EXHIBIT 2
STANDSTILL AGREEMENT
This Standstill Agreement (this "Agreement") is made as of February 10,
1999 by and among Data I/O Corporation, a Washington corporation ("the
Company"), Bisco Industries, Inc., an Illinois corporation ("Bisco"), Bisco
Industries, Inc. Profit Sharing and Savings Plan (the "Plan") and Xxxx X. Xxxxxx
("GFC," and collectively with Bisco and the Plan, the "Reporting Persons").
RECITALS
A. The Reporting Persons are the owners of approximately 13.95% of the
outstanding common stock of the Company and have requested representation on the
Board of Directors of the Company (the "Board").
B. Conditioned on execution of this Agreement by the Reporting Persons, the
Board has agreed to appoint GFC to the Board on the terms set forth herein.
NOW, THEREFORE, in consideration of the mutual promises of the parties
contained herein and for other good and valuable consideration, the receipt and
sufficiently of which is hereby acknowledged, the parties hereby agree as
follows:
1. Definitions
"affiliate" has the meaning set forth in the 1934 Act.
"associate" has the meaning set forth in the 1934 Act, except that no
person will be deemed to be an associate of another person solely because the
first person is, directly or indirectly, the beneficial owner of 10% of more of
any class of equity securities of the other person unless such ownership causes
the first person to be an affiliate of the other person.
"beneficially own" has the meaning set forth in the regulations included in
Rule 13d-3 of the 1934 Act; provided that for purposes of this Agreement, any
option, warrant, right, conversion, privilege or arrangement to purchase,
acquire or vote Company Voting Securities regardless of the time period during
or at which it may be exercised and regardless of the consideration paid shall
be deemed to give the holder thereof beneficial ownership of the Company Voting
Securities to which it relates. Any Company Voting Securities which are subject
to such options, warrants, rights, conversion privileges or other arrangements
shall be deemed to be outstanding for purposes of computing the percentage of
outstanding securities owned by such Person but shall not be deemed to be
outstanding for purposes of computing the percentage of outstanding securities
owned by any other Person.
"Bylaw Notice Provisions" means Sections (13) and (14) of Article II of the
Company's Bylaws as in effect on the date hereof.
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"Company Voting Securities" means all classes of capital stock of the
Company which are then entitled to vote generally in the election of directors
and any securities exchanged for such classes of capital stock and any
securities convertible into or exchangeable or exercisable for such classes of
capital stock. For purposes of determining the amount or percentage of
outstanding Company Voting Securities beneficially owned by a Person, and for
purposes of calculating the aggregate voting power relating to such Company
Voting Securities, securities that are deemed to be outstanding shall be
included to the extent provided in the definition of "beneficially own."
"1933 Act" means the Securities Act of 1933, as amended, and the
regulations promulgated under such statute.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
regulations promulgated under such statute.
"Person" means a natural person or any legal, commercial or governmental
entity, including, but not limited to, a corporation, partnership, joint
venture, trust, limited liability company, group acting in consent or any person
acting in a representative capacity.
"Representatives" of a party means (i) the officers, directors or partners
of such party or (ii) the employees, agents or advisors of such party acting on
behalf of such party.
"Rights Agent" means ChaseMellon Shareholder Services, L.L.C.
"Rights Agreement" means that certain Rights Agreement between the Company
and the Rights Agent dated as of April 4, 1998.
"SEC" means the Securities and Exchange Commission.
"Securities Acts" means the 1933 Act and the 1934 Act.
"Term" means the period commencing on the date this Agreement is executed
and delivered by all of the parties hereto and continuing until midnight on the
day which is two business days before the deadline established by the Bylaw
Notice Provisions for submitting nominations of persons for election to the
Board of Directors of the Company at the 2000 Annual Meeting.
"1999 Annual Meeting" means the Company's annual meeting of shareholders to
be held in 1999.
"2000 Annual Meeting" means the Company's annual meeting of shareholders to
be held in 2000.
2. Board Composition and Related Matters
2.1. The Company agrees that promptly following the execution and
delivery of this Agreement by all of the parties hereto, the Board will appoint
GFC to the Board to serve until the
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1999 Annual Meeting. The Company further agrees to propose and support GFC to
stand for election to the Board at the 1999 Annual Meeting and to include GFC in
the Company's 1999 proxy statement. GFC acknowledges and agrees that the
foregoing right is for his exclusive and personal benefit and that, if at any
time GFC becomes unable or unwilling to serve as a member of the Board, the
Company shall have no obligation to nominate, elect or appoint a successor or
replacement to GFC.
2.2 GFC acknowledges and agrees that for so long as he shall serve as a
member of the Board, he shall have all of the same legal obligations as all
other directors of the Company in respect of their service as such under
Washington law, including, but not limited to, (i) the obligation to maintain
the confidentiality of all material nonpublic information that may be disclosed
to GFC or otherwise come into his possession as a director and (ii) the duty to
act in the best interests of all shareholders of the Company.
2.3 Nothing in this Agreement is intended to limit the discretion of the
Board to expand or reduce its size.
2.4 As soon as practicable following the execution of this Agreement by
all parties, the Company shall cause the Rights Agreement to be amended as set
forth in Exhibit 2.4, subject to such changes thereto not inconsistent with the
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substance of Exhibit 2.4 as the Rights Agent shall require, if any.
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3. 1999 Annual Meeting and 2000 Annual Meeting
3.1 The Reporting Persons shall provide to the Company such information as
the Company may from time to time reasonably request for inclusion in materials
to be disseminated in connection with the 1999 Annual Meeting and the 2000
Annual Meeting under the Securities Acts in order to comply with the disclosure
requirements of the Securities Acts. The Reporting Persons represent and warrant
to the Company that such information shall not contain any material misstatement
or omission.
3.2 At any meeting of the shareholders of the Company held during the
Term, the Reporting Persons shall (i) vote, or cause to be voted, all shares of
the Company Voting Securities beneficially owned by the Reporting Persons as of
the appropriate record date for such meeting in favor of the election to the
Board of the persons nominated by the Board for election to the Board at such
meeting (the "Company Nominees"), (ii) with respect to any matter other than the
matter described by clause (i) above and other than any proposal to amend the
articles of incorporation of the Company or any proposal to be voted on by the
shareholders of the Company that would require a two-thirds vote of shareholders
under the Washington Business Corporation Act (Chapter 23B of the Revised Code
of Washington)), (A) vote, or cause to be voted, all shares of the Company
Voting Securities beneficially owned by the Reporting Persons as of the
appropriate record date for such meeting in accordance with the recommendation
of a majority of the Board with respect to any proposal to be voted on by
shareholders at such meeting or (B) vote, or cause to be voted, all shares of
the Company Voting Securities beneficially owned by the Reporting Persons as of
the appropriate record date for such meeting in the same proportion as the
percentage of votes cast by the shareholders of the Company in
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favor of, opposing and abstaining from any proposal to be voted on by
shareholders at such meeting, (iii) ensure that all shares of Company Voting
Securities beneficially owned by the Reporting Persons or any of their
respective affiliates are voted and deemed to be present, in person or by proxy,
at any meeting of the shareholders of the Company held during the Term so that
all Company Voting Securities so beneficially owned may be counted for the
purpose of determining the presence of a quorum at each such meeting and (iv)
except as otherwise instructed by the Company, not vote (or cause to be voted)
any shares of the Company Voting Securities beneficially owned by the Reporting
Persons as of the appropriate record date for such meeting in favor of the
removal from the Board of any director.
3.3 As soon as practicable following the execution of this Agreement,
the Company shall issue a press release in the form of Exhibit 3.3 hereto (the
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"Company Press Release"), (ii) the Company shall file with the SEC a Current
Report on Form 8-K to disclose this Agreement in a manner consistent with the
Company Press Release and (iii) the Reporting Persons shall file with the SEC an
amendment to the Schedule 13D (originally filed by the Reporting Persons on
August 29, 1998) to disclose this Agreement in a manner consistent with the
Company Press Release. None of the parties will make any public statement
(including any statement in any filing with the SEC or any other governmental
agency) regarding this Agreement or any event occurring prior to the date hereof
that is inconsistent with, or otherwise contrary to, the statements in the
Company Press Release or that is critical of any other party hereto or its
actions. Nothing herein shall limit, preclude or prevent either the Company or
any Reporting Person from making any public statement regarding this Agreement
or any event occurring prior to the date hereof that is neither inconsistent
with, not otherwise contrary to, the statements in the Company Press Release,
nor critical of any other party hereto or its actions, provided that all such
public statements shall be in compliance with applicable securities laws and
consistent with any such party's fiduciary duties to the Company.
4. Standstill and Related Matters
4.1 Each of the Reporting Persons agrees that, during the Term, neither
such Reporting Person nor its affiliates or associates will, directly or
indirectly, beneficially own any Company Voting Securities exceeding, in the
aggregate among the Reporting Persons (including its affiliates and associates),
19.99% of the Company's then outstanding Company Voting Securities, except
pursuant to any dividends or distributions of Company Voting Securities made on
or to the Company Voting Securities beneficially owned by such Person.
4.2 Provided that the Company is not in material default under this
Agreement, each of the Reporting Persons agrees that, during the Term, unless
such shall have been specifically invited in writing by the Company, neither
such Reporting Person nor any of its affiliates or Representatives will in any
manner, directly or indirectly: (a) effect or seek, offer or propose (whether
publicly or otherwise) to effect, or cause or participate in or in any way
assist any other person to effect or seek, offer or propose (whether publicly or
otherwise) to effect or participate in, (i) any acquisition of any securities
(or beneficial ownership thereof) or assets of the Company or any of its
subsidiaries (except as otherwise expressly provided by Section 2.4 or 4.1 of
this Agreement), (ii) any tender or exchange offer, merger or other business
combination
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involving the Company or any of its subsidiaries, (iii) any recapitalization,
restructuring, liquidation, dissolution or other extraordinary transaction with
respect to the Company or any of its subsidiaries, or (iv) any "solicitation" of
"proxies" (as such terms are used in the proxy rules of the SEC) or consents to
vote any voting securities of the Company; (b) form, join or in any way
participate in a "group" (as defined under the 0000 Xxx) with respect to the
Company (other than with the other Reporting Persons); (c) otherwise act, alone
or in concert with others, to seek to control or influence the management, Board
or policies of the Company, including, without limitation, by (i) initiating or
instituting a shareholder vote for any such purpose or (ii) nominating or
causing others to nominate or otherwise seeking to elect directors of the
Company other than those nominated by the Board; (d) initiate or institute, or
participate in the initiation or institution of any legal, regulatory or
administrative action or proceeding in any court or regulatory or administrative
body of agency with respect to the Company or any of its associates or
Representatives, which action or proceeding in any way contests, or otherwise
seeks to void, the validity of, or the enforceability of any provision of this
Agreement (provided that nothing herein shall prevent the Reporting Persons from
defending any such action or proceeding brought by or on behalf of the Company
or its affiliates or associates); (e) take any action which might force the
Company to make a public announcement regarding any of the types of matters
set forth in (a) above; or (f) enter into any discussions or arrangements with
any third party with respect to any of the foregoing. Each of the Reporting
Persons also agrees during the Term not to request the Company to amend, waive
or terminate any provision of this Agreement (including this sentence).
4.3. GFC further agrees that, following the expiration of the Term, if any
Reporting Person (i) nominates any person (other than GFC) for election to the
Board of Directors of the Company at the 2000 Annual Meeting or submits any
proposal to the Company for consideration at the 2000 Annual Meeting or (ii)
seeks to call, or participates in calling, a special meeting of the shareholders
of the Company, GFC will resign from the Board of Directors of the Company
effective concurrently with the delivery to the Company of such nomination or
proposal, or the initiation of the process of calling of a special meeting, as
the case may be. The Reporting Persons acknowledge and agree that if GFC fails
to resign as required by the preceding sentence, the nomination or proposal, or
the calling of a special meeting, as the case may be, which gives rise to the
obligation to resign will be invalid and not binding in any way on the Company.
Nothing in this Agreement shall constitute a waiver, extension or modification
of the Bylaw Notice Provisions.
5. Certain Representations and Warranties
5.1. The Company represents and warrants to the Reporting Persons that:
(a) its execution, delivery and performance of this Agreement has been approved
by the Board and does not violate its articles of incorporation, bylaws or any
agreement to which it is a party; and (b) this Agreement constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditor's rights
generally.
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5.2. GFC hereby represents to the Company that: (the execution, delivery
and performance of this Agreement does not violate any agreement to which he is
a party; (b) this Agreement constitutes a valid and binding obligation of GFC,
enforceable against him in accordance with its terms, except as such enforcement
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally; (c) he has consulted with counsel of
his choice in connection with his decision to enter into and be bound by this
Agreement; and (d) there are no circumstances that would preclude him from
serving as a member of the Board.
5.3. Each of Bisco and the Plan represents and warrants to the Company
that: (a) its respective execution, delivery and performance of this Agreement
has been approved by its board of directors or board of trustees, as the case
may be, and does not violate its respective certificate of incorporation,
bylaws, trust agreement or any other agreement to which it is a party; and (b)
this Agreement constitutes a valid and binding obligation of Bisco or the Plan
(as the case may be), enforceable against Bisco or the Plan (as the case may be)
in accordance with its terms except as such enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
5.4. Each of the Reporting Persons represents and warrants to the Company
that at the date of this Agreement, the Reporting Persons beneficially own
13.95% of the Company's outstanding Company Voting Securities.
6. Miscellaneous
6.1. This Agreement constitutes the entire agreement of the parties with
respect to its subject matter and supersedes any and all prior representations,
agreements or understandings, whether written or oral, between or among any of
them with respect to such subject matter. This Agreement may be amended only by
a written agreement duly executed by the parties.
6.2. All representations, warranties, covenants and agreements made by the
parties in this Agreement shall survive the date hereof until the end of the
Term.
6.3. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Washington without regard to its conflict of law
principles. Exclusive jurisdiction to resolve any dispute arising under or in
connection with this Agreement is hereby conferred on the Superior Court of King
County in the State of Washington or, if the dispute involves issues of federal
law or which such Superior Court lacks or declines jurisdiction, on the U.S.
federal district court located in King County, Washington. The Parties hereby
submit to the exclusive jurisdiction of said Courts.
6.4. This Agreement may not be assigned by any party without prior written
consent of the other parties. This Agreement shall be binding upon, and inure to
the benefit of, the respective successors and permitted assigns of the parties;
provided, however, that the provisions of this Agreement relating to the
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nomination of, election to and membership on the Board of GFC are for the
exclusive and personal benefit of GFC.
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6.5. In the event of litigation or any other proceeding to enforce any
right or remedy arising from this Agreement, the prevailing party shall be
entitled to its reasonable attorneys' fees and costs.
6.6. Any waiver by any party of a breach of any provision of this Agreement
shall not be deemed to be a waiver of any other breach of such provision or of
any breach of any other provision of this Agreement.
6.7. This Agreement may be executed in counterparts, each of which shall
constitute an original but all of which shall together constitute a single
instrument.
IN WITNESS WHEREOF, this Agreement has been executed by each of the Parties
as of the date first above written.
BISCO INDUSTRIES, INC. XXXX X. XXXXXX
By: /s/ Xxxx X. Xxxxxx /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, President Xxxx X. Xxxxxx, individually
and Chief Executive Officer
BISCO INDUSTRIES PROFIT SHARING DATA I/O CORPORATION
AND SAVINGS PLAN
By: /s/ Xxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxx
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Xxxx X. Xxxxxx, Trustee Xxxx Xxxxxx, President
and Chief Executive
Officer
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