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:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S.240.14a-11(c) or
S.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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EIF HOLDINGS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 4, 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 54 Stiles Road, Salem, New Hampshire, on May 4, 1998,
at 9:00 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 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 shareholders.
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 U S Industrial
Services, Inc., a Delaware corporation and a 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
March 31, 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
April 6, 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>
EIF HOLDINGS, INC.
_______________
PROXY STATEMENT
________________
ANNUAL MEETING OF SHAREHOLDERS
MAY 4, 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, 54 Stiles
Road, Salem, New Hampshire, on May, 4, 1998, at 9:00 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 April 6, 1998.
VOTING SECURITIES AND VOTE REQUIRED
Only shareholders of record at the close of business on
March 31, 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 U S 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., shares identified as held by brokers or
nominees as to which instructions have not been received from the
<PAGE>
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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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 current
executive officer named in the Summary Compensation Table and
(iv) by all directors and officers as a group.
Amount and
Status of Nature of
Name of Beneficial Beneficial
Beneficial Owner Owner Ownership(1) Percent
---------------- ---------- ------------ -------
American Eco Beneficial 8,800,000(2) 35.7%
Corporation** Owner of more
than 5% of
Common Stock
Frank J. Fradella Chairman, 8,800,000(3) 35.7%
President and
Director
Michael E. McGinnis Director 8,800,000(4) 35.7%
Andreas O. Tobler Director 25,450 *
Michael J. Chakos Nominee 15,000(5) *
All executive 8,840,450(6) 35.9%
officers and
directors as a group
(5 persons)
--------------------
* 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 shares 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 an line of credit
agreement. 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.
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:
Year
Position With the Became
Name Age Company 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 October 1996, he was employed by NSC
Corporation, a specialty contractor, having been serving as its
President and CEO since 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
4
<PAGE>
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).
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 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 served as Chief Financial Officer of JL
Manta, Inc. since March 1993, and Vice President since November
1992, having been a co-owner of such corporation until November
1997 when it was acquired by the Company. 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 years 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
shareholder 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 for Mr. Tobler for the 1998 fiscal year
assuming he is re-elected as a director.
5
<PAGE>
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 most highly compensated executive
officers whose compensation exceeded $100,000 for services
rendered to the Company (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
-------------------
PRINCIPAL SALARY BONUS
NAME POSITION YEAR ($) ($)
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Frank J. Fradella(1) President and 1997 $ 107,665 --
CEO
David L. Norris(2) President and 1997 116,667 --
CEO
LONG-TERM
COMPENSATION
------------
OTHER ANNUAL
COMPENSATION OPTIONS
NAME ($) (#)
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Frank J. Fradella(1) -- --
David L. Norris(2) -- --
(1) Mr. Fradella became President and CEO on May 1, 1997.
(2) Mr. Norris was President and CEO from September 1, 1996
through April 30, 1997.
The following table sets forth individual grants of stock
options made by the Company during the fiscal year ended
September 30, 1997 to the Named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
INDIVIDUAL GRANTS
% OF TOTAL
OPTIONS
GRANTED TO
EMPLOYEES EXERCISE
IN OR BASE
OPTION FISCAL PRICE EXPIRATION
NAME GRANTED YEAR ($/SH) DATE
-----------------------------------------------------------------
Frank J. Fradella -- -- -- --
David L. Norris -- -- -- --
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.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
-----------------------------------------------
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED VALUE FY-END ($) FY-END ($)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE/ UNEXERCISABLE/
--------------------------------------------------------------------
Frank J.
Fradella -0- -0- -0- -0-
David L.
Norris -0- -0- -0- -0-
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 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 10% 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 10% shareholders
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, the Company
discovered that Mr. Fradella had neglected to file certain
Section 16(a) forms. However, Mr. Fradella is to report these
transactions on Form 5.
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
7
<PAGE>
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
principal amount thereunder into shares of the Company's Common
Stock at a conversion price equal to 85% of the five-day weighted
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.
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 major stake in the Company.
8
<PAGE>
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 SHAREHOLDERS
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 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 the
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) 480,000 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 by
the Company is subject to the Reverse Stock 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.
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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 $.38 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-priced stocks. Some of those policies and
practices involve time-consuming procedures that make the
handling of lower-priced 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, 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
approximately 200. 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.
Common Unissued and
Reverse Stock Stock Reserved Authorized
Split Outstanding Shares* Common Stock**
------------- ----------- -------- ------------
1 for 5 4,923,640 3,696,000 16,380,360
1 for 10 2,461,820 1,848,000 20,690,180
* Includes (i) 10,000,000 shares purchasable by American Eco
pursuant to the 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 shareholder
approval of the Reverse Stock Split and/or some cases also
approval 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.
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** 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.
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 fulfilling 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 preemptive 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 at closing of the Manta Acquisition
the Acquisition Lender received a $6.5 million Convertible
Promissory Note, bearing interest at 5 1/4% per annum, 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 shares of Preferred Stock
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.
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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.
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,
which was repaid. The Company believes that the Reincorporation
would assist it in trying to achieve the growth plan through
reincorporation in Delaware.
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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 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 shareholders and key employees of
Manta and for stock options and warrants, 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 the 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 U S 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 (giving effect to any
Reverse Stock Split).
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 to American Eco and the 1,000,000
shares to be issued to the Manta shareholders 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.
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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 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 Stock
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 the Delaware 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 is not
seeking a ruling from the Internal Revenue Service or an opinion
of legal or tax counsel with respect to the tax 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
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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
shareholders who had deposited their stock certificates for
payment the estimated fair value of their shares. In determining
the 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 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, a copy of which
sections is attached hereto as Appendix I.
The Merger Agreement between the Company and US Industrial
permits the Company to terminate the Merger Agreement in the
event that shareholders holding more than two percent (2%) 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 Incorpo-
ration 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 shareholders 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
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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 by-laws of the
corporation.
Shareholder Appraisal Rights. Shareholder appraisal rights
are statutory rights of dissenting shareholders 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 corpora-
tion'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.
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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.
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,
17
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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 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.
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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.
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-KSB 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., 54 STILES ROAD, SALEM, NEW
HAMPSHIRE 03079.
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 Shareholders by December 5, 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
April 6, 1998
SHAREHOLDERS 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 May 4, 1998 effecting a reverse stock split of the Common
Stock, Article IV 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 shareholders, 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 shareholder, 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.
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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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<PAGE>
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
------------------
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
-------------------------------------------
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
---------------
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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<PAGE>
stockholders of the Constituent Corporations in accordance with the
laws of said States.
Section 7.02. Amendments. At any time prior to the
----------
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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<PAGE>
EIF HOLDINGS, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 4, 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 April 6, 1998,
and 1997 Annual Report, and hereby constitutes and appoints Frank J.
Fradella and J. Drennan Lowell, and either jointly or severally, 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)
------------------------------------------------------------------
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 U S 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.
