Agreement shall not be reduced by any compensation earned by the
Executive or benefit provided to the Executive as the result of employment
by another employer or otherwise. Notwithstanding anything to the contrary
contained herein, the Company's obligation, if any, following termination of
the Executive's employment hereunder, to provide any ongoing benefits of a
type provided for in Sections 6(a), (d), (f), and (g) hereof, shall be
excused for so long as, and to the extent that, such benefits are provided
by a subsequent employer of the Executive.
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<PAGE>
15. Garnishment. The benefits payable under this Agreement shall not be subject
to garnishment, execution or levy of any kind, and any attempt to cause any
benefits to be so subjected shall not be recognized.
16. Notice. Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally, or sent by certified
mail, return receipt requested, by overnight delivery or courier service, or
by telecopy. Notice to the Executive shall be delivered to his address set
forth at the beginning of this Agreement, and notice to the Company shall be
sent to the address set forth at the beginning of the Agreement to the
Attention: General Counsel
Any notice given by certified mail shall be deemed given five days after the
time of certification thereof. Any notice given by other means permitted by
this Section 16 will be deemed given at the time of receipt thereof.
Either party may, by notice given in accordance with this Section 18 to the
other party, designate another address or person for receipt of notices
hereunder.
17. Applicable Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York without
reference to its conflicts of law provisions.
18. Binding Agreement. Notwithstanding anything herein to the contrary, this
Agreement may not be assigned by the Company without the prior written
consent of the Executive. This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. This Agreement is personal to the Executive and neither this
Agreement nor any rights hereunder may be assigned by the Executive.
19. Miscellaneous. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer of the Company as may
be specifically designated. No waiver by either party hereto at any time of
any breach by the other party hereto of, or compliance with, any condition
or provision shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. This Agreement
constitutes the entire Agreement between the parties hereto pertaining to
the subject matter hereof. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement.
Page 7 of 8
<PAGE>
20. Counterparts. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
21. Separability. If any provisions of this Agreement shall be declared to be
invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provision hereof which shall
remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed
and the Executive has hereunto set his hand as of the date first set forth
above.
HOSOKAWA MICRON INTERNATIONAL INC.
----------------------------------
By: /s/ Yoshi Kawashima
------------------------------
Name:
Title:
Isao Sato
/s/ Isao Sato
----------------------------------
Name:
Page 8 of 8
HOSOKAWA MICRON INTERNATIONAL INC.
1997 STOCK OPTION PLAN
F. 7/97
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. PURPOSE......................................................1
ARTICLE 2. DEFINITIONS..................................................1
ARTICLE 3. ADMINISTRATION...............................................4
ARTICLE 4. SHARE AND OTHER LIMITATIONS..................................7
ARTICLE 5. ELIGIBILITY..................................................9
ARTICLE 6. STOCK OPTIONS................................................9
ARTICLE 7. NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS...................10
ARTICLE 8. NON-TRANSFERABILITY AND TERMINATION PROVISIONS..............14
ARTICLE 9. CHANGE IN CONTROL PROVISIONS................................16
ARTICLE 10. TERMINATION OR AMENDMENT OF THE PLAN........................18
ARTICLE 11. COMPANY CALL RIGHTS; RIGHTS OF FIRST REFUSAL................19
ARTICLE 12. UNFUNDED PLAN...............................................20
ARTICLE 13. GENERAL PROVISIONS..........................................20
ARTICLE 14. APPROVAL OF BOARD AND STOCKHOLDERS..........................24
ARTICLE 15. TERM OF PLAN................................................24
ARTICLE 16. NAME OF PLAN................................................24
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<PAGE>
Hosokawa Micron International Inc.
1997 Stock Option Plan
ARTICLE 1.
PURPOSE
The purpose of this Hosokawa Micron International Inc.1997 Stock Option
Plan (the "Plan") is to enhance the profitability and value of Hosokawa Micron
International Inc, a Delaware corporation (the "Company") and its Affiliates for
the benefit of its stockholders by enabling the Company (i) to grant employees
of the Company and its Affiliates, stock options, thereby creating a means to
raise the level of stock ownership by employees in order to attract, retain and
reward such employees and strengthen the mutuality of interests between
employees and the Company's stockholders and (ii) to grant stock options to
Non-Employee Directors thereby attracting, retaining and rewarding such
non-employee directors and strengthening the mutuality of interests between
non-employee directors and the Company's stockholders.
ARTICLE 2.
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1. "Affiliate" shall mean (i) any corporation (other than the
Company) or limited liability company in an unbroken chain of corporations
or limited liability companies ending with the Company, if each
corporation or limited liability company owns stock or membership
interests (as applicable) possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock or membership
interests (as applicable) in one of the other corporations or limited
liability companies in such chain, or (ii) any corporation (other than the
Company) or limited liability company in an unbroken chain of corporations
or limited liability companies beginning with the Company, if each
corporation or limited liability company (other than the last corporation
or limited liability company in the unbroken chain), owns stock or
membership interests (as applicable) possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock or
membership interests (as applicable) in one of the other corporations or
limited liability companies in such chain.
2.2. "Award" shall mean any award under this Plan of a Stock Option.
All Awards, shall be confirmed by, and subject to the terms of, a written
agreement executed by the Company and the Participant.
<PAGE>
2.3. "Board" or "Board of Directors" shall mean the Board of
Directors of the Company.
2.4. "Cause" shall mean, with respect to a Participant's Termination
of Employment, (i) the Participant's dishonesty, misappropriation, willful
breach of fiduciary duty or fraud with regard to the Company or any of its
assets or businesses which has a material adverse effect on the Company,
(ii) the Participant's conviction of or the pleading of nolo contendere
with regard to a felony (other than a traffic violation) or any other
crime involving moral turpitude, or (iii) any other breach by the
Participant of a material provision of his employment agreement (if any)
that remains uncured for thirty (30) days after written notice thereof is
given to the Participant. In the event the Participant's employment is
terminated by the Company without Cause and the Company discovers within
ninety (90) days after such Termination of Employment, acts or omissions
of the Participant occurring prior to Termination of Employment that would
have been grounds for a termination by the Company for Cause, such
termination shall be deemed for all purposes hereunder a termination for
Cause notwithstanding any earlier contrary treatment of such termination
and any acts of the Company consistent with such earlier treatment.
Notwithstanding the foregoing, a Participant shall be deemed to be
terminated for "cause" if the Participant, following his or her
Termination of Employment, becomes employed by a "competitor" (or its
successor), as determined by the Committee, in its sole discretion, at the
time of the grant of an Award, provided that the competitor (or its
successor) competes with the Company at the time of exercise or vesting of
an Award. Where there is an employment agreement and such agreement
defines termination by the Participant for "good reason" (or words of like
import), a Participant's Termination of Employment for good reason shall
not be deemed for "cause". With respect to a Participant's Termination of
Directorship, "cause" shall mean an act or failure to act that constitutes
cause for removal of a director under applicable Delaware law.
2.5. "Change in Control" shall have the meaning set forth in Article
9.
2.6. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
2.7. "Committee" shall mean a committee of the Board appointed from
time to time by the Board, which shall consist of two or more directors.
Solely to the extent required by Rule 16b-3 (as defined herein), each
director on the Committee shall be a non-employee director as defined in
Rule 16b-3. If and to the extent that no Committee exists which has the
authority to administer the Plan, the functions of the Committee shall be
exercised by the Board. If for any reason the appointed Committee does not
meet the requirements of Rule 16b-3 and if such rule is applicable, such
noncompliance with the requirements of Rule 16b-3 shall not affect the
validity of the awards, grants, interpretations or other actions of the
Committee.
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<PAGE>
2.8. "Common Stock" means the common stock, $.01 par value per
share, of the Company.
2.9. "Disability" shall mean, with respect to an Eligible Employee
or Non-Employee Director, a permanent and total disability as defined in
the Company's long-term disability policy. A Disability shall only be
deemed to occur at the time of the determination by the Committee or the
Board, as the case may be, of the Disability.
2.10. "Effective Date" shall mean July 11, 1997, subject to Article
14.
2.11. "Eligible Employees" shall mean the employees of the Company
and its Affiliates who are eligible pursuant to Section 5.1 to be granted
Awards under this Plan.
2.12. "Exchange Act" shall mean the Securities Exchange Act of 1934.
2.13. "Fair Market Value" for purposes of this Plan, unless
otherwise required by any applicable provision of the Code or any
regulations issued thereunder, shall mean, as of any date, (i) if the
Common Stock is not readily tradable on a national securities exchange or
any system sponsored by the National Association of Securities Dealers,
its Fair Market Value shall be set in good faith by the Committee based on
the valuation of the Common Stock by a registered investment advisor (as
defined under the Investment Advisors Act of 1940) or other appraiser or
advisor selected by the Committee in its sole discretion, or (ii) the last
sales price reported for the Common Stock on the applicable date (a) as
reported by the principal national securities exchange in the United
States on which it is then traded, or (b) if not traded on any such
national securities exchange, as quoted on an automated quotation system
sponsored by the National Association of Securities Dealers. For purposes
of the grant of any Award, the applicable date shall be the date for which
the last sales price is available at the time of grant. The valuation
described in (i) above shall be performed at least on an annual basis and
as of the last day of the Company's fiscal year and on such additional
dates determined by the Committee in its sole discretion.
2.14. "Non-Employee Director" shall mean a director of the Company
who is not an active employee of the Company or an Affiliate.
2.15. "Participant" shall mean an Eligible Employee to whom an Award
has been made pursuant to this Plan and each Non-Employee Director of the
Company; provided, however, that a Non-Employee Director shall be a
Participant for purposes of the Plan solely with respect to awards of
Stock Options pursuant to Article 7.
2.16. "Retirement" shall mean a Participant's Termination of
Employment at or after age sixty-five (65) (or, with the consent of the
Committee, before age sixty-five (65) but after age fifty-five (55)). With
respect to a Participant's Termination of
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<PAGE>
Directorship, Retirement shall mean the failure to stand for reelection or
the failure to be reelected at or after a Participant has attained age
sixty-five (65) (or, with the consent of the Board, before age sixty-five
(65) but after age fifty-five (55)).
2.17. "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provisions.
2.18. "Stock Option" or "Option" shall mean any option to purchase
shares of Common Stock granted to Eligible Employees or Non-Employee
Directors pursuant to Article 6 or Article 7, respectively.
2.19. "Termination of Directorship" shall mean, with respect to a
Non-Employee Director, that the Non-Employee Director has ceased to be a
director of the Company.
2.20. "Termination of Employment" shall mean (i) a termination of
service (for reasons other than a military or personal leave of absence
granted by the Company) of a Participant from the Company and its
Affiliates; or (ii) when an entity which is employing a Participant ceases
to be an Affiliate, unless the Participant thereupon becomes employed by
the Company or another Affiliate .
2.21. "Transfer" or "Transferred" or "Transferable" shall mean
anticipate, alienate, attach, sell, assign, pledge, encumber, charge,
hypothecate or otherwise transfer.
2.22. "Withholding Election" shall have the meaning set forth in
Section 13.4.
ARTICLE 3.
ADMINISTRATION
3.1. The Committee and the Board. The Plan shall be administered and
interpreted by the Committee, except that with respect to Awards to Non-Employee
Directors under Article 7 of the Plan, the Plan shall be administered by the
Board.
3.2. Awards. The Committee shall have full authority to grant Stock
Options to Eligible Employees, pursuant to the terms of this Plan. In
particular, the Committee shall have the authority:
(a) to select the Eligible Employees to whom Stock Options may
from time to time be granted hereunder;
4
<PAGE>
(b) to determine whether and to what extent Stock Options are
to be granted hereunder to one or more Eligible Employees;
(c) to determine, in accordance with the terms of this Plan,
the number of shares of Common Stock to be covered by each Stock Option
granted to an Eligible Employee hereunder;
(d) to determine the terms and conditions, not inconsistent
with the terms of this Plan, of any Award granted hereunder to an Eligible
Employee (including, but not limited to, the share price, any restriction
or limitation, any vesting schedule or acceleration thereof, or any
forfeiture restrictions or waiver thereof, regarding any Stock Option, and
the shares of Common Stock relating thereto, based on such factors, if
any, as the Committee shall determine, in its sole discretion);
(e) to determine whether and under what circumstances a Stock
Option may be settled in cash or Common Stock under Subsection 6.2(d); and
(f) to determine whether to require an Eligible Employee, as a
condition of the granting of any Award, to not sell or otherwise dispose
of shares acquired pursuant to the exercise of an Option for a period of
time as determined by the Committee, in its sole discretion, following the
date of the acquisition of such Option.
3.3. Guidelines. Subject to Article 10 hereof, the Committee, and
the Board in the case of Options granted to Non-Employee Directors under Article
7, shall have the authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing this Plan and perform all acts,
including the delegation of its administrative responsibilities, as it shall,
from time to time, deem advisable; to construe and interpret the terms and
provisions of this Plan and any Award issued under this Plan (and any agreements
relating thereto); and to otherwise supervise the administration of this Plan.
The Committee, and the Board in the case of Options granted to Non-Employee
Directors under Article 7, may correct any defect, supply any omission or
reconcile any inconsistency in this Plan or in any agreement relating thereto in
the manner and to the extent it shall deem necessary to carry this Plan into
effect but only to the extent any such action would be permitted under the
applicable provisions of Rule 16b-3 (if any). The Committee, and the Board in
the case of Options granted to Non-Employee Directors under Article 7, may adopt
special guidelines and provisions for persons who are residing in, or subject
to, the taxes of, countries other than the United States to comply with
applicable tax and securities laws and may impose any limitations and
restrictions that they deem necessary to comply with the applicable tax and
securities laws of such countries other than the United States. To the extent
applicable, the Plan is intended to comply with the applicable requirements of
Rule 16b-3 and shall be limited, construed and interpreted in a manner so as to
comply therewith.
3.4. Decisions Final. Any decision, interpretation or other action
made or taken in good faith by or at the direction of the Company, the Board, or
the Committee (or any
5
<PAGE>
of its members) arising out of or in connection with the Plan shall be within
the absolute discretion of all and each of them, as the case may be, and shall
be final, binding and conclusive on the Company and all employees and
Participants and their respective heirs, executors, administrators, successors
and assigns.
3.5. Reliance on Counsel. The Company, the Board or the Committee
may consult with legal counsel, who may be counsel for the Company or other
counsel, with respect to its obligations or duties hereunder, or with respect to
any action or proceeding or any question of law, and shall not be liable with
respect to any action taken or omitted by it in good faith pursuant to the
advice of such counsel.
3.6. Procedures. If the Committee is appointed, the Board shall
designate one of the members of the Committee as chairman and the Committee
shall hold meetings, subject to the By-Laws of the Company, at such times and
places as it shall deem advisable. A majority of the Committee members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of the members present. Any decision or determination reduced to
writing and signed by all the Committee members in accordance with the By-Laws
of the Company, shall be fully as effective as if it had been made by a vote at
a meeting duly called and held. The Committee shall keep minutes of its meetings
and shall make such rules and regulations for the conduct of its business as it
shall deem advisable.
3.7. Designation of Consultants/Liability.
(a) The Committee, and the Board in the case of Options
granted to Non-Employee Directors under Article 7, may designate employees
of the Company and professional advisors to assist the Committee and the
Board in the administration of the Plan and may grant authority to
employees to execute agreements or other documents on behalf of the
Committee and the Board.
(b) The Committee, and the Board in the case of Options
granted to Non-Employee Directors under Article 7, may employ such legal
counsel, consultants, appraisers and agents as it may deem desirable for
the administration of the Plan and may rely upon any opinion received from
any such counsel, appraiser or consultant and any computation received
from any such consultant, appraiser or agent. Expenses incurred by the
Committee or Board in the engagement of any such counsel, consultant or
agent shall be paid by the Company. The Board, the Committee, its members
and any person designated pursuant to paragraph (a) above shall not be
liable for any action or determination made in good faith with respect to
the Plan. To the maximum extent permitted by applicable law, no officer of
the Company or member or former member of the Committee or of the Board
shall be liable for any action or determination made in good faith with
respect to the Plan or any Award granted under it. To the maximum extent
permitted by applicable law and the Certificate of Incorporation and
By-Laws of the Company and to the extent not covered by insurance, each
officer and member or former member of the Committee or of the Board shall
be indemnified and held
6
<PAGE>
harmless by the Company against any cost or expense (including reasonable
fees of counsel reasonably acceptable to the Company) or liability
(including any sum paid in settlement of a claim with the approval of the
Company), and advanced amounts necessary to pay the foregoing at the
earliest time and to the fullest extent permitted, arising out of any act
or omission to act in connection with the Plan, except to the extent
arising out of such officer's, member's or former member's own fraud or
bad faith. Such indemnification shall be in addition to any rights of
indemnification the officers, directors or members or former officers,
directors or members may have under applicable law or under the
Certificate of Incorporation or By-Laws of the Company or Affiliates.
Notwithstanding anything else herein, this indemnification will not apply
to the actions or determinations made by an individual with regard to
Awards granted to him or her under this Plan.
ARTICLE 4.
SHARE AND OTHER LIMITATIONS
4.1. Shares.
The aggregate number of shares of Common Stock which may be
issued under this Plan shall not exceed 100,000 shares (subject to any
increase or decrease pursuant to Section 4.2) which may be either
authorized and unissued Common Stock or Common Stock held in or acquired
for the treasury of the Company. If any Option granted under this Plan
expires, terminates or is canceled for any reason without having been
exercised in full, the number of shares of Common Stock underlying any
unexercised Option shall again be available under the Plan.
4.2. Changes.
(a) The existence of the Plan and the Awards granted hereunder
shall not affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company or
its Affiliates, any issue of bonds, debentures, preferred or prior
preference stock ahead of or affecting Common Stock, the dissolution or
liquidation of the Company or its Affiliates, any sale or transfer of all
or part of its assets or business or any other corporate act or
proceeding.
(b) In the event of any such change in the capital structure
or business of the Company by reason of any stock dividend or
distribution, stock split or reverse stock split, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange
of shares, distribution with respect to its outstanding Common
7
<PAGE>
Stock or capital stock other than Common Stock, reclassification of its
capital stock, conversion of the Company's preferred stock, issuance of
warrants or options to purchase any Common Stock or securities convertible
into Common Stock, any sale or Transfer of all or part of the Company's
assets or business, or any similar change affecting the Company's capital
structure or business, then the aggregate number and kind of shares which
thereafter may be issued under this Plan, the number and kind of shares or
other property (including cash) to be issued upon exercise of an
outstanding Option granted under this Plan and the purchase price thereof
shall be appropriately adjusted consistent with such change in such manner
as the Committee may deem equitable to prevent substantial dilution or
enlargement of the rights granted to, or available for, Participants under
this Plan, and any such adjustment determined by the Committee in good
faith shall be binding and conclusive on the Company and all Participants
and employees and their respective heirs, executors, administrators,
successors and assigns.
(c) Fractional shares of Common Stock resulting from any
adjustment in Options pursuant to Section 4.2(a) or (b) shall be
aggregated until, and eliminated at, the time of exercise by rounding-down
for fractions less than one-half (2) and rounding-up for fractions equal
to or greater than one-half (2). No cash settlements shall be made with
respect to fractional shares eliminated by rounding. Notice of any
adjustment shall be given by the Committee to each Participant whose
Option has been adjusted and such adjustment (whether or not such notice
is given) shall be effective and binding for all purposes of the Plan.
(d) In the event of a merger or consolidation in which the
Company is not the surviving entity or in the event of any transaction
that results in the acquisition of substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of all or substantially all of the Company's assets (all of the
foregoing being referred to as "Acquisition Events"), then the Committee
may, in its sole discretion, terminate all outstanding Options of Eligible
Employees, effective as of the date of the Acquisition Event, by
delivering notice of termination to each such Participant at least twenty
(20) days prior to the date of consummation of the Acquisition Event;
provided, that during the period from the date on which such notice of
termination is delivered to the consummation of the Acquisition Event,
each such Participant shall have the right to exercise in full all of his
or her Options that are then outstanding (without regard to any
limitations on exercisability otherwise contained in the Option) but
contingent on occurrence of the Acquisition Event, and, provided that, if
the Acquisition Event does not take place within a specified period after
giving such notice for any reason whatsoever, the notice and exercise
shall be null and void.
If an Acquisition Event occurs, to the extent the Committee does not
terminate the outstanding Options pursuant to this Section 4.2(d), then the
provisions of Section 4.2(b) shall apply.
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4.3. Purchase Price. Notwithstanding any provision of this Plan to
the contrary, if authorized but previously unissued shares of Common Stock are
issued under this Plan, such shares shall not be issued for a consideration
which is less than as permitted under applicable law.
ARTICLE 5.
ELIGIBILITY
5.1. All employees of the Company and its Affiliates are eligible to
be granted Options under this Plan. Eligibility under this Plan shall be
determined by the Committee in its sole and absolute discretion.
5.2. Non-employee directors of the Company are eligible to receive
an Award of Stock Options in accordance with Article 7 of the Plan.
ARTICLE 6.
STOCK OPTIONS
6.1. Options. Stock Options granted hereunder shall be non-qualified
Options and are not intended to be incentive stock options that satisfy the
requirements of Section 422 of the Code.
6.2. Terms of Options. Options granted under Article 6 of this Plan
shall be subject to Article 8 and the following terms and conditions, and shall
be in such form and contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem desirable:
(a) Option Price. The purchase price of shares of Common Stock
subject to a Option shall be determined by the Committee at the time of
grant but shall not be less than 100% of the Fair Market Value of the
share of Common Stock at the time of grant. Notwithstanding the foregoing,
if an Option is modified, extended or renewed and, thereby, deemed to be
the issuance of a new Option under the Code or the applicable accounting
rules, the exercise price of an Option may continue to be the original
exercise price even if less than the Fair Market Value of the Common Stock
at the time of such modification, extension or renewal.
(b) Option Term. The term of each Stock Option shall be fixed
by the Committee, but no Stock Option shall be exercisable more than ten
(10) years after the date the Option is granted.
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(c) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Committee at grant. If the Committee provides, in its
discretion, that any Stock Option is exercisable subject to certain
limitations (including, without limitation, that it is exercisable only in
installments or within certain time periods), the Committee may waive such
limitations on the exercisability at any time at or after grant in whole
or in part (including, without limitation, that the Committee may waive
the installment exercise provisions or accelerate the time at which
Options may be exercised), based on such factors, if any, as the Committee
shall determine, in its sole discretion. In the absence of any provision
by the Committee, each Stock Option shall initially become exercisable six
(6) months from the date of grant.
(d) Method of Exercise. Subject to whatever installment
exercise and waiting period provisions apply under subsection (c) above,
Stock Options may be exercised in whole or in part at any time during the
Option term, by giving written notice of exercise to the Company
specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price in such form, or such
other arrangement for the satisfaction of the purchase price, as the
Committee may accept. If and to the extent determined by the Committee in
its sole discretion at or after grant, payment in full or in part may also
be made in the form of Common Stock owned by the Participant for at least
six (6) months (and for which the Participant has good title free and
clear of any liens and encumbrances) based on the Fair Market Value of the
Common Stock on the payment date.
(e) Form, Modification, Extension and Renewal of Options.
Subject to the terms and conditions and within the limitations of the
Plan, an Option shall be evidenced by such form of agreement or grant as
is approved by the Committee, and the Committee may modify, extend or
renew outstanding Options granted under the Plan (provided that the rights
of a Participant are not reduced without his consent), or accept the
surrender of outstanding Options (up to the extent not theretofore
exercised) and authorize the granting of new Options in substitution
therefor (to the extent not theretofore exercised).
ARTICLE 7.
NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS
7.1. Options. The terms of this Article 7 shall apply only to
Options granted to Non-Employee Directors.
7.2. Grants. The Board shall have full authority to grant Stock
Options to Non-Employee Directors, subject to the terms of the Plan and where
required, to action of the stockholders of the Company.
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7.3. Non-Qualified Stock Options. Stock Options granted under this
Article 7 shall be non-qualified Options which are not intended to be incentive
stock options under Section 422 of the Code.
7.4. Terms of Options. Options granted under Article 7 of this Plan
shall be subject to the following terms and conditions, and shall be in such
form and contain such additional terms and conditions, not inconsistent with the
terms of this Plan, as the Board shall deem desirable:
(a) Option Price. The option price per share of Common Stock
purchasable under an Option shall be determined by the Board at the time
of grant but shall not be less than 100% of the Fair Market Value of the
share of Common Stock at the time of grant. Notwithstanding the foregoing,
if an Option is modified, extended or renewed and, thereby, deemed to be
the issuance of a new Option under the Code or the applicable accounting
rules, the exercise price of an Option may continue to be the original
exercise price even if less than the Fair Market Value of the Common Stock
at the time of such modification, extension or renewal.
(b) Option Term. The term of each Stock Option shall be fixed
by the Board, but no Stock Option shall be exercisable more than ten (10)
years after the date the Option is granted.
(c) Exercisability. Each Stock Option shall initially become
exercisable six months from the date of grant and shall be subject to such
terms and conditions as shall be determined by the Board at grant. The
Board may waive any limitations on the exercisability of any Stock Options
at any time at or after grant in whole or in part (including, without
limitation, that the Board may accelerate the time at which Options may be
exercised), based on such factors, if any, as the Board shall determine,
in its sole discretion.
(d) Method of Exercise. Subject to whatever waiting period
provisions apply under subsection (c) above, Stock Options may be
exercised in whole or in part at any time during the Option term, by
giving written notice of exercise to the Company specifying the number of
shares to be purchased. Such notice shall be accompanied by payment in
full of the purchase price in such form, or such other arrangement for the
satisfaction of the purchase price, as the Board may accept. If and to the
extent determined by the Board in its sole discretion at or after grant,
payment in full or in part may also be made in the form of Common Stock
owned by the Participant for at least six (6) months (and for which the
Participant has good title free and clear of any liens and encumbrances)
based on the Fair Market Value of the Common Stock on the payment date. No
shares of Common Stock shall be issued until payment, as provided herein,
therefor has been made or provided for.
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(e) Form, Modification, Extension and Renewal of Options.
Subject to the terms and conditions and within the limitations of the
Plan, an Option shall be evidenced by such form of agreement or grant as
is approved by the Board, and the Board may modify, extend or renew
outstanding Options granted under the Plan (provided that the rights of a
Participant are not reduced without his consent), or accept the surrender
of outstanding Options (up to the extent not theretofore exercised) and
authorize the granting of new Options in substitution therefor (to the
extent not theretofore exercised).
7.5. Termination of Directorship. The following rules apply with
regard to Options upon the Termination of Directorship:
(a) Termination by Reason of Death. If a Participant's
Termination of Directorship is by reason of death, any Stock Option held
by such Participant, unless otherwise determined by the Board at grant or,
if no rights of the Participant's estate are reduced, thereafter, may be
exercised, to the extent exercisable at the Participant's death, by the
legal representative of the estate, at any time within a period of one
year from the date of such death, but in no event beyond the expiration of
the stated term of such Stock Option.
(b) Termination by Reason of Disability. If a Participant's
Termination of Directorship is by reason of Disability, any Stock Option
held by such Participant, unless otherwise determined by the Board at
grant or, if no rights of the Participant are reduced, thereafter, may be
exercised, to the extent exercisable at the Participant's termination, by
the Participant (or the Participant's legal representative to the extent
permitted under Section 13.12 or the legal representative of the
Participant's estate if the Participant dies after termination) at any
time within a period of one year from the date of such termination, but in
no event beyond the expiration of the stated term of such Stock Option.
(c) Termination by Reason of Retirement. If a Participant's
Termination of Directorship is by reason of Retirement, any Stock Option
held by such Participant, unless otherwise determined by the Board at
grant, or, if no rights of the Participant are reduced, thereafter, may be
exercised, to the extent exercisable at termination, by the Participant at
any time within a period of one year from the date of such termination,
but in no event beyond the expiration of the stated term of such Stock
Option; provided, however, that, if the Participant dies within such
exercise period, any unexercised Stock Option held by such Participant
shall thereafter be exercisable, to the extent to which it was exercisable
at the time of death, for a period of one year (or such other period as
the Board may specify at grant or, if no rights of the Participant's
estate are reduced, thereafter) from the date of such death, but in no
event beyond the expiration of the stated term of such Stock Option.
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(d) Involuntary Termination Without Cause. If a Participant's
Termination of Directorship is by involuntary termination without Cause,
any Stock Option held by such Participant, unless otherwise determined by
the Board at grant or, if no rights of the Participant are reduced,
thereafter, may be exercised, to the extent exercisable at termination, by
the Participant at any time within a period of ninety (90) days from the
date of such termination, but in no event beyond the expiration of the
stated term of such Stock Option.
(e) Voluntary Resignation. If a Participant's Termination of
Directorship is a voluntary resignation and such termination occurs prior
to, or more than ninety (90) days after, the occurrence of an event which
would be grounds for Termination of Directorship by the Company for Cause
(without regard to any notice or cure period requirements), any Stock
Option held by such Participant, unless otherwise determined by the Board
at grant or, if no rights of the Participant are reduced, thereafter, may
be exercised, to the extent exercisable at termination, by the
Participants at any time within a period of thirty (30) days from the date
of such termination, but in no event beyond the expiration of the stated
term of such Stock Option.
(f) Termination for Cause. Unless otherwise determined by the
Board at grant or, if no rights of the Participant are reduced,
thereafter, if a Participant's Termination of Directorship is for Cause
for any reason, any Stock Option held by such Participant shall thereupon
terminate and expire as of the date of termination. In the event the
termination is an involuntary termination without Cause or is a voluntary
resignation without Cause or is a voluntary resignation within ninety (90)
days after occurrence of an event which would be grounds for Termination
of Employment by the Company for Cause (without regard to any notice or
cure period requirement), any Stock Option held by the Participant at the
time of occurrence of the event which would be grounds for Termination of
Directorship by the Company for Cause shall be deemed to have terminated
and expired upon occurrence of the event which would be grounds for
Termination of Directorship by the Company for Cause.
7.6. Changes.
(a) The Awards to a non-employee director shall be subject to
Sections 4.2(a), (b) and (c) of the Plan and this Section 7.6, but shall
not be subject to Section 4.2(d).
(b) If the Company shall not be the surviving corporation in
any merger or consolidation, or if the Company is to be dissolved or
liquidated, then, unless the surviving corporation assumes the Options or
substitutes new Options which are determined by the Board in its sole
discretion to be substantially similar in nature and equivalent in terms
and value for Options then outstanding, upon the effective date of such
merger, consolidation, liquidation or dissolution, any unexercised Options
shall
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expire without additional compensation to the holder thereof;
provided, that, the Board shall deliver notice to each Non-Employee
Director at least twenty (20) days prior to the date of consummation of
such merger, consolidation, dissolution or liquidation which would result
in the expiration of the Options and during the period from the date on
which such notice of termination is delivered to the consummation of the
merger, consolidation, dissolution or liquidation, such Participant shall
have the right to exercise in full, effective as of such consummation, all
Options that are then outstanding (without regard to limitations on
exercise otherwise contained in the Options) but contingent on occurrence
of the merger, consolidation, dissolution or liquidation, and, provided
that, if the contemplated transaction does not take place within a ninety
(90) day period after giving such notice for any reason whatsoever, the
notice, accelerated vesting and exercise shall be null and void and, if
and when appropriate, new notice shall be given as aforesaid.
ARTICLE 8.
NON-TRANSFERABILITY AND TERMINATION PROVISIONS
The terms and conditions of this Article 8 shall apply to Awards under
this Plan as follows:
8.1. Nontransferability. No Stock Option shall be Transferable by
the Participant otherwise than by will or by the laws of descent and
distribution. All Stock Options shall be exercisable, during the Participant's
lifetime, only by the Participant or his or her legal guardian or
representative. In addition, except as provided above, no Stock Option shall be
Transferred (whether by operation of law or otherwise), and no Stock Option
shall be subject to execution, attachment or similar process. Upon any attempt
to Transfer any Stock Option, or in the event of any levy upon any Stock Option
by reason of any execution, attachment or similar process contrary to the
provisions hereof, such Stock Option shall immediately terminate and become null
and void. Notwithstanding the foregoing, the Committee may determine at the time
of grant or thereafter that a Stock Option that is otherwise not Transferable
pursuant to this Article 8 is Transferable in whole or in part and in such
circumstances, and under such conditions, as specified by the Committee.
8.2. Termination of Employment. The following rules apply with
regard to the Termination of Employment of a Participant:
(a) Termination by Reason of Death. If a Participant's
Termination of Employment is by reason of death, any Stock Option held by
such Participant, unless otherwise determined by the Committee at grant
or, if no rights of the Participant's estate are reduced, thereafter, may
be exercised, to the extent exercisable at the Participant's death, by the
legal representative of the estate, at any time within a period of one
year from the date of such death, but in no event beyond the expiration of
the stated term of such Stock Option.
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(b) Termination by Reason of Disability. If a Participant's
Termination of Employment is by reason of Disability, any Stock Option
held by such Participant, unless otherwise determined by the Committee at
grant or, if no rights of the Participant are reduced, thereafter, may be
exercised, to the extent exercisable at the Participant's termination, by
the Participant (or the Participant's legal representative to the extent
permitted under Section 13.12 or the legal representative of the
Participant's estate if the Participant dies after termination) at any
time within a period of one year from the date of such termination, but in
no event beyond the expiration of the stated term of such Stock Option.
(c) Termination by Reason of Retirement. If a Participant's
Termination of Employment is by reason of Retirement, any Stock Option
held by such Participant, unless otherwise determined by the Committee at
grant, or, if no rights of the Participant are reduced, thereafter, may be
exercised, to the extent exercisable at termination, by the Participant at
any time within a period of one year from the date of such termination,
but in no event beyond the expiration of the stated term of such Stock
Option; provided, however, that, if the Participant dies within such
exercise period, any unexercised Stock Option held by such Participant
shall thereafter be exercisable, to the extent to which it was exercisable
at the time of death, for a period of one year (or such other period as
the Committee may specify at grant or, if no rights of the Participant's
estate are reduced, thereafter) from the date of such death, but in no
event beyond the expiration of the stated term of such Stock Option.
(d) Involuntary Termination Without Cause. If a Participant's
Termination of Employment is by involuntary termination without Cause, any
Stock Option held by such Participant, unless otherwise determined by the
Committee at grant or, if no rights of the Participant are reduced,
thereafter, may be exercised, to the extent exercisable at termination, by
the Participant at any time within a period of ninety (90) days from the
date of such termination, but in no event beyond the expiration of the
stated term of such Stock Option.
(e) Voluntary Resignation. If a Participant's Termination of
Employment is due to a voluntary resignation and such termination occurs
prior to, or more than ninety (90) days after, the occurrence of an event
which would be grounds for Termination of Employment by the Company for
Cause (without regard to any notice or cure period requirements), any
Stock Option held by such Participant, unless otherwise determined by the
Committee at grant or, if no rights of the Participant are reduced,
thereafter, may be exercised, to the extent exercisable at termination, by
the Participant at any time within a period of thirty (30) days from the
date of such termination, but in no event beyond the expiration of the
stated term of such Stock Option.
(f) Termination for Cause. Unless otherwise determined by the
Committee at grant or, if no rights of the Participant are reduced,
thereafter, if a
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Participant's Termination of Employment is for Cause for any reason, any
Stock Option held by such Participant shall thereupon terminate and expire
as of the date of termination. In the event the termination is an
involuntary termination without Cause or is a voluntary resignation within
ninety (90) days after occurrence of an event which would be grounds for
Termination of Employment by the Company for Cause (without regard to any
notice or cure period requirement), any Stock Option held by the
Participant at the time of occurrence of the event which would be grounds
for Termination of Employment by the Company for Cause shall be deemed to
have terminated and expired upon occurrence of the event which would be
grounds for Termination of Employment by the Company for Cause.
ARTICLE 9.
CHANGE IN CONTROL PROVISIONS
9.1. Benefits. In the event of a Change in Control of the Company
(as defined below), except as otherwise provided by the Committee upon the grant
of an Award, the Participant shall be entitled to the following benefits:
(a) Subject to paragraph (b) below with regard to Options
granted to Eligible Employees, all outstanding Stock Options (including
those granted to Non-Employee Directors) of such Participant, if any,
granted prior to the Change in Control shall be fully vested and
immediately exercisable in their entirety. The Committee, in its sole
discretion, or the Board in its sole discretion in the case of Stock
Options granted to Non-Employee Directors under Article 7, may provide for
the purchase of any such Stock Options by the Company or Affiliate for an
amount of cash equal to the excess of the Change in Control price (as
defined below) of the shares of Common Stock covered by such Stock
Options, over the aggregate exercise price of such Stock Options. For
purposes of this Section 9.1, Change in Control price shall mean the
higher of (i) the highest price per share of Common Stock paid in any
transaction related to a Change in Control of the Company, or (ii) the
highest Fair Market Value per share of Common Stock at any time during the
sixty (60) day period preceding a Change in Control.
(b) Notwithstanding anything to the contrary herein, unless
the Committee or the Board, in the case of an Option granted to
Non-Employee Directors, provides otherwise at the time an Option is
granted to an Eligible Employee or Non-Employee Director, hereunder or
thereafter, no acceleration of exercisability shall occur with respect to
such Option if the Committee or the Board, as the case may be, reasonably
determines in good faith, prior to the occurrence of the Change in
Control, that the Options shall be honored or assumed, or new rights
substituted therefor (each such honored, assumed or substituted option
hereinafter called an "Alternative Option"), by the Participant's employer
(or the parent or a subsidiary of such employer), in the case of an Option
granted to an Eligible Employee, or by a company
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for which the Non-Employee Director will continue as a Non-Employee
Director, in the case of an Option granted to a Non-Employee Director
under Article 7, in each case immediately following the Change in Control,
provided that any such Alternative Option must meet the following
criteria:
(i) the Alternative Option must be based on stock which
is traded on an established securities market, or which will be so
traded within thirty (30) days of the Change in Control;
(ii) the Alternative Option must provide such
Participant with rights and entitlements substantially equivalent to
or better than the rights, terms and conditions applicable under
such Option, including, but not limited to, an identical or better
exercise schedule; and
(iii) the Alternative Option must have economic value
substantially equivalent to the value of such Option (determined at
the time of the Change in Control).
(c) Notwithstanding anything else herein, the Committee may,
in its sole discretion, provide for accelerated vesting of an Award at any
time (other than a grant to a Non-Employee Director pursuant to Article 7
hereof).
9.2. Change in Control. A "Change in Control" shall mean the
occurrence of any of the following:
(a) any person (as defined in Section 3(a)(9) of the Exchange
Act and as used in Sections 13(d) and 14(d) thereof), excluding the
Company, Hosokawa Micron Corp., any subsidiary of the Company or of
Hosokawa Micron Corp. and any employee benefit plan sponsored or
maintained by the Company, Hosokawa Micron Corp. or any subsidiary of the
Company or of Hosokawa Micron Corp. (including any trustee of any such
plan acting in his capacity as trustee), becoming the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of securities of the
Company representing twenty-five percent (25%) of the total combined
voting power of the Company's then outstanding securities;
(b) the merger, consolidation or other business combination of
the Company (a "Transaction"), other than (A) a Transaction involving only
the Company and one or more of its subsidiaries or Hosokawa Micron Corp.
and one or more of its subsidiaries, or (B) a Transaction immediately
following which the stockholders of the Company immediately prior to the
Transaction continue to have a majority of the voting power in the
resulting entity and no person other than Hosokawa Micron Corp. is the
beneficial owner of securities of the resulting entity representing more
than twenty-five percent (25%) of the voting power in the resulting
entity;
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(c) during any period of two (2) consecutive years beginning
on or after the Effective Date, the persons who were members of the Board
immediately before the beginning of such period (the "Incumbent
Directors") ceasing (for any reason other than death) to constitute at
least a majority of the Board or the board of directors of any successor
to the Company, provided that, any director who was not a director as of
the Effective Date shall be deemed to be an Incumbent Director if such
director was elected to the board of directors by, or on the
recommendation of or with the approval of, at least two-thirds of the
directors who then qualified as Incumbent Directors either actually or by
prior operation of the foregoing unless such election, recommendation or
approval occurs as a result of an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under
the Exchange Act or any successor provision) or other actual or threatened
solicitation of proxies or contests by or on behalf of a person other than
a member of the Board; or
(d) the approval by the stockholders of the Company of any
plan of complete liquidation of the Company or an agreement for the sale
of all or substantially all of the Company's assets other than the sale of
all or substantially all of the assets of the Company to Hosokawa Micron
Corp. or a subsidiary of Hosokawa Micron Corp. or to a person or persons
who beneficially own, directly or indirectly, at least fifty percent (50%)
or more of the combined voting power of the outstanding voting securities
of the Company at the time of such sale.
9.3. Initial Public Offering not a Change in Control. For purposes
of the Plan, an initial public offering of the Common Stock of the Company shall
not be deemed to be a Change in Control.
ARTICLE 10.
TERMINATION OR AMENDMENT OF THE PLAN
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10.1. Termination or Amendment. Notwithstanding any other provision
of this Plan, the Board may at any time, and from time to time, amend, in whole
or in part, any or all of the provisions of the Plan, or suspend or terminate it
entirely, retroactively or otherwise; provided, however, that, unless otherwise
required by law or specifically provided herein, the rights of a Participant
with respect to Awards granted prior to such amendment, suspension or
termination, may not be impaired without the consent of such Participant and,
provided further, without the approval of the stockholders of the Company in
accordance with the laws of the State of Delaware or to the extent required by
the applicable provisions of Rule 16b-3, no amendment may be made which would
(i) increase the aggregate number of shares of Common Stock that may be issued
under this Plan; (ii) change the classification of employees and Non-Employee
Directors eligible to receive Awards under this Plan; (iii) decrease the minimum
option price of any Stock Option; (iv) extend the maximum option period under
Section 6.2; (v) require stockholder approval in order for the Plan to continue
to comply with the applicable provisions of Rule 16b-3; or (vi) change any
rights under the Plan with regard to Non-Employee Directors. In no event may the
Plan be amended without the approval of the stockholders of the Company in
accordance with the applicable laws or other requirements to increase the
aggregate number of shares of Common Stock that may be issued under the Plan,
decrease the minimum option price of any Stock Option, or to make any other
amendment that would require stockholder approval under the rules of any
exchange or system on which the Company's securities are listed or traded at the
request of the Company.
Except with respect to the Award of Stock Options to non-employee
directors under Article 7, the Committee may amend the terms of any Award
theretofore granted, prospectively or retroactively, but, subject to Article 4
above or as otherwise specifically provided herein, no such amendment or other
action by the Committee shall impair the rights of any holder without the
holder's consent.
ARTICLE 11.
COMPANY CALL RIGHTS; RIGHTS OF FIRST REFUSAL
11.1. Company Call Rights; Rights of First Refusal.
(a) Company Call Rights. (i) In the event of Termination of
Employment or Termination of Directorship for Cause, the Company may
repurchase from the Participant any shares of Common Stock previously
acquired by the Participant through the grant of an Option under this Plan
at a repurchase price equal to the lesser of (a) the original purchase
price or exercise price (as applicable), if any, or (b) Fair Market Value
as of the date of termination.
(ii) In the event of a Termination of Employment or
Termination of Directorship for any reason other than for Cause (including
termination due to Retirement, death, Disability, involuntary termination
without Cause or
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resignation), the Company shall (i) repurchase from the Participant each
outstanding vested Stock Option based on the difference between the
exercise price of a share of Common Stock relating to such Option and the
Fair Market Value of a share of Common Stock on the date of termination
and (ii) repurchase from the Participant any shares of Common Stock
previously acquired by the Participant through the exercise of an Option
under this Plan at a repurchase price equal to Fair Market Value as of the
date of termination.
(b) Right of First Refusal. No Participant shall, directly or
indirectly, Transfer any shares of Common Stock acquired by the
Participant (or his or her estate or legal representative) through the
exercise of an Option under this Plan, unless in each such instance the
Participant (or his or her estate or legal representative) shall have
first offered the Common Stock proposed to be Transferred pursuant to a
bona fide offer to a third party to the Company. The right of first
refusal must be exercised by the Company by delivering to the Participant
(or his or her estate or legal representative) written notice of such
exercise within twenty (20) business days of the Company's receipt of
written notification of the proposed sale. Upon the exercise of a right of
first refusal, the Common Stock proposed to be sold shall be purchased by
the Company at the price per share offered to be paid by the prospective
transferee, subject to paragraph (a) above in the case of a Participant's
Termination of Employment or Termination of Directorship. The notice of
exercise of the right of first refusal shall specify the date and location
for the closing of such purchase.
(c) Notwithstanding the foregoing, the Company shall cease to
have rights pursuant to this Article 11 following an initial public
offering of the Common Stock of the Company.
ARTICLE 12.
UNFUNDED PLAN
12.1. Unfunded Status of Plan. This Plan is intended to constitute
an "unfunded" plan for incentive compensation. With respect to any payments as
to which a Participant has a fixed and vested interest but which are not yet
made to a Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than those of a general creditor of
the Company.
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ARTICLE 13.
GENERAL PROVISIONS
13.1. Legend. The Committee may require each person receiving shares
of Common Stock pursuant to an Award under the Plan to represent to and agree
with the Company in writing that the Participant is acquiring the shares without
a view to distribution thereof, and that any subsequent offer for sale or sale
of any such shares of Common Stock shall be made either pursuant to (i) a
registration statement on an appropriate form under the Securities Act of 1933,
which registration statement shall have become effective and shall be current
with respect to the shares of Common Stock being offered and sold, or (ii) a
specific exemption from the registration requirements of the Securities Act of
1933, and that in claiming such exemption the Participant will, prior to any
offer for sale or sale of shares of Common Stock, obtain a favorable written
opinion, satisfactory in form and substance to the Company, from counsel
acceptable to the Company as to the availability of such exception. In addition
to any legend required by this Plan, the certificates for such shares may
include any legend which the Committee, or the Board in the case of an Option
granted to a Non-Employee Director under Article 7, deems appropriate to reflect
any restrictions on Transfer.
All certificates for shares of Common Stock delivered under the Plan
shall be subject to such stock transfer orders and other restrictions as the
Committee, or the Board in the case of an Option granted to a Non-Employee
Director under Article 7, may deem advisable under the rules, regulations and
other requirements of the Securities and Exchange Commission, any stock exchange
upon which the Common Stock is then listed or any national securities
association system upon whose system the Common Stock is then quoted, any
applicable Federal or state securities law, and any applicable corporate law,
and the Committee, or the Board in the case of an Option granted to a
Non-Employee Director under Article 7, may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.
13.2. Other Plans. Nothing contained in this Plan shall prevent the
Board from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and, such arrangements may be
either generally applicable or applicable only in specific cases.
13.3. No Right to Employment/Directorship. Neither this Plan nor the
grant of any Award hereunder shall give any Participant or other employee any
right with respect to continuance of employment by the Company or any Affiliate,
nor shall there be a limitation in any way on the right of the Company or any
Affiliate by which an employee is employed to terminate his employment at any
time. Neither this Plan nor the grant of any Award hereunder shall impose any
obligations on the Company to retain any Participant as a director nor shall it
impose on the part of any Participant any obligation to remain as a director of
the Company.
13.4. Withholding of Taxes. The Company shall have the right to
deduct from any payment to be made to a Participant, or to otherwise require,
prior to the issuance or
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delivery of any shares of Common Stock or the payment of any cash hereunder,
payment by the Participant of, any Federal, state or local taxes required by law
to be withheld.
The Committee shall permit any such withholding obligation with
regard to any Eligible Employee to be satisfied by reducing the number of shares
of Common Stock otherwise deliverable or by delivering shares of Common Stock
already owned. Any fraction of a share of Common Stock required to satisfy such
tax obligations shall be disregarded and the amount due shall be paid instead in
cash by the Participant.
13.5. Listing and Other Conditions.
(a) If the Common Stock becomes listed on a national
securities exchange or system sponsored by a national securities
association, the issue of any shares of Common Stock pursuant to an Award
shall be conditioned upon such shares being listed on such exchange or
system.
(b) If at any time counsel to the Company shall be of the
opinion that any sale or delivery of shares of Common Stock pursuant to an
Award is or may in the circumstances be unlawful or result in the
imposition of excise taxes on the Company under the statutes, rules or
regulations of any applicable jurisdiction, the Company shall have no
obligation to make such sale or delivery, or to make any application or to
effect or to maintain any qualification or registration under the
Securities Act of 1933, as amended, or otherwise with respect to shares of
Common Stock or Awards, and the right to exercise any Option shall be
suspended until, in the opinion of said counsel, such sale or delivery
shall be lawful or will not result in the imposition of excise taxes on
the Company.
(c) Upon termination of any period of suspension under this
Section 13.5, any Award affected by such suspension which shall not then
have expired or terminated shall be reinstated as to all shares available
before such suspension and as to shares which would otherwise have become
available during the period of such suspension, but no such suspension
shall extend the term of any Option.
13.6. Stockholders Agreement. As a condition to the receipt of
shares of Common Stock pursuant to any Award under this Plan, to the extent
required by the Committee, the Participant shall execute and deliver a
stockholder's agreement or such other documentation which shall set forth
certain restrictions on transferability of the shares of Common Stock acquired
upon exercise or purchase, a right of first refusal of the Company with respect
to such shares, the right of the Company to purchase Common Stock in accordance
with this Plan and such other terms as the Board or Committee shall from time to
time establish. Such stockholder's agreement shall apply to all Common Stock
acquired under the Plan.
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13.7. Governing Law. This Plan shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).
13.8. Construction. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
13.9. Other Benefits. No Stock Option granted or exercised under
this Plan shall be deemed compensation for purposes of computing benefits under
any retirement plan of the Company or its Affiliates nor affect any benefits
under any other benefit plan now or subsequently in effect under which the
availability or amount of benefits is related to the level of compensation.
13.10. Costs. The Company shall bear all expenses included in
administering this Plan, including expenses of issuing Common Stock pursuant to
any Awards hereunder.
13.11. No Right to Same Benefits. The provisions of Awards need not
be the same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
13.12. Death/Disability. The Committee may in its discretion require
the transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the transfer of an Award. The
Committee may also require the agreement of the transferee to be bound by all of
the terms and conditions of the Plan. If the Committee shall find, without any
obligation or responsibility of any kind to do so, that any person to whom
payment is payable under this Plan is unable to care for his or her affairs
because of disability, illness or accident, any payment due may be paid to such
person's duly appointed legal representative in such manner and proportions as
the Committee may determine, in it sole discretion. Any such payment shall be a
complete discharge of the liabilities of the Committee and the Board under this
Plan.
13.13. Section 16(b) of the Exchange Act. In the event the Company
becomes publicly held, all elections and transactions under the Plan by persons
subject to Section 16 of the Exchange Act involving shares of Common Stock are
intended to comply with any applicable exemptive condition under Rule 16b-3. To
the extent applicable, the Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with Section 16(b)
of the Exchange Act, as it may deem necessary or proper for the administration
and operation of the Plan and the transaction of business thereunder. For
purposes of this paragraph, the Company shall be deemed publicly held when and
if the
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Company has a class of common equity securities registered under Section 12 of
the Exchange Act.
13.14. Severability of Provisions. If any provision of the Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof, and the Plan shall be construed
and enforced as if such provisions had not been included.
13.15. Headings and Captions. The headings and captions herein are
provided for reference and convenience only, shall not be considered part of the
Plan, and shall not be employed in the construction of the Plan.
13.16. Exchange Act Compliance. Except as the Company or Committee
shall otherwise determine, this Plan is intended to comply with Section 4(2) or
Rule 701 of the Exchange Act, and any provisions inconsistent with such Section
or Rule shall be inoperative and shall not affect the validity of the Plan.
ARTICLE 14.
APPROVAL OF BOARD AND STOCKHOLDERS
The Plan shall not be effective unless and until approved by the Board
and, solely to the extent required by any applicable law, registration or stock
exchange rule, approved by the stockholders of the Company in the manner set
forth in such law, regulation or rule.
ARTICLE 15.
TERM OF PLAN
No Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the earlier of the date the Plan is adopted or the date of
stockholder approval (if applicable), but Awards granted prior to such tenth
anniversary may extend beyond that date.
ARTICLE 16.
NAME OF PLAN
This Plan shall be known as the Hosokawa Micron International Inc. 1997
Stock Option Plan.
24
Hosokawa Micron International Inc.
Stock Incentive Plan
ARTICLE 1.
PURPOSE
The purpose of this Hosokawa Micron International Inc. Stock Incentive
Plan (the "Plan") is to enhance the profitability and value of Hosokawa Micron
International Inc, a Delaware corporation (the "Company") and its Affiliates for
the benefit of its stockholders by enabling the Company (i) to offer employees
of the Company and its Affiliates, stock based incentives and other equity
interests in the Company, thereby creating a means to raise the level of stock
ownership by employees in order to attract, retain and reward such employees and
strengthen the mutuality of interests between employees and the Company's
stockholders and (ii) to make equity based awards to Non-Employee Directors
thereby attracting, retaining and rewarding such non-employee directors and
strengthening the mutuality of interests between non-employee directors and the
Company's stockholders.
ARTICLE 2.
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1. "Affiliate" shall mean (i) any corporation (other than the
Company) or limited liability company in an unbroken chain of
corporations or limited liability companies ending with the Company, if
each corporation or limited liability company owns stock or membership
interests (as applicable) possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock or membership
interests (as applicable) in one of the other corporations or limited
liability companies in such chain, or (ii) any corporation (other than
the Company) or limited liability company in an unbroken chain of
corporations or limited liability companies beginning with the Company,
if each corporation or limited liability company (other than the last
corporation or limited liability company in the unbroken chain), owns
stock or membership interests (as applicable) possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock
or membership interests (as applicable) in one of the other corporations
or limited liability companies in such chain. With respect to Incentive
Stock Options, the term "Affiliate" shall mean a subsidiary corporation
(within the meaning of Section 424(f) of the Code) and a parent
corporation (within the meaning of Section 424(e) of the Code).
<PAGE>
2.2. "Award" shall mean any award under this Plan of any Stock
Option, Restricted Stock, Stock Appreciation Right, Performance Unit or
Performance Share. All Awards, shall be confirmed by, and subject to the
terms of, a written agreement executed by the Company and the
Participant.
2.3. "Board" or "Board of Directors" shall mean the Board of
Directors of the Company.
2.4. "Cause" shall mean, with respect to a Participant's
Termination of Employment, (i) the Participant's dishonesty,
misappropriation, willful breach of fiduciary duty or fraud with regard
to the Company or any of its assets or businesses which has a material
adverse effect on the Company, (ii) the Participant's conviction of or
the pleading of nolo contendere with regard to a felony (other than a
traffic violation) or any other crime involving moral turpitude, or
(iii) any other breach by the Participant of a material provision of his
employment agreement (if any) that remains uncured for thirty (30) days
after written notice thereof is given to the Participant. In the event
the Participant's employment is terminated by the Company without Cause
and the Company discovers within ninety (90) days after such Termination
of Employment, acts or omissions of the Participant occurring prior to
Termination of Employment that would have been grounds for a termination
by the Company for Cause, such termination shall be deemed for all
purposes hereunder a termination for Cause notwithstanding any earlier
contrary treatment of such termination and any acts of the Company
consistent with such earlier treatment. Notwithstanding the foregoing, a
Participant shall be deemed to be terminated for "cause" if the
Participant, following his or her Termination of Employment, becomes
employed by a "competitor" (or its successor), as determined by the
Committee, in its sole discretion, at the time of the grant of an Award,
provided that the competitor (or its successor) competes with the
Company at the time of exercise or vesting of an Award. Where there is
an employment agreement and such agreement defines termination by the
Participant for "good reason" (or words of like import), a Participant's
Termination of Employment for good reason shall not be deemed for
"cause". With respect to a Participant's Termination of Directorship,
"cause" shall mean an act or failure to act that constitutes cause for
removal of a director under applicable Delaware law.
2.5. "Change in Control" shall have the meaning set forth in
Article 13.
2.6. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
2.7. "Committee" shall mean a committee of the Board appointed
from time to time by the Board, which shall be intended to consist of
two (2) or more non-employee directors, each of whom shall be, to the
extent required by Rule 16b-3 (as defined herein), a "non-employee
director" as defined in Rule 16b-3 and, to the extent required by the
exception for performance-based compensation under Section 162(m) of the
Code and any regulations thereunder, an "outside director" as defined
under Section
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<PAGE>
162(m) of the Code. Notwithstanding the foregoing, if and to the extent
that no Committee exists which has the authority to administer the Plan,
the functions of the Committee shall be exercised by the Board. If for
any reason the appointed Committee does not meet the requirements of
Rule 16b-3 or Section 162(m) of the Code, such noncompliance with the
requirements of Rule 16b-3 or Section 162(m) of the Code shall not
affect the validity of the awards, grants, interpretations or other
actions of the Committee.
2.8. "Common Stock" means the common stock, $.01 par value per
share, of the Company.
2.9. "Disability" shall mean, with respect to an Eligible
Employee or Non-Employee Director, a permanent and total disability as
defined in the Company's long-term disability policy. A Disability shall
only be deemed to occur at the time of the determination by the
Committee or the Board, as the case may be, of the Disability.
2.10. "Effective Date" shall mean ____________________, subject
to Article 17.
2.11. "Eligible Employees" shall mean the employees of the
Company and its Affiliates who are eligible pursuant to Section 5.1 to
be granted Awards under this Plan.
2.12. "Exchange Act" shall mean the Securities Exchange Act of
1934.
2.13. "Fair Market Value" for purposes of this Plan, unless
otherwise required by any applicable provision of the Code or any
regulations issued thereunder, shall mean, as of any date the last sales
price reported for the Common Stock on the applicable date (i) as
reported by the principal national securities exchange in the United
States on which it is then traded, or (ii) if not traded on any such
national securities exchange, as quoted on an automated quotation system
sponsored by the National Association of Securities Dealers. For
purposes of the grant of any Award, the applicable date shall be the
date for which the last sales price is available at the time of grant.
For purposes of the exercise of any Stock Appreciation Right the
applicable date shall be the date a notice of exercise is received by
the Committee or, if not a day on which the applicable market is open,
the next day that it is open.
2.14. "Incentive Stock Option" shall mean any Stock Option
awarded under this Plan intended to be and designated as an "Incentive
Stock Option" within the meaning of Section 422 of the Code.
2.15. "Non-Employee Director" shall mean a director of the
Company who is not an active employee of the Company or an Affiliate.
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<PAGE>
2.16. "Non-Qualified Stock Option" shall mean any Stock Option
awarded under this Plan that is not an Incentive Stock Option.
2.17. "Participant" shall mean an Eligible Employee to whom an
Award has been made pursuant to this Plan and each Non-Employee Director
of the Company; provided, however, that a Non-Employee Director shall be
a Participant for purposes of the Plan solely with respect to awards of
Stock Options pursuant to Article 11.
2.18. "Performance Cycle" shall have the meaning set forth in
Section 10.1.
2.19. "Performance Period" shall have the meaning set forth in
Section 9.1.
2.20. "Performance Share" shall mean an Award made pursuant to
Article 9 of this Plan of the right to receive Common Stock or, as
determined by the Committee in its sole discretion, cash of an
equivalent value at the end of a specified Performance Period or
thereafter.
2.21. "Performance Unit" shall mean an Award made pursuant to
Article 10 of this Plan of the right to receive an amount payable in
cash or Common Stock or a combination of both at the end of a specified
Performance Cycle or thereafter.
2.22. "Restricted Stock" shall mean an award of shares of Common
Stock under this Plan that is subject to restrictions under Article 7.
2.23. "Restriction Period" shall have the meaning set forth in
Subsection 7.3(a) with respect to Restricted Stock for Eligible
Employees.
2.24. "Retirement" shall mean a Participant's Termination of
Employment at or after age sixty-five (65) (or, with the consent of the
Committee, before age sixty-five (65) but after age fifty-five (55)).
With respect to a Participant's Termination of Directorship, Retirement
shall mean the failure to stand for reelection or the failure to be
reelected at or after a Participant has attained age sixty-five (65)
(or, with the consent of the Board, before age sixty-five (65) but after
age fifty-five (55)).
2.25. "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of
the Exchange Act as then in effect or any successor provisions.
2.26. "Stock Appreciation Right" shall mean the right (pursuant
to an Award granted under Article 8) to surrender to the Company all (or
a portion) of a Stock Option in exchange for an amount in cash or stock
equal to the excess of (i) the Fair Market Value, on the date such Stock
Option (or such portion thereof) is surrendered, of the Common Stock
covered by such Stock Option (or such portion thereof), over (ii) the
aggregate exercise price of such Stock Option (or such portion thereof).
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<PAGE>
2.27. "Stock Option" or "Option" shall mean any option to
purchase shares of Common Stock granted to Eligible Employees or
Non-Employee Directors pursuant to Article 6 or Article 11,
respectively.
2.28. "Ten Percent Stockholder" shall mean a person owning stock
of the Company possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company, as defined
in Section 422 of the Code.
2.29. "Termination of Directorship" shall mean, with respect to a
Non-Employee Director, that the Non-Employee Director has ceased to be a
director of the Company.
2.30. "Termination of Employment" shall mean (i) a termination of
service (for reasons other than a military or personal leave of absence
granted by the Company) of a Participant from the Company and its
Affiliates; or (ii) when an entity which is employing a Participant
ceases to be an Affiliate, unless the Participant thereupon becomes
employed by the Company or another Affiliate.
2.31. "Transfer" or "Transferred" or "Transferable" shall mean
anticipate, alienate, attach, sell, assign, pledge, encumber, charge,
hypothecate or otherwise transfer.
2.32. "Withholding Election" shall have the meaning set forth in
Section 16.4.
ARTICLE 3.
ADMINISTRATION
3.1. The Committee and the Board. The Plan shall be administered
and interpreted by the Committee, except that with respect to Awards to
Non-Employee Directors under Article 11 of the Plan, the Plan shall be
administered by the Board.
3.2. Awards. The Committee shall have full authority to grant to
Eligible Employees, pursuant to the terms of this Plan: (i) Stock Options, (ii)
Restricted Stock, (iii) Stock Appreciation Rights, (iv) Performance Shares and
(v) Performance Units. In particular, the Committee shall have the authority:
(a) to select the Eligible Employees to whom Stock
Options, Restricted Stock, Stock Appreciation Rights, Performance Shares
and Performance Units may from time to time be granted hereunder;
(b) to determine whether and to what extent Stock Options,
Restricted Stock, Stock Appreciation Rights, Performance Shares and
Performance
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<PAGE>
Units or any combination thereof, are to be granted hereunder to one or
more Eligible Employees;
(c) to determine, in accordance with the terms of this
Plan, the number of shares of Common Stock to be covered by each Award
to an Eligible Employee granted hereunder;
(d) to determine the terms and conditions, not
inconsistent with the terms of this Plan, of any Award granted hereunder
to an Eligible Employee (including, but not limited to, the share price,
any restriction or limitation, any vesting schedule or acceleration
thereof, or any forfeiture restrictions or waiver thereof, regarding any
Stock Option or other Award, and the shares of Common Stock relating
thereto, based on such factors, if any, as the Committee shall
determine, in its sole discretion);
(e) to determine whether and under what circumstances a
Stock Option may be settled in cash or Common Stock under Subsection
6.3(d); and
(f) to determine whether to require an Eligible Employee,
as a condition of the granting of any Award, to not sell or otherwise
dispose of shares acquired pursuant to the exercise of an Option or as
an Award for a period of time as determined by the Committee, in its
sole discretion, following the date of the acquisition of such Option or
Award.
3.3. Guidelines. Subject to Article 14 hereof, the Committee, and
the Board in the case of Options granted to Non-Employee Directors under Article
11, shall have the authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing this Plan and perform all acts,
including the delegation of its administrative responsibilities, as it shall,
from time to time, deem advisable; to construe and interpret the terms and
provisions of this Plan and any Award issued under this Plan (and any agreements
relating thereto); and to otherwise supervise the administration of this Plan.
The Committee, and the Board in the case of Options granted to Non-Employee
Directors under Article 11, may correct any defect, supply any omission or
reconcile any inconsistency in this Plan or in any agreement relating thereto in
the manner and to the extent it shall deem necessary to carry this Plan into
effect but only to the extent any such action would be permitted under the
applicable provisions of Rule 16b-3. The Committee, and the Board in the case of
Options granted to Non-Employee Directors under Article 11, may adopt special
guidelines and provisions for persons who are residing in, or subject to, the
taxes of, countries other than the United States to comply with applicable tax
and securities laws and may impose any limitations and restrictions that they
deem necessary to comply with the applicable tax and securities laws of such
countries other than the United States. To the extent applicable, the Plan is
intended to comply with the applicable requirements of Rule 16b-3 and Section
162(m) of the Code and shall be limited, construed and interpreted in a manner
so as to comply therewith.
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<PAGE>
3.4. Decisions Final. Any decision, interpretation or other
action made or taken in good faith by or at the direction of the Company, the
Board, or the Committee (or any of its members) arising out of or in connection
with the Plan shall be within the absolute discretion of all and each of them,
as the case may be, and shall be final, binding and conclusive on the Company
and all employees and Participants and their respective heirs, executors,
administrators, successors and assigns.
3.5. Reliance on Counsel. The Company, the Board or the Committee
may consult with legal counsel, who may be counsel for the Company or other
counsel, with respect to its obligations or duties hereunder, or with respect to
any action or proceeding or any question of law, and shall not be liable with
respect to any action taken or omitted by it in good faith pursuant to the
advice of such counsel.
3.6. Procedures. If the Committee is appointed, the Board shall
designate one of the members of the Committee as chairman and the Committee
shall hold meetings, subject to the By-Laws of the Company, at such times and
places as it shall deem advisable. A majority of the Committee members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of the members present. Any decision or determination reduced to
writing and signed by all the Committee members in accordance with the By-Laws
of the Company, shall be fully as effective as if it had been made by a vote at
a meeting duly called and held. The Committee shall keep minutes of its meetings
and shall make such rules and regulations for the conduct of its business as it
shall deem advisable.
3.7. Designation of Consultants/Liability.
(a) The Committee, and the Board in the case of Options
granted to Non-Employee Directors under Article 11, may designate
employees of the Company and professional advisors to assist the
Committee and the Board in the administration of the Plan and may grant
authority to employees to execute agreements or other documents on
behalf of the Committee and the Board.
(b) The Committee, and the Board in the case of Options
granted to Non-Employee Directors under Article 11, may employ such
legal counsel, consultants, appraisers and agents as it may deem
desirable for the administration of the Plan and may rely upon any
opinion received from any such counsel, appraiser or consultant and any
computation received from any such consultant, appraiser or agent.
Expenses incurred by the Committee or Board in the engagement of any
such counsel, consultant or agent shall be paid by the Company. The
Board, the Committee, its members and any person designated pursuant to
paragraph (a) above shall not be liable for any action or determination
made in good faith with respect to the Plan. To the maximum extent
permitted by applicable law, no officer of the Company or member or
former member of the Committee or of the Board shall be liable for any
action or determination made in good faith with respect to the Plan or
any Award granted under it. To the maximum extent permitted by
applicable law and the Certificate of Incorporation and By-Laws of
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<PAGE>
the Company and to the extent not covered by insurance, each officer and
member or former member of the Committee or of the Board shall be
indemnified and held harmless by the Company against any cost or expense
(including reasonable fees of counsel reasonably acceptable to the
Company) or liability (including any sum paid in settlement of a claim
with the approval of the Company), and advanced amounts necessary to pay
the foregoing at the earliest time and to the fullest extent permitted,
arising out of any act or omission to act in connection with the Plan,
except to the extent arising out of such officer's, member's or former
member's own fraud or bad faith. Such indemnification shall be in
addition to any rights of indemnification the officers, directors or
members or former officers, directors or members may have under
applicable law or under the Certificate of Incorporation or By-Laws of
the Company or Affiliates. Notwithstanding anything else herein, this
indemnification will not apply to the actions or determinations made by
an individual with regard to Awards granted to him or her under this
Plan.
ARTICLE 4.
SHARE AND OTHER LIMITATIONS
4.1. Shares.
(a) General Limitation. The aggregate number of shares of
Common Stock which may be issued or used for reference purposes under
this Plan or with respect to which all Awards may be granted shall not
exceed 900,000 shares (subject to any increase or decrease pursuant to
Section 4.2). The aggregate number of shares of Restricted Stock which
may be issued under this Plan shall not exceed 90,000 (subject to any
increase or decrease pursuant to Section 4.2). If any Option or Stock
Appreciation Right granted under this Plan expires, terminates or is
canceled for any reason without having been exercised in full, the
number of shares of Common Stock underlying any unexercised Stock
Appreciation Right or Option shall again be available for the purposes
of Awards under the Plan. If any shares of Restricted Stock awarded
under this Plan to a Participant are forfeited for any reason, the
number of forfeited shares of Restricted Stock shall again be available
for the purposes of Awards under the Plan. If any Performance Shares or
Performance Units awarded under this Plan are forfeited, the number of
shares of Common Stock underlying the forfeited Performance Shares or
Performance Units shall again be available for purposes of Awards under
the Plan. Stock Appreciation Rights granted in tandem with an Option
shall only apply once against the maximum number of shares of Common
Stock which may be issued under this Plan.
(b) Individual Participant Limitations. (i) The maximum
number of shares of Common Stock subject to any Option which may be
granted
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<PAGE>
under this Plan during any fiscal year of the Company to each Eligible
Employee shall be 60,000 shares (subject to any increase or decrease
pursuant to Section 4.2).
(ii) The maximum number of shares of Restricted
Stock for which the lapse of the relevant Restriction Period is
subject to the attainment of preestablished performance goals in
accordance with Section 7.3(a)(ii) herein which may be granted
under this Plan to each Eligible Employee shall be 7,500 shares
(subject to any increase or decrease pursuant to Section 4.2)
during any fiscal year of the Company. There are no annual
individual Eligible Employee share limitations on Restricted
Stock for which the lapse of the relevant Restriction Period is
not subject to attainment of preestablished performance goals in
accordance with Section 7.3(a)(ii) herein.
(iii) The maximum number of shares of Common Stock
subject to any Stock Appreciation Right which may be granted
under this Plan during any fiscal year of the Company to each
Eligible Employee shall be 50,000 shares (subject to any increase
or decrease pursuant to Section 4.2). A Stock Appreciation Right
granted in tandem with an Option shall apply against the Eligible
Employee's individual share limitations for both Stock
Appreciation Rights and Options.
(iv) The maximum value at grant of Performance
Units which may be granted under this Plan during any fiscal year
of the Company to each Eligible Employee shall be $100,000. Each
Performance Unit shall be referenced to one (1) share Common
Stock and shall be charged against the available shares under
this Plan at the time the unit value measurement is converted to
a referenced number of shares of Common Stock in accordance with
Section 10.1.
(v) The maximum number of Performance Shares which
may be granted under this Plan during any fiscal year of the
Company to each Eligible Employee shall be 50,000 shares (subject
to any increase or decrease pursuant to Section 4.2).
4.2. Changes.
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(a) The existence of the Plan and the Awards granted
hereunder shall not affect in any way the right or power of the Board or
the stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the
Company or its Affiliates, any issue of bonds, debentures, preferred or
prior preference stock ahead of or affecting Common Stock, the
dissolution or liquidation of the Company or its Affiliates, any sale or
transfer of all or part of its assets or business or any other corporate
act or proceeding.
(b) In the event of any such change in the capital
structure or business of the Company by reason of any stock dividend or
distribution, stock split or reverse stock split, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange
of shares, distribution with respect to its outstanding Common Stock or
capital stock other than Common Stock, reclassification of its capital
stock, conversion of the Company's preferred stock, issuance of warrants
or options to purchase any Common Stock or securities convertible into
Common Stock, any sale or Transfer of all or part of the Company's
assets or business, or any similar change affecting the Company's
capital structure or business, then the aggregate number and kind of
shares which thereafter may be issued under this Plan, the number and
kind of shares or other property (including cash) to be issued upon
exercise of an outstanding Option or other Awards granted under this
Plan and the purchase price thereof shall be appropriately adjusted
consistent with such change in such manner as the Committee may deem
equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, Participants under this Plan, and any such
adjustment determined by the Committee in good faith shall be binding
and conclusive on the Company and all Participants and employees and
their respective heirs, executors, administrators, successors and
assigns.
(c) Fractional shares of Common Stock resulting from any
adjustment in Options or Awards pursuant to Section 4.2(a) or (b) shall
be aggregated until, and eliminated at, the time of exercise by
rounding-down for fractions less than one-half (1/2) and rounding-up for
fractions equal to or greater than one-half (1/2). No cash settlements
shall be made with respect to fractional shares eliminated by rounding.
Notice of any adjustment shall be given by the Committee to each
Participant whose Option or Award has been adjusted and such adjustment
(whether or not such notice is given) shall be effective and binding for
all purposes of the Plan.
(d) In the event of a merger or consolidation in which the
Company is not the surviving entity or in the event of any transaction
that results in the acquisition of substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale
or transfer of all or substantially all of the Company's assets (all of
the foregoing being referred to as "Acquisition Events"), then the
Committee may, in its sole discretion, terminate all outstanding Options
and Stock Appreciation Rights of
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Eligible Employees, effective as of the date of the Acquisition Event,
by delivering notice of termination to each such Participant at least
twenty (20) days prior to the date of consummation of the Acquisition
Event; provided, that during the period from the date on which such
notice of termination is delivered to the consummation of the
Acquisition Event, each such Participant shall have the right to
exercise in full all of his or her Options and Stock Appreciation Rights
that are then outstanding (without regard to any limitations on
exercisability otherwise contained in the Option or Award Agreements)
but contingent on occurrence of the Acquisition Event, and, provided
that, if the Acquisition Event does not take place within a specified
period after giving such notice for any reason whatsoever, the notice
and exercise shall be null and void.
If an Acquisition Event occurs, to the extent the Committee does not
terminate the outstanding Options and Stock Appreciation Rights pursuant to this
Section 4.2(d), then the provisions of Section 4.2(b) shall apply.
4.3. Purchase Price. Notwithstanding any provision of this Plan
to the contrary, if authorized but previously unissued shares of Common Stock
are issued under this Plan, such shares shall not be issued for a consideration
which is less than as permitted under applicable law.
ARTICLE 5.
ELIGIBILITY
5.1. All employees of the Company and its Affiliates are eligible
to be granted Options, Restricted Stock, Stock Appreciation Rights, Performance
Shares and Performance Units under this Plan. Eligibility under this Plan shall
be determined by the Committee in its sole and absolute discretion.
5.2. Non-employee directors of the Company are only eligible to
receive an Award of Stock Options in accordance with Article 11 of the Plan.
ARTICLE 6.
STOCK OPTIONS
6.1. Options. Each Stock Option granted hereunder shall be one of
two types: (i) an Incentive Stock Option intended to satisfy the requirements of
Section 422 of the Code or (ii) a Non-Qualified Stock Option.
6.2. Grants. The Committee shall have the authority to grant to
any Eligible Employee one or more Incentive Stock Options, Non-Qualified Stock
Options, or both types
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of Stock Options (in each case with or without Stock Appreciation Rights). To
the extent that any Stock Option does not qualify as an Incentive Stock Option
(whether because of its provisions or the time or manner of its exercise or
otherwise), such Stock Option or the portion thereof which does not qualify,
shall constitute a separate Non-Qualified Stock Option.
6.3. Terms of Options. Options granted under Article 6 of this
Plan shall be subject to Article 12 and the following terms and conditions, and
shall be in such form and contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem desirable:
(a) Option Price. The option price per share of Common
Stock purchasable under an Incentive Stock Option shall be determined by
the Committee at the time of grant but shall not be less than 100% of
the Fair Market Value of the share of Common Stock at the time of grant;
provided, however, if an Incentive Stock Option is granted to a Ten
Percent Stockholder, the purchase price shall be no less than 110% of
the Fair Market Value of the Common Stock. The purchase price of shares
of Common Stock subject to a Non-Qualified Stock Option shall be
determined by the Committee at the time of grant but shall not be less
than 100% of the Fair Market Value of the share of Common Stock at the
time of grant. Notwithstanding the foregoing, if an Option is modified,
extended or renewed and, thereby, deemed to be the issuance of a new
Option under the Code or the applicable accounting rules, the exercise
price of an Option may continue to be the original exercise price even
if less than the Fair Market Value of the Common Stock at the time of
such modification, extension or renewal.
(b) Option Term. The term of each Stock Option shall be
fixed by the Committee, but no Stock Option shall be exercisable more
than ten (10) years after the date the Option is granted; provided,
however, that the term of an Incentive Stock Option granted to a Ten
Percent Stockholder may not exceed five (5) years.
(c) Exercisability. Stock Options shall be exercisable at
such time or times and subject to such terms and conditions as shall be
determined by the Committee at grant. If the Committee provides, in its
discretion, that any Stock Option is exercisable subject to certain
limitations (including, without limitation, that it is exercisable only
in installments or within certain time periods), the Committee may waive
such limitations on the exercisability at any time at or after grant in
whole or in part (including, without limitation, that the Committee may
waive the installment exercise provisions or accelerate the time at
which Options may be exercised), based on such factors, if any, as the
Committee shall determine, in its sole discretion. In the absence of any
provision by the Committee, each Stock Option shall initially become
exercisable six (6) months from the date of grant.
(d) Method of Exercise. Subject to whatever installment
exercise and waiting period provisions apply under subsection (c) above,
Stock Options may be
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exercised in whole or in part at any time during the Option term, by
giving written notice of exercise to the Company specifying the number
of shares to be purchased. Such notice shall be accompanied by payment
in full of the purchase price in such form, or such other arrangement
for the satisfaction of the purchase price, as the Committee may accept.
If and to the extent determined by the Committee in its sole discretion
at or after grant, payment in full or in part may also be made in the
form of Common Stock owned by the Participant for at least six (6)
months (and for which the Participant has good title free and clear of
any liens and encumbrances) based on the Fair Market Value of the Common
Stock on the payment date or, if the Common Stock is traded on a
national securities exchange, through the delivery of irrevocable
instructions to a broker to deliver promptly to the Company an amount
equal to the purchase price. No shares of Common Stock shall be issued
until payment, as provided herein, therefor has been made or provided
for.
(e) Incentive Stock Option Limitations. To the extent that
the aggregate Fair Market Value (determined as of the time of grant) of
the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by an Eligible Employee during any
calendar year under the Plan and/or any other stock option plan of the
Company or any Affiliate exceeds $100,000, such Options shall be treated
as Options which are not Incentive Stock Options.
Should the foregoing provision not be necessary in order for the
Stock Options to qualify as Incentive Stock Options, or should any
additional provisions be required, the Committee may amend the Plan
accordingly, without the necessity of obtaining the approval of the
stockholders of the Company.
(f) Form, Modification, Extension and Renewal of Options.
Subject to the terms and conditions and within the limitations of the
Plan, an Option shall be evidenced by such form of agreement or grant as
is approved by the Committee, and the Committee may modify, extend or
renew outstanding Options granted under the Plan (provided that the
rights of a Participant are not reduced without his consent).
(g) Form of Settlement. In its sole discretion, the
Committee may provide, at the time of grant, that the shares to be
issued upon the exercise of a Stock Option shall be in the form of
Restricted Stock, or may, in the Option agreement, reserve a right to so
provide after the time of grant.
ARTICLE 7.
RESTRICTED STOCK AWARDS
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7.1. Awards of Restricted Stock. Shares of Restricted Stock may
be issued to Eligible Employees either alone or in addition to other Awards
granted under the Plan. The Committee shall determine the eligible persons to
whom, and the time or times at which, grants of Restricted Stock will be made,
the number of shares to be awarded, the price (if any) to be paid by the
recipient (subject to Section 7.2), the time or times within which such Awards
may be subject to forfeiture, the vesting schedule and rights to acceleration
thereof, and all other terms and conditions of the Awards. The Committee may
condition the grant of Restricted Stock upon the attainment of specified
performance goals or such other factors as the Committee may determine, in its
sole discretion.
7.2. Awards and Certificates. The prospective Participant
selected to receive a Restricted Stock Award shall not have any rights with
respect to such Award, unless and until such Participant has delivered a fully
executed copy of the Restricted Stock Award agreement evidencing the Award to
the Company and has otherwise complied with the applicable terms and conditions
of such Award. Further, such Award shall be subject to the following conditions:
(a) Purchase Price. The purchase price of Restricted Stock
shall be fixed by the Committee. Subject to Section 4.3, the purchase
price for shares of Restricted Stock may be the minimum permitted by
applicable law.
(b) Acceptance. Awards of Restricted Stock must be
accepted within a period of ninety (90) days (or such shorter period as
the Committee may specify at grant) after the Award date, by executing a
Restricted Stock Award agreement and by paying whatever price (if any)
the Committee has designated thereunder.
(c) Legend. Each Participant receiving a Restricted Stock
Award shall be issued a stock certificate in respect of such shares of
Restricted Stock, unless the Committee elects to use another system,
such as book entries by the transfer agent, as evidencing ownership of a
Restricted Stock Award. Such certificate shall be registered in the name
of such Participant, and shall bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Award,
substantially in the following form:
"The anticipation, alienation, attachment, sale, transfer,
assignment, pledge, encumbrance or charge of the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Hosokawa Micron International Inc. (the "Company")
Stock Incentive Plan and an Agreement entered into between the
registered owner and the Company dated [____]. Copies of such Plan and
Agreement are on file at the principal office of the Company."
(d) Custody. The Committee may require that any stock
certificates evidencing such shares be held in custody by the Company
until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock Award, the
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Participant shall have delivered a duly signed stock power, endorsed in
blank, relating to the Common Stock covered by such Award.
7.3. Restrictions and Conditions on Restricted Stock Awards. The
shares of Restricted Stock awarded pursuant to this Plan shall be subject to
Article 12 and the following restrictions and conditions:
(a) Restriction Period; Vesting and Acceleration of
Vesting. (i) The Participant shall not be permitted to Transfer shares
of Restricted Stock awarded under this Plan during a period set by the
Committee (the "Restriction Period") commencing with the date of such
Award, as set forth in the Restricted Stock Award agreement and such
agreement shall set forth a vesting schedule and any events which would
accelerate vesting of the shares of Restricted Stock. Within these
limits, based on service, attainment of performance goals established
pursuant to Section 7.3(a)(ii) below and/or such other factors or
criteria as the Committee may determine in its sole discretion, the
Committee may provide for the lapse of such restrictions in installments
in whole or in part, or may accelerate the vesting of all or any part of
any Restricted Stock Award and/or waive the deferral limitations for all
or any part of any Restricted Stock Award.
(ii) Performance Goals, Formulae or Standards (the
"Performance Goals"). If the lapse of restrictions is based on the
attainment of Performance Goals, the Committee shall establish the
Performance Goals and the applicable vesting percentage of the
Restricted Stock Award applicable to each Participant or class of
Participants in writing prior to the beginning of the applicable fiscal
year or at such later date as otherwise determined by the Committee and
while the outcome of the Performance Goals is substantially uncertain.
Such Performance Goals may incorporate provisions for disregarding (or
adjusting for) changes in accounting methods, corporate transactions
(including, without limitation, dispositions and acquisitions) and other
similar type events or circumstances. With regard to a Restricted Stock
Award that is intended to comply with Section 162(m) of the Code, to the
extent any such provision would create impermissible discretion under
Section 162(m) of the Code or otherwise violate Section 162(m) of the
Code, such provision shall be of no force or effect. The applicable
Performance Goals shall be based on one or more of the performance
criteria set forth in Exhibit A hereto.
(b) Rights as Stockholder. Except as provided in this
subsection (b) and subsection (a) above and as otherwise determined by
the Committee, the Participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a holder of shares of Common
Stock of the Company including, without limitation, the right to receive
any dividends, the right to vote such shares and, subject to and
conditioned upon the full vesting of shares of Restricted Stock, the
right to tender such shares. Notwithstanding the foregoing, the payment
of dividends shall be deferred until, and conditioned upon, the
expiration of the applicable Restriction Period, unless the Committee,
in its sole discretion, specifies otherwise at the time of the Award.
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(c) Lapse of Restrictions. If and when the Restriction
Period expires without a prior forfeiture of the Restricted Stock
subject to such Restriction Period, the certificates for such shares
shall be delivered to the Participant. All legends shall be removed from
said certificates at the time of delivery to the Participant except as
otherwise required by applicable law.
ARTICLE 8.
STOCK APPRECIATION RIGHTS
8.1. Stock Appreciation Rights. Stock Appreciation Rights may be
granted in conjunction with all or part of any Stock Option (a "Reference Stock
Option") granted under this Plan. In the case of a Non-Qualified Stock Option,
such rights may be granted either at or after the time of the grant of such
Reference Stock Option. In the case of an Incentive Stock Option, such rights
may be granted only at the time of the grant of such Reference Stock Option.
8.2. Terms and Conditions of Stock Appreciation Rights. Stock
Appreciation Rights granted hereunder shall be subject to such terms and
conditions, not inconsistent with the provisions of this Plan, as shall be
determined from time to time by the Committee, including Article 12 and the
following:
(a) Term. A Stock Appreciation Right or applicable portion
thereof granted with respect to a Reference Stock Option shall terminate
and no longer be exercisable upon the termination or exercise of the
Reference Stock Option, except that, unless otherwise determined by the
Committee, in its sole discretion, at the time of grant, a Stock
Appreciation Right granted with respect to less than the full number of
shares covered by the Reference Stock Option shall not be reduced until
and then only to the extent the exercise or termination of the Reference
Stock Option causes the number of shares covered by the Stock
Appreciation Right to exceed the number of shares remaining available
and unexercised under the Reference Stock Option.
(b) Exercisability. Stock Appreciation Rights shall be
exercisable only upon the occurrence of a Change in Control.
(c) Method of Exercise. A Stock Appreciation Right may be
exercised by an optionee by surrendering the applicable portion of the
Reference Stock Option. Upon such exercise and surrender, the
Participant shall be entitled to receive an amount determined in the
manner prescribed in this Section 8.2. Stock Options which have been so
surrendered, in whole or in part, shall no longer be exercisable to the
extent the related Stock Appreciation Rights have been exercised.
(d) Payment. Upon the exercise of a Stock Appreciation
Right a Participant shall be entitled to receive up to, but no more
than, an amount in cash
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and/or Common Stock (as chosen by the Committee in its sole discretion)
equal in value to the excess of the Fair Market Value of one share of
Common Stock over the Option price per share specified in the Reference
Stock Option multiplied by the number of shares in respect of which the
Stock Appreciation Right shall have been exercised, with the Committee
having the right to determine the form of payment.
(e) Deemed Exercise of Reference Stock Option. Upon the
exercise of a Stock Appreciation Right, the Reference Stock Option or
part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set
forth in Article 4 of the Plan on the number of shares of Common Stock
to be issued under the Plan.
ARTICLE 9.
PERFORMANCE SHARES
9.1. Award of Performance Shares. Performance Shares may be
awarded either alone or in addition to other Awards granted under this Plan. The
Committee shall determine the eligible persons to whom and the time or times at
which Performance Shares shall be awarded, the number of Performance Shares to
be awarded to any person, the duration of the period (the "Performance Period")
during which, and the conditions under which, receipt of the shares will be
deferred or postponed, and the other terms and conditions of the Award in
addition to those set forth in Section 9.2.
The Committee may condition the grant or vesting of Performance
Shares upon the attainment of specified performance goals or such other factors
or criteria as the Committee shall determine, in its sole discretion.
9.2. Terms and Conditions. Performance Shares awarded pursuant to
this Article 9 shall be subject to Article 12 and the following terms and
conditions:
(a) Vesting. At the expiration of the Performance Period
or the achievement of certain specified Performance Goals, the Committee
shall determine the extent to which the Performance Goals have been
achieved and the percentage of the Performance Shares of each
Participant that have vested.
(b) Dividends. Unless otherwise determined by the
Committee at the time of Award, amounts equal to any dividends declared
during the Performance Period with respect to the number of shares of
Common Stock covered by a Performance Share Award will not be paid to
the Participant.
(c) Payment. Subject to the provisions of the Award
agreement and this Plan, at the expiration of the Performance Period,
share certificates (including,
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without limitation, Restricted Stock) and/or cash of an equivalent value
(as the Committee may determine in its sole discretion with respect to
the payment form or value) shall be delivered to the Participant, or his
legal representative, in a number equal to the vested shares covered by
the Performance Share Award. Notwithstanding the foregoing, the
Committee may, in its sole discretion, and to the extent applicable and
permitted under Section 162(m) of the Code, award an amount less than
the earned Performance Share Award and/or subject the payment of all or
part of any Performance Share Award to additional vesting and forfeiture
conditions as its deems appropriate.
(d) Performance Goals, Formulae or Standards (the
"Performance Goals"). The Committee shall establish the objective
Performance Goals for the earning of Performance Shares based on a
Performance Period applicable to each Participant or class of
Participants in writing prior to the beginning of the applicable
Performance Period or at such later date as permitted under Section
162(m) of the Code and while the outcome of the Performance Goals is
substantially uncertain. Such Performance Goals may incorporate, if any
only to the extent permitted under Section 162(m) of the Code,
provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation,
dispositions and acquisitions) and other similar events or
circumstances. To the extent any such provision would create
impermissible discretion under Section 162(m) of the Code or otherwise
violate Section 162(m) of the Code, such provision shall be of no force
or effect. The applicable Performance Goals shall be based on one or
more of the performance criteria set forth in Exhibit A hereto.
(e) Accelerated Vesting. Solely to the extent permitted by
Section 162(m) of the Code, based on service, performance and/or such
other factors or criteria, if any, as the Committee may determine, the
Committee may, at or after grant, accelerate the vesting of all or any
part of any Performance Share Award and/or waive the deferral
limitations for all or any part of such Award.
ARTICLE 10.
PERFORMANCE UNITS
10.1. Award of Performance Units. Performance Units may be
awarded either alone or in addition to other Awards granted under this Plan. The
Committee shall determine the eligible persons to whom and the time or times at
which Performance Units shall be awarded, the number of Performance Units to be
awarded to any person, the duration of the period (the "Performance Cycle")
during which, and the conditions under which, a Participant's right to
Performance Units will be vested, the ability of Participants to defer the
receipt of payment of such Units, and the other terms and conditions of the
Award in addition to those set forth in Section 10.2.
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A Performance Unit shall have a fixed dollar value.
The Committee may condition the grant or vesting of Performance
Units upon the attainment of specified Performance Goals or such other factors
or criteria as the Committee shall determine, in its sole discretion.
10.2. Terms and Conditions. The Performance Units awarded
pursuant to this Article 10 shall be subject to Article 12 and the following
terms and conditions:
(a) Vesting. At the expiration of the Performance Cycle or
the achievement of certain specified Performance Goals, the Committee
shall determine the extent to which the Performance Goals have been
achieved, and the percentage of the Performance Units of each
Participant that have vested.
(b) Payment. Subject to the applicable provisions of the
Award agreement and this Plan, at the expiration of the Performance
Cycle, cash and/or share certificates (including, without limitation,
Restricted Stock) of an equivalent value (as the Committee may determine
in its sole discretion with respect to the payment form or value) shall
be delivered to the Participant, or his legal representative, in payment
of the vested Performance Units covered by the Performance Unit Award.
Notwithstanding the foregoing, the Committee may, in its sole
discretion, and to the extent applicable and permitted under Section
162(m) of the Code, award an amount less than the earned Performance
Unit Award and/or subject the payment of all or part of any Performance
Unit Award to additional vesting and forfeiture conditions as it deems
appropriate.
(c) Performance Goals, Formulae or Standards (the
"Performance Goals"). The Committee shall establish the objective
Performance Goals for the earnings of Performance Units based on a
Performance Cycle applicable to each Participant or class of
Participants in writing prior to the beginning of the applicable
Performance Cycle or at such later date as permitted under Section
162(m) of the Code and while the outcome of the Performance Goals is
substantially uncertain. Such Performance Goals may incorporate, if and
only to the extent permitted under Section 162(m) of the Code,
provisions for disregarding (or adjusting for) changes in accounting
methods, corporate transactions (including, without limitation,
dispositions and acquisitions) and other similar events or
circumstances. To the extent any such provision would create
impermissible discretion under Section 162(m) of the Code or otherwise
violate Section 162(m) of the Code, such provision shall be of no force
or effect. The applicable Performance Goals shall be based on one or
more of the performance criteria set forth in Exhibit A hereto.
(d) Accelerated Vesting. Solely to the extent permitted by
Section 162(m) of the Code, based on service, performance and/or such
other factors or criteria, if any, as the Committee may determine, the
Committee may, at or after grant,
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accelerate the vesting of all or any part of any Performance Unit Award
and/or waive the deferral limitations for all or any part of such Award.
ARTICLE 11.
NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS
11.1. Options. The terms of this Article 11 shall apply only to
Options granted to Non-Employee Directors.
11.2. Grants. Without further action by the Board or the
stockholders of the Company, each Non-Employee Director shall, subject to the
terms of the Plan, be granted:
(a) Options to purchase 5,000 shares of Common Stock as of
the date the Non-Employee Director begins service as a Non-Employee
Director on the Board, and
(b) Options to purchase 2,000 shares of Common Stock at
each annual anniversary of his becoming a Non-Employee Director,
provided he has not, as of such annual anniversary experienced a
Termination of Directorship.
11.3. Non-Qualified Stock Options. Stock Options granted under
this Article 11 shall be Non-Qualified Stock Options.
11.4. Terms of Options. Options granted under Article 11 of this
Plan shall be subject to the following terms and conditions, and shall be in
such form and contain such additional terms and conditions, not inconsistent
with the terms of this Plan, as the Board shall deem desirable:
(a) Option Price. The option price per share of Common
Stock purchasable under an Option shall be determined by the Board at
the time of grant but shall not be less than 100% of the Fair Market
Value of the share of Common Stock at the time of grant. Notwithstanding
the foregoing, if an Option is modified, extended or renewed and,
thereby, deemed to be the issuance of a new Option under the Code or the
applicable accounting rules, the exercise price of an Option may
continue to be the original exercise price even if less than the Fair
Market Value of the Common Stock at the time of such modification,
extension or renewal.
(b) Option Term. The term of each Stock Option shall be
fixed by the Board, but no Stock Option shall be exercisable more than
ten (10) years after the date the Option is granted.
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(c) Exercisability. Each Stock Option shall initially
become exercisable six months from the date of grant and shall be
subject to such terms and conditions as shall be determined by the Board
at grant. The Board may waive any limitations on the exercisability of
any Stock Options at any time at or after grant in whole or in part
(including, without limitation, that the Board may accelerate the time
at which Options may be exercised), based on such factors, if any, as
the Board shall determine, in its sole discretion.
(d) Method of Exercise. Subject to whatever waiting period
provisions apply under subsection (c) above, Stock Options may be
exercised in whole or in part at any time during the Option term, by
giving written notice of exercise to the Company specifying the number
of shares to be purchased. Such notice shall be accompanied by payment
in full of the purchase price in such form, or such other arrangement
for the satisfaction of the purchase price, as the Board may accept. If
and to the extent determined by the Board in its sole discretion at or
after grant, payment in full or in part may also be made in the form of
Common Stock owned by the Participant for at least six (6) months (and
for which the Participant has good title free and clear of any liens and
encumbrances) based on the Fair Market Value of the Common Stock on the
payment date or, if the Common Stock is traded on a national securities
exchange, through the delivery of irrevocable instructions to a broker
to deliver promptly to the Company an amount equal to the purchase
price. No shares of Common Stock shall be issued until payment, as
provided herein, therefor has been made or provided for.
(e) Form, Modification, Extension and Renewal of Options.
Subject to the terms and conditions and within the limitations of the
Plan, an Option shall be evidenced by such form of agreement or grant as
is approved by the Board, and the Board may modify, extend or renew
outstanding Options granted under the Plan (provided that the rights of
a Participant are not reduced without his consent).
11.5. Termination of Directorship. The following rules apply with
regard to Options upon the Termination of Directorship:
(a) Termination by Reason of Death. If a Participant's
Termination of Directorship is by reason of death, any Stock Option held
by such Participant, unless otherwise determined by the Board at grant
or, if no rights of the Participant's estate are reduced, thereafter,
may be exercised, to the extent exercisable at the Participant's death,
by the legal representative of the estate, at any time within a period
of one year from the date of such death, but in no event beyond the
expiration of the stated term of such Stock Option.
(b) Termination by Reason of Disability. If a
Participant's Termination of Directorship is by reason of Disability,
any Stock Option held by such Participant, unless otherwise determined
by the Board at grant or, if no rights of the Participant are reduced,
thereafter, may be exercised, to the extent exercisable at the
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Participant's termination, by the Participant (or the Participant's
legal representative to the extent permitted under Section 16.11 or the
legal representative of the Participant's estate if the Participant dies
after termination) at any time within a period of one year from the date
of such termination, but in no event beyond the expiration of the stated
term of such Stock Option.
(c) Termination by Reason of Retirement. If a
Participant's Termination of Directorship is by reason of Retirement,
any Stock Option held by such Participant, unless otherwise determined
by the Board at grant, or, if no rights of the Participant are reduced,
thereafter, may be exercised, to the extent exercisable at termination,
by the Participant at any time within a period of one year from the date
of such termination, but in no event beyond the expiration of the stated
term of such Stock Option; provided, however, that, if the Participant
dies within such exercise period, any unexercised Stock Option held by
such Participant shall thereafter be exercisable, to the extent to which
it was exercisable at the time of death, for a period of one year (or
such other period as the Board may specify at grant or, if no rights of
the Participant's estate are reduced, thereafter) from the date of such
death, but in no event beyond the expiration of the stated term of such
Stock Option.
(d) Involuntary Termination Without Cause. If a
Participant's Termination of Directorship is by involuntary termination
without Cause, any Stock Option held by such Participant, unless
otherwise determined by the Board at grant or, if no rights of the
Participant are reduced, thereafter, may be exercised, to the extent
exercisable at termination, by the Participant at any time within a
period of ninety (90) days from the date of such termination, but in no
event beyond the expiration of the stated term of such Stock Option.
(e) Voluntary Resignation. If a Participant's Termination
of Directorship is a voluntary resignation and such termination occurs
prior to, or more than ninety (90) days after, the occurrence of an
event which would be grounds for Termination of Directorship by the
Company for Cause (without regard to any notice or cure period
requirements), any Stock Option held by such Participant, unless
otherwise determined by the Board at grant or, if no rights of the
Participant are reduced, thereafter, may be exercised, to the extent
exercisable at termination, by the Participants at any time within a
period of thirty (30) days from the date of such termination, but in no
event beyond the expiration of the stated term of such Stock Option.
(f) Termination for Cause. Unless otherwise determined by
the Board at grant or, if no rights of the Participant are reduced,
thereafter, if a Participant's Termination of Directorship is for Cause
for any reason, any Stock Option held by such Participant shall
thereupon terminate and expire as of the date of termination. In the
event the termination is an involuntary termination without Cause or is
a voluntary resignation without Cause or is a voluntary resignation
within ninety
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(90) days after occurrence of an event which would be grounds for
Termination of Employment by the Company for Cause (without regard to
any notice or cure period requirement), any Stock Option held by the
Participant at the time of occurrence of the event which would be
grounds for Termination of Directorship by the Company for Cause shall
be deemed to have terminated and expired upon occurrence of the event
which would be grounds for Termination of Directorship by the Company
for Cause.
11.6. Changes.
(a) The Awards to a non-employee director shall be subject
to Sections 4.2(a), (b) and (c) of the Plan and this Section 11.6, but
shall not be subject to Section 4.2(d).
(b) If the Company shall not be the surviving corporation
in any merger or consolidation, or if the Company is to be dissolved or
liquidated, then, unless the surviving corporation assumes the Options
or substitutes new Options which are determined by the Board in its sole
discretion to be substantially similar in nature and equivalent in terms
and value for Options then outstanding, upon the effective date of such
merger, consolidation, liquidation or dissolution, any unexercised
Options shall expire without additional compensation to the holder
thereof; provided, that, the Board shall deliver notice to each
Non-Employee Director at least twenty (20) days prior to the date of
consummation of such merger, consolidation, dissolution or liquidation
which would result in the expiration of the Options and during the
period from the date on which such notice of termination is delivered to
the consummation of the merger, consolidation, dissolution or
liquidation, such Participant shall have the right to exercise in full,
effective as of such consummation, all Options that are then outstanding
(without regard to limitations on exercise otherwise contained in the
Options) but contingent on occurrence of the merger, consolidation,
dissolution or liquidation, and, provided that, if the contemplated
transaction does not take place within a ninety (90) day period after
giving such notice for any reason whatsoever, the notice, accelerated
vesting and exercise shall be null and void and, if and when
appropriate, new notice shall be given as aforesaid.
ARTICLE 12.
NON-TRANSFERABILITY AND TERMINATION PROVISIONS
The terms and conditions of this Article 12 shall apply to Awards under
this Plan as follows:
12.1. Nontransferability. No Stock Option, Stock Appreciation
Right, Performance Unit or Performance Share shall be Transferable by the
Participant otherwise than
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by will or by the laws of descent and distribution. All Stock Options and all
Stock Appreciation Rights shall be exercisable, during the Participant's
lifetime, only by the Participant or his or her legal guardian or
representative. Stock Appreciation Rights shall be Transferable, to the extent
permitted above, only with the underlying Stock Option. In addition, except as
provided above, no Stock Option shall be Transferred (whether by operation of
law or otherwise), and no Stock Option shall be subject to execution, attachment
or similar process. Upon any attempt to Transfer any Stock Option, or in the
event of any levy upon any Stock Option by reason of any execution, attachment
or similar process contrary to the provisions hereof, such Stock Option shall
immediately terminate and become null and void. Notwithstanding the foregoing,
the Committee may determine at the time of grant or thereafter that a Stock
Option that is otherwise not Transferable pursuant to this Article 12 is
Transferable in whole or in part and in such circumstances, and under such
conditions, as specified by the Committee. Shares of Restricted Stock under
Article 7 may not be Transferred prior to the date on which shares are issued,
or, if later, the date on which any applicable restriction, performance or
deferral period lapses. No Award shall, except as otherwise specifically
provided by law or herein, be Transferable in any manner, and any attempt to
Transfer any such Award shall be void, and no such Award shall in any manner be
liable for or subject to the debts, contracts, liabilities, engagements or torts
of any person who shall be entitled to such Award, nor shall it be subject to
attachment or legal process for or against such person.
12.2. Termination of Employment. The following rules apply with
regard to the Termination of Employment of a Participant:
(a) Termination by Reason of Death. If a Participant's
Termination of Employment is by reason of death, any Stock Option or
Stock Appreciation Right held by such Participant, unless otherwise
determined by the Committee at grant or, if no rights of the
Participant's estate are reduced, thereafter, may be exercised, to the
extent exercisable at the Participant's death, by the legal
representative of the estate, at any time within a period of one year
from the date of such death, but in no event beyond the expiration of
the stated term of such Stock Option or Stock Appreciation Right.
(b) Termination by Reason of Disability. If a
Participant's Termination of Employment is by reason of Disability, any
Stock Option or Stock Appreciation Right held by such Participant,
unless otherwise determined by the Committee at grant or, if no rights
of the Participant are reduced, thereafter, may be exercised, to the
extent exercisable at the Participant's termination, by the Participant
(or the Participant's legal representative to the extent permitted under
Section 16.11 or the legal representative of the Participant's estate if
the Participant dies after termination) at any time within a period of
one year from the date of such termination, but in no event beyond the
expiration of the stated term of such Stock Option or Stock Appreciation
Right.
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(c) Termination by Reason of Retirement. If a
Participant's Termination of Employment is by reason of Retirement, any
Stock Option or Stock Appreciation Right held by such Participant,
unless otherwise determined by the Committee at grant, or, if no rights
of the Participant are reduced, thereafter, may be exercised, to the
extent excercisable at termination, by the Participant at any time
within a period of one year from the date of such termination, but in no
event beyond the expiration of the stated term of such Stock Option or
Stock Appreciation Right; provided, however, that, if the Participant
dies within such exercise period, any unexercised Stock Option or Stock
Appreciation Right held by such Participant shall thereafter be
exercisable, to the extent to which it was exercisable at the time of
death, for a period of one year (or such other period as the Committee
may specify at grant or, if no rights of the Participant's estate are
reduced, thereafter) from the date of such death, but in no event beyond
the expiration of the stated term of such Stock Option or Stock
Appreciation Right.
(d) Involuntary Termination Without Cause. If a
Participant's Termination of Employment is by involuntary termination
without Cause, any Stock Option or Stock Appreciation Right held by such
Participant, unless otherwise determined by the Committee at grant or,
if no rights of the Participant are reduced, thereafter, may be
exercised, to the extent exercisable at termination, by the Participant
at any time within a period of ninety (90) days from the date of such
termination, but in no event beyond the expiration of the stated term of
such Stock Option or Stock Appreciation Right.
(e) Voluntary Resignation. If a Participant's Termination
of Employment is due to a voluntary resignation and such termination
occurs prior to, or more than ninety (90) days after, the occurrence of
an event which would be grounds for Termination of Employment by the
Company for Cause (without regard to any notice or cure period
requirements), any Stock Option or Stock Appreciation Right held by such
Participant, unless otherwise determined by the Committee at grant or,
if no rights of the Participant are reduced, thereafter, may be
exercised, to the extent exercisable at termination, by the Participant
at any time within a period of thirty (30) days from the date of such
termination, but in no event beyond the expiration of the stated term of
such Stock Option or Stock Appreciation Right.
(f) Termination for Cause. Unless otherwise determined by
the Committee at grant or, if no rights of the Participant are reduced,
thereafter, if a Participant's Termination of Employment is for Cause
for any reason, any Stock Option or Stock Appreciation Right held by
such Participant shall thereupon terminate and expire as of the date of
termination. In the event the termination is an involuntary termination
without Cause or is a voluntary resignation within ninety (90) days
after occurrence of an event which would be grounds for Termination of
Employment by the Company for Cause (without regard to any notice or
cure period requirement), any Stock Option or Stock Appreciation Right
held by the Participant at the time of occurrence of the event which
would be grounds for Termination of
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Employment by the Company for Cause shall be deemed to have terminated
and expired upon occurrence of the event which would be grounds for
Termination of Employment by the Company for Cause.
(g) Termination of Employment for Restricted Stock.
Subject to the applicable provisions of the Restricted Stock Award
agreement and this Plan, upon a Participant's Termination of Employment
for any reason during the relevant Restriction Period, all Restricted
Stock still subject to restriction will vest or be forfeited in
accordance with the terms and conditions established by the Committee at
grant or thereafter.
(h) Termination of Employment for Performance Shares and
Performance Units. Subject to the applicable provisions of the Award
agreement and this Plan, upon a Participant's Termination of Employment
for any reason during the Performance Period or the Performance Cycle,
the Performance Shares or Performance Units in question will vest or be
forfeited in accordance with the terms and conditions established by the
Committee at grant or thereafter.
ARTICLE 13.
CHANGE IN CONTROL PROVISIONS
13.1. Benefits. In the event of a Change in Control of the
Company (as defined below), except as otherwise provided by the Committee upon
the grant of an Award, the Participant shall be entitled to the following
benefits:
(a) Subject to paragraph (c) below with regard to Options
granted to Eligible Employees, all outstanding Stock Options (including
those granted to Non-Employee Directors) and the related Stock
Appreciation Rights of such Participant, if any, granted prior to the
Change in Control shall be fully vested and immediately exercisable in
their entirety. The Committee, in its sole discretion, or the Board in
its sole discretion in the case of Stock Options granted to Non-Employee
Directors under Article 11, may provide for the purchase of any such
Stock Options by the Company or Affiliate for an amount of cash equal to
the excess of the Change in Control price (as defined below) of the
shares of Common Stock covered by such Stock Options, over the aggregate
exercise price of such Stock Options. For purposes of this Section 13.1,
Change in Control price shall mean the higher of (i) the highest price
per share of Common Stock paid in any transaction related to a Change in
Control of the Company, or (ii) the highest Fair Market Value per share
of Common Stock at any time during the sixty (60) day period preceding a
Change in Control.
(b) All unvested Restricted Stock, Performance Units and
Performance Shares shall become fully vested upon a Change in Control,
including
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without limitation, the following: (i) the restrictions to which any
shares of Restricted Stock of a Participant granted prior to the Change
in Control are subject shall lapse as if the applicable Restriction
Period had ended upon such Change in Control; and (ii) the conditions
required for vesting of any unvested Performance Units and Performance
Shares shall be deemed to be satisfied upon such Change in Control.
(c) Notwithstanding anything to the contrary herein,
unless the Committee or the Board, in the case of an Option granted to
Non-Employee Directors, provides otherwise at the time an Option is
granted to an Eligible Employee or Non-Employee Director, hereunder or
thereafter, no acceleration of exercisability shall occur with respect
to such Option if the Committee or the Board, as the case may be,
reasonably determines in good faith, prior to the occurrence of the
Change in Control, that the Options shall be honored or assumed, or new
rights substituted therefor (each such honored, assumed or substituted
option hereinafter called an "Alternative Option"), by the Participant's
employer (or the parent or a subsidiary of such employer), in the case
of an Option granted to an Eligible Employee, or by a company for which
the Non-Employee Director will continue as a Non-Employee Director, in
the case of an Option granted to a Non-Employee Director under Article
11, in each case immediately following the Change in Control, provided
that any such Alternative Option must meet the following criteria:
(i) the Alternative Option must be based on stock
which is traded on an established securities market, or which will be so
traded within thirty (30) days of the Change in Control;
(ii) the Alternative Option must provide such
Participant with rights and entitlements substantially equivalent to or
better than the rights, terms and conditions applicable under such
Option, including, but not limited to, an identical or better exercise
schedule; and
(iii) the Alternative Option must have economic
value substantially equivalent to the value of such Option (determined
at the time of the Change in Control).
For purposes of Incentive Stock Options, any assumed or
substituted Option shall comply with the requirements of Treasury
regulation ss. 1.425-1 (and any amendments thereto).
(d) Notwithstanding anything else herein, the Committee
may, in its sole discretion, provide for accelerated vesting of an Award
at any time (other than a grant to a Non-Employee Director pursuant to
Article 11 hereof).
13.2. Change in Control. A "Change in Control" shall mean the
occurrence of any of the following:
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(a) any person (as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) thereof), excluding
the Company, [Hosokawa Micron Corp.], any subsidiary of the Company or
of [Hosokawa Micron Corp.] and any employee benefit plan sponsored or
maintained by the Company, [Hosokawa Micron Corp.] or any subsidiary of
the Company or of [Hosokawa Micron Corp.] (including any trustee of any
such plan acting in his capacity as trustee), becoming the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act) of securities
of the Company representing twenty-five percent (25%) of the total
combined voting power of the Company's then outstanding securities;
(b) the merger, consolidation or other business
combination of the Company (a "Transaction"), other than (A) a
Transaction involving only the Company and one or more of its
subsidiaries or [Hosokawa Micron Corp.] and one or more of its
subsidiaries, or (B) a Transaction immediately following which the
stockholders of the Company immediately prior to the Transaction
continue to have a majority of the voting power in the resulting entity
and no person other than [Hosokawa Micron Corp.] is the beneficial owner
of securities of the resulting entity representing more than twenty-five
percent (25%) of the voting power in the resulting entity;
(c) during any period of two (2) consecutive years
beginning on or after the Effective Date, the persons who were members
of the Board immediately before the beginning of such period (the
"Incumbent Directors") ceasing (for any reason other than death) to
constitute at least a majority of the Board or the board of directors of
any successor to the Company, provided that, any director who was not a
director as of the Effective Date shall be deemed to be an Incumbent
Director if such director was elected to the board of directors by, or
on the recommendation of or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either actually
or by prior operation of the foregoing unless such election,
recommendation or approval occurs as a result of an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act or any successor provision) or
other actual or threatened solicitation of proxies or contests by or on
behalf of a person other than a member of the Board; or
(d) the approval by the stockholders of the Company of any
plan of complete liquidation of the Company or an agreement for the sale
of all or substantially all of the Company's assets other than the sale
of all or substantially all of the assets of the Company to [Hosokawa
Micron Corp.] or a subsidiary of [Hosokawa Micron Corp.] or to a person
or persons who beneficially own, directly or indirectly, at least fifty
percent (50%) or more of the combined voting power of the outstanding
voting securities of the Company at the time of such sale.
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13.3. Initial Public Offering not a Change in Control. For
purposes of the Plan, an initial public offering of the Common Stock of the
Company shall not be deemed to be a Change in Control.
ARTICLE 14.
TERMINATION OR AMENDMENT OF THE PLAN
14.1. Termination or Amendment. Notwithstanding any other
provision of this Plan, the Board may at any time, and from time to time, amend,
in whole or in part, any or all of the provisions of the Plan, or suspend or
terminate it entirely, retroactively or otherwise; provided, however, that,
unless otherwise required by law or specifically provided herein, the rights of
a Participant with respect to Awards granted prior to such amendment, suspension
or termination, may not be impaired without the consent of such Participant and,
provided further, without the approval of the stockholders of the Company in
accordance with the laws of the State of Delaware, to the extent required by the
applicable provisions of Rule 16b-3 or Section 162(m) of the Code, or, with
regard to Incentive Stock Options, Section 422 of the Code, no amendment may be
made which would (i) increase the aggregate number of shares of Common Stock
that may be issued under this Plan or the maximum individual Participant
limitations under Section 4.1(b); (ii) change the classification of employees
and Non-Employee Directors eligible to receive Awards under this Plan; (iii)
decrease the minimum option price of any Stock Option; (iv) extend the maximum
option period under Section 6.3; (v) require stockholder approval in order for
the Plan to continue to comply with the applicable provisions of Rule 16b-3 or
Section 162(m) of the Code, or, with regard to Incentive Stock Options, Section
422 of the Code; or (vi) change any rights under the Plan with regard to
Non-Employee Directors. In no event may the Plan be amended without the approval
of the stockholders of the Company in accordance with the applicable laws or
other requirements to increase the aggregate number of shares of Common Stock
that may be issued under the Plan, decrease the minimum option price of any
Stock Option, or to make any other amendment that would require stockholder
approval under the rules of any exchange or system on which the Company's
securities are listed or traded at the request of the Company.
Except with respect to the Award of Stock Options to non-employee
directors under Article 11, the Committee may amend the terms of any Award
theretofore granted, prospectively or retroactively, but, subject to Article 4
above or as otherwise specifically provided herein, no such amendment or other
action by the Committee shall impair the rights of any holder without the
holder's consent.
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ARTICLE 15.
UNFUNDED PLAN
15.1. Unfunded Status of Plan. This Plan is intended to
constitute an "unfunded" plan for incentive compensation. With respect to any
payments as to which a Participant has a fixed and vested interest but which are
not yet made to a Participant by the Company, nothing contained herein shall
give any such Participant any rights that are greater than those of a general
creditor of the Company.
ARTICLE 16.
GENERAL PROVISIONS
16.1. Legend. The Committee may require each person receiving
shares of Common Stock pursuant to an Award under the Plan to represent to and
agree with the Company in writing that the Participant is acquiring the shares
without a view to distribution thereof, and that any subsequent offer for sale
or sale of any such shares of Common Stock shall be made either pursuant to (i)
a registration statement on an appropriate form under the Securities Act of
1933, which registration statement shall have become effective and shall be
current with respect to the shares of Common Stock being offered and sold, or
(ii) a specific exemption from the registration requirements of the Securities
Act of 1933, and that in claiming such exemption the Participant will, prior to
any offer for sale or sale of shares of Common Stock, obtain a favorable written
opinion, satisfactory in form and substance to the Company, from counsel
acceptable to the Company as to the availability of such exception. In addition
to any legend required by this Plan, the certificates for such shares may
include any legend which the Committee, or the Board in the case of an Option
granted to a Non-Employee Director under Article 11, deems appropriate to
reflect any restrictions on Transfer.
All certificates for shares of Common Stock delivered under the
Plan shall be subject to such stock transfer orders and other restrictions as
the Committee, or the Board in the case of an Option granted to a Non-Employee
Director under Article 11, may deem advisable under the rules, regulations and
other requirements of the Securities and Exchange Commission, any stock exchange
upon which the Common Stock is then listed or any national securities
association system upon whose system the Common Stock is then quoted, any
applicable Federal or state securities law, and any applicable corporate law,
and the Committee, or the Board in the case of an Option granted to a
Non-Employee Director under Article 11, may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.
16.2. Other Plans. Nothing contained in this Plan shall prevent
the Board from adopting other or additional compensation arrangements, subject
to stockholder approval if such approval is required; and, such arrangements may
be either generally applicable or applicable only in specific cases.
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16.3. No Right to Employment/Directorship. Neither this Plan nor
the grant of any Award hereunder shall give any Participant or other employee
any right with respect to continuance of employment by the Company or any
Affiliate, nor shall there be a limitation in any way on the right of the
Company or any Affiliate by which an employee is employed to terminate his
employment at any time. Neither this Plan nor the grant of any Award hereunder
shall impose any obligations on the Company to retain any Participant as a
director nor shall it impose on the part of any Participant any obligation to
remain as a director of the Company.
16.4. Withholding of Taxes. The Company shall have the right to
deduct from any payment to be made to a Participant, or to otherwise require,
prior to the issuance or delivery of any shares of Common Stock or the payment
of any cash hereunder, payment by the Participant of, any Federal, state or
local taxes required by law to be withheld. Upon the vesting of Restricted
Stock, or upon making an election under Code Section 83(b), a Participant shall
pay all required withholding to the Company.
The Committee shall permit any such withholding obligation with
regard to any Eligible Employee to be satisfied by reducing the number of shares
of Common Stock otherwise deliverable or by delivering shares of Common Stock
already owned. Any fraction of a share of Common Stock required to satisfy such
tax obligations shall be disregarded and the amount due shall be paid instead in
cash by the Participant.
16.5. Listing and Other Conditions.
(a) If the Common Stock becomes listed on a national
securities exchange or system sponsored by a national securities
association, the issue of any shares of Common Stock pursuant to an
Award shall be conditioned upon such shares being listed on such
exchange or system.
(b) If at any time counsel to the Company shall be of the
opinion that any sale or delivery of shares of Common Stock pursuant to
an Award is or may in the circumstances be unlawful or result in the
imposition of excise taxes on the Company under the statutes, rules or
regulations of any applicable jurisdiction, the Company shall have no
obligation to make such sale or delivery, or to make any application or
to effect or to maintain any qualification or registration under the
Securities Act of 1933, as amended, or otherwise with respect to shares
of Common Stock or Awards, and the right to exercise any Option shall be
suspended until, in the opinion of said counsel, such sale or delivery
shall be lawful or will not result in the imposition of excise taxes on
the Company.
(c) Upon termination of any period of suspension under
this Section 16.5, any Award affected by such suspension which shall not
then have expired or terminated shall be reinstated as to all shares
available before such suspension and as to
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shares which would otherwise have become available during the period of
such suspension, but no such suspension shall extend the term of any
Option.
16.6. Governing Law. This Plan shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).
16.7. Construction. Wherever any words are used in this Plan in
the masculine gender they shall be construed as though they were also used in
the feminine gender in all cases where they would so apply, and wherever any
words are used herein in the singular form they shall be construed as though
they were also used in the plural form in all cases where they would so apply.
16.8. Other Benefits. No Award payment under this Plan shall be
deemed compensation for purposes of computing benefits under any retirement plan
of the Company or its Affiliates nor affect any benefits under any other benefit
plan now or subsequently in effect under which the availability or amount of
benefits is related to the level of compensation.
16.9. Costs. The Company shall bear all expenses included in
administering this Plan, including expenses of issuing Common Stock pursuant to
any Awards hereunder.
16.10. No Right to Same Benefits. The provisions of Awards need
not be the same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
16.11. Death/Disability. The Committee may in its discretion
require the transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the transfer of an Award. The
Committee may also require the agreement of the transferee to be bound by all of
the terms and conditions of the Plan. If the Committee shall find, without any
obligation or responsibility of any kind to do so, that any person to whom
payment is payable under this Plan is unable to care for his or her affairs
because of disability, illness or accident, any payment due may be paid to such
person's duly appointed legal representative in such manner and proportions as
the Committee may determine, in it sole discretion. Any such payment shall be a
complete discharge of the liabilities of the Committee and the Board under this
Plan.
16.12. Section 16(b) of the Exchange Act. In the event the
Company becomes publicly held, all elections and transactions under the Plan by
persons subject to Section 16 of the Exchange Act involving shares of Common
Stock are intended to comply with any applicable exemptive condition under Rule
16b-3. To the extent applicable, the Committee may establish and adopt written
administrative guidelines, designed to facilitate compliance with Section 16(b)
of the Exchange Act, as it may deem necessary or proper for the administration
and operation of the Plan and the transaction of business thereunder. For
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purposes of this paragraph, the Company shall be deemed publicly held when and
if the Company has a class of common equity securities registered under Section
12 of the Exchange Act.
16.13. Severability of Provisions. If any provision of the Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof, and the Plan shall be construed
and enforced as if such provisions had not been included.
16.14. Headings and Captions. The headings and captions herein
are provided for reference and convenience only, shall not be considered part of
the Plan, and shall not be employed in the construction of the Plan.
ARTICLE 17.
APPROVAL OF BOARD AND STOCKHOLDERS
The Plan shall not be effective unless and until approved by the Board
and, solely to the extent required by any applicable law (including without
limitation, approval required under Rule 16b-3, Section 162(m) of the Code or
Section 422 of the Code) or registration or stock exchange rule, approved by the
stockholders of the Company in the manner set forth in such law, regulation or
rule.
ARTICLE 18.
TERM OF PLAN
No Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the earlier of the date the Plan is adopted or the date of
stockholder approval (if applicable), but Awards granted prior to such tenth
anniversary may extend beyond that date.
ARTICLE 19.
NAME OF PLAN
This Plan shall be known as the Hosokawa Micron International Stock
Incentive Plan.
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EXHIBIT A
The Performance Goals in respect of the applicable Awards referred to in
the Plan granted to Participants, shall be based on one or more of the following
performance criteria ("Performance Criteria"): (i) the attainment of certain
target levels of, or percentage increase in, pre-tax profit of the Company (or
an Affiliate, division or other operational unit of the Company); (ii) the
attainment of certain target levels of, or a percentage increase in, after-tax
profits of the Company (or an Affiliate, division or other operational unit of
the Company); (iii) the attainment of certain target levels of, or a specified
increase in, operational cash flow of the Company (or an Affiliate, division or
other operational unit of the Company); (iv) the achievement of a certain level
of, reduction of, or other specified objectives with regard to limiting the
level of increase in all or a portion of the Company's bank debt or other
long-term or short-term public or private debt or other similar financial
obligations of the Company, if any, which may be calculated net of such cash
balances and/or other offsets and adjustments as may be established by the
Company; (v) the attainment of a specified percentage increase in earnings per
share or earnings per share from continuing operation of the Company (or an
Affiliate, division or other operational unit of the Company); (vi) the
attainment of certain target levels of, or a specified percentages increase in,
revenues, net income, earnings before (a) interest, (B) taxes, (C) depreciation
and/or (D) amortization, of the Company (or an Affiliate, division of other
operational unit of the Company); (vii) the attainment of certain target levels
of, or a specified percentages increase in, return on invested capital, return
on investment return on assets or return on total capital; (viii) the attainment
of certain target levels of, or a percentage increase in, after-tax or pre-tax
return on stockholders' equity of the Company (or an Affiliate, division or
other operational unit of the Company; (ix) the attainment of a certain target
level of, or reduction in, selling, general and administrative expense as a
percentage of revenue of the Company (or an Affiliate, division or other
operational unit of the Company); (x) the attainment of certain target levels
of, a specified increase in, economic value added based on cash flow return on
investment formula of the Company (or an Affiliate, division or other
operational unit of the Company); (xi) the attainment of certain target levels
in the Fair Market Value of a share of Common Stock; and (xii) the growth in the
value of an investment in Common Stock assuming the reinvestment of dividends.
The Performance Criteria listed above for the Company (or an Affiliate, division
or other operational unit of the Company) shall be determined in accordance with
generally accepted accounting principles consistently applied by the Company,
but before consideration of payments to be made pursuant to this Plan.
In addition, such Performance Criteria may be based upon the attainment
of specified levels of Company (or an Affiliate, division or other operational
unit of the Company) performance under one or more of the measures described
above relative to the performance of other corporations. To the extent permitted
under Section 162(m) of the Code, but only to the extent permitted under Section
162(m) of the Code (including, without limitation, compliance with any
requirements for stockholder approval), the Committee may: (i) designate
additional business criteria on which the Performance Goals may be based or (ii)
adjust, modify or amend the aforementioned business criteria.
34
<PAGE>
HOSOKAWA MICRON INTERNATIONAL INC.
STOCK INCENTIVE PLAN
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE 1. PURPOSE...................................................................1
ARTICLE 2. DEFINITIONS...............................................................1
ARTICLE 3. ADMINISTRATION............................................................5
ARTICLE 4. SHARE AND OTHER LIMITATIONS...............................................8
ARTICLE 5. ELIGIBILITY..............................................................11
ARTICLE 6. STOCK OPTIONS............................................................11
ARTICLE 7. RESTRICTED STOCK AWARDS..................................................13
ARTICLE 8. STOCK APPRECIATION RIGHTS................................................16
ARTICLE 9. PERFORMANCE SHARES.......................................................17
ARTICLE 10. PERFORMANCE UNITS........................................................18
ARTICLE 11. NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS................................20
ARTICLE 12. NON-TRANSFERABILITY AND TERMINATION PROVISIONS...........................23
ARTICLE 13. CHANGE IN CONTROL PROVISIONS.............................................26
ARTICLE 14. TERMINATION OR AMENDMENT OF THE PLAN.....................................29
ARTICLE 15. UNFUNDED PLAN............................................................29
ARTICLE 16. GENERAL PROVISIONS.......................................................30
ARTICLE 17. APPROVAL OF BOARD AND STOCKHOLDERS.......................................33
ARTICLE 18. TERM OF PLAN.............................................................33
ARTICLE 19. NAME OF PLAN.............................................................33
</TABLE>
i
SUBLICENSE AGREEMENT
THIS AGREEMENT, made as of this 30th day of September, 1987, by and
between HOSOKAWA MICRON INTERNATIONAL, INC., a Delaware corporation, with
offices located at 780 Third Avenue, New York, New York 10017 (hereinafter the
"Licensor"), and HOSOKAWA MICRON CORPORATION, a Japanese corporation with
offices located at Osaka, Japan (hereinafter the "Licensee").
WITNESSETH:
WHEREAS, the University of Arkansas ("UA") is the patentee by
assignment from Dr. M.K. Mazumder and R.E. Ware of the Graduate Institute of
Techno1ogy, University of Arkansas ("GIT"), to whom was granted United States
Patent No. 4,633,714 on January 6, 1987, for an Aerosol Particle Charge and Size
Analyzer ("E-SPART"); and
WHEREAS, Licensor is licensee of the E-SPART pursuant to an
agreement with UA dated February 16, 1987 (the "License Agreement"); and
<PAGE>
2
WHEREAS, Licensee is in the powder and particle processing business
and desires to acquire a license to make, have made, use and sell the E-SPART in
the Territory (as hereafter defined);
NOW, THEREFORE, in consideration of the foregoing premises, the
parties hereto do hereby agree as follows:
1.0 Definitions
1.1 Technology Field
The term, "Technology Field" as used herein shall mean industrial
powder and particle processing and related peripheral fields.
1.2 Subject Product
The term "Subject Product" as used herein shall mean the E-SPART as
described in United States Patent No. 4,633,714 and any improvements made
thereto for use in the Technology Field.
1.3 Improvement
The term "Improvement" as used herein shall mean any modification of
the E-SPART as described in United States Patent No. 4,633,714.
1.4 Patent Rights
The term "Patent Rights" as used herein shall mean any patent
application previously or hereafter filed by or on behalf of UA or Licensor and
any patent now issued or hereafter issuing on any patent application filed by or
an behalf of UA
<PAGE>
3
or Licensor which patent application relates to the Subject Product, its method
of manufacture or use in the Technology Field.
1.5 Proprietary Information
The term "Proprietary Information" as used herein shall mean any
confidential technical information, proprietary know-how, trade secret or other
intellectual property right used in or relating to Subject Product.
1.6 Licensed Product
The term "Licensed Product" as used herein shall mean any Subject
Product based upon Patent Rights and/or Proprietary Information which is
produced or sold by Licensee, sublicensees, or contract manufacturer.
1.7 Net Sales
The term "Net Sales" as used herein shall mean the total amount paid
to Licensee or sublicensee by purchasers of Licensed Products less any freight,
insurance, packaging, sales, excise or use taxes, export or import duties, and
commissions, insofar as such freight, taxes, duties, and/or commissions are
actually paid by Licensee; provided, however, any commissions deducted to
determine net sales shall be reasonable, consistent with commissions prevailing
in the industry, and not include commissions paid to any subsidiary or affiliate
of Licensee except as such commissions relate to local sales representative
destination commissions.
<PAGE>
4
1.8 Territory
The term "Territory" as used herein shall mean Japan, Australia, New
Zealand, U.S.S.R., all Asian and Middle Eastern Countries and all territories
and possessions thereof.
2.0 Grant of License
Licensor hereby grants to Licensee and Licensee hereby accepts from
Licensor the nontransferable (except as set forth herein) right to use the
Patent Rights and Proprietary Information to make, have made, use and sell
Licensed Products in the Territory.
3.0 Licensor Technical Services
During the term of this Agreement, Licensor will continue to make
available to Licensee without charge such Proprietary Information, general
technical advice and training services as may be necessary to enable Licensee to
continue to make, have made, use, sell and service the Licensed Products.
Licensor shall also furnish, at the request of the Licensee, technical experts
to assist the Licensee in making, having made, using, selling, and servicing the
Licensed Products for such reasonable time as may be necessary, and the Licensee
shall pay the salaries (or reimburse Licensor for salaries and standard fringe
benefits paid by it) and traveling and living expenses of such technical experts
while they are away from the facilities of the Licensor.
<PAGE>
5
3.1 Secrecy Agreement
If, pursuant to Section 3.0 hereof, the Licensor shall send
employees to any facility or office of Licensee or Licensee's affiliated
companies to deliver training, Proprietary Information or other data, or to make
inspections, such employees shall, if requested, execute Licensee's standard
confidentiality covenants, to protect information not covered by this Agreement,
and shall obey and conform to all codes and regulations of such offices or
facilities.
4.0 Royalties and Other Payments
(a) For and in consideration of the licensing granted above,
Licensee agrees to pay Licensor a royalty in the amount of five percent (5%)
of the Net Sales of all Licensed Products in the Territory.
(b) Royalty payments shall be made to the party and in the manner
designed by Licensor in United States Dollars converted from the prevailing
currency in the Territory involved at the official rate of exchange of an
authorized foreign exchange bank quoted on the date when each such royalty
payment is due under Section 5(a) hereof, after deduction of any taxes imposed
and required to be withheld therefrom by controlling taxation laws in the United
States, the Territory or elsewhere. Licensee shall obtain a properly
authenticated certificate evidencing payment of such tax, which shall show the
Licensor's name as the recipient of the royalties and shall
<PAGE>
6
forward same to Licensor simultaneously with royalty remittances.
5.0 Accounting Requirements
(a) All royalty payments due from Licensee to Licensor hereunder,
shall be computed quarterly for calendar quarters ending on the last day of
March, June, September and December of each year, and shall be paid within
thirty (30) days following the end of each such calendar quarter. A report
setting forth the basis of the royalty calculation shall accompany payment.
(b) Licensee shall keep full and accurate records of all Licensed
Products manufactured and sold by it or its sublicensees or contract
manufacturer and shall upon request of Licensor, give to any representative
appointed by Licensor access to inspect such records during regular business
hours and make copies thereof.
6.0 Promotion of Licensed Products
Licensee shall exercise its best efforts to promote the sale of the
Licensed Products in the Territory.
7.0 Confidential Information
Licensee agrees that it will treat as strictly confidential all
Proprietary Information furnished at any time by Licensor hereunder, and shall
not disclose it in whole or in
<PAGE>
7
part to third parties. This obligation of confidentiality does not apply to
information which:
(a) was known and can be proven by documentary evidence to have
been known to Licensee prior to disclosure by the Licensor;
(b) is or becomes, through no fault of Licensee, public knowledge
or literature;
(c) is disclosed to Licensee in good faith by a third party other
than UA who had a right to make such disclosure; or
(d) is disclosed to sublicensees or contract manufacturer of
Licensee.
8.0 Infringement by Third Parties
Licensor and Licensee shall promptly notify each other in writing if
they acquire knowledge of any infringement of any of the Patent Rights or
Proprietary Information. Licensor reserves the right, but shall not be required,
to undertake any action against any alleged infringement by third parties.
Licensor shall notify Licensee within seventy-five (75) days after receipt of
notice of infringement indicating whether it will take any steps against the
alleged infringers. If Licensor elects not to proceed against an alleged
infringer, then the Licensee shall have the right, but not the obligation, to
undertake any and all actions it deems appropriate. In any action against an
alleged infringer, Licensor and Licensee may, at the other's request, join
together in taking whatever steps the parties agree are necessary to prevent
infringement.
<PAGE>
8
8.1 Defense of Infringement Suit
Licensor and Licensee agree to cooperate in the defense of any suit
brought against UA, Licensor, Licensee, sublicensees, or contract manufacturer
for infringement of any patent or for wrongful use of Proprietary Information of
any third party insofar as such suit is based upon a claim that the infringement
or wrongful use is attributable to the application by Licensor or Licensee
without substantial modification of the Patent Rights and/or Proprietary
Information provided under this agreement. Licensor's total liability for
payment of costs in the defense of any suit or suits shall be limited to the
amount of any gross royalties payable to Licensor under Sections 4.0 and 5.0,
and such costs shall be deducted according to the provisions of Section 10.1.
9.0 Future Improvements
With respect to Improvements made to the Subject Product by either
party to this agreement during its term, the party who makes the Improvement
shall retain the ownership rights thereto. For all Improvements made by one
party, however, the other party and UA will receive a license thereto, including
a license under any patent or patent application covering such Improvements, on
the same terms and conditions as set forth herein covering the Technology Field;
subject, however, to the intervening rights of any third party which may have
funded the research which resulted in the Improvement made
<PAGE>
9
to the Subject Product; provided, however, that Licensor shall subject any
research projects funded by third parties which may lead to improvements in the
Subject Product to existing license agreements including this Agreement. Any
license granted to Licensor and UA under this Section will be royalty free. Any
license granted to Licensee under this Section will be under the same terms and
conditions set forth in this Agreement.
The party making an Improvement to the Subject Product shall have
the obligation to notify promptly the other party and UA and to provide the
other party and UA with sufficient Proprietary Information for it to be able to
utilize the Improvement in the making, having made, using or selling of the
Licensed Products.
10.0 Patent and Trademark Applications
Licensor or UA shall be responsible for and incur the costs of
protection of the Patent Rights and Proprietary Information, subject to the
provisions of Section 8.0 and 8.1, including any rights arising from
Improvements made to the Subject Product by Licensor. Should Licensor and UA
decide not to file a patent or trademark application in the United States with
respect to improvements made to the Subject Product, or after filing, choose not
to maintain any of such patents or trademarks, Licensee is then free to file, in
Licensor's name, such applications or maintain, in Licensor's name, such patent
<PAGE>
10
and trademarks deducting the cost of such filing according to the provisions of
Section 10.1.
Licensee shall initially bear the costs of protection of the Patent
Rights and Proprietary Information in foreign countries, including any rights
arising from Improvements made to the Subject Product by Licensor or UA, subject
to a deduction of such costs according to the provisions of Section 10.1.
Licensee will keep Licensor advised as to all developments 10.2. with respect to
any foreign patent applications and will supply to Licensor copies of all papers
received and filed in connection with the prosecution thereof. Licensor shall
have the right, through its patent attorneys and/or agents, to advise and
cooperate with Licensee in the prosecution of the application.
10.1 Deduction of Patent Costs
Licensee shall be entitled to deduct from any royalties payable to
Licensor pursuant to the provisions of Sections 4.0 and 5.0 all reasonable
expenses incurred by Licensee in protecting any of the Patent Rights or
Proprietary Information under Section 10.0; provided, however, that no quarterly
payments to Licensor may be reduced by more than one-half of the amount
otherwise due. Such expenses may be accrued and carried forward by Licensee
until such time as they may be taken by Licensee as a deduction from royalties
under this Section 10.1.
<PAGE>
11
11.0 No Contest of Ownership; Use of Trademarks
Licensee acknowledges Licensor's sole ownership of the Proprietary
Information and the Patent Rights, and will not at any time contest or take any
other action which may in any way impair the value of said rights to Licensor
except as noted in Section 9.0 hereof.
12.0 Sublicense
Licensee may not sublicense any rights, including any of the Patent
Rights, Licensed Products, or Proprietary Information, granted to it under this
Agreement, without the prior written consent of Licensor. Licensee may assign
this agreement in whole or in part to one of its subsidiaries or to affiliate
companies, but shall not have the right to assign this agreement in whole or in
part to any other party without the prior written consent of Licensor.
13.0 Term
This agreement shall begin as of the date first written above, and
shall continue unless sooner terminated for a term of fifteen (15) years.
14.0 Termination
(a) In the event either party hereto fails, refuses or neglects to
perform any obligation on its part under this agreement, or if any warranty or
representation made by either party hereto prove to be false or misleading in
any material respect, the other party may then terminate this agreement upon
<PAGE>
12
ninety (90) days prior written notice; provided, however, that in the event the
defaulting party shall rectify such default within the notice period, this
agreement shall remain in full force and effect.
(b) This Agreement shall terminate automatically upon the
expiration or termination for any reason of the License Agreement.
14.1 Liquidation or Bankruptcy
In the event of a compulsory or voluntary liquidation, the
appointment of a receiver, an assignment for the benefit of creditors, or the
filing of a voluntary or involuntary petition for bankruptcy by or for a party
to this agreement, this agreement shall be terminated without notice.
14.2 Effect of Termination
Upon termination of this agreement for any cause, Licensee shall
immediately transfer to Licensor all rights Licensee may possess in sublicenses,
patents, information, trade names, and trademarks relating to the Subject
Product, and all rights and licenses granted to Licensee pursuant to this
agreement shall immediately terminate.
15.0 Force Majeure
Neither party shall be liable to the other party hereto for any
loss, injury, delay, damages or other casualty suffered or incurred by the other
party hereto due to strikes, riots, earthquakes, storms, fires, explosions, acts
of God,
<PAGE>
13
war, or any other cause similar thereto which is beyond the reasonable control
of such party hereto, and any failure or delay by either party hereto in
performance of any of is obligations under this agreement due to a cause set
forth in this Subsection shall be considered as a breach of this agreement,
unless it shall continue for a consecutive period of six months, in which event
either party may terminate this agreement.
16.0 Non-waiver
The waiver, express or implied, by Licensor or Licensee of any right
hereunder for any failure to perform or breach by the other party hereto shall
not constitute or be deemed as a waiver of any other right of Licensor or
Licensee hereunder or for any other failure to perform or breach hereof by the
other party hereto, whether of a similar or dissimilar nature thereto.
17.0 Disclaimer of Liability
Licensor shall not be liable for damages of any kind, including
consequential damages, arising out of or resulting from the manufacture, use, or
sale of the Licensed Products.
18.0 Governing Law
This agreement shall be governed by and construed in accordance with
the laws of the State of Arkansas. In the event it becomes necessary to have a
court of law or equity settle any dispute between the parties arising under this
<PAGE>
14
agreement, the parties agree to submit said dispute to a court located within
the State of Arkansas.
19.0 Notices
Any notice to be served or given hereunder may be sent by telex or
registered mail properly addressed and prepaid to the individual named below to
receive notice for the recipient party at the address for that party first
stated above, or to such individual or to such address as may hereafter be
substituted therefor.
For Licensor:
Hosokawa Micron International Inc.
780 Third Avenue
New York, New York 10017
Attn: Fumio Sawamura
For Licensee:
Hosokawa Micron Corporation
14-5, 2 Chome, Ichioka
Minato-ku, Osaka, Japan
Attn:
20.0 License Agreement
This Agreement is expressly made subject to all terms and conditions
of the License Agreement, a copy of which has been given to Licensee and receipt
of which is hereby acknowledged. Licensee agrees not to do, permit or suffer any
act or thing which will or might cause a breach of the License Agreement.
21.0 Entire Understanding
This Agreement comprises the entire understanding between the
parties hereto concerning all matters which are the
<PAGE>
15
subjects hereof, and supersedes any and all prior agreements understandings,
representations, warranties, covenants between the parties hereto or their
subsidiaries and affiliates, either oral or written on such subjects. All
modifications or amendments of this agreement must be in writing, signed by the
parties hereto.
IN WITNESS WHEREOF, the parties have executed this agreement in
duplicate by an authorized officer or principal, as of the day and year first
above written.
LICENSOR:
HOSOKAWA MICRON INTERNATIONAL INC.
----------------------------------
By /s/ F. Sawamara
-------------------------------
Name: F. Sawamara
Title: E.V.P.
LICENSEE:
HOSOKAWA MICRON CORPORATION
By /s/ Yoshio Hosokawa
-------------------------------
Name: Yoshio Hosokawa
Title: Senior Managing Director
<PAGE>
LICENSE AGREEMENT
This License Agreement, made with effect from the 1st day of
October, 1997, by and between Hosokawa Micron Corporation, a Japanese
corporation, with offices at 5-14, 2-chome, Kawaramachi, Chuo-ku Osaka 541,
Japan ("the Licensor") and Hosokawa Micron BV, a Netherlands corporation, with
offices at Gildenstraat 26, 7005 BL Doetinchem, The Netherlands ("the
Licensee").
WITNESSETH
WHEREAS Licensor owns and possesses certain confidential technical
information, trade secrets and other data, including designs, drawings,
information, skills, know-how and test engineering, production, performance and
other technical data, customer lists and marketing information (hereinafter
collectively referred to as "Proprietary Information") relating to the
manufacture, sale and servicing of equipment, products and systems, which are
listed and described in Exhibit A, attached hereto and made a part hereof
(hereinafter collectively referred to as the "Products," which term includes any
and all such items and all component and accessories for replacement or
otherwise); and
WHEREAS Licensor owns or controls certain trademarks and patent rights, or
applications therefore, as such may be listed on the date hereof or from time to
time hereafter in Exhibit B attached hereto and made a part hereof (hereinafter
referred to as the "Rights"); and
WHEREAS Licensor and Licensee are desirous that Licensee should have the
right, privilege and license to manufacture, use and sell the Products based
upon and using such Proprietary Information and Rights in such territories and
countries and on an exclusive and non-exclusive basis as are listed on the date
hereof or from time to time hereafter in Exhibit C attached hereto and made a
part hereof (hereinafter referred to as the "Territory");
<PAGE>
NOW THEREFORE, in consideration of the promises, covenants and
undertakings contained herein, it is mutually agreed as follows:
1. Grants of Licenses:
1.1 Grants. Licensor hereby grants to Licensee, and Licensee accepts,
the right, privilege and license to use all Proprietary Information
and Rights which Licensor presently possesses or which it may
hereafter possess for the purpose of manufacturing, using and
selling the Products in the Territory. Such grants shall either be
on an exclusive or non-exclusive basis for a particular country as
set forth in Exhibit C. Licensor reserves the right to license
future Proprietary Information and Rights at royalty rates different
from those set forth in Exhibit D.
1.2 Sublicenses. Licensee may enter into sublicenses of the Proprietary
Information and Right provided that the terms of such agreements are
at least as restrictive on the sublicensee as the terms of this
Agreement are restrictive on Licensee and provided that the
sublicensee shall not have the right to sublicense. Licensee shall
provide Licensor with a copy of any and all executed sublicense
agreements as soon as practicable after execution.
2. Supply of Information
Licensor will make available to Licensee and Licensee agrees to receive
during the term of the Agreement and all extensions thereof, such Proprietary
Information as may be necessary or appropriate to enable Licensee to
manufacture, use, sell and service the Products according to specifications and
quality substantially equivalent to the specifications and quality of Products
manufactured and sold by Licensor. Licensee will be required to pay for the
costs related to transfers of information.
3. Representations
2
<PAGE>
3.1 No Conflict. Licensor and Licensee warrant that they have full power
and authority to enter into this Agreement. Licensor represents and
warrants that it has not previously granted any rights with respect
to the Proprietary Information and Rights that are inconsistent
with, limit or affect Licensee's rights or Licensor's obligations
under this Agreement.
3.2 Sole Rights. Licensor warrants that it has such right, title and
interest in and to the Proprietary Information as to enable it to
vest in Licensee the right, privilege and licenses herein conveyed.
Licensor further warrants that it is not aware of any pending or
threatened litigation or claims regarding such rights, title and
interest, that it is not aware of any evidence that would render any
Rights invalid or unenforceable, and that it is not aware of any
evidence that would impair the value of any other part of the
Rights.
3.3 Infringement by Third Parties. Licensor and Licensee shall promptly
notify each other in writing if they acquire knowledge of any
infringement of any of the Products, Rights or Proprietary
Information. Licensor and Licensee shall take all steps required to
prevent alleged infringement of the Rights or Proprietary
Information.
4. Technology Transfer and Consulting
Licensor shall make available to Licensee Licensor's personnel who shall
assist in transfer of the Proprietary Information and Rights to Licensee to
enable Licensee to manufacture, use, sell and service the Products and to train
Licensee's employees to enable Licensee to manufacture, use, sell and service
the Products. Licensor shall also make available to Licensee, at Licensee's
reasonable request, additional consulting services. Licensor shall provide such
personnel at the standard rates provided hereinafter, plus travel and other
out-of-pocket expenses.
5. Royalties and Other Payments:
3
<PAGE>
5.1 Royalties. For and in consideration of the rights, continuing
obligations and licenses granted above, Licensee hereby agrees to
pay Licensor a royalty equal to the percent of the Net Sales of all
Products, including spares, therefore sold by Licensee in the
Territory indicated in Exhibit D attached. "Net Sales" means all
amounts received by Licensee or its sublicensees for any sale of any
Product, less the value of any Products supplied by Licensor, and
less the separately stated charges for (a) trade and cash discounts
actually allowed, (b) credits or refunds actually allowed for
damaged or returned goods (c) sales, excise and value added taxes,
and (d) packaging costs, insurance, transportation charges,
commissions and import duties. All computations relating to royalty
payments shall be made in accordance with generally accepted
accounting principles, applied consistently. Licensee shall obtain a
properly authenticated certificate evidencing payment of withholding
tax, which shall show the Licensor's name as the recipient of the
royalties and shall forward same to Licensor as promptly as
reasonably possible following royalty remittances. Payment of the
royalty to Licensor shall be upon Licensee's invoicing of sale to
its customer and not upon collection.
5.2 Other Payments. Licensee shall also pay Licensor for technology and
consulting services as provided for in Section 4. at the rate of
US$500.00 per day plus related expenses subject to annual
adjustment.
6. Reports; Inquiries; Promotion; Inspection:
6.1 Reports. Payments due Licensor under Section 5.1 hereof will be
calculated quarterly and shall be made in the currency of the
Licensor. Payment shall be made within sixty (60) days after the
last day of each calendar quarter. Accompanying each quarterly
payment, Licensee will deliver to Licensor a quarterly statement of
revenues received from the sale of all Products.
In addition, Licensee shall also when making its first payment
hereunder in any calendar year
4
<PAGE>
include and furnish to Licensor a full and true statement giving
particulars of all Products manufactured and sold by Licensee during
the preceding twelve-month period.
6.2 Inquiries from Territory. During the term of this Agreement,
Licensor agrees to forward to Licensee copies of all sales inquires
from prospective users and purchasers of Products located in, or
which involve shipment of Products to, the Territory. Licensee
agrees to forward to Licensor all sales inquiries received from
prospective users and purchasers of Products located outside of the
Territory or which involve shipment of Products outside of the
Territory. If because of the customer's situation, a sale is outside
the Territory and in a territory not otherwise exclusively licensed
by Licensor, Licensee must notify Licensor in advance and pay to
Licensor a fee of 5% of the Net Sales Price of the Product sold into
such territory, except in mutually agreed upon unusual or
extraordinary circumstances. Such 5% fee is in addition to the
royalties imposed in Section 5.1 of this Agreement. It is understood
that under no circumstances shall Licensee sell Products outside the
Territory and into a territory in which Licensor has entered into an
exclusive license.
6.3 Promotion of Products. Licensee shall exercise its best efforts to
promote the sale of Products in the Territory.
6.4 Inspection. Licensee and any sublicensees shall keep full and
accurate records of all Products manufactured and sold and give same
to any representative selected by Licensor, upon reasonable notice
and during normal business hours, but no more often than once each
year, complete access to inspect the records of Licensee on which
Net Sales are based. Licensee's determination of the payments due
Licensor under this Agreement will be deemed conclusive unless,
within twenty-four (24) months from the date of payment thereof,
Licensor notifies Licensee in writing of any error in such payments.
5
<PAGE>
Licensee shall permit Licensor at all reasonable times through its
duly appointed agent or agents to inspect manufacturing operations
used by Licensee in the manufacture of Products.
7. Confidentiality
7.1 Nondisclosure. Licensee agrees that it will keep confidential all
Proprietary Information and any other confidential business or
technical information disclosed to Licensee in furtherance of this
Agreement, and will insofar as it is reasonably practicable bind to
secrecy its officers, managers, and employees concerned in or who
may have knowledge of the Proprietary Information. The provisions of
this Section 7 shall survive termination of this Agreement for a
period of five (5) years.
7.2 Exclusion. Notwithstanding the above, the following materials will
not be deemed confidential:
(a) Information which at the time of disclosure is in the public
domain;
(b) Information which after disclosure is published or otherwise
becomes part of the public domain through no fault of
Licensee;
(c) Information which Licensee can show was received by it from a
third party who did not acquire it, directly or indirectly,
from Licensor; and
(d) Information which before the time of disclosure by Licensor to
Licensee was independently developed by Licensee, and which
can be shown by written documentation.
8. New Developments & Improvements
8.1 Developed by Licensor. If, during the term of this Agreement,
Licensor shall make any further improvements in Products and develop
any improvement in the Proprietary Information, then Licensor shall
notify Licensee of such improvements. Upon the request of Licensee,
Licensor
6
<PAGE>
shall provide Licensee with full information regarding such
improvements and Licensee shall be entitled to use the improvements
with all rights which are hereby granted to Licensee under Section 1
hereof.
8.2 Developed by Licensee. If, during the term of this Agreement,
Licensee shall make any improvements in the Products or develop any
improvements in the Proprietary Information, then:
(a) Licensee shall have the sole option of deciding whether to
apply for a patent. If it does, Licensor shall give all
necessary cooperation and assistance in preparing and
prosecuting Licensee's patent application. Upon issuance of a
patent, Licensor shall receive from Licensee a royalty-free
license (with the right to sublicense) to use the patent,
outside the Territory which is designated as exclusive to
Licensee, for the term of this Agreement.
(b) If Licensee decides not to file a patent application, Licensor
has the option to do so. In such event, all costs of obtaining
the patent and consequent royalty payments will be for the
account of the Licensor and Licensor will grant to Licensee a
royalty-free perpetual license to use the patent to
manufacture, use and sell Licensed Products, including the
right to sublicense, in the Territory which is designated as
exclusive to Licensee.
(c) If the improvements are not patentable, or both parties choose
not to patent them, Licensee agrees to submit to Licensor,
during the term of this Agreement, all available information
on the improvements, now or hereafter found, owned or
controlled by Licensee. Both Licensor and Licensee shall have
a perpetual royalty-free license to use all of these
improvements.
7
<PAGE>
9. No Contest; Use of Trademarks and Advertising Matter:
Licensee acknowledges Licensor's right to control the Proprietary
Information and the Rights, and will not at any time do or cause to be done any
act or thing contesting or in any way impairing Licensor's investment and rights
in such property. In accordance with Licensor's instructions, Licensee shall use
Licensor's trademarks in connection with Products it manufactures and sells
under this Agreement.
Licensee may use packaging, catalogs, labels, letterheads and
advertisements carrying or including the trademarks covered by this Agreement in
connection with the Products.
10. Term:
Except as provided for in Section 11, this Agreement shall begin as of the
date first written above, and shall end on September 30, 1998, provided that it
shall automatically be renewed and continue in full force and effect thereafter
from year to year, unless and until notice is given by Licensor or Licensee of
its intention to terminate this Agreement at the expiration of the original term
or any renewal term, such notice to be given at least sixty (60) days prior to
any such expiration date.
11. Termination:
11.1 For Breach. In the event either party hereto fails, refuses or
neglects to perform any obligation on its part under this Agreement,
or if any warranty or representation made by either party hereto
proves to be false or misleading in any material respect, the other
party may then terminate this Agreement upon sixty (60) days' prior
written notice, provided, however, that in the event the defaulting
party shall rectify such default within the notice period, this
Agreement shall remain in full force and effect. Any cancellation or
termination of this Agreement shall be without prejudice to any
other right of action or remedy for the recovery of royalties or for
the breach of any covenant herein contained.
8
<PAGE>
11.2 Other:
(a) In the event of compulsory or voluntary liquidation of
Licensee, or the appointment of a receiver; or in case
Licensee should make an assignment for the benefit of
creditors; or should Licensee go out of business; then in any
such event this Agreement shall automatically terminate.
(b) This Agreement may be terminated at the option of Licensor if
controlling interest in Licensee shall pass to any party or
parties not holding controlling interest at the date of
execution of this Agreement, unless written notice of such
change in structure or ownership is given to Licensor prior to
such change and is agreed to in writing by Licensor.
Controlling interest is defined as the ownership of 51% of the
voting stock of a corporation.
12. Effects of Termination
Upon termination of this Agreement for any reason:
(a) Licensee shall not thereafter seek or accept any additional orders
to manufacture or sell any Products; and
(b) Licensee will have the right to complete and sell or use all
Products, the production of which commenced prior to termination and
to sell or use all Products in its possession on the date of
termination.
(c) Licensee will be obligated to pay Licensor the royalties related to
any sales described in section 12 (b).
13. Force Majeure:
If, by reason of acts of God, natural events, accidents, war, governmental
controls or any cause beyond control of either party, performance of one or both
parties is prevented, then in such event
9
<PAGE>
performance by both parties hereunder shall be excused or deferred, as
appropriate, until the effects of such intervening cause have ended. Either
party has the right to terminate if a Force Majeure event remains in effect for
more than ninety (90) days.
14. Governing Law:
To the extent not prohibited by other applicable law, this Agreement is
made under the laws of The Netherlands and shall be interpreted in accordance
with such laws.
15. Miscellaneous:
15.1 Entire Agreement; Amendments. This Agreement states the entire
agreement between the parties with respect to the Products and
Rights provided for herein. No amendment or modification of this
Agreement may be made except by an instrument in writing signed by
both parties.
15.2 Assignment. This Agreement may not be assigned in whole or in part
by either party without the written consent of the other, which such
consent should not be unreasonably withheld.
15.3 Notice. Any notice required or committed to be sent hereunder will
be deemed delivered five (5) days after the date mailed or otherwise
dispatched in the mail, postage prepaid, by registered, express or
certified mail, return receipt requested, or by a recognized private
express courier, to either party at the address listed above, or
such other address of which either party may so notify the other.
Notice will also be deemed given on the date notice is faxed to the
other party.
15.4 Legal Fees. In the event that any legal action, including
arbitration, is required in order to enforce or interpret any of the
provisions of this Agreement, the prevailing party in such action
shall recover all reasonable costs and expenses, including
attorneys' fees, incurred in connection
10
<PAGE>
therewith.
15.5 No Waiver; Headings. The failure of either party to enforce any
provision of this Agreement shall not be deemed a waiver of that or
any other provision of this Agreement. The sections and paragraphs
of this Agreement are for convenience only and will not be of any
effect in construing the meanings of such sections or paragraphs.
15.6 Severability. In the event any clause, section or obligation stated
herein is determined to be illegal, invalid or unenforceable in a
particular jurisdiction, then in that jurisdiction this Agreement
may be read and understood as not including such clause, section or
obligation, and the other clauses, sections and obligations will
remain in effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
Hosokawa Micron Corporation Hosokawa Micron BV
(Licensor) (Licensee)
By: /s/ Yoshio Hosokawa By:
---------------------------
Name: Name:
Title: President Title:
11
<PAGE>
EXHIBITS A and B
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron Corporation
and
Hosokawa Micron BV
dated October 1, 1997
EXHIBIT A
Licensed Product(s):
Micron Denspack
Micron Vacu-Jet, CVX Series
Micron Dryers, MDV, MDH, MDF Series
Mechanofusion system, AM, AM-F Series
EXHIBIT B
Proprietary Information and Rights:
All related Hosokawa Micron Corporation patents and trademarks registered
in the Territory with related know-how.
12
<PAGE>
EXHIBITS C and D
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron Corporation
and
Hosokawa Micron BV
dated October 1, 1997
EXHIBIT C
Territory:
Exclusive Territory: The Netherlands
Non-Exclusive Territory: All other European countries, Africa, Middle
East, India and all Asian countries west of India.
EXHIBIT D
Royalty Rate(s):
4%: Micron Denspack
Micron Vacu-Jet, CVX Series
Micron Dryers, MDV, MDH, MDF Series
Mechanofusion system, AM, AM-F Series
13
<PAGE>
LICENSE AGREEMENT
This License Agreement, made with effect from the 1st day of
October, 1997, by and between Hosokawa Micron Corporation, a Japanese
corporation, with offices at 5-14, 2-chome, Kawaramachi, Chuo-ku Osaka 541,
Japan ("the Licensor") and Hosokawa Micron Powder Systems Division of Hosokawa
Micron International Inc., a Delaware corporation, with offices at 10 Chatham
Road, Summit, New Jersey 07901 ("the Licensee").
WITNESSETH
WHEREAS Licensor owns and possesses certain confidential technical
information, trade secrets and other data, including designs, drawings,
information, skills, know-how and test engineering, production, performance and
other technical data, customer lists and marketing information (hereinafter
collectively referred to as "Proprietary Information") relating to the
manufacture, sale and servicing of equipment, products and systems, which are
listed and described in Exhibit A, attached hereto and made a part hereof
(hereinafter collectively referred to as the "Products," which term includes any
and all such items and all component and accessories for replacement or
otherwise); and
WHEREAS Licensor owns or controls certain trademarks and patent rights, or
applications therefore, as such may be listed on the date hereof or from time to
time hereafter in Exhibit B attached hereto and made a part hereof (hereinafter
referred to as the "Rights"); and
WHEREAS Licensor and Licensee are desirous that Licensee should have the
right, privilege and license to manufacture, use and sell the Products based
upon and using such Proprietary Information and Rights in such territories and
countries and on an exclusive and non-exclusive basis as are listed on the date
hereof or from time to time hereafter in Exhibit C attached hereto and made a
part hereof (hereinafter referred to as the "Territory");
14
<PAGE>
(hereinafter referred to as the "Territory");
NOW THEREFORE, in consideration of the promises, covenants and
undertakings contained herein, it is mutually agreed as follows:
1. Grants of Licenses:
1.1 Grants. Licensor hereby grants to Licensee, and Licensee accepts,
the right, privilege and license to use all Proprietary Information
and Rights which Licensor presently possesses or which it may
hereafter possess for the purpose of manufacturing, using and
selling the Products in the Territory. Such grants shall either be
on an exclusive or non-exclusive basis for a particular country as
set forth in Exhibit C. Licensor reserves the right to license
future Proprietary Information and Rights at royalty rates different
from those set forth in Exhibit D.
1.2 Sublicenses. Licensee may enter into sublicenses of the Proprietary
Information and Right provided that the terms of such agreements are
at least as restrictive on the sublicensee as the terms of this
Agreement are restrictive on Licensee and provided that the
sublicensee shall not have the right to sublicense. Licensee shall
provide Licensor with a copy of any and all executed sublicense
agreements as soon as practicable after execution.
2. Supply of Information
Licensor will make available to Licensee and Licensee agrees to receive
during the term of the Agreement and all extensions thereof, such Proprietary
Information as may be necessary or appropriate to enable Licensee to
manufacture, use, sell and service the Products according to specifications and
quality substantially equivalent to the specifications and quality of Products
manufactured and sold by Licensor. Licensee will be required to pay for the
costs related to transfers of information.
15
<PAGE>
3. Representations
3.1 No Conflict. Licensor and Licensee warrant that they have full power
and authority to enter into this Agreement. Licensor represents and
warrants that it has not previously granted any rights with respect
to the Proprietary Information and Rights that are inconsistent
with, limit or affect Licensee's rights or Licensor's obligations
under this Agreement.
3.2 Sole Rights. Licensor warrants that it has such right, title and
interest in and to the Proprietary Information as to enable it to
vest in Licensee the right, privilege and licenses herein conveyed.
Licensor further warrants that it is not aware of any pending or
threatened litigation or claims regarding such rights, title and
interest, that it is not aware of any evidence that would render any
Rights invalid or unenforceable, and that it is not aware of any
evidence that would impair the value of any other part of the
Rights.
3.3 Infringement by Third Parties. Licensor and Licensee shall promptly
notify each other in writing if they acquire knowledge of any
infringement of any of the Products, Rights or Proprietary
Information. Licensor and Licensee shall take all steps required to
prevent alleged infringement of the Rights or Proprietary
Information.
4. Technology Transfer and Consulting
Licensor shall make available to Licensee Licensor's personnel who shall
assist in transfer of the Proprietary Information and Rights to Licensee to
enable Licensee to manufacture, use, sell and service the Products and to train
Licensee's employees to enable Licensee to manufacture, use, sell and service
the Products. Licensor shall also make available to Licensee, at Licensee's
reasonable request, additional consulting services. Licensor shall provide such
personnel at the standard rates provided hereinafter, plus travel and other
out-of-pocket expenses.
16
<PAGE>
5. Royalties and Other Payments:
5.1 Royalties. For and in consideration of the rights, continuing
obligations and licenses granted above, Licensee hereby agrees to
pay Licensor a royalty equal to the percent of the Net Sales of all
Products, including spares, therefore sold by Licensee in the
Territory indicated in Exhibit D attached. "Net Sales" means all
amounts received by Licensee or its sublicensees for any sale of any
Product, less the value of any Products supplied by Licensor, and
less the separately stated charges for (a) trade and cash discounts
actually allowed, (b) credits or refunds actually allowed for
damaged or returned goods (c) sales, excise and value added taxes,
and (d) packaging costs, insurance, transportation charges,
commissions and import duties. All computations relating to royalty
payments shall be made in accordance with generally accepted
accounting principles, applied consistently. Licensee shall obtain a
properly authenticated certificate evidencing payment of withholding
tax, which shall show the Licensor's name as the recipient of the
royalties and shall forward same to Licensor as promptly as
reasonably possible following royalty remittances. Payment of the
royalty to Licensor shall be upon Licensee's invoicing of sale to
its customer and not upon collection.
5.2 Other Payments. Licensee shall also pay Licensor for technology and
consulting services as provided for in Section 4. at the rate of
US$500.00 per day plus related expenses subject to annual
adjustment.
6. Reports; Inquiries; Promotion; Inspection:
6.1 Reports. Payments due Licensor under Section 5.1 hereof will be
calculated quarterly and shall be made in the currency of the
Licensor. Payment shall be made within sixty (60) days after the
last day of each calendar quarter. Accompanying each quarterly
payment, Licensee will deliver to Licensor a quarterly statement of
revenues received from the sale of all Products.
17
<PAGE>
In addition, Licensee shall also when making its first payment
hereunder in any calendar year include and furnish to Licensor a
full and true statement giving particulars of all Products
manufactured and sold by Licensee during the preceding twelve-month
period.
6.2 Inquiries from Territory. During the term of this Agreement,
Licensor agrees to forward to Licensee copies of all sales inquires
from prospective users and purchasers of Products located in, or
which involve shipment of Products to, the Territory. Licensee
agrees to forward to Licensor all sales inquiries received from
prospective users and purchasers of Products located outside of the
Territory or which involve shipment of Products outside of the
Territory. If because of the customer's situation, a sale is outside
the Territory and in a territory not otherwise exclusively licensed
by Licensor, Licensee must notify Licensor in advance and pay to
Licensor a fee of 5% of the Net Sales Price of the Product sold into
such territory, except in mutually agreed upon unusual or
extraordinary circumstances. Such 5% fee is in addition to the
royalties imposed in Section 5.1 of this Agreement. It is understood
that under no circumstances shall Licensee sell Products outside the
Territory and into a territory in which Licensor has entered into an
exclusive license.
6.3 Promotion of Products. Licensee shall exercise its best efforts to
promote the sale of Products in the Territory.
6.4 Inspection. Licensee and any sublicensees shall keep full and
accurate records of all Products manufactured and sold and give same
to any representative selected by Licensor, upon reasonable notice
and during normal business hours, but no more often than once each
year, complete access to inspect the records of Licensee on which
Net Sales are based. Licensee's determination of the payments due
Licensor under this Agreement will be deemed conclusive unless,
within twenty-four (24) months from the date of payment thereof,
Licensor notifies
18
<PAGE>
Licensee in writing of any error in such payments.
Licensee shall permit Licensor at all reasonable times through its
duly appointed agent or agents to inspect manufacturing operations
used by Licensee in the manufacture of Products.
7. Confidentiality
7.1 Nondisclosure. Licensee agrees that it will keep confidential all
Proprietary Information and any other confidential business or
technical information disclosed to Licensee in furtherance of this
Agreement, and will insofar as it is reasonably practicable bind to
secrecy its officers, managers, and employees concerned in or who
may have knowledge of the Proprietary Information. The provisions of
this Section 7 shall survive termination of this Agreement for a
period of five (5) years.
7.2 Exclusion. Notwithstanding the above, the following materials will
not be deemed confidential:
(a) Information which at the time of disclosure is in the public
domain;
(b) Information which after disclosure is published or otherwise
becomes part of the public domain through no fault of
Licensee;
(c) Information which Licensee can show was received by it from a
third party who did not acquire it, directly or indirectly,
from Licensor; and
(d) Information which before the time of disclosure by Licensor to
Licensee was independently developed by Licensee, and which
can be shown by written documentation.
8. New Developments & Improvements
8.1 Developed by Licensor. If, during the term of this Agreement,
Licensor shall make any further improvements in Products and develop
any improvement in the Proprietary Information, then
19
<PAGE>
Licensor shall notify Licensee of such improvements. Upon the
request of Licensee, Licensor shall provide Licensee with full
information regarding such improvements and Licensee shall be
entitled to use the improvements with all rights which are hereby
granted to Licensee under Section 1 hereof.
8.2 Developed by Licensee. If, during the term of this Agreement,
Licensee shall make any improvements in the Products or develop any
improvements in the Proprietary Information, then:
(a) Licensee shall have the sole option of deciding whether to
apply for a patent. If it does, Licensor shall give all
necessary cooperation and assistance in preparing and
prosecuting Licensee's patent application. Upon issuance of a
patent, Licensor shall receive from Licensee a royalty-free
license (with the right to sublicense) to use the patent,
outside the Territory which is designated as exclusive to
Licensee, for the term of this Agreement.
(b) If Licensee decides not to file a patent application, Licensor
has the option to do so. In such event, all costs of obtaining
the patent and consequent royalty payments will be for the
account of the Licensor and Licensor will grant to Licensee a
royalty-free perpetual license to use the patent to
manufacture, use and sell Licensed Products, including the
right to sublicense, in the Territory which is designated as
exclusive to Licensee.
(c) If the improvements are not patentable, or both parties choose
not to patent them, Licensee agrees to submit to Licensor,
during the term of this Agreement, all available information
on the improvements, now or hereafter found, owned or
controlled by Licensee. Both Licensor and Licensee shall have
a perpetual royalty-free license to use all of these
improvements.
20
<PAGE>
9. No Contest; Use of Trademarks and Advertising Matter:
Licensee acknowledges Licensor's right to control the Proprietary
Information and the Rights, and will not at any time do or cause to be done any
act or thing contesting or in any way impairing Licensor's investment and rights
in such property. In accordance with Licensor's instructions, Licensee shall use
Licensor's trademarks in connection with Products it manufactures and sells
under this Agreement.
Licensee may use packaging, catalogs, labels, letterheads and
advertisements carrying or including the trademarks covered by this Agreement in
connection with the Products.
10. Term:
Except as provided for in Section 11, this Agreement shall begin as of the
date first written above, and shall end on September 30, 1998, provided that it
shall automatically be renewed and continue in full force and effect thereafter
from year to year, unless and until notice is given by Licensor or Licensee of
its intention to terminate this Agreement at the expiration of the original term
or any renewal term, such notice to be given at least sixty (60) days prior to
any such expiration date.
11. Termination:
11.1 For Breach. In the event either party hereto fails, refuses or
neglects to perform any obligation on its part under this Agreement,
or if any warranty or representation made by either party hereto
proves to be false or misleading in any material respect, the other
party may then terminate this Agreement upon sixty (60) days' prior
written notice, provided, however, that in the event the defaulting
party shall rectify such default within the notice period, this
Agreement shall remain in full force and effect. Any cancellation or
termination of this Agreement shall be without prejudice to any
other right of action or remedy for the recovery of royalties or for
the breach of
21
<PAGE>
any covenant herein contained.
11.2 Other:
(a) In the event of compulsory or voluntary liquidation of
Licensee, or the appointment of a receiver; or in case
Licensee should make an assignment for the benefit of
creditors; or should Licensee go out of business; then in any
such event this Agreement shall automatically terminate.
(b) This Agreement may be terminated at the option of Licensor if
controlling interest in Licensee shall pass to any party or
parties not holding controlling interest at the date of
execution of this Agreement, unless written notice of such
change in structure or ownership is given to Licensor prior to
such change and is agreed to in writing by Licensor.
Controlling interest is defined as the ownership of 51% of the
voting stock of a corporation.
12. Effects of Termination
Upon termination of this Agreement for any reason:
(a) Licensee shall not thereafter seek or accept any additional orders
to manufacture or sell any Products; and
(b) Licensee will have the right to complete and sell or use all
Products, the production of which commenced prior to termination and
to sell or use all Products in its possession on the date of
termination.
(c) Licensee will be obligated to pay Licensor the royalties related to
any sales described in section 12 (b).
13. Force Majeure:
If, by reason of acts of God, natural events, accidents, war, governmental
controls or any cause
22
<PAGE>
beyond control of either party, performance of one or both parties is prevented,
then in such event performance by both parties hereunder shall be excused or
deferred, as appropriate, until the effects of such intervening cause have
ended. Either party has the right to terminate if a Force Majeure event remains
in effect for more than ninety (90) days.
14. Governing Law:
To the extent not prohibited by other applicable law, this Agreement is
made under the laws of the state of New Jersey and shall be interpreted in
accordance with such laws.
15. Miscellaneous:
15.1 Entire Agreement; Amendments. This Agreement states the entire
agreement between the parties with respect to the Products and
Rights provided for herein. No amendment or modification of this
Agreement may be made except by an instrument in writing signed by
both parties.
15.2 Assignment. This Agreement may not be assigned in whole or in part
by either party without the written consent of the other, which such
consent should not be unreasonably withheld.
15.3 Notice. Any notice required or committed to be sent hereunder will
be deemed delivered five (5) days after the date mailed or otherwise
dispatched in the mail, postage prepaid, by registered, express or
certified mail, return receipt requested, or by a recognized private
express courier, to either party at the address listed above, or
such other address of which either party may so notify the other.
Notice will also be deemed given on the date notice is faxed to the
other party.
15.4 Legal Fees. In the event that any legal action, including
arbitration, is required in order to enforce or interpret any of the
provisions of this Agreement, the prevailing party in such action
23
<PAGE>
shall recover all reasonable costs and expenses, including
attorneys' fees, incurred in connection therewith.
15.5 No Waiver; Headings. The failure of either party to enforce any
provision of this Agreement shall not be deemed a waiver of that or
any other provision of this Agreement. The sections and paragraphs
of this Agreement are for convenience only and will not be of any
effect in construing the meanings of such sections or paragraphs.
15.6 Severability. In the event any clause, section or obligation stated
herein is determined to be illegal, invalid or unenforceable in a
particular jurisdiction, then in that jurisdiction this Agreement
may be read and understood as not including such clause, section or
obligation, and the other clauses, sections and obligations will
remain in effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
Hosokawa Micron Corporation Hosokawa Micron Powder Systems Division
(Licensor) of Hosokawa Micron International Inc.
(Licensee)
By: /s/ Yoshio Hosokawa By: /s/ William J. Brennan
------------------- ----------------------
Name: Name:
Title: President Title: E.V.P.
24
<PAGE>
EXHIBITS A and B
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron Corporation
and
Hosokawa Micron Powder Systems Division
Of
Hosokawa Micron International Inc.
dated October 1, 1997
EXHIBIT A
Licensed Product(s):
Micron Innomizer, INM Series
Mechanofusion system, AM, AM-F Series
Micron Jet T, MJ-T Series
Micron Agglomasters, AGM Series (Pharmaceutical version only)
Micron Separators, MS, MS-N Series
Micron Victory Mill, VP Series
Micron Fine Victory Mill, FVP Series
Micron Feather Mill, FM-S, FM-F Series
EXHIBIT B
Proprietary Information and Rights:
All related Hosokawa Micron Corporation patents and trademarks registered
in the Territory with related know-how.
25
<PAGE>
EXHIBITS C and D
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron Corporation
and
Hosokawa Micron Powder Systems Division
Of
Hosokawa Micron International Inc.
dated October 1, 1997
EXHIBIT C
Territory:
Exclusive Territory: North, Central and South America
Non-Exclusive Territory: None
EXHIBIT D
Royalty Rate(s):
<TABLE>
<CAPTION>
<S> <C>
4%: Micron Innomizer, INM Series 2.5%: Micron Separators, MS, MS-N Series
Mechanofusion system, AM, AM-F Series Micron Victory Mill, VP Series
Micron Jet T, MJ-T Series Micron Fine Victory Mill, FVP Series
Micron Agglomasters, AGM Series Micron Feather Mill, FM-S, FM-F Series
(Pharmaceutical version only)
</TABLE>
26
<PAGE>
LICENSE AGREEMENT
This License Agreement, made with effect from the 1st day of
October, 1997, by and between Hosokawa Micron Corporation, a Japanese
corporation, with offices at 5-14, 2-chome, Kawaramachi, Chuo-ku Osaka 541,
Japan ("the Licensor") and Hosokawa Bepex Corporation, a Delaware corporation,
with offices at 333 N.E. Taft Street, Minneapolis, Minnesota 55413 ("the
Licensee").
WITNESSETH
WHEREAS Licensor owns and possesses certain confidential technical
information, trade secrets and other data, including designs, drawings,
information, skills, know-how and test engineering, production, performance and
other technical data, customer lists and marketing information (hereinafter
collectively referred to as "Proprietary Information") relating to the
manufacture, sale and servicing of equipment, products and systems, which are
listed and described in Exhibit A, attached hereto and made a part hereof
(hereinafter collectively referred to as the "Products," which term includes any
and all such items and all component and accessories for replacement or
otherwise); and
WHEREAS Licensor owns or controls certain trademarks and patent rights, or
applications therefore, as such may be listed on the date hereof or from time to
time hereafter in Exhibit B attached hereto and made a part hereof (hereinafter
referred to as the "Rights"); and
WHEREAS Licensor and Licensee are desirous that Licensee should have the
right, privilege and license to manufacture, use and sell the Products based
upon and using such Proprietary Information and Rights in such territories and
countries and on an exclusive and non-exclusive basis as are listed on the date
hereof or from time to time hereafter in Exhibit C attached hereto and made a
part hereof
27
<PAGE>
(hereinafter referred to as the "Territory");
NOW THEREFORE, in consideration of the promises, covenants and
undertakings contained herein, it is mutually agreed as follows:
1. Grants of Licenses:
1.1 Grants. Licensor hereby grants to Licensee, and Licensee accepts,
the right, privilege and license to use all Proprietary Information
and Rights which Licensor presently possesses or which it may
hereafter possess for the purpose of manufacturing, using and
selling the Products in the Territory. Such grants shall either be
on an exclusive or non-exclusive basis for a particular country as
set forth in Exhibit C. Licensor reserves the right to license
future Proprietary Information and Rights at royalty rates different
from those set forth in Exhibit D.
1.2 Sublicenses. Licensee may enter into sublicenses of the Proprietary
Information and Right provided that the terms of such agreements are
at least as restrictive on the sublicensee as the terms of this
Agreement are restrictive on Licensee and provided that the
sublicensee shall not have the right to sublicense. Licensee shall
provide Licensor with a copy of any and all executed sublicense
agreements as soon as practicable after execution.
2. Supply of Information
Licensor will make available to Licensee and Licensee agrees to receive
during the term of the Agreement and all extensions thereof, such Proprietary
Information as may be necessary or appropriate to enable Licensee to
manufacture, use, sell and service the Products according to specifications and
quality substantially equivalent to the specifications and quality of Products
manufactured and sold by Licensor. Licensee will be required to pay for the
costs related to transfers of information.
28
<PAGE>
3. Representations
3.1 No Conflict. Licensor and Licensee warrant that they have full power
and authority to enter into this Agreement. Licensor represents and
warrants that it has not previously granted any rights with respect
to the Proprietary Information and Rights that are inconsistent
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5. Royalties and Other Payments:
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30
<PAGE>
In addition, Licensee shall also when making its first payment
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Licensor notifies
31
<PAGE>
Licensee in writing of any error in such payments.
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any improvement in the Proprietary Information, then
32
<PAGE>
Licensor shall notify Licensee of such improvements. Upon the
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improvements.
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9. No Contest; Use of Trademarks and Advertising Matter:
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Except as provided for in Section 11, this Agreement shall begin as of the
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11.1 For Breach. In the event either party hereto fails, refuses or
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the breach of
34
<PAGE>
any covenant herein contained.
11.2 Other:
(a) In the event of compulsory or voluntary liquidation of
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Upon termination of this Agreement for any reason:
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13. Force Majeure:
If, by reason of acts of God, natural events, accidents, war, governmental
controls or any cause
35
<PAGE>
beyond control of either party, performance of one or both parties is prevented,
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15.4 Legal Fees. In the event that any legal action, including
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provisions of this Agreement, the prevailing party in such action
36
<PAGE>
shall recover all reasonable costs and expenses, including
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15.5 No Waiver; Headings. The failure of either party to enforce any
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15.6 Severability. In the event any clause, section or obligation stated
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
Hosokawa Micron Corporation Hosokawa Bepex Corporation
(Licensor) (Licensee)
By: /s/ Yoshio Hosokawa By: /s/ Simon H. Baker
------------------------ -----------------------
Name: Name:
Title: President Title: V.P. / Sec.
37
<PAGE>
EXHIBITS A and B
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron Corporation
and
Hosokawa Bepex Corporation
dated October 1, 1997
EXHIBIT A
Licensed Product(s):
Micron Denspack
Micron Vacu-Jet, CVX Series
Micron Dryers, MDV, MDH, MDF Series
Micron Agglomasters, AGM Series (all but Pharmaceutical version)
EXHIBIT B
Proprietary Information and Rights:
All related Hosokawa Micron Corporation patents and trademarks registered
in the Territory with related know-how.
See attached US Patent no. 5,720,550 - Micron Denspack
38
<PAGE>
EXHIBITS C and D
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron Corporation
and
Hosokawa Bepex Corporation
dated October 1, 1997
EXHIBIT C
Territory:
Exclusive Territory: North, Central and South America
Non-Exclusive Territory: None
EXHIBIT D
Royalty Rate(s):
4%: Micron Denspack
Micron Vacu-Jet, CVX Series
Micron Dryers, MDV, MDH, MDF Series
Micron Agglomasters, AGM Series (all but Pharmaceutical version)
39
<PAGE>
United States Patent [19] [11] Patent Number: 5,720,550
Akiyama et al. [45] Date of Patent: Feb. 24, 1998
[54] VOLUME REDUCER FOR POWDER MATERIAL
[75] Investors: Seizaburo Akiyama, Tsuduki-Gun;
Masasi Kato, Ibaraki, both of Japan
[73] Assignee: Hosokawa Micron Corporation.
Osaka, Japan
[21] Appl. No.: 678,158
[22] Filed: Jul. 11, 1996
[30] Foreign Application Priority Data
Aug. 24, 1995 [JP] Japan...............................................7-216281
[51] Int. Cl. (6)....................................................B65G 29/02
[52] U.S. Cl..........................................366/139; 366/191; 55/302;
55/401; 55/409; 55/431
[58] Field of Search...............................................366/101, 102,
366/103, 105, 139, 191, 194-196; 55/302,
401, 405, 409, 431, 472
[56] References Cited
U.S. PATENT DOCUMENTS
1,292,561 1/1919 Baldwin..............................................55/401
3,897,218 7/1975 Busweiler.........................................366/139 X
FOREIGN PATENT DOCUMENTS
51-39331 9/1976 Japan
56-37121 8/1981 Japan
58-3938 1/1983 Japan
2-139830 11/1990 Japan
7-41715 9/1995 Japan
Primary Examiner--Charles E. Cooley
Attorney, Agent, or Firm--Brinks Hofer Gilson & Lione
[57] ABSTRACT
A volume reducer for reducing the volume of a powder material by removal of some
air has a cylindrical casing having an inlet and an outlet for letting powder
material in and out. In the casing, a rotor rotable on the center axis of the
casing is provided. The rotor has a cylindrically formed porous plate and a
plurality of inner and outer chambers formed in the inside and outside of the
porous plate. The outer chambers are loaded with the powder material. A rotary
valve that rotates together with the rotor is provided. The rotary valve has a
plurality of ventilation openings communicating with the respective inner
chambers in an axial direction. The rotary valve is embraced in a stationary
valve. The stationary valve has a cavity that communicates with a ventilation
opening when the rotary valve is positioned within a predetermined range of its
rotation angle. The stationary valve has a compressed air injection opening with
which the ventilation opening communicates.
9 Claims, 10 Drawing Sheets
[Graphic Omitted]
<PAGE>
5,720,550
1
VOLUME REDUCER FOR POWDER MATERIAL
BACKGROUND OF THE INVENTION
1. Field of the Invention
The present invention relates to a volume reducer for reducing volume of
powder material by removing air contained therein.
2. Description of the Prior Art
A volume reducer of this type is used to reduce volume of powder material,
when a large amount of such material is dealt with, by removing part of air
contained in the material so that the material can be loaded with reduced volume
into a bag or container. The volume reducer is also used, for example, in a dust
collector to transfer dust to a described location.
Japanese Published Patent No. S56-37121 discloses a rotary valve applied
as a means for transferring powder material (rotary feeder). With reference to
FIGS. 1 and 2, the rotary feeder of this publication will be described below.
As shown in FIGS. 1 and 2, the rotor 2, together with a hollow-bodied axle
cylinder 3, rotor blades 4 and an outer drum 11, forms six chambers. The ends of
the rotor blades 4 are protruded from the outer drum 11, so that powder material
is conveyed along the casing 1 until discharged downward. The outer drum 11 is
provided with a large number of pores 12. When a negative pressure is applied to
the drum 11 through a pipe 8, which is connected to a pump (not shown in the
figure), the air contained in the powder material flows through the pores 12
into the rotor 2. The air then flows through pores 10 provided on the axle
cylinder 3 into the cylinder 3, and sucked, through the axle cylinder 3 and the
pipe 8, into the pump.
As a result, the powder material, which is fed to an inlet 19 from above,
easily enters the inlet 19, and, while the material is conveyed clockwise with
the rotation of the rotor 2, the air contained in the material is removed. The
pores 10 that are positioned in their lowest position by rotation are stopped up
by a valve member 21, so that air removal does not take place in this position.
On the other hand, the rotor 2 has a plurality of communicating openings
15 on its left side surface. The communicating openings 15 are usually not open
because they are obstructed by a part of the casing 1, except when one is in its
lowest position, where a ventilation opening 17 is provided on the casing 1. In
the lowest position, where one of the ventilation opening 17 coincides in
position with the communication opening 15, air flows into the chamber inside
the rotor from outside through holes 18 on a bearing cover 7. The thus admitted
air, after flowing through the pores 12 on the outer drum 11, acts to blow down
the powder material that is conveyed down to the lowest position, making the
discharge of the material easier.
However, the conventional structure as described above is defective in the
following respects. First, in order to achieve satisfactory air removal, the
rotation speed of the rotor 2 needs to be reduced. This also reduces centrifugal
force that acts on the powder material, and accordingly reduces the force that
causes the powder material to fall at the discharge (lowest) position. As a
result, since the air pressure provided from outside is not sufficient for
satisfactory discharge, part of the powder material is deposited on the rotor 2.
Secondly, in this conventional structure, the pores 10 need to be sealed with
the valve member 21 when they are in the discharge position. The sealing,
however, is liable to be incomplete.
2
Thirdly, the discharge pressure is constant because it depends on the supplied
air pressure. It is therefore impossible to adjust the discharge pressure
according to the type of powder material.
Further, the conventional apparatus described above (Japanese Published
Patent No. S56-37121) is an invention with the object of supplying powder
material from a low-pressure field to a high-pressure field in a compressed-air
pressure feed line, and therefore its performance is not sufficient for the
purpose of reducing volume of powder material. For example, with some type of
valve member 21, sealing is effective enough as long as the suction force is
kept moderate. When a higher suction force is applied, however, the sealing is
not effective enough to obtain a pressure (about -4.000 mmH2O) that is required
to remove the air contained in the powder material fed into the chamber inside
the rotor. It is therefore impossible to perform sufficient air removal.
SUMMARY OF THE INVENTION
An object of the present invention is to provide a volume reducer with a
simple, reliable mechanism.
To achieve the above object, a volume reducer according to the present
invention is provided with a cylindrical casing having at its top an inlet for
letting in powder material and having at its bottom an outlet for letting out
the powder material; a rotor rotatable on a center axis of said casing, provided
with a cylindrically formed porous plate and a plurality of inner and outer
chambers formed by radially separating space inside and outside the said porous
plate, the outer chambers being loaded with the powder material; a rotary valve
rotatable together with said rotor, provided with a plurality of ventilation
openings communicating with inner chambers in an axial direction; a stationary
valve embracing said rotary valve in such a way that the rotary valve rotates
sliding in absolute contact with said stationary valve, provided with a cavity
communicating with said ventilation openings when said rotary valve is
positioned within a predetermined range of its rotation angle, and provided with
an exhaust opening for connecting said cavity to outside; and a compressed air
injection opening provided on said stationary valve for receiving compressed air
from outside and for communicating with one of the ventilation openings when the
ventilation opening is rotated to a position corresponding to said outlet.
In the structure described above, the powder material, when conveyed to
the discharge position after air removal, receives forces not only from its own
weight and centrifugal force but also from compressed air to be pressed out of
the outer chamber. Consequently, the powder material is released without leaving
deposit.
BRIEF DESCRIPTION OF THE DRAWINGS
This and other objects and features of this invention will become clear
from the following description, taken in conjunction with the preferred
embodiments with reference to the accompanying drawings in which:
FIG. 1 is a partly cross-sectional and partly external view of a
conventional volume reducer;
FIG. 2 is a cross-sectional view taken along line II--II shown in FIG. 1
of the conventional volume reducer shown in FIG. 1;
FIG. 3 is a cross-sectional view of a volume reducer of the present
invention;
FIG. 4 is a cross-sectional view taken along line IV--IV shown in FIG. 3;
<PAGE>
3
FIG. 5 is a cross-sectional view taken along line V--V shown in FIG. 3;
FIG. 6 shows a construction of the filter unit with a porus plate employed
in the volume reducer of the present invention;
FIG. 7 shows a porous plate with a reinforcement member;
FIG. 8 is a cross-sectional view of the side plate arranged in the volume
reducer of the present invention;
FIG. 9 shows the side plate by half;
FIG. 10 is a cross-sectional view of the rotary valve arranged in the
volume reducer of the present invention;
FIG. 11 shows results of the tests carried out with powder materials on a
volume reducer embodying the present invention; and
FIG. 12 shows results of the tests carried out with another powder
materials on a volume reducer embodying the present invention.
DESCRIPTION OF THE PREFERRED
EMBODIMENTS
With reference to FIGS. 3 to 10, an embodiment of the present invention
will be described below. Reference numeral 22 represents an inlet provided at
the top of a cylindrical casing 21. To the inlet 22, a hopper or the like loaded
with powder material is attached, for example. Reference numeral 23 represents
an outlet provided at the bottom of the casing 21. The outlet 23 is linked, for
example, to a bag or container to receive the powder material, or to a duct for
further transfer.
Near the center of the casing 21, a shaft 24 is disposed through the
casing 21. The shaft 24 is provided with a rotor 25. The rotor 25 consists of a
filter unit 26, rotor blades 27, and a side plate 28. As shown in FIG. 6, the
filter unit 26 consists of a boss 29 which is fixed to the shaft 24, six
dividing plates 30, and porous plate 31. One end of this filter unit 26 is
stopped up with a rotary valve, which will be described later, to form six inner
chambers 32.
In the porous plate 31, a large number of pores are formed. The porous
plate 31 is formed, for example, with sintered stainless steel fiber. It may
also be formed with resin or ceramics; if sufficient strength is not secured
with these materials, however, a reinforcement member 33 such as wire netting,
punched plate, or grating is can be provided on the inner surface of the porous
plate 31, as shown in FIG. 7.
The boss 29 of the filter unit 26 is fixed to the shaft 24 with a key lock
mechanism 34 comprising a keyway and a key. The side plate 28, which is
disk-shaped, is fixed to the shaft 24 as shown in FIG. 8. As described earlier,
one end of the filter unit 26 is fitted into a re-entrant portion 35 on the
inner side of the side plate 28. As shown in FIG. 9, six radially extending
grooves 36 are formed in the side plate 28, so that the ends of the rotor blades
27 are fitted into these grooves 36.
The outer end of the rotor blades 27 slides along the inner surface of the
casing 21 keeping absolute contact therewith. Six outer chambers 37 are formed
outside the porous plate 31 by the porous plate 31, the rotor blades 27, the
side plate 28, and the later described rotary valve. The outer chambers 37
receive powder material 48 at the inlet 22, and release it at the outlet 23.
Reference numeral 38 represents a rotary valve, which is locked on the
shaft with a key. The rotary valve 38 is provided with six ventilation openings
39, which communicate at one end with the respective inner chambers 32. The
right-hand part of the ventilation openings 39 has a right-angle turning, so
that the openings lead to the outside of the rotary valve 38 (in radial
directions). The end of the ventilation openings 39 faces a cavity 41 formed in
the stationary valve 40. The cavity 41 leads through an exhaust opening 46 to a
vacuum pump 47, which is provided externally. The vacuum pump 47 applies a
negative pressure to the exhaust opening 46.
As shown in FIG. 5, the cavity 41 exists only in a range of 240(degree),
leaving the remaining range of 120(degree) for a stopping wall 49. However, the
stopping wall 49 has a compressed air injection opening 42 in its central part,
so that, when one of the ventilation opening 39 coincides in position with the
injection opening 42, compressed air from a compressed air supply unit 43 flows
into the rotor 25 through the rotary valve 38.
As shown in FIG. 10, the left-hand end 44 of the rotary valve 38 has the
same shape as the side plate 28, and has a re-entrant portion 45, into which the
right-hand end of the rotor 25 is fitted. The left-hand end 44 also has slits
(not shown in the figure) similar to the slits 36 in the side plate 28 shown in
FIG. 9, so that the right-hand ends of the rotor blades 27 are fitted into these
slits.
Next, the operation of a volume reducer constructed as described above
will be described below. As a drive axle 50 and the shaft 24 rotates, the rotor
25 rotates in the direction marked with the arrow W. The powder material 48,
which is supplied to each outer chamber 37 through the inlet 22, is exposed to
an air flow, which is caused by a negative pressure applied to the exhaust
opening 46 by the vacuum pump 47 and which flows from outer chamber 37 through
porous plate 31, inner chamber 32, ventilation openings 39, cavity 41 toward
exhaust opening 46. As a result, air contained in the powder material 48 is
removed.
Air removal takes place while the ventilation opening 39 faces the cavity
41. Therefore, as shown in FIG. 4, as the outer chamber 37 moves downward by the
rotation of the rotor 25, air removal progresses, reducing the volume of the
powder material 48 gradually. While the ventilation opening 39 of the rotary
valve 38 faces the stopping wall 49 of the stationary valve 40, air removal does
not take place.
When the ventilation opening 39 reaches its lowest position (position
corresponding to the position of the exhaust opening 23), the ventilation
opening 39 communicates with the injection opening 42. As a result, compressed
air acts, through injection opening 42, ventilation opening 39, inner chamber 32
and porous plate 31, on the powder material 48 in the outer chamber 37, pressing
the powder material 48 downward. The powder material 48 easily leaves the outer
chamber owing not only to its own weight and centrifugal force but also to the
pressure of the compressed air, and moves downward through the outlet 23.
When a bag or container is provided at the outlet 23, the powder material
48 is loaded into the bag or container (the bag or container is loaded with the
powder material). When a transfer means is provided at the outlet 23, the powder
material is transferred to another location by the transfer means. The outer
chamber 37, now empty after the discharge of the powder material 48, moves
upward with further rotation of the rotor 25 until receiving powder material 48
again at the inlet 22. The operation sequence described above is repeated to
deliver volume-reduced powder material successively.
Next, the results of the tests carried out on the volume reducer of the
above embodiment with 4 types of powder
<PAGE>
material will be described below. The table below shows the powder materials
used, together with their characteristics. There, the "Powder Density" column is
subdivided into three columns: "Loose" for values obtained when materials are
sifted and then loaded into containers. "Tight" for values obtained when
materials are loaded into containers as much as possible by alternately filling
the container with the material and applying a predetermined impact force
thereto, and "Dynamic" for values obtained by measuring materials at a
predetermined stage of processing.
- --------------------------------------------------------------------------------
Average
Particle Powder Density
Diameter (g/cc)
-------------------------------------------
Material ((mu)m) Loose Tight Dynamic
- --------------------------------------------------------------------------------
(1) Foaming Agent 16.3 0.50 0.85 0.64
(2) White Carbon 13.18 0.11 0.17 0.13
(3) Aerosol 5.44 0.067 0.099 0.077
(4) Calcium Carbonate 5.0 0.52 0.99 0.74
- --------------------------------------------------------------------------------
In the tests, a vacuum pump rated at 2 m^3/min., -4.000 mmAq was used, and
the amount of compressed air used for blowing off powder material was within
100-200 1/min at 1 kgf/cm^2. FIG. 11 shows results obtained with foaming agent
(1) and calcium carbonate (4); FIG. 12 shows results obtained with white carbon
(2) and aerosol (3). In FIGS. 11 and 12, the horizontal axis represents rotation
speed of the rotor 25, the left-hand vertical axis represents powder density,
and the right-hand vertical axis represents processing capacity per hour. In
each figure, the line F represents processing capacity characteristic.
Incidentally, these tests have shown that it is possible to reduce volume down
to about 50 percent.
As described above, according to the present invention, powder material,
when conveyed to the discharge position after air removal, is released from the
volume reducer without leaving deposit, because the powder material is pressed
out of the outer chamber not only by its own weight and centrifugal force but
also by compressed air. Moreover, the pressing force can be adjusted to the type
of powder material by changing the pressure of air supplied from outside.
Further, it is also expected that compressed air is effective in cleaning
(removing the clogging of) the porous plate 31. The use of a volume reducer of
the present invention is not confined to powder filling machines; it can also be
used as a discharger for a dust collector or other particle collector, such as a
cyclone, in a compressed-air transfer line, or can be incorporated into a powder
material processing machine, such as crusher, dryer, mixer, or granulator, to
improve efficiency of supplying and discharging materials and products.
What is claimed is:
1. A volume reducer comprising:
a cylindrical casing having at its top an inlet for letting in powder
material and having at its bottom an outlet for letting out the powder
material;
a filter unit operable with a rotor rotatable about a center axis of a
shaft of said casing, said filter unit provided with a porous plate and
inner and outer chambers
6
within the casing dividend by said porous plate, the outer chamber
being loaded with the powder material;
a rotary valve rotatable together with said rotor, the valve provided
with a plurality of ventilation openings communicating with said inner
chamber in an axial direction;
a stationary valve embracing said rotary valve such that the rotary valve
rotates in sliding contact with said stationary valve, said stationary
valve provided with a cavity communicating with said ventilation
openings when said rotary valve is positioned within a predetermined
range of its rotation angle, said stationary valve provided with an
exhaust opening for connecting said cavity to outside; and
a compressed air injection opening provided on said stationary valve for
receiving compressed air from outside and for communicating with one of
the ventilation openings when the ventilation opening is rotated to a
position corresponding to said outlet.
2. A volume reducer as claimed in claim 1.
wherein said rotor comprises a boss fixed to said shaft, a plurality of
dividing plates extending radially from said boss to subdivide said
inner chamber, said porous plate mounted at top ends of said dividing
plates, a plurality of rotor blades extending radially from said porous
plate to subdivide said outer chamber, and a side plate for fixing one
end of said rotor blades, another end of said rotor blades being
attached to an end surface of said rotary valve to be integral
therewith.
3. A volume reducer as claimed in claim 2.
wherein the porous plate is formed with sintered stainless steel fiber.
4. A volume reducer as claimed in claim 2.
wherein said porous plate is formed with a resin, and a reinforcement
member is provided on an inner surface of said porous plate.
5. A volume reducer as claimed in claim 4, wherein the reinforcement
member is selected from the group including wire netting, punched
plate, and grating.
6. A volume reducer as claimed in claim 2.
wherein said side plate is disk-shaped and provided with a plurality of
grooves extending radially for fitting the rotor blades therein.
7. A volume reducer as claimed in claim 2, wherein said porous plate
includes a ceramic component and a reinforcement member provided on an inner
surface of said porous plate is selected from the group including wire netting,
punched plate, and grating.
8. A volume reducer as claimed in claim 1.
wherein an exhaust pump is connected to the exhaust opening of the
stationary valve.
9. A volume reducer as claimed in claim 1, wherein the porous plate is
substantially cylindrical.
* * * * * *
<PAGE>
U.S. Patent Feb. 24, 1998 Sheet 1 of 10 5,720,550
FIG. 1
PRIOR ART
[Graphic Omitted]
<PAGE>
U.S. Patent Feb. 24, 1998 Sheet 2 of 10 5,720,550
FIG. 2
PRIOR ART
[Graphic Omitted]
<PAGE>
U.S. Patent Feb. 24, 1998 Sheet 3 of 10 5,720,550
FIG. 3
[Graphic Omitted]
<PAGE>
U.S. Patent Feb. 24, 1998 Sheet 4 of 10 5,720,550
FIG. 4
[Graphic Omitted]
<PAGE>
U.S. Patent Feb. 24, 1998 Sheet 5 of 10 5,720,550
FIG. 5
[Graphic Omitted]
<PAGE>
U.S. Patent Feb. 24, 1998 Sheet 6 of 10 5,720,550
FIG. 6
[Graphic Omitted]
FIG. 7
[Graphic Omitted]
<PAGE>
U.S. Patent Feb. 24, 1998 Sheet 7 of 10 5,720,550
FIG. 8
[Graphic Omitted]
<PAGE>
U.S. Patent Feb. 24, 1998 Sheet 8 of 10 5,720,550
FIG. 9
[Graphic Omitted]
<PAGE>
U.S. Patent Feb. 24, 1998 Sheet 9 of 10 5,720,550
FIG. 10
[Graphic Omitted]
<PAGE>
U.S. Patent Feb. 24, 1998 Sheet 10 of 10 5,720,550
FIG. 11
[Graphic Omitted]
FIG. 12
[Graphic Omitted]
<PAGE>
TRADEMARK LICENSING AGREEMENT
THIS AGREEMENT is entered into the 1st day of October, 1996 (the
"Effective Date"), by and between Hosokawa Micron International Inc., a
Delaware corporation, with offices at 780 Third Avenue, New York, New York
10017 (the "Licensor") and Hosokawa Micron Corporation, a Japanese
corporation, with offices at 5-14, 2-chome, Kawaramachi, Chuo-ku Osaka
541, Japan (the "Licensee").
W I T N E S S E T H:
WHEREAS, Licensor owns certain trademarks identified in Exhibit A to this
Agreement (the "Trademarks");
WHEREAS, Licensee desires to use the Trademarks within the Territory covered by
this Agreement;
WHEREAS, Licensor is willing to grant to Licensee the right to use the
Trademarks subject to the terms and conditions of this Agreement, and
Licensee is willing to accept such rights and obligations;
NOW, THEREFORE, in consideration of the mutual covenants and
conditions contained herein and intending to be legally bound, the parties
hereby agree as follows.
ARTICLE I
DEFINITIONS
Section 1.1. Effective Date. "Effective Date" is as defined
immediately prior to the
40
<PAGE>
the Recitals at the beginning of this Agreement.
Section 1.2. Licensee. "Licensee" shall mean Hosokawa Micron
Corporation.
Section 1.3. Licensor. "Licensor" shall mean Hosokawa Micron
International Inc.
Section 1.4. Net Sales. "Net Sales" shall mean the gross receipts
from sales of Products, as hereinafter defined, in the Territory by
Licensee less separately stated customary deductions, including (a)
transportation charges, including insurance; (b) sales, excise taxes,
customs, duties, tariffs, and any other governmental charges imposed on
the production, importation, exportation, use, or sale of Products; (c)
quantity and cash discounts allowed; (d) returns; and (e) allowances or
credits to customers.
Section 1.5. Products. "Products" shall mean the property sold by
Licensee which bears a trademark listed in Exhibit A to this Agreement.
Section 1.6. Territory. "Territory" shall mean exclusively Japan and
non-exclusively all other Asian countries including the countries which
comprised the former USSR, but excluding India and all countries west of
India and Australia and New Zealand.
Section 1.7. Trademark or Trademarks. "Trademark" or "Trademarks"
shall mean any one of the trademarks listed in Exhibit A hereto.
41
<PAGE>
ARTICLE II
GRANT OF RIGHT TO USE TRADEMARKS
Section 2.1. Grant by Licensor. Licensor grants to Licensee the
exclusive and non-exclusive right to use, as set forth in Section 1.7
above, and Licensee shall use only, the Trademarks with respect to
Products in the Territory.
Section 2.2. Sublicenses and Transfers. Licensee shall not assign,
sublicense, make available, or otherwise transfer or disclose any right to
use, develop or otherwise enjoy any of the Trademarks without the express
written consent of Licensor.
Section 2.3. Quality.
a. Products sold by Licensee shall meet the quality control standards and
specifications established from time-to-time by Licensor, including any
requirements of applicable regulatory agencies in the Territory. Licensor
shall have the right, at its expense, to audit Licensee's quality control
of Products from time-to-time on a reasonable basis and on reasonable
prior notice to Licensee.
b. In the event that quality control of Licensee falls below Licensor's
standards and specifications, Licensor shall give Licensee written notice
of such failures, and Licensee shall, at its expense and within the
reasonable notice period set out in the notice, take such corrective
action as is necessary to restore quality to the appropriate level.
42
<PAGE>
ARTICLE III
ROYALTY PAYMENT
Section 3.1. Compensation. Subject to Section 3.2 of this Article
III, as consideration for the rights granted under this Agreement,
Licensee shall pay to Licensor a royalty equal to the percent of
Licensee's Net Sales of Products sold by Licensee in the Territory
indicated in Exhibit B attached.
Section 3.2. Payment and Accounting. Royalties due to Licensor
shall be due and payable by Licensee within sixty (60) days after the last
day of each calendar quarter. Accompanying each quarterly payment,
Licensee will deliver to Licensor a quarterly statement of revenues
received from the sale of all Products. All computations relating to
royalty payments shall be made in accordance with generally accepted
accounting principles, applied consistently. Licensee shall obtain a
properly authenticated certificate evidencing payment of withholding tax,
which shall show the Licensor `s name as the recipient of the royalties
and shall forward same to Licensor as promptly as reasonably possible
following royalty remittances. Payment of the royalty to Licensor shall be
upon Licensee `s invoicing of sale to its customer and not upon
collection.
Section 3.3. Currency. All royalties due under this Agreement shall
be payable in the currency of the Licensor.
ARTICLE IV
WARRANTIES AND REPRESENTATIONS
43
<PAGE>
Section 4.1. Of Licensor. Licensor warrants that:
a. It owns the exclusive right, title, and interest in each Trademark;
b. Each Trademark is valid and enforceable;
c. Use of any Trademark does not infringe any rights of Third Parties; and
d. It has the right and authority to enter into this Agreement.
Section 4.2. Of Licensee. Licensee warrants that it has the right
and authority to enter into this Agreement.
ARTICLE V
TRADEMARK OWNERSHIP
Licensee acknowledges Licensor's exclusive right, title, and
interest in and to all Trademarks. Licensee shall not at any time do or
cause to be done, or fail to do or cause to be done, any act or thing,
directly or indirectly, contesting or in any way impairing Licensor's
right, title, or interest in any Trademark. Every use of any Trademark by
Licensee shall inure to the benefit of Licensor.
ARTICLE VI
TERM AND TERMINATION
44
<PAGE>
Section 6.1. Term. This Agreement shall remain in effect for a
period of three (3) years from the Effective Date, provided that it shall
automatically be renewed and continue in full force and effect thereafter
from year to year, unless and until notice is given by Licensor or
Licensee of its intention to terminate this Agreement at the expiration of
the original term or any renewal term, such notice to be given at least
sixty (60) days prior to any such expiration date.
Section 6.2. Termination. In the event either party hereto fails,
refuses or neglects to perform any obligation on its part under this
Agreement, or if any warranty or representation made by either party
hereto proves to be false or misleading in any material respect, the other
party may then terminate this Agreement upon sixty (60) days prior written
notice, provided, however, that in the event the defaulting party shall
rectify such default within the notice period, this Agreement shall remain
in full force and effect. Any cancellation or termination of this
Agreement shall be without prejudice to any other right of action or
remedy for the recovery of royalties or for the breach of any covenant
herein contained.
a. In the event of compulsory or voluntary liquidation of Licensee, or the
appointment of a receiver; or in case Licensee should make an assignment
for the benefit of creditors; or should Licensee go out of business; then
in any such event this Agreement shall automatically terminate.
b. This Agreement may be terminated at the option of Licensor if controlling
interest in Licensee shall pass to any party or parties not holding
controlling interest at the date of execution of this Agreement, unless
written notice of such change in structure or ownership is given to
Licensor prior to such change and is agreed to in writing by Licensor.
Controlling interest is defined as the
45
<PAGE>
ownership of 51% of the voting stock of a corporation.
Section 6.3. Effects of Termination. On termination of this
Agreement for any reason:
a. Licensor shall have the right to retain any sums already paid by Licensee
under this Agreement, and Licensee shall pay all sums accrued that are
then due under this Agreement; and
b. Licensee shall discontinue all use of any Trademark and shall have no
further right, title, or interest in any Trademark.
c. Licensee must remove Trademark from any unsold Products in its possession
on the date of termination.
ARTICLE VII
MISCELLANEOUS
Section 7.1. Notices. Any notice required or committed to be sent
hereunder will be deemed delivered five (5) days after the date mailed or
otherwise dispatched in the mail, postage prepaid, by registered, express
or certified mail, return receipt requested, or by a recognized private
express courier, to either party at the address listed above, or such
other address of which either party may so notify the other. Notice will
also be deemed given on the date notice is faxed to the other party.
45
<PAGE>
Section 7.2. Force Majeure. If, by reason of acts of God, natural
events, accidents, war, government controls or any cause beyond control of
either party, performance of one or both parties is prevented, then in
such event performance by both parties hereunder shall be excused or
deferred, as appropriate, until the effects of such intervening cause have
ended. Either party has the right to terminate if a Force Majeure event
remains in effect for more than ninety (90) days.
Section 7.3. Amendment. No change, modification, or amendment of
this Agreement shall be valid or binding on the parties unless such change
or modification shall be in writing signed by the party or parties against
whom the same is sought to be enforced.
Section 7.4. Remedies Cumulative. The remedies of the parties under
this Agreement are cumulative and shall not exclude any other remedies to
which the party may be lawfully entitled.
Section 7.5. Further Assurances. Each party hereby covenants and
agrees that it shall execute and deliver such deeds and other documents as
may be required to implement any of the provisions of this Agreement.
Section 7.6. No Waiver. The failure of any party to insist on
strict performance of a covenant hereunder or of any obligation hereunder
shall not be a waiver of such party's right to demand strict compliance
therewith in the future, nor shall the same be construed as a novation of
this Agreement.
46
<PAGE>
Section 7.7. Integration. This Agreement constitutes the full and
complete agreement of the parties with regard to the subject matter of
this Agreement.
Section 7.8. Captions. Titles or captions of articles and
paragraphs contained in this Agreement are inserted only as a matter of
convenience and for reference, and in no way define, limit, extend, or
describe the scope of this Agreement or the intent of any provision
hereof.
Section 7.9. Number and Gender. Whenever required by the context,
the singular number shall include the plural, the plural number shall
include the singular, and the gender of any pronoun shall include all
genders.
Section 7.10. Counterparts. This Agreement may be executed in
multiple copies, each of which shall for all purposes constitute an
Agreement, binding on the parties, and each partner hereby covenants and
agrees to execute all duplicates or replacement counterparts of this
Agreement as may be required.
Section 7.11. Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of Japan.
Section 7.12. Severability. In the event any provision, clause,
sentence, phrase, or word hereof, or the application thereof in any
circumstances, is held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder hereof,
47
<PAGE>
or of the application of any such provision, sentence, clause, phrase, or
word in any other circumstances.
Section 7.13. Costs and Expenses. Unless otherwise provided in this
Agreement, each party shall bear all fees and expenses incurred in
performing its obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on the date first written above by their duly authorized
officers.
Hosokawa Micron International Inc.
(Licensor)
By: /s/ William J. Brennan
-------------------------------
Name:
Title: E.V.P.
Hosokawa Micron Corporation
(Licensee)
By: /s/ Yoshio Hosokawa
-------------------------------
Name:
Title: President
48
<PAGE>
EXHIBITS A & B
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron International Inc.
and
Hosokawa Micron Corporation
dated October 1, 1996
EXHIBIT A
TRADEMARKS
MikroPul
Mikro-Collector
Mikro-Pulsaire
Mikro-Airlock
Mikro-Atomizer
Mikro-Pulverizer
Mikro-Bantam
Accucut
Mikro-ACM
Mikro-Samplmill
EXHIBIT B
ROYALY RATE(S)
1.0% for Products for Powder and Particle Processing:
Mikro-Pulverizer Mikro-ACM Mikro-Airlock
Accucut Mikro-Bantam Mikro-Atomizer
Mikro-Samplmill
0.3% for Products for Product Recovery and Air Pollution Control:
MikroPul Mikro-Pulsaire
Mikro-Collector
49
<PAGE>
LICENSE AGREEMENT
This License Agreement, made with effect from the 1st day of
October, 1997, by and between Hosokawa Micron BV, a Netherlands corporation,
with offices at Gildenstraat 26, 7005 BL Doetinchem, The Netherlands ("the
Licensor") and Hosokawa Micron Corporation, a Japanese corporation, with offices
at 5-14, 2-chome, Kawaramachi, Chuo-ku Osaka 541, Japan ("the Licensee").
WITNESSETH
WHEREAS Licensor owns and possesses certain confidential technical
information, trade secrets and other data, including designs, drawings,
information, skills, know-how and test engineering, production, performance and
other technical data, customer lists and marketing information (hereinafter
collectively referred to as "Proprietary Information") relating to the
manufacture, sale and servicing of equipment, products and systems, which are
listed and described in Exhibit A, attached hereto and made a part hereof
(hereinafter collectively referred to as the "Products," which term includes any
and all such items and all component and accessories for replacement or
otherwise); and
WHEREAS Licensor owns or controls certain trademarks and patent rights, or
applications therefore, as such may be listed on the date hereof or from time to
time hereafter in Exhibit B attached hereto and made a part hereof (hereinafter
referred to as the "Rights"); and
WHEREAS Licensor and Licensee are desirous that Licensee should have the
right, privilege and license to manufacture, use and sell the Products based
upon and using such Proprietary Information and Rights in such territories and
countries and on an exclusive and non-exclusive basis as are listed on the date
hereof or from time to time hereafter in Exhibit C attached hereto and made a
part hereof (hereinafter referred to as the "Territory");
50
<PAGE>
NOW THEREFORE, in consideration of the promises, covenants and
undertakings contained herein, it is mutually agreed as follows:
1. Grants of Licenses:
1.1 Grants. Licensor hereby grants to Licensee, and Licensee accepts,
the right, privilege and license to use all Proprietary Information
and Rights which Licensor presently possesses or which it may
hereafter possess for the purpose of manufacturing, using and
selling the Products in the Territory. Such grants shall either be
on an exclusive or non-exclusive basis for a particular country as
set forth in Exhibit C. Licensor reserves the right to license
future Proprietary Information and Rights at royalty rates different
from those set forth in Exhibit D.
1.2 Sublicenses. Licensee may enter into sublicenses of the Proprietary
Information and Right provided that the terms of such agreements are
at least as restrictive on the sublicensee as the terms of this
Agreement are restrictive on Licensee and provided that the
sublicensee shall not have the right to sublicense. Licensee shall
provide Licensor with a copy of any and all executed sublicense
agreements as soon as practicable after execution.
2. Supply of Information
Licensor will make available to Licensee and Licensee agrees to receive
during the term of the Agreement and all extensions thereof, such Proprietary
Information as may be necessary or appropriate to enable Licensee to
manufacture, use, sell and service the Products according to specifications and
quality substantially equivalent to the specifications and quality of Products
manufactured and sold by Licensor. Licensee will be required to pay for the
costs related to transfers of information.
3. Representations
51
<PAGE>
3.1 No Conflict. Licensor and Licensee warrant that they have full power
and authority to enter into this Agreement. Licensor represents and
warrants that it has not previously granted any rights with respect
to the Proprietary Information and Rights that are inconsistent
with, limit or affect Licensee's rights or Licensor's obligations
under this Agreement.
3.2 Sole Rights. Licensor warrants that it has such right, title and
interest in and to the Proprietary Information as to enable it to
vest in Licensee the right, privilege and licenses herein conveyed.
Licensor further warrants that it is not aware of any pending or
threatened litigation or claims regarding such rights, title and
interest, that it is not aware of any evidence that would render any
Rights invalid or unenforceable, and that it is not aware of any
evidence that would impair the value of any other part of the
Rights.
3.3 Infringement by Third Parties. Licensor and Licensee shall promptly
notify each other in writing if they acquire knowledge of any
infringement of any of the Products, Rights or Proprietary
Information. Licensor and Licensee shall take all steps required to
prevent alleged infringement of the Rights or Proprietary
Information.
4. Technology Transfer and Consulting
Licensor shall make available to Licensee Licensor's personnel who shall
assist in transfer of the Proprietary Information and Rights to Licensee to
enable Licensee to manufacture, use, sell and service the Products and to train
Licensee's employees to enable Licensee to manufacture, use, sell and service
the Products. Licensor shall also make available to Licensee, at Licensee's
reasonable request, additional consulting services. Licensor shall provide such
personnel at the standard rates provided hereinafter, plus travel and other
out-of-pocket expenses.
5. Royalties and Other Payments:
52
<PAGE>
5.1 Royalties. For and in consideration of the rights, continuing
obligations and licenses granted above, Licensee hereby agrees to
pay Licensor a royalty equal to the percent of the Net Sales of all
Products, including spares, therefore sold by Licensee in the
Territory indicated in Exhibit D attached. "Net Sales" means all
amounts received by Licensee or its sublicensees for any sale of any
Product, less the value of any Products supplied by Licensor, and
less the separately stated charges for (a) trade and cash discounts
actually allowed, (b) credits or refunds actually allowed for
damaged or returned goods (c) sales, excise and value added taxes,
and (d) packaging costs, insurance, transportation charges,
commissions and import duties. All computations relating to royalty
payments shall be made in accordance with generally accepted
accounting principles, applied consistently. Licensee shall obtain a
properly authenticated certificate evidencing payment of withholding
tax, which shall show the Licensor's name as the recipient of the
royalties and shall forward same to Licensor as promptly as
reasonably possible following royalty remittances. Payment of the
royalty to Licensor shall be upon Licensee's invoicing of sale to
its customer and not upon collection.
5.2 Other Payments. Licensee shall also pay Licensor for technology and
consulting services as provided for in Section 4. at the rate of
US$500.00 per day plus related expenses subject to annual
adjustment.
6. Reports; Inquiries; Promotion; Inspection:
6.1 Reports. Payments due Licensor under Section 5.1 hereof will be
calculated quarterly and shall be made in the currency of the
Licensor. Payment shall be made within sixty (60) days after the
last day of each calendar quarter. Accompanying each quarterly
payment, Licensee will deliver to Licensor a quarterly statement of
revenues received from the sale of all Products.
In addition, Licensee shall also when making its first payment
hereunder in any calendar year
53
<PAGE>
include and furnish to Licensor a full and true statement giving
particulars of all Products manufactured and sold by Licensee during
the preceding twelve-month period.
6.2 Inquiries from Territory. During the term of this Agreement,
Licensor agrees to forward to Licensee copies of all sales inquires
from prospective users and purchasers of Products located in, or
which involve shipment of Products to, the Territory. Licensee
agrees to forward to Licensor all sales inquiries received from
prospective users and purchasers of Products located outside of the
Territory or which involve shipment of Products outside of the
Territory. If because of the customer's situation, a sale is outside
the Territory and in a territory not otherwise exclusively licensed
by Licensor, Licensee must notify Licensor in advance and pay to
Licensor a fee of 5% of the Net Sales Price of the Product sold into
such territory, except in mutually agreed upon unusual or
extraordinary circumstances. Such 5% fee is in addition to the
royalties imposed in Section 5.1 of this Agreement. It is understood
that under no circumstances shall Licensee sell Products outside the
Territory and into a territory in which Licensor has entered into an
exclusive license.
6.3 Promotion of Products. Licensee shall exercise its best efforts to
promote the sale of Products in the Territory.
6.4 Inspection. Licensee and any sublicensees shall keep full and
accurate records of all Products manufactured and sold and give same
to any representative selected by Licensor, upon reasonable notice
and during normal business hours, but no more often than once each
year, complete access to inspect the records of Licensee on which
Net Sales are based. Licensee's determination of the payments due
Licensor under this Agreement will be deemed conclusive unless,
within twenty-four (24) months from the date of payment thereof,
Licensor notifies Licensee in writing of any error in such payments.
54
<PAGE>
Licensee shall permit Licensor at all reasonable times through its
duly appointed agent or agents to inspect manufacturing operations
used by Licensee in the manufacture of Products.
7. Confidentiality
7.1 Nondisclosure. Licensee agrees that it will keep confidential all
Proprietary Information and any other confidential business or
technical information disclosed to Licensee in furtherance of this
Agreement, and will insofar as it is reasonably practicable bind to
secrecy its officers, managers, and employees concerned in or who
may have knowledge of the Proprietary Information. The provisions of
this Section 7 shall survive termination of this Agreement for a
period of five (5) years.
7.2 Exclusion. Notwithstanding the above, the following materials will
not be deemed confidential:
(a) Information which at the time of disclosure is in the public
domain;
(b) Information which after disclosure is published or otherwise
becomes part of the public domain through no fault of
Licensee;
(c) Information which Licensee can show was received by it from a
third party who did not acquire it, directly or indirectly,
from Licensor; and
(d) Information which before the time of disclosure by Licensor to
Licensee was independently developed by Licensee, and which
can be shown by written documentation.
8. New Developments & Improvements
8.1 Developed by Licensor. If, during the term of this Agreement,
Licensor shall make any further improvements in Products and develop
any improvement in the Proprietary Information, then Licensor shall
notify Licensee of such improvements. Upon the request of Licensee,
Licensor
55
<PAGE>
shall provide Licensee with full information regarding such
improvements and Licensee shall be entitled to use the improvements
with all rights which are hereby granted to Licensee under Section 1
hereof.
8.2 Developed by Licensee. If, during the term of this Agreement,
Licensee shall make any improvements in the Products or develop any
improvements in the Proprietary Information, then:
(a) Licensee shall have the sole option of deciding whether to
apply for a patent. If it does, Licensor shall give all
necessary cooperation and assistance in preparing and
prosecuting Licensee's patent application. Upon issuance of a
patent, Licensor shall receive from Licensee a royalty-free
license (with the right to sublicense) to use the patent,
outside the Territory which is designated as exclusive to
Licensee, for the term of this Agreement.
(b) If Licensee decides not to file a patent application, Licensor
has the option to do so. In such event, all costs of obtaining
the patent and consequent royalty payments will be for the
account of the Licensor and Licensor will grant to Licensee a
royalty-free perpetual license to use the patent to
manufacture, use and sell Licensed Products, including the
right to sublicense, in the Territory which is designated as
exclusive to Licensee.
(c) If the improvements are not patentable, or both parties choose
not to patent them, Licensee agrees to submit to Licensor,
during the term of this Agreement, all available information
on the improvements, now or hereafter found, owned or
controlled by Licensee. Both Licensor and Licensee shall have
a perpetual royalty-free license to use all of these
improvements.
56
<PAGE>
9. No Contest; Use of Trademarks and Advertising Matter:
Licensee acknowledges Licensor's right to control the Proprietary
Information and the Rights, and will not at any time do or cause to be done any
act or thing contesting or in any way impairing Licensor's investment and rights
in such property. In accordance with Licensor's instructions, Licensee shall use
Licensor's trademarks in connection with Products it manufactures and sells
under this Agreement.
Licensee may use packaging, catalogs, labels, letterheads and
advertisements carrying or including the trademarks covered by this Agreement in
connection with the Products.
10. Term:
Except as provided for in Section 11, this Agreement shall begin as of the
date first written above, and shall end on September 30, 1998, provided that it
shall automatically be renewed and continue in full force and effect thereafter
from year to year, unless and until notice is given by Licensor or Licensee of
its intention to terminate this Agreement at the expiration of the original term
or any renewal term, such notice to be given at least sixty (60) days prior to
any such expiration date.
11. Termination:
11.1 For Breach. In the event either party hereto fails, refuses or
neglects to perform any obligation on its part under this Agreement,
or if any warranty or representation made by either party hereto
proves to be false or misleading in any material respect, the other
party may then terminate this Agreement upon sixty (60) days' prior
written notice, provided, however, that in the event the defaulting
party shall rectify such default within the notice period, this
Agreement shall remain in full force and effect. Any cancellation or
termination of this Agreement shall be without prejudice to any
other right of action or remedy for the recovery of royalties or for
the breach of any covenant herein contained.
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11.2 Other:
(a) In the event of compulsory or voluntary liquidation of
Licensee, or the appointment of a receiver; or in case
Licensee should make an assignment for the benefit of
creditors; or should Licensee go out of business; then in any
such event this Agreement shall automatically terminate.
(b) This Agreement may be terminated at the option of Licensor if
controlling interest in Licensee shall pass to any party or
parties not holding controlling interest at the date of
execution of this Agreement, unless written notice of such
change in structure or ownership is given to Licensor prior to
such change and is agreed to in writing by Licensor.
Controlling interest is defined as the ownership of 51% of the
voting stock of a corporation.
12. Effects of Termination
Upon termination of this Agreement for any reason:
(a) Licensee shall not thereafter seek or accept any additional orders
to manufacture or sell any Products; and
(b) Licensee will have the right to complete and sell or use all
Products, the production of which commenced prior to termination and
to sell or use all Products in its possession on the date of
termination.
(c) Licensee will be obligated to pay Licensor the royalties related to
any sales described in section 12 (b).
13. Force Majeure:
If, by reason of acts of God, natural events, accidents, war, governmental
controls or any cause beyond control of either party, performance of one or both
parties is prevented, then in such event
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performance by both parties hereunder shall be excused or deferred, as
appropriate, until the effects of such intervening cause have ended. Either
party has the right to terminate if a Force Majeure event remains in effect for
more than ninety (90) days.
14. Governing Law:
To the extent not prohibited by other applicable law, this Agreement is
made under the laws of Japan and shall be interpreted in accordance with such
laws.
15. Miscellaneous:
15.1 Entire Agreement; Amendments. This Agreement states the entire
agreement between the parties with respect to the Products and
Rights provided for herein. No amendment or modification of this
Agreement may be made except by an instrument in writing signed by
both parties.
15.2 Assignment. This Agreement may not be assigned in whole or in part
by either party without the written consent of the other, which such
consent should not be unreasonably withheld.
15.3 Notice. Any notice required or committed to be sent hereunder will
be deemed delivered five (5) days after the date mailed or otherwise
dispatched in the mail, postage prepaid, by registered, express or
certified mail, return receipt requested, or by a recognized private
express courier, to either party at the address listed above, or
such other address of which either party may so notify the other.
Notice will also be deemed given on the date notice is faxed to the
other party.
15.4 Legal Fees. In the event that any legal action, including
arbitration, is required in order to enforce or interpret any of the
provisions of this Agreement, the prevailing party in such action
shall recover all reasonable costs and expenses, including
attorneys' fees, incurred in connection
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therewith.
15.5 No Waiver; Headings. The failure of either party to enforce any
provision of this Agreement shall not be deemed a waiver of that or
any other provision of this Agreement. The sections and paragraphs
of this Agreement are for convenience only and will not be of any
effect in construing the meanings of such sections or paragraphs.
15.6 Severability. In the event any clause, section or obligation stated
herein is determined to be illegal, invalid or unenforceable in a
particular jurisdiction, then in that jurisdiction this Agreement
may be read and understood as not including such clause, section or
obligation, and the other clauses, sections and obligations will
remain in effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
Hosokawa Micron BV Hosokawa Micron Corporation
(Licensor) (Licensee)
By: By: /s/ Yoshio Hosokawa
--------------------------------- -----------------------
Name: Name:
Title: Title: President
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EXHIBITS A and B
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron BV
and
Hosokawa Micron Corporation
dated October 1, 1997
EXHIBIT A
Licensed Product(s):
Vrieco-Nauta Mixers
Vrieco-Nauta Vacuum Dryers
Cyclomix
EXHIBIT B
Proprietary Information and Rights:
All related Hosokawa Micron BV patents and trademarks registered in the
Territory with related know-how.
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EXHIBITS C and D
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron BV
and
Hosokawa Micron Corporation
dated October 1, 1997
EXHIBIT C
Territory:
Exclusive Territory: Japan
Non-Exclusive Territory: All other Asian countries including the countries
which comprised the former USSR, but excluding India and all countries
west of India and Australia and New Zealand.
EXHIBIT D
Royalty Rate(s):
1%: Vrieco-Nauta Mixers
Vrieco-Nauta Vacuum Dryers
4%: Cyclomix
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LICENSE AGREEMENT
This License Agreement, made with effect from the 31st day of March,
1998, by and between Hosokawa Alpine Aktiengesellschaft, a German corporation,
with offices at Peter-Dorfler Strasse 13-25, D-86199 Augsburg, Germany ("the
Licensor") and Hosokawa Micron Corporation, a Japanese corporation, with offices
at 5-14, 2-chome, Kawaramachi, Chuo-ku Osaka 541, Japan ("the Licensee").
WITNESSETH
WHEREAS Licensor owns and possesses certain confidential technical
information, trade secrets and other data, including designs, drawings,
information, skills, know-how and test engineering, production, performance and
other technical data, customer lists and marketing information (hereinafter
collectively referred to as "Proprietary Information") relating to the
manufacture, sale and servicing of equipment, products and systems, which are
listed and described in Exhibit A, attached hereto and made a part hereof
(hereinafter collectively referred to as the "Products," which term includes any
and all such items and all component and accessories for replacement or
otherwise); and
WHEREAS Licensor owns or controls certain trademarks and patent rights, or
applications therefore, as such may be listed on the date hereof or from time to
time hereafter in Exhibit B attached hereto and made a part hereof (hereinafter
referred to as the "Rights"); and
WHEREAS Licensor and Licensee are currently parties to the Master License
Agreement made with effect from the 1st day of March, 1990 which granted
Hosokawa Micron Corporation the right, privilege and license to manufacture and
sell certain Hosokawa Alpine Aktiengesellschaft products based upon and using
certain Hosokawa Alpine Aktiengesellschaft proprietary information and rights.
Such Master License Agreement was to terminate on February 28, 2000, but the
parties agree that due
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to a reevaluation of the royalty rates and an enhancement of the product
descriptions the Master License Agreement needed to be revised as now here
written; and
WHEREAS Licensor and Licensee are desirous that Licensee should have the
right, privilege and license to manufacture, use and sell the Products based
upon and using such Proprietary Information and Rights in such territories and
countries and on an exclusive and non-exclusive basis as are listed on the date
hereof or from time to time hereafter in Exhibit C attached hereto and made a
part hereof (hereinafter referred to as the "Territory");
NOW THEREFORE, in consideration of the promises, covenants and
undertakings contained herein, it is mutually agreed as follows:
1. Grants of Licenses:
1.1 Grants. Licensor hereby grants to Licensee, and Licensee accepts,
the right, privilege and license to use all Proprietary Information
and Rights which Licensor presently possesses or which it may
hereafter possess for the purpose of manufacturing, using and
selling the Products in the Territory. Such grants shall either be
on an exclusive or non-exclusive basis for a particular country as
set forth in Exhibit C. Licensor reserves the right to license
future Proprietary Information and Rights at royalty rates different
from those set forth in Exhibit D.
1.2 Sublicenses. Licensee may enter into sublicenses of the Proprietary
Information and Right provided that the terms of such agreements are
at least as restrictive on the sublicensee as the terms of this
Agreement are restrictive on Licensee and provided that the
sublicensee shall not have the right to sublicense. Licensee shall
provide Licensor with a copy of any and all executed sublicense
agreements as soon as practicable after execution.
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2. Supply of Information
Licensor will make available to Licensee and Licensee agrees to receive
during the term of the Agreement and all extensions thereof, such Proprietary
Information as may be necessary or appropriate to enable Licensee to
manufacture, use, sell and service the Products according to specifications and
quality substantially equivalent to the specifications and quality of Products
manufactured and sold by Licensor. Licensee will be required to pay for the
costs related to transfers of information.
3. Representations
3.1 No Conflict. Licensor and Licensee warrant that they have full power
and authority to enter into this Agreement. Licensor represents and
warrants that it has not previously granted any rights with respect
to the Proprietary Information and Rights that are inconsistent
with, limit or affect Licensee's rights or Licensor's obligations
under this Agreement.
3.2 Sole Rights. Licensor warrants that it has such right, title and
interest in and to the Proprietary Information as to enable it to
vest in Licensee the right, privilege and licenses herein conveyed.
Licensor further warrants that it is not aware of any pending or
threatened litigation or claims regarding such rights, title and
interest, that it is not aware of any evidence that would render any
Rights invalid or unenforceable, and that it is not aware of any
evidence that would impair the value of any other part of the
Rights.
3.3 Infringement by Third Parties. Licensor and Licensee shall promptly
notify each other in writing if they acquire knowledge of any
infringement of any of the Products, Rights or Proprietary
Information. Licensor and Licensee shall take all steps required to
prevent alleged infringement of the Rights or Proprietary
Information.
4. Technology Transfer and Consulting
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Licensor shall make available to Licensee Licensor's personnel who shall
assist in transfer of the Proprietary Information and Rights to Licensee to
enable Licensee to manufacture, use, sell and service the Products and to train
Licensee's employees to enable Licensee to manufacture, use, sell and service
the Products. Licensor shall also make available to Licensee, at Licensee's
reasonable request, additional consulting services. Licensor shall provide such
personnel at the standard rates provided hereinafter, plus travel and other
out-of-pocket expenses.
5. Royalties and Other Payments:
5.1 Royalties. For and in consideration of the rights, continuing
obligations and licenses granted above, Licensee hereby agrees to
pay Licensor a royalty equal to the percent of the Net Sales of all
Products, including spares, therefore sold by Licensee in the
Territory indicated in Exhibit D attached. "Net Sales" means all
amounts received by Licensee or its sublicensees for any sale of any
Product, less the value of any Products supplied by Licensor, and
less the separately stated charges for (a) trade and cash discounts
actually allowed, (b) credits or refunds actually allowed for
damaged or returned goods (c) sales, excise and value added taxes,
and (d) packaging costs, insurance, transportation charges,
commissions and import duties. All computations relating to royalty
payments shall be made in accordance with generally accepted
accounting principles, applied consistently. Licensee shall obtain a
properly authenticated certificate evidencing payment of withholding
tax, which shall show the Licensor's name as the recipient of the
royalties and shall forward same to Licensor as promptly as
reasonably possible following royalty remittances. Payment of the
royalty to Licensor shall be upon Licensee's invoicing of sale to
its customer and not upon collection.
5.2 Other Payments. Licensee shall also pay Licensor for technology and
consulting services as provided for in Section 4. at the rate of
US$500.00 per day plus related expenses subject to annual
adjustment.
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6. Reports; Inquiries; Promotion; Inspection:
6.1 Reports. Payments due Licensor under Section 5.1 hereof will be
calculated quarterly and shall be made in the currency of the
Licensor. Payment shall be made within sixty (60) days after the
last day of each calendar quarter. Accompanying each quarterly
payment, Licensee will deliver to Licensor a quarterly statement of
revenues received from the sale of all Products.
In addition, Licensee shall also when making its first payment
hereunder in any calendar year include and furnish to Licensor a
full and true statement giving particulars of all Products
manufactured and sold by Licensee during the preceding twelve-month
period.
6.2 Inquiries from Territory. During the term of this Agreement,
Licensor agrees to forward to Licensee copies of all sales inquires
from prospective users and purchasers of Products located in, or
which involve shipment of Products to, the Territory. Licensee
agrees to forward to Licensor all sales inquiries received from
prospective users and purchasers of Products located outside of the
Territory or which involve shipment of Products outside of the
Territory. If because of the customer's situation, a sale is outside
the Territory and in a territory not otherwise exclusively licensed
by Licensor, Licensee must notify Licensor in advance and pay to
Licensor a fee of 5% of the Net Sales Price of the Product sold into
such territory, except in mutually agreed upon unusual or
extraordinary circumstances. Such 5% fee is in addition to the
royalties imposed in Section 5.1 of this Agreement. It is understood
that under no circumstances shall Licensee sell Products outside the
Territory and into a territory in which Licensor has entered into an
exclusive license.
6.3 Promotion of Products. Licensee shall exercise its best efforts to
promote the sale of Products in the Territory.
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<PAGE>
6.4 Inspection. Licensee and any sublicensees shall keep full and
accurate records of all Products manufactured and sold and give same
to any representative selected by Licensor, upon reasonable notice
and during normal business hours, but no more often than once each
year, complete access to inspect the records of Licensee on which
Net Sales are based. Licensee's determination of the payments due
Licensor under this Agreement will be deemed conclusive unless,
within twenty-four (24) months from the date of payment thereof,
Licensor notifies Licensee in writing of any error in such payments.
Licensee shall permit Licensor at all reasonable times through its
duly appointed agent or agents to inspect manufacturing operations
used by Licensee in the manufacture of Products.
7. Confidentiality
7.1 Nondisclosure. Licensee agrees that it will keep confidential all
Proprietary Information and any other confidential business or
technical information disclosed to Licensee in furtherance of this
Agreement, and will insofar as it is reasonably practicable bind to
secrecy its officers, managers, and employees concerned in or who
may have knowledge of the Proprietary Information. The provisions of
this Section 7 shall survive termination of this Agreement for a
period of five (5) years.
7.2 Exclusion. Notwithstanding the above, the following materials will
not be deemed confidential:
(a) Information which at the time of disclosure is in the public
domain;
(b) Information which after disclosure is published or otherwise
becomes part of the public domain through no fault of
Licensee;
(c) Information which Licensee can show was received by it from a
third party who did not acquire it, directly or indirectly,
from Licensor; and
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<PAGE>
(d) Information which before the time of disclosure by Licensor to
Licensee was independently developed by Licensee, and which
can be shown by written documentation.
8. New Developments & Improvements
8.1 Developed by Licensor. If, during the term of this Agreement,
Licensor shall make any further improvements in Products and develop
any improvement in the Proprietary Information, then Licensor shall
notify Licensee of such improvements. Upon the request of Licensee,
Licensor shall provide Licensee with full information regarding such
improvements and Licensee shall be entitled to use the improvements
with all rights which are hereby granted to Licensee under Section 1
hereof.
8.2 Developed by Licensee. If, during the term of this Agreement,
Licensee shall make any improvements in the Products or develop any
improvements in the Proprietary Information, then:
(a) Licensee shall have the sole option of deciding whether to
apply for a patent. If it does, Licensor shall give all
necessary cooperation and assistance in preparing and
prosecuting Licensee's patent application. Upon issuance of a
patent, Licensor shall receive from Licensee a royalty-free
license (with the right to sublicense) to use the patent,
outside the Territory which is designated as exclusive to
Licensee, for the term of this Agreement.
(b) If Licensee decides not to file a patent application, Licensor
has the option to do so. In such event, all costs of obtaining
the patent and consequent royalty payments will be for the
account of the Licensor and Licensor will grant to Licensee a
royalty-free perpetual license to use the patent to
manufacture, use and sell Licensed Products, including the
right to sublicense, in the Territory which is designated as
exclusive to Licensee.
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(c) If the improvements are not patentable, or both parties choose
not to patent them, Licensee agrees to submit to Licensor,
during the term of this Agreement, all available information
on the improvements, now or hereafter found, owned or
controlled by Licensee. Both Licensor and Licensee shall have
a perpetual royalty-free license to use all of these
improvements.
9. No Contest; Use of Trademarks and Advertising Matter:
Licensee acknowledges Licensor's right to control the Proprietary
Information and the Rights, and will not at any time do or cause to be done any
act or thing contesting or in any way impairing Licensor's investment and rights
in such property. In accordance with Licensor's instructions, Licensee shall use
Licensor's trademarks in connection with Products it manufactures and sells
under this Agreement.
Licensee may use packaging, catalogs, labels, letterheads and
advertisements carrying or including the trademarks covered by this Agreement in
connection with the Products.
10. Term:
Except as provided for in Section 11, this Agreement shall begin as of the
date first written above, and shall end on September 30, 2000, provided that it
shall automatically be renewed and continue in full force and effect thereafter
from year to year, unless and until notice is given by Licensor or Licensee of
its intention to terminate this Agreement at the expiration of the original term
or any renewal term, such notice to be given at least sixty (60) days prior to
any such expiration date.
11. Termination:
11.1 For Breach. In the event either party hereto fails, refuses or
neglects to perform any obligation on its part under this Agreement,
or if any warranty or representation made by either party hereto
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<PAGE>
proves to be false or misleading in any material respect, the other
party may then terminate this Agreement upon sixty (60) days' prior
written notice, provided, however, that in the event the defaulting
party shall rectify such default within the notice period, this
Agreement shall remain in full force and effect. Any cancellation or
termination of this Agreement shall be without prejudice to any
other right of action or remedy for the recovery of royalties or for
the breach of any covenant herein contained.
11.2 Other:
(a) In the event of compulsory or voluntary liquidation of
Licensee, or the appointment of a receiver; or in case
Licensee should make an assignment for the benefit of
creditors; or should Licensee go out of business; then in any
such event this Agreement shall automatically terminate.
(b) This Agreement may be terminated at the option of Licensor if
controlling interest in Licensee shall pass to any party or
parties not holding controlling interest at the date of
execution of this Agreement, unless written notice of such
change in structure or ownership is given to Licensor prior to
such change and is agreed to in writing by Licensor.
Controlling interest is defined as the ownership of 51% of the
voting stock of a corporation.
12. Effects of Termination
Upon termination of this Agreement for any reason:
(a) Licensee shall not thereafter seek or accept any additional orders
to manufacture or sell any Products; and
(b) Licensee will have the right to complete and sell or use all
Products, the production of which commenced prior to termination and
to sell or use all Products in its possession on the date of
termination.
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<PAGE>
(c) Licensee will be obligated to pay Licensor the royalties related to
any sales described in section 12 (b).
13. Force Majeure:
If, by reason of acts of God, natural events, accidents, war, governmental
controls or any cause beyond control of either party, performance of one or both
parties is prevented, then in such event performance by both parties hereunder
shall be excused or deferred, as appropriate, until the effects of such
intervening cause have ended. Either party has the right to terminate if a Force
Majeure event remains in effect for more than ninety (90) days.
14. Governing Law:
To the extent not prohibited by other applicable law, this Agreement is
made under the laws of Japan and shall be interpreted in accordance with such
laws.
15. Miscellaneous:
15.1 Entire Agreement; Amendments. This Agreement states the entire
agreement between the parties with respect to the Products and
Rights provided for herein. No amendment or modification of this
Agreement may be made except by an instrument in writing signed by
both parties.
15.2 Assignment. This Agreement may not be assigned in whole or in part
by either party without the written consent of the other, which such
consent should not be unreasonably withheld.
15.3 Notice. Any notice required or committed to be sent hereunder will
be deemed delivered five (5) days after the date mailed or otherwise
dispatched in the mail, postage prepaid, by registered, express or
certified mail, return receipt requested, or by a recognized private
express courier, to
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either party at the address listed above, or such other address of
which either party may so notify the other. Notice will also be
deemed given on the date notice is faxed to the other party.
15.4 Legal Fees. In the event that any legal action, including
arbitration, is required in order to enforce or interpret any of the
provisions of this Agreement, the prevailing party in such action
shall recover all reasonable costs and expenses, including
attorneys' fees, incurred in connection therewith.
15.5 No Waiver; Headings. The failure of either party to enforce any
provision of this Agreement shall not be deemed a waiver of that or
any other provision of this Agreement. The sections and paragraphs
of this Agreement are for convenience only and will not be of any
effect in construing the meanings of such sections or paragraphs.
15.6 Severability. In the event any clause, section or obligation stated
herein is determined to be illegal, invalid or unenforceable in a
particular jurisdiction, then in that jurisdiction this Agreement
may be read and understood as not including such clause, section or
obligation, and the other clauses, sections and obligations will
remain in effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
Hosokawa Alpine Aktiengesellschaft Hosokawa Micron Corporation
(Licensor) (Licensee)
By: /s/ D. Mayerhauser By: /s/ Yoshio Hosokawa
------------------------------- ------------------------
Name: Name:
Title: Vorstand Title: President
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EXHIBITS A and B
to the
LICENSE AGREEMENT
By and Between
Hosokawa Alpine Aktiengesellschaft
and
Hosokawa Micron Corporation
dated March 31, 1998
EXHIBIT A
Licensed Product(s):
Opposed Jet Mills, AFG, AFG-R Series
Turboplex Ultrafine Classifier ATP-GS, ATP-S/GS
Toner Separator, TSP Type
Fine Impact Mills, UPZ Series
Contraplex Wide Chamber Mills, CW Series
Rotoplex Granulators, RO Series
Circopolex Classifier Mills, ZPS Series
EXHIBIT B
Proprietary Information and Rights:
Alpine patents and trademarks registered in the territory with related
know-how pertaining to products described above.
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EXHIBITS C and D
to the
LICENSE AGREEMENT
By and Between
Hosokawa Alpine Aktiengesellschaft
and
Hosokawa Micron Corporation
dated March 31, 1998
EXHIBIT C
Territory:
Exclusive Territory: Japan
Non-exclusive Territory: All other Asian countries including the countries
which comprised the former USSR, but excluding India and all countries
west of India and Australia and New Zealand.
EXHIBIT D
Royalty Rate(s):
1%: Rotoplex Granulators, RO Series
Circopolex Classifier Mills, ZPS Series
2.5%: Fine Impact Mills, UPZ Series
Contraplex Wide Chamber Mills, CW Series
4%: Opposed Jet Mills, AFG, AFG-R Series
Turboplex Ultrafine Classifier ATP-GS, ATP-S/GS
Toner Separator, TSP Type
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LICENSE AGREEMENT
This License Agreement, made with effect from the 1st day of
October, 1997, by and between Hosokawa Bepex Corporation, a Delaware
corporation, with offices at 333 N.E. Taft Street, Minneapolis, Minnesota 55413
("the Licensor") and Hosokawa Micron Corporation, a Japanese corporation, with
offices at 5-14, 2-chome, Kawaramachi, Chuo-ku Osaka 541, Japan ("the
Licensee").
WITNESSETH
WHEREAS Licensor owns and possesses certain confidential technical
information, trade secrets and other data, including designs, drawings,
information, skills, know-how and test engineering, production, performance and
other technical data, customer lists and marketing information (hereinafter
collectively referred to as "Proprietary Information") relating to the
manufacture, sale and servicing of equipment, products and systems, which are
listed and described in Exhibit A, attached hereto and made a part hereof
(hereinafter collectively referred to as the "Products," which term includes any
and all such items and all component and accessories for replacement or
otherwise); and
WHEREAS Licensor owns or controls certain trademarks and patent rights, or
applications therefore, as such may be listed on the date hereof or from time to
time hereafter in Exhibit B attached hereto and made a part hereof (hereinafter
referred to as the "Rights"); and
WHEREAS Licensor and Licensee are desirous that Licensee should have the
right, privilege and license to manufacture, use and sell the Products based
upon and using such Proprietary Information and Rights in such territories and
countries and on an exclusive and non-exclusive basis as are listed on the date
hereof or from time to time hereafter in Exhibit C attached hereto and made a
part hereof (hereinafter referred to as the "Territory");
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NOW THEREFORE, in consideration of the promises, covenants and
undertakings contained herein, it is mutually agreed as follows:
1. Grants of Licenses:
1.1 Grants. Licensor hereby grants to Licensee, and Licensee accepts,
the right, privilege and license to use all Proprietary Information
and Rights which Licensor presently possesses or which it may
hereafter possess for the purpose of manufacturing, using and
selling the Products in the Territory. Such grants shall either be
on an exclusive or non-exclusive basis for a particular country as
set forth in Exhibit C. Licensor reserves the right to license
future Proprietary Information and Rights at royalty rates different
from those set forth in Exhibit D.
1.2 Sublicenses. Licensee may enter into sublicenses of the Proprietary
Information and Right provided that the terms of such agreements are
at least as restrictive on the sublicensee as the terms of this
Agreement are restrictive on Licensee and provided that the
sublicensee shall not have the right to sublicense. Licensee shall
provide Licensor with a copy of any and all executed sublicense
agreements as soon as practicable after execution.
2. Supply of Information
Licensor will make available to Licensee and Licensee agrees to receive
during the term of the Agreement and all extensions thereof, such Proprietary
Information as may be necessary or appropriate to enable Licensee to
manufacture, use, sell and service the Products according to specifications and
quality substantially equivalent to the specifications and quality of Products
manufactured and sold by Licensor. Licensee will be required to pay for the
costs related to transfers of information.
3. Representations
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3.1 No Conflict. Licensor and Licensee warrant that they have full power
and authority to enter into this Agreement. Licensor represents and
warrants that it has not previously granted any rights with respect
to the Proprietary Information and Rights that are inconsistent
with, limit or affect Licensee's rights or Licensor's obligations
under this Agreement.
3.2 Sole Rights. Licensor warrants that it has such right, title and
interest in and to the Proprietary Information as to enable it to
vest in Licensee the right, privilege and licenses herein conveyed.
Licensor further warrants that it is not aware of any pending or
threatened litigation or claims regarding such rights, title and
interest, that it is not aware of any evidence that would render any
Rights invalid or unenforceable, and that it is not aware of any
evidence that would impair the value of any other part of the
Rights.
3.3 Infringement by Third Parties. Licensor and Licensee shall promptly
notify each other in writing if they acquire knowledge of any
infringement of any of the Products, Rights or Proprietary
Information. Licensor and Licensee shall take all steps required to
prevent alleged infringement of the Rights or Proprietary
Information.
4. Technology Transfer and Consulting
Licensor shall make available to Licensee Licensor's personnel who shall
assist in transfer of the Proprietary Information and Rights to Licensee to
enable Licensee to manufacture, use, sell and service the Products and to train
Licensee's employees to enable Licensee to manufacture, use, sell and service
the Products. Licensor shall also make available to Licensee, at Licensee's
reasonable request, additional consulting services. Licensor shall provide such
personnel at the standard rates provided hereinafter, plus travel and other
out-of-pocket expenses.
5. Royalties and Other Payments:
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5.1 Royalties. For and in consideration of the rights, continuing
obligations and licenses granted above, Licensee hereby agrees to
pay Licensor a royalty equal to the percent of the Net Sales of all
Products, including spares, therefore sold by Licensee in the
Territory indicated in Exhibit D attached. "Net Sales" means all
amounts received by Licensee or its sublicensees for any sale of any
Product, less the value of any Products supplied by Licensor, and
less the separately stated charges for (a) trade and cash discounts
actually allowed, (b) credits or refunds actually allowed for
damaged or returned goods (c) sales, excise and value added taxes,
and (d) packaging costs, insurance, transportation charges,
commissions and import duties. All computations relating to royalty
payments shall be made in accordance with generally accepted
accounting principles, applied consistently. Licensee shall obtain a
properly authenticated certificate evidencing payment of withholding
tax, which shall show the Licensor's name as the recipient of the
royalties and shall forward same to Licensor as promptly as
reasonably possible following royalty remittances. Payment of the
royalty to Licensor shall be upon Licensee's invoicing of sale to
its customer and not upon collection.
5.2 Other Payments. Licensee shall also pay Licensor for technology and
consulting services as provided for in Section 4. at the rate of
US$500.00 per day plus related expenses subject to annual
adjustment.
6. Reports; Inquiries; Promotion; Inspection:
6.1 Reports. Payments due Licensor under Section 5.1 hereof will be
calculated quarterly and shall be made in the currency of the
Licensor. Payment shall be made within sixty (60) days after the
last day of each calendar quarter. Accompanying each quarterly
payment, Licensee will deliver to Licensor a quarterly statement of
revenues received from the sale of all Products.
In addition, Licensee shall also when making its first payment
hereunder in any calendar year
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include and furnish to Licensor a full and true statement giving
particulars of all Products manufactured and sold by Licensee during
the preceding twelve-month period.
6.2 Inquiries from Territory. During the term of this Agreement,
Licensor agrees to forward to Licensee copies of all sales inquires
from prospective users and purchasers of Products located in, or
which involve shipment of Products to, the Territory. Licensee
agrees to forward to Licensor all sales inquiries received from
prospective users and purchasers of Products located outside of the
Territory or which involve shipment of Products outside of the
Territory. If because of the customer's situation, a sale is outside
the Territory and in a territory not otherwise exclusively licensed
by Licensor, Licensee must notify Licensor in advance and pay to
Licensor a fee of 5% of the Net Sales Price of the Product sold into
such territory, except in mutually agreed upon unusual or
extraordinary circumstances. Such 5% fee is in addition to the
royalties imposed in Section 5.1 of this Agreement. It is understood
that under no circumstances shall Licensee sell Products outside the
Territory and into a territory in which Licensor has entered into an
exclusive license.
6.3 Promotion of Products. Licensee shall exercise its best efforts to
promote the sale of Products in the Territory.
6.4 Inspection. Licensee and any sublicensees shall keep full and
accurate records of all Products manufactured and sold and give same
to any representative selected by Licensor, upon reasonable notice
and during normal business hours, but no more often than once each
year, complete access to inspect the records of Licensee on which
Net Sales are based. Licensee's determination of the payments due
Licensor under this Agreement will be deemed conclusive unless,
within twenty-four (24) months from the date of payment thereof,
Licensor notifies Licensee in writing of any error in such payments.
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Licensee shall permit Licensor at all reasonable times through its
duly appointed agent or agents to inspect manufacturing operations
used by Licensee in the manufacture of Products.
7. Confidentiality
7.1 Nondisclosure. Licensee agrees that it will keep confidential all
Proprietary Information and any other confidential business or
technical information disclosed to Licensee in furtherance of this
Agreement, and will insofar as it is reasonably practicable bind to
secrecy its officers, managers, and employees concerned in or who
may have knowledge of the Proprietary Information. The provisions of
this Section 7 shall survive termination of this Agreement for a
period of five (5) years.
7.2 Exclusion. Notwithstanding the above, the following materials will
not be deemed confidential:
(a) Information which at the time of disclosure is in the public
domain;
(b) Information which after disclosure is published or otherwise
becomes part of the public domain through no fault of
Licensee;
(c) Information which Licensee can show was received by it from a
third party who did not acquire it, directly or indirectly,
from Licensor; and
(d) Information which before the time of disclosure by Licensor to
Licensee was independently developed by Licensee, and which
can be shown by written documentation.
8. New Developments & Improvements
8.1 Developed by Licensor. If, during the term of this Agreement,
Licensor shall make any further improvements in Products and develop
any improvement in the Proprietary Information, then Licensor shall
notify Licensee of such improvements. Upon the request of Licensee,
Licensor
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shall provide Licensee with full information regarding such
improvements and Licensee shall be entitled to use the improvements
with all rights which are hereby granted to Licensee under Section 1
hereof.
8.2 Developed by Licensee. If, during the term of this Agreement,
Licensee shall make any improvements in the Products or develop any
improvements in the Proprietary Information, then:
(a) Licensee shall have the sole option of deciding whether to
apply for a patent. If it does, Licensor shall give all
necessary cooperation and assistance in preparing and
prosecuting Licensee's patent application. Upon issuance of a
patent, Licensor shall receive from Licensee a royalty-free
license (with the right to sublicense) to use the patent,
outside the Territory which is designated as exclusive to
Licensee, for the term of this Agreement.
(b) If Licensee decides not to file a patent application, Licensor
has the option to do so. In such event, all costs of obtaining
the patent and consequent royalty payments will be for the
account of the Licensor and Licensor will grant to Licensee a
royalty-free perpetual license to use the patent to
manufacture, use and sell Licensed Products, including the
right to sublicense, in the Territory which is designated as
exclusive to Licensee.
(c) If the improvements are not patentable, or both parties choose
not to patent them, Licensee agrees to submit to Licensor,
during the term of this Agreement, all available information
on the improvements, now or hereafter found, owned or
controlled by Licensee. Both Licensor and Licensee shall have
a perpetual royalty-free license to use all of these
improvements.
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9. No Contest; Use of Trademarks and Advertising Matter:
Licensee acknowledges Licensor's right to control the Proprietary
Information and the Rights, and will not at any time do or cause to be done any
act or thing contesting or in any way impairing Licensor's investment and rights
in such property. In accordance with Licensor's instructions, Licensee shall use
Licensor's trademarks in connection with Products it manufactures and sells
under this Agreement.
Licensee may use packaging, catalogs, labels, letterheads and
advertisements carrying or including the trademarks covered by this Agreement in
connection with the Products.
10. Term:
Except as provided for in Section 11, this Agreement shall begin as of the
date first written above, and shall end on September 30, 1998, provided that it
shall automatically be renewed and continue in full force and effect thereafter
from year to year, unless and until notice is given by Licensor or Licensee of
its intention to terminate this Agreement at the expiration of the original term
or any renewal term, such notice to be given at least sixty (60) days prior to
any such expiration date.
11. Termination:
11.1 For Breach. In the event either party hereto fails, refuses or
neglects to perform any obligation on its part under this Agreement,
or if any warranty or representation made by either party hereto
proves to be false or misleading in any material respect, the other
party may then terminate this Agreement upon sixty (60) days' prior
written notice, provided, however, that in the event the defaulting
party shall rectify such default within the notice period, this
Agreement shall remain in full force and effect. Any cancellation or
termination of this Agreement shall be without prejudice to any
other right of action or remedy for the recovery of royalties or for
the breach of any covenant herein contained.
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11.2 Other:
(a) In the event of compulsory or voluntary liquidation of
Licensee, or the appointment of a receiver; or in case
Licensee should make an assignment for the benefit of
creditors; or should Licensee go out of business; then in any
such event this Agreement shall automatically terminate.
(b) This Agreement may be terminated at the option of Licensor if
controlling interest in Licensee shall pass to any party or
parties not holding controlling interest at the date of
execution of this Agreement, unless written notice of such
change in structure or ownership is given to Licensor prior to
such change and is agreed to in writing by Licensor.
Controlling interest is defined as the ownership of 51% of the
voting stock of a corporation.
12. Effects of Termination
Upon termination of this Agreement for any reason:
(a) Licensee shall not thereafter seek or accept any additional orders
to manufacture or sell any Products; and
(b) Licensee will have the right to complete and sell or use all
Products, the production of which commenced prior to termination and
to sell or use all Products in its possession on the date of
termination.
(c) Licensee will be obligated to pay Licensor the royalties related to
any sales described in section 12 (b).
13. Force Majeure:
If, by reason of acts of God, natural events, accidents, war, governmental
controls or any cause beyond control of either party, performance of one or both
parties is prevented, then in such event
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performance by both parties hereunder shall be excused or deferred, as
appropriate, until the effects of such intervening cause have ended. Either
party has the right to terminate if a Force Majeure event remains in effect for
more than ninety (90) days.
14. Governing Law:
To the extent not prohibited by other applicable law, this Agreement is
made under the laws of Japan and shall be interpreted in accordance with such
laws.
15. Miscellaneous:
15.1 Entire Agreement; Amendments. This Agreement states the entire
agreement between the parties with respect to the Products and
Rights provided for herein. No amendment or modification of this
Agreement may be made except by an instrument in writing signed by
both parties.
15.2 Assignment. This Agreement may not be assigned in whole or in part
by either party without the written consent of the other, which such
consent should not be unreasonably withheld.
15.3 Notice. Any notice required or committed to be sent hereunder will
be deemed delivered five (5) days after the date mailed or otherwise
dispatched in the mail, postage prepaid, by registered, express or
certified mail, return receipt requested, or by a recognized private
express courier, to either party at the address listed above, or
such other address of which either party may so notify the other.
Notice will also be deemed given on the date notice is faxed to the
other party.
15.4 Legal Fees. In the event that any legal action, including
arbitration, is required in order to enforce or interpret any of the
provisions of this Agreement, the prevailing party in such action
shall recover all reasonable costs and expenses, including
attorneys' fees, incurred in connection
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therewith.
15.5 No Waiver; Headings. The failure of either party to enforce any
provision of this Agreement shall not be deemed a waiver of that or
any other provision of this Agreement. The sections and paragraphs
of this Agreement are for convenience only and will not be of any
effect in construing the meanings of such sections or paragraphs.
15.6 Severability. In the event any clause, section or obligation stated
herein is determined to be illegal, invalid or unenforceable in a
particular jurisdiction, then in that jurisdiction this Agreement
may be read and understood as not including such clause, section or
obligation, and the other clauses, sections and obligations will
remain in effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
Hosokawa Bepex Corporation Hosokawa Micron Corporation
(Licensor) (Licensee)
By: /s/ Simon H. Baker By: /s/ Yoshio Hosokawa
---------------------- ------------------------
Name: Name:
Title: V.P. / Sec. Title: President
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EXHIBITS A and B
to the
LICENSE AGREEMENT
By and Between
Hosokawa Bepex Corporation
and
Hosokawa Micron Corporation
dated October 1, 1997
EXHIBIT A
Licensed Product(s):
Purge Vessel
Extrud-O-Mix EM
Pulvocron
All Rietz Products
Solidaire Indirect Dryers, SJ Series
Continuator Indirect Dryer, CR Series
Turbulizer, TX, TCX Series
Torus Disc Dryer TD
Solid Phase Polymerization Systems SSP
Compactor
Briquetter
EXHIBIT B
Proprietary Information and Rights:
All related Hosokawa Bepex Corporation patents and trademarks registered
in the Territory with Related know-how.
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EXHIBITS C and D
to the
LICENSE AGREEMENT
By and Between
Hosokawa Bepex Corporation
and
Hosokawa Micron Corporation
dated October 1, 1997
EXHIBIT C
Territory:
Exclusive Territory: Japan
Non-Exclusive Territory: All other Asian countries including the countries
which comprised the former USSR, but excluding India and all countries
west of India and Australia and New Zealand.
EXHIBIT D
Royalty Rate(s):
1.5%: Compactor 2.5%: Extrud-O-Mix EM
Briquetter Pulvocron
All Rietz Products
2.0%: Solidaire Indirect Dryers, SJ Series 3.0%: Purge Vessel
Continuator Indirect Dryer, CR Series
Turbulizer, TX, TCX Series
Torus Disc Dryer TD
Solid Phase Polymerization Systems SSP
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LICENSE AGREEMENT
This License Agreement, made with effect from the 1st day of
October, 1997, by and between Hosokawa Bepex GmbH, a German limited liability
company, with offices at Daimlerstrasse 8, D-74211 Leingarten-Heilbronn, Germany
("the Licensor") and Hosokawa Micron Corporation, a Japanese corporation, with
offices at 5-14, 2-chome, Kawaramachi, Chuo-ku Osaka 541, Japan ("the
Licensee").
WITNESSETH
WHEREAS Licensor owns and possesses certain confidential technical
information, trade secrets and other data, including designs, drawings,
information, skills, know-how and test engineering, production, performance and
other technical data, customer lists and marketing information (hereinafter
collectively referred to as "Proprietary Information") relating to the
manufacture, sale and servicing of equipment, products and systems, which are
listed and described in Exhibit A, attached hereto and made a part hereof
(hereinafter collectively referred to as the "Products," which term includes any
and all such items and all component and accessories for replacement or
otherwise); and
WHEREAS Licensor owns or controls certain trademarks and patent rights, or
applications therefore, as such may be listed on the date hereof or from time to
time hereafter in Exhibit B attached hereto and made a part hereof (hereinafter
referred to as the "Rights"); and
WHEREAS Licensor and Licensee are desirous that Licensee should have the
right, privilege and license to manufacture, use and sell the Products based
upon and using such Proprietary Information and Rights in such territories and
countries and on an exclusive and non-exclusive basis as are listed on the date
hereof or from time to time hereafter in Exhibit C attached hereto and made a
part hereof (hereinafter referred to as the "Territory");
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NOW THEREFORE, in consideration of the promises, covenants and
undertakings contained herein, it is mutually agreed as follows:
1. Grants of Licenses:
1.1 Grants. Licensor hereby grants to Licensee, and Licensee accepts,
the right, privilege and license to use all Proprietary Information
and Rights which Licensor presently possesses or which it may
hereafter possess for the purpose of manufacturing, using and
selling the Products in the Territory. Such grants shall either be
on an exclusive or non-exclusive basis for a particular country as
set forth in Exhibit C. Licensor reserves the right to license
future Proprietary Information and Rights at royalty rates different
from those set forth in Exhibit D.
1.2 Sublicenses. Licensee may enter into sublicenses of the Proprietary
Information and Right provided that the terms of such agreements are
at least as restrictive on the sublicensee as the terms of this
Agreement are restrictive on Licensee and provided that the
sublicensee shall not have the right to sublicense. Licensee shall
provide Licensor with a copy of any and all executed sublicense
agreements as soon as practicable after execution.
2. Supply of Information
Licensor will make available to Licensee and Licensee agrees to receive
during the term of the Agreement and all extensions thereof, such Proprietary
Information as may be necessary or appropriate to enable Licensee to
manufacture, use, sell and service the Products according to specifications and
quality substantially equivalent to the specifications and quality of Products
manufactured and sold by Licensor. Licensee will be required to pay for the
costs related to transfers of information.
3. Representations
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3.1 No Conflict. Licensor and Licensee warrant that they have full power
and authority to enter into this Agreement. Licensor represents and
warrants that it has not previously granted any rights with respect
to the Proprietary Information and Rights that are inconsistent
with, limit or affect Licensee's rights or Licensor's obligations
under this Agreement.
3.2 Sole Rights. Licensor warrants that it has such right, title and
interest in and to the Proprietary Information as to enable it to
vest in Licensee the right, privilege and licenses herein conveyed.
Licensor further warrants that it is not aware of any pending or
threatened litigation or claims regarding such rights, title and
interest, that it is not aware of any evidence that would render any
Rights invalid or unenforceable, and that it is not aware of any
evidence that would impair the value of any other part of the
Rights.
3.3 Infringement by Third Parties. Licensor and Licensee shall promptly
notify each other in writing if they acquire knowledge of any
infringement of any of the Products, Rights or Proprietary
Information. Licensor and Licensee shall take all steps required to
prevent alleged infringement of the Rights or Proprietary
Information.
4. Technology Transfer and Consulting
Licensor shall make available to Licensee Licensor's personnel who shall
assist in transfer of the Proprietary Information and Rights to Licensee to
enable Licensee to manufacture, use, sell and service the Products and to train
Licensee's employees to enable Licensee to manufacture, use, sell and service
the Products. Licensor shall also make available to Licensee, at Licensee's
reasonable request, additional consulting services. Licensor shall provide such
personnel at the standard rates provided hereinafter, plus travel and other
out-of-pocket expenses.
5. Royalties and Other Payments:
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5.1 Royalties. For and in consideration of the rights, continuing
obligations and licenses granted above, Licensee hereby agrees to
pay Licensor a royalty equal to the percent of the Net Sales of all
Products, including spares, therefore sold by Licensee in the
Territory indicated in Exhibit D attached. "Net Sales" means all
amounts received by Licensee or its sublicensees for any sale of any
Product, less the value of any Products supplied by Licensor, and
less the separately stated charges for (a) trade and cash discounts
actually allowed, (b) credits or refunds actually allowed for
damaged or returned goods (c) sales, excise and value added taxes,
and (d) packaging costs, insurance, transportation charges,
commissions and import duties. All computations relating to royalty
payments shall be made in accordance with generally accepted
accounting principles, applied consistently. Licensee shall obtain a
properly authenticated certificate evidencing payment of withholding
tax, which shall show the Licensor's name as the recipient of the
royalties and shall forward same to Licensor as promptly as
reasonably possible following royalty remittances. Payment of the
royalty to Licensor shall be upon Licensee's invoicing of sale to
its customer and not upon collection.
5.2 Other Payments. Licensee shall also pay Licensor for technology and
consulting services as provided for in Section 4. at the rate of
US$500.00 per day plus related expenses subject to annual
adjustment.
6. Reports; Inquiries; Promotion; Inspection:
6.1 Reports. Payments due Licensor under Section 5.1 hereof will be
calculated quarterly and shall be made in the currency of the
Licensor. Payment shall be made within sixty (60) days after the
last day of each calendar quarter. Accompanying each quarterly
payment, Licensee will deliver to Licensor a quarterly statement of
revenues received from the sale of all Products.
In addition, Licensee shall also when making its first payment hereunder
in any calendar year
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include and furnish to Licensor a full and true statement giving
particulars of all Products manufactured and sold by Licensee during
the preceding twelve-month period.
6.2 Inquiries from Territory. During the term of this Agreement,
Licensor agrees to forward to Licensee copies of all sales inquires
from prospective users and purchasers of Products located in, or
which involve shipment of Products to, the Territory. Licensee
agrees to forward to Licensor all sales inquiries received from
prospective users and purchasers of Products located outside of the
Territory or which involve shipment of Products outside of the
Territory. If because of the customer's situation, a sale is outside
the Territory and in a territory not otherwise exclusively licensed
by Licensor, Licensee must notify Licensor in advance and pay to
Licensor a fee of 5% of the Net Sales Price of the Product sold into
such territory, except in mutually agreed upon unusual or
extraordinary circumstances. Such 5% fee is in addition to the
royalties imposed in Section 5.1 of this Agreement. It is understood
that under no circumstances shall Licensee sell Products outside the
Territory and into a territory in which Licensor has entered into an
exclusive license.
6.3 Promotion of Products. Licensee shall exercise its best efforts to
promote the sale of Products in the Territory.
6.4 Inspection. Licensee and any sublicensees shall keep full and
accurate records of all Products manufactured and sold and give same
to any representative selected by Licensor, upon reasonable notice
and during normal business hours, but no more often than once each
year, complete access to inspect the records of Licensee on which
Net Sales are based. Licensee's determination of the payments due
Licensor under this Agreement will be deemed conclusive unless,
within twenty-four (24) months from the date of payment thereof,
Licensor notifies Licensee in writing of any error in such payments.
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Licensee shall permit Licensor at all reasonable times through its
duly appointed agent or agents to inspect manufacturing operations
used by Licensee in the manufacture of Products.
7. Confidentiality
7.1 Nondisclosure. Licensee agrees that it will keep confidential all
Proprietary Information and any other confidential business or
technical information disclosed to Licensee in furtherance of this
Agreement, and will insofar as it is reasonably practicable bind to
secrecy its officers, managers, and employees concerned in or who
may have knowledge of the Proprietary Information. The provisions of
this Section 7 shall survive termination of this Agreement for a
period of five (5) years.
7.2 Exclusion. Notwithstanding the above, the following materials will
not be deemed confidential:
(a) Information which at the time of disclosure is in the public
domain;
(b) Information which after disclosure is published or otherwise
becomes part of the public domain through no fault of
Licensee;
(c) Information which Licensee can show was received by it from a
third party who did not acquire it, directly or indirectly,
from Licensor; and
(d) Information which before the time of disclosure by Licensor to
Licensee was independently developed by Licensee, and which
can be shown by written documentation.
8. New Developments & Improvements
8.1 Developed by Licensor. If, during the term of this Agreement,
Licensor shall make any further improvements in Products and develop
any improvement in the Proprietary Information, then Licensor shall
notify Licensee of such improvements. Upon the request of Licensee,
Licensor
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shall provide Licensee with full information regarding such
improvements and Licensee shall be entitled to use the improvements
with all rights which are hereby granted to Licensee under Section 1
hereof.
8.2 Developed by Licensee. If, during the term of this Agreement,
Licensee shall make any improvements in the Products or develop any
improvements in the Proprietary Information, then:
(a) Licensee shall have the sole option of deciding whether to
apply for a patent. If it does, Licensor shall give all
necessary cooperation and assistance in preparing and
prosecuting Licensee's patent application. Upon issuance of a
patent, Licensor shall receive from Licensee a royalty-free
license (with the right to sublicense) to use the patent,
outside the Territory which is designated as exclusive to
Licensee, for the term of this Agreement.
(b) If Licensee decides not to file a patent application, Licensor
has the option to do so. In such event, all costs of obtaining
the patent and consequent royalty payments will be for the
account of the Licensor and Licensor will grant to Licensee a
royalty-free perpetual license to use the patent to
manufacture, use and sell Licensed Products, including the
right to sublicense, in the Territory which is designated as
exclusive to Licensee.
(c) If the improvements are not patentable, or both parties choose
not to patent them, Licensee agrees to submit to Licensor,
during the term of this Agreement, all available information
on the improvements, now or hereafter found, owned or
controlled by Licensee. Both Licensor and Licensee shall have
a perpetual royalty-free license to use all of these
improvements.
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9. No Contest; Use of Trademarks and Advertising Matter:
Licensee acknowledges Licensor's right to control the Proprietary
Information and the Rights, and will not at any time do or cause to be done any
act or thing contesting or in any way impairing Licensor's investment and rights
in such property. In accordance with Licensor's instructions, Licensee shall use
Licensor's trademarks in connection with Products it manufactures and sells
under this Agreement.
Licensee may use packaging, catalogs, labels, letterheads and
advertisements carrying or including the trademarks covered by this Agreement in
connection with the Products.
10. Term:
Except as provided for in Section 11, this Agreement shall begin as of the
date first written above, and shall end on September 30, 1998, provided that it
shall automatically be renewed and continue in full force and effect thereafter
from year to year, unless and until notice is given by Licensor or Licensee of
its intention to terminate this Agreement at the expiration of the original term
or any renewal term, such notice to be given at least sixty (60) days prior to
any such expiration date.
11. Termination:
11.1 For Breach. In the event either party hereto fails, refuses or
neglects to perform any obligation on its part under this Agreement,
or if any warranty or representation made by either party hereto
proves to be false or misleading in any material respect, the other
party may then terminate this Agreement upon sixty (60) days' prior
written notice, provided, however, that in the event the defaulting
party shall rectify such default within the notice period, this
Agreement shall remain in full force and effect. Any cancellation or
termination of this Agreement shall be without prejudice to any
other right of action or remedy for the recovery of royalties or for
the breach of any covenant herein contained.
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11.2 Other:
(a) In the event of compulsory or voluntary liquidation of
Licensee, or the appointment of a receiver; or in case
Licensee should make an assignment for the benefit of
creditors; or should Licensee go out of business; then in any
such event this Agreement shall automatically terminate.
(b) This Agreement may be terminated at the option of Licensor if
controlling interest in Licensee shall pass to any party or
parties not holding controlling interest at the date of
execution of this Agreement, unless written notice of such
change in structure or ownership is given to Licensor prior to
such change and is agreed to in writing by Licensor.
Controlling interest is defined as the ownership of 51% of the
voting stock of a corporation.
12. Effects of Termination
Upon termination of this Agreement for any reason:
(a) Licensee shall not thereafter seek or accept any additional orders
to manufacture or sell any Products; and
(b) Licensee will have the right to complete and sell or use all
Products, the production of which commenced prior to termination and
to sell or use all Products in its possession on the date of
termination.
(c) Licensee will be obligated to pay Licensor the royalties related to
any sales described in section 12 (b).
13. Force Majeure:
If, by reason of acts of God, natural events, accidents, war, governmental
controls or any cause beyond control of either party, performance of one or both
parties is prevented, then in such event
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performance by both parties hereunder shall be excused or deferred, as
appropriate, until the effects of such intervening cause have ended. Either
party has the right to terminate if a Force Majeure event remains in effect for
more than ninety (90) days.
14. Governing Law:
To the extent not prohibited by other applicable law, this Agreement is
made under the laws of Japan and shall be interpreted in accordance with such
laws.
15. Miscellaneous:
15.1 Entire Agreement; Amendments. This Agreement states the entire
agreement between the parties with respect to the Products and
Rights provided for herein. No amendment or modification of this
Agreement may be made except by an instrument in writing signed by
both parties.
15.2 Assignment. This Agreement may not be assigned in whole or in part
by either party without the written consent of the other, which such
consent should not be unreasonably withheld.
15.3 Notice. Any notice required or committed to be sent hereunder will
be deemed delivered five (5) days after the date mailed or otherwise
dispatched in the mail, postage prepaid, by registered, express or
certified mail, return receipt requested, or by a recognized private
express courier, to either party at the address listed above, or
such other address of which either party may so notify the other.
Notice will also be deemed given on the date notice is faxed to the
other party.
15.4 Legal Fees. In the event that any legal action, including
arbitration, is required in order to enforce or interpret any of the
provisions of this Agreement, the prevailing party in such action
shall recover all reasonable costs and expenses, including
attorneys' fees, incurred in connection
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therewith.
15.5 No Waiver; Headings. The failure of either party to enforce any
provision of this Agreement shall not be deemed a waiver of that or
any other provision of this Agreement. The sections and paragraphs
of this Agreement are for convenience only and will not be of any
effect in construing the meanings of such sections or paragraphs.
15.6 Severability. In the event any clause, section or obligation stated
herein is determined to be illegal, invalid or unenforceable in a
particular jurisdiction, then in that jurisdiction this Agreement
may be read and understood as not including such clause, section or
obligation, and the other clauses, sections and obligations will
remain in effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
Hosokawa Bepex GmbH Hosokawa Micron Corporation
(Licensor) (Licensee)
By: /s/ D. Hummel By: /s/ Yoshio Hosokawa
--------------------------- ------------------------
Name: Name:
Title: Geschaftsfuhrer Title: President
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EXHIBITS A and B
to the
LICENSE AGREEMENT
By and Between
Hosokawa Bepex GmbH
and
Hosokawa Micron Corporation
dated October 1, 1997
EXHIBIT A
Licensed Product(s):
Compactor, L, CS, and K Series
Briquetters HK Series
Gear Pelletizers Series G
Flake Crusher
Bexmill
Bexroller
Bextruder
EXHIBIT B
Proprietary Information and Rights:
All related Hosokawa Bepex GmbH patents and trademarks registered in the
Territory with related know-how.
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EXHIBITS C and D
to the
LICENSE AGREEMENT
By and Between
Hosokawa Bepex GmbH
and
Hosokawa Micron Corporation
dated October 1, 1997
EXHIBIT C
Territory:
Exclusive Territory: Japan
Non-Exclusive Territory: All other Asian countries including the countries
which comprised the former USSR, but excluding India and all countries
west of India and Australia and New Zealand.
EXHIBIT D
Royalty Rate(s):
2.5%: Compactor, L, CS, and K Series 4.0%: Bexmill
Briquetters HK Series Bexroller
Gear Pelletizers Series G Bextruder
Flake Crusher
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LICENSE AGREEMENT
This License Agreement, made with effect from the 1st day of
October, 1997, by and between Hosokawa Micron Corporation, a Japanese
corporation, with offices at 5-14, 2-chome, Kawaramachi, Chuo-ku Osaka 541,
Japan ("the Licensor") and Hosokawa Alpine Aktiengesellschaft, a German
corporation, with offices at Peter-Dorfler Strasse 13-25, D-86199 Augsburg,
Germany ("the Licensee").
WITNESSETH
WHEREAS Licensor owns and possesses certain confidential technical
information, trade secrets and other data, including designs, drawings,
information, skills, know-how and test engineering, production, performance and
other technical data, customer lists and marketing information (hereinafter
collectively referred to as "Proprietary Information") relating to the
manufacture, sale and servicing of equipment, products and systems, which are
listed and described in Exhibit A, attached hereto and made a part hereof
(hereinafter collectively referred to as the "Products," which term includes any
and all such items and all component and accessories for replacement or
otherwise); and
WHEREAS Licensor owns or controls certain trademarks and patent rights, or
applications therefore, as such may be listed on the date hereof or from time to
time hereafter in Exhibit B attached hereto and made a part hereof (hereinafter
referred to as the "Rights"); and
WHEREAS Licensor and Licensee are desirous that Licensee should have the
right, privilege and license to manufacture, use and sell the Products based
upon and using such Proprietary Information and Rights in such territories and
countries and on an exclusive and non-exclusive basis as are listed on the date
hereof or from time to time hereafter in Exhibit C attached hereto and made a
part hereof (hereinafter referred to as the "Territory");
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NOW THEREFORE, in consideration of the promises, covenants and
undertakings contained herein, it is mutually agreed as follows:
1. Grants of Licenses:
1.1 Grants. Licensor hereby grants to Licensee, and Licensee accepts,
the right, privilege and license to use all Proprietary Information
and Rights which Licensor presently possesses or which it may
hereafter possess for the purpose of manufacturing, using and
selling the Products in the Territory. Such grants shall either be
on an exclusive or non-exclusive basis for a particular country as
set forth in Exhibit C. Licensor reserves the right to license
future Proprietary Information and Rights at royalty rates different
from those set forth in Exhibit D.
1.2 Sublicenses. Licensee may enter into sublicenses of the Proprietary
Information and Right provided that the terms of such agreements are
at least as restrictive on the sublicensee as the terms of this
Agreement are restrictive on Licensee and provided that the
sublicensee shall not have the right to sublicense. Licensee shall
provide Licensor with a copy of any and all executed sublicense
agreements as soon as practicable after execution.
2. Supply of Information
Licensor will make available to Licensee and Licensee agrees to receive
during the term of the Agreement and all extensions thereof, such Proprietary
Information as may be necessary or appropriate to enable Licensee to
manufacture, use, sell and service the Products according to specifications and
quality substantially equivalent to the specifications and quality of Products
manufactured and sold by Licensor. Licensee will be required to pay for the
costs related to transfers of information.
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3. Representations
3.1 No Conflict. Licensor and Licensee warrant that they have full power
and authority to enter into this Agreement. Licensor represents and
warrants that it has not previously granted any rights with respect
to the Proprietary Information and Rights that are inconsistent
with, limit or affect Licensee's rights or Licensor's obligations
under this Agreement.
3.2 Sole Rights. Licensor warrants that it has such right, title and
interest in and to the Proprietary Information as to enable it to
vest in Licensee the right, privilege and licenses herein conveyed.
Licensor further warrants that it is not aware of any pending or
threatened litigation or claims regarding such rights, title and
interest, that it is not aware of any evidence that would render any
Rights invalid or unenforceable, and that it is not aware of any
evidence that would impair the value of any other part of the
Rights.
3.3 Infringement by Third Parties. Licensor and Licensee shall promptly
notify each other in writing if they acquire knowledge of any
infringement of any of the Products, Rights or Proprietary
Information. Licensor and Licensee shall take all steps required to
prevent alleged infringement of the Rights or Proprietary
Information.
4. Technology Transfer and Consulting
Licensor shall make available to Licensee Licensor's personnel who shall
assist in transfer of the Proprietary Information and Rights to Licensee to
enable Licensee to manufacture, use, sell and service the Products and to train
Licensee's employees to enable Licensee to manufacture, use, sell and service
the Products. Licensor shall also make available to Licensee, at Licensee's
reasonable request, additional consulting services. Licensor shall provide such
personnel at the standard rates provided hereinafter, plus travel and other
out-of-pocket expenses.
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5. Royalties and Other Payments:
5.1 Royalties. For and in consideration of the rights, continuing
obligations and licenses granted above, Licensee hereby agrees to
pay Licensor a royalty equal to the percent of the Net Sales of all
Products, including spares, therefore sold by Licensee in the
Territory indicated in Exhibit D attached. "Net Sales" means all
amounts received by Licensee or its sublicensees for any sale of any
Product, less the value of any Products supplied by Licensor, and
less the separately stated charges for (a) trade and cash discounts
actually allowed, (b) credits or refunds actually allowed for
damaged or returned goods (c) sales, excise and value added taxes,
and (d) packaging costs, insurance, transportation charges,
commissions and import duties. All computations relating to royalty
payments shall be made in accordance with generally accepted
accounting principles, applied consistently. Licensee shall obtain a
properly authenticated certificate evidencing payment of withholding
tax, which shall show the Licensor's name as the recipient of the
royalties and shall forward same to Licensor as promptly as
reasonably possible following royalty remittances. Payment of the
royalty to Licensor shall be upon Licensee's invoicing of sale to
its customer and not upon collection.
5.2 Other Payments. Licensee shall also pay Licensor for technology and
consulting services as provided for in Section 4. at the rate of
US$500.00 per day plus related expenses subject to annual
adjustment.
6. Reports; Inquiries; Promotion; Inspection:
6.1 Reports. Payments due Licensor under Section 5.1 hereof will be
calculated quarterly and shall be made in the currency of the
Licensor. Payment shall be made within sixty (60) days after the
last day of each calendar quarter. Accompanying each quarterly
payment, Licensee will deliver to Licensor a quarterly statement of
revenues received from the sale of all Products.
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In addition, Licensee shall also when making its first payment
hereunder in any calendar year include and furnish to Licensor a
full and true statement giving particulars of all Products
manufactured and sold by Licensee during the preceding twelve-month
period.
6.2 Inquiries from Territory. During the term of this Agreement,
Licensor agrees to forward to Licensee copies of all sales inquires
from prospective users and purchasers of Products located in, or
which involve shipment of Products to, the Territory. Licensee
agrees to forward to Licensor all sales inquiries received from
prospective users and purchasers of Products located outside of the
Territory or which involve shipment of Products outside of the
Territory. If because of the customer's situation, a sale is outside
the Territory and in a territory not otherwise exclusively licensed
by Licensor, Licensee must notify Licensor in advance and pay to
Licensor a fee of 5% of the Net Sales Price of the Product sold into
such territory, except in mutually agreed upon unusual or
extraordinary circumstances. Such 5% fee is in addition to the
royalties imposed in Section 5.1 of this Agreement. It is understood
that under no circumstances shall Licensee sell Products outside the
Territory and into a territory in which Licensor has entered into an
exclusive license.
6.3 Promotion of Products. Licensee shall exercise its best efforts to
promote the sale of Products in the Territory.
6.4 Inspection. Licensee and any sublicensees shall keep full and
accurate records of all Products manufactured and sold and give same
to any representative selected by Licensor, upon reasonable notice
and during normal business hours, but no more often than once each
year, complete access to inspect the records of Licensee on which
Net Sales are based. Licensee's determination of the payments due
Licensor under this Agreement will be deemed conclusive unless,
within twenty-four (24) months from the date of payment thereof,
Licensor notifies
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Licensee in writing of any error in such payments.
Licensee shall permit Licensor at all reasonable times through its
duly appointed agent or agents to inspect manufacturing operations
used by Licensee in the manufacture of Products.
7. Confidentiality
7.1 Nondisclosure. Licensee agrees that it will keep confidential all
Proprietary Information and any other confidential business or
technical information disclosed to Licensee in furtherance of this
Agreement, and will insofar as it is reasonably practicable bind to
secrecy its officers, managers, and employees concerned in or who
may have knowledge of the Proprietary Information. The provisions of
this Section 7 shall survive termination of this Agreement for a
period of five (5) years.
7.2 Exclusion. Notwithstanding the above, the following materials will
not be deemed confidential:
(a) Information which at the time of disclosure is in the public
domain;
(b) Information which after disclosure is published or otherwise
becomes part of the public domain through no fault of
Licensee;
(c) Information which Licensee can show was received by it from a
third party who did not acquire it, directly or indirectly,
from Licensor; and
(d) Information which before the time of disclosure by Licensor to
Licensee was independently developed by Licensee, and which
can be shown by written documentation.
8. New Developments & Improvements
8.1 Developed by Licensor. If, during the term of this Agreement,
Licensor shall make any further improvements in Products and develop
any improvement in the Proprietary Information, then
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Licensor shall notify Licensee of such improvements. Upon the
request of Licensee, Licensor shall provide Licensee with full
information regarding such improvements and Licensee shall be
entitled to use the improvements with all rights which are hereby
granted to Licensee under Section 1 hereof.
8.2 Developed by Licensee. If, during the term of this Agreement,
Licensee shall make any improvements in the Products or develop any
improvements in the Proprietary Information, then:
(a) Licensee shall have the sole option of deciding whether to
apply for a patent. If it does, Licensor shall give all
necessary cooperation and assistance in preparing and
prosecuting Licensee's patent application. Upon issuance of a
patent, Licensor shall receive from Licensee a royalty-free
license (with the right to sublicense) to use the patent,
outside the Territory which is designated as exclusive to
Licensee, for the term of this Agreement.
(b) If Licensee decides not to file a patent application, Licensor
has the option to do so. In such event, all costs of obtaining
the patent and consequent royalty payments will be for the
account of the Licensor and Licensor will grant to Licensee a
royalty-free perpetual license to use the patent to
manufacture, use and sell Licensed Products, including the
right to sublicense, in the Territory which is designated as
exclusive to Licensee.
(c) If the improvements are not patentable, or both parties choose
not to patent them, Licensee agrees to submit to Licensor,
during the term of this Agreement, all available information
on the improvements, now or hereafter found, owned or
controlled by Licensee. Both Licensor and Licensee shall have
a perpetual royalty-free license to use all of these
improvements.
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9. No Contest; Use of Trademarks and Advertising Matter:
Licensee acknowledges Licensor's right to control the Proprietary
Information and the Rights, and will not at any time do or cause to be done any
act or thing contesting or in any way impairing Licensor's investment and rights
in such property. In accordance with Licensor's instructions, Licensee shall use
Licensor's trademarks in connection with Products it manufactures and sells
under this Agreement.
Licensee may use packaging, catalogs, labels, letterheads and
advertisements carrying or including the trademarks covered by this Agreement in
connection with the Products.
10. Term:
Except as provided for in Section 11, this Agreement shall begin as of the
date first written above, and shall end on September 30, 1998, provided that it
shall automatically be renewed and continue in full force and effect thereafter
from year to year, unless and until notice is given by Licensor or Licensee of
its intention to terminate this Agreement at the expiration of the original term
or any renewal term, such notice to be given at least sixty (60) days prior to
any such expiration date.
11. Termination:
11.1 For Breach. In the event either party hereto fails, refuses or
neglects to perform any obligation on its part under this Agreement,
or if any warranty or representation made by either party hereto
proves to be false or misleading in any material respect, the other
party may then terminate this Agreement upon sixty (60) days' prior
written notice, provided, however, that in the event the defaulting
party shall rectify such default within the notice period, this
Agreement shall remain in full force and effect. Any cancellation or
termination of this Agreement shall be without prejudice to any
other right of action or remedy for the recovery of royalties or for
the breach of
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any covenant herein contained.
11.2 Other:
(a) In the event of compulsory or voluntary liquidation of
Licensee, or the appointment of a receiver; or in case
Licensee should make an assignment for the benefit of
creditors; or should Licensee go out of business; then in any
such event this Agreement shall automatically terminate.
(b) This Agreement may be terminated at the option of Licensor if
controlling interest in Licensee shall pass to any party or
parties not holding controlling interest at the date of
execution of this Agreement, unless written notice of such
change in structure or ownership is given to Licensor prior to
such change and is agreed to in writing by Licensor.
Controlling interest is defined as the ownership of 51% of the
voting stock of a corporation.
12. Effects of Termination
Upon termination of this Agreement for any reason:
(a) Licensee shall not thereafter seek or accept any additional orders
to manufacture or sell any Products; and
(b) Licensee will have the right to complete and sell or use all
Products, the production of which commenced prior to termination and
to sell or use all Products in its possession on the date of
termination.
(c) Licensee will be obligated to pay Licensor the royalties related to
any sales described in section 12 (b).
13. Force Majeure:
If, by reason of acts of God, natural events, accidents, war, governmental
controls or any cause
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beyond control of either party, performance of one or both parties is prevented,
then in such event performance by both parties hereunder shall be excused or
deferred, as appropriate, until the effects of such intervening cause have
ended. Either party has the right to terminate if a Force Majeure event remains
in effect for more than ninety (90) days.
14. Governing Law:
To the extent not prohibited by other applicable law, this Agreement is
made under the laws of Germany and shall be interpreted in accordance with such
laws.
15. Miscellaneous:
15.1 Entire Agreement; Amendments. This Agreement states the entire
agreement between the parties with respect to the Products and
Rights provided for herein. No amendment or modification of this
Agreement may be made except by an instrument in writing signed by
both parties.
15.2 Assignment. This Agreement may not be assigned in whole or in part
by either party without the written consent of the other, which such
consent should not be unreasonably withheld.
15.3 Notice. Any notice required or committed to be sent hereunder will
be deemed delivered five (5) days after the date mailed or otherwise
dispatched in the mail, postage prepaid, by registered, express or
certified mail, return receipt requested, or by a recognized private
express courier, to either party at the address listed above, or
such other address of which either party may so notify the other.
Notice will also be deemed given on the date notice is faxed to the
other party.
15.4 Legal Fees. In the event that any legal action, including
arbitration, is required in order to enforce or interpret any of the
provisions of this Agreement, the prevailing party in such action
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shall recover all reasonable costs and expenses, including
attorneys' fees, incurred in connection therewith.
15.5 No Waiver; Headings. The failure of either party to enforce any
provision of this Agreement shall not be deemed a waiver of that or
any other provision of this Agreement. The sections and paragraphs
of this Agreement are for convenience only and will not be of any
effect in construing the meanings of such sections or paragraphs.
15.6 Severability. In the event any clause, section or obligation stated
herein is determined to be illegal, invalid or unenforceable in a
particular jurisdiction, then in that jurisdiction this Agreement
may be read and understood as not including such clause, section or
obligation, and the other clauses, sections and obligations will
remain in effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
Hosokawa Micron Corporation Hosokawa Alpine Aktiengesellschaft
(Licensor) (Licensee)
By: /s/ Yoshio Hosokawa By: /s/ D. Mayerhauser
----------------------- -------------------------------
Name: Name:
Title: President Title: Vorstand
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EXHIBITS A and B
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron Corporation
and
Hosokawa Alpine Aktiengesellschaft
dated October 1, 1997
EXHIBIT A
Licensed Product(s):
Micron Innomizer, INM Series
Micron Jet T, MJ-T Series
Micron Separators, MS, MS-N Series
Micron Victory Mill, VP Series
Micron Fine Victory Mill, FVP Series
Micron Feather Mill, FM-S, FM-F Series
EXHIBIT B
Proprietary Information and Rights:
All related Hosokawa Micron Corporation patents and trademarks registered
in the Territory with related know-how.
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EXHIBITS C and D
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron Corporation
and
Hosokawa Alpine Aktiengesellschaft
dated October 1, 1997
EXHIBIT C
Territory:
Exclusive Territory: Germany
Non-Exclusive Territory: All other European countries, Africa, Middle
East, India and all Asian countries west of India.
EXHIBIT D
Royalty Rate(s):
4%: Micron Innomizer, INM Series 2.5% Micron Separators, MS, MS-N Series
Micron Jet T, MJ-T Series Micron Victory Mill, VP Series
Micron Fine Victory Mill, FVP Series
Micron Feather Mill, FM-S, FM-F Series
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LICENSE AGREEMENT
This License Agreement, made with effect from the 1st day of
October, 1997, by and between Hosokawa Micron Corporation, a Japanese
corporation, with offices at 5-14, 2-chome, Kawaramachi, Chuo-ku Osaka 541,
Japan ("the Licensor") and Hosokawa Bepex GmbH, a German limited liability
company, with offices at Daimlerstrasse 8, D-74211 Leingarten-Heilbronn, Germany
("the Licensee").
WITNESSETH
WHEREAS Licensor owns and possesses certain confidential technical
information, trade secrets and other data, including designs, drawings,
information, skills, know-how and test engineering, production, performance and
other technical data, customer lists and marketing information (hereinafter
collectively referred to as "Proprietary Information") relating to the
manufacture, sale and servicing of equipment, products and systems, which are
listed and described in Exhibit A, attached hereto and made a part hereof
(hereinafter collectively referred to as the "Products," which term includes any
and all such items and all component and accessories for replacement or
otherwise); and
WHEREAS Licensor owns or controls certain trademarks and patent rights, or
applications therefore, as such may be listed on the date hereof or from time to
time hereafter in Exhibit B attached hereto and made a part hereof (hereinafter
referred to as the "Rights"); and
WHEREAS Licensor and Licensee are desirous that Licensee should have the
right, privilege and license to manufacture, use and sell the Products based
upon and using such Proprietary Information and Rights in such territories and
countries and on an exclusive and non-exclusive basis as are listed on the date
hereof or from time to time hereafter in Exhibit C attached hereto and made a
part hereof (hereinafter referred to as the "Territory");
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NOW THEREFORE, in consideration of the promises, covenants and
undertakings contained herein, it is mutually agreed as follows:
1. Grants of Licenses:
1.1 Grants. Licensor hereby grants to Licensee, and Licensee accepts,
the right, privilege and license to use all Proprietary Information
and Rights which Licensor presently possesses or which it may
hereafter possess for the purpose of manufacturing, using and
selling the Products in the Territory. Such grants shall either be
on an exclusive or non-exclusive basis for a particular country as
set forth in Exhibit C. Licensor reserves the right to license
future Proprietary Information and Rights at royalty rates different
from those set forth in Exhibit D.
1.2 Sublicenses. Licensee may enter into sublicenses of the Proprietary
Information and Right provided that the terms of such agreements are
at least as restrictive on the sublicensee as the terms of this
Agreement are restrictive on Licensee and provided that the
sublicensee shall not have the right to sublicense. Licensee shall
provide Licensor with a copy of any and all executed sublicense
agreements as soon as practicable after execution.
2. Supply of Information
Licensor will make available to Licensee and Licensee agrees to receive
during the term of the Agreement and all extensions thereof, such Proprietary
Information as may be necessary or appropriate to enable Licensee to
manufacture, use, sell and service the Products according to specifications and
quality substantially equivalent to the specifications and quality of Products
manufactured and sold by Licensor. Licensee will be required to pay for the
costs related to transfers of information.
3. Representations
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3.1 No Conflict. Licensor and Licensee warrant that they have full power
and authority to enter into this Agreement. Licensor represents and
warrants that it has not previously granted any rights with respect
to the Proprietary Information and Rights that are inconsistent
with, limit or affect Licensee's rights or Licensor's obligations
under this Agreement.
3.2 Sole Rights. Licensor warrants that it has such right, title and
interest in and to the Proprietary Information as to enable it to
vest in Licensee the right, privilege and licenses herein conveyed.
Licensor further warrants that it is not aware of any pending or
threatened litigation or claims regarding such rights, title and
interest, that it is not aware of any evidence that would render any
Rights invalid or unenforceable, and that it is not aware of any
evidence that would impair the value of any other part of the
Rights.
3.3 Infringement by Third Parties. Licensor and Licensee shall promptly
notify each other in writing if they acquire knowledge of any
infringement of any of the Products, Rights or Proprietary
Information. Licensor and Licensee shall take all steps required to
prevent alleged infringement of the Rights or Proprietary
Information.
4. Technology Transfer and Consulting
Licensor shall make available to Licensee Licensor's personnel who shall
assist in transfer of the Proprietary Information and Rights to Licensee to
enable Licensee to manufacture, use, sell and service the Products and to train
Licensee's employees to enable Licensee to manufacture, use, sell and service
the Products. Licensor shall also make available to Licensee, at Licensee's
reasonable request, additional consulting services. Licensor shall provide such
personnel at the standard rates provided hereinafter, plus travel and other
out-of-pocket expenses.
5. Royalties and Other Payments:
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5.1 Royalties. For and in consideration of the rights, continuing
obligations and licenses granted above, Licensee hereby agrees to
pay Licensor a royalty equal to the percent of the Net Sales of all
Products, including spares, therefore sold by Licensee in the
Territory indicated in Exhibit D attached. "Net Sales" means all
amounts received by Licensee or its sublicensees for any sale of any
Product, less the value of any Products supplied by Licensor, and
less the separately stated charges for (a) trade and cash discounts
actually allowed, (b) credits or refunds actually allowed for
damaged or returned goods (c) sales, excise and value added taxes,
and (d) packaging costs, insurance, transportation charges,
commissions and import duties. All computations relating to royalty
payments shall be made in accordance with generally accepted
accounting principles, applied consistently. Licensee shall obtain a
properly authenticated certificate evidencing payment of withholding
tax, which shall show the Licensor's name as the recipient of the
royalties and shall forward same to Licensor as promptly as
reasonably possible following royalty remittances. Payment of the
royalty to Licensor shall be upon Licensee's invoicing of sale to
its customer and not upon collection.
5.2 Other Payments. Licensee shall also pay Licensor for technology and
consulting services as provided for in Section 4. at the rate of
US$500.00 per day plus related expenses subject to annual
adjustment.
6. Reports; Inquiries; Promotion; Inspection:
6.1 Reports. Payments due Licensor under Section 5.1 hereof will be
calculated quarterly and shall be made in the currency of the
Licensor. Payment shall be made within sixty (60) days after the
last day of each calendar quarter. Accompanying each quarterly
payment, Licensee will deliver to Licensor a quarterly statement of
revenues received from the sale of all Products.
In addition, Licensee shall also when making its first payment hereunder
in any calendar year
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include and furnish to Licensor a full and true statement giving
particulars of all Products manufactured and sold by Licensee during
the preceding twelve-month period.
6.2 Inquiries from Territory. During the term of this Agreement,
Licensor agrees to forward to Licensee copies of all sales inquires
from prospective users and purchasers of Products located in, or
which involve shipment of Products to, the Territory. Licensee
agrees to forward to Licensor all sales inquiries received from
prospective users and purchasers of Products located outside of the
Territory or which involve shipment of Products outside of the
Territory. If because of the customer's situation, a sale is outside
the Territory and in a territory not otherwise exclusively licensed
by Licensor, Licensee must notify Licensor in advance and pay to
Licensor a fee of 5% of the Net Sales Price of the Product sold into
such territory, except in mutually agreed upon unusual or
extraordinary circumstances. Such 5% fee is in addition to the
royalties imposed in Section 5.1 of this Agreement. It is understood
that under no circumstances shall Licensee sell Products outside the
Territory and into a territory in which Licensor has entered into an
exclusive license.
6.3 Promotion of Products. Licensee shall exercise its best efforts to
promote the sale of Products in the Territory.
6.4 Inspection. Licensee and any sublicensees shall keep full and
accurate records of all Products manufactured and sold and give same
to any representative selected by Licensor, upon reasonable notice
and during normal business hours, but no more often than once each
year, complete access to inspect the records of Licensee on which
Net Sales are based. Licensee's determination of the payments due
Licensor under this Agreement will be deemed conclusive unless,
within twenty-four (24) months from the date of payment thereof,
Licensor notifies Licensee in writing of any error in such payments.
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Licensee shall permit Licensor at all reasonable times through its
duly appointed agent or agents to inspect manufacturing operations
used by Licensee in the manufacture of Products.
7. Confidentiality
7.1 Nondisclosure. Licensee agrees that it will keep confidential all
Proprietary Information and any other confidential business or
technical information disclosed to Licensee in furtherance of this
Agreement, and will insofar as it is reasonably practicable bind to
secrecy its officers, managers, and employees concerned in or who
may have knowledge of the Proprietary Information. The provisions of
this Section 7 shall survive termination of this Agreement for a
period of five (5) years.
7.2 Exclusion. Notwithstanding the above, the following materials will
not be deemed confidential:
(a) Information which at the time of disclosure is in the public
domain;
(b) Information which after disclosure is published or otherwise
becomes part of the public domain through no fault of
Licensee;
(c) Information which Licensee can show was received by it from a
third party who did not acquire it, directly or indirectly,
from Licensor; and
(d) Information which before the time of disclosure by Licensor to
Licensee was independently developed by Licensee, and which
can be shown by written documentation.
8. New Developments & Improvements
8.1 Developed by Licensor. If, during the term of this Agreement,
Licensor shall make any further improvements in Products and develop
any improvement in the Proprietary Information, then Licensor shall
notify Licensee of such improvements. Upon the request of Licensee,
Licensor
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shall provide Licensee with full information regarding such
improvements and Licensee shall be entitled to use the improvements
with all rights which are hereby granted to Licensee under Section 1
hereof.
8.2 Developed by Licensee. If, during the term of this Agreement,
Licensee shall make any improvements in the Products or develop any
improvements in the Proprietary Information, then:
(a) Licensee shall have the sole option of deciding whether to
apply for a patent. If it does, Licensor shall give all
necessary cooperation and assistance in preparing and
prosecuting Licensee's patent application. Upon issuance of a
patent, Licensor shall receive from Licensee a royalty-free
license (with the right to sublicense) to use the patent,
outside the Territory which is designated as exclusive to
Licensee, for the term of this Agreement.
(b) If Licensee decides not to file a patent application, Licensor
has the option to do so. In such event, all costs of obtaining
the patent and consequent royalty payments will be for the
account of the Licensor and Licensor will grant to Licensee a
royalty-free perpetual license to use the patent to
manufacture, use and sell Licensed Products, including the
right to sublicense, in the Territory which is designated as
exclusive to Licensee.
(c) If the improvements are not patentable, or both parties choose
not to patent them, Licensee agrees to submit to Licensor,
during the term of this Agreement, all available information
on the improvements, now or hereafter found, owned or
controlled by Licensee. Both Licensor and Licensee shall have
a perpetual royalty-free license to use all of these
improvements.
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9. No Contest; Use of Trademarks and Advertising Matter:
Licensee acknowledges Licensor's right to control the Proprietary
Information and the Rights, and will not at any time do or cause to be done any
act or thing contesting or in any way impairing Licensor's investment and rights
in such property. In accordance with Licensor's instructions, Licensee shall use
Licensor's trademarks in connection with Products it manufactures and sells
under this Agreement.
Licensee may use packaging, catalogs, labels, letterheads and
advertisements carrying or including the trademarks covered by this Agreement in
connection with the Products.
10. Term:
Except as provided for in Section 11, this Agreement shall begin as of the
date first written above, and shall end on September 30, 1998, provided that it
shall automatically be renewed and continue in full force and effect thereafter
from year to year, unless and until notice is given by Licensor or Licensee of
its intention to terminate this Agreement at the expiration of the original term
or any renewal term, such notice to be given at least sixty (60) days prior to
any such expiration date.
11. Termination:
11.1 For Breach. In the event either party hereto fails, refuses or
neglects to perform any obligation on its part under this Agreement,
or if any warranty or representation made by either party hereto
proves to be false or misleading in any material respect, the other
party may then terminate this Agreement upon sixty (60) days' prior
written notice, provided, however, that in the event the defaulting
party shall rectify such default within the notice period, this
Agreement shall remain in full force and effect. Any cancellation or
termination of this Agreement shall be without prejudice to any
other right of action or remedy for the recovery of royalties or for
the breach of any covenant herein contained.
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11.2 Other:
(a) In the event of compulsory or voluntary liquidation of
Licensee, or the appointment of a receiver; or in case
Licensee should make an assignment for the benefit of
creditors; or should Licensee go out of business; then in any
such event this Agreement shall automatically terminate.
(b) This Agreement may be terminated at the option of Licensor if
controlling interest in Licensee shall pass to any party or
parties not holding controlling interest at the date of
execution of this Agreement, unless written notice of such
change in structure or ownership is given to Licensor prior to
such change and is agreed to in writing by Licensor.
Controlling interest is defined as the ownership of 51% of the
voting stock of a corporation.
12. Effects of Termination
Upon termination of this Agreement for any reason:
(a) Licensee shall not thereafter seek or accept any additional orders
to manufacture or sell any Products; and
(b) Licensee will have the right to complete and sell or use all
Products, the production of which commenced prior to termination and
to sell or use all Products in its possession on the date of
termination.
(c) Licensee will be obligated to pay Licensor the royalties related to
any sales described in section 12 (b).
13. Force Majeure:
If, by reason of acts of God, natural events, accidents, war, governmental
controls or any cause beyond control of either party, performance of one or both
parties is prevented, then in such event
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performance by both parties hereunder shall be excused or deferred, as
appropriate, until the effects of such intervening cause have ended. Either
party has the right to terminate if a Force Majeure event remains in effect for
more than ninety (90) days.
14. Governing Law:
To the extent not prohibited by other applicable law, this Agreement is
made under the laws of Germany and shall be interpreted in accordance with such
laws.
15. Miscellaneous:
15.1 Entire Agreement; Amendments. This Agreement states the entire
agreement between the parties with respect to the Products and
Rights provided for herein. No amendment or modification of this
Agreement may be made except by an instrument in writing signed by
both parties.
15.2 Assignment. This Agreement may not be assigned in whole or in part
by either party without the written consent of the other, which such
consent should not be unreasonably withheld.
15.3 Notice. Any notice required or committed to be sent hereunder will
be deemed delivered five (5) days after the date mailed or otherwise
dispatched in the mail, postage prepaid, by registered, express or
certified mail, return receipt requested, or by a recognized private
express courier, to either party at the address listed above, or
such other address of which either party may so notify the other.
Notice will also be deemed given on the date notice is faxed to the
other party.
15.4 Legal Fees. In the event that any legal action, including
arbitration, is required in order to enforce or interpret any of the
provisions of this Agreement, the prevailing party in such action
shall recover all reasonable costs and expenses, including
attorneys' fees, incurred in connection
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therewith.
15.5 No Waiver; Headings. The failure of either party to enforce any
provision of this Agreement shall not be deemed a waiver of that or
any other provision of this Agreement. The sections and paragraphs
of this Agreement are for convenience only and will not be of any
effect in construing the meanings of such sections or paragraphs.
15.6 Severability. In the event any clause, section or obligation stated
herein is determined to be illegal, invalid or unenforceable in a
particular jurisdiction, then in that jurisdiction this Agreement
may be read and understood as not including such clause, section or
obligation, and the other clauses, sections and obligations will
remain in effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
Hosokawa Micron Corporation Hosokawa Bepex GmbH
(Licensor) (Licensee)
By: /s/ Yoshio Hosokawa By: /s/ D. Hummel
------------------------ ----------------
Name: Name:
Title: President Title: Geschaftsfuhrer
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EXHIBITS A and B
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron Corporation
and
Hosokawa Bepex GmbH
dated October 1, 1997
EXHIBIT A
Licensed Product(s):
Micron Agglomasters, AGM Series
EXHIBIT B
Proprietary Information and Rights:
All related Hosokawa Micron Corporation patents and trademarks registered
in the Territory with related know-how.
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EXHIBITS C and D
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron Corporation
and
Hosokawa Bepex GmbH
dated October 1, 1997
EXHIBIT C
Territory:
Exclusive Territory: Germany
Non-Exclusive Territory: All other European countries, Africa, Middle
East, India and all Asian countries west of India.
EXHIBIT D
Royalty Rate(s):
4%: Micron Agglomasters, AGM Series
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LICENSE AGREEMENT
This License Agreement, made with effect from the 1st day of
October, 1997, by and between Hosokawa Micron Corporation, a Japanese
corporation, with offices at 5-14, 2-chome, Kawaramachi, Chuo-ku Osaka 541,
Japan ("the Licensor") and Hosokawa Micron Australia Pty. Ltd., an Australian
corporation, with offices at 1 Toohey Road, Wetherill Park, NSW 2164, Australia
("the Licensee").
WITNESSETH
WHEREAS Licensor owns and possesses certain confidential technical
information, trade secrets and other data, including designs, drawings,
information, skills, know-how and test engineering, production, performance and
other technical data, customer lists and marketing information (hereinafter
collectively referred to as "Proprietary Information") relating to the
manufacture, sale and servicing of equipment, products and systems, which are
listed and described in Exhibit A, attached hereto and made a part hereof
(hereinafter collectively referred to as the "Products," which term includes any
and all such items and all component and accessories for replacement or
otherwise); and
WHEREAS Licensor owns or controls certain trademarks and patent rights, or
applications therefore, as such may be listed on the date hereof or from time to
time hereafter in Exhibit B attached hereto and made a part hereof (hereinafter
referred to as the "Rights"); and
WHEREAS Licensor and Licensee are desirous that Licensee should have the
right, privilege and license to manufacture, use and sell the Products based
upon and using such Proprietary Information and Rights in such territories and
countries and on an exclusive and non-exclusive basis as are listed on the date
hereof or from time to time hereafter in Exhibit C attached hereto and made a
part hereof
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(hereinafter referred to as the "Territory");
NOW THEREFORE, in consideration of the promises, covenants and
undertakings contained herein, it is mutually agreed as follows:
1. Grants of Licenses:
1.1 Grants. Licensor hereby grants to Licensee, and Licensee accepts,
the right, privilege and license to use all Proprietary Information
and Rights which Licensor presently possesses or which it may
hereafter possess for the purpose of manufacturing, using and
selling the Products in the Territory. Such grants shall either be
on an exclusive or non-exclusive basis for a particular country as
set forth in Exhibit C. Licensor reserves the right to license
future Proprietary Information and Rights at royalty rates different
from those set forth in Exhibit D.
1.2 Sublicenses. Licensee may enter into sublicenses of the Proprietary
Information and Right provided that the terms of such agreements are
at least as restrictive on the sublicensee as the terms of this
Agreement are restrictive on Licensee and provided that the
sublicensee shall not have the right to sublicense. Licensee shall
provide Licensor with a copy of any and all executed sublicense
agreements as soon as practicable after execution.
2. Supply of Information
Licensor will make available to Licensee and Licensee agrees to receive
during the term of the Agreement and all extensions thereof, such Proprietary
Information as may be necessary or appropriate to enable Licensee to
manufacture, use, sell and service the Products according to specifications and
quality substantially equivalent to the specifications and quality of Products
manufactured and sold by Licensor. Licensee will be required to pay for the
costs related to transfers of information.
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3. Representations
3.1 No Conflict. Licensor and Licensee warrant that they have full power
and authority to enter into this Agreement. Licensor represents and
warrants that it has not previously granted any rights with respect
to the Proprietary Information and Rights that are inconsistent
with, limit or affect Licensee's rights or Licensor's obligations
under this Agreement.
3.2 Sole Rights. Licensor warrants that it has such right, title and
interest in and to the Proprietary Information as to enable it to
vest in Licensee the right, privilege and licenses herein conveyed.
Licensor further warrants that it is not aware of any pending or
threatened litigation or claims regarding such rights, title and
interest, that it is not aware of any evidence that would render any
Rights invalid or unenforceable, and that it is not aware of any
evidence that would impair the value of any other part of the
Rights.
3.3 Infringement by Third Parties. Licensor and Licensee shall promptly
notify each other in writing if they acquire knowledge of any
infringement of any of the Products, Rights or Proprietary
Information. Licensor and Licensee shall take all steps required to
prevent alleged infringement of the Rights or Proprietary
Information.
4. Technology Transfer and Consulting
Licensor shall make available to Licensee Licensor's personnel who shall
assist in transfer of the Proprietary Information and Rights to Licensee to
enable Licensee to manufacture, use, sell and service the Products and to train
Licensee's employees to enable Licensee to manufacture, use, sell and service
the Products. Licensor shall also make available to Licensee, at Licensee's
reasonable request, additional consulting services. Licensor shall provide such
personnel at the standard rates provided hereinafter, plus travel and other
out-of-pocket expenses.
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5. Royalties and Other Payments:
5.1 Royalties. For and in consideration of the rights, continuing
obligations and licenses granted above, Licensee hereby agrees to
pay Licensor a royalty equal to the percent of the Net Sales of all
Products, including spares, therefore sold by Licensee in the
Territory indicated in Exhibit D attached. "Net Sales" means all
amounts received by Licensee or its sublicensees for any sale of any
Product, less the value of any Products supplied by Licensor, and
less the separately stated charges for (a) trade and cash discounts
actually allowed, (b) credits or refunds actually allowed for
damaged or returned goods (c) sales, excise and value added taxes,
and (d) packaging costs, insurance, transportation charges,
commissions and import duties. All computations relating to royalty
payments shall be made in accordance with generally accepted
accounting principles, applied consistently. Licensee shall obtain a
properly authenticated certificate evidencing payment of withholding
tax, which shall show the Licensor's name as the recipient of the
royalties and shall forward same to Licensor as promptly as
reasonably possible following royalty remittances. Payment of the
royalty to Licensor shall be upon Licensee's invoicing of sale to
its customer and not upon collection.
5.2 Other Payments. Licensee shall also pay Licensor for technology and
consulting services as provided for in Section 4. at the rate of
US$500.00 per day plus related expenses subject to annual
adjustment.
6. Reports; Inquiries; Promotion; Inspection:
6.1 Reports. Payments due Licensor under Section 5.1 hereof will be
calculated quarterly and shall be made in the currency of the
Licensor. Payment shall be made within sixty (60) days after the
last day of each calendar quarter. Accompanying each quarterly
payment, Licensee will deliver to Licensor a quarterly statement of
revenues received from the sale of all Products.
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In addition, Licensee shall also when making its first payment
hereunder in any calendar year include and furnish to Licensor a
full and true statement giving particulars of all Products
manufactured and sold by Licensee during the preceding twelve-month
period.
6.2 Inquiries from Territory. During the term of this Agreement,
Licensor agrees to forward to Licensee copies of all sales inquires
from prospective users and purchasers of Products located in, or
which involve shipment of Products to, the Territory. Licensee
agrees to forward to Licensor all sales inquiries received from
prospective users and purchasers of Products located outside of the
Territory or which involve shipment of Products outside of the
Territory. If because of the customer's situation, a sale is outside
the Territory and in a territory not otherwise exclusively licensed
by Licensor, Licensee must notify Licensor in advance and pay to
Licensor a fee of 5% of the Net Sales Price of the Product sold into
such territory, except in mutually agreed upon unusual or
extraordinary circumstances. Such 5% fee is in addition to the
royalties imposed in Section 5.1 of this Agreement. It is understood
that under no circumstances shall Licensee sell Products outside the
Territory and into a territory in which Licensor has entered into an
exclusive license.
6.3 Promotion of Products. Licensee shall exercise its best efforts to
promote the sale of Products in the Territory.
6.4 Inspection. Licensee and any sublicensees shall keep full and
accurate records of all Products manufactured and sold and give same
to any representative selected by Licensor, upon reasonable notice
and during normal business hours, but no more often than once each
year, complete access to inspect the records of Licensee on which
Net Sales are based. Licensee's determination of the payments due
Licensor under this Agreement will be deemed conclusive unless,
within twenty-four (24) months from the date of payment thereof,
Licensor notifies
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Licensee in writing of any error in such payments.
Licensee shall permit Licensor at all reasonable times through its
duly appointed agent or agents to inspect manufacturing operations
used by Licensee in the manufacture of Products.
7. Confidentiality
7.1 Nondisclosure. Licensee agrees that it will keep confidential all
Proprietary Information and any other confidential business or
technical information disclosed to Licensee in furtherance of this
Agreement, and will insofar as it is reasonably practicable bind to
secrecy its officers, managers, and employees concerned in or who
may have knowledge of the Proprietary Information. The provisions of
this Section 7 shall survive termination of this Agreement for a
period of five (5) years.
7.2 Exclusion. Notwithstanding the above, the following materials will
not be deemed confidential:
(a) Information which at the time of disclosure is in the public
domain;
(b) Information which after disclosure is published or otherwise
becomes part of the public domain through no fault of
Licensee;
(c) Information which Licensee can show was received by it from a
third party who did not acquire it, directly or indirectly,
from Licensor; and
(d) Information which before the time of disclosure by Licensor to
Licensee was independently developed by Licensee, and which
can be shown by written documentation.
8. New Developments & Improvements
8.1 Developed by Licensor. If, during the term of this Agreement,
Licensor shall make any further improvements in Products and develop
any improvement in the Proprietary Information, then
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Licensor shall notify Licensee of such improvements. Upon the
request of Licensee, Licensor shall provide Licensee with full
information regarding such improvements and Licensee shall be
entitled to use the improvements with all rights which are hereby
granted to Licensee under Section 1 hereof.
8.2 Developed by Licensee. If, during the term of this Agreement,
Licensee shall make any improvements in the Products or develop any
improvements in the Proprietary Information, then:
(a) Licensee shall have the sole option of deciding whether to
apply for a patent. If it does, Licensor shall give all
necessary cooperation and assistance in preparing and
prosecuting Licensee's patent application. Upon issuance of a
patent, Licensor shall receive from Licensee a royalty-free
license (with the right to sublicense) to use the patent,
outside the Territory which is designated as exclusive to
Licensee, for the term of this Agreement.
(b) If Licensee decides not to file a patent application, Licensor
has the option to do so. In such event, all costs of obtaining
the patent and consequent royalty payments will be for the
account of the Licensor and Licensor will grant to Licensee a
royalty-free perpetual license to use the patent to
manufacture, use and sell Licensed Products, including the
right to sublicense, in the Territory which is designated as
exclusive to Licensee.
(c) If the improvements are not patentable, or both parties choose
not to patent them, Licensee agrees to submit to Licensor,
during the term of this Agreement, all available information
on the improvements, now or hereafter found, owned or
controlled by Licensee. Both Licensor and Licensee shall have
a perpetual royalty-free license to use all of these
improvements.
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9. No Contest; Use of Trademarks and Advertising Matter:
Licensee acknowledges Licensor's right to control the Proprietary
Information and the Rights, and will not at any time do or cause to be done any
act or thing contesting or in any way impairing Licensor's investment and rights
in such property. In accordance with Licensor's instructions, Licensee shall use
Licensor's trademarks in connection with Products it manufactures and sells
under this Agreement.
Licensee may use packaging, catalogs, labels, letterheads and
advertisements carrying or including the trademarks covered by this Agreement in
connection with the Products.
10. Term:
Except as provided for in Section 11, this Agreement shall begin as of the
date first written above, and shall end on September 30, 1998, provided that it
shall automatically be renewed and continue in full force and effect thereafter
from year to year, unless and until notice is given by Licensor or Licensee of
its intention to terminate this Agreement at the expiration of the original term
or any renewal term, such notice to be given at least sixty (60) days prior to
any such expiration date.
11. Termination:
11.1 For Breach. In the event either party hereto fails, refuses or
neglects to perform any obligation on its part under this Agreement,
or if any warranty or representation made by either party hereto
proves to be false or misleading in any material respect, the other
party may then terminate this Agreement upon sixty (60) days' prior
written notice, provided, however, that in the event the defaulting
party shall rectify such default within the notice period, this
Agreement shall remain in full force and effect. Any cancellation or
termination of this Agreement shall be without prejudice to any
other right of action or remedy for the recovery of royalties or for
the breach of
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any covenant herein contained.
11.2 Other:
(a) In the event of compulsory or voluntary liquidation of
Licensee, or the appointment of a receiver; or in case
Licensee should make an assignment for the benefit of
creditors; or should Licensee go out of business; then in any
such event this Agreement shall automatically terminate.
(b) This Agreement may be terminated at the option of Licensor if
controlling interest in Licensee shall pass to any party or
parties not holding controlling interest at the date of
execution of this Agreement, unless written notice of such
change in structure or ownership is given to Licensor prior to
such change and is agreed to in writing by Licensor.
Controlling interest is defined as the ownership of 51% of the
voting stock of a corporation.
12. Effects of Termination
Upon termination of this Agreement for any reason:
(a) Licensee shall not thereafter seek or accept any additional orders
to manufacture or sell any Products; and
(b) Licensee will have the right to complete and sell or use all
Products, the production of which commenced prior to termination and
to sell or use all Products in its possession on the date of
termination.
(c) Licensee will be obligated to pay Licensor the royalties related to
any sales described in section 12 (b).
13. Force Majeure:
If, by reason of acts of God, natural events, accidents, war, governmental
controls or any cause
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beyond control of either party, performance of one or both parties is prevented,
then in such event performance by both parties hereunder shall be excused or
deferred, as appropriate, until the effects of such intervening cause have
ended. Either party has the right to terminate if a Force Majeure event remains
in effect for more than ninety (90) days.
14. Governing Law:
To the extent not prohibited by other applicable law, this Agreement is
made under the laws of Australia and shall be interpreted in accordance with
such laws.
15. Miscellaneous:
15.1 Entire Agreement; Amendments. This Agreement states the entire
agreement between the parties with respect to the Products and
Rights provided for herein. No amendment or modification of this
Agreement may be made except by an instrument in writing signed by
both parties.
15.2 Assignment. This Agreement may not be assigned in whole or in part
by either party without the written consent of the other, which such
consent should not be unreasonably withheld.
15.3 Notice. Any notice required or committed to be sent hereunder will
be deemed delivered five (5) days after the date mailed or otherwise
dispatched in the mail, postage prepaid, by registered, express or
certified mail, return receipt requested, or by a recognized private
express courier, to either party at the address listed above, or
such other address of which either party may so notify the other.
Notice will also be deemed given on the date notice is faxed to the
other party.
15.4 Legal Fees. In the event that any legal action, including
arbitration, is required in order to enforce or interpret any of the
provisions of this Agreement, the prevailing party in such action
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shall recover all reasonable costs and expenses, including
attorneys' fees, incurred in connection therewith.
15.5 No Waiver; Headings. The failure of either party to enforce any
provision of this Agreement shall not be deemed a waiver of that or
any other provision of this Agreement. The sections and paragraphs
of this Agreement are for convenience only and will not be of any
effect in construing the meanings of such sections or paragraphs.
15.6 Severability. In the event any clause, section or obligation stated
herein is determined to be illegal, invalid or unenforceable in a
particular jurisdiction, then in that jurisdiction this Agreement
may be read and understood as not including such clause, section or
obligation, and the other clauses, sections and obligations will
remain in effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
Hosokawa Micron Corporation Hosokawa Micron Australia Pty. Ltd.
(Licensor) (Licensee)
By: /s/ Yoshio Hosokawa By: /s/ W. Brame
----------------------- --------------------------------
Name: Name: W. Brame
Title: President Title: Managing Director
By: /s/ A. F. Boyce
--------------------------------
Name: A. F.Boyce
Title: Company Secretary
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EXHIBITS A and B
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron Corporation
and
Hosokawa Micron Australia Pty. Ltd.
dated October 1, 1997
EXHIBIT A
Licensed Product(s):
Micron Denspack
Micron Vacu-Jet, CVX Series
Micron Dryers, MDV, MDH, MDF Series
Micron Agglomasters, AGM Series
Micron Innomizer, INM Series
Mechanofusion system, AM, AM-F Series
Micron Jet T, MJ-T Series
Micron Separators, MS, MS-N Series
Micron Victory Mill, VP Series
Micron Fine Victory Mill, FVP Series
Micron Feather Mill, FM-S, FM-F Series
EXHIBIT B
Proprietary Information and Rights:
All related Hosokawa Micron Corporation patents and trademarks registered
in the Territory with related know-how.
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EXHIBITS C and D
to the
LICENSE AGREEMENT
By and Between
Hosokawa Micron Corporation
and
Hosokawa Micron Australia Pty. Ltd.
dated October 1, 1997
EXHIBIT C
Territory:
Exclusive Territory: Australia and New Zealand
Non-Exclusive Territory: None
EXHIBIT D
Royalty Rate(s):
4%: Micron Denspack
Micron Vacu-Jet, CVX Series
Micron Dryers, MDV, MDH, MDF Series
Micron Agglomasters, AGM Series
Micron Innomizer, INM Series
Mechanofusion system, AM, AM-F Series
Micron Jet T, MJ-T Series
2.5%: Micron Separators, MS, MS-N Series
Micron Victory Mill, VP Series
Micron Fine Victory Mill, FVP Series
Micron Feather Mill, FM-S, FM-F Series
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TRADEMARK LICENSING AGREEMENT
THIS AGREEMENT is entered into the 1st day of October, 1997, by and
between Hosokawa Micron Corporation, a Japanese corporation, with offices
at 5-14, 2-chome, Kawaramachi, Chuo-ku Osaka 541, Japan ("HMC") and
Hosokawa Micron International Inc., a Delaware corporation, with offices
at 780 Third Avenue, New York, New York 10017 ("HMII").
W I T N E S S E T H:
WHEREAS, HMC owns the Hosokawa Micron tradename and logo (the "Trademarks");
WHEREAS, HMII desires to use the Trademarks within North, Central and South
America (the "Territory");
WHEREAS, HMC is willing to grant to HMII the right to use the Trademarks subject
to the terms and conditions of this Agreement, and HMII is willing to
accept such rights and obligations;
NOW, THEREFORE, in consideration of the mutual agreements, the
parties hereby agree as follows.
ARTICLE I
GRANT OF RIGHT TO USE TRADEMARKS
Section 1.1. Grant by Licensor. HMC grants to HMII the exclusive
right to use the Trademarks, as listed in Exhibit A in the Territory.
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Section 1.2. Sublicenses and Transfers. Except to a 50% or more owned
affiliate, HMII shall not assign, sublicense, make available, or otherwise
transfer any right to use or otherwise enjoy the Trademarks without the written
consent of HMC.
ARTICLE II
ROYALTY PAYMENT
Section 2.1. Compensation. HMII shall pay to HMC a royalty equal to
$50,000 per year plus governmental costs to maintain Trademarks in the
Territory.
Section 2.2. Payment and Accounting. Royalties due to HMC shall be due
and payable by HMII semi-annually within thirty (30) days after March 31st and
September 30th each year. HMII shall withhold the necessary withholding tax and
forward to HMC the tax documentation supporting such royalty payment and related
withholding tax.
Section 2.3. Currency. All royalties due under this Agreement shall be
payable in Japanese yen.
ARTICLE III
WARRANTIES AND REPRESENTATIONS
Section 3.1. HMC warrants that:
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a. It owns the exclusive right, title, and interest in the Trademark;
b. The Trademark is valid and enforceable;
c. Use of the Trademark does not infringe any rights of Third Parties;
and
d. It has the right and authority to enter into this Agreement.
Section 3.2. HMII warrants that it has the right and authority to enter
into this Agreement.
ARTICLE IV
TRADEMARK OWNERSHIP
HMII acknowledges HMC's exclusive right, title, and interest in the
Trademarks. HMII shall not at any time do or cause to be done, or fail to do or
cause to be done, any act or thing, directly or indirectly, contesting or in any
way impairing HMC's right, title, or interest in the Trademark. Every use of the
Trademark by HMII shall inure to the benefit of HMC.
ARTICLE V
TERM AND TERMINATION
Section 5.1. Term. This Agreement shall remain in effect for a period of
three (3) years from October 1, 1997, provided that it shall automatically be
renewed and continue in full force and effect thereafter from year to year,
unless and until notice is given by HMC or HMII of its intention to terminate
this Agreement at the expiration of the original term or any renewal term, such
notice
<PAGE>
to be given at least sixty (60) days prior to any such expiration date.
Section 5.2. Termination. In the event either party hereto fails, refuses
or neglects to perform any obligation on its part under this Agreement, or if
any warranty or representation made by either party hereto proves to be false or
misleading in any material respect, the other party may then terminate this
Agreement upon sixty (60) days prior written notice, provided, however, that in
the event the defaulting party shall rectify such default within the notice
period, this Agreement shall remain in full force and effect. Any cancellation
or termination of this Agreement shall be without prejudice to any other right
of action or remedy for the recovery of royalties or for the breach of any
covenant herein contained.
a. In the event of compulsory or voluntary liquidation of HMII, or the
appointment of a receiver; or in case HMII should make an assignment for
the benefit of creditors; or should HMII go out of business; then in any
such event this Agreement shall automatically terminate.
Section 5.3. Effects of Termination. On termination of this Agreement for
any reason:
a. HMC shall have the right to retain any sums already paid by HMII under
this Agreement, and HMII shall pay all sums accrued that are then due
under this Agreement; and
b. HMII shall discontinue all use of any Trademark and shall have no further
right, title, or interest in any Trademark.
143
<PAGE>
c. HMII must remove Trademark from everything in its possession on the date
of termination.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Notices. Any notice required will be deemed delivered five
(5) days after the date mailed or otherwise dispatched in the mail, postage
prepaid, by registered, express or certified mail, return receipt requested, or
by a recognized private express courier, to either party at the address listed
above, or such other address of which either party may so notify the other.
Notice will also be deemed given on the date notice is faxed to the other party.
Section 6.2. Force Majeure. If, by reason of acts of God, natural events,
accidents, war, government controls or any cause beyond control of either party,
performance of one or both parties is prevented, then in such event performance
by both parties hereunder shall be excused or deferred, as appropriate, until
the effects of such intervening cause have ended. Either party has the right to
terminate if a Force Majeure event remains in effect for more than ninety (90)
days.
Section 6.3. Amendment. No change, modification, or amendment of this
Agreement shall be valid or binding on the parties unless such change or
modification shall be in writing signed by the party or parties against whom the
same is sought to be enforced.
Section 6.4. Remedies Cumulative. The remedies of the parties under this
Agreement are cumulative and shall not exclude any other remedies to which the
party may be lawfully entitled.
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<PAGE>
Section 6.5. Further Assurances. Each party hereby covenants and agrees
that it shall execute and deliver such deeds and other documents as may be
required to implement any of the provisions of this Agreement.
Section 6.6. No Waiver. The failure of any party to insist on strict
performance of a covenant hereunder or of any obligation hereunder shall not be
a waiver of such party's right to demand strict compliance therewith in the
future, nor shall the same be construed as a novation of this Agreement.
Section 6.7. Integration. This Agreement constitutes the full and
complete agreement of the parties with regard to the subject matter of this
Agreement.
Section 6.8. Captions. Titles or captions of articles and paragraphs
contained in this Agreement are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend, or describe the scope of this
Agreement or the intent of any provision hereof.
Section 6.9. Counterparts. This Agreement may be executed in multiple
copies, each of which shall for all purposes constitute an Agreement, binding on
the parties, and each partner hereby covenants and agrees to execute all
duplicates or replacement counterparts of this Agreement as may be required.
Section 6.10. Applicable Law. This Agreement shall be governed by and
construed in
145
<PAGE>
accordance with the laws of the state of New York, USA.
Section 6.11. Severability. In the event any provision, clause, sentence,
phrase, or word hereof, or the application thereof in any circumstances, is held
to be invalid or unenforceable, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder hereof, or of the
application of any such provision, sentence, clause, phrase, or word in any
other circumstances.
Section 6.12. Costs and Expenses. Unless otherwise provided in this
Agreement, each party shall bear all fees and expenses incurred in performing
its obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first written above by their duly authorized officers.
Hosokawa Micron Corporation Hosokawa Micron International Inc.
(Licensor) ("HMII") (Licensee) ("HMII")
By: /s/ Yoshio Hosokawa By: /s/ William J. Brennan
------------------------ -------------------------------
Name: Name: William J. Brennan
Title: President Title: E.V.P.
<PAGE>
EXHIBIT A
TRADEMARKS
HOSOKAWA MICRON U.S. Patent and Trademark Office
Reg. No. 1,303,472 &
Reg. No. 1,312,202
146
ASIAN MARKETING AGREEMENT
Agreement entered into with effect from April 1, 1995 by and between,
Hosokawa Micron Corporation, a Japanese corporation, with an office at 5-14,
2-chome, Kawaramachi Chuo-ku, Osaka 541, Japan (hereinafter referred to as
"HMC") and HMI Unternehmens-Holding GmbH, a German limited liability company,
with its offices at Peter-Dorfler-Strasse 13-15, 86199 Augsburg, Germany
(hereinafter referred to as "HOLDING"), representing Hosokawa Alpine AG, a
German stock corporation with its offices at Peter-Dorfler-Strasse 13-15, 86199
Augsburg, Germany and Hosokawa Bepex GmbH, a German limited liability company
with its offices at Daimlerstrasse 8, 74211 Leingarten, Germany.
WHEREAS, HOLDING is engaged indirectly through subsidiaries in the
manufacture and sale of a wide range of powder processing equipment and
systems and plastics extrusion equipment and systems and spare and
replacement parts for these products (hereinafter referred to as
"Products"); and,
WHEREAS, in accordance with numerous agreements and arrangements, HMC is
responsible for the sale of Products in Asia, defined to include all
countries east of India, including China and the new republics of the
former USSR, but excluding only Japan, Australia and New Zealand; and,
WHEREAS, HMC, over the years, has established a significant presence in
Asia through the HMC International Sales Department, which department is
engaged in the marketing of products and services manufactured by HMC;
and,
WHEREAS, HMC has been engaged, to a significantly lesser than
anticipated extent, in the promotion of Products due to the fact that
income resulting from the existing agreements and arrangements have not
justified additional market penetration expenses by HMC; and
WHEREAS, HOLDING recognizes that additional Asian market opportunities
may exist, wishes to expand the sales of Products in Asia and is
prepared to make additional market penetration investments; and,
Page 1 of 3
<PAGE>
WHEREAS, HOLDING wishes to more fully capitalize on the marketing
expertise and presence of HMC's International Sales Department (ISD), and HMC
has agreed to place this department at the disposal HOLDING to further sales of
Products in Asia; and,
WHEREAS, HOLDING has agreed to accept the HMC offer and use the ISD to
advance its sales objectives,
NOW WHEREFORE, in consideration of the mutual agreements, consideration
and understands among the parties, it is agreed that:
1. All agreements, arrangements, understandings and policies, including,
but not limited to, all licensing agreements, between HMC and
HOLDING and their respective divisions and subsidiaries, which
prohibit, restrict, limit or otherwise control or interfere with the
sale and marketing by HOLDING of Products in Asia are suspended.
2. HOLDING through its respective subsidiaries, may engage directly in
the marketing and sale of Products in Asia, utilizing the services of
ISD and any other parties.
3. ISD will provide approximately 20% of its facilities and capacity for
the promotion of Products. In consideration for the suspension of all
HMC rights in Asia and the additional efforts of ISD, it is agreed
that HOLDING shall pay to HMC twenty percent (20%) of the HMC fiscal
year costs for the ISD operation, but not to exceed US dollars four
hundred thousand ($400,000). Cost is to be determined in accordance
with generally accepted US accounting principles consistently applied.
4. Payment shall be made to HMC in US dollars within 60 days after the
end of the fiscal periods ending March 31 and September 30, and based
on invoices with supporting documentation provided by HMC. HOLDING and
HMC, shall provide whatever information is necessary to accurately
reflect invoice amounts, as the parties may reasonably request, and,
each party shall maintain such records and supporting information for
a period of not less than two years, during which ime any party, at
their expense, is free to conduct, or have conducted, an audit of any
other
Page 2 of 3
<PAGE>
party during regular business hours and upon not less than 30 days
notice.
5. This Agreement shall be effective from April 1, 1995 and shall
continue in effect through September 30, 1995 and shall
automatically be renewed for six-month terms unless cancelled by
either party upon not less than thirty (30) days written notice
prior to any anniversary of the Agreement.
6. This Agreement is in the English language and all invoices and other
documentation provided to any of the parties to this Agreement shall
be in the English language.
7. This Agreement shall be governed by and interpreted under the laws
of Germany and all parties agree to the jurisdiction of the courts
of Augsburg, Germany to resolve any disputes.
IN WITNESS WHEREFORE the parties have executed this Agreement on the
26th day of April, 1995, but with effect from the date above first written.
HOSOKAWA MICRON CORPORATION
(HMC)
By /s/ Koichiro Miyoshi
HMI UNTERNEHMENS-HOLDING GmbH
(HOLDING)
By /s/ Isao Sato
Paqe 3 of 3
<PAGE>
ASIAN MARKETING AGREEMENT
Agreement entered into with effect from October 1, 1994 by and among,
Hosokawa Micron Corporation, a Japanese corporation, with an office at 5-14,
2-chome, Kawaramachi Chuo-ku, Osaka 541, Japan (hereinafter referred to as
"HMC"), Hosokawa Micron International Inc, a Delaware corporation, with an
office at 780 Third Avenue, New York, New York USA (hereinafter referred to as
"HMII") and Hosokawa Micron International BV, a Dutch corporation, with an
office at World Trade Canter, Strawinskylaan 249, Amsterdam, The Netherlands
(hereinafter referred to as "HMI BV").
WHEREAS, HMII is engaged directly and indirectly through divisions and
subsidiaries in the manufacture and sale of a wide range of powder
processing equipment and systems, air pollution control equipment and
systems, filter media products for the air pollution control OEM and
after markets and plastics extrusion equipment and systems and spare
and replacement parts for these products (hereinafter referred to as
"Products"); and,
WHEREAS, HMI BV is engaged indirectly through numerous subsidiaries in
the manufacture and sale of Products; and
WHEREAS, in accordance with numerous agreements and arrangements,
HMC is responsible for the sale of Products in Asia, defined to
include all countries east of India, including China and the new
republics of the former USSR, but excluding only Japan, Australia and
New Zealand; and,
WHEREAS, HMC, over the years, has established a significant presence
in Asia through the HMC International Sales Department, which
department is engaged in the marketing of products and services
manufactured by HMC and to a significantly lesser extent, in the
promotion of Products; and,
WHEREAS, HMII and HMI BV wish to attempt to directly expand the sales
of Products in Asia, having seen that the current arrangements do not
appear to have optimized market penetration; and,
Page 1 of 4
<PAGE>
WHEREAS, HMC recognizes that additional Asian market opportunities
may exist and wishing to more fully capitalize on the marketing
expertise and presence of its International Sales Department (ISD),
wants to encourage sales of HMII and HMI BV Products in Asia, has
agreed to place this department at the disposal of HMII and HMI BV
to further sales of Products in Asia; and,
WHEREAS, HMII and HMI BV have agreed to accept the HMC offer and
use the ISD to advance their sales objectives,
NOW WHEREFORE, in consideration of the mutual agreements,
consideration and understands among the parties, it is agreed that:
1. All agreements, arrangements, understandings and policies,
including, but not limited to, all licensing agreements, among
HMC, HMII, and HMI BV and their respective divisions and
subsidiaries, which prohibit, restrict, limit or otherwise
control or interfere with the sale and marketing by HMII and
HMI BV of Products in Asia are suspended.
2. HMII and HMI BV directly, and through their respective
divisions and subsidiaries, may engage directly in the marketing
and sale of Products in Asia, utilizing the services of ISD and
any other parties, without the need to obtain any approvals or
consents from HMC.
3. ISD will provide approximately 300% of its facilities and
capacity for the promotion of Products. In consideration for the
suspension of all HMC rights in Asia, it is agreed that HMII
and HMI BV shall pay to HMC thirty percent (30%) of the HMC
fiscal year costs for the ISD operation, but not to exceed US
dollars six hundred thousand ($600,000). Cost is to be determined
in accordance with generally accepted US accounting principles
consistently applied.
4. Payment of this fee shall be apportioned between HMII and HMI
BV, using a formula of combined total HMII and HMI BV
division and subsidiary sales over sales for HMI BV and its
directly and indirectly owned subsidiaries for HMI BV and
combined total HMII and HMI BV division and subsidiary sales
over sales for HMII and its divisions and
Page 2 of 4
<PAGE>
selected subsidiaries, including only sales of Hosokawa Bepex
Corp, Hosokawa Americas Inc., and Hosokawa Micron Limited of
Canada, for HMII multiplied by thirty percent of the cost of ISD,
not to exceed six hundred thousand dollars ($600,000).
Payment shall be made to HMC in US dollars within 60 days after
the end of the fiscal periods ending March 31 and September 30,
and based on invoices with supporting documentation provided by
HMC. HMII, HMI BV, and HMC, shall provide whatever other
information is necessary to accurately reflect invoice amounts,
as the parties may reasonably request, and, each party shall
maintain such records and supporting information for a period of
not less than two years, during which time any party, at their
expense, is free to conduct, or have conducted, an audit of any
other party during regular business hours and upon not less than
30 days notice. Notwithstanding the above, in order to compensate
HMC for the initial out-of-pocket costs to implement this
arrangement, during the first year of this Agreement, HMII and
HMI BV agree to the invoice of five hundred thousand dollars
($500,000) of the annual fee for the period ending March 31,
1995, with the balance of the first year fee to be invoiced at
September 30, 1995.
5. HMII and HMI BV shall be credited with all amounts paid or for
which they are liable for activities engaged in by HMII and HMI
BV and their listed divisions and subsidiaries under any and all
of the agreements, arrangements, and undertakings which are
suspended, under terms of this Agreement, which liabilities were
incurred for transactions effected on or after, October 1, 1994.
6. This Agreement shall be effective from October 1, 1994 and shall
continue in effect for the one-year period ending on September
30, 1995 and shall automatically be renewed for one-year terms
unless cancelled by either party upon not less than thirty (30)
days written notice prior to any anniversary of the Agreement.
7. This Agreement is in the English language and all invoices and
other documentation provided to any of the parties to this
Agreement shall be in the English language.
Page 3 of 4
<PAGE>
8. This Agreement shall be governed by and interpreted under the
laws of the State of New York and all parties agree to the
jurisdiction of the courts of New York to resolve any disputes.
IN WITNESS WHEREFORE the parties have executed this Agreement on the
26th day of April, 1995, but with effect from the date above first written.
HOSOKAWA MICRON CORPORATION
(HMC)
By /s/ Koichiro Miyoshi
HOSOKAWA MICRON INTERNATIONAL INC.
(HMII)
By /s/ William Brennan
HOSOKAWA MICRON INTERNATIONAL B.V.
(HMI BV)
By /s/ Isao Sato
Page 4 of 4
EXECUTION COPY
LETTER OF CREDIT AGREEMENT
BETWEEN
HOSOKAWA MICRON INTERNATIONAL INC.
AS ACCOUNT PARTY
AND
THE MITSUBISHI BANK, LIMITED, NEW YORK BRANCH
AS ISSUING BANK
DATED AS OF DECEMBER 16, 1991
U.S. $75,000,000
RELATING TO HOSOKAWA MICRON INTERNATIONAL INC.
Commercial Paper Program
<PAGE>
ARTICLE 1 DEFINITIONS ..................................................... 1
ARTICLE 2 COMMERCIAL PAPER AND LETTER OF CREDIT OPERATIONS ................. 5
Section 2.1 Commercial Paper Notes .................................... 5
Section 2.2 Procedure for Issuance of Commercial Paper Notes .......... 5
Section 2.3 Accounts and Payment of Commercial Paper Notes ............ 6
Section 2.4 Issuance of Letter of Credit .............................. 7
Section 2.5 Expiration of Letter of Credit ............................ 8
Section 2.6 Method of Payment ......................................... 8
Section 2.7 Commercial Paper Support Fee .............................. 8
Section 2.8 Increased Costs ........................................... 9
Section 2.9 Company's Obligations Unconditional ....................... 10
Section 2.10 Waivers .................................................. 10
ARTICLE 3 EXPIRATION, TERMINATION OR SUSPENSION ............................ 10
Section 3.1 Expiration Date ........................................... 10
Section 3.2 Suspension of the Issuance of Commercial Paper
Notes ..................................................... 11
ARTICLE 4 REPRESENTATIONS AND WARRANTIES ................................... 12
Section 4.1 Organization, Corporate Powers ............................ 12
Section 4.2 Corporate Authority, Violation of Laws, Breach of
Agreements ................................................ 12
Section 4.3 Government Approvals ...................................... 13
Section 4.4 Valid and Binding Obligations ............................. 13
Section 4.5 Litigation . . . .......................................... 13
Section 4.6 Accuracy of Information ................................... 13
Section 4.7 Accuracy of Representations and Warranties ................ 14
Section 4.8 Investment Company . . .................................... 14
Section 4.9 Compliance with Laws . .................................... 14
Section 4.10 ERISA ..................................................... 14
Section 4.11 Taxes ..................................................... 14
Section 4.12 Financial Statements ...................................... 14
Section 4.13 No Materially Adverse Facts, Events, Conditions ........... 15
Section 4.14 Pari Passu ................................................ 15
ARTICLE 5 CONDITIONS PRECEDENT . ........................................... 15
Section 5.1 No Default ................................................ 15
Section 5.2 Certificate ............................................... 15
Section 5.3 Company's Supporting Documents ............................ 15
Section 5.4 Bank's Supporting Documents ............................... 16
Section 5.5 Dealer's Documents ........................................ 17
ARTICLE 6 AFFIRMATIVE COVENANTS ........................................... 17
<PAGE>
Section 6.1 Payment of Taxes .......................................... 17
Section 6.2 Preservation of Corporate Existence ....................... 17
section 6.3 Compliance with Laws ...................................... 17
Section 6.4 Inspection Rights ......................................... 18
Section 6.5 Keeping of Records and Books of Account ................... 18
Section 6.6 Maintenance of Approvals, Filings and
Registrations .......................................... 18
Section 6.7 Reporting Requirements .................................... 18
Section 6.8 Indemnification ........................................... 19
Section 6.9 Securities Act ............................................ 21
Section 6.10 Compliance with Agreements ................................ 21
Section 6.11 Dealer .................................................... 21
Section 6.12 Further Assurances ........................................ 21
ARTICLE 7 NEGATIVE COVENANTS ............................................... 21
Section 7.1 Use of Proceeds ........................................... 21
Section 7.2 Amendment of Depositary Agreement ......................... 21
Section 7.3 Sales, Mergers, Etc ....................................... 21
Section 7.4 Offering Memorandum ....................................... 21
Section 7.5 Investment Company Act .................................... 22
Section 7.6 Margin Stock .............................................. 22
ARTICLE 8 DEFAULTS ......................................................... 22
ARTICLE 9 MISCELLANEOUS .................................................... 24
Section 9.1 Notices ................................................... 24
Section 9.2 Survival and Termination of Agreement ..................... 25
Section 9.3 Fees and Expenses of the Bank ............................. 25
Section 9.4 Applicable Law ............................................ 25
Section 9.5 Modification of Agreement ................................. 25
Section 9.6 Non-Waiver of Rights by the Bank .......................... 26
Section 9.7 Set-off ................................................... 26
Section 9.8 Counterparts .............................................. 26
Section 9.9 Severability .............................................. 26
<PAGE>
LETTER OF CREDIT AGREEMENT
LETTER OF CREDIT AGREEMENT dated as of December 16, 1991 between
Hosokawa Micron International Inc., a Delaware corporation, having an office at
780 Third Avenue, New York, New York 10017 (the "Company"), and The Mitsubishi
Bank, Limited, New York Branch, a bank licensed under the laws of the State of
New York, having an office at 225 Liberty Street, Two World Financial Center,
New York, New York 10281 (the "Bank").
RECITALS
The Company desires to sell its Commercial Paper Notes in the United
States Commercial Paper market in an aggregate Face Amount not in excess of
$75,000,000 at any time Outstanding. The Bank, subject to the terms and
conditions hereinafter set forth, is willing to issue its Letter of Credit to
provide for the repayment of Commercial Paper Notes outstanding from time to
time. The proceeds from the sale of the Commercial Paper Notes will be used to
reimburse the Bank for drawings made under its Letter of Credit and for the
general corporate purposes (including but not limited to acquisition financing)
of the Company.
Accordingly, the Company and the Bank hereby agree as follows:
ARTICLE 1
DEFINITIONS
The following terms as used in this Agreement shall have the following
meanings, unless the context otherwise requires (where applicable, such meanings
to be equally applicable to both the singular and plural forms of the terms
defined).
"AGREEMENT" shall mean this Letter of Credit Agreement between the
Company and the Bank, as the same from time to time may be extended, amended,
supplemented, waived or modified.
"BANK" shall have the meaning set forth in the heading of this
Agreement.
"BANK'S ACCOUNT" shall mean the Bank's account maintained with the
Depositary and described in Section 3(c) of the Depositary Agreement.
"BOOK-ENTRY NOTE" shall have the meaning set forth in Section 1(a) of
the Depositary Agreement.
<PAGE>
"BUSINESS DAY" shall mean a day other than a Saturday or a Sunday or
other day on which commercial banks are authorized or required to close in New
York City.
"CERTIFICATED NOTE" shall have the meaning set forth in Section 1(a) of
the Depositary Agreement.
"CHARGE" shall have the meaning set forth in Section 2(a) of the
Depositary Agreement.
"COMMERCIAL PAPER NOTES" shall mean the short-term promissory notes of
the Company issued pursuant to the terms and conditions of this Agreement and
the Depositary Agreement defined in the Section 1 of the Depositary Agreement.
"COMMERCIAL PAPER SUPPORT FEE" shall have the meaning set forth in
Section 2.7 of this Agreement.
"COMMITMENT" shall mean Seventy-Five Million Dollars ($75,000,000).
"COMPANY" shall have the meaning set forth in the heading of this
Agreement.
"COMPANY OFFICIAL" shall mean the President or any Vice President of
the Company or any other officer or director of the Company designated in
writing to the Bank by the President of the Company.
"COMPANY'S ORDINARY DEPOSIT ACCOUNT" shall mean the Company's ordinary
deposit account maintained with the Bank and referred to in Section 3(a) of the
Depositary Agreement.
"CREDIT EVENT" shall have the meaning set forth in Article 5 of this
Agreement.
"DEALER" shall mean Merrill Lynch Money Markets Inc. or any other
nationally recognized commercial paper dealer or dealers designated by the
Company from time to time to act as such in connection with the issuance of the
Commercial Paper Notes.
"DEALER AGREEMENT" shall mean the agreement between the Company and the
Dealer pursuant to which the Company has authorized the Dealer to act as such in
connection with the issuance of the Commercial Paper Notes.
"DEPOSITARY" shall mean The Bank of Tokyo Trust company, a trust
company organized under the laws of New York, and its successors and assigns as
permitted under the Depositary Agreement.
"DEPOSITARY AGREEMENT" shall mean the Depositary Agreement dated the
date hereof among the Depositary, the Company and the Bank substantially in the
form of EXHIBIT B to this Agreement, as
2
<PAGE>
the same from time to time may be extended, amended, supplemented, waived or
modified.
"DISCOUNT" shall mean, with respect to a Commercial Paper Note, the
difference between the Face Amount of such Commercial Paper Note and the amount
of the proceeds from the sale of such Commercial Paper Note received by the
Company (after deduction of the Dealer's commission).
"DOLLARS" AND "$" shall mean lawful money of the United States of
America.
"DTC" shall mean The Depository Trust Company, a national clearinghouse
for the settlement of securities transactions, incorporated under the laws of
the State of New York.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA AFFILIATE" shall mean any corporation, trade or business that is
(i) a member of the same controlled group of corporations (within Section 414(c)
of the Internal Revenue Code) as the the Company or (ii) under common control
(within the meaning of Section 414(c) of the Internal Revenue Code) with the
Company.
"EVENT OF DEFAULT" shall mean any of the Events of Default described in
Article 8 of this Agreement.
"EXPIRATION DATE" shall have the meaning set forth in Section 3.1 of
this Agreement.
"FACE AMOUNT" shall mean, when used with reference to Commercial Paper
Notes outstanding, the face amount stated therein.
"FEDERAL BANKRUPTCY CODE" shall mean the United States Bankruptcy Code
codified at 11 U.S.C. Section 101 ET SEQ. as enacted by the Bankruptcy Reform
Act of 1978, as the same may be amended from time to time.
"FINANCING DOCUMENTS" shall mean this Agreement, the Depositary
Agreement, the Commercial Paper Notes, the Master Note, the Dealer Agreement,
and each other document, agreement, instrument or certificate delivered by or on
behalf of the Company in connection with the transactions contemplated by this
Agreement and the other Financing Documents.
"FIRST CREDIT EVENT" shall have the meaning set forth in Article 5 of
this Agreement.
"GENERAL ACCOUNT" shall have the meaning set forth in Section 5.3(a) of
this Agreement.
3
<PAGE>
"GUARANTOR" shall mean Hosokawa Micron Corporation, a Japanese
corporation.
"GUARANTY" shall mean the irrevocable and unconditional guaranty of the
Guarantor in favor of the Bank guaranteeing the payment when due of all amounts
payable by the Company under this Agreement.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
"LETTER OF CREDIT" shall mean the irrevocable letter of credit of the
Bank substantially in the form of EXHIBIT A to this Agreement, as such letter of
credit may be amended from time to time.
"LIABILITIES" shall have the meaning set forth in Section 6.8 of this
Agreement.
"MASTER NOTE" shall mean the global security in substantially the form
of Exhibit A attached to the Depositary Agreement to be delivered to the
Depositary as custodian and agent for DTC and recorded in the book-entry system
maintained by DTC.
"MULTIEMPLOYER PLAN" shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Company or
any ERISA Affiliate and which is covered by Title IV of ERISA.
"OUTSTANDING" shall mean, with respect to Commercial Paper Notes, all
Certificated Notes issued and authenticated and all Book-Entry Notes for which
issuance instructions have been entered in DTC's book-entry system pursuant to
the Depositary Agreement, other than those Commercial Paper Notes which have
been paid in full or for the payment of which funds equal to the Face Amount
thereof have been deposited in the Special Account or which are no longer
entitled to the benefit of the Letter of Credit and, with to respect to
Unreimbursed Drawings, all Unreimbursed Drawings less the principal amount of
such Unreimbursed Drawings which have been paid by the Company.
"PARTICIPANT" shall mean any Person which has acquired an interest in
the Bank's rights and obligations hereunder and under the Letter of Credit.
"PERSON" shall mean an individual, corporation, partnership, joint
venture, trust or unincorporated organization, or a government or any agency or
political subdivision thereof.
"PGBC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
4
<PAGE>
"PLAN" shall mean an employee benefit or other plan established or
maintained by the Company or any ERISA Affiliate and which is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"PRIME RATE" shall mean the rate publicly announced by the Bank at its
New York Branch from time to time as its prime commercial lending rate, each
change in such rate to be effective as of the opening of business on the day
such change occurs, which rate may not be the lowest rate of interest charged by
the Bank to its most creditworthy customers.
"SEC" shall mean the Securities and Exchange Commission of the United
States of America or any successor thereto.
"SECURITIES ACT" shall have the meaning set forth in Section 5.4(d) of
this Agreement.
"SPECIAL ACCOUNT" shall have the meaning set forth in Section 2.3(b) of
this Agreement.
"UNREIMBURSED DRAWING" shall have the meaning set forth in Section
2.3(c) of this Agreement.
ARTICLE 2
COMMERCIAL PAPER AND LETTER OF CREDIT OPERATIONS
Section 2.1 COMMERCIAL PAPER NOTES. The Company proposes to sell
Commercial Paper Notes in the United States commercial paper market. In support
of the Commercial Paper Notes, the Bank hereby agrees, subject to the terms and
conditions hereof, to issue the Letter of Credit to the Depositary as fiduciary
on behalf of the owners of Commercial Paper Notes to provide funds for the
payment of Commercial Paper Notes at their maturity.
SECTION 2.2 PROCEDURE FOR ISSUANCE OF COMMERCIAL PAPER NOTES
(a) The Company shall from time to time, in its discretion,
execute Certificated Notes and deliver them to the Depositary for for
completion, authentication and delivery in accordance with the terms of the
Depositary Agreement and, when the DTC, book-entry system is used for Commercial
Paper Notes, the Company shall have delivered to the Depositary as the custodian
and agent for DTC the Master Note. In no event shall Commercial Paper Notes be
issued after the date fifteen days before the Expiration Date or if the
Depositary would be prohibited from authenticating and delivering or entering
issuance instructions in DTC's book-entry system with respect to such Commercial
Paper Notes pursuant to Section 1 of the Depositary Agreement, or if the
effective rate of interest thereon would be in excess of the maximum permitted
by applicable law.
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(b) Upon notice from the Bank pursuant to Section 3.2, the Company
shall immediately cease issuing Commercial Paper Notes.
Section 2.3 ACCOUNTS AND PAYMENT OF COMMERCIAL PAPER NOTES
(a) GENERAL ACCOUNT. As provided in Section 3(a) of the Depositary
Agreement, a segregated special purpose account shall be maintained with the
Depositary designated the "Mitsubishi Bank General Account" (hereinafter called
the "GENERAL ACCOUNT") and from time to time the Company shall cause funds to be
deposited therein which shall be held by the Depositary as fiduciary for the
benefit of the Bank to the extent set forth in Section 3(a) of the Depositary
Agreement, such that immediately after any payment by the Bank under the Letter
of Credit and receipt of proceeds of any sale of Commercial Paper Notes issued
on the date of such payment there will be sufficient funds to reimburse the Bank
in full for such payment. Each issuance of Commercial Paper Notes shall be
deemed an irrevocable assignment by the Company to the Bank of the proceeds of
the sale of such Commercial Paper Notes to the extent needed to reimburse the
Bank for payments made under the Letter of Credit on the date of such issuance
and for Outstanding Unreimbursed Drawings and accrued and unpaid interest owing
thereon, and such proceeds shall be deposited in the Bank's Account in
accordance with the terms of the Depositary Agreement. As provided in the
Depositary Agreement, funds shall be transferred from the General Account to the
Bank's Account to the extent needed to reimburse the Bank for drawings made in
respect of the Letter of Credit. The right of withdrawal from the General
Account shall be vested solely in the Depositary and shall be exercised by the
Depositary only as provided in Section 3 of the Depositary Agreement.
(b) SPECIAL ACCOUNT. As provided in Section 3(b) of the Depositary
Agreement, the Depositary shall open a segregated special purpose trust account
designated the "Hosokawa Micron International Commercial Paper Owners/Mitsubishi
Bank Special Account" (hereinafter called the "SPECIAL ACCOUNT"). The sole
purpose of the Special Account shall be to hold moneys deposited therein by the
Depositary as provided in Section 3 of the Depositary Agreement, such moneys to
be held by the Depositary as fiduciary for the benefit of the owners of
Commercial Paper Notes for the purpose of paying Commercial Paper Notes. The
right of withdrawal from the Special Account shall be vested solely in the
Depositary and shall be exercised by the Depositary only to pay matured
Commercial Paper Notes in accordance with the terms of the Depositary Agreement
until all Commercial Paper Notes have been paid in full. The Company shall not
have any legal, equitable or beneficial interest in the Special Account or any
funds on deposit therein.
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(c) REIMBURSEMENT OF DRAWINGS. The Company shall reimburse the
Bank (or cause the Bank to be reimbursed) forthwith whenever a drawing is
honored under the Letter of Credit by deposit of immediately available funds to
the General Account and the transfer thereof to the Bank's Account in the manner
provided in Section 2.3(c) of this Agreement on the day of such drawing, free of
any deductions whatsoever. If such reimbursement is not so made on the date of
such drawing, the drawing shall constitute an "Unreimbursed Drawing," and
interest shall accrue thereon as provided in Section 2.3(d) of this Agreement.
At the time of each payment by the Bank under the Letter of
Credit, the amount of the Letter of Credit shall be reduced by the amount of
such payment. Upon (i) reimbursement to the Bank of such payment on the date of
such payment, (ii) the repayment of any unreimbursed Drawing arising from such
payment, or (iii) the issuance of Commercial Paper Notes on the date of such
payment, which issuance shall be deemed to be an assignment to the Bank of
proceeds from the sale of such Commercial Paper Notes on the day of such payment
pursuant to Section 2.3(a) of this Agreement, in each case in the manner
contemplated by this Agreement and the Depositary Agreement, the amount by which
the Letter of Credit was so reduced shall be automatically reinstated (subject
to Section 3.2 and Articles 5 and 8 hereof), in the case of (i) or (ii) above,
by the amount of such reimbursement or repayment (except that the aggregate
amount of such increases shall not exceed the amount of such payment under the
Letter of Credit) and, in the case of (iii) above, by the Face Amount of the
Commercial Paper Notes the proceeds of which have been assigned to the Bank;
provided, however, that in the case of an automatic reinstatement in the amount
of the Letter of Credit following an assignment of the proceeds from the sale of
Commercial Paper Notes as described in (iii) above, any repayment or
reimbursement to the Bank in respect of the Discount on such Commercial Paper
Notes shall not increase the amount of the Letter of Credit. In no event shall
the amount of the Letter of Credit at any time exceed the Commitment.
(d) LATE PAYMENTS. For each day that any sum due and payable to
the Bank hereunder remains unpaid as of 4:00 P.M. New York time such sum shall
bear interest from and including the due date to but excluding the date of
payment at a rate per annum equal to the Prime Rate as in effect on each such
day plus two percent (2%) computed on the basis of a 360-day year and actual
days elapsed. Notwithstanding the foregoing, to the extent that a drawing under
the Letter of Credit is repaid on the same day after 4:00 P.M. New York time but
by the close of business on such day in New York by the application of proceeds
of newly issued Commercial Paper Notes as contemplated by Section 2(a) of the
Depositary Agreement, no such interest shall accrue.
Section 2.4 ISSUANCE OF LETTER OF CREDIT. Subject to Article 5 hereof,
the Bank shall issue and deliver the Letter of
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Credit to the Depositary concurrently with the execution and delivery of this
Agreement and the Depositary Agreement by the parties hereto and thereto. The
Letter of Credit shall be issued in an amount equal to the Commitment, subject
to reductions and increases as provided by Section 2.3(c) of this Agreement;
provided, however, that no such reduction shall have the effect of terminating
or altering in any respect the terms of the Letter of Credit or reducing the
amount payable with respect to Commercial Paper Notes Outstanding at the time of
such reduction.
The Bank agrees that all payments made by the Bank under the Letter of
Credit shall be paid out of the general funds of the Bank, including funds that
represent the proceeds of a Charge, and that no payments under the Letter of
Credit shall in any way be contingent upon or drawn from amounts on deposit in
any account maintained by the Company with the Depositary or paid out of
proceeds of Commercial Paper Notes.
Section 2.5 EXPIRATION OF LETTER OF CREDIT. The Letter of Credit shall
expire with respect to any Commercial Paper Note at the earlier of (i) payment
of such Commercial Paper Note, or (ii) 5:00 P.M. New York time on the fifteenth
day after the maturity date of such Commercial Paper Note, or if such day is not
a Business Day, 5:00 P.M. New York time on the first Business Day thereafter. In
no event shall the Letter of Credit remain in effect after 5:00 P.M. New York
time on the Expiration Date, or if such day is not a Business Day, 5:00 P.M. New
York time on the first Business Day thereafter.
Section 2.6 METHOD OF PAYMENT. All payments and other transfers of
funds under this Agreement shall be made in Dollars in funds immediately
available at the place of payment, unless otherwise provided in the Depositary
Agreement or unless the recipient thereof shall otherwise agree.
Section 2.7 COMMERCIAL PAPER SUPPORT FEE. As consideration to the Bank
for issuing its Letter of Credit, the Company shall pay the Bank a fee (the
"Commercial Paper Support Fee") of three-eighths of one percent (0.375%) per
annum (based on a 360-day year and actual days elapsed) of the average Face
Amount of Commercial Paper Notes Outstanding during the calendar quarter
immediately preceding the date such fee is to be paid pursuant to the next
sentence. The Company shall pay the Commercial Paper Support Fee to the Bank
quarterly in arrears on the fifth Business Day of March, June, September and
December commencing on the fifth Business Day of March 1992 (each such payment
to cover the quarterly period ending on the last day of the immediately
preceding calendar month), with a final payment five Business Days after the
Expiration Date. On the later of the Expiration Date or the date when there are
no longer any Outstanding Commercial Paper Notes, the Company shall pay the
Commercial Paper Support Fee to
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the Bank prorated for the period since the last quarterly payment pursuant to
the preceding sentence.
Section 2.8 INCREASED COSTS. If on or after the date hereof any change
in any law or regulation, domestic or foreign, or in any decree or order,
domestic or foreign, or in the interpretation or administration thereof by any
court or administrative or governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law), or in any regulatory accounting principles, shall (i) impose, modify,
render or deem applicable any capital adequacy, reserve, deposit or special
deposit requirement, deposit insurance assessment or similar requirement against
the Letter of Credit issued or participated in by, or assets held by, or
deposits in or for the account of the Bank or any Participant, (ii) impose on
the Bank or any participant any other condition or requirement regarding this
Agreement or the Letter of Credit or any participation therein, or (iii) subject
the Bank or any Participant to any tax, charge, fee, deduction or any
withholding of any kind whatsoever other than with respect to federal, state and
municipal income taxes or taxes in lieu thereof imposed by the jurisdiction (or
political subdivision thereof) of incorporation of the Bank or such Participant
or of the issuing office or participating office thereof, and the result of any
event referred to in clause (i), (ii) or (iii) above shall be to increase the
cost to the Bank or such Participant of issuing, maintaining or participating in
the Letter of Credit or reduce the amount of any fee or any other amount
receivable by the Bank or such Participant with respect to the Letter of Credit
or this Agreement or any participation therein (which increase in cost or
reduction in fee or other receipt, as the case may be, shall be determined by
the Bank's or Participant's reasonable allocation of the aggregate of such cost
increases or fee reductions resulting from such events), then, upon written
demand by the Bank, which demand shall be accompanied by a certificate from the
Bank or such Participant as described in the next sentence, the Company shall
pay to the Bank such additional amounts as are necessary to compensate the Bank
and/or such Participant for such increased costs incurred or reduced receipts
suffered thereby. A certificate of the Bank or such Participant as to such
increased costs incurred or reduced receipts suffered by such parties as a
result of any event mentioned in clause (i), (ii) or (iii) above specifying the
event causing such increased cost or reduced receipt and setting forth in
reasonable detail the calculation made to determine the amount of such increased
cost or reduced receipt shall be prima facie evidence of the amount thereof. The
Bank and each Participant shall exercise reasonable efforts to minimize such
increased cost or reduced receipts, provided that neither the Bank nor any
Participant shall be required to take any action which is otherwise inconsistent
with its internal policies or regulatory requirements or which is otherwise
disadvantageous to the Bank or such Participant. Neither the Bank nor any
Participant shall be entitled to any additional payment pursuant to this Section
2.8 to
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the extent that any increased cost or reduced receipt results solely from a
change by such entity of the branch or office at which the Letter of Credit or
such entity's participation therein is issued or maintained.
Section 2.9 COMPANY'S OBLIGATIONS UNCONDITIONAL. The obligations of the
Company under this Agreement and each of the other Financing Documents
(including its reimbursement obligations hereunder) shall be absolute,
unconditional, irrevocable, and performed strictly in accordance with the terms
of each of the Financing Documents irrespective of any right of setoff,
counterclaim or defense to payment which the Company may have against the Bank,
the beneficiary of the Letter of Credit (or any other person for whom such
beneficiary may be acting), or any other person, including any defense based on
(i) any failure of any drawing on the Letter of Credit by the Depositary to
conform to the terms of the Letter of Credit or the invalidity, inaccuracy,
falsity, or lack of genuineness, whether by forgery, fraud or otherwise, of any
document, demand, or statement presented under the Letter of Credit, or (ii) any
failure of the Company to receive all or any part of the proceeds of the sale of
any Commercial Paper Notes with respect to which such drawing on the Letter of
Credit was made by the Depositary, or (iii) any non-application or
misapplication by the Depositary of the proceeds of such drawing, or (iv) the
illegality, invalidity, irregularity or unenforceability of all or any of the
Financing Documents, or (v) any amendment or waiver of any of the Financing
Documents or (vi) the expiration of the Letter of Credit; provided, however,
that the Company shall not be obligated to reimburse the Bank for any wrongful
payment or disbursement made under the Letter of Credit as a result of acts or
omissions constituting willful misconduct or gross negligence on the part of the
Bank.
Section 2.10 WAIVERS. To the fullest extent permitted by law, the
Company hereby waives (a) presentment, demand, notice of demand, protest, notice
of protest, notice of dishonor and notice of non-payment; and (b) all statutes
of limitation.
ARTICLE 3
EXPIRATION, TERMINATION OR SUSPENSION
Section 3.1 EXPIRATION DATE. As used herein, "Expiration Date" shall
mean December 16, 1992, which date may be extended by the written agreement of
the parties hereto as set forth below or accelerated pursuant to Article 8. If
the Company wishes to extend the Expiration Date, it shall so notify the Bank
and the Depositary not later than 90 days prior to the Expiration Date as then
in effect. The Bank shall consider in good faith such request for an extension
of the Expiration Date, but may, in its sole discretion, for any reason or for
no reason, decline to agree to such
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extension. The Bank shall notify the Company and the Depositary not later than
70 days prior to an Expiration Date whether the Bank agrees to an extension of
such Extension Date duly requested by the Company, provided that any failure by
the Bank to respond timely to any such request shall be deemed to be a rejection
by the Bank of such request.
Section 3.2 SUSPENSION OF THE ISSUANCE OF COMMERCIAL PAPER NOTES. Upon
the occurrence of any one of the following events, the Bank may give notice
(which may be telephonic notice confirmed in writing) to the Company and the
Depositary instructing the Company to cease issuing Commercial Paper Notes and
instructing the Depositary to cease authenticating or delivering Certificated
Notes and entering issuance instructions in DTC's book-entry system with respect
to Commercial Paper Notes, whereupon no further Commercial Paper Notes shall be
issued by the Company and the Depositary shall cease to (i) authenticate and
deliver Certificated Notes and (ii) enter issuance instructions in DTC's
book-entry system with respect to Book-Entry Notes, and the amount of the Letter
of Credit shall thereafter not be reinstated pursuant to Section 2.3(c), unless
such notice is thereafter rescinded by the Bank as provided below:
(i) If performance by the Bank of its obligations under this
Agreement, the Letter of Credit or the Depositary Agreement would
subject the Bank to regulation by any governmental body other than the
State of New York and the federal banking authorities of the United
States, the Government of Japan and such other governmental bodies as
presently directly regulate the Bank, its activities and properties,
or would restrict the ability of the Bank to conduct a general banking
business or materially increase the present level of such regulation
of the Bank; or if any restriction is imposed or threatened to be
imposed on the Bank which would make it unlawful for the Letter of
Credit to be issued or to remain in effect or for demands for payment
thereunder to be honored or otherwise prevent the Bank from issuing
the Letter of Credit or honoring drawings thereunder; or
(ii) If any governmental approval or clearance required or
advisable (including any necessary clearance from the Ministry of
Finance of the Government of Japan) for the Bank to issue and perform
its obligations under the Letter of Credit is modified, suspended, or
terminated for any reason and the effect of such modification,
suspension, or termination would make it impermissible or inadvisable
under the terms of such approval or clearance for the Letter of Credit
to be issued or to remain in effect or for demands for payment
thereunder to be honored; or
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(iii) If an Event of Default or an event that with the giving
of notice or the passing of time or both would constitute an Event of
Default shall occur; or
(iv) If the issuance or proposed issuance of Commercial Paper
Notes is not in accordance with this Agreement or the Depositary
Agreement; or
(v) If the Depositary fails to comply with the terms of the
Depositary Agreement; or
(vi) If any of the conditions precedent specified in Article 5
hereof shall not be satisfied;
provided, however, that no such notice shall be effective with respect to
Commercial Paper Notes issued on the same date as such notice but prior to the
receipt of such notice by the Depositary; and provided, further, that no such
notice shall have the effect of terminating or altering in any respect the terms
of the Letter of Credit or reducing the amount payable with respect to
Commercial Paper Notes Outstanding at the time such notice is given. The Bank
shall not give notice under this Section unless one of the conditions set forth
above exists. The Bank may at any time in its discretion rescind any notice
given pursuant to this Section 3.2.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
Section 4.1 ORGANIZATION CORPORATE POWERS. The Company has been duly
incorporated and is validly existing and in good standing under the laws of the
State of Delaware and is qualified and in good standing as a foreign corporation
in New York and each other jurisdiction where the failure to so qualify would
have a materially adverse effect on its financial condition or its ability to
perform its obligations under the Financing Documents. The Company has all
requisite corporate power and authority to conduct its business in each
jurisdiction in which its business is conducted, to own its properties and to
execute and deliver and perform all of its obligations under the Financing
Documents.
Section 4.2 CORPORATE AUTHORITY, VIOLATION OF LAWS, BREACH OF
AGREEMENTS. The execution, delivery and performance by the Company of the
Financing Documents have been duly authorized by all necessary corporate action
and do not and will not (i) violate any provision of any law, rule, regulation
(including, without limitation, the rules and regulations of the SEC), order,
writ, judgment, injunction, decree, determination, award or the charter or
by-laws of the Company, (ii) result in a breach of or consti-
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tute a default under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which the Company is a party or by which the
Company or any of its properties may be bound or affected, or (iii) result in or
require the creation or imposition of a mortgage, deed of trust, assignment,
pledge, lien, security interest or other charge or encumbrance of any nature
upon or with respect to any of the properties of the Company. The Company is not
in violation of or in default under any such law, regulation, order, writ,
judgment, injunction, decree, determination or award, or any such indenture,
agreement, lease or instrument, which violation or default would have a
materially adverse effect on its financial condition or its ability to perform
its obligations under the Financing Documents.
Section 4.3 GOVERNMENT APPROVALS. No authorization, consent, approval,
license, exemption of or filing or registration with any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, is or will be necessary for the valid execution, delivery or
performance by the Company of any of the Financing Documents or for the issuance
or sale of Commercial Paper Notes by the Company.
Section 4.4 VALID AND BINDING OBLIGATIONS. This Agreement and the
Depositary Agreement constitute, and the Book-Entry Notes when identified on the
records of DTC's book-entry system and the Certificated Notes when executed and
delivered under and as contemplated by this Agreement and the Depositary
Agreement will constitute, legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, liquidation, moratorium,
readjustment of debt or other similar laws and by the application of general
principles of equity.
Section 4.5 LITIGATION. There are no actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against the Company or
any of its properties before any court, arbitrator or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign
(including the SEC or any other regulatory commission), which, if determined
adversely to the Company, would singly or in the aggregate materially adversely
affect its financial condition or its ability to perform its obligations under
the Financing Documents.
Section 4.6 ACCURACY OF INFORMATION. All information supplied by the
Company to the Bank in connection with the transactions contemplated by the
Financing Documents is true, complete and accurate in all material respects and
does not omit to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
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Section 4.7 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by the Company in each of the Financing
Documents were true, complete and accurate in all material respects when made
and do not and will not contain any material misstatements or omit to state any
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
Section 4.8 INVESTMENT COMPANY. The Company is not, and upon receipt by
the Company of the proceeds from the sale of Commercial Paper Notes the Company
will not thereby become, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
Section 4.9 COMPLIANCE WITH LAWS. The Company has not failed to comply
with the requirements of any applicable laws, regulations and orders of any
governmental authority, the non-compliance with which would, singly or in the
aggregate, materially adversely affect its financial condition or its ability to
perform its obligations under the Financing Documents.
Section 4.10 ERISA. The Company and the ERISA Affiliates have fulfilled
their respective obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan, are in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code and have not incurred any liability to the PBGC, any Plan
or any Multiemployer Plan (other than to make contributions in the ordinary
course of business).
Section 4.11 TAXES. The Company has filed all tax returns, statements,
reports and forms required to be filed by it and has paid and discharged all
taxes, assessments, and governmental charges and levies imposed upon it or upon
its income or profits and upon any properties belonging to it prior to the date
on which penalties would have attached thereto, other than any such tax,
assessment, charge or levy which is being contested by the Company in good faith
and by appropriate proceedings, adequate reserves having been provided for the
payment thereof in accordance with United States generally accepted accounting
principles, which contest operates to stay any materially adverse effect of any
such non-payment.
Section 4.12 FINANCIAL STATEMENTS. The financial statements of the
Company for the year ended September 30, 1990, which have been delivered to the
Bank present fairly and accurately, in accordance with generally accepted
accounting principles consistently applied, the financial condition of the
Company as of the dates thereof and the results of operations and cash flow for
the periods then ended. As of the date hereof, there has been no change in the
financial condition of the Company which materially adversely affects the
financial condition of the Company or the
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ability of the Company to perform its obligations under the Financing Documents.
Section 4.13 NO MATERIALLY ADVERSE FACTS, EVENTS, CONDITIONS. There is
no fact, event or condition which materially adversely affects the financial
condition of the Company or the ability of the Company to perform its
obligations under the Financing Documents which has not been set forth in this
Agreement or in the other documents, certificates and statements furnished to
the Bank by or on behalf of the Company prior to the date hereof.
Section 4.14 PARI PASSU. The reimbursement obligations of the Company
to the Bank hereunder rank at least pari passu with all other unsecured and
unsubordinated indebtedness of the Company for borrowed money.
ARTICLE 5
CONDITIONS PRECEDENT
The issuance of the Letter of Credit and each issuance of Commercial
Paper Notes (each such issuance being herein called a "Credit Event" and the
issuance of the Letter of Credit being herein called the "First Credit Event")
may be made only if the following conditions precedent are met:
Section 5.1 NO DEFAULT. On the date of each Credit Event, the Company
shall be in compliance with all the terms and provisions set forth herein on its
part to be observed or performed; the representations and warranties set forth
in Article 4 hereof shall be true and correct as if made on and as of such date;
and no Event of Default or event which, but for the lapse of time or giving of
notice or both, would constitute an Event of Default hereunder sha11 have
occurred and be continuing on such date. On the date of each Credit Event, the
Company shall be deemed to have certified to the Bank that the conditions set
forth in this Section 5.2 have been satisfied and, if requested by the Bank with
respect to any Credit Event, the Company will deliver to the Bank a certificate
of a Company Official containing such a certification on and as of the date of
such Credit Event.
Section 5.2 CERTIFICATE. On the date of the First Credit Event, the
Company shall have delivered to the Bank a certificate of the Company, signed by
a Company Official, substantially in the form of EXHIBIT C hereto.
Section 5.3 COMPANY'S SUPPORTING DOCUMENTS. On the date of the First
Credit Event, the Company shall have delivered or caused to be delivered to the
Bank, in form and substance satisfactory to the Bank:
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(a) Executed counterparts of the Depositary Agreement and the
Dealer Agreement, along with copies of the offering memorandum to be used in the
offering and sale of the Commercial Paper Notes;
(b) Certificates of the Secretary of the Company dated such date
certifying (i) as to the truth and accuracy of the copies of the Certificate of
Incorporation and By-laws of the Company and the resolutions of the Board of
Directors of the Company approving the transactions contemplated by the
Financing Documents, and (ii) as to the incumbency of officers of the Company
executing the Financing Documents or otherwise acting on behalf of the Company
in respect of the transactions contemplated thereunder, together with specimen
signatures of such officers attached thereto;
(c) A good standing certificate for the Company from the Secretary
of State of the State of Delaware dated as of a recent date;
(d) On the date of the First Credit Event, the Bank shall have
received the favorable written opinion of Hughes, Hubbard & Reed, counsel to the
Company, dated such date and addressed to and satisfactory to the Bank, with
regard to Sections 4.1, 4.2, 4.3, 4.4, 4.5, and 4.8 of this Agreement and such
other matters as the Bank may request;
(e) A favorable written opinion of Hughes, Hubbard & Reed, counsel
to the Company, as to the status of drawings under the Letter of Credit and
payments of the Commercial Paper Notes under the Federal Bankruptcy Code;
(f) Evidence that the Commercial Paper Notes shall have received
the highest ratings from Standard & Poor's Corporation and Moody's Investors
Service, Inc.;
(g) The Guaranty, duly executed by the Guarantor, together with
such evidence as to due authorization and execution thereof as shall be
reasonably requested by the Bank; and
(h) Such other documents as the Bank or counsel for the Bank may
reasonably request.
Section 5.4 BANK'S SUPPORTING DOCUMENTS. On the date of the First
Credit Event, the Bank shall have delivered or caused to be delivered to the
Company:
(a) Executed counterparts of the Depositary Agreement and a copy
of the executed Letter of Credit;
(b) A certificate of an officer of the Bank dated such date
certifying as to the incumbency and signatures of the officers of the Bank
executing this Agreement, the Depositary Agreement and
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the Letter of Credit or otherwise acting on behalf of the Bank hereunder and
thereunder;
(c) A favorable written opinion of Graham & James, United States
counsel to the Bank, as to (i) the enforceability of the Letter of Credit
against the Bank and (ii) the applicability of the Securities Act of 1933, as
amended (the "Securities Act") to the Letter of Credit and the Commercial Paper
Notes;
(d) A favorable written opinion of Japanese counsel to the Bank as
to the enforceability of the Letter of Credit against the Bank; and
(e) A certificate of an authorized officer of the Bank consenting
to the use of certain financial information concerning the Bank contained in the
offering memorandum used in the offering and sale of Commercial Paper Notes.
Section 5.5 DEALER'S DOCUMENTS. The Company either has delivered or
will promptly deliver to the Dealer original or certified copies of all of the
documents described in this Article 5, other than those described in Section
5.3(g) and (h).
ARTICLE 6
AFFIRMATIVE COVENANTS
Section 6.1 PAYMENT OF TAXES. The Company shall file all tax returns,
statements, reports and forms required to be filed by it and shall pay and
discharge all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits and upon any properties belonging to it prior
to the date on which penalties attach thereto, other than any such tax,
assessment, charge or levy which is being contested by the Company in good faith
and by appropriate proceedings, adequate reserves having been provided for the
payment thereof in accordance with United States generally accepted accounting
principles, which contest shall operate to stay any materially adverse effect of
any such non-payment.
Section 6.2 PRESERVATION OF CORPORATE EXISTENCE. The Company shall
preserve and maintain its corporate existence, rights, franchises and privileges
in the jurisdiction of its incorporation, and qualify and remain qualified as a
foreign corporation in each jurisdiction in which its failure to maintain such
qualification would have a material adverse effect on its business or financial
condition or its ability to perform its obligations under the Financing
Documents.
Section 6.3 COMPLIANCE WITH LAWS. The Company shall comply with all
applicable laws, regulations and orders of any governmental authority, the
failure to comply with which would singly or in the aggregate materially
adversely affect its business or
17
<PAGE>
financial condition or its ability to perform its obligations under the
Financing Documents.
Section 6.4 INSPECTION RIGHTS. The Company shall at any time and from
time to time upon reasonable advance notice permit the Bank or any agents of the
Bank to examine and make copies of the records and books of account of, and
visit the properties of, the Company and discuss the affairs and finances of the
Company with any of its officers.
Section 6.5 KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Company shall
keep records and books of account in accordance with United States generally
accepted accounting principles consistently applied reflecting all financial
transactions of the Company.
Section 6.6 MAINTENANCE OF APPROVALS, FILINGS AND REGISTRATIONS. The
Company shall at all times maintain all consents, licenses, approvals and
authorizations as may be necessary under any applicable law or regulation for
the conduct of its business and for the execution, delivery and performance of
this Agreement and each of the other Financing Documents and to make this
Agreement and such other documents legal, valid, binding and enforceable
obligations of the Company.
Section 6.7 REPORTING REQUIREMENTS. The Company shall furnish to the
Bank:
(a) As soon as possible but in no event more than five (5)
Business Days after becoming aware (i) of the occurrence of any Event of Default
or any event which with the giving of notice or passing of time or both would
constitute an Event of Default, or (ii) that any of the representations and
warranties contained in Article 4 of this Agreement has ceased to be true and
correct in any material respect at any time since the last Credit Event
hereunder (or, if no Credit Event has taken place, since the execution and
delivery of this Agreement), telephonic advice of the same (confirmed in writing
within three (3) Business Days by a Company Official) setting forth the details
thereof and the action which the Company proposes to take with respect thereto;
(b) As soon as available and in any event within 60 days after the
end of each fiscal year of the Company in the case of unaudited reports and
within 120 days after the end of each fiscal year of the Company in the case of
audited reports, a copy of the annual unaudited and audited reports, as the case
may be, for such year for the Company and its consolidated subsidiaries,
including the balance sheet of the Company and its consolidated subsidiaries as
at the end of such year and the related statements of operations and cash flow
of the Company and its consolidated subsidiaries for such year, in the case of
unaudited statements certified by the Senior Vice President for Administration
of the Company as fairly representing the financial condition of the Company and
its
18
<PAGE>
consolidated subsidiaries to the date stated, and in the case of audited
statements, certified by independent certified public accountants reasonably
acceptable to the Bank;
(c) As soon as available and in any event within 60 days after the
end of each quarter of each fiscal year of the Company, unaudited consolidated
reports for such quarter for the Company, including the balance sheet of the
Company and its consolidated subsidiaries as at the end of such quarter and the
related statements of operations and cash flow of the Company and its
consolidated subsidiaries for such quarter, certified by the Senior Vice
President for Administration of the Company as fairly representing the financial
condition of the Company and its consolidated subsidiaries to the date stated,
subject to normal year-end adjustments;
(d) Promptly after the commencement thereof, notice of any action,
suit or proceeding before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, against the
Company an adverse decision in which would materially adversely affect its
financial condition or its ability to perform its obligations under the
Financing Documents; and
(e) Such other information respecting the business, properties,
condition or operations of the Company, financial or otherwise, as the Bank may
from time to time reasonably request.
Section 6.8 INDEMNIFICATION.
(a) The Company shall pay, and will protect, indemnify and save
harmless the Bank and, in their capacity as such, its respective officers,
directors, shareholders, controlling persons, employees, agents and servants,
from and against all liabilities, losses, claims, damages, penalties, stamp or
other similar taxes, causes of action, suits, costs and expenses (including
reasonable attorneys' fees and expenses) or judgments of any nature arising from
(i) the offering and sale of the Commercial Paper Notes, or (ii) the default of
the Company in the performance of its respective agreements, rights or
obligations contained in any of the Financing Documents, or (iii) the execution
and delivery or transfer of, or the payment or failure to pay under the Letter
of Credit (collectively, the "Liabilities"); provided, however, that the Company
shall not be liable for any Liabilities arising from any untrue statement of a
material fact in the material fact relating to the Bank in the offering
memorandum used in the sale of the Commercial Paper Notes or any omission to
state therein a material fact relating to the Bank necessary in order to make
the statements therein relating to the Bank, in light of the circumstances under
which they were made, not misleading, provided that such material was approved
in writing by the Bank prior to its inclusion in such offering memorandum, nor
shall the Company be liable for any
19
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Liabilities arising out of the gross negligence or willful misconduct of the
Bank or of its officers, employees, agents or servants. If any action, suit or
proceeding arising from any of the foregoing (other than an action, suit or
proceeding regarding which the Company has no obligation to indemnify the Bank)
is brought against the Bank or any other person indemnified pursuant to this
Section, the Company shall, if requested by the Bank, at its own expense, cause
such action, suit or proceeding to be defended by counsel designated by the
Company, which counsel shall be approved by the Bank. The Company shall keep the
Bank fully informed of the defense of such action, suit or proceeding. The
obligations of the Company under this Section shall survive termination of this
Agreement.
(b) Without limiting the foregoing, the Company agrees that the
Bank does not assume any of the risks of the acts or omissions of the
Depositary. The Bank shall not be liable or responsible to the Company for: (i)
any use which may be made of the Letter of Credit or for any acts or omissions
of the Depositary in connection therewith; (ii) the validity, sufficiency, or
genuineness of any documents presented to the Bank in connection with a drawing
made on the Bank under the Letter of Credit, even if such documents should in
fact prove to be in any or all respects invalid, insufficient, fraudulent, or
forged; (iii) payment by the Bank which does not comply with the terms of the
Letter of Credit, including failure to bear any reference or adequate reference
to the Letter of Credit, except to the extent that payment by the Bank under the
Letter of Credit constitutes gross negligence or willful misconduct by the Bank;
(iv) any delay or failure by the Bank or any other party to give notice, demand,
or protest of the errors, omissions, or delays in or non-delivery of any demand,
notice or message however given; or (v) any other circumstances whatsoever,
other than the gross negligence or willful misconduct of the Bank, in making or
failing to make payment under the Letter of Credit. In furtherance and not in
limitation of the foregoing, the Bank will examine documents in connection with
a drawing with care so as to ascertain that on their face they appear to comply
with the terms of the Letter of Credit, without responsibility for further
investigation. The determination of whether a request for a drawing has been
made under the Letter of Credit prior to the Expiration Date or whether a
request for a drawing made under the Letter of Credit is in proper and
sufficient form shall be made by the Bank. The Company hereby waives any right
to object to any payment made under the Letter of Credit with regard to a
drawing that is in the form provided in the Letter of Credit but which varies
with respect to punctuation, capitalization, spelling or similar matters of
form.
20
<PAGE>
Section 6.9 SECURITIES ACT. The Company shall sell or offer to sell
Commercial Paper Notes pursuant to an exemption under the Securities Act and in
compliance with other federal securities laws and with the securities laws of
any State having jurisdiction, including any applicable registration or
qualification provisions.
Section 6.10 COMPLIANCE WITH AGREEMENTS. The Company will observe and
perform each term, covenant, condition and agreement on its part to be performed
or observed under the Financing Documents.
Section 6.11 DEALER. The Company will give the Bank prompt written
notice of the resignation of the Dealer.
Section 6.12 FURTHER ASSURANCES. The Company shall from time to time,
at the cost and expense of the Company, execute and deliver to the Bank all such
documents and instruments and do all such other acts and things as may be
reasonably required to enable the Bank to exercise and enforce its rights under
this Agreement.
ARTICLE 7
NEGATIVE COVENANTS
Section 7.1 USE OF PROCEEDS. The Company will not use the proceeds from
the sale of Commercial Paper Notes for any purpose other than those described in
the Recitals hereto and the payment of principal, interest, fees, expenses and
other obligations described in this Agreement, the Depositary Agreement and the
Dealer Agreement.
Section 7.2 AMENDMENT OF DEPOSITARY AGREEMENT. The Company will not
amend the Depositary Agreement, or waive any of its rights thereunder, or fail
to perform or require the performance of any obligations thereunder without the
prior written consent of the Bank.
Section 7.3 SALES, MERGERS, ETC. The Company will not, without the
prior written consent of the Bank, liquidate or dissolve, issue or redeem any of
its capital stock or otherwise effect any change in its stock or capitalization,
or merge or consolidate with or into, or sell, assign, lease or otherwise
dispose of (whether in one transaction or in a series of transactions) all or
any material portion of its assets (whether now owned or hereafter acquired) to,
any Person; provided, that the foregoing shall not apply to the issuance or
redemption of the Company's capital stock to or from any entity which owns more
than 50% of the Company's issued and outstanding capital stock immediately prior
to such issuance or redemption.
Section 7.4 OFFERING MEMORANDUM. The Company will not include nor
permit the inclusion by any Dealer of any material relating to the Bank in any
offering memorandum used in the
21
<PAGE>
offering or sale of Commercial Paper Notes unless such material is approved in
writing by the Bank in advance.
Section 7.5 INVESTMENT COMPANY ACT. The Company will not take any
action so as to subject itself to regulation as an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
Section 7.6 MARGIN STOCK. The Company will not use any part of the
proceeds of any of the Commercial Paper Notes to purchase or carry, or to reduce
or retire or refinance any credit incurred to purchase or carry, any margin
stock (within the meaning of Regulations U and X of the Board of Governors of
the Federal Reserve System) or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
ARTICLE 8
DEFAULTS
In case of the happening of any of the following events (herein
sometimes called "Events of Default"):
(a) Any amount payable in respect of any Commercial Paper Note
shall not be paid when due and payable (unless such Commercial Paper Note is not
paid because of the wrongful failure of the Bank to honor a demand for payment
under the Letter of Credit); or
(b) Any amount due and payable by the Company to the Bank under
this Agreement shall not be paid within five (5) Business Days after such amount
is due and payable; or
(c) Any representation or warranty made by the Company herein or
in any certificate, agreement, instrument or statement contemplated by or made
or delivered pursuant to or in connection with any of the Financing Documents,
or any representation or warranty made by the Guarantor in the Guaranty, shall
prove to have been incorrect or misleading in any material respect when made or
when deemed made; or
(d) The Company shall fail to perform or observe any term,
covenant or agreement contained in Article 7 or Section 6.7(a) hereof; or
(e) The Company shall fail to perform or observe any other term,
covenant or agreement contained herein or in the Depositary Agreement, or the
Guarantor shall fail to perform or observe any term, covenant or agreement
contained in the Guaranty, and any such failure remains unremedied for thirty
(30) days after written notice thereof shall have been given to the Company or
when the Guarantor, as relevant, by the Bank; or
22
<PAGE>
(f) Any of this Agreement, the Depositary Agreement or the
Guaranty shall at any time after its execution and delivery for any reason cease
to be in full force and effect or shall be declared to be null and void, or the
validity or enforceability thereof shall be contested by the Company or the
Guarantor, or the Company or the Guarantor shall deny that it has any or further
liability or obligation hereunder or thereunder; or
(g) Any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied in respect of the General Account,
Bank Account, or Special Account (other than a judgment, writ, warrant of
attachment or execution or similar process issued solely in connection with an
obligation owed or allegedly owed by the Bank); or
(h) The Company or the Guarantor (i) shall be adjudicated a
bankrupt or insolvent, or admit in writing its inability to pay its debts as
they mature, or make an assignment for the benefit of creditors; or (ii) shall
fail generally to pay its debts as such debts become due; or (iii) shall apply
for or consent to the appointment of any receiver, trustee, custodian or similar
officer for it or for all or any substantial part of its property, or such
receiver, trustee, custodian or similar officer shall be appointed without the
application or consent of the Company or the Guarantor and such appointment
shall continue undischarged for a period of 60 days; or (iv) shall institute (by
petition, application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceeding relating to it under the laws of any jurisdiction, or any
such proceeding shall be instituted (by petition, application or otherwise)
against the Company or the Guarantor and shall remain undismissed for a period
of 60 days; or
(i) Any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against the Company or any property of
the Company involving a liability in excess of $5,000,000, or any judgment,
writ, warrant of attachment or execution or similar process shall be issued or
levied against the Guarantor or any property of the Guarantor involving a
liability in excess of $25,000,000, and the same shall not be released, vacated,
stayed or fully bonded or paid within 60 days after its issue or levy; or
(j) The Company shall fail to pay when due (after any applicable
period of grace) any amount due with respect to any other indebtedness for
borrowed money in an aggregate amount equal to not less than $1,000,000, or the
Guarantor shall fail to pay when due (after any applicable period of grace) any
amount due with respect to any indebtedness for borrowed money in an aggregate
amount equal to not less than $5,000,000, or any other event shall occur or any
condition shall exist in respect of any such
23
<PAGE>
indebtedness the effect of which is to cause (or permit any holder thereof or a
trustee to cause) such indebtedness to become due prior to its stated maturity;
then, and in every such event and at any time during the continuation thereof,
the Bank may, at the same or different times, take one or more of the following
actions: (i) give notice (which may be telephonic notice confirmed in writing)
to the Company and the Depositary instructing the Company to cease issuing
Commercial Paper Notes and instructing the Depositary to cease authenticating or
delivering Certificated Notes and entering issuance instructions in DTC's
book-entry system with respect to Commercial Paper Notes, whereupon no further
Commercial Paper Notes shall be issued and the amount of the Letter of Credit
shall not be increased, (ii) declare by written notice all amounts payable by
the Company to the Bank hereunder to be forthwith due and payable, whereupon
such amounts shall become forthwith due and payable, both as to principal and
interest, (iii) direct the Depositary to make a drawing under the Letter of
Credit for deposit in the Special Account in an amount required to pay in full
all Outstanding Commercial Paper Notes entitled to the benefit of the Letter of
Credit upon maturity (and the date of the honoring of such drawing shall become
the Expiration Date) and require from the Company immediate reimbursement for
such drawing, and (iv) exercise any other rights or remedies available to the
Bank under this Agreement, the Depositary Agreement, applicable law or
otherwise; provided, however, that if any event specified in (h) above occurs,
the acceleration specified in (ii) above shall be deemed to have been made upon
the occurrence of such event without notice from the Bank. No action taken or
omitted to be taken by the Bank shall have the effect of terminating or altering
in any respect the terms of the Letter of Credit or reducing the amount payable
with respect to Commercial Paper Notes Outstanding at the time.
ARTICLE 9
MISCELLANEOUS
Section 9.1 NOTICES. Except where instructions or notices are
authorized herein to be given by telephone, all instructions, notices and other
communications to be given to either party hereto in connection herewith shall
be in writing and shall be personally delivered, or sent by certified,
registered or express mail, postage prepaid, or by telecopier, and shall be
deemed to be given for purposes of this Agreement on the day when sent or
transmitted (except if sent by certified or registered mail, they shall be
deemed given on the seventh day after the day on which mailed) to the intended
party at its address or telecopier number as set forth below its signature
hereto (or as such party may have otherwise specified to the other party in
writing). Whenever the giving of notice by telephone is permitted by this
Agreement and unless
24
<PAGE>
otherwise provided herein, such notice shall be confirmed in writing within two
(2) Business Days.
Section 9.2 SURVIVAL AND TERMINATION OF AGREEMENT. All covenants,
agreements, representations and warranties made herein and in the certificates
and other documents delivered pursuant hereto shall survive (i) the issuance of
the Letter of Credit, (ii) the issuance of Commercial Paper Notes by the
Company, and (iii) the making of any investigation by the Bank, and shall
continue in full force and effect until all amounts payable to the Bank in
connection with this Agreement are paid or until the Bank no longer has any
liability under the Letter of Credit, whichever is latest, at which time this
Agreement shall terminate, it being expressly understood that the obligations of
the Company under Section 2.8, Section 6.8 and Section 9.3 of this Agreement
shall survive any termination of this Agreement. Whenever in this Agreement any
party is referred to, such reference shall be deemed to include the successors
and assigns of such party, but no assignment or transfer (whether by operation
of law or otherwise) of this Agreement by the Company or of any of its rights or
duties hereunder may be made without the prior written consent of the Bank, and
any such attempted assignment or transfer made without such consent shall be
null and void. All covenants by or on behalf of the Company which are contained
in this Agreement shall inure to the benefit of the successors and assigns of
the Bank.
Section 9.3 FEES AND EXPENSES OF THE BANK. Whether or not any
Commercial Paper Notes are issued, the Company will pay the reasonable
out-of-pocket costs and expenses incurred by the Bank (including the reasonable
fees and expenses of counsel to the Bank) in connection with the preparation,
execution, extension, amendment, termination or enforcement of this Agreement,
the Letter of Credit and the Depositary Agreement, or the protection of the
rights of the Bank thereunder.
Section 9.4 APPLICABLE LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York without regard
to principles of conflicts of law.
Section 9.5 MODIFICATION OF AGREEMENT. No amendment, modification or
waiver of any provision of this Agreement, or consent to any departure by the
Company therefrom, shall be effective unless the same shall be in writing and
signed by the Company and the Bank, and then such amendment, modification,
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. No notice to or demand on the Company in any case shall
entitle the Company to any other or further notice or demand in the same,
similar or other circumstances. No amendment, modification or waiver of any
provision of this Agreement shall have the effect of terminating, limiting or
altering in any respect the obligation of the Bank under its Letter
25
<PAGE>
of Credit to honor demands for payment thereunder made in conformity with the
terms thereof.
Section 9.6 NON-WAIVER OF RIGHTS BY THE BANK. Neither any failure nor
any delay on the part of the Bank in exercising any right, power or privilege
hereunder or under the Depositary Agreement shall operate as a waiver thereof,
nor shall a single or partial exercise thereof preclude any other or further
exercise of any other right, power or privilege.
Section 9.7 SET-OFF. Upon the occurrence of an Event of Default, the
Bank may, at any time and from time to time without notice to the Company,
set-off or exercise any banker's lien or any other right of attachment or
garnishment and apply any and all balances, credits, deposits, accounts or
moneys at any time held and other indebtedness at any time owing by the Bank to
or for the account of the Company against any and all of the obligations of the
Company to the Bank, absolute or contingent, due or to become due, whether or
not the Bank shall have made any demand under or with respect to any of such
obligations.
Section 9.8 COUNTERPARTS. This Agreement may be executed in
counterparts which, taken together, shall constitute a single document.
Section 9.9 SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
26
<PAGE>
IN WITNESS WHEREOF, the Company and the Bank have caused this Agreement
to be duly executed by their duly authorized officers, all as of the day and
year first above written.
HOSOKAWA MICRON INTERNATIONAL INC.
By: /s/ ISAO SATO
-------------------------------
Name:
Title: President
By: /s/ WILLIAM J. BRENNAN
-------------------------------
Name:
Title: Vice President
Address for Notices:
780 Third Avenue
New York, New York 10017
Tel. No.: (212) 826-3830
Telecopier No.: (212) 826-6612
Attention: Manager of Finance
THE MITSUBISHI BANK, LIMITED,
NEW YORK BRANCH
By: /s/ HIROSHI JINZA
-------------------------------
Name: Hiroshi Jinza
Title: Vice President and Manager
Address for Notices:
225 Liberty Street
Two World Financial Center
New York, New York 10281
Tel. No.: (212) 667-2500
Telecopier No.: (212) 667-3550
Attention: Business Development Department/
Letter of Credit No. HK0750
27
<PAGE>
EXHIBIT A TO LETTER OF CREDIT AGREEMENT
DIRECT DRAW LETTER OF CREDIT
December 16, 1991
Irrevocable Letter of Credit No. [___________]
The Bank of Tokyo Trust Company
100 Broadway
New York, New York 10005
Attention: [__________________]
Gentlemen:
At the request and for the account of Hosokawa Micron International
Inc., a Delaware corporation (the "COMPANY"), we hereby establish in your favor,
as fiduciary on behalf of the owners from time to time of certain promissory
notes of the Company referred to below (the "COMMERCIAL PAPER NOTES"), this
irrevocable Letter of Credit in an aggregate amount equal to Seventy-Five
Million United States Dollars (U.S.$75,000,000) available from time to time in
amounts equal to the face amount of maturing Commercial Paper Notes identified
on the records of the book-entry system maintained by The Depository Trust
Company ("DTC") or authenticated and delivered by you to purchasers pursuant to
a certain Depositary Agreement (the "DEPOSITARY AGREEMENT") dated as of December
16, 1991 among the Company, The Mitsubishi Bank, Limited, New York Branch (the
"Bank"), and you (the "Depositary").
Demand for a drawing hereunder (i) may be made by you on or after the
maturity date of any Commercial Paper Note and prior to the expiration of this
Letter of Credit with respect to such Commercial Paper Note as herein provided
and (ii) shall be made by you prior to the maturity date of such Commercial
Paper Note upon notice from the Bank stating that an "Event of Default" has
occurred under the Letter of Credit Agreement referred to in the Depositary
Agreement (the "CREDIT AGREEMENT"), and directing you to make a drawing in
respect of all Commercial Paper Notes not yet matured. Such drawings shall be
made by delivering or transmitting by tested telex or telecopier to the Bank, at
225 Liberty Street, Two World Financial Center, New York, New York 10281,
Attention: Business Development Department/Letter of Credit No. _____, Telex
No.: 232328, Telecopier: (212) 667-3550, a demand executed by you in the form of
Annex 1 hereto, with the blanks appropriately completed. In the event of a
drawing made by tested telex or
<PAGE>
telecopier, you shall immediately confirm receipt of the telex or telecopy by
telephone.
We hereby agree to honor each such demand drawn under and in full
compliance with this Letter of Credit, provided that such demand is delivered to
us not later than 5:00 P.M. New York time on the fifteenth day after the
maturity date of any such Commercial Paper Note (or if such day is not a
Business Day, on the first Business Day thereafter) (the date of delivery of
such demand being the "DRAWING DATE") by, unless other arrangements satisfactory
to you have been made for making Bank funds available to honor such drawing,
transferring in immediately available Bank funds the amount demanded to the
Special Account maintained by you pursuant to the Depositary Agreement not later
than 2:00 P.M. New York time on the maturity date of any such Commercial Paper
Note (or if such day is not a Business Day, on the first Business Day
thereafter) if such demand is received by us by 11:00 A.M. New York time on the
maturity date, or, if such demand is received by us after 11:00 A.M. New York
time on the maturity date, then not later than 2:00 P.M. New York time on the
next Business Day after the Drawing Date. Upon any payment under this Letter of
Credit, the amount of this Letter of Credit shall be reduced in an amount equal
to such payment. Upon (i) reimbursement to the Bank of such payment on the date
of such payment, (ii) the repayment of any "Unreimbursed Drawing" referred to in
the Credit Agreement arising from such payment, or (iii) the assignment to the
Bank of the proceeds from the sale of such newly issued Commercial Paper Notes
on the date of such payment, the amount by which this Letter of Credit was so
reduced shall, unless the Bank therefore notifies you to the contrary, be
automatically reinstated, in the case of (i) or (ii) above, by the amount of
such reimbursement or repayment (except that the aggregate amount of such
increases shall not exceed the amount of such payment under this Letter of
Credit) and, in the case of (iii) above, by the face amount of the Commercial
Paper Notes the proceeds of which have been assigned to the Bank; provided,
however, that, in the case of an automatic reinstatement in the amount of this
Letter of Credit following an assignment of the proceeds from the sale of
Commercial Paper Notes as described in (iii) above, any repayment or
reimbursement to the Bank in respect of a "Discount" as referred to in the
Credit Agreement on such Commercial Paper Notes shall not increase the amount of
this Letter of Credit. No amendment of this Letter of Credit shall be necessary
to effect any such reduction or increase.
All payments made by us under this Letter of Credit shall be paid out
of our general funds, and no payments under this Letter of Credit shall in any
way be contingent upon or drawn from amounts on deposit in any account
maintained by the Company with you or paid out of proceeds of Commercial Paper
Notes.
It is understood and agreed that the provisions of this Letter of
Credit are intended to provide for payment of the Commercial Paper Notes at
their maturity. Accordingly, in actions taken by
2
<PAGE>
you as beneficiary of the Letter of Credit you shall not be acting as an agent
of the Company but exclusively as fiduciary on behalf of the holders of
Commercial Paper Notes.
This Letter of Credit shall expire with respect to each Commercial
Paper Note authenticated and delivered or identified on the records of DTC's
book-entry system pursuant to the Depositary Agreement at the earlier of (i)
payment of such Commercial Paper Note, or (ii) 5:00 P.M. New York time on the
fifteenth day after the maturity date of such Commercial Paper Note (or, if such
day is not a Business Day, the first Business Day thereafter). In no event shall
this Letter of Credit remain in effect after 5:00 P.M. New York time on December
16, 1992.
This Letter of Credit sets forth in full the terms of our undertaking
and this undertaking shall not in any way be modified, amended or amplified by
reference to any document, instrument or agreement referred to herein or to
which this Letter of Credit relates, and any such reference shall not be deemed
to incorporate by reference any such document, instrument or agreement.
As used herein, "Business Day" means a day other than a Saturday, a
Sunday or other day on which commercial banks are authorized or required to
close in New York City.
Except as otherwise expressly stated herein, this Letter of Credit is
subject to the Uniform Customs and Practice for Documentary Credits (1983
Revision), International Chamber of Commerce, Publication No. 400 (the "UCP"),
as the same may be amended or supplemented from time to time. This Letter of
Credit shall be deemed a contract made under the laws of the State of New York
and shall, to the extent not inconsistent with the UCP, be governed and
construed in accordance with such laws without regard to principles of conflicts
of law.
This Letter of Credit may not be transferred.
Very truly yours,
THE MITSUBISHI BANK, LIMITED,
NEW YORK BRANCH
By:
------------------------
Name:
Title:
3
<PAGE>
ANNEX 1 TO LETTER OF CREDIT
DRAWING UNDER LETTER OF CREDIT NO. [_______]
FROM
THE MITSUBISHI BANK, LIMITED, NEW YORK BRANCH
[______________, 19___]
TO: The Mitsubishi Bank, Limited
New York Branch
225 Liberty Street
Two World Financial Center
New York, New York 10281
RE: HOSOKAWA MICRON INTERNATIONAL INC. COMMERCIAL PAPER PROGRAM
FOR THE URGENT ATTENTION OF: [Business Development Department]
Gentlemen:
1. The undersigned, acting on behalf of the holder or holders of
the below-mentioned Commercial Paper Note or Commercial Paper Notes, is making
demand for payment of the amount stated in paragraph 4 hereof under the
captioned letter of credit (the "Letter of Credit") to pay the face amount of
such Commercial Paper Note or Commercial Paper Notes.
2. The face amounts and maturity dates of all such Commercial
Paper Notes are as follows:
Aggregate
Commercial Paper Face Maturity
Note No. Date Amount Date
---------------- --------- --------
<PAGE>
3. Each such Commercial Paper Note was authenticated and delivered
by us or recorded pursuant to our issuance instructions to DTC in DTC's
book-entry system pursuant to the Depositary Agreement and has not been the
subject of any previous drawing by us under the Letter of Credit.
4. The aggregate amount required to be drawn under the Letter of
Credit to pay in full the face amount of each such Commercial Paper Note
specified in paragraph 2 hereof is [______] U.S. dollars (US$____________).
5. Upon receipt of the amount demanded in paragraph 4 hereof, we
will (i) deposit the same in the Special Account maintained by us pursuant to
the Depositary Agreement and apply the same to the payment of matured Commercial
Paper Notes, (ii) not deposit any portion of said amount in any other account
maintained by us by or for the account of the Company or use any portion of said
amount for any purpose other than payment of Commercial Paper Notes, and (iii)
when Certificated Notes (as defined in the Depositary Agreement) are presented
for payment and paid by us, transmit such matured Commercial Paper Notes to the
Company with a copy to you.
All terms used herein which are defined in the Letter of Credit have
the same meanings when used herein.
Very truly yours,
THE BANK OF TOKYO TRUST COMPANY
By:
-------------------------
Name:
Title:
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EXHIBIT B TO LETTER OF CREDIT AGREEMENT
DEPOSITARY AGREEMENT
As of December 16, 1991
The Bank of Tokyo Trust Company
100 Broadway
New York, New York 10005
Re: Issuance of Commercial Paper Notes
for Hosokawa Micron International Inc.
Gentlemen:
We hereby request that you (the "Depositary") act as issuing and
paying agent and depositary on behalf of Hosokawa Micron International Inc. (the
"Company") in connection with the sale from time to time of the Company's
Commercial Paper Notes and as depositary of and drawing agent under the Letter
of Credit issued by The Mitsubishi Bank, Limited, New York Branch (the "Bank")
pursuant to the Letter of Credit Agreement dated as of December 16, 1991 (the
"Credit Agreement") between the Company and the Bank. In such capacities, you
shall be governed by the terms and conditions of this Depositary Agreement
(hereinafter referred to as "this Agreement") and, when The Depository Trust
Company ("DTC") book-entry system is used for the Commercial Paper Notes, by the
Letter of Representations dated November 13, 1991 from the Company to you and
DTC, the Commercial Paper Certificate Agreement between you and DTC dated June
26, 1991 (the "Certificate Agreement") and your obligations as a participant in
DTC, including DTC's Same-Day Funds Settlement System. Except as otherwise
provided in this Agreement, all capitalized terms used herein which are defined
in the Credit Agreement, as in effect on the date hereof, shall have the same
meanings when used herein.
1. ISSUANCE OF THE COMMERCIAL PAPER NOTES
The Commercial Paper Notes may be issued as bearer or registered
securities and may be represented by either (i) a global security in
substantially the form of Exhibit A attached hereto (the "Master Note")
delivered to you as custodian and agent for DTC and recorded in the book-entry
system maintained by DTC (a "Book-Entry Note") or (ii) a promissory note
substantially in the form of Exhibit B attached hereto issued in physical form
(a "Certificated Note") delivered to the purchaser thereof. Book-Entry Notes and
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Certificated Notes are collectively referred to herein as "Commercial Paper
Notes."
At such time as the Company shall use the DTC book-entry system for the
Commercial Paper Notes, the Company will deliver to you the manually or
facsimile executed Master Note, evidencing the aggregate Face Amount of
Book-Entry Notes to be sold via DTC's book-entry system, registered in the name
of DTC's nominee and to be held by you as custodian and agent on DTC's behalf.
From time to time there will also be delivered to you executed
Certificated Notes of the Company, to be held in safekeeping by you for the
account of the Company. The Certificated Notes will be signed manually or by
facsimile on behalf of the Company by an Authorized Agent (as defined below) of
the Company. You will be furnished with incumbency certificates from the
Secretary or an Assistant Secretary of the Company with respect to any officer
of the Company whose signature is authorized to appear on the Certificated Notes
and the Master Note or otherwise is authorized to act for the Company hereunder
(the "Authorized Agents"), together with the specimen signature of each such
officer. The Master Note or any Certificated Note bearing the signature of an
Authorized Agent authorized to execute the same on the date such signature is
affixed thereto shall bind the Company after the completion thereof by you
notwithstanding that such person shall have died or shall have otherwise ceased
to hold his office or be so authorized on the date such Certificated Note is
countersigned or delivered by you.
The Certificated Notes delivered to you will be incomplete as to face
amount, date of issue and maturity. They will be numbered consecutively and may
bear other appropriate identification. When any Certificated Note is delivered
to you as the Depositary, an Authenticating Representative will acknowledge
receipt by signing and returning a receipt to the Company.
By appropriate certificates of designation, you shall specify the names
of your officers and employees who are authorized (i) to receipt for, complete,
authenticate and deliver the Certificated Notes, and to enter issuance
instructions in DTC's book-entry system with respect to the Book-Entry Notes
(the "Authenticating Representatives"), and (ii) to receive instructions or
notices from an Authorized Agent of the Company, an authorized officer of the
Bank (an "Authorized Bank Officer") or DTC (with respect to the Book-Entry
Notes) and to act for you hereunder and who are authorized to make a drawing
under the Letter of Credit "Designated Persons").
In the case of Book-Entry Notes, in accordance with instructions given
to you by any Authorized Agent of the Company (in writing or by telephone,
promptly confirmed in writing, or by other electronic transmission), from time
to time, but in no event later than 12:30 P.M. New York time on the proposed
date of
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issuance of Commercial Paper Notes, you will enter an issuance instruction in
DTC's Book-Entry System in accordance with the procedures set forth in the
Certificate Agreement which instructions shall identify the Face Amount of
Book-Entry Notes to be sold, the date of issue and the maturity date. The
issuance instruction shall include a delivery order to debit the Dealer's
account with DTC against credit to your account with DTC. Upon confirmation of
receipt of funds, you shall transfer the amount so received to the General
Account as provided in Section 3(a) of this Agreement. You shall record on the
schedule attached to the Master Note each change in the Face Amount of
Outstanding Book-Entry Notes and the maturity dates thereof.
In the case of Certificated Notes, in accordance with instructions
given to you by any Authorized Agent of the Company (in writing or by telephone
or by other electronic transmission), from time to time, but in no event later
than 12:30 P.M. New York time on the proposed date of issuance of Commercial
Paper Notes, an Authenticating Representative shall withdraw the necessary
number of Certificated Notes from safekeeping and shall:
(i) complete each such Certificated Note as to the date of issue,
maturity date, Face Amount and, if so directed, the name of the payee thereof
and the federal taxpayer identification number of such payee;
(ii) authenticate each such Certificated Note by countersigning
the form of authentication inscribed thereon; and
(iii) deliver each such Certificated Note to or for the account of
the purchaser of such Certificated Note designated in such instructions against
payment in accordance with the provisions of this Agreement.
Instructions from the Company for authentication and de1ivery by you of
Certificated Notes shall include the following information with respect to each
Certificated Note: its date of issue, maturity date, Face Amount, discount rate
and amount of Discount from Face Amount and the party to whom delivery of such
Commercial Paper Note or for whom is to be made together with its address. If
you are instructed to register a Certificated Note other than to "bearer," the
Company shall provide to you the name, address and federal taxpayer
identification number of the registered owner of such Commercial Paper Note.
All oral instructions and approvals given to you for the completion and
delivery of Certificated Notes or the entering of issuing instructions in DTC's
book-entry system with respect to Book-Entry Notes will be confirmed by the
Company in writing or by telex or telecopier by an Authorized Agent of the
Company by the next Business Day. You shall incur no liability in acting upon
telephone instructions and approvals which a Designated Person or
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<PAGE>
an Authenticating Representative believes in good faith to have been given by an
Authorized Agent or an Authorized Bank Officer.
You shall not authenticate or deliver any Certificated Note or enter
issuance instructions in DTC's book-entry system with respect to any Book-Entry
Note on any day on which a Commercial Paper Note matures until after you have
provided for the deposit of funds into the Special Account in the Face Amount of
such maturing Commercial Paper Note.
No Commercial Paper Note shall mature (i) more than 270 days after the
date of issuance thereof, or (ii) less than 15 days prior to the Expiration Date
in effect at the time of issuance of such Commercial Paper Note, whichever is
earlier, or mature on a day other than a Business Day.
Each Commercial Paper Note shall be issued only on a discount basis,
shall have a face amount of not less than $100,000 and may be issued in larger
amounts in integral multiples of $1,000.
Notwithstanding any instructions from an Authorized Agent of the
Company, you shall not authenticate and deliver any Certificated Note or enter
issuance instructions in DTC's book-entry system with respect to any Book-Entry
Note if, immediately after the authentication and delivery of such Certificated
Note or giving effect to such instructions with respect to such Book-Entry Note
and the provision for the deposit of the proceeds (or a portion thereof) of such
issuance on the date of computation and any other funds as provided in Section
2(c) of this Agreement to the Bank's Account for the purpose of reimbursing the
Bank for payments made in respect of a drawing under the Letter of Credit (1)
the aggregate Face Amount of Outstanding Commercial Paper Notes would exceed the
amount of the Letter of Credit in effect after the adjustments thereto pursuant
to Section 2.3(c) of the Credit Agreement arising from any reimbursement,
repayment or assignment to the Bank of the proceeds from the sale of Commercial
Paper Notes or (2) the aggregate Face Amount of Outstanding Commercial Paper
Notes plus the amount of Outstanding Unreimbursed Drawings would Exceed the
Commitment. In the event instructions from an Authorized Agent of the Company
would or do result in the occurrence of an event described above, the Depositary
shall immediately so inform the Bank, the Company and the Dealer. In making the
above calculations, you may rely on the information last delivered to you by the
Bank and you shall have no obligation to make any further determination other
than with respect to the Face Amount of Outstanding Commercial Paper Notes and
the amount of the Letter of Credit as then in effect. Until you are notified to
the contrary in writing by the Bank, you shall be entitled to assume that the
Expiration Date is December 16, 1992.
Each issuance of Commercial Paper Notes pursuant to the provisions of
this Agreement shall be deemed (1) an irrevocable
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<PAGE>
assignment by the Company to the Bank of the proceeds of the sale of such
Commercial Paper Notes in an amount not to exceed the amount required to
reimburse the Bank for any payment made on the same day in respect of a drawing
under the Letter of Credit and otherwise not reimbursed by the Company, (2) an
irrevocable assignment by the Company to the Bank of any remaining proceeds of
the sale of such Commercial Paper Notes in an amount not to exceed the amount of
unpaid interest and principal with respect to Unreimbursed Drawings, and (3) in
the event that you receive notice from an Authorized Bank Officer pursuant to
this Agreement which also states that an Event of Default has occurred, an
irrevocable assignment to the Bank of the entire remaining proceeds of the sale
of such Commercial Paper Notes on the date of such notice. Proceeds of the sale
of Commercial Paper Notes shall be distributed pursuant to Sections 2 and 3 of
this Agreement; provided, however, that in the event you receive notice from an
Authorized Bank Officer pursuant to this Agreement which also states that an
Event of Default has occurred, you shall hold for the benefit of the Bank all
proceeds from the sale of Commercial Paper Notes on such date and transfer such
funds to the Bank's Account on the date of and after any payment by the Bank
under the Letter of Credit; provided, further, that the Bank shall apply such
funds from time to time to reimburse itself for any drawings under the Letter of
Credit and any Unreimbursed Drawings and interest thereon, and after all
Outstanding Commercial Paper Notes have been paid in full, any remaining balance
of such funds shall be paid by the Bank to the Company.
If you receive instructions from an Authorized Bank Officer to cease
authenticating or delivering Certificated Notes or entering issuance
instructions in DTC's book-entry system with respect to Commercial Paper Notes,
you shall immediately notify the Dealer thereof and comply with such
instructions, notwithstanding any contrary instructions received by you from any
Authorized Agent of the Company. You shall use reasonable efforts to retrieve or
recover any Certificated Notes which have left your offices prior to your having
received instructions from an Authorized Bank Officer to cease authenticating or
delivering or entering issuance instructions in DTC's book-entry system with
respect to Commercial Paper Notes but you shall have no liability for your
failure to retrieve or recover such Certificated Notes. If instructions to cease
authenticating or delivering or entering issuance instructions in DTC's
book-entry system with respect to Commercial Paper Notes are given by telephone,
they shall be confirmed within 24 hours in writing or by telex or telecopier. In
all cases hereunder, you shall incur no liability to the Company in acting upon
telephone instructions which a Designated Person or Authenticating
Representative believes in good faith to have been given by an Authorized Bank
Officer, absent gross negligence or willful misconduct. Following receipt of
such instructions, no further authentication or delivery or entering issuance
instructions in DTC's book-entry system with respect to Commercial Paper Notes
shall be made until such time as an Authorized Bank
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<PAGE>
Officer shall have rescinded such instructions and shall consent to the issuance
of Commercial Paper Notes by a notice in writing to you. Notwithstanding the
provisions of this paragraph, the giving of instructions pursuant to this
paragraph shall not have the effect of terminating, reducing, or altering in any
respect the terms of the Letter of Credit with respect to Commercial Paper Notes
Outstanding at the time.
Each delivery or issuance of a Certificated Note shall be subject to
the rules of the New York Clearing House Association in effect at the time of
the delivery or issuance.
In the event you are instructed by an Authorized Agent of the Company
to deliver a Certificated Note against payment, the delivery and receipt of
payment may not necessarily be completed simultaneously and you are hereby
authorized to follow the prevailing custom, which is: to deliver a Certificated
Note to or for the account of the purchaser, to receive the purchaser's receipt
for the delivery, and at a later time, but on the same day, after the purchaser
has verified the delivery against the purchase agreement, to receive payment
from the purchaser in immediately available funds by 5:00 P.M. New York time.
Should you be instructed by an Authorized Agent of the Company to
deliver any Certificated Note against payment and the delivery thereof and the
receipt of payment are not completed simultaneously, you shall have no
responsibility or liability for the credit risks involved in your delivery of
such Certificated Note to those designated in writing by an Authorized Agent of
the Company.
You shall send to the Bank and to the Company quarterly statements
specifying (i) the average Face Amount of Commercial Paper Notes Outstanding
during each quarter then ending (calculated on a daily basis) and (ii) the
aggregate Face Amount of Commercial Paper Notes Outstanding at the end of each
such quarter, such statements to cover quarterly periods corresponding to the
quarterly periods for the calculation of the Commercial Paper Support Fee set
forth in Section 2.7 of the Letter of Credit Agreement. A statement containing
the issue date, Face Amount, maturity date, discount amount, net proceeds
amount, payee (if, in the case of a Certificated Note, it is not payable to
"bearer") and discount rate of each Commercial Paper Note shall be sent by
facsimile by you to the Bank on the date of the issuance of such Commercial
Paper Note.
2. Payment of the Commercial Paper Notes.
(a) You shall make a drawing request under the Letter of Credit (i) the
maturity date of each Commercial Paper Note, not later than 11:00 A.M. New York
time, in an amount equal to the aggregate Face Amount of the Commercial Paper
Note or Commercial
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Paper Notes maturing on such maturity date, or (ii) as soon as practicable upon
receipt of a notice from the Bank (but in no event later than one Business Day
after receipt of such notice) stating that an Event of Default has occurred and
directing you to make a drawing for deposit in the Special Account in an amount
equal to the aggregate Face Amount of all of the Outstanding Commercial Paper
Notes. You shall in each case send to the Bank a certificate drawn under and in
compliance with the Letter of Credit, and after you have sent such certificate
and provided such certificate conforms to the requirements of the Letter of
Credit, you may charge the amount of such drawing to the Bank's Account (a
"Charge") notwithstanding that the Charge may result in an overdraft pending
transfer or deposit of funds as provided in the immediately succeeding sentence
hereof. Unless other arrangements satisfactory to you have been made for making
funds available to cover a Charge (any such arrangements not to be inconsistent
with the third sentence of Section 2(b) hereof), the Bank agrees to transfer or
deposit into the Bank's Account immediately available funds in the amount of the
Charge on the date of the Charge. If no such other arrangements have been made
and you do not receive such funds on such date, you shall notify the Bank
promptly thereafter. The Bank shall be liable to you for the amount of each
Charge, which shall be deemed to be an extension of credit by you to the Bank,
and the Company shall have no liability to you therefor.
(b) You shall immediately deposit the proceeds of any drawing
(including but not limited to the proceeds of a Charge) made pursuant to Section
2(a) of this Agreement in the Special Account, and you shall pay each matured
Commercial Paper Note in immediately available funds and solely from such funds.
In the case of Book-Entry Notes, you shall pay each matured Book-Entry Note out
of funds held in the Special Account by transferring such funds to your account
with DTC. In the case of Certificated Notes, you shall pay each such matured
Certificated Note upon presentation and, should any Certificated Note not be
presented, maintain proceeds therefor in the Special Account. In no event shall
funds deposited in or credited to the Special Account be contingent upon or
drawn from amounts on deposit in any account maintained by the Company with the
Depositary or paid out of proceeds of Notes.
(c) After, but only after, you have received the proceeds a drawing
(including but not limited to the proceeds of a Charge) on a maturity date or on
a date on which the Bank requests a drawing under the Letter of Credit as
provided in Section 2(a) of this Agreement and deposited such proceeds in the
Special Account pursuant to Section 3(b) of this Agreement, you shall (1)
transfer to the Bank's Account the amount of any immediately available funds
received by you from the Company with instructions from an Authorized Agent of
the Company to make such transfer, and (2) transfer from the General Account to
the Bank's Account the proceeds of Commercial Paper Notes issued on such date to
the extent required to reimburse the Bank for drawings under the Letter of
Credit (including but not limited to any Charge) and for
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Unreimbursed Drawings and any interest owing thereon, and (3) transfer any
remaining balance of the General Account to the Bank's Account to the extent
required to reimburse the Bank for drawings under the Letter of Credit
(including but not limited to any Charge) and for Unreimbursed Drawings and any
interest owing thereon.
(d) Each Certificated Note shall be delivered to you prior to or at the
time of payment therefor. You shall cancel any Certificated Note paid by you and
send it to the Company, with a copy thereof to the Bank.
(e) You shall hold all funds received by you from purchasers in payment
for Commercial Paper Notes as a fiduciary for the benefit of the Bank, as
contemplated by Section 3(a), until such time as all drawings under the Letter
of Credit otherwise not reimbursed by the Company and any Unreimbursed Drawings
and any interest owing thereon have been received by the Bank. You shall pay all
such funds received by you in accordance with Section 2(c) and Section 3(a)
hereof.
(f) Nothing herein shall affect the obligation of the Company to
reimburse the Bank under the Credit Agreement.
3. General Account. Special Account and Bank's Account.
(a) GENERAL ACCOUNT. You will establish and maintain a segregated
special purpose account for the benefit of the Bank designated "Mitsubishi Bank
General Account" (the "General Account"). You shall deposit in the General
Account all proceeds received from the sale of Commercial Paper Notes, and all
funds paid to you by the Company for deposit therein, and you shall apply such
funds as set forth in Section 2(c). All funds in the General Account shall be
held by you as fiduciary for the benefit of the Bank to the extent such funds
are required to reimburse the Bank as provided in Section 2(c) of this
Agreement. You shall have control of and the sole right of withdrawal from the
General Account.
On each day that any Commercial Paper Note matures, moneys in the
General Account shall be transferred to the Bank's Account in the manner and to
the extent provided in Section 2(c) of this Agreement. To the extent that any
moneys remain in the General Account on (i) any such day after the above
application or (ii) any other day on which proceeds from the sale of Commercial
Paper Notes are deposited in the General Account, then, except as contemplated
by the next sentence, such moneys shall be withdrawn and credited to the
Company's Ordinary Deposit Account with the Bank.
Upon receipt by you from an Authorized Bank Officer (which may be
telephone notice and, if so, shall be promptly confirmed by the Bank in writing)
of notice that an Event of Default, or an event that with the giving of notice
or the passing of time or both would become an Event of Default, has occurred
(including the failure of
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the Company to reimburse the Bank for a drawing under the Letter of Credit), the
Depositary shall not draw on the General Account without the prior consent of
the Bank.
(b) SPECIAL ACCOUNT. You will establish and maintain as fiduciary on
behalf of the owners of the Commercial Paper Notes a segregated special purpose
trust account designated "Hosokawa Micron International Commercial Paper
Owners/Mitsubishi Bank special Account" (the "Special Account"). You shall
deposit in the Special Account only the proceeds of drawings under the Letter of
Credit (including proceeds of any Charge) as provided in Section 2 of this
Agreement. All funds from time to time on deposit in the special Account shall
at all times be under your exclusive control and shall be held uninvested by you
as fiduciary for the benefit of the owners of the Commercial Paper Notes. Except
as provided in Section 4, the funds in the Special Account shall be subject to
withdrawal solely by you for the purpose of effecting payment of the Commercial
Paper Notes as provided in this Agreement until the Commercial Paper Notes have
been paid in full. The Company shall not have any legal, equitable or beneficial
interest in the Special Account. Funds will not be deposited to the Special
Account except as provided herein, and funds deposited therein will not be
commingled with any other funds.
(c) BANK'S ACCOUNT. You will establish and maintain for the benefit of
the Bank a segregated special purpose account designated "Mitsubishi Bank Letter
of Credit Account" (the "Bank's Account"), the funds in which shall be subject
to withdrawal solely by the Bank except as provided in Section 2(a) of this
Agreement. Funds will not be deposited to the Bank's Account except as provided
herein, and funds deposited therein will not be commingled with any other funds.
Before the close of business on each Business Day, the Depositary shall transfer
any funds in the Bank's Account to any other account of the Bank as designated
by the Bank. The Bank agrees to keep designated an account pursuant to the
preceding sentence at all times.
4. THE LETTER OF CREDIT.
Concurrently with the execution of this Agreement, subject to the terms
and conditions of the Credit Agreement, the Bank shall deliver to you the Letter
of Credit. The Letter of Credit shall identify you, acting as fiduciary on
behalf of the owners of Commercial Paper Notes, as the beneficiary thereof and
shall be issued for the account of the Company to assure payment of the
Commercial Paper Notes. Such Letter of Credit shall be irrevocable and shall be
issued in an amount equal to the Commitment under the Credit Agreement. You
shall hold the Letter of Credit in safekeeping for the benefit of the owners of
Commercial Paper Notes and from time to time shall make drawings under the
Letter of Credit on behalf of such owners pursuant to Section 2 of this
Agreement. Such drawings shall be made in accordance with the terms of the
Letter of Credit and this Agreement.
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The amount of the Letter of Credit shall be reduced by an amount equal
to the proceeds of any drawings thereunder (but the amount by which the Letter
of Credit is reduced by such proceeds shall be automatically reinstated as
provided in Section 2.3(C) of the Credit Agreement).
It is understood and agreed by the parties hereto that the provisions
of this Agreement relating to the Letter of Credit are intended to provide for
payment of the Commercial Paper Notes at their maturity. Accordingly, the
parties hereto specifically acknowledge that in actions taken by you as
beneficiary of the Letter of Credit you shall not be acting as an agent of the
Company but shall be acting as fiduciary on behalf of the owners of Commercial
Paper Notes.
If any Certificated Note shall not be presented to you for payment on
the maturity date thereof and sufficient collected funds are then on deposit in
the Special Account for payment thereof, you shall hold such funds until
presentation as fiduciary for the benefit of the owner of such Certificated
Note; provided, however, that if any Certificated Note shall not be presented
for payment on or before the fifteenth day after its maturity date (or, if such
day is not a Business Day, on the next succeeding Business Day), such
Certificated Note shall not be entitled to payment from funds on deposit in the
Special Account, and any funds on deposit in the Special Account which were
drawn under the Letter of Credit with respect to such Certificated Note shall be
paid to the Bank. Notwithstanding the foregoing, the Company shall remain liable
to the owners of Commercial Paper Notes on account of all Commercial Paper Notes
in accordance with their terms. The Bank shall remit its own funds to the
Company in an amount equal to the amount received from the Special Account, less
the amount of any Unreimbursed Drawings under the Letter of Credit, any interest
thereon and any other amounts then due and owing to the Bank under the Credit
Agreement.
Promptly after the Expiration Date, you shall cancel and return the
Letter of Credit to the Bank.
If, two years after the termination of this Agreement, there remain any
funds in any of the accounts specified in Section 3 hereof, you may transfer any
such remaining funds to any other account of the Bank as designated by the Bank,
whereupon the Bank shall remit such funds to the Company except to the extent
there remains any Unreimbursed Drawing or interest thereon or other amounts
owing to the Bank under the Financing Documents.
5. EXPENSES; INDEMNIFICATION; LIMITATION OF LIABILITY.
The Company shall, on demand, pay or reimburse the Depositary for (a)
all fees payable in connection with, arising out
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of, or in any way related to performance of this Agreement (such fees to be as
mutually agreed upon between the Company and you in a separate written
agreement), and (b) all of the Depositary's reasonable out-of-pocket costs and
expenses incurred (including reasonable fees and expenses of counsel), and all
payments made, and indemnify and hold the Depositary harmless from and against
all losses suffered, by the Depositary in connection with, arising out of, or in
any way related to (i) the negotiation, preparation, execution and delivery of
(A) this Agreement and the Commercial Paper Notes and (B) whether or not
executed, any waiver, amendment or consent under or to this Agreement and the
Commercial Paper Notes, (ii) protecting, preserving, exercising or enforcing any
of the rights of the Depositary under or related to this Agreement or the
Commercial Paper Notes, (iii) any governmental investigation arising out of,
related to, or in any way connected with, this Agreement, the Commercial Paper
Notes or the relationship established hereunder, or (iv) any action taken or
omitted in good faith within the scope of this Agreement upon telephone
instructions, if authorized herein, received from or believed by you in good
faith to have been given by an Authorized Agent of the Company, or an Authorized
Bank Officer, except that the foregoing indemnity shall not be applicable to any
loss suffered by the Depositary to the extent such loss is the result of acts or
omissions on the part of the Depositary constituting (x) gross negligence, (y)
willful misconduct, or (z) knowing violations of law. The Bank shall have no
responsibility or liability for the payment of any such fees, costs or expenses.
The obligations of the Company hereunder shall survive your resignation or
removal or the termination of this Agreement and the payment in full of all
Commercial Paper Notes.
6. NOTICES.
Except where instructions or notices are authorized herein to be given
by telephone, all instructions, notices and other communications to be given to
any party hereto or to DTC in connection herewith shall be in writing and shall
be personally delivered, or sent by certified, registered or express mail,
postage prepaid, or by telecopier, and shall be deemed to be given for purposes
of this Agreement on the day when sent or transmitted (except, if given by
certified or registered mail, they shall be deemed given on the seventh day
after the day on which mailed) to the intended party at its address or telex or
telecopier number set forth below its signature hereto (or as such party may
have otherwise specified to the other parties in writing) and, in the case of
DTC, to DTC at its address or telex or telecopier number that is specified in
the Certificate Agreement. Whenever the giving of notice by telephone is
permitted by this Agreement and unless otherwise provided herein, such notice
shall be confirmed in writing within two (2) Business Days.
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7. MISCELLANEOUS PROVISIONS.
The Company hereby warrants and represents to you, which shall be a
continuing warranty and representation, that this Agreement is, and all
Commercial Paper Notes delivered to you as Depositary pursuant to this Agreement
will be, duly authorized, executed and delivered by the Company, and your
appointment as Depositary and issuing and paying agent for the Commercial Paper
Notes and as drawing agent and depositary for the Letter of Credit under this
Agreement is duly authorized in accordance with and by a resolution duly adopted
by the Board of Directors of the Company and in full force and effect.
It is understood that you may resign or the Company may terminate this
Agreement and the authority granted herein at any time upon at least sixty (60)
days' written notice of resignation or termination, as the case may be, such
notice to be given to the Bank, the Dealer and DTC and to you or the Company (as
relevant). In such event, (i) you shall return to the Company all undelivered
Certificated Notes held by you at the time of such notice; (ii) prior to the
termination of or effectiveness of your resignation from your obligations
hereunder, the Company shall have appointed a successor Depositary after
obtaining the written approval of the Bank, and such successor, upon accepting
such appointment hereunder, shall establish a new General Account, Special
Account and Bank's Account for purposes of this Agreement and the Credit
Agreement; and (iii) you shall transfer to the successor Depositary for deposit
in the new General Account, the Special Account and the Bank's Account
established by the successor Depositary all funds, if any, on deposit in, or
otherwise to the credit of, the General Account, the Special Account and the
Bank's Account maintained by you, in excess of that amount necessary to pay in
full the Face Amount of Commercial Paper Notes Outstanding. Any successor
Depositary shall have a participant relationship with DTC at the time that the
successor Depositary is appointed if Commercial Paper Notes are then being
issued through the DTC Book-Entry System. All Commercial Paper Notes validly
authenticated and delivered by you as Depositary pursuant hereto prior to the
termination of this Agreement, and the authority granted to and obligations
assumed by you hereunder with respect to the payment of such Commercial Paper
Notes, shall be valid obligations notwithstanding such termination, and this
Agreement shall remain in full force and effect with respect to such Commercial
Paper Notes until the same have been paid in full.
This Agreement may be supplemented, modified or amended if such
supplement, modification or amendment is in writing and signed by each of the
parties hereto. No supplement, modification or amendment shall adversely affect
the rights of owners of Commercial Paper Notes outstanding at that time.
In acting with respect to the Letter of Credit, and generally in acting
under this Agreement, you will be required by
12
<PAGE>
the Company and the Bank to perform only such duties as are specifically set
forth in (i) this Agreement, (ii) the Letter of Credit itself, and (iii)
applicable law as in effect from time to time. You shall not be liable to the
Company or the Bank except for gross negligence or willful misconduct in the
performance of said duties and obligations. You undertake to perform such duties
and only such duties as are specifically set forth in this Agreement and you
shall have no fiduciary duties to the owners of Commercial Paper Notes other
than as specifically set forth in this Agreement. No implied covenants or
obligations shall be read into this Agreement against you.
Except as otherwise provided in Sections 3 and 4 of this Agreement, you
may execute any of the powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys, provided that your liabilities or
obligations hereunder shall not be reduced by reason thereof.
You, in your individual or any other capacity, may become the owner or
pledgee of Commercial Paper Notes or a participant in the credit provided under
the Credit Agreement with the same rights you would have if you were not acting
hereunder.
Until used or applied as herein provided, all monies received by you
hereunder shall be held for the purposes for which they were received, but need
not be segregated from other funds except to the extent provided herein or
required by law. You shall be under no liability for interest on any monies
received by you hereunder except such as you may agree with the Company to pay
thereon.
Except as otherwise expressly provided herein, whenever, in the
administration of this Agreement, you shall deem it necessary that a matter be
proved or established prior to taking, suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate of an Authorized Agent of the Company or an Authorized Bank
Officer, and such certificate shall be full warranty to you for any action
reasonably taken, suffered or omitted under the provisions of this Agreement
upon the faith thereof. You may consult with and rely upon the advice of legal
counsel.
Any corporation into which you may be merged or with which you may be
consolidated, or any corporation resulting from any merger or consolidation to
which you shall be a party, or any corporation succeeding to your business,
shall succeed to all your rights, obligations and immunities hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding.
13
<PAGE>
This Agreement shall in all respects be governed by and construed in
accordance with the laws of New York without regard to principles of conflicts
of law.
You hereby covenant and agree that prior to the date which is
ninety-one (91) days after the payment in full of the latest maturing Commercial
Paper Note, you will not, in your capacity as Depositary hereunder, institute
against, or join any person in instituting against, the Company any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any federal or state bankruptcy or similar law.
Subject to the next succeeding sentence, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. No party hereto may assign any of its rights or
obligations hereunder except with the prior written consent of all parties
hereto (including the Bank).
Any provision of this Agreement which is prohibited, unenforceable or
not authorized in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions of this
Agreement or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
This Agreement may be executed in any number of counterparts and by
different parties hereto and separate counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
Agreement.
14
<PAGE>
If the foregoing correctly and fully sets forth our agreement with
respect to the matters to which it pertains, please sign and return to us the
enclosed copies of this letter.
Very truly yours,
HOSOKAWA MICRON INTERNATIONAL INC.
By:
---------------------------------------
Name: President
Title:
By:
---------------------------------------
Name:
Title: Vice President
Address:
780 Third Avenue
New York, New York 10017
Attention:
-----------------------------
Telephone: (212) 826-3830
Telecopier: (212) 826-6612
15
<PAGE>
Accepted and approved as of
December 16, 1991
THE BANK OF TOKYO TRUST COMPANY
By:
---------------------------------------
Name:
Title:
Address:
100 Broadway
New York, New York 10005
Attention:
---------------------------------
Telephone: 212-766-3535
Telecopier: 212-962-5364
The foregoing Agreement is hereby accepted by the undersigned.
THE MITSUBISHI BANK, LIMITED,
NEW YORK BRANCH
By:
---------------------------------------
Name:
Title:
Address:
225 Liberty Street
Two World Financial Center
New York, New York 10281
Attention:_____________________
Telephone: (212) 667-2500
Telecopier: (212) 667-3550
16
<PAGE>
EXHIBIT A TO THE DEPOSITARY AGREEMENT
COMMERCIAL PAPER MASTER NOTE
HOSOKAWA MICRON INTERNATIONAL INC.
December 16, 1991
HOSOKAWA MICRON INTERNATIONAL INC. (the "Company"), a corporation organized and
existing under the laws of the State of Delaware, for value received, hereby
promises to pay to Cede & Co. or registered assigns on the maturity date of each
obligation identified on the records of the Company, which records are reflected
on a schedule attached hereto and made a part hereof and are maintained by The
Bank of Tokyo Trust Company (the "Depositary"), the principal amount for each
such obligation. Payment shall be made by wire transfer to the registered owner
from the Depositary without the necessity of presentation and surrender of this
Master Note.
This Master Note has been issued in accordance with a Letter of Credit Agreement
dated as of December 16, 1991, as from time to time amended, between the Company
and The Mitsubishi Bank, Limited, New York Branch (the "Bank"), and is entitled
to the benefit of an Irrevocable Letter of Credit (the "Letter of Credit")
issued by the Bank pursuant to said Letter of Credit Agreement, provided that
payment is requested from the Depositary not later than 5:00 p.m., New York
time, on the fifteenth day after the maturity date of each obligation (or, if
such fifteenth day is not a Business day, on the next succeeding Business Day).
As used herein, the term "Business Day" means any day other than a Saturday or
Sunday or a day on which banks are authorized or required by law to close in New
York.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS
OF THIS MASTER NOTE SET FORTH ON THE NEXT PAGE HEREOF.
This Master Note is a valid and binding obligation of the Company.
HOSOKAWA MICRON INTERNATIONAL INC.
By:
--------------------------------------
(Authorized Officer's Signature)
At the request of the registered owner, the Company shall promptly
issue and deliver one or more separate note certificates evidencing each
obligation evidenced by this Master Note. As of the date any such note
certificate or certificates are issued, the obligations which are evidenced
thereby shall no longer be evidenced by this Master Note.
1
<PAGE>
- --------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Name, Address and Taxpayer Identification Number of Assignee)
the Master Note and all rights hereunder, hereby irrevocably constituting and
appointing _____________________ Attorney to transfer said Master Note on the
books of the Company with full power of substitution in the premises.
Dated: ----------------------------------------
(Signature)
Signature(s) Guaranteed:
NOTICE: The signature of this assignment
must correspond with the names as
written upon the face of this Master
Note, in every particular, without
alteration or enlargement or any change
whatsoever.
- --------------------------------------------------------------------------------
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT
IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
2
<PAGE>
Schedule to
Commercial Paper Master Note
dated December 16, 1991 of Hosokawa Micron International Inc.
Date of Face Amount of CUSIP Maturity Date Amount Notation
Issue Discount Note Number Date Paid Paid Made By
----- ------------- ------ ---- ---- ---- -------
3
<PAGE>
EXHIBIT B TO THE DEPOSITARY AGREEMENT
PROMISSORY NOTE
HOSOKAWA MICRON INTERNATIONAL INC.
_____________, 19__ New York, New York
On ________________, 19__, for value received, HOSOKAWA MICRON
INTERNATIONAL INC. (the "Company") promises to pay to the order of BEARER
the sum of
dollars
payable at the office of The Bank of Tokyo Trust Company, Corporate Trust
Department, 100 Broadway, New York, New York 10005 (the "Depositary"). Payment
in respect of this Note shall be made by 5:00 P.M. New York time on any Business
Day, provided that this Note is presented for payment not later than 2:00 P.M.
New York time on such Business Day. If this Note is presented for payment later
than 2:00 P.M. New York time on any Business Day, payment in respect of this
Note shall be made on the next succeeding Business Day.
This Note is entitled to the benefit of an irrevocable letter of credit
(the "Letter of Credit") issued to the Depositary for the benefit of the owner
hereof by The Mitsubishi Bank, Limited, New York Branch (the "Bank"), pursuant
to a certain Letter of Credit Agreement dated as of December 16, 1991 (the
"Credit Agreement") between the Company and the Bank, provided that the
Depositary makes a demand for payment under the Letter of Credit, and that this
Note is presented to the Depositary for payment, not later than 5:00 P.M. New
York time on the fifteenth day after the above-stated maturity date (or, if such
day is not a Business Day, not later than 5:00 P.M. New York time on the next
succeeding Business Day). As used herein, "Business Day" means a day other than
a Saturday or a Sunday or other day on which commercial banks are authorized or
required to close in New York City.
This Note shall be governed by, and construed in accordance with, the laws
of the State of New York.
Reference is made to the Credit Agreement and related documents which, as
from time to time amended, are on file with the Depositary at its aforesaid
office for a statement of the terms upon which the Letter of Credit has been
issued and the procedure
1
<PAGE>
and conditions governing drawings and the liability of the Bank thereunder.
HOSOKAWA MICRON INTERNATIONAL INC.
By:
-------------------------------
Name:
Title:
COUNTERSIGNED FOR AUTHENTICATION ONLY BY
THE BANK OF TOKYO TRUST COMPANY, AS DEPOSITARY
By:
-------------------------------------
Name:
Title:
THIS NOTE IS NOT VALID FOR ANY PURPOSE UNLESS COUNTERSIGNED BY THE BANK OF TOKYO
TRUST COMPANY, AS DEPOSITARY.
2
<PAGE>
EXHIBIT C TO LETTER OF CREDIT AGREEMENT
CERTIFICATE OF
HOSOKAWA MICRON INTERNATIONAL INC.
The Mitsubishi Bank, Limited
New York Branch
225 Liberty Street
Two World Financial Center
New York, NY 10281
Dear Sir or Madam:
Hosokawa Micron International Inc. (the "Company") does hereby certify
that:
1. as of the date hereof no event has occurred which constitutes, or which
with the giving of notice or the passing of time, or both, would
constitute an Event of Default under Article 8 of the Letter of Credit
Agreement (the "Letter of Credit Agreement") dated as of December __,
1991 between the Company and The Mitsubishi Bank, Limited, New York
Branch (the "Bank");
2. all the representations and warranties of the Company contained in
Article 4 of the Letter of Credit Agreement and any other document
executed and delivered on or before the date hereof in connection
therewith were true and correct on the date that they were made and
remain true and correct as of the date hereof; and
3. all of the covenants of the Company set forth in the Letter of Credit
Agreement have been fully met and performed as of the date hereof.
HOSOKAWA MICRON INTERNATIONAL INC.
By:
-------------------------------
Name:
Title: Senior Vice President
for Administration
<PAGE>
Execution Copy
GUARANTY
of
HOSOKAWA MICRON CORPORATION
THIS GUARANTY is made as of the 16th day of December, 1991 by HOSOKAWA
MICRON CORPORATION (the "Guarantor"), a corporation organized and existing under
the laws of Japan for the benefit of THE MITSUBISHI BANK, LIMITED, NEW YORK
BRANCH (the "Bank").
WHEREAS, pursuant to the Letter of Credit Agreement (the "Letter of
Credit Agreement") of even date herewith between the Bank and Hosokawa Micron
International Inc. (the "Company"), a subsidiary of the Guarantor, the Bank has
agreed to issue in favor of The Bank of Tokyo Trust Company, as fiduciary on
behalf of the owners of certain promissory notes to be issued by the Company, a
Letter of Credit (the "Letter of Credit") in an aggregate principal amount equal
to Seventy-Five Million United States Dollars (US$75,000,000); and
WHEREAS, it is a condition precedent to the Bank's commitment to issue
the Letter of Credit that the Bank shall have received from the Guarantor an
irrevocable and continuing guaranty (the "Guaranty") in favor of the Bank
securing the due and punctual payment to the Bank of all amounts which may now
or hereafter from time to time be owing by the Company to the Bank under the
Letter of Credit Agreement.
NOW THEREFORE, the Guarantor hereby agrees as follows:
1. GUARANTY.
To secure the due payment to the Bank of all amounts which may now or
hereafter from time to time be owing by the Company to the Bank and to induce
the Bank from time to time, in its discretion, to extend or continue credit to
the Company under the Letter of Credit Agreement, the Guarantor hereby
irrevocably guarantees absolutely and unconditionally, as direct obligor and not
merely as a surety, the full and timely payment when due (whether at stated
maturity, by acceleration or otherwise) of any and all liabilities of the
Company to the Bank arising under the Letter of Credit Agreement and the Letter
of Credit (all such liabilities and obligations hereinafter referred to as the
"Obligations"). The Guarantor agrees that, with or without notice or demand, the
Guarantor shall reimburse the Bank, to the extent that such reimbursement is not
made by the Company, for all expenses (including legal fees) incurred by the
Bank in connection
<PAGE>
with any of the Obligations of the Company or the collection thereof.
2. SCOPE OF GUARANTY.
This Guaranty is a guaranty of payment and not merely of collection. It
is an irrevocable and continuing obligation of the Guarantor and is in addition
to and not in substitution for any other guaranties or other security now or
hereafter held by the Bank. No invalidity, irregularity or unenforceability of
all or any part of the Obligations hereby guaranteed shall affect, impair or be
a defense to this Guaranty. The Guarantor hereby consents that from time to
time, before or after any default by the Company or any notice of termination
hereof, with or without further notice to or assent from the Guarantor, any
security at any time held by or available to the Bank for any Obligation of the
Company, or any security at any time held by or available to the Bank for any
obligation of any person secondarily or otherwise liable for any of the
Obligations of the Company, may be exchanged, surrendered or released and any
Obligation of the Company, or any of such other person, may be changed, altered,
renewed, extended, continued, surrendered, compromised, waived or released in
whole or in part, or any default with respect thereto waived, and the Bank may
fail to set off and may release, in whole or in part, any balance of any deposit
account or credit on its books in favor of the Company, or of any such other
person, and may extend further credit in any manner whatsoever to the Company,
and generally deal with the Company or any such security or other person as the
Bank may see fit; and the Guarantor shall remain bound under this Guaranty
notwithstanding any such exchange, surrender, release, change, alteration,
renewal, extension, continuance, compromise, waiver, inaction, extension of
further credit or dealing.
3. PAYMENT.
Upon notice by the Bank to the Guarantor stating that a sum is due to
the Bank under this Guaranty, the Guarantor shall immediately pay such sum to
the account of the Bank at its office designated above or such other location or
account as the Bank may by notice specify. Such notice as between the Bank and
the Guarantor shall, except for manifest errors, constitute conclusive evidence
of the liability of the Guarantor hereunder. All sums owing to the Bank
hereunder shall be paid in United States dollars in immediately available funds
free and clear of and without deduction for any and all present and future
taxes, levies, imposts, deductions, charges, withholdinqs, and all liabilities
with respect thereto.
2
<PAGE>
4. SUBORDINATION.
The Guarantor hereby waives all rights of subrogation and reimbursement
and all rights to enforce any remedy and to participate in any security which
the Bank may now or hereafter have against the Company. The Guarantor hereby
subordinates its right to receive payment of any amounts which the Company now
or hereafter owes the Guarantor to the Bank's right to receive payment in full
of all Obligations of the Company.
5. WAIVER.
(a) The Guarantor hereby specifically waives (i) notice of acceptance
of this Guaranty, and also presentment, demand, protest and notice of dishonor
of any and all of the Obligations, and promptness in commencing suit against any
party thereto or liable thereon, and in giving any notice to or of making any
claim or demand hereunder upon the Guarantor; (ii) any rights, whether granted
by statute or otherwise, to require the Bank to institute suit against the
Company or to exhaust the Bank's rights and remedies against the Company prior
to asserting its rights against the Guarantor hereunder, the Guarantor being
bound to the full and complete payment and performance of all of the
Obligations, whether now existing or hereafter accruing, as fully and completely
as if the Obligations were directly owing to the Bank by the Guarantor; and
(iii) any defense arising by reason of any lack of validity of the Obligations
or any agreement or instrument relating thereto, by reason of any disability of
the Company or any other defense of the Company, by reason of the cessation from
any cause whatsoever of the liability of the Company and by reason of any
defense that the Bank was to obtain other or further indemnity, guaranty or
security for the Obligations.
(b) The failure or delay of the Bank to require performance by the
Guarantor of any provision of this Guaranty or any document, instrument or
agreement executed with this Guaranty, or the failure of the Bank to exercise
any right, power or privilege shall not affect its right to require performance
of such provision unless and until such performance has been waived by the Bank
in writing. Each and every right granted to the Bank hereunder or any other
document, instrument or agreement delivered hereunder or in connection herewith,
or allowed at law or in equity, shall be cumulative and may be exercised from
time to time.
6. REPRESENTATIONS AND WARRANTIES.
The Guarantor represents and warrants to the Bank that:
(a) The Guarantor has been duly incorporated and is validly existing
and in good standing under the laws of Japan, and the Guarantor has all
requisite power and authority to conduct its business, to own its properties and
to execute, deliver and perform its obligations under this Guaranty.
3
<PAGE>
(b) The execution, delivery and performance by the Guarantor of this
Guaranty have been duly authorized by all necessary corporate action, and does
not and will not violate any provision of any law or regulation, or contractual
or corporate restriction binding on the Guarantor.
(c) This Guaranty constitutes the legal valid and binding obligation of
the Guarantor, enforceable in accordance with its terms.
(d) Since the date of the financial statements of the Guarantor most
recently delivered to the Bank there has been no material adverse change in the
financial condition of the Guarantor which would materially adversely affect the
ability of the Guarantor to perform its obligations under this Guaranty.
7. COVENANTS.
In addition to the other undertakings herein, the Guarantor covenants
to the Bank that from the date of this Guaranty until payment in full of all
sums guaranteed by the Guarantor hereunder:
(a) The Guarantor shall maintain its corporate existence in good
standing in compliance with all applicable laws, shall maintain the present
character of its business and shall conduct its business and operations in
accordance with all applicable laws and other governmental directives,
guidelines and policies applicable to it, and shall pay all of its indebtedness
and perform all of its contractual obligations promptly.
(b) The Guarantor shall within 120 days after the end of its fiscal
year deliver to the Bank a copy of the Guarantor's annual financial statements
(including, at least, its audited balance sheet and statement of income)
certified by independent public accountants acceptable to the Bank, and shall
furnish the Bank within 60 days after the close of each fiscal quarter
comparable quarterly financial statements certified by its principal financial
officer, and such other information concerning the condition and operations of
the Guarantor, financial or otherwise, as the Bank may from time to time
reasonably request.
8. SET-OFF.
In addition to any rights now or hereafter granted under applicable
law, during the continuance of any event of default of any of the Obligations,
the Bank is hereby authorized at any time and form time to time, without notice
to the Company, or to any other person or entity (any such notice being hereby
expressly waived) to set off and to appropriate and apply any and all deposits
(general or special, time or demand, matured or unmatured, in whatever currency)
and any other indebtedness at any time held by or owing to the Bank against and
on account of the Obligations
4
<PAGE>
irrespective of whether or not the Bank shall have made any demand hereunder.
9. AMENDMENTS.
This Guaranty may be amended only by an instrument in writing which is
signed by the Bank and the Guarantor.
10. GOVERNING LAW.
This Guaranty shall be governed by and interpreted in accordance with
the laws of the State of New York.
11. SUBMISSION TO JURISDICTION.
(a) The Guarantor hereby irrevocably consents that any legal action or
proceedings against the Guarantor or any of its property arising out of or in
any way connected with this Guaranty may be brought in any court of the State of
New York or any Federal Court of the United States of America located in the
City and State of New York, United States of America, or both, as the Bank may
elect, and by execution and delivery of this Guaranty, the Guarantor hereby
submits to and accepts with regard to any such action or proceeding, for itself
and in respect of its property, generally and unconditionally, the jurisdiction
of such courts. The Guarantor further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to the Guarantor at its address set forth in the first paragraph of
this Guaranty. The foregoing, however, shall not limit the right of the Bank to
serve process in any other manner permitted by law or to bringing any legal
action or proceeding or to obtain execution of judgment in any jurisdiction.
(b) The Guarantor hereby irrevocably waives any objection which it may
now or hereafter have to the laying of the venue of any suit, action or
proceeding arising out of or relating to this Guaranty in the City and State of
New York and hereby further irrevocably waives any right it may now or hereafter
have to a trial by jury and hereby further irrevocably waives any claim that the
City and State of New York is not a convenient forum for any such suit, action
or proceeding.
12. NOTICES.
Any notice hereunder shall be in writing and shall be personally
delivered or transmitted by postage prepaid registered or certified mail, return
receipt requested, addressed to the party receiving such notice at its address
set forth on the first page hereof or such other address as a party may by
notice specify to the other party. Notices shall be deemed effective on the date
of
5
<PAGE>
delivery if personally delivered or on the fifth day after mailing if delivered
by mail.
13. SEVERABILITY.
If any term contained in this Guaranty is invalid, illegal or
unenforceable in any respect under any applicable law, the remaining terms
hereof shall not in any way be affected or impaired.
14. BINDING OBLIGATION; ASSIGNMENT.
This Guaranty shall be binding upon the Guarantor, and the Guarantor's
successors and assigns; provided, that the Guarantor shall not assign or
transfer any of its obligations hereunder without the prior written consent of
the Bank. The Bank may at any time assign or transfer its interest herein and
the transferee shall thereupon become vested with all of the rights and powers
given to the Bank herein.
Executed on the date first written above.
HOSOKAWA MICRON CORPORATION
By: /s/ [Illegible]
---------------------------
Name:
Title:
6
<PAGE>
November 1, 1996
The Bank of Tokyo-Mitsubishi, Ltd.
New York Branch
1251 Avenue of the Americas
New York, NY 10020
Re: HOSOKAWA MICRON INTERNATIONAL INC. COMMERCIAL PAPER PROGRAM
Gentlemen:
We refer to our guaranty, dated December 16, 1991, in your favor (the
"Guaranty") which guarantees the payment when due of all amounts payable by
Hosokawa Micron International Inc., a Delaware corporation (the "Company"), to
you under the Letter of Credit Agreement, dated as of December 16, 1991, between
the Company and you (as amended, the "Credit Agreement").
We hereby acknowledge that the Letter of Credit issued by you pursuant
to the Credit Agreement has been extended and may be further extended from time
to time. We hereby agree that the Guaranty will remain in full force and effect,
enforceable against us as a guaranty of the payment of all amounts payable by
the Company to you under the Credit Agreement, as the same may be amended from
time to time (with or without our consent).
Very truly yours,
HOSOKAWA MICRON CORPORATION,
a Japanese corporation
By: /s/ K. Miyoshi
---------------------------
Name: K. Miyoshi
Title: Managing Director
<PAGE>
================================================================================
ELEVENTH AMENDMENT TO LETTER OF CREDIT AGREEMENT
between
HOSOKAWA MICRON INTERNATIONAL INC.
as Account Party
and
THE BANK OF TOKYO-MITSUBISHI, LTD., NEW YORK BRANCH
as Issuing Bank
Dated as of November 14, 1997
================================================================================
Relating to Hosokawa Micron International Inc.
US$ 75,000,000 Commercial Paper Program
================================================================================
<PAGE>
ELEVENTH AMENDMENT TO LETTER OF CREDIT AGREEMENT
ELEVENTH AMENDMENT TO LETTER OF CREDIT AGREEMENT (this "AMENDMENT"),
dated as of November 14, 1997, between Hosokawa Micron International Inc., a
Delaware corporation, having an office at 780 Third Avenue, New York, New York
10017 (the "COMPANY"), and The Bank of Tokyo-Mitsubishi, Ltd., New York Branch,
a bank licensed under the laws of the State of New York, having an office at
1251 Avenue of the Americas, New York, New York 10020 (the "BANK").
The Company and the Bank entered into a certain Letter of Credit
Agreement, dated as of December 16, 1991 (the "CREDIT AGREEMENT"), pursuant to
which the Bank issued its Irrevocable Letter of Credit No. HK0750 (the "LETTER
OF CREDIT"), a direct-draw letter of credit which provides for the repayment of
the Company's Commercial Paper Notes (as such term and all other capitalized
terms used but not defined herein are defined in the Credit Agreement).
Subsequently, the Company and the Bank entered into a certain First Amendment to
Letter of Credit Agreement, dated as of November 25, 1992, a certain Second
Amendment to Letter of Credit Agreement, dated as of December 16, 1992, a
certain Third Amendment to Letter of Credit Agreement, dated as of November 17,
1993, a certain Fourth Amendment to Letter of Credit Agreement, dated as of
December 16, 1993, a certain Fifth Amendment to letter of Credit Agreement,
dated as of November 1, 1994, a certain Sixth Amendment to Letter of Credit
Agreement dated as of December 16, 1994, a certain Seventh Amendment to Letter
of Credit Agreement dated as of November 1, 1995, a certain Eighth Amendment to
Letter of Credit Agreement dated as of December 15, 1995, a certain Ninth
Amendment to Letter of Credit Agreement, dated as of November 1, 1996 and a
certain Tenth Amendment to Letter of Credit Agreement, dated as of December 16,
1996 (the "TENTH AMENDMENT"; all of the foregoing amendments are hereinafter
referred to each as a "PRIOR AMENDMENT" and collectively as the "PRIOR
AMENDMENTS"), pursuant to which the Expiration Date provided for in the Credit
Agreement was changed to December 16, 1997. (The Credit Agreement, as amended by
the Prior Amendments, is hereinafter referred to as the "AMENDED CREDIT
AGREEMENT"). In accordance with the terms of the Amended Credit Agreement,
unless the Expiration Date provided therein is changed, the Letter of Credit
will expire on December 16, 1997.
The Company has requested that the Bank extend the Letter of Credit and
the Bank has agreed to do so by issuing an eleventh amendment to the Letter of
Credit (the "ELEVENTH LETTER OF CREDIT AMENDMENT") which extends the Expiration
Date until December 16, 1998.
Accordingly, the Company and the Bank, intending to be legally bound
hereby, hereby agree as follows:
<PAGE>
1. EXPIRATION DATE RE-DEFINED. The first sentence of Section 3.1 of the
Amended Credit Agreement is hereby amended and restated in its entirety to read
as follows:
As used herein, "Expiration Date" shall mean December
16, 1998, which date may be extended by the written
agreement of the parties hereto as set forth below or
accelerated pursuant to Article 8.
2. REPRESENTATIONS AND WARRANTIES. As of the date of this Amendment,
the Company hereby represents and warrants to the Bank as follows:
2.1 CORPORATE AUTHORITY VIOLATION OF LAWS, BREACH
OF AGREEMENTS. The execution, delivery and performance
by the Company of this Amendment have been duly
authorized by all necessary corporate action and do not
and will not (i) violate any provision of any law, rule,
regulation (including, without limitation, the rules and
regulations of the SEC), order, writ, judgment,
injunction, decree, determination, award or the charter
or by-laws of the Company, (ii) result in a breach of or
constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or
instrument to which the Company is a party or by which
the Company or any of its properties may be bound or
affected, or (iii) result in or require the creation or
imposition of a mortgage, deed of trust, assignment,
pledge, lien, security interest or other charge or
encumbrance of any nature upon or with respect to any of
the properties of the Company. The Company is not in
violation of or in default under any such law,
regulation, order, writ, judgment, injunction, decree,
determination or award, or any such indenture,
agreement, lease or instrument, which violation or
default would have a materially adverse effect on its
financial condition or its ability to perform its
obligations under the Financing Documents.
2.2 GOVERNMENT APPROVALS. No authorization,
consent, approval, license, exemption of or filing or
registration with any court or governmental department,
commission, board, bureau, agency or instrumentality,
domestic or foreign, is or will be necessary for the
valid execution, delivery or performance by the Company
of this Amendment or for the issuance or sale of
Commercial Paper Notes by the Company subsequent to the
date hereof.
2
<PAGE>
2.3 ACCURACY OF INFORMATION. All information
supplied by the Company to the Bank in connection with
the transactions contemplated by this Amendment is true,
complete and accurate in all material respects and does
not omit to state any material fact necessary in order
to make the statements contained therein, in light of
the circumstances under which they were made, not
misleading.
2.4 FINANCIAL STATEMENTS. The financial statements
of the Company for the year ended September 30, 1997,
which have been delivered to the Bank present fairly and
accurately, in accordance with generally accepted
accounting principles consistently applied, the
financial condition of the Company as of the dates
thereof and the results of operations and cash flow for
the periods then ended. As of the date hereof, there
has been no change in the financial condition of the
Company which materially adversely affects the financial
condition of the Company or the ability of the Company
to perform its obligations under the Financing
Documents.
2.5 ORIGINAL REPRESENTATIONS AND WARRANTIES. After
giving effect to the provisions of this Amendment, the
representations and warranties of the Company set forth
in Article 4 of the Credit Agreement and in each of the
Prior Amendments remain true and correct as of the date
hereof as if such representations and warranties had
been made by the Company as of the date hereof.
2.6 PERFORMANCE OF COVENANTS; NO EVENT OF DEFAULT.
As of the date hereof, all of the covenants of the
Company set forth in the Amended Credit Agreement have
been fully met and performed, and no Event of Default
has occurred.
3. ISSUANCE OF COMMERCIAL PAPER. The Company may issue Commercial Paper
Notes in accordance with the terms of the Financial Documents.
4. ADDITIONAL DOCUMENTS. Simultaneously with the execution of this
Amendment, the Company shall deliver to the Bank the following certificates and
supporting documents:
4.1 a fully executed letter to the Depositary
substantially in the form of EXHIBIT A attached
hereto;
3
<PAGE>
4.2 a good standing certificate for the Company from
the Secretary of State of the State of Delaware
dated as of a recent date;
4.3 evidence that the "Prime 1" rating received from
Moody's Investors Service, Inc. and the "A-l+"
rating received from Standard & Poor's Ratings
Group with respect to the Commercial Paper Notes
will continue; and
4.4 such other documents as the Bank or counsel for the
Bank may reasonably request.
5. MISCELLANEOUS.
5.1 BANK'S COSTS. The Company shall reimburse the Bank for all
reasonable costs and expenses (including reasonable attorneys' fees and
disbursements) incurred by the Bank in connection with the preparation of this
Amendment and the documents related hereto and the closing of the transactions
contemplated hereby.
5.2 APPLICABLE LAW. This Amendment shall be construed in accordance
with and governed by the laws of the State of New York without regard to
principles of conflicts of law.
5.3 COUNTERPARTS. This Amendment may be executed in counterparts which,
taken together, shall constitute a single document.
5.4 SEVERABILITY. In case any one or more of the provisions contained
in this Amendment should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
5.5 NO ADDITIONAL AMENDMENTS. Except as amended by Section 1 of this
Amendment, the Amended Credit Agreement remains unmodified and in full force and
effect.
4
<PAGE>
IN WITNESS WHEREOF, the Company and the Bank have caused this Amendment
to be duly executed by their duly authorized officers, all as of the day and
year first above written.
HOSOKAWA MICRON INTERNATIONAL INC.
By: /s/ William J. Brennan
-------------------------------
Name: William J. Brennan
Title: Exec. V.P. & CFO
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH
By:
-------------------------------
Name:
Title:
5
<PAGE>
IN WITNESS WHEREOF, the Company and the Bank have caused this Amendment
to be duly executed by their duly authorized officers, all as of the day and
year first above written.
HOSOKAWA MICRON INTERNATIONAL INC.
By:
------------------------------------
Name:
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH
By: /s/ Nobuyuki Hirano
------------------------------------
Name: Nobuyuki Nirano
Title: Deputy General Manager
5
<PAGE>
EXHIBIT A TO ELEVENTH AMENDMENT TO LETTER OF CREDIT AGREEMENT
As of November 14, 1997
Bank of Tokyo-Mitsubishi Trust Company
1251 Avenue of the Americas
New York, New York 10020
Re: Issuance of Commercial Paper Notes
For Hosokawa Micron International Inc.
--------------------------------------
Gentlemen:
We refer to the Depositary Agreement dated as of December 16, 1991 (the
"Depositary Agreement") between you and Hosokawa Micron International Inc., a
Delaware corporation (the "Company"), pursuant to which you are acting (i) on
the Company's behalf as the issuing and paying agent and the depositary in
connection with the sale from time to time of the Company's commercial paper
notes and (ii) as the depositary of and the drawing agent under a letter of
credit (as amended from time to time, the "Letter of Credit") issued by us
pursuant to the Letter of Credit Agreement dated as of December 16, 1991 (as
amended, the "Letter of Credit Agreement") between the Company and us.
Please note that, as of the date hereof, pursuant to the terms of the
Eleventh Amendment to Letter of Credit Agreement between the Company and the
undersigned, the "Expiration Date" referred to in the Letter of Credit Agreement
and in the Depositary Agreement is December 16, 1998, and the undersigned has
amended the Letter of Credit to reflect the same.
Please confirm by signing and returning to us a copy of this letter
that you acknowledge the extension of the Letter of Credit and that the
Depositary Agreement shall remain in full force and effect.
Sincerely yours,
THE BANK OF TOKYO-MITSUBISHI, LTD.
NEW YORK BRANCH
By:
--------------------------------
Name:
Title:
6
<PAGE>
ACKNOWLEDGED:
HOSOKAWA MICRON INTERNATIONAL INC.
By: ---------------------------------
Name:
Title:
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: ---------------------------------
Name:
Title:
7
<PAGE>
[LETTERHEAD OF BANK OF TOKYO-MITSUBISHI]
ELEVENTH AMENDMENT TO LETTER OF CREDIT NO. HK0750
November 14, 1997
Bank of Tokyo-Mitsubishi Trust Company
1251 Avenue of the Americas
New York, New York 10020
Re: Hosokawa Micron International Inc.
Commercial Paper Program
----------------------------------
Gentlemen:
We refer to our Irrevocable Letter of Credit No. HK0750, dated December
16, 1991, as amended by the Amendment to Letter of Credit No. HK0750 dated
November 25, 1992, the Second Amendment to Letter of Credit No. HK0750 dated
December 16, 1992, the Third Amendment to Letter of Credit No. HK0750 dated
November 17, 1993, the Fourth Amendment to Letter of Credit No. HK0750 dated
December 16, 1993, the Fifth Amendment to Letter of Credit No. HK0750 dated
November 1, 1994, the Sixth Amendment to Letter of Credit No. HK0750 dated
December 16, 1994, the Seventh Amendment to Letter of Credit No. HK0750 dated
November 1, 1995, the Eighth Amendment to Letter of Credit No. HK0750 dated
December 15, 1995, the Ninth Amendment to Letter of Credit No. HK0750 dated
November 1, 1996 and the Tenth Amendment to Letter of Credit No. HK0750 dated
December 16, 1996 (the "LETTER OF CREDIT"), in your favor as fiduciary on behalf
of the owners from time to time of certain promissory notes of Hosokawa Micron
International Inc., a Delaware corporation (the "COMPANY"), in an aggregate
amount equal to Seventy-Five Million United States Dollars (U.S.$ 75,000,000).
All capitalized terms used but not defined in this Amendment shall have
the respective meanings set forth in the Letter of Credit.
We hereby amend the Letter of Credit by substituting for the last
sentence of the first full paragraph on page 3 thereof the following:
<PAGE>
In no event shall this Letter of Credit
remain in effect after 5:00 P.M. New York
time on December 16, 1998.
This Eleventh Amendment to Letter of Credit is subject to the Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce, Publication No. 500 (the "UNIFORM CUSTOMS"), and shall, as
to matters not governed by the Uniform Customs, be governed and construed in
accordance with the laws of the State of New York.
Except as amended above, the Letter of Credit remains in full force and
effect and is not otherwise modified or amended.
Very truly yours,
THE BANK OF TOKYO-MITSUBISHI, LTD.
NEW YORK BRANCH
By: /s/ Nobuyuki Hirano
-------------------------------------
Name: Nobuyuki Hirano
Title: Deputy General Manager
<PAGE>
As of November 14, 1997
Bank of Tokyo-Mitsubishi Trust Company
1251 Avenue of the Americas
New York, New York 10020
Re: Issuance of Commercial Paper Notes
for Hosokawa Micron International Inc.
--------------------------------------
Gentlemen:
We refer to the Depositary Agreement dated as of December 16, 1991 (the
"DEPOSITARY AGREEMENT") between you and Hosokawa Micron International Inc., a
Delaware corporation (the "COMPANY"), pursuant to which you are acting (i) on
the Company's behalf as the issuing and paying agent and the depositary in
connection with the sale from time to time of the Company's commercial paper
notes and (ii) as the depositary of and the drawing agent under a letter of
credit (as amended from time to time, the "LETTER OF CREDIT") issued by us
pursuant to the Letter of Credit Agreement dated as of December 16, 1991 (as
amended, the "LETTER OF CREDIT AGREEMENT") between the Company and us.
Please note that, as of the date hereof, pursuant to the terms of the
Eleventh Amendment to Letter of Credit Agreement between the Company and the
undersigned, the "Expiration Date" referred to in the Letter of Credit Agreement
and in the Depositary Agreement is December 16, 1998, and the undersigned has
amended the Letter of Credit to reflect the same.
Please confirm by signing and returning to us a copy of this letter
that you acknowledge the extension of the Letter of Credit and that the
Depositary Agreement shall remain in full force and effect.
Sincerely yours,
BANK OF TOKYO-MITSUBISHI, LTD.
NEW YORK BRANCH
By: /s/ Nobuyuki Hirano
-------------------------------------
Name: Nobuyuki Hirano
Title: Deputy General Manager
<PAGE>
ACKNOWLEDGED:
HOSOKAWA MICRON INTERNATIONAL INC.
By: /s/ William J. Brennan
----------------------------
Name: William J. Brennan
Title: Exec. V.P. & CFO
THE BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By: /s/ Donna Marie White
- -------------------------------
Name: D. WHITE
Title: TRUST OFFICER
2
<PAGE>
DEPOSITARY'S ACKNOWLEDGEMENT
OF RECEIPT OF ELEVENTH AMENDMENT TO LETTER OF CREDIT
Bank of Tokyo-Mitsubishi Trust Company ("BTMTC") hereby acknowledges
that BTMTC, the Depositary under the Depositary Agreement, dated as of December
16, 1991, between BTMTC and Hosokawa Micron International Inc., a Delaware
corporation, has received the Eleventh Amendment to Letter of Credit No. HK0750
(the "Amendment") of The Bank of Tokyo-Mitsubishi, Ltd., New York Branch (the
"Bank"), a copy of which is attached hereto. BTMTC further acknowledges that it
will attach the Amendment to, and treat the Amendment as a part of, the original
Letter of Credit No. HK0750 of the Bank.
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By: /s/ Donna Marie White
---------------------------------
Name: D. WHITE
Title: TRUST OFFICER
Dated: November 14, 1997
<PAGE>
ANNEX A
COMMERCIAL PAPER
CERTIFICATE AGREEMENT
Agreement made this 26th day of JUNE, 1991 between The Depository Trust Company
("DTC") and THE BANK OF TOKYO TRUST COMPANY (the "Custodian");
Whereas, the Custodian perform as, as agent of the issuers, certain paying
agency functions with respect to one or more issues of commercial paper notes
issued under the commercial paper programs listed on EXHIBIT A, as it may be
amended in writing from time to time by the parties (the "Notes") and;
Whereas, in order to enhance the efficiency of the processes for issuing and
redeeming such Notes the Custodian has agreed to act as custodian of Master Note
Certificates registered in the name of DTC's nominee, Cede & Co., evidencing the
Notes (the "Note Certificates") and has established procedures to perform the
services hereinafter set forth.
WITNESSETH:
In consideration of the covenants herein contained the parties agree:
1. Custodian will assure that each Note Certificate held pursuant to this
agreement shall be in registered form registered in the name of Cede & Co.
and shall bear the following legend:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN."
Custodian agrees that the foregoing provisions of this paragraph constitute
as to the Custodian, a timely written notice of an adverse claim by DTC as
to each such Note Certificate regardless of whether the legend actually
appears thereon.
2. Subsequent to the issuance of Note Certificates, Custodian shall hold
the Note Certificates awaiting DTC's instructions. On receipt of
instructions from DTC and except as hereinafter provided, the Custodian
will deliver to DTC any or all Notes or Note Certificates held for DTC in
accordance with such instructions.
19
<PAGE>
ANNEX A (cont'd)
3. Custodian shall confirm to DTC the amount of Notes evidenced by each
Note Certificate on a daily basis.
4. As between DTC and Custodian, including, without limitation, its
creditors, lien holders and pledgees, the Notes evidenced by a Note
Certificate and such Note Certificate shall be deemed to be the sole
property of DTC. Custodian shall not by reason of any provision of this
Agreement or the delivery to it of Notes in connection with their issuances
obtain any legal or equitable right, title or interest in or to Notes
evidenced by such Note Certificate.
5. Custodian shall itself at all times hold all Note Certificates in one of
its secured areas.
6(a) Notwithstanding any event whatsoever, other than an event described in
subparagraph (b) of this paragraph or in the proviso to paragraph 8 hereof,
Custodian shall, upon the request of DTC, deliver to or make available for
pick-up by DTC any or all Notes or Note Certificates within 24 hours after
receipt of such request, except that Custodian shall not be required hereby
to deliver or make available Notes or Note Certificates for pick-up by DTC
on a day that Custodian is not open for business.
(b) Custodian shall notify DTC immediately after it determines that any
Note Certificate received by it from the issuer, deliverable by it to DTC,
or held by it pursuant to the provisions of this Agreement has been lost,
apparently destroyed or wrongfully taken or is unaccounted for by Custodian
("Missing Security"). After such notification DTC and Custodian shall seek
to obtain the replacement thereof in accordance with the custom and usage
of the financial industry, and the course of dealing between the Custodian
and DTC, in accordance with applicable law.
7. Custodian represents and warrants that it is insured under an insurance
policy in the form of Financial Institution Bond Standard Form 24, or
similar coverage, in the maximum amount of $35 MILLION which insurance
covers any Notes held by Custodian on behalf of DTC under this Agreement.
Custodian has delivered to DTC a writing signed by its insurance broker or
agent which evidences the existence of such insurance coverage in such
amount, and Custodian covenants and agrees to maintain at its expense such
insurance (or a comparable plan of insurance) in no less amount and with
like coverage during the term of this Agreement, subject to its right to
cancel, decrease or limit the same. Custodian will notify DTC promptly of
any material changes in such insurance coverage. Custodian shall prior to
the first anniversary of the date of this Agreement and prior to each
succeeding anniversary of this Agreement during its term deliver to DTC a
writing signed by its insurance broker or agent which shall evidence the
amount and coverage of Custodian's insurance and shall state whether or not
such insurance is equivalent to Financial Institution Bond Standard Form
24. Custodian agrees that whenever Custodian ships Notes or Note
Certificates to DTC, Custodian will either provide adequate insurance
coverage or require such coverage from the carrier of the Notes or Note
Certificates, such coverage to cover losses of Notes or Note Certificates
while in transit and until received. Custodian shall, at DTC's request,
furnish DTC with documentation evidencing the amount and coverage of the
insurance provided by Custodian for any such shipment of Notes or Note
Certificates.
<PAGE>
ANNEX A (cont'd)
8. Custodian agrees that it shall not for any reason, including the
assertion of any claim, right or lien of any kind, refuse or refrain from
delivering any Notes or Note Certificates to or as directed by DTC in
accordance with the terms of this Agreement: provided, however, that if
Custodian shall be served with a notice of levy, seizure or similar notice,
or order or judgment, issued or directed by a governmental agency or court,
or an officer thereof, having jurisdiction over Custodian, which on its
face affects Notes evidenced by Note Certificates in the possession of
Custodian pursuant to the provisions hereof, Custodian may, pending further
direction of such governmental agency or court, refuse or refrain from
delivery or making available to DTC in contravention of such notice or
levy, seizure or similar notice or order of judgment, Notes not greater in
amount than the Notes which are affected by such notice of levy, seizure or
similar notice, or order or judgment on the face thereof.
9. Custodian may act relative to this Agreement in reliance upon advice of
counsel in reference to any matters connected with its duties under this
Agreement, and shall not be liable for any mistake of fact or error of
judgment, or for any acts or omissions to act of any kind, unless caused by
its own negligence.
10. Custodian may at any time, without any resulting liability to itself,
act under this Agreement in reliance upon the signature of any person which
it reasonably believes has authority to act for DTC with respect to this
Agreement, but Custodian shall not be required so to act, and may in its
discretion at any time require such evidence of the authenticity of such
signature and of the authority of the person acting for DTC as may be
satisfactory to Custodian.
11. So long as this Agreement remains in effect as to any issue of Notes,
Custodian will furnish to DTC as soon as available a copy of any report on
the adequacy of Custodian's internal accounting control procedures relating
to the safeguarding of securities in its custody prepared for any
regulatory agency by Custodian's independent outside auditor.
12. This Agreement may be terminated by either party upon ten business
days' written notice to the other party. In the event of the termination of
this Agreement or the termination hereunder of this Agreement as to issues
of Notes evidenced by specific Note Certificates, it shall be deemed that
Custodian has received as of the time of such termination a request by DTC
within the meaning of paragraph 6(a) with regard to (i) all Notes or Note
Certificates subject hereto if this Agreement is terminated or (ii) the
specific Notes or Notes Certificates in respect of which this Agreement
shall terminate.
13. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
14. All notices, instructions, requests and other communications required
or contemplated by this Agreement shall be in writing, shall be delivered
by hand or sent, postage prepaid, by certified or registered mail, return
receipt requested, and shall be addressed to Custodian at 100 BROADWAY, NY,
NY 10005 Attn: JOE BUGAY, and to DTC at 55 Water Street, New York, New
York 10041, Attn: General Counsel. Notice given as aforesaid shall be
deemed given upon the receipt thereof. Either of the parties may change the
address to which notices shall be sent upon notice to the other in the
manner hereinabove provided.
21
<PAGE>
ANNEX A (cont'd)
15.(a) Custodian agrees to indemnify and hold harmless DTC from and against
any and all losses, liabilities, claims, penalties, charges and expenses
(including reasonable counsel fees and expenses) suffered or incurred by or
asserted or assessed against DTC by reason of Custodian's negligent action
or negligent failure to act: provided, however, that should Custodian be
held to be negligent hereunder and should DTC be held to have been
contributorily negligent in connection therewith, then the aforementioned
liability shall be shared between Custodian and DTC in such proportion as
may be set forth in any decision of a court or other tribunal having
jurisdiction, unless Custodian and DTC shall agree in writing to share such
liability in a different proportion.
(b) DTC agrees to indemnify and hold harmless Custodian from and against
any and all losses, liabilities, claims, taxes, assessments, penalties,
charges and expenses (including reasonable counsel fees and expenses)
suffered or incurred by or asserted or assessed against Custodian as a
result of any action pursuant to this Agreement or following the
instructions of DTC in connection with the performance of its duties under
this Agreement where Custodian has acted in good faith without negligence.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE BANK OF TOKYO TRUST COMPANY THE DEPOSITORY TRUST COMPANY
By: /s/ [Illegible] By: /s/ [Illegible]
------------------------------ -------------------------------
VICE PRESIDENT
------------------------------ -------------------------------
TITLE TITLE
JUNE 26, 1991 JULY 10, 1991
------------------------------ -------------------------------
DATE DATE
/s/ [Illegible] /s/ [Illegible]
------------------------------ -------------------------------
VICE PRESIDENT ATTEST
22
<PAGE>
EXECUTION COPY
DIRECT DRAW LETTER OF CREDIT
December 16, 1991
Irrevocable Letter of Credit No. HKO750
The Bank of Tokyo Trust Company
100 Broadway
New York, New York 10005
Gentlemen:
At the request and for the account of Hosokawa Micron International Inc., a
Delaware corporation (the "Company"), we hereby establish in your favor, as
fiduciary on behalf of the owners from time to time of certain promissory notes
of the Company referred to below (the "COMMERCIAL PAPER NOTES"), this
irrevocable Letter of Credit in an aggregate amount equal to Seventy-Five
Million United States Dollars (U.S.$75,000,O00) available from time to time in
amounts equal to the face amount of maturing Commercial Paper Notes identified
on the records of the book-entry system maintained by The Depository Trust
Company ("DTC") or authenticated for delivered by you to purchasers pursuant to
a certain Depositary Agreement (the "DEPOSITARY AGREEMENT") dated as of December
16, 1991 among the Company, The Mitsubishi Bank, Limited, New York Branch (the
"Bank"), and you (the "Depositary").
Demand for a drawing hereunder (i) may be made by you on or after the
maturity date of any Commercial Paper Note and prior to the expiration of this
Letter of Credit with respect to such Commercial Paper Note as herein provided
and (ii) shall be made by you prior to the maturity date of such Commercial
Paper Note upon notice from the Bank stating that an "Event of Default" has
occurred under the Letter of Credit Agreement referred to in the Depositary
Agreement (the "CREDIT AGREEMENT"), and directing you to make a drawing in
respect of all Commercial Paper Notes not yet matured. Such drawings shall be
made by delivering or transmitting interested telex or telecopier to the Bank,
at 225 Liberty Street, Two World Financial Center, New York, New York 10281,
Attention: Business Development Department/Letter of Credit No. HK0750, Telex on
the form of Annex 1 hereto, with the blanks appropriately completed. In the
event of a drawing made by tested telex or telecopier, you shall immediately
confirm receipt of the telex or telecopy by telephone.
<PAGE>
We hereby agree to honor each such demand drawn under and in full compliance
with this Letter of Credit, provided that such demand is delivered to us not
later than 5:00 P.M. New York time on the fifteenth day after the maturity date
of any such Commercial paper Note (or if such day is not a Business Day, on the
first Business Day thereafter) (the date of delivery of such demand being the
"DRAWING DATE") by, unless other arrangements satisfactory to you have been made
for making Bank funds available to honor such drawing, transferring in
immediately available Bank funds the amount demanded to the Special Account
maintained by you pursuant to the Depositary Agreement not later than 2:00 P.M.
New York time on the maturity date of any such Commercial Paper Note (or if such
day is not a Business Day, on the first Business Day thereafter) if such demand
is received by us by 11:00 A.M. New York time on the Maturity date, or, if such
demand is received by us after 11:00 A.M. New York time on the maturity date,
then not later than 2:00 P.M. New York time on the next Business Day after the
Drawing Date. Upon any payment under this Letter of Credit, the amount of this
Letter of Credit shall be reduced in an amount equal to such payment. Upon (i)
reimbursement to the Bank of such payment on the date of such payment, (ii) the
repayment of any "Unreimbursed Drawing" referred to in the Credit Agreement
arising from such payment, or (iii) the assignment to the Bank of the proceeds
from the sale of such newly issued Commercial Paper Notes on the date of such
payment, the amount by which this Letter of Credit was so reduced shall, unless
the Bank theretofore notifies you to the contrary, be automatically reinstated,
in the case of (i) or (ii) above, by the amount of such reimbursement or
repayment (except that the aggregate amount of such increases shall not exceed
the amount of such payment under this Letter of Credit) and, in the case of
(iii) above, by the face amount of the Commercial Paper Notes the proceeds of
which have been assigned to the Bank; PROVIDED, HOWEVER, that, in the case of an
automatic reinstatement the amount of this Letter of Credit following an
assignment of the proceeds from the sale of Commercial Paper Notes as described
in (iii) above, any repayment or reimbursement to the Bank in respect of a
"Discount" as referred to in the Credit Agreement on Commercial Paper Notes
shall not increase the amount of this Letter of Credit. No amendment of this
Letter of Credit shall be necessary to effect any such reduction or increase.
All payments made by us under this Letter of Credit shall be paid out of
our general funds, and no payments under this Letter of edit shall in any way be
contingent upon or drawn from amounts on deposit in any account maintained by
the Company with you or paid out of proceeds of Commercial Paper Notes.
It is understood and agreed that the provisions of this Letter of Credit
are intended to provide for payment of the Commercial Paper Notes at their
maturity. Accordingly, in actions taken by you as beneficiary of the Letter of
Credit you shall not be acting as an agent of the Company but exclusively as
fiduciary on behalf of the holders of Commercial Paper Notes.
2
<PAGE>
This Letter of Credit shall expire with respect to each commercial Paper
Note authenticated and delivered or identified on the records of DTC's
book-entry system pursuant to the Depositary Agreement at the earlier of (i)
payment of such Commercial Paper Note, or (ii) 5:00 P.M. New York time on the
fifteenth day after the maturity date of such Commercial Paper Note (or, if such
day is not a Business Day, the first Business Day thereafter). In no event shall
this Letter of Credit remain in effect after 5:00 P.M. New York time on December
16, 1992.
This Letter of Credit sets forth in full the terms of our undertaking and
this undertaking shall not in any way be modified, amended or amplified by
reference to any document, instrument or agreement referred to herein or to
which this Letter of Credit relates, and any such reference shall not be deemed
to incorporate by reference any such document, instrument or agreement.
As used herein, "Business Day" means a day other than a Saturday, a Sunday
or other day on which commercial banks are authorized or required to close in
New York City.
Except as otherwise expressly stated herein, this Letter of Credit is
subject to the Uniform Customs and Practice for Documentary Credits (1983
Revision), International Chamber of Commerce, Publication No. 400 (the "UCP"),
as the same may be amended or supplemented from time to time. This Letter of
Credit shall be deemed a contract made under the laws of the State of New York
and shall, to the extent not inconsistent with the UCP, be governed and
construed in accordance with such laws without regard to principles of conflicts
of law.
This Letter of Credit may not be transferred.
Very truly yours,
THE MITSUBISHI BANK, LIMITED,
NEW YORK BRANCH
By: /s/ Hirichi Jinza
--------------------------------
Name: Hirschi Jinza
Title: Vice President & Manager
3
<PAGE>
ANNEX 1 TO LETTER OF CREDIT
DRAWING UNDER LETTER OF CREDIT NO. [________]
FROM
THE MITSUBISHI BANK, LIMITED, NEW YORK BRANCH
[________________, 19__]
To: The Mitsubishi Bank, Limited
New York Branch
225 Liberty Street
Two World Financial Center
New York, New York 10281
Re: HOSOKAWA MICRON INTERNATIONAL INC. COMMERCIAL PAPER PROGRAM
FOR THE URGENT ATTENTION OF: [Business Development Department]
Gentlemen:
1. The undersigned, acting on behalf of the holder or holders of the
below-mentioned Commercial Paper Note or Commercial Paper Notes, is making
demand for payment of the amount stated in paragraph 4 hereof under the
captioned letter of credit (the "Letter of Credit") to pay the face amount of
such Commercial Paper or Commercial Paper Notes.
2. The face amounts and maturity dates of all such Commercial Paper
Notes are as follows:
Aggregate
Commercial Paper Face Maturity
Note No. Amount Date
-------- ------ ----
<PAGE>
3. Each such Commercial Paper Note was authenticated and delivered by
us or recorded pursuant to our issuance instructions to DTC in DTC's book-entry
system pursuant to the Depositary Agreement and has not been the subject of any
previous drawing by us under the Letter of Credit.
4. The aggregate amount required to be drawn under the Letter of Credit
to pay in full the face amount of each such Commercial Paper Note specified in
paragraph 2 hereof is [_______] U.S. dollars (US$____________).
5. Upon receipt of the amount demanded in paragraph 4 hereof, we will
(i) deposit the same in the Special Account maintained by us pursuant to the
Depositary Agreement and apply the same to the payment of matured Commercial
Paper Notes, (ii) not deposit any portion of said amount in any other account
maintained by us by or for the account of the Company or use any portion of said
amount for any purpose other than payment of Commercial Paper Notes, and (iii)
when Certificated Notes (as defined in the Depositary Agreement) are presented
for payment and paid by us, transmit such matured Commercial Paper Notes to the
Company with a copy to you.
All terms used herein which are defined in the Letter of Credit have
the same meanings when used herein.
Very truly yours,
THE BANK OF TOKYO TRUST COMPANY
By:
-------------------------------------
Name:
Title:
2
<PAGE>
Execution Copy
COMMERCIAL PAPER MASTER NOTE
HOSOKAWA MICRON INTERNATIONAL INC.
December 16, 1991
HOSOKAWA MICRON INTERNATIONAL INC. (the "Company"), a corporation organized and
existing under the laws of the State of Delaware, for value received, hereby
promises to pay to Cede & Co. or registered assigns on the maturity date of each
obligation identified on the records of the Company, which records are reflected
on a schedule attached hereto and made a part hereof and are maintained by The
Bank of Tokyo Trust Company (the "Depositary"), the principal amount for each
such obligation. Payment shall be made by wire transfer to the registered owner
from the Depositary without the necessity of presentation and surrender of this
Master Note.
This Master Note has been issued in accordance with a Letter of Credit Agreement
dated as of December 16, 1991, as from time to time amended, between the Company
and The Mitsubishi Bank, Limited, New York Branch (the "Bank"), and is entitled
to the benefit of an Irrevocable Letter of Credit (the "Letter of Credit")
issued by the Bank pursuant to said Letter of Credit Agreement, provided that
payment is requested from the Depositary not later than 5:00 p.m., New York
time, on the fifteenth day after the maturity date of each obligation (or, if
such fifteenth day is not a Business day, on the next succeeding Business Day).
As used herein, the term "Business Day" means any day other than a Saturday or
Sunday or a day on which banks are authorized or required by law to close in New
York.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS
OF THIS MASTER NOTE SET FORTH ON THE NEXT PAGE HEREOF.
This Master Note is a valid and binding obligation of the Company.
HOSOKAWA MICRON INTERNATIONAL INC.
By: /s/ William J. Brennan By: /s/ Isao Sato
--------------------------------- --------------------------------
(Authorized Officer's Signature) (Authorized Officer's Signature)
At the request of the registered owner, the Company shall promptly issue and
deliver one or more separate note certificates evidencing each obligation
evidenced by this Master Note. As of the date any such note certificate or
certificates are issued, the obligations are evidenced thereby shall no longer
be evidenced by this Master Note.
1
<PAGE>
- --------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Name, Address and Taxpayer Identification Number of Assignee)
the Master Note and all rights hereunder, hereby irrevocably constituting and
appointing _____________________ Attorney to transfer said Master Note on the
books of the Company with full power of substitution in the premises.
Dated: ------------------------------------
(Signature)
Signature(s) Guaranteed:
NOTICE: The signature of this
assignment must correspond with the
names as written upon the face of
this Master Note, in every
particular, without alteration or
enlargement or any change
whatsoever.
- --------------------------------------------------------------------------------
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT
IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
2
<PAGE>
Schedule to
Commercial Paper Master Note
dated December 16, 1991 of Hosokawa Micron International Inc.
Date of Face Amount of CUSIP Maturity Date Amount Notation
Issue Discount Note Number Date Paid Paid Made by
----- ------------- ------ ---- ---- ---- -------
3
<PAGE>
Execution Version
COMMERCIAL PAPER DEALER AGREEMENT
December 16, 1991
Merrill Lynch Money Markets Inc.
Merrill Lynch World Headquarters
World Financial Center - North Tower
250 Vesey Street - 23rd Floor
New York, New York 10281-1218
Gentlemen:
This letter agreement (the "Agreement") sets forth our understanding of
the basis on which Merrill Lynch Money Markets Inc. ("MLMMI") proposes to work
with Hosokawa Micron International Inc. (the "Company") in connection with the
issuance and sale by the Company of its short-term promissory notes (the
"Notes") in the United States commercial paper market. While (i) the Company
shall have no obligation to issue or sell the Notes to, or arrange sales of
Notes through, MLMMI and (ii) MLMMI shall have no obligation to purchase the
Notes from, or arrange sales of Notes for, the Company, the Company has
requested MLMMI to act as commercial paper dealer therefor and MLMMI has
indicated its willingness to do so on the terms and conditions contained herein.
1. The Notes will be supported by an irrevocable letter of credit (the
"Letter of Credit") issued by The Mitsubishi Bank, Limited, New York Branch (the
"Bank") pursuant to a Credit Agreement dated as of December 16, 1991 on the
Company, the Participants thereto and the Bank (as from time to time amended,
the "Credit Agreement"). Unless otherwise defined herein, capitalized terms used
herein shall have the meanings assigned to such terms in the Credit Agreement.
The Company hereby repeats and reaffirms for the benefit of MLMMI the Company's
representations, warranties and covenants contained in the Credit Agreement. The
Company agrees to notify MLMMI of any event or events which might result in the
suspension of the Letter of Credit or in termination or reduction of the
commitment of the Bank to maintain the Letter of Credit under the Credit
Agreement.
<PAGE>
Prior to the initial purchase or placement by MLMMI of Notes hereunder, MLMMI
shall have received such opinion(s) of counsel as it may reasonably request.
2. The Notes will be issued in such face or principal amounts (but not
less than $100,000 each), will have such maturities (not in excess of 270 days
from the date of issuance exclusive of days of grace), will bear such interest
rates (if interest-bearing), or will be sold at such discounts, if any, from
their face amounts, as shall be mutually agreed to by the Company and MLMMI at
the time of each proposed purchase or placement.
3. (a) On the date of a proposed issuance of Notes, MLMMI shall confer
with the Company as to the face or principal amounts, maturities and
denominations thereof, the applicable interest rates or the discounts from the
face amounts, at which the Notes are to be issued.
(b) When agreement is reached on the foregoing, the Company will
instruct The Bank of Tokyo Trust Company (the "Depositary") or another issuing
agent designated by the Company in a written notice to MLMMI, to deliver
executed and countersigned Notes issued in the form attached to the Depositary
Agreement as Annex I, to Merrill Lynch Money Markets Operations, One Liberty
Plaza, 165 Broadway, Fourth Floor, New York, New York 10080, prior to 2:15 p.m.,
New York City time, on the date of issuance. Following MLMMI's receipt of duly
and properly completed Notes, MLMMI or its agent will transfer by the close of
business on such day immediately available funds to the Depositary in an amount
equal to the net proceeds of the Notes.
(c) If the Notes are issued in the form attached to the Depositary
Agreement as Annex II, payment for, and delivery of, the Notes will be made in
accordance with (i) a letter agreement among the Company, The Depository Trust
Company ("DTC") and those certain DTC participants acting as the Company's
issuing and paying agents, in such form that is reasonably acceptable to MLMMI,
(ii) the related certificate agreement between DTC and that certain DTC and
participant who is the Company's paying agent.
4. If MLMMI and the Company, in accordance with Section 3 above, agree
upon the sale of Notes to or through M1MI shall be entitled to compensation in
the form
2
<PAGE>
of a discount to be applied to the face or principal amount of the Notes sold at
such rate per annum as the Company and MLMMI shall from time to time agree.
5. The Company understands that, in connection with the sale of the
Notes, one or more of the following relating to the Company, its affiliates and
the Bank may be prepared: (a) annual information reports, (b) interim
information reports, (c) summary reports for inclusion in MLMMI's Commercial
Paper Digests, and (d) other reports or offering materials (all of the foregoing
being hereinafter called the "Offering Materials"), which are distributed to
MLMMI account executives and/or to purchasers and prospective purchasers of the
Notes. The Offering Materials will state, and MLMMI hereby agrees, that the
Company has not authorized any party including MLMMI to give any information or
to make any representation other than those contained in the Offering Materials.
To provide a basis for the preparation of the Offering Materials and to assist
MLMMI's normal credit review procedures, the Company shall provide MLMMI with
copies of its and its affiliates' publicly available recent reports, including
any filings or reports provided to their respective shareholders, any national
securities exchanges or any rating agency and any information generally supplied
in writing to security analysts. In addition, the Company will request the Bank
to provide MLMMI with copies of the following documents: the Bank's fiscal year
end financial statements for its last three years and any interim financial
reports prepared subsequent to its most recent fiscal year end, all reports
hereafter filed by the Bank with the Board of Governors of the Federal Reserve
System and any filings or reports provided by the Bank to its shareholders, any
national Securities exchange or any rating agency, together with a Summary of
the material differences, if any, in accounting practices applicable to the Bank
and generally accepted accounting principles applicable to United States banks.
In addition, the Company will provide MLMMI and will request the Bank to provide
to MLMMI any other information that MLMMI reasonably requests for the purpose of
the on-going credit review of the Company and the Bank.
6. MLMMI agrees to furnish all Offering Materials the Company and the
Bank for their written approval prior the use thereof in offering the Notes. No
other written information, circulars or statements will be distributed by MLMMI.
If, at any time during the term of this Agreement, Company becomes aware of any
event that occurs or
3
<PAGE>
circumstances that exist as a result of which any then current Offering Material
would include an untrue statement or omission, the Company will promptly notify
MLMMI and provide to MLMMI or request the Bank to provide to MLMMI revised
information that corrects such untrue statement or omission provided, however
that the obligation of the Company to notify MLMMI of any event or circumstance
of which the Company becomes aware relating to the Bank shall not create any
affirmative duty or obligation on the Company to monitor the activities or
performance of the Bank. The Company agrees that MLMMI's acting as a dealer for
the Notes is conditioned upon its being able to provide such Offering Materials
to purchasers or potential purchasers as MLMMI deems appropriate.
7. The Company represents that (a) the issue and sale of the Notes is
duly authorized, (b) upon issuance, the Notes will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the "Act"),
pursuant to Section 3(a)(2) thereof, (c) upon issuance and payment therefor in
accordance with this Agreement, the Notes will be the legal, valid, binding and
enforceable obligations of the Company, and (d) the Company is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
8. Each sale of Notes by the Company hereunder shall be deemed to be a
representation by it that:
(a) the representations, warranties and covenants of the
Company contained or incorporated in this Agreement pursuant to
Section 1, Section 6 and Section 7 of this Agreement, are true
and correct on and as of the date of such sale; and
(b) no event has occurred and is continuing, would result
from such sale, which constitutes or would constitute an event of
default, or which would constitute an event of default but for
the requirement that notice be given or time elapse or both,
under any of the Company's indebtedness for money borrowed,
obligations as lessee under capital leases or under any
guarantees by the Company of such indebtedness or capital lease
obligations.
9. (a) The Company will indemnify and hold harmless MLMMI and any
affiliate, director, officer,
4
<PAGE>
employee or agent of MLMMI or any individual, corporation, partnership, trust,
association or other entity controlling MLMMI or any affiliate, director,
officer, employee or agent of MLMMI against any and all liabilities, losses,
damages, claims, costs and expenses (including without limitation reasonable
fees and disbursements of counsel) (i) arising out of or based upon any
allegation that any Offering Material or any information provided by the Company
regarding the Company to MLMMI hereunder includes an untrue statement of a
material fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or (ii) arising out of the breach by the Company of any
agreement or representation made or deemed made pursuant to this Agreement, or
(iii) arising out of or related in any way to any obligation, representation or
covenant of the Company under the Credit Agreement, the Depositary Agreement or
the Letter of Credit or the transactions contemplated thereby. The above
indemnification shall not apply to the extent that the liability arises from the
inclusion by any indemnified party in any Offering Material that has not been
approved by the Company pursuant to Section 6 of this Agreement of an untrue
statement of a material fact or omission to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) MLMMI agrees to indemnify and hold harmless the Company and each
person who controls the Company within the meaning of either the Act or the
Exchange Act of 1934, as amended (the "Exchange Act") against any and all
losses, liabilities, claims, damages, penalties, causes Of action, suits, costs
and expenses (including, without limitation, reasonable attorneys' fees and
expenses) to which the Company may become subject under the Act, the Exchange
Act or other Federal or state statutory law or regulation, insofar as such
losses, liabilities, claims, damages, penalties, causes of action, suits, costs
or expenses arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Offering Materials related
to the issuance of the Notes, arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, but in any event
only with reference to written information relating to MLMMI in its capacity as
agent for the sale of the Notes or MLMMI's activities
5
<PAGE>
pursuant to this Agreement furnished to the Company by or on behalf of MLMMI
specifically for use in the preparation of the Offering Materials.
(c) In order to provide for just and equitable contribution in
circumstances in which the indemnifications provided for in this Section 9 are
for any reason held unenforceable, although applicable in accordance with the
terms of this paragraph, the Company, on the one hand, and MLMMI, on the other
hand, shall contribute to the aggregate costs of any such claim in the
proportion of their respective economic interests. The respective economic
interests shall be calculated by reference to the aggregate proceeds to the
Company of the Notes sold hereunder and the aggregate commissions and fees
earned by MLMMI hereunder.
10. The Company shall reimburse MLMMI for all of its out-of-pocket
expenses related to this Agreement and the transactions contemplated hereby
(including but not limited to the printing and distribution of any Offering
Material and any advertising expenses) and shall reimburse MLMMI for, or pay
directly, the reasonable fees and out-of-pocket expenses of Seward & Kissel,
counsel to MLMMI.
11. All notices required or permitted under the terms and provisions
hereof shall be in writing (which shall include electronic transmission) and
shall, unless otherwise provided herein, be effective when received at the
address specified below or at such other address as shall be specified in a
notice furnished hereunder.
If to the Company:
Hosokawa Micron International Inc.
780 Third Avenue
New York, New York 10017
Attention: MANAGER OF FINANCE
Tel. No. (2l2) 826-3830
Facsimile No. (212) 826-6612
6
<PAGE>
If to MLMMI:
Merrill Lynch Money Markets Inc.
Merrill Lynch World Headquarters
World Financial Center - North Tower
250 Vesey Street - 23rd Floor
New York, New York 10281-1218
Attention: Product Management - CP
Tel. No. (212) 449-0774
Telex No. 6716341 (ANSWERBACK: MLBSCTR)
Facsimile No. (212) 449-2234
12. This Agreement is to be delivered and performed, and shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of New York.
13. The Company agrees that any suit, action or proceeding brought by
the Company against MLMMI in connection with or arising out of this Agreement or
the offer and sale of the Notes shall be brought solely in the United States
Federal courts or the New York courts, which are located in the Borough of
Manhattan.
14. This Agreement may be terminated, at any time, by the Company, upon
notice to such effect to MLMMI, or by MLMMI, upon notice to such effect to the
Company. Any such termination, however, shall not affect the obligations of the
Company or MLMMI under Section 9 hereof or the obligations of the Company under
Sections 10 or 13 hereof or the rights or responsibilities of the parties
arising prior to the termination of this Agreement.
7
<PAGE>
If the foregoing is in accordance with your understanding of this
Agreement, please sign and return to us a counterpart hereof, whereupon this
letter agreement along with all counterparts will become a binding agreement
between us in accordance with its terms.
Very truly yours,
HOSOKAWA MICRON
INTERNATIONAL INC.
By: /s/ Isao Sato
------------------------------------
Authorized Signatory
By: /s/ William J. Brennan
------------------------------------
Authorized Signatory
Accepted and agreed to as of the date first above written.
MERRILL LYNCH MONEY MARKETS INC.
By: /s/ [Illegible]
-----------------------------
Authorized Signatory
8
<PAGE>
Execution Copy
================================================================================
DEPOSITARY AGREEMENT
between
THE BANK OF TOKYO TRUST COMPANY
as Depositary
and
HOSOKAWA MICRON INTERNATIONAL INC.
as Issuer
Dated as of December 16, 1991
================================================================================
Relating to Hosokawa Micron International Inc.
Commercial Paper Program
================================================================================
<PAGE>
DEPOSITARY AGREEMENT
As of December 16, 1991
The Bank of Tokyo Trust Company
100 Broadway
New York, New York 10005
Re: Issuance of Commercial Paper Notes
for Hosokawa Micron International Inc.
--------------------------------------
Gentlemen:
We hereby request that you (the "Depositary") act as issuing and
paying agent and depositary on behalf of Hosokawa Micron International Inc. (the
"Company") in connection with the sale from time to time of the Company's
Commercial Paper Notes and as depositary of and drawing agent under the Letter
of Credit issued by The Mitsubishi Bank, Limited, New York Branch (the "Bank")
pursuant to the Letter of Credit Agreement dated as of December 16, 1991 (the
"Credit Agreement") between the Company and the Bank. In such capacities, you
shall be governed by the terms and conditions of this Depositary Agreement
(hereinafter referred to as "this Agreement") and, when The Depository Trust
Company ("DTC") book-entry system is used for the Commercial Paper Notes, by the
Letter of Representations dated November 13, 1991 from the Company to you and
DTC, the Commercial Paper Certificate Agreement between you and DTC dated June
26, 1991 (the "Certificate Agreement") and your obligations as a participant in
DTC, including DTC's Same-Day Funds Settlement System. Except as otherwise
provided in this Agreement, al1 capitalized terms used herein which are defined
in the Credit Agreement, as in effect on the date hereof, shall have the same
meanings when used herein.
1. ISSUANCE OF THE COMMERCIAL PAPER NOTES.
The Commercial Paper Notes may be issued as bearer or registered
securities and may be represented by either (i) a global security in
substantially the form of Exhibit A attached hereto (the "Master Note")
delivered to you as custodian and agent for DTC and recorded in the book-entry
system maintained by DTC (a "Book-Entry Note") or (ii) a promissory note
substantially in the form of Exhibit B attached hereto issued in physical form
(a "Certificated Note") delivered to the purchaser thereof. Book-Entry Notes and
Certificated Notes are collectively referred to herein as "Commercial Paper
Notes."
1
<PAGE>
At such time as the Company shall use the DTC book-entry system for the
Commercial Paper Notes, the Company will deliver to you the manually or
facsimile executed Master Note, evidencing the aggregate Face Amount of
Book-Entry Notes to be sold via DTC's book-entry system, registered in the name
of DTC's nominee and to be held by you as custodian and agent on DTC's behalf.
From time to time there will also be delivered to you executed
Certificated Notes of the Company, to be held in safekeeping by you for the
account of the Company. The certificated Notes will be signed manually or by
facsimile on behalf of the Company by an Authorized Agent (as defined below) of
the Company. You will be furnished with incumbency certificates from the
Secretary or an Assistant Secretary of the Company with respect to any officer
of the Company whose signature is authorized to appear on the Certificated Notes
and the Master Note or otherwise is authorized to act for the Company hereunder
(the "Authorized Agents"), together with the specimen signature of each such
officer. The Master Note or any Certificated Note bearing the signature of an
Authorized Agent authorized to execute the same on the date such signature is
affixed thereto shall bind the Company after the completion thereof by you
notwithstanding that such person shall have died or shall have otherwise ceased
to hold his office or be so authorized on the date such Certificated Note is
countersigned or delivered by you.
The Certificated Notes delivered to you will be incomplete as to face
amount, date of issue and maturity. They will be numbered consecutively and may
bear other appropriate identification. When any Certificated Note is delivered
to you as the Depositary, an Authenticating Representative will acknowledge
receipt by signing and returning a receipt to the Company.
By appropriate certificates of designation, you shall specify the names
of your officers and employees who are authorized (i) to receipt for, complete,
authenticate and deliver the Certificated Notes, and to enter issuance
instructions in DTC's book-entry system with respect to the Book-Entry Notes
(the "Authenticating Representatives"), and (ii) to receive instructions or
notices from an Authorized Agent of the Company, an authorized officer of the
Bank (an "Authorized Bank Officer") or DTC (with respect to the Book-Entry
Notes) and to act for you hereunder and who are authorized to make a drawing
under the Letter of Credit (the "Designated Persons").
In the case of Book-Entry Notes, in accordance with instructions given
to you by any Authorized Agent of the Company (in writing or by telephone,
promptly confirmed in writing, or by other electronic transmission), from time
to time, but in no event later than 12:30 P.M. New York time on the proposed
date of issuance Commercial Paper Notes, you will enter an issuance instruction
in DTC's Book-Entry System in accordance with the procedures set forth in the
Certificate Agreement which
2
<PAGE>
instructions shall identify the Face Amount of Book-Entry Notes to be sold, the
date of issue and the maturity date. The issuance instruction shall include a
delivery order to debit the Dealer's account with DTC against credit to your
account with DTC. Upon confirmation of receipt of funds, you shall transfer the
amount so received to the General Account as provided in Section 3(a) of this
Agreement. You shall record on the schedule attached to the Master Note each
change in the Face Amount of Outstanding Book-Entry Notes and the maturity dates
thereof.
In the case of Certificated Notes, in accordance with instructions
given to you by any Authorized Agent of the Company (in writing or by telephone
or by other electronic transmission), from time to time, but in no event later
than 12:30 P.M. New York time on the proposed date of issuance of Commercial
Paper Notes, an Authenticating Representative shall withdraw the necessary
number of Certificated Notes from safekeeping and shall:
(i) complete each such Certificated Note as to the date of issue,
maturity date, Face Amount and, if so directed, the name of the payee thereof
and the federal taxpayer identification number of such payee;
(ii) authenticate each such Certificated Note by countersigning
the form of authentication inscribed thereon; and
(iii) deliver each such Certificated Note to or for the account of
the purchaser of such Certificated Note designated in such instructions against
payment in accordance with the provisions of this Agreement.
Instructions from the Company for authentication and delivery by
you of Certificated Notes shall include the following information with respect
to each Certificated Note: its date of issue, maturity date, Face Amount,
discount rate and amount of Discount from Face Amount and the party to whom
delivery of such Commercial Paper Note or for whom is to be made together with
its address. If you are instructed to register a Certificated Note other than to
"bearer," the Company shall provide to you the name, address and federal
taxpayer identification number of the registered owner of such Commercial Paper
Note.
All oral instructions and approvals given to you for the completion and
delivery of Certificated Notes or the entering of issuing instructions in DTC's
book-entry system with respect to Book-Entry Notes will be confirmed by the
Company in writing or by telex or telecopier by an Authorized Agent of the
Company by the next Business Day. You shall incur no liability in acting upon
telephone instructions and approvals which a Designated Person or an
Authenticating Representative believes in good faith to have been given by an
Authorized Agent or an Authorized Bank Officer.
3
<PAGE>
You shall not authenticate or deliver any Certificated Note or enter
issuance instructions in DTC's book-entry system with respect to any Book-Entry
Note on any day on which a Commercial Paper Note matures until after you have
provided for the deposit of funds into the Special Account in the Face Amount of
such maturing Commercial Paper Note.
No Commercial Paper Note shall mature (i) more than 270 days after the
date of issuance thereof, or (ii) less than 15 days prior to the Expiration Date
in effect at the time of issuance of such Commercial Paper Note, whichever is
earlier, or mature on a day other than a Business Day.
Each Commercial Paper Note shall be issued only on a discount basis,
shall have a face amount of not less than $100,000 and may be issued in larger
amounts in integral multiples of $1,000.
Notwithstanding any instructions from an Authorized Agent of the
Company, you shall not authenticate and deliver any Certificated Note or enter
issuance instructions in DTC's book-entry system with respect to any Book-Entry
Note if, immediately after the authentication and delivery of such Certificated
Note or giving effect to such instructions with respect to such Book-Entry Note
and the provision for the deposit of the proceeds (or a portion thereof) of such
issuance on the date of computation and any other funds as provided in Section
2(c) of this Agreement to the Bank's Account for the purpose of reimbursing the
Bank for payments made in respect of a drawing under the Letter of Credit (1)
the aggregate Face Amount of Outstanding Commercial Paper Notes would exceed the
amount of the Letter of Credit in effect after the adjustments thereto pursuant
to Section 2.3(c) of the Credit Agreement arising from any reimbursement,
repayment or assignment to the Bank of the proceeds from the sale of Commercial
Paper Notes or (2) the aggregate Face Amount of Outstanding Commercial Paper
Notes plus the amount of Outstanding Unreimbursed Drawings would exceed the
Commitment. In the event instructions from an Authorized Agent of the Company
would or do result in the occurrence of an event described above, the Depositary
shall immediately so inform the Bank, the Company and the Dealer. In making the
above calculations, you may rely on the information last delivered to you by the
Bank and you shall have no obligation to make any further determination other
than with respect to the Face Amount of Outstanding Commercial Paper Notes and
the amount of the Letter of Credit as then in effect. Until you are notified to
the contrary in writing by the Bank, you shall be entitled to assume that the
Expiration Date is [December ___, 1992].
Each issuance of Commercial Paper Notes pursuant to the provisions of
this Agreement shall be deemed (1) an irrevocable assignment by the Company to
the Bank of the proceeds of the sale of such Commercial Paper Notes in an amount
not to exceed the amount required to reimburse the Bank for any payment made on
the
4
<PAGE>
same day in respect of a drawing under the Letter of Credit and otherwise not
reimbursed by the Company, (2) an irrevocable assignment by the Company to the
Bank of any remaining proceeds of the sale of such Commercial Paper Notes in an
amount not to exceed the amount of unpaid interest and principal with respect to
Unreimbursed Drawings, and (3) in the event that you receive notice from an
Authorized Bank Officer pursuant to this Agreement which also states that an
Event of Default has occurred, an irrevocable assignment to the Bank of the
entire remaining proceeds of the sale of such Commercial Paper Notes on the date
of such notice. Proceeds of the sale of Commercial Paper Notes shall be
distributed pursuant to Sections 2 and 3 of this Agreement; PROVIDED, HOWEVER,
that in the event you receive notice from an Authorized Bank Officer pursuant to
this Agreement which also states that an Event of Default has occurred, you
shall hold for the benefit of the Bank all proceeds from the sale of Commercial
Paper Notes on such date and transfer such funds to the Bank's Account on the
date of and after any payment by the Bank under the Letter of Credit; PROVIDED,
FURTHER, that the Bank shall apply such funds from time to time to reimburse
itself for any drawings under the Letter of Credit and any Unreimbursed Drawings
and interest thereon, and after all outstanding Commercial Paper Notes have been
paid in full, any remaining balance of such funds shall be paid by the Bank to
the Company.
If you receive instructions from an Authorized Bank Officer to cease
authenticating or delivering Certificated Notes or entering issuance
instructions in DTC's book-entry system with respect to Commercial Paper Notes,
you shall immediately notify the Dealer thereof and comply with such
instructions, notwithstanding any contrary instructions received by you from any
Authorized Agent of the Company. You shall use reasonable efforts to retrieve or
recover any Certificated Notes which have left your offices prior to your having
received instructions from an Authorized Bank Officer to cease authenticating or
delivering or entering issuance instructions in DTC's book-entry system with
respect to Commercial Paper Notes but you shall have no liability for your
failure to retrieve or recover such Certificated Notes. If instructions to cease
authenticating or delivering or entering issuance instructions in DTC's
book-entry system with respect to Commercial Paper Notes are given by telephone,
they shall be confirmed within 24 hours in writing or by telex or telecopier. In
all cases hereunder, you shall incur no liability to the Company in acting upon
telephone instructions which a Designated Person or Authenticating
Representative believes in good faith to have been given by an Authorized Bank
Officer, absent gross negligence or wilful misconduct. Following receipt of such
instructions, no further authentication or delivery or entering issuance
instructions in DTC's book-entry system with respect to Commercial Notes shall
be made until such time as an Authorized Bank Officer shall have rescinded such
instructions and shall consent to the issuance of Commercial Paper Notes by a
notice in writing to you. Notwithstanding the provisions of this paragraph, the
giving
5
<PAGE>
of instructions pursuant to this paragraph shall not have the effect of
terminating, reducing, or altering in any respect the terms of the Letter of
Credit with respect to Commercial Paper Notes Outstanding at the time.
Each delivery or issuance of a Certificated Note shall be subject to
the rules of the New York Clearing House Association in effect at the time of
the delivery or issuance.
In the event you are instructed by an Authorized Agent of the Company
to deliver a Certificated Note against payment, the delivery and receipt of
payment may not necessarily be completed simultaneously and you are hereby
authorized to follow the prevailing custom, which is: to deliver a Certificated
Note to or for the account of the purchaser, to receive the purchaser's receipt
for the delivery, and at a later time, but on the same day, after the purchaser
has verified the delivery against the purchase agreement, to receive payment
from the purchaser in immediately available funds by 5:00 P.M. New York time.
Should you be instructed by an Authorized Agent of the Company to
deliver any Certificated Note against payment and the delivery thereof and the
receipt of payment are not completed simultaneously, you shall have no
responsibility or liability for the credit risks involved in your delivery of
such Certificated Note to those designated in writing by an Authorized Agent of
the Company.
You shall send to the Bank and to the Company quarterly statements
specifying (i) the average Face Amount of Commercial Paper Notes outstanding
during each quarter then ending (calculated on a daily basis) and (ii) the
aggregate Face Amount of Commercial Paper Notes Outstanding at the end of each
such quarter, such statements to cover quarterly periods corresponding to the
quarterly periods for the calculation of the Commercial Paper Support Fee set
forth in Section 2.7 of the Letter of Credit Agreement. A statement containing
the issue date, Face Amount, maturity date, discount amount, net proceeds
amount, payee (if, in the case of a Certificated Note, it is not payable to
"bearer") and discount rate of each Commercial Paper Note shall be sent by
facsimile by you to the Bank on the date of the issuance of such Commercial
Paper Note.
2. PAYMENT OF THE COMMERCIAL PAPER NOTES
(a) You shall make a drawing request under the Letter of Credit (i) on
the maturity date of each Commercial Paper Note, not later than 11:00 A.M. New
York time, in an amount equal to the aggregate Face Amount of the Commercial
Paper Note or Commercial Paper Notes maturing on such maturity date, or (ii) as
soon as practicable upon receipt of a notice from the Bank (but in no event
later than one Business Day after receipt of such notice) stating
6
<PAGE>
that an Event of Default has occurred and directing you to make a drawing for
deposit in the Special Account in an amount equal to the aggregate Face Amount
of all of the Outstanding Commercial Paper Notes. You shall in each case send to
the Bank a certificate drawn under and in compliance with the Letter of Credit,
and after you have sent such certificate and provided such certificate conforms
to the requirements of the Letter of Credit, you may charge the amount of such
drawing to the Bank's Account (a "Charge") notwithstanding that the Charge may
result in an overdraft pending transfer or deposit of funds as provided in the
immediately succeeding sentence hereof. Unless other arrangements satisfactory
to you have been made for making funds available to cover a Charge (any such
arrangements not to be inconsistent with the third sentence of Section 2(b)
hereof), the Bank agrees to transfer or deposit into the Bank's Account
immediately available funds in the amount of the Charge on the date of the
Charge. If no such other arrangements have been made and you do not receive such
funds on such date, you shall notify the Bank promptly thereafter. The Bank
shall be liable to you for the amount of each Charge, which shall be deemed to
be an extension of credit by you to the Bank, and the Company shall have no
liability to you therefor.
(b) You shall immediately deposit the proceeds of any drawing
(including but not limited to the proceeds of a Charge) made pursuant to Section
2(a) of this Agreement in the Special Account, and you shall pay each matured
Commercial Paper Note in immediately available funds and solely from such funds.
In the case of Book-Entry Notes, you shall pay each matured Book-Entry Note out
of funds held in the Special Account by transferring such funds to your account
with DTC. In the case of Certificated Notes, you shall pay each such matured
Certificated Note upon presentation and, should any Certificated Note not be
presented, maintain proceeds therefor in the Special Account. In no event shall
funds deposited in or credited to the Special Account be contingent upon or
drawn from amounts on deposit in any account maintained by the Company with the
Depositary or paid out of proceeds of Notes.
(c) After, but only after, you have received the proceeds of a drawing
(including but not limited to the proceeds of a Charge) on a maturity date or on
a date on which the Bank requests a drawing under the Letter of Credit as
provided in Section 2(a) of this Agreement and deposited such proceeds in the
Special Account pursuant to Section 3(b) of this Agreement, you shall (1)
transfer to the Bank's Account the amount of any immediately available funds
received by you from the Company with instructions from an Authorized Agent of
the Company to make such transfer, and (2) transfer from the General Account to
the Bank's Account the proceeds of Commercial Paper Notes issued on such date to
the extent required to reimburse the Bank for drawings under the Letter of
Credit (including but not limited to any Charge) and for Unreimbursed Drawings
and any interest owing thereon, and (3) transfer any remaining balance of the
General Account to the Bank's Account to the extent required to reimburse the
Bank for drawings
7
<PAGE>
under the Letter of Credit (including but not limited to any Charge) and for
Unreimbursed Drawings and any interest owing thereon.
(d) Each Certificated Note shall be delivered to you prior to or at the
time of payment therefor. You shall cancel any Certificated Note paid by you and
send it to the Company, with a copy thereof to the Bank.
(e) You shall hold all funds received by you from purchasers in payment
for Commercial Paper Notes as a fiduciary for the benefit of the Bank, as
contemplated by Section 3(a), until such time as all drawings under the Letter
of Credit otherwise not reimbursed by the Company and any Unreimbursed Drawings
and any interest owing thereon have been received by the Bank. You shall pay all
such funds received by you in accordance with Section 2(c) and Section 3(a)
hereof.
(f) Nothing herein shall affect the obligation of the Company to
reimburse the Bank under the Credit Agreement.
3. GENERAL ACCOUNT, SPECIAL ACCOUNT AND BANK'S ACCOUNT.
(a) GENERAL ACCOUNT. You will establish and maintain a segregated
special purpose account for the benefit of the Bank designated "Mitsubishi Bank
General Account" (the "General Account"). You shall deposit in the General
Account all proceeds received from the sale of Commercial Paper Notes, and all
funds paid to you by the Company for deposit therein, and you shall apply such
funds as set forth in Section 2(c). All funds in the General Account shall be
held by you as fiduciary for the benefit of the Bank to the extent such funds
are required to reimburse the Bank as provided in Section 2(c) of this
Agreement. You shall have control of and the sole right of withdrawal from the
General Account.
On each day that any Commercial Paper Note matures, moneys in the
General Account shall be transferred to the Bank's Account in the manner and to
the extent provided in Section 2(c) of this Agreement. To the extent that any
moneys remain in the General Account on (i) any such day after the above
application or (ii) any other day on which proceeds from the sale of Commercial
Paper Notes are deposited in the General Account, then, except as contemplated
by the next sentence, such moneys shall be withdrawn and credited to the
Company's Ordinary Deposit Account with the Bank.
Upon receipt by you from an Authorized Bank Officer (which may be
telephone notice and, if so, shall be promptly confirmed by the Bank in writing)
of notice that an Event of Default, or an event that with the giving of notice
or the passing of time or both would become an Event of Default, has occurred
(including the failure of the Company to reimburse the Bank for a drawing under
the Letter of Credit), the Depositary shall not draw on the General Account
without the prior consent of the Bank.
8
<PAGE>
(b) SPECIAL ACCOUNT. You will establish and maintain as fiduciary on
behalf of the owners of the Commercial Paper Notes a segregated special purpose
trust account designated "Hosokawa Micron International Commercial Paper
Owners/Mitsubishi Bank Special Account" (the "Special Account"). You shall
deposit in the Special Account only the proceeds of drawings under the Letter of
Credit (including proceeds of any Charge) as provided in Section 2 of this
Agreement. All funds from time to time on deposit in the Special Account shall
at all times be under your exclusive control and shall be held uninvested by you
as fiduciary for the benefit of the owners of the Commercial Paper Notes. Except
as provided in Section 4, the funds in the Special Account shall be subject to
withdrawal solely by you for the purpose of effecting payment of the Commercial
Paper Notes as provided in this Agreement until the Commercial Paper Notes have
been paid in full. The Company shall not have any legal, equitable or beneficial
interest in the Special Account. Funds will not be deposited to the Special
Account except as provided herein, and funds deposited therein will not be
commingled with any other funds.
(c) BANK'S ACCOUNT. You will establish and maintain for the benefit of
the Bank a segregated special purpose account designated "Mitsubishi Bank Letter
of Credit Account" (the "Bank's Account"), the funds in which shall be subject
to withdrawal solely by the Bank except as provided in Section 2(a) of this
Agreement. Funds will not be deposited to the Bank's Account except as provided
herein, and funds deposited therein will not be commingled with any other funds.
Before the close of business on each Business Day, the Depositary shall transfer
any funds in the Bank's Account to any other account of the Bank as designated
by the Bank. The Bank agrees to keep designated an account pursuant to the
preceding sentence at all times.
4. THE LETTER OF CREDIT.
Concurrently with the execution of this Agreement, subject to the terms
and conditions of the Credit Agreement, the Bank shall deliver to you the Letter
of Credit. The Letter of Credit shall identify you, acting as fiduciary on
behalf of the owners of Commercial Paper Notes, as the beneficiary thereof and
shall be issued for the account of the Company to assure payment of the
Commercial Paper Notes. Such Letter of Credit shall be irrevocable and shall be
issued in an amount equal to the Commitment under the Credit Agreement. You
shall hold the Letter of Credit in safekeeping for the benefit of the owners of
Commercial Paper Notes and from time to time shall make drawings under the
Letter of Credit on behalf of such owners pursuant to Section 2 of this
Agreement. Such drawings shall be made in accordance with the terms of the
Letter of Credit and this Agreement.
The amount of the Letter of Credit shall be reduced by an amount equal
to the proceeds of any drawings thereunder (but the amount by which the Letter
of Credit is reduced by such proceeds
9
<PAGE>
shall be automatically reinstated as provided in Section 2.3(c) of the Credit
Agreement).
It is understood and agreed by the parties hereto that the provisions
of this Agreement relating to the Letter of Credit are intended to provide for
payment of the Commercial Paper Notes at their maturity. Accordingly, the
parties hereto specifically acknowledge that in actions taken by you as
beneficiary of the Letter of Credit you shall not be acting as an agent of the
Company but shall be acting as fiduciary on behalf of the owners of Commercial
Paper Notes.
If any Certificated Note shall not be presented to you for payment on
the maturity date thereof and sufficient collected funds are then on deposit in
the Special Account for payment thereof, you shall hold such funds until
presentation as fiduciary for the benefit of the owner of such Certificated
Note; PROVIDED, HOWEVER, that if any Certificated Note shall not be presented
for payment on or before the fifteenth day after its maturity date (or, if such
day is not a Business Day, on the next succeeding Business Day), such
Certificated Note shall not be entitled to payment from funds on deposit in the
Special Account, and any funds on deposit in the Special Account which were
drawn under the Letter of Credit with respect to such Certificated Note shall be
paid to the Bank. Notwithstanding the foregoing, the Company shall remain liable
to the owners of Commercial Paper Notes on account of all Commercial Paper Notes
in accordance with their terms. The Bank shall remit its own funds to the
Company in an amount equal to the amount received from the Special Account, less
the amount of any Unreimbursed Drawings under the Letter of Credit, any interest
thereon and any other amounts then due and owing to the Bank under the Credit
Agreement.
Promptly after the Expiration Date, you shall cancel and return the
Letter of Credit to the Bank.
If, two years after the termination of this Agreement, there remain any
funds in any of the accounts specified in Section 3 hereof, you may transfer any
such remaining funds to any other account of the Bank as designated by the Bank,
whereupon the Bank shall remit such funds to the Company except to the extent
there remains any Unreimbursed Drawing or interest thereon or other amounts
owing to the Bank under the Financing Documents.
5. EXPENSES; INDEMNIFICATION; LIMITATION OF LIABILITY.
The Company shall, on demand, pay or reimburse the Depositary for (a)
all fees payable in connection with, arising out of, or in any way related to
performance of this Agreement (such fees to be as mutually agreed upon between
the Company and you in a separate written agreement), and (b) all of the
Depositary's
10
<PAGE>
reasonable out-of-pocket costs and expenses incurred (including reasonable fees
and expenses of counsel), and all payments made, and indemnify and hold the
Depositary harmless from and against all losses suffered, by the Depositary in
connection with, arising out of, or in any way related to (i) the negotiation,
preparation, execution and delivery of (A) this Agreement and the Commercial
Paper Notes and (B) whether or not executed, any waiver, amendment or consent
under or to this Agreement and the Commercial Paper Notes, (ii) protecting,
preserving, exercising or enforcing any of the rights of the Depositary under or
related to this Agreement or the Commercial Paper Notes, (iii) any governmental
investigation arising out of, related to, or in any way connected with, this
Agreement, the Commercial Paper Notes or the relationship established hereunder,
or (iv) any action taken or omitted in good faith within the scope of this
Agreement upon telephone instructions, if authorized herein, received from or
believed by you in good faith to have been given by an Authorized Agent of the
Company, or an Authorized Bank Officer, except that the foregoing indemnity
shall not be applicable to any loss suffered by the Depositary to the extent
such loss is the result of acts or omissions on the part of the Depositary
constituting (x) gross negligence, (y) willful misconduct, or (z) knowing
violations of law. The Bank shall have no responsibility or liability for the
payment of any such fees, costs or expenses. The obligations of the Company
hereunder shall survive your resignation or removal or the termination of this
Agreement and the payment in full of all Commercial Paper Notes.
6. NOTICES.
Except where instructions or notices are authorized herein to be given
by telephone, all instructions, notices and other communications to be given to
any party hereto or to DTC in connection herewith shall be in writing and shall
be personally delivered, or sent by certified, registered or express mail,
postage prepaid, or by telecopier, and shall be deemed to be given for purposes
of this Agreement on the day when sent or transmitted (except, if given by
certified or registered mail, they shall be deemed given on the seventh day
after the day on which mailed) to the intended party at its address or telex or
telecopier number set forth below its signature hereto (or as such party may
have otherwise specified to the other parties in writing) and, in the case of
DTC, to DTC at its address or telex or telecopier number that is specified in
the Certificate Agreement. Whenever the giving of notice by telephone is
permitted by this Agreement and unless otherwise provided herein, such notice
shall be confirmed in writing within two (2) Business Days.
7. MISCELLANEOUS PROVISIONS.
The Company hereby warrants and represents to you, which shall be a
continuing warranty and representation, that this Agreement is, and all
Commercial Paper Notes delivered to you as
11
<PAGE>
Depositary pursuant to this Agreement will be, duly authorized, executed and
delivered by the Company, and your appointment as Depositary and issuing and
paying agent for the Commercial Paper Notes and as drawing agent and depositary
for the Letter of Credit under this Agreement is duly authorized in accordance
with and by a resolution duly adopted by the Board of Directors of the Company
and in full force and effect.
It is understood that you may resign or the Company may terminate this
Agreement and the authority granted herein at any time upon at least sixty (60)
days' written notice of resignation or termination, as the case may be, such
notice to be given to the Bank, the Dealer and DTC and to you or the Company (as
relevant). In such event, (i) you shall return to the Company all undelivered
Certificated Notes held by you at the time of such notice; (ii) prior to the
termination of or effectiveness of your resignation from your obligations
hereunder, the Company shall have appointed a successor Depositary after
obtaining the written approval of the Bank, and such successor, upon accepting
such appointment hereunder, shall establish a new General Account, Special
Account and Bank's Account for purposes of this Agreement and the Credit
Agreement; and (iii) you shall transfer to the successor Depositary for deposit
in the new General Account, the Special Account and the Bank's Account
established by the successor Depositary all funds, if any, on deposit in, or
otherwise to the credit of, the General Account, the Special Account and the
Bank's Account maintained by you, in excess of that amount necessary to pay in
full the Face Amount of Commercial Paper Notes Outstanding. Any successor
Depositary shall have a participant relationship with DTC at the time that the
successor Depositary is appointed if Commercial Paper Notes are then being
issued through the DTC Book-Entry System. All Commercial Paper Notes validly
authenticated and delivered by you as Depositary pursuant hereto prior to the
termination of this Agreement, and the authority granted to and obligations
assumed by you hereunder with respect to the payment of such Commercial Paper
Notes, shall be valid obligations notwithstanding such termination, and this
Agreement shall remain in full force and effect with respect to such Commercial
Paper Notes until the same have been paid in full.
This Agreement may be supplemented, modified or amended if such
supplement, modification or amendment is in writing and signed by each of the
parties hereto. No supplement, modification or amendment shall adversely affect
the rights of owners of Commercial Paper Notes outstanding at that time.
In acting with respect to the Letter of Credit, and generally in acting
under this Agreement, you will be required by the Company and the Bank to
perform only such duties as are specifically set forth in (i) this Agreement,
(ii) the Letter of Credit itself, and (iii) applicable law as in effect from
time to time. You shall not be liable to the Company or the Bank except for
gross negligence or willful misconduct in the performance of
12
<PAGE>
said duties and obligations. You undertake to perform such duties and only such
duties as are specifically set forth in this Agreement and you shall have no
fiduciary duties to the owners of Commercial Paper Notes other than as
specifically set forth in this Agreement. No implied covenants or obligations
shall be read into this Agreement against you.
Except as otherwise provided in Sections 3 and 4 of this Agreement, you
may execute any of the powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys, provided that your liabilities or
obligations hereunder shall not be reduced by reason thereof.
You, in your individual or any other capacity, may become the owner or
pledgee of Commercial Paper Notes or a participant in the credit provided under
the Credit Agreement with the same rights you would have if you were not acting
hereunder.
Until used or applied as herein provided, all monies received by you
hereunder shall be held for the purposes for which they were received, but need
not be segregated from other funds except to the extent provided herein or
required by law. You shall be under no liability for interest on any monies
received by you hereunder except such as you may agree with the Company to pay
thereon.
Except as otherwise expressly provided herein, whenever, in the
administration of this Agreement, you shall deem it necessary that a matter be
proved or established prior to taking, suffering or omitting any action
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively proved and established
by a certificate of an Authorized Agent of the Company or an Authorized Bank
Officer, and such certificate shall be full warranty to you for any action
reasonably taken, suffered or omitted under the provisions of this Agreement
upon the faith thereof. You may consult with and rely upon the advice of legal
counsel.
Any corporation into which you may be merged or with which you may be
consolidated, or any corporation resulting from any merger or consolidation to
which you shall be a party, or any corporation succeeding to your business,
shall succeed to all your rights, obligations and immunities hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding.
This Agreement shall in all respects be governed by and construed in
accordance with the laws of New York without regard to principles of conflicts
of law.
You hereby covenant and agree that prior to the date which is
ninety-one (91) days after the payment in full of the latest
13
<PAGE>
maturing Commercial Paper Note, you will not, in your capacity as Depositary
hereunder, institute against, or join any person in instituting against, the
Company any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any federal or state bankruptcy or
similar law.
Subject to the next succeeding sentence, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. No party hereto may assign any of its rights or
obligations hereunder except with the prior written consent of all parties
hereto (including the Bank).
Any provision of this Agreement which is prohibited, unenforceable or
not authorized in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions of this
Agreement or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
This Agreement may be executed in any number of counterparts and by
different parties hereto and separate counterparts, each of which counterparts,
when so executed and delivered, shall be deemed to be an original and all of
which counterparts, taken together, shall constitute but one and the same
Agreement.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
14
<PAGE>
If the foregoing correctly and fully sets forth our agreement with
respect to the matters to which it pertains, please sign and return to us the
enclosed copies of this letter.
Very truly yours,
HOSOKAWA MICRON INTERNATIONAL INC.
By: /s/ Isao Sato
--------------------------------------
Name: Isao Sato
Title: President
By: /s/ William J. Brennan
--------------------------------------
Name: William J. Brennan
Title: Vice President
Address:
780 Third Avenue
New York, New York 10017
Attention: _____________________
Telephone: (212) 826-3830
Telecopier: (212) 826-6612
Accepted and approved as of
December 16, 1991
THE BANK OF TOKYO TRUST COMPANY
By: /s/
-------------------------------
Name:
Title:
Address:
100 Broadway
New York, New York 10005
Telephone: 212-766-3535
Telecopier: 212-962-5364
15
<PAGE>
The foregoing Agreement is hereby accepted by the undersigned.
THE MITSUBISHI BANK, LIMITED,
NEW YORK BRANCH
By: /s/
--------------------------------------
Name:
Title:
Address:
225 Liberty Street
Two World Financial Center
New York, New York 10281
Attention: Business Development
Department Letter of
Credit No. HK0750
Telephone: (212) 667-2500
Telecopier: (212) 667-3550
16
<PAGE>
EXHIBIT A TO THE DEPOSITARY AGREEMENT
COMMERCIAL PAPER MASTER NOTE
HOSOKAWA MICRON INTERNATIONAL INC.
December 16, 1991
HOSOKAWA MICRON INTERNATIONAL INC. (the "Company"), a corporation organized and
existing under the laws of the State of Delaware, for value received, hereby
promises to pay to Cede & Co. or registered assigns on the maturity date of each
obligation identified on the records of the Company, which records are reflected
on a schedule attached hereto and made a part hereof and are maintained by The
Bank of Tokyo Trust Company (the "Depositary"), the principal amount for each
such obligation. Payment shall be made by wire transfer to the registered owner
from the Depositary without the necessity of presentation and surrender of this
Master Note.
This Master Note has been issued in accordance with a Letter of Credit Agreement
dated as of December 16, 1991, as from time to time amended, between the Company
and The Mitsubishi Bank, Limited, New York Branch (the "Bank"), and is entitled
to the benefit of an Irrevocable Letter of Credit (the "Letter of Credit")
issued by the Bank pursuant to said Letter of Credit Agreement, provided that
payment is requested from the Depositary not later than 5:00 p.m., New York
time, on the fifteenth day after the maturity date of each obligation (or, if
such fifteenth day is not a Business day, on the next succeeding Business Day).
As used herein, the term "Business Day" means any day other than a Saturday or
Sunday or a day on which banks are authorized or required by law to close in New
York.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS
OF THIS MASTER NOTE SET FORTH ON THE NEXT PAGE HEREOF.
This Master Note is a valid and binding obligation of the Company.
HOSOKAWA MICRON INTERNATIONAL INC.
By:
--------------------------------
(Authorized Officer's Signature)
At the request of the registered owner, the Company shall promptly issue and
deliver one or more separate note certificates evidencing each obligation
evidenced by this Master Note. As of the date any such note certificate or
certificates are issued, the obligations are evidenced thereby shall no longer
be evidenced by this Master Note.
1
<PAGE>
- --------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Name, Address and Taxpayer Identification Number of Assignee)
the Master Note and all rights hereunder, hereby irrevocably constituting and
appointing ______________________ Attorney to transfer said Master Note on the
books of the Company with full power of substitution in the premises.
Dated: --------------------------------------
(Signature)
Signature(s) Guaranteed:
NOTICE: The signature of this
assignment must correspond with the
names as written upon the face of this
Master Note, in every particular,
without alteration or enlargement or
any change whatsoever.
- --------------------------------------------------------------------------------
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT
IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
2
<PAGE>
Schedule to
Commercial Paper Master Note
dated December 16, 1991 of Hosokawa Micron International Inc.
Date of Face Amount of CUSIP Maturity Date Amount Notation
Issue Discount Note Number Date Paid Paid Made by
- ----- ------------- ----------- ---- ---- -------
3
<PAGE>
EXHIBIT B TO THE DEPOSITARY AGREEMENT
PROMISSORY NOTE
HOSOKAWA MICRON INTERNATIONAL INC.
_____________, 19__ NEW YORK, NEW YORK
On ________________, 19__, for value received, HOSOKAWA MICRON
INTERNATIONAL INC. (the "Company") promises to pay to the order of BEARER
the sum of
dollars
payable at the office of The Bank of Tokyo Trust Company, Corporate Trust
Department, 100 Broadway, New York, New York 10005 (the "Depositary"). Payment
in respect of this Note shall be made by 5:00 P.M. New York time on any Business
Day, provided that this Note is presented for payment not later than 2:00 P.M.
New York time on such Business Day. If this Note is presented for payment later
than 2:00 P.M. New York time on any Business Day, payment in respect of this
Note shall be made on the next succeeding Business Day.
This Note is entitled to the benefit of an irrevocable letter of credit
(the "Letter of Credit") issued to the Depositary for the benefit of the owner
hereof by The Mitsubishi Bank, Limited, New York Branch (the "Bank"), pursuant
to a certain Letter of Credit Agreement dated as of December [___], 1991 (the
"Credit Agreement") between the Company and the Bank, provided that the
Depositary makes a demand for payment under the Letter of Credit, and that this
Note is presented to the Depositary for payment, not later than 5:00 P.M. New
York time on the fifteenth day after the above-stated maturity date (or, if such
day is not a Business Day, not later than 5:00 P.M. New York time on the next
succeeding Business Day). As used herein, "Business Day" means a day other than
a Saturday or a Sunday or other day on which commercial banks are authorized or
required to close in New York City.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York.
Reference is made to the Credit Agreement and related documents which,
as from time to time amended, are on file with the Depositary at its aforesaid
office for a statement of the terms upon which the Letter of Credit has been
issued and the procedure
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and conditions governing drawings and the liability of the Bank thereunder.
HOSOKAWA MICRON INTERNATIONAL INC.
By:
-------------------------------
Name:
Title:
COUNTERSIGNED FOR AUTHENTICATION ONLY BY
THE BANK OF TOKYO TRUST COMPANY AS DEPOSITARY
By:
------------------------------------
Name:
Title:
THIS NOTE IS NOT VALID FOR ANY PURPOSE UNLESS COUNTERSIGNED BY THE BANK OF TOKYO
TRUST COMPANY, AS DEPOSITARY.
2
L E A S E
THIS LEASE, made and entered into as of the 23rd day of June, 1993, by and
between SOUTH CAROLINA REAL ESTATE DEVELOPMENT COMPANY, INC. (referred to
hereinafter as "Landlord"), and HOSOKAWA MICRON INTERNATIONAL, INC. (referred to
hereinafter as "Tenant").
W I T N E S S E T H :
WHEREAS, the Landlord is or expects to become the owner of certain
property hereinafter described; and,
WHEREAS, the Landlord has agreed to construct a building and other
improvements on said property and to lease such improvements and property to the
Tenant subject to certain terms and conditions; and,
WHEREAS, the Tenant desires to lease the said improvements and property
from the Landlord, and to that end and in consideration of the premises, the
covenants, terms and conditions to be performed as set forth hereinafter, the
parties have agreed and do agree as follows:
1. PREMISES. Subject to the terms and conditions set forth hereinafter,
the Landlord leases hereby to the Tenant, and the Tenant rents hereby from the
Landlord that land containing
<PAGE>
approximately fifteen (15) acres (the "Land") which is situate on U. S. Highway
25 near its intersection with South Carolina State Road 19-429 in Edgefield
County, South Carolina, being more particularly described on the attached
Exhibit "A" and the improvement to be constructed on the land (the Land and
improvements hereinafter referred to as the "Premises").
2. TERM OF LEASE.
A. The initial term of this Lease shall be for a period of
fifteen (15) years to commence on the 1st day of either the month following the
fourteenth (14th) day after substantial completion of construction of the
Building (as hereinafter defined) or the month in which Tenant opens for
business in the entire Building, whichever first occurs. Provided, however, if
the earlier of the 14th day following substantial completion or Tenant's opening
takes place on the first day of a month the initial term shall commence on such
date. If the Tenant opens for business prior to the actual commencement of the
initial term, the Tenant shall pay pro rata rent for the number of days from and
including the earlier of the date the Tenant opened for business or the 14th day
after substantial completion to the commencement date of the initial term. When
the date of commencement of the initial term is determined, Landlord shall
provide Tenant a written notice thereof.
B. Provided Tenant is not then in default, Tenant shall have the
right to renew this Lease by giving Landlord written notice to renew 180 days
prior to the expiration of the initial term and any renewal term for an
additional period of five (5) years, on the same terms and conditions as apply
to the initial term, except that annual rent during the first renewal term shall
be 110% of the annual rent in effect during the last year of the initial term as
provided for in Section 4(B), and annual rent for each succeeding renewal term
shall be 105% of the annual rent
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in effect for the last year of the preceding renewal term. The word "Term" in
this Lease shall apply to the initial term and any renewal term.
3. CONSTRUCTION OF PREMISES.
A. As used herein the following terms shall have the following
meanings:
(i) Plans: Drawing No. M37 (Perspective, without company
name on building) dated 1/20/93, Drawing No.M37Al, Sheet No. Al (Floor Plan)
dated 1/15/93, Drawing No. M37A2, Sheet No. A2 (Exterior Elevations), dated
1/15/93, Drawing No. M37A3, Sheet No. A3, dated 1/15/93 (Enlarged Office Floor
Plan) and Drawing No. M37S2 dated 1/12/93, all drawings prepared by Carlisle
Associates, attached hereto as Exhibit "B", Exhibit "C" (which consists of
Exhibit "C-l", Exhibit "C-2", Exhibit "C-3" and Exhibit "C-4"), respectively,
together with such other plans and specifications as shall be reasonably
developed and prepared by Landlord and approved by Tenant, consistent with the
Exhibits B and C attached to this Lease.
(ii) Site Plan: Drawing No. M37C101, Sheet No. C101 (Site
Plan) dated 1/29/93, prepared by Carlisle Associates, attached hereto as Exhibit
"D".
(iii) General Specifications dated January 15, 1993 prepared
by Fitts & Goodwin, Inc., containing a title page, a table of contents page and
thirty-two (32) specification pages, attached hereto as Exhibit "E", as modified
by "Schedule of Alternates and Clarifications" containing three (3) pages
attached hereto as Exhibit "F". The parties agree and acknowledge that the
alternates in Exhibit "F" numbered 3, 9, 10 and 15 were not elected by Tenant
and are not applicable; that of the remaining items, those additions to cost or
deductions from cost which are designated "Subject to Provisions of 3B" shall
cause an adjustment of rent in accordance with
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<PAGE>
Section 3(B) of this Lease; and that those alternates which are designated
"Included in Base Rates" shall be accomplished but shall not cause an adjustment
in rent under Section 3(B).
B. The Landlord, at its expense, shall construct a building of
approximately one hundred one thousand (101,000) gross square feet (the
"Building") and other improvements on the Premises in accordance with the Plans,
Site Plan and General Specifications. Final approval of the Plans, Site Plan and
General Specifications shall be given by Tenant not later than the twentieth day
after final execution of this Lease, or Landlord will be entitled to one day of
extension of the delivery date specified below for each day of delay in said
approval after said twentieth day. Landlord will submit final construction plans
and specifications to tenant for approval upon receipt of same from the
Landlord's project architect/engineer. Tenant shall have five (5) working days
from receipt of said plans and specifications to approve them or to notify
Landlord of any objections thereto, or Landlord will be entitles to one day of
extension of the said delivery dates for each day after said fifth day. Landlord
and Tenant contemplate that governmental entities will provide funds, namely,
Community Development Block Grant Funds and South Carolina Coordinating Council
for Economic Development Funds (such funds hereinafter referred to collectively
as "Development Funds") to pay the cost of certain off-site infrastructure
improvements and facilities and portions of the work which is part of the
project to be constructed by Landlord. Any material changes or omissions to the
Plans shall be made by written change order duly signed by Landlord and Tenant.
Any such written change shall specify any extension of completion times and
delivery date, as determined by Landlord, as a result of any such changes. If
any change requested by Tenant causes Landlord's cost of construction to
increase, at Tenant's option, Tenant may promptly pay for such increase within
ten days after
4
<PAGE>
notice of the amount from Landlord, or the amount of annual rent set forth in
Sections 4A (prorata), B, C and D below shall be increased by an amount equal to
the product of (x) the cost of the change divided by 1,000 times (y) $0.0012
times (z) 101,000 (sq. ft.). If any change requested by Tenant causes Landlord's
cost of construction to decrease or if a portion of Landlord's construction work
is paid for with Development Funds, whether by payment to Landlord or by direct
payment to the entity performing the work, the amount of annual rent set forth
in Sections 4A (prorata), B, C and D below shall be decreased by an amount equal
to the product of (x) the cost of the change or the amount of cost savings
resulting to Landlord from the use of Development Funds divided by 1,000 times
(y) $0.0010 times (z) 101,000 (sq. ft.). Construction shall be performed in a
workmanlike manner in accordance with the Plans in all material respects and in
accordance with standard trade practices and all applicable laws, ordinances and
regulations in all respects.
C. This Lease and Landlord and Tenant's obligations hereunder are
contingent upon the following matters being satisfied, both of which shall be
conditions precedent to Landlord's obligation to commence construction of any
improvements:
(i) Landlord being able to obtain title to the Land on terms
satisfactory to Landlord; and
(ii) Commitments reasonably satisfactory to Landlord having
been obtained by Landlord that sewer, water, electricity and natural gas will be
available to the Land in such time as will enable Landlord to meet its delivery
dates hereunder and in sufficient capacity for the uses intended by Tenant.
Tenant acknowledges that said services are to be provided by parties other than
5
<PAGE>
Landlord which are beyond Landlord's control.
If Landlord has not been able to satisfy the said matters by the earlier of the
date on which Landlord is to close the purchase of the Land or September 1,
1993, either Landlord or Tenant shall have the right to cancel this Lease, and
the security deposit paid at the execution hereof shall be refunded to Tenant.
D. The Landlord shall, by the end of the twenty-first (21st) week
after all permits required for construction of the Premises have been obtained,
have the manufacturing portion of the Building substantially completed to the
extent that Tenant can begin to move its fixtures and equipment into that
portion of the Building. Tenant agrees that it will not interfere with the work
of Landlord's contractors and subcontractors and will hold Landlord harmless
from any cost incurred by Landlord as a result of such interference. Landlord
shall have no responsibility or liability for any loss or damage to the property
of Tenant during the period of partial occupancy before the Building is
substantially complete and possession is delivered to Tenant. The Landlord shall
have the Premises substantially completed for delivery to the Tenant on or
before the end of the twenty-fourth (24th) week after all permits required for
construction of the Premises have been obtained. The time for partial occupancy
and for substantial completion shall be reasonably extended for delays caused by
acts of God (including without limitation inclement weather), strikes, casualty
or other causes beyond Landlord's control or changes requested by Tenant.
E. Landlord warrants that as of the date of delivery of
possession of the Premises to Tenant, to the best of Landlord's knowledge, there
is not present on the Premises any hazardous substance as defined in applicable
federal, state or local laws and regulations, and that the Premises are free of
asbestos.
6
<PAGE>
4. RENT. The Tenant agrees to pay to the Landlord as annual rental for
the Premises the following amounts (subject to the adjustments, if any, provided
for in Section 3 [B] above) for the following time periods, one-twelfth (1/12)
of said annual rental to be paid monthly, in advance, on the first day of each
month during the applicable period; provided, however, that the first full
month's rent shall be paid in advance at the execution hereof.
A. $899.32 per day for the number of days Tenant has taken
possession of the Premises or has opened for business prior to commencement of
the Lease Term. If Tenant commences operations in the Premises during the period
of partial occupancy referred to in Section 3(D) above, the Rent due under this
subparagraph shall be prorated in the same proportion as the amount of space
occupied bears to the gross area of the Building.
B. Years One through Fifteen: $328,250.00 per annum, or
$27,354.17 per month.
C. If any installment of rent or any other sum due to Landlord
from Tenant hereunder is not paid within ten (10) days of the date due, a late
charge equal to five percent (5%) of the amount owed shall be due in addition to
and payable together with such amount, and shall be deemed additional rent
hereunder.
5. USE OF PREMISES.
A. The Tenant agrees that only lawful business shall be operated
by it on the Premises, and said business will not be operated in such a manner
as to constitute a nuisance or a hazard, and that in connection with the
operation of the business the Tenant will observe and comply with all applicable
laws, ordinances, orders and regulations prescribed by lawful authority having
jurisdiction over the business operated in the Premises.
B. Under no circumstances shall Tenant bring, store, keep or use
(nor permit any
7
<PAGE>
of the foregoing) into, on or within the Premises any substance or material
which is classified or deemed to be hazardous under any federal law or
regulation or any law or regulation of the State of South Carolina, without
first obtaining Landlord's written permission for same. In the event Landlord
gives its consent (which may include the imposition of conditions for Landlord's
benefit), any such substance shall be transported, handled, stored, used and
disposed of strictly in accordance with applicable laws and regulations.
Landlord shall have the absolute right to revoke any permission if Tenant
breaches the foregoing covenant. Tenant shall be absolutely liable for all costs
and expenses of any kind whatsoever resulting from the presence of hazardous
materials on the Premises or the transportation of them to or from the Premises.
Tenant shall defend, indemnify and hold Landlord harmless from all loss, cost,
expense or liability of any kind whatsoever resulting from Tenant's
transportation, storage, use or disposal of such substances on the Premises.
This Lease may not be cancelled or terminated by Tenant notwithstanding the
termination or expiration of the term if at the time for termination or
expiration of the term there remain on the Premises any such hazardous
substances, and rent shall accrue and be payable at one and one-half (1.5) times
the rate otherwise in effect at the end of the term until all such substances
have been removed from the Premises.
6. REPAIRS AND ALTERATIONS. The Tenant agrees, at its sole cost and
expense, to maintain, repair and replace all of the improvements including, but
not limited to, all mechanical systems, plate glass, the parking and service
areas and landscaped areas located on the Premises in a good state of repair
(including replacement when necessary) and to keep the Premises in a clean, neat
and orderly condition, subject to normal wear and tear. Landlord shall and does
hereby assign any assignable warranties it may have with regard to the portions
of the
8
<PAGE>
Premises, or any component thereof, for which Tenant is responsible. Landlord
shall maintain the roof and structural integrity of the Building. Landlord
warrants that the general contract for construction of the Building shall
contain a warranty against defects in materials and workmanship for a period of
one (1) year after substantial completion.
The Tenant, at its sole cost and expense and only with Landlord's prior
written consent, may make minor alterations or renovations to the existing
improvements. Tenant shall hold Landlord harmless from any claim, losses,
damages or liens arising as a result of such alterations or renovations.
7. EXPANSION OF BUILDING. Landlord warrants to Tenant that under
applicable laws and zoning regulations, if any, in effect as of the date of
execution of this Lease, the Land contains sufficient area for an expansion of
the Building by up to twenty thousand (20,000) gross square feet of new area. At
any time during the first ten (10) years of the term, Tenant shall have the
right to have the Building expanded by the addition of up to twenty thousand
(20,000) gross square feet of new area. Tenant may exercise this right by giving
Landlord written notice thereof, together with a detailed specification of
Tenant's requirements for such expansion. Within sixty (60) days of receipt of
such notice, Landlord shall provide to Tenant a written proposal for the
expansion, including delivery date, rent for the new area and combined rent for
the entire Premises as expanded, revised prices for the purchase option set
forth in Section 29 hereof and a time limit for acceptance or rejection of the
proposal. Tenant shall have the option to accept Landlord's proposal or to have
the expansion constructed at its own expense, subject to Landlord's approval of
the plans and specifications for the expansion and the contractor to perform the
work, which approvals shall not be unreasonably withheld or delayed by Landlord.
After the tenth year
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<PAGE>
of the term, Tenant shall not have the right to expand the Building without
Landlord's prior consent unless either (i) Tenant exercises its option to
purchase the Premises or (ii) Landlord and Tenant agree on an extension of the
Lease term (and the rent therefor) such that after the construction of the
expansion, there shall remain at least ten (10) years in the term as extended.
Any expansion space shall be subject to all of the terms and conditions of this
Lease.
8. UTILITIES; REGIME FEES. The Tenant shall be responsible for the
costs of electricity, lights, water, sewer, heat, janitor service or any other
utility or service consumed including any initial hookups or taps in connection
with the occupancy of the Premises by the Tenant. If the Premises are part of an
integrated park development and the Land is subject to annual assessment by the
park developer or an association or regime of owners of parcels within the park
of fees for the costs of maintaining common areas, roadways and facilities,
utilities serving common areas, ad valorem taxes on the common areas and similar
costs, Tenant shall reimburse Landlord for the amount of such fees assessed and
paid against the Land.
9. SIGNS. The Tenant shall have the right to erect and maintain such
sign or signs on the Premises advertising Tenant's name, affiliation and uses
permitted by this Lease as may be permitted by applicable law, and subject to
Landlord's prior consent which shall not be unreasonably withheld.
10. TAXES. The Tenant shall pay during the Lease Term (when due and
before any past due or penalty date) all ad valorem taxes assessed against the
Premises by the appropriate governmental authorities and also all ad valorem
taxes levied against any stock or merchandise, furniture, furnishings, equipment
and other property located in, on or upon the Premises. Landlord shall forward
the tax bill for the Premises to Tenant promptly upon receipt of same and in no
case
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<PAGE>
later than the fifteenth day before the last day the taxes may be paid without
penalty, failing which Tenant shall be liable only for the amount of the taxes
due and not for any penalties. Landlord shall also promptly forward to Tenant a
copy of any notice of reappraisal or reassessment of the Premises. Tenant shall
have the right to appeal or contest the amount of any appraisal, assessment or
property tax bill as provided by law, in its own name or in Landlord's name, as
appropriate, and Landlord shall, at no cost to itself, cooperate in such appeal
or contest.
11. LIABILITY INSURANCE. The Tenant shall provide and keep in force at
its own expense during the term of this Lease public liability insurance for the
protection of Landlord and Tenant and property damage insurance coverage with
respect to the contents of the Premises. The insurance coverage to be provided
by Tenant shall contain limits of not less than $1,000,000.00 combined single
limit.
12. FIRE AND EXTENDED COVERAGE INSURANCE. The Landlord shall, at
Tenant's cost and expense, procure and keep in effect a policy (which term shall
include coverage under any blanket policy of Landlord) of fire and extended
coverage insurance in an amount equal to the insurable replacement value of the
building and Landlord's other improvements upon and constituting a part of the
Premises. Said policy shall provide coverage for Landlord's benefit for six (6)
months of loss of rents. Such policy shall be issued in the name of the Landlord
and shall name Landlord's Mortgagee(s) as a loss payee. The Tenant shall within
ten (10) days following receipt by Tenant of written demand reimburse Landlord
for the cost of all insurance carried pursuant hereto. Tenant shall have the
right to furnish such insurance for Landlord's benefit if Tenant can obtain the
same coverage and benefits at less cost than Landlord, provided such insurance
shall be issued by a company or companies reasonably acceptable to Landlord.
Tenant
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<PAGE>
shall be responsible to keep insured all contents of the Building.
13. DAMAGE OR DESTRUCTION BY FIRE. ETC. If the Building is damaged or
destroyed by fire, flood, tornado, or by the elements, or through any casualty,
or otherwise, after the commencement of the term of this Lease, the Lease shall
continue in full force and effect, and Landlord at its expense shall promptly
restore, repair or rebuild same, to the same condition as existed immediately
prior to such damage or destruction. Should all or a portion of the Premises be
made untenantable by such damage, rent and additional rent, if any, shall be
adjusted proportionately from the date of such damage or destruction until ten
(10) days after Landlord has repaired or restored said building in the manner
and in the condition provided in this paragraph. Notwithstanding the foregoing,
if Landlord has not repaired and restored the Building to its condition as
existed immediately prior to the damage within one hundred eighty (180) days
after the date of the casualty, Tenant may by written notice terminate this
Lease.
In the event that the Premises shall be damaged, in whole or in part,
within the last twenty-four (24) months of the Lease Term, or any Renewal Term,
or the last twelve (12) months of the last Renewal Term, Landlord shall have the
option, exercisable within thirty (30) days following such damage of terminating
this Lease, effective the date of giving notice thereof, provided, however, that
if at the time of such damage Tenant has the right to exercise a renewal option
which will extend the term of this Lease to a date no earlier than five (5)
years following such damage, and if Tenant exercises such option by notice to
Landlord within thirty (30) days following such damage, Landlord shall have no
right to terminate under the provisions of this subparagraph, and any previously
attempted exercise by Landlord of such right shall be ineffective.
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14. INDEMNIFICATION. The Tenant agrees hereby to indemnify and save the
Landlord harmless from any and all actions, demands, liabilities, claims, losses
or litigation, including court costs and reasonable attorneys fees arising out
of or connected with the Tenant's occupancy or use of the Premises and/or which
results from any alleged act or negligence of the Tenant, except for damage
caused by the negligence of Landlord or its employees, agents or contractors.
15. DEFAULT. As used in this Lease, the term "event of default" shall
mean any one of the following:
A. The failure of the Tenant to make any payment of rent by the
tenth (10th) day after the date on which the same becomes due and payable;
B. The failure of the Tenant to fulfill any other duty or
obligation imposed on the Tenant by this Lease;
C. The appointment of a receiver or the entry of an order
declaring the Tenant bankrupt or the assignment by the Tenant for the benefit of
creditors or the participation by the Tenant in any other insolvency
proceedings;
D. The taking of the leasehold interest of the Tenant hereunder
pursuant to an execution on a judgment.
Upon the happening of any "event of default", the Landlord may at its
option accelerate payments due hereunder and terminate this Lease and expel the
Tenant and recover reasonable legal fees and costs therefrom without prejudice
to any other remedy; provided, however, that before the exercise of such option
in the event of default, in the case of failure by the Tenant in the payment of
rent or the payment of taxes or insurance costs or any other sums as required by
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this Lease ("Monetary Default"), the Landlord shall first have given written
notice of such event of default to Tenant, which thereafter shall have five (5)
days within which to remedy or correct such monetary default, including the
payment of any late fees or other charges assessed by the Lender of Landlord,
and in the case of failure by Tenant to perform any other condition imposed
herein upon the Tenant, the Landlord shall have first given written notice of
such event of default to the Tenant, which thereafter shall have thirty (30)
days (as to any event of default) within which to remedy or correct such
default; provided, that if such event of nonmonetary default cannot reasonably
be cured within said thirty (30) day period, the Tenant shall not be deemed in
default hereunder if cure is commenced within said period and diligently pursued
thereafter. In case of acceleration of rent due to default by Tenant and
termination of this Lease by Landlord as aforesaid, if Tenant promptly (in any
event within sixty {60} days of default and the applicable cure period) vacates
and surrenders possession of the Premises to Landlord and consents to the entry
of judgment against Tenant so providing, Tenant shall have the right to pay as
liquidated damages an amount equal to (x) the accelerated rent minus (y) the
amount of funds collected by Landlord from the Letter of Credit described in
Section 32 hereinbelow (net of Landlord's costs of collection, as stated in
Section 32), if any, said liquidated damage amount to be payable in equal
monthly installments (the "Post-acceleration Payments") over the period
remaining on the Term at the time of the default. As long as Tenant has not
failed to make timely any Post-acceleration Payment as aforesaid, if Landlord
relets the Premises, Tenant shall be entitled to a credit against future
Post-acceleration Payments equal to the amount of rent received under the new
lease, reduced by the costs to Landlord of reletting, including, without
limitation, commissions, attorneys fees and cost of alterations or improvements
to the Premises to make them
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ready for the new tenant. If Tenant fails to vacate and surrender the Premises
and consent to the entry of judgment as aforesaid, the accelerated rent shall be
immediately due and payable, and Landlord may pursue such remedies as are
available at law or in equity. Notwithstanding anything herein to the contrary
the Landlord shall have no obligation to give notice of Monetary Default more
than six (6) times in any twelve (12) month period.
16. IDENTITY OF INTEREST. The execution of this Lease or the performance
of any act pursuant to the provisions hereof shall not be deemed or construed to
have the effect of creating between Landlord and Tenant the relationship of
principal and agent or of a partnership or of a joint venture and the
relationship between them shall be and remain only that of Landlord and Tenant.
17. NOTICES AND REPORTS. Any notice, report, statement, approval,
consent, designation, demand or request to be given and any option or election
to be exercised by a party under the provisions of this Lease shall be effective
only when made in writing and delivered, including telecopy or delivery by
Federal Express or other recognized overnight courier, or mailed by registered
or certified mail with postage prepaid, (notice by mail shall be deemed given on
the second day after mailing) to the other party at the address (or telecopy
number) given below:
LANDLORD: South Carolina Real Estate Development Company, Inc.
Post Office Box 262
Columbia, South Carolina 29202
Attention: Vice President, Commercial
Telecopier: (803) 791-9230
TENANT: Hosokawa Micron International, Inc.
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c/o Menardi-Criswell
P.O. Box 213
Augusta, GA 30903
Attn: President
Telecopier: (706) 722-0178
provided however, that either party may designate a different address from time
to time by giving to the other party notice in writing of the change.
18. MEMORANDUM OF LEASE. Landlord and Tenant agree, upon the request of
the other, to execute a memorandum of this Lease suitable for recording under
the applicable laws of the recording authority where the Premises are located.
19. ENTRY OF LANDLORD. Landlord may enter the premises during business
hours after reasonable notice (which need not be in writing):
A. to inspect or protect the Premises;
B. to exhibit the Premise to any prospective purchaser or
mortgagee;
C. to place a "for sale" or "for rent" sign on the Premises
during the last 180 days of this Lease or following an event of default.
No authorized entry by Landlord shall constitute an eviction of Tenant or
a deprivation of its rights or alter the obligation of the Landlord or create
any right in the Landlord averse to the interest of the Tenant hereunder.
20. OWNERSHIP OF IMPROVEMENTS AT LEASE EXPIRATION. At the
expiration of the Lease, the improvements on the Premises shall be and remain
the sole property of the Landlord. Provided that Tenant is not in default
hereunder, any trade fixtures, items of personalty and signs purchased and
installed (at Tenant's expense) and used by Tenant in the operation of its
business on the Premises shall remain the Tenant's sole property and Tenant
shall
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<PAGE>
have the right to remove the same provided any damages in removal are repaired
by the Tenant. Provided, further, that if Tenant shall fail to remove same
within thirty (30) days after the expiration of the term, the same shall be
deemed abandoned by Tenant, and Landlord shall have the right to remove and
dispose of same without liability to Tenant and to recover from Tenant
Landlord's costs of such removal and disposition.
21. QUIET ENJOYMENT. The Landlord warrants that the Tenant, upon
observing and complying with the terms, covenants and conditions of this Lease
shall enjoy the use and occupancy of the Premises during the Lease Term without
any hindrance or interference.
22. ENTIRE AGREEMENT. This Lease contains all of the understandings by
and between the parties hereto relative to the leasing of the Premises and all
prior or contemporaneous agreements relative thereto have been merged herein or
are voided by this instrument, which may be amended, modified, altered, changed,
revoked or rescinded in whole or in part only by an instrument in writing signed
by each of the parties hereto.
23. ASSIGNMENT AND SUBLETTING. The Tenant may not assign this Lease or
sublet the Premises or any portion thereof or otherwise transfer any right or
interest hereunder without the prior written consent of the Landlord, which
shall not be unreasonably withheld. Notwithstanding the foregoing, Tenant may
assign this Lease to an entity which is wholly owned or controlled by Tenant
without Landlord's consent, but such assignment shall not relieve or release
Tenant from any obligation or liability hereunder, and Landlord shall continue
to look to Tenant for the performance of all covenants and obligations of Tenant
hereunder.
24. EMINENT DOMAIN. If any person, corporation or authority, municipal,
public, private or otherwise, shall at any time during the term of this Lease or
any extension or renewal
17
<PAGE>
hereof, lawfully condemn and acquire title to the Premises, or to any portion
thereof in or by condemnation or other similar proceeding, pursuant to any law,
general, special or otherwise, the respective rights of Landlord and Tenant
shall be as hereinafter provided.
A. Landlord shall be entitled to, and shall receive any and all
awards or payments attributable to taking of the title to the Premises,
including an easement or right of way therein, and Tenant shall and does hereby
assign and transfer to Landlord such award or payment as may be made therefor.
B. Tenant shall be entitled to, and shall receive, any and all
awards or payments attributable to its leasehold improvements and any other
award made specifically to Tenant for loss of business, moving expenses or other
purposes, free and clear of every claim of every kind whatsoever by or on the
part of Landlord as herein provided.
C. The rental herein reserved for the term hereof then in effect
shall be reduced by the same percentage as the building area taken (measured to
the nearest whole square foot) bears to the area of the building prior to the
taking (measured to the nearest whole square foot). If the taking is with regard
to a portion of the land, the Landlord recognizes that a reduction in rent is
warranted if said taking impacts the intended use or expansion of the
improvement. The Landlord and Tenant agree that under such circumstances, they
will attempt at such time to develop a reduction for the balance of the term.
Failing agreement of the parties, the parties agree to submit this to
arbitration.
D. The term "taken" or "taking" shall include the actual physical
taking of the Land and/or Building in whole or in part, including those
instances where the condemnor acquires fee simple title to the area condemned,
as well as those instances where the condemnor acquires an easement, right of
way or estate of less than a fee simple title to the area condemned, provided
that the taking of any such easement, right of way or estate less than the fee
has the effect of excluding the Tenant from that portion of the property or
depriving Tenant of the beneficial use and enjoyment of such condemned area for
any period. The terms "taken" and "taking" shall not include those instances,
and Tenant shall not be entitled to any reduction in rentals or price, where any
easement, right of way, or other estate acquired by the condemnor does not
exclude Tenant from the area condemned or does not deprive Tenant of the
beneficial use thereof.
E. If substantially all of the Premises are taken, then this
Lease shall terminate as of the day of taking without further obligation for
payment of rent.
F. Anything herein contained to the contrary notwithstanding, any
award for any taking which affects only Landlord's interest under this Lease and
does not affect Tenant's interest under the Lease shall be payable solely to the
Landlord, and any award for any taking of Tenant's interest under this Lease
which does not effect Landlord's interest under this Lease shall be payable to
Tenant. In all cases where the award is attributable to a taking of interest of
18
<PAGE>
Landlord and Tenant and the condemning authority does not make separate awards,
the award shall be paid to landlord who shall deposit the same in a special
account in the name of Landlord and be kept separate and distinct from other
funds of Landlord pending distribution of the award between Landlord and Tenant
by agreement or pursuant to arbitration.
G. The valuation of Landlord's and Tenant's interest and the
apportionment of any award shall be determined by agreement, or if they are
unable to agree, the value shall be determined by arbitration as hereinafter
provided.
H. In the event of a partial taking of any building structure
erected on the Premises or parking area the Landlord shall:
(a) In the event the remaining portion of such structure
contains sufficient area to be put to its intended use as of the date of the
partial taking, Landlord shall rebuild and repair the structure in a good and
workmanlike manner. Despite the fact the remaining portion of any such structure
contains a sufficient area to be usable, if in the opinion of a competent
engineer the remaining portion of the structure has been structurally damaged to
the extent it would be impossible to repair the same in a good and workmanlike
manner or not economically feasible to make such repairs, then Landlord may
terminate this Lease as of the day of taking.
(b) In the event the remaining portion of any such structure
does not contain sufficient area to be put to its intended use, then this Lease
shall be terminated as of the day of taking.
I. ARBITRATION. Arbitration as provided herein shall be the
arbitration of three persons who shall be licensed realtors, to whom such
arbitration shall be referred, one of such persons to be nominated by the
Landlord, one to be nominated by Tenant and the third to be appointed by writing
under the hands of the two so nominated before the reference is proceeded with,
and the decision of any two of the arbitrators shall be binding. If either the
Landlord or Tenant shall refuse or neglect to appoint an arbitrator within ten
(10) days after the other shall have appointed an arbitrator and served written
notice upon the other requiring him to appoint an arbitrator, then upon such
failure, the party making the request and having himself appointed an arbitrator
may appoint another arbitrator to act on behalf of the party so failing to
appoint, and the arbitrator so appointed may proceed and act in all respects as
if appointed by the party so failing to make such appointment. The costs of the
reference of the arbitrator shall be borne by the parties equally.
25. WAIVER OF SUBROGATION. Landlord and Tenant hereby waive all rights
of recovery and causes of action which either has or may have or which may arise
hereafter against the other, whether caused by negligence, intentional
misconduct or otherwise, for any
19
<PAGE>
damage to Premises, property or business cause by any of the perils covered by
fire and extended coverage building and contents and business interruption
insurance, or for which either party may be reimbursed as a result of insurance
coverage affecting any loss suffered by it, provided, however, that the
foregoing waivers shall apply only to the extent of any recovery made by the
parties hereto under any policy of insurance now or hereafter issued, and
further provided that the foregoing waivers do not invalidate any policy of
insurance of the parties hereto, now or hereafter issued, it being stipulated by
the parties hereto that the waivers shall not apply in any case in which the
application thereof would result in the invalidation of any such policy of
insurance; and further provided that it is the intention of the parties that no
third party shall benefit in any way from such actions of the Landlord or the
Tenant.
26. SUBORDINATION AND ESTOPPEL AGREEMENTS. The Tenant shall from time to
time provide landlord or any mortgagee of Landlord with an estoppel letter, in a
form reasonably requested by Landlord, confirming the status of the Lease,
including whether or not any defaults exist. The Tenant shall and does hereby,
automatically and without the necessity of execution of any further document*,*
acknowledge that this lease is subordinate to any mortgage(s) placed on the
Premises by Landlord provided that the mortgagee shall acknowledge Tenant's
right to enjoy the undisturbed use of the Premises so long as Tenant is not in
default. The Tenant shall execute such documents as may be reasonably required
from time to time in accordance herewith.
27. HOLDING OVER. If Tenant holds over after termination of the initial
term and any renewals thereof this Lease, the tenancy thereafter shall be from
month to month subject to all terms, condition, and covenants of this Lease
provided that the monthly rent during such
20
<PAGE>
holdover shall be one hundred fifty percent (150%) of the monthly rent in effect
for the last month of the Term.
28. BINDING EFFECT. This Lease shall be binding upon and shall inure to
the benefit of the parties hereto, their respective heirs, successors and
assigns.
29. PURCHASE OPTION. Landlord hereby grants to Tenant the right and
option to purchase the Premises at the end of each five (5) year period ("Fifth
Anniversary") after the commencement date of the term hereof. The purchase price
shall be subject to downward or upward adjustment for net decreases or net
increases, respectively, in Landlord's cost to develop the Premises due to
application of Development Funds or cost changes due to changes in the Plans
requested by Tenant. If there is a net decrease in said cost, the purchase price
at each Fifth Anniversary shall be as set forth in the following schedule. If
there is a net increase in said cost, the purchase price will be adjusted upward
by the same percentage as results in the case of a corresponding amount of net
decrease. The purchase price shall be interpolated for exact amounts of change
in cost between the amounts stated in the following schedule.
<TABLE>
<CAPTION>
NET DECREASE PURCHASE PRICE AT
IN COST 5TH ANNIV. >> FIRST SECOND THIRD
------- ------------- ----- ------ -----
<S> <C> <C> <C> <C>
-0- $3,055,090 $2,810,990 $2,078,390
$ 75,000 $3,004,208 $2,796,929 $2,078,390
$100,000 $2,977,723 $2,789,515 $2,076,306
$150,000 $2,974,755 $2,754,682 $2,074,609
$200,000 $2,971,785 $2,739,848 $2,071,911
</TABLE>
The purchase price in effect at the time of exercise of the option shall be
equitably adjusted by Landlord and Tenant if an expansion or a partial taking of
the Premises has occurred between the execution of this Lease and the exercise
of the option. This option may be exercised by Tenant giving Landlord written
notice of its intention to purchase the Premises at least one hundred
21
<PAGE>
eighty (180) days before the applicable Fifth Anniversary together with payment
of Ten Thousand Dollars ($10,000.00) earnest money, which shall be applied to
the purchase price at closing. From the date of such notice, Tenant shall have
ninety (90) days to conduct such inspections and other matters of due diligence
as it may desire. If Tenant is not satisfied with the results thereof, it must
give Landlord notice within ten (10) days after the ninety (90) day period noted
above that it does not desire to purchase the Premises, and the earnest money
refunded to Tenant. If Tenant does not give Landlord notice that it does not
desire to pursue the purchase of the Premises, then the purchase and sale shall
be closed on the last day of the then current five-year period for the
applicable purchase price. The Purchase Price shall be paid by cash, certified
check or other immediately available funds at closing, which shall occur in the
offices of Landlord's attorneys in Columbia, South Carolina or at such other
place as Landlord and Tenant may agree upon.
30. RIGHT OF FIRST REFUSAL. Landlord agrees that it will not sell the
Premises during the Term of this Lease to any non-affiliated entity other than
Tenant without first offering to Tenant the right (which Tenant may assign to an
affiliate controlled by or under common control with Tenant) to purchase the
Premises on the same terms as those on which Landlord proposes to sell to such
other non-affiliated entity as set forth in a written bona fide offer from such
entity. Landlord shall give Tenant written notice of any bona fide offer to
purchase received (and any modifications thereof), and Tenant shall have ten
(10) days from receipt of said notice in which to give Landlord written notice
whether it elects to purchase the Premises on the same terms set forth in the
offer, including any modification thereof. If no notice is given by Tenant with
in the time allowed, it shall be conclusively deemed that Tenant elected not to
purchase, and Tenant shall have no further rights with respect to that proposed
sale. If that sale is not
22
<PAGE>
consummated, this right of first refusal shall remain in effect with respect to
subsequent offers.
31. SECURITY DEPOSIT. Tenant shall pay to Landlord, at the execution
hereof, a security deposit in the amount of Twenty-seven Thousand Three Hundred
Fifty-four and 17/100 ($27,354.17). Landlord shall hold same in its non-interest
bearing escrow account. If at the expiration of the Term (or any extension
thereof) Tenant vacates the Premises and leaves them in good, broom clean
condition and repair, except for normal and reasonable wear and tear, Landlord
shall refund the said security deposit to Tenant within thirty (30) days of
Tenant vacating the Premises; provided, however, that if at the expiration or
earlier termination of this Lease there remains past due and payable any
arrearage of rent or other sum due hereunder, Landlord may apply the security
deposit toward the payment of same, in addition to exercising its rights under
Section 32 below.
32. ADDITIONAL SECURITY BY LETTER OF CREDIT. Notwithstanding any other
provisions in this lease, as additional security for the faithful performance by
Tenant of its rental payment and other obligations and covenants under this
Lease, Tenant shall within thirty (30) days after the execution of this Lease
cause to be delivered to Landlord an irrevocable letter of credit in favor of
Landlord, from a bank reasonably acceptable to Landlord, on which Landlord shall
be entitled to collect payment of the face amount (as set forth hereinbelow)
upon providing written notice to the issuing bank that Tenant has defaulted in
the performance of an obligation or covenant under this Lease and has failed to
cure same within the period of time allowed by this Lease and that Landlord has
exercised or intends to exercise its rights under Section 15 of this Lease. The
amount collected by Landlord, less any out-of-pocket costs incurred by Landlord
to collect same, shall be credited toward Tenant's liability to Landlord under
Section 15. The
23
<PAGE>
initial face amount of the letter of credit shall be Two Million Dollars
($2,000,000.00). Tenant shall maintain the letter of credit in force at all
times during the lease term; provided, however, that after such time as Tenant
demonstrates to Landlord by its independently audited consolidated financial
statements, which include an opinion rendered by Tenant's independent certified
public accountants, that it has had net income of Two Million Dollars
($2,000,000.00) or more for two consecutive fiscal years of twelve calendar
months each subsequent to the fiscal year in which this Lease is executed,
Tenant shall no longer be required to renew the letter of credit; and provided,
further, that at such time as the total amount of rent remaining payable to
landlord for the balance of the term is less than Two Million Dollars
($2,000,000.00), if Tenant is still required hereunder to maintain the letter of
credit in force, Tenant may renew the letter of credit annually in a face amount
equal to the total amount of rent remaining payable to Landlord for the balance
of the term at the time of each such renewal.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as
of the day and year first above written.
WITNESSES: SOUTH CAROLINA REAL ESTATE
DEVELOPMENT COMPANY, INC. (SEAL)
/s/ Karon K. Hadley By: /s/ A. H. Gibbes
- ------------------------------ ----------------
A. H. Gibbes
/s/ Jennifer Hall President
- ------------------------------
HOSOKAWA MICRON INTERNATIONAL, INC.
(SEAL)
/s/ Kathy Rabah By: /s/ William J. Brennan
- ------------------------------ ----------------------
William J. Brennan
/s/ Leonard H. Baer Senior Vice President
- ------------------------------
24
<PAGE>
AMENDMENT OF LEASE
------------------
AMENDMENT made the _______ day of _________, 1994 to that certain Lease
dated June 23, 1993 (the "Lease") between SOUTH CAROLINA REAL ESTATE DEVELOPMENT
COMPANY, INC. now known as SCANA DEVELOPMENT CORPORATION as Landlord and
HOSOKAWA MICRON INTERNATIONAL, INC. as Tenant.
WHEREAS the Lease provides in Section 4 for annual rental, which is
subject to adjustment due to changes in the cost of the project which is the
subject of the Lease, as provided in Section 3 of the Lease; and
WHEREAS Tenant requested certain changes in the plans and specifications
of the project which resulted in increased cost to Landlord, for which tenant
elected an increase in annual rental as provided in Section 3 of the Lease, the
increases totaling $269,317.00, as is detailed on Exhibit A hereto; and
WHEREAS Landlord and Tenant desire to amend the Lease to reflect the
increase in annual rental caused by the adjustments referred to above; now,
therefore,
IN CONSIDERATION of the sum of One Dollar ($1.00) and the premises,
Landlord and Tenant agree that the Lease shall be and hereby is amended as
follows:
Section 4 of the Lease is amended by changing subsections A and B to read
as follows:
A. $988.74 per day for the number of days Tenant has taken
possession of the Premises or has opened for business prior to
commencement of the Lease term. If Tenant commences operations in the
Premises during the period of partial occupancy referred to in Section
3(D) above, the Rent due under this subparagraph shall be prorated in the
same proportion as the amount of space occupied bears to the gross area of
the Building.
B. Years One through Fifteen: $360,891.00 per annum, or $30,074.25
per month.
Except as amended above, the Lease shall remain in full force and effect
according to its terms.
HOSOKAWA MICRON SCANA DEVELOPMENT
INTERNATIONAL, INC. CORPORATION (f/k/a South
Carolina Real Estate Development
Company, Inc.)
By: /s/ Leonard E. Baling By: /s/ A.H. Gibbes
------------------------ ----------------------------
Its President Its President
MENARDI-CRISWELL DIV.
DATED: APRIL 3RD, 1980
----------------------
BRAMALEA LIMITED
-and-
DUCON-MIKROPUL
--------------
---------------------------------
LEASE
---------------------------------
Address: 1940 Steeles Avenue, Brampton
SHIFF, GROSS
Suite 800
1867 Yonge Street
TORONTO, Ontario
M4S 1R2 (SI: 11238)
<PAGE>
SCHEDULE A
PLAN OF SURVEY OF
BLOCK G REGISTERED PLAN NO. 720
TOWNSHIP OF CHINGUACOUSY
COUNTY OF PEEL
SCALE: 1 INCH = 100 FEET
<PAGE>
<PAGE>
THIS INDENTURE made as of the 3rd day of April l980
IN PURSUANCE OF THE SHORT FORMS OF LEASES ACT
B E T W E E N:
BRAMALEA LIMITED, a Corporation incorporated
under the laws of the Province of Ontario,
(hereinafter called the "Landlord")
OF THE FIRST PART:
- and -
DUCON-MIKROPUL LIMITED, a Corporation
incorporated under the laws of Canada
(hereinafter called the "Tenant")
OF THE SECOND PART:
W H E R E A S:
A. The Landlord and Tenant are parties to a certain indenture of
lease dated January l5th,1974, amended by agreement dated December
lst,1975 and by letter dated October 23rd,1978 ( the "(Original
Lease");
B. The Original Lease terminates on April 3Oth,1980, and the
Landlord and Tenant desire to enter into this lease to provide for a
continuation of tenure;
W I T N E S S E T H:
DEMISE 1.00 That in consideration of the rents, covenants and agreements
hereinafter reserved and contained on the part of the Tenant to be
paid, observed and performed, the Landlord doth demise and lease unto
the Tenant all and singular that certain parcel or tract of land and
premises situate, lying and being in the City of Brampton and Province
of Ontario, and being municipally known as 1940 Steeles Avenue, all of
which said property is sometimes hereinafter referred to as the
"demised premises," "leased premises" or "premises," and being Part
of Block G, Registered Plan 720, as shown outlined in blue on Schedule
"A" annexed hereto, and having thereon a building containing 18,496
square feet.
TERM 2.00 TO HAVE AND TO HOLD the demised premises, unless such term
shall be sooner terminated as hereinafter provided, for and during the
term of six (6) years to be computed from and inclusive of the 1st day
of May,1980, and from thenceforth next ensuing and ended on the 30th
day of April, 1986.
USE OF 3.00 The Tenant shall use and occupy the demised premises for
PREMISES offices, warehousing and other uses required by the Tenant in
connection with its business; provided the Tenant, in the use and
<PAGE>
-2-
occupation of the demised premises and in the prosecution or conduct of
any business therein, shall comply with all requirements of all laws,
orders, ordinances, rules and regulations of the Federal, Provincial,
Regional and/or Municipal authorities, and with any direction or
certificate of occupancy issued pursuant to any law by a public officer
or officers. The Tenant covenants that it will not use or permit to be
used any part of the demised premises for any dangerous, noxious or
offensive trade or business and it will not cause or maintain any
nuisance in, at or on the demised premises, and the Tenant covenants to
carry on active business in the demised premises for the term hereby
granted.
RENT 4.00 YIELDING AND PAYING THEREFOR yearly and every year without any
abatement or deduction for any reason whatsoever, during the term hereby
granted, the sum of FIFTY-FIVE THOUSAND FOUR HUNDRED EIGHTY-EIGHT
DOLLARS ($55,488.00) of lawful money of Canada to be paid in advance in
equal consecutive monthly installments of $4,624.00 each on the 1st day
of each and every month in each year during the term hereby demised,
commencing on the 1st day of May , 1980, together with additional rent
hereinafter reserved.
DEPOSIT
PAYMENT 6.00 All payments required to be made by the Tenant under and in
respect to this lease shall be made to the Landlord, at the Landlord's
office, 1867 Yonge Street, Suite 1100, Toronto, Ontario, M4S1Y5, or to
such agent o agents of the Landlord or at such other place as the
Landlord shall hereafter from time to time direct in writing to the
Tenant.
-3-
TENANT'S 7.00 The Tenant covenants with the Landlord:
COVENANTS
7.01 To pay rent.
ADDIT- 7.02 The Tenant shall as additional rent in each and every year
IONAL during the term, pay and discharge all taxes (including local
RENT improvement rates), rates, duties and assessments that may be levied,
rated, charged or assessed against the demised premises or any part
thereof, and without limiting the generality of the foregoing, every
other tax, charge, rate, assessment or payment which may become a
charge or encumbrance upon or levied or collected upon or in respect of
the demised premises or any part thereof, whether charged by any
Municipal, Parliamentary or other body during the term hereby demised.
7.03 The Tenant shall pay, as the same becomes due respectively,
all charges for public and private utilities, including without
limitation, water, gas, electrical power or energy, steam or hot water
used upon or in respect of the demised premises and for fittings,
machines, apparatus, meters or other things leased in respect thereof,
and for all work or services performed by any corporation or commission
in connection with such public or private utilities.
7.04 The Tenant shall have the right to contest by appropriate
legal proceedings, the validity of any tax, rate, including local
improvement rates, assessments or other charges referred to in this
section.
INTERIOR 7.05 The Tenant, at its sole cost and expense, shall maintain and
MAINTEN- keep the demised premises and every part thereof in good order and
ANCE condition and promptly make all needed repairs and replacements
(reasonable wear and tear and damage by perils insured against only
excepted) and without limiting the generality of the foregoing, the
Tenant shall keep the demised premises well painted, clean and in such
condition as a careful owner would do.
EXTERIOR 7.06 The Tenant, at its sole cost and expense, shall maintain and
keep the sidewalks, parking areas, driveways and landscaping generally
in good order and condition and promptly make all needed
<PAGE>
-4-
repairs and replacements (reasonable wear and tear and damage by perils
insured against only excepted) and without limiting the generality of
the foregoing, the Tenant shall keep the sidewalks, parking areas and
driveways in a clean and orderly condition free of accumulation of
dirt, rubbish, snow and ice. The Tenant shall also keep and maintain
all lawns and landscaping in such condition as a careful owner would do
including the replacement of lawn and landscaping where the Tenant has
failed to care for such lawn and landscaping as a careful owner would
do.
7.07 In the event that the Tenant requires outside storage
facilities, the Tenant shall construct a fence in compliance with all
Municipal by-laws, and in the event that such by-laws do not exist,
then in accordance with the specifications of the Landlord. The Tenant,
at its sole cost and expense shall maintain and keep all outside
storage areas in good order and condition and promptly make all needed
repairs and replacements (reasonable wear and tear, and damage by
perils insured against only excepted).
ENTRY 7.08 It shall be lawful for the Landlord and/or its agents, at all
BY reasonable times during the term and following at least twenty-four
LAND- (24) hours notice, to enter the demised premises to inspect the
LORD condition thereof. Where an inspection reveals repairs are necessary,
in the reasonable opinion of the Landlord, the Landlord shall give the
Tenant notice in writing, and thereupon the Tenant shall within thirty
(30) days of the date of delivery of the notice, make the necessary
repairs in a good and workmanlike manner.
LEAVE 7.09 And the Tenant shall, at the expiration or sooner
PREMISES determination of the term, peaceably surrender and yield up unto the
IN GOOD Landlord the demised premises, together with the appurtenances, and all
REPAIR buildings or erections which at any time during the term shall have
been made therein or thereon, in good and substantial repair and
condition (reasonable wear and tear and damage by perils insured
against only excepted).
<PAGE>
-5-
HEATING 7.10 To heat the demised premises in a reasonable manner at its own
expense from heating equipment supplied by the Landlord, and to
maintain, keep in good repair, and replace,* if necessary, at its own
expense, the heating equipment and controls used in connection
therewith, subject to the condition of the said heating equipment as of
the date of the commencement of the within term, and to provide all the
necessary fuel and other supplies for the operation of the heating
plant; and to heat the demised premises as aforementioned so as, at all
times, to protect the demised premises and all of its contents from
damage by cold or frost.
AIR- 7.11 To air-condition the office area located in the demised
CONDIT- premises from air-conditioning equipment supplied by the Landlord and
IONING to maintain, keep in good repair, and replace,* if necessary at its own
expense, the air-conditioning equipment and controls used in connection
therewith, subject to the condition of the said air-conditioning
equipment as of the date of the commencement of the within term.
PUBLIC 7.12 The Tenant, at its own expense, shall observe and promptly
ORDERS comply with all statutes, orders-in-council, by-laws, rules,
regulations and requirements of all Federal, Provincial, Regional and
Municipal Governments and appropriate Departments thereof, and the
orders, rules and regulations of the Insurance Advisory Organization or
any other body hereafter constituted exercising similar functions which
may be applicable to the leased premises and or the use or manner of
use of the leased premises. The Tenant shall likewise observe and
comply with the requirements of all policies of insurance at any time
in force under the provisions of this lease. The Landlord acknowledges
that the demised premises, at the commencement of the term of the
lease, comply with all Municipal by-laws.
ASSIGN- 7.13 The Tenant shall not assign nor sublet or permit the premises
MEMT to be occupied by anyone other than the Tenant, without the written
AND SUB- consent of the Landlord, provided such consent shall not be
LETTING unreasonably withheld.
*if it is determined by an independent mechanical engineer that the
existing roof mounted combination heating-cooling unit requires
replacement, the Landlord shall make such replacement and the Tenant
shall pay the cost thereof up to a maximum of $25,000.00 and the
Landlord shall pay the excess.
<PAGE>
-6-
NUISANCE 7.14 The Tenant shall not do, nor omit nor permit to be done or
omitted upon or about the demised premises, anything which shall be or
shall result in a nuisance or menace to the Landlord, or the owners or
occupiers of neighbouring premises.
INSUR- 7.15 The Tenant, in the names of the Tenant, the Landlord and
ANCE every mortgagee of the demised premises from time to time and with some
insurance company or companies satisfactory to the Landlord and every
such mortgagee, shall take out and maintain with respect to the demised
premises and the Tenant's use and occupation thereof and furnish to the
Landlord policies of:
(a) public liability and property damage insurance,
including personal injury, in respect of the demised
premises and its operation therein up to such limits as
the Landlord may from time to time reasonably request
but to the extent of not less than ONE MILLION DOLLARS
($1,000,000.00) inclusive of all injuries or death to
persons and damage to property of others arising from
any one occurrence;
(b) plate glass insurance in an amount sufficient to
replace all plate glass in the demised premises and in
the exterior doors and windows thereof;
(c) insurance against loss by such insurable hazards as the
Landlord may from time to time reasonably request on a
replacement cost basis in an amount sufficient to cover
the cost of replacement of all alterations,
decorations, fixtures, additions, improvements, and
trade inventory made, installed, brought, maintained
or stored by the Tenant on the demised premises;
(d) business interruption insurance for such amount as the
Landlord may from time to time reasonably request.
7.16 The Tenant shall pay forthwith on demand all premiums with
respect to the following insurance policies which the Landlord
<PAGE>
-7-
shall take out and maintain, or cause to be taken out and maintained:
(a) insurance against destruction or damage by fire and
those additional perils contained in the extended
perils endorsement of such insurance company or
companies usual from time to time for similar risks to
the extent of the full replacement value of footings,
foundations and pavements;
(b) if any boiler or pressure vessels are on the demised
premises, boiler and pressure vessels insurance up to a
limit of not less than FIVE HUNDRED THOUSAND DOLLARS
($500,000.00);
(c) loss of rental income insurance for such amount as the
Landlord may from time to time reasonably request.
7.17 The proceeds of all insurance on the demised premises against
property damage shall be paid to the Landlord and/or to any
mortgagee(s) as aforesaid upon the occurrence of any loss. In case of
damage to, or total or partial destruction of the demised premises or
any part thereof, by force or otherwise; the Tenant shall give the
Landlord prompt notice thereof, and the Landlord, subject to Paragraph
8.00 herein, shall proceed to restore the property so damaged to the
same condition as prevailed immediately prior to the occurrence of such
damage.
7.18 All insurance policies required under this Article shall
provide for waiver of subrogation, if available, in favour of the
Landlord and the Tenant respectively and all other companies
respectively owned, operated or controlled by or affiliated to any of
them, and each party may from time to time require the other to supply
evidence in respect thereto provided that if such endorsement can only
be obtained by payment of an additional premium, the other party, if it
insists upon such endorsement, shall pay such additional premium; and
in the event that waiver of subrogation is not available in favour of
the Landlord, then the Tenant shall obtain Tenant's legal liability
insurance in an amount reasonably satisfactory to the Landlord.
<PAGE>
-8-
7.19 From time to time, at the request of the Landlord, the Tenant
shall also maintain such other or additional insurance and in such
amounts as at the time customarily is carried in respect of buildings
and building equipment then on the leased premises and shall also
maintain such other or additional insurance and in such amounts as may
be required by the holder of any mortgage of the premises, pursuant to
the terms of the particular mortgage.
7.20 The Tenant shall comply with all regulations of the Insurance
Advisory Organization or of any liability or fire insurance company by
which the Landlord or Tenant may be insured, which are necessary to
maintain such insurance. Such insurance shall, as from the respective
dates upon which the several existing policies of insurance
respectively expire, be effected with such insurance company or
companies as the Landlord may approve; provided such approval shall not
be unreasonably withheld and the policies of insurance shall be
produced to the Landlord. In the event that the Tenant shall fail to
insure and keep insured as herein provided, the Landlord shall be at
liberty to effect insurance as aforesaid and the cost of such insurance
shall be added to the rent hereby reserved and the amount thereof shall
be payable with the next ensuing installment of rent, and the Landlord,
in the event of nonpayment, shall be entitled to all remedies for the
recovery of same as for rent in arrears; and the Tenant shall have the
public liability insurance in the names of the Landlord and Tenant as
the persons assured.
7.21 Receipts or satisfactory evidence establishing the payment of
premiums in respect of each of the said policies shall be delivered to
the Landlord at least ten days before the same becomes due.
7.22 Subject to the provisions of Paragraph 8.00 below, in the
event of destruction of the demised premises or any part thereof by any
reason whatsoever insured against by the Landlord as hereinbefore
referred to, the Landlord shall cause the demised premises or any part
thereof to be reinsured as hereinbefore provided immediately upon
reconstruction or restoration.
<PAGE>
-9-
DAMAGE 8.00 If and whenever during the term hereby demised the building
AND DES- erected on the demised premises shall be destroyed or damaged by
TRUCTION perils insured against as hereinbefore stated, then and in every such
event:
(a) If the damage or destruction is such that the building
erected on the demised premises is rendered wholly
unfit for occupancy or it is impossible or unsafe to
use or occupy, and if in either event the damage, in
the opinion of the Landlord to be given to the Tenant
within ten (10) days of the happening of such damage or
destruction, cannot be repaired with reasonable
diligence within one hundred and twenty (120) days from
the happening of such damage or destruction, then
either the Landlord or the Tenant may, within five (5)
days next succeeding the giving of the Landlord's
opinion as aforesaid, terminate this lease by giving to
the other notice in writing of such termination, in
which event this lease and the term hereby demised
shall cease and be at an end as of the date of such
destruction or damage and the rent and all other
payments for which Tenant is liable under the terms of
this lease shall be apportioned and paid in full to the
date of such destruction or damage. In the event that
neither Landlord nor Tenant shall terminate this lease,
then the Landlord shall repair the building with all
reasonable speed and the rent hereby reserved shall
abate from the date of the happening of the damage
until the damage shall be made good to the extent of
enabling Tenant to use and re-occupy the demised
premises in the opinion of an architect designated by
the Landlord.
(b) If the damage or destruction is such that the building
erected on the demised premises is rendered wholly
unfit for occupancy or it is impossible or unsafe to
use or occupy, and if in either event the damage, in
the opinion of the Landlord to be given to the Tenant
within ten (10) days from the happening of such damage,
can be repaired with reasonable diligence within one
hundred and twenty (120)
<PAGE>
-10-
days from the happening of such damage, then the rent
hereby reserved shall abate from the date of the
happening of such damage until the damage shall be made
good to the extent of enabling the Tenant to use and
re-occupy the demised premises in the opinion of an
architect designated by the Landlord, and the Landlord
shall repair the damage with all reasonable speed.
(c) If in the opinion of the Landlord the damage or
destruction can be made good as aforesaid within one
hundred and twenty (120) days of the happening of such
damage or destruction, and the damage is such that a
portion of the building upon the demised premises is
capable of being partially used for the purposes for
which it is hereby demised, then until such damage has
been repaired, the rent shall abate in the proportion
that the part of the portion of the building demised is
rendered unfit for occupancy bears to the whole of the
said building and the Landlord shall repair the damage
with all reasonable speed.
SEIZURE 9.00 PROVIDED AND IT IS HEREBY EXPRESSLY AGREED:
AND BANK-
RUPTCY
9.01 That in case, without the written consent of Landlord, the
demised premises shall become and remain vacant or not used for a
period of thirty (30) days while the same are suitable for use by the
Tenant, or be used by any other person than the Tenant, or in case the
term hereby granted or any of the goods and chattels of Tenant shall be
at any time seized or taken in execution or in attachment by any
creditor of Tenant or Tenant shall make any assignment for the benefit
of creditors or give any Bill of Sale without complying with The Bulk
Sales Act (Ontario) or become bankrupt or insolvent or take the benefit
of any Act now or hereafter in force for bankrupt or insolvent debtors
or any Order shall be made for the winding-up of Tenant, then in every
such case the then current month's rent and the next ensuing three (3)
months' rent shall immediately become due and payable, and, at the
option of the Landlord, this lease shall cease and determine and the
said term
<PAGE>
-11-
shall immediately become forfeited and void, in which event the
Landlord may re-enter and take possession of the demised premises as
though the Tenant or any occupant or occupants of the demised premises
was or were holding over after the expiration of the term without any
right whatsoever.
NO EX- 9.02 That notwithstanding the benefit of any present or future
CEPTIONS Statute taking away or limiting the Landlord's right of distress, none
FOR of the goods and chattels of the Tenant on the demised premises at any
DISTRESS time during the said term shall be exempt from levy by distress for
rent in arrears.
9.03 That the Landlord shall not in any event whatsoever be liable
or responsible for any personal injury or death that may be suffered or
sustained by the Tenant or any employee of the Tenant or any other
person who may be upon the demised premises or for any loss or damage
or injury to any property belonging to the Tenant or to its employees
or to any other person while such property is on the demised premises
and, in particular, (but without limiting the generality of the
foregoing) Landlord shall not be liable for any damage to any such
property caused by steam, water, rain or snow which may leak into,
issue or flow from any part of the said building or adjoining premises
or from the water, steam, sprinkler or drainage pipes or plumbing works
of the same or from any other place or quarter or for any damage caused
by or attributable to the condition or arrangement of any electrical or
other wiring or from any damage caused by anything done or omitted to
be done by any Tenant.
INDEM- 9.04 The Tenant will indemnify and save harmless the Landlord
NIFICAT- from any and all liabilities, fines, suits, claims, demands, costs and
ION OF actions of any kind or nature whatsoever to which the Landlord shall or
LAND- may become liable for, or suffer by reason of any breach, violation or
LORD non-performance by the Tenant of any covenant, term or provision
hereof, or by reason of any injury, loss, damage or death resulting
from occasioned to or suffered by any person or persons, or any
property by reason of any act, neglect or default on the part of the
Tenant, or any of its agents, customers, employees,
<PAGE>
-12-
servants, contractors, licensees or invitees, in or about the demised
premises or any part thereof; such indemnification in respect of any
such breach, violation, non-performance, damage to property, loss,
injury or death occurring during the term of this lease shall survive
any termination of this lease, anything in this lease to the contrary
notwithstanding.
HOLD- 9.05 That if the Tenant shall continue to occupy the demised
ING premises after the expiration of this lease, with or without the
OVER consent of the Landlord, and without any further written agreement, the
Tenant shall be a monthly Tenant at a monthly rental herein reserved
and otherwise on the terms and conditions herein set forth, except as
to length of tenancy.
OVER- 9.06 That the Tenant will not bring upon the demised premises or
LOAD- any part thereof or hang from the ceiling or walls any machinery,
ING equipment, article or thing that by reason of its weight, size or use
might damage the floor, roof or walls of the demised premises and that
if any damage is caused to the demised premises by any machinery,
equipment, article or thing or by overloading or by any act, neglect or
misuse on the part of the Tenant or any of its servants, agents or
employees or any person having business with the Tenant, the Tenant
will forthwith repair the same or pay to the Landlord the cost of
making good the same.
PAY- 9.07 That in the event of the Tenant failing to pay any taxes,
MENTS rates, insurance premiums or other charges, which it has herein
DEEMED covenanted to pay, or carry out any repairs, maintenance or
RENT replacements as it has herein covenanted to do, the Landlord may pay
or, as herein provided, perform the same, and shall be entitled to
charge the sums so paid or the cost of such performance to the Tenant
who shall pay them forthwith on demand; and Landlord, in addition to
any other rights, shall have the same remedies and make take the same
steps for the recovery of all such sums together with interest thereon
at prime plus four (4%) percent per annum, as it might have and take
for the recovery of rent in arrears under the terms of this lease; all
such payments required to be made under the terms of this lease shall
be deemed rent. In this lease "prime" shall mean the prime lending rate
by the Canadian Imperial Bank of Commerce, Main Branch Toronto,
adjusted on the first day of each month.
<PAGE>
-13-
REFUSE 9.08 That the Tenant will keep the demised premises and every part
thereof in a clean and tidy condition and will not permit waste paper,
garbage, ashes or waste or objectionable material to accumulate
thereon.
LOADING 9.09 That all loading and unloading of merchandise, supplies
& UN- materials, garbage and other chattels shall be effected only through or
LOADING by means of such doorways or corridors as the Landlord shall designate.
DEMISED 9.10 Whenever in this lease reference is made to the demised
PREMISES premises, it shall include all structures, improvements and erections
DEFINED in or upon the demised premises or any part thereof from time to time.
EVID- 9.11 The Tenant shall from time to time at the request of the
ENCE OF Landlord produce to the Landlord satisfactory evidence of the due
PAY- payment by the Tenant of all payments required to be made by the Tenant
MENTS under this lease.
BY
TENANT
ADJUST- 9.12 The taxes and local improvement rates in respect of the first
MENT and last years of the terms hereby demised shall be adjusted between
OF TAXES the Landlord and the Tenant.
WAIVER 10.00 The Tenant hereby expressly waives in favour of the Landlord,
and of the holder or holders of any mortgages of the demised premises
during the whole of the term hereby granted, and any and all extensions
thereof or holding over, the benefit of and right granted by Section 35
of The Landlord and Tenant Act, R.S.O. 1970, Chapter 236, and
amendments thereto, and any other and all future Acts of any competent
legislative body having jurisdiction herein permitting or which may
permit the Tenant to claim or effect any setoff in whole or in part of
any debt due to the Tenant from the Landlord against the rental
reserved hereby, except as is herein provided.
FIX- 11.00 PROVIDED that the Tenant may remove trade fixtures; provided
TURES further that the Tenant shall not remove or carry away from
<PAGE>
-14-
the said premises any building or any plumbing, heating or ventilating
plant or equipment or other building services.
RE- 12.00 PROVISO FOR RE-ENTRY by the said Landlord on non-payment of
ENTRY rent or non-performance of covenants.
The above powers may be exercised, whether legal demand for
the rent has been made or not. Provided that notwithstanding anything
hereinbefore contained, the Landlord's right of re-entry hereunder for
non-payment of rent, non-performance of covenants, seizure or
forfeiture of the said term shall become exercisable immediately upon
such default being made. Provided further, that upon such re-entry by
the Landlord under the terms of this paragraph, or any other provision
or provisions of this lease, the Landlord may in addition to any other
remedies to which the Landlord may be entitled, at its option, at any
time and from time to time re-let as agent for the Tenant the demised
premises or any part or parts thereof for the account of the Tenant or
otherwise and receive and collect the rents therefor, applying the same
first to the payment of such expenses as the Landlord may have incurred
in recovering possession of the demised premises including the legal
expenses and solicitor's fees and for putting the same into good order
or condition or preparing or altering the same for re-rental and all
other expenses, commissions and charges paid, assumed or incurred by
the Landlord in or about re-letting the premises and then to the
fulfillment of the covenants of the Tenant hereunder. Any such
re-letting herein provided for may be for the remainder of the term as
originally granted or for a longer or shorter period. In any such case
and whether or not the demised premises or any part thereof be re-let,
the Tenant shall pay to the Landlord the rental hereby reserved and all
other sums required to be paid by the Tenant up to the time of the
termination of this lease or of recovery of possession of the demised
premises by the Landlord, as the case may be, and thereafter the Tenant
covenants and agrees, if required by the Landlord, to pay to the
Landlord until the end of the term of this lease the equivalent of the
amount of all the rentals hereby reserved and all other sums required
to be paid by the Tenant hereunder, less
<PAGE>
-15-
the net avails of re-letting, if any, and the same shall be due and
payable by the Tenant to the Landlord on the days herein provided for
rental, that is to say, upon each of the days herein provided for the
payment of rental, the Tenant shall pay to the Landlord the amount of
the deficiency then existing.
NET 13.00 The Tenant acknowledges and agrees that it is intended that
LEASE this lease shall be a completely carefree net lease for the Landlord,
that the Landlord shall not be responsible during the term of the lease
for any costs, charges, expenses and outlays of every nature whatsoever
in respect of the lands, buildings or improvements on the whole or part
of the demised premises, or the contents thereof, excepting only the
Landlord's income tax in respect of income received from leasing the
demised premises, corporation taxes, and principal and interest
payments to be made in connection with any mortgage or mortgages placed
on the lands and premises by the Landlord and except as may be herein
specifically noted.
QUIET 14.00 The Landlord covenants with the Tenant for quiet enjoyment.
ENJOY-
MENT
INSPEC- 15.00 The Landlord, or any other person producing a written order
TION OF signed by the Landlord or its agents, shall have the right to enter the
PREM- leased premises at all reasonable times in a manner so as not to
ISES unreasonably interfere with the operations of the Tenant or any of its
subtenants for the purposes of:
(a) making any repairs to the leased premises and
performing any work therein that may be necessary by
reason of the Tenant's default under the terms of this
lease continuing beyond the applicable periods of
grace; and
(b) exhibiting the leased premises for the purpose of sale
or mortgage; and
(c) exhibiting the leased premises (within one year prior
to the expiration of the term of this lease) to
prospective Tenants.
<PAGE>
-16-
The Landlord shall have the right to erect a sign advertising
the premises for lease during the last six months of the term of the
lease.
REMOV- 16.00 PROVIDED that in case of removal by Tenant of the goods and
AL OF chattels of Tenant from off the premises, Landlord may follow the same
GOODS for thirty (30) days in the same manner as is provided for in the
Landlord and Tenant Act.
IMPROVE- 17.00 ANY BUILDING, erection or improvement placed or erected upon
MENTS the demised premises shall become a part thereof and shall not be
removed and shall be subject to all the provisions of this lease. No
building, erection or improvement shall be erected upon the demised
premises without the prior written consent of the Landlord.
ASSIGN- l8.00 LANDLORD DECLARES that it may assign its rights under this
MENT BY lease to any lending institution as security for a loan to Landlord and
LAND- in the event that such an assignment is given and executed by Landlord
LORD and notification thereof is given to Tenant by or on behalf of
Landlord, it is expressly agreed between Landlord and Tenant that this
lease shall not be cancelled or modified for any reason whatsoever
except as provided for, anticipated or permitted by the terms of this
lease or by law, without the consent of such Lending Institution.
TENANT COVENANTS AND AGREES WITH LANDLORD that it will, if and
whenever reasonably required by Landlord and at Landlord's expense,
consent to and become a party to any instrument relating to this lease
which may be required by or on behalf of any purchaser, bank or
mortgagee from time to time of the said premises; provided, always,
that the rights of the Tenant as hereinbefore set out be not altered or
varied by the terms of such instrument or documents.
LIMIT- 19.00 The term "Landlord" as used in this lease so far as covenants
ATION or obligations on the part of the Landlord are concerned, shall be
OF limited to mean and include only the owner or owners at the time in
LAND- question of the demised premises, and in the event of
LORD'S
LIABIL-
ITY
<PAGE>
-17-
any transfer or transfers of ownership, the Landlord herein named, and
in case of any subsequent transfers or conveyances, the then vendor or
transferor, shall be automatically freed and relieved from and after
the date of such transfer or conveyance, of all personal liability as
respect the performance of any covenants or obligations on the part of
the Landlord contained in this lease thereafter to be performed,
provided that:
(a) Any funds in the hands of such Landlord or the then
vendor or transferor at the time of such transfer, in
which the Tenant has an interest, shall be turned over
to the purchaser or transferred and any amount then due
and payable to the Tenant by the Landlord or the then
vendor or transferor under any provisions of this
lease, shall be paid to the Tenant; and
(b) Upon any such transfer, the purchaser or transferee
shall be deemed to have assumed, subject to the
limitations of this paragraph, all of the terms,
covenants and conditions in this lease contained to be
performed on the part of the landlord; it being
intended hereby that the covenants and obligations
contained in this lease on the part of the Landlord
shall, subject as aforesaid, be binding on the
Landlord, its successors and assigns, only during and
in respect of their respective successive periods of
ownership.
SIGNS 20.00 The Tenant shall have the right to erect a sign, logo or
trademark (the "sign") on the exterior and interior of the walls
located on the demised premises; provided that the Tenant shall only
erect a sign in accordance with any local and/or regional building
codes, by-laws or regulations; and provided that the Tenant shall have
obtained the prior written consent of the Landlord.
20.01 The Tenant agrees that the Tenant shall not erect a sign or
any other identification on the roof of the leased premises.
<PAGE>
-18-
The Tenant further agrees to submit to the Landlord detailed plans and
specifications of any proposed sign, prior to the Tenant acquiring such
sign.
LIENS 21.00 If any mechanics' or other liens or order for the payment of
money shall be filed against the leased premises by reason or arising
out of any labor or material furnished to the Tenant or to anyone
claiming through the Tenant, the Tenant shall, within fifteen (15) days
after notice to Tenant of the filing thereof, cause the same to be
discharged by bonding, deposit, payment, court order or otherwise. The
Tenant shall defend all suits to enforce such lien, or orders, whether
against Tenant or Landlord, at Tenant's sole expense. The Tenant hereby
indemnifies the Landlord against any expense or damage as a result of
such liens or orders.
WAIVERS 22.00 Any condoning, excusing or overlooking by the Landlord of any
CUMULAT- default, breach of non-observance by the Tenant at any time or times in
IVE respect of any covenant, proviso or condition herein contained or the
REMEDIES acceptance of any rent while any such default, breach or non-observance
ETC. exists shall not (any law, statutory or otherwise, to the contrary
notwithstanding) operate as a waiver of the Landlord's rights hereunder
in respect of any continuing or subsequent default, breach or
non-observance, nor so as to defeat or affect in any way the rights of
the Landlord hereunder in respect of any such continuing or subsequent
default, breach or non-observance and all rights and remedies herein
contained of the Landlord shall be deemed to be cumulative and not
alternative and the taking of any proceedings or step shall not
preclude the taking of any other proceeding or step.
INVALID- 23.00 If any term or provisions of this lease or the application
ITY OF thereof to any person or circumstances shall, to any extent, be invalid
PARTIC- or unenforceable, the remainder of this lease, or the application
ULAR of such term or provisions to persons or circumstances other than those
PROVIS- as to which it is held invalid or unenforceable, shall not be affected
IONS thereby and each term and provision of this lease shall be valid and
enforced to the fullest extent permitted by law.
<PAGE>
-19-
LANDLORD 24.00 If Tenant shall default in the performance of any of the
MAY CURE terms, covenants and conditions of this lease, Landlord may,
TENANT'S after thirty (30) days notice to Tenant specifying such default, or
DEFAULT without notice if in the reasonable exercise of Landlord's judgment an
emergency exists, but shall not be obligated to perform the same for
the account and at the expense (including reasonable counsel fees) of
Tenant and the amount of any payments made or expenses incurred by
Landlord for such purpose, with interest thereon at prime plus four
(4%) percent per annum, shall become due and payable by Tenant as
additional rent with the next or any subsequent installment of rent
which shall become due after such expenditure by Landlord; but any such
expenditure by Landlord shall not be deemed to waive or release
Tenant's default or the right of Landlord to take such action as may be
permissible under the terms of this lease in the event of such default.
When no emergency exists, the provisions of this paragraph 24.00 shall
be inapplicable if, within thirty (30) days after such notice by
Landlord, Tenant shall have cured such default or shall have commenced
and is diligently proceeding to cure same.
NOTICES 25.00 The Tenant shall, without charge, at any time and from
AND time to time, within ten (10) days after request by Landlord,
CERTIFI- certify by written instrument, duly executed, acknowledged and
CATES delivered to Landlord or any other person, firm or corporation
specified by Landlord:
(a) that this lease is unmodified and in full force and
effect, or, if there have been any modifications, that
the same is in full force and effect as modified and
stating the modification;
(b) whether or not there are then existing any setoffs or
defenses against the enforcement of any of the
agreements, terms, covenants or conditions of this
lease upon the part of the Tenant to be performed or
complied with and, if so, specifying the same; and
<PAGE>
-20-
(c) the dates, if any, to which the net rent, additional
rent and any other charges hereunder have been paid.
25.01 Any notice to be given by the provisions of this lease shall
be sufficiently given if served personally or if mailed, postage
prepaid, at any one of Her Majesty's Post Offices in the Province of
Ontario in a registered letter addressed:
(a) in the case of a notice to the Landlord, to it at 1867
Yonge Street, Suite 1100, Toronto, Ontario, M4S lY5,
attention President - Bramalea Limited with a copy to
Bramalea Limited, Industrial Division;
(b) in the case of a notice to the Tenant, to it at the
demised premises.
Any notice so mailed shall be held conclusively to have been
given 24 hours after such mailing.
Either party may from time to time by notice to the other
change the address to which notices are to be given, such change of
address to be effective only upon the written acknowledgment of the
other party of receipt thereof.
In the event of a publicized disruption of postal service, all
notices required hereunder shall be made by personal service.
SURREN- 26.00 The Tenant, upon termination of this lease shall peaceably and
DER OF quietly surrender the leased premises and any improvements thereon in
PREMISES good order, repair and condition.
MISCELL- 27.00 In addition to the specific obligations elsewhere in this
ANEIOUS lease reserved and contained on the part of the Tenant to be observed
and performed, and without in any limiting the generality thereof, the
condition, maintenance, operation and management of the demised
premises, the buildings, appurtenances thereto and other improvements
from time to time thereon and all machinery, equipment and other
facilities therein or thereon shall be the
<PAGE>
-21-
sole responsibility of the Tenant throughout the term thereof and the
Tenant shall make all payments, foreseen, unforeseen, ordinary and/or
extraordinary, required to be made only with respect to the observance
and performance of specific obligations but also with respect to the
general obligation in this clause contained.
27.01 Any payment required to be made by any provision of this lease
shall be made in lawful money of Canada.
27.02 The Tenant acknowledges the leased premises are subject to all
local ordinances and building restrictions as the same may affect the
demised premises. Tenant accepts the Landlord's title to the demised
premises and further accepts the demised premises in their present
condition.
27.03 This lease contains the entire agreement between the parties
and shall not be modified in any manner except by an instrument in
writing executed by the parties.
27.04 The marginal notes contained in this lease are for convenience
and references only and in no way define, limit or describe the scope
or intent of this lease nor in any way affect this lease.
27.05 Words importing the singular number only shall include the
plural and vice-versa, and words importing the masculine gender shall
include the feminine gender and words importing persons shall include
firms and corporations and vice-versa.
27.06 This Indenture and everything herein contained shall extend to
and bind and enure to the benefit of the respective heirs, executors,
administrators, successors and assigns (as the case may be) of each and
every of the parties hereto, subject to the consent of the Landlord
being obtained, as hereinbefore provided, to any assignment or
sub-lease by Tenant. All rights and powers reserved to Landlord may be
exercised by either Landlord or its agents or representatives.
<PAGE>
-22-
27.07 The Tenant shall not assign or sublet, nor agree to assign or
sublet, nor accept an offer to assign or sublet (other than to a
subsidiary or associated corporation within the meaning of The Income
Tax Act of Canada) a portion(s) of the demised premises containing in
the aggregate greater than eighty-four (84%) per cent of the rentable
area of the demised premises, until the Tenant has first delivered a
copy of the proposed assignment or sub-letting agreement to the
Landlord (the "Notice") and the Landlord shall, for a period of thirty
(30) days following receipt of the Notice, have the option to terminate
this lease by notice in writing to the Tenant on a date set by the
Landlord not to exceed sixty (60) days after the date of the Notice.
Failure by the Landlord to exercise the termination provisions herein
contained shall not affect nor alter the covenants or conditions of
this lease nor relieve the Tenant of any of its obligations or
responsibilities hereunder including, without limiting the generality
of the foregoing, the obtaining of the Landlord's consent pursuant to
paragraph 7.13 hereof, and the delivery of a subsequent Notice if the
proposal contained in the original Notice is not completed.
27.08 The provisions of this lease are subject to compliance with
The Planning Act, R.S.O. 1970, c. 349 as amended.
SUBORDI- 28.00 Provided that at the request of the Landlord, this lease and
NATION everything herein contained shall be deemed to be subordinate to any
charge or charges from time to time created by the Landlord with
respect to the demised premises, by way of mortgage, and the Tenant
hereby covenants and agrees that it will promptly, at any time and from
time to time, as required by the Landlord, during the term hereof,
execute all documents and give all further assurances to this proviso
as may be reasonably required to effect the postponement of its rights
and privileges hereunder to the holder or holders of such charge or
charges.
29.00 The Tenant covenants and agrees with the Landlord that it will
as and whenever reasonably required by the Landlord, certify or
acknowledge to any purchaser, bank or mortgagee as to the status
<PAGE>
-23-
and validity of its lease and the status of the rentals and the
Tenant's account herein.
30.00 With respect to realty taxes and rates payable by the Tenant
pursuant to paragraph 7.02 above, the Landlord shall estimate the
amount sufficient to pay the said taxes for the remainder of the
calendar year falling within the first year of the term hereby granted,
and the Tenant shall pay, monthly, a sum equal to the proportion of
such estimated amount divided by the number of months remaining in the
calendar year. Thereafter, the Landlord shall reasonably estimate the
amount of taxes which will become payable in each subsequent calendar
year, and during such calendar year, the Tenant shall pay, monthly, and
in addition to any other sum otherwise payable hereby, an amount on
account of taxes which shall be equal to one-ninth (1/9) of the
estimated annual taxes, which sum shall be payable on the rental
payment date in each of January to September (both inclusive). In the
event that the actual taxes for the calendar year are greater than or
less than the amount estimated by the Landlord as aforesaid, the Tenant
shall either pay on demand by the Landlord, or to be credited with
respect to the difference accordingly.
REGIS- 31.00 The Tenant covenants that it will not register nor cause to be
TRATION registered the within lease against the registered title of the lands
more particularly described in Schedule "A" hereto. It is understood,
however, that in the event either Landlord or Tenant shall require
notice of such lease to be registered, then such notice shall be
prepared and registered at the expense of the party requesting same and
in accordance with the regulations governing such Notice of Lease as
may appear from time to time under the provisions of The Registry Act,
R.S.O. 1970 and amendments together with regulations and both
parties agree to execute such Notice of Lease upon request.
<PAGE>
-24-
32.00 The Landlord and Tenant acknowledge that the lands and
premises outlined in red on Schedule "A" annexed hereto (the "Transport
Premises") are leased to Transport International Pool of Canada Limited
("Transport") for a term commencing May 1st, 1980, and that there shall
be maintained by Transport a driveway over that area shown hatched in
green on Schedule "A" (the "Driveway") and that the Driveway shall be
available for common use by the Tenant and Transport, and their
respective employees, servants, agents, licensees or invitees provided
neither the Tenant nor Transport shall restrict or impede the right of
the other to utilize the Driveway; and provided that a twenty foot
(20') strip west of the Driveway, as shown shaded yellow on Schedule
"A" annexed hereto shall be available to the Tenant, its employees,
servants, agents, licensees or invitees for parking purposes. If
required the Landlord shall use its best efforts to co-ordinate
Driveway usage as herein provided.
32.01 The Tenant shall have to option to renew this lease upon the
following terms and conditions:
(a) Provided the Tenant has duly paid, the rent, and has
regularly performed all the covenants herein contained,
the Landlord shall, not later than ten (10) months
prior to the expiry of the original term of this lease,
advise the Tenant in writing of the rental rate for a
renewal term of five (5) years.
(b) Not later than nine (9) months prior to the expiry of
the original term of this lease, the Tenant shall
advise the Landlord in writing of whether or not it
desires to exercise its option to extend the term of
this lease for a further period of five (5) years upon
the terms and conditions as are contained in this lease
(except as to further right of renewal) and at the
rental rate stipulated by the Landlord to sub-paragraph
(a) above.
<PAGE>
-25-
32.02 In consideration of the execution of this lease by the Tenant,
the Landlord covenants and agrees:
(a) To assure that ample electric power will be available
to handle the proposed baseboard heaters.
(b) To modify the existing heating and cooling system at
its expense, and which modifications include:
(i) installing a ceiling diffuser pattern and
connecting ducts directly from the ductwork to the
diffusers. (This will allow the air flow to be
controlled).
(ii) installing a 5 ton 575 volt/3/60 roof-top air
conditioner with 150 MBH of heat, as well as a
ductwork distribution system with diffusers and
grilles. (This unit will serve the northerly
portion of the offices north of the foyer).
(iii) repairing and adjusting the multi-zone unit, to
assure proper cycling of the zones, and hot and
cold decks.
(iv) supplying and installing 11 additional electric
baseboards below the large glazed areas to protect
against down drafts. (This will require a new
distribution panel in the offices, wired from the
main splitter).
<PAGE>
-26-
(v) guaranteeing the complete systems, including the
existing multi-zone unit for one year. These
systems when completed will maintain design
conditions as follows:
Summer 75 deg. F. indoors at 87 deg. F. outdoors
Winter 70 deg. F. indoors at -5 deg. F. outdoors
this work to be all inclusive, including roofing
and bases and wiring.
(c) To undertake a further $9,250.00 of improvements to the
building (repainting and other cosmetic applications)
as requested by the Tenant.
33.00 The Landlord and Tenant expressly acknowledge and agree that
the terms of the Original Lease shall govern the parties to and
including April 30th, 1980, and thereafter this lease shall govern; and
accordingly, and without limiting the generality of the foregoing as of
and from May lst, 1980, the rights of occupation in favour of the
Tenant shall be restricted to the demised premises (and the Driveway
and additional parking area as herein provided) and shall not extend to
the Transport premises.
IN WITNESS WHEREOF the parties have hereunto set their hands
and seals.
DUCON-MIKROPUL LIMITED
Per: Illegible
---------------------
---------------------
BRAMALEA LIMITED
Per: Illegible
---------------------
Vice President
---------------------
Vice President
<PAGE>
LEASE AMENDING AGREEMENT
THIS AGREEMENT made as of the 11th day of April, 1991.
IN PURSUANCE of the Short Forms of Leases Act.
BETWEEN OR AMONGST:
BRAMALEA LIMITED
(hereinafter called the "Landlord")
OF THE FIRST PART
- and -
HOSOKAWA MICRON LIMITED, formerly
named MIKROPUL LIMITED, and previously
NAMED DUCON-MIKROPUL LIMITED
(hereinafter called the "Tenant")
OF THE SECOND PART
WHEREAS:
1. The Landlord and Tenant entered into a lease dated as of April 3, l980,
respecting approximately 18,496 sq. ft. in the building municipally known as
1940 Steeles Avenue East, Brampton, Ontario, as more particularly described
therein, as amended by amending agreements dated as of May 1, 1986 and December
5, 1988, (the "Lease").
2. The Tenant has requested to extend the Lease term for ten (10) additional
years from May 1, 1991 to April 30, 2001, and the Landlord and the Tenant have
agreed upon the rental amounts and other terms respecting such extension,
including without limitation, the termination of the existing renewal option,
and the granting of an option to purchase upon the terms set out herein.
NOW THEREFORE WITNESSETH in consideration of the rents, covenants and
agreements hereinafter reserved and contained on the part of the Tenant to be
paid, observed and performed, and in consideration of the sum of $10.00 of
lawful money of Canada now paid by each of the parties to each of the other
parties herein (the receipt and sufficiency whereof are hereby acknowledged),
and in consideration of other good and valuable consideration (the receipt and
sufficiency whereof are hereby acknowledged), the parties agree as follows:
1. INCORPORATION BY REFERENCE
Except as otherwise expressly provided in this agreement the capitalized
terms used herein shall have the meanings attributed to them in the Lease.
<PAGE>
-2-
2. EXTENSION OF TERM
The parties hereby confirm that the term has been extended for ten (10)
additional years from May 1, 1991 to April 30, 2001 (such period being referred
to herein as the Extended Term).
3. BASIC RENT DURING THE EXTENDED TERM
(a) During the first, second and third years of the Extended Term, the
Tenant hereby covenants to pay without any abatement or deduction
for any reason whatsoever the sum of Ninety-Four Thousand Three
Hundred and Twenty-Nine Dollars and Sixty Cents ($94,329.60) per
annum in equal consecutive monthly installments of Seven Thousand,
Eight Hundred and Sixty Dollars and Eighty Cents ($7,860.80) each on
the first day of each and every month during such period, together
with additional rent herein reserved.
(b) During the fourth and fifth years of the Extended Term, the Tenant
hereby covenants to pay without any abatement or deduction for any
reason whatsoever the sums of One Hundred and Seven Thousand, Two
Hundred and Seventy-Six Dollars and Eighty Cents ($107,276.80) per
annum in equal consecutive monthly installments of Eight
Thousand, Nine Hundred and Thirty-Nine Dollars and
Seventy-Three cents ($8,939.73) each on the first day of each and
every month during such period, together with additional rent
herein reserved.
(c) During the sixth, seventh and eighth years of the Extended Term, the
Tenant hereby covenants to pay without any abatement or deduction
for any reason whatsoever the sum of One Hundred and Sixteen
Thousand, Five Hundred and Twenty-Four Dollars and Eighty Cents
($116,524.80) per annum in equal consecutive monthly installments of
Nine Thousand, Seven Hundred and Ten Dollars and Forty Cents
($9,710.40) each on the first day of each and every month during
such period, together with additional rent herein reserved.
(d) During the ninth and tenth years of the Extended Term, the Tenant
hereby covenants to pay without any abatement or deduction for any
reason whatsoever the sum of One Hundred and Thirty-Three Thousand,
One Hundred and Seventy-One Dollars and Twenty Cents ($133,171.20)
per annum in equal consecutive monthly installments of Eleven
Thousand, and Ninety-Seven Dollars and Sixty Cents ($11,097.60) each
on the first day of each and every month during such period,
together with additional rent herein reserved.
<PAGE>
-3-
4. WAIVER OR OPTION TO RENEW
The Tenant hereby expressly waives its option to renew set out in
paragraph 2 of the December 5, 1988 Amending Agreement, which option to renew
shall be of no further force or effect.
5. APPLICABLE TERMS AND CONDITIONS APPLYING TO LEASE
(a) During the period from May 1, 1991 to April 30, 1996 of the Extended
Term, except as herein amended the terms and conditions of the Lease
shall continue in full and effect.
(b) During the period from May 1, 1996 to April 30, 2001 of the Extended
Term, and any overholding or negotiated extension after such date,
the demised premises shall be governed by the Landlord's present
standard lease form terms and conditions, a copy of which is
attached as Schedule "C" hereto (the "Lease Form") and the Landlord
shall deliver to the Tenant, at least thirty (30) days prior to May
1, 1996, a restated lease, containing the terms and conditions of
the Lease Form, together with the Basic Rent amounts as set out
herein, and the Tenant agrees to execute same within fifteen (15)
days of delivery by the Landlord to the Tenant.
6. OPTION TO PURCHASE
(a) The Landlord as Vendor hereby grants to the Tenant as Purchaser a
personal, non-assignable, irrevocable option to purchase the demised
premises (sometimes referred to herein as the "Real Property") as
described in Schedule "A" annexed hereto and as outlined in red on
Schedule "B" annexed hereto, exercisable at any time between May 1,
1995 and February 1, 1996 (after which time this option shall
expire), provided that this Lease is then in existence and the
Tenant is not then in default hereunder, for the Purchase Price (as
defined in subparagraph (b) herein).
(b) "Purchase Price" means the aggregate of:
(i) $2,980,000.00; and
(ii) The amount, if any, up to a maximum of $25,000.00 required to
be paid by the Landlord as Vendor to any then existing
mortgagee of the Real Property in the nature of a prepayment
penalty, bonus or fee (the "Penalty") in order to obtain a
discharge of such mortgage on the closing date. The Landlord
covenants and agrees to pay the amount of the Penalty which is
in excess of $25,000.00.
<PAGE>
-4-
(c) This option is exercisable by notice in writing to the Landlord,
such notice to be given in accordance with the terms of the Lease.
(d) Upon exercise of the option, there shall be paid to the Landlord's
solicitors, Borden & Elliot, to be held in trust as a deposit the
sum of $100,000.00 which sum shall be applied to the Purchase Price
and held by the Landlord pending completion of the sale or other
termination of the Agreement arising from the exercise of the
option. The deposit as aforesaid shall be placed in an interest
bearing account or certificate of deposit (whichever bears the
highest interest rate) with all interest being for the account of
the Tenant. In the event that the Landlord and Tenant do not agree
in writing respecting the disbursement of the deposit, and any
interest thereon, the Landlord's solicitors shall retain the
deposit, and any interest thereon, in escrow until the Landlord and
the Tenant have agreed in writing as to disbursement thereof, or
until a trial adjudication of the issue by a court of competent
jurisdiction. Notwithstanding the foregoing the Landlord's
solicitors may pay the deposit, and any interest thereon, into court
or other secured depositary and shall thereafter be relieved of all
liabilities. Each of the parties hereby releases the Landlord's
solicitors from all liabilities whatsoever with respect to the
deposit, and any interest thereon, save and except for the gross
negligence or wilful misconduct of the Landlord's solicitors in that
regard, and hereby agree not to institute against or join the
Landlord's solicitors in any legal proceedings, and to indemnify and
hold the Landlord's solicitors harmless from any costs, losses or
damages whatsoever in relation thereto.
(e) The balance of the Purchase Price shall be paid to the Landlord as
Vendor by cash or certified cheque on date of closing subject to
usual adjustments.
(f) The sale shall be completed on April 30, 1996, unless on such day
the appropriate Land Titles Office or Registry Office is closed, in
which case the sale shall be completed on the next following day
when such office is open.
(g) The Landlord shall deliver to the Tenant an up-to-date location
survey of the Real Property showing the current location of all
buildings thereon within ten (10) days of exercise of the option.
The Tenant as Purchaser shall not call for the production of any
title deed, abstract of title, sketch or other evidence of title,
except such as are in Landlord's possession or under its control.
The Tenant as Purchaser shall be allowed forty-five (45) days from
the date of exercise of the option herein to examine its own expense
title to the Real Property and to satisfy itself that there are no
outstanding active files, deficiency notices or work orders
affecting the Real Property, that its present use may be lawfully
continued and that the buildings thereon may be insured against risk
of fire. The Landlord hereby consents to the municipality releasing
to the Purchaser details of all
<PAGE>
-5-
outstanding active files, work orders or deficiencies affecting the
Real Property and agrees to execute and deliver to the Tenant such
further authorizations as the Tenant may reasonably require,
provided that no inspections shall be authorized or made.
(h) The Tenant as Purchaser agrees to accept title to the Real Property
subject to minor all rights and easements, if any, registered
against title for the supply and installation of telephone services,
electricity, gas, sewers, water, and other related services;
provided that title to the Real Property is otherwise good and free
of all easements, liens and encumbrances (and the Landlord covenants
to so discharge on or before closing) except:
(i) as herein expressly provided;
(ii) any registered restrictions, conditions or covenants that run
with the land; provided that such have been complied with;
(iii) any existing municipal agreements, including subdivision
agreement, development agreement and site plan, provided that
such have been complied with and the municipality states there
is satisfactory security to ensure future compliance.
(i) If the Tenant shall furnish the Landlord in writing with any valid
objection to title or to any outstanding active file, deficiency
notice or work order or to the fact that the present use may not
lawfully be continued or that the buildings located on the Real
Property may not be insured against risk of fire which the Landlord
shall be unable to remove, remedy or satisfy and which Tenant will
not waive. the Agreement resulting from the exercise of the option,
notwithstanding any intervening acts or negotiations in respect of
such objections, shall be null and void and all deposit monies paid
by the Tenant as Purchaser hereunder shall be immediately refunded
with interest and without deduction and the parties shall have no
further liability to each other with respect to the purchase
transaction, but the Lease shall remain in full force and effect.
Save as to any valid objections so made within such time and except
for any objection going to the root of the title, the Tenant as
Purchaser shall be conclusively deemed to have accepted the title of
the Landlord to the Real Property.
(j) The parties acknowledge that since the Lease is net to the Landlord,
there are no adjustments on closing.
(k) The Building shall be and remain at the risk of Landlord as Vendor
until completion. Pending completion the Landlord shall hold all
insurance policies, if any, and the proceeds thereof in trust for
the parties as their interest may appear pursuant to the Lease and
the agreement of purchase and sale arising from the exercise of the
option and in the event of
<PAGE>
-6-
substantial damage. Tenant as Purchaser may, once the amount of the
proceeds of insurance is established, either terminate this
Agreement of Purchase and sale and have the deposit returned with
interest and without deduction, and pursue its elections pursuant to
the Lease, or else take the proceeds of any insurance and complete
the purchase.
(l) On completion of the sale transaction, the Landlord as Vendor shall
deliver a Statutory Declaration by an officer of the Landlord that
it is not then a non-resident of Canada with the meaning of the
Income Tax Act, a Declaration of a Senior Officer of the Landlord as
to the Landlord's possession of the Real Property in a form
acceptable to the Tenant's solicitors, acting reasonably, an
undertaking to readjust any error or omission in the Statement of
Adjustments and such further documents and assurances as the
Tenant's solicitor may reasonably require to complete the purchase
of the Real Property. The transfer shall, save for the Land Transfer
Tax Affidavit, be prepared in registrable form at the expense of the
Landlord as Vendor. The Transfer/Deed shall be prepared in
registrable form at the expense of the Landlord and if requested by
the Tenant the Landlord covenants that the Transfer/Deed shall
contain the statements contemplated by clauses 49(21a)(a) and (b) of
the Planning Act.
(m) Any tender of documents or money hereunder may be made upon the
Landlord as Vendor or Tenant as Purchaser or any solicitor acting
for either party and any money may be tendered by negotiable cheque
certified by a chartered bank or Province of Ontario Savings Office.
(n) Notwithstanding anything elsewhere herein contained the option shall
expire upon the valid determination or the herein Lease.
(o) The Tenant as Purchaser is registered under Subdivision d of
Division V of Part IX of the Excise Tax Act (Canada) ("ETA") for the
collection and remittance of the goods and services tax ("GST") and
the registration number for the Tenant is No. 1O2399417. The Tenant
will remit directly to the Receiver General of Canada the GST
payable and file the prescribed form GST 60 pursuant to Subsection
228 (4) of the ETA in connection with the sale and conveyance of the
Real Property. The Real Property being transferred on the closing
resulting from the purchase by the Tenant is being purchased by the
Tenant as principal for its own account and is not being purchased
by the Tenant as agent, trustee or otherwise on behalf of or for
another person and does not constitute a supply of a residential
complex made to an individual for the purposes of paragraph
221(2)(b) of the ETA. The Tenant shall indemnify and save harmless
the Landlord from any GST, penalty, interest or other amounts which
may be payable by or assessed against the Landlord, as Vendor, under
the ETA as a result of or in connection with the Landlord's failure,
as Vendor to collect and remit any GST applicable on the sale and
conveyance of the Real Property herein.
<PAGE>
SCHEDULE A
ALL and SINGULAR that certain parcel or tract of land and premises,
situate, lying and being the City of Brampton in the Regional
Municipality of Peel being composed of Part of Block G, Registered
Plan 720 City of Brampton.
<PAGE>
PLAN
OF SURVEY OF
CK G REGISTERED PLAN No. 720
TOWNSHIP OF CHINGUACOUSY
COUNTY OF PEEL
<PAGE>
-7-
(p) In the event that the Tenant has a bona fide intention to exercise
the option to purchase herein, prior to exercise of such option to
purchase (but not thereafter) in order to satisfy itself with
respect to the environmental status of the Real Property, the
Tenant shall be entitled to conduct such environmental testing as
the Tenant reasonably requires, subject to the prior written
approval of the Landlord, acting reasonably, provided that such
testing does not interfere with the activities of other tenants at
the Real Property, and provided that such testing shall be at the
sole risk and expense of the Tenant, and the Tenant shall make good
any damage.
7. Effective Date
The provisions of this agreement shall come into force and have effect
from the date of execution hereof.
IN WITNESS WHEREOF the parties hereto have executed this Agreement.
BRAMALEA LIMITED
PER: /s/ BUBBA MARRIOTT
----------------------------------
Bubba Marriot, VICE PRESIDENT
Per: /s/ DAVID MURRAY
----------------------------------
David Murray
Vice-President
HOSOKAWA MICRON LIMITIED
Per:[Illegible]
----------------------------------
Per:[Illegible]
----------------------------------
**
(q) The Agreement of Purchase and Sale arising from the exercise of the Option
contained herein shall be effective to create an interest in the real
property only if the applicable Land Division provisions of the Planning
Act are complied with, and the Landlord agrees, at its expense, to comply
with such provisions and to proceed diligently with the application for
such compliance.
LEASE CONTRACT
Kreuter GmbH, Hamburg
(named in the future as Verwaltungsgesellschaft Kreuter mbH),
represented by Mrs. Gramlow-Kreuter
Landlord
and
VEM Einunddreissigste Vermogensverwaltungsgesellschaft mbH,
(named in the future as Kreuter GmbH),
Tenant
agree on the following leasing contract:
ss. 1 Leasing Object
1. The landlord is the owner of the land in Hamburg-Langenhorn, Essener
Stra(beta)e 104-108, having 6,284 qm, of which approx. 3,625 qm are used for
buildings.
2. The existing buildings are made up of approx. 480 qm offices
approx. 170 qm wash rooms, changing rooms, toilets
approx. 320 qm canteen, filing rooms
approx. 660 qm production hall (old)
approx. 2,520 qm production halls (new)
approx. 470 qm basement (storage)
3. The buildings and their present condition is known to the Tenant.
4. The elevator, the heating system, ventilation, air condition, light system
and all other installations for water- and electricity supply are properties
of the Landlord. The telephone- and telex system is leased by the Landlord
and is made available to the Tenant.
ss. 2 Purpose of the Contract
1. The leased object is used for machine manufacturing and trading. The lease
object can only be used for these purposes.
2. All business purpose changes need to be approved and confirmed in writing by
the Landlord. Only important reasons allow the Landlord to refuse such
changes in the business purpose. The same applies to a sublease of the lease
object, in total or in part.
ss. 3 Duration of the Lease
<PAGE>
1. The lease begins with the signature of both parties of the company purchase
contract which due for signing together with this contract.
2. The lease ends 3 years after its start.
3. The Landlord offers five times a prolongation of the lease contract for one
year. The Tenant has to declare the acceptance of each option at least
twelve months prior to the end of a leasing period. This acceptance must be
made in writing.
ss. 4 Lease
1. The yearly lease for the whole lease object for the first three years
amounts to
DEM 270,000.00 p.a.
(in words: twohundredseventythousand German Marks)
plus valid value added tax.
2. In addition the Tenant pays running costs according to the rules of the
valid Calculation Ruling II, Appendix 3, ss.27,Sub 1. The Tenant makes
appropriate advance payments to cover the running costs. Both parties agree
that the Tenant is responsible for the payment of the additional costs.
Insurance compensations for damages to the leased object are to be
transferred to the Landlord.
3. The Landlord submits a statement for all running costs on a yearly basis
deducting the received advance payments. The advance payments are to be
adjusted yearly.
4. The lease and the running costs are to be paid monthly and in advance. The
latest on the 3rd working day of the month to an account to be named by the
Landlord.
ss. 5 Changes to the Lease Rate
1. The lease is valid for three years according to ss. 4, Sub 1.
2. For each prolongation period the lease will be adjusted comparing other
appropriate market leases. If the two parties do not reach an agreement
within eight weeks after the start of the lease negotiations, one or both
parties can call an arbitrator of the Chamber of Commerce of Hamburg in
order to determine an appropriate lease rate. Both parties will accept the
arbitrators lease proposal. Each party will bear 50% of the arbitrators
costs.
ss. 6 Not applicable
ss. 7 Not applicable
ss. 8 Heating System
The Tenant operates the heating system (ss. 1) at his own costs.
2
<PAGE>
ss. 9 Liability Limitations
1. The Landlord is not liable for expenses in relation to the possible switch
from city gas to natural gas. He is also not liable for eventual changes in
the electric system or in the water system.
ss. 10 Claims after the Lease ends
The lease object was taken over by the Tenant in a condition asking for
renovations and may be returned in such a condition. The lease object has to be
returned cleaned of all production machines, accessories, means of production
and waste. This does not apply for objects, which were in the lease object when
taking it over. However, the Tenant has to remove all objects he purchased from
the Landlord. Damages to the buildings must be fixed. Changes according ss. 11,
Sub 2 must only by restored when the construction substance is not touched. The
Landlord, on the other side, is not liable for such expenses unless agreed in
writing. The Tenant is allowed to remove objects during the lease period,
however, the conditions at the start of the lease must be reestablished.
ss. 11 Expansion, Maintenance and Usage of the Leased Objects
1. The Landlord is authorized to update the leased objects. However, only to
the extend that the continuation of the day-to-day business of the Tenant is
not negatively influenced. The Landlord has to announce such activities at
least two months before the start of the work and obtain the acceptance of
the Tenant. The Tenant can refuse his acceptance within four weeks after he
has received the announcement if he expects that the influence on his
day-to-day business is too big.
2. The Tenant is authorized to update or change the leased objects at his own
expense. The Tenant has to announce such activities at least eight weeks
months before the start of the work. The Landlord can only refuse the
acceptance when he expects substantial negative impact on his property. The
acceptance is considered granted when the Landlord has not objected in
writing within four weeks after the receipt of the request.
3. It exists need of maintenance work to the leased objects. The constructive
maintenance is the Landlords responsibility. The Tenant is responsible for
the non-constructive maintenance, especially the execution of cosmetic
changes to the leased objects. However, the Tenant is only obliged to do so
when otherwise damages to the leased objects would occur. The Tenant has to
replace broken windows at his own expense.
4. The Tenant is responsible for all culpable caused damages to the lease
objects. It is not relevant whether these damages may have been caused by
employees, subtenants, visitors, suppliers or craftsmen.
5. The Tenant is obliged to follow all regulations in connection with
environmental controls. The Landlord can request the immediate removal of
all such polluting conditions. The Tenant is obliged to release the Landlord
3
<PAGE>
from all obligations in connection with offenses against environmental
matters.
ss. 12 Not applicable
ss. 13 Access of the Landlord to the Leased Objects
Upon suitable notice and during the normal work hours the Landlord or his
representatives are allowed to enter the leased objects.
ss. 14 Installation of Machines, Storing of Goods, Parking of Vehicles
Prior to the installation of machines the Tenant has to observe the maximum
weight allowed per floor. The Tenant is responsible for damages resulting from
not meeting such requirements.
ss. 15 Unpaid Lease, Offsets, Reductions
1. The Landlord has the right to cancel the lease contract without observing
the notice period when the Tenant has not paid the lease in total or in part
for two months (ss. 554 BGB). The running costs and other expenses due by
the Tenant are considered lease costs (ss. 554 BGB).
2. To offset expenses against the lease rate are allowed when the receivable
coincides withss.538 BGB or when both parties agree.
ss. 16 Signs, Selling Machines, Sunblinds
1. The Tenant is authorized to setup company signs.
2. In other cases the Tenant is not authorized, without written approval of the
Landlord, to install/attach displays, selling machines, advertising signs,
on the outside walls or on the roof of the house. The authorization can only
be refused for important reasons. Approvals from third party authorities are
to be obtained by the Tenant. He bears all related costs.
3. The Tenant is responsible that all signs, sunblinds, etc., are securely and
according to the rules installed. All related costs are born by the Tenant.
Upon termination of the lease or upon justified withdrawal of the
authorization, the previous conditions have to be restored at the expense of
the Tenant.
ss. 17 Road Cleaning
1. The Tenant is responsible to clean the roads in accordance with the law and
he to release the Landlord from all obligations. The Tenant purchases
cleaning material at his own expense.
2. When icy conditions occur, the streets and open spaces have to be treated.
It is not allowed to use salt or salt containing means. Snow has to be
removed immediately. Ice has to be removed. In case the snow falls or icy
conditions
4
<PAGE>
occur after 8 p.m., the removal has to take place on 8.30 a.m. the next day,
or 9.30 a.m. on Sundays or Holidays. All water channels have to be kept
clean that the melting water can flow unhindered.
Hamburg, February 2, 1996
<PAGE>
[GRAPHIC LOGO OMITTED] HOSOKAWA KREUTER GmbH
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Addendum No. 1
to the Lease
between
Verwaltungsgesellschaft Kreuter mbH (formerly Kreuter GmbH), represented by Mrs.
Gramlow-Kreuter
- Landlord -
and
Hosokawa Kreuter GmbH) (formerly Kreuter GmbH, formerly VEM Einunddreissigste
Vermogensverwaltungsgesellschaft mbH)
- Tenant -
dated 16th February 1996, Annex 1. Annex 1 is attached to this document simply
for evidential purposes.
The Tenant intends to use the Leased Object in accordance with ss. 1 of the
Lease for a longer period of time. For this purpose, however, considerable
investment for renovation, maintenance measures and modernization of the Leased
Objects specified in ss. 1 of the Lease (hereinafter referred to as "Measures")
is necessary. The parties estimate the relevant investments DM 735,000.-- net,
which costs are
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<PAGE>
[GRAPHIC LOGO OMITTED] HOSOKAWA KREUTER GmbH
================================================================================
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to borne by the Landlord. Since the Landlord, for financial reasons, is not at
the present time in a position to finance the Measures, the parties agree to the
following, whilst maintaining the provisions of the Lease dated 16.02.1996, to
the extent that the same are not amended by this Addendum or become invalid:
1. The Landlord undertakes to assume the costs for the Measures for the
renovation, maintenance and modernization of the Leased Object in the
amount of the estimated figure of approx. DM 735,000.-- net (in words:
seven hundred and thirty-five thousand German marks). This figure is broken
down as follows:
a) approx. DM 410,000.-- net (in words: four hundred and ten thousand
German marks) for immediate Measures;
b) approx. DM 257,000.-- net (in words: two hundred and fifty-seven
thousand German marks) for short-term Measures;
c) approx. DM 68,000.-- net (in words: sixty eight thousand German marks)
for further Measures necessary in the medium term.
The individual Measures to be carried out are set out in detail in Annex 2,
together with their estimated cost. Any substantial deviations herefrom are
to be agreed to between the parties. Should the amounts set out under
Clause 1, paras. a) and b) not be entirely exhausted, the sums remaining
shall be used for Measures under Clause 1, paras. b) or c).
2. The Tenant is entitled to instruct third parties with the performance of
all the Measures in accordance with Clause 1 in its own name and for its
own account, without being obliged to do so. The costs of all work carried
out shall be borne by the Landlord.
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<PAGE>
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================================================================================
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3. The Tenant shall settle accounts with the Landlord with respect to the
costs incurred by it shortly afterwards and shall submit proofs of
expenditure to the Landlord. The Landlord shall settle the sums invoiced as
follows:
a) The amounts invoiced shall initially be deferred for payment until
28th February 1999.
b) As of 1st March 1999, the Landlord shall make the Tenant monthly
repayments by the 3rd working day of each month to the amount of DM
10,000.-- (in words: ten thousand German marks) net plus the statutory
value added tax at the rate valid at that time. This amount will be
set off against the rent payable monthly in advance under ss. 4 (1)
and (4) of the Lease until full repayment has been made of the claims
of the Tenant as against the Landlord under Clauses 1, 2 and 3,
sentence 1 of this Addendum.
c) The Landlord shall not be liable to pay interest for deferred payment.
4. In deviation from ss. 5 (2) of the Lease, the parties already agree at this
point to a rent payable by the Tenant as of 1st March 1999 until the end of
the tenancy for the entire Leased Object of DM 456,000.-- (in words: four
hundred and fifty-six thousand German Marks) p.a. net fixed (= DM
38,000.--/month) plus the statutory value added tax and payments in advance
for overheads. The Landlord may require negotiations to be held in
accordance with ss. 5.2 of the Lease for the option period in accordance
with ss. 3.3 in the version set out in this Addendum. An increase in the
rent by reason of the improved condition of the Leased Object through the
Measures is, however, excluded. The rent is to be paid in monthly partial
installments in accordance with ss. 4 (4) of the Lease.
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<PAGE>
[GRAPHIC LOGO OMITTED] HOSOKAWA KREUTER GmbH
================================================================================
-4-
5. ss. 3 of the Lease shall be worded as follows:
1. The Lease shall begin with the conclusion of the Business Purchase
Contract between the parties to be signed at the same time as this
Lease.
2. The Lease is concluded for a fixed period of time ending 29th February
2004 and shall end at this point in time without any notice being
required as long as the Tenant has not exercised its right of option
in accordance with para. 3. The Tenant is, however, entitled to
terminate the Lease by giving 12 (twelve) months' notice expiring as
if the end of the month, but not to take effect earlier than 28th
February 1999, in the event that the Tenant, for business or financial
reasons, wishes to discontinue its business operations in the Leased
Object or to transfer the same, or provides a solvent new tenant who
will assume the Lease.
3. The Landlord grants the Tenant a right of option to extend the Lease
five times by one year at a time. The respective notice by the Tenant
that it will exercise its right of option must be submitted to the
Landlord by the Tenant no later than 12 months prior to the expiration
of the Lease. It is expressly stipulated that the written form must be
used for this purpose."
6. a) To the extent that claims of the Tenant under Clauses 1 and 2 of this
Addendum have not been repaid or not repaid in full at the point in
time of the termination of the Lease and the termination was not
instigated by the Landlord, the Landlord shall only be liable (again)
to render monthly repayments of DM 10,000.-- net plus value added
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<PAGE>
[GRAPHIC LOGO OMITTED] HOSOKAWA KREUTER GmbH
================================================================================
-5-
tax to the Tenant as of the point in time when a new tenant takes over
the Leased Object.
b) In the case of the sale of the Leased Object by the Landlord, the
claims of the Tenant not yet repaid shall immediately become due and
shall be paid to the Tenant in one sum. The same shall apply in the
case of an application on the part of the Landlord for the institution
or opening of insolvency, composition or comparable proceedings in
relation to the assets of the Landlord or in the case of termination
of the Lease for reasons for which the Landlord is responsible.
c) By way of provision of security for the claims under Clause 6 a) and 6
b), the Landlord undertakes within two weeks after the conclusion of
this Addendum to have a charge entered in favour of the Tenant, each
at the first available entry of priority, to the amount of DM
735,000.-- (seven hundred and thirty-five thousand German marks) plus
10% interest p.a. against the properties in the ownership of the
Landlord, Essener Str. 104, Hamburg Langenhorn, entered in the
Property Register of the District Court Hamburg of Langenhorn, volume
330, page 10500, and Essener Str. 108, Hamburg Langenhorn, entered in
the Property Register of the District Court Hamburg of Langenhorn,
volume 128, page 4416, including provision for immediate enforcement
under ss. 800 ZPO (Civil Procedure Rules). Any notary and court costs
shall be borne by the Tenant.
7. The Landlord grants the Tenant a right of pre-emption to each of the
properties Essener Str. 104 and 108, Hamburg Langenhorn, entered in the
Property Register of the District Court of Hamburg Langenhorn as
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<PAGE>
[GRAPHIC LOGO OMITTED] HOSOKAWA KREUTER GmbH
================================================================================
-6-
described under Clause 6 c) above, in all cases of sale. The parties
consent to and the Tenant shall apply for the entry of the rights of
preemption in the Property Register at the next free entry of priority
after the above-mentioned charge. The court and notary costs shall be borne
by the Tenant.
8. The parties undertake to affix this Addendum, together with Annex 2, firmly
to the respective copies of the Lease dated 16.02.1996 in accordance with
ss. 566 BGB (German Civil Code).
9. In the event that one or more provisions of this Addendum or of the Lease
should be or become invalid, the contracting parties undertake to agree to
a valid provision which most closely corresponds to the invalid provision.
The validity neither of this Addendum nor of the Lease shall be affected by
an invalid provision.
================================================================================
INDEMNIFICATION AGREEMENT
-------------------------
This INDEMNIFICATION AGREEMENT made and entered into this
day of ___, 1998 (the "Agreement"), by and between HOSOKAWA MICRON
INTERNATIONAL, INC., a Delaware corporation (together with its affiliates,
as defined in the federal securities laws, the "Company"), and ________________
(the "Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to
serve publicly-held corporations as officers or in other capacities unless they
are provided with adequate protection through insurance and indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation; and
WHEREAS, the current difficulties or virtual impossibility of
obtaining adequate insurance and uncertainties relating to indemnification have
increased the difficulty of attracting and retaining such persons; and
WHEREAS, the Board of Directors of the Company has determined that
the inability to attract and retain such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, the Indemnitee is willing to serve, continue to serve and
to take on additional service for or on behalf of the Company on the condition
that he be so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and the Indemnitee do hereby covenant and agree as
follows:
Section 1. Services by Indemnitee. The Indemnitee agrees to serve as
a director of the Company. The Indemnitee may at any time and for any reason
resign from such position (subject to any other contractual obligation or other
obligation imposed by operation of law).
Section 2. Indemnification. The Company shall indemnify the
Indemnitee to the fullest extent permitted by applicable law in effect on the
date hereof or as such laws may from time to time be amended. Without
diminishing the scope of
<PAGE>
the indemnification provided by this Section 2, the rights of indemnification of
the Indemnitee provided hereunder shall include but shall not be limited to
those rights set forth hereinafter, except to the extent expressly prohibited by
applicable law.
Section 3. Action or Proceeding Other Than an Action by or in the
Right of the Company. The Indemnitee shall be entitled to the indemnification
rights provided in this Section 3 if he is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative in nature, other than
an action by or in the right of the Company, by reason of the fact that he is or
was a director, officer, employee, agent, partner or fiduciary of the Company or
is or was serving at the request of the Company as a director, officer,
employee, agent, partner or fiduciary of any other entity or by reason of
anything done or not done by him in any such capacity. Pursuant to this Section
3, the Indemnitee shall be indemnified against all expenses (including
attorneys' fees), costs, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding (including, but not limited to, the investigation,
defense or appeal thereof), if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, he had no
reasonable cause to believe his conduct was unlawful.
Section 4. Actions by or in the Right of the Company. The Indemnitee
shall be entitled to the indemnification rights provided in this Section 4 if he
is a person who was or is made a party or is threatened to be made a party to
any threatened, pending or completed action or suit brought by or in the right
of the Company to procure a judgment in its favor by reason of the fact that he
is or was a director, officer, employee, agent, partner or fiduciary of the
Company or is or was serving at the request of the Company as a director,
officer, employee, agent, partner or fiduciary of any other entity by reason of
anything done or not done by him in any such capacity. Pursuant to this Section
4, the Indemnitee shall be indemnified against all expenses (including
attorneys' fees) and costs actually and reasonably incurred by him in connection
with such action or suit (including, but not limited to, the investigation,
defense, settlement or appeal thereof) if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company; provided, however, that no such indemnification shall be made in
respect of any claim, issue or matter as to which applicable law expressly
prohibits such indemnification by reason of an adjudication of liability of the
Indemnitee to the Company, unless, and only to the extent that, the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite such adjudication of
liability but in view of all the circumstances of the case, the Indemnitee is
fairly and reasonably entitled to indemnification for such expenses and costs as
such court shall deem proper.
-2-
<PAGE>
Section 5. Indemnification for Costs, Charges and Expenses of
Successful Party. Notwithstanding the other provisions of this Agreement and in
addition to the rights to indemnification set forth in Sections 3 and 4 hereof,
to the extent that the Indemnitee has served as a witness on behalf of the
Company or has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
action, suit or proceeding referred to in Sections 3 and 4 hereof, or in defense
of any claim, issue or matter therein, he shall be indemnified against all
costs, charges and expenses (including attorneys' fees) actually and reasonably
incurred by him or on his behalf in connection therewith.
Section 6. Partial Indemnification. In addition to the rights to
indemnification set forth in Sections 3 and 4 hereof, if the Indemnitee is only
partially successful in the defense, investigation, settlement or appeal of any
action, suit, investigation or proceeding described in Section 3 or 4 hereof,
and as a result is not entitled under Section 3, 4 or 5 hereof to
indemnification by the Company for the total amount of the expenses (including
attorneys' fees), costs, judgments, penalties, fines, and amounts paid in
settlement actually and reasonably incurred by him, the Company shall
nevertheless indemnify the Indemnitee, as a matter of right pursuant to Section
5 hereof, to the extent that the Indemnitee has been partially successful.
Section 7. Determination of Entitlement to Indemnification. Upon
written request by the Indemnitee for indemnification pursuant to Section 3 or 4
hereof, the entitlement of the Indemnitee to indemnification pursuant to the
terms of this Agreement shall be determined by the following person or persons
who shall be empowered to make such determination: (a) the Board of Directors of
the Company by a majority vote of a quorum consisting of Disinterested Directors
(as hereinafter defined); or (b) if such a quorum is not obtainable or, even if
obtainable, if the Board of Directors by the majority vote of Disinterested
Directors so directs, by Independent Counsel (as hereinafter defined) in a
written opinion to the Board of Directors, a copy of which shall be delivered to
the Indemnitee; or (c) by the stockholders of the Company. Independent Counsel
shall be selected by the Board of Directors and approved by the Indemnitee. Upon
failure of the Board so to select Independent Counsel or upon failure of the
Indemnitee so to approve Independent Counsel, Independent Counsel shall be
selected by the Chancellor of the State of Delaware or such other person as the
Chancellor shall designate to make such selection. Such determination of
entitlement to indemnification shall be made not later than 60 days after
receipt by the Company of a written request for indemnification. Such request
shall include documentation or information which is necessary for such
determination and which is reasonably available to the Indemnitee. Any costs or
expenses (including attorneys' fees) incurred by the Indemnitee in connection
with his request for indemnification hereunder shall be borne by the Company.
The Company hereby indemnifies and agrees to hold the Indemnitee harmless
therefrom irrespective of the outcome of the determination of the Indemnitee's
entitlement to indemnification. If the
-3-
<PAGE>
person making such determination shall determine that the Indemnitee is entitled
to indemnification as to part (but not all) of the application for
indemnification, such person shall reasonably prorate such partial
indemnification among such claims, issues or matters.
Section 8. Presumptions and Effect of Certain Proceedings. The
Secretary of the Company shall, promptly upon receipt of the Indemnitee's
request for indemnification, advise in writing the Board of Directors or such
other person or persons empowered to make the determination as provided in
Section 7 that the Indemnitee has made such request for indemnification. Upon
making such request for indemnification, the Indemnitee shall be presumed to be
entitled to indemnification hereunder and the Company shall have the burden of
proof in the making of any determination contrary to such presumption. If the
person or persons so empowered to make such determination shall have failed to
make the requested indemnification within 60 days after receipt by the Company
of such request, the requisite determination of entitlement to indemnification
shall be deemed to have been made and the Indemnitee shall be absolutely
entitled to such indemnification, absent actual and material fraud in the
request for indemnification. The termination of any action, suit, investigation
or proceeding described in Section 3 or 4 hereof by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself: (a) create a presumption that the Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, that the Indemnitee had reasonable cause to believe that his conduct
was unlawful; or (b) otherwise adversely affect the rights of the Indemnitee to
indemnification except as may be provided herein.
Section 9. Advancement of Expenses and Costs. All reasonable
expenses and costs incurred by the Indemnitee (including attorneys' fees,
retainers and advances of disbursements required of the Indemnitee) shall be
paid by the Company in advance of the final disposition of such action, suit or
proceeding at the request of the Indemnitee within 20 days after the receipt by
the Company of a statement or statements from the Indemnitee requesting such
advance or advances from time to time. The Indemnitee's entitlement to such
expenses shall include those incurred in connection with any proceeding by the
Indemnitee seeking an adjudication or award in arbitration pursuant to this
Agreement. Such statement or statements shall reasonably evidence the expenses
and costs incurred by him in connection therewith and shall include or be
accompanied by an undertaking by or on behalf of the Indemnitee to repay such
amount if it is ultimately determined that the Indemnitee is not entitled to be
indemnified against such expenses and costs by the Company as provided by this
Agreement or otherwise.
-4-
<PAGE>
Section 10. Remedies of Indemnitee in Cases of Determination not to
Indemnify or to Advance Expenses. In the event that a determination is made that
the Indemnitee is not entitled to indemnification hereunder or if payment has
not been timely made following a determination of entitlement to indemnification
pursuant to Sections 7 and 8, or if expenses are not advanced pursuant to
Section 9, the Indemnitee shall be entitled to a final adjudication in an
appropriate court of the State of Delaware or any other court of competent
jurisdiction of his entitlement to such indemnification or advance.
Alternatively, the Indemnitee at his option may seek an award in arbitration to
be conducted by a single arbitrator pursuant to the rules of the American
Arbitration Association, such award to be made within 60 days following the
filing of the demand for arbitration. The Company shall not oppose the
Indemnitee's right to seek any such adjudication or award in arbitration or any
other claim, but may oppose the Indemnitee's right to indemnification. Such
judicial proceeding or arbitration shall be made de novo and the Indemnitee
shall not be prejudiced by reason of a determination (if so made) pursuant to
Sections 7 and 8 that he is not entitled to indemnification. If a determination
is made or deemed to have been made pursuant to the terms of Section 7 or
Section 8 hereof that the Indemnitee is entitled to indemnification, the Company
shall be bound by such determination and is precluded from asserting that such
determination has not been made or that the procedure by which such
determination was made is not valid, binding and enforceable. The Company
further agrees to stipulate in any such court or before any such arbitrator that
the Company is bound by all the provisions of this Agreement and is precluded
from making any assertion to the contrary. If the court or arbitrator shall
determine that the Indemnitee is entitled to any indemnification hereunder, the
Company shall pay all reasonable expenses (including attorneys' fees) and costs
actually incurred by the Indemnitee in connection with such adjudication or
award in arbitration (including, but not limited to, any appellate proceedings).
Section 11. Other Rights to Indemnification. The indemnification and
advancement of expenses (including attorneys' fees) and costs provided by this
Agreement shall not be deemed exclusive of any other rights to which the
Indemnitee may now or in the future be entitled under any provision of the
by-laws, agreement, provision of the Certificate of Incorporation, vote of
stockholders or disinterested directors, provision of law or otherwise.
Section 12. Attorneys' Fees and Other Expenses To Enforce Agreement.
In the event that the Indemnitee is subject to or intervenes in any proceeding
in which the validity or enforceability of this Agreement is at issue or seeks
an adjudication or award in arbitration to enforce his rights under, or to
recover damages for breach of, this Agreement, the Indemnitee, if he prevails in
whole or in part in such action, shall be entitled to recover from the Company
and shall be indemnified by the Company against, any actual expenses for
attorneys' fees and disbursements reasonably incurred by him.
-5-
<PAGE>
Section 13. Duration of Agreement. This Agreement shall continue
until and terminate upon the later of: (a) 10 years after the Indemnitee has
ceased to occupy any of the positions or have any of the relationships described
in Sections 3 and 4 of this Agreement; and (b) the final termination of all
pending or threatened actions, suits, proceedings or investigations with respect
to the Indemnitee. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit the Indemnitee and his
spouse, assigns, heirs, devises, executors, administrators or other legal
representatives.
Section 14. Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation, all portions of any
paragraphs of this Agreement containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and (b) to
the fullest extent possible, the provisions of this Agreement (including,
without limitation, all portions of any paragraph of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
Section 15. Identical Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall for all purposes be deemed to
be an original but all of which together shall constitute one and the same
Agreement. Only one such counterpart signed by the party against whom
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
Section 16. Headings. The headings of the Sections of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
Section 17. Definitions. For purposes of this Agreement:
(a) "Disinterested Director" shall mean a director of the
Company who is not or was not a party to the action, suit, investigation or
proceeding in respect of which indemnification is being sought by the
Indemnitee.
(b) "Independent Counsel" shall mean a law firm or a member
of a law firm that neither is presently nor in the past five years has been
retained to represent: (i) the Company or the Indemnitee in any matter material
to either such party, or (ii) any other party to the action, suit, investigation
or proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable
-6-
<PAGE>
standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Company or the Indemnitee in an action to
determine the Indemnitee's right to indemnification under this Agreement.
Section 18. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 19. Notice by the Indemnitee. The Indemnitee agrees promptly
to notify the Company in writing upon being served with any summons, citation,
subpoena, complaint, indictment, information or other document relating to any
matter which may be subject to indemnification covered hereunder, either civil,
criminal or investigative.
Section 20. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed or if (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to the Indemnitee, to:
-------------------------
-------------------------
-------------------------
(b) If to the Company to:
HOSOKAWA MICRON INTERNATIONAL, INC.
780 Third Avenue
New York, New York 10017
Attn: Chairman of the Board
or to such other address as may have been furnished to the Indemnitee by the
Company or to the Company by the Indemnitee, as the case may be.
Section 21. Governing Law. The parties agree that this Agreement
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware, without giving effect to the conflict of laws.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
HOSOKAWA MICRON INTERNATIONAL, INC.
By
-------------------------------
Name:
Title:
-------------------------------
-8-
Exhibit 10.18
COST SHARING AGREEMENT
THIS AGREEMENT is entered into on this 1st day of Jan 1998, by and
between Hosokawa Micron Corporation, a Japanese corporation, with offices at
5-14, 2-chome, Kawaramachi, Chuo-ku Osaka 541, Japan ("HMC") and Hosokawa Micron
International, Inc., a Delaware, United States corporation, with offices at 780
Third Avenue, New York, New York 10017 ("HMII").
WITNESSETH:
WHEREAS, HMC and HMII are engaged directly and through a number of
subsidiaries in the business of designing, engineering, manufacturing, and
marketing powder and particle processing equipment, systems and
technologies;
WHEREAS, the powder and particle processing industry is extremely
competitive on a worldwide basis, so that it is imperative that HMC and HMII
be in the forefront of the acquisition and development of new ideas,
products and technologies in this business;
WHEREAS, HMC and HMII have, do and are conducting extensive research
and development in the areas of powder and particle technology;
WHEREAS, HMC AND HMII desire to develop new and improved technologies,
products, systems and processes for application in powder and particle
processing equipment and systems and technologies offered and manufactured
by HMC and HMII, and to share the costs, risks and benefits of such
development;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereby agree as follows.
ARTICLE 1
DEFINITIONS
SECTION 1.1. AFFILIATES(S). "Affiliate(s)" shall mean any entity that is
directly or indirectly
<PAGE>
50 percent or more owned by a party to this Agreement.
SECTION 1.2. CONFIDENTIAL MATTERS. "Confidential Matters" is as defined in
Paragraph 5.2 of this Agreement.
SECTION 1.3. DEVELOPED INTANGIBLE PROPERTY. "Developed Intangible Property"
shall mean Intangible Property developed as part of the Research Program under
this Agreement.
SECTION 1.4. IMPROVEMENTS. "Improvements" shall mean, any and all findings,
discoveries, inventions, additions, modifications, formulations, or changes made
during the term of this Agreement that relate to Intangible Property, Developed
Intangible Property, Know-How, or Product.
SECTION 1.5. INTANGIBLE PROPERTY. "Intangible Property" shall mean and
include any and all patents and similar industrial property rights, copyrights,
process technology, inventions, computer programs, enhancements, updates,
improvements, translations, adaptations, secret and confidential Know-How,
information, data, specifications, designs, manufacturing techniques and
descriptions, or other intangible property.
SECTION 1.6. KNOW-HOW. "Know-How" shall mean any and all technical
information generated during the term of this Agreement that relates to Product
or Improvements and shall include, without limitation, all manufacturing data
and any other information relating to Products or Improvements and useful for
the development, manufacture, or effectiveness of Product.
SECTION 1.7. PRODUCT. "Product" shall mean equipment, systems, components
and processes developed under this Agreement.
SECTION 1.8. RESEARCH COMMITTEE. "Research Committee" shall mean the
Committee composed of two representatives from HMC and two representatives from
HMII that shall have responsibility for making determinations relating to this
Agreement and the Research Program.
<PAGE>
SECTION 1.9. TERRITORY. "Territory" shall mean the geographic area of:
Japan for HMC; and North, Central and South America, Europe, Australia, New
Zealand, South Africa, India and all Asian countries west of India for HMII.
SECTION 1.10. THIRD PARTY OR THIRD PARTIES. "Third Party" or "Third
Parties" shall mean any entity other than a party to this Agreement or an
Affiliate.
ARTICLE II
TERM
SECTION 2.1. TERM. The term of this Agreement shall be for a period of 5
years from January 1, 1998, or for so long as a Research Project is in
existence, whichever is later, unless terminated earlier as provided in Article
VII of this Agreement.
ARTICLE III
RESEARCH PROGRAM
SECTION 3.1. RESEARCH PROGRAM. The Research Program is research and
development activity performed by HMC or HMII or an affiliate of either party,
or performed by Third Parties and funded by HMC or HMII or an affiliate of
either, including, without limitation, (a) basic research, (b) product specific
development, and (c) improvements to Products or systems or processes, relating
to projects previously funded by the Research Program. A list of the most
important projects included in the Research Program is attached as Exhibit A to
this Agreement. Projects specifically excluded from the Research Program are
listed in Exhibit B to this Agreement. Research activity which is not listed in
Exhibit A but not excluded in Exhibit B shall be included in the Research
Program. Exhibits A and B shall be updated no less frequently than semi-annually
as of October 1st and April 1st of each year.
<PAGE>
SECTION 3.2. ACQUIRED PRODUCTS OR PROJECTS. A product or project may be
added to the Research Program on the acquisition of the product or a portion
thereof by purchase, license, or otherwise.
SECTION 3.3. RESEARCH PROGRAM AND BUDGET.
a. The Research Committee shall prepare an annual operating plan, which
shall set forth in detail:
i) Objectives to be accomplished during such year;
ii) Costs expected to be incurred for the year;
iii) Projected future operations and objectives:
iv) The nature of the research and development work that needs to be
completed by one or both parties in order to achieve the purposes
of this Agreement, and
v) Projects to be included in the annual operating plan ("Project"
or "Projects"). Each Project shall separately identify the nature
of the work to be performed by each party, the particular use to
which the work is expected to be put, and the total cost of such
work and an estimate of the date by which such work is to be
completed.
b. The parties shall perform the work specified for each Project. Each
party convenants with the other that all such work will be performed as
specified in the Project, and that each will cause such work to be
performed by its employees or contractors utilizing the level of skill,
care, and diligence as is exercised by its respective employees in their
own internal projects of the same or similar nature.
c. Each party shall be reimbursed for its total development costs incurred
in such work in accordance with the terms of this Agreement. The total
development costs shall include all of the direct costs incurred by the
party related to the Project, and the indirect costs necessary to maintain
the Projects. Indirect costs shall mean the allocable portion of overhead
expenses attributable to the Projects according to generally accepted
accounting
<PAGE>
principles.
SECTION 3.4. COST SHARING
a. COST SHARE. HMC and HMII shall be responsible for its proportional share of
the costs of each Project for each year in which this Agreement is effective, as
defined in Subparagraph (b) of this Section.
b. PROPORTIONAL SHARE. The HMC proportional share for a year shall be determined
by taking the Net Sales (as defined below) sold by HMC and its affiliates over
the Net Sales sold by HMC and HMII and all of their affiliates for the preceding
fiscal year ended September 30th. The HMII proportional share for a year shall
be determined by taking the Net Sales sold by HMII and its affiliates over the
Net Sales sold by HMC and HMII and all of their affiliates for the preceding
fiscal year ended September 30th. For the purposes of this Section, "Net Sales"
shall mean the net sales of powder and particle processing product line products
and technologies, excluding the following:
i) Sales of products and technologies that are currently licensed
between HMC and HMII and all of their affiliates; and
ii) Inter-company sales between HMC and HMII and all of their
affiliates.
c. ACCOUNTING. Each party shall provide the other with detailed documents
supporting their Net Sales (as defined in Section 3.4 b) and their actual
Research Program costs incurred (as defined in Section 3.3 c.)
SECTION 3.5. REIMBURSEMENT. Upon receipt of the detailed documentation
supporting the Net Sales and the actual Research Program costs incurred by the
other party the Chief Financial Officers of the party will:
a. Confirm the calculation of the other party's proportional share of the
costs of the Research Program,
b. Monitor that the actual costs incurred by the other party are in line
with the
<PAGE>
budgeted costs set forth in the annual operating plan (as described in
Section 3.3),
c. Compare the actual costs incurred by the other party to their
proportional share of the costs,
d. Reimburse and/or charge the other party for the amount of costs they
have either over or under incurred as compared to their proportional share,
and
e. Reimbursement shall be made within 60 days of notification by the other
party.
f. If the Chief Financial Officer of a party does not dispute the other
party's computation of the proportional share of costs within 12 months of
receipt of such calculation, the calculation will be deemed final.
ARTICLE IV
OWNERSHIP OF DEVELOPED INTANGIBLES
SECTION 4.1. LEGAL TITLE. Legal title to Developed Intangible Property
shall be in the name of the party that has responsibility for a given Territory.
SECTION 4.2. BENEFICIAL RIGHTS. HMC and HMII shall have the exclusive right
to use, license and assign the Developed Intangible Property for manufacturing,
marketing, and other purposes in its Territory, except as otherwise provided in
this Agreement.
ARTICLE V
EXCHANGE OF INFORMATION, CONFIDENTIALITY, AND TRANSFER
SECTION 5.1. KNOW-HOW AND IMPROVEMENTS. During the term of this Agreement,
each party shall promptly disclose to the other party its Know-How and inform
the other party of any information that it obtains or develops regarding Product
and Improvements.
<PAGE>
SECTION 5.2. CONFIDENTIALITY. During the Term of this Agreement, and for a
period of 5 years from the date of expiration or termination of this Agreement,
each party shall treat this Agreement, Know-How, Intangible Property,
Improvements, and all information that it receives from the other party
(collectively, the "Confidential Matters") as confidential and shall not
disclose or use such Confidential Matters without the prior written consent of
such other party. Nothing in this Agreement shall prevent the disclosure by a
party to this Agreement or its employees of confidential information that:
a. Prior to the transmittal thereof to the party was of general public
knowledge;
b. Becomes, subsequent to the time of transmittal to the party, a matter
of general public knowledge otherwise than as a consequence of a
breach by the party of any obligation under this Agreement;
c. Is made public by the disclosing party;
d. Was in the possession of a party in documentary form prior to the time
of disclosure thereof to it by the disclosing party, and was held by
the party free of any obligation of confidence; or
e. Is received in good faith from a Third Party having the right to
disclose it.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1. PRODUCT LIABILITY CLAIMS. The manufacturing party shall save,
hold harmless, and defend the other party from and against any loss, cost, or
expense, including reasonable attorney's fees, on account of or resulting from
any claim or action for product liability with respect to Developed Intangible
Property, Intangible Property, or other Confidential Matters owned,
<PAGE>
developed, or held by such party. The manufacturing party shall defend any such
claim or action at its own expense provided that the other party cooperates with
the manufacturing party in defending any such claim or action.
SECTION 6.2. INTELLECTUAL PROPERTY CLAIMS. The developing party shall save,
hold harmless and defend the other party from and against any loss, cost, or
expense, including reasonable attorney's fees, on account of or resulting from
any claim or action for infringement of any existing or future patent, or
misappropriation of any trade secret or other intellectual property right with
respect to Developed Intangible Property, Intangible Property, or other
Confidential Matters owned, developed, or held by such party. The developing
party shall defend any such claim or action at its own expense provided that the
other party promptly notifies the developing party upon learning of any such
claim or action and cooperates with the developing party in defending any such
claim or action.
ARTICLE VII
TERMINATION
SECTION 7.1. TERMINATION BY CONSENT. This Agreement may be terminated at
any time by the unanimous written consent of the parties.
SECTION 7.2. TERMINATION FOR OTHER REASONS. This Agreement shall terminate
on the occurrence of any of the following terms:
a. The transfer of a substantial portion of the stock or assets of a party.
b. The default of a party with respect to any of its obligations under this
Agreement, and its failure to cure any such default within 30 days
following the date of notice to it from the other party identifying such
default.
c. Any act, determination, filing, judgment, declaration, notice,
appointment of receiver or trustee, failure to pay debts, or other
events under any law applicable to a party
<PAGE>
indicating the insolvency or bankruptcy of the party.
d. The taking of any extraordinary governmental action, including, without
limitation, seizure or nationalization of assets, stock or other property
relating to a party.
SECTION 7.3. EFFECT OF TERMINATION OF THIS AGREEMENT. In the event of a
termination of this Agreement, the parties shall determine a winding-up
procedure that will have the effect of allowing each party to continue to enjoy
the rights granted to it hereunder with respect to Know-How, Improvements, and
Confidential Matter that might be in progress, relating to incomplete Research
Projects as of the effective date of such termination of this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. NOTICES. Any notice required to be sent hereunder will be
deemed delivered five ( 5) days after the date mailed or otherwise dispatched in
the mail, postage prepaid, by registered, express or certified mail, return
receipt requested, or by a recognized private courier, to any party at the
address listed above, or such other address of which any party may so notify the
other. Notice will also be deemed given on the date notice is faxed to the other
party.
SECTION 8.2. FORCE MAJEURE. If, by reason of acts of God, natural events,
accidents, war, government controls or any cause beyond control of any party,
performance is prevented, then in such event performance by all parties
hereunder shall be excused or deferred, as appropriate, until the effects of
such intervening cause have ended. A party has the right to terminate if a Force
Majeure event remains if effect for more than ninety (90) days.
SECTION 8.3. ASSIGNMENT. This Agreement may not be assigned in whole or in
part by either party without the written consent of the other party, which such
consent should not be
<PAGE>
unreasonably withheld.
SECTION 8.4. ENTIRE AGREEMENT; AMENDMENT: This Agreement states the entire
agreement between the parties. No modification or amendment of this Agreement
shall be made except by an instrument in writing signed by all parties.
SECTION 8.5. REMEDIES CUMULATIVE. The remedies of the parties under this
Agreement are cumulative and shall not exclude any other remedies to which the
party may be lawfully entitled.
SECTION 8.6. FURTHER ASSURANCES. Each party hereby covenants and agrees
that it shall execute and deliver such deeds and other documents as may be
required to implement any of the provisions of this Agreement.
SECTION 8.7. NO WAIVER. The failure of any party to enforce any provision
of this Agreement shall not be deemed a waiver of that or any other provision of
this Agreement.
SECTION 8.8. CAPTIONS. Captions of paragraphs contained in this Agreement
are inserted only as a matter of convenience and for reference, and in no way
define, limit, extend, or describe the scope of this Agreement or the intent of
any provision hereof.
SECTION 8.9. COUNTERPARTS. This Agreement may be executed in multiple
copies, each of which shall for all purposes constitute an Agreement, binding on
the parties, and each partner hereby covenants and agrees to execute all
duplicates or replacement counterparts of this Agreement as may be required.
SECTION 8.10 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the United States.
SECTION 8.11 SEVERABILITY. In the event any provision, clause or obligation
stated herein is held to be invalid or unenforceable, such invalidity or
unenforceability shall not affect the validity
<PAGE>
or enforceability of the remainder hereof.
SECTION 8.12. COSTS AND EXPENSES. Unless otherwise provided in this
Agreement, each party shall bear all fees and expenses incurred in performing
its obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date first written above by their duly authorized officers.
Hosokawa Micron Corporation
/s/ Yoshio Hosokawa
- ------------------------------------
[SIGNATURE]
[NAME AND TITLE]
YOSHIO HOSOKAWA, PRESIDENT
Hosokawa Micron International, Inc.
/s/ Isao Sato
- ------------------------------------
[SIGNATURE]
[NAME AND TITLE]
ISAO SATO, PRESIDENT
<PAGE>
EXHIBIT A
RESEARCH PROJECTS
<PAGE>
EXHIBIT B
EXCLUDED RESEARCH PROJECTS
THIS ASSIGNMENT is made the day of 1998
B E T W E E N:
1. HOSOKAWA STOTT LIMITED (registered number 1368493) of Beech Industrial
Estate, BACUP, Lancashire, OL13 9EL ("the Assignor"), and
2. HOSOKAWA MICRON CORPORATION of 5-14, 2-chome, Kawaramachi, Chuo-Ku, Osaka
541, Japan ("the Assignee").
RECITALS:
1. The Assignor was formerly named L E Stott Limited and changed its name to
Hosokawa Stott Limited on 2nd April 1997.
2. The Assignor is the registered proprietor and beneficial ownership of the
patents numbered 1834494 and 2548630 registered in Japan (hereinafter called
"the Patents") particulars of which are set out in Schedule 1 hereto and
copies of which are annexed hereto.
3. The Assignor and the Assignee hereby agree that the beneficial ownership of
the Patents should be transferred by the Assignor to the Assignee and that
this be effective from the 31st December 1996.
OPERATIVE PROVISIONS:
1. CONSIDERATION
In consideration of the payment of (British pounds) 117,375 by the
Assignee to the Assignor receipt of which is hereby acknowledged by the
Assignor, the Assignor agrees to assign the Patents to the Assignee.
2. ASSIGNMENT
The Assignor as beneficial owner hereby ASSIGNS absolutely to the Assignee
free from all incumbrances all its right title and interest in and to the
Patents together with:-
<PAGE>
2.1 all rights and powers arising or accrued in relation to the Patents
including the right to sue for damages and other remedies in respect of
any infringement of such rights or other acts within the scope of the
claims of any published specification of any of the Patents.
2.2 any rights the Assignor may have to apply for prosecute and obtain
patent or similar protection throughout the world in respect of the
inventions claimed in the Patents.
3. THE ASSIGNOR'S OBLIGATIONS
The Assignor covenants that at the request and cost of the Assignee it will
at all times hereafter do all such acts and execute all such documents as
the Assignee may reasonably require to enable it to:-
3.1 secure the vesting in the Assignee of all rights assigned to the
Assignee hereunder;
3.2 enable it to become registered in the Register of Patents as proprietor
of the Patents;
3.3 assist in the resolution of any question concerning the Patents;
4. EXCLUSION OF DAMAGES FOR INVALIDITY
The Assignee shall have no claim against the Assignor in respect of any
damage or loss sustained by reason of the Patents or any part of them being
invalid.
5. EXCLUSION OF WARRANTY AS TO VALIDITY AND INFRINGEMENT
The Assignor does not warrant or guarantee the validity of the Patents or
that the invention patented under the Patents does not infringe any valid
and subsisting patent or other right not held by the Assignor.
2
<PAGE>
6. WARRANTIES
6.1 The Assignor warrants to the best of its knowledge information and
belief that from the 31st of December 1996 the Patents have been free of
and or all liens claims security interests and other encumbrances of any
nature or kind whatsoever.
6.2 The Assignor further warrants that it is the sole proprietor of the
Patents and has full power to enter into this Assignment.
7. COSTS
The costs of drafting, executing and registering this Assignment shall be
borne by the Assignee.
IN WITNESS whereof the parties hereunto have executed this Deed the day and year
first above mentioned
EXECUTED AS A DEED by )
HOSOKAWA STOTT LIMITED )
acting by two of its Directors )
Director [illegible]
Director [illegible]
WITNESS: HOSOKAWA MICRON CORPORATION
...................... By: (Seal)
Name:
Title:
3
<PAGE>
SCHEDULE 1
PATENTS
Patent Number 1834494 "Exhaust System"
Description: Powder Dispensing Apparatus (Mk II machine)
Application Number: 62-214981 filed on 28.8.87
Publication Number: 63-60814
Based on the UK Patent Application Number: 8620839
Patent Number 2548630 "PP Machine 11 (LFB-IF)"
Description: Powder Dispensing Apparatus (LFB-IF Machine).
Application Number: 3-74405 filed on 14.3.91
Publication Number: 5-97120
Based on the UK Patent Application Number: 9110245 8
Date of Grant: 23.4.96
Date of Publication: 30.10.96
HOSOKAWA MICRON INVESTMENT RETIREMENT PLAN
------------------------------------------
(AS AMENDED 1995)
-----------------
0395
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
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Page No.
<S> <C> <C>
ARTICLE 1 - DEFINITIONS
1.01 Account 1
1.02 Anniversary Date 3
1.03 Annuity Starting Date 3
1.04 Applicable Computation Period 3
1.05 Beneficiary 3
1.06 Board of Directors 3
1.07 Committee 3
1.08 Company 3
1.09 Compensation 4
1.10 Controlled or Affiliated Service Group 5
1.11 Disability 5
1.12 Effective Date/Supplemental Effective Date 6
1.13 Election Period 6
1.14 Employee/Eligible Employee/Leased Employee 6
1.15 Employer 7
1.16 Highly Compensated Employee/
Nonhighly Compensated Employee 7
1.17 Internal Revenue Code or Code 9
1.18 Participant 9
1.19 Plan 9
1.20 Plan Year 10
1.21 Protected Spouse 10
1.22 Qualified Annuity 10
1.23 Qualified Domestic Relations Order 10
1.24 Recordkeeper 10
1.25 Retirement 10
1.26 Retirement Dates 10
1.27 Service (Break-in-Service - Month of Service
Year of Service - Hour of Employment) 11
1.28 Services Agreement 12
1.29 Trust Agreement 12
1.30 Trustee 13
1.31 Trust Fund 13
1.32 Valuation Date 13
1.33 Voice Technology System (VTS)/
Customer Service Representative (CSR) 13
ARTICLE 2 - ELIGIBILITY AND PARTICIPATION
2.01 Eligibility for Participation 14
2.02 Change in Employment Status 14
0395
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TABLE OF CONTENTS
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Page No.
ARTICLE 3 - CONTRIBUTIONS
3.01 Elective Deferral Contributions 16
3.02 Reduction of Excess Elective
Deferral Contributions 16
3.03 Matching and Regular Contributions 17
3.04 Voluntary After-Tax Contributions 19
3.05 Contribution Changes 19
3.06 Discontinuance of Contributions 20
3.07 Rollover Contributions from Other
Qualified Plans 20
3.08 Transfer of Assets from Other
Qualified Plans 21
3.09 Deposit of Contributions 22
3.10 Payment of Expenses 22
ARTICLE 4 - CONTRIBUTIONS LIMITATIONS
4.01 $7,000 Limitation on Elective
Deferral Contributions 23
4.02 Limitation on Elective Deferral, Matching
and/or Voluntary After-Tax Contributions 23
4.03 Limitation on Allocations 28
ARTICLE 5 - MAINTENANCE OF ACCOUNTS, INVESTMENT FUNDS AND
VALUATION OF THE TRUST FUND
5.01 Maintenance of Accounts 33
5.02 Investment Election 33
5.03 Investment Funds 34
5.04 Valuation of Trust Fund 35
5.05 Allocation of Investment Earnings and
Expenses 35
ARTICLE 6 - BENEFITS PAYABLE UPON TERMINATION OF EMPLOYMENT
6.01 Upon Retirement 36
6.02 Upon Disability 36
6.03 Upon Death 36
6.04 Upon Other Termination of Employment 39
6.05 Reemployment and Repayment of Benefits 40
0395
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Page No.
ARTICLE 7 - DISTRIBUTION OF BENEFITS
7.01 Claim Procedure For Benefits 41
7.02 Commencement of Benefits 41
7.03 Method and Form of Payment of Benefits
for Participants Who Commenced Participation
On or After January 1, 1992 45
7.04 Method and Form of Payment of Benefits
for Participants Who Commenced Participation
Prior to January 1, 1992 46
7.05 Disposition of Unclaimed Benefits 51
7.06 Non-Assignability 51
7.07 Substitute Payee 51
7.08 Satisfaction of Liability 51
7.09 Direct Rollover to Eligible Retirement Plans 51
7.10 Waiver of 30 Day Notice Requirement 53
ARTICLE 8 - ADMINISTRATION OF THE PLAN
8.01 Assignment of Administrative Authority 54
8.02 Organization and Operation of the Committee 54
8.03 Authority and Responsibility of the Committee 55
8.04 Duties of the Recordkeeper 56
8.05 Records and Reports 56
8.06 Required Information 56
8.07 Fiduciary Liability 57
8.08 Payment of Expenses 57
8.09 Indemnification 57
8.10 Qualified Domestic Relations Orders 57
ARTICLE 9 - AMENDMENT AND TERMINATION
9.01 Amendment 62
9.02 Termination 62
9.03 Vesting Upon Termination 63
9.04 Distribution of Benefits After Termination 63
ARTICLE 10 - PARTICIPATING COMPANIES
10.01 Adoption by Other Entities 64
10.02 Alternative Provisions 64
10.03 Right to Withdraw (Plan Spinoff) 64
10.04 Procedure Upon Withdrawal 64
0395
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ARTICLE 11 - TOP-HEAVY PROVISIONS
11.01 Definition of Top-Heavy and Super Top-Heavy 66
11.02 Definition of Key Employee 67
11.03 Minimum Employer Contribution 68
11.04 Limitation of Allocations 69
ARTICLE 12 - WITHDRAWAL OF FUNDS DURING EMPLOYMENT
12.01 Withdrawals from Elective Deferral
Contribution Account 70
12.02 Withdrawals from Matching
Contribution Account 70
12.03 Withdrawals from Regular Contribution Account 70
12.04 Withdrawals from Rollover Account 70
12.05 Withdrawals from Transfer Account 70
12.06 Withdrawals from Qualified Matching
Contribution and Qualified Nonelective
Contribution Accounts 70
12.07 Financial Hardship Rules 70
12.08 General Withdrawal Rules 72
ARTICLE 13 - LOANS
13.01 Activation of Loan Provisions 74
13.02 Amount of Loans and Terms of Repayment 74
ARTICLE 14 - GENERAL PROVISIONS
14.01 Exclusiveness of Benefits 78
14.02 Limitation of Rights 78
14.03 Limitation of Liability and Legal Actions 78
14.04 Construction of Agreement 79
14.05 Title to Assets 79
14.06 Severability 79
14.07 Titles and Headings 79
14.08 Counterparts as Original 79
14.09 Merger of Plans 79
</TABLE>
0395
<PAGE>
HOSOKAWA MICRON INVESTMENT RETIREMENT PLAN
------------------------------------------
(AS AMENDED 1995)
-----------------
STATEMENT OF PURPOSE
--------------------
Hosokawa Micron International Inc. has had in effect since April 1, 1987 the
Hosokawa Micron Retirement Plan, to which it made contributions for the purpose
of sharing its profits with its employees in order to provide for the
accumulation of funds for the benefit of eligible employees and their
beneficiaries in the manner and to the extent set forth in such plan, which plan
was fully restated in 1992.
The Hosokawa Micron Retirement Plan (As Amended 1995), hereinafter set forth,
constitutes an amendment in its entirety to said plan which is continued
effective as of January 1, 1995 with respect to employees and participants who
had not yet retired, terminated employment or died as of such date. The rights
of anyone covered under the plan prior to January 1, 1995, who retired,
terminated employment or died before that date, shall be determined in
accordance with the terms and provisions of the plan in effect on the date of
such retirement, termination of employment or death, except as otherwise
specifically provided herein.
The plan contains assets transferred from the Alpine American Corp.
Profit-Sharing Plan effective August 1, 1989 in its Transfer Account.
Unless otherwise provided herein, those provisions added or amended to comply
with the Tax Reform Act of 1986 required to be effective as of April 1, 1987 or
April 1, 1989 shall be effective as of such dates.
ARTICLE 1
---------
DEFINITIONS
-----------
For purposes of the Plan, the following words and phrases shall have the
following meanings unless a different meaning is plainly required by the
context. Wherever used, the masculine pronoun shall include the feminine pronoun
and the feminine pronoun shall include the masculine and the singular shall
include the plural and the plural shall include the singular.
1.01 "Account"
The interest of a Participant in the Trust Fund as represented by his
accounts as designated below.
(a) "Elective Deferral Contribution Account" (Account A) - Portion of
Trust Fund attributable to a Participant's
0395 1
<PAGE>
Elective Deferral Contributions in accordance with the provisions of
Section 3. 01 and the provisions of the Plan in effect prior to the
Supplemental Effective Date.
(b) "Matching Contribution Account" (Account B) - Portion of Trust Fund
attributable to the Company's
(i) Matching Contributions in accordance with the provisions of
Subsection 3.03(a) and with the provisions of the Plan in
effect prior to the Supplemental Effective Date; and
(ii) Additional Matching Contributions in accordance with the
provisions of Subsection 3.03(b) and with the provisions of
the Plan in effect prior to the Supplemental Effective Date.
(c) "Regular Contribution Account" (Account C) - Portion of Trust Fund
attributable to the Company's Regular Contributions in accordance
with the provisions of Subsection 3.03(c) and the provisions of the
Plan in effect prior to the Supplemental Effective Date, and
Top-Heavy Contributions in accordance with Article 11.
(d) "Rollover Account" (Account D) - Portion of Trust Fund attributable
to funds rolled over from another qualified plan in accordance with
Section 3.07.
(e) "Transfer Account" (Account E) - Portion of Trust Fund attributable
to the Company's contributions during a Participant's participation
under another qualified plan and transferred in accordance with the
provisions of Section 3.08.
(f) "Voluntary After-Tax Contribution Account" - Portion of Trust Fund
attributable to a Participant's Voluntary After-Tax Contributions in
accordance with the provisions of Section 3.04 and the provisions of
the Plan in effect prior to the Supplemental Effective Date.
(g) "Qualified Matching Contribution Account" - Portion of Trust Fund
attributable to the Company's Qualified Matching Contributions in
accordance with the provisions of Subsection 3.03(b).
(h) "Qualified Nonelective Contribution Account" - Portion of Trust Fund
attributable to the Company's Qualified Nonelective Contributions in
accordance with the provisions of Subsection 3.03(c).
0395 2
<PAGE>
1.02 "Anniversary Date"
Each January 1 commencing January 1, 1992.
1.03 "Annuity Starting Date"
The first day of the first period for which an amount is payable as an
annuity. If a benefit is not payable in the form of an annuity, the first
day on which all events have occurred which entitle the Participant to
such benefit.
1.04 "Applicable Computation Period"
(a) For purposes of contributions in accordance with Articles 3 and 11,
Applicable Computation Period shall be a Plan Year.
(b) For all other purposes, Applicable Computation Period shall be the
12-month period beginning as of the date a person first completed an
Hour of Employment with the Employer and each anniversary thereof.
1.05 "Beneficiary"
The person designated to receive benefits payable under the Plan in the
event of death. In the event a Beneficiary is not designated, the
Participant's surviving spouse shall be deemed his Beneficiary or in the
absence of a surviving spouse, the benefits shall be paid to the
Participant's estate.
1.06 "Board of Directors"
The Board of Directors of Hosokawa Micron International Inc.
1.07 "Committee"
The person or persons appointed in accordance with Section 8.01 to
administer the Plan. In the absence of such designation, the Company shall
serve as the Committee and in such case all references herein to the
Committee shall be deemed a reference to the Company.
1.08 "Company"
(a) Hosokawa Micron International Inc. and any successor which shall
maintain this Plan; and
(b) any other business entity which duly adopts the Plan with the
approval of the Board of Directors.
0395 3
<PAGE>
1.09 "Compensation"
(a) Unless otherwise indicated, for purposes of Sections 3.01, 3.03 and
3.04, the amount described in Subsection (c), exclusive of any (i)
amount which is paid by the Employer but not by the Company; (ii)
amount paid by the Company for any period during which the
Participant's employment status did not meet the requirements of
Section 1.14; and (iii) amount paid before an Eligible Employee was
eligible to become a Participant in accordance with Section 2.01.
For purposes of Section 3.01, third party insurance payments shall
be excluded.
(b) For purposes of Section 4.03, the Participant's wages for the Plan
Year paid by the Employer of the type reported in box 10 of Form W-2
(1991). Such wages shall include amounts within the meaning of
Section 3401(a) of the Code plus any other amounts paid to the
Participant by the Employer for which the Employer is required to
furnish a written statement under Section 6041(d) and 6051(a)(3) of
the Code, determined without regard to any rules that limit the
amount required to be reported based on the nature or location of
the employment or services performed, exclusive of
(i) severance pay on a non payroll basis;
(ii) non-qualified deferred compensation payments;
(iii) any amounts paid or reimbursed by the Employer for moving
expenses which the Employer reasonably believes at the time of
such payment to be deductible by the Employee under Section
217 of the Code; and
(iv) welfare benefits, fringe benefits (cash and non-cash),
reimbursements of other expense allowances, moving expenses
and deferred compensation.
(c) For purposes of Sections 1.16 and 4.02 and Article 11, the amount
described in Subsection (b) increased by the amount of any
contributions made by the Employer under any salary reduction or
similar arrangement to a qualified deferred compensation, pension or
cafeteria plan, contributions to a simplified employee pension plan
described in Section 408(k) of the Code, contributions towards the
purchase of an annuity contract described in Section 403(b) of the
Code, compensation deferred under a deferred compensation plan
within the meaning of Section 457(b) of the Code and Employee
contribution (under governmental plans described in Section 414 (h)
(2) of the Code which are picked up and treated as Employer
contributions. For purposes of Section 1.16, the amount described
above shall be for the applicable
0395 4
<PAGE>
period for making the determination of Highly Compensated Employees.
For purposes of Section 4.02, the amount paid before an Eligible
Employee was eligible to become a Participant in accordance with
Section 2.01 shall be excluded.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of
each Employee taken into account under the Plan shall not exceed the OBRA
'93 annual compensation limit. The OBRA '93 annual compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with Section 401(a)(17)(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar year applies
to any period, not exceeding 12 months, over which Compensation is
determined (determination period) beginning in such calendar year. If a
determination period consists of fewer than 12 months, the OBRA '93 annual
compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the
denominator of which is 12.
If compensation for any prior determination period is taken into account
in determining an Employee's benefits accruing in the current Plan Year,
the Compensation for that prior determination period is subject to the
OBRA '93 annual compensation limit in effect for that prior determination
period. For this purpose, for the determination periods beginning before
the first day of the first Plan Year beginning on or after January 1,
1994, the OBRA '93 annual compensation limit is $150,000.
1.10 "Controlled or Affiliated Service Group"
(a) "Controlled Group" - Any group of business entities under common
control, including but not limited to proprietorships and
partnerships, or a controlled group of corporations within the
meaning of Sections 414 (b), (c) and (o) of the Code.)For
purposes of Section 4.03, the phrase "more than 50%" is substituted
for the phrase "at least 80%" each place it appears in Section
1563(a)(1) of the Code.
(b) "Affiliated Service Group" - Any group of business entities within
the meaning of Section 414(m) of the Code.
1.11 "Disability"
Any physical or mental condition for which a Participant shall be eligible
to receive benefits under the disability insurance provisions of the
Social Security Act.
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<PAGE>
1.12 "Effective Date"
April 1, 1987, the date as of which the Plan was established.
"Supplemental Effective Date"
January 1, 1995, the last date as of which the Plan was amended in its
entirety.
Unless otherwise provided herein, those provisions added or amended to
comply with the Tax Reform Act of 1986 required to be effective as of
April 1, 1987 or April 1, 1989 shall be effective as of such date.
1.13 "Election Period"
The period commencing 90 days before the Annuity Starting Date and ending
on such Annuity Starting Date.
1.14 "Employee"
Any person in the employ of the Company.
Leased Employees shall be included as Employees unless (i) such individual
is covered by a money purchase pension plan providing (A) a nonintegrated
employer contribution rate of at least 10 percent of compensation, as
defined in Section 415(c)(3) of the Code, but including amounts
contributed by the employer pursuant to a salary reduction agreement which
are excludable from the Leased Employee's gross income under Section 125,
402(a)(8), 403(h) or 403(b) of the Code; (B) immediate participation; and
(C) full and immediate vesting; and (ii) Leased Employees do not
constitute more than 20% of the Employer's Nonhighly Compensated Employee
workforce.
"Eligible Employee"
An Employee for whom the Company is required to contribute Federal
Insurance Contributions Act taxes excluding persons (a) who are Leased
Employees, (b) from the parent company on temporary assignment in the
United States of America, (c) employed as work-study, seasonal and/or
temporary employees and (d) who are members in good standing of the
Teamster Local No. 418 or Laborer's International Union of North America
Local No. 1137.
Notwithstanding the above, Leased Employees shall be included in the
definition of Eligible Employee if the requirements of Section 414(n)(2)
of the Code require such inclusion in order to meet the plan qualification
requirements enumerated in Section 414(n) and then only if the coverage
requirements of Section 410(b) of the Code would otherwise not be met.
0395 6
<PAGE>
"Leased Employee"
Any person (other than an Employee of the recipient) who pursuant to an
agreement between the recipient and any other person ("leasing
organization") has performed services for the recipient (or for the
recipient and related persons determined in accordance with Section
414(n)(6) of the Code) on a substantially full time basis for a period
of at least one year, and such services are of a type historically
performed by employees in the business field of the recipient employer.
Contributions or benefits provided a Leased Employee by the leasing
organization which are attributable to services performed for the
recipient employer shall be treated as provided by the recipient employer.
1.15 "Employer"
The Company and any other business entity in a Controlled or Affiliated
Service Group which includes the Company.
1.16 "Highly Compensated Employee"
(a) An Employee who is a Highly Compensated Active Employee or a Highly
Compensated Former Employee.
(b) A Highly Compensated Active Employee is any Employee who performs
Service with the Employer during the Determination Year and is
described in either the Look-back Year Group or the Determination
Year Group or both such groups.
(i) The Look-back Year Group includes any Employee who (A) was at
any time during the Look-back Year a 5% owner, as defined in
Section 416(i)(1) of the Code; (B) received Compensation from
the Employer in excess of $75,000; (C) received Compensation
from the Employer in excess of $50,000 and was in the Top-Paid
Group, as defined in Section 414(q) of the Code, of Employees
for such Look-back Year; or (D) was at any time an officer and
received Compensation greater than 50% of the maximum dollar
limitation under Section 415(b)(1)(A) of the Code.
The 415(b)(1)(A) limitation and the $75,000 and $50,000
thresholds set forth above shall be adjusted annually for
increases in the cost-of-living in accordance with Section
415(d) of the Code, effective as of January 1 of the calendar
year such increase is promulgated and applicable to the Plan
Year which begins with or within such calendar year.
(ii) The Determination Year Group includes any Employee who (A) was
at any time during the Determination Year a 5% owner, as
defined in Section 416(i)(1) of
0395 7
<PAGE>
the Code; or (B) is both (1) described in Subparagraphs
(i)(B), (i)(C) or (i)(D) above substituting the Determination
Year for the Look-back Year; and (2) a member of the group
consisting of the 100 Employees paid the greatest Compensation
during the Determination Year of reference.
(c) A Highly Compensated Former Employee for a Determination Year is any
former Employee who separated from Service prior to such
Determination Year and was a Highly Compensated Active Employee for
either the year in which such Employee separated from Service or any
Determination Year ending on or after such Employee's 55th birthday.
(d) For purposes of this definition, the following shall be applicable:
(i) The Determination Year is the applicable Plan Year for which a
determination is being made and the Look-back Year is the
12-month period immediately preceding such Plan Year.
(ii) If there are no officers as described above in either the
Determination Year or the Look-back Year, then the highest
paid officer of the Employer in each such year shall be deemed
a Highly Compensated Employee with respect to such year.
(iii) The determination of Highly Compensated Employees, including
the determinations of the number and identity of Employees in
the Top-Paid Group, the top 100 Employees and the number of
Employees treated as officers shall be governed by Section
414(q) of the Code and Treasury Regulation 1.414(q)-1T.
(iv) The Compensation and contributions under the Plan of a Highly
Compensated Employee who is a 5% owner or in the group
consisting of the 10 Highly Compensated Employees paid the
greatest Compensation during any Determination Year or
Look-back Year shall be determined by aggregating such amounts
with the Compensation and contributions of each other Employee
who is the spouse, lineal ascendant or descendant or spouse of
a lineal ascendant or descendant of such Highly Compensated
Employee.
(e) The Company may make the following elections as provided for in
Treasury Regulation 1.414(q)-1T:
(i) the special rule for determining Highly Compensated Former
Employees who separated from Service before
0395 8
<PAGE>
January 1, 1987 in accordance with Treasury Regulation
1.414(q)-lT, Q&A 4(d). However, once such an election is made
it may not be changed without the consent of the Commissioner;
(ii) the calendar year election for the Look-back Year in
accordance with Treasury Regulation 1.414(q)-lT, Q&A 14(b);
(iii) the modification on a consistent and uniform basis of the
permissible age and service exclusions in accordance with
Treasury Regulation 1.414(q)-1T, Q&A 9(b)(2);
(iv) the inclusion of employees covered under a collective
bargaining agreement in accordance with Treasury Regulation
1.414(q)-lT, Q&A 9(b)(2);
(v) the inclusion of leased employees in determining the highly
compensated group in accordance with Treasury Regulation
1.414(q)-lT, Q&A 7(b)(4); and
(vi) the transitional rule in accordance with Treasury Regulation
1.414(q)-lT, Q&A 15.
"Nonhighly Compensated Employee"
An Employee who is not deemed to be a Highly Compensated Employee.
1.17 "Internal Revenue Code" or "Code"
The Internal Revenue Code of 1986, and any amendments thereto.
1.18 "Participant"
(a) An Eligible Employee who participates under the Plan in accordance
with Section 2.01.
(b) Each other Eligible Employee or former Eligible Employee for whom an
Account is maintained.
1.19 "Plan"
The Hosokawa Micron Investment Retirement Plan, as herein set forth and as
from time to time supplemented and amended, which Plan is intended to be a
profit-sharing plan for purposes of Sections 401(a), 402, 412 and 417 of
the Code.
0395 9
<PAGE>
1.20 "Plan Year"
A period of 12 consecutive months commencing on January 1, 1992 and each
January 1 thereafter.
However, "Plan Year" prior to January 1, 1992 shall be a period of 12
consecutive months commencing on the Effective Date and each April 1
thereafter and the "Plan Year" beginning on April 1, 1991 shall be for a
period of nine consecutive months ending on December 31, 1991.
1.22 "Protected Spouse"
The spouse to whom the Participant had been legally married on the earlier
of the date of the Participant's death or the Participant's Annuity
Starting Date.
1.22 "Qualified Annuity"
(a) In the case of a married Participant who commenced his participation
in the Plan prior to January 1, 1992, an immediate annuity payable
for the life of the Participant with a survivorship benefit payable
to the Participant's spouse (on the Annuity Starting Date) for life.
Such survivorship benefit shall not be less than 50% or greater than
100% of the benefit payable to the Participant. In the absence of a
specific election, 100% shall be applicable.
(b) In the case of a Participant who is not married on his Annuity
Starting Date, an immediate annuity payable for the life of the
Participant. Upon the Participant's death, all benefits cease.
1.23 "Qualified Domestic Relations Order"
A domestic relations order as defined in Section 8.10 in accordance with
Section 414(p) of the Code.
1.24 "Recordkeeper"
Sedgwick Noble Lowndes and its affiliates and its successors.
1.25 "Retirement"
The termination of employment of a Participant on his Early, Normal or
Deferred Retirement Date.
1.26 "Retirement Dates"
(a) "Normal Retirement Date" - The date on which the Participant attains
age 65.
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<PAGE>
(b) "Early Retirement Date" - The first day of any month coincident with
or following the date on which the Participant attains age 55,
provided he has completed five Years of Service as of such date.
(c) "Deferred Retirement Date" - The first day of any month subsequent
to the Participant's Normal Retirement Date.
1.27 "Service"
(a) All periods of employment with the Employer and with Hosokawa Micron
(USA) Inc., MikroPul Corporation, Menardi-Criswell Corporation,
Sonodyne Industries, Inc. and U.S. Felt Co.
A period of employment begins as of the date the Employee first
completes an Hour of Employment for the Employer or with Hosokawa
Micron (USA) Inc., MikroPul Corporation, Menardi-Criswell
Corporation, Sonodyne Industries, Inc. and U.S. Felt Co. and ends
on the earlier of the date the Employee resigns, is discharged,
retires or dies or, if the Employee is absent for any other reason,
on the first anniversary of the first day of such absence (with or
without pay) from the Employer. If an Employee is absent for any
reason and returns to the employ of the Employer before incurring a
Break-in-Service, as provided in Subsection (b), he shall receive
credit for his period of absence up to a maximum of 12 months.
Service subsequent to a Break-in-Service will be credited as a
separate period of employment.
(b) "Break-in-Service" - A period of 12-consecutive months during which
an Employee fails to accrue an Hour of Employment with the Employer.
Such period begins on the earlier of the date the Employee resigns,
is discharged, retires or dies or, if the Employee is absent for any
other reason, on the first anniversary of the first day of such
absence (with or without pay) from the Employer. If an Employee is
absent by reason of (i) the pregnancy of the Employee, (ii) the
birth of a child of the Employee, (iii) the placement of a child
with the Employee in connection with an adoption of such child by
such Employee, or (iv) caring for such child immediately following
such birth or placement, such Employee will not be treated as having
retired, resigned or been discharged and the period between the
first and second anniversary of the first day of such absence shall
not be deemed a Break-in-Service.
(c) "Month of Service" - A calendar month, or in the case of aggregation
of non-successive periods of employment, 30 days of employment or
credited absence whether or not completed consecutively.
0395 11
<PAGE>
(d) "Year of Service" - Unless otherwise indicated, 12 Months of
Service.
(e) "Hour of Employment"
(i) For an Employee paid on an hourly basis or for whom hourly
records of employment are required to be maintained, each hour
for which the person is directly or indirectly paid or
entitled to payment for the performance of duties or for the
period of time when no duties are performed, irrespective of
whether the employment relationship has terminated, such as
vacation, holiday or illness.
(ii) For an Employee paid on a non-hourly basis or for whom hourly
records of employment are not required to be maintained, each
week for which the person is directly or indirectly paid or
entitled to payment shall be equal to 45 Hours of Employment.
(iii) A person shall receive an Hour of Employment for each hour for
which back pay has been awarded or agreed to irrespective of
mitigation of damages, provided that each such hour shall be
credited to the Applicable Computation Period to which it
pertains, rather than the Applicable Computation Period in
which the award or agreement is made, and further provided
that no such award or agreement shall have the effect of
crediting an Hour of Employment for any hour for which the
person previously received credit under (i) or (ii) above.
(iv) Notwithstanding the foregoing, Hours of Employment shall be
computed and credited in accordance with Department of Labor
Regulation 2530.200b-2, Subparagraphs (b) and (c).
(f) An Employee shall receive credit for the period of his employment
with another business entity to which he had been transferred by the
Company solely for purposes of determining his vested interest in
accordance with Section 6.04.
1.28 "Services Agreement"
The instrument executed by the Committee and the Recordkeeper fixing the
rights and responsibilities of each.
1.29 "Trust Agreement"
The instrument executed by the Company and the Trustee fixing the rights
and liabilities of each with respect to holding and
0395 12
<PAGE>
administering the Trust Fund, which instrument shall be incorporated by
reference into this Plan.
1.30 "Trustee"
The Trustee or any successor Trustee, appointed by the Board of Directors,
acting in accordance with the terms of the Trust Agreement.
1.31 "Trust Fund"
All assets held by the Trustee for the purposes of the Plan in accordance
with the terms of the Trust Agreement.
1.32 "Valuation Date"
Each business day of the Plan Year as determined by the New York Stock
Exchange.
1.33 "Voice Technology System or Customer Service Representative"
(a) "Voice Technology System (VTS)"
The interactive voice communications system maintained by the
Recordkeeper and utilized by the Participants and the Committee in
facilitating investment fund changes, withdrawal and loan requests
and benefit payments, and for requesting general plan information.
(b) "Customer Service Representative (CSR)"
The individual(s) designated by the Recordkeeper and utilized by the
Participants and the Committee in facilitating investment fund
changes, withdrawal and loan requests and benefit payments, and for
requesting general plan information.
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<PAGE>
ARTICLE 2
---------
ELIGIBILITY AND PARTICIPATION
-----------------------------
2.01 Eligibility for Participation
(a) Each Eligible Employee on the Supplemental Effective Date who was a
Participant of the Plan shall continue as a Participant as of the
Supplemental Effective Date.
(b) Each other Eligible Employee shall become a Participant as of the
Supplemental Effective Date or the first day of the month coincident
with or next following the date he completes six Months of Service.
(c) If a former Participant is reemployed, he shall be eligible to
resume his participation as of the date of his reemployment. Such
Participant may elect to comply with the provisions of Section 3.01
as of the date of his reemployment or any subsequent January, April,
July or October 1.
2.02 Change in Employment Status
(a) In the event a Participant ceases to be an Eligible Employee as the
result of becoming part of an excluded class, only Compensation up
to the date he ceased to be an Eligible Employee shall be considered
for purposes of contributions in accordance with Article 3. Such
Employee shall remain a Participant but shall not be permitted to
contribute in accordance with Article 3 or share in any Company
contributions allocated in accordance with Article 3 for the period
beyond the date he ceased to be an Eligible Employee.
In the event such Participant returns to an eligible class and again
becomes an Eligible Employee, he shall be permitted to share in
Company contributions allocated in accordance with Article 3 as of
the date he again became an Eligible Employee and may elect to
comply with the provisions of Section 3.01 as of such date or any
subsequent January, April, July or October 1. Only Compensation from
the date he again became an Eligible Employee shall be considered
for purposes of such contributions.
(b) If a person otherwise satisfied the eligibility requirements of
Section 2.01 and subsequently becomes an Eligible Employee, he shall
be eligible to become a Participant as of the date he became an
Eligible Employee and may elect to comply with the provisions of
Section 3.01 as of such date or any subsequent January, April, July
or October 1.
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<PAGE>
(c) In the event a collective bargaining agreement is entered into
between the Company and a representative for any class of Employees
in the employ of the Company subsequent to the Supplemental
Effective Date, eligibility for participation in the Plan by such
Employees who are not Participants shall not be extended beyond the
effective date of the collective bargaining agreement unless the
agreement extends participation in the Plan to such Employees. The
provisions of Subsection (a) shall apply to those Employees who are
currently Participants.
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<PAGE>
ARTICLE 3
---------
CONTRIBUTIONS
-------------
3.01 Elective Deferral Contributions
A Participant may, when first eligible or as of any subsequent January,
April, July or October 1 elect to save, through pay reduction each payroll
period, no less than 1% nor more than 16%, in whole percentages, of that
portion of his Compensation attributable to such payroll period, subject
to the limitations on Elective Deferral Contributions under Sections 4.01
and 4.02 and the limitations on annual additions under Section 4.03.
Such contributions shall take the form of before tax contributions
(hereinafter known as "Elective Deferral Contributions") and shall be
deemed to be Company contributions for purposes of Section 414(h) of the
Code.
(a) An initial written election must be made by an Eligible Employee and
submitted to the Committee at least 30 days (or such other period as
the Committee may fix from time to time) prior to the first date the
Eligible Employee would be eligible to become a Participant of the
Plan in accordance with Section 2.01.
(b) An election, once made, shall remain in effect until subsequently
changed by the Eligible Employee in accordance with the provisions
of Section 3.05 or 3.06.
3.02 Reduction of Excess Elective Deferral Contributions
If Elective Deferral Contributions under Section 3.01 are projected to
exceed the limitations of Sections 4.01 or 4.02 at any time during a Plan
Year, the Committee, in a good faith effort to comply with such
limitations, retains the right to reduce the rate of elective deferrals
made by Highly Compensated Employees. Such reduction shall be made in the
sole discretion of the Committee and for purposes of Section 4.02 shall be
accomplished by progressively reducing the Elective Deferral Contributions
of those Highly Compensated Employees with the highest deferral percentage
until the limitations are met.
Contributions made prior to the date of such reduction shall be deemed to
be made pro rata throughout the Plan Year of reference for purposes of
entitlement to a Matching Contribution under Section 3.03.
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<PAGE>
3.03 Matching and Regular Contributions
Subject to the limitations on annual additions under Section 4.03, the
Company shall contribute the following amounts:
(a) Matching Contributions - 100% of that portion of the Participant's
Elective Deferral Contributions each payroll period which does not
exceed 3% of the Participant's Compensation for such payroll period.
Only Elective Deferral Contributions which are not required to be
restricted under Sections 3.02, 4.01 or 4.02 shall be matched. No
Matching Contribution will be provided in excess of the limitations
under Subsections 4.02(b) and (c).
(b) Additional Matching Contributions - For any Plan Year, the Company
may contribute such additional amounts as it shall determine. Such
Additional Matching Contributions shall be allocated to Participants
in the employ of the Company on the last business day of such Plan
Year in the same proportion that the Elective Deferral Contributions
of each such Participant for such Plan Year bears to the aggregate
Elective Deferral Contributions of all Participants for such Plan
Year, taking into consideration only that portion of each
Participant's Elective Deferral Contributions which does not exceed
3% of such Participant's Compensation for each payroll period during
such Plan Year.
Qualified Matching Contributions - For any Plan Year, the Company
may contribute such additional amounts as it shall determine. Such
Qualified Matching Contributions shall be allocated to those
Participants who are Nonhighly Compensated Employees in the employ
of the Company on the last business day of such Plan Year in the
same proportion that the Elective Deferral Contributions of each
such Participant for such Plan Year bears to the aggregate Elective
Deferral Contributions of all such Participants for such Plan Year,
taking into consideration only that portion of each Participant's
Elective Deferral Contributions which does not exceed 3% of such
Participant's Compensation for each payroll period during such Plan
Year.
Such contributions shall be subject to Treasury Regulation 1.401(k)-
1(g)(13).
Notwithstanding the foregoing provision, a Participant otherwise
eligible shall share in such Additional or Qualified Matching
Contributions for the Plan Year of (i) his Retirement, Disability or
death, (ii) the commencement of a Leave of Absence authorized by the
Company or (iii) his transfer to another business entity to which
such Participant had been transferred by the Company, even if the
0395 17
<PAGE>
Participant is not in the employ of the Company on the last business
day of such Plan Year.
(c) Regular Contributions - 2% of the Participant's Compensation,
provided the Participant is in the employ of the Company on the last
business day of such Plan Year, which amount shall be credited at
the end of the Plan Year.
Notwithstanding the foregoing provision, a Participant shall be
entitled to a share of the Company's Regular Contributions for the
Plan Year of (i) his Retirement, Disability or death, (ii), the
commencement or end of a Leave of Absence authorized by the Company
or (iii) his transfer to another business entity to which such
Participant had been transferred by the Company, even if the
Participant is not in the employ of the Company on the last business
day of such Plan Year.
A Participant shall not share in the allocation of the Company's
Regular Contributions for any Plan Year during which he terminated
his employment for reasons other than specified in (i), (ii) or
(iii).
Notwithstanding the above, in the event the Plan fails to meet the
requirements of Section 401(a)(26) or 410(b) of the Code, those
Participants who are not in the employ of the Company on the last
business day of the Plan Year shall share in the allocation of the
Company's Regular Contribution to the extent necessary by
progressively including those Participants with the greatest number
of Hours of Employment to a minimum of 501 such hours until the
requirements are met.
(d) Qualified Nonelective Contributions - Such amount as the Company
shall determine for any Plan Year, which shall be allocated to those
Participants who are Nonhighly Compensated Employees in the same
proportion that his Compensation bears to the aggregate Compensation
of all such Participants for such Plan Year, provided the
Participant is in the employ of the Company on the last business
day of such Plan Year, which amount shall be credited at the end of
the Plan Year.
Such contributions shall be subject to Treasury Regulation
1.401(k)-l(g)(13).
Notwithstanding the foregoing provision, a Participant otherwise
eligible shall be entitled to a share of the Company's Qualified
Nonelective Contributions for the Plan Year of (i) his Retirement,
Disability or death, (ii), the commencement or end of a Leave of
Absence authorized by the Company or (iii) his transfer to another
business entity to
0395 18
<PAGE>
which such Participant had been transferred by the Company, even if
the Participant is not in the employ of the Company on the last
business day of such Plan Year.
A Participant shall not share in the allocation of the Company's
Qualified Nonelective Contributions for any Plan Year during which
he terminated his employment for reasons other than specified in
(i), (ii) or (iii).
As used herein, Leave of Absence shall mean a leave granted for pregnancy,
sickness, death or any other family obligation or status; personal or
family hardship or special business circumstances; educational purposes;
and/or civic, charitable or governmental services, provided that all
Eligible Employees under similar circumstances shall be treated in a
similar manner.
3.04 Voluntary After-Tax Contributions
(a) The Committee, solely at its discretion, may elect to provide
Participants with the option of making Voluntary After-Tax
Contributions for each Plan Year any amount from 2% to 10%, in whole
percentages, of Compensation.
(b) The Committee may also, solely at its discretion, permit such
Participants to contribute the difference between (i) 10% of such
Participant's Compensation while a Participant of the Plan,
excluding Compensation that is not paid by the Company, and (ii) the
sum of all previous Voluntary After-Tax Contributions actually made
by the Participant.
(c) All contributions under this Section shall be subject to the
limitations on Voluntary After-Tax Contributions under Section 4.02
and the limitations on annual additions under Section 4.03.
(d) The Committee shall promulgate such specific rules and regulations
as may be required with respect to the implementation and operation
of these provisions.
3.05 Contribution Changes
A Participant may, subject to the minimum and maximum percentages as
specified in Section 3.01, increase or reduce the percentage rate of his
Elective Deferral Contributions and/or, if applicable, his Voluntary
After-Tax Contributions four times during a Plan Year, as of any January,
April, July or October 1 (or as of such other dates as the Committee may
fix from time to time), by written notification to the Committee at least
30 days (or such other period as the Committee may fix from time to time)
prior to the effective date of such change.
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<PAGE>
3.06 Discontinuance of Contributions
(a) A Participant may discontinue his Elective Deferral Contributions
and/or, if applicable, his Voluntary After-Tax Contributions at any
time, but limited to four times during a Plan Year, by written
notification to the Committee at least 30 days (or such other
period as the Committee may fix from time to time) prior to the
effective date of such discontinuance.
(b) A Participant may resume his Elective Deferral Contributions and/or,
if applicable, his Voluntary After-Tax Contributions as of any
subsequent January, April, July or October 1 (or such other dates as
the Committee may fix from time to time) by written notification to
the Committee at least 30 days (or such other period as the
Committee may fix from time to time) prior to the effective date of
such resumption.
(c) The discontinuance of Elective Deferral Contributions will
automatically include a discontinuance of the Matching
Contributions. A discontinuance only of the Participant's Voluntary
After-Tax Contributions will not affect contributions to the
Participant's other accounts.
3.07 Rollover Contributions from Other Qualified Plans
(a) Any Eligible Employee upon commencement of employment may make a
rollover contribution to the Trust Fund of all or any portion of the
entire amount (including money or any other property acceptable to
the Committee and Trustee) which is an eligible rollover
distribution, as defined in Section 402(c)(4) of the Code and
temporary Treasury Regulation 1.402 (C) -2T, Q&A 3 and 4, provided
such rollover contribution is either (i) a direct transfer from
another qualified plan or (ii) received on or before the 60th day
immediately following the date the Employee received such
distribution from a qualified plan or conduit Individual Retirement
Account or Annuity.
Such Eligible Employee must complete and sign the Plan's rollover
request form and provide such evidence as is requested by the
Committee, including evidence supporting the satisfaction of the
remaining provisions of this Section.
(b) The distribution intended to be rolled over must be an eligible
rollover distribution from a
(i) qualified trust, as verified by written evidence from the
administrator of the distributing plan;
0395 20
<PAGE>
(ii) conduit IRA, as verified in writing by the custodian or
insurance company that the original distribution from the
qualified trust was an eligible rollover distribution; or
(iii) qualified trust as a direct rollover as provided for in
Section 402(c) of the Code.
(c) The Committee shall credit the fair market value of any rollover
contribution and investment earnings attributable thereto to the
Participant's Rollover Account. Such rollover contributions shall
not be considered annual additions for purposes of Section 4.03.
(d) An Eligible Employee who becomes a Participant by virtue of the
acceptance of such rollover contribution, but who is not otherwise
eligible for participation in accordance with Section 2.01, shall
not be entitled to make contributions or share in any Company
contribution allocated in accordance with this Article 3 or Article
11.
(e) The Committee may promulgate specific rules and regulations
governing all aspects of this Section.
(f) The Committee may promulgate specific rules and regulations
governing all aspects of this Section.
3.08 Transfer of Assets from Other Qualified Plans
(a) The Committee may accept the direct transfer to the Trust Fund from
another qualified trust fund of those assets (including money or any
other property acceptable to the Committee and Trustee) attributable
to a Participant's participation in any qualified plan to which such
trust relates. Such transferred amounts shall not be considered
annual additions for purposes of Section 4.03.
Notwithstanding the foregoing provisions, for Participants who
commenced their participation in the Plan on or after January 1,
1992, transfers from a plan subject to Section 412 of the Code
without the required spousal consent shall not be permitted.
(b) The amount transferred shall be credited to the Participant's
Accounts as determined by the Committee, taking into account the
applicable vesting schedules, amounts subject to special tax
treatment and withdrawal rules. Additional Transfer Accounts will be
established, if required, to accommodate these objectives.
(c) An Eligible Employee who becomes a Participant by virtue of a
transfer of assets, but who is not otherwise eligible for
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<PAGE>
participation in accordance with Section 2.01, shall not be entitled
to make contributions or share in any Company contribution allocated
in accordance with this Article 3 or Article 11.
(d) The Committee may promulgate specific rules and regulations
governing all aspects of this Section but until promulgated, all
other provisions of the Plan shall be applicable based on the
Account to which such assets were transferred.
3.09 Deposit of Contributions
The Company shall deposit the Elective Deferral Contributions and
Voluntary After-Tax Contributions with the Trustee as soon as practicable
(in no event to exceed 90 days) following the date on which such amounts
would otherwise have been paid to the Participant. In no event shall
Voluntary After-Tax Contributions be deposited later than 30 days after
the end of the Plan Year. All other Company contributions must be
deposited by the earlier of the end of the subsequent Plan Year or after
the end of the period described in Code Section 404(a)(6) applicable to
the tax year of the Company with or within which the Plan Year ends.
3.10 Payment of Expenses
In addition to its contributions, the Company may elect to pay all the
administrative expenses of the Plan and all fees and retainers of the
Plan's Trustee, Recordkeeper, accountant, counsel, consultant,
administrator or other specialist so long as the Plan or Trust Fund
remains in effect. If the Company does not pay all or part of such
expenses, the Trustee shall pay these expenses from the Trust Fund. All
expenses relating directly to the investments of the Trust Fund, including
taxes, brokerage commissions and registration charges, must be paid from
the Trust Fund.
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<PAGE>
ARTICLE 4
CONTRIBUTION LIMITATIONS
4.01 $7,000 Limitation on Elective Deferral Contributions
Each Participant's Elective Deferral Contributions under Section 3.01,
when added to any additional elective deferrals, as defined in Section
402(g) of the Code, under all other plans maintained by the Employer,
shall be limited to $7,000 during any calendar year, adjusted annually for
increases in the cost-of-living in accordance with Section 415(d) of the
Code, or such other maximum permitted under Section 402(g) of the Code.
To the extent a Participant's Elective Deferral Contributions exceed the
above limitation the Employer will notify the Plan of such excess and such
amount will be designated as an excess deferral. Such excess deferral will
be distributed to such Participant with investment experience no later
than April 15 following the close of the calendar year to which such
excess relates. Such excess may be distributed prior to the close of the
calendar year of reference provided the correcting distribution is made
after the date on which the plan received the excess deferral and is
specifically designated as an excess deferral.
Investment experience will be determined in accordance with the fourth
paragraph of Section 4.02(d) below.
4.02 Limitation on Elective Deferral, Matching and/or Voluntary After-Tax
Contributions
(a) The Actual Deferral Percentage of Highly Compensated Employees in
the Testing Group for any Plan Year shall be limited to the greater
of
(i) the Actual Deferral Percentage for the Nonhighly Compensated
Employees in the Testing Group multiplied by 1.25; or
(ii) the Actual Deferral Percentage for the Nonhighly Compensated
Employees in the Testing Group multiplied by 2.00, provided,
however, that the Actual Deferral Percentage for the Highly
Compensated Employees in the Testing Group may not exceed the
Actual Deferral Percentage for such Nonhighly Compensated
Employees by more than two percentage points.
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<PAGE>
(b) The Actual Contribution Percentage of Highly Compensated Employees
in the Testing Group for any Plan Year shall be limited to the
greater of
(i) the Actual Contribution Percentage for Nonhighly Compensated
Employees in the Testing Group multiplied by 1.25; or
(ii) the Actual Contribution Percentage for Nonhighly Compensated
Employees in the Testing Group multiplied by 2.00, provided,
however, that the Actual Contribution Percentage for the
Highly Compensated Employees in the Testing Group may not
exceed the Actual Contribution Percentage for such Nonhighly
Compensated Employees by more than two percentage points.
(c) If one or more Highly Compensated Employees are eligible for both
Elective Deferral Contributions and to receive Matching
Contributions or to make Voluntary After-Tax Contributions, such
contributions shall be limited to the greater of (i) or (ii) below.
Notwithstanding the above, this Subsection (c) shall only be
applicable if both the Actual Deferral Percentage and the Actual
Contribution Percentage of the Highly Compensated Employees exceeds
1.25 multiplied by the respective Nonhighly Compensated Employee
percentages.
(i) The sum of
(A) 1.25 times the greater of
(1) the Actual Deferral Percentage for the Nonhighly
Compensated Employees, or
(2) the Actual Contribution Percentage for the
Nonhighly Compensated Employees; and
(B) two plus the lesser of Subparagraph (1) or (2) above,
provided that such amount may not exceed 200% of the
lesser of Subparagraph (1) or (2).
(ii) The sum of
(A) 1.25 times the lesser of
(1) the Actual Deferral Percentage for the Nonhighly
Compensated Employees, or
(2) the Actual Contribution Percentage for the
Nonhighly Compensated Employees; and
0395 24
<PAGE>
(B) two plus the greater of Subparagraph (1) or (2) above,
provided that such amount may not exceed 200% of the
greater of Subparagraph (1) or (2).
(d) To the extent the otherwise applicable Elective Deferral, Voluntary
After-Tax and Matching Contributions for any Plan Year must be
limited due to the restrictions described in Subsections (a), (b)
and (c), such limitations shall be applied to the Highly
Compensated Employees' Elective Deferral, Matching and/or Voluntary
After-Tax Contribution percentages, whichever applicable, beginning
with the highest of such percentages until the limitations are met.
In satisfying the limited percentages applicable to any individual
Highly Compensated Employee, reductions will first be made to
Voluntary After-Tax Contributions. Additional reductions to satisfy
Subsection (c) shall be applied first to unmatched Elective Deferral
Contributions, if any, and then to matched Elective Deferral
Contributions and Matching Contributions proportionately.
Excess Elective Deferral, Voluntary After-Tax and Matching
Contributions shall be allocated to Participants who are subject to
the family aggregation rules of Section 414(q) (6) of the Code in
proportion to their unadjusted deferrals and contributions.
Any excess Elective Deferral or Voluntary After-Tax Contributions
that result from the above limitations shall be refunded to such
Highly Compensated Employees with investment experience, no later
than the last day of the Plan Year subsequent to the Plan Year to
which the excess relates. The limitation on Matching Contributions
is effected by limiting the otherwise applicable Matching
Contributions in accordance with Subsection 3.03(a).
Investment experience shall be the income or loss allocable to the
Participant's Elective Deferral Contribution Account or Voluntary
After-Tax Contribution Account for the Plan Year multiplied by a
fraction, the numerator of which is such Participant's excess
Elective Deferral or Voluntary After-Tax Contributions for the year
and the denominator is the sum of (i) the Participant's Elective
Deferral Contribution Account or Voluntary After-Tax Contribution
Account balance as of the beginning of the Plan Year and (ii) the
Participant's Elective Deferral or Voluntary After- Tax
Contributions for the Plan Year.
(e) Definitions and Special Rules
(i) The Actual Deferral Percentage for the Highly Compensated
Employees and Nonhighly Compensated Employees for a Plan Year
shall be the average of
0395 25
<PAGE>
the ratios (calculated separately for each such Employee in
the Testing Group) of
(A) the amount of contributions credited to the Elective
Deferral Contribution Account on behalf of each such
Employee in the Testing Group during such Plan Year, to
(B) the Compensation of each such Employee in the Testing
Group for such Plan Year.
For purposes of the above, Qualified Matching Contributions
and Qualified Nonelective Contributions may be taken into
account in determining the Actual Deferral Percentage for each
Employee in the Testing Group for such Plan Year provided
such amounts comply with the provisions of Treasury Regulation
1.401(k)-l(b).
Qualified Matching Contributions, Qualified Nonelective
Contributions and Elective Deferral Contributions included in
the calculation of the Actual Contribution Percentages will
not be included in the calculation of Actual Deferral
Percentages.
(ii) The Actual Contribution Percentage for the Highly Compensated
and Nonhighly Compensated Employees in the Testing Group for a
Plan Year shall be the average of the ratios (calculated
separately for each such Employee in the Testing Group) of
(A) the amount of Matching and Voluntary After-Tax
Contributions credited on behalf of each such Employee
in the Testing Group during such Plan Year, to
(B) the Compensation of each such Employee in the Testing
Group for such Plan Year.
For purposes of the above, Qualified Matching Contributions,
Qualified Nonelective Contributions and Elective Deferral
Contributions may be taken into account in determining the
Actual Contribution Percentage for each Employee in the
Testing Group for such Plan Year provided such amounts comply
with the provisions of Treasury Regulation 1.401(m)-1(b).
Qualified Matching Contributions, Qualified Nonelective
Contributions and Elective Deferral contributions included in
the calculation of the Actual Deferral Percentages will not be
included in the calculation of Actual Contribution
Percentages.
0395 26
<PAGE>
(iii) Testing Group shall mean the group of all Eligible Employees
eligible for participation in accordance with Section 2.01.
(iv) All Eligible Employees in the Testing Group will be included
in determining the Actual Deferral Percentages and/or the
Actual Contribution Percentages, whichever is applicable. The
ratio averaged into the respective percentages will be zero
for any Eligible Employee in the Testing Group if the
otherwise applicable numerator is zero.
(v) All such ratios and the average of such ratios shall be
calculated to the nearest one-hundredth of one percent.
(vi) The deferral percentage and/or contribution percentage for a
Plan Year for any Highly Compensated Employee who is eligible
to participate under two or more plans or arrangements
described in Section 401(a) or 401(k) of the Code that are
maintained by the Employer shall be determined as if all
contributions were made under a single plan.
(vii) In the event that this Plan satisfies the requirements of
Section 401(k), 401(a)(4) or 410(b) of the Code only if
aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of such Sections of the
Code only if aggregated with this Plan, deferral and
contribution percentages shall be determined as if all such
plans were a single plan. Any other plan may be aggregated
with this Plan at the discretion of the Company. Plans may be
aggregated in order to satisfy Section 401(k) of the Code only
if they have the same Plan Year.
(viii)The ratio for any 5% owner, as defined in Section 416(i)(1)
of the Code, and for any Highly Compensated Employee in the
group consisting of the 10 Highly Compensated Employees paid
the greatest Compensation shall be determined by aggregating
the Elective Deferral Contributions or Matching and Voluntary
After-Tax Contributions and Compensation of such individual
with the respective amounts of each other Eligible Employee
who is a family member of such Highly Compensated Employee.
Once the ratio for the family group is determined, the
individual ratios of the family members are not taken into
account.
0395 27
<PAGE>
For purposes of this paragraph, family member shall mean the
spouse, lineal ascendant or descendant or spouse of a lineal
ascendant or descendant of the Highly Compensated Employee.
4.03 Limitation on Allocations
(a) The "annual addition" for any Participant shall not exceed the amount
determined hereunder. Annual addition shall mean the sum of Employer
contributions, Employee contributions and forfeitures allocated on behalf
of a Participant for a Plan Year, which is defined to be the limitation
year.
Annual additions shall also include excess deferrals, excess contributions
and excess aggregate contributions, other than excess deferrals
distributed in accordance with Treasury Regulation 1.402(g)-l(e)(2) or
(3).
The determination of the annual addition will be made as if all defined
contribution plans of the Employer were one plan and any Participant
contributions to defined benefit plans will be treated as contributions to
defined contribution plans. Annual additions will be applied to the
applicable Plan Year in accordance with Section 1.415-6(b) of the Treasury
Regulations.
For purposes of Subsection (b) (i), annual addition shall also include
amounts allocated, after March 31, 1984, to an individual medical account,
as defined in Section 415(l) of the Code which is part of a defined
benefit plan maintained by the Employer and amounts derived from
contributions paid or accrued after December 31, 1985, in taxable years
ending after such date, which are attributable to post-retirement medical
benefits allocated to the separate account of a Key Employee (as defined
in Section 11.02) under a welfare benefit plan (as defined in Section
419A(d) of the Code) maintained by the Employer.
(b) The annual addition for any Participant shall not exceed the lesser of (i)
or (ii) below:
(i) $30,000, or if greater, one-fourth of the defined benefit dollar
limitation set forth in Section 415(b)(1)(A) of the Code as in
effect for the limitation year.
In the event of a short Plan Year, the maximum dollar limitation
shall be divided by 12 and multiplied by the number of months in the
short Plan Year.
(ii) 25% of the Participant's Compensation.
0395 28
<PAGE>
(c) If a Participant also is or has been a participant in one or more
defined benefit plans of the Employer, whether or not terminated,
the projected annual benefit from such defined benefit plans shall
be reduced so that a "combined benefit factor" in excess of 1.0
shall not result. The combined benefit factor is the sum of (i) the
defined benefit factor and (ii) the defined contribution factor
where
(i) the defined benefit factor is a fraction
(A) the numerator of which is the Participant's projected
annual benefit under all defined benefit plans of the
Employer at the end of the limitation year of the Plan,
and
(B) the denominator of which is the lesser of
(1) 1.25 multiplied by the maximum allowable annual
benefit under Sections 415(b)(1)(A) and 415(d)
of the Code at the end of the limitation year of
the Plan, or
(2) 1.4 multiplied by the maximum allowable annual
benefit under Section 415(b)(1)(B) of the Code
at the end of the limitation year of the Plan, and
(ii) the defined contribution factor is a fraction
(A) the numerator of which is the sum of the annual
additions for such Participant under all defined
contribution plans of the Employer, whether or not
terminated, for all such years during which he was a
participant in such plans, and
(B) the denominator of which is the sum of the lesser of the
amounts determined in (1) or (2) for the current year
and each prior year during which the Participant was
employed by the Employer, regardless of whether or not a
plan was in existence during those years:
(1) 1.25 multiplied by the maximum dollar limitation
as defined in Subsection (b)(i), or
(2) 1.4 multiplied by the compensation limitation as
defined in Subsection (b)(ii).
0395 29
<PAGE>
(d) A Participant shall not be permitted to defer Compensation or
contribute amounts, nor shall he be entitled to an allocation of any
Employer contributions or forfeitures under any qualified defined
contribution plan which exceeds the limitations described herein.
(e) The limitations on allocations to a Participant's Account will be
applied by limiting otherwise allocable amounts starting with the
latest allocations during the limitation year. To the extent more
than one type of addition is allocated as of any date, the
limitation will be applied in the following order:
(i) forfeitures;
(ii) Employer contributions under profit-sharing plans other than
matching contributions;
(iii) Employer contributions under money purchase plans other than
matching contributions;
(iv) Employer matching contributions under money purchase plans.
(v) Employer matching contributions under profit-sharing plans;
(vi) Employee contributions; and
(vii) elective deferrals.
Amounts listed above which would have been added to a Participant's
Account based on an allocation method specified in a Plan will be
reallocated among the remaining Participants eligible to share under
the Plan.
Amounts listed above which would have been added to the
Participant's Account based on an individually defined entitlement
will reduce the Employer's contribution commitment.
Employee contributions and elective deferrals will be limited at the
time deposited and will not be permitted to the extent the limits of
this Section would be violated.
In the event annual additions on behalf of a Participant
participating in more than one plan of the same type during a Plan
Year are required to be limited under this Section, the limitation
shall be ratably apportioned among all such plans.
0395 30
<PAGE>
(f) Notwithstanding the above, if an excess allocation occurs as a
result of
(i) an allocation of forfeitures;
(ii) a reasonable error in determining a Participant's
Compensation;
(iii) a reasonable error in determining the amount of elective
deferrals that may be made under this Section; or
(iv) any other reason acceptable to the Internal Revenue Service,
the resulting additions to the Participant's Account will be reduced
by first eliminating Employee contributions and elective deferrals
to the extent otherwise required to be refunded Sections 402(g),
401(k)(3) or 401(1)(2) of the Code. Any additional reductions
permitted under this Subsection will be applied in the
manner described in Subsection (e).
However, any amounts paid to the Trust for the limitation year which
are not allocated to other Participants will be held in a suspense
account, without investment earnings, and allocated and reallocated
in the following limitation year and, to the extent necessary, each
subsequent limitation year. Allocations from a suspense account in a
money purchase plan will be viewed as an allocation of accrual
requirement for the year in which the amount is ultimately
allocated.
In the event a plan is terminated, suspense accounts shall revert to
the Employer to the extent such accounts may not then be allocated
on behalf of any remaining eligible Participants.
(g) Notwithstanding any provision of the Plan to the contrary,
(i) the annual addition for any Plan Years beginning before
January 1, 1987 shall not be recomputed to include all
Employee contributions.
(ii) if the Employee was a Participant as of the first day of the
first limitation year beginning after December 31, 1986, in
one or more defined benefit plans maintained by the Employer
which were in existence on May 6, 1986, the denominator of the
defined benefit fraction will not be less than 125 percent of
the sum of the annual benefits under such plans which the
Participant had accrued as of the
0395 31
<PAGE>
close of the last limitation year beginning before January 1,
1987, disregarding any changes in the terms and conditions of
the plan after May 5, 1986. The preceding sentence applies
only if the defined benefit plans individually and in the
aggregate satisfied the requirements of Section 415 of the
Code for all limitation years beginning before January 1,
1987.
(iii) if the Employee was a Participant as of the end of the first
day of the first limitation year beginning after December 31,
1986, in one or more defined contribution plans maintained by
the Employer which were in existence on May 6, 1986, the
numerator of the defined contribution fraction will be
adjusted if the sum of this fraction and the defined benefit
fraction would otherwise exceed 1.0 under the terms of this
Plan. Under the adjustment, an amount equal to the product of
(A) the excess of the sum of the fractions over 1.0 times (B)
the denominator of the defined contribution fraction, will be
permanently subtracted from the numerator of the defined
contribution fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of the last
limitation year beginning before January 1, 1987, and
disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the Code Section 415
limitation applicable to the first limitation year beginning
on or after January 1, 1987.
(iv) transitional rules provided in conjunction with legislative
changes and changes in the Plan's top-heavy status will be
applied in accordance with Internal Revenue service
promulgations and legislative history.
0395 32
<PAGE>
ARTICLE 5
MAINTENANCE OF ACCOUNTS, INVESTMENT FUNDS AND
VALUATION OF THE TRUST FUND
5.01 Maintenance of Accounts
The Committee shall establish and maintain a separate Account in the name
of each Participant to which it shall credit all amounts contributed in
accordance with Articles 3 and 11.
5.02 Investment Election
(a) Initial Election - Each Participant shall designate one or more of
the investment funds established in accordance with Section 5.03 for
the investment of his Account. The percentage elected for investment
in any one of the investment funds must be a multiple of 1%, and the
same percentage shall be applied equally to each of the
Participant's Accounts.
(b) Subsequent Election - A Participant may, change his investment fund
election with respect to subsequent contributions as of any date,
but until changed, an investment fund election, once made, shall
remain in effect for all subsequent deposits to the Accounts. Such
change shall become effective as of the date such election was made
through the VTS or CSR if such election is made before noon Eastern
Time. If such election is made after noon Eastern Time, it will be
effective as of the next following business day.
(c) Transfer Election - A Participant may elect a change in investment
funds applicable to his then existing Accounts as of any date,
provided such change (i) results in multiples of 1% in any one
investment fund and a combined total of 100% in the fund(s)
selected;(ii) is applied to the ending balance determined as of the
applicable Valuation Date; and (iii) is applicable equally to each
of the Participant's Accounts. Such change shall become effective as
of the date such election was made through the VTS or CSR if such
election is made before noon Eastern Time. If such election is made
after noon Eastern Time, it will be effective as of the next
following business day.
(d) The Committee may promulgate any additional rules and regulations it
deems necessary or appropriate to govern all aspects of this
Section.
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<PAGE>
5.03 Investment Funds
The Trust Fund shall be divided into such investment funds as designated
by the Committee and approved by the Trustee for the investment of all
Accounts which shall be administered as a unit. Until changed, the
investment funds shall include, but not be limited to, the following:
(a) The Daiwa Money Market Fund consisting of short-term direct and
indirect obligations of the United States government with maximum
maturities of one year.
(b) The Stepstone Government securities Fund consisting of high grade
securities with quality ratings ranging from direct and indirect
obligations of the United States government to corporate bonds with
ratings of AAA through BBB by Standard & Poor's and Moody's.
(c) The Bond Fund of America which invests in a diversified portfolio
consisting primarily of marketable fixed-income debt securities,
government obligations and money market instruments.
(d) The Daiwa Balanced Fund which invests in a combination of equities
of U.S. corporations and investment grade debt.
(e) The Fidelity Advisor Income & Growth Fund which invests in equity
and fixed-income securities with income, growth of income and
capital appreciation potential. It may also invest in equity
securities of some smaller, more rapidly growing companies.
(f) The Daiwa Pooled Equity Fund which invests in large U.S. company
stocks and convertible securities.
(g) The Investment Company of America Fund which invests primarily in
common stocks but may also invest in high-quality convertibles and
debt securities.
(h) The Stepstone Emerging Growth Fund which will be invested primarily
in the common stocks of smaller and medium-sized companies with
above-average prospects for earnings growth.
(i) The AIM Constellation Fund which invests primarily in common stocks,
emphasizing small to medium sized emerging growth companies.
(j) The American EuroPacific Fund which will be invested in a carefully
chosen selection of more than 250 companies based outside the U.S.
which offer above-average growth potential.
0395 34
<PAGE>
5.04 Valuation of Trust Fund
(a) The Trust Fund shall be valued by the Trustee as of each Valuation
Date on the basis of its fair market value.
(b) The Trust Fund may also be valued by the Trustee as of any other
date as the Committee may authorize for any reason the Committee
deems appropriate.
5.05 Allocation of Investment Earnings and Expenses
On the basis of the valuation as of a Valuation Date, subject to the
provisions of Subsection 7.03(b) and 7.04(h), the Accounts of all
Participants, shall be (a) proportionately adjusted to reflect expenses in
accordance with Section 3.10 and investment earnings, other than those
credited to a specific Account; and (b) directly adjusted to reflect all
other applicable transactions during the Plan Year attributable to such
Accounts including, but not limited to, any contributions or
distributions.
0395 35
<PAGE>
ARTICLE 6
BENEFITS PAYABLE UPON TERMINATION OF EMPLOYMENT
6.01 Upon Retirement
A Participant shall be 100% vested in his Account at all times after first
becoming eligible for Retirement.
A Participant shall be eligible to retire on his Early, Normal or Deferred
Retirement Date.
In the event a Participant does not retire on his Early or Normal
Retirement Date, he shall continue to be credited with contributions in
accordance with Articles 3 and 11 until his actual retirement.
6.02 Upon Disability
(a) A Participant who incurs a Disability prior to termination of
employment shall be 100% vested in his Account.
(b) The Committee shall require evidence that the application for such
benefits has been approved by the Social Security Administrator. The
final determination shall be made by the Committee on the basis of
such evidence.
(c) If such Participant returns to the employ of the Company, he shall
resume his participation as of the date of his return. The
Participant's vested interest in that portion of his Account
attributable to Service from the date of his last reemployment shall
be determined in accordance with the provisions of Article 6,
without regard to his prior Disability.
6.03 Upon Death
(a) A Participant who dies prior to termination of employment shall be
100% vested in his Account.
(b) Upon the death of a Participant
(i) who became a Participant on or after January 1, 1992, his
Beneficiary shall be entitled to 100% of such Participant's
vested Account.
(ii) who became a Participant prior to January 1, 1992, if death
occurs before his Annuity Starting Date, the Participant's
Protected Spouse shall be entitled to 100% of such
Participant's vested Account. If the Participant is not
survived by a Protected
0395 36
<PAGE>
Spouse, the Participant's vested Account shall be payable to his
Beneficiary. Such vested Account shall take into account any
Participant loans made in accordance with Article 13.
Notwithstanding the above, subject to Subsection (c), such
Participant may waive the death benefit otherwise payable to the
Protected Spouse in favor of a different Beneficiary. Such waiver
must specify such other Beneficiary and include the written
acknowledgment and irrevocable consent of the Participant's spouse
and be witnessed by a Plan representative or a notary public.
(c) Any waiver of death benefits by a Participant who commenced
participation in the Plan prior to January 1, 1992 to the
Participant's Protected Spouse with respect to 50% of any Account
which includes funds transferred without the required spousal
consent, directly or indirectly, to the Plan from a plan subject to
Section 412 of the Code, prior to termination of employment or the
first day of the Plan Year during which the Participant attains age
35 will be null and void as of the earlier of such dates, but may be
renewed by executing a new waiver which meets the requirement of
Subsection (b)(ii).
In the event of the Participant's death on or subsequent to the
indicated dates and prior to the submission of a new waiver, the
Protected Spouse shall be entitled to 50% of any such Account.
The designation of a Beneficiary other than the Protected Spouse to
receive the balance of benefits payable remains valid after the
earlier of the dates described above.
Any waiver prior to the first day of the Plan Year during which such
Participant attains age 35 which is made by a Participant whose
employment was terminated but who is subsequently reemployed is not
revoked by this rule at any time but applies solely to benefits
accrued before the date of termination.
(d) The Committee shall provide to Participants who commenced
participation in the Plan prior to January 1, 1992 within the
Applicable Period notice of the availability of any election which
results in a waiver of any death benefit payable to the Protected
Spouse. Such notice shall be in such terms and such manner as would
be comparable to the notice described in Subsection 7.04(e).
0395 37
<PAGE>
For purposes of this Subsection, the term Applicable Period means,
with respect to a Participant, whichever of the following periods
ends last:
(i) The period beginning with the first day of the Plan Year in
which the Participant attains age 32 and ending with the close
of the Plan Year preceding the Plan Year in which the
Participant attains age 35.
(ii) A reasonable period ending after the individual becomes a
Participant.
(iii) A reasonable period ending after this Section first applies to
the Participant.
(iv) A reasonable period ending after separation from service in
the case of a Participant who separates before attaining age
35.
A reasonable period ending after the events described in
Paragraphs (ii), (iii) and (iv) is the end of the two-year
period beginning one year prior to the date the applicable
event occurs, and ending one year after that date. In the case
of a Participant who separates from service before the Plan
Year in which age 35 is attained, notice shall be provided
within the two-year period beginning one year prior to
separation and ending one year after separation. If such
Participant thereafter returns to employment with the Company,
the Applicable Period for such Participant shall be
redetermined.
(e) Upon the death of a Participant who commenced participation in the
Plan prior to January 1, 1992 after his Annuity Starting Date, his
Beneficiary shall be entitled to receive the death benefit, if any,
as determined by the provisions of the benefit elected in accordance
with Sections 7.03 and 7.04.
(f) Each Participant, upon becoming eligible for participation in the
Plan, may designate a primary Beneficiary to receive the benefits
payable in the event of his death, or, absent the applicability of a
survivor annuity, may designate a secondary Beneficiary to receive
any benefits payable in the event of the death of the primary
Beneficiary. If a Participant designates a primary Beneficiary but
not a secondary Beneficiary or if any such secondary Beneficiary
dies, the Beneficiary last in receipt of or entitled to any benefit
shall have the right to designate a successor Beneficiary to receive
any benefits payable in the event of his death. In the absence of
any such designation, benefits payable upon the death of the last
living Beneficiary shall
0395 38
<PAGE>
be paid in a lump sum to such Beneficiary's estate. A Participant may
change his Beneficiary designation at any time. All Beneficiary
designations and changes shall be made on an appropriate form and filed
with the Committee. If the primary Beneficiary designated by the
Participant is anyone other than the Participant's Protected Spouse, such
designation must include the written acknowledgment and consent of such
spouse and be witnessed by a Plan representative or a notary public, to
the extent required by law and the Committee. Such consent will be limited
to a specific alternate Beneficiary and any change in such alternate
Beneficiary will require a new spousal consent.
6.04 Upon Other Termination of Employment
(a) Upon a Participant's termination of employment for reasons other
than Retirement, Disability or death, the following provisions shall
be applicable:
(i) Such Participant shall have a 100% vested interest in his
Elective Deferral Contribution, Voluntary Contribution,
Rollover, Transfer, Qualified Matching Contribution and
Qualified Nonelective Contribution Accounts.
(ii) Such Participant's vested interest in his Matching
Contribution and Regular Contribution Accounts shall, subject
to Subsection 6.05(a), be determined in accordance with the
following schedule on the basis of such Participant's full
Years of Service.
<TABLE>
<CAPTION>
Number of Years Percentage of Account
--------------- ---------------------
<S> <C>
Less than 2 full years 0%
2 full years 40%
3 full years 60%
4 full years 80%
5 or more full years 100%
</TABLE>
(b) The portion of a Participant's Account which is not vested shall be
forfeited on the earlier of the date on which the Participant
receives a distribution of his vested benefits or the date on which
such Participant incurs five consecutive Breaks-in-Service. If a
Participant does not have a vested interest in his Account, he shall
be deemed to have received an immediate distribution as of the date
on which such Participant terminated employment.
That portion of the Participant's Account which is not vested shall
be used to reduce the Company's contributions in accordance with
Section 3.03.
0395 39
<PAGE>
6.05 Reemployment and Repayment of Benefits
(a) If a Participant is reemployed by the Employer prior to incurring
five consecutive Breaks-in-Service, the dollar amount which was
subject to forfeiture in accordance with Subsection 6.04(b) will be
restored to the Participant's Account if the Participant repays the
amount distributed, if any, from Elective Deferral Contribution,
Matching Contribution, Regular Contribution, Qualified Matching
Contribution and Qualified Nonelective Contribution Accounts. Such
amounts must be repaid to the Trust Fund in a lump sum within five
years from the date such Participant resumes his employment with the
Employer. If a Participant who is deemed to receive a distribution
pursuant to Subsection 6.04(b) is reemployed by the Employer prior
to incurring five consecutive Breaks-in-Service, the dollar amount
which was subject to forfeiture in accordance with such Subsection
will be restored to the Participant's Account. The funds required
for the restoration of such Account will be paid by the Company.
Such repaid amounts shall be credited to the Participant's Accounts
as determined by the Committee, taking into account the applicable
vesting schedules, amounts subject to special tax treatment and
withdrawal rules. Additional Accounts will be established, if
required, to accommodate these objectives. Amounts repaid and
restored in accordance with this Subsection will not be treated as
annual additions for purposes of Section 4.03.
(b) Notwithstanding the above, no restoration shall be made to a
Participant's Account and no repayment will be permitted with
respect to funds accumulated prior to reemployment in the case of
(i) any Participant who was fully vested, or
(ii) any Participant who is reemployed after incurring five
consecutive Breaks-in-Service.
0395 40
<PAGE>
ARTICLE 7
DISTRIBUTION OF BENEFITS
7.01 Claim Procedure For Benefits
(a) Any request for specific information with respect to benefits
under the Plan must be made to the Committee in writing by a
Participant or his Beneficiary. Oral communications will not be
recognized as a formal request or claim for benefits.
(b) The Committee shall provide adequate notice in writing to any
Participant or Beneficiary whose claim for benefits under the
Plan has been denied, (i) setting forth the specific reasons for
such denial; specific references to pertinent plan provisions; a
description of any material and information which had been
requested but not received by the Committee; and, (ii) advising
such Participant or Beneficiary that any appeal of such adverse
determination must be in writing to the Committee, within such
period of time designated by the Committee but, until changed,
not more than 60 days after receipt of such notification, and
must include a full description of the pertinent issues and basis
of claim.
(c) If the Participant or Beneficiary fails to appeal such action to
the Committee in writing within the prescribed period of time,
the Committee's adverse determination shall be final.
(d) If an appeal is filed with the Committee, the Participant or
Beneficiary shall submit such issues he feels are pertinent and
the Committee shall re-examine all facts, make a final
determination as to whether the denial of benefits is justified
under the circumstances, and advise the Participant or
Beneficiary in writing of its decision and the specific reasons
on which such decision was based, within 60 days of receipt of
such written request, unless special circumstances require a
reasonable extension of such 60-day period.
7.02 Commencement of Benefits
The following provisions shall be applicable for determining when
distribution of benefits shall be made. These provisions are intended
to conform to the requirements of Section 401(a)(9) of the Code,
including the minimum distribution incidental benefit proposed
Treasury Regulation 1.401(a)(9)-2, and shall be construed
accordingly:
0395 41
<PAGE>
(a) Unless otherwise provided in Subsection (c), in the event of
termination of employment, benefits which total $3,500 or less
will commence as soon as administratively feasible following
notification by the Committee that the distribution is approved.
(b) Unless otherwise provided in this Section, in the event of
termination of employment, benefits which total more than $3,500
will commence as soon as administratively feasible following
notification by the Committee that the distribution is approved,
provided that, if the Participant has not attained his Normal
Retirement Date, the Participant consents to such distribution
within his Election Period. If a Participant who commenced
participation in the Plan prior to January 1, 1992 had funds
transferred without the required spousal consent, directly or
indirectly, from a plan subject to Code Section 412, any
distribution of benefits attributable to such transferred funds,
if more than $3,500, to the Protected Spouse as Beneficiary prior
to the date the Participant would have attained his Normal
Retirement Date will require the written acknowledgment and
irrevocable consent of such spouse within 90 days of the Annuity
Starting Date.
Notwithstanding the above, no consent to a distribution prior to
the date the Participant attained or would have attained his
Normal Retirement Date shall be valid until after written
notification of the right to defer is received by the Participant
or Protected Spouse, if applicable. The Committee shall provide
such written notification of the right to defer any benefit
payable no less than 30 days nor more than 90 days before the
Annuity Starting Date.
If a Participant does not consent to the distribution at the time
specified above and fails to elect deferral in accordance with
Subsection (d), benefits will commence as of the 60th day
following the last day of the Plan Year during which the
Participant's Normal Retirement Date occurs, unless the
Participant makes a subsequent election in accordance with
Subsection (d).
If the Protected Spouse as Beneficiary of a Participant who
commenced participation in the Plan prior to January 1, 1992 does
not consent to the distribution of a Participant's transferred
funds at the time specified above, and if such funds exceed
$3,500, benefits attributable to such transferred funds will
commence as of the 60th day following the last day of the Plan
Year during which the Participant's Normal Retirement Date would
have occurred.
(c) The amount of any benefit payable will be determined as of the
Valuation Date such transaction is processed.
0395 42
<PAGE>
If the amount of any payment under this Section would adversely
affect the Trust Fund by forcing the premature liquidation of
assets, such payment may be delayed until the timely and orderly
liquidation of investments can be accomplished, but in no event
later than the 60th day following the last day of the Plan Year
during which occurs the latest of
(i) the date a Participant attains the earlier of his Normal
Retirement Date or age 65;
(ii) the tenth anniversary of the year during which the
Participant commenced participation in the Plan; or
(iii) the date the Participant terminates his employment.
If the amount of any payment under this Section would adversely
affect the Trust Fund by permitting former Participants to enter
into direct competition with the Company, such payment will be
delayed until the 60th day after the end of the Plan Year during
which the Participant's Normal Retirement Date occurs.
If the amount of any payment under this Section cannot be
ascertained by the applicable commencement date, payment shall be
made no later than 60 days after the earliest date on which the
amount of such payment can be ascertained.
(d) A Participant who terminates employment may elect that benefit
payments commence at a date later than specified in Subsection
(b) by submitting a signed, written statement describing the
benefit and the date on which the payment of such benefit shall
commence, provided such date is not later than the April 1
following the calendar year during which the Participant attains
age 70-1/2 or such later date as may be promulgated by the
Internal Revenue Service. A Participant may at any time revise
such election by submitting a signed written statement describing
the revision at least six months (or such other period as the
Committee may fix from time to time) before the revised benefit
commencement date.
(e) Effective for Plan Years beginning before January 1, 1989,
distribution of benefits to a 5% owner, within the meaning of
Section 416(i)(1)(B)(i)of the Code, must commence not later
than the April 1 following the calendar year in which the
Participant attains age 70-1/2, or such later date as promulgated
by the Internal Revenue Service, whether or not the Participant
terminates employment in that year and whether or not the
Participant applies for benefit payment.
0395 43
<PAGE>
Effective for Plan Years beginning after December 31, 1988,
distribution of benefits must commence not later than the April 1
following the calendar year in which the Participant attains age
70-1/2, or such later date as promulgated by the Internal Revenue
Service, whether or not the Participant terminates employment in
that year and whether or not the Participant applies for benefit
payment.
The foregoing shall not apply to a Participant (i) who attains
age 70-1/2 before January 1, 1988 unless such Participant was or
becomes a 5% owner, within the meaning of Section 416(i)(1)(B)(i)
of the Code, at any time during the Plan Year ending with or
within the calendar year in which he attains age 66-1/2 or any
subsequent Plan Year, or (ii) who had made a valid election under
Section 242 (b) of the Tax Equity and Fiscal Responsibility Act
of 1982 (TEFRA) to commence his benefits at a later date.
(f) If the designated Beneficiary is,
(i) the Participant's spouse, such spouse may elect that benefit
payments commence at a date later than specified in
Subsection (b) by submitting a signed written statement
describing the benefit and the date on which the payment of
such benefit shall commence, provided such date is not later
than the latest of (A) December 31 of the calendar year in
which the Participant dies, (B) December 31 of the calendar
year during which the Participant would have attained age
70-1/2, or (C) such later date as may be promulgated by the
Internal Revenue Service.
If such spouse dies prior to the commencement of benefits,
and if the distribution of any death benefit payable to the
spouse's Beneficiary is made in a form that may extend
beyond the December 31 of the calendar year during which the
fifth anniversary of such spouse's death occurs, such
distribution must commence no later than the December 31 of
the calendar year immediately following the date of such
spouse's death or such later date as may be promulgated by
the Internal Revenue Service.
(ii) other than the Participant's spouse, and the death benefit
payable is made in a form that may extend beyond the
December 31 of the calendar year during which the fifth
anniversary of such Participant's death occurs, such
distribution must commence no later than the December 31 of
the calendar year immediately following the date of such
Participant's death or such later date as may be promulgated
by the Internal Revenue Service.
0395 44
<PAGE>
(g) If a Participant is in receipt of benefits from the Company's
insured long-term disability program, if applicable, payment of
the Participant's Elective Deferral Contribution, Matching
Contribution, Regular Contribution, Transfer, Qualified Matching
Contribution and Qualified Nonselective Contribution Accounts
shall be deferred to the first day of the month in which such
Participant is no longer eligible to receive such benefits or, if
earlier, the 60th day following the last day of the Plan Year
during which the Participants Normal Retirement Date occurs,
provided the benefits payable under the long-term disability
program would otherwise be reduced by the benefits payable under
the Plan.
7.03 Method and Form of Payment of Benefits for Participants Who
Commenced Participation On Or After January 1, 1992
The following provisions shall be applicable for determining when
distribution of benefits shall be made for Participants who
commence participation under the plan on or after January 1,
1992. These provisions are intended to conform to the
requirements of Section 401(a)(9) of the Code, including the
minimum distribution incidental benefit proposed Treasury
Regulation 1.401(a)(9)-2, and shall be construed accordingly:
(a) Subject to Section 7.02, all benefits will be distributed in a
lump sum.
(b) Notwithstanding the provisions of Section 5.05, when distribution
of benefits from the Trust Fund is to be deferred in accordance
with Section 7.02, whether in whole or in part, the Committee may
direct the Trustee to deposit the Participant's Account in an
interest-bearing account. Thereafter, such Participant's Account
shall be credited with the interest attributable to such account
and the provisions of Section 5.05 shall not be applicable.
(c) Subject to Section 7.02, if a Participant's benefits are required
to commence in accordance with Subsection 7.02(d) or (e), in lieu
of an immediate lump sum distribution, the Participant may elect
to have the minimum amount required to be distributed each year
under Code Section 401(a)(9) with the remaining balance payable
in a lump sum upon termination of employment. Such benefit shall
be payable directly from the Trust Fund and shall reflect the
Participant's elections regarding Beneficiary and recalculation
of life expectancies in accordance with regulations under Code
Section 401(a)(9).
In the absence of an election by the Participant, the form of
payment shall irrevocably be in the form of a lump sum.
0395 45
<PAGE>
(d) Any benefits payable under this Article may be paid in cash,
securities, or such other assets of the Trust Fund as the
Committee may direct.
The distribution of a lump sum payment to the Participant or his
Beneficiary will constitute the complete discharge of all
obligations of the Plan.
7.04 Method and Form of Payment of Benefits for Participants Who Commenced
Participation Prior to January 1, 1992.
The following provisions shall be applicable for determining the
method and form of payment of all benefits for Participants who
commenced their participation in the Plan prior to January 1, 1992.
These provisions are intended to conform to the requirements of
Section 401(a)(9) of the Code, including the minimum distribution
incidental benefit proposed Treasury Regulation 1.401(a)(9)-2, and
shall be construed accordingly.
(a) Subject to Section 7.02, any benefit payable to a Participant who
has terminated employment or Beneficiary which in total is $3,500
or less will be distributed in a lump sum.
(b) Subject to Section 7.02, any benefit payable to a Participant who
has terminated employment which is more than $3,500 will be
distributed at the Participant's election as follows:
(i) All or any portion of such amount may be distributed in a
lump sum, subject to the provisions below.
(ii) The balance, if any, may be used to purchase an immediate
or deferred annuity in accordance with the provisions of
Subsections (e), (f) and (g).
In the absence of an election by the Participant, benefits will,
be distributed in a lump sum. If such benefits are deferred in
accordance with Section 7.02, the provisions of Subsection (h)
will be applicable.
(c) Subject to Section 7.02, if a Participant's benefits are required
to commence in accordance with Subsection 7.02(d) or (e), such
Participant shall make an irrevocable election as to the optional
form of payment. Such benefit shall reflect the Participant's
elections regarding Beneficiary and recalculation of life
expectancies in accordance with regulations under Code Section
401(a)(9). A Participant whose Account includes funds
transferred without the required spousal consent, directly or
indirectly, from a plan subject to Code Section 412, must elect
to recalculate life expectancies unless his spouse consents to
waive the
0395 46
<PAGE>
Qualified Annuity. The options available will include the options
available under Subsection (f), with lifetime option benefits
determined using the rules provided by regulations under Code
Section 401(a)(9) and will be payable through the purchase of
an annuity contract. Upon subsequent termination of employment,
the optional form previously elected will remain in effect. In
lieu of the options available under Subsection (f), the
Participant may elect to have the value of his Account each year
payable in a lump sum or to have the minimum amount required to
be distributed each year under Code Section 401(a)(9) payable
directly from the Trust Fund with the remaining balance payable
in a lump sum upon termination of employment.
In the absence of an election by the Participant, the form of
payment shall irrevocably be the minimum amount required to be
distributed each year under Code Section 401(a)(9) payable
directly from the Trust Fund with the remaining balance payable
in a lump sum upon such Participant's termination of employment
and life expectancies shall not be recalculated. If the
Participant's Account includes funds transferred without the
required spousal consent, directly or indirectly, from a plan
subject to Code Section 412, the form of payment shall
irrevocably be a Qualified Annuity and life expectancies shall be
recalculated.
(d) Subject to Section 7.02 and before the Participant's Annuity
Starting Date, any benefit payable to a Participant's Beneficiary
other than the Participant's Protected Spouse which is more than
$3,500 may be distributed in a lump sum or used to purchase an
immediate annuity in accordance with the provisions of
Subsections (e) and (f), as elected by the Participant while in
the employ of the Company. In the absence of such an election by
the Participant, or if the Participant's Protected Spouse is the
Beneficiary, such Beneficiary may make the election.
In the absence of an election by the Beneficiary, benefits will
be payable in a lump sum unless the Protected Spouse is the
Beneficiary and the Participant had funds transferred without the
required spousal consent, directly or indirectly, to the Plan
from a plan subject to Section 412 of the Code, in which case,
benefits will be payable to the Protected Spouse in the form of a
life annuity.
(e) Any benefit payable as an annuity will be distributed (i) by the
purchase of a nontransferable single premium annuity contract,
including an annuity purchased under a group annuity contract, on
behalf of a Participant or Beneficiary from an insurance
company, provided at least $3,500 is available for the purchase
of the annuity, or (ii) directly from the Trust Fund.
0395 47
<PAGE>
Any annuity contract purchased and distributed to a Participant
or Beneficiary shall comply with the requirement of this Plan.
In the absence of a requirement or an election indicating the
type of annuity preferred, a deferred annuity will be provided
upon the Participant's termination of employment unless the
Participant had attained his Normal Retirement Date, in which
event an immediate annuity shall be provided. If the payment of
benefits to a Participant is deferred in accordance with
Subsection 7.02(g), a deferred annuity will be provided on behalf
of such Participant.
(f) The annuity options available include the Life, Joint and 100%
Survivor, 15 Year Certain and Continuous, and 10, 15 or 20 Year
Certain Installments.
The election of the annuity option under the above provisions
shall be at the discretion of the Participant or his Beneficiary
provided that no method shall be permitted which would (i) defer
all or part of a Participant's benefits or other non-forfeitable
interest so as to be payable only after his death to his
Beneficiary; (ii) result in benefits to the Participant of less
than 51% of the benefits otherwise payable to him, unless such
benefits are being paid over the lives or the life expectancy of
the Participant and his spouse; (iii) result in the benefits
being payable over a period extending beyond the life of such
Participant or the lives of such Participant and his Beneficiary
or life expectancy of such Participant or the life expectancy of
such Participant and his Beneficiary; or (iv) distribute any
remaining balance, in the event of a Participant's death after
the commencement of his benefits, less rapidly than the method of
distribution in effect prior to his death.
In no event may the Participant or Beneficiary change any annuity
option subsequent to the Annuity Starting Date.
(g) Subject to Subsection (j),
(i) if a Participant elects to receive his benefits in the
form of a life annuity, such benefits shall be distributed
under a Qualified Annuity unless the Participant elects to
receive his retirement income under any other optional
form of distribution as made available to such
Participant.
(ii) if a Participant has had funds transferred without the
required spousal consent, directly or indirectly, from a
plan subject to Code Section 412 and the portion of the
Participant's Account
0395 48
<PAGE>
attributable to such transferred funds is more than
$3,500, such funds will be distributed in the form of a
Qualified Annuity unless the Participant elects to receive
his retirement income under any other optional form of
distribution as made available to such Participant.
(iii) the Participant shall have the right to elect, revoke or
change any election under this Subsection at any time
during his Election Period.
(h) Notwithstanding the provisions of Section 5.05, when distribution
of benefits from the Trust Fund is to be deferred, whether in
whole or in part, the Committee may direct the Trustee to deposit
the Participant's Account in an interest-bearing account or to
purchase, on behalf of such Participant, a single-premium
deferred annuity policy. Thereafter, such Participant's Account
shall be credited with the interest attributable to such account
or shall be equal to the value of such annuity policy and the
provisions of Section 5.05 shall not be applicable.
(i) Any benefits payable under this Article may be paid in cash,
securities, or such other assets of the Trust Fund as the
Committee may direct.
The distribution of a lump sum payment and/or annuity contract to
the Participant or his Beneficiary will constitute the complete
discharge of all obligations of the Plan.
(j) Spousal Consent Requirements
(i) If a Participant is married and has elected to receive his
benefits in the form of a life annuity, any election by
such Participant to commence a benefit payment in a form
other than a Qualified Annuity at any time will require
the written acknowledgment and irrevocable consent of the
Protected Spouse as witnessed by a Plan representative or
a notary public during the Election Period.
(ii) If a Participant is married and has had funds transferred
without the required spousal consent, directly or
indirectly, to the Plan from a plan subject to Section 412
of the Code, any election by such Participant to commence
a benefit payment in a form other than a Qualified Annuity
at any time, will require the written acknowledgment and
irrevocable consent of the Protected Spouse as
0395 49
<PAGE>
witnessed by a Plan representative or a notary public
during the Election Period.
Notwithstanding the above, if such transferred funds are
accounted for separately, the above consent requirement
will only apply to payments attributable to such funds and
then only if the value of such funds at the Annuity
Starting Date exceeds $3,500.
(iii) Any spousal consent will be limited to a specific
alternate Beneficiary and form of payment and any change
in such Beneficiary or form will require a new spousal
consent.
(iv) If it is established to the satisfaction of the Committee
that there is no spouse because the spouse cannot be
located or such other circumstances as may be promulgated
by the Internal Revenue Service or established by law,
such consent will not be required. Spousal consent may
additionally be required at the Committee's request.
(v) Notwithstanding the above, no consent to a distribution or
election of an optional form shall be valid until written
notification of the provisions of this Section and
Subsection 7.04(g) is received by the Participant. The
Committee shall provide such written notification no less
than 30 days nor more than 90 days before the Annuity
Starting Date.
Such notice shall contain a written explanation of
(A) the terms and conditions of a Qualified Annuity;
(B) the Participant's right to make and the effect of an
election to waive the Qualified Annuity form of
benefit;
(C) the rights of the Protected Spouse;
(D) the right to make, and the effect of, a revocation
of a previous election to waive the Qualified
Annuity; and
(E) a description of the optional forms available under
Subsection 7.04(f).
0395 50
<PAGE>
7.05 Disposition of Unclaimed Benefits
In the event that any check or notice with respect to the payment of
benefits under the Plan remains outstanding at the expiration of three
months from the date of mailing of such check to the last known
address of the payee, the Committee shall notify the Trustee to stop
payment of all such outstanding checks and to suspend the issuance of
any further checks, if any, to such payee. If, during the three-year
period (or such other period as specified in the Trust Agreement) from
the date of mailing of the first such check or of notice that a
benefit is due under the Plan, the Committee cannot establish contact
with the payee by taking such action as it deems appropriate and the
payee does not make contact with the Committee, the remaining benefits
shall be forfeited and used to reduce the Company's contributions in
accordance with Section 3.03. In the event the payee is located
subsequent to the date the benefits were forfeited, the dollar amount
of such benefits shall be restored from Company contributions.
7.06 Non-Assignability
No benefit under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any such action shall be void for all
purposes of the Plan. No benefit shall in any manner be subject to the
debts, contracts, liabilities, engagements or torts of any person, nor
shall it be subject to attachments or other legal process for or
against any person, except with respect to a Qualified Domestic
Relations Order and in such other instances and to such extent as may
be required by law and except as provided in Article 13.
7.07 Substitute Payee
If a Participant or Beneficiary entitled to receive any benefits
hereunder is in his minority or is, in the judgment of the Committee,
legally, physically, or mentally incapable of personally, receiving
and receipting any distribution, the Committee may instruct the
Trustee to make distributions to his legally appointed guardian.
7.08 Satisfaction of Liability
After all benefits have been distributed in full to a Participant or
to his Beneficiary, all liability to such Participant or to his
Beneficiary shall cease.
7.09 Direct Rollover to Eligible Retirement Plans
(a) Notwithstanding any provisions of the Plan to the contrary
that would otherwise limit a Distributee's election under
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this Section, a Distributee may elect, at the time and in the
manner prescribed by the Committee, to have any portion of an
Eligible Rollover Distribution paid directly to an Eligible
Retirement Plan specified by the Distributee in a Direct
Rollover.
(b) Definitions
(i) Eligible Rollover Distribution
An Eligible Rollover Distribution is any distribution of
all or any portion of the balance to the credit of the
Distributee, except that an Eligible Rollover Distribution
does not include: (A) any distribution that is one of a
series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or
joint life expectancies) of the Distributee and the
Distributee's designated Beneficiary, or for a specified
period of ten years of more; (B) any distribution to the
extent such distribution is required under Section 401(a)
(9) of the Code; and (C) the portion of any distribution
that is not includable in gross income (determined without
regard to the exclusion for net unrealized appreciation
with respect to Employer securities).
(ii) Eligible Retirement Plan
An Eligible Retirement Plan is an individual retirement
account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b)
of the Code, an annuity plan described in Section 403(a)
of the Code, or a qualified trust described in section
401(a) of the Code, that accepts the Distributee's
Eligible Rollover Distribution. However, in the case of an
Eligible Rollover Distribution to the surviving spouse, an
Eligible Retirement Plan is an individual retirement
account or individual retirement annuity.
(iii) Distributee
A Distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or
former spouse who is the alternate payee under a Qualified
Domestic Relations order, are Distributees with regard to
the interest of the spouse or former spouse.
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(iv) Direct Rollover
A Direct Rollover is a payment by the Plan to the Eligible
Retirement Plan specified by the Distributee.
7.10 Waiver of 30 Day Notice Requirement
Notwithstanding any provisions of the Plan to the contrary, if a
distribution is one to which Sections 401(a)(11) and 417 of the Code
do not apply, such distribution may commence less than 30 days after
the notice required under Section 1.411(a)-11(c) of the Treasury
Regulations is given, provided that:
(a) the Committee clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a particular
distribution option), and
(b) the Participant, after receiving the notice, affirmatively elects
a distribution.
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ARTICLE 8
ADMINISTRATION OF THE PLAN
8.01 Assignment of Administrative Authority
The Board of Directors shall appoint a Committee as the "named
fiduciary" to administer the Plan. The Committee may resign by
delivering his written resignation to the Board of Directors. The
Board of Directors shall also appoint the Trustee, the Recordkeeper
and may appoint an investment manager.
8.02 Organization and Operation of the Committee
(a) The Committee shall act, in carrying out its duties and
responsibilities, in the interest of the Participants and
Beneficiaries with the care, skill, prudence, and diligence under
the circumstances then prevailing that a prudent man, acting in a
like capacity and familiar with such matters, would use in the
conduct of an enterprise of like character and aims.
(b) The Committee shall act by a majority of its members unless
unanimous consent is required by the Plan or by unanimous
approval of its members if there are two or less members in
office at the time. In the event of a Committee deadlock, the
Committee shall determine the method for resolving such deadlock.
If there are two or more Committee members, no member shall act
upon any question pertaining solely to himself, and the other
member or members shall make any determination required by the
Plan in respect thereof.
(c) The Committee may authorize any one or more of its members to
execute documents on behalf of the Committee and shall notify the
Trustee in writing of such action and the name or names of the
member or members so designated.
(d) The Committee may, by unanimous consent, delegate specific
authority and responsibilities to one or more of its members. The
member or members so designated shall be solely liable, jointly
and severally, for their acts or omissions with respect to such
delegated authority and responsibilities. Members not so
designated, except as provided under Subsection 8.06(b), shall be
relieved from liability for any act or omission resulting from
such delegation.
(e) The Committee shall endeavor not to engage in any prohibited
transactions, as specified in the Employee Retirement Income
Security Act of 1974, or any successor act. However, any member
of the Committee who is a Participant or Beneficiary
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shall not be precluded from receiving benefits payable under the
Plan.
8.03 Authority and Responsibility of the Committee
The Committee and its delegates shall have full discretionary
authority and responsibility for administration of the Plan. Such
authority and responsibility shall include, but shall not be limited
to the following areas.
(a) Appointment of qualified accountants, consultants,
administrators, counsel or other persons it deems necessary or
advisable, who shall serve the Committee as advisors only and
shall not exercise any discretionary authority, responsibility or
control with respect to the management or administration of the
Plan.
Any action of the Committee on the basis of advice, opinion,
reports, etc. furnished by such qualified accountants,
consultants, administrators and counsel shall be the sole
responsibility of the Committee.
(b) Authorization of duties and responsibilities delegated to the
Recordkeeper in accordance with Section 8.04.
(c) Acceptance of duties and responsibilities not delegated to the
Recordkeeper in accordance with Section 8.04.
(d) Determination of eligibility to participate and all benefits, and
resolution of all questions arising from the administration,
interpretation and application of the Plan, including the
determination of the validity of any Qualified Domestic Relations
Order in accordance with Section 8.10.
(e) Adoption of forms and regulations for the administration of the
Plan.
(f) Remedy of any inequity resulting from incorrect information
received or communicated or of administrative error.
(g) Assurance that its members, the Trustee and other persons who
handle funds or other property of the Trust Fund are bonded as
required by law.
(h) Settlement or compromise of any claims or debts arising from the
operation of the Plan and the commencement of any legal actions
or administrative proceeding.
(i) Action as agent for the service of legal process.
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8.04 Duties of the Recordkeeper
(a) Maintenance of VTS.
(b) Notification to the Trustee of all benefits payable in accordance
with Article 7, withdrawals made in accordance with Article 12
and loans made in accordance with Article 13 and the manner in
which such benefits, withdrawals and loans are to be paid.
(c) Any other administrative duty authorized by the Committee and
accepted by the Recordkeeper in accordance with the terms of the
Services Agreement.
8.05 Records and Reports
(a) The Committee shall keep a record of its proceedings and acts and
shall keep books of account, records and other data necessary for
the proper administration of the Plan.
(b) The Committee shall make its records available for examination by
the Employer, or any Participant or Beneficiary during business
hours at the principal place of business of the Company. However,
a Participant or Beneficiary may examine only records pertaining
exclusively to himself and such other records specified by law.
(c) The Committee shall make available to any Participant or
Beneficiary any material required by law without cost. The
Committee may, upon written request by any Participant or
Beneficiary, provide copies of such material as it deems
appropriate and shall furnish copies of such material required by
law. The Participant or Beneficiary may be required to pay the
reasonable cost as determined by the Committee of preparing and
furnishing such material or the cost as prescribed by law.
8.06 Required Information
The Company and Participants or Beneficiaries entitled to benefits
shall furnish forms, including but not limited to annuity applications,
and any information or evidence, as requested by the Committee for the
proper administration of the Plan. Failure on the part of any
Participant or Beneficiary to comply with such request within a
reasonable period of time shall be sufficient grounds for delay in the
payment of benefits until the information or evidence requested is
received.
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8.07 Fiduciary Liability
(a) A member of the Committee who breaches the responsibilities,
obligations, or duties imposed by law shall be liable to the Plan
for any losses resulting from such breach.
(b) A member of the Committee shall be liable for a breach of
fiduciary responsibility by another Committee member or Trustee,
with respect to the Plan or Trust Fund, under the following
circumstances.
(i) The member knowingly participates in or undertakes to
conceal an act or omission of another member of the
Committee or Trustee with knowledge that the act or
omission is such a breach.
(ii) If the member's failure to comply with Subsection 8.02(a)
has enabled another member or Trustee to commit such a
breach.
(iii) The member has knowledge of such a breach by another
member or Trustee and does not make reasonable efforts
under the circumstances to remedy the breach.
8.08 Payment of Expenses
Those members of the Committee who are full-time paid employees of the
Company shall serve without compensation. The expenses of the
Committee, including reasonable compensation as may be agreed upon in
writing between the Company and the Committee for members of the
Committee who are not full-time employees of the Company, shall be
deemed administrative expenses payable in accordance with Article 3.
8.09 Indemnification
The Company shall indemnify members of the Committee against personal
financial loss resulting from liability incurred in the administration
of the Plan, unless such liability and loss were caused by such
individual's gross negligence or willful misconduct.
8.10 Qualified Domestic Relations Orders
(a) Qualified Domestic Relations Order
(i) Qualified Domestic Relations Order (hereinafter referred
to as "QDRO") is a Domestic Relations Order which
creates or recognizes the existence of an Alternate
Payee's right to, or assigns to an Alternate Payee the
right to, receive all or a
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portion of the benefits payable with respect to a
Participant under the Plan, and which the Committee has
determined meets the requirements of Paragraphs (ii) and
(iii).
(ii) A Domestic Relations Order meets the requirements of a
QDRO only if the order clearly specifies
(A) the name and the last known mailing address (if any)
of the Participant and the name and mailing address
of each Alternate Payee covered by the order;
(B) the amount or percentage of the Participant's
benefits to be paid by the Plan to each such
Alternate Payee, or the manner in which such amount
or percentage is to be determined;
(C) the number of payments or period to which such order
applies; and
(D) that the order applies to this Plan.
(iii) A Domestic Relations Order meets the requirements of a
QDRO only if the order
(A) does not require the Plan to provide any type or form
of benefits, or any option, not otherwise provided
under the Plan;
(B) does not require the Plan to provide increased
benefits (determined on the basis of actuarial
value); and
(C) does not require the payment of benefits to an
Alternate Payee which are required to be paid to
another Alternate Payee under another Domestic
Relations Order previously determined to be a QDRO.
(iv) In the case of any payment before a Participant has
separated from service, a QDRO shall not be treated as
failing to meet the requirements of Paragraph (iii)(A)
above solely because the order requires the payment of
benefits to an Alternate Payee
(A) on or after the date on which the Participant attains
(or would have attained) the Earliest Retirement Age;
(B) as if the Participant had retired on the date such
payment is to begin under such order; and
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(C) in any form in which such benefits may be paid
under the Plan to the Participant (other than in
the form of a joint and survivor annuity with
respect to the Alternate Payee and his or her
subsequent spouse).
(v) For purposes of Paragraph (iv), Earliest Retirement Age
means the earlier of
(A) the date on which the Participant is entitled to a
distribution under the Plan; or
(B) the later of (1) the date the Participant attains age
50 or (2) the earliest date on which the Participant
could begin receiving benefits under the Plan if such
Participant separated from service.
Notwithstanding any provisions of the Plan to the
contrary, for purposes of Subparagraph (A) above, a
distribution to an Alternate Payee may be made prior to
the date on which the Participant is entitled to a
distribution under Section 7.02 or Article 12 if
requested by the Alternate Payee to the extent such
distribution is permitted under the QDRO. Nothing in this
provision shall permit the Participant to receive a
distribution at a date otherwise not permitted under
Section 7.02 or Article 12 nor shall it permit the
Alternate Payee to receive a form of payment not
permitted in Section 7.03.
(b) Procedures
Upon receipt of a Domestic Relations Order, the Committee shall
take, or cause to be taken, the following actions:
(i) The Committee shall promptly notify the Participant, each
Alternate Payee covered by the order and each
representative for these parties of the receipt of the
Domestic Relations Order. Such notice shall include a copy
of the order and these QDRO Procedures for determining
whether such order is a QDRO.
(ii) Once a Domestic Relations Order has been received (A) the
affected Participant will not be permitted to request a
withdrawal from the Plan and (B) no distributions will be
made from the Plan to the Participant upon a subsequent
termination until after the payment to the Alternate Payee
has been determined, unless the Committee determines the
order not to be a QDRO.
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(iii) Within a reasonable period after receipt of a Domestic
Relations Order, the Committee shall determine whether it
is a QDRO and shall notify the parties indicated in
Paragraph (i) of such determination. Such notice shall
indicate whether the benefits payable to the Alternate
Payee in accordance with the QDRO are subject to a
previously existing QDRO.
(iv) Pending the Committee's determination of whether a
Domestic Relations Order is a QDRO, if payments are due to
be paid to the Participant, the Committee shall withhold
payment and separately account for the amounts otherwise
payable to the Alternate Payee during such period if the
order is subsequently determined to be a QDRO (hereinafter
referred to as the "segregated amounts"). If, within the
18-month period beginning with the date the first payment
would have been required to be made under the Domestic
Relations Order, the Committee determines the order to be
a QDRO, the Committee shall pay the segregated amounts,
including any interest thereon, to the person or persons
entitled thereto. If, within such 18-month period, the
Committee determines an order is not a QDRO or the
Committee fails to reach a decision, the Committee shall
pay the segregated amounts to the Participant. If, after
the 18-month period, the Committee subsequently determines
that the order is a QDRO, the Committee shall pay benefits
subsequent to such determination in accordance with the
order. If action is taken in accordance with this
Subsection (b), the Plan's obligation to the Participant
and each Alternate Payee shall be discharged to the extent
of any payment made pursuant to the QDRO.
(v) In determining the segregated amount in accordance with
Paragraph (iv), the Participant's vested interest shall be
prorated between the Participant and Alternate Payee and
the entire amount of any nonvested interest or any
outstanding Plan loans will be credited to the Participant
and not taken into consideration in making such
determination. Any future contributions or loan repayment
will be credited to the Participant and not the Alternate
Payee.
(vi) Upon a determination by the Committee that a Domestic
Relations Order is a QDRO, the Committee shall arrange for
benefits to be paid to the Alternate Payee in accordance
with such order and
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Sections 7.02 and 7.03 as if the Participant had terminated
employment at such time.
(vii) If benefits are not immediately distributable to the Alternate
Payee, such amount shall be separately accounted for until
such time as the distribution is made. Any amount subject to a
QDRO will not be available to the Participant under the Plan
withdrawal provisions nor will it be available as collateral
for a Plan loan.
(viii)The Alternate Payee shall be treated as a Beneficiary for all
purposes of the Plan. The Alternate Payee will be eligible for
the same investment election option in accordance with Article
5 as the Participant.
The foregoing provisions are effective for QDROs entered into on or after
January 1, 1985, except that, in the case of a Domestic Relations Order
entered into before January 1, 1985, the Committee (i) may treat such
order as a QDRO even though such order fails to meet the requirements of
Subsections (a)(ii) and (iii) above, and (ii) must treat such order as a
QDRO if benefits were being paid pursuant to such order on January 1,
1985.
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ARTICLE 9
AMENDMENT AND TERMINATION
9.01 Amendment
(a) The Plan may be amended or otherwise modified by the Board of
Directors, or the Committee to the extent authorized in accordance
with Subsection (c). Copies of any such amendment or modification
shall be sent to the governing body of each Company for adoption.
(b) No amendment or modification shall
(i) permit any part of the Trust Fund, other than such part as is
required to pay taxes, administrative expenses and expenses
incurred in effectuating such changes, to be used for or
diverted to purposes other than the exclusive benefit of the
Participants or Beneficiaries and/or persons entitled to
benefits under the Plan or permit any portion of the Trust
Fund to revert to or become the property of the Company;
(ii) have the effect of reducing the Account of any Participant as
of the date of such amendment or deprive any Participant or
Beneficiary of a benefit accrued and payable; or
(iii) eliminate any option which constitutes a valuable right
available to a Participant with respect to benefits previously
accrued to the extent the Participant satisfied, either before
or after the amendment, the conditions for the form of payment
except as otherwise permitted by applicable law and
regulations.
(c) The Committee may amend or modify the Plan in order to bring the
Plan into compliance with applicable law or regulations, provided
said amendment or modification does not have a material effect on
the estimated cost of maintaining the Plan and does not create a new
class of benefits or entitlements.
9.02 Termination
While the Plan and Trust Fund are intended to be permanent, they may be
terminated at the discretion of the Board of Directors. Written
notification of such action shall be given to each Company, the Trustee
and the Committee. Thereafter, no further contributions shall be made to
the Trust Fund.
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9.03 Vestinq Upon Termination
Upon the complete discontinuance of Company contributions or the
termination or partial termination of the Plan and Trust Fund, the Account
of each affected Participant shall become fully vested and shall not be
reduced except
(a) for adjustments resulting from a valuation in accordance with
Article 5, which valuation shall also reflect the expenses incurred
for administration of the Plan and/or Trust Fund after such
discontinuance or termination date, and all expenses incurred in
effectuating the complete discontinuance of Company contributions or
termination or partial termination of the Plan and Trust Fund, such
as the fees and retainers of the Plan's Trustee, accountant,
custodian, administrator, consultant, counsel and other specialists
if such expenses are not paid by the Company;
(b) for distributions of benefits by the Trustee to the Participant in
accordance with the Plan and at the written direction of the
Committee; and
(c) as provided in Section 14.01.
9.04 Distribution of Benefits After Termination
As soon as administratively feasible following receipt of a favorable
letter of determination from the Internal Revenue Service with regard to
the termination of the Plan and Trust Fund, the Trustee, as authorized and
directed by the Committee, shall, provided there is no successor defined
contribution plan within the meaning of Section 401(k)(10)(A)(i) of the
Code, distribute each Account, after adjustment in accordance with
Subsection 9.03(a), in a manner consistent with the provisions of
Article 7.
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ARTICLE 10
PARTICIPATING COMPANIES
10.01 Adoption by Other Entities
Any corporation or other business entity may, by resolution of its own
governing body, and with the approval of the Board of Directors, adopt the
Plan and thereby become a Company. Notwithstanding the adoption of the
Plan by other entities, the Plan will be administered as a single plan and
all Plan assets will be available to pay benefits to all Participants
under the Plan.
10.02 Alternative Provisions
No Company may adopt alternative provisions as to itself or its Employees.
Upon request of the governing body of a Company, the Board of Directors
may amend the Plan with respect to the Employees of such Company provided
that any change will only apply if any inequity resulting from such
changed Plan provisions is not found to be discriminatory on behalf of
Highly Compensated Employees.
10.03 Right to Withdraw (Plan Spinoff)
Each Company having adopted the Plan shall have the right as of the last
day of any month to withdraw from the Plan and/or Trust Agreement by
delivering to the Board of Directors, the Committee and the Trustee
written notification from its own governing body of such action and
setting forth the date as of which the withdrawal shall be effective. The
date specified in such written notice shall be deemed a Valuation Date.
10.04 Procedure Upon Withdrawal
(a) If a Company withdraws from the Plan and Trust Agreement as the
result of its adoption of a different plan, the Trustee shall
segregate the portion of the Trust Fund attributable to the Accounts
of Participants employed solely by such Company.
As soon as administratively feasible following receipt of a
favorable letter of determination from the Internal Revenue Service
with regard to the adoption of such successor plan, the Trustee
shall transfer the segregated assets to the insurance carrier or
fiduciary designated by the Company as the agency through which the
benefits of such successor plan are to be disbursed.
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(b) If a Company withdraws from the Plan and Trust Agreement as the
result of its adoption of a resolution to terminate its
participation in the Plan and to distribute assets to its Employees
who are Participants, the Trustee shall segregate the portion of the
Trust Fund attributable to the Accounts of the Participants who are
employed solely by such Company, and the termination provisions of
Section 9.03 and 9.04 shall apply with respect to such segregated
assets.
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ARTICLE 11
TOP-HEAVY PROVISIONS
11.01 Definition of Top-Heavy and Super Top-Heavy
(a) The Plan will be Top-Heavy for a Plan Year if, as of the final
Valuation Date of the preceding Plan Year (or the final Valuation
Date of the current Plan Year, if such year is the first Plan Year),
hereinafter referred to as the Determination Date,
(i) the aggregate value of the Accounts of all Participants who
are Key Employees (as defined in Section 11.02) exceeds 60% of
the aggregate value of such Accounts of all Participants and
the Plan cannot be aggregated with any other plans which would
result in the formation of a non-Top-Heavy aggregation group
of plans; or
(ii) the Plan is required to be part of an aggregation group of
plans and the aggregation group is Top-Heavy. The group will
be deemed Top-Heavy if the aggregate value of all defined
contribution plan accounts and the value of all defined
benefit plan accrued benefits attributable to Key Employees
exceeds 60% of such values attributable to all participants of
the aggregated plans. Such benefit values and accounts shall
be aggregated using the Determination Dates of the individual
plans which fall within the same calendar year.
For purposes of this Section, aggregation group means all plans,
including terminated plans, maintained by the Employer if maintained
within the last five years ending on the Determination Date, in
which a Key Employee is a participant or which enables any plan in
which a Key Employee is a participant to meet the requirements of
Section 401(a)(4) or Section 410 of the Code, as well as all other
plans maintained by the Employer, provided that inclusion of such
other plans in the aggregation group would not prevent the group of
plans from continuing to meet the requirements of such sections of
the Code.
(b) The Plan will be Super Top-Heavy for a Plan Year if the aggregate
value of all defined contribution plan accounts and the value of all
defined benefit plan accrued benefits attributable to all
Participants who are Key Employees exceeds 90% of such values
attributable to all Participants in lieu of 60% as stated in
Subsection (a).
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(c) For purposes of determining the aggregate value of the benefit
values and accounts under this Section, distributions, other than
rollovers or direct transfers to another qualified plan maintained
by the Employer or rollovers or direct transfers not initiated by
the Participant, made during the five-year period ending on the
Determination Date of the plan from which such distributions were
made, shall be included to the extent such distributions are not
otherwise reflected in the value of any accrued benefit under a
defined benefit plan as determined with respect to such plan's
Determination Date. Such aggregate value shall not include any (i)
assets rolled over or transferred at the initiation of the
Participant directly from a qualified plan maintained by a business
entity other than an Employer to the Plan, (ii) amounts attributable
to former Key Employees, (iii) amounts attributable to Participants
not employed during such five-year period, or (iv) amounts
attributable to deductible employee contributions under former
Section 219(e)(2) of the Code.
A Participant's accounts under any defined contribution plan as of
any Determination Date, other than the Determination Date which
falls within the first Plan Year, shall not include any Employer
contributions due and not yet paid as of the Determination Date, if
the plan under which the account is maintained is not subject to
Section 412 of the Code.
Accrued benefit values under defined benefit plans aggregated with
this Plan shall be determined, subject to the rules set forth in
Section 416(g)(4)(F)(ii) of the Code, as of the dates of the
most recent valuations preceding or coincident with such defined
benefit plans' Determination Dates, in accordance with the interest
and mortality rate assumptions specified in such defined benefit
plans for this purpose or, if not specified, shall be determined
using an interest rate of 5% and mortality rates in accordance with
Group Annuity Mortality Table for 1951 (Projection "C" to 1970,
set back five years for females). Such accrued benefit values shall
be determined under the method of accrual used for all plans of the
Employer or, if such method is not identical, as if such benefit
accrued under the fractional rule as described in Section
411(b)(1)(C) of the Code.
11.02 Definition of Key Employee
An Employee or a former Employee will be considered to be a Key Employee
for a Plan Year if, at any time during the Plan Year or the preceding four
Plan Years, he is an officer of the Employer earning more than 50% of the
maximum dollar limitation under
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Section 415(b)(1)(A) of the Code; one of the 10 employees owning the
largest interests (minimum 1/2%) in the Employer earning more than the
maximum dollar limitation under Section 415(c)(1)(A) of the Code; a 5%
owner; or a 1% owner whose compensation exceeds $150,000. This definition
of Key Employee shall be governed by Section 416 of the Code and
Regulations thereunder. For purposes of this definition, but only to the
extent required by law, a Key Employee's Beneficiary shall be treated as a
Key Employee, and ownership percentages shall be determined without regard
to aggregation of entities under common control within the meaning of
Sections 414(b), (c) and (m) of the Code. In no event shall more than 50
employees (or, if less, the greater of three employees or 10 percent of
the employees) be deemed officers for purposes of this definition.
11.03 Minimum Employer Contribution
(a) Unless otherwise provided in this Section, for any Plan Year in
which the Plan is determined to be Top-Heavy, the Company
contribution allocated to any non Key Employee Participant in the
employ of the Company on the last business day of that Plan Year,
shall not be less than an amount which, in combination with all
other such amounts allocated to him under all other defined
contribution plans maintained by the Employer, is equal to the
lesser of
(i) 3% of the Participant's Compensation or
(ii) the highest percentage of Compensation (net of amounts
contributed under a qualified salary reduction or similar
arrangement) at which contributions (including Employer
matching contributions and forfeitures) are allocated for the
Plan Year under the Plan and under any other defined
contribution plan required to be aggregated with the Plan on
behalf of any Key Employee, times the Participant's
Compensation.
(b) Any contributions made solely to comply with the provisions of this
Section shall be credited at the end of the Plan Year.
(c) If any Participant is also covered by a defined benefit plan or
plans maintained by the Employer, then for each year the Plan is
determined to be Top-Heavy, 5% will be substituted in lieu of the 3%
minimum allocation under Paragraph (a)(i) for such Participant and
Paragraph (a)(ii) shall not be applicable, unless the Participant
receives the Top-Heavy defined benefit minimum under the defined
benefit plan or plans in accordance with Section 416(c)(1) of the
Code, notwithstanding any offset attributable to defined
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contribution account balances, in which event no minimum
contribution will be required under the Plan.
(d) For purposes of this Section, only benefits derived from Employer
contributions under the Plan, or any other defined contribution plan
or plans are to be taken into account to determine whether the
minimum Employer contribution or benefit has been satisfied,
excluding matching contributions and any contributions attributable
to a salary reduction or similar arrangement, but including
contributions as defined in Treasury Regulation 1.401(k)-1(g)(13).
Such salary reduction contributions will be taken into account to
determine the Employer contribution made on behalf of any Key
Employee under Subsection 11.03(a)(ii), but not to determine
whether the minimum Employer contribution or benefit has been
satisfied.
(e) An employee of a business entity which has not adopted the Plan
shall not be considered a Participant for purposes of this Section
unless also employed by the Company.
(f) An Eligible Employee who becomes a Participant by virtue of the
acceptance of a rollover contribution in accordance with Section
3.07 or a transfer of assets in accordance with Section 3.08 but who
is not otherwise eligible in accordance with Section 2.01, shall not
be entitled to share in any Company contribution allocated in
accordance with this Article.
11.04 Limitation of Allocations
For any Plan Year in which the Plan is determined to be Top-Heavy or Super
Top-Heavy, the reference to "1.25" in Item (1) of Paragraph (B) of
Subsection 4.03(c) will be changed to read "1.0".
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ARTICLE 12
WITHDRAWAL OF FUNDS DURING EMPLOYMENT
12.01 Withdrawals from Elective Deferral Contribution Account
Subject to the general withdrawal rules below, a Participant may withdraw
up to 100% of his Elective Deferral Contribution Account (a) after
attaining age 59-1/2 or (b) before attaining age 59-1/2, provided such
withdrawal meets the Financial Hardship Rules below.
12.02 Withdrawals from Matching Contribution Account
Subject to the general withdrawal rules below, a Participant who has
completed five or more full years of Plan participation and has a 100%
vested interest in his Matching Contribution Account may withdraw up to
100% of such Account.
12.03 Withdrawals from Regular Contribution Account
No withdrawals shall be permitted from a Participant's Regular
Contribution Account.
12.04 Withdrawals from Rollover Account
Subject to the general withdrawal rules below, a Participant may elect to
withdraw up to 100% of his Rollover Account.
12.05 Withdrawals from Transfer Account
Subject to the general withdrawal rules below, a Participant may elect to
withdraw up to 100% of his Transfer Account, provided such withdrawal
meets the Financial Hardship Rules below.
12.06 Withdrawals from Qualified Matching Contribution and Qualified Nonelective
Contribution Accounts
Subject to the general withdrawal rules below, a Participant who has
attained age 59-1/2 may withdraw up to 100% of his Qualified Matching
Contribution and Qualified Nonelective Contribution Accounts.
12.07 Financial Hardship Rules
(a) For purposes of this Article, a Financial Hardship withdrawal may be
made only if it is on account of an immediate and heavy financial
need of the Participant and is necessary to satisfy such financial
need.
0395 70
<PAGE>
(b) The following needs shall be recognized as immediate and heavy
financial needs:
(i) medical expenses, as described in Section 213(d) of the Code,
previously incurred by the Participant, the Participant's
spouse or the Participant's dependents, or funds necessary for
these persons to obtain medical care described in Section
213(d) of the Code,
(ii) purchase of a principal residence for the Participant,
(iii) tuition payments, related educational fees and room and board
expenses for the next 12 months of post-secondary education
for the Participant or the Participant's spouse, children or
other dependents,
(iv) the need to prevent eviction from or foreclosure on the
mortgage of the Participant's principal residence,
(v) any other financial need as may be promulgated by the Internal
Revenue Service, and
(vi) any other financial stress the satisfaction of which is
necessary for the safety, well-being, livelihood or health of
the Participant or his immediate family.
(c) Unless otherwise provided in Subsection (d), the Participant shall
provide the Committee with a signed written statement certifying
that the Financial Hardship cannot be relieved
(i) through reimbursement or compensation by insurance or
otherwise,
(ii) by reasonable liquidation of such Participant's assets,
including those of his spouse and minor children if they are
reasonably available to him,
(iii) by discontinuance of Elective Deferral or Voluntary After-Tax
Contributions, or
(iv) by other distributions or loans from the Plan or any other
qualified plan or loans from commercial sources on reasonable
commercial terms.
(d) In the absence of the above certification, the following
requirements will be applicable:
0395 71
<PAGE>
(i) The Participant must have obtained all other distributions and
loans available under all plans maintained by the Employer.
(ii) Elective Deferral Contributions and any other Employee
contributions under all plans maintained by the Employer will
be suspended for 12 months following the receipt of the
Financial Hardship withdrawal. The Participant's Elective
Deferral Contributions under Section 3.01 will automatically
be resumed following the required period of suspension, unless
the Participant elects otherwise.
(iii) The limitation of Section 4.01 which is imposed on a
Participant's Elective Deferral Contributions for the calendar
year immediately following the calendar year of the Financial
Hardship withdrawal will be reduced by the amount of such
contributions and/or deferrals for the calendar year of such
withdrawal.
(e) The amount of such Financial Hardship withdrawal may not exceed the
amount required to meet the specified need plus any amounts
necessary to pay any federal, state or local income taxes or
penalties reasonably anticipated to result from the withdrawal. In
addition, effective for Plan Years beginning after December 31,
1988, the amount of such withdrawal from a Participant's Elective
Deferral Contribution Account shall be limited to the sum of the
Participant's Elective Deferral Contributions made, plus the income
credited to such Account as of the last Valuation Date in 1988.
(f) A Financial Hardship withdrawal from a Participant's Elective
Deferral Contribution Account will be available only after the total
amount available from all other Accounts has been withdrawn.
12.08 General Withdrawal Rules
Any withdrawal shall be subject to the following requirements:
(a) If a Participant elected to receive his benefits in the form of a
life annuity in accordance with the provisions of Sections 7.03 and
7.04 at any time, any withdrawal will be distributed under a
Qualified Annuity unless such Participant elects to receive such
withdrawal in a lump sum. All withdrawals will be considered
separate Annuity Starting Dates for purposes of Sections 7.02 and
7.04.
(b) Only one withdrawal will be permitted during any Plan Year.
0395 72
<PAGE>
(c) A withdrawal must be requested through the VTS or CSR. Such
withdrawals will be processed as soon as administratively feasible
following notification by the Committee that the withdrawal is
approved.
(d) The minimum amount that may be withdrawn is $500 or the balance in
the Participant's Accounts from which a current withdrawal is
permitted, if less. The minimum amount limitation shall not apply in
the case of a hardship withdrawal.
(e) If a loan is outstanding at the time a withdrawal is requested, such
withdrawal shall be permitted only to the extent that the remaining
vested Account balance under the Plan will be at least 100% of the
outstanding loan balance as of the date of the withdrawal.
(f) There may be an application fee for each withdrawal as set by the
Committee from time to time.
0395 73
<PAGE>
ARTICLE 13
LOANS
13.01 Activation of Loan Provisions
Upon request through the VTS or CSR, the Committee, solely in its
discretion and in accordance with the provisions of this Article, may
permit Participants to borrow from the Trust Fund.
13.02 Amount of Loans and Terms of Repayment
At such time as loans are permitted, the Committee shall promulgate any
additional specific rules and regulations governing all aspects of this
Article as it deems necessary. The following general rules shall serve as
the basis for any specific rules and regulations:
(a) Upon written application on forms provided by the Committee, the
Committee may grant a loan to a Participant, except shareholder
employees or owner employees as referred to in Section 4975(d) of
the Code, for the following purposes:
(i) medical expenses, as described in Section 213(d) of the Code,
previously incurred by the Participant, the Participant's
spouse or the Participant's dependents, or the funds necessary
for these persons to obtain medical care described in Section
213(d) of the Code,
(ii) purchase of a principal residence for the Participant,
(iii) tuition payments, related educational fees and room and board
expenses for the next 12 months of post-secondary education
for the Participant or the Participant's spouse, children or
other dependents,
(iv) the need to prevent eviction from or foreclosure on the
mortgage of the Participant's principal residence, or
(v) any other financial stress the satisfaction of which is
necessary for the safety, well-being, livelihood or health of
the Participant or his immediate family.
The Participant may be required to furnish such evidence of purpose
and need as the Committee deems necessary.
0395 74
<PAGE>
Loans will be processed as soon as administratively feasible
following notification by the Committee that the loan has been
approved.
(b) The minimum amount of any loan shall be $1,000.
(c) In no event shall a loan exceed the lesser of
(i) $50,000, reduced by the highest outstanding loan balance
during the one-year period ending on the day before the date
on which any new loan is to be granted, or
(ii) 50% of the amount to which the Participant is vested under
this Plan on the date the loan is granted.
(d) Each loan granted to a Participant must be repaid in full before any
subsequent loan is granted to such Participant.
(e) All loans under this Article shall be considered investments of the
Account of the Participant to whom the loan is granted and shall be
charged to the investment funds proportionately.
The Participant's Accounts shall be charged in the following order:
Regular Contribution Account, Elective Deferral Contribution
Account, Transfer Account, Matching Contribution Account, Qualified
Matching Contribution Account, Qualified Nonelective Contribution
Account and Voluntary Contribution Account.
Interest shall be charged thereon at a rate equal to 1% in excess of
the prime rate reported in The Wall Street Journal on the first day
of the month during which the loan application was received through
the VTS or CSR.
(f) Each loan shall be secured by the assignment of not more than, 50%
of the Participant's vested Account balance on the date the loan is
granted, a promissory note executed by the Participant and such
additional collateral as the Committee shall require to assure
repayment of the loan and all interest payable thereon.
(g) Each loan shall be repaid by the Participant either through payroll
deductions or in such other manner as the Committee shall determine,
provided such payment schedule does not permit payment less
frequently than quarterly. All payment schedules shall be calculated
to amortize principal and interest in level payments over the period
of the loan as agreed to by the Committee and the Participant not to
exceed five years from the date of such loan. Notwithstanding the
foregoing, in the event a loan is approved for the purchase
0395 75
<PAGE>
of a principal residence, the five-year repayment requirement will
not be applicable.
Principal and interest payments shall be credited to the Account of
the Participant to whom the loan is granted in the same manner as
the loan was charged and shall be invested in accordance with the
Participant's current investment election.
(h) Except as provided in Subsection (m), upon a Participant's
termination of employment for any reason, the entire unpaid balance
of the loan shall be due and payable.
(i) If a Participant should fail to make a payment when due, the entire
unpaid balance of the loan shall be in default and the Committee
shall take any one or more of the following steps, as it deems
necessary, to secure repayment of such loan:
(i) Deduct the amount of the outstanding indebtedness from the
Participant's Account, to the extent permitted and available
under law and in accordance with the terms of the Plan. Such
deduction will not occur until a distributable event occurs
under the terms of the Plan.
(ii) Instruct the Trustee to sell any property held as collateral
for such loan.
(iii) Take such other steps as may be required.
(j) Each loan will require that within the 90-day period before the
granting of the loan, the Participant and, if married, his spouse,
consent to such loan in writing, and acknowledge the reduction in
the Participant's Account in the event the loan is in default.
(k) There may be an initial processing fee for the administration of the
loan as set by the Committee from time to time.
(l) No distribution from the Plan upon termination of employment for any
reason shall be made to any Participant or Beneficiary unless and
until all loans, including interest thereon, have been fully repaid.
(m) Any Participant who is a "party in interest" as defined in ERISA
Section 3(14) and who ceases to be an active Eligible Employee may
be eligible to borrow from the Plan under terms and conditions
reflecting valid differences between active Participants and other
Participants which would be considered in a normal commercial
setting, such as the
0395 76
<PAGE>
unavailability of payroll deductions for repayment. In addition, there will
be an annual fee for the administration of each of such loans of $100. In no
event will loans be unreasonably withheld from any eligible applicant.
0395 77
<PAGE>
ARTICLE 14
GENERAL PROVISIONS
14.01 Exclusiveness of Benefits
The Plan has been created for the exclusive benefit of the Participants
and their Beneficiaries. No part of the Trust Fund shall ever revert to
the Company nor shall such Trust Fund ever be used other than for the
exclusive benefit of the Participants and their Beneficiaries, except as
provided in Sections 3.10 and 9.03 and Subsection 4.03(d) provided,
however, that contributions made by the Company by mistake of fact or
which are not deductible under Section 404 of the Code, may be returned to
the Company within one year of the mistaken payment of the contribution or
the date of disallowance of the deduction, as the case may be. All
contributions made by the Company shall be conditional upon their
deductibility under Section 404 of the Code. No person shall have any
interest in or right to any part of the Trust Fund, or any equitable right
under the Trust Agreement, except to the extent expressly provided in the
Plan or Trust Agreement.
14.02 Limitation of Rights
Neither the establishment of the Plan, nor any modification thereof, nor
the creation of any fund, trust or account, nor the purchase of any
policy, nor the payment of any benefits shall be construed as giving any
Participant, Beneficiary, or any other person whomsoever, any legal or
equitable right against the Company, the Committee, or the Trustee, unless
such right shall be specifically provided for in the Plan or conferred by
affirmative action of the Committee or the Company in accordance with the
terms and provisions of the Plan; or as giving any Participant or any
other employee of the Company the right to be retained in the service of
the Company and all Participants and other employees shall remain subject
to discharge to the same extent as if the Plan had never been adopted.
14.03 Limitation of Liability and Legal Actions
In any action or proceeding involving the Trust Fund, or any part thereof,
or the administration thereof, the Company, the Committee, and the Trustee
shall be the only necessary parties. Any final judgment entered in any
such action or proceeding, which is not appealed or appealable, shall be
binding and conclusive on the parties thereto, and all persons having or
claiming to have an interest in the Trust Fund or under the Plan.
0395 78
<PAGE>
14.04 Construction of Agreement
The Plan shall be construed according to the laws of the State in which
the Company named under Article 1 has its principal place of business, and
all provisions hereof shall be administered according to, and its validity
shall be determined under, the laws of such State except where pre-empted
by Federal law.
14.05 Title to Assets
No Participant, Beneficiary or any other person shall have any legal or
equitable right or interest in the funds set aside by the Company, or
otherwise received or held under the Plan, or in any assets of the Trust
Fund, except as expressly provided in the Plan, and no Participant,
Beneficiary or any other person shall be deemed to possess a right to any
assets except as herein provided.
14.06 Severability
Should any provision of the Plan or any regulations adopted thereunder be
deemed or held to be unlawful or invalid for any reason, such fact shall
not adversely affect the other provisions or regulations unless such
invalidity shall render impossible or impractical the functioning of the
Plan and, in such case, the appropriate parties shall immediately adopt a
new provision or regulation to take the place of the one held illegal or
invalid.
14.07 Titles and Headings
The titles and headings of the Sections in this instrument are for
convenience of reference only and, in the event of any conflict, the text
rather than such titles or headings shall control.
14.08 Counterparts as Original
The Plan has been prepared in counterparts, each of which so
prepared shall be construed an original.
14.09 Merger of Plans
Upon the merger or consolidation of any other plan with this Plan or the
transfer of assets or liabilities from this Plan to any other plan, all
Participants of this Plan shall be entitled to a benefit immediately after
the merger, consolidation or transfer (if the merged, consolidated or
transferee plan had then been terminated) at least equal to the benefit
they would have been entitled to immediately prior to such merger,
consolidation or transfer (if the Plan had then terminated).
0395 79
<PAGE>
HOSOKAWA MICRON INVESTMENT RETIREMENT PLAN
(AS AMENDED 1995)
Pursuant to the provisions of Section 9.01 of the Hosokawa Micron
Investment Retirement Plan (As Amended 1995), the following amendment is now
a part of the Plan.
AMENDMENT NO. 2
Pages 2, 34, 35, 39 and 70 are hereby deleted in their entirety and replaced
by the attached pages 2, 34, 35, 39 and 70.
Unless otherwise provided herein, the provisions of this amendment shall be
effective as of November 6, 1995.
<PAGE>
(ii) during a Participant's participation under the Bepex
Corporation 401(k) Incentive Savings Plan.
(b) "Matching Contribution Account" (Account B) - Portion of Trust
Fund attributable to the Company's
(i) Matching Contributions in accordance with the provisions
of Subsection 3.03(a) and with the provisions of the Plan
in effect prior to the Supplemental Effective Date; and
(ii) Additional Matching Contributions in accordance with the
provisions of Subsection 3.03(b) and with the provisions
of the Plan in effect prior to the Supplemental Effective
Date.
(c) "Regular Contribution Account" (Account C) - Portion of Trust
Fund attributable to the Company's Regular contributions in
accordance with the provisions of Subsection 3.03(c) and the
provisions of the Plan in effect prior to the Supplemental
Effective Date, and Top-Heavy contributions in accordance with
Article 11.
(d) "Rollover Account" (Account D) - Portion of Trust Fund
attributable to funds rolled over from another qualified plan in
accordance with Section 3.07.
(e) "Transfer Account" (Account E) - Portion of Trust Fund
attributable to the Company's contributions during a
Participant's participation under another qualified plan and
transferred in accordance with the provisions of Section 3.08.
This account shall include that portion of Trust Fund
attributable to the discretionary (nonelective) contributions
made during a Participant's participation under the Bepex
Corporation 401(k) Incentive Savings Plan and transferred into
this Plan on December 31, 1995.
(f) "Voluntary After-Tax Contribution Account" - Portion of Trust
Fund attributable to a Participant's Voluntary After Tax
Contributions in accordance with the provisions of Section 3.04
and the provisions of the Plan in effect prior to the
Supplemental Effective Date.
(g) "Qualified Matching Contribution Account" - Portion of Trust Fund
attributable to the Company's Qualified Matching Contributions in
accordance with the provisions of Subsection 3.03(b).
(h) "Qualified Nonelective Contribution Account" - Portion of Trust
Fund attributable to the Company's Qualified Nonelective
Contributions in accordance with the provisions of Subsection
3.03(c).
"Amendment No. 2, effective November 6, 1995,
unless otherwise provided herein."
<PAGE>
5.03 Investment Funds
The Trust Fund shall be divided into such investment funds as
designated by the Committee and approved by the Trustee for the
investment of all Accounts, which shall be administered as a unit.
Until changed, the investment funds shall include, but not be limited
to, the following:
(a) Effective October 16, 1995, The Cash Management Trust of America
which will be invested in high-quality instruments of banks,
savings institutions, insurance companies, government instruments
and short-term corporate obligations, including commercial paper,
notes and bonds.
(b) The Stepstone Government Securities Fund consisting of high grade
securities with quality ratings ranging from direct and indirect
obligations of the United States government to corporate bonds
with ratings of AAA through BBB by Standard & Poor's and Moody's.
(c) The Bond Fund of America which invests in a diversified portfolio
consisting primarily of marketable fixed-income debt securities,
government obligations and money market instruments.
(d) The Daiwa Balanced Fund which invests in a combination of
equities of U.S. corporations and investment grade debt.
Effective December 8, 1995, this fund shall no longer be
available.
(e) The Fidelity Advisor Income & Growth Fund which invests in equity
and fixed-income securities with income, growth of income and
capital appreciation potential. It may also invest in equity
securities of some smaller, more rapidly growing companies.
(f) The Daiwa Pooled Equity Fund which invests in large U.S. company
stocks and convertible securities.
Effective December 8, 1995, this fund shall no longer be \
available.
(g) The Investment Company of America Fund which invests primarily in
common stocks but may also invest in high-quality convertibles
and debt securities.
(h) The Stepstone Emerging Growth Fund which will be invested
primarily in the common stocks of smaller and medium-sized
companies with above-average prospects for earnings growth.
(i) The AIM Constellation Fund which invests primarily in common
stocks, emphasizing small to medium sized emerging growth
companies.
34
"Amendment No. 2, effective November 6, 1995
unless otherwise provided herein."
<PAGE>
(j) The American EuroPacific Fund which will be invested in a
carefully chosen selection of more than 250 companies based
outside the U.S. which offer above-average growth potential.
(k) The American Balanced Fund which normally invests in a
diversified array of equities, debt and cash instruments. These
purchases may include common stocks, preferred stocks, corporate
bonds or U.S. government securities. The equity portion includes
foreign and domestic issues. Fixed-income securities must be
rated investment grade at the time of purchase.
(1) The AIM Value A Fund which invests primarily in equity securities
that are undervalued relative to current or projected earnings of
the companies issuing the securities, or relative to current
market values of assets owned by the companies. It invests
chiefly in stocks and convertibles, but may also invest in
preferred stocks and debt securities. The fund may invest up to
25% of its assets in foreign securities.
5.04 Valuation of Trust Fund
(a) The Trust Fund shall be valued by the Trustee as of each
Valuation Date on the basis of its fair market value.
(b) The Trust Fund may also be valued by the Trustee as of any other
date as the Committee may authorize for any reason the Committee
deems appropriate.
5.05 Allocation of Investment Earnings and Expenses
On the basis of the valuation as of a Valuation Date, subject to the
provisions of Subsection 7.03(b) and 7.04(h), the Accounts of all
Participants, shall be (a) proportionately adjusted to reflect
expenses in accordance with Section 3.10 and investment earnings other
than those credited to a specific Account; and (b) directly adjusted
to reflect all other applicable transactions during the Plan Year
attributable to such Accounts including, but not limited to, any
contributions or distributions.
35
"Amendment No. 2, effective November 6, 1995
unless otherwise provided herein".
<PAGE>
be paid in a lump sum to such Beneficiary's estate. A Participant may
change his Beneficiary designation at any time. All Beneficiary
designations and changes shall be made on an appropriate form and
filed with the Committee. If the primary Beneficiary designated by the
Participant is anyone other than the Participant's Protected Spouse,
such designation must include the written acknowledgment and consent
of such spouse and be witnessed by a Plan representative or a notary
public, to the extent required by law and the Committee. Such consent
will be limited to a specific alternate Beneficiary and any change in
such alternate Beneficiary will require a new spousal consent.
6.04 Upon other Termination of Employment
(a) Upon a Participant's termination of employment for reasons other
than Retirement, Disability or death, the following provisions
shall be applicable:
(i) Such Participant shall have a 100% vested interest in his
Elective Deferral Contribution, Voluntary Contribution,
Rollover, Transfer, Qualified Matching Contribution and
Qualified Nonelective Contribution Accounts.
(ii) Such Participant's vested interest in his Matching
Contribution and Regular Contribution Accounts shall,
subject to Subsection 6.05(a), be determined in accordance
with the following schedule on the basis of such
Participant's full Years of Service.
<TABLE>
Number of Years Percentage of Account
--------------- ---------------------
<S> <C> <C>
Less than 2 full years 0%
2 full years 40%
3 full years 60%
4 full years 80%
5 or more full years 100%
</TABLE>
(b) The portion of a Participant's Account which is not vested shall
be forfeited on the earlier of the date on which the Participant
receives a distribution of his vested benefits or the date on
which such Participant incurs five consecutive Breaks-in-Service.
If a Participant does not have a vested interest in his Account,
he shall be deemed to have received an immediate distribution as
of the date on which such Participant terminated employment.
That portion of the Participant's Account which is not vested
shall be used to reduce the Company's contributions in accordance
with Section 3.03.
39
"Amendment No. 2, effective November 6, 1995
unless otherwise provided herein."
<PAGE>
ARTICLE 12
WITHDRAWAL OF FUNDS DURING EMPLOYMENT
12.01 Withdrawals from Elective Deferral Contribution Account
Subject to the general withdrawal rules below, a Participant may
withdraw up to 100% of his Elective Deferral Contribution Account
(a) after attaining age 59-1/2 or (b) before attaining age 59-1/2,
provided such withdrawal meets the Financial Hardship Rules below.
12.02 Withdrawals from Matching Contribution Account
Subject to the general withdrawal rules below, a Participant who has
completed five or more full years of Plan participation and has a 100%
vested interest in his Matching Contribution Account may withdraw up
to 100% of such Account.
12.03 Withdrawals from Regular Contribution Account
No withdrawals shall be permitted from a Participant's Regular
Contribution Account.
12.04 Withdrawals from Rollover Account
Subject to the general withdrawal rules below, a Participant may elect
to withdraw up to 100% of his Rollover Account.
12.05 Withdrawals from Transfer Account
Subject to the general withdrawal rules below, a Participant may elect
to withdraw up to 100% of his Transfer Account, provided
such withdrawal meets the Financial Hardship Rules below.
12.06 Withdrawals from Qualified Matching Contribution and Qualified
Nonelective Contribution Accounts
Subject to the general withdrawal rules below, a Participant who has
attained age 59-1/2 may withdraw up to 100% of his Qualified Matching
Contribution and Qualified Nonelective Contribution Accounts.
12.07 Financial Hardship Rules
(a) For purposes of this Article, a Financial Hardship withdrawal may
be made only if it is on account of an immediate and heavy
financial need of the Participant and is necessary to satisfy
such financial need.
70
"Amendment No. 2, effective November 6, 1995
unless otherwise provided herein."
<PAGE>
HOSOKAWA MICRON INVESTMENT RETIREMENT PLAN
(AS AMENDED 1995)
Pursuant to the provisions of Section 9.01 of the Hosokawa Micron Investment
Retirement Plan (As Amended 1995), the following amendment is now a part of the
Plan.
AMENDMENT NO. 1
Pages 1, 2, 6, 11, 39, 45, 46, 70 and 72 are hereby deleted in their entirety
and replaced by the attached pages 1, 2, 6, 11 and 11a, 39, 45, 46, 70 and 72.
The provisions of this amendment shall be effective as
of January 1, 1996.
<PAGE>
HOSOKAWA MICRON INVESTMENT RETIREMENT PLAN
(AS AMENDED 1995)
STATEMENT OF PURPOSE
Hosokawa Micron International Inc. has had in effect since April 1, 1987 the
Hosokawa Micron Retirement Plan, to which it made contributions for the purpose
of sharing its profits with its employees in order to provide for the
accumulation of funds for the benefit of eligible employees and their
beneficiaries in the manner and to the extent set forth in such plan, which plan
was fully restated in 1992.
The Hosokawa Micron Retirement Plan (As Amended 1995), hereinafter set forth,
constitutes an amendment in its entirety to said plan which is continued
effective as of January 1, 1995 with respect to employees and participants who
had not yet retired, terminated employment or died as of such date. The rights
of anyone covered under the plan prior to January 1, 1995, who retired,
terminated employment or died before that date, shall be determined in
accordance with the terms and provisions of the plan in effect on the date of
such retirement, termination of employment or death, except as otherwise
specifically provided herein.
The plan contains assets transferred from the Alpine American Corp.
Profit-Sharing Plan effective August 1, 1989 in its Transfer Account.
Unless otherwise provided herein, those provisions added or amended to comply
with the Tax Reform Act of 1986 required to be effective as of April 1, 1987 or
April 1, 1989 shall be effective as of such dates.
ARTICLE 1
DEFINITIONS
For purposes of the Plan, the following words and phrases shall have the
following meanings unless a different meaning is plainly required by the
context. Wherever used, the masculine pronoun shall include the feminine pronoun
and the feminine pronoun shall include the masculine and the singular shall
include the plural and the plural shall include the singular.
1.01 "Account"
The interest of a Participant in the Trust Fund as represented by his
accounts as designated below.
(a) "Elective Deferral Contribution Account" (Account A) - Portion of
Trust Fund attributable to a Participant's Elective Deferral
Contributions
(i) in accordance with the provisions of Section 3.01 and the
provisions of the Plan in effect prior to the Supplemental
Effective Date; and
1
Amendment No. 1, effective January 1, 1996.
<PAGE>
(ii) during a Participant's participation under the Bepex
Corporation 401(k) Incentive Savings Plan.
(b) "Matching Contribution Account" (Account B) - Portion of Trust Fund
attributable to the Company's
(i) Matching Contributions in accordance with the provisions of
Subsection 3.03(a) and with the provisions of the Plan in
effect prior to the Supplemental Effective Date; and
(ii) Additional Matching Contributions in accordance with the
provisions of Subsection 3.03(b) and with the provisions of
the Plan in effect prior to the Supplemental Effective Date.
(c) "Regular Contribution Account" (Account C) - Portion of Trust Fund
attributable to the Company's Regular Contributions in accordance
with the provisions of Subsection 3.03(c) and the provisions of the
Plan in effect prior to the Supplemental Effective Date, and
Top-Heavy Contributions in accordance with Article 11.
(d) "Rollover Account" (Account D) - Portion of Trust Fund attributable
to funds rolled over from another qualified plan in accordance with
Section 3.07.
(e) "Transfer Account" (Account E) - Portion of Trust Fund attributable
to the Company's contributions during a Participant's participation
under another qualified plan and transferred in accordance with the
provisions of Section 3.08.
(f) "Voluntary After-Tax Contribution Account" - Portion of Trust Fund
attributable to a Participant's Voluntary After-Tax Contributions
in accordance with the provisions of Section 3.04 and the provisions
of the Plan in effect prior to the Supplemental Effective Date.
(g) "Qualified Matching Contribution Account" - Portion of Trust Fund
attributable to the Company's Qualified Matching Contributions in
accordance with the provisions of Subsection 3.03(b).
(h) "Qualified Nonelective Contribution Account" - Portion of Trust Fund
attributable to the Company's Qualified Nonelective Contributions in
accordance with the provisions of Subsection 3.03(c).
(i) Prior Bepex Contribution Account" - Portion of Trust Fund
attributable to the discretionary (nonelective) contributions made
during a Participant's participation under the Bepex Corporation
401(k) Incentive Savings Plan and transferred into this Plan on
December 31, 1995.
2
Amendment No. 1, effective January 1, 1996.
<PAGE>
1.12 "Effective Date"
April 1, 1987, the date as of which the Plan was established.
"Supplemental Effective Date"
January 1, 1995, the last date as of which the Plan was amended in its
entirety.
Unless otherwise provided herein, those provisions added or amended to
comply with the Tax Reform Act of 1986 required to be effective as of
April 1, 1987 or April 1, 1989 shall be effective as of such date.
1.13 "Election Period"
The period commencing 90 days before the Annuity Starting Date and ending
on such Annuity Starting Date.
1.14 "Employee"
Any person in the employ of the Company.
Leased Employees shall be included as Employees unless (i) such individual
is covered by a money purchase pension plan providing (A) a nonintegrated
employer contribution rate of at least 10 percent of compensation, as
defined in Section 415(c)(3) of the Code, but including amounts
contributed by the employer pursuant to a salary reduction agreement which
are excludable from the Leased Employee's gross income under Section 125,
402(a)(8), 403(h) or 403(b) of the Code; (B) immediate participation;
and (C) full and immediate vesting; and (ii) Leased Employees do not
constitute more than 20% of the Employer's Nonhighly Compensated Employee
workforce.
"Eligible Employee"
An Employee for whom the Company is required to contribute Federal
Insurance Contributions Act taxes excluding persons (a) who are Leased
Employees, (b) from the parent company on temporary assignment in the
United States of America, (c) employed as work-study, seasonal and/or
temporary employees and (d) who are members in good standing of the
Teamster Local No. 418 or Laborer's International Union of North America
Local No. 1137 or the International Association of Machinists and
Aerospace Workers, AFLA-CIO Lodge #1596, District No. 115.
Notwithstanding the above, Leased Employees shall be included in the
definition of Eligible Employee if the requirements of Section 414(n)(2)
of the Code require such inclusion in order to meet the plan qualification
requirements enumerated in Section 414(n) and then only if the coverage
requirements of Section 410(b) of the Code would otherwise not be met.
6
Amendment No. 1, effective January 1, 1996.
<PAGE>
(b) "Early Retirement Date" - The first day of any month coincident
with or following the date on which the Participant attains age 55,
provided he has completed five Years of Service as of such date.
For a Participant who was a participant of the Bepex Corporation
401(k) Incentive Savings Plan on December 31, 1995, Early Retirement
Date shall be the first day of any month coincident with or
following the date on which the Participant attains age 55.
(c) "Deferred Retirement Date" - The first day of any month subsequent
to the Participant's Normal Retirement Date.
1.27 "Service"
(a) All periods of employment with the Employer and with Hosokawa Micron
(USA) Inc., MikroPul Corporation, Menardi- Criswell Corporation,
Sonodyne Industries, Inc. and U.S. Felt Co.
A period of employment begins as of the date the Employee first
completes an Hour of Employment for the Employer or with Hosokawa
Micron (USA) Inc., MikroPul Corporation, Menardi-Criswell
Corporation, Sonodyne Industries, Inc. and U.S. Felt Co. and ends
on the earlier of the date the Employee resigns, is discharged,
retires or dies or, if the Employee is absent for any other reason,
on the first anniversary of the first day of such absence (with or
without pay) from the Employer. If an Employee is absent for any
reason and returns to the employ of the Employer before incurring a
Break-in-Service, as provided in Subsection (b), he shall receive
credit for his period of absence up to a maximum of 12 months.
Service subsequent to a Break-in-Service will be credited as a
separate period of employment.
(b) "Break-in-Service" - A period of 12-consecutive months during
which an Employee fails to accrue an Hour of Employment with the
Employer. Such period begins on the earlier of the date the Employee
resigns, is discharged, retires or dies or, if the Employee is
absent for any other reason, on the first anniversary of the first
day of such absence (with or without pay) from the Employer. If an
Employee is absent by reason of (i) the pregnancy of the Employee,
(ii) the birth of a child of the Employee, (iii) the placement of a
child with the Employee in connection with an adoption of such child
by such Employee, or (iv) caring for such child immediately
following such birth or placement, such Employee will not be treated
as having retired, resigned or been discharged and the period
between the first and second anniversary of the first day of such
absence shall not be deemed a Break-in-Service.
11
Amendment No. 1, effective January 1, 1996.
<PAGE>
(c) "Month of Service" - A calendar month, or in the case of aggregation
of non-successive periods of employment, 30 days of employment or
credited absence whether or not completed consecutively.
11a
Amendment No. 1, effective January 1, 1996.
<PAGE>
be paid in a lump sum to such Beneficiary's estate. A Participant
may change his Beneficiary designation at any time. All Beneficiary
designations and changes shall be made on an appropriate form and
filed with the Committee. If the primary Beneficiary designated by
the Participant is anyone other than the Participant's Protected
Spouse, such designation must include the written acknowledgment and
consent of such spouse and be witnessed by a Plan representative or
a notary public, to the extent required by law and the Committee.
Such consent will be limited to a specific alternate Beneficiary and
any change in such alternate Beneficiary will require a new spousal
consent.
6.04 Upon Other Termination of Employment
(a) Upon a Participant's termination of employment for reasons other
than Retirement, Disability or death, the following provisions shall
be applicable:
(i) Such Participant shall have a 100% vested interest in his
Elective Deferral Contribution, Voluntary Contribution,
Rollover, Transfer, Prior Bepex Contribution Account,
Qualified Matching Contribution and Qualified Nonelective
Contribution Accounts.
(ii) Such Participant's vested interest in his Matching
Contribution and Regular Contribution Accounts shall,
subject to Subsection 6.05(a), be determined in
accordance with the following schedule on the basis of
such Participant's full Years of service.
<TABLE>
<CAPTION>
Number of Years Percentage of Account
--------------- ---------------------
<S> <C>
Less than 2 full years 0%
2 full years 40%
3 full years 60%
4 full years 80%
5 or more full years 100%
</TABLE>
(b) The portion of a Participant's Account which is not vested
shall be forfeited on the earlier of the date on which the
Participant receives a distribution of his vested benefits or
the date on which such Participant incurs five consecutive
Breaks-in-Service. If a Participant does not have a vested
interest in his Account, he shall be deemed to have received an
immediate distribution as of the date on which such Participant
terminated employment.
That portion of the Participant's Account which is not vested
shall be used to reduce the Company's contributions in
accordance with Section 3.03.
39
Amendment No. 1, effective January 1, 1996.
<PAGE>
(g) If a Participant is in receipt of benefits from the Company's
insured long-term disability program, if applicable, payment of the
Participant's Elective Deferral Contribution, Matching Contribution,
Regular Contribution, Transfer, Qualified Matching Contribution and
Qualified Nonelective Contribution Accounts shall be deferred to the
first day of the month in which such Participant is no longer
eligible to receive such benefits or, if earlier, the 60th day
following the last day of the Plan Year during which the
Participant's Normal Retirement Date occurs, provided the benefits
payable under the long-term disability program would otherwise be
reduced by the benefits payable under the Plan.
7.03 Method and Form of Payment of Benefits for Participants Not Described in
Section 7.04
The following provisions shall be applicable for determining when
distribution of benefits shall be made for Participants not described in
Section 7.04. These provisions are intended to conform to the requirements
of Section 401(a)(9) of the Code, including the minimum distribution
incidental benefit proposed Treasury Regulation 1.401(a)(9)-2, and shall
be construed accordingly:
(a) Subject to Section 7.02, all benefits will be distributed in a lump
sum.
(b) Notwithstanding the provisions of Section 5.05, when distribution of
benefits from the Trust Fund is to be deferred in accordance with
Section 7.02, whether in whole or in part, the Committee may direct
the Trustee to deposit the Participant's Account in an interest-
bearing account. Thereafter, such Participant's Account shall be
credited with the interest attributable to such account and the
provisions of Section 5.05 shall not be applicable.
(c) Subject to Section 7.02, if a Participant's benefits are required to
commence in accordance with Subsection 7.02(d) or (e), in lieu of an
immediate lump sum distribution, the Participant may elect to have
the minimum amount required to be distributed each year under Code
Section 401(a)(9) with the remaining balance payable in a lump sum
upon termination of employment. Such benefit shall be payable
directly from the Trust Fund and shall reflect the Participant's
elections regarding Beneficiary and recalculation of life
expectancies in accordance with regulations under Code Section
401(a)(9).
In the absence of an election by the Participant, the form of
payment shall irrevocably be in the form of a lump sum.
45
Amendment No. 1, effective January 1, 1996.
<PAGE>
(d) Any benefits payable under this Article may be paid in cash,
securities, or such other assets of the Trust Fund as the Committee
may direct.
The distribution of a lump sum payment to the Participant or his
Beneficiary will constitute the complete discharge of all
obligations of the Plan.
7.04 Method and Form of Payment of Benefits for Participants Who Commenced
Participation Prior to January 1, 1992 and for Those Who Were
Participants in the Bepex Corporation 401(k) Incentive Savings Plan On
December 30, 1995
The following provisions shall be applicable for determining the method
and form of payment of all benefits for Participants who commenced their
participation in the Plan prior to January 1, 1992 and for those who were
participants in the Bepex Corporation 401(k) Incentive Savings Plan on
December 30, 1995. These provisions are intended to conform to the
requirements of Section 401(a)(9) of the Code, including the minimum
distribution incidental benefit proposed Treasury Regulation 1.401(a)
(9)-2, and shall be construed accordingly.
(a) Subject to Section 7.02, any benefit payable to a Participant who
has terminated employment or Beneficiary which in total is $3,500 or
less will be distributed in a lump sum.
(b) Subject to Section 7.02, any benefit payable to a Participant who
has terminated employment which is more than $3,500 will be
distributed at the Participant's election as follows:
(i) All or any portion of such amount may be distributed in a lump
sum, subject to the provisions below.
(ii) The balance, if any, may be used to purchase an immediate or
deferred annuity in accordance with the provisions of
Subsections (e), (f) and (g).
In the absence of an election by the Participant, benefits will be
distributed in a lump sum. If such benefits are deferred in
accordance with Section 7.02, the provisions of Subsection (h) will
be applicable.
(c) Subject to Section 7.02, if a Participant's benefits are required to
commence in accordance with Subsection 7.02(d) or (e), such
Participant shall make an irrevocable election as to the optional
form of payment. Such benefit shall reflect the Participant's
elections regarding Beneficiary and recalculation of life
expectancies in accordance with regulations under Code Section
401(a)(9). A Participant whose Account includes funds transferred
without the required spousal consent, directly or indirectly, from a
plan subject to Code Section 412, must elect to recalculate life
expectancies unless his spouse consents to waive the
46
Amendment No. 1, effective January 1, 1996.
<PAGE>
ARTICLE 12
WITHDRAWAL OF FUNDS DURING EMPLOYMENT
12.01 Withdrawals from Elective Deferral Contribution Account
Subject to the general withdrawal rules below, a Participant may withdraw
up to 100% of his Elective Deferral Contribution Account (a) after
attaining age 59-1/2 or (b) before attaining age 59-1/2, provided such
withdrawal meets the Financial Hardship Rules below.
12.02 Withdrawals from Matching Contribution Account
Subject to the general withdrawal rules below, a Participant who has
completed five or more full years of Plan participation and has a 100%
vested interest in his Matching Contribution Account may withdraw up to
100% of such Account.
12.03 Withdrawals from Regular and Prior Bepex Contribution Accounts
No withdrawals shall be permitted from a Participant's Regular and Prior
Bepex Contribution Accounts.
12.04 Withdrawals from Rollover Account
Subject to the general withdrawal rules below, a Participant may elect to
withdraw up to 100% of his Rollover Account.
12.05 Withdrawals from Transfer Account
Subject to the general withdrawal rules below, a Participant may elect to
withdraw up to 100% of his Transfer Account, provided such withdrawal
meets the Financial Hardship Rules below.
12.06 Withdrawals from Qualified Matching Contribution and Qualified Nonelective
Contribution Accounts
Subject to the general withdrawal rules below, a Participant who has
attained age 59-1/2 may withdraw up to 100% of his Qualified Matching
Contribution and Qualified Nonelective Contribution Accounts.
12.07 Financial Hardship Rules
(a) For purposes of this Article, a Financial Hardship withdrawal may be
made only if it is on account of an immediate and heavy financial
need of the Participant and is necessary to satisfy such financial
need.
70
Amendment No. 1, effective January 1, 1996.
<PAGE>
(i) The Participant must have obtained all other distributions and
loans available under all plans maintained by the Employer.
(ii) Elective Deferral Contributions and any other Employee
contributions under all plans maintained by the Employer will
be suspended for 12 months following the receipt of the
Financial Hardship withdrawal. The Participant's Elective
Deferral Contributions under Section 3.01 will automatically
be resumed following the required period of suspension, unless
the Participant elects otherwise.
(iii) The limitation of Section 4.01 which is imposed on a
Participant's Elective Deferral Contributions for the calendar
year immediately following the calendar year of the Financial
Hardship withdrawal will be reduced by the amount of such
contributions and/or deferrals for the calendar year of such
withdrawal.
(e) The amount of such Financial Hardship withdrawal may not exceed the
amount required to meet the specified need plus any amounts
necessary to pay any federal, state or local income taxes or
penalties reasonably anticipated to result from the withdrawal. In
addition, effective for Plan Years beginning after December 31,
1988, the amount of such withdrawal from a Participant's Elective
Deferral Contribution Account shall be limited to the sum of the
Participant's Elective Deferral Contributions made, plus the income
credited to such Account as of the last Valuation Date in 1988.
(f) A Financial Hardship withdrawal from a Participant's Elective
Deferral Contribution Account will be available only after the total
amount available from all other Accounts has been withdrawn.
12.08 General Withdrawal Rules
Any withdrawal shall be subject to the following requirements:
(a) If a Participant elected to receive his benefits in the form of a
life annuity in accordance with the provisions of Sections 7.03 and
7.04 at any time, any withdrawal will be distributed under a
Qualified Annuity unless such Participant elects to receive such
withdrawal in a lump sum. All withdrawals will be considered
separate Annuity Starting Dates for purposes of Sections 7.02 and
7.04.
(b) Generally, only one withdrawal will be permitted during any Plan
Year.
Notwithstanding the above, an unlimited number of withdrawals will
be permitted from a Participant's Rollover Account during any Plan
Year.
72
Amendment No. 1, effective January 1, 1996.
<PAGE>
HOSOKAWA MICRON INVESTMENT RETIREMENT PLAN
(AS AMENDED 1995)
Pursuant to the provisions of Section 9.01 of the Hosokawa Micron Investment
Retirement Plan (As Amended 1995), the following amendment is now a part of the
Plan.
AMENDMENT NO. 2
Pages 2, 34, 35, 39 and 70 are hereby deleted in their entirety and replaced by
the attached pages 2, 34, 35, 39 and 70.
Unless otherwise provided herein, the provisions of this amendment
shall be effective as of November 6, 1995.
<PAGE>
(ii) during a Participant's participation under the Bepex
Corporation 401(k) Incentive Savings Plan.
(b) "Matching Contribution Account" (Account B) - Portion of Trust Fund
attributable to the Company's
(i) Matching Contributions in accordance with the provisions of
Subsection 3.03(a) and with the provisions of the Plan in
effect prior to the Supplemental Effective Date; and
(ii) Additional Matching Contributions in accordance with the
provisions of Subsection 3.03(b) and with the provisions of
the Plan in effect prior to the Supplemental Effective Date.
(c) "Regular Contribution Account" (Account C) - Portion of Trust Fund
attributable to the Company's Regular Contributions in accordance
with the provisions of Subsection 3.03(c) and the provisions of the
Plan in effect prior to the Supplemental Effective Date, and
Top-Heavy Contributions in accordance with Article 11.
(d) "Rollover Account" (Account D) - Portion of Trust Fund attributable
to funds rolled over from another qualified plan in accordance with
Section 3.07.
(e) "Transfer Account" (Account E) - Portion of Trust Fund attributable
to the Company's contributions during a Participant's participation
under another qualified plan and transferred in accordance with the
provisions of Section 3.08. This account shall include that portion
of Trust Fund attributable to the discretionary (nonelective)
contributions made during a Participant's participation under the
Bepex Corporation 401(k) Incentive Savings Plan and transferred into
this Plan on December 31, 1995.
(f) "Voluntary After-Tax Contribution Account" - Portion of Trust Fund
attributable to a Participant's Voluntary After-Tax Contributions
in accordance with the provisions of Section 3.04 and the provisions
of the Plan in effect prior to the Supplemental Effective Date.
(g) "Qualified Matching Contribution Account" - Portion of Trust Fund
attributable to the Company's Qualified Matching Contributions in
accordance with the provisions of Subsection 3.03(b).
(h) "Qualified Nonelective Contribution Account" - Portion of Trust Fund
attributable to the Company's Qualified Nonelective Contributions in
accordance with the provisions of Subsection 3.03(c).
2
"Amendment No. 2, effective November 6, 1995,
unless otherwise provided herein."
<PAGE>
5.03 Investment Funds
The Trust Fund shall be divided into such investment funds as designated
by the Committee and approved by the Trustee for the investment of all
Accounts, which shall be administered as a unit. Until changed, the
investment funds shall include, but not be limited to, the following:
(a) Effective October 16, 1995, The Cash Management Trust of America
which will be invested in high-quality instruments of banks, savings
institutions, insurance companies, government instruments and
short-term corporate obligations, including commercial paper, notes
and bonds.
(b) The Stepstone Government Securities Fund consisting of high grade
securities with quality ratings ranging from direct and indirect
obligations of the United States government to corporate bonds with
ratings of AAA through BBB by Standard & Poor's and Moody's.
(c) The Bond Fund of America which invests in a diversified portfolio
consisting primarily of marketable fixed-income debt securities,
government obligations and money market instruments.
(d) The Daiwa Balanced Fund which invests in a combination of equities
of U.S. corporations and investment grade debt.
(e) The Fidelity Advisor Income & Growth Fund which invests in equity
and fixed-income securities with income, growth of income and
capital appreciation potential. It may also invest in equity
securities of some smaller, more rapidly growing companies.
(f) The Daiwa Pooled Equity Fund which invests in large U.S. company
stocks and convertible securities.
(g) The Investment Company of America Fund which invests primarily in
common stocks but may also invest in high-quality convertibles and
debt securities.
(h) The Stepstone Emerging Growth Fund which will be invested primarily
in the common stocks of smaller and medium-sized companies with
above-average prospects for earnings growth.
(i) The AIM Constellation Fund which invests primarily in common stocks,
emphasizing small to medium sized emerging growth companies.
(j) The American EuroPacific Fund which will be invested in a carefully
chosen selection of more than 250 companies based outside the U.S.
which offer above-average growth potential.
34
"Amendment No. 2, effective November 6, 1995
unless otherwise provided herein."
<PAGE>
(k) The American Balanced Fund which normally invests in a diversified
array of equities, debt and cash instruments. These purchases may
include common stocks, preferred stocks, corporate bonds or U.S.
government securities. The equity portion includes foreign and
domestic issues. Fixed-income securities must be rated investment
grade at the time of purchase.
(l) The AIM Value A Fund which invests primarily in equity securities
that are undervalued relative to current or projected earnings of
the companies issuing the securities, or relative to current market
values of assets owned by the companies. It invests chiefly in
stocks and convertibles, but may also invest in preferred stocks and
debt securities. The fund may invest up to 25% of its assets in
foreign securities.
5.04 Valuation of Trust Fund
(a) The Trust Fund shall be valued by the Trustee as of each Valuation
Date on the basis of its fair market value.
(b) The Trust Fund may also be valued by the Trustee as of any other
date as the Committee may authorize for any reason the Committee
deems appropriate.
5.05 Allocation of Investment Earnings and Expenses
On the basis of the valuation as of a Valuation Date, subject to the
provisions of Subsection 7.03(b) and 7.04(h), the Accounts of all
Participants, shall be (a) proportionately adjusted to reflect expenses in
accordance with Section 3.10 and investment earnings, other than those
credited to a specific Account; and (b) directly adjusted to reflect all
other applicable transactions during the Plan Year attributable to such
Accounts including, but not limited to, any contributions or
distributions.
35
"Amendment No. 2, effective November 6, 1995
unless otherwise provided herein."
<PAGE>
be paid in a lump sum to such Beneficiary's estate. A Participant may
change his Beneficiary designation at any time. All Beneficiary
designations and changes shall be made on an appropriate form and filed
with the Committee. If the primary Beneficiary designated by the
Participant is anyone other than the Participant's Protected Spouse, such
designation must include the written acknowledgment and consent of such
spouse and be witnessed by a Plan representative or a notary public, to
the extent required by law and the Committee. Such consent will be limited
to a specific alternate Beneficiary and any change in such alternate
Beneficiary will require a new spousal consent.
6.04 Upon Other Termination of Employment
(a) Upon a Participant's termination of employment for reasons other
than Retirement, Disability or death, the following provisions shall
be applicable:
(i) Such Participant shall have a 100% vested interest in his
Elective Deferral Contribution, Voluntary Contribution,
Rollover, Transfer, Qualified Matching Contribution and
Qualified Nonelective Contribution Accounts.
(ii) Such Participant's vested interest in his Matching Contribution
and Regular Contribution Accounts shall, subject to Subsection
6.05(a), be determined in accordance with the following
schedule on the basis of such Participant's full Years of
Service.
<TABLE>
<CAPTION>
Number of Years Percentage of Account
--------------- ---------------------
<S> <C>
Less than 2 full years 0%
2 full years 40%
3 full years 60%
4 full years 80%
5 or more full years 100%
</TABLE>
(b) The portion of a Participant's Account which is not vested shall be
forfeited on the earlier of the date on which the Participant
receives a distribution of his vested benefits or the date on which
such Participant incurs five consecutive Breaks-in-Service. If a
Participant does not have a vested interest in his Account, he shall
be deemed to have received an immediate distribution as of the date
on which such Participant terminated employment.
That portion of the Participant's Account which is not vested shall
be used to reduce the Company's contributions in accordance with
Section 3.03.
39
"Amendment No. 2, effective November 6, 1995
unless otherwise provided herein."
<PAGE>
ARTICLE 12
WITHDRAWAL OF FUNDS DURING EMPLOYMENT
12.01 Withdrawals from Elective Deferral Contribution Account
Subject to the general withdrawal rules below, a Participant may withdraw
up to 100% of his Elective Deferral Contribution Account (a) after
attaining age 59-1/2 or (b) before attaining age 59-1/2, provided such
withdrawal meets the Financial Hardship Rules below.
12.02 Withdrawals from Matching Contribution Account
Subject to the general withdrawal rules below, a Participant who has
completed five or more full years of Plan participation and has a 100%
vested interest in his Matching Contribution Account may withdraw up to
100% of such Account.
12.03 Withdrawals from Regular Contribution Account
No withdrawals shall be permitted from a Participant's Regular
Contribution Account.
12.04 Withdrawals from Rollover Account
Subject to the general withdrawal rules below, a Participant may elect to
withdraw up to 100% of his Rollover Account.
12.05 Withdrawals from Transfer Account
Subject to the general withdrawal rules below, a Participant may elect to
withdraw up to 100% of his Transfer Account, provided such withdrawal
meets the Financial Hardship Rules below.
12.06 Withdrawals from Qualified Matching Contribution and Qualified Nonelective
Contribution Accounts
Subject to the general withdrawal rules below, a Participant who has
attained age 59-1/2 may withdraw up to 100% of his Qualified Matching
Contribution and Qualified Nonelective Contribution Accounts.
12.07 Financial Hardship Rules
(a) For purposes of this Article, a Financial Hardship withdrawal may be
made only if it is on account of an immediate and heavy financial
need of the Participant and is necessary to satisfy such financial
need.
70
"Amendment No. 2, effective November 6, 1995
unless otherwise provided herein."
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<S> <C>
SUBSIDIARY JURISDICTION OF INCORPORATION
- -------------------------------------------- ------------------------------
Hosokawa Bepex Corporation Delaware, USA
Hosokawa Americas Inc. Delaware, USA
Procequipo, S.A. de C.V. Mexico
Hosokawa Micron Ltd. (Canada) Canada
Hosokawa Micron do Brasil Ltda Brazil
Hosokawa Micron Chile Ltda Chile
Hosokawa Micron International B.V. Netherlands
Hosokawa Micron B.V. Netherlands
Hosokawa Schugi B.V. Netherlands
Menardi-Criswell B.V. Netherlands
Hosokawa Alpine Aktiengesellschaft (HAAG) Germany
Hosokawa MikroPul GmbH Germany
Hosokawa Bepex GmbH Germany
HMI Unternehmens-Holding GmbH Germany
Hosokawa Rietz Ltd. United Kingdom
Hosokawa France S.A. France
Hosokawa Kreuter GmbH Germany
Hosokawa Ter Braak B.V. Netherlands
Hosokawa Stott Ltd. United Kingdom
Recomix B.V. Netherlands
Hosokawa Micron S.A. France
Hosokawa Micron Ltd. (UK) United Kingdom
Menardi-Criswell Ltd. United Kingdom
Hosokawa Micron Espana S.A. Spain
Hosokawa Micron Pty., Ltd. (South Africa) South Africa
Hosokawa Alpine (Japan) (a branch of HAAG) Germany
Hosokawa Micron Australia Pty., Ltd. Australia
Hosokawa Micron Pvt. Ltd. (India) India
Hosokawa Management Ltd. Switzerland
</TABLE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Hosokawa Micron International Inc.
The audits referred to in our report dated November 3, 1997, except for note 22,
which is as of April 16, 1998, included the related financial statement schedule
for each of the years in the three-year period ended September 30, 1997,
included in the registration statement. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
New York, New York
April 20, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000849745
<NAME> Hosokawa Micron International Inc.
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1997
<PERIOD-END> SEP-30-1997 MAR-31-1998
<CASH> 13,455 9,442
<SECURITIES> 303 222
<RECEIVABLES> 62,239 67,361
<ALLOWANCES> (2,898) (2,636)
<INVENTORY> 42,198 39,553
<CURRENT-ASSETS> 128,514 135,417
<PP&E> 77,921 76,469
<DEPRECIATION> (15,078) (15,826)
<TOTAL-ASSETS> 283,890 286,820
<CURRENT-LIABILITIES> 225,202 227,764
<BONDS> 0 0
0 0
0 0
<COMMON> 95 95
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 283,890 286,820
<SALES> 360,472 178,856
<TOTAL-REVENUES> 360,472 178,856
<CGS> 247,022 122,469
<TOTAL-COSTS> 345,894 170,544
<OTHER-EXPENSES> 756 407
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 5,573 2,686
<INCOME-PRETAX> 8,249 5,219
<INCOME-TAX> 3,996 1,743
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 4,253 3,476
<EPS-PRIMARY> 0.25 0.37
<EPS-DILUTED> 0.25 0.37
</TABLE>
