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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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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
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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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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-
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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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(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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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.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
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.
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
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