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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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[LOGO]
HASKEL INTERNATIONAL, INC.
(NAME OF SUBJECT COMPANY)
HASKEL INTERNATIONAL, INC.
(NAMES OF PERSON(S) FILING STATEMENT)
COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS OF SECURITIES)
418106100
(CUSIP NUMBER OF CLASS OF SECURITIES)
PATRICIA WEHR
CHIEF FINANCIAL OFFICER
HASKEL INTERNATIONAL, INC.
100 E. GRAHAM PLACE
BURBANK, CA 91502
(818) 556-2561
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON
BEHALF OF THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO:
RICHARD A. STRONG
GIBSON, DUNN & CRUTCHER LLP
333 SOUTH GRAND AVENUE, 47TH FLOOR
LOS ANGELES, CALIFORNIA 90071
(213) 229-7000
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INTRODUCTION
This Solicitation/Recommendation Statement on Schedule 14D-9 relates to an
offer by HI Holdings Inc., a Delaware corporation, through its wholly-owned
subsidiary HI Merger Subsidiary Inc., a California corporation, to purchase all
of the Shares (as defined below) of Haskel International, Inc., a California
corporation.
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Haskel International, Inc., a California
corporation (the "Company"). The address of the principal executive offices of
the Company is 100 E. Graham Place, Burbank, California 91502. The title of the
class of equity securities to which this Solicitation/Recommendation Statement
on Schedule 14D-9 (this "Schedule 14D-9" or "Statement") relates is the Class A
common stock, no par value, and the Class B common stock, no par value, of the
Company (collectively, the "Common Stock"). Unless the context otherwise
requires, as used herein the term "Shares" shall mean shares of Common Stock.
ITEM 2. TENDER OFFER OF THE PURCHASER.
This Statement relates to the cash tender offer (the "Offer") described in
the Tender Offer Statement on Schedule 14D-1, dated March 22, 1999 (as amended
or supplemented, the "Schedule 14D-1"), filed by HI Holdings Inc., a California
corporation ("Parent"), and HI Merger Subsidiary Inc., a California corporation
and wholly owned subsidiary of Parent ("Purchaser"), with the Securities and
Exchange Commission (the "SEC"), relating to an offer to purchase all of the
issued and outstanding Shares at $12.90 per Share (such amount, or any greater
amount per Share paid pursuant to the Offer, hereinafter referred to as the
"Offer Price"), net to the seller in cash, upon the terms and subject to the
conditions set forth in Purchaser's Offer to Purchase, dated March 22, 1999 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which together
with any amendments or supplements thereto constitute the "Offer Documents").
The Offer is being made in accordance with an Agreement and Plan of Merger,
dated as of March 15, 1999 (the "Merger Agreement"), by and among Parent,
Purchaser and the Company. Pursuant to the Merger Agreement, as soon as
practicable after completion of the Offer and satisfaction or waiver, if
permissible, of certain conditions, Purchaser will be merged with and into the
Company (the "Merger"), and the Company will become a wholly owned subsidiary of
Parent (the "Surviving Corporation"). At the effective time of the Merger (the
"Effective Time"), each Share issued and outstanding immediately prior to the
Effective Time (other than Shares held by Parent, Purchaser, the Company or any
of their wholly-owned subsidiaries and Shares held by shareholders of the
Company who will have properly perfected their dissenters' rights, if any, under
California law) will be converted into the right to receive the Offer Price
without interest. The Merger Agreement is summarized in Item 3 of this Schedule
14D-9.
The Offer Documents indicate that the principal executive offices of Parent
and Purchaser are located at 800 Third Avenue, 40th Floor, New York, NY 10022.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements or understandings between
the Company or its affiliates and certain of its executive officers, directors
or affiliates are described in the Company's Proxy Statement, dated September
21, 1998, relating to its October 30, 1998 Annual Meeting of Shareholders (the
"Proxy Statement") under the headings "Security Ownership of Management,"
"Compensation of Directors," "Executive Compensation," "Employment Agreements,"
"Stock Option Plans," "Retirement Plans," "Report of Compensation Committee,"
"Compensation Committee Interlocks and Insider Participation in Compensation
Decision." A copy of the applicable portions of the Proxy Statement has been
filed as an exhibit to this Schedule 14D-9 and is incorporated herein by
reference.
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THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement, a
copy of which is filed as an exhibit to this Schedule 14D-9 and is incorporated
herein by reference. Such summary is qualified in its entirety by reference to
the Merger Agreement.
THE OFFER. The Merger Agreement provides that if none of the events or
conditions set forth in "Certain Conditions to the Offer" (the "Conditions")
shall have occurred and be existing, as promptly as practicable after, but in no
event later then five (5) Business Days after, the public announcement of the
execution of the Merger Agreement by the parties thereto, Purchaser is required
to commence the Offer for all the outstanding Shares, at the Offer Price.
Purchaser is required to use all commercially reasonable efforts to consummate
the Offer. Purchaser shall accept for payment all outstanding Shares which have
been validly tendered and not withdrawn pursuant to the Offer at the earliest
time following the expiration of the Offer provided that all conditions to the
Offer shall have been satisfied or waived by Purchaser. The obligation of
Purchaser to accept for payment, purchase and pay for Shares tendered pursuant
to the Offer is subject only to the Conditions and to the Minimum Condition.
Purchaser has expressly reserved the right to increase the Offer Price or to
make any other changes in the terms and conditions of the Offer (provided that,
unless previously approved by the Company in writing, no change may be made
which decreases the Offer Price, which changes the form of consideration to be
paid in the Offer, which reduces the maximum number of Shares to be purchased in
the Offer, which imposes conditions to the Offer in addition to the Conditions
or which broadens the scope of such Conditions except as provided below, which
amends any other term of the Offer in a manner adverse to the holders of Shares,
which extends the Offer except as provided below or which amends the Minimum
Condition).
The Merger Agreement provides that the Offer Price is to be paid net to the
sellers of Shares in cash, less any required withholding of taxes, upon the
terms and subject to the Conditions of the Offer. No Shares held by the Company
or any of its subsidiaries will be tendered in the Offer.
The Merger Agreement provides that the Offer will expire at midnight, New
York City time, on the date that is twenty Business Days (which means any day
other than Saturday, Sunday or a federal holiday) after the Offer is commenced;
provided, however, that without the consent of the Company or the Company Board,
Purchaser may (i) extend the Offer, if at the scheduled expiration date of the
Offer any of the conditions to the Offer shall not have been satisfied or
waived, until such time as such conditions are satisfied or waived, (ii) extend
the Offer for any period required for any rule, regulation, interpretation or
position of the Securities and Exchange Commission ("Commission") or the staff
thereof applicable to the Offer or (iii) extend the Offer for any reason on one
or more occasions for an aggregate period of not more than ten Business Days
beyond the latest expiration date that would otherwise be permitted under clause
(i) or (ii) of this sentence if on such expiration date the Minimum Condition
has not been satisfied. If all of the Conditions to the Offer are not satisfied
on any scheduled expiration date of the Offer then, provided that all such
Conditions are reasonably capable of being satisfied prior to May 28, 1999,
Purchaser is required to extend the Offer from time to time until such
Conditions are satisfied or waived, provided that Purchaser will not be required
to extend the Offer beyond June 11, 1999. Subject to the terms and conditions of
the Offer and the Merger Agreement, Purchaser has agreed to accept for payment,
and pay for, all Shares validly tendered and not withdrawn pursuant to the Offer
that Purchaser becomes obligated to accept for payment and pay for pursuant to
the Offer, as promptly as practicable after the expiration of the Offer.
COMPANY ACTION. The Company has approved of and consented to the Offer.
The Company Board, at a meeting duly called and held, has, subject to the terms
and conditions set forth in the Merger Agreement, (i) determined that the Merger
Agreement and the transactions contemplated thereby, including the Offer and the
Merger, are fair to, and in the best interests of, the shareholders of the
Company, (ii) approved the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, in all respects, such approval
constituting approval of the Offer, the Merger Agreement and the Merger for
purposes of Section 1101 of the California General Corporations Law (the "CGCL"
or "California Law"), and similar provisions of any other similar state statutes
that might be deemed applicable to the transactions contemplated by the Merger
Agreement, and (iii) resolved to recommend that the shareholders of the Company
accept the
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Offer, tender their Shares to Purchaser and approve and adopt the Merger
Agreement and the Merger; provided, however, that such recommendation may be
withdrawn, modified or amended in accordance with the Merger Agreement.
The Merger Agreement provides that the Company will file with the
Commission a Solicitation/ Recommendation Statement on Schedule 14D-9 containing
the recommendation described above, and promptly mail the Schedule 14D-9 to the
shareholders of the Company. Notwithstanding anything to the contrary in the
Merger Agreement, if in response to an acquisition proposal that the Company
Board reasonably believes to be more favorable from a financial point of view to
its shareholder than the Offer and the Merger taking into account at the time of
determination all factors relating to such proposed transaction deemed relevant
by the Company Board or as otherwise consistent with its fiduciary duties under
applicable law, the Company Board determines in accordance with the Merger
Agreement, that it is required in the exercise of its fiduciary duties to
withdraw, modify or amend its recommendation, such withdrawal, modification or
amendment shall not constitute a breach of the Merger Agreement.
COMPANY BOARDS OF DIRECTORS AND COMMITTEES. The Merger Agreement provides
that promptly upon the purchase by Purchaser of Shares pursuant to the Offer and
from time to time thereafter, subject to compliance with Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder, Purchaser shall be entitled
to designate up to such number of directors, rounded up to the next whole
number, on the Company Board as will give Purchaser representation on the
Company Board equal to the product of the number of directors on the Company
Board (giving effect to any increase in the number of directors as provided in
the Merger Agreement) and the percentage that such number of Shares so purchased
bears to the total number of outstanding Shares on a fully diluted basis, and
the Company shall use its reasonable best efforts to, upon request by Purchaser,
promptly, at the Company's election, either increase the size of the Company
Board or secure the resignation of such number of directors as is necessary to
enable Purchaser's designees to be elected to the Company Board and to cause
Purchaser's designees to be so elected. At such times, the Company will use its
reasonable best efforts to cause persons designated by Purchaser to constitute
the same percentage as is on the Company Board to be represented on (i) each
committee of the Company Board (other than any committee of the Company Board
established to take action under the Merger Agreement), (ii) each Company Board
of each subsidiary of the Company and (iii) each committee of each such Company
Board.
THE MERGER. The Merger Agreement provides that, upon the terms and subject
to the conditions set forth in the Merger Agreement, and in accordance with
California Law, at the Effective Time, Purchaser will be merged with and into
the Company. The Merger Agreement provides that the Merger will become effective
upon the filing of the Merger Agreement and an officers' certificate of each
constituent corporation with the Secretary of State of the State of California
(the "Effective Time"). As a result of the Merger, the separate corporate
existence of Purchaser will cease, and the Company will continue as the
Surviving Corporation.
Pursuant to the Merger Agreement, each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held by the Company,
its subsidiaries or by Parent, Purchaser or any other subsidiaries of Parent,
which will be canceled and extinguished without consideration, or Shares as to
which appraisal rights are exercised) shall be converted into the right to
receive an amount in cash equal to the Offer Price, without interest (the
"Merger Consideration"). In addition, each share of common stock of Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one share of a class of capital stock of the Surviving
Corporation and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation. Each Share held by the Company as treasury stock or
its subsidiary, as Parent, Purchaser or any subsidiary of Parent or Purchaser
will be canceled and extinguished without consideration. Notwithstanding any
other provision of the Merger Agreement to the contrary, Shares outstanding
immediately prior to the Effective Time and held by shareholders who shall have
not voted in favor of the Merger or consented thereto in writing and who shall
be entitled to and shall have demanded properly in writing payment for such
Shares in accordance with Chapter 13 of California Law and who shall not have
withdrawn such demand or otherwise have forfeited appraisal rights shall not be
converted into or represent the right to receive cash pursuant to the Merger
Agreement.
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The Merger Agreement provides that the directors of Purchaser at the
Effective Time will be the directors of the Surviving Corporation and that the
officers of the Purchaser at the Effective Time will be the officers of the
Surviving Corporation, in each case, until successors are duly elected or
appointed and qualified in accordance with applicable law. The Merger Agreement
also provides that the Articles of Incorporation of the Company in effect at the
Effective Time will be the Articles of Incorporation of the Surviving
Corporation, and that the By-Laws of the Company will be the By-Laws of the
Surviving Corporation, in each case, until amended in accordance with applicable
law.
SHARES OF DISSENTING HOLDERS. The Merger Agreement provides that
notwithstanding anything to the contrary contained in the Merger Agreement, any
holder of Shares with respect to which dissenters' rights, if any, are granted
by reason of the Merger under California Law and who does not vote in favor of
the Merger and who otherwise complies with Chapter 13 of California Law
("Company Dissenting Shares") shall not be entitled to receive any Merger
Consideration pursuant to the terms of the Merger Agreement, unless such holder
fails to perfect, effectively withdraws or loses his or her right to dissent
from the Merger under California Law. If any such holder so fails to perfect,
effectively withdraws or loses his or her dissenters' rights under California
Law, each Company Dissenting Share of such holder shall thereupon be deemed to
have been converted, as of the Effective Time, into the right to receive the
Offer Price.
Any payments relating to Company Dissenting Shares shall be made solely by
the Surviving Corporation and no funds or other property have been or will be
provided by Purchaser, Parent or any of Parent's other direct or indirect
subsidiaries for such payment, nor shall the Company make any payment with
respect to, or settle or offer to settle, any such demands.
EXCHANGE OF CERTIFICATES. The Merger Agreement provides that a bank or
trust company designated by Parent and reasonably acceptable to the Company,
shall act as the exchange agent (in such capacity, the "Exchange Agent"), for
the benefit of the holders of Shares, for the exchange of a certificate or
certificates which immediately prior to the Effective Time represented Shares
(the "Certificates") that were converted into the right to receive the Offer
Price. The Merger Agreement provides that Parent will deposit, or will cause to
be deposited, with the Exchange Agent, for the benefit of the holders of Shares,
the Merger Consideration to be paid in respect of the Shares. The Depositary is
acting as the Exchange Agent.
Pursuant to the Merger Agreement, as soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record of
Certificates: (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Parent and the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for a cash payment of the proper Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent and
Purchaser, together with such letter of transmittal, duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor by check
an amount equal to (A) the Offer Price, multiplied by (B) the number of Shares
represented by such Certificate, which such holder has the right to receive, and
the Certificate so surrendered shall forthwith be canceled. No interest shall be
paid or accrued on any Merger Consideration upon the surrender of any
Certificates. In the event of a transfer of ownership of Shares which is not
registered in the transfer records of the Company, payment of the proper Merger
Consideration may be paid to a transferee if the Certificate representing such
Shares is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any applicable stock
transfer or other taxes required as a result of such payment to a Person other
than the registered holder of such shares have been paid. Until surrendered and
exchanged, each Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender an amount equal to
(A) the Offer Price, multiplied by (B) the number of Shares represented by such
Certificate. In the event that any Certificate shall have been lost, stolen or
destroyed, the Exchange Agent shall pay, upon the making of an affidavit of that
fact by the holder thereof, the proper Merger Consideration, provided, however,
that Parent may, in its discretion, require the delivery of a suitable bond
and/or indemnity.
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The Merger Agreement further provides that the Merger Consideration paid
upon the surrender for exchange of Shares shall be deemed to have been paid in
full satisfaction of all rights pertaining to such Shares, subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by the Company on such Shares in accordance with the terms of
the Merger Agreement or prior to the date thereof and which remain unpaid at the
Effective Time, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged.
Pursuant to the Merger Agreement, any portion of the Merger Consideration
which remains undistributed to the shareholders of the Company for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
shareholders of the Company who have not theretofore complied with the terms of
the Merger Agreement shall thereafter look only to Parent for payment of their
claim for any Merger Consideration.
COMPANY STOCK OPTIONS. The Merger Agreement provides that at the Effective
Time, each outstanding, vested and exercisable Existing Stock Option issued
pursuant to the 1989 Incentive Stock Option Plan, the 1995 Incentive Stock
Option Plan, the 1995 Formula Stock Option Plan, the 1998 Long-Term Performance
Incentive Plan or the Non-Qualified Stock Option Plan of the Company (the
"Company Plans") or issued outside the Company Plans via special grants by the
Company's Stock Option Committee, shall be converted into and shall become the
right to receive a cash payment per Existing Stock Option, without interest,
determined by multiplying (i) the excess, if any, of the Offer Price over the
applicable per share exercise price of such Existing Stock Option by (ii) the
number of Shares into which such Existing Stock Option was exercisable
immediately prior to the Effective Time, provided that Parent and Purchaser may,
with the consent of the option holder, treat such options differently. At the
Effective Time, all Existing Stock Options (including those options that are not
exercisable at the time of the Merger) shall be canceled and be of no further
force or effect except for the right to receive cash to the extent provided in
the Merger Agreement.
WARRANTS. The Merger Agreement provides that the Effective Time, each
outstanding and exercisable warrant that entitles the holder to purchase Shares
(a "Warrant" or collectively "Warrants") sold pursuant to Company's initial
public offering of its common stock shall be converted into and shall become the
right to receive a cash payment per Warrant, without interest, determined by
multiplying (i) the excess, if any, of the Offer Price over the applicable per
share exercise price of such Warrant by (ii) the number of Shares into which the
Warrant was exercisable immediately prior to the Effective Time. At the
Effective Time, all outstanding Warrants shall be canceled and be of no further
force or effect except for the right to receive cash to the extent provided in
the Merger Agreement.
CONDUCT OF BUSINESS PRIOR TO CONSUMMATION OF THE MERGER. Pursuant to the
Merger Agreement, the Company Board has agreed not to permit the Company or its
subsidiaries to conduct its business in any manner other than in the ordinary
course of business and in a manner consistent with past practice. The Company
has agreed that, among other things and subject to certain exceptions, between
the date of the Merger Agreement and the Effective Time, other than with
Parent's or Purchaser's prior written consent, the Company and its subsidiaries
shall not, voluntarily or involuntarily, take any of the following actions:
(i) amend its Articles of Incorporation or By-Laws;
(ii) amend or modify (except as contemplated by the Merger Agreement) the
terms of the Company Plans or authorize for issuance, issue, sell, deliver or
agree or commit to issue (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities or equity equivalents (including, without
limitation, any stock options or stock appreciation rights), except for the
issuance or sale of Shares pursuant to the exercise of Existing Stock Options;
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(iii) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
or redeem or otherwise acquire any securities of the Company or of its
subsidiaries;
(iv) except in connection with the exercise or purchase options under
existing leases, (A) incur or assume any long-term or short-term debt or issue
any debt securities, except for borrowings under existing lines of credit in the
ordinary course of business and in amounts not material to the Company and its
subsidiaries taken as a whole and except for indebtedness not exceeding $100,000
in the aggregate; (B) except as described in the Merger Agreement, assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person, except in
the ordinary course of business consistent with past practice and in amounts not
material to the Company and its subsidiaries taken as a whole and except for
obligations of its subsidiaries; (C) except for investments not exceeding
$100,000 in the aggregate, make any loans, advances or capital contributions to,
or investments in, any other person (other than to subsidiaries of the Company
or customary loans or advances to employees in the ordinary course of business
consistent with past practice and in amounts not material to the maker of such
loan or advance); (D) except as described in the Merger Agreement, pledge or
otherwise encumber shares of capital stock of the Company or its subsidiaries;
or (E) except as described in the Merger Agreement, mortgage or pledge any of
its material assets, tangible or intangible, or create or suffer to exist any
material lien thereupon except for liens securing indebtedness not exceeding
$100,000 in the aggregate;
(v) except as may be required by law or as contemplated by the Merger
Agreement and except in connection with the hiring of officers (to replace at
compensation levels not to exceed those of the officers being replaced any
officer who retires or is terminated for any reason) or employees in the
ordinary course of business, enter into, adopt or amend or terminate any bonus,
profit sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent, stock
purchase agreement, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreement, trust, plan, fund or other
arrangement for the benefit or welfare of any director, officer or employee in
any manner, provided that the Company may not, under any circumstance, issue any
stock option or stock option equivalents thereof to any person, or (except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company, except as required under
existing agreements and except for the payment of bonuses and severance payments
in the ordinary course of business generally consistent with past practice)
increase in any manner the compensation or fringe benefits of any director,
officer, employee or agent or pay any benefit not required by any plan and
arrangement as in effect as of the date of the Merger Agreement (including,
without limitation, the granting of stock appreciation rights or performance
units or create, issue or increase any severance agreement or stay bonus with
any officer, director or employee);
(vi) except as described in the Merger Agreement or with the consent of
Parent or Purchaser, which consent will not be unreasonably withheld, acquire,
sell, lease or dispose of any assets outside the ordinary course of business or
any assets which have a value in excess of $250,000;
(vii) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(viii) except in connection with the exercise of purchase options under
existing leases which must be exercised for the Company to retain possession of
the subject property, (A) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein (except for transactions having
an aggregate value not exceeding $100,000); (B) authorize or make any new
capital expenditure or expenditures which, individually, is in excess of
$100,000 or, in the aggregate, are in excess of $500,000; or (C) enter into or
amend any contract, agreement, commitment or arrangement providing for the
taking of any action that would be prohibited by clauses (A) or (B) of this
paragraph;
(ix) make any tax election or settle or compromise any income tax liability
material to the Company and its subsidiaries taken as a whole;
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(x) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against, in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and its
subsidiaries in the filings with the Commission made prior to the date of the
Merger Agreement and since the filing of the Company's most recent Annual Report
on Form 10-K (the "Recent SEC Reports") or incurred in the ordinary course of
business consistent with past practice;
(xi) settle or compromise any pending or threatened suit, action or claim
relating to the transactions contemplated by the Merger Agreement;
(xii) alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of any subsidiary of
the Company;
(xiii) incur any expenses in connection with the transactions contemplated
hereby in excess of the amount set forth in the Merger Agreement without the
prior written consent of Parent or Purchaser;
(xiv) make any intercompany transfer of cash in excess of $500,000; or
(xv) take, or agree in writing or otherwise to take, any of the actions
which would make any of the representations or warranties of the Company
contained in the Merger Agreement untrue or incorrect as of the date when made.
OTHER POTENTIAL ACQUIRORS. The Merger Agreement provides that the Company,
its affiliates and their respective officers, directors, employees,
representatives and agents shall immediately cease any existing discussions or
negotiations, if any, with any parties (other than the parties to the Merger
Agreement) conducted with respect to any offer or proposal for a merger or other
business combination involving the Company or any of its subsidiaries or the
acquisition of all or any material portion of the assets of, or any equity
interest in, the Company or its subsidiaries or any business combination with
the Company or its subsidiaries (each an "Acquisition Proposal"). The Company
may, directly or indirectly, furnish information and access, in each case only
in response to unsolicited requests therefor, to any corporation, partnership,
limited liability company or other entity or group pursuant to confidentiality
agreements on terms no less favorable to the Company than the confidentiality
agreement that has been entered into by and between the Company and Parent, and
may participate in discussions and negotiate with such entity or group
concerning any merger, sale of assets, sale of shares of capital stock or
similar transaction involving the Company or any subsidiary or division thereof,
if such entity or group has submitted a bona fide written proposal to the
Company Board relating to any such transaction that is a proposal made by a
third party to acquire, directly or indirectly, all of the equity securities of
the Company entitled to vote generally in the election of directors or all or
substantially all of the assets of the Company for cash and on terms which the
Company Board reasonably believes (after consultation with a financial advisor
of nationally recognized reputation) to be more favorable from a financial point
of view to its shareholders than the Offer and the Merger, taking into account
at the time of determination all factors relating to such proposed transaction
deemed relevant by the Company Board, including, without limitation, the
financing thereof, the proposed timing thereof and all other conditions thereto
and any changes to the financial terms of this Agreement proposed by Parent and
Purchaser (a "Superior Proposal") and the Company Board shall immediately notify
Parent and Purchaser after receipt of any Acquisition Proposal, or any
modification of or amendment to any Acquisition Proposal, or any request for
nonpublic information relating to the Company or any of its subsidiaries in
connection with an Acquisition Proposal or for access to the properties, books
or records of the Company or any subsidiary by any person or entity that informs
the Company Board or such subsidiary that it is considering making, or has made,
an Acquisition Proposal. Such notice to Parent and Purchaser shall be made
orally and in writing, and, unless the Company Board concluded that such
disclosure is inconsistent with its fiduciary duties under applicable law, shall
indicate the identity of the person making the Acquisition Proposal or intending
to make the Acquisition Proposal or requesting nonpublic information or access
to the books and records of the Company, the terms of any such Acquisition
Proposal or modification or amendment to an Acquisition Proposal, and whether
the Company is providing or intends to provide the person making the Acquisition
Proposal with access to information concerning the Company as provided in the
Merger Agreement. The Company shall also
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immediately notify Parent and Purchaser, orally and in writing, if it enters
into negotiations concerning any Acquisition Proposal. Except as set forth
above, neither the Company Board nor any committee thereof shall (i) withdraw or
modify, or indicate publicly its intention to withdraw or modify, in a manner
adverse to Parent, the approval or recommendation by such Company Board or such
committee of the Offer or the Merger, (ii) approve or recommend, or indicate
publicly its intention to approve or recommend, any Acquisition Proposal or
(iii) cause the Company to enter into any letter of intent, agreement in
principle, acquisition agreement or other similar agreement (each, a "Company
Acquisition Agreement") related to any Acquisition Proposal. Notwithstanding the
foregoing, in the event that prior to the Effective Time the Company Board
reasonably determines in good faith, after discussions with its counsel, that it
is consistent with its fiduciary duties under applicable law, the Company Board
may (subject to this and the following sentences) approve or recommend a
Superior Proposal and, in connection therewith, withdraw or modify its approval
or recommendation of the Offer or the Merger and/or terminate the Merger
Agreement (and concurrently with or after such termination, if it so chooses,
cause the Company to enter into any Company Acquisition Agreement with respect
to any Superior Proposal), but only at a time that is after the third business
day following Parent's receipt of written notice advising Parent that the
Company Board has received a Superior Proposal and, in the case of any
previously received Superior Proposal that has been materially modified or
amended, such modification or amendment and specifying the material terms and
conditions of such Superior Proposal, modification or amendment. However,
nothing set forth above shall prevent the Company Board from taking, and
disclosing to the Company's shareholders, a position contemplated by Rules 14d-9
and 14e-2 promulgated under the Exchange Act with regard to any tender offer;
and provided further, however, that nothing shall prevent the Company Board from
making such disclosure to the Company's shareholders as, in the good faith
judgment of the Company Board, is required in the exercise of its fiduciaries
duties under California Law, provided that the Company complies with the
termination provisions of the Merger Agreement; provided further, that neither
the Company nor the Company Board nor any committee thereof shall, except as
permitted above, withdraw or modify or indicate publicly its intention to
withdraw or modify, its position with respect to the Offer or the Merger or
approve or recommend, or indicate publicly its intention to approve or recommend
an Acquisition Proposal. The Company shall advise its officers and directors and
any investment banker or attorney retained by the Company in connection with the
transactions contemplated by the Merger Agreement of the restriction set forth
therein.
ACCESS TO INFORMATION. The Merger Agreement provides that until the
Effective Time, the Company will provide to Parent and Purchaser and their
authorized representatives reasonable access to all employees, plants, offices,
warehouses and other facilities and to all books and records of the Company and
its subsidiaries, will permit Parent and Purchaser to make such inspections as
Parent and Purchaser may reasonably require and will cause the Company's
officers and those of its subsidiaries to furnish Parent and Purchaser with such
financial and operating data and other information with respect to the business
and properties of the Company and its subsidiaries as Parent or Purchaser may
from time to time reasonably request.
Pursuant to the Merger Agreement, each of Parent and Purchaser has agreed
that it will hold and will cause its consultants and advisors to hold in
confidence all documents and information concerning the Company and its
subsidiaries furnished to Parent or Purchaser in connection with the
transactions contemplated by the Merger Agreement.
SHAREHOLDERS MEETING. The Merger Agreement provides that, if a vote of the
Company's shareholders is required by law, the Company will, as promptly as
practicable following (A) the acceptance for payment of Shares by Purchaser
pursuant to the Offer, or (B) the termination of the offer by its terms, take,
in accordance with applicable law and its Articles of Incorporation and By-Laws,
all action necessary to convene a meeting of holders of Shares (the
"Shareholders Meeting") to consider and vote upon the approval of the Merger
Agreement. The Company shall, as promptly as practicable, prepare and file with
the Commission the Proxy Statement which shall include the recommendation of the
Company Board that shareholders of the Company vote in favor of the approval and
adoption of the Merger Agreement and the written opinion of Schroder that the
cash consideration to be received by the shareholders of the Company pursuant to
the Merger is fair to such shareholders from a financial point of view. The
Company shall use all reasonable efforts to have the
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Proxy Statement cleared by the Commission as promptly as practicable after such
filing, and promptly thereafter mail the Proxy Statement to the shareholders of
the Company. The Company shall also use its best efforts to obtain all necessary
state securities law or "blue sky" permits and approvals required in connection
with the Merger and to consummate the other transactions contemplated by the
Merger Agreement and will pay all expenses incident thereto. Notwithstanding the
foregoing, the Merger Agreement provides that if Parent, Purchaser and/or any
other subsidiary of Parent shall acquire at least 90% of the outstanding Shares,
the parties shall take all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after the expiration of the Offer
without a Shareholders Meeting in accordance with Section 1110 of the California
Law.
Parent and Purchaser have agreed to cause all Shares purchased pursuant to
the Offer and all other Shares owned by Parent, Purchaser or any subsidiary of
Parent to be voted in favor of the Merger.
ADDITIONAL AGREEMENTS; REASONABLE BEST EFFORTS. Subject to the terms and
conditions in the Merger Agreement, Parent, Purchaser and the Company agree to
use all reasonable best efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things reasonably necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by the Merger Agreement, including, without
limitation, (a) cooperation in the preparation and filing of the Schedule 14D-1,
the Schedule 14D-9, the Schedule 13E-3, if any, the Proxy Statement, any filings
that may be required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act") and any amendments thereto; (b) the taking of all action
reasonably necessary, proper or advisable to secure any necessary consents under
existing debt obligations of the Company and its subsidiaries or to amend the
notes, indentures or agreements relating thereto to the extent required by such
notes, indentures or agreements or redeem or repurchase such debt obligations;
(c) contesting any legal proceeding relating to the Offer or the Merger and (d)
the execution of any additional instruments necessary to consummate the
transactions contemplated thereby. Subject to the terms and conditions of the
Merger Agreement, Parent and Purchaser agree to use all reasonable efforts to
cause the Effective Time to occur as soon as practicable after the shareholder
vote, if any, with respect to the Merger. In case at any time after the
Effective Time any further action is necessary to carry out the purposes of the
Merger Agreement, the proper officers and directors of each party shall take all
such necessary action.
CONSENTS. The Merger Agreement provides that Parent, Purchaser and the
Company each will use all commercially reasonable efforts to obtain consents of
all third parties and governmental entities necessary, proper or advisable for
the consummation of the transactions contemplated by the Merger Agreement.
PUBLIC ANNOUNCEMENTS. The Merger Agreement provides that Parent, Purchaser
and the Company, as the case may be, will consult with one another before
issuing any press release or otherwise making any public statements with respect
to the transactions contemplated by the Merger Agreement, including, without
limitation, the Offer or the Merger, and shall not issue any such press release
or make any such public statement prior to such consultation and approval,
except as may be required by applicable law or by obligations pursuant to any
listing agreement with The Nasdaq Stock Market, as determined by Parent,
Purchaser or the Company, as the case may be.
GUARANTEE OF PERFORMANCE. Pursuant to the Merger Agreement, Parent has
agreed to guarantee performance by Purchaser of its obligations under the Merger
Agreement and the indemnification obligations of the Surviving Corporation (as
described below).
FINANCING COMMITMENTS. Pursuant to the Merger Agreement, Tinicum and
Edmundson have executed a guarantee. The guarantee provides that Tinicum Capital
Partners, L.P. and Edmundson International, Inc. (the "Guarantors") jointly and
severally, unconditionally and irrevocably guarantee to the Company that if
Parent or Purchaser fail to pay any damages due to the Company (the
"Obligations") arising from a breach or violation by Parent or Purchaser of
their Obligations under the Merger Agreement, then Guarantors shall forthwith,
upon demand (which demand shall be for the sole purpose of providing notice to
the Guarantors and shall not require the Company to exhaust any remedy before
proceeding against the Guarantors), discharge the Obligations. The Guarantors
shall be liable to the Company for the reasonable costs and expenses (including,
without limitation, reasonable out-of-pocket legal fees and expenses) incurred
by the
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Company (following a demand upon the Guarantor) in any proceeding brought by or
on behalf of the Company to enforce the guarantee, except in the event a court
or adjudicatory panel of competent jurisdiction determines that a good faith
dispute existed with respect to the amount owed by the Guarantors hereunder.
CONDITIONS TO THE MERGER. Under the Merger Agreement, the respective
obligations of the parties to effect the Merger are subject to the satisfaction
of the following conditions prior to the Effective Time: (a) if required by
California Law, the Merger Agreement shall have been approved and adopted by the
requisite vote of the shareholders of the Company; (b) no statute, rule,
regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated or enforced by any United States court or United
States governmental authority which prohibits, restrains, enjoins or restricts
the consummation of the Merger; (c) any waiting period applicable to the Merger
under the HSR Act shall have terminated or expired, and any other governmental
or regulatory notices or approvals required with respect to the transactions
contemplated by the Merger Agreement shall have been either filed or received;
(d) the number of holders of Company Dissenting Shares shall be less than five
percent of the total number of Shares; (e) the representations and warranties of
each of the parties set forth in the Merger Agreement are true and correct as of
the date of the Merger Agreement and as of the Closing Date; it being understood
that representations and warranties shall be deemed to be true and correct
unless the respects in which the representations and warranties are untrue or
incorrect in the aggregate is likely to have a Material Adverse Effect; and (f)
each of the parties shall have performed in all material respects all
obligations required to be performed by it under the Merger Agreement at or
prior to the Closing Date.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto including,
without limitation, representations by the Company as to the Company's corporate
organization and qualification, the Company's subsidiaries, capitalization,
authority, filings with the Commission and other governmental authorities,
financial statements, the absence of certain changes or events concerning the
Company's corporate organization and qualification, the absence of undisclosed
liabilities, the truth of information supplied by the Company, litigation, labor
matters, employee benefit matters and ERISA, taxes, compliance with applicable
laws, environmental matters, real property, intellectual property, year 2000
compliance, insurance, suppliers and customers, restrictions on business
activities, brokers, conduct of business, expenses, dividends, state takeover
statutes and related party transactions.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE. Pursuant to the
Merger Agreement, Parent and Purchaser have agreed that all rights to
indemnification or exculpation now existing in favor of the directors, officers,
employees and agents of the Company and its subsidiaries as provided in their
respective charters or By-Laws (or other similar governing instruments) or
otherwise in effect as of the date hereof with respect to matters occurring
prior to the Effective Time shall survive the Merger and shall continue in full
force and effect. To the maximum extent permitted by California Law, such
indemnification shall be mandatory rather than permissive, and the Surviving
Corporation shall advance expenses in connection with such indemnification
(subject to the Surviving Corporation's receipt of an undertaking by the
indemnified party to return such advanced expenses to the Surviving Corporation
if it is determined by a final, non-appealable order of a court of competent
jurisdiction that such indemnified party is not entitled to retain such advanced
expenses).
The Merger Agreement further provides that Parent shall cause the Surviving
Corporation to maintain in effect for not less than five years from the
Effective Time the policies of the directors' and officers' liability and
fiduciary insurance most recently maintained by the Company (provided that the
Surviving Corporation may substitute policies of at least the same coverage
containing terms and conditions which are no less advantageous to the
beneficiaries thereof so long as such substitution does not result in gaps or
lapses in coverage) with respect to matters occurring prior to the Effective
Time; provided, however, that in satisfying its obligation, the Surviving
Corporation shall not be obligated to pay premiums in excess of $125,000 with
respect to such insurance.
In the event the Surviving Corporation or its successor (i) is consolidated
with or merges into another person and is not the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any other person in a single
transaction or a
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series of related transactions, Parent has agreed that it will make or cause to
be made proper provision so that the successor or transferee of the Surviving
Corporation shall comply in all material respect with these terms.
EMPLOYEE MATTERS. Under the Merger Agreement, employees of the Company and
its subsidiaries shall be treated after the Merger no less favorably under
Parent's ERISA plans, to the extent applicable, than other similarly situated
employees of Parent and its subsidiaries.
For a period of one year following the Merger, Parent has agreed to, and to
cause its subsidiaries to, maintain with respect to their employees who had been
employed by the Company or any of its subsidiaries prior to the Effective Time
and who remain employed following the Effective Time (i) base salary or regular
hourly wage rates for each such employee at not less than the rate applicable
immediately prior to the Merger to such employee, and (ii) employee benefits (as
defined for purposes of Section 3(3) of ERISA), which are substantially
comparable in the aggregate to such employee benefits provided by the Company
and its subsidiaries immediately prior to the Merger.
To the extent they participate under such plans, Parent and its
subsidiaries have agreed to credit employees of the Company and its Subsidiaries
for purposes of determining eligibility to participate or vesting under Parent's
ERISA Plans with their service prior to the Merger with the Company and its
subsidiaries to the same extent such service was counted under similar benefit
plans of the Company prior to the Merger.
Neither Parent nor the Surviving Corporation is required to continue any
specific plans or to continue the employment of any specific person.
TERMINATION. The Merger Agreement may be terminated and the Offer and the
Merger may be abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Parent, Purchaser and the Company;
(b) by Parent or Purchaser or the Company if (i) any court of competent
jurisdiction in the United States or other United States governmental authority
shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the Offer or the Merger
and such order, decree, ruling or other action is or shall have become
nonappealable; or (ii) by October 31, 1999, the Merger has not been consummated
(unless otherwise extended by the parties); provided, however, that the right to
terminate the Merger Agreement pursuant to this clause (ii) shall not be
available to a party if such party's failure to fulfill any obligations under
the Merger Agreement shall have been the reason that the Effective Time shall
not have occurred on or before such date;
(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Purchaser set forth in the
Merger Agreement, or if any representation or warranty of Parent or Purchaser
shall have become untrue, in either case which materially adversely affects the
consummation of the Offer, (ii) there shall have been a breach on the part of
Parent or Purchaser of any of their respective covenants or agreements set forth
in the Merger Agreement having a Material Adverse Effect on Parent or materially
adversely affecting the consummation of the Offer, and Parent or Purchaser, as
the case may be, has not cured such breach prior to the earlier of (A) ten days
following notice by the Company thereof and (B) two Business Days prior to the
date on which the Offer expires, provided that the Company has not breached any
of its obligations in a manner that proximately contributed to such breach by
Parent or Purchaser, or (iii) prior to the purchase of Shares pursuant to the
Offer, the Company has received a Superior Proposal and the Company Board by a
majority vote shall have determined in its good faith judgment, on the advice of
counsel, that it is required to do so in the exercise of its fiduciary duties
under California Law; provided that, without limiting Parent's right to
liquidated damages, such termination under this clause shall not be effective
until payment of the required termination fee (see below); or
(d) by Parent or Purchaser prior to the purchase of Shares pursuant to the
Offer if (i) the Company Board withdraws or modifies in a manner materially
adverse to Parent or Purchaser its favorable recommendation of the Offer or the
approval or recommendation of the Merger or shall have recommended a Third Party
Acquisition (as defined below), (ii) a Third Party Acquisition occurs, (iii)
there shall have been a breach of any representation or warranty on the part of
the Company set forth in the Merger Agreement, or any
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representation or warranty of the Company shall have become untrue, in either
case if the respects in which the representations and warranties made by the
Company are inaccurate would in the aggregate have a Material Adverse Effect on
the Company or materially adversely affect (or delay) the consummation of the
Offer or the Merger, (iv) there shall have been a breach on the part of the
Company of its covenants or agreements set forth in the Merger Agreement having,
individually or in the aggregate, a Material Adverse Effect on the Company or
materially adversely affecting (or materially delaying) the consummation of the
Merger, and, with respect to clauses (iii) and (iv) above, the Company has not
cured such breach prior to the earlier of (A) ten days following notice by the
Parent or Purchaser thereof and (B) two Business Days prior to the date on which
the Offer expires, provided that, with respect to clauses (iii) and (iv) above,
neither Parent or Purchaser has breached any of their respective obligations in
a manner that proximately contributed to such breach by the Company or (v)
Parent or Purchaser shall have discovered that any information supplied to
Parent or Purchaser by the Company (excluding, for such purposes, any
projections or forecasts or other forward looking information supplied by the
Company), at the time provided to Parent or Purchaser, contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading and such misstatement or omission would have a Material
Adverse Effect on the Company.
As used in the Merger Agreement, "Material Adverse Effect" means any effect
that is materially adverse to the financial condition, business, properties or
results of operations of the Company and its subsidiaries taken as whole, on the
one hand, or Parent and its subsidiaries taken as a whole on the other hand.
None of the following shall be deemed by itself or by themselves, either alone
or in combination, to constitute a Material Adverse Effect on the Company and
its subsidiaries taken as a whole: (i) a change in the market price or trading
volume of Shares, (ii) a failure by the Company to meet the revenue or earnings
predictions of equity analysts for any period ending (or for which earnings are
released) on or after the date of the Merger Agreement and prior to the
Effective Date, (iii) conditions affecting the U.S. economy as whole, or (iv)
conditions affecting the worldwide industrial equipment market. Additionally,
conditions affecting the U.S. economy as whole shall not be deemed to constitute
a Material Adverse Effect on Parent and its subsidiaries taken as a whole.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall become void and have no effect, without any liability on the
part of any party or its affiliates, directors, officers or shareholders, other
than the provisions concerning fees and expenses (discussed below) and
confidentiality. Nothing shall relieve any party from liability for any breach
of the Merger Agreement prior to such termination.
FEES AND EXPENSES. As provided in the Merger Agreement, in the event that
the Merger Agreement is terminated pursuant to paragraph (c)(iii) above or
paragraph (d) above, and, within twelve months thereafter, a Third Party
Acquisition occurs, then Parent and Purchaser would suffer direct and
substantial damages, which damages cannot be determined with reasonable
certainty. To compensate Parent and Purchaser for such damages, the Company has
agreed to pay to Parent the amount of $2.0 million as liquidated damages (the
"Break-Up Fee").
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger or otherwise by any person
(which includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) or entity other than Parent, Purchaser or any affiliate thereof (a
"Third Party"); (ii) the acquisition by a Third Party of 50% or more of the
total assets of the Company and its subsidiaries, taken as a whole; (iii) the
acquisition by a Third Party of Shares resulting in such person holding at least
50% or more of the outstanding Shares; or (iv) the acquisition by a Third Party
of shares of the Company's capital stock resulting in such person being able to
elect a majority of the Company's directors.
Upon the termination of the Merger Agreement prior to the purchase of
Shares by Purchaser pursuant to the Offer pursuant to paragraph (c)(iii) above
or paragraph (d) above, the Company shall reimburse Parent, Purchaser and their
affiliates (not later than ten Business Days after submission of statements
therefor) for all documented out-of-pocket fees and expenses, not to exceed
$500,000, reasonably incurred by any of them or on their behalf in connection
with the Merger and the consummation of all transactions contemplated by the
Merger Agreement (including, without limitation, filing fees, printing and
mailing costs, fees payable to
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investment bankers, counsel to any of the foregoing, and accountants). If Parent
or Purchaser shall have submitted a request for reimbursement, such party will
provide the Company in due course with invoices or other reasonable evidence of
such expenses upon request. The Company shall in any event pay the amount
requested within ten Business Days of such request, subject to the Company's
right to demand a return of any portion as to which invoices are not received in
due course.
Upon the termination of the Merger Agreement pursuant to paragraph (e)(i)
or (e)(ii) above, Parent shall reimburse the Company and their affiliates (not
later than ten Business Days after submission of statements therefor) for all
documented out-of-pocket fees and expenses, not to exceed $500,000, reasonably
incurred by any of them or on their behalf in connection with the Merger and the
consummation of all transactions contemplated by the Merger Agreement
(including, without limitation, filing fees, printing and mailing costs, fees
payable to investment bankers, counsel to any of the foregoing, and
accountants). If the Company shall have submitted a request for reimbursement,
it will provide Parent in due course with invoices or other reasonable evidence
of such expenses upon request. Parent shall in any event pay the amount
requested within ten Business Days of such request, subject to Parent's right to
demand a return of any portion as to which invoices are not received in due
course.
Except as specifically provided in the Merger Agreement, each party has
agreed to bear its own expenses in connection with the Merger Agreement and the
transactions contemplated thereby.
AMENDMENT. The Merger Agreement may be amended by action taken by the
Company, Parent and Purchaser at any time before or after approval of the Merger
by the shareholders of the Company (if required by applicable law) but, after
any such approval, no amendment shall be made which requires the approval of
such shareholders under applicable law without such approval. The Merger
Agreement may not be amended except by an instrument in writing signed on behalf
of the parties.
EXTENSION. The Merger Agreement provides that at any time prior to the
Effective Time, each party may (a) extend the time for the performance of any of
the obligations or other acts of the other party or parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained therein or in any document, certificate or writing delivered pursuant
thereto or (c) waive compliance by the other parties with any of the agreements
or conditions contained therein. Any agreement on the part of any party to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. The failure of any party to assert any
of its rights shall not constitute a waiver of such rights.
SHAREHOLDER AGREEMENT
On March 15, 1999, Parent, Purchaser and trusts established under the
Richard L. Hayman and Dorothy M. Hayman Trust No. 1 (the "Trusts") entered into
an agreement (as amended as of March 18, 1999, the "Shareholder Agreement") with
respect to the voting of the Trusts' Shares (the "Subject Shares") in connection
with the Merger. The Trusts agreed to vote (or cause to be voted) the Subject
Shares (i) in favor of the Merger Agreement and the Merger and (ii) against any
Third Party Acquisition, or any amendment of the Company's Articles of
Incorporation, Bylaws, or any other proposal or transaction or any change in
management or the Company Board, that could reasonably be expected to impede, in
any material respect, prevent or nullify the Merger or Merger Agreement. As of
the date of the execution of the Shareholder Agreement, the Trusts beneficially
owned 1,521,477 shares of Class A Common Stock and all 40,000 shares of Class B
Common Stock. The Trusts granted Purchaser a proxy to vote and an option to
acquire all of the Trusts' shares of Class A Common Stock upon the terms and
subject to the conditions set forth therein. As a result, Purchaser and Parent
may be deemed to beneficially own such Shares of Class A Common Stock.
Additionally, the Trusts agreed to tender the Subject Shares into the offer. As
of March 10, 1999, the Trusts' Shares of Class A Common Stock represent 31.9% of
the total outstanding Shares of Class A Common Stock.
EMPLOYMENT AGREEMENT
On March 15, 1999, Parent, Purchaser and R. Malcolm Greaves ("Greaves")
entered into a Letter Agreement which provides that upon Purchaser's purchase of
Shares pursuant to the Offer or the Merger, whichever occurs first, Greaves will
enter into an employment agreement with the Company (the "Employ-
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ment Agreement"), and pursuant to which Greaves agreed to forego the $180,000
"stay" bonus that the Company had previously agreed to pay him. Under the
Employment Agreement, Greaves will continue to serve as President and Chief
Executive Officer of the Company. The Employment Agreement will contain
customary definitions of cause and good reason, a
non-competition/non-solicitation provision and other customary provisions.
INDEMNIFICATION
The Company's Certificate of Incorporation provides that the liability of a
director of the Company for monetary damages shall be eliminated to the fullest
extent permissible under California Law.
The Company's Bylaws provide that the Company may indemnify its agents,
including its directors and officers, and persons serving in such capacities in
other business enterprises at the Company's request, against expenses actually
and reasonably incurred in connection with the defense or settlement of any
threatened, pending or completed action brought against such person by reason of
the fact that such person is or was an agent of the Company, if such person
acted in good faith, in a manner such person believed would be in the best
interests of the Company and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances. The Bylaws allow the Company to advance expenses incurred in
connection with defending such a proceeding upon receipt of an undertaking by or
on behalf of the agent to repay such amount unless it shall ultimately be
determined that the agent is entitled to indemnification. The rights conferred
in the Bylaws are not exclusive, and the Company is authorized to enter into
indemnification agreements with its directors, officers, employees and agents.
In addition, the Bylaws permit the Company to maintain director and officer
liability insurance to the extent reasonably available.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE COMPANY BOARD.
The Company Board has (a) determined that the Merger Agreement and the
transactions contemplated thereby, including each of the Offer and the Merger,
are fair to and in the best interests of the holders of the Shares, (b) approved
and adopted the Merger Agreement and the transactions contemplated thereby, and
(c) resolved to recommend that the shareholders of the Company accept the Offer
and approve and adopt the Merger Agreement and approve the transactions
contemplated thereby.
(b) BACKGROUND OF THE OFFER; OPINION OF FINANCIAL ADVISOR; FACTORS
CONSIDERED BY THE BOARD OF DIRECTORS.
Background of the Offer
In August 1998, the Company Board resolved to undertake a search for
strategic alternatives to the Company's then current strategy. The Company Board
decided to retain an investment banker, Schroder & Co. Inc. ("Schroders"), to
explore the capital needs of the Company and the strategic alternatives
available to the Company, including partnering of the Company with third parties
or a sale of the entire Company.
During the period from September to October 1998, Schroders conducted
extensive interviews with senior management, engaged in customary due diligence
procedures, analyzed valuation parameters, explored new product opportunities
and product line sales and developed a list of potential acquirors of the
Company. Schroders and the Company Board discussed and explored these
possibilities in numerous meetings, and the Company Board authorized Schroders
to contact potential acquirors to explore the sale of the entire company.
On October 20, 1998, the Company publicly announced that it had retained
Schroders to advise the Company on its strategic alternatives. In October and
November 1998, Schroders contacted 103 potential buyers and distributed a
descriptive document highlighting the Company's strengths prepared in
consultation with Company management (the "Offering Memorandum"). A total of 70
potential buyers executed confidentiality agreements with the Company and
received the Offering Memorandum. These potential buyers included both strategic
and financial buyers.
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In early December 1998, the Company received initial indications of
interest from approximately 20 potential acquirors, and, of those, invited five
bidders to participate in due diligence and management presentations at the
Company's facility in Burbank, California. On or about January 26, 1999, the
Company received three written formal indications of interest, two from the five
bidders that had participated in due diligence and management presentations at
the Company's facility and a third on behalf of certain members of management
presented by Merchants Group International ("Merchants Group").
On January 26, 1999, the Company Board met to evaluate the bids that had
been received. The Company's legal counsel gave a presentation to the Board on
the directors' duties in connection with the sale of the Company and the
directors' duties of care and loyalty in connection therewith. Representatives
of Schroders described the terms and conditions of each of the bids, the
background of the bidders and the status of the diligence performed by each of
the bidders. The Company Board discussed each of the bids in detail, focusing on
the terms and conditions of the bids and the likelihood of completing a
transaction on the terms and conditions outlined. Thereafter, the Company Board
resolved to accept the bid from Constellation Capital Partners LLC, a company
affiliated with Colfax Corporation ("Colfax"), and granted an exclusive right to
negotiate with the Company's representatives until February 19, 1999. The
Company Board then directed Schroders and the Company's legal counsel to meet
with representatives of Colfax and their counsel to negotiate the terms of a
definitive acquisition agreement and report back to the Company Board concerning
the results thereof.
From January 26 to February 18, 1999, representatives of the Company,
Schroders and the Company's legal counsel held discussions with representatives
of Colfax and Colfax's legal counsel to negotiate various aspects of the
acquisition proposal. In addition, from time to time from January 26 to February
18, 1999, Colfax's legal counsel, accountants and other representatives
conducted legal, financial and technical reviews of the Company.
On February 8, 1999, the Company Board received an unsolicited new bid from
Merchants Group, representing a different purchaser. The Company's legal counsel
sent Merchants Group a letter informing it that the Company could not consider
Merchants Group's new bid because Colfax's exclusive negotiating period was
still in effect.
On February 18, 1999, the Company Board met to discuss Colfax's request for
an extension of its exclusive negotiating period. The Company Board discussed
the status of the negotiations with Colfax in detail, and the likelihood of
completing a transaction with Colfax. The Company Board resolved to extend
Colfax's exclusive negotiating period until February 23, 1999 and instructed
Schroders and the Company's legal counsel to continue negotiating the terms of a
definitive acquisition agreement with Colfax.
From February 18 to February 23, 1999, representatives of the Company,
Schroders and the Company's legal counsel continued to negotiate various aspects
of the acquisition proposal with representatives of Colfax and Colfax's legal
counsel, while Colfax's legal counsel, accountants and other representatives
continued conducting legal, financial and technical reviews of the Company.
On February 24, 1999, the Company Board met to discuss Colfax's request for
an additional extension of its exclusive negotiating period and a report on the
proposal received from Merchants Group. The Company Board discussed the status
of the negotiations with Colfax and the reasons for the delay. Representatives
from Schroders reported on their discussions with representatives from Merchants
Group and their continued interest in acquiring the Company. The Company Board
discussed the viability of the continuing interest by Merchants Group, which was
now proposing a separate offer by affiliates of Parent. The Company Board
discussed the bidding process to date and whether they should extend Colfax's
negotiating period. The Company Board decided not to extend Colfax's exclusive
negotiating period and, instead, decided to negotiate with both Colfax and
Parent. To allow Parent to conduct its due diligence investigation, the Company
Board agreed not to enter into a definitive agreement with any person until
March 5, 1999.
From February 24 to March 5, 1999, Parent's legal counsel, accountants and
other representatives conducted legal, financial and technical reviews of the
Company. On March 5, 1999, representatives of the Company and its legal counsel
met with representatives of Parent at the offices of the Company's legal counsel
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<PAGE> 17
to discuss the terms of Parent's best bid. On March 5, 1999, representatives of
Schroders spoke with representatives of Colfax to ask Colfax to submit its best
bid by Monday morning, March 8, 1999.
On March 8, 1999, the Company Board met to consider the final bids of
Parent and Colfax. Parent had submitted a final bid of $13.00 per share of the
Company Common Stock, subject to the negotiation of a satisfactory definitive
acquisition agreement, assuming completion of a satisfactory due diligence
investigation. Colfax had indicated that it still wanted to purchase the Company
but for various reasons was not in a position to submit a binding bid at that
time. The Company Board discussed the situation and the likelihood of completing
a transaction with either party. Thereafter, the Company Board resolved to
accept Parent's bid and granted an exclusive right to negotiate with the
Company's representatives until March 11, 1999. The Company Board directed
Schroders and the Company's legal counsel to meet with representatives of Parent
and their counsel to negotiate the terms of a definitive acquisition agreement
and report back to the Company Board concerning the results thereof.
From March 8 to March 13, 1999, representatives of the Company, Schroders
and the Company's legal counsel held discussions with representatives of Parent
and Parent's legal counsel to negotiate various aspects of the acquisition
proposal. In addition, Parent's legal counsel, accountants and other
representatives conducted legal, financial and technical reviews of the Company.
On March 11, 1999, the Company Board met to discuss the status of
negotiations between Parent and the Company. The Company had not finalized a
definitive agreement with Parent, and Parent had not provided a firm final offer
by the expiration of Parent's exclusive negotiating period. The principal terms
of the proposed transaction and the remaining issues were reviewed and
discussed. The Company Board also discussed the possibility of any other
acquirors becoming available. The Company Board discussed the open issues
related to the acquisition proposal and directed its legal counsel and Schroders
to discuss concerns the Company Board had regarding the proposals with
representatives of Parent and continue negotiating the terms of Parent's
proposal. The Company Board also directed Schroders and the Company's legal
counsel to reopen discussions with Colfax. From March 11 to March 14, 1999,
Schroders had discussions with Colfax, and Schroders and the Company's legal
counsel had various discussions and negotiations with representatives of Parent,
finalizing the terms of Parent's offer.
On March 14, 1999, the Company Board met to review and discuss the
finalized terms of Parent's proposed acquisition of the Company. At the meeting,
the Company's legal counsel gave a presentation to the Board on the terms of the
Merger Agreement and related documents, the structure of the Offer and the
Merger and the Company Board's fiduciary duties to shareholders. The Company
Board received the written opinion of Schroders, dated March 14, 1999, at the
meeting that, as of such date and based upon and subject to certain matters
stated therein, the consideration to be received by the holders of Shares
pursuant to the Offer and the Merger as contemplated in the Merger Agreement was
fair from a financial point of view to such holders. The Company Board members
discussed the terms of the proposed acquisition and asked questions of Schroders
and the Company's legal counsel. Following this discussion, the Company Board
(a) determined that the Merger Agreement and the transactions contemplated
thereby, including each of the Offer and the Merger, are fair to and in the best
interests of the holders of the Shares, (b) approved and adopted the Merger
Agreement and the transactions contemplated thereby, and (c) resolved to
recommend that the shareholders of the Company accept the Offer and approve and
adopt the Merger Agreement and approve the transactions contemplated thereby.
On March 15, 1999, Parent, Purchaser and the Company executed the Merger
Agreement and, simultaneously, Parent, Purchaser and certain shareholders of the
Company executed the Shareholder Agreement.
Opinion of Financial Advisor
In connection with its consideration of the proposed Merger, the Company
requested that Schroders advise the Company Board with respect to the fairness,
from a financial point of view, of the consideration to be received by holders
of Haskel's Common Stock in the Merger. On March 14, 1999, at a meeting of the
Company Board held to evaluate the proposed Merger, Schroders reviewed with the
Company Board the
17
<PAGE> 18
financial analyses performed by Schroders and delivered to the Company Board an
oral opinion (which opinion was subsequently confirmed by delivery of a written
opinion, dated March 14, 1999) to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the Merger
consideration was fair, from a financial point of view, to the holders of Common
Stock of the Company. The full text of Schroders' opinion, dated March 14, 1999,
which sets forth the assumptions made, matters considered and limits of the
review undertaken, is included as Exhibit 4 to this Schedule 14D-9 and is
incorporated herein by reference. Schroders has consented to the inclusion of
the full text of the Schroders' Opinion as Exhibit 4 to this Schedule 14D-9. THE
SUMMARY OF SCHRODERS' OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF SUCH OPINION. STOCKHOLDERS ARE URGED TO READ THE
SCHRODERS' OPINION CAREFULLY IN ITS ENTIRETY.
No limitations were imposed by the Company Board on the scope of Schroders'
investigation or the procedures to be followed by Schroders in tendering its
opinion. In arriving at its opinion, Schroders, among other things, (i) reviewed
a draft, dated March 14, 1999, of the Merger Agreement; (ii) visited the
executive offices and operations of the Company in Burbank, California; (iii)
reviewed the Company's Annual Reports on Form 10-K for the fiscal years ended
May 31, 1994 through 1998, including the audited consolidated financial
statements contained therein; (iv) reviewed the Company's Quarterly Report on
Form 10-Q for the quarter ended November 30, 1998, including the unaudited
consolidated financial statements contained therein; (v) reviewed historical
financial results of the Company and its subsidiaries prepared by management;
(vi) had discussions with the senior management of the Company regarding the
business, operations and prospects of the Company and its subsidiaries; (vii)
reviewed projections of the Company prepared by management; (viii) researched
certain publicly available information on the industry in which the Company
operates; (ix) performed various analyses, as Schroders deemed appropriate, of
the Company using generally accepted analytical methodologies, including (a) an
analysis of premiums paid in public merger and acquisition transactions; (b) the
application of the public trading multiples of companies which Schroders deemed
comparable to the Company; (c) the application of the multiples reflected in
recent merger and acquisition transactions involving businesses which Schroders
deemed comparable to the financial results of the Company; and (d) discounting
the projected cash flows of the Company's operations; (x) solicited indications
of interest from 103 potential buyers; (xi) reviewed historical trading prices
and volume of the Company's common stock; and (xii) performed such other of the
financial studies, analyses, inquiries and investigations, as Schroders deemed
appropriate.
In its review and analysis and in formulating its opinion, Schroders
assumed and relied upon, without independent verification, the accuracy and
completeness of all of the financial and other information supplied or otherwise
made available to it by the Company or obtained by Schroders from other publicly
available sources, and upon the assurance of the Company's management that they
were not aware of any information or facts that would make the information
provided by it to Schroders incomplete or misleading.
With respect to financial forecasts and projections for the Company,
Schroders was advised by management of the Company, and assumed without
independent investigation, that such forecasts and projections had been
reasonably prepared and reflected the best currently available estimates and
judgments as to the expected future financial performance of the Company. The
financial forecasts and projections were based upon numerous variables and
assumptions that are inherently uncertain, including, without limitation,
factors related to general economic and competitive conditions. Accordingly,
actual results could vary significantly from those set forth in such
projections.
Schroders noted that its opinion was necessarily based upon financial,
economic, market and other conditions as they existed and could be evaluated by
Schroders on, and the information made available to it as of, the date of its
opinion. Schroders has disclaimed any undertaking or obligation to advise any
person of any change in any fact or matter affecting its opinion that is brought
to its attention after the date of its opinion.
The Opinion does not constitute a recommendation as to any action the Board
of Directors of the Company or any stockholder of the Company should take in
connection with the Transaction or any aspect thereof and is not a
recommendation to any person on how such person should vote in the consideration
of the
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<PAGE> 19
Merger. The Opinion relates solely to the fairness, from a financial point of
view, of the Transaction Consideration to the stockholders of the Company.
Schroders expresses no opinion therein as to the relative merits of the Merger
and any other transactions or business strategies discussed by the Board of
Directors of the Company as alternatives to the Merger or the decision of the
Board of Directors of the Company to proceed with the Merger, nor, does
Schroders express any opinion on the structure, terms or effect of any other
aspect of the Transaction.
In preparing its opinion, Schroders performed a variety of financial and
comparative analyses, including those described below. The summary of such
analyses does not purport to be a complete description of the analyses
underlying the Schroders' Opinion. In arriving at its opinion, Schroders did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Schroders believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors,
without considering all analyses and factors, could create a misleading or
incomplete view of the processes underlying the preparation of its opinion. The
Schroders' Opinion and analyses were only one of many factors considered by the
Board of Directors in its evaluation of the Merger and should not be viewed as
determinative of the view of the Board of Directors or management of the Company
with respect to the Merger Consideration of the proposed Merger.
The following is a summary of the analyses performed by Schroders in
connection with the preparation of its opinion.
Financial Valuation Analyses
Analysis of Comparable Publicly Traded Companies. Using publicly available
information, Schroders compared selected historical and projected financial
data, and selected stock market data of the Company to the corresponding data of
the following six publicly-traded companies that Schroders deemed to be
reasonably comparable to Haskel: Roper Industries, Inc., IDEX Corporation, Graco
Inc., Denison International plc, Robbins & Myers Inc. and Flowserve Corporation
(the "Comparable Companies").
Schroders compared (i) the stock prices, (ii) market capitalization
(defined as share price times total shares outstanding), (iii) stock price to
Latest Twelve Months ("LTM") EPS, (iv) stock price to fiscal year ("FY") 1999
EPS, (iv) enterprise values (defined as market capitalization plus total debt,
preferred stock and minority interest, and capitalized leases less cash and cash
equivalents), (v) enterprise values to LTM revenues, (vi) enterprise values to
FY 1999 revenues, (vii) enterprise values to LTM earnings before interest and
taxes ("EBIT"), (viii) enterprise values to FY 1999 EBIT, (ix) enterprise values
to LTM earnings before interest, taxes, depreciation and amortization ("EBITDA")
and (x) enterprise values to FY 1999 EBITDA for each of Haskel and the selected
Comparable Companies.
Discounted Cash Flow ("DCF") Analysis. Schroders performed a DCF analysis
using financial forecasts supplied to Schroders by management of the Company for
FYs 1999-2004. The DCF was calculated as the sum of the present values of (i)
the projected unlevered free cash flows from FYs 2000-2004, and (ii) the FY 2004
terminal value based upon a range of multiples from 6.0x to 8.0x projected
EBITDA for FY 2004. Schroders than adjusted the enterprise values thus obtained
by subtracting existing debt and adding existing cash to get a range of equity
values for the Company.
Comparable Transaction Analysis. Using publicly available information,
Schroders analyzed certain financial and operating information relating to
selected transactions in the flow control and pump industries. The flow control
transactions were all executed after January 1, 1997 while the transactions in
the pump industry were all executed on or after January 1, 1996.
Schroders analyzed the following transactions in the flow control industry
(the purchaser is listed first and is in italics and is followed by the seller):
Code Hennessey & Simmons/Hunt Valve Company; Watts Industries/Hoke Inc.; Dover
Corporation/Wilden Pump & Engineering; Cooper Cameron Corporation/Orbit Valve;
IDEX Corporation/Gast Manufacturing; IDEX Corporation/Knight Equipment
International, Inc.; David Brown Group/Union Pump Company; Robbins & Myers
Inc./the flow control equipment division of J.M. Huber Corporation; Parker
Hannifin Corporation/Honeywell Inc.'s flow business; Danaher Corpora-
19
<PAGE> 20
tion/Gems Sensors; Pentair, Inc./the pump group of General Signal Corporation;
Durco International/BW/ IP Inc.; and Culligan Water Technologies/Ametek's water
filtration business.
Schroders analyzed the following transactions in the pump industry (the
purchaser is listed first and is in italics and is followed by the seller):
Dover Corporation/Wilden Pump & Engineering; IDEX Corporation/ Knight Equipment
International, Inc.; David Brown Group/Union Pump Company; Durco International/
BW/IP Inc.; Cypress Group/Amtrol Inc.; Precision Castpart Corporation/Newflo
Corporation; and Roper Industries, Inc./Fluid Metering, Inc.
With respect to each of the transactions analyzed, Schroders computed the
equity costs (where applicable, the offer price per share multiplied by total
common shares outstanding (the "Equity Cost")) and the adjusted price (the
Equity Cost plus latest reported total debt, capitalized leases, preferred stock
and minority interest minus total cash and cash equivalents) paid in such
transactions and divided the adjusted price by the acquired company's LTM
Revenues, EBIT and EBITDA, and the acquired company's projected revenues, EBIT
and EBITDA for the next fiscal year ending subsequent to the acquisition.
Premium Analysis. Schroders analyzed the premiums paid over the stock price
of acquired companies in selected merger transactions since 1995, based on stock
prices one day, one week, and four weeks prior to the announcement of the
transaction. This analysis demonstrated that, on average, the acquired company
received a 39%, 33% and 28% premium over its stock price one day, one week and
four weeks prior to the announcement of the transaction, respectively. Schroders
noted that the $12.90 per share consideration implied by the Merger represents
premiums of 46%, 27%, and 32% to Haskel's average closing stock price one month,
three months, and six months prior to the date (March 15, 1999) the Merger was
announced.
Based on the above analyses, Schroders derived a range of values for
Haskel's common stock from $10.00 to $20.00 per share.
Pursuant to the terms of Schroders' engagement by the Company, the Company
has agreed, among other things, to pay Schroders for its services in connection
with the Merger a financial advisory fee which is contingent on consummation of
the Merger. The Company has also agreed to reimburse Schroders for reasonable
out-of-pocket expenses incurred by Schroders in performing its services,
including the reasonable fees and expenses of its outside legal counsel, and to
indemnify Schroders and related persons against certain liabilities relating to
or arising out of its engagement, including certain liabilities under the
federal securities laws.
Schroders, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. Schroders, in the normal course of its business,
may trade in securities of the Company for its own account and for the accounts
of its customers.
Factors Considered by the Board of Directors
In approving the Merger Agreement and the transactions contemplated
thereby, and recommending that all shareholders tender their Shares pursuant to
the Offer, the Company Board considered a number of factors, including:
(1) the financial and other terms of the Offer, the Merger Agreement
and the related transaction agreements;
(2) the presentation of Schroders and Schroders' opinion to the effect
that, as of the date of its opinion and based upon and subject to certain
matters stated therein, the $12.90 per Share cash consideration to be
received by the holders of Shares pursuant to the Offer and the Merger was
fair to the shareholders of the Company, from a financial point of view
(the "Fairness Opinion"). THE FULL TEXT OF SCHRODERS' WRITTEN FAIRNESS
OPINION IS FILED AS EXHIBIT 4 TO THIS SCHEDULE 14D-9. SHAREHOLDERS ARE
URGED TO READ SUCH OPINION IN ITS ENTIRETY;
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<PAGE> 21
(3) the fact that the $12.90 per share tender offer price represents a
premium of approximately 43% over the closing price of the Company's Common
Stock on the Nasdaq National Market System ("Nasdaq") on March 9, 1999 and
a premium of approximately 60% over the Company's closing price on October
19, 1998, which was the day before the Company announced that it had
retained Schroders to evaluate strategic alternatives;
(4) the view of the Company Board, based in part upon the presentation
of Schroders, regarding the likelihood of a superior offer arising, the
efforts of Schroders over the last 8 months to locate other potential
merger candidates, and the fact that certain candidates which had been
identified over such period had held discussions with the Company that had
proven unsuccessful;
(5) the Company's existing competitive and market position;
(6) the provisions of the Merger Agreement, including the provisions
allowing the Company to respond to certain unsolicited inquiries concerning
an acquisition of the Company, and the provisions which permit the Company
to terminate the Merger Agreement and pay a break-up fee to Parent under
certain circumstances; and
(7) the fact that Parent's and Purchaser's obligations under the Offer
were not subject to any financing condition, and the fact that Parent's
obligations to pay any damages under the Merger Agreement are guaranteed by
Tinicum Capital Partners, L.P. and Edmundson International, Inc., and the
fact that Parent's financial condition and ability to cause Purchaser to
meet its obligations under the Merger Agreement appear to be sufficient.
The foregoing discussion of the information and factors considered and
given weight by the Company Board is not intended to be exhaustive. In view of
the variety of factors considered in connection with its evaluation of the
Merger Agreement and the Offer, the Company Board did not find it practicable
to, and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination. In addition, individual
members of the Company Board may have given different weights to different
factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company retained Schroders in connection with the Offer and the Merger.
Pursuant to a letter agreement, dated September 21, 1998, the Company is
required to pay Schroders, upon delivery of the Fairness Opinion, a fee, payable
in cash, of $100,000, which amount will be credited against any compensation
otherwise payable by the Company to Schroders upon the consummation of a sale of
the Company. Upon consummation of a sale of the Company, including a sale
pursuant to the transactions contemplated by the Merger Agreement, the Company
has agreed to pay Schroders a fee, payable in cash on closing, equal to 1.125%
of (a) minus (b) where (a) is equal to all consideration received by the
shareholders of the Company and (b) is equal to the Company's cash balance. In
addition to the foregoing compensation, the Company has agreed to indemnify
Schroders against certain liabilities and expenses arising out of the engagement
and the transactions in connection therewith, including certain liabilities
under the federal securities laws.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the shareholders of the Company on its
behalf with respect to the Offer and the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60
days by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, all of the Company's executive
officers, directors and affiliates who own Shares presently intend to tender
such Shares to Purchaser pursuant to the Offer. See "Item 3 -- The Shareholder
Agreement."
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<PAGE> 22
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth herein, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i) an
extraordinary transaction such as a merger or reorganization, involving the
Company or any subsidiary of the Company; (ii) a purchase, sale or transfer of a
material amount of assets by the Company or any subsidiary of the Company; (iii)
a tender offer for or other acquisition of securities by or of the Company; or
(iv) any material change in the present capitalization or dividend policy of the
Company.
(b) Except as set forth herein, there are no transactions, Company Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Short Form Merger. Under the California General Corporations Law, if
Purchaser acquires, pursuant to the Offer or otherwise, at least 90% of each
class of the outstanding shares of Common Stock, Purchaser will be able to
effect the Merger after consummation of the Offer without a vote of the
Company's shareholders. However, if Purchaser does not acquire at least 90% of
each class of the outstanding Shares of Common Stock pursuant to the Offer or
otherwise and a vote of the Company's shareholders is required under California
Law, a significantly longer period of time will be required to effect the
Merger.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1 Agreement and Plan of Merger, dated March 15, 1999, by and
among Haskel International, Inc., HI Holdings Inc. and HI
Merger Subsidiary Inc.
2 Shareholder Agreement, dated as of March 15, 1999, by and
among certain shareholders of the Company, Purchaser and
Parent, as amended as of March 18, 1999.
3 Letter to Shareholders of Haskel International, Inc., dated
March 22, 1999.
4 Fairness Opinion of Schroders & Co. Inc., dated March 11,
1998.
5 Text of Press Release issued by the Company on March 15,
1999.
6 Proxy Statement of Haskel International, Inc., dated
September 21, 1998, for the Annual Shareholder Meeting on
October 30, 1998.
7 Restated Articles of Incorporation of Haskel International,
Inc., dated June 30, 1997.
8 Restated By-Laws of Haskel International, Inc., effective
June 9, 1994.
</TABLE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
By: /s/ R. Malcolm Greaves
R. Malcolm Greaves
Chief Executive Officer
Dated: March 22, 1999
22
<PAGE> 1
Exhibit 1
================================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
HASKEL INTERNATIONAL, INC.
HI HOLDINGS INC.
AND
HI MERGER SUBSIDIARY INC.
DATED AS OF MARCH 15, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE 1 THE OFFER 1
Section 1.1. The Offer 1
Section 1.2. Company Action 3
Section 1.3. Board of Directors and Committees;
Section 14(f) 5
ARTICLE 2 THE MERGER 6
Section 2.1. The Merger 6
Section 2.2. Effective Time 6
Section 2.3. Closing of the Merger 6
Section 2.4. Effects of the Merger 6
Section 2.5. Articles of Incorporation and Bylaws 6
Section 2.6. Directors 6
Section 2.7. Officers 7
Section 2.8. Conversion of Shares 7
Section 2.9. Shares of Dissenting Holders 7
Section 2.10. Exchange of Certificates 8
Section 2.11. Company Stock Options; Warrants 9
Section 2.12. Officers 10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 11
Section 3.1. Organization and Qualification; Subsidiaries 11
Section 3.2. Capitalization of the Company and its
Subsidiaries 12
Section 3.3. Authority Relative to this Agreement;
Consents and Approvals 13
Section 3.4. SEC Reports; Financial Statements 13
Section 3.5. Information Supplied 14
Section 3.6. Consents and Approvals; No Violations 14
Section 3.7. No Default 15
Section 3.8. No Undisclosed Liabilities; Absence of Changes 15
Section 3.9. Litigation 16
Section 3.10. Compliance with Applicable Law 16
Section 3.11. Employee Plans 17
Section 3.12. Environmental Laws and Regulations 17
Section 3.13. Intellectual Property; Software 18
Section 3.14. Certain Business Practices 19
Section 3.15. Vote Required 19
Section 3.16. Labor Matters 19
Section 3.17. Insurance 19
Section 3.18. Suppliers and Customers 20
2
<PAGE> 3
Section 3.19. Tax Matters 20
Section 3.20. Brokers 21
Section 3.21. Related Party Transactions 21
Section 3.22. Restrictions on Business Activities 21
Section 3.23. Year 2000 Compliance 21
Section 3.24. Real Estate 22
Section 3.25. Conduct of Business 23
Section 3.26. Expenses 23
Section 3.27. Dividends 23
Section 3.28. No Other Representations or Warranties 23
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION 23
Section 4.1. Organization 24
Section 4.2. Authority Relative to this Agreement 24
Section 4.3. Information Supplied 24
Section 4.4. Consents and Approvals; No Violations 25
Section 4.5. No Default 25
Section 4.6. Availability of Financing; Parent Guarantee 26
Section 4.7. No Prior Activities 26
Section 4.8. Brokers 26
Section 4.9. No Other Representations or Warranties 26
ARTICLE 5 COVENANTS 26
Section 5.1. Conduct of Business of the Company 26
Section 5.2. Other Potential Acquirers 29
Section 5.3. Access to Information 31
Section 5.4. Shareholders Meeting 31
Section 5.5. Additional Agreements; Reasonable Best Efforts 32
Section 5.6. Consents 32
Section 5.7. Public Announcements 32
Section 5.8. Indemnification; Directors' and Officers'
Insurance 32
Section 5.9. Notification of Certain Matters 33
Section 5.10. Employee Matters 33
Section 5.11. SEC Filings 34
Section 5.12. Guarantee of Performance 34
Section 5.13. Notice of Certain Events 34
Section 5.14. Takeover Statutes 34
ARTICLE 6 CONDITIONS TO CONSUMMATION OF THE MERGER 35
Section 6.1. Conditions to Each Party's Obligations to
Effect the Merger 35
Section 6.2. Conditions to Obligations of Parent and
Acquisition 35
3
<PAGE> 4
Section 6.3. Conditions to Obligations of the Company 36
ARTICLE 7 TERMINATION; AMENDMENT; WAIVER 36
Section 7.1. Termination 36
Section 7.2. Effect of Termination 37
Section 7.3. Fees and Expenses 38
Section 7.4. Amendment 39
Section 7.5. Extension; Waiver 39
ARTICLE 8 MISCELLANEOUS 39
Section 8.1. Nonsurvival of Representations and Warranties 39
Section 8.2. Entire Agreement; Assignment 39
Section 8.3. Validity 39
Section 8.4. Notices 40
Section 8.5. Governing Law 40
Section 8.6. Construction; Interpretation 40
Section 8.7. Parties in Interest 41
Section 8.8. Severability 41
Section 8.9. Specific Performance 41
Section 8.10. Counterparts 41
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of the 15th day of March, 1999
(this "Agreement"), is made by and among Haskel International, Inc., a
California corporation (the "Company"), HI Holdings Inc., a Delaware corporation
("Parent") and HI Merger Subsidiary Inc., a California corporation and a wholly
owned subsidiary of Parent ("Acquisition").
R E C I T A L S
WHEREAS, the Board of Directors of the Company (the "Company Board") has,
in light of and subject to the terms and conditions set forth herein, (i)
determined that each of the Offer (as defined in the recitals) and the Merger
(as defined in Section 2.1) is fair to, and in the best interests of, its
shareholders and (ii) approved and adopted this Agreement and the transactions
contemplated hereby and resolved to recommend acceptance of the Offer and
approval and adoption of this Agreement by the shareholders of the Company; and
WHEREAS, in furtherance thereof, it is proposed that Acquisition shall
commence a tender offer (the "Offer") to acquire all of the outstanding shares
of common stock of the Company (the "Company Common Stock") at a price equal to
$12.90 per share (such amount, or any greater amount per share paid pursuant to
the Offer, being hereinafter referred to as the "Per Share Amount"), net to the
seller in cash, subject to reduction for any applicable federal back-up
withholding or stock transfer taxes payable by such seller, in accordance with
the terms and subject to the conditions provided herein;
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and the mutual promises
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company, Parent and
Acquisition hereby agree as follows:
ARTICLE 1
THE OFFER
Section 1.1. The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 7.1 and none of the events or conditions set forth in
Annex A shall have occurred and be existing, as promptly as practicable after,
but in no event later than five (5) Business Days after, the public announcement
of the execution of this Agreement by the parties hereto, Acquisition shall
commence (within the meaning of the Rule 14d-2 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) the Offer for all the outstanding
shares of Company Common Stock at the Per Share Amount. Acquisition shall use
all commercially reasonable efforts to consummate the Offer. Acquisition shall
accept for payment all outstanding shares of Company Common Stock which have
been validly tendered and not withdrawn
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pursuant to the Offer at the earliest time following the expiration of the Offer
that all conditions to the Offer shall have been satisfied or waived by
Acquisition. The obligation of Acquisition to accept for payment, purchase and
pay for shares of Company Common Stock tendered pursuant to the Offer shall be
subject only to the conditions set forth in Annex A and to the further condition
that a number of shares of Company Common Stock which, together with shares of
Company Common Stock then owned directly or indirectly by Acquisition, would
equal at least ninety percent (90%) of the shares of Company Common Stock then
outstanding shall have been validly tendered and not withdrawn prior to the
expiration date of the Offer (the "Minimum Condition"). Acquisition expressly
reserves the right to increase the price per share of Company Common Stock
payable in the Offer or to make any other changes in the terms and conditions of
the Offer (provided that, unless previously approved by the Company in writing,
no change may be made that (i) decreases the Per Share Amount payable in the
Offer, (ii) changes the form of consideration to be paid in the Offer, (iii)
reduces the maximum number of shares of Company Common Stock to be purchased in
the Offer, (iv) imposes conditions to the Offer in addition to those set forth
in Annex A or that broaden the scope of such conditions, (v) amends any other
term of the Offer in a manner adverse to the holders of the Company Common
Stock, (vi) extends the Offer except as provided in Section 1.1(b), or (vii)
amends the Minimum Condition). It is agreed that the conditions set forth in
Annex A are for the sole benefit of Acquisition and may be asserted by
Acquisition regardless of the circumstances giving rise to any such condition
(including any action or inaction by Acquisition) or may be waived by
Acquisition (other than the Minimum Condition) in whole or in part at any time
and from time to time, in its sole discretion, other than the Minimum Condition,
as to which prior written Company approval is required. The failure by
Acquisition at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time. Any determination
(which shall be made in good faith) by Acquisition with respect to any of the
foregoing conditions (including, without limitation, the satisfaction of such
conditions) shall be final and binding on the parties. The Company agrees that
no shares of Company Common Stock held by the Company or any of its Subsidiaries
(as defined in Section 3.1(b)) will be tendered in the Offer. "Business Day"
means any day other than Saturday, Sunday or a federal holiday.
(b) Subject to the terms and conditions hereof, the Offer shall
expire at midnight, New York City time, on the date that is twenty (20) Business
Days after the Offer is commenced; provided, however, that without the consent
of the Company or the Company Board, Acquisition may (i) extend the Offer, if at
the scheduled expiration date of the Offer any of the conditions to the Offer
shall not have been satisfied or waived, until such time as such conditions are
satisfied or waived, (ii) extend the Offer for any period required for any rule,
regulation, interpretation or position of the Securities and Exchange Commission
("SEC") or the staff thereof applicable to the Offer or (iii) extend the Offer
for any reason on one or more occasions for an aggregate period of not more than
ten (10) Business Days beyond the latest expiration date that would otherwise be
permitted under clause (i) or (ii) of this sentence if on such expiration date
there shall not have been tendered that number of shares of Company Common Stock
which, together with shares of Company Common Stock then owned directly or
indirectly by Acquisition, would equal at least ninety percent (90%) of the
shares of Company
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Common Stock. Acquisition agrees that if all of the conditions to the Offer set
forth in Annex A are not satisfied on any scheduled expiration date of the Offer
then, provided that all such conditions are reasonably capable of being
satisfied prior to May 28, 1999, Acquisition shall extend the Offer from time to
time until such conditions are satisfied or waived, provided that Acquisition
shall not be required to extend the Offer beyond June 11, 1999. Subject to the
terms and conditions of the Offer and this Agreement, Acquisition shall accept
for payment, and pay for, all shares of Company Common Stock validly tendered
and not withdrawn pursuant to the Offer that Acquisition becomes obligated to
accept for payment and pay for pursuant to the Offer as promptly as practicable
after the expiration of the Offer.
(c) As soon as practicable after commencement of the Offer,
Acquisition shall file with the SEC a Tender Offer Statement on Schedule 14D-l
with respect to the Offer which will reflect the existence of this Agreement
(together with any supplements or amendments thereto and any other related
documents, including, if required, a Schedule 13E-3, collectively the "Offer
Documents"). The Offer Documents will comply in all material respects with the
provisions of applicable federal securities laws. The information provided and
to be provided by the Company, Parent and Acquisition for use in the Offer
Documents shall not, on the date filed with the SEC and on the date first
published or sent or given to the Company's shareholders, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Parent, Acquisition and the Company each agrees to correct promptly
any information provided by it for use in the Offer Documents if and to the
extent that it shall have become false or misleading in any material respect,
and Acquisition further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of shares of Company Common Stock, in each case as and to the extent
required by applicable federal securities laws.
Section 1.2. Company Action.
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that the Company Board, at a meeting duly called and
held, has, subject to the terms and conditions set forth herein, (i) determined
that this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, are fair to, and in the best interests of, the
shareholders of the Company, (ii) approved this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, in all respects and
that such approval constitutes approval of the Offer, this Agreement and the
Merger for purposes of Section 1101 of the California General Corporation Law
(the "CGCL"), and similar provisions of any other similar state statutes that
might be deemed applicable to the transactions contemplated hereby, and (iii)
resolved to recommend that the shareholders of the Company accept the Offer,
tender their shares of Company Common Stock thereunder to Acquisition and
approve and adopt this Agreement and the Merger; provided, however, that such
recommendation may be withdrawn, modified or amended in accordance with the
provisions of Section 5.2 of this Agreement. The Company consents to the
inclusion of such recommendation and approval in the Offer Documents. The
Company further represents and warrants that Schroder & Co. Inc. (the "Financial
Advisor") has delivered to the Company Board its written opinion, dated as of
the date
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hereof, that the cash consideration to be received by the shareholders of the
Company pursuant to the Offer and the Merger is fair to such shareholders from a
financial point of view. The Company has been authorized by the Financial
Adviser to permit, subject to the prior review and consent by the Financial
Adviser (such consent not to be unreasonably withheld), the inclusion of the
fairness opinion (or a reference thereto) in the Schedule 14D-9 and, if
required, the Schedule 13E-3 (each, as defined in Section 1.2(b)).
(b) Contemporaneously with the commencement of the Offer as provided
in Section 1.1, the Company hereby agrees to file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 pertaining to the Offer
(together with any amendments or supplements thereto, the "Schedule 14D-9")
containing the recommendation described in Section 1.2(a) and to promptly mail
the Schedule 14D-9 to the shareholders of the Company. The Schedule 14D-9 will
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the Company's shareholders, shall not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation is made by the Company with respect to information
supplied by Parent or Acquisition in writing for inclusion in the Schedule
14D-9. The Company, Parent and Acquisition each agrees to correct promptly any
information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false or misleading in any material respect, and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and disseminated to the holders of
shares of Company Common Stock, in each case as and to the extent required by
applicable federal securities laws. Acquisition and its counsel shall be given a
reasonable opportunity to review and comment on the Schedule 14D-9 before it is
filed with the SEC, and the Company shall consider such comments in good faith.
Notwithstanding anything to the contrary in this Agreement, if the Company Board
withdraws, modifies or amends its recommendation in accordance with the
provisions of Section 5.2 of this Agreement, such withdrawal, modification or
amendment shall not constitute a breach of this Agreement.
(c) In connection with the Offer, the Company will cause its
transfer agent to promptly furnish to Parent and Acquisition mailing labels,
security position listings and any available listing or computer files
containing the names and addresses of the record holders of shares of Company
Common Stock as of a recent date and shall furnish Acquisition with such
additional information and assistance (including, without limitation, updated
lists of shareholders, mailing labels and lists of securities positions) as
Acquisition or its agents may reasonably request in communicating the Offer to
the record and beneficial holders of shares of Company Common Stock. Subject to
the requirements of applicable law, and except for such steps as are necessary
to disseminate the Offer Documents and any other documents necessary to
consummate the Merger, Parent, Acquisition and their affiliates, associates,
agents and advisors shall hold in confidence the information contained in any
such labels, listings and files and use such information only in connection with
the Offer and the Merger, and, if this Agreement shall be terminated, will
deliver to the Company all copies of such information then in their possession.
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Section 1.3. Board of Directors and Committees; Section 14(f).
(a) Promptly upon the purchase by Acquisition of shares of Company
Common Stock pursuant to the Offer and from time to time thereafter, Acquisition
shall be entitled to designate up to such number of directors, rounded up to the
next whole number, on the Company Board as will give Acquisition representation
on the Company Board equal to the product of the number of directors on the
Board (giving effect to any increase in the number of directors pursuant to this
Section 1.3) and the percentage that such number of shares of Company Common
Stock so purchased bears to the total number of outstanding shares of Company
Common Stock on a fully diluted basis, and the Company shall use its reasonable
best efforts to, upon request by Acquisition, promptly, at the Company's
election, either increase the size of the Board or secure the resignation of
such number of directors as is necessary to enable Acquisition's designees to be
elected to the Company Board and to cause Acquisition's designees to be so
elected. At such times, the Company will use its reasonable best efforts to
cause persons designated by Acquisition to constitute the same percentage as is
on the Company Board of (i) each committee of the Company Board (other than any
committee of the Company Board established to take action under this Agreement),
(ii) each board of directors of each subsidiary of the Company and (iii) each
committee of each such board.
(b) The Company's obligation to appoint designees to the Company
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all action required
pursuant to such Section and Rule in order to fulfill its obligations under this
Section 1.3 and shall include in the Schedule 14D-9 such information with
respect to the Company and its officers and directors as is required under such
Section and Rule in order to fulfill its obligations under this Section 1.3.
Acquisition will furnish to the Company in writing and be solely responsible for
any information with respect to itself and its nominees, officers, directors and
affiliates required by such Section and Rule.
(c) Following the election or appointment of Acquisition's designees
pursuant to this Section 1.3 and prior to the Effective Time, if there shall be
any directors of the Company who were directors as of the date hereof, any
amendment of this Agreement, any termination of this Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Acquisition or Parent or waiver of any of the
Company's rights hereunder will require the concurrence of a majority of such
directors.
ARTICLE 2
THE MERGER
Section 2.1. The Merger. At the Effective Time (as defined below) and upon
the terms and subject to the conditions of this Agreement and in accordance with
the CGCL, Acquisition shall be merged with and into the Company (the "Merger").
Following the Merger, the Company shall continue as the surviving corporation of
the Merger (the "Surviving Corporation"), and the separate corporate existence
of Acquisition shall cease.
Section 2.2. Effective Time. Subject to the terms and conditions set forth
in this
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Agreement, on the Closing Date (as defined in Section 2.3) or as soon thereafter
as is practicable, the Surviving Corporation shall file a copy of this Agreement
and an officers' certificate of each constituent corporation with the Secretary
of State of the State of California for filing pursuant to the CGCL, at which
time the Merger shall become effective (the time the Merger becomes effective
being referred to herein as the "Effective Time").
Section 2.3. Closing of the Merger. The closing of the Merger (the
"Closing") shall take place at a time and on a date to be specified by the
parties, which shall be no later than the second Business Day after satisfaction
(or waiver) of the latest to occur of the conditions precedent set forth in
Article 6 (the "Closing Date"), at the offices of Gibson, Dunn & Crutcher LLP,
333 South Grand Avenue, Los Angeles, California 90071, unless another time, date
or place is agreed to in writing by the parties.
Section 2.4. Effects of the Merger. The Merger shall have the effects set
forth in the CGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, all the properties, rights, privileges, powers
and franchises of the Company and Acquisition shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and
Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
Section 2.5. Articles of Incorporation and Bylaws. The Articles of
Incorporation of Acquisition in effect at the Effective Time shall be the
Articles of Incorporation of the Surviving Corporation until amended in
accordance with applicable law. The Bylaws of Acquisition in effect at the
Effective Time shall be the Bylaws of the Surviving Corporation until amended in
accordance with applicable law.
Section 2.6. Directors. The directors of Acquisition at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation until such director's successor is duly elected or appointed and
qualified.
Section 2.7. Officers. The officers of Acquisition at the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation until such officer's successor is duly elected or appointed and
qualified.
Section 2.8. Conversion of Shares.
(a) At the Effective Time, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (individually a "Share"
and, collectively, the "Shares") (other than (i) Shares held by the Company or
any subsidiary of the Company, (ii) Shares held by Parent, Acquisition or any
other subsidiary of Parent and (iii) Company Dissenting Shares (as defined in
Section 2.9(a), collectively the "Excluded Shares")) shall, by virtue of the
Merger and without any action on the part of Parent, Acquisition, the Company or
the holder thereof, be canceled and extinguished and be converted into and shall
become the right to receive a cash payment per Share, without interest, equal to
the Per Share Amount (the
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"Merger Consideration") upon the surrender of the certificate representing such
Share. From and after the Effective Time, the holders of certificates evidencing
ownership of Shares outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares except as otherwise
provided for herein or by applicable law.
(b) At the Effective Time, each issued and outstanding share of the
common stock, par value $0.01 per share, of Acquisition shall be converted into
one share of common stock, par value $0.01 per share, of the Surviving
Corporation.
(c) At the Effective Time, each Share held by the Company as
treasury stock or held by Parent, Acquisition or any subsidiary of Parent,
Acquisition or the Company immediately prior to the Effective Time shall, by
virtue of the Merger and without any action on the part of Parent, Acquisition,
the Company or the holder thereof, be canceled, retired and cease to exist, and
no consideration shall be delivered with respect thereto.
Section 2.9. Shares of Dissenting Holders.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any holder of Shares with respect to which dissenters' rights, if
any, are granted by reason of the Merger under the CGCL and who does not vote in
favor of the Merger and who otherwise complies with the CGCL ("Company
Dissenting Shares") shall not be entitled to receive any Merger Consideration
pursuant to Section 2.8(a), unless such holder fails to perfect, effectively
withdraws or loses his or her right to dissent from the Merger under the CGCL.
If any such holder so fails to perfect, effectively withdraws or loses his or
her dissenters' rights under the CGCL, each Company Dissenting Share of such
holder shall thereupon be deemed to have been converted, as of the Effective
Time, into the right to receive the Per Share Amount pursuant to Section 2.8(a).
(b) Any payments relating to Company Dissenting Shares shall be made
solely by the Surviving Corporation, and no funds or other property have been or
will be provided by Acquisition, Parent or any of Parent's other direct or
indirect subsidiaries for such payment, nor shall the Company make any payment
with respect to, or settle or offer to settle, any such demands.
(c) The Company shall give Acquisition prompt notice of any demands
received by the Company for the payment of fair value for shares, and
Acquisition shall have the right to direct all negotiations and proceedings with
respect to such demands.
Section 2.10. Exchange of Certificates.
(a) American Stock Transfer or another bank or trust company
designated by Parent and reasonably acceptable to the Company shall act as the
exchange agent (in such capacity, the "Exchange Agent") for the benefit of the
holders of Shares for the exchange of a certificate or certificates which
immediately prior to the Effective Time represented Shares (the "Certificates")
that were converted into the right to receive the Per Share Amount pursuant to
Section 2.8(a), all in accordance with this Article 2. At the Effective Time,
Parent shall deposit,
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or shall cause to be deposited, with the Exchange Agent, for the benefit of the
holders of Shares, cash in U.S. dollars in an amount equal to the Merger
Consideration multiplied by the aggregate outstanding Shares (other than the
Excluded Shares) to be paid pursuant to Section 2.8(a).
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of Certificates: (i) a letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent and the Company may reasonably specify); and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for a cash payment of the proper Merger Consideration pursuant to Section
2.8(a). Upon surrender of a Certificate for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by Parent and Acquisition,
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor by check an amount
equal to (A) the Per Share Amount, multiplied by (B) the number of Shares
represented by such Certificate, which such holder has the right to receive
pursuant to the provisions of this Article 2, and the Certificate so surrendered
shall forthwith be canceled. No interest shall be paid or accrued on any Merger
Consideration upon the surrender of any Certificates. In the event of a transfer
of ownership of Shares which is not registered in the transfer records of the
Company, payment of the proper Merger Consideration may be paid to a transferee
if the Certificate representing such Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer or other taxes required as a
result of such payment to a Person other than the registered holder of such
shares have been paid. Until surrendered and exchanged as contemplated by this
Section 2.10, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender an amount equal
to (A) the Per Share Amount, multiplied by (B) the number of Shares represented
by such Certificate, as contemplated by this Section 2.10.
(c) In the event that any Certificate shall have been lost, stolen
or destroyed, the Exchange Agent shall pay, upon the making of an affidavit of
that fact by the holder thereof in form and substance reasonably acceptable to
Parent, the proper Merger Consideration as may be required pursuant to this
Section 2.10; provided, however, that Parent may, in its discretion, require the
delivery of a suitable bond and/or indemnity.
(d) The Merger Consideration paid upon the surrender for exchange of
Shares in accordance with the terms hereof shall be deemed to have been paid in
full satisfaction of all rights pertaining to such Shares; subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by the Company on such Shares in accordance with the terms of
this Agreement, or prior to the date hereof, and which remain unpaid at the
Effective Time, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article 2.
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(e) Any portion of the Merger Consideration which remains
undistributed to the shareholders of the Company for six months after the
Effective Time shall be delivered to Parent, upon demand, and any shareholders
of the Company who have not theretofore complied with this Article 2 shall
thereafter look only to Parent for payment of their claim for any Merger
Consideration.
(f) Notwithstanding Section 2.11(e), neither Parent nor the Company
shall be liable to any holder of Shares for any Merger Consideration delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
(g) Any amounts remaining unclaimed by holders of Shares one year
after the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any governmental
entity) shall, to the extent permitted by applicable law, become the property of
Parent free and clear of any claim or interest of any Person previously entitled
thereto.
(h) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 2.10(a) to pay for shares for which
dissenters' rights have been perfected shall be returned to the Parent upon
demand.
Section 2.11. Company Stock Options; Warrants.
(a) At the Effective Time, each outstanding, vested and exercisable
option to purchase shares of Company Common Stock (including those options that
will become exercisable upon a change in control of the Company) (a "Company
Stock Option" or collectively "Company Stock Options") issued pursuant to the
1989 Incentive Stock Option Plan, the 1995 Incentive Stock Option Plan, the 1995
Formula Stock Option Plan, the 1998 Long-Term Performance Incentive Plan or the
Non-Qualified Stock Option Plan of the Company (collectively the "Company
Plans") or issued outside the Company Plans via special grants by the Company's
Stock Option Committee to certain employees shall be converted into and shall
become the right to receive a cash payment per Company Stock Option, without
interest, determined by multiplying (i) the excess, if any, of the Per Share
Amount over the applicable per share exercise price of such Company Stock Option
by (ii) the number of shares of Company Common Stock underlying the Company
Stock Options immediately prior to the Effective Time; provided that Parent and
Acquisition may, with the consent of the option holder, treat such options
differently. At the Effective Time, all outstanding options to purchase shares
of Company Common Stock (including those options that are not exercisable at the
time of the Merger) shall be canceled and be of no further force or effect
except for the right to receive cash to the extent provided in this Section
2.11. Prior to the Effective Time, the Company shall take all actions
(including, if appropriate, amending the terms of any Company Plan) that are
necessary to give effect to the transactions contemplated by this Section 2.11.
(b) At the Effective Time, each outstanding and exercisable warrant
that entitles the holder to purchase shares of Company Common Stock, (a
"Warrant" or collectively "Warrants") sold pursuant to Company's initial public
offering of its common stock shall be converted into and shall become the right
to receive a cash payment per Warrant, without
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interest, determined by multiplying (i) the excess, if any, of the Per Share
Amount over the applicable per share exercise price of such Warrant by (ii) the
number of shares of Company Common Stock underlying the Warrants immediately
prior to the Effective Time. At the Effective Time, all outstanding Warrants
shall be canceled and be of no further force or effect except for the right to
receive cash to the extent provided in this Section 2.11. Prior to the Effective
Time, the Company shall take all actions that are necessary to give effect to
the transactions contemplated by this Section 2.11.
(c) As soon as practicable after the Effective Time (but no later
than thirty (30) days following the Effective Time), Parent shall establish a
procedure to effect the surrender of Company Stock Options and Warrants, as the
case may be, in exchange for the cash payment to which the holder of a Company
Stock Option or Warrant shall be entitled under Section 2.11(a) or (b), and,
upon surrender of such Company Stock Option or Warrant, Parent shall pay to the
holder thereof in cash the amount, if any, to which such holder shall be
entitled thereunder.
Section 2.12. Additional Actions. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Acquisition or the Company or otherwise to carry
out this Agreement, the officers and directors of the Company and Acquisition
shall be authorized to execute and deliver, in the name and on behalf of
Acquisition or the Company, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of Acquisition or the
Company, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
ARTICLE 3
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition as
follows:
Section 3.1. Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its businesses as presently conducted.
(b) Except as set forth on Section 3.1(b) of the Disclosure Schedule
or as disclosed in filings with the SEC made prior to the date hereof and since
the filing of the Company's most recent Annual Report on Form 10-K (the "Recent
SEC Reports"), the Company has no equity interests in any corporations,
partnerships, limited liability companies, trusts or
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similar business entities. Each of the subsidiaries listed on Exhibit 21 to the
Company's Annual Report on Form 10-K for the fiscal year ended May 30, 1998
(each a "Subsidiary" and collectively "Subsidiaries") is a corporation or a
limited partnership, as the case may be, duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of its incorporation
or organization and has all requisite corporate or other power and authority to
own, lease and operate its respective properties and to carry on its respective
businesses as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority, both
individually and in the aggregate, would not have a Company Material Adverse
Effect (as defined below). When used in connection with the Company or its
Subsidiaries, the term "Company Material Adverse Effect" means a material
adverse effect on the financial condition, properties, business or results of
operations of the Company and its Subsidiaries taken as a whole, it being
understood that none of the following shall be deemed by itself or by
themselves, either alone or in combination, to constitute a Company Material
Adverse Effect (i) a change in the market price or trading volume of the Company
Common Stock, (ii) a failure by the Company to meet the revenue or earnings
predictions of equity analysts for any period ending (or for which earnings are
released) on or after the date of this Agreement and prior to the Effective
Date, (iii) conditions affecting the U.S. economy as whole, or (iv) conditions
affecting the worldwide industrial equipment market.
(c) Each of the Company and its Subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it, or the nature of the business
conducted by it, makes such qualification or licensing necessary, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not have, individually or in the aggregate, a Company Material
Adverse Effect.
(d) The Company has heretofore delivered to Acquisition or Parent
accurate and complete copies of the Articles of Incorporation and Bylaws, each
as amended to date and currently in effect, of the Company.
Section 3.2. Capitalization of the Company and its Subsidiaries.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of Class A common stock, of which, as of March 10, 1999,
4,772,205 shares were issued and outstanding, 40,000 shares of Class B common
stock, all of which, as of March 10, 1999, were issued and outstanding and
2,000,000 shares of preferred stock, no shares of which are issued or
outstanding (collectively the "Company Common Stock"). All of the shares of
Company Common Stock have been validly issued, and are fully paid, nonassessable
and free of preemptive rights. As of March 10, 1999, 834,640 shares of Company
Common Stock were reserved for issuance and issuable upon, or otherwise
deliverable in connection with, the exercise of outstanding Company Stock
Options. Since March 10, 1999, no shares of the Company's capital stock have
been issued other than pursuant to Company Stock Options already in existence on
such date, and, since March 10, 1999, no stock options have been granted. As of
March 10, 1999, 75,000 shares of Company Common Stock were reserved for issuance
and issuable upon, or otherwise deliverable in connection with, the exercise of
outstanding Warrants.
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Since March 10, 1999, no shares of the Company's capital stock have been issued
other than pursuant to Warrants already in existence on such date, and, since
March 10, 1999, no warrants have been issued. Section 3.2(a) of the Disclosure
Schedule sets forth the outstanding Company Stock Options and Warrants. Except
as set forth above, there are outstanding (i) no shares of capital stock or
other voting securities of the Company, (ii) no securities of the Company or its
Subsidiaries convertible into or exchangeable for shares of capital stock or
voting securities of the Company, (iii) no options or other rights to acquire
from the Company or its Subsidiaries, and no obligations of the Company or its
Subsidiaries to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of the
Company, and (iv) no equity equivalents, interests in the ownership or earnings
of the Company or its Subsidiaries or other similar rights (collectively
"Company Securities"). There are no outstanding obligations of the Company or
its Subsidiaries to repurchase, redeem or otherwise acquire any Company
Securities.
(b) Except as set forth on Schedule 3.2(b) of the disclosure
schedule delivered by the Company to Parent concurrently herewith (the
"Disclosure Schedule"), or as publicly disclosed by the Company, all of the
issued and outstanding shares of capital stock of each Subsidiary have been duly
and validly authorized and issued, are fully paid and non-assessable, and are
owned by the Company, directly or indirectly, free and clear of any Lien (as
hereinafter defined) or any other limitation or restriction (including any
restriction on the right to vote or sell the same, except as may be provided as
a matter of law). There are no securities of the Company or its Subsidiaries
issued and outstanding that are convertible into or exchangeable for, no options
or other rights to acquire from the Company or its Subsidiaries, and no other
contract, understanding, arrangement or obligation (whether or not contingent)
providing for the issuance or sale, directly or indirectly, of any capital stock
or other ownership interests in, or any other securities of, any Subsidiary.
There are no outstanding contractual obligations of the Company or its
Subsidiaries to repurchase, redeem or otherwise acquire any outstanding shares
of capital stock or other ownership interests in any Subsidiary. For purposes of
this Agreement, "Lien" means, with respect to any asset (including, without
limitation, any security) any mortgage, lien, pledge, charge, claim, security
interest or encumbrance of any kind in respect of such asset.
Section 3.3. Authority Relative to this Agreement; Consents and Approvals.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Company Board, and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority of the then
outstanding shares of Company Common Stock). This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid, legal and
binding agreement of the Company, enforceable against the Company in accordance
with its terms.
(b) The Company Board has duly and validly approved, and taken all
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corporate actions required to be taken by the Company Board for the consummation
of, the transactions, including the Offer and the Merger, contemplated hereby
and resolved to recommend that the shareholders of the Company approve and adopt
this Agreement; provided, however, that such approval and recommendation may be
withdrawn, modified or amended in accordance with the provisions of Section 5.2
of this Agreement.
Section 3.4. SEC Reports; Financial Statements.
(a) The Company has filed all required forms, reports and documents
with the SEC since May 30, 1996 (the "SEC Reports"), each of which has complied
in all material respects with all applicable requirements of the Securities Act
of 1933, as amended (the "Securities Act"), and the Exchange Act, each as in
effect on the dates such forms, reports and documents were filed. The Company
has delivered to Acquisition or Parent, in the form filed with the SEC
(including any amendments thereto), (i) its Annual Reports on Form 10-K for each
of the fiscal years ended May 30, 1997 and 1998, (ii) all definitive proxy
statements relating to the Company's meetings of shareholders (whether annual or
special) held since May 30, 1997, (iii) its Quarterly Reports on Form 10-Q for
the quarters ended August 28, 1998 and November 30, 1998 and (iv) all other
reports or registration statements filed by the Company with the SEC since May
30, 1997. None of such forms, reports, registration statements or documents,
including, without limitation, any financial statements or schedules included or
incorporated by reference therein, contained, when filed, any untrue statement
of a material fact or omitted to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company and its
Subsidiaries included in the Annual Reports on Form 10-K referred to in the
second sentence of this Section 3.4(a) and the unaudited consolidated interim
financial statements of the Company and its Subsidiaries included in the
Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1998 (A)
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, (B) have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods covered thereby, except as may be indicated in the notes thereto,
and (C) fairly present the consolidated financial position of the Company and
its Subsidiaries as of the dates thereof and their consolidated results of
operations, financial condition, cash flow and changes in financial position for
the periods then ended (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments).
(b) The Company has heretofore made available to Acquisition or
Parent a complete and correct copy of any amendments or modifications, which
have not yet been filed with the SEC, to agreements, documents or other
instruments which previously had been filed by the Company with the SEC pursuant
to the Exchange Act.
Section 3.5. Information Supplied. None of the information supplied or to
be supplied by the Company for inclusion or incorporation by reference in the
Offer Documents, the Schedule 13E-3 or the Proxy Statement or provided by the
Company in the Schedule 14D-9 will,
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at the respective times that the Offer Documents, the Proxy Statement, the
Schedule 13E-3 and the Schedule 14D-9 or any amendments or supplements thereto
are filed with the SEC and are first published or sent or given to holders of
Shares, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
Section 3.6. Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, state
securities or blue sky laws, the Hart Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the filing and recordation of this
Agreement and officers' certificates of each constituent corporation with the
Secretary of State of the State of California as required by the CGCL, no filing
with or notice to, and no permit, authorization, consent or approval of, or
order of, any court or tribunal or administrative, governmental or regulatory
body, agency or authority (a "Governmental Entity") is necessary for the
execution and delivery by the Company of this Agreement or the consummation by
the Company of the transactions contemplated hereby, except where the failure to
obtain such permits, authorizations, consents or approvals or to make such
filings or give such notice would not have a Company Material Adverse Effect.
Neither the execution, delivery and performance of this Agreement by the Company
nor the consummation by the Company of the transactions contemplated hereby will
(a) conflict with or result in any breach of any provision of the Articles of
Incorporation or Bylaws (or similar governing documents) of the Company or any
of its Subsidiaries, (b) except as set forth on Schedule 3.6 of the Disclosure
Schedule, result in a violation or breach of, or cause acceleration, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which any of
them or any of their respective properties or assets may be bound, or (c)
violate any order, writ, injunction, decree, law, statute, rule or regulation of
any court, or any governmental agency or body having jurisdiction over the
Company or any of its Subsidiaries or any of their respective properties or
assets, except in the case of (b) or (c) for violations, breaches or defaults
which would not have, individually or in the aggregate, a Company Material
Adverse Effect.
Section 3.7. No Default. Except as set forth on Schedule 3.7 of the
Disclosure Schedule or as disclosed in the Recent SEC Reports, none of the
Company or its Subsidiaries is in default, in conflict with or violation (and no
event has occurred which, with notice or the lapse of time or both, would
constitute a default or violation) of any term, condition or provision of (a)
its Articles of Incorporation or Bylaws (or similar governing documents), (b)
any note, bond, mortgage, indenture, lease, license, permit, franchise,
contract, agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound or affected or (c) any order, writ,
injunction, decree, law, judgment, statute, rule or regulation applicable to the
Company, its Subsidiaries or any of their respective properties or assets,
except in the case of (b) or (c) for violations, breaches or defaults that would
not have, individually or in the aggregate, a Company Material Adverse Effect.
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Section 3.8. No Undisclosed Liabilities; Absence of Changes. Except as set
forth on Schedule 3.8 of the Disclosure Schedule or as disclosed in the Recent
SEC Reports, as of November 30, 1998, none of the Company or its Subsidiaries
has any liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, that would be required by GAAP to be reflected on a
consolidated balance sheet of the Company and its Subsidiaries (including the
notes thereto) or which would have, individually or in the aggregate, a Company
Material Adverse Effect. Except as set forth on Schedule 3.8 of the Disclosure
Schedule or as disclosed in the Recent SEC Reports, since November 30, 1998,
none of the Company or its Subsidiaries has incurred any liabilities of any
nature, whether or not accrued, contingent or otherwise, which would have, and
there have been no events, changes or effects with respect to the Company or its
Subsidiaries having, individually or in the aggregate, a Company Material
Adverse Effect. Except as set forth on Schedule 3.8 and Schedule 5.1 of the
Disclosure Schedule or as disclosed in the Recent SEC Reports, since November
30, 1998, the Company and its Subsidiaries have conducted their business in the
ordinary course consistent with past practice; there has not been any event,
occurrence or development or state of circumstances or facts as described in
Sections 5.1(a) through 5.1(m) and, as of the date hereof and at the Closing
Date, there has not been any event or occurrence of any condition that has had
or would reasonably be likely to result in a Company Material Adverse Effect.
The consummation of the transactions contemplated hereby will not give rise to
any liability of any nature, whether or not accrued, contingent or otherwise,
except as set forth herein.
Section 3.9. Litigation. Except as disclosed in the Recent SEC Reports,
there is no suit, litigation, arbitration, claim, action, proceeding or
investigation pending or, to the knowledge of the Company, threatened against
the Company or any of its Subsidiaries or any of their respective properties,
assets or business before any Governmental Entity which could reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect or would prevent or substantially delay the consummation of the
transactions contemplated by this Agreement. Except as disclosed in the Recent
SEC Reports, none of the Company or its Subsidiaries is subject to any
outstanding order, writ, injunction or decree that would have, individually or
in the aggregate, a Company Material Adverse Effect or would prevent or delay
the consummation of the transactions contemplated hereby. There are no actions,
suits or proceedings related to discrimination on the basis of age, sex,
religion, race or physical or mental disability, and no labor disturbance by the
employees of the Company or any Subsidiary exists or, to the knowledge of the
Company or any Subsidiary, is imminent which, in each case could reasonably be
expected to have a Company Material Adverse Effect.
Section 3.10. Compliance with Applicable Law. Except as disclosed in the
Recent SEC Reports, the Company and its Subsidiaries hold all permits, licenses,
consents, authorizations, certificates, variances, exemptions, orders and
approvals of and from all, and has made all declarations and filings with
Governmental Entities necessary for the lawful conduct of their respective
businesses and to own, lease, license and use its respective properties and
assets (the "Company Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which would not have,
individually or in the aggregate, a Company Material Adverse Effect. The Company
and its Subsidiaries are in compliance with the terms of the Company Permits,
except where the failure so to comply would not have a
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Company Material Adverse Effect. Except as disclosed in the Recent SEC Reports,
the activities or businesses of the Company and its Subsidiaries are not being
conducted in violation of or in conflict with any law, rule, order, judgment,
decree, ordinance or regulation of the United States, any foreign country, any
state, county or locality, or of any Governmental Entity of the United States,
any country, any state, county or locality or of any foreign jurisdiction,
except that no representation or warranty is made in this Section 3.10 with
respect to Environmental Laws (as defined in Section 3.12) and except for
violations or possible violations which do not, and, insofar as reasonably can
be foreseen, in the future will not have, individually or in the aggregate, a
Company Material Adverse Effect. Except as disclosed in the Recent SEC Reports,
no investigation or review by any Governmental Entity of the United States, any
country, any state, county or locality or of any foreign jurisdiction with
respect to the Company or its Subsidiaries is pending or, after reasonably
inquiry, to the knowledge of the Company and any Subsidiary, threatened, nor,
after reasonable inquiry, to the knowledge of the Company and any Subsidiary,
has any Governmental Entity of the United States, any country, any state, county
or locality or of any foreign jurisdiction indicated an intention to conduct the
same, other than, in each case, those which the Company reasonably believes will
not have a Company Material Adverse Effect.
Section 3.11. Employee Plans. Except as set forth on Schedule 3.11 of the
Disclosure Schedule or as disclosed in the Recent SEC Reports, there are no
employee benefit plans (including without limitation, retirement, savings,
thrift, deferred compensation, severance, stock ownership, stock purchase, stock
option, performance, bonus, incentive, vacation or holiday pay, travel, fringe
benefit, hospitalization or other medical, disability, life or other insurance,
and any other employee benefit policy, trust, understanding or arrangement of
any kind) maintained or contributed to by the Company or its Subsidiaries or
with respect to which the Company or its Subsidiaries has any actual or
potential liability (the "Employee Plans") except for liability that would not
have, individually or in the aggregate, a Company Material Adverse Effect. The
Employee Plans are in compliance with applicable law, including without
limitation, the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and the Code, except for instances of non-compliance that would not
have, individually or in the aggregate, a Company Material Adverse Effect. None
of the Employee Plans are subject to Title IV of ERISA nor provide for medical
or life insurance benefits to retired or former employees of the Company or any
Subsidiary (other than as required under Code Section 4980B, or similar state
law). None of the Employee Plans have any material unfunded liabilities. Except
as set forth on Schedule 3.11 of the Disclosure Schedule or as disclosed in the
Recent SEC Reports, none of the Employee Plans obligates the Company to pay any
separation, severance, termination, bonus or similar benefit solely as a result
of any transaction contemplated by this Agreement or solely as a result of a
change in control or ownership. There are no pending or, to the knowledge of the
Company, threatened actions, suits, investigations or claims with respect to any
Employee Plan, and the Company has no knowledge of any facts that could result
in any actions, suits, investigations or claims that could reasonably be
expected to result in a Company Material Effect.
Section 3.12. Environmental Laws and Regulations.
(a) Except as set forth on Schedule 3.12 of the Disclosure Schedule
or as
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disclosed in the Recent SEC Reports, (i) each of the Company and its
Subsidiaries is in compliance with all applicable federal, state and local laws
and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) (collectively "Environmental Laws"),
except for non-compliance that would not have a Company Material Adverse Effect,
which compliance includes, but is not limited to, the possession by the Company
and its Subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof, (ii) since November 30, 1998, none of the
Company or its Subsidiaries has received written notice of, or, to the best
knowledge of the Company, is the subject of, any material action, cause of
action, claim, investigation, demand or notice by any person or entity alleging
liability under or non-compliance with any Environmental Law (an "Environmental
Claim"), and (iii) to the best knowledge of the Company, there are no
circumstances that are reasonably likely to prevent or interfere with such
material compliance, or give rise to material Environmental Claims, in the
future.
(b) Except as disclosed in the Recent SEC Reports, there are no
Environmental Claims which would have a Company Material Adverse Effect that are
pending or, to the best knowledge of the Company, threatened against the Company
or its Subsidiaries or, to the best knowledge of the Company, against any person
or entity whose liability for any Environmental Claim the Company or any of its
Subsidiaries has or may have retained or assumed either contractually or by
operation of law.
Section 3.13. Intellectual Property; Software.
(a) Each of the Company and its Subsidiaries owns, or possesses
valid and enforceable licenses to use, all existing United States and foreign
patents, trademarks, trade names, service marks, trade dress, Internet domain
names, together with all the goodwill associated therewith, copyrights, computer
software, data, databases and documentation thereof, trade secrets, know-how and
other confidential information, including any applications and registrations of
any of the foregoing necessary for the operation of the business of the Company
and its Subsidiaries as now conducted and as currently proposed to be conducted
(the "Company Intellectual Property Rights"), except where the failure to own or
possess valid rights to use such Company Intellectual Property Rights would not
have a Company Material Adverse Effect. The Company patents are set forth on
Section 3.13(a) of the Company Disclosure Schedule.
(b) Except for any of the following which would not reasonably be
expected to have a Company Material Adverse Effect,
(i) except as set forth on Schedule 3.13(b) of the Disclosure
Schedule, the validity, enforceability and use of the Company Intellectual
Property Rights and the title thereto of the Company or any Subsidiary as the
case may be is not being questioned in any litigation or other proceeding to
which the Company or any Subsidiary is a party, nor has any claim of
infringement or misappropriation (including, without limitation, any demand or
request that the Company or any Subsidiary license any intellectual property
rights from a third party)
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been alleged against the Company or any Subsidiary by any third party in
connection with such third party's intellectual property rights,
(ii) except as set forth on Schedule 3.13(b) of the Disclosure
Schedule, to the knowledge of the Company and its Subsidiaries, no third party
is infringing or misappropriating the Company Intellectual Property Rights, and
(iii) except as set forth on Schedule 3.13(b) of the
Disclosure Schedule, the conduct of the business of the Company and its
Subsidiaries as now conducted does not, to the knowledge of the Company,
infringe, misappropriate or otherwise conflict with any valid patents,
trademarks, trade names, service marks, copyrights or other intellectual
property rights of others. The consummation of the transactions completed hereby
will not result in the loss or impairment of any Company Intellectual Property
Rights.
Section 3.14. Certain Business Practices. To the knowledge of the Company
after due inquiry, none of the Company, any of its Subsidiaries or any
directors, officers, agents or employees of the Company or any of its
Subsidiaries has (i) used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to political activity, (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii)
made any other unlawful payment.
Section 3.15. Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Class A common stock and a majority of the
holders of the outstanding shares of Class B common stock is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve the merger contemplated by this Agreement.
Section 3.16. Labor Matters. Neither the Company nor any of its
Subsidiaries is a party to or otherwise bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is the Company or any of its Subsidiaries the subject of
any proceeding asserting that the Company or any of its Subsidiaries has
committed an unfair labor practice or seeking to compel it to bargain with any
labor union or labor organization, nor is there pending or, to the knowledge of
the Company, threatened any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving the Company or any of its Subsidiaries.
Section 3.17. Insurance. The Company maintains insurance policies (the
"Insurance Policies") against all risks of a character and in such amounts as
are usually insured against by similarly situated companies in the same or
similar businesses. Each Insurance Policy is in full force and effect and is
valid, outstanding and enforceable, and all premiums due thereon have been paid
in full. None of the Insurance Policies will terminate or lapse (or be affected
in any other materially adverse manner) by reason of the transactions
contemplated by this Agreement. The Company and its Subsidiaries have complied
in all material respects with provisions of each Insurance Policy under which it
is the insured party. No insurer under any Insurance Policy has canceled or
generally disclaimed liability under any such policy or, to the Company's
knowledge, indicated any intent to do so or not to renew any such policy. All
material claims under the
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Insurance Policies have been filed in a timely fashion.
Section 3.18. Suppliers and Customers. The documents and information
supplied by the Company to Parent and Acquisition in connection with this
Agreement with respect to the relationships and volumes of business done with
significant suppliers and customers and with respect to inventory aging and
reserves with respect thereto was accurate in all material respects. The Company
is not aware of any circumstances that would indicate that any significant
supplier or customer intends to materially alter its relationship with the
Company as a result of the Company's entering into this Agreement.
Section 3.19. Tax Matters.
(a) The Company and its Subsidiaries have accurately prepared and duly
filed with the appropriate federal, state, local and foreign taxing authorities
all tax returns, information returns and reports required to be filed with
respect to the Company and its Subsidiaries and have paid in full or made
adequate provision for the payment of all Taxes (as defined below). Neither the
Company nor any of its Subsidiaries is delinquent in the payment of any Taxes.
As used herein, the term "Taxes" means all federal, state, local and foreign
taxes, including, without limitation, income, profits, franchise, employment,
transfer, withholding, property, excise, sales and use taxes (including interest
and penalties thereon and additions thereto).
(b) Except as set forth on Section 3.19(b) of the Disclosure Schedule, no
claim has ever been made by an authority in a jurisdiction where the Company or
any Subsidiary does not file tax returns that the Company so not filing is or
may be subject to taxation by that jurisdiction.
(c) There are no security interests on any of the assets of the Company or
any Subsidiary that arose in connection with any failure (or alleged failure) to
pay any Tax.
(d) There is no dispute or claim concerning any Tax liability of the
Company or any Subsidiary either (i) claimed or raised by any authority in
writing or (ii) as to which any of the employees responsible for Tax matters of
the Company or any Subsidiary has knowledge based upon personal contact with any
agent of such authority. Schedule 3.19(d) sets forth those tax returns that
currently are the subject of audit.
(e) None of the Company or any Subsidiary has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(f) None of the Company nor any Subsidiary has filed a consent under Code
ss.341(f) concerning collapsible corporations. Except as set forth on Section
3.19(f) of the Disclosure Schedule, none of the Company nor any Subsidiary has
made any payments, is obligated to make payments, or is a party to any agreement
that under certain circumstances could obligate it to make any payments that
will not be deductible under Code ss.280G or Code ss.162(m). None of the Company
nor any Subsidiary has been a United States real property holding corporation
within the meaning of Code ss.897(c)(2) during the applicable period specified
in Code
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ss.897(c)(1)(A)(ii).
(g) None of the Company nor any Subsidiary has any liability for the Taxes
of any Person other than the Company or any Subsidiary (i) under Treas. Reg.
ss.1.1502-6 (or any similar provision of state, local or foreign law), or (ii)
by contract.
(h) None of the Company nor any Subsidiary owns an interest in an entity
either treated as a partnership or whose separate existence is ignored for
federal income tax purposes.
Section 3.20. Brokers. No broker, finder or investment banker (other than
the Financial Advisor pursuant to an arrangement (that may not be amended or
modified without the prior written consent of Parent) that has been disclosed to
Parent and Acquisition prior to the date hereof) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by and on behalf of
the Company or any Subsidiary.
Section 3.21. Related Party Transactions. Since May 30, 1998, neither the
Company nor any officer or director of the Company has engaged in any
transactions required to be disclosed by the Company in its SEC Reports pursuant
to Item 404 of Regulation S-K promulgated under the Exchange Act, except as have
been publicly disclosed by the Company or disclosed herein.
Section 3.22. Restrictions on Business Activities. There is no judgment,
injunction, order or decree binding upon the Company or any of its Subsidiaries,
or, to the Company's knowledge, threatened, which has, or could reasonably be
expected to have, the effect of prohibiting or materially impairing any business
practice of the Company or any of its Subsidiaries, any acquisition of property
by the Company or any of its Subsidiaries or the conduct of business by the
Company or any of its Subsidiaries as currently conducted.
Section 3.23. Year 2000 Compliance. The Company and each of its
Subsidiaries are conducting a thorough inventory and assessment of the software,
hardware, databases and embedded control systems (microprocessor controlled,
robotic or other device) (collectively "Systems") used by the Company and its
Subsidiaries in connection with their business or in connection with the use,
operation or enjoyment of, any material tangible or intangible asset or real
property of the Company or its Subsidiaries, in order to determine which parts
of the Systems are not Year 2000 Compliant (as defined below) and to estimate
the cost of rendering such Systems Year 2000 Compliant prior to December 31,
1999 or such earlier date on which the Computer Systems may shut down or may
produce incorrect calculations or otherwise malfunction without becoming totally
inoperable. Based on the above inventory and assessment, the estimated total
cost of rendering the Systems Year 2000 Compliant is $200,000, which expenditure
has been included in the budget adopted by the Company. Year 2000 Compliant
means that the Systems will operate to accurately process date data (including
but not limited to calculating, comparing and sequencing) from, into and between
year 1999 and 2000, including leap-year calculations. To the knowledge of the
Company, after due inquiry, neither the Company nor any of its Subsidiaries will
incur material expenses arising from or relating to the failure of any of its
Systems as a result of the advent of the year 2000, the advent of the
twenty-
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first century or the transition from the twentieth century through the year
2000. Neither the Company nor any of its Subsidiaries has made any other
representations or warranties regarding the ability of any product or service
sold, licensed, rendered, or otherwise provided by the Company or by any of its
Subsidiaries in the conduct of their respective businesses to operate without
malfunction, to operate without ceasing to function, to generate correct data or
to produce correct results when processing, providing or receiving (i)
date-related data from, into and between the twentieth and twenty-first
centuries and (ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
Section 3.24. Real Estate.
(a) Attached as Schedule 3.24(a) is the address and legal description of
each parcel of real property owned by the Company or any Subsidiary (the "Owned
Real Property"). The Company or its applicable Subsidiary has good and
marketable title in and to all of the Owned Real Property subject to no liens,
encroachments, encumbrances or other defects in title (collectively, "Liens"),
except as described on such Schedule.
(b) Attached as Schedule 3.24(b) is a list of all leases, subleases and
other occupancy agreements, including all amendments, extensions and other
modifications (the "Leases") for real property (the "Leased Real Property"; the
"Owned Real Property" and the "Leased Real Property" collectively the "Real
Property") to which the Company or any Subsidiary is a party. The Company or its
applicable Subsidiary has a good and valid leasehold interest in and to all of
the Leased Real Property, subject to no Liens except as described in such
Schedule. Each Lease is in full force and effect and is enforceable in
accordance with its terms. Except as disclosed on Schedule 3.24(b), there exists
no default or condition which, with the giving of notice, the passage of time or
both, could become a default under any Lease. The Company has previously
delivered to Parent true, complete, and correct copies of all the Leases.
(c) The Real Property constitutes all of the real property owned, leased,
occupied or otherwise used in connection with the business of the Company and
its Subsidiaries. Except as disclosed on Schedule 3.24(c), other than the
Company and the Subsidiaries, there are no parties in possession or parties
having any current or future right to occupy any of the Real Property. The Real
Property is in good condition and repair and is sufficient and appropriate for
the conduct of the business of the Company and the Subsidiaries. The Real
Property and all plants, buildings and improvements located thereon conform to
all applicable building, zoning and other laws, ordinances, rules and
regulations. All permits, licenses and other approvals necessary to the current
occupancy and use of the Real Property have been obtained, are in full force and
effect and have not been violated, except for violations that, individually or
in the aggregate, would not have a Company Material Adverse Effect. There exists
no violation of any covenant, condition, restriction, easement, agreement or
order affecting any portion of the Real Property (except for violations that,
individually or in the aggregate, would not have a Company Material Adverse
Effect). All improvements located on the Real Property have direct access to a
public road adjoining such Real Property. No such improvements or accessways
encroach on land not included in the Real Property and no such improvement is
dependent for its access, operation or utility on any land, building or other
improvement not included in the Real Property. There is no
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pending or, to the knowledge of the Company and its Subsidiaries, any threatened
condemnations proceeding affecting any portion of the Real Property. Except as
disclosed on Schedule 3.24(c), there are no outstanding options or rights of
first refusal with respect to the purchase or use of any of the Real Property,
any portion thereof or interest therein. Except as disclosed on Schedule
3.24(c), neither the Company nor any Subsidiary is obligated to purchase or
lease any real property.
Section 3.25. Conduct of Business. Since November 30, 1998, the Company
has conducted its operations in the ordinary course of business.
Section 3.26. Expenses. Section 3.26 of the Company Disclosure Schedule
sets forth the Company's estimated expenses incurred in connection with this
Agreement and the transaction contemplated hereby. Except as set forth in
Section 3.26 of the Disclosure Schedule, the Company has not incurred any
expenses or liabilities in connection with the transactions contemplated by this
Agreement or outside the ordinary course of business.
Section 3.27. Dividends. On December 16, 1998, the Company declared a
dividend of $0.07 per share, payable on January 15, 1999 to shareholders of
record as of January 4, 1999. The Company has not declared any dividends since
December 16, 1998.
Section 3.28. No Other Representations or Warranties. No representations
or warranties have been made by or on behalf of the Company or any of its
Subsidiaries in connection with the Merger and the transactions contemplated by
this Agreement other than those expressly set forth in this Article 3. Without
limiting the generality of the foregoing, no representations or warranties are
being made with respect to financial projections or the future financial
performance or prospects of the Company, its Subsidiaries or their respective
businesses.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
Parent and Acquisition hereby represent and warrant to the Company as
follows:
Section 4.1. Organization.
(a) Each of Parent and Acquisition is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its businesses as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not have a Parent Material Adverse Effect (as defined below). The term
"Parent Material Adverse Effect" means a material adverse effect on the
financial condition, properties, business or results of operations of the Parent
and its subsidiaries taken as a whole. It being understood that conditions
affecting the U.S. economy as whole shall not be deemed to constitute a Parent
Material Adverse Effect.
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(b) Parent has heretofore delivered to the Company accurate and
complete copies of the Articles of Incorporation and Bylaws, as currently in
effect, of Parent and Acquisition. Each of Parent and its subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have a Parent Material Adverse Effect.
Section 4.2. Authority Relative to this Agreement. Each of Parent and
Acquisition has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
boards of directors of Parent and Acquisition and by Parent as the sole
shareholder of Acquisition, and no other corporate proceedings on the part of
Parent or Acquisition are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Acquisition and constitutes a
valid, legal and binding agreement of each of Parent and Acquisition,
enforceable against each of Parent and Acquisition in accordance with its terms,
except (i) to the extent that enforceability may be limited by applicable
bankruptcy, insolvency, reorganization or other laws affecting the enforcement
of creditors' rights generally and (ii) that the availability of equitable
remedies, including specific performance, is subject to the discretion of the
court before which any proceeding thereof may be brought.
Section 4.3. Information Supplied. None of the information supplied or to
be supplied by Parent or Acquisition for inclusion or incorporation by reference
in the Offer Documents, the Schedule 14D-9, the Schedule 13E-3 or the Proxy
Statement (as defined in Section 5.4(a)) will, at the respective times that the
Offer Documents, the Schedule 14D-9, the Schedule 13E-3, the Proxy Statement or
any amendments or supplements thereto are filed with the SEC and are first
published or sent or given to holders of shares of Company Common Stock, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
Section 4.4. Consents and Approvals; No Violations. Assuming the truth and
accuracy of the Company's representations and warranties contained in Section
3.6, except for filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Securities Act, the
Exchange Act, state securities or blue sky laws, the HSR Act and the filing and
recordation of this Agreement and officers' certificates of each constituent
corporation with the Secretary of State of the State of California as required
by the CGCL, no filing with or notice to, and no permit, authorization, consent
or approval of, any Governmental Entity is necessary for the execution and
delivery by Parent or Acquisition of this Agreement or the consummation by
Parent or Acquisition of the transactions contemplated hereby, except where the
failure to obtain such permits, authorizations, consents or approvals or to make
such filings or give such notice would not have a Parent Material Adverse Effect
or have a material adverse affect on the ability of Parent or Acquisition to
consummate the Offer or the
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Merger. Neither the execution, delivery and performance of this Agreement by
Parent or Acquisition nor the consummation by Parent or Acquisition of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the respective certificate or articles of incorporation or
Bylaws (or similar governing documents) of Parent or Acquisition, (b) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which Parent or Acquisition is a party or by
which any of them or any of their respective properties or assets may be bound
or (c) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to Parent or Acquisition or any of Parent's subsidiaries
or any of their respective properties or assets, except in the case of (b) or
(c) for violations, breaches or defaults which would not have a Parent Material
Adverse Effect or have a material adverse effect on the ability of Parent or
Acquisition to consummate the Offer or the Merger.
Section 4.5. No Default. None of Parent or any of its subsidiaries is in
default or violation (and no event has occurred which, with notice or the lapse
of time or both, would constitute a default or violation) of any term, condition
or provision of (a) its certificate or articles of incorporation or Bylaws (or
similar governing documents), (b) any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which Parent
or any of its subsidiaries is now a party or by which any of them or any of
their respective properties or assets may be bound or (c) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to Parent, its
subsidiaries or any of their respective properties or assets, except in the case
of (b) or (c) for violations, breaches or defaults that would not have a Parent
Material Adverse Effect or have a material adverse effect on the ability of
Parent or Acquisition to consummate the Offer or the Merger.
Section 4.6. Availability of Financing; Parent Guarantee. Parent has
caused the attached guarantee to be executed by Tinicum Capital Partners, L.P.
and Edmundson International, Inc.
Section 4.7. No Prior Activities. Except for obligations incurred in
connection with its incorporation or organization, the making of the Offer or
the negotiation and consummation of this Agreement and the transactions
contemplated hereby, Acquisition has neither incurred any obligation or
liability or engaged in any business or activity of any type or kind whatsoever
or entered into any agreement or arrangement with any person or entity.
Section 4.8. Brokers. Except for Merchants Group International Ltd., Inc.,
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by and on behalf of Parent or
Acquisition.
Section 4.9. No Other Representations or Warranties. No representations or
warranties are made by or on behalf of Parent or Acquisition in connection with
the transactions contemplated by this Agreement other than those expressly set
forth in this Article 4. Without
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limiting the generality of the foregoing, no representations or warranties are
being made with respect to financial projections or the future financial
performance or prospects of Parent, Acquisition or their businesses.
ARTICLE 5
COVENANTS
Section 5.1. Conduct of Business of the Company. Except as contemplated by
this Agreement, during the period from the date hereof to the Effective Time,
the Company Board will not permit the Company or its any of its Subsidiaries to
conduct their operations otherwise than in the ordinary course of business
consistent with past practice, and the Company shall, and shall cause its
Subsidiaries to, use its or their reasonable best efforts to preserve
substantially intact its business organization, to keep available the services
of its present officers and employees and to preserve the present commercial
relationships of the Company and its Subsidiaries with persons with whom the
Company or its Subsidiaries do business. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement, prior
to the Effective Time, the Company will not, without the prior written consent
of Parent or Acquisition, and will not permit any of its Subsidiaries to:
(a) amend its Articles of Incorporation or Bylaws (or other similar
governing instrument);
(b) amend or modify (except as required hereby) the terms of the
Company Plans or authorize for issuance, issue, sell, deliver or agree or commit
to issue (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any other securities or equity equivalents (including, without
limitation, any stock options or stock appreciation rights), except for the
issuance or sale of shares of Company Common Stock pursuant to the exercise of
Company Stock Options;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock,
or redeem or otherwise acquire any Company Securities or any securities of its
Subsidiaries;
(d) except in connection with the exercise of purchase options under
existing leases, (i) incur or assume any long-term or short-term debt or other
liability (whether directly, contingently or otherwise) or issue any debt
securities, except for borrowings under existing lines of credit in the ordinary
course of business and in amounts not material to the Company and its
Subsidiaries taken as a whole and except for indebtedness not exceeding $100,000
in the aggregate, (ii) except as described in Schedule 5.1(d) of the Disclosure
Schedule, assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary course of business consistent with past practice
and in amounts not material to the Company and its Subsidiaries taken as a whole
and except for obligations of its Subsidiaries, (iii) except for investments not
exceeding $100,000 in the aggregate, make any loans, advances or capital
contributions to, or
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investments in, any other person (other than to Subsidiaries of the Company or
customary loans or advances to employees in the ordinary course of business
consistent with past practice and in amounts not material to the maker of such
loan or advance), (iv) except as described in Schedule 5.1(d) of the Disclosure
Schedule, pledge or otherwise encumber shares of capital stock of the Company or
its Subsidiaries, or (v) except as described in Schedule 5.1(d) of the
Disclosure Schedule, mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any material Lien thereupon except for
Liens securing indebtedness not exceeding $100,000 in the aggregate;
(e) except as may be required by law or as contemplated by this
Agreement and except in connection with the hiring of officers (to replace at
compensation levels not to exceed those of the officers being replaced any
officer who retires or is terminated for any reason) or employees in the
ordinary course of business, enter into, adopt or amend or terminate any bonus,
profit sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent, stock
purchase agreement, pension, retirement, deferred compensation, employment,
severance or other employee benefit agreement, trust, plan, fund or other
arrangement for the benefit or welfare of any director, officer or employee in
any manner, provided that the Company may not, under any circumstance, issue any
stock option or stock option equivalents thereof to any person, or (except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits or compensation expense to the Company, except as required under
existing agreements and except for the payment of bonuses and severance payments
in the ordinary course of business generally consistent with past practice)
increase in any manner the compensation or fringe benefits of any director,
officer or employee or agent or pay any benefit not required by any plan and
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock appreciation rights or performance units) or create, issue
or increase any severance agreement or stay bonus with any officer, director or
employee;
(f) except as described in Schedule 5.1(f) of the Disclosure
Schedule or with the consent of Parent or Acquisition, which consent will not be
unreasonably withheld, acquire, sell, lease or dispose of any assets outside the
ordinary course of business or any assets which have a value in the aggregate in
excess of $250,000;
(g) except as may be required as a result of a change in law or in
GAAP, change any of the accounting principles or practices used by it;
(h) except in connection with the exercise of purchase options under
existing leases which must be exercised for the Company to retain possession of
the subject property, (i) acquire (by merger, consolidation or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein (except for transactions having
an aggregate value not exceeding $100,000), (ii) authorize or make any new
capital expenditure or expenditures which, individually, is in excess of
$100,000 or, in the aggregate, are in excess of $500,000 or (iii) enter into or
amend any contract, agreement, commitment or arrangement providing for the
taking of any action that would be prohibited hereunder;
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(i) make any tax election or settle or compromise any income tax
liability material to the Company and its Subsidiaries taken as a whole;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business of
liabilities reflected or reserved against, in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and its
Subsidiaries in the Recent SEC Reports or incurred in the ordinary course of
business consistent with past practice;
(k) alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any Subsidiary
or the Company;
(l) settle or compromise any pending or threatened suit, action or
claim relating to the transactions contemplated hereby;
(m) incur any expenses in connection with the transactions
contemplated hereby in excess of the amount set forth on Schedule 3.26 without
the prior written consent of Parent or Acquisition;
(n) make any intercompany transfers of cash in excess of $500,000;
or
(o) take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through 5.1(n) or any action which would
make any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect as of the date when made.
Section 5.2. Other Potential Acquirers.
(a) The Company, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties (other than the parties to
this Agreement) conducted heretofore with respect to any offer or proposal for a
merger or other business combination involving the Company or any of its
Subsidiaries or the acquisition of all or any material portion of the assets of,
or any equity interest in, the Company or its Subsidiaries or any business
combination with the Company or its Subsidiaries (each an "Acquisition
Proposal"). The Company may, directly or indirectly, furnish information and
access, in each case only in response to unsolicited requests therefor, to any
corporation, partnership, limited liability company or other entity or group
pursuant to confidentiality agreements on terms no less favorable to the Company
than the confidentiality agreement that has been entered into by and between the
Company and Parent, and may participate in discussions and negotiate with such
entity or group concerning any merger, sale of assets, sale of shares of capital
stock or similar transaction involving the Company or any Subsidiary or division
thereof, if such entity or group has submitted a bona fide written proposal to
the Company Board relating to any such transaction that is a Superior Proposal.
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For purposes of this Agreement, a "Superior Proposal" means any proposal
made by a third party to acquire, directly or indirectly, all of the equity
securities of the Company entitled to vote generally in the election of
directors or all or substantially all of the assets of the Company for cash and
on terms which the Company Board reasonably believes (after consultation with a
financial advisor of nationally recognized reputation) to be more favorable from
a financial point of view to its shareholders than the Offer and the Merger,
taking into account at the time of determination all factors relating to such
proposed transaction deemed relevant by the Company Board, including, without
limitation, the financing thereof, the proposed timing thereof and all other
conditions thereto and any changes to the financial terms of this Agreement
proposed by Parent and Acquisition.
(b) The Company shall immediately notify Parent and Acquisition after
receipt of any Acquisition Proposal, or any modification of or amendment to any
Acquisition Proposal, or any request for nonpublic information relating to the
Company or any of its Subsidiaries in connection with an Acquisition Proposal or
for access to the properties, books or records of the Company or any Subsidiary
by any person or entity that informs the Board of Directors of the Company or
such Subsidiary that it is considering making, or has made, an Acquisition
Proposal. Such notice to Parent and Acquisition shall be made orally and in
writing, and, unless the Company Board concluded that such disclosure is
inconsistent with its fiduciary duties under applicable law, shall indicate the
identity of the person making the Acquisition Proposal or intending to make the
Acquisition Proposal or requesting nonpublic information or access to the books
and records of the Company, the terms of any such Acquisition Proposal or
modification or amendment to an Acquisition Proposal, and whether the Company is
providing or intends to provide the person making the Acquisition Proposal with
access to information concerning the Company as provided in Section 5.2(a). The
Company shall also immediately notify Parent and Acquisition, orally and in
writing, if it enters into negotiations concerning any Acquisition Proposal.
(c) Except as set forth in this Section 5.2, neither the Company Board nor
any committee thereof shall (i) withdraw or modify, or indicate publicly its
intention to withdraw or modify, in a manner adverse to Parent, the approval or
recommendation by such Company Board or such committee of the Offer or the
Merger, (ii) approve or recommend, or indicate publicly its intention to approve
or recommend, any Acquisition Proposal or (iii) cause the Company to enter into
any letter of intent, agreement in principle, acquisition agreement or other
similar agreement (each, a "Company Acquisition Agreement") related to any
Acquisition Proposal. Notwithstanding the foregoing, in the event that prior to
the Effective Time the Company Board reasonably determines in good faith, after
discussions with its counsel, that it is consistent with its fiduciary duties
under applicable law, the Company Board may (subject to this and the following
sentences) approve or recommend a Superior Proposal and, in connection
therewith, withdraw or modify its approval or recommendation of the Offer or the
Merger and/or terminate this Agreement (and concurrently with or after such
termination, if it so chooses, cause the Company to enter into any Company
Acquisition Agreement with respect to any Superior Proposal), but only at a time
that is after the third business day following Parent's receipt of written
notice advising Parent that the Company Board has received a Superior Proposal
and, in the case of any previously received Superior Proposal that has been
materially modified or
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amended, such modification or amendment and specifying the material terms and
conditions of such Superior Proposal, modification or amendment.
(d) Nothing herein shall prevent the Company Board from taking, and
disclosing to the Company's shareholders, a position contemplated by Rules 14d-9
and 14e-2 promulgated under the Exchange Act with regard to any tender offer,
and nothing herein shall prevent the Board from making such disclosure to the
Company's shareholders as, in the good faith judgment of the Company Board, is
done pursuant to the exercise of its fiduciary duties under the CGCL, provided
that the Company complies with the provisions of Section 7.3; provided further,
that neither the Company nor the Company Board nor any committee thereof shall,
except as permitted by Section 5.2(c), withdraw or modify, or indicate publicly
its intention to withdraw or modify, its position with respect to the Offer or
the Merger or approve or recommend, or indicate publicly its intention to
approve or recommend, an Acquisition Proposal.
(e) The Company shall advise its officers and directors and any investment
banker or attorney retained by the Company in connection with the transactions
contemplated by this Agreement of the restriction set forth in this Section 5.2.
Section 5.3. Access to Information.
(a) Between the date hereof and the Effective Time, the Company will
provide to Parent and Acquisition and their authorized representatives
reasonable access to all employees, plants, offices, warehouses and other
facilities and to all books and records of the Company and its Subsidiaries,
will permit Parent and Acquisition to make such inspections as Parent and
Acquisition may reasonably require and will cause the Company's officers and
those of its subsidiaries to furnish Parent and Acquisition with such financial
and operating data and other information with respect to the business and
properties of the Company and its Subsidiaries as Parent or Acquisition may from
time to time reasonably request.
(b) Each of Parent and Acquisition will hold and will cause its
consultants and advisors to hold in confidence all documents and information
concerning the Company and its Subsidiaries furnished to Parent or Acquisition
in connection with the transactions contemplated by this Agreement.
Section 5.4. Shareholders Meeting.
(a) If a vote of the Company's shareholders is required by law, the
Company will, as promptly as practicable following (i) the acceptance for
payment of shares of Company Common Stock by Acquisition pursuant to the Offer
or (ii) the termination of the offer by its terms, take, in accordance with
applicable law and its Articles of Incorporation and By-laws, all action
necessary to convene a meeting of holders of shares of Company Common Stock (the
"Shareholders Meeting") to consider and vote upon the approval of this
Agreement. The Company shall, as promptly as practicable, prepare and file with
the SEC a proxy statement for the solicitation of a vote of holders of shares of
Company Common Stock approving the Merger (the "Proxy Statement"), which shall
include the recommendation of the Company Board that shareholders of the Company
vote in favor of the approval and adoption of this Agreement and
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the written opinion of the Financial Advisor that the cash consideration to be
received by the shareholders of the Company pursuant to the Merger is fair to
such shareholders from a financial point of view. The Company shall use all
reasonable efforts to have the Proxy Statement cleared by the SEC as promptly as
practicable after such filing and promptly thereafter mail the Proxy Statement
to the shareholders of the Company. The Company shall also use its best efforts
to obtain all necessary state securities law or "blue sky" permits and approvals
required in connection with the Merger and to consummate the other transactions
contemplated by this Agreement and will pay all expenses incident thereto.
Notwithstanding the foregoing, if Parent, Acquisition and/or any other
subsidiary of Parent shall acquire at least 90% of the outstanding shares of
Company Common Stock, the parties shall take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after the
expiration of the Offer without a Shareholders Meeting in accordance with
Section 1110 of the CGCL.
(b) Parent and Acquisition agree to cause all shares of Company
Common Stock purchased pursuant to the Offer and all other shares of Company
Common Stock owned by Parent, Acquisition or any Subsidiary of Parent to be
voted in favor of the Merger.
Section 5.5. Additional Agreements; Reasonable Best Efforts. Subject to
the terms and conditions herein provided, each party agrees to use all
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (a)
cooperation in the preparation and filing of the Offer Documents, the Schedule
14D-9, the Schedule 13E-3, the Proxy Statement, any filings that may be required
under the HSR Act and any amendments thereto, (b) the taking of all action
reasonably necessary, proper or advisable to secure any necessary consents under
existing debt obligations of the Company and its Subsidiaries or to amend the
notes, indentures or agreements relating thereto to the extent required by such
notes, indentures or agreements or redeem or repurchase such debt obligations,
(c) contesting any legal proceeding relating to the Offer or the Merger and (d)
the execution of any additional instruments necessary to consummate the
transactions contemplated hereby. Subject to the terms and conditions of this
Agreement, Parent and Acquisition agree to use all reasonable efforts to cause
the Effective Time to occur as soon as practicable after the shareholder vote,
if any, with respect to the Merger. In case at any time after the Effective Time
any further action is necessary to carry out the purposes of this Agreement, the
proper officers and directors of each party hereto shall take all such necessary
action.
Section 5.6. Consents. Parent, Acquisition and the Company each will use
all commercially reasonable efforts to obtain consents of all third parties and
Governmental Entities necessary, proper or advisable for the consummation of the
transactions contemplated by this Agreement.
Section 5.7. Public Announcements. Parent, Acquisition and the Company, as
the case may be, will consult with one another and seek one anothers approval
before issuing any press release, or otherwise making any public statements,
with respect to the transactions contemplated by this Agreement, including,
without limitation, the Offer or the Merger and shall
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<PAGE> 35
not issue any such press release or make any such public statement prior to such
consultation and approval, except as may be required by applicable law or by
obligations pursuant to any listing agreement with the Nasdaq Stock Market, as
determined by Parent, Acquisition or the Company, as the case may be.
Section 5.8. Indemnification; Directors' and Officers' Insurance.
(a) Parent and Acquisition agree that all rights to indemnification
or exculpation now existing in favor of the directors, officers, employees and
agents of the Company and its Subsidiaries, as provided in their respective
charters or bylaws (or other similar governing instruments) or otherwise in
effect as of the date hereof with respect to matters occurring prior to the
Effective Time, shall survive the Merger and shall continue in full force and
effect. To the maximum extent permitted by the CGCL, such indemnification shall
be mandatory rather than permissive, and the Surviving Corporation shall advance
expenses in connection with such indemnification (subject to the Surviving
Corporation's receipt of an undertaking by the indemnified party to return such
advanced expenses to the Surviving Corporation if it is determined by a final,
non-appealable order of a court of competent jurisdiction that such indemnified
party is not entitled to retain such advanced expenses).
(b) Parent shall cause the Surviving Corporation to maintain in
effect for not less than five (5) years from the Effective Time the policies of
the directors' and officers' liability and fiduciary insurance most recently
maintained by the Company (provided, that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous to the beneficiaries thereof so long
as such substitution does not result in gaps or lapses in coverage) with respect
to matters occurring prior to the Effective Time; provided, however, that in
satisfying its obligation under this Section, the Surviving Corporation shall
not be obligated to pay premiums in excess of $125,000 with respect to such
insurance.
(c) In the event the Surviving Corporation or its successor (i) is
consolidated with or merges into another person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to any other
person in a single transaction or a series of related transactions, then in each
such case Parent shall make or cause to be made proper provision so that the
successor or transferee of the Surviving Corporation shall comply in all
material respect with the terms of this Section 5.8.
Section 5.9. Notification of Certain Matters. The Company shall give
prompt notice to Parent and Acquisition, and Parent and Acquisition shall give
prompt notice to the Company, of (a) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which would be likely to cause any
representation or warranty of the notifying party contained in this Agreement to
be untrue or inaccurate in any material respect as if made at the Effective Time
and (b) any material failure of the notifying party to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.9 shall not cure such breach or non-compliance or limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
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Section 5.10. Employee Matters.
(a) Employees of the Company and its Subsidiaries shall be treated
after the Merger no less favorably under Parent ERISA Plans, to the extent
applicable, than other similarly situated employees of Parent and its
subsidiaries.
(b) For a period of one year following the Merger, Parent shall and
shall cause its subsidiaries to maintain with respect to their employees who had
been employed by the Company or any of its Subsidiaries prior to the Effective
Time and who remain employed following the Effective Time (i) base salary or
regular hourly wage rates for each such employee at not less than the rate
applicable immediately prior to the Merger to such employee and (ii) employee
benefits (as defined for purposes of Section 3(3) of ERISA) that are
substantially comparable in the aggregate to such employee benefits provided by
the Company and its Subsidiaries immediately prior to the Merger.
(c) To the extent they participate under such plans, Parent and its
subsidiaries shall credit employees of the Company and its Subsidiaries for
purposes of determining eligibility to participate or vesting under Parent ERISA
Plans with their service prior to the Merger with the Company and its
Subsidiaries to the same extent such service was counted under similar benefit
plans of the Company prior to the Merger.
(d) Nothing contained herein shall be construed as requiring Parent
or the Surviving Corporation to continue any specific plans or to continue the
employment of any specific person.
Section 5.11. SEC Filings. Each of Parent and the Company shall promptly
provide the other party (or its counsel) with copies of all filings made by the
other party or any of its subsidiaries with the SEC or any other state or
federal Governmental Entity in connection with this Agreement and the
transactions contemplated hereby.
Section 5.12. Guarantee of Performance. Parent hereby guarantees the
performance by Acquisition of its obligations under this Agreement and the
indemnification obligations of the Surviving Corporation pursuant to Section
5.8(a).
Section 5.13. Notice of Certain Events. The Company shall promptly notify
Acquisition and Acquisition shall promptly notify the Company of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) with respect only to the Company, any actions, suits, claims,
investigations or proceedings commenced or, to the best of its knowledge,
threatened which, if
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pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 3.9 or 3.13 or which relate to the consummation of
the transactions contemplated by this Agreement.
Section 5.14. Takeover Statutes. If any "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
enacted under state or federal laws in the United States (each a "Takeover
Statute") is or may become applicable to the Offer or the Merger, the Company
will use reasonable best efforts to grant such approvals and take such actions
as are necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act so as to eliminate or minimize the effects of any Takeover Statute
on any of the transactions contemplated hereby.
ARTICLE 6
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 6.1. Conditions to Each Party's Obligations to Effect the Merger.
The respective obligations of each party to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) if required by applicable law, this Agreement shall have been
approved and adopted by the requisite vote of the shareholders of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Merger;
(c) any waiting period applicable to the Merger and the other
transactions described in the recitals to this Agreement under the HSR Act shall
have terminated or expired, and any other governmental or regulatory notices or
approvals required with respect to the transactions contemplated hereby shall
have been either filed or received; and
Section 6.2. Conditions to Obligations of Parent and Acquisition. The
obligations of Parent and Acquisition to effect the Merger are also subject to
the satisfaction or waiver by Parent prior to the Effective Time of the
following conditions:
(a) The representations and warranties of the Company set forth in
this Agreement shall be true and correct as of the date of this Agreement and
(except to the extent such representations and warranties speak as of an earlier
date) as of the Closing Date, as though made on and as of the Closing Date; it
being understood that representations and warranties shall be deemed to be true
and correct unless the respects in which the representations and warranties
(without giving effect to any "materiality" limitations or references to
"material adverse effect" set forth therein) are untrue or incorrect in the
aggregate is likely to have a Company Material Adverse Effect.
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<PAGE> 38
(b) The Company shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date.
(c) The number of Company Dissenting Shares shall be less than five
percent (5%) of the total number of shares of Company Common Stock.
Section 6.3. Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is also subject to the satisfaction or waiver
by the Company prior to the Effective Time of the following conditions:
(a) The representations and warranties of Parent and Acquisition set
forth in this Agreement shall be true and correct as of the date of this
Agreement and (except to the extent such representations and warranties speak as
of an earlier date) as of the Closing Date, as though made on and as of the
Closing Date; it being understood that representations and warranties shall be
deemed to be true and correct unless the respects in which the representations
and warranties (without giving effect to any "materiality" limitations or
references to "material adverse effect" set forth therein) are untrue or
incorrect in the aggregate is likely to have a Parent Material Adverse Effect.
(b) Each of Parent and Acquisition shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.
ARTICLE 7
TERMINATION; AMENDMENT; WAIVER
Section 7.1. Termination. This Agreement may be terminated and the Offer
and the Merger may be abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Parent, Acquisition and the
Company;
(b) by Parent or Acquisition or the Company if (i) any court of
competent jurisdiction in the United States or other United States governmental
authority shall have issued a final order, decree or ruling or taken any other
final action restraining, enjoining or otherwise prohibiting the Offer or the
Merger and such order, decree, ruling or other action is or shall have become
nonappealable or (ii) the Merger has not been consummated by October 31, 1999
(unless otherwise extended by the parties; provided that no party may terminate
this Agreement pursuant to this clause (ii) if such party's failure to fulfill
any of its obligations under this Agreement shall have been the reason that the
Effective Time shall not have occurred on or before said date;
(c) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of Parent or Acquisition set forth in
this Agreement, or if any representation or warranty of Parent or Acquisition
shall have become untrue, in either case which materially adversely affects the
consummation of the Offer, (ii) there shall have been a breach on the part of
Parent or Acquisition of any of their respective covenants or agreements
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hereunder having a Parent Material Adverse Effect or materially adversely
affecting the consummation of the Offer, and Parent or Acquisition, as the case
may be, has not cured such breach prior to the earlier of (A) ten (10) days
following notice by the Company thereof and (B) two (2) Business Days prior to
the date on which the Offer expires; provided, however, that the Company has not
breached any of its obligations hereunder in a manner that proximately
contributed to such breach by Parent or Acquisition or (iii) prior to the
purchase of Shares pursuant to the Offer, the Company has received a Superior
Proposal and the Company Board by a majority vote shall have determined in its
good faith judgment, on advice of counsel, that it must do so in the exercise of
its fiduciary duties under the CGCL; provided, however, that, without limiting
Parent's rights under Section 7.3(a), such termination under this clause (iii)
shall not be effective until payment of the amount required by Section 7.3(b);
or
(d) by Parent or Acquisition prior to the purchase of shares of
Company Common Stock pursuant to the Offer if (i) the Company Board withdraws or
modifies in a manner materially adverse to Parent or Acquisition its favorable
recommendation of the Offer or the approval or recommendation of the Merger or
shall have recommended a Third Party Acquisition (as defined below), (ii) a
Third Party Acquisition occurs, (iii) there shall have been a breach of any
representation or warranty on the part of Company set forth in this Agreement,
or any representation or warranty of the Company shall have become untrue, in
either case if the respects in which the representations and warranties made by
the Company are inaccurate would in the aggregate have a Company Material
Adverse Effect or materially adversely affect (or delay) the consummation of the
Offer or the Merger, (iv) there shall have been a breach on the part of the
Company of its covenants or agreements hereunder having, individually or in the
aggregate, a Company Material Adverse Effect or materially adversely affecting
(or materially delaying) the consummation of the Merger, and, with respect to
clauses (iii) and (iv) above, the Company has not cured such breach prior to the
earlier of (A) ten (10) days following notice by the Parent or Acquisition
thereof and (B) two (2) Business Days prior to the date on which the Offer
expires; provided that, with respect to clauses (iii) and (iv) above, neither
Parent or Acquisition has breached any of their respective obligations hereunder
in a manner that proximately caused such breach by the Company or (v) Parent or
Acquisition shall have discovered that any information supplied to Parent or
Acquisition by the Company (excluding, for such purposes, any projections or
forecasts or other forward looking information supplied by the Company), at the
time provided to Parent or Acquisition, contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and such misstatement or omission would have a Company Material
Adverse Effect.
Section 7.2. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void (except for the provisions of this Section 7.2 and Sections 5.3(b) and
7.3), and there shall be no liability or obligation on the part of any party or
its affiliates, directors, officers or shareholders, other than (a) the
provisions of this Section 7.2 and Sections 5.3(b) and 7.3 and (b) any liability
of any party for any breach of this Agreement prior to such termination.
Section 7.3. Fees and Expenses.
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(a) In the event that this Agreement shall be terminated pursuant to
Section 7.1(c)(iii) or Section 7.1(d) and, within twelve (12) months thereafter,
a Third Party Acquisition occurs, then Parent and Acquisition would suffer
direct and substantial damages, which damages cannot be determined with
reasonable certainty. To compensate Parent and Acquisition for such damages, the
Company shall pay to Parent the amount of $2.0 million as liquidated damages. It
is specifically agreed that the amount to be paid pursuant to this Section
7.3(a) represents liquidated damages and not a penalty.
"Third Party Acquisition" means the occurrence of any of the
following events (i) the acquisition of the Company by merger or otherwise by
any person (which includes a "person" as such term is defined in Section
13(d)(3) of the Exchange Act) or entity other than Parent, Acquisition or any
affiliate thereof (a "Third Party"), (ii) the acquisition by a Third Party of
50% or more of the total assets of the Company and its Subsidiaries, taken as a
whole, (iii) the acquisition by a Third Party of shares of Company Common Stock
resulting in such person holding at least 50% or more of the outstanding shares
of Company Common Stock or (iv) the acquisition by a Third Party of shares of
the Company's capital stock resulting in such person being able to elect a
majority of the Company's directors.
(b) Upon the termination of this Agreement prior to the purchase of
Shares by Acquisition pursuant to the Offer pursuant to Section 7.1(c)(iii) or
7.1(d), the Company shall reimburse Parent, Acquisition and their affiliates
(not later than ten (10) Business Days after submission of statements therefor)
for all documented out-of-pocket fees and expenses, not to exceed $500,000,
reasonably incurred by any of them or on their behalf in connection with the
Merger and the consummation of all transactions contemplated by this Agreement
(including, without limitation, filing fees, printing and mailing costs, fees
payable to investment bankers, counsel to any of the foregoing, and
accountants). If Parent or Acquisition shall have submitted a request for
reimbursement hereunder, such party will provide the Company in due course with
invoices or other reasonable evidence of such expenses upon request. The Company
shall in any event pay the amount requested within ten (10) Business Days of
such request, subject to the Company's right to demand a return of any portion
as to which invoices are not received in due course. Nothing in this Section
7.3(b) shall relieve any party from any liability for breach of this Agreement.
(c) Upon the termination of this Agreement pursuant to Sections
7.1(e)(i) or (ii), Parent shall reimburse the Company and its affiliates (not
later than ten (10) Business Days after submission of statements therefor) for
all documented out-of-pocket fees and expenses, not to exceed $500,000,
reasonably incurred by any of them or on their behalf in connection with the
Merger and the consummation of all transactions contemplated by this Agreement
(including, without limitation, filing fees, printing and mailing costs, fees
payable to investment bankers, counsel to any of the foregoing, and
accountants). If the Company shall have submitted a request for reimbursement
hereunder, such party will provide Parent in due course with invoices or other
reasonable evidence of such expenses upon request. Parent shall in any event pay
the amount requested within ten (10) Business Days of such request, subject to
Parent's right to demand a return of any portion as to which invoices are not
received in due course. Nothing in this Section 7.3(c) shall relieve any party
from any liability for breach of this Agreement.
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(d) Except as specifically provided in this Section 7.3, each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
Section 7.4. Amendment. This Agreement may be amended by action taken by
the Company, Parent and Acquisition at any time before or after approval of the
Merger by the shareholders of the Company (if required by applicable law) but,
after any such approval, no amendment shall be made which requires the approval
of such shareholders under applicable law without such approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of the
parties.
Section 7.5. Extension; Waiver. At any time prior to the Effective Time,
each party may (a) extend the time for the performance of any of the obligations
or other acts of the other party or parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance by the other parties with any of the agreements or conditions
contained herein. Any agreement on the part of any party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of such rights.
ARTICLE 8
MISCELLANEOUS
Section 8.1. Nonsurvival of Representations and Warranties. The
representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement, except for Sections 3.12,
3.13, 3.23 and 8.1 hereunder.
Section 8.2. Entire Agreement; Assignment. This Agreement (a) constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all other prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof and (b) shall
not be assigned by operation of law or otherwise; provided, however, that
Acquisition may assign any or all of its rights and obligations under this
Agreement to any wholly owned subsidiary of Parent, but no such assignment shall
relieve Acquisition of its obligations hereunder if such assignee does not
perform such obligations.
Section 8.3. Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
Section 8.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telegram, facsimile or telex, or by registered or certified mail (postage
prepaid, return receipt requested) to the other party as follows:
if to Parent or Acquisition: Tinicum Incorporated
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800 Third Avenue, 40th Floor
New York, NY 10022
Attention: Eric Ruttenberg
with a copy to: Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York, NY 10022
Attention: John Kuehn, Esq.
if to the Company to: Haskel International, Inc.
100 E. Graham Place
Burbank, CA 91502
Attention: R. Malcolm Greaves
Chief Executive Officer
with a copy to: Gibson, Dunn & Crutcher LLP
333 S. Grand Avenue
Los Angeles, CA 90071
Attention: Richard A. Strong, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
Section 8.5. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California without regard
to the principles of conflicts of law thereof.
Section 8.6. Construction; Interpretation. The headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement. Article, section, exhibit,
schedule, annex, party, preamble and recital references are to this Agreement
unless otherwise stated. No party, nor its respective counsel, shall be deemed
the drafter of this Agreement for purposes of construing the provisions hereof,
and all provisions of this Agreement shall be construed according to their fair
meaning and not strictly for or against any party.
Section 8.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party and its successors and permitted
assigns and, except as provided in Section 8.2, nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 8.8. Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions of this
Agreement shall remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party.
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Section 8.9. Specific Performance. The parties acknowledge that
irreparable damage would result if this Agreement were not specifically
enforced, and they therefore consent that the rights and obligations of the
parties under this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies, including arbitration,
which any party may have under this Agreement or otherwise.
Section 8.10. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
HASKEL INTERNATIONAL, INC., a California
corporation
By: /s/ EDWARD MALKOWICZ
------------------------------------
Name: Edward Malkowicz
Title: Chairman
HI HOLDINGS INC., a Delaware corporation
By: /s/ SETH HENDON
------------------------------------
Name: Seth Hendon
Title:
HI MERGER SUBSIDIARY INC., a California
corporation
By: /s/ SETH HENDON
-----------------------------------
Name: Seth Hendon
Title:
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<PAGE> 45
GUARANTEE
THE CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE
AGREEMENT AND PLAN OF MERGER TO WHICH THIS GUARANTEE IS ATTACHED.
Tinicum Capital Partners, L.P. and Edmundson International, Inc. (the
"Guarantors") hereby jointly and severally, unconditionally and irrevocably
guarantee to the Company that if Parent or Acquisition fail to pay any damages
due to the Company (the "Obligations") arising from a breach or violation by
Parent or Acquisition of their Obligations under the Agreement and Plan of
Merger by and among Haskel International, Inc., HI Holdings Inc. and HI Merger
Subsidiary, Inc. (the "Agreement"), then the Guarantors shall forthwith, upon
demand (which demand shall be for the sole purpose of providing notice to the
Guarantors and shall not require the Company to exhaust any remedy before
proceeding against the Guarantors), discharge the Obligations. The Guarantors
shall be liable to the Company for the reasonable costs and expenses (including,
without limitation, reasonable out-of-pocket legal fees and expenses) incurred
by the Company (following a demand upon the Guarantor) in any proceeding brought
by or on behalf of the Company to enforce this guarantee, except in the event a
court or adjudicatory panel of competent jurisdiction determines that a good
faith dispute existed with respect to the amount owed by the Guarantors
hereunder.
To the maximum extent permitted by applicable law, the Guarantors hereby
waive notice of acceptance of this guarantee, notice of any Obligations, notice
of protest, notice of dishonor or nonpayment of any Obligations, and any other
notice to the Guarantors (other than the demand referred to above). One or more
successive or concurrent actions may be brought hereon against the Guarantors,
either in the same action in which any obligor is sued or in separate actions.
To the maximum extent permitted by applicable law, the obligations of the
Guarantors under this guarantee shall not be affected by (i) any merger or
consolidation of the Company or any Subsidiary, (ii) any change in the direct or
indirect ownership of the Guarantors, (iii) any increase in the Obligations,
except for changes, amendments, waivers, or consents effected in accordance with
the Agreement.
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<PAGE> 46
This guarantee shall be governed by, and construed in accordance with, the laws
of the State of California. This guarantee is entered into for the sole and
exclusive benefit of the Company, and no other Person shall have any rights with
respect hereto. This guarantee shall be binding on the Guarantors' successors.
Executed as of March 15, 1999.
TINICUM CAPITAL PARTNERS, L.P., a
Delaware partnership
By: TINICUM LANTERN LLC, its General
Partner
By: /s/ SETH HENDON
-------------------------------
Name: Seth Hendon
Title:
EDMUNDSON INTERNATIONAL, INC, a
California Corporation
By: /s/ JOHN D. PARISH
-------------------------------
Name: John D. Parish
Title: Vice President
HASKEL INTERNATIONAL, INC., a California
corporation
By: /s/ EDWARD MALKOWICZ
-------------------------------
Name: Edward Malkowicz
Title: Chairman
46
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ANNEX A
THE CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE
AGREEMENT AND PLAN OF MERGER TO WHICH THIS ANNEX A IS ATTACHED.
Notwithstanding any other provisions of the Offer, Acquisition shall not
be required to accept for payment or pay for, and shall delay the acceptance for
payment of, or the payment for, any Shares and, if required pursuant to Section
1.1(b) of the Agreement, shall extend the Offer by one or more extensions until
May 28, 1999 and may terminate the Offer at any time after June 11, 1999 if (i)
immediately prior to the expiration of the Offer (as extended in accordance with
the Offer), the Minimum Condition shall not have been satisfied, (ii) any
applicable waiting period under the HSR Act shall not have expired or been
terminated or (iii) prior to the acceptance for payment of Shares, Acquisition
makes a determination (which shall be made in good faith) that any of the
following conditions exist:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, enacted, entered,
enforced or deemed applicable to the Offer, or any other action shall have been
taken, by any state or federal government or governmental authority or by any
U.S. court, other than the routine application to the Offer or the Merger of
waiting periods under the HSR Act, that (i) restrains, prohibits, or makes
illegal the acceptance for payment of, or the payment for, some or all of the
Shares or otherwise prohibits consummation of the Offer or the Merger, (ii)
restrains, prohibits, or imposes material limitations on the ability of
Acquisition or Parent to acquire or hold or to exercise effectively all rights
of ownership of the Shares, including, without limitation, the right to vote any
Shares purchased by Acquisition on all matters properly presented to the
shareholders of the Company or effectively to control in any material respect
the business, assets or operations of the Company, its subsidiaries, Acquisition
or any of their respective affiliates or (iii) otherwise has a Company Material
Adverse Effect or there shall be any litigation or suit pending by any person or
governmental authority seeking to do any of the foregoing; or
(b) (i) the representations and warranties of the Company set forth in the
Agreement (without giving effect to any "materiality" limitations or references
to "Material Adverse Effect" set forth therein) shall not be true and correct in
any material respect as of the date of the Agreement and as of consummation of
the Offer as though made on or as of such date, but only if the respects in
which the representations and warranties made by the Company are inaccurate and
would in the aggregate have a Company Material Adverse Effect, (ii) the Company
shall have breached or failed to comply in any material respect with any of its
obligations under the Agreement or (iii) any material adverse changes shall have
occurred that have had, or could reasonably be expected to have, a Company
Material Adverse Effect; or
(c) it shall have been publicly disclosed that any person (which includes
a "person" as such term is defined in Section 13(d)(3) of the Exchange Act)
other than Parent, Acquisition, any of their affiliates, or any group of which
any of them is a member, shall have acquired beneficial ownership of more than
50% of the outstanding Shares or shall have entered into a definitive
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<PAGE> 48
agreement or an agreement in principle with the Company with respect to a tender
offer or exchange offer for any Shares or a merger, consolidation or other
business combination with or involving the Company, any of its subsidiaries or
any of their material assets; or
(d) the Agreement shall have been terminated in accordance with its terms;
or
(e) prior to the purchase of Shares pursuant to the Offer, the Company
Board shall have withdrawn or modified (including by amendment of the Schedule
14D-9) in a manner adverse to Acquisition its approval or recommendation of the
Offer, this Agreement or the Merger or shall have recommended another offer, or
shall have adopted any resolution to effect any of the foregoing which, in the
good faith judgment of Acquisition in any such case, and regardless of the
circumstances (including any action or omission by Acquisition) giving rise to
any such condition, makes it inadvisable to proceed with such acceptance for
payment; or
(f) there shall have occurred any general suspension of, or limitation on
prices for, trading in the Shares on the Nasdaq Stock Market; or
(g) the Company shall commence a case under any chapter of Title XI of the
United States Code or any similar law or regulation; or a petition under any
chapter of Title XI of the United States Code or any similar law or regulation
is filed against the Company which is not dismissed within two (2) business
days; or
(h) any authorizations, consents, orders or approvals of, or declarations
or filings with, or expirations of waiting periods imposed by, any governmental
entity required in order to consummate the Offer or the Merger or to permit the
Company and its Subsidiaries to conduct their businesses after the Offer and the
Merger as currently conducted shall not have been filed, granted, given,
occurred or satisfied.
48
<PAGE> 1
Exhibit 2
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT, dated as of March 15, 1999 (this "Agreement")
is made by and among HI Holdings Inc., a Delaware corporation, ("Parent"), HI
Merger Subsidiary Inc., a California corporation and a wholly owned subsidiary
of Parent ("Acquisition"), and the Hayman Non-Exempt Trust FBO Sandra Nelson,
the Hayman Non-Exempt Trust FBO Sheryl Evertt, the Hayman Non-Exempt Trust FBO
Rick Hayman, the Hayman Exempt Trust FBO Sandra Nelson, the Hayman Exempt Trust
FBO Sheryl Evertt and the Hayman Exempt Trust FBO Rick Hayman, all established
under the Richard L. Hayman and Dorothy M. Hayman Trust No. 1 (collectively, the
"Shareholder").
RECITALS
Parent, Acquisition and Haskel International, Inc. (the "Company")
propose to enter into an Agreement and Plan of Merger, dated as of the date
hereof (as the same may be amended or supplemented, the "Merger Agreement")
providing for the merger of Acquisition with and into the Company, upon the
terms and subject to the conditions set forth in the Merger Agreement.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Merger Agreement as entered into on the date hereof.
As of the date hereof, the Shareholder is the beneficial owner of
1,465,002 shares of Class A Common Stock and 40,000 shares of Class B Common
Stock (the "Existing Shares" and, together with any shares of Class A Common
Stock or Class B Common Stock acquired by the Shareholder after the date hereof,
whether upon the exercise of warrants, options or rights, the conversion or
exchange of any Existing Shares or convertible or exchangeable securities or by
means of purchase, dividend, distribution or otherwise, the "Subject Shares").
As an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Shareholder agree, and the Shareholder
has agreed, to enter into this Agreement.
The Shareholder and Parent desire to set forth their agreement with
respect to the voting of the Subject Shares and the election of Merger
Consideration in connection with the Merger and the Shareholder desires to grant
to Acquisition an option to acquire the Subject Shares, in each case upon the
terms and subject to the conditions set forth herein.
AGREEMENT
<PAGE> 2
To implement the foregoing and in consideration of the mutual
agreements contained herein, the parties agree as follows:
1. Covenants of the Shareholder. Until the termination of this Agreement in
accordance with Section 6, the Shareholder agrees as follows:
(a) Agreement to Vote. At any meeting of Shareholders of the Company
called for purposes that include approval of the Merger and the Merger
Agreement, however called, or at any adjournment thereof, or in connection with
any written consent of the holders of Shares or in any other circumstances in
which the Shareholder is entitled to vote, consent or give any other approval
with respect to the Merger and the Merger Agreement, the Shareholder shall vote
(or cause to be voted) the Subject Shares in favor of adoption and approval of
the Merger Agreement and the Merger and the approval of the terms thereof and
each of the other actions contemplated by the Merger Agreement and this
Agreement and any amendments hereto or, with the Shareholder's written consent,
thereto.
At any meeting of Shareholders of the Company, however called, or at
any adjournment thereof, or in connection with any written consent of the
holders of Shares or in any other circumstances in which the Shareholder is
entitled to vote, consent or give any other approval, except as otherwise agreed
to in writing in advance by Parent, the Shareholder shall vote (or cause to be
voted) the Subject Shares against the following actions:
(i) any action or agreement that would result in a breach in
any material respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or of the
Shareholder hereunder; or
(ii) any action or agreement that could reasonably be expected
to impede, interfere with, delay, postpone or attempt to discourage the Merger,
including, but not limited to: (A) the adoption by the Company of a proposal
regarding (1) the acquisition of the Company by merger, tender offer or
otherwise by any person other than Parent, Acquisition or any designee thereof
(a "Third Party"), or any other merger, combination or similar transaction with
any Third Party; (2) the acquisition by a Third Party of 10% or more of the
assets of the Company and its subsidiaries, taken as a whole (whether by the
acquisition of assets or securities of, or any merger, consolidation or other
business combination involving, the Company or any of its subsidiaries); (3) the
acquisition by a Third Party of 10% or more of the outstanding Shares; or (4)
the repurchase by the Company or any of its subsidiaries of 10% or more of the
outstanding Shares; (B) any amendment of the Company's Articles of Incorporation
or Bylaws or other proposal or transaction involving the Company or any of its
subsidiaries, which amendment or other proposal or transaction could in any
manner reasonably be expected to impede, in any material respect, prevent or
nullify the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement or change in any manner the rights
<PAGE> 3
and privileges, including, without limitation, voting rights of any class of the
Company's capital stock; (C) any change in the management or board of directors
of the Company that could in any manner reasonably be expected to impede, in any
material respect, prevent or nullify the Merger, the Merger Agreement or any of
the other transactions contemplated by the Merger Agreement; (D) any material
change in the present capitalization or dividend policy of the Company; or (E)
any other material change in the Company's corporate structure or business. The
Shareholder further agrees not to commit or agree to take any action
inconsistent with the foregoing agreements.
(b) Proxies. As security for the agreements of the Shareholder
provided for herein, the Shareholder hereby grants to Acquisition a proxy to
vote all shares of Class A Common Stock that are part of the Subject Shares (the
"Proxy Shares"). The Shareholder agrees that this proxy shall be irrevocable
during the term of this Agreement and coupled with an interest and each of the
Shareholder and Acquisition will take such further action or execute such other
instruments as may be necessary to effectuate the intent of this proxy and
hereby revokes any proxy previously granted by the Shareholder with respect to
the Proxy Shares.
(c) Transfer Restrictions. The Shareholder agrees not to (I) sell,
transfer, pledge, encumber, assign or otherwise dispose of or hypothecate
(including by gift or by contribution or distribution to any trust or similar
instrument or to any beneficiaries of the Shareholder (collectively,
"Transfer")), or enter into any contract, option or other arrangement or
understanding (including any profit sharing arrangement) with respect to the
Transfer of, any of the Subject Shares other than pursuant to the terms hereof
and the Merger Agreement, (ii) enter into any voting arrangement or
understanding with respect to the Subject Shares, whether by proxy, voting
agreement or otherwise, or (iii) take any action that could reasonably be
expected to make any of its representations or warranties contained herein
untrue or incorrect or could reasonably be expected to have the effect of
preventing or disabling the Shareholder from performing any of its obligations
hereunder.
(d) Stop Transfer. The Shareholder hereby authorizes and requests
the Company and its counsel to notify the Company's transfer agent that there is
a stop transfer order with respect to all of the Subject Shares (and that this
Agreement places limits on the voting of the Subject Shares). The Shareholder
agrees with, and covenants to, Parent that the Shareholder shall not request
that the Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Subject Shares,
unless such transfer is made in compliance with this Agreement. In the event of
a stock dividend or distribution, or any change in the Shares by reason of any
stock dividend or distribution, or any change in the Shares by reason of any
stock dividend, split-up, recapitalization, combination, exchange of shares or
the like, the term "Subject Shares" shall be deemed to refer to and include the
Subject Shares as well as all such stock dividends and distributions and any
shares into which or for which any or all of the
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<PAGE> 4
Subject Shares may be changed or exchanged and the Subject Shares Purchase Price
shall be accordingly adjusted. The Shareholder shall be entitled to receive and
retain any cash dividend paid by the Company during the term of this Agreement
until the Subject Shares are canceled in the Merger or purchased hereunder.
(e) Merger Consideration. The Shareholder agrees and hereby
acknowledges that the Merger Consideration to be received by the Shareholder
will consist solely of a cash payment per Share.
(f) Appraisal Rights. The Shareholder hereby irrevocably waives any
and ail rights which it may have as to appraisal, dissent or any similar or
related matter with respect to the Merger.
2. Option.
(a) Grant of Option. The Shareholder hereby grants to Acquisition
(or its designee) an irrevocable option (the "Option") to purchase the Proxy
Shares at an exercise price of $12.90 per share (the "Exercise Price"). In the
event of any change in the Proxy Shares by reason of stock dividends, split-ups,
recapitalizations or the like, the type and number of shares or securities
subject to the Option and the Exercise Price shall be adjusted appropriately to
preserve the respective rights of the Shareholder and Acquisition hereunder.
(b) Exercise of Option. The Option may be exercised by Acquisition,
as a whole and not in part, at any time during the twelve-month period
commencing upon the occurrence of any of the following events:
(i) the Merger Agreement shall have been terminated or become
terminable pursuant to Section 7.1(c)(iii) or Section 7.1(d) thereof; or
(ii) any failure by the Shareholder to perform its obligations
hereunder.
If the Merger Agreement shall have been terminated pursuant to
Section 7.1(a), (b), (c)(I) or (c)(ii) thereof, the Option may not be exercised
by Acquisition.
(c) Notice of Exercise. If Acquisition wishes to exercise the
Option, Acquisition shall send a written notice to the Shareholder of its
intention to exercise the Option, specifying the place, and, if then known, the
time and the date (the "Option Closing Date") of the closing (the "Option
Closing") of the purchase. The Option Closing Date shall occur on the fifth
business day or such longer period as may be required by
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<PAGE> 5
applicable law or regulation, after the later of (I) the date on which such
notice is delivered and (ii) the satisfaction of the conditions set forth in
Section 2(f).
(d) Closing Deliveries by Shareholder. At the Option Closing, the
Shareholder shall deliver to Acquisition (or its designee) all of the Proxy
Shares by delivery of a certificate or certificates evidencing the Proxy Shares
in the denominations designated by Acquisition in its exercise notice delivered
pursuant to Section 2(c), duly endorsed to Acquisition or accompanied by stock
powers duly executed in favor of Acquisition, with all necessary stock transfer
stamps affixed.
(e) Closing Deliveries by Acquisition. At the Option Closing,
Acquisition shall pay, and Parent shall cause Acquisition to pay, to the
Shareholder the aggregate Exercise Price for the Proxy Shares by delivery to the
Shareholder of cash in the amount of the aggregate Exercise Price for the number
of Proxy Shares purchased pursuant to the exercise of the Option.
(f) Conditions. The Option Closing shall be subject to the
satisfaction of each of the following conditions:
(i) no court, arbitrator or governmental body, agency or
official shall have issued any order, decree or ruling that is in effect, and
there shall not be any statute, rule or regulation, which in either case
restrains, enjoins or prohibits the consummation of the purchase and sale of the
Proxy Shares pursuant to the exercise of the Option;
(ii) any waiting period applicable to the consummation of the
purchase and sale of the Proxy Shares pursuant to the exercise of the Option
under the HSR Act shall have expired or been terminated; and
(iii) all actions by or in respect of, and any filing with,
any governmental body, agency, official, or authority required to permit the
consummation of the purchase and sale of the Proxy Shares pursuant to the
exercise of the Option shall have been obtained or made and shall be in full
force and effect.
(g) Termination of Option. The Option, the Proxy provided for in
Section 1(b) of this Agreement and the stop transfer restrictions provided for
in Section 1(d) shall each terminate at such time of Third Party Acquisition at
a price per share which is less than $12.90.
3. Representations and Warranties of the Shareholder. The Shareholder hereby
represents and warrants to Parent and Acquisition as of the date hereof as
follows:
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<PAGE> 6
(a) Organization. The Shareholder are trusts duly organized, validly
existing and in good standing under the laws of the jurisdictions of their
organization.
(b) Authorization; Validity of Agreement; Necessary Action. The
Shareholder has full power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance by it of this
Agreement and the consummation by it of the transactions contemplated hereby
have been duly and validly authorized by the Shareholder and no other trust
action or proceedings on the part of the Shareholder are necessary to authorize
the execution and delivery by it of this Agreement and the consummation by it of
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Shareholder, and, assuming this Agreement constitutes a valid
and binding obligation of Parent and Acquisition, constitutes a valid and
binding obligation of the Shareholder, enforceable against it in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law), an implied covenant of good
faith and fair dealing and considerations of public policy.
(c) Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Securities Act, the Exchange Act, the HSR
Act and any applicable state takeover laws, neither the execution, delivery or
performance of this Agreement by the Shareholder nor the consummation by it of
the transactions contemplated hereby nor compliance by it with any of the
provisions hereof will (I) conflict with or result in any breach of any
provision of the trust documents; (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity (except where the
failure to obtain such permits, authorizations, consents or approvals or to make
such filings would not materially impair the ability of the Shareholder to
consummate the transactions contemplated hereby), (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration) under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, guarantee, other evidence of indebtedness, lease,
license, contract, agreement or other instrument or obligation to which the
Shareholder is a party or by which it or any of its properties or assets may be
bound or (iv) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to it or any of its properties or assets, except in the
case of clauses (iii) and (iv) for violations, breaches or defaults, or rights
of termination, amendment, cancellation or acceleration, which would not
materially impair the ability of the Shareholder to consummate the transactions
contemplated hereby.
(d) Shares. The Existing Shares are, and the Subject Shares on the
Option Closing Date will be, owned beneficially by the Shareholder. The Existing
Shares
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<PAGE> 7
constitute all of the Shares owned beneficially by the Shareholder. All of the
Existing Shares are issued and outstanding and the Shareholder does not own,
beneficially, any warrants, options or other rights to acquire any Shares. The
Shareholder has sole voting power, sole power of disposition, sole power to
issue instructions with respect to the matters set forth in Sections 1 and 2
hereof, sole power of conversion, sole power to demand appraisal rights and sole
power to agree to all of the matters set forth in this Agreement, in each case
with respect to all of the Existing Shares and will have sole voting power, sole
power of disposition, sole power to issue instructions with respect to the
matters set forth in Sections 1 and 2 hereof, sole power of conversion, sole
power to demand appraisal rights and sole power to agree to all of the matters
set forth in this Agreement, with respect to all of the Subject Shares on the
Option Closing Date, with no limitations, qualifications or restrictions on such
rights, subject to applicable federal securities laws and the terms of this
Agreement. The Shareholder has good and valid title to the Existing Shares and
at all times during the term hereof and on the Option Closing Date will have
good and valid title to the Subject Shares, free and clear of all Liens and free
of any other limitation or restriction, and, upon delivery thereof to
Acquisition against delivery of the consideration therefor pursuant to this
Agreement, good and valid title thereto, free and clear of all Liens and free of
any other limitation or restriction (other than any arising as a result of
actions taken or omitted by Parent or Acquisition or any arising under this
Agreement), will pass to Acquisition.
(e) No Finder's Fees. Except as disclosed in the Merger Agreement,
no broker, investment banker, financial advisor or other person is entitled to
any broker's, finder's, financial advisor's or other similar fee or commission
in connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Shareholder.
4. Representations and Warranties of Parent and Acquisition. Parent and
Acquisition, jointly and severally, hereby represent and warrant to the
Shareholder as of the date hereof as follows:
(a) Organization. Each of Parent and Acquisition is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Corporate Authorization; Validity of Agreement; Necessary
Action. Each of Parent and Acquisition has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by Parent of this
Agreement and the consummation by Parent of the transactions contemplated hereby
have been duly and validly authorized by its Board of Directors and the
execution, delivery and performance by Acquisition of this Agreement and the
consummation by Acquisition of the transactions contemplated hereby
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<PAGE> 8
have been duly and validly authorized by its Board of Directors, and no other
corporate action or proceedings on the part of Parent or Acquisition are
necessary to authorize the execution and delivery by Parent or Acquisition of
this Agreement, and the consummation by Parent or Acquisition of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent and Acquisition, and, assuming this Agreement constitutes a
valid and binding obligation of the Shareholder, constitutes valid and binding
obligations of Parent and Acquisition, enforceable against them in accordance
with its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law), an implied covenant of good
faith and fair dealing and considerations of public policy.
(c) Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the HSR Act and any applicable state takeover
laws, neither the execution, delivery or performance of this Agreement by Parent
or Acquisition nor the consummation by Parent or Acquisition of the transactions
contemplated hereby nor compliance by Parent or Acquisition with any of the
provisions hereof will (I) conflict with or result in any breach of any
provision of the Articles of Incorporation or Bylaws of Parent or Acquisition,
(ii) require any filing with, or permit, authorization, consent or approval of,
any Governmental Entity (except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not
materially impair the ability of Parent and Acquisition to consummate the
transactions contemplated hereby), (iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration)
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, guarantee, other evidence of indebtedness, lease, license, contract,
agreement or other instrument or obligation to which Parent or Acquisition is a
party or by which it or any of its properties or assets may be bound or (iv)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, any of its subsidiaries or any of their properties or
assets, except in the case of clauses (iii) and (iv) for violations, breaches or
defaults, or rights of termination, amendment, cancellation or acceleration,
which would not materially impair the ability of Parent and Acquisition to
consummate the transactions contemplated hereby.
5. Further Assurances. From time to time prior to the Option Closing, at any
other party's request and without further consideration, each party hereto shall
execute and deliver such additional documents and take all such further lawful
action as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement.
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<PAGE> 9
6. Tender of Subject Shares. Shareholder hereby agrees to tender its Subject
Shares into the Offer.
7. Termination. Except as set forth in Section 2, this Agreement shall
terminate, and no party shall have any rights or obligations hereunder and this
Agreement shall become null and void and have no further effect upon the
earliest to occur of (a) the Effective Time, (b) twelve months following the
termination of the Merger Agreement pursuant to Section 7.1(c)(iii) or Section
7.1(d) thereof or (c) termination of the Merger Agreement pursuant to Section
7.1(a), (b), (c)(I) or (c)(ii) thereof. Notwithstanding the foregoing, in the
event the Option shall have been exercised in accordance with Section 2, but the
Option Closing shall not have occurred, this Agreement shall not terminate.
Nothing in this Section 6 shall relieve any party of liability for breach of
this Agreement.
8. General Provisions.
(a) Costs and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby shall be paid by the party incurring such expenses.
(b) Amendment. This Agreement may not be amended except by an
instrument in writing signed by the party to be charged therewith.
(c) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (which
is confirmed) or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to Parent or Acquisition, to:
Tinicum Incorporated
800 Third Avenue
New York, NY 10022
Attention: Eric Ruttenberg
Telephone No.: (212) 446-9300
Telecopy No.: (212) 750-9264
with a copy to:
Kirkland & Ellis
153 East 53rd Street
New York, NY 10022
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<PAGE> 10
Attention: John L. Kuehn
Telephone No.: (212) 446-4821
Telecopy No.: (212) 446-4900
(ii) if to the Shareholder, to:
Mellon Trust of California
400 So. Hope Street
Suite 400
Los Angeles, CA 90071
Attention: Michael O'Brien
Telephone No.: (213) 553-9600
Telecopy No.: (213) 629-0495
with a copy to:
Goodson and Wachtel
10940 Wilshire Blvd.
Suite 1400
Los Angeles, CA 90024
Attention: Marvin Goodson
Telephone No.: (310) 208-8282
Telecopy No.: (310) 208-8582
(d) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation." The phrases "the date of this Agreement," "the date hereof," and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to March 15, 1999.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(f) Entire Agreement; No Third Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and is
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<PAGE> 11
not intended to confer upon any person other than the parties hereto any rights
or remedies hereunder.
(g) Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated hereby may be consummated as originally
contemplated to the fullest extent possible.
(h) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
(i) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder, except as specifically provided herein with
respect to the rights of Acquisition under the Option, shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties, except that Parent and Acquisition
may assign, in Parent's sole discretion, any or all of their respective rights,
interests and obligations hereunder to any direct or indirect wholly owned
subsidiary of Parent; provided, however, that no such assignment shall relieve
Parent from any of its obligations hereunder. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors (including the Company as
successor to Acquisition pursuant to the Merger), heirs, agents,
representatives, trust beneficiaries, attorneys, affiliates and associates and
all of their respective predecessors, successors, permitted assigns, heirs,
executors and administrators.
(j) Enforcement; Consent to Jurisdiction; Waiver of Jury Trial.
(i) The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in the United States District Court
for the District of Delaware to the extent such court would have subject matter
jurisdiction with respect to such dispute, and the Chancery or other Courts of
the
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<PAGE> 12
State of Delaware this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto:
(A) consents to submit itself to the personal
jurisdiction of (x) the United States District Court for the District of
Delaware in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement to the extent such court would have
subject matter jurisdiction with respect to such dispute and (y) the Chancery or
other Courts of the State of Delaware otherwise;
(B) agrees that it will not attempt to deny or defeat
such personal jurisdiction or venue by motion or other request for leave from
any such court;
(C) agrees that it will not bring any action relating to
this Agreement or any of the transactions contemplated by this Agreement in any
court other than such courts;
(D) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to a party at
its address set forth in Section 7(c) or at such other address of which a party
shall have been notified pursuant thereto; and
(E) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction.
(ii) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING IN RELATION TO THIS
AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
(iii) All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any thereof by any party
shall not preclude the simultaneous or later exercise of any other such right,
power or remedy by such party.
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<PAGE> 13
IN WITNESS WHEREOF, Parent, Acquisition and the Shareholder have caused this
Agreement to be signed by their respective officers or other authorized person
thereunto duly authorized as of the date first written above.
HI HOLDINGS INC.
By: /s/ SETH HENDON
-----------------------
Name: Seth Hendon
Title:
HI MERGER SUBSIDIARY INC.
By: /s/ SETH HENDON
-----------------------
Name: Seth Hendon
Title:
HAYMAN NON-EXEMPT TRUST FBO
SANDRA NELSON, HAYMAN NON-EXEMPT
TRUST FBO SHERYL EVERTT, HAYMAN
NON-EXEMPT TRUST FBO RICK HAYMAN,
HAYMAN EXEMPT TRUST FBO SANDRA
NELSON, HAYMAN EXEMPT TRUST FBO
SHERYL EVERTT, HAYMAN EXEMPT
TRUST FBO RICK HAYMAN, ALL
ESTABLISHED UNDER THE RICHARD L.
HAYMAN AND DOROTHY M. HAYMAN
TRUST NO. 1
By: MELLON TRUST OF CALIFORNIA, AS
CO-TRUSTEE
By: /s/ MICHAEL D. O'BRIEN
--------------------------
Name: Michael D. O'Brien
Title: Vice President
<PAGE> 14
AMENDMENT NO.1 TO SHAREHOLDER AGREEMENT
AMENDMENT NO. 1 TO SHAREHOLDER AGREEMENT, dated as of March 18, 1999 (this
"AGREEMENT") is made by and among HI HOLDINGS INC., a Delaware corporation,
("PARENT"), HI MERGER SUBSIDIARY INC., a California corporation and a wholly
owned subsidiary of Parent ("ACQUISITION"), and the Hayman Non-Exempt Trust FBO
Sandra Nelson, the Hayman Non-Exempt Trust FBO Sheryl Everett, the Hayman
Non-Exempt Trust FBO Rick Hayman, the Hayman Exempt Trust FBO Sandra Nelson, the
Hayman Exempt Trust FBO Sheryl Everett and the Hayman Exempt Trust FBO Rick
Hayman, all established under the Richard L. Hayman and Dorothy M. Hayman Trust
No. 1 (collectively, the "ORIGINAL SHAREHOLDER"), and Hayman Trust No.6 for
Sheryl Everett and Hayman Trust No.5 for Sandra Nelson (collectively, the
"ADDITIONAL SHAREHOLDER" and together with the Original Shareholder, the
"SHAREHOLDER").
RECITALS
Parent, Acquisition and the Original Shareholder entered into
the Shareholder Agreement dated as of March 15, 1999 (the "AGREEMENT").
Capitalized terms used but not defined herein shall have the meanings set forth
in the Agreement.
Parent, Acquisition and the Original Shareholder desire to
amend the Agreement to, among other things, add the Additional Shareholder, and
the Additional Shareholder desires to become a party to the Agreement.
AGREEMENT
To implement the foregoing and in consideration of the mutual
agreements contained herein, the parties agree as follows:
1. Amendments.
A. The term "Shareholder", as used throughout the Agreement,
shall mean, collectively, the Original Shareholder and the
Additional Shareholder.
B. The number "1,465,002" appearing in the first line of the
second paragraph under "Recitals" in the Agreement is hereby
amended in its entirety to read:
"1,521,477"
C. In all other respects, the Agreement remains in full force and
effect.
2. General Provisions.
(a) Counterparts. This Amendment No. 1 to the Agreement may be executed
in two or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to
the other parties, it being understood that all parties need not sign
the same counterpart.
(b) Governing Law. This Amendment No. 1 to the Agreement shall be
governed and construed in accordance with the laws of the State of
Delaware without giving effect to the principles of conflicts of law
thereof.
<PAGE> 15
IN WITNESS WHEREOF, Parent, Acquisition and the Shareholder have caused this
Amendment No. 1 to Agreement to be signed by their respective officers or other
authorized person thereunto duly authorized as of the date first written above.
HI HOLDINGS INC.
By: /s/ SETH HENDON
-----------------------
Name: Seth Hendon
Title: Vice President
HI MERGER SUBSIDIARY INC.
By: /s/ SETH HENDON
-----------------------
Name: Seth Hendon
Title: Vice President
HAYMAN NON-EXEMPT TRUST FBO SANDRA NELSON,
HAYMAN NON-EXEMPT TRUST FBO SHERYL EVERETT,
HAYMAN NON-EXEMPT TRUST FBO RICK HAYMAN, HAYMAN
EXEMPT TRUST FBO SANDRA NELSON, HAYMAN EXEMPT
TRUST FBO SHERYL EVERETT, HAYMAN EXEMPT TRUST
FBO RICK HAYMAN, ALL ESTABLISHED UNDER THE
RICHARD L. HAYMAN AND DOROTHY M. HAYMAN TRUST
NO. 1, HAYMAN TRUST NO.6 FOR SHERYL EVERETT,
HAYMAN TRUST NO.5 FOR SANDRA NELSON
By: MELLON TRUST OF CALIFORNIA, AS CO-TRUSTEE
By: /s/ MICHAEL D. O'BRIEN
--------------------------
Name: Michael D. O'Brien
Title: Vice President
<PAGE> 1
EXHIBIT 3
March 22, 1999
TO THE SHAREHOLDERS OF
HASKEL INTERNATIONAL, INC.
Dear Shareholder:
I am pleased to report that on March 15, 1999, Haskel International, Inc.
("Haskel") entered into a merger agreement with HI Holdings Inc., a Delaware
corporation that is controlled by Tinicum Capital Partners, L.P., a private
investment fund, and certain related parties, and its wholly-owned subsidiary,
HI Merger Subsidiary Inc., a California corporation ("Purchaser"), that provides
for the acquisition of all of the Class A and Class B Common Stock, no par value
(the "Shares"), of Haskel by Purchaser at a price of $12.90 per Share in cash,
net to the seller, without interest. Under the terms of the proposed
transaction, Purchaser has commenced a tender offer (the "Tender Offer") for all
outstanding shares of Haskel Common Stock at $12.90 per Share. The Tender Offer
is currently scheduled to expire at Midnight, New York City Time, on April 19,
1999, unless extended.
Following the successful completion of the Tender Offer, Purchaser will be
merged with and into Haskel (the "Merger"), and all Shares not purchased in the
Tender Offer will be converted into the right to receive $12.90 per Share in
cash, net to the seller, without interest.
THE BOARD OF DIRECTORS OF HASKEL HAS DETERMINED THAT THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER,
TAKEN TOGETHER, ARE FAIR AND IN THE BEST INTERESTS OF THE SHAREHOLDERS OF
HASKEL, HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT THE
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES HEREUNDER.
The recommendation of the Board of Directors is described in the
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
filed by Haskel with the Securities and Exchange Commission and enclosed with
this letter. In arriving at its recommendation, the Board of Directors gave
careful consideration to a number of factors. These factors included the opinion
of Schroder & Co. Inc., financial advisor to Haskel, a copy of which is attached
as an annex to the Schedule 14D-9. We urge you to read carefully the Schedule
14D-9 in its entirety so that you will be more informed as to the Board's
recommendation.
Also accompanying this letter is a copy of the Offer to Purchase and
related materials, including a Letter of Transmittal for use in tendering
Shares. These documents set forth the terms and conditions of the Offer and
provide instructions as to how to tender your Shares. We urge you to read each
of the enclosed materials carefully.
The management and directors of Haskel thank you for the support you have
given the company.
On behalf of the Board of Directors,
Sincerely,
R. Malcolm Greaves
Chief Executive Officer
<PAGE> 1
EXHIBIT 4
March 14, 1999
The Board of Directors
Haskel International, Inc.
100 E. Graham Place
Burbank, CA 91502
Members of the Board of Directors:
We understand that Haskel International, Inc. ("Haskel" or the "Company")
is contemplating a transaction pursuant to which HI Holdings Inc. ("HI
Holdings") would acquire all of the outstanding Class A and Class B shares (the
"Shares") of Common Stock of the Company (the "Transaction"). The Transaction
will be effected through a merger (the "Merger") by HI Merger Subsidiary, Inc.
("Acquisition Corp."), an indirect wholly-owned subsidiary of HI Holdings, with
the Company pursuant to which, among other things, (i) the Company would become
an indirect wholly-owned subsidiary of HI Holdings, (ii) each outstanding Share
(other than treasury Shares) would be converted into the right to receive $12.90
in cash (the "Transaction Consideration"), and (iii) concurrent with the
consummation of the Merger, the holder of each outstanding option to purchase
Shares not previously exercised would receive in cash, upon cancellation of such
option, an amount equal to the positive difference, if any, between $12.90 and
the exercise price per Share of such option multiplied by the number of Shares
subject to such option. The terms and conditions of the Transaction are more
fully described in the proposed Agreement and Plan of Merger (the "Merger
Agreement").
You have requested that Schroder & Co. Inc. ("Schroders") render an opinion
(the "Opinion"), as investment bankers, as to the fairness, from a financial
point of view, of the Transaction Consideration to be received by the
stockholders of the Company.
Schroders, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. Schroders has acted as financial advisor to Haskel
with respect to the Transaction for which we will receive a fee for our
services, a significant portion of which is contingent upon consummation of the
Transaction.
In connection with the Opinion set forth herein we have, among other
things:
- - reviewed a draft, dated March 14, 1999, of the Merger Agreement;
- - visited the executive offices and operations of the Company in Burbank, CA;
- - reviewed the Company's Annual Reports on Form 10-K for the fiscal years ended
May 31, 1994 through 1998, including the audited consolidated financial
statements contained therein;
- - reviewed the Company's Quarterly Report on Form 10-Q for the quarter ended
November 30, 1998, including the unaudited consolidated financial statements
contained therein;
- - reviewed historical financial results of the Company and its subsidiaries
prepared by management;
- - had discussions with the senior management of the Company regarding the
business, operations and prospects of the Company and its subsidiaries;
- - reviewed projections of the Company prepared by the management;
- - researched certain publicly available information on industry in which the
Company operates;
- - performed various analyses, as we deemed appropriate, of the Company using
generally accepted analytical methodologies, including (i) an analysis of
premiums paid in public merger and acquisition transactions; (ii) the
application of the public trading multiples of companies which we deemed
comparable to the Company; (iii) the application of the multiples reflected in
recent merger and acquisition transactions involving businesses which we
deemed comparable to the financial results of the Company; and (iv)
discounting the projected cash flows of the Company's operations;
- - solicited indications of interest from 103 potential buyers;
- - reviewed historical trading prices and volume of the Company's common stock;
and
- - performed such of the financial studies, analyses, inquiries and
investigations, as we deemed appropriate.
<PAGE> 1
Exhibit 5
HASKEL INTERNATIONAL, INC. MAKES ANNOUNCEMENT
BURBANK, California - March 15, 1999 - Haskel International, Inc.
announced today that it has entered into a definitive agreement whereby an
entity controlled by Tinicum Capital Partners, L.P., a private investment fund,
and certain related parties will acquire all of Haskel's outstanding shares for
a cash price of $12.90 per share. The transaction is valued at approximately
$72.8 million. The tender offer for all of the shares will commence by Monday,
March 22, 1999 and will be scheduled to expire 20 business days thereafter,
unless extended. Purchase of the shares under the tender offer is subject to 90%
of the shares being tendered, the expiration of applicable waiting periods under
applicable antitrust laws, and other customary conditions. Subsequent to the
tender offer, the agreement provides for the merger of Haskel with HI Merger
Subsidiary, a subsidiary of HI Holdings, Inc., pursuant to which all remaining
shareholders of Haskel would receive $12.90 per share. If less than 90% of the
shares are tendered, the merger would be subject to approval by the shareholders
of Haskel at a meeting to be called and held after regulatory approvals have
been obtained. The deal is expected to be completed in May 1999 if 90% of the
shares are tendered or July 1999 if a merger approved by the shareholders is
required.
The Boards of Directors of both companies have approved the transaction,
and the Haskel Board of Directors has recommended that Haskel's shareholders
accept HI Holdings Inc.'s all-cash tender offer and vote in favor of the merger
if a vote is required.
Haskel International, Inc. is one of the world's leading manufacturers of
high-pressure liquid pumps and gas boosters, specializing in pressure technology
and systems integration. Haskel conducts its operations through facilities in
North America, Europe and the Pacific rim, as well as through distributors and
agents worldwide.
<PAGE> 1
EXHIBIT 6
HASKEL INTERNATIONAL, INC.
100 EAST GRAHAM PLACE
BURBANK, CALIFORNIA 91502
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
September 21, 1998
The Annual Meeting of Shareholders of Haskel International, Inc. will
be held on October 30, 1998 at 10:30 A.M. at the Red Lion Hotel, 100 West
Glenoaks Boulevard, Glendale, California 91202, for the following purposes:
1. Election of seven directors, consisting of three
Class A directors and four Class B directors, to
serve on the Company's Board of Directors until
the next Annual Meeting of Shareholders and until
their successors are duly elected and qualified;
2. Approval of the Company's 1998 Long-term
Performance Incentive Plan;
3. Ratification of the selection of Deloitte & Touche
LLP as the Company's independent auditors; and
4. Such other business as may properly come before
the meeting or any adjournments or postponements
thereof.
The Board of Directors has fixed September 14, 1998 as the record date
for determining the shareholders entitled to receive notice of and to vote at
the meeting.
All shareholders are cordially invited to attend the meeting. Whether
or not you expect to attend the meeting, please mark, sign, date and return
promptly the enclosed proxy card in the stamped return envelope provided.
By Order of the Board of Directors,
/s/ PATRICIA A. WEHR
------------------------------
Patricia A. Wehr
Secretary
<PAGE> 2
HASKEL INTERNATIONAL, INC.
100 EAST GRAHAM PLACE
BURBANK, CALIFORNIA 91502
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 30, 1998
GENERAL INFORMATION
This proxy statement (the "Proxy Statement") and the enclosed proxy are
furnished in connection with the solicitation of proxies by the Board of
Directors of Haskel International, Inc., a California corporation (the
"Company"), for use at the Annual Meeting of Shareholders (the "Annual Meeting")
to be held at the Red Lion Hotel, 100 West Glenoaks Boulevard, Glendale,
California, 91202 on October 30, 1998 at 10:30 a.m. local time and any
adjournments or postponements thereof. The Company's Annual Report to
Shareholders for the fiscal year ended May 30, 1998, including the Company's
Form 10-K and other information concerning the Company, is also enclosed for
your information. The Company anticipates that the Proxy Statement and the
enclosed proxy will first be mailed or given to its shareholders on or about
September 21, 1998.
A proxy may be revoked by filing with the Secretary of the Company a
written notice of revocation or a duly executed proxy bearing a later date, or
by attending the Annual Meeting and voting in person. Attendance in person at
the Annual Meeting does not itself revoke an otherwise valid proxy; however, any
shareholder who attends the Annual Meeting may orally revoke his or her proxy at
the Annual Meeting and vote in person. All properly executed proxies received
prior to or at the Annual Meeting, and not revoked, will be voted at the Annual
Meeting with the instructions indicated on such proxies. If no instructions are
indicated, such proxies will be voted for the election of the three Class A and
four Class B nominees, as the case may be, as directors, and for Proposals 2 and
3. The Board of Directors is not aware at the date hereof of any other matters
to be presented at the Annual Meeting; however, if any other matter is properly
presented, the proxyholders will vote in their sole discretion upon such other
matter.
The cost of this solicitation of proxies will be borne by the Company.
Proxies will be solicited by the Company principally through use of the mail,
but directors, officers and regular employees of the Company may solicit proxies
in person, by telephone, or by other means of communication. Such persons will
not be specially compensated for such services. The Company may reimburse
brokers, banks, custodians, nominees and other fiduciaries for their customary
and reasonable charges and expenses in forwarding proxy materials to beneficial
owners.
VOTING SECURITIES
Only shareholders of record at the close of business on September 14,
1998 will be entitled to vote at the Annual Meeting. On that date, there were
4,758,795 shares of the Company's Class A Common Stock and 40,000 shares of
Class B Common Stock outstanding. Each share of Common Stock is entitled to one
vote. The Class A Common Shares, voting as a class, shall elect a minority of
the Board of Directors. The Class B Common Shares, voting as a class, shall
elect a majority of the Board of Directors. The holders of a majority of the
outstanding shares of Common Stock present in person or by proxy and entitled to
vote will constitute a quorum at the Annual Meeting. Abstentions and shares held
by brokers that are present but not voted because the brokers had no
discretionary authority with respect to such shares (broker non-votes) will not
be counted as being present for purposes of determining a quorum. Kristin L.
Pudwill has been appointed by the Board of Directors to serve as the Inspector
of Elections for the purposes of this meeting.
1
<PAGE> 3
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to each person
who, as of August 14, 1998, is known by the Company to be the beneficial owner
of more than five percent (5%) of the Company's Common Stock:
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
------------------------- -----------------------
Amount and Amount and Percent of
Nature of Percent Nature of Percent Combined
Name and Address of Beneficial of Beneficial of Voting
Beneficial Owner Ownership Class(1) Ownership Class(1) Power(2)
--------- ------ --------- ------ ------
<S> <C> <C> <C> <C> <C>
Hayman Family Trust 385,781(3) 8.1% 13,3333 33.3% 8.3%
FBO Sandra Nelson
c/o Mellon Trust of California
400 S. Hope Street, Suite 400
Los Angeles, CA 90071
Hayman Family Trust 385,781(4) 8.1% 13,3334 33.3% 8.3%
FBO Sheryl L. Everett
c/o Mellon Trust of California
400 S. Hope Street, Suite 400
Los Angeles, CA 90071
Hayman Family Trust 385,781(5) 8.1% 13,3345 33.4% 8.3%
FBO Rick Meeker Hayman
c/o Mellon Trust of California
400 S. Hope Street, Suite 400
Los Angeles, CA 90071
Hayman Family Trusts - Aggregate 1,521,477(6) 32.0% 40,0006 100.0% 32.5%
c/o Mellon Trust of California
400 S. Hope Street, Suite 400
Los Angeles, CA 90071
Maury S. Friedman 269,500(7) 5.7% -- -- 5.6%
29480 Bertrand Street
Agoura Hills, CA 91301
</TABLE>
[Footnotes on next page]
2
<PAGE> 4
- -------------------------
1 Included as outstanding for purposes of these calculations with
respect to (i) the Class A Common Stock were 4,759,205 shares of Class
A Common Stock outstanding as of August 14, 1998 and (ii) the Class B
Common Stock were 40,000 shares of Class B Common Stock outstanding as
of August 14, 1998.
2 Represents the combined voting power of the shares of Class A Common
Stock and Class B Common Stock beneficially owned by the persons named
as a percent of the aggregate combined voting power of all outstanding
shares of Common Stock.
3 Sandra Nelson, c/o Haskel International, Inc., 100 E. Graham Place,
Burbank, CA 91502, is the beneficiary of the trust. Mellon Trust of
California ("Mellon Trust"), Sandra Nelson, and Sheryl L. Everett are
the trustees of the trust. Mellon Trust has one vote and the other
trustees have one vote in determining action to be taken with respect
to the shares held by the trust.
4 Sheryl L. Everett, c/o Haskel International, Inc., 100 E. Graham
Place, Burbank, CA 91502, is the beneficiary of the trust. Mellon Trust
of California ("Mellon Trust"), Sandra Nelson, and Sheryl L. Everett
are the trustees of the trust. Mellon Trust has one vote and the other
trustees have one vote in determining action to be taken with respect
to the shares held by the trust.
5 Rick Meeker Hayman, c/o Haskel International, Inc., 100 E. Graham
Place, Burbank, CA 91502, is the beneficiary of the trust. Mellon Trust
of California ("Mellon Trust"), Sandra Nelson, and Sheryl L. Everett
are the trustees of the trust. Mellon Trust has one vote and the other
trustees have one vote in determining action to be taken with respect
to the shares held by the trust.
6 All of the shares shown are owned beneficially and of record by eight
irrevocable trusts, three of which are individually identified above.
Sandra Nelson, c/o Haskel International, Inc., 100 E. Graham Place,
Burbank, CA 91502, is the beneficiary of three of the trusts, Sheryl L.
Everett, c/o Haskel International, Inc., 100 E. Graham Place, Burbank,
CA 91502, the beneficiary of three of the trusts, and Rick Meeker
Hayman, c/o Haskel International, Inc., 100 E. Graham Place, Burbank,
CA 91502, the beneficiary of two of the trusts. The trustees of two of
the trusts of which Sandra Nelson is the beneficiary, two of the trusts
of which Sheryl L. Everett is the beneficiary and the two of the trusts
of which Rick Meeker Hayman is the beneficiary, are Mellon Trust of
California ("Mellon Trust"), Sandra Nelson and Sheryl L. Everett.
Mellon Trust has one vote and the other trustees have one vote in
determining action to be taken by each of these six trusts with respect
to the shares held by each such trust. Mellon Trust is sole trustee for
each of the other two trusts, one of which Sandra Nelson is the
beneficiary and one of which Sheryl L. Everett is the beneficiary.
Excludes 9,950 and 40,545 shares as to which Sandra Nelson and Sheryl
L. Everett, respectively, have sole voting and dispositive power; and
41,145 shares which are held in trust by another trustee, and with
respect to which Rick Meeker Hayman is the beneficiary, and has sole
voting and dispositive power.
7 Includes 265,000 shares owned beneficially and of record by the
Friedman Family Trust, of which Maury S. Friedman and Lisa E. Friedman
are co-trustees, and 4,500 shares owned by Mr. Friedman as custodian
for his minor children.
3
<PAGE> 5
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of August 14, 1998, by (i)
each director and nominee for director, (ii) each of the executive officers
named in the Summary Compensation Table, and (iii) all directors and executive
officers as a group. Except as otherwise noted, and subject to applicable
community property and similar laws, each person named has sole voting and
investment power with respect to the Common Stock shown as beneficially owned.
<TABLE>
<CAPTION>
Class A Shares Percent
Beneficially of
Name and Address Title Owned Class
- ---------------- ----- -------------- -------
<S> <C> <C> <C>
R. Malcolm Greaves President, Chief Executive 138,784(1) 2.9%
100 East Graham Place Officer and Director
Burbank, CA 91502
Lonnie D. Schnell Chief Financial Officer and 25,730(2) *
100 East Graham Place Secretary(10)
Burbank, CA 91502
Henry Mason Managing Director of HESL 17,270(3) *
100 East Graham Place
Burbank, CA 91502
Edward Malkowicz Chairman of the Board and 42,200(4) *
100 East Graham Place Director
Burbank, CA 91502
Marvin L. Goldberger Director 50,155(5) 1.1%
100 East Graham Place
Burbank, CA 91502
Stanley T. Myers Director 8,200(6) *
100 East Graham Place
Burbank, CA 91502
Terrence A. Noonan Director 5,000(7) *
100 East Graham Place
Burbank, CA 91502
John Vinke Director 3,100(8) *
100 East Graham Place
Burbank, CA 91502
H. Carr Wells Director (Deceased)
100 East Graham Place
Burbank, CA 91502
W. Bradley Zehner II, Ph.D. Director 3,250(8) *
100 East Graham Place
Burbank, CA 91502
All directors and executive
officers as a group (10 persons) 293,689(9) 6.2%
</TABLE>
* Denotes beneficial ownership of less than 1%.
[Footnotes on next page]
4
<PAGE> 6
- --------------------------
1 Includes 131,800 shares issuable upon exercise of options
exercisable within 60 days of August 14, 1998.
2 Includes 21,000 shares issuable upon exercise of options exercisable
within 60 days of August 14, 1998.
3 Includes 17,270 shares issuable upon exercise of options exercisable
within 60 days of August 14, 1998.
4 Includes 15,000 shares owned beneficially and of record as community
property of Edward Malkowicz and Michaele Malkowicz. Includes 25,200
shares issuable upon exercise of options exercisable within 60 days of
August 14, 1998.
5 Includes 11,155 shares owned beneficially and of record by the
Marvin and Mildred Goldberger Family Trust, of which Dr. Goldberger is
a co-trustee; and 39,000 shares issuable upon exercise of options
exercisable within 60 days of August 14, 1998.
6 Includes 4,800 shares issuable upon exercise of options exercisable
within 60 days of August 14, 1998.
7 Includes 1,000 shares owned beneficially and of record by a family
trust of which Terrence A. Noonan and Carolyn L. Noonan are
co-trustees. Includes 4,000 shares issuable upon exercise of options
exercisable within 60 days of August 14, 1998.
8 Includes 2,000 shares issuable upon exercise of options exercisable
within 60 days of August 14, 1998.
9 Includes 247,070 shares issuable upon exercise of options
exercisable within 60 days of August 14, 1998.
10 Effective September 3, 1998, Patricia A. Wehr replaced Lonnie D.
Schnell as Chief Financial Officer and Secretary. As of August 14,
1998, Ms. Wehr beneficially owned 3,000 Class A Common Shares, less
than 1% of the outstanding Class A Common Shares.
5
<PAGE> 7
PROPOSAL 1
ELECTION OF DIRECTORS
In accordance with the Company's Bylaws, at the Annual Meeting seven
directors are to be elected to serve until the next Annual Meeting of
Shareholders and until the election and qualification of their successors. Three
directors are elected by the holders of Class A Common Stock voting as a class
and four directors are elected by the holders of Class B Common Stock voting as
a class. Holders of Class A Common Stock may vote only for Class A nominees and
holders of Class B Common Stock may vote only for Class B nominees. The three
Class A nominees and the four Class B nominees receiving the highest number of
affirmative votes of the shares entitled to vote, for the respective class of
nominees, shall be elected directors. Abstentions and broker non-votes will have
no effect on the outcome of the vote. Unless otherwise instructed, the
proxyholders will vote the proxies received by them for the nominees of the
respective class named below, all of whom are currently directors of the
Company. If any of the listed nominees is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for such
person or persons as the proxyholders may designate. The Board of Directors has
no reason to believe that any of the nominees will be unable or decline to serve
as a director.
NOMINEES FOR ELECTION AS DIRECTOR
Set forth below is certain information as of August 14, 1998 with
respect to each director and each person nominated for election as a director.
<TABLE>
<CAPTION>
Name Age Position with Company
- ---- --- ---------------------
<S> <C> <C>
R. Malcolm Greaves * 59 President, Chief Executive Officer and Director
Edward Malkowicz * 58 Chairman of the Board and Director
Marvin L. Goldberger, Ph.D. ** 76 Director
Stanley T. Myers * 61 Director
Terrence A. Noonan ** 60 Director
John Vinke** 54 Director
W. Bradley Zehner II, Ph.D.** 54 Director
</TABLE>
* Nominee as Class A director
** Nominee as Class B director
R. Malcolm Greaves was appointed President and Chief Executive Officer
of the Company in February 1996. He joined Haskel Energy Systems, Ltd. ("HESL"),
a wholly owned subsidiary of the Company, as General Manager in January 1989 and
was appointed Managing Director of HESL in June 1989. Mr. Greaves has served as
a director of the Company since September 1990. Between January 1994 and
February 1995, he served as Executive Vice President in charge of worldwide pump
operations, after serving as Vice President, Chief Operating Officer for Europe,
the Middle East, India and Africa from April 1993.
Edward Malkowicz has been a director of the Company since November
1994. He was elected Chairman of the Board in April 1995. Mr. Malkowicz served
as the acting Chief Executive Officer of the Company from April 1995 to February
1996. Between 1992 and May 1995, Mr. Malkowicz taught business courses at
Riverside College in Riverside, California. In September 1987, Mr. Malkowicz was
employed as Senior Vice President of Finance and Administration for Turbo-tek
International, a manufacturer and distributor of packaged consumer goods, and
served as its President and Chief Operating Officer from June 1989 through
November 1990.
6
<PAGE> 8
Marvin L. Goldberger, Ph.D., served as a director of the Company from
1982 through 1997. Since January 1993, Dr. Goldberger has been a professor of
physics at the University of California, San Diego. From September 1991 through
December 1992 he was a professor of physics at the University of California, Los
Angeles, and from 1987 through July 1991 he served as the director of the
Institute for Advanced Studies at Princeton, New Jersey. Dr. Goldberger served
as a director of General Motors from January 1981 through June 1983, and is
currently a member of the General Motors Corporate Advisory Council. He is
currently Dean of Natural Sciences, University of California, San Diego and
President Emeritus of the California Institute of Technology.
Stanley T. Myers has been a director of the Company since November
1994. Mr. Myers is currently President of Semiconductor Equipment and Materials
International (SEMI). SEMI is an international trade association that serves
more than 2,000 corporate members involved in the semiconductor and flat panel
display equipment and materials industries. Prior to his appointment at SEMI,
Mr. Myers served in various capacities at Mitsubishi Silicon America Corporation
(formerly Siltec Corporation), a manufacturer of silicon wafers, including
President and Chief Executive Officer since November 1985. Mr. Myers also serves
on the SEMI Board of Directors, a post to which he was elected in 1989 and he is
chairman of Mitsubishi Silicon America Board of Directors.
Terrence A. Noonan has been a director of the Company since May 1996.
Mr. Noonan is the President and Chief Operating Officer of Furon Company, a
manufacturing company specializing in polymer components. He has served in this
capacity since June 1991. He is also a member of the Board of Directors of Furon
Company.
John Vinke was elected a director of the Company in October 1996. Mr.
Vinke is the Vice President of Finance and Chief Financial Officer of Special
Devices, Inc. He has served in this capacity since April 1994. From January 1990
through March 1994, Mr. Vinke served as Vice President of Finance and Chief
Financial Officer of Chalco Industries, Inc.
H. Carr Wells served on the Board of Directors of Haskel International,
Inc. from October 17, 1997 until his untimely death on August 4, 1998. Mr. Wells
was President of Triconex Corporation, a subsidiary of SIEBE, PLC from 1995
until his death in 1998. He served as Vice President of Sales at the Foxboro
Company, a subsidiary of SIEBE, PLC, from 1992 until his appointment at Triconix
. Prior to joining the SIEBE organization, Mr. Wells served in various
capacities with Honeywell, Inc. from 1977 to 1992, including the position of
Vice President Western Region Business Center.
W. Bradley Zehner II, Ph.D. was appointed a director of the Company in
August 1997. Since 1989, Dr. Zehner has been an associate professor of business
strategy at Pepperdine University's MBA and executive MS in Technology
Management programs. Dr. Zehner also consults with a number of international
technology-based organizations. Dr. Zehner was formerly President - Worldwide
Sales and Marketing for John Brown Machinery Group; Managing Chairman of four
separate engineering/sales companies in the United States, England, France and
Hong Kong; and served as Vice President of Strategic Planning and Business
Development for John Brown PLC's Industrial Products Sector.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE CLASS A
NOMINEES BY THE HOLDERS OF CLASS A COMMON STOCK AND EACH OF THE CLASS B
NOMINEES BY THE HOLDERS OF CLASS B COMMON STOCK.
COMPENSATION OF DIRECTORS
Each of the Company's directors who is not an employee of the Company
receives an annual fee of $24,000, payable in monthly installments, except for
the Chairman, who receives annual compensation of $60,500. Non-employee
directors receive $500 for each committee meeting in which they participate,
except directors who chair a Board committee, who receive $750 per meeting. Each
director receives reimbursement for out-of-pocket expenses.
7
<PAGE> 9
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held five meetings during fiscal
1998. All of the current directors attended at least 75% of the meetings of the
Board of Directors and each committee of the Board on which they served during
fiscal 1998.
During fiscal 1998, the Board of Directors of the Company had three
standing committees: the Audit Committee (comprised of Messrs. Greaves,
Malkowicz and Vinke), the Compensation Committee (comprised of Messrs. Greaves,
Myers, Noonan and Wells), and the Executive Committee (comprised of Messrs.
Greaves, Malkowicz, Noonan, Vinke and Zehner). The Audit Committee held two
meetings, the Compensation Committee held four meetings, and the Executive
Committee held three meetings during fiscal 1998.
The Audit Committee reviews the arrangements for and the scope of the
independent audit, as well as the results of the audit engagement. The Audit
Committee also makes recommendations to the Board of Directors regarding the
retention or discharge of the Company's independent auditors. The Compensation
Committee reviews and makes recommendations to the Board of Directors regarding
salaries, compensation, bonuses, benefits and option grants for executive
officers and key employees. The Executive Committee was formed to expedite
certain matters relative to the management of the Company in lieu of a formal
board meeting and has all of the authority of the Board of Directors except with
respect to (i) the approval of any action for which the General Corporation Law
or the Articles of Incorporation also require shareholder approval; (ii) the
filling of vacancies on the Board or in any committee; (iii) the fixing of
compensation of the directors for serving on the Board or on any committee; (iv)
the adoption, amendment or repeal of By-Laws; (v) the amendment or repeal of any
resolution of the Board; (vi) any distribution to the shareholders; and (vii)
the appointment of other committees of the Board or the members thereof. The
Executive Committee preliminarily reviews and has the authority to approve
acquisition proposals up to a maximum of $1,000,000 and also performs searches
and makes recommendations for nominations of new Board members. Each committee
makes recommendations to the Board of Directors for further action by it.
EXECUTIVE OFFICERS
As of August 14, 1998, the executive officers of the Company were as
follows:
R. Malcolm Greaves, President, Chief Executive Officer and Director.
Biographical information regarding Mr. Greaves is set forth above under
"Nominees for Election as Director."
Lonnie D. Schnell, 49, joined the Company as Chief Financial Officer
and Secretary in November 1994. From August 1990 through October 1994, Mr.
Schnell was Vice President and Controller of Teleflex Control Systems, Inc., an
electromechanical actuator and cargo handling business. Effective September 3,
1998, Patricia A. Wehr replaced Lonnie D. Schnell as Chief Financial Officer and
Secretary.
Henry Mason, 48, was appointed Managing Director of HESL in January
1997. He has been employed by HESL since its formation in the United Kingdom in
1978 where he held the position of Business Manager for its Mining Products
Division. In 1987, he was appointed Sales Manager for HESL and was appointed
Sales and Marketing Director in April 1993.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1998, there were no transactions with members of the
Board of Directors or management which require disclosure under SEC
requirements.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Company's
directors, its executive officers, and any persons holding more than ten percent
of the Company's Common Stock are required to report their initial ownership of
the Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange
8
<PAGE> 10
Commission. Specific filing deadlines of these reports have been established and
the Company is required to disclose in this Proxy Statement any failure to file
by these dates during the fiscal year ended May 30, 1998. Based solely upon a
review of Forms 3 and 4 and amendments thereto furnished to the Company during
the fiscal year ended May 30, 1998 and Forms 5 and amendments thereto furnished
to the Company with respect to the fiscal year ended May 30, 1998, and written
representations, all of these filing requirements have been satisfied, except
that W. Bradley Zehner II, Ph.D., a director, made one late filing on Form 4,
relating to one transaction. All such filings have been made as of the date
hereof.
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation paid by the
Company, together with long term and other compensation, for each of the last
three fiscal years to its Chief Executive Officer and to each of its executive
officers whose total salary and bonus from the Company exceeded or equaled
$100,000 in fiscal 1998 (the "Named Executive Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------
Long-term
Compensation
Other Annual Awards - Stock All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($)(2) Options(#)(3) Compensation($)(4)
- ------------------------------ ------ ----------- --------- ------------------ -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
R. Malcolm Greaves(1) 1998 $233,500 $41,000 $4,200 -- $ 31,000
President and Chief 1997 205,500 124,500 2,000 -- 30,000
Executive Officer 1996 165,200 110,000 -- 43,000 29,500
Lonnie D. Schnell 1998 117,500 19,000 4,500 -- --
Chief Financial Officer and 1997 105,700 42,800 2,400 15,000 --
Secretary(5) 1996 100,900 40,000 1,500 30,000 --
Henry Mason 1998 92,800 24,700 2,100 -- 19,600
Managing Director of HESL 1997 88,000 39,600 1,600 10,000 17,000
1996 66,800 24,800 1,600 -- 15,500
</TABLE>
- --------------------------
1 Mr. Greaves was appointed President and Chief Executive Officer in
February 1996.
2 Automobile allowance and employer's matching contribution to the
Haskel International, Inc. Retirement Savings Plan.
3 Options granted under the Company's Stock Option Plans.
4 Company's contribution to HESL Pension Plan.
5 Effective September 3, 1998, Patricia A. Wehr replaced Lonnie D.
Schnell as Chief Financial Officer and Secretary.
9
<PAGE> 11
EMPLOYMENT AGREEMENTS
The Company established, effective March 1, 1996, an Executive
Separation Pay Plan (the "Separation Pay Plan"), to establish a uniform basis
for providing separation allowances to certain executives when their positions
are eliminated or when they are terminated for reasons other than for cause. The
Separation Pay Plan is administered by the Compensation Committee. The Board of
Directors or the Compensation Committee has absolute discretion to designate
those executives who are covered by the Separation Pay Plan (a "Covered
Employee"). The amount of separation allowance which a Covered Employee is
entitled to receive is determined by the Board of Directors and specified as a
number of months of the Covered Employee's base salary as of the date of
termination of employment. Presently, the following Named Executive Officers are
the only executives designated as Covered Employees under the Separation Pay
Plan (specified period for separation allowance indicated in parentheses): R.
Malcolm Greaves, President and Chief Executive Officer (12 months); and Lonnie
D. Schnell, Chief Financial Officer and Secretary (8 months).
In September 1997, the Company entered into Change in Control Agreements
with R. Malcolm Greaves, President and Chief Executive Officer; Lonnie D.
Schnell, Chief Financial Officer and Secretary; and Henry Mason, Managing
Director of HESL. Such agreements were put in place in order to encourage the
executive to continue his employment with Haskel and to devote full attention to
Haskel's business notwithstanding the possibility, threat, or occurrence of an
acquisition, merger, or change of control of Haskel International, Inc. The
agreements provide for a continuation of employment in the executive's position
or a position of comparable responsibility and compensation. In the event of
termination following a change of control, salary and benefits continue for a
period of three years after the change of control for Mr. Greaves, and for a
period of two years for Mr. Schnell and Mr. Mason.
With the exception of the employment and change in control agreements
described above, the Company has no employment agreements with any of the Named
Executive Officers.
STOCK OPTION PLANS
1989 Incentive Stock Option Plan
The Haskel International, Inc. 1989 Incentive Stock Option Plan, as
amended (the "1989 ISO Plan") is administered by the Compensation Committee.
Subject to the terms of the 1989 ISO Plan, the Compensation Committee
establishes the terms and conditions applicable to option grants under said
Plan. The 1989 ISO Plan has a term of ten years and provides for the sale by the
Company of a maximum of 450,000 shares of Class A Common Stock, subject to
adjustments to reflect any future change in capitalization of the Company. As of
May 30, 1998, there were options granted and outstanding for 65,040 shares at an
exercise price of $9.46 per share, 50,000 shares at an exercise price of $8.03
per share, and 38,086 shares at an exercise price of $7.18 per share.
Nonqualified Stock Option Plan
The Haskel International, Inc. Stock Option Plan, as amended (the
"Nonqualified Plan"), is also administered by the Compensation Committee. The
Nonqualified Plan differs from the 1989 ISO Plan in that the 1989 ISO Plan is
qualified under the Internal Revenue Code as an Incentive Stock Option plan
entitling the optionee to certain income tax benefits, to which the optionee
under the Nonqualified Plan is not entitled. Subject to the terms of the
Nonqualified Plan, the Compensation Committee establishes the terms and
conditions applicable to option grants under said Plan. The Nonqualified Plan
has a term of ten years and provides for the sale by the Company of a maximum of
650,000 shares of Class A Common Stock, subject to adjustments to reflect any
future change in capitalization of the Company. As of May 30, 1998, there were
options granted and outstanding under the Nonqualified Plan for 92,667 shares at
an exercise price of $7.00 per share. 127,247 shares at an exercise price of
$7.18 per share, 87,500 shares at an exercise price of $9.46 per share, 21,600
shares at an exercise price of $10.00 per share.
10
<PAGE> 12
1995 Incentive Stock Option Plan
The Haskel International, Inc. 1995 Incentive Stock Option Plan (the
"1995 ISO Plan") permits certain employees of the Company and its subsidiaries
who are responsible for the management, growth and protection of the business of
the Company or its subsidiaries to be granted the right to purchase shares of
Class A Common Stock at the fair market value per share at the date of grant.
The 1995 ISO Plan is designed to assist the Company in securing and retaining
employees of outstanding ability and to motivate such individuals to exert their
best efforts on behalf of the Company. The 1995 ISO Plan is administered by the
Stock Option Committee of the Board of Directors, consisting of disinterested
directors as that term is defined by Rule 16b-3 under the Securities Exchange
Act of 1934, as amended. The Committee selects employees who may purchase shares
under the 1995 ISO Plan and establishes, subject to the terms of the 1995 ISO
Plan, the terms and conditions applicable to such purchase. In order to purchase
shares, an employee is required to enter into a purchase agreement with the
Company. The 1995 ISO Plan has a term of ten years and provides for the grant of
options to purchase an aggregate of 240,000 shares of Class A Common Stock, plus
the number of shares available as a result of presently outstanding options
which lapse because of nonexercise under the 1989 ISO Plan. That additional
number of shares cannot be determined at this time, but cannot exceed the total
number of 773,885 shares subject to options which are currently outstanding and
unexercised. The number of shares is also subject to adjustments to reflect any
future changes in the capitalization of the Company. As of May 30, 1998, there
were options granted and outstanding for 50,000 shares at an exercise price of
$5.375 per share, 43,000 shares at an exercise price of $6.50 per share, 5,000
shares at an exercise price of $7.25 per share, 8,000 shares at an exercise
price of $7.50 per share, 45,000 shares at an exercise price of $7.625 per
share, 5,000 shares at an exercise price of $9.00 per share, 65,000 shares at an
exercise price of $10.00 per share, 5,000 shares at an exercise price of $10.625
per share, and 5,000 shares at an exercise price of $12.00 per share.
1995 Formula Stock Option Plan
The Haskel International, Inc. 1995 Formula Stock Option Plan (the
"1995 Formula Plan") permits directors, who are not employees of the Company or
its subsidiaries ("Outside Directors"), and who have been granted options under
said Plan, the right to purchase shares of Class A Common Stock at the fair
market value per share at the date of the grant. Because the 1995 Formula Plan
operates by its own terms, and there are no discretionary decisions, there is no
committee needed to administer the 1995 Formula Plan. The 1995 Formula Plan is
designed to assist the Company in attracting and retaining high quality Outside
Directors. Every new Outside Director, upon becoming a director of the Company,
is granted an option to purchase 10,000 shares of Class A Common Stock. Such
options vest in equal amounts over five years, with the first installment
vesting on the first anniversary of the Outside Director's appointment as
director. Additional options are granted to each Outside Director if the
Company's performance exceeds certain benchmarks. All options granted under the
1995 Formula Plan become 100% vested in the event of a change in control of the
Company. The 1995 Formula Plan provides for grants of options to purchase an
aggregate of 40,000 shares of Class A Common Stock. The number of shares is also
subject to adjustments to reflect any future changes in the capitalization of
the Company. As of May 30, 1998, there were options granted and outstanding for
10,000 shares at an exercise price of $6.625 per share, 10,000 shares at an
exercise price of $8.00, 10,000 shares at an exercise price of $12.00, and
10,000 shares at an exercise price of $14.00.
11
<PAGE> 13
OPTION GRANTS IN LAST FISCAL YEAR
No stock options were granted to the Named Executive Officers during
fiscal 1998.
STOCK OPTION EXERCISES AND OPTIONS OUTSTANDING
The following table provides certain information regarding outstanding
options held by the Named Executive Officers at May 30, 1998:
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised
Acquired on Value Underlying Unexercised In-the-Money
Name Exercise (#) Realized ($) Options at May 30, 1998 (#) Options at May 30, 1998 ($)
- ---- ------------ ------------- ----------------------------- -----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Malcolm Greaves 0 $ 0 131,800 17,200 $ 377,480 $ 68,800
Lonnie D. Schnell 0 $ 0 21,000 24,000 $ 93,750 $ 67,500
Henry Mason 0 $ 0 15,270 12,000 $ 28,131 $ 32,880
</TABLE>
RETIREMENT PLANS
Haskel International, Inc. Profit Sharing Plan
The Haskel International, Inc. Profit Sharing Plan, as amended (the
"PSP"), covers all of Haskel International, Inc.'s employees and employees of
its U.S. subsidiaries, but not employees of HESL or its subsidiaries. The
purpose of the PSP is to enable participating employees of the Company to share
in a portion of the profits and in the growth and prosperity of the Company and
to provide them with the opportunity to accumulate capital for their future
economic security. Generally, employees whose employment terminates for any
reason other than death or retirement are vested after five years of service.
The Company's matching contribution is determined annually by the Board of
Directors of the Company. The PSP is administered by a four-member
administrative committee of employees (the "Administrative Committee") appointed
by the Board of Directors. The Board of Directors retains an independent
corporate trustee who holds all funds in trust.
Effective June 1, 1997, the Company amended the PSP to adopt the Haskel
International, Inc. Retirement Savings Plan. The Company adopted the Plan to
meet the requirements of a qualified retirement plan pursuant to the provisions
of Section 401(k) of the Internal Revenue Code.
HESL Pension Plan
All of HESL's employees who work at least 16 hours per week, who are at
least 21 years of age, and have been with HESL for one year or more are eligible
to join the Haskel Retirement Benefits Plan, a contributory pension plan (the
"HESL Pension Plan"). Mr. Greaves and Mr. Mason are the only executive officers
who are currently participating in the HESL Pension Plan. Currently, the pension
costs are equivalent to 15% of the individual's pensionable salary (basic annual
salary or wages at the HESL Pension Plan anniversary, which is June 1 of each
year) and are borne 80% by HESL and 20% by the individual. The pension benefits
payable are on a final salary basis, i.e. pension benefits accrue at the rate of
1/60th of final pensionable salary for each complete year of service with HESL
less deductions to take into account earnings between the lower-level earnings
and upper-level earnings limits originally set down in SERPS (State Earnings
Related Pension Scheme). Pension benefits are subject to an annual
cost-of-living increase of not less than 3% nor more than 5%. Four directors of
HESL have an enhancement to their pension plan (the "Haskel Discretionary
Benefits Scheme"), whereby pension benefits accrue at the rate of 1/40th of
pensionable salary but, again, subject to the deductions described in the
preceding sentence. The normal retirement age for both men and women is 65
years. The HESL Pension Plan additionally provides for a death-in-
12
<PAGE> 14
service lump sum payment of twice salary (in the case of the four directors'
pension enhancement scheme, four times salary) and a spouse's pension of
two-thirds the prospective pension at date of death of the employee. The funds
are held and invested by Norwich Union on behalf of the trustees of the HESL
Pension Plan, and HESL is assisted in its management of the HESL Pension Plan by
Sedgwick Noble Lowndes, who are pension advisers. The trustees responsible for
the HESL Pension Plan are HESL's secretary, a retired director of HESL, an
employee of HESL and a representative of HESL's legal counsel, Dickinson Dees.
The following table sets forth annual pension benefits under the HESL
Pension Plan on a straight-line annuity basis for representative years of
service as defined in the HESL Pension Plan at an accrual rate of 1/60th of
final pensionable salary. Amounts shown assume retirement at age 65 on January
1, 1998. Other than the adjustment described in footnote 2 below, such benefits
are not subject to reduction for benefits and other offset amounts. As of May
30, 1998, Mr. Greaves and Mr. Mason had approximately 9 and 27 years of service,
respectively, credited under the HESL Pension Plan.
HESL Pension Plan Table
<TABLE>
<CAPTION>
Estimated Annual Retirement Benefit at Age 65 for Indicated Years of Credited Service(2)
----------------------------------------------------------------------------------------
Final Pensionable Salary(1) 5 10 15 20 25 30 35
- ------------------------- ------- ------- ------- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 4,167 $ 8,333 $12,500 $16,667 $20,833 $ 25,000 $ 29,167
75,000 6,250 12,500 18,750 25,000 31,250 37,500 43,750
100,000 8,333 16,667 25,000 33,333 41,667 50,000 58,333
125,000 10,417 20,833 31,250 41,667 52,083 62,500 72,917
150,000 12,500 25,000 37,500 50,000 62,500 75,000 87,500
200,000 16,667 33,333 50,000 66,667 83,333 100,000 116,667
</TABLE>
- --------------------------
1 Calculated based on highest average of three consecutive years'
pensionable salaries at June 1 during the 13-year or shorter period
prior to retirement.
2 Benefits under the HESL Pension Plan are reduced by an amount of
1/100th of the employee's earnings in excess of a lower earnings limit
(as of April 6, 1998, such limit was (pound)3,328, subject to annual
adjustment), not to exceed an upper earnings limit (as of April 6,
1998, such limit was (pound)25,2200, subject to annual increase) times
the number of years in service after April 6, 1978.
REPORT OF COMPENSATION COMMITTEE
The Compensation Committee reviews and makes recommendations to the
Board of Directors regarding salaries, bonuses, benefits and other compensation
for executive officers and key employees of the Company. This Compensation
Committee report discusses the components of the Company's executive officer
compensation policies and programs and describes the bases upon which
compensation is determined by the Compensation Committee with respect to the
executive officers of the Company, including the Named Executive Officers.
Compensation Philosophy. The compensation philosophy of the Company is
to link executive compensation directly to individual and team contributions,
continuous improvements in corporate performance and shareholder value. The
Compensation Committee has adopted the following objectives as guidelines for
compensation decisions:
o Display a willingness to pay levels of compensation that are
necessary to attract and retain highly qualified executives.
o Be willing to compensate executive officers in recognition
of superior individual performance, new responsibilities or new positions within
the Company.
o Take into account historical levels of executive
compensation and the overall competitiveness of the market for high quality
executive talent.
o Implement a balance between short and long-term compensation
to complement the Company's annual and long-term business objectives and
strategy and encourage executive performance in furtherance of the fulfillment
of those objectives.
13
<PAGE> 15
o Provide variable compensation opportunities based on the
performance of the Company, encourage stock ownership by executives and align
executive remuneration with the interests of shareholders.
The Compensation Committee is aware of the $1,000,000 cap on deductions
for compensation imposed by the Internal Revenue Code. While that cap does not
have an impact on the Company at present, the Compensation Committee will take
appropriate steps to make the Company's compensation policy comply should
circumstances warrant in the future.
Compensation Program Components. The Compensation Committee regularly
reviews the Company's compensation program to ensure that pay levels and
incentive opportunities are competitive with the market and reflect the
performance of the Company. The particular elements of the compensation program
for executive officers are further explained below.
Base Salary. The Company's base pay levels for executive officers are
determined by the particular responsibilities of the position held and the
experience of the individual and by comparing the salary scale with companies of
similar size and complexity. Actual base salaries are kept within a competitive
salary range for each position that is established through job evaluation and
market comparisons.
Chief Executive Officer's Compensation. The Chief Executive Officer
("CEO") of the Company heads a group of senior management officers who
participate in a common set of compensation criteria linked to the performance
of the Company. The compensation of the CEO is determined by the Compensation
Committee and approved by the Board of Directors based upon its assessment of
the Company's financial performance and non-financial performance measured
against a background of factors which are critical to the success of the
business. The Compensation Committee exercises its judgment in weighting the
factors and evaluating performance. The CEO, who currently sits on the
Compensation Committee, does not participate in deliberations regarding his own
compensation.
Annual Bonus. The executive bonus program provides for the granting of
cash bonuses to the senior managers (including the Named Executive Officers) of
the Company. The objective of the bonus is to enhance management's contribution
to shareholder value by providing competitive levels of compensation for the
attainment of financial objectives. In particular, the executive bonus program
focuses corporate behavior on consistent and steady earnings growth by basing
performance on a comparison of actual results to the Company's annual budget.
Actual bonuses are subject to decrease or increase on the basis of the Company's
performance and range up to 55% of base salary for attaining goals. Based on the
Company's performance during fiscal year 1998, bonuses were paid to the Named
Executive Officers and the majority of the senior management.
Summary. After its review of all existing programs, the Compensation
Committee continues to believe that the total compensation program for
executives of the Company is focused on increasing values for shareholders and
enhancing corporate performance. The Compensation Committee believes that
executive compensation levels of the Company are competitive with the
compensation programs provided by other corporations with which the Company
competes. The foregoing report has been approved by all members of the
Compensation Committee.
COMPENSATION COMMITTEE
Stanley T. Myers, Chairman
R. Malcolm Greaves
Terrence A. Noonan
H. Carr Wells
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During fiscal 1998, Stanley T. Myers, R. Malcolm Greaves, Terrence A.
Noonan, and H. Carr Wells served as members of the Compensation Committee of the
Board of Directors, which determines salaries of the Company's employees. Mr.
Greaves, President and Chief Executive Officer of the Company, did not
participate in deliberations regarding his own compensation.
14
<PAGE> 16
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total
shareholders' return since the Class A Common Stock became publicly traded on
November 1, 1994, with the Nasdaq Stock Market (National Market) Index, the
Standard & Poor's 500 Index and with a peer group comprised of companies which
manufacture high-pressure equipment and with which the Company generally
competes. The peer group is comprised of the following companies: Flowserve
Corp., Flow International Corp., IDEX Corp., Oilgear Co. and Watts Industries
Inc. The graph and table assume that $100 was invested on November 1, 1994 in
the Company's Class A Common Stock, at the initial public offering price of
$10.00 per share, and in each of the indexes mentioned above, and that all
dividends were reinvested.
INDEXED RETURNS
FISCAL YEAR
<TABLE>
<CAPTION>
BASE
PERIOD
COMPANY/INDEX 11/1/94 1995 1996 1997 1998
- ------------- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
HASKEL INTERNATIONAL, INC. 100 68.49 74.25 111.16 117.98
NASDAQ COMPOSITE 100 111.84 162.55 183.13 232.71
PEER GROUP 100 119.17 130.08 150.36 169.84
</TABLE>
15
<PAGE> 17
PROPOSAL NO. 2
APPROVAL OF THE
1998 LONG-TERM PERFORMANCE INCENTIVE PLAN
Acting upon the recommendation of the Compensation Committee, on May 28,
1998, the Company's Board of Directors unanimously approved a proposal to adopt
the Company's 1998 Long-term Performance Incentive Plan (the "Plan") and
directed that the proposal be submitted for shareholder consideration and action
at the annual meeting. The resolution to be proposed at the annual meeting is
attached to this Proxy Statement as Appendix A.
The Board of Directors has determined that the Plan is in the best
interest of the Company and its shareholders. The Board of Directors believes
that the grant of long-term performance incentives is an effective method to
attract and retain key employees and that the availability of shares of the
Company's stock for future grants is important to the Company's business
prospects and operations. In the 1997 fiscal year, the shareholders approved the
merger of the Company's 1995 ISO Plan and the 1989 ISO Plan into the Combined
Plan. The Combined Plan will expire in October, 1999 leaving the Company without
an approved stock option plan for long-term incentive awards. In the judgment of
the Board of Directors, approval of the 1998 Long-term Performance Incentive
Plan is important to ensure that the Company continues to have authorized shares
available for grants. Approval of the Plan by the shareholders will initially
authorize 250,000 shares of Class A Common Stock for issuance, and ratify the
grant of options made in the 1999 fiscal year under the Plan.
The following discussion summarizes the principal features of the Plan.
This discussion does not purport to be complete and is qualified in its entirety
by reference to the Plan, a copy of which is attached to this Proxy Statement as
Appendix B.
The Plan provides for the reservation of 250,000 shares of Class A
Common Stock of the Company for issuance upon the grant of incentives. The Plan
further provides that beginning June 1, 2000, and then annually thereafter, an
additional number of shares of the outstanding Class A Common Stock, equal to 3%
of the then outstanding shares, also be made available for grants.
The purpose of the Plan is to provide incentives to and to encourage the
ownership of Haskel International, Inc. stock by directors, officers, and other
employees of the Company and its subsidiaries. The Plan provides for stock
options which qualify as incentive stock options ("ISOs") under section 422 of
the Internal Revenue Code of 1986, as amended, as well as stock options which do
not qualify (non-statutory or non-qualified). The Plan further provides for the
issuance of Stock Appreciation Rights, Restricted Stock, Performance Shares, and
Other Stock Unit Awards, as deemed appropriate by the Compensation Committee.
The Plan is not a qualified deferred compensation plan under Section 401(a) of
the Internal Revenue Code and is not subject to the provisions of ERISA.
The Plan provides that an appropriate adjustment of shares available
under the Plan may be made in the event of any change in the number of
outstanding shares of Common Stock of the Company resulting from
reorganizations, recapitalization, reclassification, stock dividends, stock
splits or other similar events. All employees (including employee-directors),
and non-employee directors of the Company and its subsidiaries are eligible to
be granted options under the Plan.
The Plan will be administered by the Compensation Committee appointed by
the Board of Directors. The Compensation Committee has the authority to (i)
construe and interpret the Plan, (II) define the terms used therein, (iii)
prescribe, amend and rescind rules and regulations relating to the Plan, (iv)
determine the individuals to whom and the time or times at which options shall
be granted, the number of shares to be subject to each option, the terms of
vesting of each option, and the duration of each option, (v) amend the terms of
any outstanding option, with the consent of the option holder, and (vi) make all
other determinations necessary or advisable for the administration of the Plan.
The Plan will become effective on October 30, 1998, the date of approval
by the shareholders of
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the Company (the "Effective Date"). The Plan will terminate on the tenth
anniversary of the adoption of the Plan.
The exercise price of each option granted under the Plan must be at
least 100 percent of the fair market value per share of the Class A Common Stock
on the date the option is granted, except that options granted to a shareholder
who owns stock possessing more than 10 percent of the combined voting power of
all classes of stock (a "Ten Percent Holder') shall be at an exercise price no
less than 110 percent of fair market value an the date of grant. All options
granted pursuant to the Plan will expire no later than ten years from their
grant date, provided that any option granted to a Ten Percent Holder shall be
exercised within five years from the date of its grant
The Plan provides that an optionee whose employment relationship has
terminated may exercise his or her outstanding options for a period of three
months from the date of such termination, or within one year if permanently
disabled. If an option holder dies, his or her personal representative may
exercise such outstanding options within three months after the date of death
unless the option by its terms expires sooner. No option is transferable by the
optionee other than by will or the laws of descent and distribution.
The consideration to be received by the Company upon exercise of options
is to be paid (i) in cash, (ii) in the discretion of the Compensation Committee,
in previously owned shares of Class A Common Stock (which the optionee, if a
director or executive officer, has held at least six months prior to delivery of
such shares and for which the optionee has good title free and clear of all
liens and encumbrances) having an equivalent fair market value determined as of
the date of exercise or (iii) in the discretion of the Compensation Committee, a
combination of (i) and (ii), and by executing such documents as the Company may
reasonably request. No shares of Class A Common Stock shall be delivered until
the full purchase price therefor has been paid.
The Compensation Committee may at any time suspend or terminate the
Plan. The Compensation Committee may also at any time amend or revise the Plan
as it shall deem advisable, subject to any requirement of shareholder approval
required by applicable law, including Section 422 of the Internal Revenue Code
(the "Code"), provided, however, that no amendment shall be made without
shareholder approval if such amendment would (i) increase the maximum number of
shares of Class A Common Stock available under the Plan, (ii) reduce the minimum
purchase price per share of Class A Common Stock subject to an option, (iii)
effect any change inconsistent with Section 422 of the Code or (iv) extend the
term of the Plan or the maximum period during which an option may be exercised;
provided, further, that the Plan shall not be amended in a manner which fails to
comply with Rule 16b-3 under the Exchange Act. No amendment may impair the
rights of a holder of an outstanding option without the consent of such holder.
The federal income tax consequences associated with incentive stock
options are generally more favorable to the optionee and less favorable to the
employer than those associated with stock options which are not incentive stock
options. Under current federal income tax law, the grant of an incentive stock
option does not result in income to the optionee or in a deduction for the
Company at the time of the grant. The exercise of an incentive stock option will
not result in income for the optionee if the optionee (i) does not dispose of
the shares within two years after the date of grant or within one year after
exercise and (ii) is an employee of the Company or any of its subsidiaries from
the date of grant until three months before the exercise date (one year if
disabled). If these requirements are met, the basis of the shares upon later
disposition would be the option price. Any gain will be taxed to the optionee as
long-term capital gain and the Company will not be entitled to a deduction. If
the optionee disposes of the shares prior to the expiration of either of the
holding periods described above, the optionee would have compensation taxable as
ordinary income, and the Company would be entitled to a deduction equal to the
lesser of the fair market value of the shares on the exercise date minus the
option price or the amount realized on disposition minus the option price. If
the price realized in any such premature sale of the shares exceeds the fair
market value of the shares on the exercise date, the excess will be treated as
long-term or short-term capital gain depending on the optionee's holding period
for the shares.
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It is not possible to determine how many eligible employees will
participate in the plan in the future. Therefore, it is not possible to
determine with certainty the dollar value or number of Class A Common Shares
that will be distributed under the Plan. Because participation in the Plan is
optional, it is not possible to determine the benefits or amounts that would
have been received by the CEO, Named Executive Officers, or any other directors
or officers of the Company under the plan during Fiscal Year 1998.
Shareholders will be asked at the annual meeting to vote upon the
proposal to approve the Plan and to ratify the previous grant of options under
the Plan.
Unless otherwise directed, the persons named in the enclosed Proxy
intend to vote in favor of the Plan and to ratify the grant of options
heretofore.
An affirmative vote by the holders of a majority of the outstanding
shares of Class A Common Stock and Class B Common Stock, voting together,
present in person or represented by proxy at the meeting is required for
approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'FOR' THIS PROPOSAL.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors recommends that shareholders vote to ratify the
appointment of Deloitte & Touche LLP as the Company's independent auditors for
the 1999 fiscal year. Deloitte & Touche LLP served as the Company's independent
auditors for the fiscal year ended May 30, 1998. Representatives of Deloitte &
Touche LLP are expected to be present at the meeting and will have an
opportunity to make a statement if they desire to do so and to respond to
appropriate questions.
An affirmative vote by the holders of a majority of the outstanding
shares of Class A Common Stock and Class B Common Stock, voting together,
present in person or represented by proxy at the meeting is required for
approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
OTHER BUSINESS
The Board of Directors does not know of any other business to be
presented to the Annual Meeting and does not intend to bring any other matters
before such meeting. If any other matters properly do come before the Annual
Meeting, however, the persons named in the accompanying proxy are empowered, in
the absence of contrary instructions, to vote according to their best judgment.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
If a shareholder wishes to present a proposal at the next Annual
Meeting of Shareholders, such a proposal must be received by the Company at its
principal executive offices prior to May 29, 1999.
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<PAGE> 20
AVAILABILITY OF REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for fiscal year 1998
as filed with the Securities and Exchange Commission is available upon written
request and without charge to any shareholder by writing to: Haskel
International, Inc., 100 East Graham Place, Burbank, CA 91502, Attn: Patricia A.
Wehr, Secretary.
By Order of the Board of Directors,
/s/ PATRICIA A. WEHR
------------------------
Patricia A. Wehr
Secretary
Burbank, California
September 21, 1998
PLEASE PROMPTLY DATE, SIGN AND RETURN THE ENCLOSED PROXY, WHETHER OR
NOT YOU EXPECT TO ATTEND THE MEETING. A RETURN ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO ADDITIONAL POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED
STATES. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE APPRECIATED. AT
ANY TIME BEFORE A VOTE YOU MAY REVOKE YOUR PROXY BY (1) A LATER PROXY OR A
WRITTEN NOTICE OF REVOCATION DELIVERED TO THE INSPECTOR OF ELECTIONS OR (2)
ADVISING THE INSPECTOR OF ELECTIONS AT THE MEETING THAT YOU ELECT TO VOTE IN
PERSON. ATTENDANCE AT THE MEETING WILL NOT IN AND OF ITSELF REVOKE A PROXY.
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APPENDIX A
RESOLUTION REGARDING THE APPROVAL OF THE
1998 LONG-TERM PERFORMANCE INCENTIVE PLAN
RESOLVED that the 1998 Long-term Performance Incentive Plan of the Company, with
the terms and conditions as set forth in Appendix B to the Proxy Statement
delivered to the shareholders of the Company in connection with this meeting, is
hereby approved.
RESOLVED FURTHER, that the granting heretofore during the fiscal year of the
Company ending May 29, 1999, of options for the purchase of 25,000 shares of the
Class A Common Stock of the Company pursuant to the 1998 Long-term Performance
Incentive Plan of the Company is hereby ratified, approved and confirmed.
APPENDIX B
HASKEL INTERNATIONAL, INC.
1998 LONG-TERM PERFORMANCE INCENTIVE PLAN
1. PURPOSE.
The purpose of the Haskel International, Inc. 1998 Long-Term
Performance Incentive Plan (the "Plan") is to provide incentives to and to
encourage the ownership of Haskel International, Inc. (the "Company") stock by
directors, officers, and other employees of the Company and its subsidiaries.
The Plan provides for stock options which qualify as incentive stock options
("ISOs") under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), as well as stock options which do not qualify (non-statutory or
non-qualified). The Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code and is not subject to the provisions of ERISA.
2. ADMINISTRATION.
2.1 The Plan shall be administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"), consisting of not less than two
members of the Board of Directors of the Company (the "Board").
2.2 Subject to the limitations of the Plan, the Committee shall have
the sole and complete authority (a) to select those employees and non-employee
directors who shall be eligible to have awards made to them under the Plan from
the class of employees eligible to have awards made to them (as is identified in
Section 4 of this Plan) ("Participants"), (b) to make awards in such forms and
amounts as it shall determine and to cancel or suspend awards, (c) to impose
such limitations, restrictions, and conditions upon awards as it shall deem
appropriate, (d) to interpret the Plan and to adopt, amend, and rescind
administrative guidelines and other rules and regulations relating to the Plan
and (e) to make all other determinations and to take all other actions necessary
or advisable for the proper administration of the Plan. Determinations of fair
market value under the Plan shall be made in accordance with the methods and
procedures established by the Committee. For purposes of the Plan, the fair
market value of any award which is issued as an incentive stock option shall be
determined without regard to any restriction other than a restriction which, by
its terms, will never lapse. The Committee's determinations on matters within
its authority shall be conclusive and binding on the Company and all other
parties. No member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any award made
under it. The Committee may select one of its members as its Chairman, and shall
hold meetings at such times and places as it may determine. Acts by a majority
of the Committee, or acts reduced to or approved in writing by a majority of the
members of the Committee without a meeting, shall be the valid acts of the
Committee.
2.3 The "fair market value" of Company stock shall mean the closing
price of that class of stock
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<PAGE> 22
as of the day in question (or, if such day is not a trading day in the principal
securities market or markets for such stock, on the nearest preceding trading
day), as reported with respect to the market (or the composite of markets, if
more than one) in which shares of such stock are then traded, or, if no such
closing prices are reported, on the basis of the mean between the high bid and
low asked prices that day on the principal market or quotation system on which
shares of such stock are then quoted, or, if not so quoted, as furnished by a
professional securities dealer making a market in such stock selected by the
Board or the Committee. If at any time the stock is not then publicly traded,
fair market value shall be established by the Committee or, at the discretion of
the Committee, by an independent appraiser or appraisers selected by the
Committee. In such case, the determination by the Committee or its appraiser or
appraisers of the fair market value of the stock shall be conclusive and
binding. For purposes of this Section 2.3, stock shall be considered "publicly
traded" if stock of that class is listed or admitted to unlisted trading
privileges on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. ("NASD") or if sales or bid and offer quotations are
reported for that class of stock in the automated quotation system ("NASDAQ")
operated by the NASD.)
3. TYPES OF AWARDS.
Awards under the Plan shall constitute or be otherwise based on Class A
Common shares of the Company ("Common Shares") and may be issued in any one or
more of the following: (a) stock options, including ISOs, (b) stock appreciation
rights ("SARs"), in tandem with stock options or free-standing, (c) restricted
stock, (d) performance shares and performance units conditioned upon meeting
performance criteria and, (e) other awards valued in whole or in part by
reference to or otherwise based on Common Shares ("other stock unit awards"). In
connection with any award or any deferred award, payments may also be made
representing dividends or interest or their equivalent. No awards shall be
granted under the Plan after ten years from the date the Plan is approved by the
shareholders of the Company or the date the Plan is adopted by the Board,
whichever occurs earlier.
4. SHARES SUBJECT TO PLAN AND ELIGIBLE EMPLOYEES/DIRECTORS.
4.1 Subject to adjustment as provided in Section 12 below, the
aggregate number of Common Shares which may be issued upon exercise of stock
options, including ISOs, or rights or upon any awards hereunder shall not exceed
250,000 shares, which is equal to approximately 5.3% of the total Common Shares
of the Company outstanding on May 31, 1998, plus such additional Common Shares
each fiscal year thereafter beginning June 1, 2000, which are equal in number to
3% of the number of Common Shares outstanding as of the first day of each such
fiscal year. In the future, if another company is acquired by the Company or any
of its subsidiaries, any Common Shares covered by or issued as a result of the
assumption or substitution of outstanding grants of the acquired company shall
not be deemed issued under the Plan and shall not be subtracted from the Common
Shares available for grant under the Plan. The Common Shares deliverable under
the Plan may consist in whole or in part of authorized and unissued shares or
issued shares which have been repurchased by the Company. Notwithstanding the
foregoing, if any award is forfeited, or an award is terminated without issuance
of Common Shares or other consideration, the Common Shares subject to such award
shall again be available for grant pursuant to the Plan.
4.2 The class eligible to have awards made to them under the Plan shall
be all employees and non-employee directors of the Company and its subsidiaries
as selected by the Committee.
4.3 Non-employee directors may only receive non-qualified options under
this Plan.
5. STOCK OPTIONS.
All stock options granted under the Plan shall be subject to the
following terms and conditions:
5.1 The Committee may, from time to time, subject to the provisions of
the Plan and such other terms and conditions as the Committee may prescribe,
grant to any Participant options to purchase Common Shares, which options,
except for options granted to Participants who are non-employee directors, may
be ISOs, options that are not ISOs, or both. The grant of an option shall be
evidenced by a signed written agreement ("Stock Option Agreement") containing
such terms and conditions as the Committee may from
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time to time prescribe. Options granted under the Plan which are intended to be
ISOs shall be designated as such in the Stock Option Agreement covering such
options.
5.2 The price per share of the shares subject to each option shall be
set by the Committee; provided, however, that such price shall be no less than
the par value of a Common Share and in the case of an ISO such price shall not
be less than one hundred percent (100%) of the fair market value of a Common
Share as of the date the option is granted; provided further, that in the case
of ISOs such price shall be no less than one hundred ten percent (110%) of the
fair market value of a Common Share as of the date the option is granted if such
option is granted to a person who owns ten percent (10%) or more of the issued
and outstanding Common Shares of the Company as of such date.
5.3 The term of an option shall be set by the Committee in its
discretion; provided, however, that no such term shall exceed a reasonable time
period, and provided further that, in the case of ISOs, the term shall not be
more than ten years from the date the ISO is granted, or, in the case of an
option granted to a person who owns ten percent (10%) or more of the issued and
outstanding Common Shares of the Company as of the date the option is granted,
the term shall not be more than five years from the date the ISO is granted.
5.4 The period during which the right to exercise an option in whole or
in part vests in the Participant shall be set by the Committee, and the
Committee may determine that an option may not be exercised in whole or in part
for a specified period after it is granted; provided, however, that no option
shall be exercisable by any Participant who is then subject to Section 16 of the
Exchange Act within the period ending six months after the date the option is
granted; provided further that, this six-month waiting period shall not apply to
the exercise of any option by such Participant if the grant of such option to
the Participant was approved in advance by the Board or, if the Committee is
then composed solely of two or more non-employee directors, by the Committee, or
was approved in advance or subsequently ratified not later than the date of the
next annual meeting of the Company's stockholders, by the stockholders. At any
time after grant of an option the Committee may, in its sole discretion and
subject to whatever terms and conditions it selects, accelerate the period
during which an option vests.
5.5 No portion of an option which is unexercisable at the time a
Participant terminates employment with the Company shall thereafter become
exercisable; provided, however, that provision may be made that such option
shall become exercisable, with the consent of the Committee, in the event of a
termination of employment because of a Participant's normal retirement or
permanent and total disability (each as determined by the Committee in
accordance with Company policies), death or early retirement and, provided
further, that the Committee's right to accelerate the period during which an
option vests, as described at Section 5.4, shall continue following a
Participant's termination of employment for a period of 30 days.
5.6 For those Participants who are employees of the Company or a
subsidiary of the Company, an option shall be exercisable by a Participant only
while he or she is an employee. The preceding notwithstanding, the Committee may
determine that an option may be exercised subsequent to a Participant's
termination of employment, subject to the following limitations:
(a) If a Participant dies while an option is exercisable under
the terms of this Plan, the Participant's beneficiary may exercise such rights,
to the extent the Participant could have done so immediately preceding his or
her death. Any such option must be exercised within twelve months after the
Participant's death, but no later than the option's expiration date. The
Committee may, in its discretion, extend the expiration date of such option to
accommodate such exercise; provided, however, that the term of an ISO may not be
extended beyond ten years from the date of grant.
(b) If a Participant's employment is terminated due to his or
her permanent and total disability, the Participant may exercise his or her
option, to the extent exercisable as of his or her termination of employment,
within twelve months after termination, but no later than the option's
expiration date. For purposes of this Subsection (b) and the Plan in general, a
Participant shall be considered to be under a "permanent and total disability"
if he or she is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which can be
expected to result in death or
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<PAGE> 24
which has lasted or can be expected to last for a continuous period of not less
than 12 months.
(c) If a Participant's employment is terminated for any reason
other than those set forth in Subsection (a) or (b) above, the Participant may
exercise his or her option, to the extent exercisable as of his or her
termination of employment, within three months after such termination, but not
later than the option's expiration date.
5.7 An exercisable option may be exercised in whole or in part.
However, an option shall not be exercisable with respect to fractional shares
and the Committee may require that, by the terms of the option, a partial
exercise be with respect to a minimum number of shares.
5.8 All or a portion of an exercisable option shall be deemed exercised
upon:
(a) Delivery of all of the following to the Secretary of the
Company or his or her office:
(i) A written notice complying with the applicable
rules established by the Committee or the Company stating that the option, or a
portion thereof, is exercised. The notice shall be signed by the Participant or
other person then entitled to exercise the option or such portion;
(ii) Such representations and documents as the
Committee, in its absolute discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Securities Act of 1933, as
amended, and any other federal or state securities laws or regulations. The
Committee may, in its absolute discretion, also take whatever additional actions
it deems appropriate to effect such compliance, including, without limitation,
placing legends on share certificates and issuing stop-transfer notices to
agents and registrars; and
(iii) In the event that the option shall be exercised
pursuant to Section 5.6(a) by any person or persons other than the Participant,
appropriate proof of the right of such person or persons to exercise the option;
and
(b) Full cash payment to the Secretary of the Company for the
shares with respect to which the option, or portion thereof, is exercised.
However, at the discretion of the Committee, the terms of the option may allow,
or provide the Committee with the continuous discretion to allow: (i) a delay in
payment up to thirty days from the date the option, or portion thereof, is
exercised, (ii) payment, in whole or in part, through the delivery of Common
Shares owned by the Participant, (iii) payment, in whole or in part, through the
surrender of Common Shares then issuable upon exercise of the option; or (iv)
payment, in whole or in part, through the delivery of property of any kind which
constitutes good and valuable consideration.
5.9 As soon as practicable after receipt by the Company, pursuant to
Section 5.8(b), of full cash payment for the shares with respect to which an
option, or portion thereof, is exercised by a Participant, with respect to each
such exercise, the Company shall transfer to the Participant the number of
shares equal to the quotient of:
(a) The amount of the payment made by the Participant to the
Company pursuant to Section 5.8(b), and
(b) The price per share of the shares subject to the option as
determined pursuant to Section 5.3.
5.10 The Company shall not be required to issue or to deliver any
certificate or certificates for shares of stock purchased upon the exercise of
any option or portion thereof prior to fulfillment of all of the following
conditions:
(a) The completion of any registration or other qualification
of such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other governmental
regulatory body which the Committee shall, in its absolute discretion, deem
necessary or
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advisable;
(b) Obtaining any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable;
(c) The lapse of such reasonable period of time following the
exercise of the option as the Committee may establish from time to time for
reasons of administrative convenience; and
(d) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax.
5.11 To the extent that the aggregate fair market value of stock with
respect to which ISOs are exercisable for the first time by a Participant during
any calendar year (under the Plan and all other incentive stock option plans of
the Company or any Company subsidiary) exceeds $100,000, such options shall be
treated as non-qualified options to the extent required by Section 422 of the
Code. For purposes of this Section 5.11, the fair market value of stock shall be
determined as of the time the option, with respect to such stock, is granted.
6. STOCK APPRECIATION RIGHTS (SARS).
6.1 A SAR may be granted free-standing or in tandem with new options or
alter the grant of a related option which is not an ISO. The SAR shall represent
the right to receive payment of a sum not to exceed the amount, if any, by which
the fair market value of the Common Shares subject to the SAR on the date of
exercise of the SAR (or, if the Committee shall so determine in the case of any
SAR not related to an ISO, anytime during a specified period before the exercise
date) exceeds the grant price of the SAR. Each SAR shall be evidenced by a
signed written agreement containing such terms and conditions as the Committee
may determine.
6.2 The grant price (which shall not be less than the fair market value
of the Common Shares subject to the SAR on the date of grant) and other terms of
the SAR shall be determined by the Committee.
6.3 Payment of the amount to which a Participant is entitled upon the
exercise of a SAR shall be made in cash, Common Shares or other property or in a
combination thereof, as the Committee shall determine. To the extent that
payment is made in Common Shares or other property, the Common Shares or other
property shall be valued at fair market value on the date of exercise of the
SAR.
6.4 Unless otherwise determined by the Committee, any related option
shall no longer be exercisable to the extent the SAR has been exercised and the
exercise of an option shall cancel the related SAR to the extent of such
exercise.
7. RESTRICTED STOCK.
Common Shares awarded as restricted stock may not be disposed of by the
recipient until certain restrictions established by the Committee lapse.
Recipients of restricted stock are not required to provide consideration other
than the rendering of services or the payment of any minimum amount required by
law, unless the Committee otherwise elects. The Participant shall have, with
respect to Common Shares awarded as restricted stock, all of the rights of a
shareholder of the Company, including the right to vote the shares and the right
to receive any cash dividends, unless the Committee shall otherwise determine.
Upon termination of employment during the restriction period, all restricted
stock shall be forfeited, subject to such exceptions, if any, as are authorized
by the Committee, as to termination of employment, retirement, disability,
death, or special circumstances. Each award of restricted stock shall be
evidenced by a signed written agreement containing such terms and conditions as
the Committee may determine.
8. PERFORMANCE SHARES AND UNITS.
8.1 The Committee may award to any Participant performance shares and
performance units (collectively, "Performance Awards"). Each Performance Award
which is a performance share shall
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represent, as the Committee shall determine, one Common Share which becomes
payable after certain performance criteria are met with respect to a certain
performance period. Each Performance Award which is a performance unit shall
represent the right of a Participant to receive an amount equal to a value,
determined in relation to a Common Share and in the manner established by the
Committee at the time of award, which becomes payable after certain performance
criteria are met with respect to a certain performance period. Recipients of
Performance Awards are not required to provide consideration other than the
rendering of service, unless the Committee otherwise elects.
8.2 Each Performance Award under the Plan shall be evidenced by a
signed written agreement containing such terms and conditions as the Committee
may determine.
8.3 The performance period for each Performance Award shall be of such
duration as the Committee shall establish at the time of award ("Performance
Period"). There may be more than one award in existence at any one time, and
Performance Periods may differ. The performance criteria for each Performance
Period shall be determined by the Committee.
8.4 The Committee may provide that amounts equivalent to dividends paid
shall be credited with respect to each Performance Award which is a performance
share, and that amounts equivalent to interest at such rates as the Committee
may determine shall be credited with respect to amounts equivalent to dividends
previously credited to the Participant. The Committee may provide that amounts
equivalent to interest at such rates as the Committee may determine shall be
credited with respect to each Performance Award which is a performance unit.
8.5 Payment of a Performance Award which is a performance share and any
related dividends, amounts equivalent to dividends, and amounts equivalent to
interest may be made, in a lump sum or in installments, in cash, Common Shares
or other property, or in a combination thereof, as the Committee may determine.
Payment of a Performance Award which is a performance unit and any related
amounts equivalent to interest may be made, in a lump sum or in installments, in
cash, Common Shares or other property, or in a combination thereof, as the
Committee may determine.
9. OTHER STOCK UNIT AWARDS.
9.1 The Committee is authorized to grant to Participants, either alone
or in addition to other awards granted under the Plan, any other types of other
stock unit awards. Other stock unit awards may be paid in cash, Common Shares,
other property, or in a combination thereof, as the Committee shall determine.
Each award of another stock unit award shall be evidenced by a signed written
agreement containing such terms and conditions as the Committee may determine.
9.2 The Committee shall determine the Participants to whom other stock
unit awards are to be made, the times at which such awards are to be made, the
number of shares to be granted pursuant to such awards, and all other conditions
of such awards. The provisions of other stock unit awards need not be the same
with respect to each recipient. The Participant shall not be permitted to sell,
assign, transfer, pledge, or otherwise encumber the Common Shares or other
securities prior to the later of the date on which the Common Shares are issued
or the date on which any applicable restriction, performance, or deferral period
lapses. Common Shares granted pursuant to other stock unit awards may be issued
for no cash consideration or for such minimum consideration as may be required
by applicable law. Common Shares purchased pursuant to purchase rights granted
pursuant to other stock unit awards may be purchased for such consideration as
the Committee shall determine, which price shall not be less than the fair
market value of such Common Shares on the date of grant, unless the Committee
otherwise elects.
10. NONASSIGNABILITY OF AWARDS.
No award granted under the Plan shall be assigned, transferred,
pledged, or otherwise encumbered by a Participant, otherwise than by will or by
the laws of descent and distribution. Each award shall be exercisable during the
Participant's lifetime only by the Participant. Any attempt to assign, transfer,
pledge or otherwise encumber any such award or of any right or privilege
conferred thereby, contrary to this Section 10, or the sale or levy or similar
process upon the rights and privileges conferred thereby, shall be
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<PAGE> 27
null and void.
11. DEFERRALS OF AWARDS.
The Committee may permit Participants to defer the distribution of all
or part of any award in accordance with such terms and conditions as the
Committee shall establish.
12. ADJUSTMENTS.
12.1 In the event of any change affecting the Common Shares by reason
of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, or other similar change, the Committee may make such substitution or
adjustment in the aggregate number or class of shares which may be distributed
under the Plan and in the number, class, and option price or other price of
shares subject to the outstanding awards granted under the Plan as it deems to
be appropriate in order to maintain the purpose of the original grant.
12.2 The Committee shall be authorized to make adjustments in
performance award criteria or in the terms and conditions of other awards in
recognition of unusual or non-recurring events affecting the Company or its
financial statements or changes in applicable laws, regulations, or accounting
principles. The Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any award in the manner and to the
extent it shall deem desirable to carry it into effect.
13. CHANGE OF CONTROL.
13.1 Notwithstanding any other provision of the Plan to the contrary,
if a "change in control" as defined below occurs, any stock option, SAR or
restricted stock granted under the Plan to Participants, prior to such change in
control may, at the discretion of the Committee, be immediately and fully
exercisable and free of all restrictions, regardless of any limits on exercise
or other restrictions that may have been imposed under the stock option, SAR, or
restricted stock.
13.2 "Change in control" means: (a) the election of persons
constituting a majority of the whole number of directors of the Company, which
persons were not nominated by the nominating committee of the Board or, if so
nominated, were not recommended by a majority of the directors in office prior
to being nominated by such nominating committee, unless the person nominated is
nominated to take the place of an individual previously so recommended by the
directors who has died, become disabled, or chose not to serve, in which event
that nominee shall be deemed to be recommended by the majority of the directors
in office if such majority recommends that nominee at the meeting of directors
next following the nomination of such person; (b) any consolidation or merger of
the Company if, within two years after such consolidation or merger, individuals
who were directors of the Company immediately prior to such consolidation or
merger cease to constitute a majority of the Board of Directors of the Company
or its successor by consolidation or merger, (c) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company other than to a directly or
indirectly majority-owned subsidiary of the Company; (d) the sale of a majority
of the voting interest in any subsidiary or subsidiaries of the Company, which
subsidiary or subsidiaries before such sale held assets that constituted all or
substantially all of the assets of the Company and its subsidiaries on a
consolidated basis; (e) the sale of a minority voting interest in the Company or
any direct or indirect subsidiary or subsidiaries of the Company, which
subsidiary or subsidiaries before the sale held assets that constituted all or
substantially all of the assets of the Company and its subsidiaries on a
consolidated basis, which gives the minority owner the ability to elect more
than one-third of the Board of Directors of the Company; or (f) the approval by
the shareholders of the Company of any plan or proposal for the liquidation or
dissolution of the Company. For purposes of this Agreement, all directors of the
Company serving on the date this Plan becomes effective are deemed to have been
nominated by the nominating committee of the Company and recommended by a
majority of the directors in office.
13.3 The term "change in control" shall not refer to a merger the sole
purpose of which is to change the Company's state of incorporation or to a
transaction referred to in Section 13.2 if, after the consummation thereof, the
shareholders of the Company immediately prior to the consummation thereof own
more than fifty percent (50%) of the voting stock of the resulting entity.
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<PAGE> 28
14. WITHHOLDING.
At the Committee's discretion, the recipient of any award under the
Plan may be required to pay to the Company, in cash, Common Shares or other
property, or a combination thereof, the amount of any taxes required to be
withheld with respect to such award or, in the case of an award in the form of
Common Shares, the Company shall have the right to retain from such award a
sufficient number of Common Shares to satisfy the applicable withholding tax
obligation.
15. SUBSIDIARIES.
For purposes of the Plan, a "subsidiary" of the Company means any
corporation of which at least fifty-one percent (51%) of the total combined
voting power of all classes of its stock is owned by the Company.
16. FINANCIAL ASSISTANCE.
The Company is vested with authority under this Plan to assist any
employee to whom an option is granted hereunder (including any director or
officer of the Company or any of its subsidiaries who is also an employee) in
the payment of the purchase price payable on exercise of that option, by lending
the amount of such purchase price to such employee on such terms and at such
rates of interest and upon such security (or unsecured) as shall have been
authorized by or under authority of the Board.
17. LIMITATIONS OF RIGHTS OF PARTICIPANTS.
17.1 A person to whom an option is granted under this Plan shall not
have any interest in the optioned shares or in any dividends paid thereon, and
shall not have any of the rights or privileges of a stockholder with respect to
such shares until the certificates therefor have been issued and delivered to
him or her.
17.2 No shares of stock issuable under the Plan shall be issued and no
certificate therefor delivered unless and until, in the opinion of legal counsel
for the Company, such securities may be issued and delivered without causing the
Company to be in violation of or to incur any liability under any federal, state
or other securities law, or any other requirement of law or of any regulatory
body having jurisdiction over the Company.
17.3 The receipt of an option does not give the optionee any right to
continued employment by the Company or a subsidiary for any period, nor shall
the granting of the option or the issuance of shares on exercise thereof give
the Company or any subsidiary any right to the continued services of the
optionee for any period.
17.4 Nothing contained in this Plan shall constitute the granting of an
option hereunder, which shall occur only pursuant to express authorization by
the Board or the Committee.
18. AMENDMENT AND TERMINATION.
The Board may alter, amend, suspend or terminate this Plan, provided
that no such action shall, without the consent of a Participant, alter or impair
any rights or obligations under any stock option or other award granted to such
Participant. Notwithstanding the foregoing, no such action of the Board, unless
taken with the approval of the stockholders of the Company, may:
(a) Increase the maximum number of shares for which options
granted under this Plan may be exercised;
(b) Reduce the minimum permissible exercise price;
(c) Extend the ten-year duration of the Plan set forth herein;
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<PAGE> 29
(d) Alter the class of employees eligible to receive options
under the Plan; or
(e) Amend the Plan in any other manner which the Board, in its
discretion, determines should become effective only if approved by the
stockholders even though such stockholder approval is not expressly required by
this Plan.
19. STOCK OPTION AGREEMENTS.
Each option awarded to a Participant shall be evidenced by a written
stock option agreement, which shall be executed by the Participant and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan. Stock
option agreements evidencing ISOs shall contain such terms and conditions as may
be necessary to meet the applicable provisions of Section 422 of the Code.
20. GOVERNING LAW.
The place of administration of the Plan and such Agreement shall be in
the State of California. The corporate law of the Company's state of
incorporation shall govern issues related to the validity and issuance of
shares. Otherwise, this Plan and each Agreement shall be construed and
administered in accordance with the laws of the State of California, without
giving effect to principles relating to conflict of laws.
21. USE OF PROCEEDS.
Any cash proceeds received by the Company from the sale of shares
pursuant to grants made under this Plan shall be used for general corporate
purposes.
22. REGULATORY APPROVALS.
The implementation of the Plan, the granting of any option hereunder,
and the issuance of stock upon the exercise or surrender of any such option
shall be subject to the Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over the Plan, the
options granted under it, and the stock issued pursuant to it.
23. RESTRICTIONS ON RESALE.
Certain officers and directors of the Company may be deemed to be
"affiliates" of the Company, as that term is defined under the Securities Act.
Common Shares acquired under the Plan by an affiliate may only be re-offered or
resold pursuant to an effective registration statement or pursuant to Rule 144
under the Securities Act or another exemption from the registration requirements
of the Securities Act.
24. EFFECTIVE DATE.
This Plan shall become effective upon adoption by the Company's Board
of Directors, subject to the subsequent approval of the Plan by the stockholders
of the Company within 12 months from the date of said adoption. Stock options
may be granted prior to such stockholder approval, provided that such options
shall not be exercisable prior to the time when this Plan is approved by the
stockholders, and provided further that if such approval has not been obtained
at the end of said 12-month period, all options previously granted under this
Plan shall thereupon be cancelled and become null and void. No other awards
under the Plan shall be granted prior to stockholder approval.
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<PAGE> 30
PROXY
CLASS A COMMON STOCK
HASKEL INTERNATIONAL, INC.
100 EAST GRAHAM PLACE
BURBANK, CALIFORNIA 91502
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Edward Malkowicz, R. Malcolm Greaves
and Stanley T. Myers, or any of them, with full power of substitution, as
proxies, to appear and vote, as designated on the reverse side of this proxy
card, all shares of Class A Common Stock of Haskel International, Inc. which
the undersigned would be entitled to vote if then personally present, at the
1998 Annual Meeting of Shareholders to be held on Friday, October 30, 1998, at
10:30 a.m. (local time), upon such business as may properly come before the
meeting and any adjournments thereof.
This proxy may be revoked prior to the exercise of the powers
conferred by the proxy.
(CONTINUED ON REVERSE SIDE)
-------------
SEE REVERSE
SIDE
-------------
<PAGE> 31
Please mark your
[X] votes as in this
example
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR ALL
OF THE CLASS A NOMINEES
NAMED BELOW AND FOR
PROPOSALS 2 AND 3.
WITHHOLD AUTHORITY
FOR to vote for all nominees
1. ELECTION OF [ ] [ ] NOMINEES:
DIRECTORS R. Malcolm Greaves
Edward Malkowicz
Stanley T. Myers
(INSTRUCTIONS: to withhold authority to vote FOR any individual nominee, strike
a line through the nominee's name in the list above)
2. Approval of the Company's 1998 FOR AGAINST ABSTAIN
Long-Term Performance Incentive Plan [ ] [ ] [ ]
3. Ratification of Appointment of Deloitte FOR AGAINST ABSTAIN
& Touche LLP as Independent Auditors [ ] [ ] [ ]
This proxy, when properly executed, will be voted in the manner specified by
the undersigned. Except as otherwise specified, this proxy will be voted FOR
the election as directors of all Class A nominees named above, FOR the approval
of the Company's 1998 Long-Term Performance Incentive Plan and FOR the
ratification of the appointment of Deloitte & Touche LLP as the Company's
independent auditors.
PLEASE SIGN AND DATE THIS PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
Signature(s) ___________________________________ Dated ___________ 1998
Please sign name exactly as it appears hereon. If shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
<PAGE> 1
EXHIBIT 7
RESTATED
ARTICLES OF INCORPORATION
OF
HASKEL INTERNATIONAL, INC.
Maury S. Friedman and Edward G. Farrell III certify that:
1. They are the President and Secretary, respectively, of Haskel
International, Inc., a California corporation.
2. The Articles of Incorporation of this corporation are amended and restated
to read as follows:
I
The name of this corporation is:
Haskel International, Inc.
II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of California other than the banking business, the trust
company business or the practice of a profession permitted to be
incorporated by the California Corporations Code.
III
A. Authorized Shares. The aggregate number of shares which this
Corporation shall have authority to issue is 22,447,260, of which
20,000,000 shares, without par value, shall be designated "Class A Common
Shares," 447,260 shares, without par value, shall be designated "Class B
Common Shares" and 2,000,000 shares, without par value, shall be
designated "Preferred Shares." The Preferred Shares may be issued from
time to time in one or more series. The board of Directors is authorized
to fix the number of shares of any series of Preferred Shares and to
determine the designation of any such series. The Board of directors is
also authorized to determine or alter the rights,
1
<PAGE> 2
preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Shares and, within the limits and
restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any series,
to increase or decrease (but not below the number of shares of such series
then outstanding) the number of shares of any such series subsequent to the
issuance of shares of that series.
B. Voting rights - The Class A Common Shares, voting as a class, shall
elect a minority of the Board of Directors. The Class B Common Shares,
voting as a class, shall elect a majority of the Board of Directors. If the
number of members of the Board of Directors is an odd number, then the
Class B Common Shares shall elect one more member than the Class A Common
Shares. If the number of members of the Board is an even number, then the
Class B Common Shares shall elect two more members than the Class A Common
Shares. If all outstanding Class B Common Shares are converted to Class A
Common Shares, then all members of the Board of Directors shall be elected
by the Class A Common Shares.
C. Conversion Rights. Each holder of Class B Common Shares shall
have conversion rights as follows:
1. The Class B Common Shares shall be convertible at the option
of the holder of such shares, at any time, into fully paid and
nonassessable Class A Common Shares, on a share for share basis.
2. To effect such conversion, the holder of the Class B Common
Shares must surrender the certificate or certificates for the shares
to be converted, duly endorsed in blank or accompanied by proper
instruments of transfer, at the office
2
<PAGE> 3
of the corporation. The holder must also give written notice to the
corporation at such office that the holder elects to convert a
specified number or all of the shares represented by the surrendered
certificate(s). The corporation shall, as soon as practicable
thereafter, issue and deliver to such holder, certificates for the
number of Class A Common Shares to which the holder shall be entitled.
Conversion shall be deemed to have been made as of the date of
surrender of the Class B Common Shares to be converted, and the person
or persons entitled to receive the Class A Common Shares issuable upon
conversion shall be treated for all purposes as the record holder or
holders of those Class A Common Shares on that date.
3. At such time as the total number of outstanding Class B
Common Shares is less than 40,000 shares, all such shares shall be
automatically converted into fully paid and nonassessable shares of
Class A Common Shares, on a share for share basis, and such Class A
Common Shares shall thereupon be issued and outstanding. In such an
event, the Board of Directors may order any holders of certificates
for outstanding Class B Common Shares to surrender them for
certificates evidencing Class A Common Shares. The order may provide
that a holder of certificates to be exchanged is not entitled to vote
or to receive dividends or to exercise any other rights of a
shareholder until the holder has complied with the order, but this
order shall be operative only after notice and only until compliance.
4. The corporation shall at all times reserve and keep
available, out of its authorized
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<PAGE> 4
but unissued Class A Common shares, solely for the purpose of
effecting the conversion of the Class B Common Shares, the full
number of Class A Common Shares deliverable upon conversion of
all Class B Common Shares from time to time outstanding and shall
take all action and obtain all permits or orders that may be
necessary to enable the corporation to lawfully issue Class A
Common Shares upon the conversion of Class B Common Shares.
5. All certificates evidencing Class B Common Shares
surrendered for conversion shall be appropriately canceled on the
books of the corporation, and the shares so converted represented
by those certificates shall not be reissuable by the corporation.
The Articles of Incorporation of the corporation shall be
appropriately amended to affect the corresponding reduction in
the corporation's authorized capital stock.
IV
The liability of the directors of the corporation for
monetary damages shall be eliminated to the fullest extent permissible
under California law.
V
This corporation is authorized to provide indemnification of
agents (as defined in Section 317 of the Corporations Code) for breach
of duty to the corporation and its stockholders through by-law
provisions or through agreements with the agents, or both, in excess
of the indemnification otherwise permitted by section 317 of the
Corporation Code, subject to the limits on such excess indemnification
set forth in Section 204 of the Corporations Code.
3. The foregoing amendment and restatement of Articles of Incorporation
has been duly approved by the Board of Directors.
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<PAGE> 5
4. The foregoing amendment and restatement of Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance with
section 903 of the Corporations Code. The total number of outstanding
shares of the corporation is 3,406,480 Class A Common shares and 447,260
Class B Common shares. The number of shares voting in favor of the
amendment equaled or exceeded the vote required for each class. The
percentage vote required was more than 50% of each of the Class A and B
shares.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this Certificate are true and correct
of our own knowledge.
Date: June 30, 1994
/s/ MAURY S. FRIEDMAN
----------------------------------------
Maury S. Friedman, President
/s/ EDWARD G. FARRELL III
----------------------------------------
Edward G. Farrell III Secretary
5
<PAGE> 6
A455016
E N D O R S E D
F I L E D
In the office of the Secretary of State
of the State of California
DEC 19 1994
TONY MILLER
Acting Secretary of State
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
HASKEL INTERNATIONAL, INC.
Maury S. Friedman and Lonnie D. Schnell certify that:
1. They are the President and the Secretary, respectively, of Haskel
International, Inc., a California corporation.
2. The provision in Paragraph A of Article III of the Articles of
Incorporation which now reads:
The aggregate number of shares which this Corporation shall have
authority to issue is 22,447,260, of which 20,000,000 shares, without
par value, shall be designated "Class A Common Shares," 447,260
shares, without par value, shall be designated "Class B Common
Shares" and 2,000,000 shares, without par value, shall be designated
"Preferred Shares."
is amended to read:
The aggregate number of shares which this Corporation shall have
authority to issue is 22,040,000, of which 20,000,000 shares, without
par value, shall be designated "Class A Common Shares," 40,000
shares, without par value, shall be designated "Class B Common
Shares" and 2,000,000 shares, without par value, shall be designated
"Preferred Shares."
3. The foregoing amendment of Articles of Incorporation has been duly
approved by the Board of Directors.
4. The foregoing amendment of Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with section
902 of the Corporations Code. The total number of outstanding shares of
1
<PAGE> 7
the corporation is 3,729,311 Class A Common Shares and 40,000 Class B
Common Shares. The number of shares voting in favor of the amendment
equaled or exceeded the vote required for each class. The percentage vote
required was more than 50%.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Date: November 22, 1994
/s/ MAURY S. FRIEDMAN
----------------------------------
Maury S. Friedman, President
/s/ LONNIE D. SCHNELL
----------------------------------
Lonnie D. Schnell, Secretary
2
<PAGE> 1
EXHIBIT 8
RESTATED
BY-LAWS
OF
HASKEL INTERNATIONAL, INC.
EFFECTIVE JUNE 9, 1994
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICES. The Board of Directors shall fix
the location of the principal executive office of the Corporation at any place
within or outside the State of California. If the principal executive office
is located outside this State, and the Corporation has one or more business
offices in this State, the Board of Directors shall fix and designate a
principal business office in the State of California.
Section 2. OTHER OFFICES. The Board of Directors may at any
time establish branch or subordinate offices at any place or places where the
Corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be
held at any place within or outside the State of California designated by the
Board of Directors. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the Corporation.
Section 2. ANNUAL MEETINGS. The annual meeting of the
shareholders shall be held on the third Friday in October, each year, if not a
legal holiday, and if a legal holiday, then on the next succeeding business
day, at the hour of 10:00 o'clock A.M., at which time the shareholders shall
elect the Board of Directors, consider reports of the affairs of the
Corporation, and transact such other business as may properly be brought before
the meeting.
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<PAGE> 2
Section 3. SPECIAL MEETING. A special meeting of the
shareholders may be called at any time by the Board of Directors, or by the
Chairman of the Board, or by the President, or by one or more shareholders
holding shares in the aggregate entitled to cast not less than ten percent
(10%) of the votes at that meeting.
Upon request, in writing, to the Chairman of the Board, President,
Vice President or Secretary by any person (other than the Board) entitled to
call a special meeting of shareholders, the officer forthwith shall cause
notice to be given to the shareholders entitled to vote that a meeting will be
held at a time requested by the person or persons calling the meeting, not less
than 35 nor more than 60 days after the receipt of the request. If the notice
is not given within 20 days after receipt of the request, the persons entitled
to call the meeting may give the notice.
Section 4. NOTICE OF ANNUAL OR SPECIAL MEETING. Written notice
of each annual or special meeting of shareholders shall be given not less than
ten (10) nor more than sixty (60) days before the date of the meeting to each
shareholder entitled to vote thereat. Such notice shall state the place, date,
and hour of the meeting and (i) in the case of a special meeting, the general
nature of the business to be transacted, and no other business may be
transacted, or (ii) in the case of the annual meeting, those matters which the
Board, at the time of the mailing of the notice, intends to present for action
by the shareholders, but subject to the provisions of applicable law, any
proper matter may be presented at the meeting for such action. The notice of
any meeting at which directors are to be elected shall include the names of
nominees intended at the time of the notice to be presented by management for
election.
Notice of a shareholders meeting shall be given either personally, by
mail or by other means of written communication, addressed to the shareholder
at the address of such shareholder appearing on the books of the corporation,
or given by the shareholder to the corporation for the purpose of notice; or,
if no such address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at least once
in a newspaper of general circulation in the county in which the principal
executive office is located. Notice by mail shall be
2
<PAGE> 3
deemed to have been given at the time a written notice is deposited in the
United States mail, postage prepaid. Any other written notice shall be deemed
to have been given at the time it is personally delivered to the recipient or
is delivered to a common carrier for transmission, or actually transmitted by
the person giving the notice by electronic or other means of written
communication, to the recipient.
If any notice or report addressed to the shareholder at the address of
such shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice or report to the
shareholder at such address, all future notices or reports shall be deemed to
have been duly given without further mailing if the same shall be available for
the shareholder upon written demand of the shareholder at the principal
executive office of the corporation for a period of one (1) year from the date
of the giving of the notice or report to all other shareholders. An affidavit
of mailing of any such notice in accordance with the foregoing provisions,
executed by the Secretary, Assistant Secretary or any transfer agent of the
corporation shall be prima facie evidence of the giving of the notice.
Section 5. QUORUM. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting of
shareholders shall constitute a quorum for the transaction of business. The
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 6. ADJOURNED MEETING AND NOTICE THEREOF. Any
shareholders' meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the vote of the majority of the shares
represented at that meeting, except as provided in Section 5 of this Article.
It shall not be necessary to give any notice of the time and place of the
adjourned meeting or of the
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<PAGE> 4
business to be transacted thereat, other than by announcement at the meeting at
which such adjournment is taken; provided, however, when any shareholders'
meeting is adjourned for more than 45 days or, if after adjournment a new
record date is fixed for the adjourned meeting, notice of the adjourned meeting
shall be given as in the case of an original meeting.
Section 7. VOTING. The shareholders entitled to notice of any
meeting or to vote at any such meeting shall be only persons in whose name
shares stand on the stock records of the corporation on the record date
determined in accordance with Section 9 of this Article.
Voting shall in all cases be subject to the provisions of Chapter 6 of
the California General corporation Law and to the following provisions:
(a) Subject to subparagraph (g), shares held by an administrator,
executor, guardian, conservator or custodian may be voted by such holder either
in person or by proxy, without a transfer of such shares into the holder's
name; and shares standing in the name of a trustee may be voted by the trustee,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by such trustee without a transfer of such shares into the trustee's name.
(b) Shares standing in the name of a receiver may be voted by such
receiver; and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into the receiver's name if
authority to do so is contained in the order of the court by which such
receiver was appointed.
(c) Subject to the provisions of section 705 of the California
General Corporation Law, and except where otherwise agreed in writing between
the parties, a shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
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(d) Shares standing in the name of a minor may be voted and the
corporation may treat all rights incident thereto as exercisable by the minor,
in person or by proxy, whether or not the corporation has notice, actual or
constructive, of the nonage, unless a guardian of the minor's property has been
appointed and written notice of such appointment given to the corporation.
(e) Shares standing in the name of another corporation, domestic
or foreign, may be voted by such officer, agent or proxyholder as the By-Laws
of such other corporation may prescribe or, in the absence of such provision,
as the Board of Directors of such other corporation may determine or, in the
absence of such determination, by the Chairman of the Board, President or any
Vice President of such other corporation, or by any other person authorized to
do so by the Board, President or any Vice President of such other corporation.
Shares which are purported to be voted or any proxy purported to be executed in
the name of a corporation (whether or not any title of the person signing is
indicated) shall be presumed to be voted or the proxy executed in accordance
with the provisions of this subdivision, unless the contrary is shown.
(f) Shares of the corporation owned by any subsidiary shall not be
entitled to vote on any matter.
(g) Shares held by the corporation in a fiduciary capacity, and
shares of the corporation held in a fiduciary capacity by any subsidiary, shall
not be entitled to vote on any matter, except to the extent that the settlor or
beneficial owner possesses and exercises a right to vote or to give the
corporation binding instructions as to how to vote such shares.
(h) If shares stand of record in the names of two (2) or more
persons, whether fiduciaries, members of a partnership, joint
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tenants, tenants in common, husband and wife as community property, tenants by
the entirety, voting trustees, persons entitled to vote under a shareholder
voting agreement or otherwise, or if two (2) or more persons (including
proxyholders) have the same fiduciary relationship respecting the same shares,
unless the Secretary of the corporation is given written notice to the contrary
and is furnished with a copy of the instrument or order appointing them or
creating the relationship wherein it is so provided, their acts with respect to
voting shall have the following effect:
(i) If only one votes, such act binds all;
(ii) If more than one vote, the act of the majority so voting binds
all; or
(iii) If more than one vote, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionately.
If the instrument so filed, or the registration of the shares shows
that any such tenancy is held in unequal interests, a majority or even split for
the purpose of this section shall be a majority or even split in interest.
Subject to the following sentence and to the provisions of section 708
of the California General Corporation Law, every shareholder entitled to vote
at any election of directors may cumulate such shareholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the shareholder's shares are
entitled, or distribute the shareholder's votes on the same principle among as
many candidates as the shareholder thinks fit. No shareholder shall be
entitled to cumulate votes for any candidate or candidates pursuant to the
preceding sentence unless such candidate or candidates' names have been placed
in nomination prior to the voting and the
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shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes
for candidates in nomination.
Notwithstanding any other provision in these By-Laws, in accordance
with California Corporations Code Section 301.5 (the "Code"), at such time as
this corporation becomes a "listed corporation" as defined in the Code,
cumulative voting will be eliminated. This provision shall become effective
only when the corporation becomes a listed corporation within the meaning of
the Section 301.5 of the Corporations Code.
Elections need not be by ballot; provided, however, that all elections
for directors must be by ballot upon demand made by a shareholder at the
meeting and before the voting begins.
Section 8. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS.
The transactions of any meeting of shareholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though had
at a meeting duly held after regular call and notice, if a quorum be present
either in person or by proxy, and, if either before or after the meeting each
person entitled to vote who was not present in person or by proxy signs a
written waiver of notice or a consent to a holding of the meeting or an
approval of the minutes. The written waiver of notice need not specify either
the business to be transacted or the purpose of any annual or special meeting
of shareholders, except as provided in section 601(b) of the California General
Corporation Law. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters required to be but not
included in the notice of the meeting if that objection is expressly made at
the meeting.
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Section 9. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING. Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted. In the case of
election of directors, such a consent shall be effective only if signed by the
holders of all outstanding shares entitled to vote for the election of
directors; provided, that a director may be elected at any time to fill a
vacancy on the Board of Directors that has not been filled by the directors, by
the written consent of the holders of a majority of the outstanding shares
entitled to vote for the election of directors. All such consents shall be
filed with the Secretary of the corporation and shall be maintained in the
corporate records. Any shareholder giving a written consent, or the
shareholder's proxyholders, or a transferee of the shares or a personal
representative of the shareholder or their respective proxyholders, may revoke
the consent by a writing received by the Secretary of the corporation before
written consents of the number of shares required to authorize the proposed
action have been filed with the Secretary of the corporation, but may not do so
thereafter. Such revocation is effective upon its receipt by the Secretary of
the corporation.
Unless the consents of all shareholders entitled to vote have been
solicited in writing,
(a) Notice of any proposed shareholder approval of, (i) a contract
or other transaction with an interested director, (ii) indemnification of an
agent of the corporation as authorized by Article V of these By-Laws, (iii) a
reorganization of the corporation as defined in section 181 of the General
Corporation Law, or (iv) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, if any, without a meeting by
less than unanimous written consent, shall be given at least ten (10) days
before the consummation of the action authorized by such approval; and
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(b) Prompt notice shall be given of the taking of any other
corporate action approved by shareholders without a meeting by less than
unanimous written consent, to those shareholders entitled to vote who have not
consented in writing. Such notices shall be given in the manner and shall be
deemed to have been given as provided in Section 4 of Article II of these
By-Laws.
Section 10. RECORD DATE. The Board may fix, in advance, a record
date for the determination of the shareholders entitled to notice of any
meeting, to vote or entitled to receive payment of any dividend or other
distribution, or any allotment of rights, or to exercise rights in respect of
any other lawful action. The record date so fixed shall be not more than sixty
(60) nor less than ten (10) days prior to the date of the meeting nor more than
sixty (60) days prior to any other action. When a record date is so fixed,
only shareholders of record on that date are entitled to notice of and to vote
at the meeting or to receive the dividend, distribution, or allotment of
rights, or to exercise of the rights, as the case may be, notwithstanding any
transfer of shares on the books of the corporation after the record date. A
determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless
the Board fixes a new record date for the adjourned meeting. The Board shall
fix a new record date if the meeting is adjourned for more than forty-five (45)
days.
If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held. The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board has been taken, shall be the day on which the first written
consent is given. The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto, or the 60th day prior to the date of
such other action, whichever is later.
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Section 11. PROXIES. Every person entitled to vote shares shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the Secretary of the
corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission, or otherwise) by the shareholder or the shareholder's attorney in
fact. A validly executed proxy which does not state that it is irrevocable
shall continue in full force and effect unless (i) revoked by the person
executing it, before the vote pursuant to that proxy, by a writing delivered to
the corporation stating that the proxy is revoked, or by a subsequent proxy
executed by, or attendance at the meeting and voting in person by, the person
executing the proxy; or (ii) written notice of the death or incapacity of the
maker of that proxy if received by the corporation before the vote pursuant to
that proxy is counted; provided, however, that no proxy shall be valid after
the expiration of eleven (11) months from the date of the proxy, unless
otherwise provided in the proxy. The revocability of a proxy that states on
its face that it is irrevocable shall be governed by the provisions of Sections
705(e) and 705(f) of the Corporations Code of California. The dates contained
on the forms of proxy presumptively determine the order of execution,
regardless of the postmark dates on the envelopes in which they are mailed.
Section 12. INSPECTORS OF ELECTION. Before any meeting of
shareholders, the Board of Directors may appoint any persons other than
nominees for office to act as inspectors of election at the meeting or its
adjournment. If no inspectors of election are so appointed, the chairman of
the meeting may, and on the request of any shareholder or a shareholder's proxy
shall, appoint inspectors of election at the meeting. The number of inspectors
shall be either one (1) or three (3). If inspectors are appointed at a meeting
on the request of one or more shareholders or proxies, the majority of shares
represented in person or by proxy shall determine whether one represented in
person or by proxy shall determine whether one (1) or three (3) inspectors are
to be appointed. If any person appointed as inspector fails to appear or fails
or refuses to act, the chairman of the meeting may, and upon the request of any
shareholder or a shareholder's proxy shall, appoint a person to fill that
vacancy.
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These inspectors shall:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
The inspectors of election shall perform their duties
impartially, in good faith, to the best of their ability and as expeditiously
as is practical. If there are three (3) inspectors of election, the decision,
act or certificate of a majority is effective in all respects as to the
decision, act or certificate of all. Any report or certificate made by the
inspectors of election is prima facie evidence of the facts stated therein.
ARTICLE III
DIRECTORS
Section 1. POWERS. Subject to the provisions of the California
General Corporation Law and any limitations in the Articles of Incorporation
and these By-Laws relating to action required to be approved by the
shareholders or by the outstanding shares, the business and affairs of the
corporation shall be managed
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and all corporate powers shall be exercised by or under the direction of the
Board of Directors. The Board may delegate the management of the day-to-day
operation of the business of the corporation to a management company or other
person provided that the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised under the ultimate
direction of the Board.
Without prejudice to these general powers, and subject to the same
limitations, it is hereby expressly declared that the directors shall have the
following powers in addition to the other powers enumerated in these By-Laws:
(a) to select and remove all officers, agents and employees of the
corporation; prescribe any powers and duties for them that are consistent with
law, with the Articles of Incorporation, and with these By-Laws; fix their
compensation; and require from them security for faithful service.
(b) to conduct, manage and control the affairs and business of the
corporation, and to make such rules and regulations therefor not inconsistent
with the law, the Articles of Incorporation or the By-Laws, fix their
compensation and require from them security for faithful service.
(c) to change the principal executive office and the principal
business office in the State of California from one location to another; cause
the corporation to be qualified to do business in any other state, territory,
dependency, or country and conduct business and fix and locate one (1) or more
subsidiary offices within or without the State of California; and designate any
place within or without the State of California for the holding of any
shareholders' meeting, or meetings, including annual meetings.
(d) to adopt, make and use a corporate seal; prescribe the forms
of certificates of stock; and alter the form of the seal and certificates from
time to time, as in their
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judgment, within the provisions of the law, they may deem best.
(e) to authorize the issuance of shares of stock of the
corporation on any lawful terms, in consideration of money paid, labor done,
services actually rendered, debts or securities canceled, or tangible or
intangible property actually received.
(f) to borrow money and incur indebtedness for the purposes of the
corporation, and cause to be executed and delivered therefor, in the corporate
name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations, and other evidences of debt and securities therefor.
(g) by resolution adopted by a majority of the authorized number
of directors, to designate an executive and other committees, each consisting
of two (2) or more directors, to serve at the pleasure of the Board, and to
prescribe the manner in which proceedings of such committees shall be
conducted. Unless the Board of Directors shall otherwise prescribe the manner
of proceedings of any such committee, meetings of such committee may be
regularly scheduled in advance and may be called at any time by any two (2)
members thereof; otherwise, the provisions of these By-Laws with respect to
notice and conduct of meetings of the Board shall govern. Any such committee,
to the extent provided in a resolution of the Board, shall have all of the
authority of the Board, except with respect to:
(i) the approval of any action for which the General Corporation
Law or the Articles of Incorporation also require shareholder approval;
(ii) the filing of vacancies on the Board or in any committee;
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(iii) the fixing of compensation of the directors for serving on the
Board or on any committee;
(iv) the adoption, amendment or repeal of By-Laws;
(v) the amendment or repeal of any resolution of the Board;
(vi) any distribution to the shareholders, except at a rate or in a
periodic amount or within a price range determined by the Board; and
(vii) the appointment of other committees of the Board or the
members thereof.
Section 2. LIABILITY OF DIRECTORS. A person who performs the
duties of a director, in good faith, in a manner such director believes to be
in the best interests of the corporation and its shareholders, and with such
care including reasonable inquiry as an ordinarily prudent person in a like
position would use under similar circumstances, shall have no liability based
upon any alleged failure to discharge the person's obligations as a director.
In addition, the liability of a director for monetary damages in an action
brought by or in the right of the corporation for breach of a director's duties
to the corporation and its shareholders shall be eliminated.
The personal liability of a director may not be limited or eliminated
for actions brought against a director for:
(a) Acts or omissions involving intentional misconduct or a
knowing and culpable violation of law;
(b) Acts or omissions that a director believes to be contrary to
the best interests of the corporation or its shareholders or that involve the
absence of good faith on the part of a director;
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(c) Any transaction from which a director derived an improper
personal benefit;
(d) Acts or omissions that show a reckless disregard for the
director's duty to the corporation or its shareholders in circumstances in
which the director was aware, or should have been aware, in the ordinary course
of performing a director's duties, of a risk of serious injury to the
corporation or its shareholders;
(e) Acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders;
(f) Approval of an improper distribution to shareholders; or
(g) Approval of an improper loan to any director or officer.
Section 3. NUMBER AND QUALIFICATION OF DIRECTORS. The
authorized number of directors shall be seven (7) until changed by a duly
adopted amendment to the Articles of Incorporation or by an amendment to this
by-law adopted by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote; provided, however, that an amendment
reducing the number of directors to a number less than five (5) cannot be
adopted if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of action by written consent, are equal to more than
sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to
vote.
Section 4. ELECTION AND TERM OF OFFICE. The directors shall be
elected at each annual meeting of shareholders but, if any such annual meeting
is not held or the directors are not elected thereat, the directors may be
elected at any special meeting of shareholders held for that purpose. All
directors shall hold office until their respective successors are elected,
subject to the General Corporation Law and the provisions of these By-Laws with
respect to vacancies on the Board.
Section 5. VACANCIES. Vacancies on the Board of Directors may
be filled by a majority of the
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remaining directors though less than a quorum, or by a sole remaining director,
except that a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
vote of a majority of the shares entitled to vote represented at a duly held
meeting at which a quorum is present, or by the written consent of holders of a
majority of the outstanding shares entitled to vote. Each director so elected
shall hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies on the Board of Directors shall be deemed to
exist in the event of the death, resignation, or removal of any director, or if
the Board of Directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, or if the authorized number of directors is increased, or if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the full authorized number of directors to be
voted for at that meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election by
written consent shall require the consent of a majority of the outstanding
shares entitled to vote.
Any director may resign effective on giving written notice to the
Chairman of the Board, the President, the Secretary, or the Board of Directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
Board of Directors may elect a successor to take office when the resignation
becomes effective.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
Section 6. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular
meetings of the Board of Directors may be held at any place within or outside
the State of California that has been designated from time to time by
resolution of the Board or by written consent of all members of the Board. In
the absence of such a
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designation, regular meetings shall be held at the principal executive office
of the corporation. Special meetings of the Board shall be held at any place
within or outside the State of California that has been designated in the
notice of the meeting or, if not stated in the notice, or there is no notice,
at the principal executive office of the corporation. Any meeting, regular or
special, may be held by telephone conference or similar communication
equipment, so long as all directors participating in the meeting can hear one
another, and all such directors shall be deemed to be present in person at the
meeting.
Section 7. ANNUAL MEETING. The Board of Directors shall hold a
regular annual meeting on the last Friday in July each year if not a legal
holiday, and if a legal holiday, on the next succeeding business day, for the
purpose of organization, any desired election of officers, and the transaction
of other business. Notice of this meeting shall not be required.
Section 8. OTHER REGULAR AND ORGANIZATIONAL MEETINGS. An
organizational meeting shall be held immediately following the annual meeting
of the shareholders. The organizational meeting and other regular meetings of
the Board of Directors shall be held without call at such time and at such
place as shall from time to time be fixed by the Board of Directors. Such
organizational and regular meetings may be held without notice.
Section 9. SPECIAL MEETINGS. Special meetings of the Board of
Directors for any purpose or purposes may be called at any time by the Chairman
of the Board, or the President, or any Vice President, or the Secretary or any
two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. In case the notice
is mailed, it shall be deposited in the United States mail at least four (4)
days before the time of the holding of the meeting. In case the notice is
delivered personally, or by telephone or telegram, it shall be delivered
personally or by
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telephone or to the telegraph company at least forty-eight (48) hours before
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose of the meeting nor the place if the meeting is to be held at the
principal executive office of the corporation.
Section 10. QUORUM. A majority of the authorized number of
directors shall constitute a quorum for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors, unless a
greater number be required by law, by these By-Laws or by the Articles of
Incorporation. A meeting at which a quorum is initially present may continue
to transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
Section 11. WAIVER OF NOTICE. The transactions of any meeting of
the Board of Directors, however called and noticed, or wherever held, shall be
as valid as though had at a meeting duly held after regular call and notice if
a quorum is present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding
the meeting or an approval of the minutes. The waiver of notice or consent
need not specify the purpose of the meeting. All such waivers, consents, and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Notice of a meeting shall also be deemed given to any
director who attends the meeting without protesting before or at its
commencement, the lack of notice to that director.
Section 12. ADJOURNMENT. A majority of the directors present,
whether or not constituting a quorum, may adjourn any meeting to another time
and place.
Section 13. NOTICE OF ADJOURNMENT. Notice of the time and place
of holding an adjourned meeting need not be given, unless the meeting is
adjourned for more than twenty-four (24) hours, in which case notice of the
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time and place shall be given before the time of the adjourned meeting to the
directors who were not present at the time of the adjournment.
Section 14. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the Board of Directors may be taken without a meeting,
if all members of the Board shall individually or collectively consent in
writing to that action. Such action by written consent shall have the same
force and effect as a unanimous vote of the Board of Directors. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board.
Section 15. FEES AND COMPENSATION OF DIRECTORS. Directors and
members of committees may receive such compensation, if any, for their
services, and such reimbursement of expenses, as may be fixed or determined by
resolution of the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a
Chief Executive officer, a President, a Secretary, and a Chief Financial
Officer. The corporation may also have, at the discretion of the Board of
Directors, a Chairman of the Board, one or more Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article. Any number of offices may be held by the same person.
Section 2. ELECTION OF OFFICERS. The officers of the
corporation, except such officers as may be appointed in accordance with the
provisions of Section 3 or Section 5 of this Article IV, shall be chosen
annually by the Board of Directors, and each shall serve at the pleasure of the
Board, and shall hold their respective offices until their resignation,
removal, or other disqualification from service, or until their respective
successors shall be elected subject to the rights, if any, of an officer under
any contract of employment.
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Section 3. SUBORDINATE OFFICERS. The Board of Directors may
appoint, and may empower the President to appoint, such other officers as the
business of the corporation may require, each of whom shall hold office for
such period, have such authority and perform such duties as are provided in the
By-Laws or as the Board of Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause by the Board of Directors, at any
regular or special meeting of the Board, or, except in case of an officer
chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
Section 5. VACANCIES IN OFFICES. A vacancy in any office
because of death, resignation, removal, disqualification or any other cause
shall be filled in the manner prescribed in these By-Laws for regular
appointments to that office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
such an officer be elected, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Board of Directors or prescribed by
the By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if
any, as may be given by the Board of Directors to the Chairman of the Board, if
there be such an officer, the President shall be the Chief Executive Officer of
the corporation and shall, subject to the control of the Board of Directors,
have general supervision, direction, and control of the business and the
officers of the corporation. He shall preside at all meetings of the
shareholders and, in the absence of
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the Chairman of the Board, or if there be none, at all meetings of the Board of
Directors. He shall have the general powers and duties of management usually
vested in the office of President of a corporation, and shall have such other
powers and duties as may be prescribed by the Board of Directors or the
By-Laws.
Section 8. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents, in order of their rank as fixed by the Board of
Directors or, if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by
the Board of Directors or the By-Laws, and the President, or the Chairman of
the Board.
Section 9. SECRETARY. The Secretary shall keep or cause to be
kept, at the principal executive office and such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and shareholders, with the time and place
of holding, whether regular or special, and, if special, how authorized, the
notice given, the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board of Directors required by the By-Laws or by
law to be given, and the Secretary shall keep the seal of the corporation if
one be adopted, in safe custody, and shall have such other powers and perform
such other
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duties as may be prescribed by the Board of Directors or by the By-Laws. In
the absence or disability of the Secretary, the Assistant Secretary shall
perform all of the duties of the Secretary and when so doing shall have all of
the powers of and be subject to all of the restrictions upon the Secretary.
Section 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings, and shares.
The books of account shall at all reasonable times be open to inspection by any
director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the Board of Directors. The Chief
Financial Officer shall disburse the funds of the corporation as may be ordered
by the Board of Directors, shall render to the President and Directors,
whenever they request it, an account of all of his transactions as Chief
Financial Officer and of the financial condition of the corporation, and shall
have other powers and perform such other duties as may be prescribed by the
Board of Directors or the By-Laws. In the absence or disability of the Chief
Financial Officer, the Assistant Treasurer shall perform all the duties of the
Chief Financial Officer and when so doing shall have all of the powers of and
be subject to all of the restrictions upon, the Chief Financial Officer.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES, AND OTHER AGENTS
Section 1. AGENTS, PROCEEDINGS, EXPENSES. For the purposes of
this Article, "agent" means any person who is or was a director, officer,
employee, or other agent of this corporation, or is or was serving at the
request of this corporation as a director, officer, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a director, officer, employee, or
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agent of a foreign or domestic corporation which was a predecessor corporation
of this corporation or of another enterprise at the request of such predecessor
corporation; "proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative, or investigative; and
"expenses" includes, without limitation, attorneys' fees and any expenses of
establishing a right to indemnification under Section 4 or Section 5(c) of this
Article.
Section 2. ACTIONS OTHER THAN BY THE CORPORATION. This
corporation shall indemnify any person who was or is a party, or is threatened
to be made a party, to any proceeding (other than an action by or in the right
of this corporation) by reason of the fact that such person is or was an agent
of this corporation, against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with such proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in the best interests of this corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of such person was
unlawful. The termination of any proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which the person reasonably believed to be in the best interests of this
corporation or that the person had reasonable cause to believe that the
person's conduct was unlawful.
Section 3. ACTIONS BY THE CORPORATION. This corporation shall
indemnify any person who was or is a party, or is threatened to be made a
party, to any threatened, pending or completed action by or in the right of
this corporation to procure a judgment in its favor by reason of the fact that
such person is or was an agent of this corporation, against expenses actually
and reasonably incurred by such person in connection with the defense or
settlement of such action if such person acted in good faith, in a manner such
person believed would be in the best interests of this corporation and with
such care, including reasonable inquiry, as an ordinarily prudent person in a
like position would use under similar circumstances. No indemnification shall
be made under this Section 3:
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(a) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to this corporation in the
performance of such person's duty to this corporation, unless and only
to the extent that the court in which that action was brought shall
determine upon application that, in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity
for the expenses which the court shall determine;
(b) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval; or
(c) Of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval.
Section 4. SUCCESSFUL DEFENSE BY AGENT. To the extent that an
agent of this corporation has been successful on the merits in defense of any
proceeding referred to in Sections 2 or 3 of this Article, or in defense of any
claim, issue, or matter therein, the agent shall be indemnified against
expenses actually and reasonably incurred by the agent in connection therewith.
Section 5. REQUIRED APPROVAL. Except as provided in Section 4
of this Article, any indemnification under this Article shall be made by this
corporation only if authorized in the specific case upon a determination that
indemnification of the agent is proper in the circumstances because the agent
has met the applicable standard of conduct set forth in Sections 2 or 3 of this
Article, by:
(a) A majority vote of a quorum consisting of directors who
are not parties to such proceeding;
(b) Approval or ratification by the affirmative vote of a
majority of the shares of this corporation entitled to vote represented
at a duly held meeting at which a
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quorum is present or by the written consent of holders of a majority of
the outstanding shares entitled to vote. For such purpose, the shares
owned by the person to be indemnified shall not be considered
outstanding or entitled to vote thereon; or
(c) The court in which the proceeding is or was pending, upon
application made by this corporation, or the agent, the attorney or
other person rendering services in connection with the defense, whether
or not such application by the agent, attorney, or other person is
opposed by this corporation.
Section 6. ADVANCE OF EXPENSES. Expenses incurred in defending
any proceeding may be advanced by this corporation prior to the final
disposition of such proceeding upon receipt of an undertaking by or on behalf
of the agent to repay such amount unless it shall be determined ultimately that
the agent is entitled to be indemnified as authorized in this Article.
Section 7. OTHER INDEMNIFICATION. No provision made by the
corporation to indemnify its or its subsidiary's directors or officers for the
defense of any proceeding, whether contained in the Articles of Incorporation,
By-Laws, a resolution of shareholders or directors, an agreement, or otherwise,
shall be valid unless consistent with this Article. Nothing contained in this
Article shall affect any right to indemnification to which persons other than
such directors and officers may be entitled by contract or otherwise.
Section 8. LIMITATIONS. No indemnification or advance shall be
made under this Article, except as provided in Section 4 or Section 5(c), in
any circumstance where it appears:
(a) That it would be inconsistent with a provision of the
Articles of Incorporation, a resolution of the shareholders, or an
agreement in effect at the time of the accrual of the alleged cause of
action asserted in the proceeding in which the expenses were incurred
or other amounts
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were paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
Section 9. INSURANCE. Upon and in the event of a determination
by the Board of Directors of this corporation to purchase such insurance, this
corporation shall purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by the agent in
such capacity or arising out of the agent's status as such whether or not this
corporation would have the power to indemnify the agent against that liability
under the provisions of this section.
Section 10. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN. This
Article does not apply to any proceeding against any trustee, investment
manager, or other fiduciary of an employee benefit plan in such person's
capacity as such, even though such person may also be an agent of the
corporation as defined in Section 1 of this Article. Nothing contained in this
Article shall limit any right to indemnification to which such a trustee,
investment manager, or other fiduciary may be entitled by contract or
otherwise, which shall be enforceable to the extent permitted by applicable law
other than this Article.
ARTICLE VI
RECORDS AND REPORTS
Section 1. MAINTENANCE AND INSPECTION OF REGISTER. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, if either be appointed and as determined by resolution of
the Board of Directors, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of shares held by each
shareholder.
A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who hold at least one percent (1%) of such voting shares and
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have filed a Schedule 14B with the United States Securities and Exchange
Commission relating to the election of directors of the corporation shall have
the right to (i) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours five (5) business days'
after written demand upon the corporation, and (ii) obtain from the transfer
agent for the corporation, upon written demand and upon the tender of its usual
charges for such a list, a list of the shareholders' names and addresses, who
are entitled to vote for the election of directors, and their shareholdings, as
of the most recent record date for which it has been compiled or as of a date
specified by the shareholder subsequent to the date of demand. This list shall
be made available on or before the later of five (5) business days after the
demand is received or the date specified therein as the date as of which the
list is to be compiled.
The record of shareholders shall also be open to inspection and
copying upon written demand of any shareholder or holder of a voting trust
certificate, at any time during usual business hours, for a purpose reasonably
related to such holder's interests as a shareholder or holder of a voting trust
certificate.
Any inspection and copying under this Section 1 may be made in person
or by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
Section 2. MAINTENANCE AND INSPECTION OF BY-LAWS. The
corporation shall keep at its principal executive office, or if its principal
executive office is not in the State of California, at its principal business
office in this State, the original or a copy of the By-laws as amended to
date, which shall be open to inspection by the shareholders at all reasonable
times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in this State, the Secretary shall, upon the written
request of any shareholder, furnish to that shareholder a copy of the By-laws
as amended to date.
Section 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE
RECORDS. The accounting books and records and minutes of proceedings of the
shareholders and the Board of Directors and any committee or committees of the
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Board Directors shall be kept at such place or places designated by the Board
of Directors, or, in the absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written
demand of any shareholder or holder of a voting trust certificate, at any
reasonable time during usual business hours, for a purpose reasonably related
to such holder's interests as a shareholder or as the holder of such voting
trust certificate. The inspection may be made in person or by an agent or
attorney, and shall include the right to copy and make extracts. These rights
of inspection shall extend to the records of each subsidiary corporation of the
corporation.
Section 4. INSPECTION BY DIRECTORS. Every director shall have
the absolute right at any reasonable time to inspect all books, records, and
documents of every kind and to inspect the physical properties of the
corporation and each of its subsidiary corporations. Such inspection by a
director may be made in person or by an agent or attorney and the right of
inspection includes the right to copy and make extracts of documents.
Section 5. ANNUAL REPORT TO SHAREHOLDERS. The Board of
Directors of the corporation shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of
the fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days before the annual meeting of shareholders to be held during
the next fiscal year and in the manner specified in Section 4 of Article II of
these By-laws for giving notice to shareholders of the corporation. The annual
report shall contain a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year, accompanied by any report thereon of independent accountants or, if there
is no such report, the certificate of an authorized officer of the corporation
that the statements were prepared without audit from the books and records of
the Company. The annual report referred to herein is expressly waived if the
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corporation has less than one hundred (100) shareholders.
Section 6. FINANCIAL STATEMENTS. A copy of any annual financial
statement and any income statement of the corporation for each quarterly period
of each fiscal year, and any accompanying balance sheet of the corporation as
of the end of each such period that has been prepared by the corporation shall
be kept on file in the principal executive office of the corporation for twelve
(12) months, and each such statement shall be exhibited at all reasonable times
to any shareholder demanding an examination of any such statement or a copy
shall be mailed to any such shareholder.
ARTICLE VII
GENERAL CORPORATE MATTERS
Section 1. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All
checks, drafts, or other orders for payment of money, notes, or other evidences
of indebtedness, issued in the name of or payable to the corporation, shall be
signed or endorsed by such person or persons and in such manner as, from time
to time, shall be determined by resolution of the Board of Directors.
Section 2. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.
The Board of Directors, except as otherwise provided in these By-laws, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation, and
this authority may be general or confined to specific instances; and, unless so
authorized or ratified by the Board of Directors or within the agency power of
an officer, no officer, agent, or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its credit or
to render it liable for any purpose or for any amount.
Section 3. CERTIFICATE FOR SHARES. Every holder of shares in
the corporation shall be entitled to have a certificate signed in the name of
the corporation by the Chairman or Vice Chairman of the Board or the President
or a Vice President and by the Chief Financial Officer or an Assistant
Treasurer or the Secretary or
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any Assistant Secretary, certifying the number of shares and the class or
series of shares owned by the shareholder. Any or all of the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such person were an officer, transfer agent or registrar at the date of
issue.
Any such certificate shall also contain such legend or other statement
as may be required by Section 418 of the General Corporation Law, the Corporate
Securities Law of 1968, the federal securities laws, and any agreement between
the corporation and the issuee thereof.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the Board of Directors or the By-Laws may
provide; provided, however, that any such certificate so issued prior to full
payment shall state on the face thereof the amount remaining unpaid and the
terms of payment thereof.
Section 4. LOST CERTIFICATES. No new certificate for shares
shall be issued in lieu of an old certificate unless the latter is surrendered
and canceled at the same time; provided, however, that a new certificate will
be issued without the surrender and cancellation of the old certificate if (a)
the old certificate is lost, apparently destroyed or wrongfully taken; (b) the
request for the issuance of the new certificate is made within a reasonable
time after the owner of the old certificate has notice of its loss,
destruction, or theft; (c) the request for the issuance of a new certificate is
made prior to the receipt of notice by the corporation that the old certificate
has been acquired by a bona fide purchaser; (d) the owner of the old
certificate files a sufficient indemnity bond with or provides other adequate
security to the corporation; and (e) the owner satisfies any other reasonable
requirements imposed by the corporation. In the event of the issuance of a new
certificate, the rights and liabilities of the corporation, and of the holders
of the old and new certificates, shall be
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governed by the provisions of Section 8104 and 8405 of the California
Commercial Code.
Section 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
Chairman of the Board, the President, or any Vice President, or any other
person authorized by resolution of the Board of Directors or by any of the
foregoing designated officers, is authorized to vote on behalf of the
corporation any and all shares of any other corporation or corporations,
foreign or domestic, standing in the name of the corporation. The authority
granted to these officers to vote or represent on behalf of the corporation any
and all shares held by the corporation in any other corporation or corporations
may be exercised by any of these officers in person or by any person authorized
to do so by a proxy or power of authority duly executed by these officers.
Section 6. CONSTRUCTION AND DEFINITIONS. Unless the context
requires otherwise, the general provisions, rules of construction, and
definitions in the California General Corporation Law shall govern the
construction of these By-Laws. Without limiting the generality of the
foregoing, the masculine gender includes the feminine and neuter, the singular
number includes the plural, the plural number includes the singular, and the
term "person" includes both a corporation and a natural person.
ARTICLE VIII
AMENDMENTS
Section 1. AMENDMENT BY SHAREHOLDERS. New By-Laws may be
adopted or these By-Laws may be amended or repealed by the affirmative vote or
written consent of holders of a majority of the outstanding shares entitled to
vote except as otherwise provided by law or by the Articles of Incorporation.
Section 2. AMENDMENT BY DIRECTORS. Subject to the rights of the
shareholders as provided in Section 1 of this Article VIII, to adopt, amend or
repeal By-Laws, By-Laws other than a by-law or an amendment thereof changing
the authorized number of directors, may be adopted, amended, or repealed by the
Board of Directors.
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AMENDMENT TO BY-LAWS
OF
HASKEL INTERNATIONAL, INC.
Adopted at a special meeting of the Board of Directors held on
August 31, 1994, the By-Laws of this corporation are amended as follows:
That ARTICLE II, Section 2 be amended for 1994 only, as follows:
ARTICLE II, Section 2 be amended only for the
year 1994, for the purpose of changing the annual meeting of
the shareholders, for the shareholders of record on September
30, 1994, to be on November 22, 1994 at 9:00 o'clock A.M. For
the ensuing years, or until again amended, the date for the
annual meeting of the shareholders will remain as the third
Friday in October each year at 10:00 o'clock A.M.
<PAGE> 33
AMENDMENT TO BY-LAWS
OF
HASKEL INTERNATIONAL, INC.
Pursuant to a resolution adopted at a meeting of the Board of
Directors held on May 12, 1995, ARTICLE II, Section 2 of the By-Laws of this
corporation is amended as follows:
"For the year 1995, the annual shareholders meeting
will be October 5, 1995. For the ensuing years, or until this
Section is again amended, the date for the annual shareholders
meeting will remain as the fourth Friday in September."
<PAGE> 34
AMENDMENT TO BY-LAWS
OF
HASKEL INTERNATIONAL, INC.
Pursuant to a resolution adopted at a meeting of the Board of
Directors held on August 1, 1996, ARTICLE II, Section 2 of the By-Laws of this
corporation is amended as follows:
Section 2. The Annual Meeting of
shareholders shall be held on such date and at such time as
shall be fixed by the Board of Directors by resolution, at
which time the shareholders shall elect the Board of
Directors, consider reports of the affairs of the Corporation,
and transact such other business as may properly be brought
before the meeting.
