SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
EIF Holdings, Inc.
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(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PRELIMINARY COPIES
EIF HOLDINGS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD _____________, 1998
------------
Notice is hereby given that the Annual Meeting of Shareholders
(the "Meeting") of EIF Holdings, Inc., a Hawaii corporation (the
"Company"), will be held at the Company's offices at 53 Stiles Road,
Salem, New Hampshire, on __________, ______, 1998, at ____ a.m.,
local time, for the following purposes:
1. To elect four directors to serve for the following year and
until their successors have been elected.
2. To authorize the Board of Directors to effect a Reverse
Stock Split (any one falling within a range between and
including five-for-one and a ten-for-one Reverse Stock
Split) of the Company's outstanding Common Stock, depending
upon a determination by the Board that a Reverse Stock Split
is in the best interests of the Company and the
stockholders.
3. To approve an Article of Amendment to establish a class of
Preferred Stock, $.01 par value, consisting of 20,000,000
shares.
4. To approve an Agreement and Plan of Merger pursuant to which
the Company would change its state of incorporation from
Hawaii to Delaware through the merger of the Company with
and into US Industrial Services, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company.
5. To act upon such other matters as may properly come before
the Meeting or any adjournments thereof.
Only shareholders of record at the close of business on
_________, 1998 will be entitled to notice of and to vote at the
Meeting or any adjournments thereof. All shareholders are cordially
invited to attend the Meeting in person. Pursuant to the Hawaii
Business Corporation Act, shareholders are entitled to appraisal
rights with respect to Proposal No. 4 by filing with the Company a
written Notice of Dissent prior to the vote of shareholders on such
Proposal, and any such shareholder must refrain from voting on such
Proposal. The right of dissent is described in greater detail in the
attached Proxy Statement and Appendix I thereto.
By order of the Board of Directors
J. Drennan Lowell,
Secretary
________, 1998
Salem, New Hampshire
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WISH YOUR SHARES
OF COMMON STOCK TO BE VOTED, YOU ARE REQUESTED TO SIGN AND MAIL
PROMPTLY THE ENCLOSED PROXY WHICH IS BEING SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS. A RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
<PAGE>
PRELIMINARY COPIES
EIF HOLDINGS, INC.
---------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
_____________, 1998
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of the enclosed proxy by the Board of Directors of EIF
Holdings, Inc., a Hawaii corporation (the "Company"), for use at the
1998 Annual Meeting of Shareholders of the Company (the "Meeting") to
be held at the offices of the Company, 53 Stiles Road, Salem, New
Hampshire, on __________, , 1998, at ____ a.m., local time, and at
any and all adjournments thereof, for the purposes set forth in
the accompanying Notice of Annual Meeting of Shareholders ("Notice of
Meeting").
This Proxy Statement, Notice of Meeting and accompanying proxy
are first being mailed to shareholders on ____________, 1998.
VOTING SECURITIES AND VOTE REQUIRED
Only shareholders of record at the close of business on ________,
1998 (the "Record Date") are entitled to notice of and to vote the
shares of common stock, no par value (the "Common Stock"), of the
Company held by them on such date at the Meeting or any and all
adjournments thereof. As of the Record Date, 24,618,201 shares of
Common Stock were outstanding. There was no other class of voting
securities outstanding at that date.
Each share of Common Stock held by a shareholder entitles such
shareholder to one vote on each matter that is voted upon at the
Meeting or any adjournments thereof.
The presence, in person or by proxy, of the holders of majority
of the outstanding shares of Common Stock is necessary to constitute a
quorum at the Meeting. Assuming that a quorum is present, (i) a
plurality of votes cast will be required for the election of directors
and (ii) the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock will be required to approve the
reverse stock split (the "Reverse Stock Split"), the establishment of
a class of Preferred Stock, $.01 par value (the "Preferred Stock"),
and the merger (the "Reincorporation") of the Company with and into US
Industrial Services, Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("US Industrial").
With regard to the election of directors, votes may be cast in
favor or withheld; votes that are withheld will be excluded entirely
from the vote and will have no effect, except that votes withheld will
be counted toward determining the presence of a quorum for the
transaction of business. Abstentions and broker "non-votes" (i.e.,
<PAGE>
shares identified as held by brokers or nominees as to which
instructions have not been received from the beneficial owners or
persons entitled to vote that the broker or nominee does not have
discretionary power to vote on a particular matter) will be counted
toward determining the presence of a quorum for the transaction of
business. Abstentions may be specified on all proposals except the
election of directors. With respect to all proposals other than the
election of directors, abstentions will have the effect of a negative
vote. A broker "non-vote" will have no effect on the outcome of the
election of directors, but broker "non-votes" could affect the outcome
of the Reverse Stock Split proposal, the Preferred Stock proposal and
the Reincorporation proposal because the Company must obtain approval
of each of these proposals from the holders of a majority of the
outstanding shares of Common Stock.
If the accompanying proxy is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the
instructions contained therein. Unless contrary instructions are
given, the persons designated as proxy holders in the accompanying
proxy will vote "FOR" the Board of Directors' slate of nominees, "FOR"
approval of the Reverse Stock Split, "FOR" approval of the
establishment of the Preferred Stock, "FOR" approval of the
Reincorporation, and as recommended by the Board of Directors with
regard to any other matters which may properly come before the Meeting
or if no such recommendation is given, in their own discretion. Each
proxy granted by a shareholder may be revoked by such shareholder at
any time thereafter by writing to the Secretary of the Company prior
to the Meeting, or by execution and delivery of a subsequent proxy or
by attendance and voting in person at the Meeting, except as to any
matter or matters upon which, prior to such revocation, a vote shall
have been cast pursuant to the authority conferred by such proxy.
The Company's By-Laws state that shareholders may cumulate their
votes for the election of directors pursuant to Section 415-33 of the
Hawaii Business Corporation Act. If, not less than forty-eight hours
prior to the time fixed for the Meeting, any shareholder delivers to
an officer of the Company a request that the election of directors to
be elected at the Meeting be by cumulative voting, then the directors
to be elected at the Meeting shall be chosen as follows: each
shareholder present in person or represented by proxy at the Meeting
shall have a number of votes equal to the number of shares of Common
Stock owned by such shareholder multiplied by five (the number of
directors to be elected), and shall be entitled to cumulate his votes
and give all thereof to one nominee or to distribute the votes among
two or more of the nominees in such manner as the shareholder
determines. The five nominees receiving the highest number of votes on
the foregoing basis, up to the total number of directors to be elected
at the Meeting, shall be the successful nominees. In the event of
cumulative voting, the proxy solicited by the Board of Directors
confers discretionary authority on the proxies to cumulate votes so as
to elect the maximum number of persons nominated by the Board of
Directors.
The cost of soliciting these proxies, consisting of the printing,
handling, and mailing of the proxy and related material, and the
actual expense incurred by brokerage houses, custodians, nominees and
fiduciaries in forwarding proxy material to the beneficial owners of
stock, will be paid by the Company.
In order to assure that there is a quorum, it may be necessary
for certain officers, directors, regular employees and other
representatives of the Company to solicit Proxies by telephone or
telegraph or in person. These persons will receive no extra
compensation for their services.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the
beneficial ownership of the Common Stock of the Company as of the
Record Date concerning (i) persons known to the Company to be the
beneficial owners of more than 5% of the outstanding Common Stock,
(ii) by each director and nominee, (iii) by each executive officer
named in the Summary Compensation Table and (iv) by all directors and
officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of
Status of Beneficial
Name of Beneficial Owner Beneficial Owner Ownership(1) Percent
- ------------------------ ---------------- ------------ -------
<S> <C> <C> <C>
American Eco Corporation** Beneficial Owner of more 8,800,000(2) 35.7%
than 5% of Common Stock
Frank J. Fradella Chairman, President and 8,800,000(3) 35.7%
Director
Michael E. McGinnis Director 8,800,000(4) 35.7%
Andreas O. Tobler Director 25,450 1%
Michael J. Chakos Nominee 15,000(5) *
All executive officers and 8,840,450(6) 35.9%
directors as a group (5 persons)
- ------------------------------------
</TABLE>
* Represents less than 1% of the issued and outstanding shares of Common Stock.
** The principal executive offices of American Eco Corporation
("American Eco") are 154 University Avenue, Toronto, Ontario,
Canada M5H 3Y9.
(1) Unless otherwise noted, all of the shares shown are held by
individuals or entities possessing sole voting and investment
power with respect to such shares. The number of shares
beneficially owned includes shows which each beneficial owner has
the right to acquire within 60 days of the Record Date.
(2) These shares are subject to an option granted to Mr. Fradella and
his wife, see note (3) below. Does not include (i) 10,000,000
shares purchasable upon the closing of a Stock Purchase
Agreement, which closing is subject to shareholder approval of
Proposals Nos. 2 and 4 or (ii) shares subject to conversion
rights under revolving line of credit, see Proposal No. 1
"Election of Directors -- Certain Transactions" for information
regarding the interest of American Eco in the Company.
(3) Includes 8,800,000 shares subject to an option granted by
American Eco during the term of the option, see note (2) above.
(4) Includes 8,800,000 shares beneficially owned by American Eco, of
which Mr. McGinnis is Chairman of the Board, President and CEO.
Mr. McGinnis disclaims beneficial ownership of the Company's
securities owned by American Eco.
3
<PAGE>
(5) Includes 15,000 shares subject to options, and does not include
(i) 30,000 shares subject to options which are not exercisable
within 60 days from the Record Date or (ii) 30,000 shares which
will be subject to options issued upon shareholder approval of
Proposals No. 2 and 4.
(6) Includes 15,000 shares subject to options. See Notes (2) and (5)
above.
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<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
INFORMATION ABOUT NOMINEES
At the Meeting, four directors will be elected to serve until the
next annual meeting and until their successors are elected and
qualified. The Board of Directors currently consists of three persons,
Messrs. Fradella, McGinnis and Tobler. As of the Meeting, the number
of directors will be increased to four and Mr. Chakos will be
nominated for such directorship. The Board of Directors will vote all
proxies received by them in the accompanying form for the nominees
listed below. It is not contemplated that any of the nominees will be
unable or unwilling to serve as a director, but if that should occur,
the persons designated as proxies will vote for a substitute nominee
or nominees designated by the Board of Directors.
The following table sets forth certain information about each
nominee for election to the Board of Directors:
Position With the
------------------
Name Age Company Year Became Director
---- --- ------- --------------------
Frank J. Fradella 42 Chairman, President, 1997
CEO and Director
Michael E. McGinnis 47 Director 1996
Andreas O. Tobler 47 Director 1993
Michael J. Chakos 40 Nominee --
The terms of the directors will expire at the next annual meeting
and until their successors are elected and qualified. The Company's
officers are elected by the Board of Directors and hold office at the
will of the Board of Directors. These is no family relationship
between any of the nominees.
FRANK J. FRADELLA has been President, CEO and a director of the
Company since May 1997 and has been Chairman since November 1997. From
October 1996 to May 1997, he was Executive Vice President and Chief
Operating Officer of American Eco. From February 1993 to September
1994, he was employed by NSC Corporation, having been serving as its
President and CEO in September 1994. From February 1991 to January
1993, Mr. Fradella was Vice President of Kaselaan & D'Angelo
Associates.
MICHAEL E. MCGINNIS has been a director of the Company since
February 1996, and served as Chairman of the Board from February 1996
to November 1997 and as President of the Company from March 1996 until
August 1996. Mr. McGinnis has served as the President and Chief
Executive Officer of American Eco since 1993, Chairman since May 1997
and as a director since 1994. He was the President and Chief Executive
Officer of Eco Environmental, Inc., a provider of environmental
remediation services to industrial clients, when it was acquired by
American Eco in 1993. Prior to joining Eco Environmental, Inc. in
1992, Mr. McGinnis was employed with The Brand Companies which he
joined in 1965 and served in various operational and administrative
capacities for more than 27 years. Since February 1998, Mr. McGinnis
has been a director of Dominion Bridge Corporation (Nasdaq NMS).
5
<PAGE>
ANDREAS O. TOBLER has served as a director of the Company since
November 1993. He served as Vice President and Treasurer of the
Company from January 1995 and November 1993, respectively, to February
1996, having been an employee [what position? what compensation?] from
October 1991 through February 1997. Since October 1996, Mr. Tobler has
served as a principal and an officer of Online Capital GmbH, a Swiss
private investment company, and also served as the Managing Director
of its affiliate Cornerstone Financial Corporation, a U.S. private
financial company. From 1989 to 1991, Mr. Tobler was Managing Partner
of Royal Trust (Switzerland).
MICHAEL J. CHAKOS has been a co-owner and served as Chief
Financial Officer of JL Manta, Inc. since March 1993. From February
1992 to March 1993, he was employed by The Brand Companies as a
regional controller. Prior to February 1992, Mr. Chakos served as the
Chief Financial Officer of Hydro Services, Inc., a hydroblasting and
vacuum services company based in California, since 1988. Since March
1995, he has owned and served as President of CUBS Construction
Company.
One-post closing condition in the agreement whereby the Company
acquired JL Manta Inc. (the "Manta Acquisition") was that for a period
of three year from the November 1997 closing date the Company would
use its reasonable best efforts to include Mr. Chakos on the
management slate for the election of directors at stockholders
meetings.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of four
meetings during the fiscal year ended September 30, 1997, including
actions by unanimous written consent. No director attended fewer than
75% of all meetings of the Board of Directors.
The Board of Directors of the Company currently does not have
either a standing compensation committee or audit committee. It is
anticipated that the directors elected at the Meeting will establish
such committees. The compensation committee would recommend the
compensation arrangements with the executive officers and the
Company's compensation plans, and would administer the stock option
plan, see Proposal No. 4 - "Approve a Plan of Merger to Change the
State of Incorporation of the Company from Hawaii to Delaware -
Business and Financial Condition." The audit committee would oversee
the financial reporting by the Company and consult, as required, with
the Company's chief financial officer and independent accountants.
COMPENSATION OF DIRECTORS
The Company is authorized to pay $15,000 per year to its
non-employee directors, which may be paid, at the Company's option,
either in cash or shares of Common Stock on a quarterly basis. Mr.
Tobler did not receive any compensation for the 1997 fiscal year. It
is intended that the Board of Directors will authorize some form of
compensation to Mr. Tobler for the 1998 fiscal year assuming he is
re-elected as a director.
EXECUTIVE COMPENSATION AND EMPLOYMENT AGREEMENTS
The following table sets forth all cash compensation for the
fiscal year ended September 30, 1997 of the Company's Chief Executive
Officer and the four most highly compensated executive officers whose
compensation exceeded $100,000 for services rendered to the Company
(the "Named Executive Officers").
6
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
OTHER ANNUAL
SALARY BONUS COMPENSATION OPTIONS
NAME PRINCIPAL POSITION YEAR ($) ($) ($) (#)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Frank J. Fradella1/ President and CEO 1997 $ 107,665 -- -- --
David L. Norris2/ President and CEO 1997 116,667 -- -- --
</TABLE>
1/ Mr. Fradella became President and CEO on May 1, 1997.
2/ Mr. Norris was President and CEO from September 1, 1996 through
April 30, 1997.
The following table sets forth individual grants of stock
options made by the Company during the fiscal year ended September 30,
1997 to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
% OF TOTAL OPTIONS
GRANTED TO EMPLOYEES
IN EXERCISE OR BASE EXPIRATION
NAME OPTION GRANTED FISCAL YEAR PRICE ($/SH) DATE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank J. Fradella -- -- -- --
David L. Norris -- -- -- --
</TABLE>
The following table sets forth information regarding each
exercise of stock options rights during the last fiscal year by each
Named Executive Officer and the fiscal year-end value of unexercised
options and stock appreciation rights provided on an aggregate basis.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END ($) FY-END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE/ UNEXERCISABLE/
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frank J. Fradella -0- -0- -0- -0-
David L. Norris -0- -0- -0- -0-
</TABLE>
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<PAGE>
EMPLOYMENT CONTRACTS
Mr. Fradella is employed as Chairman, President and CEO of the
Company at a salary of $250,000 at an annum rate. He does not have an
employment agreement.
As of October 1, 1997, J. Drennan Lowell became Vice President
and Chief Financial Officer of the Company at a base annual salary of
$175,000. He received a $50,000 "signing" bonus and is to receive a
$70,000 "performance" bonus on or about March 15, 1998. The performance
bonus is to compensate him for the target bonus he was to have
received from his prior employer. In the event the Company terminates
Mr. Lowell's employment without cause, he would be entitled to
severance in the amount of one year's salary. In addition, as part of
the proposed arrangement with American Eco (see "Certain Transactions"
below), Mr. Lowell is to receive options from the purchasing group to
purchase 1,000,000 shares of the Company's Common Stock at an exercise
price of $.65 per share, vesting over a three year period with
automatic vesting upon a "change of control" of the Company (without
giving effect to the proposed Reverse Stock Split).
Upon the closing of the Manta Acquisition, Mr. Chakos is entered
into an Employment Agreement with Manta providing for him to serve as
Vice President of Manta for a period of three years at an annual base
salary of $150,000.
SECTION 16(A) COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more
than ten percent of the Company's Common Stock, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission ("SEC") and any national securities exchange or quotation
system on which such class of equity securities is listed. Officers,
directors and greater than ten percent stockholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a)
forms filed.
Based solely on the Company's review of the copies of such forms
received by it, or on written representation from certain reporting
persons _________. However, Messrs. _________ and _______ did report
these transactions on Form 5 as soon as the omissions were discovered.
CERTAIN TRANSACTIONS
In January 1996, American Eco agreed to purchase 10,000,000
shares of the Company's Common Stock at a price of $.10 per share, or
an aggregate purchase price of $1,000,000, pursuant to a Stock
Purchase Agreement. The closing has been conditioned upon Company
shareholders approving an increase in its authorized shares of Common
Stock to have sufficient shares to issue upon the closing. One reason
for the Reverse Stock Split, which is Proposal No. 2 at this Meeting,
is to permit the Company to have authorized but unissued shares of
Common Stock available for the closing of the Stock Purchase Agreement
with American Eco.
In February 1996, American Eco agreed to loan money to the
Company pursuant to an unsecured line of credit agreement (the "Line
of Credit") with a maximum borrowing of $5,250,000, bearing interest
at the prime rate plus 2%. The Line of Credit initially was to expire
on July 31, 1997, and was modified as of July 31, 1997, and the
availability was increased to $15,000,000 and extended to February 18,
1998. As of September 30, 1997, the availability was increased to
$20,000,000 in order to permit the Company to meet certain of its
existing obligations. As of November 30, 1997, $17,873,000, including
accrued interest, was outstanding under the Line of Credit. American
Eco was the Company's primary source of funding in fiscal 1997. Upon
the closing of the Stock Purchase Agreement, the outstanding principal
amount on the Line of Credit would be reduced by $1,000,000,
representing the purchase price under such Agreement. The
modifications of the Line of Credit also granted American Eco the
right to convert all, and not less than all, of the remaining
8
<PAGE>
principal amount thereunder into shares of the Company's Common Stock
at a conversion price equal to 85% of the five-day weighed average
closing market price of such Common Stock immediately prior to the
conversion date.
When Mr. Fradella became employed by American Eco in October 1996
he received a $350,000 loan to cover the purchase of a home upon
joining American Eco. This loan is repayable in five years, without
interest, subject to an annual $70,000 principal reduction upon each
anniversary of his employment with American Eco. In September 1997,
American Eco assigned this loan to the Company, increasing the
principal amount under the Line of Credit by $280,000. At November 30,
1997, the outstanding principal amount of this loan was $280,000,
reflecting a reduction of $70,000 upon the first anniversary.
American Eco has also guaranteed certain indebtedness and leases
of the Company. At September 30, 1997, the outstanding aggregate
principal amount of the obligations being guaranteed was $404,500.
During the 1997 fiscal year, the Company repaid a bank loan and
certain other outstanding obligation in the amount of $4,207,000,
which had been guaranteed by American Eco. Subsequent to September 30,
1997, the amount of the Company's outstanding obligations guaranteed
by American Eco was reduced to $127,000.
American Eco and the Company also entered into a Management
Agreement as of October 1, 1996 pursuant to which American Eco
provided management and financial guidance to the Company and also
guaranteed certain of the Company's obligations in order to allow the
Company to receive more favorable terms from creditors. The Agreement
called for a quarterly fee of $1,000,000. American Eco ceased
providing the management services to the Company shortly after the
appointment of Mr. Fradella as President and CEO of the Company in May
1997. The fee for the first two fiscal quarters and pro rata for the
third quarter was in the aggregate amount of $2,300,000, This amount
was not paid, but added to the principal amount of the Line of Credit.
The Management Agreement was terminated as of June 30, 1997.
In December 1997, American Eco granted an option to Mr. Fradella
and his wife to purchase its 8,800,000 shares of the Company's Common
Stock at an exercise price of $.65 per share exercisable for a period
of one year. Pursuant to the grant of this option, the Company granted
Mr. Fradella and his wife a proxy to vote all of the option shares.
The purpose of the option was to give Mr. Fradella a stake in the
Company.
PROPOSAL NO. 2
AUTHORIZE THE BOARD OF DIRECTORS TO EFFECT A REVERSE STOCK SPLIT
(ANY ONE FALLING WITHIN A RANGE BETWEEN AND INCLUDING A ONE-FOR-FIVE
AND A ONE-FOR-TEN REVERSE STOCK SPLIT) OF THE COMPANY'S OUTSTANDING
COMMON STOCK, DEPENDING UPON A DETERMINATION BY THE BOARD THAT A
REVERSE STOCK SPLIT IS IN THE BEST INTERESTS OF THE COMPANY AND THE
STOCKHOLDERS
BACKGROUND
As of March 3, 1998, the Board of Directors authorized, subject
to shareholder approval, a Reverse Stock Split (any one falling within
a range between and including a one-for-five and a one-for-ten Reverse
Stock Split) of the Company's outstanding Common Stock that may be
effected by the Board depending on market conditions. The intent of
the Reverse Stock Split is to increase the marketability and liquidity
of the Common Stock. Moreover, the proposed Reincorporation (see
Proposal No. 4) contemplates an exchange of shares of the Company's
Common Stock for shares of US Industrial Common Stock on a
post-Reverse Stock Split one-for-one basis.
If the Reverse Stock Split is approved by the shareholders at the
Meeting, it will be effected only upon a determination by the Board of
Directors to such effect, the Board will select in its discretion the
ratio for the Reverse Stock Split which falls within a range between
and including a one-for-five and a one-for-ten Reverse Stock Split
9
<PAGE>
which, in the Board's judgment, would result in the greatest
marketability and liquidity of the Common Stock, based upon prevailing
market conditions, on the likely effect on the market price of the
Common Stock and other relevant factors.
If approved by the shareholders, the Reverse Stock Split would
become effective on any date (the "Effective Date") selected by the
Board of Directors on or prior to the Company's next Annual Meeting of
Shareholders, but not later than the Reincorporation, if such proposal
also is approved by shareholders. If no Reverse Stock Split is
effected by such date, the Board of Directors will take action to
abandon the Reverse Stock Split. The procedures for the consummation
of the Reverse Stock Split are attached hereto as Exhibit A.
The primary reasons for the Reverse Stock Split are to permit the
Company to have sufficient authorized but unissued shares of Common
Stock for issuances and to try to increase the per share price to
facilitate trading activity in the Common Stock.
There are presently 25,000,000 shares of Common Stock authorized
of which 24,618,201 shares are issued and outstanding. The Company is
committed to issue or reserve for issuance (i) 10,000,000 shares of
Common Stock to American Eco, (ii) 894,125 shares of Common Stock
underlying conversion of Stockholder Notes issued by the Company to
the former stockholders of JL Manta Inc. ("Manta") upon the closing of
its Manta Acquisition (iii) 105,875 shares of Common Stock underlying
Retention Bonus Agreements with certain Manta stockholders and key
employees, (iv) 500,000 shares underlying stock options granted and to
be granted to former stockholders of Manta, (v) 430,000 shares
underlying exercise of warrants issued in connection with loan
transactions and (vi) 6,500,000 shares underlying conversion of
Preferred Stock to be issued to a lender (the "Acquisition Lender") on
the Manta Acquisition (with issuance of the Preferred Stock subject to
shareholder approval of Proposal No. 3). The actual numbers of shares
to be issued is subject to the Reverse Split and the anti-dilution
provisions under the respective agreements governing the conversion
rights. The Company also desires to have additional authorized shares
for future capital raising, acquisitions and options, although there
are no current plans for any such issuances other than described above
and options under the US Industrial 1998 Stock Option Plan. See
Proposal No. 4 "Principal Reason for the Reincorporation" for
information regarding the Manta Acquisition.
PURPOSES AND EFFECTS OF A REVERSE STOCK SPLIT
Consummation of the Reverse Stock Split will not alter the number
of authorized shares of Common Stock, which will remain 25,000,000
shares, no par value, assuming no Reincorporation. Consummation of the
Reverse Stock Split will not have any federal tax consequences to
shareholders.
The Common Stock is listed for trading on the OTC Electronic
Bulletin Board under the symbol EIFH. On the Record Date, the reported
closing price of the Common Stock on the OTC Electronic Bulletin Board
was $____ per share. One purpose of the Reverse Stock Split is to seek
trading of the Common Stock on the Nasdaq SmallCap System which
requires, among other things, a minimum market price of $4.00 per
share. However, no assurance can be given that the market price of the
Common Stock will rise in proportion to the reduction in the number of
outstanding shares resulting from any Reverse Stock Split or that the
Company would meet the other eligibility standards for the Nasdaq
SmallCap System trading market, or if so listed would later meet the
maintenance requirements for continued listing.
Additionally, the Board believes that the current per share price
of the Common Stock may limit the effective marketability of the
Common Stock because of the reluctance of many brokerage firms and
institutional investors to recommend lower-priced stocks to their
clients or to hold them in their own portfolios. Certain policies and
practices of the securities industry may tend to discourage individual
brokers within those firms from dealing in lower-prices stocks. Some
of those policies and practices involve time-consuming procedures that
make the handling of lower-prices stocks economically unattractive.
The brokerage commission on a sale of lower-priced stock may also
represent a higher percentage of the sale price than the brokerage
commission on a higher-priced issue. Any reduction in brokerage
commissions resulting from the Reverse Stock Split may be offset,
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<PAGE>
however, in whole or in part, by increased brokerage commissions
required to be paid by stockholders selling "odd lots" created by such
Reverse Stock Split.
The par value of the Common Stock will remain at no par value per
share following any Reverse Stock Split, and the number of shares of
Common Stock outstanding will be reduced. The number of record holders
of the Common Stock as of the Record Date was ______. The Company does
not anticipate that any Reverse Stock Split would result in a
significant reduction in the number of such holders. It is noted that
while the present number of record holders is at a level which would
permit the Company to suspend its duty to file periodic reports with
the Securities and Exchange Commission, the Company intends to remain
subject to such reporting requirements.
The Reverse Stock Split would have the following effects upon the
number of shares of Common Stock outstanding (24,618,201 shares as of
the Record Date) and the number of authorized and unissued shares of
Common Stock (assuming that no additional shares of Common Stock are
issued by the Company after the Record Date). The following examples
are not exhaustive of all possible Reverse Stock Splits that fall
within the Board approved range, and are only intended for
illustrative purposes.
<TABLE>
<CAPTION>
Common Unissued and
Reverse Stock Split Stock Outstanding Reserved Shares Authorized Common Stock**
- ------------------- ----------------- --------------- -----------------------
<S> <C> <C> <C>
1 for 5 4,923,640 3,696,000 16,380,360
1 for 10 2,461,820 1,848,000 20,690,180
</TABLE>
* Includes (i) 10,000,000 shares purchasable by American Eco
pursuant to Stock Purchase Agreement; (ii) 1,500,000 shares
issuable to the former stockholders, key employees and lenders of
Manta, underlying Stockholder Notes, Retention Bonus Agreements
and stock options granted and to be granted; (iii) 480,000 shares
underlying outstanding warrants and (iv) 6,500,000 shares
underlying conversion of Preferred Shares issuable to a lender,
all of which are subject to stockholder approval of the Reverse
Split and/or some case also of the class of Preferred Stock.
These amounts were proportionately reduced to reflect the
applicable Reverse Stock Split ratios. Does not include shares of
Common Stock issuable upon conversion rights under the American
Eco Line of Credit.
** Excludes reserved shares.
At the Effective Date, each share of the Common Stock issued and
outstanding immediately prior thereto (the "Old Common Stock"), will
be reclassified as and changed into the appropriate fraction of a
share of the Company's Common Stock (the "New Common Stock"), subject
to the treatment of fractional share interests as described below.
Shortly after the Effective Date, assuming the proposed
Reincorporation does not become effective, the Company will send
transmittal forms to the holders of the Old Common Stock to be used in
forwarding their certificates formerly representing shares of Old
Common Stock for surrender and exchange for certificates representing
whole shares of New Common Stock. If the Reincorporation also becomes
effective, the Company will notify shareholders of the Reverse Stock
Split and the Recapitalization as set forth in Proposal No. 4
"Certificates for Shares of Common Stock." No certificates or scrip
representing fractional share interests in the New Common Stock will
be issued, and no such fractional share interest in the holder thereto
to vote, or to any rights of a shareholder of the Company. Any
fractional share interest will result in the adjustment of the number
of shares either upward or downward to the nearest whole share.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF
THE REVERSE-STOCK SPLIT.
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<PAGE>
PROPOSAL NO. 3
APPROVE A CLASS OF PREFERRED STOCK
Proposal. The Board of Directors has, subject to shareholder
approval, decided to amend the Company's Articles of Incorporation to
establish a class of 20,000,000 shares of preferred stock, $.01 par
value (the "Preferred Stock"). The Board was of the view that having
the Preferred Stock available would give the Company greater
flexibility for structuring corporate transactions, raising additional
capital and other corporate purposes, and also to fulfill its
obligation to issue Preferred Stock to the lender on the Manta
Acquisition.
Pursuant to the Preferred Stock authorization, the Board would be
able to issue up to 20,000,000 shares of Preferred Stock. Holders of
the Common Stock have no pre-emptive other rights to subscribe for
shares of Preferred Stock. Issuance of Preferred Stock, whether or not
convertible into Common Stock, might under circumstances dilute either
shareholders' equity or voting rights.
The Board has no present plans to issue any shares of Preferred
Stock except that the closing of the Manta Acquisition the Acquisition
Lender received a $6.5 million Convertible Promissory Note, bearing
interest at 5 1/4% per annum and due May 18, 1999, and convertible,
subject upon shareholder approval of Proposals No. 2 and this Proposal
No. 3, into shares of Preferred Stock at the conversion price of $1.00
per share, and thereafter convertible into the Company's Common Stock
on a one-for-one basis, subject to the Reverse Stock Split. However,
the Board may issue Preferred Stock in acquisitions and for other
corporate purposes as an alternative to the issuance of the Company's
Common Stock. The authorization of such shares will enable the Company
to act promptly and without additional expense if appropriate
circumstances arise which require the issuance of such shares. The
Board intends to issue Preferred Stock only on terms which are in the
best interests of the Company and consistent with the Board's
fiduciary obligations to its shareholders.
The Preferred Stock may have certain anti-takeover effects. The
availability of Preferred Stock could render more difficult or
discourage, to varying degrees and in various circumstances, a merger,
tender offer, proxy contest, or assumption of control of a large block
of the Company's Common Stock without approval of the Board, or the
Board's own removal, even though shareholders may favor such action.
The Board believes that the proposed class of Preferred Stock would
strengthen and enhance protections against unfair takeover tactics.
Management of the Company is not presently aware of any effort to
accumulate the Common Stock or to obtain control of the Company by
means of a merger, tender, offer, solicitation in opposition to
management, or otherwise.
Although neither the Company's management nor its Board has any
current plans to adopt anti-takeover amendments to the Company's
charter, they may consider such proposals from time to time and
recommend their adoption if they believe that they are in the best
interests of the Company and its shareholders.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDMENT TO AUTHORIZE A CLASS OF PREFERRED STOCK.
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<PAGE>
PROPOSAL NO. 4
APPROVE A PLAN OF MERGER TO CHANGE THE STATE OF
INCORPORATION OF THE COMPANY FROM HAWAII TO DELAWARE.
GENERAL
As of March 2, 1998, the Board of Directors authorized an
Agreement and Plan of Merger (the "Merger Agreement") between the
Company and US Industrial pursuant to which the Company will merge
with and into US Industrial, the Company's newly-formed wholly-owned
subsidiary and a Delaware corporation. As a result of such merger, the
state of incorporation of the Company will be changed from Hawaii to
Delaware (the "Reincorporation"), the capitalization will be changed
and US Industrial will have certain other characteristics as set forth
herein. The discussion contained herein is qualified in its entirety
by reference to the Merger Agreement, a copy of which is attached
hereto as Exhibit B.
By voting for the Reincorporation, a shareholder would not be
deemed to waive any claims he may have against the Company or its
officers and directors (excluding a claim seeking dissenter's
appraisal rights), and the Company would not use such a vote as a
defense to any such action.
PRINCIPAL REASONS FOR THE REINCORPORATION
When the Company was formed some of its principals were located
in the State of Hawaii and it was contemplated that some of its
business activities would be conducted there. However, at present, the
major activities are located in California, Florida, Illinois, Indiana
and Missouri, and management is located in New Hampshire. Hawaii is
not the state of formation of many public companies. Accordingly, for
the reasons mentioned below, management has considered changing the
Company's state of incorporation and chose Delaware.
Over the past several years there have been changes in management
of the Company. The most recent changes occurred in March 1996 upon
the investment by American Eco in the Company, and then in May 1997
upon Frank J. Fradella becoming President and CEO. The management
under American Eco was involved in evaluating the current business
operations and in dealing with personnel and financial problems they
uncovered. Mr. Fradella has brought in a management team which has
stabilized the past operations and is seeking to expand the Company
through acquisitions, such as the Manta Acquisition in November 1997.
Manta provides specialized maintenance services for clients in the
industrial sector. It has annualized revenues of approximately $45
million. On November 20, 1997, the Company acquired all of the
outstanding Manta capital stock for $6,960,633, consisting of
$4,725,321 in cash and $2,235,312 in convertible notes due in November
2000. To finance the Manta Acquisition, the Company borrowed $9
million from the Acquisition Lender, consisting of a $6.5 million
Convertible Promissory Note due in May 1999 and a $2.5 million note
due in February 1998. The Company believes that the Reincorporation
would assist it in trying to achieve the growth plan through
reincorporation in Delaware.
Delaware is generally considered to be among the most modern
jurisdictions in terms of its corporate law. The State of Delaware
has, over the years, undertaken to maintain a modern and flexible
corporation law which is frequently revised to meet changing business
conditions. As a result, Delaware has become a preferred domicile for
many major American corporations. By reincorporating in Delaware, the
Company will be able to make use of the increased flexibility afforded
by the General Corporation Law of Delaware. Because of Delaware's
significance as the state of incorporation of major corporations, the
Delaware judiciary has become particularly familiar with matters of
corporate law, and a substantial body of court decisions has developed
construing Delaware corporate law. As a consequence, Delaware
corporate law has been, and is likely to continue to be, interpreted
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<PAGE>
and explained in a number of significant court decisions, a
circumstance which may provide greater predictability with respect to
the Company's corporate legal affairs and greater marketability of the
Company's securities.
CONVERSION OF SHARES OF COMMON STOCK
Upon consummation of the Reincorporation, each outstanding share
of Common Stock, after giving effect to the Reverse Stock Split, will
automatically be converted into one share of US Industrial common
stock, par value $.01 per share (the "Delaware Common Stock"). As a
result, the existing shareholders of the Company will become
stockholders of US Industrial, and they will maintain their pro-rata
share of the outstanding and issued shares of the Delaware Common
Stock that they held of the outstanding shares of Common Stock.
In addition, US Industrial will issue shares of its Common Stock
to American Eco and will reserve shares of its Common Stock for
issuance to the former stockholders and key employees of Manta and for
stock options, and will issue shares of its Preferred Stock to the
Acquisition Lender, as described in Proposals No. 2 and No. 3.
CERTIFICATES FOR SHARES OF COMMON STOCK
Following Reincorporation, stock certificates representing shares
of the Company's Common Stock will be accepted for transfer, but must
first be exchanged for certificates representing shares of Delaware
Common Stock. Upon presentation to the Company's transfer agent, stock
certificates representing shares of the Company's Common Stock may,
following the Reincorporation, be exchanged for stock certificates
representing an equal number of shares of Delaware Common Stock. US
Industrial will send a notice to shareholders as of the effective date
of the Reincorporation a letter of transmittal advising them of the
procedure for the exchange of stock certificates.
BUSINESS AND FINANCIAL CONDITION
The Reincorporation will not result in any change in the physical
location, business, properties, management, assets, liabilities or net
worth of the Company. As a result of the Reincorporation, the name
will become US Industrial Services, Inc., US Industrial will succeed
to all the business, properties, assets and liabilities of the
Company, and the shareholders of the Company will become the
stockholders of US Industrial. The issued and outstanding shares of
capital stock of US Industrial will be the same as the number of
outstanding shares of the Company at the effective date of the Merger.
US Industrial has an authorized capitalization of 25,000,000
shares of Delaware Common Stock and 20,000,000 shares of Preferred
Stock. US Industrial will assume all obligations of the Company,
including all outstanding options and warrants to purchase shares of
the Company's Common Stock as well as the issuance of 10,000,000
shares of Common Stock to American Eco and the 1,000,000 shares to be
issued to the Manta stockholders and employees and the Preferred Stock
to the Acquisition Lender. All such options and warrants will be
exercisable for shares of Delaware Common Stock upon the same terms as
they are currently exercisable for shares of the Company's Common
Stock, after giving effect to the Reverse Stock Split, and the number
of Shares of Delaware Common Stock issuable as set forth in the
immediately preceding sentence also will be adjusted to give effect to
the Reverse Stock Split.
US Industrial has established a 1998 Stock Option Plan (the "1998
Plan") providing for the grant of options to purchase up to 1,000,000
shares of its Common Stock to employees, officers, directors and
consultants of US Industrial and its subsidiaries. The options may be
either incentive stock options (as defined under the Internal Revenue
Code of 1986, as amended) which may only be granted to employees, or
non-qualified options which may be granted to eligible optionees. The
1998 Plan will be administered by a Compensation Committee to be
selected by US Industrial's Board of Directors. The exercise price of
each share of Common Stock subject to an option, the method of payment
and the vesting and duration of the option will be fixed by the
Compensation Committee, but the exercise price shall not be less than
the fair market value of the Common Stock on the date of grant. No
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<PAGE>
options have been granted under the 1998 Plan. Assuming approval of
the Reincorporation, US Industrial will grant options to Manta
employees for an aggregate of 500,000 shares, prior to possible
reduction based upon the Reverse Split.
DIRECTORS AND OFFICERS
Following the Meeting, but prior to the Reincorporation, the
Company, in its capacity as the sole stockholder of US Industrial, if
necessary, will elect as the four directors of US Industrial the same
individuals who are elected as directors of the Company at the
Meeting. Messrs. Chakos, Fradella, McGinnis, and Tobler are the
current directors of US Industrial and the present executive officers
of the Company serve in the same capacities at US Industrial. Each of
the directors of US Industrial will be elected for a term of office of
one year and until his successor is elected and qualified. Therefore,
the persons who are serving as directors of the Company immediately
prior to the Reincorporation will constitute the entire Board of
Directors of US Industrial immediately after the Reincorporation.
It is anticipated that the four directors of US Industrial will
elect as officers of US Industrial the same persons who are elected as
officers of the Company following the Meeting.
FEDERAL INCOME TAX EFFECTS
The Reincorporation is intended to be a tax free reorganization
under the Internal Revenue Code of 1986, as amended. Assuming the
Reincorporation qualifies as a reorganization, no gain or loss will be
recognized to the holders of Common Stock of the Company as a result
of consummation of the Reincorporation, and no gain or loss will be
recognized by the Company or US Industrial. Each former holder of
Common Stock of the Company will have the same basis in the capital
stock of the US Industrial received by such holder pursuant to the
Reincorporation as such holder has in the Common Stock of the Company
held by such holder at the time of consummation of the
Reincorporation. Each shareholder's holding period with respect to US
Industrial Common Stock will include the period during which such
holder held the corresponding Company Common Stock,provided the latter
was held by such holder as a capital asset at the time of consummation
of the Reincorporation. The Company has not obtained a ruling from the
Internal Revenue Service or an opinion of legal or tax counsel with
respect to the consequences of the Reincorporation.
The foregoing is only a summary of certain federal income tax
consequences. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS
REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE PROPOSED
REINCORPORATION, INCLUDING THE APPLICABILITY OF THE LAWS OF ANY STATE
OR OTHER JURISDICTION.
RIGHTS OF DISSENTING SHAREHOLDERS
Pursuant to the Hawaii Business Corporation Act, the Company's
shareholders are entitled to dissent from the proposed Reincorporation
of the Company with and into US Industrial, and each dissenting
shareholder may obtain from the Company the fair value of all shares
of Common Stock beneficially owned by such dissenting shareholder. A
shareholder who wishes to so dissent must file with the Company, prior
to the vote, a written notice of intention to demand that the
shareholder be paid fair value for such shareholder's shares of his
Common Stock in the event that the proposed Reincorporation is
effectuated. Any such dissenting shareholder must refrain from
approving the proposed Reincorporation. In the event that the Merger
Agreement is approved by the shareholders, the Company will deliver
notice to those shareholders who have dissented providing instructions
on how to surrender their certificates and to be compensated therefor.
Thereafter, the Company would send to dissenting stockholders who had
deposited their stock certificate payment for the estimated fair value
of their shares. In determining fair value of the shares, the Company
would primarily take into account the market value of the Company's
Common Stock immediately prior to the effectuation of the
Reincorporation, excluding any appreciation or depreciation in
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<PAGE>
anticipation of the Reincorporation. If a dissenting shareholder does
not agree with the Company's determination of fair value and a
resolution cannot be reached as to fair value, the Company would file
a proceeding in a Hawaii state court requesting the court to determine
the fair value. Reference is made to Sections 415-80 and 415-81 of the
Hawaii Business Corporation Act which govern the rights of
shareholders to dissent and seek appraisal, copies of which sections
are attached hereto as Appendix I.
The Merger Agreement between the Company and US Industrial
permits the Company to terminate such Merger Agreement in the event
that shareholders holding more than five percent (5%) of the issued
and outstanding shares of Common Stock dissent and assert their
appraisal rights. In the event that the Company terminates the Merger
Agreement, those shareholders who have dissented will not be able to
exercise their dissenters right to receive the fair value of their
shares of Common Stock and will continue as shareholders of the
Company.
CHANGES IN THE COMPANY'S CERTIFICATE OF INCORPORATION AND BY-LAWS TO
BE EFFECTED BY THE REINCORPORATION
US Industrial will be governed by Delaware corporate law and by
its certificate of incorporation (the "Delaware Certificate") and
By-Laws (the "Delaware By-Laws"), which will result in some changes in
the rights of shareholders. The following discussion summarizes the
material differences between the Delaware Certificate and the Delaware
By-laws and the Articles of Incorporation and By-Laws of the Company.
The shareholders of the Company will become subject to the Delaware
General Corporation Law and to the US Industrial charter provisions
upon the effective date of the Reincorporation.
Action by Shareholders Without a Meeting. Under the By-laws of
the Company, actions may be taken by the shareholders of the Company
without a meeting only if all of the shareholders entitled to vote on
the matter consent in writing to the corporate action being taken.
Under the Delaware By-laws however, actions may be taken by the
stockholders of US Industrial without a meeting if the holders of
outstanding stock representing the minimum number of votes that would
be necessary to authorize such action at a meeting at which all shares
entitled to vote thereon were present and voted consent in writing to
the corporate action being taken, provided that US Industrial must
send prompt notice of the authorization before it may effect the
corporate action.
Special Meetings Called by Shareholders. Under the Company's
By-laws, one or more shareholders holding not less than 10% of the
issued and outstanding shares of Common Stock may call a special
meeting of shareholders. The Delaware By-laws provide that
stockholders holding 40% or more of the issued and outstanding shares
of Delaware Common Stock may call a special meeting of the
stockholders. As a result, it will be more difficult for the
stockholders of the Company to effect corporate actions without the
support of the Company's Board of Directors.
CERTAIN DIFFERENCES BETWEEN DELAWARE AND HAWAII CORPORATION LAW
Delaware law differs in certain respects from Hawaii law.
Although it is not practical to compare all the differences between
the laws governing corporations of Hawaii and Delaware, the following
discussion provides a summary of the material differences which may
significantly affect the rights of shareholders. Such differences can
be determined in full by reference to the Hawaii Business Corporation
Act and to the Delaware General Corporation Law. In addition, both
Hawaii and Delaware law provide that some of the statutory provisions
as they affect various rights of holders may be modified by provisions
in the certificate of incorporation or bylaws of the corporation.
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<PAGE>
Shareholder Appraisal Rights. Shareholder appraisal rights are
statutory rights of dissenting stockholders to demand that, upon
consummation of certain reorganizations, the corporation purchase
their shares at an appraised fair market value. Delaware law provides
rights of appraisal to stockholders in the event of a merger or
consolidation, except (a) a merger by a corporation, the shares of
which are either listed on a national securities exchange or widely
held (by more than 2,000 stockholders of record) if such stockholders
receive shares of the surviving corporation or of a listed or widely
held corporation, and (b) a merger, if the corporation in which the
dissenter is a stockholder survives the merger and no vote of such
corporation's stockholders is required to approve the merger. Under
Delaware law, no vote of the stockholders of a corporation surviving a
merger is required if the number of shares to be issued in the merger
does not exceed 20% of the shares of the surviving corporation
outstanding immediately prior to such issuance and if certain other
conditions are met. Delaware law provides that any corporation may
stipulate in its certificate of incorporation that appraisal rights
shall be available for shares of its stock as a result of an amendment
to its certificate of incorporation, any merger in which the
corporation is a constituent corporation, or the sale of all or
substantially all of the assets of the corporation. The Delaware
Certificate does not provide for such appraisal rights.
Hawaii law provides appraisal rights to shareholders in more
types of reorganizations than under Delaware law. Shareholders of a
Hawaii corporation may seek appraisal of their shares in the event
that (a) the corporation merges, except where the corporation is the
surviving corporation and no vote of the shareholders was needed in
order to effect such merger, (b) any sale or exchange of all or
substantially all of the property and assets of the corporation not
made in the ordinary course of business, (c) any plan of exchange to
which the corporation is a party as the corporation the shares of
which are to be acquired, or (d) any amendment of the articles of
incorporation which materially and adversely affects certain
dissenter's rights.
Payment of Dividends and Repurchase of Shares of Stock. Under
Delaware law, a corporation may pay dividends only out of surplus
(generally, the stockholders' equity of the corporation less the par
value of the capital stock outstanding) or, if there exists no
surplus, out of the net profits of the corporation for the fiscal year
in which the dividend is declared and/or the preceding fiscal year. If
the capital of the corporation has diminished to an amount less than
the aggregate amount of capital represented by issued and outstanding
stock having a liquidation preference, the corporation may not declare
and pay out of its net profits any dividends to the holders of its
common stock until the deficiency has been repaired.
In general, Delaware law provides that shares of a corporation's
capital stock may only be repurchased or redeemed by the corporation
out of surplus. To determine the surplus, assets and liabilities are
valued at their current fair market value. Assuming that such assets
have a fair market value greater than their book value and that
liabilities have not increased in value to a greater extent, such
revaluation will increase the surplus of the corporation and thereby
permit the corporation to pay an increased dividend and/or to
repurchase a greater number of shares.
Under Hawaii law, a corporation may pay dividends or redeem its
shares if the articles of incorporation permit it to make such
distributions, unless, after giving effect to the payment of the
dividend or redemption of shares, the corporation would be unable to
pay its debts as they become due in the usual course of business, or
the corporation's total assets would be less than the sum of its total
liabilities and, unless the articles of incorporation otherwise
permit, the maximum amount that then would be payable, in any
liquidation, in respect of all outstanding shares having preferential
rights in liquidation.
It is the present policy of the Board of Directors to retain any
earnings for use in the Company's business.
Inspection of Books and Records. Hawaii law provides that any
shareholder may inspect only the corporation's register of
shareholders. Delaware law grants any stockholder the right to examine
all books and records of the corporation for a proper purpose provided
that such stockholder makes a written demand under oath.
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<PAGE>
Cumulative Voting. Under Delaware law, cumulative voting in the
election of directors is not available unless expressly provided by
the certificate of incorporation. Without cumulative voting, no person
can be elected without the support of the holders of a plurality of
the shares voting. The Delaware Certificate does not provide for
cumulative voting. Hawaii law provides that shareholders shall have
the right to cumulate their votes for the election of directors if a
shareholder delivers to an officer of the corporation a request to
cumulate votes at least 48 hours prior to the date for the annual
meeting or special meeting. This right may be restricted or eliminated
by the corporation's certificate of incorporation if such corporation
has a class of equity securities registered pursuant to the Securities
Exchange Act of 1934, as amended, which are listed on a national
securities exchange or quoted on the Nasdaq National Market.
Acquisition of Significant Shares of Stock. As a result of the
Reincorporation, the Company will become subject to Section 203 of the
Delaware General Corporation Law which regulates certain business
combinations, including tender offers. Section 203 may have the effect
of significantly delaying certain stockholders' ability to acquire a
significant equity interest in the Company if such acquisition is not
approved by the Board of Directors. In general, Section 203 prevents
an "Interested Stockholder" (defined generally as a person with 15% or
more of a corporation's outstanding voting stock) of a Delaware
corporation from engaging in a "Business Combination" (defined to
include mergers and a variety of other transactions such as transfers
of assets, loans, and transactions that would increase the Interested
Stockholder's proportionate share of stock) with a Delaware
corporation for three years following the date such person became an
Interested Stockholder unless, among other things, before such person
became an Interested Stockholder the board of directors of the
corporation approved the Business Combination or the transaction which
resulted in the stockholder becoming an Interested Stockholder. Under
Section 203, the restrictions described above do not apply to certain
Business Combinations proposed by an Interested Stockholder following
the announcement or notification of one of certain extraordinary
transactions involving the corporation and a person who had not been
an Interested Stockholder during the previous three years or who
became an Interested Stockholder with the approval of a majority of
the corporation's directors. In addition, the restrictions under
Section 203 do not apply if the corporation's original certificate of
incorporation contains a provision expressly electing not to be
governed by Section 203. The Delaware Certificate does not contain
such a provision.
The board of directors of US Industrial has approved American Eco
becoming a significant stockholder of that corporation as a result of
the Reincorporation. In addition, the board of directors of US
Industrial has approved the American Eco Agreement pursuant to which
American Eco will acquire an additional 10,000,000 shares of Delaware
Common Stock. Accordingly, American Eco will not be deemed an
Interested Stockholder for the purposes of Section 203, and American
Eco will be permitted to pursue further Business Combinations with US
Industrial should it desire to do so in the future. No other Business
Combinations have been proposed. See "Security Ownership of Certain
Beneficial Owners, Directors and Executive Officers."
Under Hawaii law, shareholders proposing to make a "control share
acquisition" are subject to Sections 415-171 and 415-172 of the Hawaii
Business Corporation Act. These sections require that a person
proposing to make a "control share acquisition" (defined to mean the
acquisition of shares of an issuing public company, which is defined
as a company incorporated in Hawaii with at least 100 shareholders and
having its principal place of business or substantial assets located
in Hawaii, resulting in beneficial ownership by the acquiring person
of a new range of voting powers, as specified below) must file an
information statement with the issuing public corporation. Such
information statement must include information on the identity of the
person making such acquisition, the terms of the proposed control
share acquisition, and a specification of the voting power in the
election of directors that would result from the control share
acquisition in the following ranges: (1) at least ten percent, but
less than twenty percent; (2) at least twenty percent, but less than
thirty percent; (3) at least thirty percent, but less than forty
percent; (4) at least forty percent, but less than a majority; and (5)
at least a majority. The proposed control share acquisition must be
approved by the affirmative vote of the holders of a majority of the
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voting power of all shares entitled to vote which are not beneficially
owned by the acquiring person and the proposed control share
acquisition must be consummated within 180 days after shareholder
approval.
If shareholder approval is not properly obtained and shares are
thus acquired in violation of Sections 415-171 and 415-172, the shares
so acquired will be denied voting rights for one year after
acquisition, the shares shall be nontransferable on the books of the
corporation for one year after acquisition and the corporation shall
have the option during that one-year period to call the shares for
redemption either at the price at which the shares were acquired or at
book value per share as of the end of the last fiscal quarter ended
prior to the call for redemption.
In addition, if a person proposes to engage in a corporate
"take-over" (defined to include the offer to acquire any equity
securities from a resident of Hawaii pursuant to a tender offer) of a
target company (defined to include an issuer of publicly traded equity
securities which is organized under Hawaiian law or has at least 20%
of its equity securities beneficially owned by residents of Hawaii,
and has substantial assets in Hawaii), then that person is subject to
Chapter 417E of the Hawaii Corporate Take-Overs Act. Chapter 417E
requires, among other things, that a take-over offer must be
registered and forbids specific fraudulent and deceptive practices in
connection with a take-over offer. Failure to comply with these
sections will result in the take-over offer not being effective.
AMENDMENT TO THE MERGER AGREEMENT; TERMINATION
The Company's Board of Directors may amend, modify or supplement
the Merger Agreement, before the Reincorporation is consummated,
notwithstanding shareholder approval. The Board of Directors will
solicit the shareholders' approval in the event that it determines
that any such amendment, modification or supplement is material.
The Merger Agreement may be terminated and the Reincorporation
abandoned, notwithstanding shareholder approval, by the Board of
Directors of the Company at any time before consummation of the Merger
if (i) shareholders holding more than two percent (2%) of the issued
and outstanding shares of the Company's Common Stock dissent and seek
appraised rights; or (ii) the Board of Directors of the Company
determines that in its judgment the Reincorporation does not appear to
be in the best interests of the Company or its shareholders.
In the event the Merger Agreement is terminated or the
shareholders fail to approve the Reincorporation, the Company would
remain as a Hawaii corporation; however, the Board of Directors would
consider calling a Special Meeting of Shareholders for the purposes of
changing the corporate name to US Industrial Services, Inc., and
approving a stock option plan covering up to 2,000,000 shares of
Common Stock, which plan would be similar to US Industrial's 1998
Plan, see "-- Business and Financial Condition" above.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF
THE REINCORPORATION OF THE COMPANY IN THE STATE OF DELAWARE.
ACCOUNTANTS
Karlins Fuller Arnold & Klodosky, P.C. ("Karlins Fuller") have
acted as the independent accountants of the Company for the last three
fiscal years. The Board of Directors of the Company has not yet
selected its independent accountants for the 1998 fiscal year. A
representative of Karlins Fuller is expected to be present at the
Meeting and will have the opportunity to make a statement and may be
available to respond to appropriate questions.
1997 ANNUAL REPORT
All shareholders of record as of the Record Date have or are
currently being sent a copy of the Company's 1997 Annual Report for
the fiscal year ended September 30, 1997, which includes financial
statements for the fiscal year ended September 30, 1997. Such Report
is deemed to be part of the material for the solicitation of proxies.
This Proxy Statement incorporates by reference the financial
information contained in the Company's 1997 Annual Report.
19
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THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH BENEFICIAL HOLDER
OF ITS COMMON STOCK ON THE RECORD DATE WHO DID NOT RECEIVE A COPY OF
THE COMPANY'S ANNUAL REPORT, ON THE WRITTEN REQUEST OF ANY SUCH
PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED SEPTEMBER 30, 1997 AS FILED WITH THE SEC. ANY SUCH
REQUEST SHOULD BE MADE IN WRITING TO THE SECRETARY, EIF HOLDINGS,
INC., 59 STILES ROAD, SUITE 101, SALEM, NEW HAMPSHIRE 03077.
OTHER MATTERS
Stockholder proposals must be received by the Secretary of the
Company for inclusion in the Company's proxy materials relating to the
1999 Annual Meeting of Stockholders by __________, 1998.
As of the date of this Proxy Statement, the Company knows of no
business that will be presented for consideration at the Meeting other
than that which has been referred to above. As to other business, if
any, that may come before the Meeting, it is intended that Proxies in
the enclosed form will be voted in respect thereof in accordance with
the judgment of the person or persons voting the Proxies.
By order of the Board of Directors
J. Drennan Lowell,
Secretary
_________, 1998
STOCKHOLDERS ARE URGED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY IN
THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION
WILL BE APPRECIATED.
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APPENDIX I
HAWAII BUSINESS CORPORATION ACT
DISSENT AND APPRAISAL RIGHTS
415-80. RIGHT OF SHAREHOLDERS TO DISSENT. -- (a) Any shareholder of a
corporation shall have the right to dissent from, and to obtain
payment for the shareholder's shares in the event of, any of the
following corporate actions:
(1) Any plan of merger or consolidation to which the corporation
is a party, except as provided in subsection (c);
(2) Any sale or exchange of all or substantially all of the
property and assets of the corporation not made in the usual and
regular course of its business, including a sale in dissolution, but
not including a sale pursuant to an order of a court having
jurisdiction in the premises or a sale for cash on terms requiring
that all or substantially all of the net proceeds of sale be
distributed to the shareholders in accordance with their respective
interests within one year after the date of sale;
(3) Any plan of exchange to which the corporation is a party as
the corporation the shares of which are to be acquired;
(4) Any amendment of the articles of incorporation which
materially and adversely affects the rights appurtenant to the shares
of the dissenting shareholder in that it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities; or
(D) Excludes or limits the right of the holder of the shares to
vote on any matter, or to cumulate the holder's votes, except as the
right may be limited by dilution through the issuance of shares or
other securities with similar voting rights; or
i. Any other corporate action taken pursuant to a shareholder
vote with respect to which the articles of incorporation, the bylaws,
or a resolution of the board of directors directs that dissenting
shareholders shall have a right to obtain payment for their shares.
(b) (1) A record holder of shares may assert dissenters' rights
as to less than all of the shares registered in the record holder's
name only if the record holder dissents with respect to all the shares
beneficially owned by any one person, and discloses the name and
address of the person or persons on whose behalf the record holder
dissents. In that event, the record holder's rights shall be
determined as if the shares as to which the record holder has
dissented and his other shares were registered in the names of
different shareholders.
ii. A beneficial owner of shares who is not the record holder may
assert dissenters' rights with respect to shares held on the
beneficial owner's behalf, and shall be treated as a dissenting
shareholder under the terms of this section and section 415-31 if the
beneficial owner submits to the corporation at the time of or before
the assertion of these rights a written consent of the record holder.
(c) The right to obtain payment under this section shall not
apply to the shareholders of the surviving corporation in a merger if
a vote of the shareholders of the corporation is not necessary to
authorize the merger.
(d) A shareholder of a corporation who has a right under this
section to obtain payment for the shareholder's shares shall have no
right at law or in equity to attack the validity of the corporate
action that gives rise to the shareholder's right to obtain payment,
nor to have the action set aside or rescinded, except when the
corporate action is unlawful or fraudulent with regard to the
complaining shareholder or to the corporation.
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415-81 RIGHTS OF DISSENTING SHAREHOLDERS. -- (a) As used in this
section:
"Dissenter" means a shareholder or beneficial owner who is
entitled to and does assert dissenters' rights under section 415-80,
and who has performed every act required up to the time involved for
the assertion of such rights.
"Corporation" means the issuer of the shares held by the
dissenter before the corporate action, or the successor by merger or
consolidation of that issuer.
"Fair value" of shares means their value immediately before the
effectuation of the corporate action to which the dissenter objects,
excluding any appreciation or depreciation in anticipation of the
corporate action unless the exclusion would be inequitable.
"Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate
currently paid by the corporation on its principal bank loans, or, if
none, at such rate as is fair and equitable under all of the
circumstances.
(b) If a proposed corporate action which would give rise to
dissenters' rights under section 415-80(a) is submitted to a vote at a
meeting of shareholders, the notice of meeting shall notify all
shareholders that they have or may have a right to dissent and obtain
payment for their shares by complying with the terms of this section,
and shall be accompanied by a copy of sections 415-80 and 415-81 of
this chapter.
(c) If the proposed corporate action is submitted to a vote at a
meeting of shareholders, any shareholder who wishes to dissent and
obtain payment for the shareholder's shares must file with the
corporation, prior to the vote, a written notice of intention to
demand that the shareholder be paid fair compensation for the
shareholder's shares if the proposed action is effectuated and shall
refrain from voting the shareholder's shares in approval of the
action. A shareholder who fails in either respect shall acquire no
right to payment for the shareholder's shares under this section or
section 415-80.
(d) If the proposed corporate action is approved by the required
vote at a meeting of shareholders, the corporation shall mail a
further notice to all shareholders who gave due notice of intention to
demand payment and who refrained from voting in favor of the proposed
action. If the proposed corporate action is to be taken without a vote
of shareholders, the corporation shall send to all shareholders who
are entitled to dissent and demand payment for their shares a notice
of the adoption of the plan of corporate action. The notice shall: (1)
state where and when a demand for payment must be sent and
certificates of certificated shares must be deposited in order to
obtain payment; (2) inform holders of uncertificated shares to what
extent transfer of shares will be restricted from the time that demand
for payment is received; (3) supply a form for demanding payment which
includes a request for certification of the date on which the
shareholder, or the person on whose behalf the shareholder dissents,
acquired beneficial ownership of the shares; and (4) be accompanied by
a copy of sections 415-80 and 415-81 of this chapter. The time set for
the demand and deposit shall not be less than thirty days from the
mailing of the notice.
(e) A shareholder who fails to demand payment, or fails (in the
case of certificated shares) to deposit certificates, as required by a
notice pursuant to subsection (d) shall have no right under this
section or section 415- 80 to receive payment for the shareholder's
shares. If the shares are not represented by certificates, the
corporation may restrict their transfer from the time of receipt of
demand for payment until effectuation of the proposed corporate
action, or the release of restrictions under the terms of subsection
(f). The dissenter shall retain all other rights of a shareholder
until these rights are modified by effectuation of the proposed
corporate action.
(f) (1) Within sixty days after the date set for demanding
payment and depositing certificates, if the corporation has not
effectuated the proposed corporate action and remitted payment for
shares pursuant to paragraph (3), it shall return any certificates
that have been deposited, and release uncertificated shares from any
transfer restrictions imposed by reason of the demand for payment.
(2) When uncertificated shares have been released from transfer
restrictions, and deposited certificates have been returned, the
corporation may at any later time send a new notice conforming to the
requirements of subsection (d), with like effect.
(3) Immediately upon effectuation of the proposed corporate
action, or upon receipt of demand for payment if the corporate action
has already been effectuated, the corporation shall remit to
dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount which the corporation
estimates to be the fair value of the shares, with interest if any has
accrued. The remittance shall be accompanied by:
(A) The corporation's closing balance sheet and statement of
income for a fiscal year ending not more than sixteen months before
the date of remittance, together with the latest available interim
financial statements;
(B) A statement of the corporation's estimate of fair value of
the shares; and
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(C) A notice of the dissenter's right to demand supplemental
payment, accompanied by a copy of sections 415- 80 and 415-81 of this
chapter.
(g)(1) If the corporation fails to remit as required by
subsection (f), or if the dissenter believes that the amount remitted
is less than the fair value of the dissenter's shares, or that the
interest is not correctly determined, the dissenter may send the
corporation the dissenter's own estimate of the value of the shares or
of the interest, and demand payment of the deficiency.
(2) If the dissenter does not file such an estimate within thirty
days after the corporation's mailing of its remittance, the dissenter
shall be entitled to no more than the amount remitted.
(h)(1) Not more than sixty days after receiving a demand for
payment pursuant to subsection (g), if any such demands for payment
remain unsettled, the corporation shall file in an appropriate court a
petition requesting that the fair value of the shares and interest
thereon be determined by the court.
iii. An appropriate court shall be a court of competent
jurisdiction in the county of this State where the principal office of
the corporation is located. If, in the case of a merger or
consolidation or share exchange, the corporation is a foreign
corporation without a registered office in this State, the petition
shall be filed in the county where the principal office of the
domestic corporation was last located.
iv. All dissenters, wherever residing, whose demands have not
been settled shall be made parties to the proceeding as in an action
against their shares. A copy of the petition shall be served on each
dissenter; if a dissenter is a nonresident, the copy may be served on
the dissenter by registered or certified mail or by publication as
provided by law.
v. The jurisdiction of the court shall be plenary and exclusive.
The court may appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The
appraisers shall have such power and authority as shall be specified
in the order of their appointment or in any amendment thereof. The
dissenters shall be entitled to discovery in the same manner as
parties in other civil suits.
vi. All dissenters who are made parties shall be entitled to
judgment for the amount by which the fair value of their shares is
found to exceed the amount previously remitted, with interest.
vii. If the corporation fails to file a petition as provided in
paragraph (1) of this subsection, each dissenter who made a demand and
who has not already settled the dissenter's claim against the
corporation shall be paid by the corporation the amount demanded by
the dissenter with interest, and may sue therefor in an appropriate
court.
a. i. The costs and expenses of any proceeding under subsection
(h), including the reasonable compensation and expenses of appraisers
appointed by the court, shall be determined by the court and assessed
against the corporation, except that any part of the costs and
expenses may be apportioned and assessed as the court may deem
equitable against all or some of the dissenters who are parties and
whose action in demanding supplemental payment the court finds to be
arbitrary, vexatious, or not in good faith.
ii. Fees and expenses of counsel and of experts for the
respective parties may be assessed as the court may deem equitable
against the corporation and in favor of any or all dissenters if the
corporation failed to comply substantially with the requirements of
this section, and may be assessed against either the corporation or a
dissenter, in favor of any other party, if the court finds that the
party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith in respect to the
rights provided by this section and section 80.
iii. If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly
situated, and should not be assessed against the corporation, it may
award to these counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefitted.
b. i. Notwithstanding the foregoing provisions of this section,
the corporation may elect to withhold the remittance required by
subsection (f) from any dissenter with respect to shares of which the
dissenter (or the person on whose behalf the dissenter acts) was not
the beneficial owner on the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate
action. With respect to such shares, the corporation shall, upon
effectuating the corporate action, state to each dissenter its
estimate of the fair value of the shares, state the rate of interest
to be used (explaining the basis thereof), and offer to pay the
resulting amounts on receiving the dissenter's agreement to accept
them in full satisfaction.
ii. If the dissenter believes that the amount offered is less
than the fair value of the shares and interest determined according to
this section, the dissenter may within thirty days after the date of
mailing of the corporation's offer, mail to the corporation the
dissenter's own estimate of fair value and interest, and demand their
payment. If the dissenter fails to do so, the dissenter shall be
entitled to no more than the corporation's offer.
iii. If the dissenter makes a demand as provided in paragraph
(2), the provisions of subsections (h) and (i) shall apply to further
proceedings on the dissenter's demand.
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EXHIBIT A:
THE REVERSE STOCK SPLIT
RESOLVED, that, prior to the Company's next Annual Meeting of
Shareholders, on the condition that no other amendment to the
Company's Articles of Incorporation shall been filed subsequent to
__________, 199__ effecting a reverse stock split of the Common Stock,
Article ___ of the Company's Restated Articles of Incorporation be
amended by addition of the following provision:
Simultaneously with the effective date of this amendment (the
"Effective Date"), each share of the Company's Common Stock, no
par value, issued and outstanding immediately prior to the
Effective Date (the "Old Common Stock") shall automatically and
without any action on the part of the holder thereof be
reclassified as and changed, pursuant to a reverse stock split,
into any fraction thereof falling within a range between and
including one-for-five and one-for-ten of a share of the
Company's outstanding Common Stock, no par value (the "New Common
Stock"), depending upon a determination by the Board that a
reverse stock split is in the best interests of the Company and
the stockholders, subject to the treatment of fractional share
interests as described below. Each holder of a certificate or
certificates which immediately prior to the Effective Date
represented outstanding shares of Old Common Stock (the "Old
Certificates," whether one or more) shall be entitled to receive
upon surrender of such Old Certificates to the Company's Transfer
Agent for cancellation, a certificate or certificates (the "New
Certificates," whether one or more) representing the number of
whole shares of the New Common Stock into which and for which the
shares of the Old Common Stock formerly represented by such Old
Certificates so surrendered, are reclassified under the terms
hereof. From and after the Effective Date, Old Certificates shall
represent only the right to receive New Certificates pursuant to
the provisions hereof. No certificates or scrip representing
fractional share interests in New Common Stock will be issued,
and no such fractional share interest will entitle the holder
thereof to vote, or to any rights of a shareholder of the
Company. Any fraction of a share of New Common Stock to which the
holder would otherwise be entitled will be adjusted upward or
downward to the nearest whole share. If more than one Old
Certificate shall be surrendered at one time for the account of
the same stockholder, the number of full shares of New Common
Stock for which New Certificates shall be issued shall be
computed on the basis of the aggregate number of shares
represented by the Old Certificates so surrendered. In the event
that the Company's Transfer Agent determines that a holder of Old
Certificates has not tendered all his certificates for exchange,
the Transfer Agent shall carry forward any fractional share until
all certificates of that holder have been presented for exchange
such that payment for fractional shares to any one person shall
not exceed the value of one share. If any new Certificate is to
be issued in a name other than that in which the Old Certificates
surrendered for exchange are issued, the Old Certificates so
surrendered shall be properly endorsed and otherwise in proper
form for transfer, and the person or persons requesting such
exchange shall affix any requisite stock transfer tax stamps to
the Old Certificates surrendered, or provide funds for their
purchase, or establish to the satisfaction of the Transfer Agent
that such taxes are not payable. From and after the Effective
Date the amount of capital represented by the shares of the New
Common Stock into which and for which the shares of the Old
Common Stock are reclassified under the terms hereof shall be the
same as the amount of capital represented by the shares of Old
Common Stock so reclassified, until thereafter reduced or
increased in accordance with applicable law.
FURTHER RESOLVED, that at any time prior to the filing of the
foregoing amendment to the Company's Articles of Incorporation
effecting a Reverse Stock Split, notwithstanding authorization of the
proposed amendment by the shareholders of the Company, the board of
directors may abandon such proposed amendment without further action
by the shareholders.
A-1
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EXHIBIT B
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger, dated March 2, 1998 (the
"Agreement"), between EIF Holdings, Inc., a Hawaii corporation
("EIF Holdings"), and U S Industrial Services, Inc., a Delaware
corporation ("US Industrial")(EIF Holdings and US Industrial are
sometimes referred to herein collectively as the "Constituent
Corporations").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, US Industrial was incorporated in the State of
Delaware on January 9, 1998, and is the wholly-owned subsidiary
of EIF Holdings; and
WHEREAS, the Board of Directors of EIF Holdings believes
that it is in the best interest of EIF Holdings to reincorporate
in the State of Delaware by merging with and into US Industrial
pursuant to this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises,
the mutual agreements and undertakings herein given and other
good and valuable consideration, the parties hereto agree, in
accordance with the applicable provisions of the statutes of
Hawaii and Delaware, respectively, which permit such merger, EIF
Holdings shall be, and hereby is, merged with and into the US
Industrial, at the Effective Time (as herein defined), and that
the terms and conditions of the merger hereby agreed to (the
"Merger") shall be as hereinafter set forth:
ARTICLE ONE
Principal terms of Merger
Section 1.01. Merger. At the Effective Time (as herein
------
defined), EIF Holdings shall merge with and into US Industrial
provided that this Agreement has not been terminated pursuant to
Section 4.02 herein.
Section 1.02. Effective Time of Merger. The Merger shall
------------------------
become effective as of the completion of all filing requirements
specified in Sections 4.03 and 4.04 of this Agreement, and such
date and time is hereinafter referred to as the "Effective Time."
<PAGE>
ARTICLE TWO
Certificate of Incorporation, By-Laws and Directors
Section 2.01. Certificate of Incorporation. The
----------------------------
Certificate of Incorporation of US Industrial in effect at the
Effective Time of the Merger shall be the Certificate of
Incorporation of US Industrial, to remain unchanged until amended
as provided by law.
Section 2.02. By-Laws. The By-Laws of US Industrial in
-------
effect at the Effective Time of the Merger shall by the By-Laws
of US Industrial, to remain unchanged until amended as provided
by law.
Section 2.03. Directors. EIF Holdings, in its capacity as
---------
sole shareholder of US Industrial, shall elect as directors of US
Industrial those individuals elected by the shareholders of EIF
Holdings prior to the Effective Time of the Merger, and such
persons shall serve as directors of US Industrial until the next
annual meeting of the stockholders of US Industrial.
ARTICLE THREE
Exchange and Cancellation of Shares
At the Effective Time of the Merger, all issued and
outstanding shares of EIF Holdings common stock, no par value
(the "Old Common Stock"), and all issued and outstanding shares
of EIF Holdings preferred stock, par value $.01 per share (the
"Old Preferred Stock"), shall be canceled and the corporate
existence of the said corporation shall cease. Shares of US
Industrial's common stock, par value $.01 per share (the "New
Common Stock"), and shares of US Industrial's preferred stock,
par value $.01 per share (the "New Preferred Stock"), shall be
issued to the shareholders of EIF Holdings as a result of the
Merger as herein provided.
Section 3.01. The Surviving Corporation Common Stock. Each
--------------------------------------
share of Old Common Stock which is outstanding prior to the
Effective Time of the Merger shall be converted into one issued
and outstanding share of New Common Stock, and, from and after
the Effective Time of the Merger, the holders of all of said
issued and outstanding shares of Old Common Stock shall
automatically be and become holders of shares of New Common Stock
upon the basis above specified, whether or not certificates
representing said shares are then issued and delivered.
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<PAGE>
Section 3.02. Cancellation of Old Common Stock. After the
--------------------------------
Effective Time of the Merger, each holder of record of any
outstanding certificate or certificates theretofore representing
shares of Old Common Stock and Old Preferred Stock may surrender
the same to American Stock Transfer & Trust Company, 40 Wall
Street, 46th Floor, New York, New York 10005, and such holder
shall be entitled upon such surrender to receive in exchange
therefor a certificate or certificates representing an equal
number of shares of New Common Stock and New Preferred Stock,
respectively. Until so surrendered, each outstanding certificate
which, prior to the Effective Time of the Merger, represented one
or more shares of Old Common Stock or Old Preferred Stock shall
be deemed for all corporate purposes to evidence ownership of an
equal number of shares of New Common Stock or New Preferred
Stock, respectively. Upon the surrender of a certificate or
certificates representing shares of Old Common Stock or Old
Preferred Stock, a proper officer of US Industrial shall cancel
said certificate or certificates.
ARTICLE FOUR
Adoption and Termination
Section 4.01. Submission to Vote of Stockholders. This
----------------------------------
Agreement shall be submitted to the shareholders of EIF Holdings,
as provided by applicable law, and shall take effect, and be
deemed to be the Agreement and Plan of Merger of the Constituent
Corporations, upon the approval or adoption thereof by said
stockholders of EIF Holdings in accordance with the requirements
of the laws of the State of Hawaii.
Section 4.02. Termination of Agreement. Anything herein or
------------------------
elsewhere to the contrary notwithstanding, this Agreement may be
abandoned by EIF Holdings by an appropriate resolution of its Board
of Directors at any time prior to the Effective Time of the Merger
if such Board of Directors believes that the Merger is not in the
best interest of the EIF Holdings or in the event that the
shareholders who hold more than two (2%) percent of the outstanding
and issued shares of Old Common Stock dissent from the Merger and
seek appraisal rights pursuant to Sections 415-80 and 415-81 of the
Hawaii Business Corporation Act.
Section 4.03. Filing of Articles of Merger in the State of
--------------------------------------------
Hawaii. As soon as practicable after the requisite stockholder
------
approval referenced in Section 4.01 herein, Articles of Merger to
effectuate the terms of this Agreement shall be executed and
acknowledged by US Industrial and thereafter delivered to the
Commissioner of Securities of the Department of Commerce and
Consumer Affairs of the State of Hawaii for filing and recording in
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<PAGE>
accordance with applicable law, unless this Agreement has been
terminated pursuant to Section 4.02 herein.
Section 4.04. Filing of Certificates of Merger in the State
---------------------------------------------
of Delaware. As soon as practicable after the requisite
-----------
stockholder approval referenced in Section 4.01 herein, a
Certificate of Merger to effectuate the terms of this Agreement
shall be executed by each of the Constituent Corporations and
thereafter delivered to the Secretary of the State of Delaware for
filing and recording in accordance with applicable law, unless this
Agreement has been terminated pursuant to Section 4.02 herein.
ARTICLE FIVE
Effect of Merger
Section 5.01. Effect of Merger. At the Effective Time of the
----------------
Merger, the Constituent Corporations shall be a single corporation,
which shall be US Industrial, and the separate existence of EIF
Holdings shall cease except to the extent provided by the laws of
the States of Hawaii and Delaware. US Industrial shall thereupon
and thereafter possess all the rights, privileges, immunities and
franchises, of both a public and private nature, of each of the
Constituent Corporations; and all property, real, personal and
mixed, and all debts due on whatever account, including
subscriptions to shares, and all other choses in action, and all
and every other interest of, or belonging to, or due to each of the
Constituent Corporations, shall be taken and deemed to be vested in
US Industrial without further act or deed; and the title to all
real estate, or any interest therein, vested in either of the
Constituent Corporations shall not revert or be in any way impaired
by reason of the Merger. US Industrial shall thenceforth be
responsible and liable for all of the liabilities and obligations
of each of the Constituent Corporations and any claim existing or
action or proceeding pending by or against either of the
Constituent Corporations may be prosecuted to judgment as if the
Merger had not taken place, or the Surviving Corporation may be
substituted in its place, and neither the rights of creditors nor
any liens upon the property of either of the Constituent
Corporations shall be impaired by the Merger. US Industrial shall
assume any stock option or similar employee benefits plan of EIF
Holdings, and all contractual rights of EIF Holdings for the
issuance of shares of the Old Common Stock and/or Old Preferred
Stock, and such issuances or reserves for issuances shall be of
shares of New Common Stock and/or New Preferred Stock on an as-
converted basis as set forth in Section 3.01 hereof.
Section 5.02. Business Combinations With American Eco. US
---------------------------------------
Industrial hereby acknowledges that American Eco Corporation, an
Ontario corporation ("American Eco"), beneficially owns 8,800,000
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shares of Old Common Stock at the date of this Agreement and
further recognizes that, as a result of such stock ownership,
American Eco could be deemed to be an Interested Stockholder (as
that term is defined under Section 203 of the General Corporation
Law of the State of Delaware) of US Industrial after the
consummation of the Merger. US Industrial hereby represents and
warrants to EIF Holdings that the Board of Directors of US
Industrial has considered the stock ownership that American Eco
will have in US Industrial at the Effective Time of the Merger in
approving this Agreement. US Industrial further acknowledges that,
as a result of its assumption of all of EIF Holdings' obligations
pursuant to this Agreement and the consummation of the Merger,
American Eco will consummate a certain stock purchase agreement
pursuant to which American Eco will purchase 10,000,000 shares of
New Common Stock. US Industrial hereby represents and warrants to
EIF Holdings that the Board of Directors of US Industrial has
approved such stock purchase.
ARTICLE SIX
Post Merger Undertakings
Section 6.01 Service of Process. US Industrial hereby agrees
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that it may be served with process within the State of Hawaii in
any proceeding for the enforcement of any obligation of EIF
Holdings and in any proceeding for the enforcement of the rights of
any dissenting shareholder of EIF Holdings.
Section 6.02 Appointment of Agent for Service of Process. US
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Industrial hereby appoints ______________, a resident of Hawaii, as
its duly appointed agent to accept service of process delivered
pursuant to Section 6.01 herein. Such agency shall be deemed to be
given with an interest and shall be irrevocable.
Section 6.03 Payments to Dissenting Shareholders. US
-----------------------------------
Industrial shall promptly pay to any shareholders of EIF Holdings
who dissent from the Merger the amount, if any, to which such
dissenting shareholders shall be entitled with respect to the
Merger pursuant to applicable law.
ARTICLE SEVEN
Miscellaneous
Section 7.01 Further Actions. Each of the Constituent
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Corporations shall take or cause to be taken all action, or do, or
cause to be done, all things necessary, proper or advisable under
the laws of the States of Hawaii and Delaware to consummate and
make effective the Merger following approval of the Merger by the
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stockholders of the Constituent Corporations in accordance with the
laws of said States.
Section 7.02. Amendments. At any time prior to the
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Effective Time of the Merger (notwithstanding any stockholder
approval), if authorized by their respective Board of Directors,
the parties hereto may, by written agreement, amend or supplement
any of the provisions of this Agreement. Any written instrument or
agreement referred to in this section shall be validly and
sufficiently authorized for the purposes of this Agreement if
signed on behalf of each of the Constituent Corporations by a
person authorized to sign this Agreement.
Section 7.03. Counterparts. This Agreement may be
------------
executed in any number of counterparts, each of which shall be
deemed to be an original instrument, but all such counterparts
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Constituent Corporations,
pursuant to the approval and authority duly given by resolutions
adopted by their respective Board of Directors have caused this
Agreement and Plan of Merger to be executed by an authorized
officer of each party hereto, and the corporate seal affixed on the
date above first written.
U S INDUSTRIAL SERVICES, INC.
(a Delaware corporation)
By
----------------------------
Name: Frank J. Fradella
Title: President
EIF HOLDINGS, INC.
(a Hawaii corporation)
By
----------------------------
Name: Frank J. Fradella
Title: President
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PRELIMINARY COPIES
EIF HOLDINGS, INC.
ANNUAL MEETING OF SHAREHOLDERS
__________, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of EIF Holdings, Inc., a Hawaii
corporation (the "Company"), acknowledges receipt of the Notice of
Annual Meeting of Shareholders, Proxy Statement, dated _________,
1998, and 1997 Annual Report, and hereby constitutes and appoints
Frank J. Fradella and J. Drennan Lowell to vote all shares of Common
Stock of the Company which the undersigned would be entitled to vote
at the 1998 Annual Meeting of Shareholders (the "Meeting"), and at any
adjournment or adjournments thereof, hereby revoking any proxy or
proxies heretofore given and ratifying and confirming all that said
proxies may do or cause to be done by virtue thereof with respect to
the following matters:
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS WHICH
RECOMMENDS A VOTE "FOR" PROPOSALS NO. 1, 2, 3 AND 4.
1. The election of four (4) directors nominated by the Board of
Directors:
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY to vote for
(except as indicated) all nominees listed below
Frank J. Fradella, Michael J. Chakos,
Michael E. McGinnis and Andreas O. Tobler.
(Instruction: To withhold authority to vote for any individual
nominee or nominees write such nominee's or nominees, names in
the space provided below)
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2. The approval of the Reverse Stock Split:
|_| FOR |_| AGAINST |_| ABSTAIN
3. The approval of a class of Preferred Stock:
|_| FOR |_| AGAINST |_| ABSTAIN
4. The approval of the Merger Agreement pursuant to which the
Company will merge with and into US Industrial Services, Inc., a
wholly-owned subsidiary and Delaware corporation:
|_| FOR |_| AGAINST |_| ABSTAIN
5. Other matters as may properly come before the Meeting or any
adjournment or adjournments thereof.
This Proxy, when properly executed, will be voted as directed. If
no direction is indicated, the Proxy will be voted FOR each of the
above proposals.
Dated: _________________, 1998
__________________________(L.S.)
__________________________(L.S.)
Please sign your name exactly as it
appears hereon. When signing as
attorney, executor, administrator,
trustee or guardian, please give your
full title as it appears hereon. When
signing as joint tenants, all parties in
the joint tenancy must sign. When a
proxy is given by a corporation, it
should be signed by an authorized
officer and the corporate seal affixed.
No postage is required if returned in
the enclosed envelope and mailed in the
United States.
PLEASE SIGN, DATE AND MAIL THIS PROXY
IMMEDIATELY IN THE ENCLOSED ENVELOPE.
