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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
EKCO GROUP, INC.
(Name of Subject Company)
EKCO GROUP, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
SERIES B ESOP CONVERTIBLE PREFERRED STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
282636109
(CUSIP NUMBER OF COMMON STOCK)
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DONATO A. DENOVELLIS
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
EKCO GROUP, INC.
98 SPIT BROOK ROAD, SUITE 102
NASHUA, NEW HAMPSHIRE 03062
(603) 888-1212
(Name, address and telephone number of person authorized to receive
notice and communication on behalf of the person(s) filing statement).
WITH A COPY TO:
PETER S. LAWRENCE, ESQ.
MICHAEL L. FANTOZZI, ESQ.
MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND POPEO, P.C.
ONE FINANCIAL CENTER
BOSTON, MASSACHUSETTS 02111
(617) 542-6000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Ekco Group, Inc., a Delaware corporation
(the "Company"), and the address of the principal executive offices of the
Company is 98 Spit Brook Road, Suite 102, Nashua, New Hampshire 03062. The
titles of the classes of equity securities to which this statement relates are
the Company's (i) common stock, par value $.01 per share, and the related series
A preferred share purchase rights (collectively, the "EKCO Common Stock") issued
pursuant to the Rights Agreement (the "Rights Agreement") dated March 27, 1987,
as amended, between the Company and American Stock Transfer & Trust Company, and
(ii) series B ESOP convertible preferred stock, par value $.01 per share (the
"ESOP Preferred Stock" and, together with the EKCO Common Stock, the "EKCO
Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to the tender offer by EG Two Acquisition Co., a
Delaware corporation (the "Purchaser"), and a subsidiary of CCPC Acquisition
Corp., a Delaware corporation (the "Parent"), and Borden, Inc., a New Jersey
corporation ("Borden"), disclosed in a Tender Offer Statement on Schedule 14D-1,
dated August 11, 1999 (as may be amended and supplemented from time to time, the
"Schedule 14D-1"), to purchase all of the outstanding EKCO Shares at a price of
$7.00 per EKCO Share, net to the seller in cash, without interest thereon (the
"Per Share Amount"), upon the terms and subject to the conditions set forth in
the Offer to Purchase (the "Offer to Purchase") dated August 11, 1999 and in the
related Letter of Transmittal (which together with the Offer to Purchase, each
as may be amended and supplemented from time to time, constitute the "Offer").
The Offer to Purchase and the related Letter of Transmittal are exhibits to the
Schedule 14D-1, that has been filed by the Purchaser with the Securities and
Exchange Commission. The Parent and the Purchaser are affiliates of Borden.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 5, 1999, and amended on August 10, 1999 (collectively, the "Merger
Agreement"), by and among the Parent, the Purchaser and the Company. The Merger
Agreement provides that, among other things, as soon as practicable after the
purchase of the EKCO Shares pursuant to the Offer and the satisfaction of the
other conditions set forth in the Merger Agreement, in accordance with the
relevant provisions of the General Corporation Law of the State of Delaware, as
amended (the "DGCL"), the Purchaser will be merged with and into the Company
(the "Merger"), and the Company will continue as the surviving corporation (the
"Surviving Corporation") under the name "EKCO Group, Inc." as a wholly owned
subsidiary of the Parent. A copy of the Merger Agreement and the amendment
thereto are filed herewith as Exhibits 1 and 2, respectively, and are
incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of the
Parent and the Purchaser are located at 180 East Broad Street, Columbus, Ohio
43215.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
there are no material contracts, agreements, arrangements or understandings and
no actual or potential conflicts of interest between the Company or its
affiliates and (i) the Company's executive officers, directors or affiliates or
(ii) the Parent or the Purchaser or their respective executive officers,
directors or affiliates.
ARRANGEMENTS WITH THE PARENT, PURCHASER OR THEIR AFFILIATES
THE MERGER AGREEMENT
The following is a summary of certain material provisions of the Merger
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the
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Merger Agreement, which is incorporated herein by reference. Capitalized terms
not otherwise defined below will have the meanings set forth in the Merger
Agreement.
THE OFFER. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five business
days after the initial public announcement of the Purchaser's intention to
commence the Offer. The Purchaser will, and the Parent will cause the Purchaser
to, accept for payment and pay for, as promptly as practicable after expiration
of the Offer, all EKCO Shares validly tendered and not withdrawn. The Per Share
Amount payable in the Offer will be paid net to the seller in cash without
interest thereon (subject to any applicable withholding of taxes), upon the
terms and subject to the conditions of the Offer, including the Minimum
Condition and the other conditions described below in "Conditions of the Offer."
The Purchaser may increase the Per Share Amount, provided that, without the
prior written consent of the Company, the Purchaser will not (i) decrease the
Per Share Amount below $7.00, (ii) reduce the minimum number of the EKCO Shares
to be purchased in the Offer, (iii) change the form of the consideration payable
in the Offer (other than by adding consideration), (iv) add to, modify or
supplement the Conditions of the Offer, (v) extend the expiration date of the
Offer beyond September 8, 1999, except as expressly provided below or (vi) make
any other change in the terms or Conditions of the Offer which is materially
adverse to the holders of the EKCO Shares.
The Offer will initially remain open until midnight, New York City time, on
September 8, 1999. The Purchaser may extend the Offer for up to a maximum of 15
business days if less than 90% of the outstanding EKCO Shares have been tendered
on any expiration date. During such 15 business days, all of the Conditions of
the Offer other than the Minimum Condition and the conditions set forth below in
paragraphs (a), (b) and (d) of the Conditions of the Offer will be waived.
In addition, if the Purchaser does not consummate the Offer on September 8,
1999 due to the failure of one or more of the Conditions of the Offer to be
satisfied, the Purchaser will be obligated to extend the Offer on one or more
occasions until the earlier of (x) 11:59 p.m. New York time on October 4, 1999,
or (y) two business days after such condition or conditions are satisfied or
waived, provided that the unsatisfied condition or conditions are reasonably
capable of being satisfied on or prior to October 4, 1999. If the Purchaser does
not consummate the Offer on or prior to October 4, 1999 due to the failure of
one or more of the Conditions of the Offer to be satisfied, and if such
unsatisfied condition or conditions are reasonably capable of being satisfied,
then the Purchaser may (or will, if requested by the Company), extend the Offer
one or more times until the earlier of (x) 11:59 p.m. New York time on December
3, 1999, or (y) two business days after such condition or conditions are
satisfied or waived. The Purchaser may also extend the Offer one or more times
until February 1, 2000, if the Offer has not been consummated solely due to the
waiting period or approvals under the Hart-Scott-Rodino Antitrust Improvements
Act or any applicable foreign competition laws not having expired or terminated
or been received.
The Purchaser may at any time transfer or assign to the Parent or to one or
more corporations directly or indirectly 80% owned by the Parent the right to
purchase all or any portion of the EKCO Shares tendered pursuant to the Offer.
CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer,
the Purchaser will not be obligated to accept for payment or pay for, any EKCO
Shares tendered pursuant to the Offer if (i) the waiting period or approvals
under the Hart-Scott-Rodino Antitrust Improvements Act or any applicable foreign
competition laws have not expired or terminated or been received, (ii) EKCO
Shares equal to less than a majority of the voting power (determined on a
fully-diluted basis) of all the securities of the Company entitled to voted
generally in a merger have been tendered (the "Minimum Condition"), or (iii) at
any time prior to the acceptance for payment of EKCO Shares, any of the
following conditions exist:
(a) any statute, rule or regulation, or any decree, order or injunction, is
promulgated, enacted, entered or enforced by any governmental entity that (i)
makes the acquisition by the Purchaser of a material portion of the EKCO Shares
illegal, or prohibits or materially limits the ownership or operation
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by the Company or any of the Ekco subsidiaries, or by the Parent or the
Purchaser or any of the Parent's subsidiaries of all or any material portion of
the business or assets of the Company or any of the Ekco subsidiaries or the
Parent or any of its material subsidiaries, or compells the Purchaser, the
Parent or any of the Parent's subsidiaries to dispose of or hold separate all or
any material portion of the business or assets of the Company or any of the Ekco
Subsidiaries or the Parent or any of its material subsidiaries, as a result of
the transactions contemplated by the Offer or the Merger Agreement, or (ii)
otherwise prohibits or restricts the making or consummation of the Offer or the
Merger (each a "Governmental Restriction"); provided that in order to invoke
this condition, the Parent and the Purchaser will have used their reasonable
best efforts to prevent such Governmental Restriction or to lift, rescind,
mitigate, reverse, cause to expire, terminate or ameliorate the effects thereof;
(b) any action or proceeding is brought or any imminent action or proceeding
is meaningfully threatened by any governmental entity that seeks an order having
any effect set forth in clause (a) above;
(c) the Board of Directors of the Company (the "Company Board") has
withdrawn, modified or amended in a manner that is materially adverse to the
Parent or the Purchaser (including by way of any amendment to this
Schedule14D-9) its recommendation of the Offer, the Merger or the Merger
Agreement;
(d) the Company has breached or failed to perform in any material respect
any of its material covenants or agreements (other than covenants or agreements
relating in any way to the Debt Offer (as defined below)) under the Merger
Agreement or the Company has willfully breached or willfully failed to perform
in any material respect any of the covenants or agreements relating in any way
to the Debt Offer;
(e) any of the representations and warranties of the Company set forth in
the Merger Agreement which are qualified as to material adverse effect are not
true and correct when made and as of the expiration of the Offer, or any of the
other representations and warranties of the Company set forth in the Merger
Agreement is not true and correct when made and as of the expiration of the
Offer, which failure would have a material adverse effect (except in each case
in the case of representations and warranties of the Company which address
matters only as of a particular date, which need only be true and correct as
aforesaid as of such date);
(f) the Merger Agreement has been terminated in accordance with its terms;
(g) the Parent, the Purchaser and the Company have agreed in writing that
the Purchaser will terminate the Offer or postpone the acceptance for payment of
or the payment for EKCO Shares thereunder;
(h) any of the following has occurred (i) any general suspension of, or
limitation on prices for trading in securities on the New York Stock Exchange,
American Stock Exchange, any national securities exchange or on the Nasdaq
National Market System for a period in excess of 24 hours (excluding any
suspension or limit resulting solely from physical damage or interference with
such exchanges not related to market conditions), (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, or (iii) a material adverse change in the general financial, bank
or capital markets, including, without limitation, a decline of a least 30% in
either the Dow Jones Average of Industrial Stocks or the Standard & Poor's 500
index from August 5, 1999; or
(i) a distribution date or a stock acquisition date (as each such term is
defined in the Rights Agreement) has occurred pursuant to the Rights Agreement;
which makes it inadvisable, as determined by the Purchaser in good faith, to
proceed with the Offer or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Parent and the
Purchaser and may be asserted by them regardless of the circumstances giving
rise to any such condition or may be waived by them in whole or in part at any
time and from time to time in their sole discretion. The failure by the Parent
or the Purchaser at any time to exercise any of the foregoing rights will not be
deemed a waiver of any such right;
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the waiver of any such right with respect to particular facts and circumstances
will not be deemed a waiver with respect to any other facts and circumstances;
and each such right will be deemed an ongoing right that may be asserted at any
time and from time to time.
COMPANY BOARD REPRESENTATION. The Merger Agreement provides that promptly
upon the purchase by the Purchaser of the EKCO Shares pursuant to the Offer, the
Purchaser will be entitled to designate such number of directors, rounded up to
the next whole number, on the Company Board as will give the Purchaser
representation on the Company Board equal to the product of the total number of
directors on the Company Board (giving effect to the directors appointed or
elected pursuant to this sentence) multiplied by a percentage that the aggregate
number of EKCO Shares beneficially owned by the Purchaser, Parent or any other
affiliates of the Purchaser bears to the total number of EKCO Shares
outstanding, and the Company will, at such time, promptly take all action
necessary to cause the Purchaser's designees to be so elected, including either
increasing the size of the Company Board or securing the resignation of
incumbent directors or both. At such time, the Company will cause persons
designated by the Purchaser to constitute the same percentage as is on the
Company Board on (i) each committee of the Company Board, (ii) each board of
directors of each domestic subsidiary of the Company and (iii) each committee of
such boards, in each case only to the extent permitted by law.
Notwithstanding the foregoing, following the election of the Purchaser's
designees to the Company Board, until the Effective Time, (i) the Purchaser will
only be entitled to designate up to that number of directors that is one less
than the total number of directors on the Company Board and regardless of the
total number of such directors, and the Company Board will have at least one
director who was a director on August 5, 1999 (provided that the Company will
cause there to be at least three directors), and (ii) any amendment to the
Merger Agreement adverse to the Company, its stockholders, directors, officers
or employees, termination of the Merger Agreement by the Company, amendment of
the indemnification or exculpation provisions of the certificate of
incorporation or by-laws of the Company in effect on August 5, 1999, extension
of time for the performance of the Parent's or the Purchaser's obligations under
the Merger Agreement, waiver of any conditions for the benefit of the Company or
any of the obligations or other acts of the Parent or the Purchaser, or any
waiver or exercise of the Company's or its stockholders' rights, remedies or
benefits under the Merger Agreement will require (in addition to the approval of
the Company Board as a whole) the approval of a majority of the directors, or of
the director, of the Company then in office who was or were director(s) on
August 5, 1999, and (iii) the Parent will cause the Purchaser not to, and the
Purchaser will not take any action to cause its designees to constitute a
greater number of directors than provided in the Merger Agreement.
In order to effectuate the requirements in the preceding paragraph, the
Company is required to include in this Schedule 14D-9 information with respect
to the Company and its officers and directors that is included in the
Information Statement attached hereto as Schedule I.
THE MERGER. The Merger Agreement provides that upon the filing of a
certificate of merger with the Delaware Secretary of State (or at such later
time as the parties agree) the Merger will become effective (the "Effective
Time") and the Purchaser will be merged with and into the Company. As a result
of the Merger, the separate corporate existence of the Purchaser will cease and
the Company will continue as the Surviving Corporation. From and after the
Effective Time, the Surviving Corporation will possess all the property, rights,
privileges, powers and franchises and be subject to all of the restrictions,
debts, liabilities, disabilities, obligations and duties of the Company and the
Purchaser.
At the Effective Time, each Share issued and outstanding immediately prior
to the effective time held by stockholders (other than EKCO Shares held by the
Company, the Parent or the Purchaser, or EKCO Shares held by stockholders who
properly exercise their appraisal rights under the DGCL) will be canceled and
converted automatically into the right to receive $7.00 in cash, without
interest, less any required withholding taxes. Each Share held by the Company,
the Parent or the Purchaser will automatically be canceled and retired and will
cease to exist, and no cash or other consideration will be delivered in exchange
therefor.
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At the Parent's election, the Merger may alternatively be structured so that
(i) the Company is merged with and into the Purchaser or any other direct or
indirect subsidiary of the Parent or (ii) any direct or indirect subsidiary of
the Parent other than the Purchaser is merged with and into the Company,
provided that no such change shall (i) alter the consideration to be issued to
the holders of EKCO Shares in the Merger or the treatment of holders of EKCO
Options or Restricted Stock, (ii) materially impede or delay consummation of the
Merger, or (iii) release the Parent or the Purchaser from any of its obligations
under the Merger Agreement.
DISSENTING EKCO SHARES. EKCO Shares outstanding immediately prior to the
Effective Time held by a stockholder who has not voted in favor of the Merger
and is otherwise entitled to demand, and who properly demands, appraisal for
such EKCO Shares in accordance with Section 262 of the DGCL ("Dissenting EKCO
Shares") will not be converted into a right to receive the Per Share Amount
unless such holder fails to perfect or withdraws or loses such holder's right to
appraisal. Such stockholders shall be entitled to receive payment of the
appraised value of such EKCO Shares in accordance with the provisions of such
Section 262.
TREATMENT OF STOCK OPTIONS AND WARRANTS. Pursuant to the Merger Agreement,
prior to the Effective Time, the Company will use its commercially reasonable
best efforts to cause each outstanding option to purchase the EKCO Shares (in
each case, an "EKCO Option") granted under the Company's stock option plans,
whether or not then exercisable, to be canceled by the Company and exchanged for
a cash payment, paid by the Surviving Corporation equal to the product of (i)
the number of EKCO Shares previously subject to such EKCO Option and (ii) the
excess, if any, of the Per Share Price over the exercise price per EKCO Share
previously subject to such EKCO Option. The Merger Agreement provides that all
applicable withholding taxes attributable to the payments made thereunder will
be deducted from the amounts payable thereunder, provided that, with respect to
any person subject to Section 16 of the Exchange Act of 1934, as amended (the
"Exchange Act"), any such amount will be paid as soon as practicable after the
first date payment can be made without liability to such person under Section
16(b) of the Exchange Act.
The Company will use its commercially reasonable best efforts to (A)(i)
terminate as of the Effective Time all stock or other equity based plans
maintained with respect to the shares and (ii) amend as of the Effective Time,
any other plan providing for the issuance, transfer or grant of any capital
stock of the Company or any interests in respect of any capital stock of the
Company to provide that no further issuance, transfer or grant shall be
permitted as of the Effective Time, and (B) provide that, following the
Effective Time, no holder of an EKCO Option or any participant in any option
plan shall have any right thereunder to acquire any capital stock of the
Company, the Parent or the Purchaser.
Notwithstanding the foregoing, the Company will cause the Chairman and the
Chief Executive Officer of the Company and all the members of the Company Board
to execute an option election in respect of all of their outstanding EKCO
Options, prior to the consummation of the Offer, provided that if such election
would result in a violation of Section 16 of the Exchange Act and Rule 16(b)
promulgated thereunder, then such election may be delayed until such time as it
would not result in a violation of Section 16.
Pursuant to the Merger Agreement, prior to the Effective Time, the Company
will use its commercially reasonable best efforts to provide that each
outstanding warrant to purchase EKCO Shares (in each case, an "EKCO Warrant"),
whether or not then vested or exercisable, will be exercisable for and entitle
each holder thereof to, a payment in cash from the Surviving Corporation, upon
exercise, equal to the product of (i) the number of EKCO Shares previously
subject to such EKCO Warrant and (ii) the excess, if any, of the Per Share
Amount over the exercise price per EKCO Share previously subject to such EKCO
Warrant. All applicable withholding taxes attributable to the payments made
under the Merger Agreement will be deducted from the amounts payable thereunder.
EKCO RESTRICTED STOCK. As soon as practicable after the commencement of the
Offer, the Company will use commercially reasonable best efforts to cause each
unvested EKCO Share ("Restricted Stock") under the 1984 Ekco Group, Inc.
Restricted Stock Plan and the 1985 Ekco Group, Inc. Restricted Stock
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Plan, as to which a valid restricted stock election is executed (and not
revoked) and delivered to the Company, to become fully vested and
non-forfeitable immediately prior to the purchase and contingent upon the
consummation of the Offer. As soon as practicable after the commencement of the
Offer, the Company will use its commercially reasonable best efforts to cause
each holder of shares of Restricted Stock to execute and deliver to the Company,
prior to the expiration of the Offer, a restricted stock election under which
such holder agrees, contingent upon the purchase of EKCO Shares by the Purchaser
pursuant to the Offer, to cause, immediately prior to the expiration of the
Offer, the shares of Restricted Stock to be deemed to have been tendered in the
Offer in exchange for the Per Share Amount which will be paid by the Purchaser
to the holder as soon as practicable after the consummation of the Offer but in
no event more than 10 business days after the consummation of the Offer.
DIRECTORS AND OFFICERS, CERTIFICATE OF INCORPORATION AND BY-LAWS. The
Merger Agreement provides that the directors of Purchaser immediately prior to
the Effective Time and the officers of the Company immediately prior to the
Effective Time will be the initial directors and officers of the Surviving
Corporation. The Merger Agreement also provides that the by-laws of the
Purchaser will be the by-laws of the Surviving Corporation.
STOCKHOLDER APPROVAL. Under the DGCL, if the Purchaser acquires, pursuant
to the Offer, at least 90% of the EKCO Common Stock and 90% of the ESOP
Preferred Stock, it will be able to approve the Merger Agreement and the
transactions contemplated thereby, without a vote of the Company's stockholders
in accordance with Section 253 of the DGCL; provided that the Company's
Certificate of Designation for the ESOP Preferred Stock contains provisions that
may require the Purchaser to acquire all of the outstanding ESOP Preferred Stock
to effect the Merger without a stockholder vote. If the Purchaser is entitled
under Section 253 of the DGCL to approve the Merger Agreement without a
stockholder vote, the Company has agreed that it will take all necessary and
appropriate action to cause the Merger to become effective as soon as reasonably
practicable after such acquisition of EKCO Shares. If the Purchaser does not
acquire at least 90% of the EKCO Common Stock and the requisite vote of the ESOP
Preferred Stock under the Company's Certificate of Designation as of any
scheduled expiration date of the Offer, then the Purchaser will be required to
obtain stockholder approval of the Merger Agreement and the transaction
contemplated thereby. However, if the Minimum Condition is satisfied, the
Purchaser will have the requisite voting power to approve the Merger without a
meeting of the stockholders by means of a written consent in lieu of a meeting,
but will have to mail an information statement to its stockholders prior to
effectuating the Merger.
AGREEMENTS OF PARENT, PURCHASER AND THE COMPANY; STOCKHOLDERS'
MEETING. Pursuant to the Merger Agreement, if a stockholders' meeting is
required to approve the Merger Agreement, the Company will take all necessary
action to hold a meeting as soon as practicable following the consummation of
the Offer. At the stockholders' meeting, the Parent and the Purchaser will cause
all EKCO Shares then owned by them and their subsidiaries to be voted in favor
of the approval and adoption of the Merger Agreement. If a stockholders' meeting
is called, the Company will prepare and file with the Securities and Exchange
Commission a Proxy Statement for the solicitation of a vote of holders of EKCO
Shares approving the Merger, which will include the recommendation of the
Company Board that holders of EKCO Shares vote in favor of the approval and
adoption of the Merger Agreement.
CONDUCT OF BUSINESS. Pursuant to the Merger Agreement, prior to the
Effective Time, unless otherwise expressly contemplated by the Merger Agreement
or consented to in writing by Parent, the Company will, and will cause its
subsidiaries (the "Subsidiaries" and, individually, a "Subsidiary") to, (i)
operate its business in the ordinary and usual course of business and consistent
with past practice, and (ii) use its commercially reasonable best efforts to
preserve intact its business organization, keep available the services of its
current officers and employees and preserve the goodwill of those having
advantageous business relationships with it and its Subsidiaries.
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NO SOLICITATION. Until the earlier of the termination of the Merger
Agreement or the Effective Time, the Company will not, and will direct each
affiliate, officer, director, and agent of the Company not to, solicit,
participate in or initiate discussions with any person or other entity or take
any other action to facilitate, any inquiry, proposal or offer that constitutes,
or may reasonably be expected to lead to, an offer or proposal for any merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries, or any purchase or sale of more than 15% of
the assets (including stock of its Subsidiaries) of the Company and its
Subsidiaries taken as a whole, or any purchase or sale of, or tender or exchange
offer for, more than 15% of the equity securities of the Company or any of the
its Subsidiaries (an "Acquisition Proposal") or furnish to any other person any
information with respect to its business, properties or assets or any of the
foregoing, or otherwise cooperate in any way with, or assist or participate in,
facilitate any effort by any other person to do or seek any of the foregoing. In
addition, the Company will, and will cause each affiliate, officer, director and
agent of the Company to, immediately cease any such discussions or other
activities. Notwithstanding the foregoing, the Company may, (i) refer any party
to the Merger Agreement, (ii) directly or indirectly furnish information and
access, in response to unsolicited requests therefor, to any person or entity
that has made a Superior Proposal (as defined below) and to any investment
banker, financial advisor, attorney, accountant or other representative retained
by such party, pursuant to an appropriate confidentiality agreement and may
participate in discussions and negotiations concerning any such Superior
Proposal if the Company Board determines in its good faith judgment, after
receiving and based upon advice from outside legal counsel, that such action is
required to prevent the Company Board from breaching its fiduciary duties to the
stockholders of the Company under DGCL and (iii) to the extent applicable,
comply with Rule 14e-2 or 14d-9 promulgated under the Exchange Act with regard
to an Acquisition Proposal, subject in the case of clauses (ii) and (iii) to any
rights of the Parent to terminate the Merger Agreement and receive payment of
any fee due thereunder as a result thereof. The Company will promptly notify the
Parent orally and in writing if any unsolicited request for information and
access in connection with a possible Acquisition Proposal involving such a party
is made and will, in any such notice to the Parent, indicate in reasonable
detail the identity of the offeror and the terms and conditions of any proposal
or offer, or any such inquiry or contact. "Superior Proposal" means any bona
fide written Acquisition Proposal made by a third party after August 5, 1999
that, if consummated, would result in a transaction that, taking into account
all legal, financial and regulatory aspects and consequences of the proposal and
the person making such proposal, is financially superior, is not subject to a
financing contingency and is otherwise as favorable in all material respects to
stockholders of the Company as the Offer and the Merger. The Company will not
release any third party from, waive any provisions of, or fail to enforce any
confidentiality or standstill agreement to which the Company is a party.
ACCESS TO INFORMATION. Pursuant to the Merger Agreement, and subject to the
provisions of the confidentiality agreement between the Company and Parent dated
May 3, 1999 (the "Confidentiality Agreement"), from August 5, 1999 to the
Effective Time, the Company will, and will cause its Subsidiaries and agents to,
afford Parent and its representatives reasonable access, during regular business
hours upon reasonable written notice, to all of the employees, properties,
offices, facilities, books, records, files, correspondence and audits of the
Company, and will furnish the Parent with access to such financial and operating
data and other information with respect to its and its Subsidiaries' business
and assets, as the Parent may from time to time reasonably request. The Company
will promptly furnish to the Parent and the Purchaser a copy of each report,
schedule, registration statement and other document filed by it or its
Subsidiaries during such period pursuant to the requirements of federal or state
securities laws. The Company will also provide the Parent, promptly at the end
of each month, with monthly financial statements including an income statement
and statement of cash flows for such month and a balance sheet as of the end of
such month.
PUBLIC ANNOUNCEMENTS. Pursuant to the Merger Agreement, the Parent and the
Company will each obtain the prior consent of the other before issuing any press
release or otherwise making any public statements with respect to the Merger
Agreement or any transaction contemplated thereby except as may
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be required by law or any listing agreement with a national securities exchange
to which the Parent or the Company is a party.
DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Merger
Agreement provides that until the six year anniversary date of the Effective
Time, the Parent and the Purchaser agree that all rights to indemnification or
exculpation now existing in favor of the present and former officers, directors,
employees and other indemnified parties (the "Indemnified Parties") of the
Company as provided in the Company's certificate of incorporation or by-laws or
otherwise in effect on August 5, 1999, will continue in full force and effect,
and the Parent and the Surviving Corporation will keep in effect all such
indemnification and exculpation provisions and will not amend or repeal such
provision, except to make changes that would enlarge the exculpation or rights
of indemnification thereunder. To the maximum extent permitted by the DGCL, such
indemnification will be mandatory rather than permissive and the Surviving
Corporation will advance expenses as incurred to the fullest extent permitted
under applicable law in connection with such indemnification.
For a period of six years after the Effective Time, the Parent and the
Surviving Corporation will maintain in effect the current policies of directors'
and officers' liability insurance maintained by the Company (or policies of at
least the same coverage and amounts containing terms and conditions which are no
less advantageous) with respect to claims arising from facts or events which
occurred before the Effective Time and covering parties who are covered by such
current insurance, provided, however, that in no event will the Surviving
Corporation be required to expend in any one year an amount in excess of 200% of
the annual premium currently paid by the Company for such insurance (in which
case the Surviving Corporation will obtain the maximum amount of coverage that
may be obtained for such premium).
The provisions in the Merger Agreement relating to indemnification and
insurance are intended to be for the benefit of, and will be enforceable by, the
Indemnified Parties, their heirs and personal representatives and will be
binding on the Parent and the Purchaser and the Surviving Corporation and their
respective successors and assigns.
NOTICE OF SUBSEQUENT EVENTS. The Merger Agreement provides that the Company
and the Parent or the Purchaser will give each other prompt notice of (i) the
occurrence, or nonoccurrence, of any event the respective occurrence, or
nonoccurrence, of which would be likely to cause any representation or warranty
contained in the Merger Agreement to be untrue or inaccurate and (ii) any
failure of the Company, the Parent or the Purchaser, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
thereunder.
REASONABLE BEST EFFORTS. The Merger Agreement provides that, subject to its
terms and conditions, the parties thereto will use their reasonable best efforts
to take, or cause to be taken, all necessary or appropriate action, and to do,
or cause to be done, all things necessary under applicable laws and regulations
or otherwise to consummate and make effective the Offer, the Merger and all
other transactions contemplated by the Merger Agreement. If at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of the Merger Agreement, the proper officers and directors of the
Company, the Parent or Purchaser will take all such necessary action.
SENIOR NOTES AND OTHER INDEBTEDNESS. At the request of the Parent, the
Company will, as soon as reasonably practicable after such request, commence a
debt tender offer for its Series B 9 1/4% Senior Notes due 2006 (the "Senior
Notes") together with a solicitation of consents to amend the Senior Notes
Indenture, dated as of March 25, 1996, as amended (collectively, the "Debt
Offer"). The Debt Offer will be on terms and conditions provided to the Company
by the Parent. The Company will waive any of the conditions to the Debt Offer
and make any other changes to the terms and conditions of the Debt Offer as may
be reasonably requested by the Parent, and the Company will not, without the
Parent's prior written consent, waive any condition to the Debt Offer or make
any changes to the terms and conditions of the Debt Offer. Provided the
conditions of the Debt Offer are met or, at the sole discretion of the Parent,
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waived, the Company will accept for payment and pay for the Senior Notes validly
tendered and not withdrawn pursuant to the Debt Offer, simultaneously with the
consummation of the Offer. The Parent will provide to the Company with all
necessary funds to purchase the Senior Notes pursuant to the Debt Offer. The
Parent will pay all costs and expenses incurred in connection with the Debt
Offer. See Item 7 "Certain Negotiations and Transactions by the Subject
Company."
EMPLOYMENT; EMPLOYEE WELFARE. The Merger Agreement provides that the
Surviving Corporation will maintain for a period of not less than one year
following the Merger, the Company's employee compensation and benefit plans,
programs, policies and fringe benefits (including any post-employment benefits)
that are no less favorable than those provided to such employees of the Company
under the plans as in effect immediately prior to the closing (the "Existing
Plans"), subject to the Surviving Corporations right to amend or terminate such
Existing Plans in accordance with their terms. In addition, for a period of not
less than one year after the Merger, the Surviving Corporation will provide to
all Company employees severance pay and benefits, to the extent provided under
the applicable severance plans, programs, agreements and policies of the Company
(the "Existing Severance Benefits") which are equivalent to such Existing
Severance Benefits, subject to the right to amend or terminate such Existing
Severance Benefits in accordance with their terms. The Parent will credit the
prior service of all employees of the Company and its subsidiaries for purposes
of determining the eligibility, vesting or qualification of such employees under
Existing Plans, Existing Severance Benefits and any successor plans and benefit
programs. In addition, the Surviving Corporation will assume and honor in
accordance with their terms all of the Company's existing employment and
severance agreements and arrangements.
GUARANTEE OF PURCHASER'S OBLIGATIONS. The Parent has guaranteed the due and
timely performance and observance by the Purchaser of all of its
representations, warranties, covenants, agreements and obligations under the
Merger Agreement.
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REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company, the Parent and the Purchaser as to the
enforceability of the Merger Agreement. The Company also has provided, subject
to appropriate materiality standards, representations and warranties as to
absence of certain changes or events concerning the Company's business,
compliance with law, absence of litigation, corporate status, capitalization,
the accuracy of financial statements and filings with the Securities and
Exchange Commission and intellectual property rights.
TERMINATION; FEES AND EXPENSES. The Merger Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding approval of the Merger by the stockholders of the Company: (a)
by mutual written consent duly authorized by the board of directors of Parent
and the Company Board (b) by either the Parent or the Company if any
governmental entity or court has issued a final and non-appealable order, or
taken any other action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the acceptance for payment of,
or payment for, EKCO Shares pursuant to the Offer or the Merger (which the party
seeking to terminate the Merger Agreement will have used its reasonable best
efforts to have lifted, rescinded, mitigated or reversed); (c) by either the
Parent or the Company if the consummation of the Offer has not occurred on or
before December 3, 1999; provided that this right is not available to any party
whose failure to fulfill any agreement or obligation under the Merger Agreement
has been the cause of or resulted in the failure of the consummation of the
Offer to occur on or before such date; and provided, further, that if the Offer
or the Merger has not been consummated solely due to the waiting period (or any
extension thereof) or approvals under the Hart-Scott-Rodino Antitrust
Improvements Act or any applicable foreign competition laws not having expired
or terminated or been received, then such date will be extended to February 1,
2000; (d) by the Parent if, due to an occurrence or circumstance that would
result in a failure to satisfy any Conditions of the Offer set forth above, the
Purchaser has (i) failed to commence the Offer, (ii) terminated the Offer
without having accepted any EKCO Shares for payment, or (iii) failed to pay for
the EKCO Shares validly tendered pursuant to the Offer in accordance with the
terms thereof, unless such termination or failure to pay for EKCO Shares was
caused by or resulted from the failure of the Parent or the Purchaser to perform
in any material respect any covenant or agreement contained in the Merger
Agreement or the material breach by the Parent or the Purchaser of any
representation or warranty contained in the Merger Agreement; (e) by the Parent
(i) if, prior to the purchase of any EKCO Shares validly tendered pursuant to
the Offer, the Company Board has withdrawn or amended in any manner adverse to
the Parent or the Purchaser its approval of the Merger Agreement, the Offer or
the Merger or has recommended another merger, consolidation or business
combination involving, or acquisition of, the Company or its assets or another
tender offer for EKCO Shares or failed to reconfirm its approval of the Merger
Agreement, the Offer or the Merger if so requested by the Parent within 10
business days following such request or resolved to do any of the foregoing; or
(ii) if the Company is directly or indirectly through agents or representatives
continue discussions or negotiations with any third party concerning any
Acquisition Proposal or Superior Proposal for more than 15 business days after
having first furnished information or commenced discussions or negotiations with
such third party (whichever occurred earlier) with respect thereto; or (iii) (A)
if an Acquisition Proposal that is publicly disclosed has commenced, publicly
proposed or communicated to the Company which contains a proposal as to price
(without regard to the specificity of such price proposal) and (B) the Company
has not rejected such Acquisition Proposal within 15 business days after the
earlier of its receipt thereof, and the date its existence first becomes
publicly disclosed; or (iv) if the Company has amended its Rights Agreement or
taken other action to redeem the rights associated with the EKCO Common Stock or
render such rights inapplicable to any transactions, other than the Offer, that
allows a person to acquire greater than 15% of the outstanding EKCO Common
Stock; (f) by the Company, prior to the purchase of EKCO Shares pursuant to the
Offer, upon three business days prior notice to the Parent in order to accept a
Superior Proposal; provided that, prior to terminating the Merger Agreement, (A)
the Company has fully complied with its obligations under the No Solicitation
provisions set forth above, (B) such notice will specify all material terms,
conditions
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and other information with respect thereto, (C) prior to any such termination,
the Company will, if requested by the Parent in connection with any revised
proposal the Parent might make, negotiate in good faith for such two business
day period with the Parent, and such third party proposal remains a Superior
Proposal after taking into account any revised proposal by the Parent during
such two business day period and (D) immediately following such termination, the
Company enters into definitive and binding documentation with respect to such
Superior Proposal; and provided further, that it will be a condition to
termination that the Company will have made the payment of the fees and expenses
to the Parent required by the Merger Agreement; (g) by the Company if, due to an
occurrence or circumstance that would result in a failure to satisfy any
Conditions of the Offer, the Purchaser will have (i) failed timely to commence
the Offer, (ii) terminated the Offer without having accepted any EKCO Shares for
payment, or (iii) failed to pay for the EKCO Shares validly tendered pursuant to
the Offer in accordance with the terms thereof, unless such termination or
failure to pay for EKCO Shares was caused by or resulted from the failure of the
Company to perform in any material respect any agreement contained in the Merger
Agreement or the failure of the condition set forth in paragraph (d) of the
Conditions of the Offer; or (h) by the Company if any representation or warranty
of the Parent or the Purchaser in the Merger Agreement is not true and correct
in any material respect on August 5, 1999, or the Parent or the Purchaser has
failed to perform in any material respect any obligation or to comply in any
material respect with any agreement of the Parent or the Purchaser to be
performed or complied with by it under the Merger Agreement; provided that such
breach or failure to perform (if curable) has not been cured within thirty (30)
calendar days after notice to the Parent, and provided further that the Company
is not in material breach thereof.
In the event of the termination of the Merger Agreement, the Merger
Agreement will forthwith become void, except for certain provisions of the
Merger Agreement (including those related to fees and expenses described below)
that survive termination. The Merger Agreement also provides that no party will
be relieved from liability for any willful breach thereof.
EFFECT OF TERMINATION. In the event of termination of the Merger Agreement,
the Agreement, except for the confidentiality, public disclosure and
miscellaneous provisions and, provided that the Offer has been consummated prior
to termination, the indemnification and insurance provisions and the employment
and employee welfare provisions, will become void and have no further effect,
without any liability on the part of any party or its affiliates, directors,
officers or stockholders; however no party will be relieved of its liability for
breach of the Merger Agreement on or prior to the date of termination.
If: (1) the Merger Agreement is terminated (A) by the Company pursuant to
Termination provisions clause (f) or, (B) by the Parent pursuant to clauses
(e)(i), (ii), (iii) or (iv) of the Termination provisions above; (2) (A) the
Merger Agreement is terminated pursuant to clause (c) or (d) of the Termination
provision (other than in the event that the Parent is in material breach of the
Merger Agreement at the time of such termination), (B) after the execution and
delivery of the Merger Agreement but prior to such termination either (I) the
Company (or its agents) breaches its obligations under the No Solicitation or
(II) a third party makes a proposal either publicly or which becomes public
prior to such termination with respect to any Acquisition Proposal and (C)
within nine months after such termination, either (I) a Third Party Acquisition
occurs or (II) the Company enters into an agreement with respect to a Third
Party Acquisition which is later consummated (provided that if clause (B) (I)
above does not apply, the Third Party Acquisition referred to in this clause (C)
must be with the same person (or an affiliate thereof) that made the Acquisition
Proposal referred to in clause (B)(II) above); then the Company will pay to the
Parent, within one business day following the execution and delivery of such
agreement or such occurrence (which in the case of a termination contemplated by
Termination Provisions clause (e) will be the date of such termination), or no
later than concurrently with any termination contemplated by Termination
Provision clause (f) above, a fee of $6 million (the "Termination Fee"). The
Company is not obligated to pay more than one Termination Fee.
In addition, if a Termination Fee is due, the Company will pay to the
Parent, within one business day after receipt of a written statement therefor,
an amount equal to all reasonable out-of-pocket fees and
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expenses actually incurred by the Parent or the Purchaser in connection with the
transactions contemplated by the Merger Agreement, provided that such fees and
expenses will not exceed $1 million and shall exclude any out-of-pocket expenses
incurred by the Parent in connection with any litigation or other proceedings to
collect the Termination Fee and expenses. The Company will however pay all such
out-of-pocket collection expenses if the Parent prevails in such litigation or
other proceedings.
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger, tender offer, exchange
offer or otherwise by any third party; (ii) the acquisition by a third party of
50% or more of the assets of the Company and its Subsidiaries, taken as a whole;
(iii) the acquisition by a third party of more than 50% of the outstanding EKCO
Shares; (iv) the adoption by the Company of a plan of liquidation or the
declaration or payment of an extraordinary dividend; or (v) the repurchase by
the Company of outstanding EKCO Shares in connection with which a third party
becomes the owner of 50% or more of the outstanding EKCO Shares.
THE GUARANTEE
Concurrently with the execution and delivery of the Merger Agreement, Borden
provided a guarantee to the Company of the obligations of the Purchaser and the
Parent under the Merger Agreement to effect the Offer and the Merger. A copy of
the Guarantee is filed as Exhibit 3 hereto and is incorporated herein by
reference.
CONFIDENTIALITY AGREEMENT
The following is a summary of certain portions of the Confidentiality
Agreement dated May 3, 1999 between Borden and the Company (the "Confidentiality
Agreement") and is qualified in its entirety by reference to the complete text
of the Confidentiality Agreement, a copy of which is filed as Exhibit 4 hereto
and is incorporated herein by reference.
Borden, its affiliates and advisors each agreed to keep certain confidential
information relating to the Company (the "Evaluation Material"), confidential
and to use such Evaluation Material solely for the purpose of evaluating a
possible transaction with the Company. In addition, Borden agreed that, without
the prior written consent of the Company Board, for a period of 2 years from the
date of termination of its discussions with the Company regarding a possible
transaction, neither Borden, nor any of its affiliates, acting alone or as part
of a group, will acquire or offer to agree to acquire, directly or indirectly,
by purchase or otherwise, any voting securities (or direct or indirect rights or
options to acquire any voting securities) of the Company, or otherwise seek to
influence or control, in any manner whatsoever, the management or policies of
the Company. Additionally, Borden agreed that until May 3, 2001, it would not,
directly or indirectly, actively solicit for employment or hire any director,
officer or employee of the Company, except as a result of such individual
contacting Borden on his or her own initiative without any direct or indirect
solicitation or encouragement by Borden.
CERTAIN TRANSACTIONS
ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE COMPANY
GENERAL. In considering the recommendation of the Company Board with
respect to the Offer and the Merger and the fairness of the consideration to be
received in the Offer and the Merger, stockholders should be aware that the
executive officers of the Company and members of the Company Board have the
interests and relationships summarized below that may present them with
potential conflicts of interest in connection with the Offer and the Merger.
OWNERSHIP OF EKCO COMMON STOCK. As of August 9, 1999, the directors and
executive officers of the Company, as a group, beneficially owned an aggregate
of 658,171 shares of EKCO Common Stock (representing approximately 3.44% of the
then outstanding EKCO Common Stock), excluding shares
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subject to EKCO Options and EKCO Warrants, and an aggregate of 34,176 shares of
ESOP Preferred Stock (representing approximately 3.67% of the then outstanding
ESOP Preferred Stock) or an aggregate of 692,347 EKCO Shares (representing
approximately 3.45% of the then outstanding EKCO Shares). All such EKCO Shares
held by such directors and executive officers will be treated in the Offer and
the Merger in the same manner as EKCO Shares held by the other stockholders. See
"The Merger Agreement--The Offer" and "--The Merger." In the aggregate, the
directors and executive officers of the Company will be entitled to receive
approximately $4.8 million for their EKCO Shares upon consummation of the Offer
and the Merger (based upon the number of EKCO Shares owned as of August 9, 1999,
1999).
OPTIONS. As of August 9, 1999, the directors and executive officers of the
Company held EKCO Options to acquire an aggregate of 1,692,717 EKCO Shares. For
a discussion of the treatment of the EKCO Options, including those held by the
directors and executive officers, see "The Merger Agreement--Treatment of Stock
Options and Warrants." The directors and executive officers of the Company, as a
group, will receive approximately $5.0 million (before applicable taxes) in
exchange for the cancellation of their EKCO Options based on the number of EKCO
Options outstanding as of August 9, 1999.
INDEMNIFICATION AND INSURANCE. The Company has entered into indemnity
agreements (the "Indemnity Agreements") with the directors and officers of the
Company (the "Indemnitees") pursuant to which the Company will pay on behalf of
the Indemnitee any amount, including damages, judgments, settlements and costs,
which the Indemnitee is, or becomes legally obligated to pay, because of any
claim made against him after specified dates, because of any act or omission by
the Indemnitee alleged to have occurred while he was acting in his capacity as
director or officer of the Company. For a discussion of certain agreements by
the Parent with respect to indemnification of, and insurance for, directors and
officers of the Company, see "The Merger Agreement--Directors' and Officers'
Indemnification and Insurance."
EMPLOYMENT CONTRACTS AND ARRANGEMENTS.
The Company has entered into employment agreements with its (a) Chairman and
Chief Executive Officer, Malcolm L. Sherman, (b) Executive Vice President of
Finance and Administration and Chief Financial Officer, Donato A. DeNovellis,
(c) Executive Vice President, Jeffrey A. Weinstein, (d) Vice President and
Controller, Brian R. McQuesten, and (e) Vice President, Secretary and General
Counsel, J. Jay Althoff. As a result of the consummation of the Merger, the
Purchaser will assume the Company's obligations under the employment agreements.
The amounts and benefits payable to these executives under these agreements
(with the exception of Mr. Althoff) are summarized under "Employment,
Termination of Employment and Change of Control Arrangements" in the Information
Statement on Schedule I attached hereto.
CHANGE OF CONTROL PAYMENTS
On August 15, 1999, ten days after the announcement of the Offer (assuming
the Offer is not discontinued by August 15), a change of control under the
agreements will be deemed to have occurred and will result in Messrs. Sherman,
DeNovellis, Weinstein, McQuesten and Althoff receiving the following benefits:
Each of Messrs. Sherman, DeNovellis, Weinstein, McQuesten and Althoff will
be entitled to all EKCO Shares which were granted, sold or optioned (subject
only to the payment of any option exercise price when due) to each of them by
the Company at any time prior to the date of the change of control, as if all
restrictions had lapsed and all events necessary to vest such rights had
occurred.
If any of Messrs. DeNovellis, Weinstein or McQuesten are constructively
terminated or terminated by the Company without good cause, then (1) in the case
of Messrs. DeNovellis and Weinstein, the Company shall pay to such executive
officer three times his respective Lump Sum Payment Amount (as defined below)
and, in the case of Mr. McQuesten, two times his respective Lump Sum Payment
Amount; (2) each
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such executive officer will be entitled to all EKCO Shares which were granted,
sold or optioned by the Company to him (subject only to payment of any option
exercise price when due) as if all restrictions had lapsed and all events
necessary to vest such rights had occurred; (3) in the case of Messrs.
DeNovellis and Weinstein, the Company shall pay for the continuation of their
medical, dental and life insurance coverage for up to three years and, in the
case of Mr. McQuesten for up to two years; (4) for each such executive officer,
the Company shall provide outplacement benefits and, in the case of Messrs.
DeNovellis and Weinstein, automobile benefits for three years; and (5) for each
such executive officer, the Company shall pay an additional gross-up payment
equal to any tax due under Section 4999 of the Internal Revenue Code or any
similar tax as a result of any payment by the Company to such officer
(collectively, the "Severance Benefits").
For purposes of describing the Company's employment agreements with Messrs.
DeNovellis, Weinstein and McQuesten, a "Lump Sum Payment Amount" shall be equal
to (1) such executive officer's then current salary, plus (2) the maximum amount
payable to such executive officer under all specified compensation bonus plans
and arrangements for the fiscal year in which a termination occurs, plus (3) an
amount equal to the amount allocated to such executive officer's account in the
ESOP for the fiscal year immediately preceding the fiscal year in which a
termination occurs (in addition to any distribution from the ESOP to which such
executive officer may be entitled).
Mr. Sherman is also entitled to a gross-up payment if any payments he
received are subject to excise tax under Section 4999.
If Mr. Althoff is constructively terminated or terminated by the Company
without good cause, then the Company shall make a lump-sum payment to Mr.
Althoff in an amount equal to two times his annual base salary.
The employment agreements for each of Messrs. DeNovellis, Weinstein and
McQuesten also require the Company to provide an irrevocable letter of credit in
an amount at least equal to, in the case of Messrs. DeNovellis and Weinstein,
the greater of four times annual base salary or the amount necessary to fund the
Severance Benefits and, in the case of Mr. McQuesten, the greater of two and
one-half times annual salary or the amount necessary to fund the Severance
Benefits in order to assure payment of amounts due upon termination and in each
case, in an additional amount necessary to secure the Company's obligations
under any stock appreciation rights plan or other equity-linked plan.
As a result of these provisions, if Messrs. DeNovellis, Weinstein,
McQuesten, and Althoff are constructively terminated or terminated without good
cause, they will be entitled to cash payments of approximately $2,517,000,
$1,963,000, $515,000, and $340,000, respectively. Included in the estimated cash
payments for Mr. DeNovellis and Weinstein are gross-up payments of approximately
$878,000, and $517,000, respectively.
Mr. Sherman is not entitled to any severance payments pursuant to his
employment agreement, other than his right to receive gross-up payments.
The Company's post-change of control severance policy provides that each
exempt employee whose employment is terminated, whose duties or responsibilities
are substantially diminished, or who is directed to relocate within 12 months
after such change of control will receive salary continuation benefits for a
period of months determined by dividing his or her then yearly salary by
$10,000, limited to no more than 12 months. This policy does not apply to any
employee of the Company who is a party to a contractual commitment with the
Company that provides him or her with greater than 12 months salary, severance
payment or salary continuation upon his or her termination in the event of a
change of control.
OTHER TERMS OF MR. ALTHOFF'S AGREEMENT
Mr. Althoff's current annual salary is $170,000, and he is eligible for
annual salary increases and bonuses. In addition, Mr. Althoff received a stock
option for 7,099 shares of EKCO Common Stock. He is
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entitled to certain fringe benefits and an automobile allowance. In addition,
(a) if he is constructively terminated or terminated by the Company without good
cause following a change of control, or (b) upon his death or permanent
disability, Mr. Althoff is entitled to all EKCO shares which were granted, sold
or optioned (subject only to the payment of any option exercise price when due)
to him by the Company as if all restrictions had lapsed and all events necessary
to vest such rights had occurred.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Company has adopted a
Supplemental Executive Retirement Plan (the "SERP") that uses a defined benefit
formula to provide for lump sum payments to be made upon retirement, termination
of employment, death or disability, to certain officers designated by the
Company Board. The amount of a participant's payment under the SERP is generally
determined by multiplying an amount designated by the compensation committee of
the Company Board by such participant's years of credited service. Additional
payments are payable to a participant under the SERP if his employment with the
Company terminates within three years of a change in control and under certain
other circumstances specified in the SERP. All participants become 100% vested
in their benefits in the SERP upon a change in control of the Company, and if
the participant's employment with the Company terminates within the following
three years, a lump sum payment of SERP benefits will be made to the
participant. The Offer will constitute a change in control under the SERP.
Consequently, all the executive officers participating in the SERP will become
fully vested in an aggregate of $270,615 in SERP benefits as of August 1, 1999.
If all of the executive officers participating in the SERP were terminated
within three years of the Offer, such benefit would increase to $368,259.
OFFICERS OF THE SURVIVING CORPORATION. The executive officers of the
Company immediately prior to the Effective Time will be the executive officers
of the Surviving Corporation until their respective successors are duly elected
or appointed and qualified.
DIRECTOR COMPENSATION. Each member of the Company Board who is not an
employee (excluding Mr. Sherman) is entitled to receive an annual fee of $10,000
plus a fee of $1,000 for each Company Board meeting attended, including
telephonic meetings, and reimbursement of meeting travel expenses.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE COMPANY BOARD
The Company Board, by unanimous vote of its directors, has 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
Company, approved the Merger Agreement, the Offer and the Merger, declared the
Merger Agreement to be advisable and resolved to recommend that stockholders
accept the Offer and tender their EKCO Shares pursuant to the Offer.
A letter to the Company's stockholders communicating the Company Board's
recommendation and a press release announcing the execution of the Merger
Agreement are filed herewith as Exhibits 5 and 6, respectively, and are
incorporated herein by reference.
(B) BACKGROUND; REASONS FOR THE COMPANY BOARD'S RECOMMENDATION
In August 1998, Borden's Chairman, C. Robert Kidder, met with the Company's
Chairman, Malcolm L. Sherman, for lunch in Boston, Massachusetts. At this lunch,
Mr. Kidder expressed Borden's interest in being considered as a potential
partner if the Company were ever to explore strategic transactions in the
future. No follow-up conversations occurred between the two executives.
On February 10, 1999, the Board of Directors of the Company held a regular
meeting at which Mr. Sherman informed the Board of two unsolicited contacts that
Mr. Sherman had received from parties unaffiliated with the Parent who might be
interested in exploring possible transactions with the Company, including sale
transactions. Mr. Sherman informed the Board that the contacts were very
preliminary in nature, and that no specific proposals had been made.
In late 1998 and early 1999, Mr. Sherman and Donato A. DeNovellis, the
Company's Chief Financial Officer, each attended meetings with senior management
of a consumer products company unaffiliated with the Parent (the "Other Consumer
Products Company"). At these meetings, the issue of a possible business
combination between the Other Consumer Products Company and the Company was
raised, but no specific proposals were made. Mr. Sherman subsequently informed
the Board of the details of these meetings.
In the latter half of March 1999, Mr. Sherman had discussions with members
of the Board of Directors of the Company regarding the advisability of exploring
strategic alternatives for the Company's business, including the retention of
investment bankers to provide guidance on the valuation of the Company and to
establish a confidential process to solicit indications of interest from third
parties regarding the Company.
Based on those discussions, on April 16, 1999, the Company retained Lehman
Brothers to explore strategic alternatives, including contacting third parties
on a confidential basis to solicit indications of interest in the Company.
Lehman Brothers promptly began to contact potentially interested parties
including the Parent and the aforementioned consumer products company to
determine interest levels regarding the Company and to execute confidentiality
agreements with interested parties.
On April 26, 1999, the Company issued a press release indicating that the
results for its fiscal 1999 first quarter were below security analyst
expectations and that it anticipated second quarter results would also be below
previous security analyst expectations.
On May 10, 1999, the Company received an unsolicited indication of interest
from the Other Consumer Products Company regarding a possible acquisition
transaction with the Company. The proposal was subject to a number of
conditions.
On May 11, 1999, the Company's Board met telephonically to discuss the
proposal. Representatives of Lehman Brothers and Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C., the Company's outside general counsel, were asked to
participate in the meeting. After a discussion of the proposal, the Board
directed
17
<PAGE>
Lehman Brothers and Mintz Levin to assist it in the evaluation of the proposal,
including the preparation of a valuation analysis of the Company to be presented
to the Board at its regularly scheduled meeting on May 25, 1999. The Board
instructed Mr. Sherman to inform the Other Consumer Products Company that the
Board would consider and respond to it promptly after its May 25, 1999 Board
meeting and to encourage it to sign a confidentiality agreement and become part
of the process that the Board had established. The Board also received an update
from Lehman Brothers on strategic alternatives and discussed, and gave guidance
to Lehman Brothers on, the process that it was establishing to identify, contact
and engage potentially interested parties. Lehman Brothers reported that it had
contacted a significant number of potentially interested parties and had signed
several parties to confidentiality agreements, including Parent, on May 3, 1999.
Following the May 11, 1999, Board of Directors meeting, Lehman Brothers
encouraged the investment bankers retained by the Other Consumer Products
Company to cause their client to enter into a confidentiality agreement in order
to receive access to management and the Company's data room, because the Company
wanted all interested parties to be equally informed and have the best possible
information on which to evaluate a possible transaction with the Company. On May
17, 1999, the Company entered into a confidentiality agreement with the Other
Consumer Products Company.
On May 18, Lehman Brothers and Mr. DeNovellis met with Kevin Kelley and John
Muller of Borden in Boston, Massachusetts. At that meeting Lehman Brothers
described a process for a possible sale of the Company.
On May 25, 1999, the Board of the Company held a regularly scheduled
meeting. Lehman Brothers and Mintz Levin participated by invitation. At the
meeting, Lehman Brothers presented its preliminary analysis of the value of the
Company and the Other Consumer Products Company proposal received on May 10,
1999. After extensive discussion by the Board regarding Lehman Brothers'
analysis and the proposal, Lehman Brothers advised the Board of its work to date
regarding strategic alternatives and the progress of that process. The Board
authorized Lehman Brothers to continue the process to identify interested
parties and authorized the Company to meet with those parties that had signed
confidentiality agreements and to provide access to the due diligence data room
established for all such interested parties. Given the significant number of
participants in the process and the valuation analysis conducted by Lehman
Brothers, the Board instructed management to respond to the Other Consumer
Products Company that its proposal, in its then-current form, was not acceptable
to the Company's Board.
During May, Lehman Brothers continued to contact potentially interested
parties, sign certain of such parties to confidentiality agreements, and provide
those that entered into such agreements with initial information packages which
included financial and business information on the Company. Lehman also
scheduled management presentations and access to the Company's data room. Mr.
Sherman provided regular updates to the Board of Directors on the process.
In the first half of June, the parties that entered into confidentiality
agreements were asked to supply initial indications of interest in the Company,
and Lehman Brothers received preliminary proposals from seven parties, including
Parent and the consumer products company.
On June 21, 1999, the Company's Board met and received an update on the
process from Mr. Sherman. The Board was informed in detail about the preliminary
proposals received from seven parties and about the timing and steps that would
be taken to complete the process, which was scheduled for the end of July. After
a discussion, the Board authorized management to continue the process as
contemplated to seek final indications of interests from the various parties.
Mr. Sherman also informed the Board that the Company had revised downward its
financial forecast for the year downward and that it was being delisted from the
New York Stock Exchange for failure to meet its continuing listing criteria, but
that it was likely that the Company could move the listing to the American Stock
Exchange.
18
<PAGE>
The Company determined that circumstances warranted the publication of a
press release that would disclose that the Company was engaged in an evaluation
of strategic alternatives to maximize stockholder value and that it had retained
Lehman Brothers to assist them. The Company disseminated such release on June
21, 1999. Lehman Brothers subsequently responded to inquiries from a number of
parties regarding the process.
Between June 28, 1999 and July 23, 1999, five parties attended management
presentations and conducted due diligence at the Company's data room, and
certain of such parties conducted plant tours. During this time, the Other
Consumer Products Company called Mr. Sherman indicating that it would like to
preempt the process and make a firm bid. However, its preemptive bid was
significantly below other indications of interest already received by the
Company and was therefore declined. Lehman Brothers encouraged the Other
Consumer Products Company, through its bankers, to remain in the process, which
was scheduled to conclude at the end of July, and to re-bid at that time.
On July 7 and 12, 1999, certain members of Parent's management met with
certain members of the Company's management and their advisors to conduct
additional business due diligence. Parent also initiated further comprehensive
legal and financial due diligence of the Company.
During the first half of July 1999, Lehman Brothers maintained contact with
the interested parties or their advisors and made them aware that final bids
would be due at 5:00 p.m. on July 29, 1999. During this time, it appeared that
three parties would submit final bids, including Parent and the Other Consumer
Products Company.
On July 21, 1999, Mintz Levin mailed a form of merger agreement to each of
the three remaining parties in the process, indicating that the guidelines for
submitting final bids would require submission of a markup of the agreement.
On July 26, 1999, Lehman Brothers sent a letter to the three remaining
parties in the process inviting them to submit an offer for the acquisition of
the Company, along with procedures and guidelines for the submission of such
offer. The guidelines provided that all offers were to be received by 5:00 p.m.
Eastern Time on Thursday, July 29, 1999.
Lehman Brothers received offers from Parent and the Other Consumer Products
Company on July 30 and July 29, respectively. Each party also supplied proposed
revisions to the merger agreement. The third interested party did not submit a
final offer.
By letter dated July 29, 1999, the Other Consumer Products Company offered
to acquire the Company pursuant to an all cash tender offer to be commenced
promptly after the execution of a merger agreement. The offer was fully
financed, but was subject to confirmatory due diligence and had a per share
price below the price offered by Parent.
By letter dated July 30, 1999, Parent submitted a proposal to acquire the
Company at a per share price of $6.50 pursuant to an all cash tender offer to be
commenced promptly after execution of a merger agreement. The offer was fully
financed but subject to a number of conditions, including satisfaction of the
treatment of the Company's ESOP preferred stock and outstanding options and
warrants, satisfactory review of the Company's Year 2000 compliance
implementation plan, understanding of data relating to customer profitability
and satisfactory calls with Company customers. The offer was also subject to the
successful completion of a tender offer for the Company's outstanding 9 1/4%
Senior Notes.
During the period from July 29, 1999 through August 1, 1999, Mr. Sherman had
discussions with various Board members about the final offers in anticipation of
a scheduled board meeting on August 3, 1999. As a result of those calls, it was
determined that the Company and its advisors should meet with both Parent and
the Other Consumer Products Company as soon as possible in order to attempt to
eliminate any conditions to the offers, resolve contractual issues on the forms
of merger agreements and determine
19
<PAGE>
whether, with two bidders, Parent or the Other Consumer Products Company might
increase the price of its offer.
On Sunday, August 1, 1999, Lehman Brothers separately contacted the
investment bankers representing Parent and the Other Consumer Products Company
to inform them that the Company was requesting that they meet with
representatives of the Company, Mintz Levin and Lehman Brothers on Monday in the
offices of Mintz Levin in Boston, Massachusetts. The parties were informed that
the Company was not prepared to engage in exclusive negotiations at this time.
On Monday, August 2, 1999, Parent and its legal and financial advisors and
the Other Consumer Products Company and its legal and financial advisors arrived
in Boston and commenced negotiations with separate groups consisting of
representatives of the Company and its financial and legal advisors. The Other
Consumer Products Company and its advisors were only prepared to remain in
Boston through 5:00 p.m. on Monday, August 2, 1999 but indicated a willingness
to return on Wednesday, August 4, 1999. During the period from Monday, August 2,
1999 through Wednesday, August 4, 1999, Parent and its legal advisors and
financial advisors met continuously with the Company and its legal advisors and
financial advisors to negotiate the terms of the merger agreement and a proposed
debt tender. During these discussions, Parent agreed to drop its demand that the
debt tender offer be a condition to the closing of the Offer and also satisfied
itself with respect to the other conditions set forth in its bid letter.
On Tuesday, August 3, 1999, the Board of Directors convened to assess the
outcome of the strategic alternatives process, to consider the terms of the two
proposed transactions and to review in detail the merger agreements and the
terms of the tender offer of each party. At the meeting, Lehman Brothers
presented a detailed presentation of its assessment of the strategic
alternatives process and an update of how the process resulted in the two offers
to purchase the Company. The Company's legal advisors described in detail the
respective terms of the two merger agreements and the transactions contemplated
thereby. The Board asked detailed questions with respect to the merits of the
two proposals. The Company's legal advisors also advised the Board on its duties
in considering the two proposals. The Board expressed concerns about various
aspects of the Other Consumer Products Company's bid, including certainty of
closing and price. Representatives of Lehman Brothers indicated that they would
attempt to increase the prices offered by each of the parties but believed that
the price offered by Parent would continue to be higher than the price offered
by the Other Consumer Products Company. The Board considered Parent's request to
enter into exclusive negotiations with it. Although the Board did not grant the
request for exclusive negotiations, it authorized management to focus its
efforts on attempting to reach a satisfactory agreement with Parent at a higher
price than the $6.50 originally offered.
On August 4, 1999, Parent increased its offer to $7.00 per share. In
addition, during the evening of August 3, 1999 and during the day of August 4,
1999, many of the contractual issues between the Parent and the Company were
resolved. During the afternoon of August 4, 1999, the Company's Board convened
again and held a special meeting both in person and via teleconference, in which
all the members of the Board were present. Lehman Brothers made a presentation
regarding certain financial analyses it had performed in connection with its
review of Parent's increased offer, and rendered its opinion, both orally and in
writing, that subject to certain assumptions and qualifications, the
consideration to be received by the holders of the Company's common stock (other
than Parent and its affiliates) in the Offer and Merger pursuant to the merger
agreement was fair to such holders from a financial point of view. Lehman
Brothers also reviewed its discussions with the consumer products company. They
informed the Board that the Other Consumer Products Company had not shown a
willingness to increase its price sufficiently. Representatives of Mintz Levin
presented the Board with an update of various legal aspects of the transactions
and an updated summary of the principal terms of the merger agreements. At the
conclusion of this meeting, the Company's Board decided to accept Parent's offer
and unanimously approved the Offer, the Merger and the transactions contemplated
thereby and determined that the Offer, and the Merger are fair to and in the
best interests of the stockholders of the Company, and recommended that the
stockholders accept the Offer and tender their shares pursuant thereto.
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<PAGE>
In the early morning on August 5, 1999, the merger agreement was executed
and a joint press release was issued by the Company and the Parent before the
opening of the U.S. stock markets on that date announcing such transaction.
RECOMMENDATION OF THE COMPANY'S BOARD; FAIRNESS OF THE OFFER AND THE MERGER
ON AUGUST 4, 1999, THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY
DETERMINED THAT THE MERGER WAS FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS AND UNANIMOUSLY VOTED TO RECOMMEND AND APPROVE THE MERGER
AGREEMENT.
FAIRNESS OF THE MERGER. In reaching its determination, the Company Board
considered:
<TABLE>
<C> <S>
(i) the historical market prices of the EKCO Common Stock, including the fact that the
$7.00 per Share represented a premium of approximately 65% over the $4.25 per EKCO
Share closing price on August 3, 1999, the last full trading day prior to August 4,
1999, the date of the approval of the Merger by the Company Board;
(ii) the fact that the $7.00 per EKCO Share to be paid to the stockholders in the Offer
and the Merger exceeded the highest price at which the EKCO Common Stock had traded
on the American Stock Exchange ("AMEX") and the New York Stock Exchange ("NYSE")
since August 28, 1998 (prior to July 26, 1999, the EKCO Common Stock was listed on
the NYSE);
(iii) the fact that the $7.00 per EKCO Share to be paid to stockholders in the Offer and
the Merger represented a 29.4% premium over the net book value per EKCO Share of
$5.41 as of July 4, 1999;
(iv) the opinion of Lehman Brothers, Inc. ("Lehman Brothers") that, based upon and
subject to the assumptions and qualifications stated in its opinion, the $7.00 per
EKCO Share to be paid to the public stockholders in the Offer and the Merger is fair
to the stockholders from a financial point of view, and the report and analysis
presented to the Company Board in connection with the Lehman Brothers opinion (a
copy of the Lehman Brothers opinion is filed herewith as Exhibit 7, and is
incorporated herein by reference);
(v) the history of the negotiations between the Company Board and its representatives
and the Parent's representatives, including the fact that (a) the negotiations
resulted in an increase in the price at which the Parent was prepared to acquire the
EKCO Shares from $6.50 per EKCO Share to $7.00 per EKCO Share, an increase of 7.69%,
and (b) the Company Board believed that the Parent would not further increase the
price payable in the Offer and that $7.00 per EKCO Share was the highest price that
could be obtained from the Parent;
(vi) in view of the extensive efforts of both the Company and Lehman Brothers to find
financial and strategic partners and potential acquirors, that it was highly
unlikely that any other party would propose to enter into a transaction more
favorable to the Company and its stockholders;
(vii) that the terms of the Merger Agreement were determined through arm's-length
negotiations between the Company Board and its legal and financial advisors, on one
hand, and representatives of Parent, on the other, and provide for the Offer in
order to allow stockholders to receive payment for their EKCO Shares on an
accelerated basis and for all stockholders to receive the same cash consideration;
(viii) that $7.00 per EKCO Share was the highest final bid received by the Company Board
and that the final bid reflected the results of a comprehensive auction procedure;
(ix) the ability of stockholders who object to the Merger to obtain "fair value" for
their EKCO Shares if they exercise and perfect their appraisal rights under the
DGCL;
</TABLE>
21
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<TABLE>
<C> <S>
(x) the fact that the Offer provides the stockholders with liquidity to dispose of their
EKCO Shares which may not be available in the public market due to the low level of
trading volume of the EKCO Common Stock on the AMEX (and NYSE) prior to the
announcement of the Offer (an average daily trading volume of 27,000 shares since
June 23, 1999).
(xi) the amount of consideration to be received by the Company's stockholders in the
Offer and the Merger pursuant to the Merger Agreement, as well as the fact that
stockholders would receive a cash payment with no financing condition;
(xii) the Company's prospects if it were to remain independent, including the risks
inherent in remaining independent, and the prospects of the Company going forward as
an independent company;
(xiii) the possible alternatives to the Offer and the Merger (including the possibility of
continuing to operate the Company as an independent entity), the range of possible
benefits to the Company's stockholders of such alternatives and the timing and the
likelihood of accomplishing the goal of any of such alternatives;
(xiv) the financial condition, historical results of operations and business and strategic
objectives of the Company, as well as the risks involved in achieving those
objectives;
(xv) other historical information concerning the Company's business, prospects, financial
performance and condition, operations, technology, management and competitive
position;
(xvi) current financial market conditions, and historical market prices, volatility and
trading information with respect to EKCO Common Stock;
(xvii) the high likelihood that the proposed acquisition would be consummated, in light of
the experience, reputation and financial capabilities of Parent, and that the
proposed acquisition would be consummated more quickly than a stock-for-stock merger
and, on the other hand, the risks to the Company if the acquisition were not
consummated or were not consummated for a significant period of time, including a
potential negative effect on (a) the Company's sales and operating results, (b)
progress of certain development projects and (c) the Company's stock price;
(xviii) the terms of the Merger Agreement, including the parties' representations,
warranties and covenants, and the conditions to their respective obligations; and
(xix) the fact that pursuant to the Merger Agreement, the Company is not prohibited from
responding to any unsolicited Superior Proposal to acquire the Company in the manner
provided in the Merger Agreement, and the Company may terminate the Merger Agreement
and accept such Superior Proposal subject to the Company's compliance with the terms
of the Merger Agreement and the Company's obligation to pay the Termination Fee in
the amount and in the manner described in the Merger Agreement.
</TABLE>
The Company Board did not assign relative weights to the above factors or
determine that any factor was of particular importance. Rather, the Company
Board viewed its position and recommendations as being based on the totality of
the information presented to and considered by it. In addition, it is possible
that different members of the Company Board assigned different weights to the
various factors described above.
The Company Board recognized that, while the consummation of the Offer gives
the Company's stockholders the opportunity to realize a premium over the price
at which the EKCO Shares were traded during the period prior to the public
announcement of the Offer, tendering in the Offer would eliminate the
opportunity for such stockholders to participate in the future growth and
profits of the Company. The Company Board believes that the loss of this
opportunity was fully reflected in the Offer price of $7.00 per EKCO Share. The
Company Board recognized that there can be no assurance as to the level of
growth or
22
<PAGE>
profits to be attained by Company, if it remained independent, or by the
Surviving Corporation in the future.
It is expected that, if the EKCO Shares are not purchased by the Purchaser
in accordance with the terms of the Offer or if the Merger is not consummated,
the Company's current management, under the general direction of the Company
Board, will continue to manage the Company as an ongoing business.
In order to determine the fairness of the terms of the Offer and the Merger
and to approve the Merger Agreement and the transaction contemplated thereby,
including the Offer and the Merger, the Board considered the written opinion of
Lehman Brothers with respect to the financial evaluation of the Company and of
the Offer and the Per Share Price.
On August 4, 1999, the Company Board, by unanimous vote of all directors,
based upon, among other things, the opinion of Lehman Brothers determined that
the Merger Agreement and the transaction contemplated thereby, are fair to, and
in the best interests of, the Company, approved the Merger Agreement, the Offer
and the Merger, declared the Merger Agreement to be advisable and recommended
that stockholders accept the Offer and tender their EKCO Shares pursuant to the
Offer.
THE FULL TEXT OF THE WRITTEN OPINION OF LEHMAN BROTHERS IS ATTACHED HERETO
AS EXHIBIT 7. STOCKHOLDERS ARE URGED TO, AND SHOULD, READ SUCH OPINION CAREFULLY
AND IN ITS ENTIRETY. SUCH OPINION IS DIRECTED TO THE COMPANY BOARD IN CONNECTION
WITH THEIR CONSIDERATION OF THE MERGER AGREEMENT AND ADDRESSES ONLY THE FAIRNESS
(FROM A FINANCIAL POINT OF VIEW) OF THE CONSIDERATION TO BE RECEIVED BY HOLDERS
OF EKCO SHARES (OTHER THAN PARENT AND ITS AFFILIATES) IN THE OFFER AND THE
MERGER PURSUANT TO THE MERGER AGREEMENT. SUCH OPINION DOES NOT ADDRESS ANY OTHER
ASPECT OF THE OFFER OR THE MERGER AND DOES NOT CONSTITUTE AN OPINION OR A
RECOMMENDATION TO ANY STOCKHOLDER AS TO WHETHER TO TENDER EKCO SHARES IN THE
OFFER OR HOW TO VOTE WITH RESPECT TO THE MERGER. IN LIGHT OF THE FACTORS SET
FORTH ABOVE, THE BOARD RESOLVED UNANIMOUSLY TO APPROVE THE OFFER, THE MERGER,
THE MERGER AGREEMENT, AND DETERMINED THAT THE TERMS OF THE OFFER, THE MERGER AND
THE MERGER AGREEMENT, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDED THAT STOCKHOLDERS OF THE
COMPANY ACCEPT THE OFFER AND TENDER THEIR EKCO SHARES TO THE PURCHASER.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated April 16, 1999, the Company retained
Lehman Brothers' services as investment banker in connection with the proposed
sale of the Company. If the Offer and the Merger are consummated, the Company
has agreed to pay Lehman Brothers an aggregate fee of approximately $2.0 million
for acting as financial adviser in connection with the transaction, including
rendering a fairness opinion. Lehman Brothers was paid $500,000 of this fee on
delivery of its written opinion, to be credited against the aggregate fee to be
paid to Lehman Brothers by the Company under the Letter Agreement. The Company
also has agreed to reimburse Lehman Brothers for its reasonable expenses
(including reasonable professional and legal fees and disbursements).
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<PAGE>
In the ordinary course of its business, Lehman Brothers and its affiliates
may actively trade in the securities of the Company for its own account and for
the account of its customers and, accordingly, may at any time hold a long or
short position.
Except as disclosed herein, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to the Company's stockholders with respect to the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Since June 13, 1999, 60 days prior to the date of this Schedule 14D-9,
through August 9, 1999, none of the Company, Parent, Purchaser, any
majority-owned subsidiary thereof, any director or executive officer thereof and
no pension, profit-sharing or similar plan of the Company, Parent or Purchaser
has effected any purchases or sales of the EKCO Shares, except as follows:
<TABLE>
<CAPTION>
NUMBER OF EKCO
STOCKHOLDER TRANSACTION DATE ACTION SHARES
- --------------------------------------------------------------------- ---------------- ----------- -----------------
<S> <C> <C> <C>
EKCO Group, Inc...................................................... 7/4/99 Sale 17,114
Employee Stock Purchase Plan
EKCO Group, Inc...................................................... 7/12/99 Sell 53
Dividend Reinvestment Plan
Jeffrey A. Weinstein................................................. 7/4/99 Buy 500
Executive Vice President of the Company
</TABLE>
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all EKCO Shares held of record or beneficially owned by them (other
than EKCO Shares issuable upon exercise of EKCO Options and EKCO Shares, if any,
which if tendered could cause such persons to incur liability under the
provisions of Section 16(b) of the Exchange Act).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, 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.
Pursuant to the Merger Agreement, the Purchaser has requested that the
Company commence the Debt Offer. The Debt Offer is contingent on, among other
things, the consummation of the Offer by the Purchaser in accordance with the
conditions thereof. The consummation of the Debt Offer is not a condition to any
of the transactions contemplated by the Merger Agreement. See "The Merger
Agreement--Senior Notes and Other Indebtedness."
(b) Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
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<PAGE>
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Company Board other
than at a meeting of the Company's stockholders.
In addition, on August 4, 1999 the Company adopted an amendment to the
Rights Agreement and took such other actions so that (a) the execution and
delivery of the Merger Agreement and the consummation of the transactions
contemplated thereby including the Offer, the purchase of Ekco Shares pursuant
to the Offer or the Merger, will not (i) trigger the provisions of Section 11 or
Section 13 of the Rights Agreement, (ii) result in the occurrence of a
"Distribution Date" under the Rights Agreement or (iii) result in the Parent,
the Purchaser or any of their affiliates becoming an "Acquiring Person" under
the Rights Agreement and (b) the rights issued pursuant to the Rights Agreement
will expire at, and subject to, the consummation of the Offer.
As a Delaware corporation, the Company is subject to section 203 ("Section
203") of the General Corporation Law of the State of Delaware. Section 203
prevents an "Interested Stockholder" (generally defined as a person beneficially
owning 15% or more of a corporation's voting stock) from engaging in a "Business
Combination" (as defined in Section 203) with a Delaware corporation for three
years following the date such person became an Interested Stockholder unless (i)
before such person became an Interested Stockholder, the board of directors of
the corporation approved the transaction in which the Interested Stockholder
became an Interested Stockholder or approved the Business Combination, (ii) upon
consummation of the transaction which resulted in the Interested Stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by directors who are also officers
and by employee stock ownership plans that do not allow plan participants to
determine confidentiality whether to tender shares), or (iii) following the
transaction in which such person became an Interested Stockholder, the Business
Combination is (A) approved by the board of directors of the corporation and (B)
authorized at a meeting of stockholders by the affirmative vote of the holders
of at least 66 2/3% of the outstanding voting stock of the corporation not owned
by the Interested Stockholder. In accordance with the provisions of Section 203,
the Company has approved the Merger Agreement and the Purchaser's acquisition of
the Ekco Shares pursuant to the Offer and the Merger and, therefore, Section 203
is inapplicable to such transactions.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
Exhibit 1 Agreement and Plan of Merger among Ekco Group, Inc., CCPC Acquisition Corp. and
EG Two Acquisition Co., dated as of August 5, 1999.
<S> <C>
Exhibit 2 Amendment to the Agreement and Plan of Merger among Ekco Group, Inc., CCPC
Acquisition Corp. and EG Two Acquisition Co., dated as of August 10, 1999.
Exhibit 3 Guarantee dated August 5, 1999 exclusively executed by Borden, Inc. in favor of
Ekco Group, Inc.
Exhibit 4 Confidentiality Agreement between Ekco Group, Inc. and Borden, Inc., dated as of
May 3, 1999.
Exhibit 5 Letter to Stockholders of Ekco Group, Inc., dated August 11, 1999.*
Exhibit 6 Press Release issued by Ekco Group, Inc., CCPC Acquisition Corp. and EG TWO
Acquisition Co. on August 5, 1999 (incorporated by reference to Exhibit 99.1 to
Ekco Group, Inc.'s Current Report on Form 8-K reporting events occurring on
August 5, 1999).
Exhibit 7 Opinion of Lehman Brothers, Inc., dated as of August 4, 1999.*
</TABLE>
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<TABLE>
<S> <C>
Exhibit 8 1984 Restricted Stock Purchase Plan, as amended (incorporated herein by
reference to Exhibit 10.1(a) to Form 10-K for the year ended December 29, 1996).
Exhibit 9 1985 Restricted Stock Purchase Plan, as amended (incorporated herein by
reference to Exhibit 10.1(b) to Form 10-K for the year ended December 29, 1996).
Exhibit Form of Restricted Stock Purchase Agreement, as amended (incorporated herein by
10 reference to Exhibit 10.1(b) to Form 10-K for the year ended January 1, 1995,
Exhibit 10.1(c)(3) to Form 10-K for the year ended December 31, 1995 and
schedule thereto in Exhibit 10.1(c)(2) to Form 10-K for the year ended December
29,1996).
Exhibit Form of Restricted Stock Purchase Agreement, as amended (incorporated by
11 reference to Exhibits 10.1(d) to Form 10-K for the year ended December 31,
1995).
Exhibit 1987 Stock Option Plan, as amended, including forms of incentive stock option
12 and non-qualified stock option agreements (incorporated herein by reference to
Exhibit 10.2(a) to Form 10-K for the year ended December 28, 1997).
Exhibit Form of Non-Qualified Stock Option and Repurchase Agreement, as amended
13 (incorporated herein by reference to Exhibit10.2(b)(2)(i) to Form 10-K for the
year ended December 31, 1995).
Exhibit Schedule to Form of Non-Qualified Stock Option and Repurchase Agreement, as
14 amended.
Exhibit Form of Non-Qualified Stock Option Agreement (incorporated herein by reference
15 to Exhibit 10.2(e) to Form 10-K for the year ended December 29, 1996).
Exhibit Form of Non-Qualified Stock Option and Repurchase Agreement (incorporated herein
16 by reference to Exhibit 10.2(e) to Form 10-K for the year ended December 28,
1997 and Exhibit 10.2(b)(2) to Form 10-K for the year ended January 3, 1999).
Exhibit Form of Non-Qualified Stock Option Agreement (incorporated herein by reference
17 to Exhibit 10.2(f) to Form 10-K for the year ended December 28, 1997).
Exhibit Form of Indemnity Agreement for officers and directors, originally filed as
18 Exhibit 10.3(c) to Form 10-K for the year ended January 1, 1995 (incorporated
herein by reference to Exhibit 10.3 to Form 10-K for the year ended January 3,
1999).
Exhibit Ekco Group, Inc. 1988 Directors' Stock Option Plan, as amended, and form of
19 Non-Qualified Stock Option and Repurchase Agreement (incorporated herein by
reference to Exhibit 10.4 to Form 10-K for the year ended December 28, 1997).
Exhibit Schedule to Form of Non-Qualified Stock Option and Repurchase Agreement
20 (incorporated herein by reference to Exhibit 10.4(a)(2) to Form 10-K for the
year ended January 3, 1999).
Exhibit Ekco Group, Inc. Employees' Stock Ownership Plan ("ESOP") effective as of
21 January 1, 1989, as amended (incorporated herein by reference to Exhibits
10.6(a)(1) and (2) to Form 10-K for the year ended January 1, 1995, Exhibits
10.5(a)(2) and 10.5(a)(3) to Form 10-K for the year ended December 29, 1996 and
Exhibit 10.5(b) to Form 10-K for the year ended January 3, 1999).
Exhibit Employment Agreement with Malcolm L. Sherman dated December 4, 1996, as amended
22 (incorporated herein by reference to Exhibit 10.6 to Form 10-K for the year
ended January 3, 1999).
</TABLE>
26
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<TABLE>
<S> <C>
Exhibit Amended and Restated Employment Agreement with Donato A. DeNovellis dated as of
23 May 25, 1995, as amended (incorporated herein by reference to Exhibit 10.3 to
Form 10-Q for the quarterly period ended October 1, 1995, Exhibit 10.9(b) to
Form 10-Q for the period ended June 30, 1996 and Exhibit 10.10 to Form 10-K for
the year ended December 29, 1996).
Exhibit Amended and Restated Employment Agreement with Jeffrey A. Weinstein dated as of
24 May 25, 1995 (incorporated herein by reference to Exhibit 10.2 to Form 10-Q for
the quarterly period ended October 1, 1995 and Exhibit 10.10 to Form 10-K for
the year ended December 29, 1996).
Exhibit Form of Amended and Restated Employment Agreement with Brian R. McQuesten and
25 another officer dated as of May 25, 1995, as amended (incorporated herein by
reference to Exhibit 10.5 to Form 10-Q for the quarterly period ended October 1,
1995).
Exhibit Employment Agreement with J. Jay Althoff dated September 16, 1997, as amended.
26
Exhibit 1995 Restatement of Incentive Compensation Plan for Executive Employees of Ekco
27 Group, Inc. and its Subsidiaries, as amended (incorporated herein by reference
to Exhibit 10.12 to Form 10-K for the year ended December 28, 1997).
Exhibit Ekco Group, Inc. Supplemental Executive Retirement Plan dated as of July 1,
28 1992, (incorporated herein by reference to Exhibit 10.12 to Form 10-K for the
year ended January 3, 1999).
Exhibit Form of Split Dollar Agreement (incorporated herein by reference to Exhibit
29 10.13 to Form 10-K for the year ended January 3, 1999).
Exhibit Resolutions dated May 25, 1995 re: Ekco Group, Inc. Severance Policy.
30
</TABLE>
- ------------------------
* Included with Schedule 14D-9 mailed to stockholders
27
<PAGE>
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.
<TABLE>
<S> <C> <C>
Dated: August 11, 1999 EKCO GROUP, INC.
By: /s/ DONATO A. DENOVELLIS
-----------------------------------------
Donato A. DeNovellis
Title: Executive Vice President and Chief
Financial Officer
</TABLE>
28
<PAGE>
SCHEDULE I
EKCO GROUP, INC.
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
GENERAL
This Information Statement is being mailed on or about August 12, 1999 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Ekco Group, Inc., a Delaware corporation (the "Company"),
to the holders of record shares of the Company's (i) common stock, par value
$.01 per share, and the related series A preferred share purchase rights
(collectively, the "EKCO Common Stock") issued pursuant to the Rights Agreement
dated March 27, 1987, as amended, between the Company and American Stock
Transfer & Trust Company, and (ii) series B ESOP convertible preferred stock,
par value $.01 per share (the "ESOP Preferred Stock" and, together with the EKCO
Common Stock, the "EKCO Shares"). You are receiving this Information Statement
in connection with the possible election of persons designated by the Purchaser
(as defined below) to a majority of the seats on the Company's Board of
Directors (the "Company Board").
On August 5, 1999, the Company, CCPC Acquisition Corp., a Delaware
corporation (the "Parent"), and EG Two Acquisition Co., a Delaware corporation,
and a subsidiary of the Parent (the "Purchaser"), entered into an Agreement and
Plan of Merger, as amended on August 10, 1999 (collectively, the "Merger
Agreement"), pursuant to which (i) the Purchaser will commence a tender offer to
purchase all of the outstanding EKCO Shares at a price of $7.00 per EKCO Share,
net to the seller in cash, without interest thereon (the "Per Share Amount"),
upon the terms and subject to the conditions set forth in the Offer to Purchase
(the "Offer to Purchase") dated August 11, 1999 and in the related Letter of
Transmittal (which together with the Offer to Purchase, each as may be amended
and supplemented from time to time, constitute the "Offer"), and (ii) the
Purchaser will be merged with and into the Company (the "Merger"), and the
Company will continue as the surviving corporation (the "Surviving Corporation")
under the name "Ekco Group, Inc." as a wholly owned subsidiary of the Parent.
The Parent and the Purchaser are affiliates of Borden, Inc., a New Jersey
corporation ("Borden").
The Merger Agreement provides that, promptly after the purchase of a
majority of the outstanding EKCO Shares pursuant to the Offer, and from time to
time thereafter, the Purchaser will be entitled to designate such number of
directors ("Purchaser Designees") on the Company Board as will give the
Purchaser representation proportionate to its ownership interest. The Merger
Agreement requires the Company to take all action necessary to cause the
Purchaser Designees to be elected to the Company Board under the circumstances
described therein. This Information Statement is required by Section 14(f) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14f-1 promulgated thereunder.
YOU ARE URGED TO READ THIS INFORMATION STATEMENT CAREFULLY. YOU ARE NOT,
HOWEVER, REQUIRED TO TAKE ANY ACTION. Capitalized terms used and not otherwise
defined herein shall have the meaning set forth in the Schedule 14D-9.
The information contained in this Information Statement concerning the
Parent and the Purchaser has been furnished to the Company by the Parent, and
the Company assumes no responsibility for the accuracy, completeness or fairness
of any such information.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
The Merger Agreement provides that, promptly upon the purchase by the
Purchaser of the EKCO Shares pursuant to the Offer, and from time to time
thereafter, the Purchaser will be entitled to designate such number of Purchaser
Designees, rounded up to the next whole number, on the Company Board as
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<PAGE>
will give the Purchaser representation on the Company Board equal to the product
of the total number of directors on the Company Board (giving effect to the
directors appointed or elected pursuant to this sentence) multiplied by the
percentage that the aggregate number of EKCO Shares beneficially owned by the
Purchaser, the Parent or any of their affiliates bears to the total number of
EKCO Shares outstanding, and Ekco will at such time, promptly take all action
necessary to cause the Purchaser Designees to be elected to the Company Board,
including either increasing the size of the Company Board or securing the
resignations of incumbent directors or both. At such time, the Company will
cause the Purchaser Designees to constitute the same percentage as is on the
Company Board of (i) each committee of the Company Board, (ii) each board of
directors of each domestic subsidiary of the Company and (iii) each committee of
such board, in each case only to the extent permitted by law.
Notwithstanding the foregoing, following the election of the Purchaser's
designees to the Company Board, until the Effective Time, (i) the Purchaser will
only be entitled to designate up to that number of directors that is one less
than the total number of directors on the Company Board and regardless of the
total number of such directors, and the Company Board will have at least one
director who was a director on August 5, 1999 (provided that the Company will
cause there to be at least three directors), and (ii) any amendment to the
Merger Agreement adverse to the Company, its stockholders, directors, officers
or employees, termination of the Merger Agreement by the Company, amendment of
the indemnification or exculpation provisions of the certificate of
incorporation or by-laws of the Company in effect on August 5, 1999, extension
of time for the performance of the Parent's or the Purchaser's obligations under
the Merger Agreement, waiver of any conditions for the benefit of the Company or
any of the obligations or other acts of the Parent or the Purchaser, or any
waiver or exercise of the Company's or its stockholders' rights, remedies or
benefits under the Merger Agreement will require (in addition to the approval of
the Company Board as a whole) the approval of a majority of the directors, or of
the director, of the Company then in office who was or were director(s) on
August 5, 1999, and (iii) the Parent will cause the Purchaser not to, and the
Purchaser will not take any action to cause its designees to constitute a
greater number of directors than provided in the Merger Agreement.
The Purchaser Designees will be selected by the Purchaser from among the
individuals listed below. Each of the following individuals has consented to
serve as a director of the Company if appointed or elected. If necessary, the
Purchaser may choose additional or other Purchaser Designees, subject to the
requirements of Rule 14f-1. None of the following individuals owns any EKCO
Shares. In addition, none of the following individuals is a director of, or
holds any position with, the Company. The name, age, present principal
occupation or employment and five-year employment history of each of the
following individuals are set forth below.
DIRECTORS
1. DIRECTORS. The name, age, present principal occupation or employment
and five-year employment history of each director are set forth below. All
directors listed below are citizens of the United States of America. The
business address of Messrs. Kidder, Carter, Stoll, Kelley and Ms. Reardon is 180
East Broad Street, Columbus, Ohio 43215. The business address of Messrs. Kravis,
Stuart, Navab and Robbins is 9 West 57th Street, New York, New York 10019. The
business address of Mr. Roberts is 2800 Sand Hill Road, Menlo Park, California
94025. The business address of Mr. Campanella is One Pyrex Place, P.O. Box 1555,
Elmira, New York 14902.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
C. Robert Kidder.................... C. Robert Kidder (age 54) is Chairman of the Board and Chief Executive
Officer of Borden, a position he has held since January 10, 1995. He is
also President of the Purchaser. He also serves as a
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
Director of Borden Foods Corporation, Borden Chemical, Inc., Wise Foods
Holdings, Inc., Elmer's Holdings, Inc., CCPC Holding Company, Inc. and
reSource Partner, Inc. He served as Chairman of the Board of Duracell
International Inc. and Duracell, Inc. from August 1991 through October 1994
and was Chairman of the Board and Chief Executive Officer of both companies
from April 1992 through September 30, 1994, Chairman of the Board,
President and Chief Executive Officer of both companies from August 1991
until April 1992, and President and Chief Executive Officer of both
companies from June 1988 until August 1991. He is also a Director of
Electronic Data Systems Corporation, AEP Industries, Inc. and Morgan
Stanley, Dean Witter, Discover & Co.
<S> <C>
Henry R. Kravis..................... Henry R. Kravis (age 55) acted as Chairman of the Board of Borden from
December 21, 1994 to January 10, 1995. He has been a member of KKR & Co.,
LLC since 1996, was a General Partner of Kohlberg Kravis Roberts & Co. from
its establishment through 1995 and has been a General Partner of KKR
Associates, L.P. since its establishment. He is also a Director of Accuride
Corporation, Amphenol Corporation, The Boyds Collection, Ltd., Evenflo
Company Inc., The Gillette Company, IDEX Corporation, KinderCare Learning
Centers, Inc., KSL Recreation Corporation, Owens-Illinois, Inc., PRIMEDIA
Inc., Randall's Food Markets, Inc., Regal Cinemas, Inc., Safeway, Inc.,
Sotheby's Holdings, Inc., and Spalding Holdings Corporation. He is a member
of the Executive Committee of the Borden Board. Messrs. Kravis and Roberts
are first cousins.
George R. Roberts................... George R. Roberts (age 55) has been a member of KKR & Co., LLC since 1996,
was a General Partner of Kohlberg Kravis Roberts & Co. from its
establishment through 1995, and has been a General Partner of KKR
Associates, L.P. since its establishment. He is also a Director of Accuride
Corporation, Amphenol Corporation, The Boyds Collection, Ltd., Evenflo
Company Inc., IDEX Corporation, KinderCare Learning Centers, Inc., KSL
Recreation Corporation, Owens-Illinois, Inc., PRIMEDIA Inc., Randall's Food
Markets, Inc., Regal Cinemas, Inc., Safeway, Inc., and Spalding Holdings
Corporation. Messrs. Kravis and Roberts are first cousins.
Alexander Navab..................... Alexander Navab (age 33) is a Director of Borden and also serves as a
director of Elmer's Products, Inc., Wise Foods, Inc., Borden Chemical,
Inc., CCPC Holding Company, Inc. and Borden Foods Corporation. He has been
an Executive of KKR since June 1993. He was employed by James D. Wolfensohn
Incorporated, an investment banking firm, from September 1991 to June 1993.
He is also a Director of KAMAZ, Inc., KSL Recreation Corporation, Regal
Cinemas Inc. and World Color Press, Inc. He is a member of the Audit
Committee of the Borden Board of Directors.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
<S> <C>
Clifton S. Robbins.................. Clifton S. Robbins (age 41) is a Director of the Borden and also serves as
a Director of Borden Chemical, Inc., Borden Foods Corporation, CCPC Holding
Company, Inc. and BCP Management, Inc. He has been a member of KKR & Co.,
LLC since 1996, was a General Partner of Kohlberg Kravis Roberts & Co. and
has been a General Partner of KKR Associates, L.P. since January 1995. He
began as an Executive with Kohlberg Kravis Roberts & Co. in 1987. He is
also a Director of AEP Industries, Inc., IDEX Corporation, KinderCare
Learning Centers, Inc., and Regal Cinemas, Inc. He is Chairman of the
Compensation Committee and a member of the Executive Committee of the
Borden Board of Directors.
Scott M. Stuart..................... Scott M. Stuart (age 40) is a Director of Borden and also serves as
Director of Borden Chemical, Inc., Borden Foods Corporation and CCPC
Holding Company, Inc. He has been a member of KKR & Co., LLC since 1996,
and has been a General Partner of KKR Associates, L.P. since January 1995.
He was a General Partner of KKR from January 1995 until January 1, 1996
when he became a member of the limited liability company which serves as
the general partner of KKR. He has been an Executive with KKR since 1986.
He is a Director of AEP Industries, Inc., and World Color Press, Inc., The
Boyds Collection, Ltd., and KSL Recreation Corporation.
William H. Carter................... William H. Carter (age 46) is Executive Vice President and Chief Financial
Officer of Borden, a position he has held since April 1998. He is also a
Director of Elmer's Products, Inc., BCP Management, Inc., Borden Chemical,
Inc., AEP Industries, Inc., reSource Partner, Inc., Borden Foods
Corporation, CCPC Holding Company, Inc. and Wise Foods Inc. Prior to
joining Borden in 1995, he served as the Price Waterhouse LLP engagement
partner responsible for Borden.
Nancy A. Reardon.................... Nancy A. Reardon (age 46) was elected Senior Vice President, Human
Resources and Corporate Affairs effective March 3, 1997. She is also a
Director of Borden Chemical, Inc., Elmer's Products, Inc., Wise Foods,
Inc., Borden Foods Corporation, reSource Partner, Inc. and CCPC Holding
Company, Inc. Previously Ms. Reardon was Senior Vice President--Human
Resources and Communications for Duracell International, Inc. from 1991
through February 1997.
Kevin M. Kelley..................... Kevin M. Kelley (age 41) Executive Vice President-Corporate Strategy and
Development Borden since April 5, 1999. He is also a Director of Borden
Chemical, Inc., Elmer's Products, Inc., Wise Foods, Inc., Borden Foods
Corporation, reSource Partner, Inc. and CCPC Holding Company, Inc. Prior
thereto he was a Managing Director at Ripplewood Holdings LLC from 1996, a
Managing
</TABLE>
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<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME EMPLOYMENT HISTORY
- ------------------------------------ ---------------------------------------------------------------------------
Director at Onex Investment Corporation from 1995 to 1996, and a founding
partner of Bannon & Co., Inc. from 1991 to 1994.
<S> <C>
William Stoll, Jr................... William F. Stoll, Jr. (age 51) has been Senior Vice President and General
Counsel since July 1, 1996. He is also a director of Borden Chemical, Inc.,
Elmer's Products, Inc., Wise Foods, Inc., Borden Foods Corporation, BCP
Management, Inc., reSource Partner, Inc. and CCPC Holding Company, Inc.
Prior to joining Borden he was a Vice President of Westinghouse Electric
Corporation since 1993, and served as its Deputy General Counsel from 1988
to 1996.
Peter F. Campanella................. Peter F. Campanella (age 53) is President and Chief Executive Officer of
CCPC Holding Company, Inc., (formerly Corning Consumer Products Company)
since April 1996; prior to that he was Senior Vice President and General
Manager of Corning, Inc's Science Products Division from 1994 to 1996.
</TABLE>
I-5
<PAGE>
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The following table and text set forth, as of August 11, 1999, as to each
director and executive officer of the Company, his age, principal occupation and
business experience.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---------------------------------------------------- ----- ----------------------------------------------------
<S> <C> <C>
Malcolm L. Sherman.................................. 68 Chief Executive Officer and Chairman of the Board of
Directors
Donato A. DeNovellis................................ 54 Executive Vice President, Finance and Administration
and Chief Financial Officer
Jeffrey A. Weinstein................................ 48 Executive Vice President
J. Jay Althoff...................................... 34 Vice President, Secretary and General Counsel
Peter D. Conopask................................... 50 Vice President, Information Technology and Chief
Information Officer
Brian R. McQuesten.................................. 50 Vice President and Controller
George W. Carmany, III. ............................ 59 Director
Michael G. Frieze................................... 61 Director
Avram J. Goldberg................................... 69 Director
Kenneth J. Novack................................... 57 Director
Stuart B. Ross...................................... 62 Director
Alan D. Solomont.................................... 50 Director
Bill W. Sorenson.................................... 68 Director
Herbert M. Stein.................................... 70 Director
</TABLE>
MALCOLM L. SHERMAN has served as Chief Executive Officer since December
1996, as Chairman of the Board since July 1996, a director of the Company since
May 1995, and as a consultant to the Company from February 1993 to December
1996. Since February 1993, Mr. Sherman has served as Chairman of the Board of
Advisors of the several Gordon Brothers companies (a group of companies which
provide retail, merchant and financial services to the retail community as well
as serve as wholesalers of fine jewelry). He was Chairman and Director of K.T.
Scott, Ltd. (a chain of wallpaper and window treatment stores) from January 1991
to August 1995. Mr. Sherman has had many years of experience in the retail and
housewares industries, including service to Zayre Stores (a chain of general
merchandise discount stores) in a number of executive capacities which included
Chairman from 1982 to 1987, and from 1975 to 1987 service to Zayre Corporation
(a group of companies engaged in retail businesses) as its Executive Vice
President.
DONATO A. DENOVELLIS has served as Executive Vice President, Finance and
Administration since October 1994 and as Chief Financial Officer since July
1993. He served as Vice President from July 1993 to October 1994. Since
September 1996, Mr DeNovellis has served as Senior Vice President and Chief
Financial Officer of Ekco Housewares, Inc.
JEFFREY A. WEINSTEIN has served as Executive Vice President since April
1985. He has also served as President and Managing Director of Ekco
International, Inc., since July 1997. He served as Secretary to the Company from
February 1988 to October 1997 and as General Counsel from October 1978 to
October 1997. From July 1996 to April 1997, Mr Weinstein served as President of
Ekco Consumer Plastics, Inc.
J. JAY ALTHOFF has served as Vice President, Secretary and General Counsel
since October 1997. Prior to joining the Company, from September 1993 to
September 1997 Mr. Althoff was an associate with Ropes & Gray (a law firm)
working with corporate clients. From August 1987 through October 1989, Mr.
Althoff was an associate in the Capital Markets Group of Westpac Banking
Corporation (an Australian bank).
PETER D. CONOPASK has served as Vice President, Information Technology, and
Chief Information Officer since February 1999. Prior to joining the Company,
from June 1996 to February 1999,
I-6
<PAGE>
Mr. Conopask served as Chief Information Officer and Director of Information
Systems and Telecommunications of Toray Plastics (America), Inc. (a Japanese
process manufacturer of plastic films and chemicals), and from 1990 to May 1996,
he served as Director of Information Services & Telecommunications for Cranston
Print Works Co. (a manufacturer and designer of textiles, chemicals and related
services).
BRIAN R. MCQUESTEN has served as Vice President since February 1996, and as
Controller since May 1987.
MR. CARMANY has served as a director of the Company since February 1997 and
is President of G.W. Carmany Company, which he established in 1995. From 1975
until 1994, he served American Express Company (a global travel and financial
services company) in senior positions in that company's international banking
division and at the corporate level, including Senior Executive Vice President,
Treasurer and Director of its subsidiary The Boston Company (an investment
manager and private bank) from July 1990 to May 1993 and Chairman of Olympia and
York Noteholders Steering Committee from November 1992 to April 1994. Mr.
Carmany is a director of Equivest Finance, Inc. (a finance company).
MR. FRIEZE has served as a director of the Company since February 1997. Mr.
Frieze joined the Gordon Brothers companies in 1966, and he has served Gordon
Brothers Corporation (a jewelry distributor) as Chairman since January 1992,
Chief Executive Officer since January 1991, Executive Vice President since
October 1993 and Treasurer since October 1990. He has served Gordon Brothers
Retail Partners, Inc. (a merchant services company) as Chief Executive Officer,
Executive Vice President and Treasurer since January 1992. In addition, he also
serves various other Gordon Brothers companies in similar executive capacities,
including Gordon Brothers Group (an asset disposition company), Gordon Brothers
Equity Partners (a financial services company), Gordon Brothers Capital
Corporation (a financial services company), Gordon Brothers Ltd. (a U.K.
merchant services company) and Kurt Gutmann Jewelry, Inc. (an importer and
distributor of gold and jewelry).
MR. GOLDBERG has served as a director of the Company since February 1997 and
has been Chairman of The AVCAR Group since 1990. From 1958 to 1989, Mr. Goldberg
served The Stop & Shop Companies, Inc. (a chain of supermarket and mass
retailing stores) in a number of senior executive positions, including Chairman
of the Board and Chief Executive Officer from 1985 to 1989. Mr. Goldberg serves
as a director of Whole Foods Market, Inc. (a chain of natural foods
supermarkets).
MR. NOVACK has served as a director of the Company since March 1998 and as a
consultant to the Company since December 1996. Since August 1998, he has been
Vice Chairman of America Online, Inc. He is Of Counsel to Mintz, Levin, Cohn,
Ferris, Glovsky and Popeo, P.C., which he joined in 1966 and served as a member
until August 1998. Mintz, Levin, Cohn, Ferris Glovsky and Popeo, P.C. has served
as outside legal counsel to the Company since 1988, and Mr. Novack also served
as outside legal counsel to the Company from 1988 until August 1998.
MR. ROSS has served as a director of the Company since February 1989. He has
served as the Executive Vice President, XEROX Corporation (a worldwide document
company) and Chairman and Chief Executive Officer, XEROX Financial Services,
Inc. (a financial services company) since May 1990. Mr. Ross serves as a
director of Hansberger Global Investors, an investment company.
MR. SOLOMONT has served as a director of the Company since July 1998. He has
been Co-Chairman and Co-Chief Executive Officer of Solomont Bailis Ventures, LLC
(a health services and elder care organization) since May 1998. He was the
Chairman and Chief Executive Officer of the A.D.S. Group (an eldercare services
organization), which he founded in 1984, until December 1996 when that company
was sold to the Multicare Companies. He served the Multicare Companies as Vice
Chairman from December 1996 to March 1997 and as a consultant from March 1997 to
October 1997, when the Multicare Companies were sold to Genesis Health Ventures
(an eldercare services company). Mr. Solomont served as a consultant to Genesis
Health Ventures through May 1998. He has been a director of Boston Private Bank
& Trust Company since May 1999.
I-7
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MR. SORENSON has served as a director of the Company since October 1986 and
has been Chairman and a director of Management Resources of America, Inc. (a
management consulting firm) since January 1986 and was its Chief Executive
Officer from January 1986 to May 1994. He has been Chairman and a director of
American Sports Products Group, Inc. (a holding company that owns sports
equipment manufacturing business) since May 1994.
MR. HERBERT STEIN has served as a director of the Company since September
1981. He has served as Chairman of Organogenesis Inc. since February 1991 and as
its Chief Executive Officer and a director since 1987. Mr. Stein has also served
as President of H. M. Stein & Co., Inc. since 1970. He is a director of Apogee
Technology (a company engaged in research and development of digital
amplification).
The directors of the Company consist of no less than six and no more than
eleven as determined from time to time by the Company Board. The directors are
elected at the annual meeting of stockholders except for vacancies and newly
created directorships. Directors hold office until their successors are elected
and duly qualified or until the earlier of their death, resignation or removal.
The executive officers of the Company are elected annually by the Company
Board and serve, subject to the provisions of any employment agreement between
the executive and the Company, until their respective successors are chosen and
qualified or until their earlier resignation or removal.
BOARD COMMITTEES AND MEETINGS
The Company Board held a total of six meetings during the fiscal year ended
January 3, 1999 ("Fiscal 1998"), and the various committees of the Company Board
met a total of five times. All of the members of the Company Board attended at
least 75% of the aggregate of all meetings held by the Company Board and the
committees of the Company Board upon which they served, except for Mr. Sorenson
who attended 71%. In addition, from time to time, the members of the Company
Board and its committees act by unanimous written consent pursuant to Delaware
law. The Company Board has an Audit Committee, a Compensation Committee and an
Executive Committee. It does not have a nominating committee or a committee
performing the functions of a nominating committee.
AUDIT COMMITTEE. The Audit Committee currently consists of three
non-employee directors: George W. Carmany, III, Kenneth J. Novack and Herbert M.
Stein. The Audit Committee reviews the engagement of the Company's independent
auditors. The Audit Committee also reviews the audit fees of the independent
auditors and the adequacy of the Company's internal accounting procedures. The
Audit Committee met once in Fiscal 1998.
COMPENSATION COMMITTEE. The Compensation Committee currently consists of
three non-employee directors: George W. Carmany, III, Michael G. Frieze and
Stuart B. Ross. The Compensation Committee reviews, approves and makes
recommendations regarding the Company's compensation policies, practices and
procedures to ensure that the legal and fiduciary responsibilities of the
Company Board are carried out and that such policies, practices and procedures
contribute to the success of the Company. The Compensation Committee administers
the Company's 1984 and 1985 Restricted Stock Plans (collectively, the "1984 and
1985 Plans"), the 1987 Stock Plan (the "1987 Stock Plan") and the 1984 Employee
Stock Purchase Plan. The Committee met three times during Fiscal 1998.
THE EXECUTIVE COMMITTEE. The Executive Committee currently consists of
Malcolm L. Sherman, Avram J. Goldberg and Bill W. Sorenson. The Executive
Committee has the authority to take all actions that could be taken by the full
Company Board with certain exceptions. The Executive Committee meets as
necessary between regularly scheduled meetings of the Company Board to take such
action as is advisable for the efficient operation of the Company. The Executive
Committee did not meet during Fiscal 1998.
I-8
<PAGE>
COMPENSATION OF DIRECTORS
Directors of the Company who are not employees receive an annual fee of
$10,000, a fee of $1,000 for each Company Board meeting attended, including
telephonic meetings, and reimbursement of meeting travel expenses. Such
directors also receive a fee of $1,000 for attendance at each meeting of a
committee of the Company Board, including telephone meetings. Mr. Sherman, an
employee director, does not receive additional compensation for serving on the
Company Board.
DIRECTORS STOCK OPTIONS.
1988 DIRECTORS STOCK OPTION PLAN. The 1988 Directors' Stock Option Plan
(the "Directors' Plan"), as amended, provides for the granting of non-qualified
stock options to purchase EKCO Common Stock to non-employee directors of the
Company. Under the terms of the Directors' Plan, EKCO Options (as defined below)
are automatically granted to outside directors who are not employees of the
Company or an affiliate of the Company, who have not been so employed within one
year before the time of grant, and have been elected as a director by the
stockholders of the Company, at the time they so qualify. No outside director
may be granted more than one EKCO Option. The option exercise price for each
share of EKCO Common Stock covered by an EKCO Option is the fair market value of
such share on the date the EKCO Option is granted. Each director EKCO Option
covers that number of shares determined by dividing $100,000 by the fair market
value of a share of EKCO Common Stock on the date of grant, but in no event may
the number of shares subject to such option be greater than 50,000. Each EKCO
Option has a term of ten years from the date of grant, subject to earlier
termination as provided in the Directors' Plan.
Each outstanding EKCO Option is exercisable at any time and from time to
time in accordance with the terms of the Directors' Plan. Shares purchased
pursuant to the exercise of any EKCO Option are subject to repurchase by the
Company within three years of the date of grant of the EKCO Option at the
exercise price upon termination of the outside director's directorship with the
Company as follows: as to all EKCO Shares so purchased if termination occurs
prior to the first anniversary of the date of grant of the EKCO Option; as to up
to two-thirds of the EKCO Shares purchased pursuant to the EKCO Option if
termination occurs prior to the second such anniversary; and as to up to
one-third of the EKCO Shares purchased pursuant to the EKCO Option if
termination occurs prior to the third such anniversary. The EKCO Shares cease to
be subject to the right of the Company to repurchase them if termination of the
directorship is due to the death of the outside director or if a change of
control (as defined) of the Company occurs at any time before the outside
director's directorship is terminated.
1987 STOCK PLAN. Directors are eligible to receive stock options under the
Company's 1987 Stock Plan.
EKCO OPTIONS IN THE MERGER. Pursuant to the Merger Agreement, prior to the
Effective Time, the Company will use its commercially reasonable best efforts to
cause all outstanding options to purchase the EKCO Shares (in each case, an
"EKCO Option") granted under the Company's stock option plans, whether or not
then exercisable, to be canceled by the Company and exchanged for a cash
payment, paid by the Surviving Corporation equal to the product of (i) the
number of EKCO Shares previously subject to such EKCO Option and (ii) the
excess, if any, of the Per Share Price over the exercise price per EKCO Share
previously subject to such EKCO Option. See "Certain Transactions--Arrangements
with Executive Officers, directors and Affiliates of the Company--Options" in
the Schedule 14D-9.
INDEMNIFICATION AND INSURANCE.
For a discussion of certain agreements by the Parent with respect to
indemnification of, and insurance for, directors and officers of the Company,
see "The Merger Agreement--Directors' and Officers' Indemnification and
Insurance" in the Schedule 14D-9.
I-9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the close of business on August 9,
1999, the number of shares of EKCO Common Stock and ESOP Preferred Stock
beneficially owned by each person known by the Company to own more than 5% of
either the outstanding EKCO Common Stock or ESOP Preferred Stock, by each
director, by each individual named in the Summary Compensation Table on page
I-15 hereof, and by all current executive officers and directors as a group, and
the percentage of the outstanding EKCO Common Stock and ESOP Preferred Stock
which such shares represent. Except as indicated in the accompanying notes and
except in the case of the trust of the Company's Employees' Stock Ownership Plan
(the "ESOP"), which holds shares of ESOP Preferred Stock and EKCO Common Stock
on behalf of participants in the ESOP who have voting power and investment power
as set forth in the ESOP, the owners have sole voting and investment power with
respect to the shares. Attached to each share of EKCO Common Stock is a
preferred share purchase right to acquire one-one hundredth of a share of the
Company's series A junior participating preferred stock, par value $.01 per
share, which rights are not presently exercisable.
<TABLE>
<CAPTION>
AMOUNT AND AMOUNT
NATURE OF OF BENEFICIAL PERCENT
BENEFICIAL PERCENT OF OWNERSHIP OF OF ESOP
OWNERSHIP OF COMMON ESOP PREFERRED
BENEFICIAL OWNERS COMMON STOCK STOCK(1) PREFERRED STOCK STOCK
- ---------------------------------------- ---------------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
First Manhattan Co. .................... 2,231,325(2) 11.6% -- --
437 Madison Avenue
New York, New York 10022
Tweedy, Browne Company L.P. ............ 1,614,175(3) 8.4% -- --
TBK Partners, L.P.
Vanderbilt Partners, L.P. ..............
52 Vanderbilt Avenue
New York, NY 10017
Pioneering Investment Management,
Inc..................................... 1,285,800(4) 6.7% -- --
(a/k/a Pioneering Management Corp.)
60 State Street
Boston, MA 02109
Dimensional Fund Advisors Inc. ......... 1,177,700(5) 6.1% -- --
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
George W. Carmany, III.................. 80,753(6)(7)(8) * -- --
Stuart W. Cohen......................... 49,751(8)(9) 10) * -- --
Donato A. DeNovellis.................... 274,385(6)(8) 11) 1.4% 4,592 *
Michael G. Frieze....................... 104,753(7)(8) * -- --
Avram J. Goldberg....................... 47,753(7)(8) * -- --
Brian R. McQuesten...................... 113,333(8)(9) 10) * 12,691 1.4%
Kenneth J. Novack....................... 16,402(7)(8) * -- --
Stuart B. Ross.......................... 44,373(8) * -- --
Malcolm L. Sherman...................... 1,131,515(7)(8) 10) 5.6% 78 *
Alan D. Solomont........................ 39,394(7) * -- --
Bill W. Sorenson........................ 39,114(8) * -- --
Herbert M. Stein........................ 103,201(8) * -- --
Jeffrey A. Weinstein.................... 360,489(6)(8) 10) 1.9% 16,815 1.8%
All Current Directors and Executive
Officers as a Group (14 Persons)........ 2,373,064(6)(7) 11) 11.4% 34,176 3.7%
</TABLE>
- ------------------------------
* Represents holdings of less than one percent.
(FOOTNOTES ON FOLLOWING PAGE)
I-10
<PAGE>
(1) Computed on the basis of 19,159,871 shares of EKCO Common Stock outstanding,
plus, in the case of any person deemed to own shares of EKCO Common Stock as
a result of owning options or rights to purchase EKCO Common Stock
exercisable within 60 days or ESOP Preferred Stock which is presently
convertible into an equal number of shares of EKCO Common Stock by the
record owner, the additional shares of EKCO Common Stock which would be
outstanding upon such exercise, purchase or conversion by such person or
group.
(2) Based on an amended Schedule 13G filed in February 1999 by First Manhattan
Co. ("FMC"), a registered broker-dealer and investment advisor. FMC has sole
voting authority with respect to 198,350 of such shares, shared voting
authority with respect to 1,972,275 of such shares, sole dispositive power
as to 198,350 of such shares and shared dispositive power with respect to
2,032,975 of such shares. The 2,231,325 shares includes 23,750 shares owned
by family members of general partners of FMC as to which FMC disclaims
dispositive power as to 20,750 of such shares and disclaims beneficial
ownership as to 3,000 of such shares.
(3) Based on an amended Schedule 13D jointly filed in June 1996 by Tweedy,
Browne Company, L.P. ("TBC"), T.B.K. Partners, L.P. ("TBK") and Vanderbilt
Partners, L.P. ("Vanderbilt"). TBC, a registered broker-dealer and
investment adviser and a member of the National Association of Securities
Dealers, Inc., may be deemed to be the beneficial owner of 1,507,275 of such
shares, which are held in the accounts of various customers (the "TBC
Accounts"), with respect to which it has obtained sole voting authority as
to 1,315,965 of such shares and shared dispositive power as to all 1,507,275
such shares. Included in the TBC shares are 410 shares held in a TBC Account
for a charitable foundation of which Christopher H. Browne, a General
Partner (as defined below) is a trustee. In addition, TBK and Vanderbilt,
each a private investment partnership, beneficially own directly and have
sole voting authority and investment discretion with respect to 76,000 and
30,900 of such shares, respectively. The aggregate number of shares of EKCO
Common Stock with respect to which TBC, TBK and Vanderbilt could be deemed
to be the beneficial owner as of the date of such amended Schedule 13D is
1,614,175 shares. The general partners of TBC and Vanderbilt are Christopher
H. Browne, William H. Browne and John D. Spears (the "General Partners").
All of the General Partners and Thomas P. Knapp are general partners of TBK.
The General Partners may be deemed to control TBC and Vanderbilt, and the
General Partners and Thomas P. Knapp may be deemed to control TBK. The
aggregate number of shares of EKCO Common Stock with respect to which each
of the General Partners may be deemed to be the beneficial owner by reason
of his being a general partner of TBC, TBK and Vanderbilt, respectively, is
1,614,175 shares, with Thomas P. Knapp deemed to be the beneficial owner of
76,000 shares by reason of his being a general partner of TBK. Each of TBC,
TBK and Vanderbilt disclaims beneficial ownership of EKCO Common Stock held
by the other and held in the TBC Accounts.
(4) Based upon a Schedule 13G filed in January 1999 by Pioneering Investment
Management, Inc. ("Pioneering"), an investment adviser. Pioneering has sole
voting and investment power with respect to all such shares.
(5) Based upon an amended Schedule 13G filed in February 1999 by Dimensional
Fund Advisors Inc. ("Dimensional"), a registered investment advisor.
Dimensional furnishes investment advice to four investment companies
registered under the Investment Company Act of 1940 and serves as investment
manager to certain other investment vehicles, including commingled group
trusts (collectively, these investment companies and investment vehicles are
referred to as the "Portfolios"). In its role as investment advisor and
investment manager, Dimensional possesses both voting and investment power
over all of such shares that are owned by the Portfolios. Dimensional
disclaims beneficial ownership of all such shares.
(6) Includes the following number of shares of EKCO Common Stock owned jointly
by the following persons and their wives as to which such persons may be
deemed to share voting and investment
I-11
<PAGE>
power: Mr. Carmany, 44,000 shares; and Mr. DeNovellis, 26,173 shares.
Excludes 6,000 shares owned by Mr. Weinstein's children as to which Mr.
Weinstein disclaims beneficial ownership.
(7) Includes the following number of shares of EKCO Common Stock currently
issuable upon the exercise of stock options held by the following directors
pursuant to the Company's 1988 Directors' Stock Option Plan, as amended: Mr.
Carmany, Mr. Frieze and Mr. Goldberg, 19,753 shares each, 13,169 of which
are subject to repurchase by the Company; Mr. Novack, 12,402 shares, of
which 8,268 are subject to repurchase by the Company; Mr. Solomont, 19,394
shares, all of which are subject to repurchase by the Company; and Mr.
Sherman, 16,162 shares.
(8) Includes the following number of shares of EKCO Common Stock currently
issuable upon the exercise of stock options held by the following persons
pursuant to the 1987 Stock Option Plan, as amended: Mr. Carmany, Mr. Frieze,
Mr. Goldberg, Mr. Ross, Mr. Sorenson and Mr. Stein, 10,000 shares each, of
which 6,667 shares are subject to repurchase by the Company; Mr. Novack,
3,000 shares; Mr. Cohen, 19,385 shares; Mr. DeNovellis, 191,637 shares, of
which 16,291 shares are subject to repurchase by the Company; Mr. McQuesten,
36,099 shares, of which 3,024 shares are subject to repurchase by the
Company; Mr. Sherman, 1,110,000 shares, of which 100,000 are subject to
repurchase by the Company; Mr. Weinstein, 155,665 shares, of which 7,689
shares are subject to repurchase by the Company; and all current executive
officers and directors as a group, 1,680,717 shares, of which 253,042 shares
are subject to repurchase by the Company.
(9) Includes the following number of shares of EKCO Common Stock purchased
pursuant to the Company's 1984 and 1985 Restricted Stock Plans, as amended,
which are held in escrow, are presently subject to repurchase by the Company
and as to which certain transfer restrictions apply: Mr. Cohen, 16,366
shares, Mr. DeNovellis, 37,566 shares; Mr. McQuesten, 14,258 shares; Mr.
Weinstein, 28,858 shares; and all current executive officers and directors
as a group, 80,682 shares.
(10) Includes the number of shares of ESOP Preferred Stock listed in the table,
if any, and the following number of shares of EKCO Common Stock allocated to
the ESOP accounts of the following participants: Mr. DeNovellis, 1,541
shares; Mr. McQuesten, 3,209 shares; Mr. Sherman, 275 shares; Mr. Weinstein,
4,001 shares; and all current executive officers and directors as a group,
9,026 shares. Mr. DeNovellis, an executive officer, is also the trustee of
the ESOP, and Mr. DeNovellis disclaims beneficial ownership of 1,193,362
shares of ESOP Preferred Stock and EKCO Common Stock held by the ESOP (other
than shares specifically allocated to his account under the ESOP).
(11) Includes 11,410 shares of EKCO Common Stock held by retirement plans of
subsidiary corporations of which Mr. DeNovellis is trustee and as to which
Mr. DeNovellis disclaims beneficial ownership.
I-12
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Company Board. This report is submitted by those
directors who served on the Compensation Committee in Fiscal 1998. This report
includes a discussion of the compensation of Malcolm L. Sherman, the Company's
Chief Executive Officer ("CEO"), and the Company's other executive officers who
were executive officers in 1998, including the persons named in the Summary
Compensation Table below (collectively, "Senior Management").
The Compensation Committee has considered the effect of the limitations on
the deductibility of executive compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), on the Company's compensation
policies and practices. Section 162(m) generally disallows a tax deduction by a
public company for annual compensation in excess of $1 million paid to its CEO
and to any of the Company's four other most highly compensated executives. It is
the policy of the Compensation Committee and Company Board to seek to preserve
tax deductibility of compensation paid to executives unless it determines that
regulatory requirements to do so are contrary to the best interests of the
Company and its stockholders. Compensation attributable to the exercise of
non-qualified stock options under the Company's 1987 Stock Plan is excluded from
the limitation on deductible compensation under Section 162(m). Compensation
attributable to the Company's 1995 Incentive Plan, more fully described below,
including restricted stock issued to Senior Management in fiscal 1995 pursuant
to the 1984 and 1985 Plans (but excluding stock options granted under the 1987
Stock Plan), does not currently qualify for any exception to the Section 162(m)
tax deduction limitations and therefore counts against the $1 million limit.
On December 14, 1998, the Compensation Committee and the Company Board
jointly reviewed the stock options issued to employees of the Company which had
an exercise price higher than the market price of the EKCO Common Stock and
concluded that such options were not providing the desired incentive. The
Compensation Committee and the Company Board unanimously approved the grant of
replacement stock options to all employees (other than the CEO) holding
unexercised stock options under the 1987 Stock Option Plan with an exercise
price equal to or greater than $5.00 per share. See the separate Compensation
Committee Report below under "--Repricing of Stock Options" for a detailed
description of this grant of replacement stock options.
CEO COMPENSATION--The CEO's compensation was negotiated by a special
committee of the Company Board in 1996 with the advice of KPMG Peat Marwick LLP
("KPMG"), who acted as independent compensation consultants to the Company, and
was approved by the Compensation Committee in November 1996.
The CEO's compensation is comprised of an annual salary of $250,000, such
bonus as may be determined by the Company Board or the Compensation Committee, a
stock option to purchase 900,000 shares of Common Stock pursuant to the
Company's 1987 Stock Plan and other stock options granted since 1996. In 1996,
KPMG compared the CEO's compensation to that of a peer group consisting of 15
consumer goods companies, some of which were substantially larger and some
substantially smaller than the Company. Overall, the CEO's total compensation
was at median competitive levels with respect to other recently hired chief
executive officers.
In July 1998, the CEO received a stock option to purchase 100,000 shares of
Common Stock. The Compensation Committee made the grant after consultation with
KPMG, who provided its opinion that the option was appropriate in view of (i)
the performance of the Company over the preceding year and (ii) the CEO's
compensation package. No bonus was awarded for 1998.
SENIOR MANAGEMENT COMPENSATION--GENERAL--Compensation in Fiscal 1998 for
Senior Management was based upon the Company's 1995 Incentive Compensation Plan
for Executive Employees, as amended (the "1995 Incentive Plan"), for each named
executive officer. The purpose of the 1995 Incentive Plan is to enable the
Company and its subsidiaries to attract and retain highly qualified executive
management and
I-13
<PAGE>
to motivate such individuals by providing competitive total compensation based
partly on their performance and partly on the performance of the Company. The
1995 Incentive Plan provides for compensation consisting of base salary,
bonuses, restricted stock (granted in fiscal 1995 through May 1997) and option
grants based on the Company's performance and the participating executive's
individual performance and contribution to the achievement of Company
objectives.
The structure of the 1995 Incentive Plan was originally proposed by Towers
Perrin, an independent compensation consulting firm retained by the Compensation
Committee. In February 1997, the Compensation Committee replaced the cash bonus
component of the 1995 Incentive Plan with a cash incentive plan (the "Cash Bonus
Plan") based upon the Company's operating budget as approved by the Company
Board. The 1995 Incentive Plan was further modified in fiscal 1997 based upon
the recommendations made to the Compensation Committee by Coopers & Lybrand,
L.L.P. ("Coopers & Lybrand"), an independent executive compensation consulting
firm, after comparing the 1995 Incentive Plan against published survey data
representing an average of 300 companies in similar industries and/or of
comparable revenue size. As modified, the 1995 Incentive Plan provided that no
further grants of restricted stock would be made, that stock option grants would
be at the discretion of the Compensation Committee rather than the formula
originally included in the plan and that deferred compensation would be limited
to a participant's bonus and up to 20% of base salary and be solely invested in
interest bearing accounts.
Target bonus amounts for participating executives remained the same for 1998
as those which had been in place for 1997. The Cash Bonus Plan provides for
payment of a participating executive's target bonus for a fiscal year as
follows: if the budgeted profit (as defined) is fully achieved, then 60% of the
target bonus will be paid; for every variance of 5% above or below budgeted
profit, payment is increased or decreased, as the case may be, by one-third of
this portion of the target bonus, with no upper limit in the bonus earned from
achievement of profit in excess of the budgeted profit and no target bonus
payable at 85% or less of budgeted profit. The remaining 40% of the target bonus
will be payable only if actual achieved profit exceeds 85% of budgeted profit,
and then up to a maximum of 20% due to the successful accomplishment of goals
and objectives specific to the individual, with the remaining 20% to be at the
discretion of the CEO.
FISCAL 1998 TOTAL REMUNERATION--Total remuneration for Senior Management is
comprised of their base salary and stock options, more fully described below in
"Long-Term Incentive Awards."
FISCAL 1998 CASH COMPENSATION--In July 1998, the Compensation Committee
approved the following increases in base salary upon the recommendation of the
CEO, which reflected his evaluation of job responsibilities and performance: Mr.
DeNovellis' base salary was increased by $10,000, and Mr. Weinstein's base
salary was also increased by $10,000. No bonuses were paid for Fiscal 1998 to
Senior Management.
LONG-TERM INCENTIVE AWARDS--The Compensation Committee approved the grant to
Senior Management for Fiscal 1998 of stock options reflected in the tables that
follow pursuant to the 1987 Stock Plan. Each option granted under the 1987 Stock
Plan is referred to as an "Option." Such grants were made by the Compensation
Committee based upon the recommendation of the CEO after his evaluation of the
grantee's job responsibilities and performance. Option grants provide the right
to purchase shares of Common Stock at the fair market value on the date of
grant. Each Option for Fiscal 1998 for Senior Management becomes exercisable
immediately but is subject to repurchase rights of the Company which lapse over
three years from the date of grant of the Option or upon the executive's death
or disability, upon a change of control, or in accordance with the terms of
Senior Management's employment agreements, more fully described in
"--Employment, Termination of Employment and Change of Control Arrangements"
below.
I-14
<PAGE>
The tables below and the accompanying footnotes reflect the decisions
covered by the above discussion.
GEORGE W. CARMANY, III
MICHAEL G. FRIEZE
AVRAM J. GOLDBERG
STUART B. ROSS
BILL W. SORENSON
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
Mr. Frieze, who has served on the Compensation Committee since May 12, 1998,
is an executive officer of the several Gordon Brothers companies. Malcolm L.
Sherman is Chairman of the Board of Advisors of the several Gordon Brothers
companies.
PERFORMANCE GRAPH
The following table compares the total shareholder return to the EKCO Common
Stock with the Standard & Poors 500 Index and the Dow Jones Consumer
Non-Cyclical Index for a period of five years and assumes $100 was invested on
December 31, 1993. Total return assumes that dividends, if any, were reinvested.
The stock performance in the table below is not necessarily indicative of future
price performance.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
EKO GROUP, INC. S&P 500 DJ CONSUMER, NON-CYCLICAL
<S> <C> <C> <C>
12/31/93 100 100 100
12/31/94 93 101 108
12/31/95 87 139 150
12/31/96 65 171 191
12/31/97 115 228 242
12/31/98 56 293 307
</TABLE>
<TABLE>
<CAPTION>
EKCO GROUP, INC. S & P 500 DJ CONSUMER, NON-CYCLICAL
----------------------- ------------- -----------------------------------
<S> <C> <C> <C>
12/31/93................... 100 100 100
12/31/94................... 93 101 108
12/31/95................... 87 139 150
12/31/96................... 65 171 191
12/31/97................... 115 228 242
12/31/98................... 56 293 307
</TABLE>
I-15
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth individual compensation information for the
Company's CEO and each of the other four most highly compensated executive
officers of the Company serving in Fiscal 1998 (collectively, the "Named
Executive Officers") for services rendered in all capacities to the Company
during the last three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION AWARDS
---------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RESTRICTED SECURITIES ALL OTHER
NAME AND STOCK UNDERLYING ANNUAL
PRINCIPAL SALARY BONUS AWARD(S) OPTIONS/SARS COMPENSATION
POSITION(S) YEAR ($)(2) ($) ($)(3)(4) (#)(3)(5) ($)(6)
- --------------------------------------- ----------- --------- ----------- ------------- ----------------- -----------------
Malcolm L. Sherman..................... 1998 250,000 -- -- 100,000 15,667
Chairman and Chief Executive 1997 250,000 -- -- 110,000 23,674
Officer 1996 18,108 -- -- 900,000/100,000 76,612
Jeffrey A. Weinstein................... 1998 254,815 -- -- 70,419 18,349
Executive Vice President 1997 244,507 -- -- 15,000* 28,916
and President, EKCO 1996 219,600 7,320 16,248 63,246 23,178
International, Inc. 16,491*/50,000
Donato A. DeNovellis 1998 254,655 -- -- 69,368 17,654
Executive Vice President, 1997 236,615 -- -- 35,000* 28,480
Finance & Administration 1996 207,000 6,297 21,739 122,269 22,609
and Chief Financial Officer 24,538*/100,000
Brian R. McQuesten 1998 135,200 -- -- 23,468 21,071
Vice President and Controller 1997 131,969 -- -- 5,000* 59,621
1996 113,700 2,843 18,256 4,131 14,514
8,262*
Stuart W. Cohen (1).................... 1998 182,300 -- -- 12,961 6,113
Former Vice President, Strategic 1997 182,300 -- -- 6,424 14,148
Planning and Business 1996 182,300 -- -- 12,847* 5,127
Development
</TABLE>
- ------------------------
* These options were repriced on December 14, 1998 as more fully described in
Footnote 5 below.
(1) Mr. Cohen's employment with the Company terminated on April 5, 1999.
(2) The amounts shown include the individual's before-tax contributions to
the Company's 401(k) retirement plan.
(3) Pursuant to the Rights Agreement, with each share of EKCO Common Stock
issued, including shares of EKCO Common Stock issued in connection with a
compensation plan, a right to purchase one one-hundredth of a share of the
Company's series A junior participating preferred stock will be issued. Such
rights are not currently exercisable.
I-16
<PAGE>
(4) On January 3, 1999, the number of shares listed below were held in
escrow pursuant to the terms of the 1984 and 1985 Plans for each named
purchaser. The shares are valued as of December 31, 1998 (the last business day
of Fiscal 1998) at $3.75 per share (net of consideration paid).
<TABLE>
<CAPTION>
NO. OF MARKET VALUE
SHARES AT 12/31/98
----------- ----------------
<S> <C> <C>
Jeffrey A. Weinstein............................................. 29,290 $ 106,909
Donato A. DeNovellis............................................. 38,102 139,073
Brian R. McQuesten............................................... 14,742 53,809
Stuart W. Cohen.................................................. 16,366 59,736
</TABLE>
Of the foregoing shares, 26,900 shares of Mr. Weinstein, 35,080 shares of
Mr. DeNovellis, 12,080 shares of Mr. McQuesten and all of the shares of Mr.
Cohen were apportioned into five blocks ("Performance Blocks"), with each
identified with a fiscal year of a 5-year period beginning with fiscal 1995 and
ending with fiscal 1999, under the 1995 Incentive Plan and the individual
restricted stock purchase agreements. Restrictions on disposition on shares in
each Performance Block lapse either (i) if the specified Target Return on
Capital (as defined) for the performance of the Company for the designated
fiscal year for the Performance Block is achieved, then at the rate of 20% per
year on each of the first, second, third, fourth and fifth anniversaries of the
closing date (as defined) for each full year of employment following the later
to occur of (a) January 1 of the year designated for the Performance Block or
(b) the closing date for the shares in such Performance Block; (ii) upon the
purchaser's death, disability (as defined); (iii) upon a change of control (as
defined); or (iv) upon specified continued service with the Company. The
restrictions on disposition also lapse in accordance with the terms of Senior
Management's employment agreements, more fully described in "--Employment,
Termination of Employment and Change of Control Arrangements" below.
The remaining shares of restricted stock are held in escrow as a result of
the election made by Mr. Weinstein, Mr. DeNovellis and Mr. McQuesten to defer
all or a portion of their increases in salary for fiscal 1995 in accordance with
the terms of the 1995 Incentive Plan. Restrictions on disposition of such shares
lapse in accordance with the terms of the 1995 Plan at the rate of 20% per year
on each of the first, second, third, fourth and fifth anniversaries of the
closing date (as defined), provided that the purchaser is at each such
anniversary date an employee or director of the Company, upon the purchaser's
death or disability (as defined) or upon a change of control (as defined).
(5) Options to purchase the number of shares shown were granted pursuant to
the 1987 Stock Plan. All EKCO Options with an exercise price equal to or greater
than $5.00 per share (except for the Options to Malcolm Sherman) were replaced
with stock options to purchase at $3.875 (the market price on the December 14,
1998 repricing date) that number of shares of EKCO Common Stock determined by
the following formula: Multiplying the number of shares which may be exercised
by a fraction, the numerator of which was $3.875 and the denominator of which
was the exercise price of the applicable eligible option.
(6) The amounts shown for Fiscal 1998 consist of (i) the sum of the economic
benefit to each of the following persons for split dollar life insurance
coverage plus the difference between the premiums paid in 1998 and the present
value of the recoverable premium as follows: Mr. Weinstein, $11,875; Mr.
DeNovellis, $11,519; and Mr. McQuesten, $5,934 (Mr. Sherman and Mr. Cohen did
not have such coverage); (ii) automobile allowances to Mr. Sherman and Mr.
McQuesten of $9,600 each (Mr. DeNovellis and Mr. Weinstein have the use of
Company-owned automobiles instead of automobile allowances, and Mr. Cohen did
not have such an allowance); (iii) the value of shares of ESOP Preferred Stock
and EKCO Common Stock allocated to the account of each person for the first
three quarters of ESOP plan year 1998 pursuant to the ESOP, as follows: Mr.
Sherman, $1,322; Mr. Weinstein, $1,411; Mr. DeNovellis, $1,337; Mr. McQuesten,
$1,207; and Mr. Cohen, $1,332; and the amount of the cash contribution allocated
to the account of each person for the fourth quarter of ESOP plan year 1998 (in
lieu of shares of stock after the Company's December 14, 1998 repurchase of all
unallocated shares held by the ESOP, more fully
I-17
<PAGE>
described below in "Certain Relationships and Related Transactions") as follows:
Mr. Sherman, $4,745; Mr. Weinstein, $5,063 Mr. DeNovellis, $4,798; Mr.
McQuesten, $4,330; and Mr. Cohen, $4,781.
OPTION GRANTS
The following table sets forth information as to option grants made by the
Company during Fiscal in 1998 to the Named Executive Officers pursuant to the
1987 Stock Plan:
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME (#)(1)(2) IN FISCAL YEAR ($/SH) DATE VALUE($)(3)
- -------------------------------------- -------------- --------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Malcolm L. Sherman.................... 100,000 14.2% 7.8438 07-28-08 479,038
Jeffrey A. Weinstein.................. 10,590 10.0% 3.8750 02-13-02 26,298
20,552 3.8750 02-19-03 51,037
11,273 3.8750 02-25-04 27,994
9,831 3.8750 02-03-05 24,413
10,763 3.8750 03-06-06 26,728
7,410 3.8750 07-28-08 18,401
15,000* 4.1%* 7.8438* 07-28-08* 71,856*
Donato A. DeNovellis.................. 11,553 9.9% 3.8750 08-14-03 28,690
10,248 3.8750 02-25-04 25,449
14,628 3.8750 02-03-05 36,326
16,014 3.8750 03-06-06 39,768
7,045 3.8750 02-10-08 17,495
9,880 3.8750 07-28-08 24,535
15,000* 9.7%* 8.2500* 02-10-08* 77,637*
20,000* 7.8438* 07-28-08* 95,808*
Brian R. McQuesten.................... 3,658 3.3% 3.8750 02-13-02 9,084
3,425 3.8750 02-19-03 8,505
4,355 3.8750 02-25-04 10,815
4,168 3.8750 02-03-05 10,350
5,392 3.8750 03-06-06 13,390
2,470 3.8750 07-28-08 6,134
5,000* 1.4%* 7.8438* 07-28-08* 23,952*
Stuart W. Cohen....................... 4,577 1.8% 3.8750 07-12-05 11,366
8,384 3.8750 03-06-06 20,820
</TABLE>
- ------------------------
* These options were repriced on December 14, 1998 as more fully described in
Footnote 2 below and the percentage of total options granted to employees in
the fiscal year was calculated on the number of shares granted prior to the
occurrence of the repricing.
(1) All of the foregoing EKCO Options were granted pursuant to the 1987
Stock Plan and individual option agreements. Pursuant to the Merger Agreement,
prior to the Effective Time, the Company will use its commercially reasonable
best efforts to cause all outstanding EKCO Options, whether or not then
I-18
<PAGE>
exercisable, to be canceled by the Company and exchanged for a cash payment,
paid by the Surviving Corporation equal to the product of (i) the number of EKCO
Shares previously subject to such EKCO Option and (ii) the excess, if any, of
the Per Share Price over the exercise price per EKCO Share previously subject to
such EKCO Option. See "Certain Transactions--Arrangements with Executive
Officers, Directors and Affiliates of the Company--Options" in the Schedule
14D-9.
(2) All EKCO Options (except for the EKCO Options of Malcolm L. Sherman,
CEO) with an exercise price equal to or greater than $5.00 per share were
replaced with stock options to purchase at $3.875 (the market price on the
December 14, 1998 repricing date) that number of shares of EKCO Common Stock
determined by the following formula: Multiplying the number of shares subject to
the option by a fraction, the numerator of which was $3.875 and the denominator
of which was the exercise price of the applicable eligible option, rounded to
the next whole number.
(3) Based on the Black-Scholes option pricing model adapted for use in
valuing executive stock options. The actual value, if any, an executive may
realize will depend on the excess of the stock price over the exercise price on
the date the Option is exercised, so there is no assurance that the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model. Estimated values under the model are based upon the
following assumptions: stock price volatility of 0.58, future dividend yield of
- -0-, and risk-free interest rates of 4.53%, 4.54%, 4.55% and 4.56%, based on the
1, 2, 3 and 5-year strip yields of U.S. Treasury Securities at January 3, 1999.
It was also assumed that the EKCO Options had a weighted average expected life
of seven years.
OPTION EXERCISES/YEAR-END OPTION VALUES
The table below sets forth information as to shares acquired upon exercise
of options as well as the number of securities underlying stock options granted
pursuant to the 1987 Stock Plan and, for the CEO when he was an outside
director, the Directors' Plan, and the value of such securities as of December
31, 1998 (the last business day of Fiscal 1998) with respect to the Named
Executive Officers:
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND FISCAL
1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
SHARES ACQUIRED VALUE AT FY END(#) AT FY END($)
NAME ON EXERCISE(#) REALIZED($)(1) EXERCISABLE(2) EXERCISABLE(3)
- ----------------------------------- -------------------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Malcolm L. Sherman................. -- -- 1,126,162 -0-
Jeffrey A. Weinstein............... 170,000 848,198 155,655 26,125
Donato A. DeNovellis............... -- -- 191,637 -0-
Brian R. McQuesten................. 80,000 422,525 36,099 10,094
Stuart W. Cohen.................... -- -- 19,385 -0-
</TABLE>
(1) The net value realized on exercise of stock options is calculated by
subtracting the exercise price from the market value of the EKCO Common Stock as
of the exercise dates. Market value is based on the closing prices of EKCO
Common Stock on the New York Stock Exchange (prior to July 26, 1999, the date
EKCO Common Stock began trading on the American Stock Exchange, the EKCO Common
Stock was traded on the New York Stock Exchange) on the dates of exercise as
reported by The Wall Street Journal as of such dates as follows as to Mr.
McQuesten and Mr. Weinstein, respectively: $7.9375 on February 13, 1998 as to
10,000 and 20,000 shares, respectively; $8.00 on February 17, 1998 as to 8,500
and 16,500 shares, respectively; $7.688 on May 5, 1998 as to 11,700 and 20,000
shares, respectively; $8.375 on May 6, 1998 as to 19,800 and 23,500 shares,
respectively; and $7.875 on July 23, 1998 as to 30,000 and 90,000 shares,
respectively.
I-19
<PAGE>
(2) Includes the following number of shares of EKCO Common Stock subject to
repurchase by the Company under the 1987 Stock Plan as of January 3, 1999: Mr.
Sherman, 100,000 shares; Mr. Weinstein, 16,495 shares; Mr. DeNovellis, 30,452
shares; Mr. McQuesten, 7,021 shares; and Mr. Cohen, 7,078 shares.
(3) Based upon the $3.75 closing price of the EKCO Common Stock on December
31, 1998 as reported by The Wall Street Journal. Each option has an exercise
price equal to the fair market value of the EKCO Common Stock on the date of
grant.
REPRICING OF OPTIONS
On December 14, 1998, the Compensation Committee and the Company Board
jointly reviewed the stock options issued to employees of the Company which had
an exercise price higher than the market price of the EKCO Common Stock and
concluded that such options were not providing the desired incentive. The
Compensation Committee and the Company Board unanimously approved the grant to
all employees (other than the CEO) holding unexercised stock options under the
1987 Stock Option Plan with an exercise price equal to or greater than $5.00 per
share replacement stock options to purchase at the then current market price
that number of shares of EKCO Common Stock determined by multiplying the number
of shares subject to the eligible option by a fraction, the numerator of which
was $3.875 (the December 14, 1998 market price) and the denominator of which was
the exercise price of the applicable eligible option. No changes were made to
the vesting schedule of the options as originally granted, other than precluding
the employees from exercising such options for a period of six months from
December 14, 1998, except in the event of death, permanent and total disability,
retirement or, if the employee's option agreement or employment agreement or
other agreement so specified, change of control (as defined). As a result of
this grant, options to purchase 1,170,713 shares of EKCO Common Stock were
exchanged for options to purchase 592,236 shares of EKCO Common Stock.
GEORGE W. CARMANY III
MICHAEL G. FRIEZE
STUART B. ROSS
I-20
<PAGE>
TEN-YEAR OPTION REPRICINGS
The table below sets forth certain information concerning the repricing of
stock options held by any executive officer of the Company which occurred on
December 14, 1998:
<TABLE>
<CAPTION>
NO. OF
SECURITIES MARKET PRICE EXERCISE
UNDERLYING OF STOCK PRICE AT NEW NO. OF
OPTIONS AT TIME OF TIME OF EXERCISE REPRICED
NAME DATE REPRICED REPRICING($)(1) REPRICING($) PRICE($) OPTIONS(2)
- ---------------------------- --------- ----------------- --------------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Malcolm L. Sherman.......... -- -- -- -- --
Chairman and Chief
Executive Officer
Jeffrey A. Weinstein........ 12-14-98 27,500 3.875 10.0625 3.875 10,590
Executive Vice President 12-14-98 60,000 3.875 11.3125 3.875 20,552
and President and Managing 12-14-98 22,000 3.875 7.5625 3.875 11,273
Director, Ekco 12-14-98 16,491 3.875 6.5000 3.875 9,831
International, Inc. 12-14-98 16,491 3.875 5.9375 3.875 10,763
12-14-98 15,000 3.875 7.8438 3.875 7,410
Donato A. DeNovellis........ 12-14-98 30,000 3.875 10.0625 3.875 11,553
Executive Vice President, 12-14-98 20,000 3.875 7.5625 3.875 10,248
Finance and 12-14-98 24,538 3.875 6.5000 3.875 14,628
Administration, 12-14-98 24,538 3.875 5.9375 3.875 16,014
and Chief Financial 12-14-98 15,000 3.875 8.2500 3.875 7,045
Officer 12-14-98 20,000 3.875 7.8438 3.875 9,880
Brian R. McQuesten.......... 12-14-98 9,500 3.875 10.0625 3.875 3,658
Vice President and 12-14-98 10,000 3.875 11.3125 3.875 3,425
Controller 12-14-98 8,500 3.875 7.5625 3.875 4,355
12-14-98 6,992 3.875 6.5000 3.875 4,168
12-14-98 8,262 3.875 5.9375 3.875 5,392
12-14-98 5,000 3.875 7.8438 3.875 2,470
J. Jay Althoff.............. 12-14-98 15,000 3.875 8.1875 3.875 7,099
Vice President, General
Counsel and Secretary
Stuart W. Cohen............. 12-14-98 7,161 3.875 6.0625 3.875 4,577
Former Vice President, 12-14-98 12,847 3.875 5.9375 3.875 8,384
Strategic Planning and
Business Development
<CAPTION>
LENGTH OF
ORIGINAL
OPTION
TERM
REMAINING
AT DATE OF
NAME REPRICING
- ---------------------------- -------------
<S> <C>
Malcolm L. Sherman.......... --
Chairman and Chief
Executive Officer
Jeffrey A. Weinstein........ 38 Months
Executive Vice President 50 Months
and President and Managing 62 Months
Director, Ekco 74 Months
International, Inc. 86 Months
115 Months
Donato A. DeNovellis........ 56 Months
Executive Vice President, 62 Months
Finance and 74 Months
Administration, 86 Months
and Chief Financial 110 Months
Officer 115 Months
Brian R. McQuesten.......... 38 Months
Vice President and 50 Months
Controller 62 Months
74 Months
86 Months
115 Months
J. Jay Althoff.............. 106 Months
Vice President, General
Counsel and Secretary
Stuart W. Cohen............. 79 Months
Former Vice President, 86 Months
Strategic Planning and
Business Development
</TABLE>
- ------------------------
(1) The shares are valued at $3.875 per share in accordance with the terms of
the 1987 Stock Option Plan.
(2) All EKCO Options (except for the EKCO Options of Malcolm L. Sherman, CEO)
with an exercise price equal to or greater than $5.00 per share were
replaced with stock options to purchase at $3.875 (the market price on the
December 14, 1998 repricing date) that number of shares of EKCO Common Stock
determined by the following formula: Multiplying the number of shares
subject to the option by a fraction, the numerator of which was $3.875 and
the denominator of which was the exercise price of the applicable eligible
option, rounded to the next whole number.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
In July 1992, the Company adopted the Supplemental Executive Retirement Plan
(the "SERP"). The SERP is a retirement plan which uses a defined benefit formula
to provide for lump sum payments to be made upon retirement, termination of
employment, death or disability, to certain officers designated by the Company
Board, as more fully described below. The SERP is not qualified under Section
401(a) of the Code.
Each lump sum payment to a participant in the SERP is calculated in order to
equal the actuarial equivalent of a lifetime pension. The amount of a
participant's payment under the SERP is generally determined by multiplying an
amount designated by the Compensation Committee with respect to such participant
by such participant's years of credited service. Certain additional payments are
payable to a participant under the SERP if his employment with the Company
terminates within three years of a change in control and under certain other
circumstances specified in the SERP. A participant's benefits under the SERP
vest at 20% per year beginning upon the attainment of five years of credited
service, becoming fully
I-21
<PAGE>
vested upon the attainment of ten years of such credited service;
notwithstanding the foregoing, upon a change in control of the Company, all
participants shall become 100% vested in their benefits in the SERP, and if such
participant's employment with the Company terminates within three years after
such change in control, a lump sum payment of SERP benefits shall be made to
such participant.
The estimated lump sum payments payable under the SERP to the Named
Executive Officer-participants upon each such Named Executive Officer's
respective normal retirement date (as defined) will be the actuarial equivalent
of an annual payment of the following amounts: Mr. DeNovellis, $41,782 per
annum; Mr. McQuesten, $25,075 per annum; and Mr. Weinstein, $47,151 per annum.
Mr. Cohen and Mr. Sherman have not participated in the SERP.
Notwithstanding the foregoing, the Offer will constitute a change of control
under the SERP. See "Certain Transactions--Arrangements with Executive
Officers--Supplemental Executive Retirement Plan" in the Schedule 14D-9.
EMPLOYMENT CONTRACTS AND ARRANGEMENTS
The Company has entered into employment agreements with its CEO and Senior
Management, as well as with other executives and management personnel. Each of
the employment agreements continues until terminated by the executive or the
Company. Although Mr. Cohen's employment agreement is described below, Mr. Cohen
resigned from the Company on April 5, 1999 and was not entitled to any severance
payments.
MR. SHERMAN
Mr. Sherman's employment agreement commenced on December 4, 1996. Pursuant
to his agreement (as amended), Mr. Sherman receives an annual base salary of
$300,000 and is eligible for an annual bonus. Mr. Sherman received a stock
option for 900,000 shares of EKCO Common Stock, which option is fully vested. In
addition, Mr. Sherman is entitled to participate in Company benefit plans and
fringe benefits. In the event of (1) a change of control of the Company, (2) a
constructive termination or termination by the Company without good cause
following a change of control, or (3) his death or permanent and total
disability, Mr. Sherman is entitled to all EKCO Shares which were granted, sold
or optioned to him (subject only to payment of any option exercise price when
due) by the Company at any time prior to such event as if all restrictions had
lapsed and all events necessary to vest such rights had occurred. If Mr. Sherman
becomes subject to tax under Section 4999 of the Internal Revenue Code or any
similar tax as a result of any payment by the Company or any affiliate of the
Company, the Company has agreed to gross-up his compensation by making an
additional payment in the amount which would be equal to such tax. Further, Mr.
Sherman has agreed not to compete with the Company for 36 months after the
termination of his employment.
MESSRS. DENOVELLIS, WEINSTEIN, MCQUESTEN AND COHEN
Messrs. DeNovellis, Weinstein and McQuesten each have entered into amended
and restated employment agreements, effective as of May 25, 1995, as amended,
whereby they are to receive annual salaries in the sum of $260,000, $260,000,
and $135,200, respectively, and are further entitled to annual performance
increases and bonuses. Mr. Cohen entered into an employment agreement, effective
as of June 12, 1995, whereby he was entitled to receive an annual salary of
$182,300 as well as, an annual performance increase and bonus. In addition,
Messrs. DeNovellis, Weinstein, McQuesten are, and Mr. Cohen was, entitled to
such fringe benefits as the Company may provide for its executive employees and
the use of an automobile. In addition, under such employment agreements the
Company is required to provide, in any event, whether or not such coverage is
provided for other executive employees generally, group life or other life
insurance with a death benefit equal to at least four times such Senior
Management's then current salary.
In the event of a total or permanent disability, the Company is to provide
salary and benefit coverage continuation in the case of Messrs. DeNovellis and
Weinstein, for 36 months thereafter (or longer, to the extent the Company's
existing policy so provides), and, in the case of Messrs. McQuesten and Cohen,
12 months thereafter (or longer, to the extent the Company's existing policy so
provides), as well as outplacement benefits. If the executive dies, the
executive's estate will receive a lump sum payment of one year's
I-22
<PAGE>
salary in addition to any payment received under the Company's group life
insurance plan and certain other benefits. In addition, if an executive dies or
is totally or permanently disabled, he is entitled to all shares of stock of the
Company which were granted, sold or optioned to him by the Company (subject only
to payment of any option exercise price when due) as if all restrictions had
lapsed and all events necessary to vest such rights had occurred.
The employment agreements with Senior Management also provide that if such
executive is terminated without good cause prior to a change of control, then
(1) in the case of Messrs. DeNovellis and Weinstein, the Company shall pay to
such executive two times his respective Lump Sum Payment Amount and, in the case
of Messrs. McQuesten and Cohen, to such executive one times the respective Lump
Sum Payment Amount; (2) each executive will be entitled to all EKCO shares which
were granted, sold or optioned to him by the Company (subject only to payment of
any option exercise price when due) at any time prior to the date of termination
as if all restrictions had lapsed and all events necessary to vest such rights
had occurred; (3) in the case of Messrs. DeNovellis and Weinstein, the Company
shall pay for the continuation of their medical, dental and life insurance
coverage continuation for up to two years and, in the case of Messrs. McQuesten
and Cohen, for up to one year; (4) for each such executive, the Company shall
provide outplacement benefits and, in the case of Messrs. DeNovellis and
Weinstein, automobile benefits for two years; and (5) for each such executive,
the Company shall pay a gross-up payment.
"Lump Sum Payment Amount" means an amount equal to (1) such executive's then
current salary, plus (2) the maximum amount payable to such executive under all
specified compensation bonus plans and arrangements for the fiscal year in which
a termination occurs, plus (3) an amount equal to the value of the securities,
cash or other property which were allocated to such executive's account in the
ESOP for the fiscal year immediately preceding the fiscal year in which a
termination occurs (which shall be in addition to any distribution from the ESOP
to which such executive may be entitled).
Immediately upon a change of control, each member of Senior Management will
be entitled to all EKCO Shares which were granted, sold or optioned (subject
only to the payment of any option exercise price when due) to such executive by
the Company at any time prior to such change of control as if all restrictions
had lapsed and all events necessary to vest such rights had occurred.
After a change of control, and upon an event of a constructive termination
or termination by the Company of such executive's employment without good cause
of if such executive elects to terminate his employment after 6 months but
within 24 months of the occurrence of a change of control of the Company (unless
such change of control was approved by the resolution of the Company's board of
directors with at least two-thirds of the directors serving as of May 25, 1995
(or June 12, 1995 for Mr. Cohen) voting in favor), then (1) in the case of
Messrs. DeNovellis and Weinstein, the Company shall pay to such executive three
times his respective Lump Sum Payment Amount and, in the case of Messrs.
McQuesten and Cohen, two times his respective Lump Sum Payment Amount; (2) each
such executive shall have all EKCO Shares which were granted, sold or optioned
to him by the Company (subject only to payment of any option exercise price when
due) at any time prior to the date of termination as if all restrictions had
lapsed and all events necessary to vest such rights had occurred; (3) in the
case of Messrs. DeNovellis and Weinstein, the Company shall pay medical, dental
and life insurance coverage continuation for up to three years and, in the case
of Messrs. McQuesten and Cohen, for up to two years; (4) for each such
executive, the Company shall provide outplacement benefits and, in the case of
Messrs. DeNovellis and Weinstein, automobile benefits for three years; and (5)
for each such executive, the Company shall pay a gross-up payment (collectively,
the "Severance Benefits").
The employment agreements for each of the members of Senior Management
(other than Mr. Cohen) also require the Company to provide to each such
executive an irrevocable letter of credit in an amount at least equal to, in the
case of Messrs. DeNovellis and Weinstein, the greater of four times annual base
salary or the amount necessary to fund the Severance Benefits and, in the case
of Mr. McQuesten, the greater of two and one-half times annual salary or the
amount necessary to fund the Severance Benefits in order to assure prompt
payment of amounts due to such executive upon termination and in each case, in
an amount necessary to secure the Company's obligations under any stock
appreciation rights plan or other equity-
I-23
<PAGE>
linked plan. Further, each of such executives have agreed not to compete with
the Company for, in the case of Messrs. DeNovellis and Weinstein, 24 months
after the termination of such executive's employment and, in the case of Messrs.
McQuesten and Cohen, 12 months thereafter.
On August 15, 1999, ten days after the announcement of this Officer
(assuming the tender offer is not discontinued by August 15), a change of
control under the agreements will be deemed to have occurred and will result in
Messrs. Sherman, DeNovellis, Weinstein, McQuesten and Althoff receiving certain
benefits. See "Certain Transactions--Arrangements with Executive
Officers--Employment Contracts and Agreements" in the Schedule 14D-9.
SEVERANCE POLICY
The Company's post-change of control severance policy provides that each
exempt employee whose employment is terminated, whose duties or responsibilities
are substantially diminished, or who is directed to relocate within 12 months
after such change of control will receive salary continuation benefits for a
period of months determined by dividing his or her then yearly salary by
$10,000, limited to no more than 12 months. This policy does not apply to any
employee of the Company who is a party to a contractual commitment with the
Company that provides him or her with greater than 12 months salary, severance
payment or salary continuation upon his or her termination in the event of a
change of control.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ESOP LOANS; REPURCHASE OF SERIES B ESOP PREFERRED STOCK AND COMMON STOCK
FROM ESOP. The Company loaned $6.9 million to the ESOP since fiscal 1989 to
purchase an aggregate of 1.8 million shares of ESOP Preferred Stock and 1
million shares of EKCO Common Stock. As of December 31, 1998, ESOP plan
year-end, the Company repurchased 127,109 shares of ESOP Preferred Stock and
593,359 shares of EKCO Common Stock held by the ESOP and not allocated to the
accounts of participants (which amounted to approximately 34.5% of the shares
held by the ESOP and 3.6% of all then-outstanding shares of the Company) in
exchange for forgiveness of the remaining loan from the Company to the ESOP of
approximately $3.2 million.
CERTAIN BUSINESS RELATIONSHIPS--LEGAL COUNSEL. Kenneth J. Novack, a
director of and consultant to the Company, served as a member of the law firm of
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. during Fiscal 1998 until
August 1998, when he became Of Counsel to the firm. The firm of Mintz, Levin,
Cohn, Ferris, Glovsky and Popeo, P.C. has served as outside legal counsel to the
Company since 1988, and Mr. Novack also served as outside legal counsel to the
Company from 1988 until August 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires directors, executive officers and persons who
beneficially own more than 10% of the Company's equity securities to file with
the Securities and Exchange Commission (the "Commission") initial reports of
ownership and reports of changes in ownership of the Company's stock with the
Commission and the exchange on which the EKCO Common Stock is listed. These
reporting persons are required by regulations of the Commission to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on a review of the forms furnished to the Company and written
representations from the reporting persons, the Company believes that all
Section 16(a) filing requirements applicable to its executive officers and
directors were complied with during Fiscal 1998, except, through oversight, two
transactions on Form 4 to report open market purchases made in February and
October 1998 by Michael G. Frieze, a director. A Form 5 filed in February 1999
covered these transactions.
CHANGE IN CONTROL
The Offer, if consummated, will result in a change of control of the
Company. See "Arrangements with Parent, Purchaser or their Affiliates--The
Offer".
I-24
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
EKCO GROUP, INC.,
CCPC ACQUISITION CORP.
AND
EG TWO ACQUISITION CO.
DATED AS OF AUGUST 5, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE OFFER....................................................... 5
1.1 The Offer............................................................ 5
1.2 Action by EKCO....................................................... 7
1.3 EKCO Board Representation............................................ 9
1.4 EKCO Options......................................................... 9
1.5 EKCO Restricted Stock................................................ 10
ARTICLE II THE MERGER..................................................... 10
2.1 The Merger........................................................... 10
2.2 The Closing.......................................................... 11
2.3 Effective Time....................................................... 11
2.4 Effect of the Merger................................................. 11
2.5 Effect on Capital Stock.............................................. 11
2.6 Surrender of Securities; Funding of Payments; Stock Transfer Books... 13
2.7 Certificate of Incorporation of Surviving Corporation................ 14
2.8 Bylaws of the Surviving Corporation.................................. 14
2.9 Directors and Officers of the Surviving Corporation.................. 14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EKCO........................ 14
3.1 Corporate Organization and Authorization............................. 15
3.2 EKCO Capital Stock................................................... 15
3.3 EKCO Subsidiaries.................................................... 16
3.4 Organization, Existence and Good Standing of EKCO Subsidiaries....... 16
3.5 Noncontravention; Consents........................................... 16
3.6 EKCO Public Information.............................................. 17
3.7 No Material Adverse Change........................................... 18
3.8 Legal Proceedings.................................................... 18
3.9 Material Contracts................................................... 18
3.10 Subsequent Events................................................... 18
3.11 Inventories......................................................... 19
3.12 Tax Returns......................................................... 19
3.13 Commissions and Fees................................................ 20
3.14 Employee Benefit Plans; Employment Matters.......................... 20
3.15 Compliance with Laws in General..................................... 22
3.16 Intellectual Property............................................... 22
3.17 Insurance........................................................... 23
3.18 Properties.......................................................... 23
3.19 Environmental Matters............................................... 24
3.20 Year 2000........................................................... 24
3.21 Absence of Certain Liabilities...................................... 25
3.22 Takeover Statute.................................................... 25
3.23 Rights Agreement.................................................... 25
3.24 Opinion of Financial Advisor........................................ 25
3.25 Offer Documents; Schedule 14D-9; Proxy Statement.................... 25
</TABLE>
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<TABLE>
<S> <C>
3.26 Stockholder Vote Required........................................... 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ACQUISITION SUBSIDIARY
AND ACQUIROR ............................................................. 26
4.1 Organization, Existence and Capital Stock............................ 26
4.2 Authorization of Agreement........................................... 26
4.3 Non-Contravention; Consents.......................................... 26
4.4 Commissions and Fees................................................. 27
4.5 No Subsidiaries...................................................... 27
4.6 No Prior Activities.................................................. 27
4.7 Offer Documents; Proxy Statement................................... 27
4.8 Financing............................................................ 28
4.9 Legal Proceedings.................................................... 28
4.10 DGCL 203............................................................ 28
ARTICLE V COVENANTS....................................................... 28
5.1 Preservation of Business............................................. 28
5.2 Acquisition Proposals; No Solicitation............................... 30
5.3 Meetings of Stockholders; Proxy Statement............................ 31
5.4 Access to Information; Confidentiality............................... 31
5.5 HSR Act and Foreign Competition Laws................................. 32
5.6 Accounting Methods................................................... 32
5.7 Public Disclosures................................................... 33
5.8 Indemnification and Insurance........................................ 33
5.9 Reasonable Best Efforts.............................................. 34
5.11 Notice of Subsequent Events......................................... 35
5.12 Employment,; Employee Welfare....................................... 35
5.12 Guarantee of Acquisition Subsidiary's Obligations................... 36
5.13 No Amendment to the Rights Agreement................................ 36
5.14 Year 2000 Remediation Program....................................... 36
ARTICLE VI CONDITIONS TO MERGER........................................... 36
6.1 Mutual Conditions.................................................... 36
ARTICLE VII TERMINATION................................................... 37
7.1 Termination.......................................................... 37
7.2 Effect of Termination................................................ 39
7.3 Procedure for Termination............................................ 40
ARTICLE VIII MISCELLANEOUS................................................ 40
8.1 Expenses............................................................. 40
8.2 Amendment............................................................ 40
8.3 Extension; Waiver.................................................... 41
8.4 Nonsurvival of Representations and Warranties........................ 41
8.5 Notices.............................................................. 41
8.6 Governing Law/Consent to Jurisdiction................................ 42
8.7 Waiver of Jury Trial................................................. 42
8.8 Certain Definitions.................................................. 43
8.9 Captions............................................................. 43
8.10 Integration of Schedules............................................ 43
</TABLE>
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<TABLE>
<S> <C>
8.11 Entire Agreement; Assignment........................................ 43
8.12 Parties in Interest................................................. 44
8.13 Enforcement of the Agreement........................................ 44
8.14 Validity............................................................ 44
8.15 Counterparts........................................................ 44
8.16 No Rule of Construction............................................. 44
8.17 Performance By Acquisition Subsidiary............................... 44
</TABLE>
ANNEX A CONDITIONS OF THE OFFER
ANNEX B OPTION ELECTION
ANNEX C RESTRICTED STOCK ELECTION
ANNEX D INDEX OF DEFINED TERMS
EXHIBIT A CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), made and entered into
as of the 5th day of August, 1999, by and among CCPC ACQUISITION CORP., a
Delaware corporation ("ACQUIROR"), EG TWO ACQUISITION CO., a Delaware
corporation (the "Acquisition Subsidiary"), and EKCO GROUP, INC., a Delaware
corporation ("EKCO").
W I T N E S S E T H:
WHEREAS, the Board of Directors of each of ACQUIROR and Acquisition
Subsidiary have approved, and declared it to be advisable and in the best
interests of their respective stockholders, for Acquisition Subsidiary to make
the Offer (as defined below) and following the consummation of the Offer to
effect the Merger (as defined below), upon the terms and subject to the
conditions provided herein;
WHEREAS, the Board of Directors of EKCO has unanimously determined that
it is fair to and in the best interests of EKCO and its stockholders to approve
Acquisition Subsidiary's proposed acquisition and has resolved (i) to recommend
that the stockholders of EKCO accept the Offer (as defined below) and tender
their shares of Common Stock, par value $.01 per share (the "EKCO Common Stock")
and the associated preferred share purchase rights (the "Rights") issued
pursuant to the Rights Agreement dated March 27, 1987, as amended on June 9,
1988, January 10, 1989, March 23, 1992 and December 22, 1992 and as amended and
restated as of March 21, 1997 between EKCO and American Stock Transfer & Trust
Company, the rights agent (as so amended and restated, the "Rights Agreement"),
and their shares of Series B ESOP Convertible Preferred Stock, par value $.01
per share, (the "ESOP Preferred Stock" and, together with the EKCO Common Stock
and associated rights, the "EKCO Shares"), pursuant to the Offer and (ii) to
approve and declare advisable the merger (the "Merger") of Acquisition
Subsidiary with and into EKCO, with EKCO being the surviving corporation (the
"Surviving Corporation"), in accordance with the General Corporation Law of the
State of Delaware ("DGCL") following consummation of the Offer;
WHEREAS, in furtherance of the foregoing, Acquisition Subsidiary will
make a cash tender offer (the "Offer") in compliance with Section 14(d)(1) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder, to acquire all of the issued and
outstanding EKCO Shares for $7.00 per EKCO Share (such amount, or any greater
amount per EKCO Share paid pursuant to the Offer, being hereinafter referred to
as the "Per Share Amount"), net to the seller in cash without interest thereon
less any requested withholding taxes, upon the terms and subject to the
conditions of this Agreement; and that the Offer will be followed by the Merger,
pursuant to which each issued and outstanding EKCO Share not owned by
Acquisition Subsidiary or ACQUIROR (other than Dissenting Shares (as defined
below)) will be converted into the right to receive the Per Share Amount, upon
the terms and subject to the conditions provided herein; and
WHEREAS, the Board of Directors of EKCO has received the written
opinion of Lehman Brothers, Inc. ("Lehman Brothers") that the consideration to
be received by the holders of EKCO Shares pursuant to the Offer and the Merger
is fair to such holders from a financial point of view;
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants and agreements contained herein, the parties hereto do hereby agree as
follows:
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ARTICLE I
THE OFFER
1.1. THE OFFER.
(a) Not later than the first business day after the date of this
Agreement, ACQUIROR, Acquisition Subsidiary and EKCO will make a public
announcement of the Offer.
(b) Provided that this Agreement shall not have been terminated in
accordance with Section 7.1 and none of the events set forth in ANNEX A hereto
shall have occurred or be existing, Acquisition Subsidiary shall commence, in
accordance with the terms hereof, the Offer and ACQUIROR shall cause Acquisition
Subsidiary to commence, within the meaning of Rule 14d-2 under the Exchange Act,
as amended, including the rules and regulations promulgated thereunder (the
"Exchange Act"), the Offer as promptly as reasonably practicable after the date
hereof, but in no event later than five (5) business days (as such term is
defined in Rule 14d-1 under the Exchange Act) after the initial public
announcement of Acquisition Subsidiary's intention to commence the Offer. The
obligation of Acquisition Subsidiary to accept for payment and pay for EKCO
Shares tendered pursuant to the Offer shall be subject only to satisfaction or
waiver (other than a waiver of the Minimum Condition requirement) of the
conditions set forth in ANNEX A hereto (unless the failure of any such condition
was caused by any material breach by ACQUIROR or Acquisition Subsidiary of this
Agreement in which case Acquisition Subsidiary shall be obligated to accept for
payment and pay for EKCO Shares tendered pursuant to the Offer provided that
such failure has been waived by EKCO), including the condition that a number of
EKCO Shares representing that number of EKCO Shares which would equal more than
fifty percent (50%) of the voting power (determined on a fully-diluted basis),
of all the securities of EKCO entitled to voted generally in a merger shall have
been validly tendered and not withdrawn prior to the expiration date of the
Offer (the "Minimum Condition"). Acquisition Subsidiary expressly reserves the
right to waive any such condition, to increase the Per Share Amount and to make
any other changes in the terms and conditions of the Offer; PROVIDED, HOWEVER,
that, without the prior written consent of EKCO, Acquisition Subsidiary will not
(i) decrease the Per Share Amount below $7.00 (ii) reduce the minimum number of
EKCO Shares to be purchased in the Offer, (iii) change the form of the
consideration payable in the Offer (other than by adding consideration), (iv)
add to, modify or supplement the conditions to the Offer set forth in ANNEX A
hereto, (v) extend the expiration date of the Offer beyond the twenty (20)
business days following the commencement thereof, except as expressly provided
herein or (vi) make any other change in the terms or conditions of the Offer
which is materially adverse to the holders of EKCO Shares, it being agreed that
a waiver by Acquisition Subsidiary of any condition in whole or in part (other
than the Minimum Condition) at any time and from time to time in its discretion
shall not be deemed to be materially adverse to any holder of EKCO Shares. The
Per Share Amount shall, subject to any applicable withholding of taxes, be net
to each seller in cash, upon the terms and subject to the conditions of the
Offer. Subject to the terms and conditions of the Offer, Acquisition Subsidiary
shall, and ACQUIROR shall cause Acquisition Subsidiary to, accept for payment
and pay, as promptly as practicable after expiration of the Offer, for all EKCO
Shares validly tendered and not withdrawn; provided, that Acquisition Subsidiary
shall have the right, in its sole discretion, to extend the Offer from time to
time for up to a maximum of 15 business days, notwithstanding the prior
satisfaction of the conditions contained in ANNEX A if on such expiration date
there shall not have been tendered that number of EKCO Shares which would equal
more than 90% of the issued and outstanding EKCO Shares (the "15 Day Right") and
provided further, that if Acquisition Subsidiary shall extend the Offer pursuant
to the 15 Day Right, Acquisition Subsidiary shall waive during such 15 business
days all conditions set forth in ANNEX A other than the Minimum Condition and
the conditions set forth in paragraphs (a), (b) and (d) in ANNEX A.
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(c) On the date of commencement of the Offer, ACQUIROR and Acquisition
Subsidiary shall file with the Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule 14D-1, including all exhibits thereto
(together with all amendments and supplements thereto, the "Schedule 14D-1"),
with respect to the Offer. The Schedule 14D-1 shall contain or shall incorporate
by reference an offer to purchase (the "Offer to Purchase") and the forms of
related Letters of Transmittal as well as all other information and exhibits
required by law (the Schedule 14D-1, the Offer to Purchase and such other
documents, together with all supplements and amendments thereto, being referred
to herein collectively as the "Offer Documents"). The Offer Documents will
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or given to EKCO's stockholders, shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading except that no
representation is made by ACQUIROR and Acquisition Subsidiary with respect to
information supplied by EKCO for inclusion in the Offer Documents. ACQUIROR,
Acquisition Subsidiary and EKCO shall correct promptly any information provided
by any of them for use in the Offer Documents which shall become false or
misleading, and ACQUIROR and Acquisition Subsidiary shall take all steps
necessary to cause the Schedule 14D-1, as so corrected, to be filed with the SEC
and the other Offer Documents, as so corrected, to be disseminated to holders of
EKCO Shares, in each case as and to the extent required by applicable federal
securities laws. EKCO and its counsel shall be given the reasonable opportunity
to review and comment on the Offer Documents prior to the filing thereof with
the SEC. ACQUIROR and Acquisition Subsidiary shall provide EKCO and its counsel
with a copy of any written comments or telephonic notification of any oral
comments ACQUIROR or Acquisition Subsidiary may receive from the SEC or its
staff with respect to the Offer Documents promptly after the receipt thereof. In
the event that ACQUIROR or Acquisition Subsidiary receives any comments from the
SEC or its staff with respect to the Offer Documents, each shall use its
reasonable best efforts to respond promptly to such comments and take all other
actions necessary to resolve the issues raised therein.
(d) (i) Subject to the terms and conditions hereof, the Offer shall
initially remain open until midnight, New York City time, on the date that is
twenty (20) business days after the Offer is commenced (within the meaning of
Rule 14d-2 under the Exchange Act) (the "Initial Expiration Date").
(ii) If Acquisition Subsidiary does not consummate the Offer on
the Initial Expiration Date due to the failure of one or more conditions in
ANNEX A to be satisfied, Acquisition Subsidiary shall extend the Offer one or
more times until the earlier of (x) 11:59 p.m. New York time on the 60th
calendar day after the date of this Agreement or (y) two business days after
such time as such condition or conditions are satisfied or waived; PROVIDED that
Acquisition Subsidiary shall not be obligated to extend the Offer pursuant to
this sentence if the condition that has not been satisfied is not reasonably
capable of being satisfied at or prior to the time referred to in clause (x)
above; provided, further, that nothing herein shall prohibit Acquisition
Subsidiary from exercising its 15 Day Right.
(iii) If Acquisition Subsidiary does not consummate the Offer on
or prior to the 60th calendar day after the date of this Agreement due to the
failure of one or more conditions in ANNEX A to be satisfied, and if such
unsatisfied condition or conditions are reasonably capable of being satisfied,
Acquisition Subsidiary shall, at the request of EKCO, extend the Offer one or
more times until the earlier of (x) 11:59 p.m. New York time on the 120th
calendar day after the date of this Agreement or (y) two business days after
such time as such condition or conditions are satisfied or waived; provided,
further, that nothing herein shall prohibit Acquisition Subsidiary from
exercising its 15 Day Right.
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(iv) If Acquisition Subsidiary does not consummate the Offer on
or prior to the 60th calendar day after the date of this Agreement due to the
failure of one or more conditions in ANNEX A to be satisfied, and if such
unsatisfied condition or conditions are reasonably capable of being satisfied,
Acquisition Subsidiary may extend the Offer one or more times until (a) the
120th calendar day after the date of this Agreement or (b) until the 180th
calendar day after the date of this Agreement if the Offer shall not have been
consummated solely due to the waiting period (or any extension thereof) or
approvals under the HSR Act or any applicable foreign competition laws not
having expired or been terminated or received.
(v) Acquisition Subsidiary may at any time transfer or assign
to ACQUIROR or to one or more corporations, 80% or more of the outstanding
capital stock of which is directly or indirectly owned by ACQUIROR, the right to
purchase all of the EKCO Shares tendered pursuant to the Offer, but any such
transfer or assignment shall not relieve ACQUIROR or Acquisition Subsidiary of
its obligations hereunder or prejudice the rights of stockholders or holders of
EKCO Options or EKCO Warrants to receive payment for EKCO Shares validly
tendered and accepted for payment in the Offer or in the Merger or otherwise in
accordance with the terms hereof. Any such assignee or transferee of Acquisition
Subsidiary shall assume all of the obligations of Acquisition Subsidiary
hereunder, and ACQUIROR and Acquisition Subsidiary shall amend this Agreement,
at the request of EKCO, to substitute any such assignee or transferee for
Acquisition Subsidiary in this Agreement.
(vi) Acquisition Subsidiary shall be obligated to consummate the
Offer on the date (or no later than one business day after the date) that all of
the conditions set forth in ANNEX A shall have been satisfied; provided,
however, that nothing herein shall prohibit Acquisition Subsidiary from
exercising its 15 Day Right.
1.2. ACTION BY EKCO.
(a) EKCO hereby approves of and consents to the Offer and represents
and warrants that the Board of Directors of EKCO, at a meeting duly called and
held, has, subject to the terms and conditions set forth herein, unanimously (i)
determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, taken together, are fair to, advisable and
in the best interests of, the stockholders of EKCO, (ii) approved the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, the Offer and the Merger, in
all respects, and has, subject to and in reliance on, the accuracy of the
representation and warranty contained in Section 4.10, taken all other action
necessary to render Section 203 of the DGCL inapplicable to the execution and
delivery of this Agreement and the consummation of the transactions contemplated
thereby including the Offer, the purchase of the EKCO Shares pursuant to the
Offer and the Merger, and (iii) resolved to recommend that the stockholders of
EKCO accept the Offer, tender their EKCO Shares thereunder to Acquisition
Subsidiary and approve and adopt this Agreement and the Merger; PROVIDED,
HOWEVER, such approval and recommendation by the Board of Directors may be
withdrawn, modified, or amended if the Board of Directors of EKCO determines in
good faith, after receiving advice from outside counsel, that such action is
necessary to comply with its fiduciary duties under applicable law. EKCO
consents to the inclusion of such approval and recommendation and the opinion of
Lehman Brothers described below in the Offer Documents, subject to the foregoing
proviso. In addition, EKCO represents that it adopted an amendment to the Rights
Agreement dated as of August 4, 1999 and that a copy of such amendment has been
delivered by EKCO to ACQUIROR that, as of the date hereof and after giving
effect to the execution and delivery of this Agreement, each Right is
represented by the certificate representing the associated EKCO Share, that
there has not been a "Distribution Date" or "Shares Acquisition Date" and that
EKCO has taken all necessary actions so that
7
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(a) the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby including the Offer, the purchase
of EKCO Shares pursuant to the Offer or the Merger, will not (i) trigger the
provisions of Section 11 or Section 13 of the Rights Agreement, (ii) result in
the occurrence of a "Distribution Date" (as defined in the Rights Agreement) or
(iii) result in Acquisition, Acquisition Subsidiary or any of their affiliates
becoming an "Acquiring Person" (as defined in the Rights Agreement) and (b) the
Rights will expire at, and subject to, the consummation of the Offer. EKCO
further represents and warrants that Lehman Brothers has delivered to the Board
of Directors of EKCO its written opinion dated August 4, 1999, that the cash
consideration to be received by the stockholders of EKCO pursuant to the Offer
and the Merger is fair from a financial point of view to such stockholders. EKCO
has been authorized by Lehman Brothers to permit the inclusion of the fairness
opinion or a reference thereto in the Offer Documents and the Schedule 14D-9 (as
defined in Section 1.2(b)), subject to the foregoing proviso.
(b) Contemporaneously with the commencement of the Offer as provided
in Section 1.1, EKCO hereby agrees to file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 pertaining to the Offer
(together with any amendments or supplements thereto, the "Schedule 14D-9")
containing the recommendations described in Section 1.2(a) and the written
opinion of Lehman Brothers, and to mail promptly the Schedule 14D-9 to the
stockholders of EKCO. The Schedule 14D-9 will comply in all material respects
with the provisions of applicable federal securities laws and, on the date filed
with the SEC and on the date first published, sent or given to EKCO's
stockholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except that no representation is made by EKCO with
respect to information supplied by ACQUIROR or Acquisition Subsidiary for
inclusion in the Schedule 14D-9. EKCO, ACQUIROR and Acquisition Subsidiary each
agrees to correct promptly any information provided by it for use in the
Schedule 14D-9 if and to the extent that it shall have become false or
misleading in any material respect and EKCO further agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC
and disseminated to the holders of EKCO Shares, in each case as and to the
extent required by applicable federal securities laws. ACQUIROR and its counsel
shall be given a reasonable opportunity to review the Schedule 14D-9 prior to
filing with the SEC. In addition, EKCO agrees to provide ACQUIROR and its
counsel with any comments, whether written or oral, that EKCO or its counsel
receives from time to time from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments or other communications.
(c) In connection with the Offer, EKCO will promptly furnish (or cause
to be furnished) to ACQUIROR and Acquisition Subsidiary mailing labels, security
position listings, any non-objecting beneficial owner lists and any available
listing or computer files containing the names and addresses of the record
holders of EKCO Shares as of the most recent practicable date and shall furnish
Acquisition Subsidiary with such additional information and assistance
(including, without limitation, updated lists of stockholders, mailing labels
and lists of securities positions and non-objecting beneficial owner lists, as
ACQUIROR, Acquisition Subsidiary or their respective agents may reasonably
request in communicating the Offer to the record and beneficial holders of EKCO
Shares. Subject to the requirements of applicable law, and except for such steps
as are necessary to disseminate the Offer Documents and any other documents
necessary to consummate the Offer and the Merger, ACQUIROR, Acquisition
Subsidiary and their affiliates, associates, agents, representatives and
advisors shall use the information contained in any such labels, listings and
files only in connection with the Offer and the Merger and, if this Agreement
shall be terminated, will deliver to EKCO all copies of such information, in
whatever media, then in their possession. In addition, EKCO, ACQUIROR, and
Acquisition Subsidiary agree to cooperate in providing the record holders of
EKCO Shares (identified as of the most recent practicable date), including the
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Trustee of the EKCO Employee Stock Ownership Plan (the "ESOP") (or an agent or
service provider specified by such ESOP Trustee) with the Offer Documents and
any other document necessary to consummate the Offer and the Merger, in
accordance with all applicable law and, in the case of the ESOP, in accordance
with the terms of the ESOP, the Trust Agreement of the ESOP, and the Certificate
of Designations of Series B ESOP Convertible Preferred Stock of EKCO.
1.3. EKCO BOARD REPRESENTATION.
(a) Promptly upon the purchase by Acquisition Subsidiary of the EKCO
Shares pursuant to the Offer, and from time to time thereafter, Acquisition
Subsidiary shall be entitled to designate up to such number of directors,
rounded up to the next whole number, on the Board of Directors of EKCO as shall
give Acquisition Subsidiary representation on the Board of Directors equal to
the product of the total number of directors on such Board of Directors (giving
effect to the directors elected pursuant to this sentence) multiplied by a
percentage that the aggregate number of EKCO Shares beneficially owned by
Acquisition Subsidiary or any affiliate of Acquisition Subsidiary bears to the
total number of EKCO Shares outstanding, and EKCO shall, at such time, promptly
take all action necessary to cause Acquisition Subsidiary's designees to be so
elected, including either increasing the size of the Board of Directors or
securing the resignations of incumbent directors or both. At such time, EKCO
shall cause persons designated by Acquisition Subsidiary to constitute the same
percentage as is on the Board of Directors of (i) each committee of the Board of
Directors, (ii) each board of directors of each domestic subsidiary of EKCO and
(iii) each committee of such board, in each case only to the extent permitted by
law. Notwithstanding the foregoing, following the purchase of the EKCO Shares by
Acquisition Subsidiary pursuant to the Offer, only directors who were serving as
directors on the date of this Agreement shall be entitled to vote with respect
to any matters (other than termination of this Agreement) that are in any
material respect in conflict with or inconsistent with the interests of ACQUIROR
and Acquisition Subsidiary under this Agreement, except if at least three of
such directors are not in office.
(b) EKCO's obligations to appoint designees to its Board of Directors
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder. Subject to the foregoing sentence, EKCO shall promptly take all
actions required pursuant to Section 14(f) and Rule 14f-l in order to fulfill
its obligations under this section and shall include in the Schedule 14D-9 or a
separate Rule 14f-l information statement provided to stockholders such
information with respect to EKCO and its officers and directors as is required
under Section 14(f) and Rule 14f-l to fulfill its obligations under this
section. ACQUIROR or Acquisition Subsidiary will supply in a timely manner to
EKCO and be solely responsible for any information with respect to either of
them and their nominees, officers, directors and affiliates required by Section
14(f) and Rule 14f-1.
1.4. EKCO OPTIONS. As soon as practicable after the commencement of the
Offer, EKCO shall use its reasonable best efforts to cause each holder of each
outstanding option to purchase EKCO Shares (in each case, an "EKCO Option")
granted under EKCO's 1987 Stock Option Plan or EKCO's 1988 Directors' Stock
Option Plan (collectively, the "Stock Option Plans"), whether or not such EKCO
Options are vested as of the date of this Agreement, to execute and deliver to
EKCO, prior to the expiration of the Offer, an agreement substantially in the
form of ANNEX B (an "Option Election") under which such holder would agree,
contingent upon the purchase of EKCO Shares by Acquisition Subsidiary pursuant
to the Offer, to cause, immediately prior to the expiration of the Offer, such
EKCO Options to be cancelled in exchange for a cash payment (the "Option
Payment") equal to the aggregate amount that the undersigned would receive if
each of the Option Shares had been tendered to Acquisition Subsidiary pursuant
to the terms of the Offer, less the payment of the exercise price of each Option
Share and all withholding taxes attributable to such Option Payment, determined
in accordance with Section 2.5(c) of
9
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this Agreement. The Option Payment shall be made by Acquistion Subsidiary to any
such electing EKCO Option holder as soon as practicable after the consummation
of the Offer but in no event more than 10 business days after the consummation
of the Offer. Notwithstanding the foregoing, EKCO shall cause the Chairman and
Chief Executive Officer of EKCO, and all members of the Board of Directors of
EKCO, to execute an Option Election in respect of all of their outstanding EKCO
Options, prior to the consummation of the Offer, provided that if such election
would result in a violation of Section 16 of the Exchange Act and Rule 16(b)
promulgated thereunder ("Section 16"), then such election may be delayed until
such time as it would not result in a violation of Section 16.
1.5. EKCO RESTRICTED STOCK. As soon as practicable after the
commencement of the Offer, EKCO and the Plan Administrator of the 1984 EKCO
Restricted Stock Plan and the 1985 EKCO Restricted Stock Plan (the "Restricted
Stock Plans") shall use their commercially reasonable best efforts to cause each
unvested EKCO Share ("Restricted Stock") outstanding under the Restricted Stock
Plans, as to which a valid Restricted Stock Election (as defined below) is
executed (and not revoked) and delivered to EKCO, to become fully vested and
non-forfeitable immediately prior to the purchase and contingent upon the
consummation of the Offer. The parties to this Agreement consent to the action
of the Plan Administrator of the Restricted Stock Plans referenced in the
immediately preceding sentence, agree that they will not cause the revocation of
such action and will use their reasonable best efforts to cause the Restricted
Stock as to which a valid Restricted Stock Election has been made to be deemed
to have been tendered in the Offer. As soon as practicable after the
commencement of the Offer, EKCO shall use its commercially reasonable best
efforts to cause each holder of shares of Restricted Stock to execute and
deliver to EKCO, prior to the expiration of the Offer, an agreement
substantially in the form of ANNEX C (a "Restricted Stock Election") under which
such holder would agree, contingent upon the purchase of EKCO Shares by
Acquisition Subsidiary pursuant to the Offer, to cause, immediately prior to the
expiration of the Offer, the shares of Restricted Stock (which will be fully
vested in accordance with the foregoing provisions of this Section 1.4) to be
deemed to have been tendered in the Offer in exchange for the Per Share Amount
which shall be paid by Acquisition Subsidiary to such holder as soon as
practicable after the consumation of the Offer but in no event more than 10
business days after the consummation of the Offer. Immediately prior to the
Effective Time, if the conditions to Article VI are satisfied, EKCO shall cause
the Plan Administrator of the Restricted Stock Plans to cause all shares of
Restricted Stock outstanding as of the Effective Time to be fully vested and
non-forfeitable.
ARTICLE II
THE MERGER
2.1. THE MERGER. Upon the terms and conditions set forth in this
Agreement, and in accordance with the DGCL, Acquisition Subsidiary shall be
merged with and into EKCO at the Effective Time (as defined in Section 2.3).
From and after the Effective Time, the separate corporate existence of
Acquisition Subsidiary shall cease and EKCO shall continue as the surviving
corporation (the "Surviving Corporation") under the laws of the state of
Delaware under the name "EKCO Group, Inc." and shall succeed to and assume all
the rights and obligations of Acquisition Subsidiary and EKCO in accordance with
the DGCL. At ACQUIROR's election, the Merger may alternatively be structured so
that (i) EKCO is merged with and into Acquisition Subsidiary or any other direct
or indirect subsidiary of ACQUIROR or (ii) any direct or indirect subsidiary of
ACQUIROR other than Acquisition Subsidiary is merged with and into EKCO;
provided, however, that no such change shall (i) alter or change the amount or
kind of consideration to be issued to the holders of EKCO Shares in the merger
as set forth in Article II hereof or the treatment of the holders of EKCO
Options or Restricted Stock, (ii) materially impede or delay
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consummation of the Merger, or (iii) release ACQUIROR or Acquisition Subsidiary
from any of its obligations hereunder. In the event of such an election, the
parties agree to execute an appropriate amendment to this Agreement in order to
reflect such election.
2.2. THE CLOSING. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. Eastern Time at the offices of Simpson Thacher & Bartlett,
425 Lexington Avenue, New York, New York 10017 on the second business day after
all of the conditions to the obligations of the parties to consummate the Merger
as set forth in Article VI shall have been satisfied or waived, or on such other
mutually agreeable later date as soon as practicable after the satisfaction or
waiver of all conditions to the obligations of the parties to consummate the
transactions contemplated hereby as set forth in Article VI (the "Closing
Date").
2.3. EFFECTIVE TIME. Subject to the provisions of this Agreement, the
parties shall file a certificate of merger substantially in the form attached
hereto as EXHIBIT A or, if applicable, a certificate of ownership and merger
(the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings required
under the DGCL as soon as practicable on or after the Closing Date. The Merger
shall become effective at such time as the Certificate of Merger is duly filed
with the Delaware Secretary of State, or at such later time as ACQUIROR,
Acquisition Subsidiary and EKCO shall agree should be specified in the
Certificate of Merger (the "Effective Time").
2.4. EFFECT OF THE MERGER. From and after the Effective Time, the
Surviving Corporation shall possess all the property, rights, privileges, powers
and franchises and be subject to all of the restrictions, debts, liabilities,
disabilities, obligations and duties of EKCO and Acquisition Subsidiary, and the
Merger shall otherwise have the effects set forth in Section 259 of the DGCL.
2.5. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of the
Merger and without any further action on the part of the ACQUIROR, Acquisition
Subsidiary, EKCO, the Surviving Corporation or any holder of EKCO Shares or any
shares of capital stock of Acquisition Subsidiary:
(a) ACQUISITION SUBSIDIARY COMMON STOCK. Each share of capital stock
of Acquisition Subsidiary issued and outstanding immediately prior to the
Effective Time shall be converted into one validly issued, fully paid and
nonassessable share of Common Stock of the Surviving Corporation.
(b) CANCELLATION OF STOCK. Each EKCO Share that is held by EKCO (as
treasury stock or otherwise) or held by ACQUIROR or Acquisition Subsidiary or by
any direct or indirect wholly-owned subsidiary of ACQUIROR or Acquisition
Subsidiary, shall automatically be cancelled and retired and shall cease to
exist, and no cash or other consideration shall be delivered in exchange
therefor.
(c) CONVERSION OF EKCO SHARES. (i) Each share of EKCO Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares of EKCO Common Stock to be cancelled in accordance with Section 2.5(b)
and Dissenting Shares) (as defined below) shall be cancelled, extinguished and
converted into and become a right to receive an amount equal to the Per Share
Amount in cash, without interest (the "Merger Consideration") less any required
withholding taxes and (ii) each share of ESOP Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than shares of ESOP
Preferred Stock to be cancelled in accordance with Section 2.5(b) and Dissenting
Shares) shall be cancelled, extinguished and converted into and become a right
to receive an amount equal to the Per Share Amount that a holder of the number
of shares of EKCO Common Stock into which such shares of ESOP Preferred Stock
were convertible immediately prior to the Effective Time would
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have been entitled to receive in cash without interest thereon and less any
required withholding taxes in accordance with Section 8(b) of the Certificate of
Designations of the Series B ESOP Convertible Preferred Stock of EKCO.
(d) DISSENTING SHARES. (i) Notwithstanding anything in this Agreement
to the contrary but only to the extent required by the DGCL, EKCO Shares
outstanding immediately prior to the Effective Time held by a holder (if any)
who has not voted in favor of the Merger and is otherwise entitled to demand,
and who properly demands, appraisal for such EKCO Shares in accordance with
Section 262 of the DGCL ("Dissenting Shares") shall not be converted into a
right to receive the Merger Consideration unless such holder fails to perfect or
otherwise effectively withdraw or loses such holder's right to appraisal, if
any. Such stockholders shall be entitled to receive payment of the appraised
value of such EKCO Shares held by them in accordance with the provisions of such
Section 262. If, after the Effective Time, such holder fails to perfect or loses
any such right to appraisal, such EKCO Shares shall be treated as if they had
been converted as of the Effective Time into the right to receive the Merger
Consideration without interest pursuant to Section 2.5(c).
(ii) EKCO shall give ACQUIROR (A) prompt notice and a copy of
any written notice of a stockholder's intent to demand payment, of any request
to withdraw a demand for payment and of any other instrument delivered to it
pursuant to Section 262 of the DGCL and (B) the opportunity to direct all
negotiations and proceedings with respect to demands for payment under Section
262 of the DGCL. Except with the prior written consent of ACQUIROR, EKCO shall
not make any payment with respect to any demand for payment and shall not settle
or offer to settle any such demands or approve any withdrawal of any such
demands.
(e) STOCK OPTIONS. (i) Prior to the Effective Time, EKCO shall use its
commercially reasonable best efforts to cause each outstanding EKCO Option
(whether or not then exercisable) that has not, prior to the Effective Time,
been cancelled and payment made therefor pursuant to each EKCO Option holder's
execution of the Option Election, to be cancelled and exchanged for a cash
payment, paid by the Surviving Corporation equal to the product of (x) the
number of EKCO Shares previously subject to such EKCO Option and (y) the excess,
if any, of the Merger Consideration over the exercise price per EKCO Share
previously subject to such EKCO Option. All applicable withholding taxes
attributable to the payments made hereunder shall be deducted from the amounts
payable hereunder; provided, however, that with respect to any person subject to
Section 16 of the Exchange Act, any such amount shall be paid as soon as
practicable after the first date payment can be made without liability to such
person under Section 16(b) of the Exchange Act.
(ii) EKCO shall (A) use its commercially reasonable best efforts
to (1) terminate as of the Effective Time all stock or other equity based plans
maintained with respect to the Shares, including, without limitation, the plans
listed in Section 3.14(a) of the EKCO Disclosure Schedules ("OPTION PLANS"), and
(2) amend as of the Effective Time any other Plan providing for the issuance,
transfer or, grant of any capital stock of EKCO or any interest in respect of
any capital stock of EKCO to provide that no further issuances, transfer or
grants shall be permitted as of the Effective Time, and (B) use its commercially
reasonable best efforts to provide that, following the Effective Time, no holder
of an EKCO Option or any participant in any Option Plan shall have any right
thereunder to acquire any capital stock of EKCO, ACQUIROR or the Surviving
Corporation.
(f) WARRANTS. Prior to the Effective Time, EKCO shall use its
commercially reasonable best efforts to provide that each outstanding warrant to
purchase EKCO Shares (in each case, an "EKCO Warrant"), whether or not then
vested or exercisable, shall be exercisable for and entitle each holder
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thereof to, a payment in cash from the Surviving Corporation, upon exercise,
equal to the product of (i) the number of EKCO Shares previously subject to such
EKCO Warrant and (ii) the excess, if any, of the Merger Consideration over the
exercise price per EKCO Share previously subject to such EKCO Warrant. All
applicable withholding taxes attributable to the payments made hereunder shall
be deducted from the amounts payable hereunder.
2.6. SURRENDER OF SECURITIES; FUNDING OF PAYMENTS; STOCK TRANSFER
BOOKS.
(a) EXCHANGE AGENT. Prior to the Effective Time ACQUIROR shall
designate a bank or trust company reasonably acceptable to EKCO to act as agent
(the "Exchange Agent") for the purpose of exchanging Certificates (as defined
below) for the Merger Consideration. The fees and expenses of the Exchange Agent
shall be paid by ACQUIROR.
(b) PAYMENT FUND. ACQUIROR shall remit to the Exchange Agent
concurrently with or immediately prior to the Effective Time an amount equal to
the aggregate Merger Consideration necessary to pay the holders of the EKCO
Shares (other than Dissenting Shares or EKCO Shares to be cancelled in
accordance with Section 2.5(b)) (collectively, the "Payment Fund").
(c) LETTER OF TRANSMITTAL; PROCEDURE FOR EXCHANGE. ACQUIROR agrees
that, as soon as practicable after the Effective Time and in no event later than
five (5) business days thereafter, the Surviving Corporation shall cause the
distribution to holders of record of EKCO Shares (as of the Effective Time) of a
form of letter of transmittal and other appropriate materials and instructions
for use in effecting the surrender of a certificate or certificates which
immediately prior to the Effective Time represented issued and outstanding EKCO
Shares (each, a "Certificate") and to each holder of an agreement evidencing an
EKCO Option (including an Option Election in the form of Annex B attached
hereto) or an EKCO Warrant (an "Option Agreement") for payment of the Merger
Consideration therefor. Upon surrender to the Exchange Agent of a Certificate or
an Option Agreement, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto, the holder of
such Certificate or Option Agreement shall be entitled to receive, and the
Exchange Agent shall promptly pay to the holders out of the Payment Fund, the
Merger Consideration multiplied by the number of EKCO Shares represented by such
Certificate or the amount of the payment for such Option Agreement such holder
is entitled to receive pursuant to Section 2.5(e) or (f) immediately prior to
the Effective Time, less any amounts required to be held pursuant to applicable
tax laws. No interest shall accrue or be paid on the Merger Consideration
payable upon the surrender of a Certificate or Option Agreement for the benefit
of the holder thereof. In the event any Certificate shall have been lost or
destroyed, the Exchange Agent, subject to such other conditions as the Surviving
Corporation may reasonably impose (including the posting of an indemnity bond or
other surety in favor of the Surviving Corporation with respect to the
Certificate alleged to be lost or destroyed), shall be authorized to accept an
affidavit from the record holder of such Certificate in a form reasonably
satisfactory to the Surviving Corporation of each such Certificate formerly
representing EKCO Shares, together with such letter of transmittal, duly
completed and validly executed in accordance with the instructions thereto, the
Exchange Agent shall promptly pay to the holder of such Certificate out of the
Payment Fund the Merger Consideration multiplied by the number of EKCO Shares
represented by such Certificates immediately prior to the Effective Time, less
any amounts required to be held pursuant to applicable tax laws.
(d) PAYMENT TO REGISTERED HOLDERS. If any portion of the Merger
Consideration is to be paid to a person other than the person in whose name a
Certificate or Option Agreement is registered, it shall be a condition to such
payment that such Certificate or Option Agreement shall be surrendered and shall
be properly endorsed, accompanied by appropriate stock powers and shall be
otherwise in proper form
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for transfer, that such transfer otherwise be proper and that the person
requesting such payment shall have paid any transfer and other taxes required by
reason of such payment in a name other than that of the registered holder of the
certificate or instrument surrendered or shall have established to the
satisfaction of the Surviving Corporation and the Exchange Agent that such tax
either has been paid or is not payable.
(e) STOCK TRANSFER BOOKS CLOSED. At the Effective Time, the stock
transfer books of EKCO shall be closed and there shall not be any further
registration of transfers of EKCO Shares thereafter on the records of EKCO.
(f) NO DIVIDENDS. After the Effective Time, no dividends, interest or
other distributions shall be paid to the holder of any EKCO Shares.
(g) NO FURTHER RIGHTS. After the Effective Time, holders of
Certificates shall cease to have any rights as stockholders of EKCO, except as
provided herein or under the DGCL. No interest shall be paid on any Merger
Consideration payable to former holders of EKCO Shares.
(h) TERMINATION OF PAYMENT FUND. Promptly following the one year
anniversary date of the Effective Time, the Exchange Agent shall return to the
Surviving Corporation all of the remaining Payment Fund, and the Exchange
Agent's duties shall terminate. Thereafter, each holder of a Certificate may
surrender the same to the Surviving Corporation and upon such surrender (subject
to applicable abandoned property, escheat or similar laws) shall receive the
applicable aggregate Merger Consideration. Notwithstanding the foregoing,
neither the Exchange Agent nor any party hereto shall be liable to any former
holder of EKCO Shares for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar law.
2.7. CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION. At the
Effective Time, the Certificate of Incorporation of EKCO shall be amended to
read in its entirety as set forth in EXHIBIT B hereto. The Certificate of
Incorporation of EKCO, as so amended, shall be the Certificate of Incorporation
of the Surviving Corporation from and after the Effective Time and, subject to
the limitations set forth in Section 5.8, until thereafter amended as provided
by law.
2.8. BYLAWS OF THE SURVIVING CORPORATION. Subject to Section 5.8, the
Bylaws of Acquisition Subsidiary shall be the Bylaws of the Surviving
Corporation from and after the Effective Time of the Merger and until thereafter
altered, amended or repealed as provided by law.
2.9. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The Directors
of Acquisition Subsidiary immediately prior to the Effective Time shall be the
Directors of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation. The
officers of EKCO immediately prior to the Effective Time shall be the officers
of the Surviving Corporation, each to hold office in accordance with the laws of
the State of Delaware, the Certificate of Incorporation and Bylaws of the
Surviving Corporation until their respective successors shall be duly elected or
appointed and qualified.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EKCO
EKCO represents and warrants, as of the date hereof, as follows:
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3.1. CORPORATE ORGANIZATION AND AUTHORIZATION.
(a) EKCO is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. EKCO has all necessary
corporate power and authority to own, lease and operate its property, carry on
its business as it is now being conducted, to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the Offer, the
Merger and the other transactions contemplated hereby. EKCO has provided to
ACQUIROR correct and complete copies of the certificate of incorporation and
bylaws of EKCO. The execution and delivery of this Agreement by EKCO and the
consummation by EKCO of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of EKCO are necessary to authorize this Agreement or to
consummate the Offer, the Merger and the other transactions contemplated hereby
(other than, with respect to the Merger, the approval and adoption of this
Agreement by the affirmative vote of a majority of the then outstanding EKCO
Shares, if and to the extent required by applicable law, and the filing and
recordation of appropriate merger documents as required by the DGCL). This
Agreement has been duly and validly executed and delivered by EKCO and, assuming
the due authorization, execution and delivery by ACQUIROR and Acquisition
Subsidiary, constitutes a legal, valid and binding obligation of EKCO
enforceable against EKCO in accordance with its terms.
(b) (i) EKCO has all requisite governmental authorizations,
certificates, licenses, consents and approvals required to carry on its business
as presently conducted, except where the failure to possess such authorizations,
certificates, licenses, consents and approvals would not reasonably be expected
to have a Material Adverse Effect (as defined below). EKCO is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of the activities conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing would not
reasonably be expected to have a Material Adverse Effect (as defined below).
(ii) For purposes of this Agreement, "Material Adverse Effect"
shall mean with respect to EKCO, any fact, event, change, circumstance or effect
that is materially adverse to the business, assets, liabilities or condition
(financial or otherwise) or results of operations of EKCO and the EKCO
Subsidiaries, taken as a whole, other than any fact, event, change, circumstance
or effect (i) relating to the industries for EKCO's products or the general
economy, or (ii) arising out of or resulting from entering into this Agreement,
the announcement thereof, or the consummation of the transactions contemplated
hereby.
3.2. EKCO CAPITAL STOCK. (a) The authorized capital stock of EKCO
consists of (i) 60,000,000 shares of EKCO Common Stock, of which 19,159,818
shares were issued and outstanding, as of July 4, 1999, and of which 10,023,770
shares were issued and held as treasury shares, (ii) 1,800,000 shares of ESOP
Preferred Stock, of which 931,897 shares were issued and outstanding as of July
4, 1999; (iii) 600,000 shares of Series A Junior Participating Preferred Stock,
$.01 par value, ("Junior Stock"), none of which shares are issued and
outstanding as of the date of this Agreement and none of which are issued and
held as treasury shares as of the date of this Agreement; and (iv) 17,600,000
shares of undesignated Preferred Stock, par value $.01 per share, none of which
shares are issued and outstanding as of the date of this Agreement and none of
which are issued and held as treasury shares as of the date of this Agreement.
All of the issued and outstanding EKCO Shares are and all EKCO Shares and other
securities of EKCO issuable as set forth in the next sentence, upon issuance and
payment therefor in accordance with their respective terms, will be duly and
validly issued, fully paid and nonassessable and free of preemptive rights.
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Section 3.2(a) of the EKCO Disclosure Schedule sets forth a true and complete
list of all options, warrants, or other rights, agreements or commitments
obligating EKCO to issue, sell or deliver any shares of its capital stock or any
securities convertible into its capital stock and the exercise prices therefor.
Except as set forth in Section 3.2(a) of the EKCO Disclosure Schedule, there are
no options, warrants, or other rights, agreements or commitments obligating EKCO
to issue, sell or deliver any shares of its capital stock or any securities
convertible into its capital stock or to repurchase, redeem or otherwise
acquire, or make any payment in respect of any shares of its capital stock. As
of July 4, 1999, 2,529,802 shares of EKCO Common Stock were reserved for
issuance upon exercise of outstanding options or warrants. No EKCO Shares have
been issued (including from treasury) since July 4, 1999 and through the date
hereof except for any shares issued pursuant to the option(s) and warrant(s)
described above, shares issued upon conversion of EKCO's ESOP Preferred Stock,
and no more than 30,000 shares issued pursuant to EKCO's Dividend Reinvestment
and Stock Purchase Plan or offered to employees pursuant to EKCO's 1984 Employee
Stock Purchase Plan. Except as set forth above, no shares of capital stock or
outstanding other equity securities of EKCO are issued, reserved for issuance or
outstanding. There are no outstanding bonds, debentures, notes or other
indebtedness or other securities of EKCO having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of EKCO may vote. The only outstanding
indebtedness for borrowed money of EKCO and its subsidiaries is listed in
Section 3.2(a) of the EKCO Disclosure Schedule. Except as set forth in Section
3.2(a) of the EKCO Disclosure Schedule, there are no agreements or arrangements
to which EKCO is a party pursuant to which EKCO is or could be required to
register shares of common stock or other securities under the Securities Act.
(b) Except for the ESOP, there are no voting trusts or other
agreements or understandings to which EKCO or any of its Subsidiaries is a party
with respect to the voting of the capital stock of EKCO or any of its
Subsidiaries.
(c) To the knowledge of EKCO, Schedule 3.2(c) sets forth, as of the
date hereof, each person or group (within the meaning of Section 13(d)(3) of the
Exchange Act) (i) who has beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of more than 5% of the outstanding shares of EKCO Common
Stock and the number of shares of EKCO Common Stock beneficially owned by such
person or group, or (ii) who has made any filing under the HSR Act with respect
to EKCO or EKCO Common Stock since January 1, 1998.
3.3. EKCO SUBSIDIARIES. Section 3.3 of the EKCO Disclosure Schedule
sets forth a list of all subsidiaries of EKCO (individually, an "EKCO
Subsidiary", and collectively, the "EKCO Subsidiaries") and their respective
jurisdictions of incorporation.
3.4. ORGANIZATION, EXISTENCE AND GOOD STANDING OF EKCO SUBSIDIARIES.
Each EKCO Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of its respective state of incorporation and has
all necessary corporate power to own its properties and assets and to carry on
its business as presently conducted, except where the failure to be so
organized, existing or in good standing, or to have such power, would not
reasonably be expected to have a Material Adverse Effect.
3.5. NONCONTRAVENTION; CONSENTS.
(a) None of the execution or delivery of this Agreement, the
performance by EKCO of its obligations hereunder or the consummation of the
transactions contemplated hereby does or will:
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(i) violate, conflict with, or constitute a default under, the
Certificate of Incorporation, as amended, or Bylaws, as amended, of EKCO; or
(ii) assuming that all consents, approvals, orders or
authorizations contemplated by subsection (b) below have been obtained and all
filings described therein have been made, (A) violate any statute or law or any
rule, regulation or ordinance (together, "Laws") or any order, injunction,
judgment or decree (together, "Orders") of any court or Governmental Entity to
which EKCO or any of its assets or properties is subject, which violation has or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect or (B) except as set forth in Section 3.5(a) of the EKCO
Disclosure Schedule, result in a violation or breach of, or constitute a default
under, or give rise to any right of termination, acceleration or modification
of, any note, bond, mortgage, indenture, deed of trust, license, lease, security
agreement, permit, concession, franchise or other agreement, instrument or
obligation of any kind to which EKCO is a party or by which it or any of its
assets or properties is bound, which default, breach or other action has or
would reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
(b) Except for the expiration or termination of the applicable waiting
period under the HSR Act and any applicable foreign competition laws, and except
for such filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Securities Act, the
Exchange Act, state securities or "Blue Sky" laws or regulations (the "Blue Sky
laws") or any exchange upon which EKCO Shares are listed, and except for the
filing and recordation of a Certificate of Merger as required by the DGCL, there
is no other consent, approval, order or authorization of, or filing with, or any
permit from, or any notice to, any court or Governmental Entity required to be
obtained by EKCO in connection with the execution of this Agreement, the
performance by EKCO of its obligations hereunder, or the consummation of the
transactions contemplated hereby, the failure of which to obtain, individually
or in the aggregate, would reasonably be expected to have a Material Adverse
Effect.
3.6. EKCO PUBLIC INFORMATION.
(a) EKCO has filed all forms, reports, schedules, statements and other
documents required to be filed by it since January 1, 1998 under the Exchange
Act or the Securities Act (together with all subsequent forms, reports,
schedules, statements and other documents filed by EKCO with the SEC prior to
the Effective Time, collectively, the "EKCO Public Reports") and has heretofore
made available the EKCO Public Reports to ACQUIROR. At the time they were made,
the EKCO Public Reports (including information incorporated by reference
therein) and, at the time it is made, any EKCO Public Report made by EKCO with
the SEC after the date of this Agreement (x) did not, or with respect to those
not yet made, will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (y) complied, or with respect to those not yet made, will
comply as to form in all material respects with the Securities Act and the
Exchange Act as appropriate. Except to the extent revised or superseded by a
subsequent filing with the SEC (a copy of which has been provided to ACQUIROR
prior to the date hereof), none of the EKCO Public Reports made since January 1,
1998 and prior to the date hereof contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Since January 1, 1998, no EKCO
Subsidiary has been required to file any forms, reports, or other documents with
the SEC.
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(b) The consolidated financial statements of EKCO (including any
footnotes and schedules thereto) contained in the EKCO Public Reports have been
or will be prepared from, and are or will be in accordance with, the books and
records of EKCO and have been or will be prepared in accordance with and have
complied or will comply with applicable accounting requirements and the
published rules and regulations of the SEC and generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may be otherwise indicated therein) and fairly present or will fairly present in
all material respects the consolidated financial position of EKCO and EKCO
Subsidiaries as of the dates thereof and the consolidated results of operations,
changes in stockholders' equity and cash flows of EKCO and EKCO Subsidiaries for
the periods then ended, except that any unaudited financial statements contained
therein are subject to normal and recurring year-end adjustments that are not
material, individually or in the aggregate. The consolidated balance sheet of
EKCO at January 3, 1999 included in the EKCO Public Reports is herein sometimes
referred to as the "EKCO Balance Sheet."
3.7. NO MATERIAL ADVERSE CHANGE. Except as disclosed in Section 3.7 of
the EKCO Disclosure Schedule, since January 3, 1999, there has been no change,
event, loss or occurrence affecting EKCO or any of the EKCO Subsidiaries that
has had or would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
3.8. LEGAL PROCEEDINGS. Except as set forth in Section 3.8 of the EKCO
Disclosure Schedule or described in the EKCO Public Reports, as of the date this
Agreement, there is no pending, or to the knowledge of EKCO, threatened
litigation, arbitration, governmental investigation or other proceeding against
EKCO or any of its assets or properties or relating directly to the transactions
contemplated by this Agreement which, if resolved adversely to EKCO, would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
3.9. MATERIAL CONTRACTS. EKCO has made available to ACQUIROR true
copies of all written contracts of EKCO and the EKCO Subsidiaries that are
material to the business, financial condition or results of operations of EKCO
and the EKCO Subsidiaries, taken as a whole, entered into in connection with and
related to the business and operations of EKCO and the EKCO Subsidiaries (the
"Material Contracts") and together with the Other Contracts (as defined below),
the "Significant Contracts") or has otherwise disclosed such material written
contracts in Section 3.9 of the EKCO Disclosure Schedule or in the EKCO Public
Reports. The term "Other Contracts" shall mean: (a) all contracts required to be
disclosed pursuant to Items 401 or 601 of Regulation S-K of the SEC, (b) all
contracts for the future purchase of materials, supplies, merchandise or
equipment, (c) all contracts for the sale or lease of any of the assets of EKCO,
other than sales of inventory in the ordinary course of business, (d) all
mortgages, pledges, conditional sales contracts, security agreements, factoring
agreements or other similar agreements with respect to any material assets of
EKCO, (e) all consulting agreements providing for annual payments thereunder in
excess of $50,000, and (f) all non-competition or similar agreements which
restrict or may hereafter restrict the geographic or operational scope of EKCO's
business or the ability of EKCO to enter into new lines of business. To the
knowledge of EKCO, all of such written Significant Contracts are valid, binding
and enforceable in accordance with their terms (assuming the other parties
thereto are bound) and are in full force and effect, except where such
invalidity or unenforceability would not reasonably be expected to have a
Material Adverse Effect. No default, breach or violation or alleged default by
EKCO or the EKCO Subsidiaries exists under such material written Significant
Contracts, except for defaults, breaches or violations or alleged defaults,
breaches or violations which would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
3.10. SUBSEQUENT EVENTS. Except as set forth in Section 3.10 of the EKCO
Disclosure Schedule or disclosed in the EKCO Public Reports, EKCO has not, since
January 3, 1999:
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(a) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability other than any lien,
encumbrance, obligation or liability (i) discharged, paid or satisfied in the
ordinary course of business, (ii) shown or reflected on the EKCO Balance Sheet,
(iii) incurred since the date of the EKCO Balance Sheet in the ordinary course
of business or (iv) the discharge or satisfaction of which would not reasonably
be expected to have a Material Adverse Effect.
(b) Increased or established any reserve for Taxes (as defined in
Section 3.12) or any other liability on its books or otherwise provided therefor
which would have a Material Adverse Effect, except as may have been required due
to income or operations of EKCO since the date of the EKCO Balance Sheet.
(c) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the assets, tangible or intangible, which assets are material
to the consolidated business or financial condition of EKCO.
(d) Sold or transferred any of the assets material to the consolidated
business of EKCO, cancelled any material debts or claims or waived any material
rights, except in the ordinary course of business.
(e) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted under this Agreement.
(f) Issued any stock, bonds or other securities, other than stock
options granted to employees, directors or consultants of EKCO or warrants
granted to third parties or shares of common stock issuable pursuant thereto or
pursuant to any other contract or agreement outstanding as of the date hereof,
all of which are disclosed in Section 3.2 of the EKCO Disclosure Schedule.
(g) Except as set forth in Section 3.10(g) of the EKCO Disclosure
Schedule, declared, paid, set aside or made any dividend or distribution on or
payment with respect to the EKCO Shares or any other shares of EKCO's capital
stock.
3.11. INVENTORIES. All inventories reflected on the EKCO Balance Sheet
were as of the date thereof carried at amounts which reflect valuations pursuant
to EKCO's normal inventory valuation policy of stating inventory as the lower of
cost or market on a (except as set forth in Section 3.11 of the EKCO Disclosure
Schedule) first-in-first out basis, all in accordance with GAAP. Except as set
forth in Section 3.11 of the EKCO Disclosure Schedule, since the date of the
EKCO Balance Sheet, no inventory items have been sold or disposed of except
through sales in the ordinary course of business.
3.12. TAX RETURNS. EKCO and each EKCO Subsidiary has filed all Tax
Returns required to be filed by them or requests for extensions to file such
returns or reports have been timely filed and granted and have not expired,
except to the extent that such failures to file would not have a Material
Adverse Effect. All such Tax Returns are, or will be at the time of filing,
true, correct and complete in all material respects, except where the failure to
be true, correct and complete would not reasonably be expected to have a
Material Adverse Effect. Except as disclosed in Section 3.12 of the EKCO
Disclosure Schedule, (i) EKCO and each EKCO Subsidiary have paid (or have had
paid on their behalf), or where payment is not yet due, have established (or
have established on their behalf and for their sole benefit and recourse), or
will establish or cause to be established on or before the Effective Time, an
adequate accrual for the payment of, all material Taxes (other than deferred
Taxes reflecting differences between the book and tax bases in assets and
liabilities) with respect to any period (or portion thereof) ending prior to or
immediately prior to the
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Effective Time, (ii) EKCO and each EKCO Subsidiary have not been notified that
any tax returns of EKCO or any EKCO Subsidiary are currently under audit by the
Internal Revenue Service or any state or local tax agency, (iii) no agreements
have been made by EKCO or any EKCO Subsidiary for the extension of time or the
waiver of the statute of limitations for the assessment or payment of any Taxes,
(iv) neither EKCO nor, to EKCO's knowledge, any EKCO Subsidiary have received
any notice of deficiency or assessment from any taxing authority with respect to
Taxes, which have not been fully paid or finally settled, and (v) neither EKCO
nor any EKCO Subsidiary (other than any EKCO Subsidiary whose capital stock was
previously owned by any person other than EKCO or another EKCO Subsidiary) (x)
has been a member of an affiliated group filing a consolidated Federal Income
Tax Return or any comparable state or local Tax Return, other than the
affiliated group in which they are currently members, or (y) has any liability
for any Taxes of any person under Treasury Regulation section 1.1502-6 (or any
comparable state, local or foreign law), as a transferee or successor, by
contract or otherwise. As used herein, the term "Taxes" means all federal,
state, local and foreign taxes, including, without limitation, income, profits,
franchise, employment, transfer, withholding, property, excise, sales and use
taxes, customs duties or similar fees and other assessments of a similar nature
(whether imposed directly or through withholding), including interest and
penalties thereon and additions thereto and "Tax Returns" shall mean all
federal, state, local and foreign tax returns, declarations, statements,
reports, schedules, forms and information returns and any amendments thereto.
3.13. COMMISSIONS AND FEES. Except for fees owed to Lehman Brothers,
Inc., no agent, broker, person or firm acting on behalf of ACQUIROR or
Acquisition Subsidiary is or will be entitled to any brokerage commissions,
investment bankers' fees or finder's fees in connection with the transaction
contemplated by this Agreement.
3.14. EMPLOYEE BENEFIT PLANS; EMPLOYMENT MATTERS.
(a) (i) Schedule 3.14(a) contains a true and complete list of each
"employee benefit plan" (within the meaning of section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including, without
limitation, multi-employer plans within the meaning of ERISA section 3(37)),
stock purchase, stock option, severance, employment, change-in-control, fringe
benefit, bonus, incentive, deferred compensation and all other employee benefit
plans, agreements, programs, policies or other arrangements, whether or not
subject to ERISA (including any funding mechanism therefor now in effect or
required in the future solely as a result of the consummation of the transaction
contemplated by this Agreement), whether formal or informal, oral or written,
legally binding or not, under which any employee or former employee of EKCO or
its EKCO Subsidiaries has any present or future right to benefits or under which
EKCO or its EKCO Subsidiaries has any liability (all such plans, agreements,
programs, policies and arrangements shall be referred to as (individually, a
"Plan" and collectively, the "Plans"); (ii) except as set forth in Section
3.14(a) of the EKCO Disclosure Schedule, all such plans listed in Section
3.14(a) of the EKCO Disclosure Schedule have been operated and administered in
accordance with ERISA, the Code and other applicable law, except where such
failure so to operate and administer would not reasonably be expected to have a
Material Adverse Effect; (iii) except as set forth in Section 3.14(a) of the
EKCO Disclosure schedule, no act or failure to act by EKCO has resulted in a
"prohibited transaction" (as defined in ERISA) with respect to the Plans that is
not subject to a statutory or regulatory exception, and no "reportable event"
(as defined in ERISA) which requires the filing of a report thereof with the
Pension Benefit Guaranty Corporation has occurred with respect to any of the
Plans which is subject to Title IV of ERISA; (iv) each Plan which is intended to
be qualified within the meaning of Code section 401(a) is so qualified and has
received a favorable determination or opinion letter as to its qualification,
and nothing has occurred, whether by action or failure to act, that could
reasonably be expected to cause the loss of such qualification (except for the
failure to amend such Plans to comply
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with requirements of the Code or regulations thereunder for which the remedial
amendment period has not expired), (v) no event has occurred and no condition
exists that would subject EKCO or any EKCO Subsidiary, either directly or by
reason of their affiliation with any member of their "Controlled Group" (defined
as any organization which is a member of a controlled group of organizations
within the meaning of Code sections 414(b), (c), (m) or (o), to any tax, fine,
lien, penalty or other liability imposed by ERISA, the Code or other applicable
laws, rules and regulations that would result in a Material Adverse Effect; and
(vi) EKCO is not obligated in any way to make any contributions to any
multi-employer plan within the meaning of the Multi-Employer Pension Plan
Amendments Act of 1980, as amended. With respect to any multi-employer plan
(within the meaning of ERISA section 4001(a)(3)) to which EKCO, its EKCO
Subsidiaries or any member of their Controlled Group has any liability or
contributes (or has at any time contributed or had an obligation to contribute):
(i) none of EKCO, the EKCO Subsidiaries or any member of their Controlled Group
has incurred any withdrawal liability in an amount that would have a Material
Adverse Effect under Title IV of ERISA or would be subject to such liability if,
as of the Effective Time, EKCO, its EKCO Subsidiaries or any member of their
Controlled Group were to engage in a complete withdrawal (as defined in ERISA
section 4203) or partial withdrawal (as defined in ERISA section 4205) from any
such multi-employer plan; and (ii) no such multi-employer plan is in
reorganization or insolvent (as those terms are defined in ERISA sections 4241
and 4245, respectively, such that any liability in an amount that would have a
Material Adverse Effect on EKCO, any EKCO Subsidiary or any member of their
Controlled Group.
(b) Except as set forth in Section 3.14(b) of the EKCO Disclosure
Schedule, EKCO is not a party to any oral or written union, guild or collective
bargaining agreement which agreement covers employees in the United States, and,
to the knowledge of EKCO, no union organizing activity is currently being
conducted in respect to any of its employees.
(c) With respect to each Plan, EKCO has delivered, made available or
will make available within ten business days hereafter to ACQUIROR a current,
accurate and complete copy (or, to the extent no such copy exists, Section
3.14(a) of the EKCO Disclosure Schedule contains an accurate summary) thereof
and, to the extent applicable: (i) any related trust agreement or other funding
instrument; (ii) the most recent determination letter, if applicable; (iii) any
summary plan description; (iv) for the three most recent years (A) the Form 5500
and attached schedules and (B) audited financial statements and (C) for the most
recent year, actuarial valuation reports.
(d) With respect to any Plan, (i) no actions, suits or claims (other
than routine claims for benefits in the ordinary course) are pending or, to the
knowledge of EKCO, threatened, (ii) to the knowledge of EKCO, no facts or
circumstances exist that could give rise to any such actions, suits or claims
and (iii) no written or, to the knowledge of EKCO, oral communication has been
received from any Governmental Entity in respect of any Plan subject to Title IV
of ERISA concerning the funded status of any such Plan or concerning the impact
of the transactions contemplated herein on the funded status of any such Plan;
and (iv) no oral promises or obligation have been made by any authorized EKCO
officer, employee or representative to any present or former employee of EKCO
or, to the knowledge of EKCO, the EKCO Subsidiaries, of any increase in any
compensation or benefits of any such employee.
(e) Except as set forth in Schedule 3.14(a) of the EKCO Disclosure
Schedule, no Plan exists that could, as a result of the transaction contemplated
by this Agreement, result in the payment to any present or former employee of
EKCO or its EKCO Subsidiaries of any money or other property or in the
acceleration of or the provision of any other rights or benefits to any present
or former employee of EKCO or its EKCO Subsidiaries, whether or not such payment
would constitute a parachute payment within the meaning of Code section 280G.
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(f) Except as set forth on Schedule 3.14(f), neither EKCO nor any of
its EKCO Subsidiaries sponsor, maintain or contribute to any Plan that provides
post-retirement medical or life insurance benefits to any present or former
employee of EKCO or its EKCO Subsidiaries, other than such benefits in
accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended or any state law requiring continuation coverage.
(g) Except as set forth on Schedule 3.14(g), (i) all Plans that are
sponsored or maintained by EKCO or its EKCO Subsidiaries that are non-U.S. Plans
have been operated and administered in accordance with all applicable laws,
codes and regulations except where the failure to so operate and administer
would not reasonably be expected to have a Material Adverse Effect, and each non
U.S. Plan that is required to be funded under any applicable law has been funded
in amounts that equal or exceed such funding requirements.
3.15. COMPLIANCE WITH LAWS IN GENERAL. EKCO and the EKCO Subsidiaries
hold all permits, licenses, variances, exemptions, orders, registrations,
franchises and approvals of all Governmental Entities which are required for the
operation of the business of EKCO and its EKCO Subsidiaries as now being
operated (collectively, the "EKCO Permits"), except where the failure to have
any such EKCO Permits would not, individually as in the aggregate, reasonably be
expected to have a Material Adverse Effect. EKCO and the EKCO Subsidiaries are
in compliance with the terms of the EKCO Permits and all applicable statutes,
laws, ordinances, rules and regulations, except where the failure to be in
compliance would not reasonable be expected to have a Material Adverse Effect.
EKCO has not violated or failed to comply with, or received any written notice
from any Governmental Entity asserting a failure to comply with, any Law or
Order, except where such violation or failure to comply would not, individually
or in the aggregate, have a Material Adverse Effect.
3.16. INTELLECTUAL PROPERTY.
(a) Except as set forth in Section 3.16(a) of the EKCO Disclosure
Schedule, EKCO owns, or is licensed or otherwise entitled to exercise all rights
under or with respect to all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, and trade secrets employed in the
operation of EKCO's business as currently conducted (the "EKCO Intellectual
Property Rights"), except where the failure to so own, or be licensed or
otherwise entitled to exercise all rights under or with respect to such
Intellectual Property Rights would not reasonably be expected to have a Material
Adverse Effect. Section 3.16(a) of the EKCO Disclosure Schedules lists all
material EKCO patents and registered trademarks, and any applications therefor.
Section 3.16(a) of the EKCO Disclosure Schedule lists all material licenses,
sublicenses and other agreements as to which EKCO is a party and pursuant to
which EKCO is authorized to use third party patents, registered copyrights,
registered trademarks, trade names and registered service marks (the "Material
IP Agreements" and the "Third Party Intellectual Property Rights").
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(b) Except as set forth in Section 3.16(b) of the EKCO Disclosure
Schedule, EKCO has not received written notice of any claims with respect to the
EKCO Intellectual Property Rights, which claims would reasonably be expected to
have a Material Adverse Effect, and, to the knowledge of EKCO, there are no
claims (i) to the effect that any business of EKCO as currently conducted
infringes on or misappropriates any patents, copyrights, trademarks, trade names
or service marks in which a third party has any rights or (ii) challenging the
ownership, validity or effectiveness of any of the EKCO Intellectual Property
Rights, in either case, which claims would reasonably be expected to have a
Material Adverse Effect. Except as set forth in Section 3.16(c) of the EKCO
Disclosure Schedule, no EKCO Intellectual Property Right is subject to any
material lien, encumbrance or other secured interest.
(c) Neither EKCO nor, to EKCO's knowledge, any other party to any
Material IP Agreement is, as a result of the execution and delivery of this
Agreement or the performance of its obligations hereunder will not be, in
violation of any Material IP Agreement, except such violations as would not
reasonably be expected to have a Material Adverse Effect. Except as set forth in
Section 3.16(c) of the EKCO Disclosure Schedule and except for those EKCO
Intellectual Property Rights which are in the public domain, EKCO is the owner
or licensee of, with all right, title and interest in and to (free and clear of
any liens or encumbrances), the EKCO Intellectual Property Rights, and rights in
respect thereof, and is not contractually obligated to pay any compensation to
any third party.
(d) Except as set forth in Section 3.16(d) of the EKCO Disclosure
Schedules, EKCO has taken all reasonable steps to protect, maintain and
safeguard the EKCO Intellectual Property, and has made all filings and executed
all agreements necessary or desirable in connection therewith, except for such
steps, filings and agreements the absence of which would not reasonably be
expected to have Material Adverse Effect.
3.17. INSURANCE. Section 3.17 of the EKCO Disclosure Schedule sets forth
a complete and correct list of all material insurance policies and programs
(other than welfare benefit insurance policies and programs), including
self-insurance programs, maintained by EKCO. Except as set forth in Section 3.17
of the EKCO Disclosure Schedule, all material insurance policies maintained by
EKCO or the EKCO Subsidiaries are in full force and effect and are not currently
terminable, and the consummation of the transactions contemplated by this
Agreement would not be expected to give rise to a right of termination on the
part of the insurance carriers, other than those policies the absence or
termination of which would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
3.18. PROPERTIES. Section 3.18 of the EKCO Disclosure Schedule sets
forth a list of all real property or interests in real property owned by EKCO.
Section 3.18 of the EKCO Disclosure Schedule sets forth by location all material
real property used or occupied by EKCO that is held under lease or sub-lease by
EKCO (the "Leases"). Except for the properties subject to the Leases and as set
forth in Section 3.18 of the EKCO Disclosure Schedule, EKCO has good title, free
and clear of all liens, mortgages, claims, restrictions, pledges, or other
claims or encumbrances to all their material tangible properties, except for (i)
liens for current Taxes not yet due and payable, (ii) assets disposed of since
the date of the EKCO Balance Sheet in the ordinary course of business, (iii)
liens imposed by law and incurred in the ordinary course of business for
obligations not yet due to carriers, warehousemen, laborers and materialmen,
(iv) liens in respect of pledges or deposits under workers' compensation laws,
and (v) liens and encumbrances which do not affect marketability of title or the
use being made of such properties or immaterial title defects, all of which
would not reasonably be expected to materially detract from the value or
materially interfere with the present use of such properties. The Leases are in
full force and effect, and EKCO holds a valid existing leasehold interest under
each of the Leases on the terms set forth
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in such Leases, except to the extent that the failure to be in full force and
effect or the failure to hold a valid leasehold interest would not reasonably be
expected to have a Material Adverse Effect. EKCO has made available to ACQUIROR
complete and correct copies of each of the Leases, including all modifications,
amendments and supplements thereto.
3.19. ENVIRONMENTAL MATTERS.
(a) EKCO and each EKCO Subsidiary is, and has been, in compliance with
applicable Environmental Laws, except as would not reasonably be expected to
have a Material Adverse Effect.
(b) Neither EKCO nor any EKCO Subsidiary has received written notice
alleging that (i) EKCO or any EKCO Subsidiary is in violation of any applicable
Environmental Law, which violation is unresolved or (ii) that EKCO or any EKCO
Subsidiary is obligated to undertake, or to bear all or any portion of the cost
of, any Cleanup, which, in the case of clauses (i) or (ii), would reasonably be
expected to have a Material Adverse Effect.
(c) There have been no releases, spills or discharges of Regulated
Materials (as hereinafter defined) on or underneath any location currently or
formerly owned, leased or otherwise operated by EKCO or any of the EKCO
Subsidiaries (the "Properties"), which release, spills or discharges would
reasonably be expected to have a Material Adverse Effect. There are no pending
or, to the knowledge of EKCO, threatened claims, liens or encumbrances resulting
from Environmental Laws with respect to any of the EKCO Properties, which
claims, liens or encumbrances would reasonably be expected to have a Material
Adverse Effect.
(d) Regulated materials have not been disposed of or arranged to be
disposed of by EKCO or any EKCO Subsidiary in violation of, or in a manner or to
a location that could reasonably be expected to give rise to liability under,
Environmental Laws that could reasonably be expected to have a Material Adverse
Effect.
(e) For purposes of this Agreement the following terms shall have the
following meanings:
"Cleanup" means all actions required to: (i) cleanup, remove, treat or
remediate Regulated Materials, (ii) prevent the release of Regulated Materials
so that they do not migrate, endanger or threaten to endanger public health or
the environment, or (iii) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"Environmental Laws" shall mean all federal, state, local laws, statutes,
ordinances, codes, rules, regulations, judgments, orders and decrees related to
the protection of the environment or the handling, use, recycling, generation,
treatment, storage, transportation or disposal of Regulated Materials.
"Regulated Materials" shall mean any pollutants; contaminants; or toxic,
hazardous or extremely hazardous substances, materials or wastes, regulated by,
or that could result in liability under, any Environmental Laws.
3.20. YEAR 2000. Except as would not individually or in the aggregate
have a Material Adverse Effect, all computer hardware, software, databases,
systems and other computer equipment (collectively, "Systems") owned, held,
and/or used by EKCO or any of the EKCO Subsidiaries (including, to the knowledge
of EKCO, Systems obtained from third parties) can be used prior to, during and
after the calendar year 2000 A.D., and will operate during each such time
period, either on a stand-
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alone basis, or by interacting or interoperating with third-party software
without error relating to the processing, calculating, comparing, sequencing or
other use of date data (the foregoing ability, "Year 2000 Compliant") except as
disclosed in the EKCO Public Reports filed and publicly available prior to the
date of this Agreement.
3.21. ABSENCE OF CERTAIN LIABILITIES. Except for matters reflected or
reserved against in the balance sheet as of March 31, 1999 included in the
financial statements contained in the EKCO Public Reports filed on or prior to
the date hereof, EKCO had not at that date, and has not since that date,
incurred any liabilities or obligations (whether absolute, accrued, contingent,
fixed or otherwise, or whether due or to become due) of any nature except
liabilities or obligations that (a) were incurred in the ordinary course of
business consistent with past practices and (b) have not had, and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect.
3.22. TAKEOVER STATUTE. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby including
the Offer, the purchase of Shares pursuant thereto and the Merger have been
approved by the Board of Directors for purposes of Section 203 of the DGCL.
3.23. RIGHTS AGREEMENT. EKCO and the Board of Directors of EKCO have
taken all necessary action so that (a) the execution and delivery of this
Agreement, the making of the Offer, the acquisition of the EKCO Shares pursuant
to the Offer, the consummation of the Merger and the consummation of the
transactions contemplated hereby do not and will not, with or without the
passage of time, result in (i) the grant of any Rights to any person under the
Rights Agreement or enable or require EKCO's outstanding Rights to be exercised,
distributed or triggered, (ii) ACQUIROR, Acquisition Subsidiary or any of their
affiliates becoming an "Acquiring Person" (as defined in the Rights Agreement),
or (iii) the occurrence of a "Distribution Date" or "Shares Acquisition Date"
(as each such term is defined in the Rights Agreement) and (b) the Rights will
expire at, and subject to, the consummation of the Offer.
3.24. OPINION OF FINANCIAL ADVISOR. EKCO has received the written
opinion of Lehman Brothers dated August 4, 1999 to the effect that, as of the
date hereof, the Per Share Amount to be received by the stockholders of EKCO is
fair to the holders of EKCO Shares from a financial point of view. A written
copy of such opinion has been delivered by EKCO to ACQUIROR.
3.25. OFFER DOCUMENTS; SCHEDULE 14D-9; PROXY STATEMENT. The information
supplied by EKCO for inclusion in the Schedule 14D-9 and the Offer Documents
shall not, at the respective times the Schedule 14D-9 or the Offer Documents are
filed with the SEC or are first published, sent or given to stockholders of
EKCO, as the case may be, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they are made, not misleading. The information supplied by EKCO for
inclusion in the proxy statement to be sent to the stockholders of EKCO in
connection with the Stockholders' Meeting or the information statement to be
sent to such stockholders, as appropriate (such proxy statement or information
statement, as amended or supplemented, being referred to herein as the "Proxy
Statement"), shall not, at the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to stockholders of EKCO, at the time of the
Stockholders' Meeting and at the Effective Time, contain any untrue statement of
a material fact, or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they are made, not misleading.
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3.26. STOCKHOLDER VOTE REQUIRED. Under the DGCL and EKCO's amended and
restated certificate of incorporation and by-laws, the only vote required to
adopt this Agreement is the affirmative vote of the holders of a majority of the
outstanding EKCO Shares, voting as a single class.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUISITION SUBSIDIARY
AND ACQUIROR
Each of Acquisition Subsidiary and ACQUIROR, jointly and severally,
represent and warrant to EKCO, as of the date hereof, as follows:
4.1. ORGANIZATION, EXISTENCE AND CAPITAL STOCK.
(a) ACQUIROR is a corporation duly organized and validly existing and
is in good standing under the laws of the State of the Delaware and ACQUIROR has
all necessary corporate power to own its properties and assets and to carry on
its business as presently conducted, except where the failure to be so
organized, validly existing and in good standing would not, individually or in
the aggregate, prevent or delay consummation of the transactions contemplated by
this Agreement. ACQUIROR is duly qualified to do business and is in good
standing in all jurisdictions in which the character of the property owned,
leased or operated or the nature of the business transacted by it makes
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, prevent or delay
consummation of the transactions contemplated by this Agreement.
(b) Acquisition Subsidiary is a corporation duly organized and validly
existing and is in good standing under the laws of the State of Delaware and has
all necessary corporate power to own its properties and assets and to carry on
its business as presently conducted. All of the shares of Acquisition Subsidiary
have been duly authorized and validly issued and are owned, either directly or
indirectly, by ACQUIROR, and are fully paid and nonassessable.
4.2. AUTHORIZATION OF AGREEMENT. Each of ACQUIROR and Acquisition
Subsidiary has all necessary corporate power and authority to execute and
deliver this Agreement and each other document, agreement, certificate and
instrument required hereby to be executed and delivered by it at the Closing, to
perform its obligations hereunder and thereunder and to consummate the Offer,
the Merger and the other transactions contemplated hereby and thereby. The
execution and delivery by each of ACQUIROR and Acquisition Subsidiary of this
Agreement and each other document, agreement, certificate and instrument
required hereby to be executed and delivered by ACQUIROR and Acquisition
Subsidiary at the Closing and the performance of their respective obligations
hereunder and thereunder have been duly and validly authorized by the Board of
Directors of each of ACQUIROR and Acquisition Subsidiary and by ACQUIROR as the
sole stockholder of Acquisition Subsidiary. Except for filing of the Certificate
of Merger, no other corporate proceedings on the part of ACQUIROR or Acquisition
Subsidiary are necessary to authorize the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
of ACQUIROR and Acquisition Subsidiary and, assuming due authorization,
execution and delivery hereof by EKCO, constitutes a legal, valid and binding
obligation of each of ACQUIROR and Acquisition Subsidiary, enforceable against
each of ACQUIROR and Acquisition Subsidiary in accordance with its terms.
4.3. NON-CONTRAVENTION; CONSENTS
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(a) Neither the execution or delivery of this Agreement or any other
document, agreement, certificate or instrument nor the consummation of the
transactions contemplated hereby or thereby does or will:
(i) violate, conflict with, or constitute a default under, the
Certificate of Incorporation or other charter document, as amended, or Bylaws,
as amended, of ACQUIROR or Acquisition Subsidiary; or
(ii) assuming that all consents, approvals, orders or
authorizations contemplated by subsection (b) below have been obtained and all
filings described therein have been made, (A) violate any statute or law or any
rule, regulation, order, writ, injunction, judgment or decree of any court or
Governmental Entity to which ACQUIROR or Acquisition Subsidiary or any of their
assets or properties are subject or (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default under, or
give rise to any right of termination, acceleration or modification of, any
note, bond, mortgage, indenture, deed of trust, license, lease or other
agreement, instrument or obligation to which ACQUIROR or Acquisition Subsidiary
is a party or by which their or any of their assets or properties may be bound.
(b) Except for the expiration or termination of the applicable waiting
period under the HSR Act and any applicable foreign competition laws, and except
for such filings, permits, authorizations, consents and approvals as may be
required under, and other applicable requirements of, the Securities Act, the
Exchange Act and the Blue Sky laws, and except for the filing and recordation of
a Certificate of Merger as required by the DGCL, there is no other consent,
approval, order or authorization of, or filing with, or any permit from, or any
notice to, any court or Governmental Entity required to be obtained by ACQUIROR
or Acquisition Subsidiary in connection with the execution of this Agreement and
the consummation of the transactions contemplated hereby.
4.4. COMMISSIONS AND FEES. Except for fees owed to Goldman, Sachs &
Co., no agent, broker, person or firm acting on behalf of ACQUIROR or
Acquisition Subsidiary is or will be entitled to any brokerage commissions,
investment bankers' fees or finder's fees in connection with the transaction
contemplated by this Agreement.
4.5. NO SUBSIDIARIES. Acquisition Subsidiary does not own stock in, and
does not control directly or indirectly, any other corporation, association or
business organization. Acquisition Subsidiary is not a party to any joint
venture or partnership.
4.6. NO PRIOR ACTIVITIES. Other than the obligations created under this
Agreement, Acquisition Subsidiary has neither incurred any obligation or
liability nor engaged in any business activities of any type or kind whatsoever,
and is not obligated under any contracts, claims, leases, liabilities, loans or
otherwise.
4.7. OFFER DOCUMENTS; PROXY STATEMENT. The information supplied by
ACQUIROR and Acquisition Subsidiary for inclusion in the Offer Documents will
not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to stockholders of EKCO, as the case may be, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they are made, not
misleading. The information supplied by ACQUIROR and Acquisition Subsidiary for
inclusion in the Proxy Statement will not, on the date the Proxy Statement (or
any amendment or supplement thereto) is first mailed to stockholders of EKCO, at
the time of the
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Stockholders' Meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not false or misleading.
4.8. FINANCING. At the time of the consummation of the Offer, ACQUIROR
and Acquisition Subsidiary will have cash and/or cash equivalents available to
irrevocably provide the amount of cash necessary to accept for payment and pay
for all EKCO Shares eligible to be tendered pursuant to the Offer and to permit
the Surviving Corporation to pay the aggregate Merger Consideration, and to pay
all related fees and expenses, and will make such funds available to Acquisition
Subsidiary.
4.9. LEGAL PROCEEDINGS. As of the date this Agreement, there is no
litigation, governmental investigation or other proceeding against either
ACQUIROR or Acquisition Subsidiary, or to the knowledge of either ACQUIROR nor
Acquisition Subsidiary, pending or threatened, relating to this Agreement or the
transactions contemplated hereby.
4.10. DGCL 203. At no time during the three (3) years prior to the date
of this Agreement has ACQUIROR, Acquisition Subsidiary or any of their
respective affiliates or associates been an "interested person" within the
meaning of and as defined in Section 203 of the DGCL.
ARTICLE V
COVENANTS
5.1. PRESERVATION OF BUSINESS. Except as expressly contemplated by this
Agreement or as set forth in Section 5.1 of the EKCO Disclosure Schedule, during
the period from the date of this Agreement to the Effective Time, EKCO and the
EKCO Subsidiaries shall in all material respects conduct their operations
according to their ordinary and usual course of business and consistent with
past practice, and EKCO shall use its commercially reasonable best efforts to
preserve intact the business organization of EKCO, keep available the services
of its current officers and employees and preserve the goodwill of those having
advantageous business relationships with it and the EKCO Subsidiaries. Without
limiting the generality of the foregoing, and except as expressly contemplated
by this Agreement, or as set forth in the EKCO Disclosure Schedules, neither
EKCO nor any of the EKCO Subsidiaries, as the case may be, will, without the
prior written consent of ACQUIROR:
(a) issue, deliver, sell, dispose of or pledge, or authorize or
propose the issuance, delivery, sale, disposition or pledge of, additional
shares of its capital stock or any of its other securities or securities
convertible into any such shares or any other securities or equity equivalents
(including, without limitation, stock appreciation rights), or any rights,
warrants or options to acquire or enter into any arrangement or contract with
respect to the issuance or sale of, any such shares, securities or other
convertible securities, other than in connection with the exercise of EKCO
Options or EKCO Warrants outstanding on July 4, 1999, pursuant to EKCO's
Dividend Reinvestment and Stock Purchase Plan, or upon conversion of EKCO's ESOP
Preferred Stock, or make any other changes in its capital structure;
(b) split, combine, subdivide, reclassify or redeem, or purchase or
otherwise acquire, directly or indirectly, or propose to do any of the foregoing
with respect to, any of its capital stock or other securities;
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(c) declare, pay, set aside or make any dividend or distribution on or
payment with respect to the EKCO Shares or any other shares of its capital
stock;
(d) except pursuant to agreements or arrangements in effect on the
date hereof, purchase or otherwise acquire, sell or otherwise dispose of or
encumber (or enter into any agreement to so purchase or otherwise acquire, sell
or otherwise dispose of or encumber) any material amount of its properties or
assets except in the ordinary course of business consistent with past practice
or adopt a plan of complete or partial liquidation or resolutions providing for
or authorizing such a liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or reorganization of EKCO;
(e) adopt any amendments to the Certificate of Incorporation or Bylaws
of EKCO;
(f) (i) increase the compensation or fringe benefits of any of its
directors or officers or employees, except pursuant to the terms of agreements
or plans currently in effect which increases, for each such individual, shall
not exceed five percent (5%) of each such individual's annual rate of
compensation; (ii) pay or agree to pay any pension, retirement allowance or
other employee benefit not required or permitted by any existing plan, agreement
or arrangement to any director or officers; (iii) commit itself to any
additional pension, profit-sharing, bonus, extra compensation, incentive,
deferred compensation, stock option, stock appreciation right, group insurance,
severance pay, retirement or other employee benefit plan, agreement or
arrangement, or to any employment or consulting agreement with or for the
benefit of any director or officer, whether past or present; (iv) except as
required by applicable law or as reported in Section 5.1(f) of the EKCO
Disclosure Schedule, amend in any material respect any such material plan,
agreement or arrangement; or (v) pay or agree to pay any discretionary severance
amount;
(g) except in the ordinary course of business (i) incur any amount of
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse or otherwise become liable in respect of the obligations of
any other person except for obligations of wholly-owned EKCO Subsidiaries
outstanding on the date hereof, (ii) make any loans, advances or capital
contributions to, or investments in, any other person (other than to
wholly-owned EKCO Subsidiaries in the ordinary course of business consistent
with past practice), (iii) pledge or otherwise encumber shares of capital stock
of EKCO or any EKCO Subsidiaries, or (iv) mortgage or pledge any material amount
of its assets, tangible or intangible, or create or suffer to exist any lien
thereupon;
(h) (i) acquire (by merger, consolidation or acquisition of stock
or assets) any corporation. partnership or other business organization or
division, (ii) make any capital expenditure or commitments for additions to
plant, property or equipment constituting capital assets except expenditures
pursuant to commitments existing as of the date of this Agreement or as
contemplated in the annual budget of EKCO and the EKCO Subsidiaries (a copy of
which has been provided to ACQUIROR), (iii) change any assumption underlying, or
method of calculating, any bad debt, contingency or other reserve or change any
other material accounting principle or practice used by it (except changes that
may be necessary or appropriate in order to comply with a change in generally
accepted accounting principles that take effect after the date of this
Agreement), (iv) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction of liabilities in the ordinary course consistent with
past practice, (v) waive, release, grant or transfer any rights of a material
value or modify or change in any material respect or renew any existing license,
lease, contract or other document, (vi) make or change any Tax election, make or
change any method of accounting with respect to Taxes, file any amended Tax
Return, or settle or compromise any proceeding with respect to any Tax
liability;
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(i) engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any of EKCO's
affiliates, other than EKCO Subsidiaries, including, without limitation, any
transactions, agreements, arrangements, or understandings with any affiliate or
other person covered under Item 404 of Regulation S-K under the Securities Act
that would be required to be disclosed under such Item 404;
(j) amend, modify or terminate any existing Intellectual Property
license, execute any new Intellectual Property license, sell, license or
otherwise dispose of, in whole or in part, any EKCO Intellectual Property,
and/or subject any EKCO Intellectual Property to any encumbrance; or
(k) enter into any contract, agreement, commitment or arrangement with
respect to, or resolve to do, any of the foregoing.
5.2. ACQUISITION PROPOSALS; NO SOLICITATION. From the date hereof until
the earlier of the termination of this Agreement or the Effective Time, EKCO
shall not, and will direct each affiliate, officer, director, representative and
agent of EKCO and its affiliates not to, directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with any
corporation, partnership, person or other entity or group (other than ACQUIROR
or an affiliate or an associate of ACQUIROR) or take any other action to
facilitate, any inquiry or the making of any proposal or offer which
constitutes, or may reasonably be expected to lead to, an offer or proposal for
any merger, reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving EKCO
or any of the EKCO Subsidiaries, or any purchase or sale of more than 15% of the
assets (including stock of the EKCO Subsidiaries) of EKCO and the EKCO
Subsidiaries taken as a whole, or any purchase or sale of, or tender or exchange
offer for, more than 15% of the equity securities of EKCO or any of the EKCO
Subsidiaries (an "Acquisition Proposal") or furnish to any other person any
information with respect to its business, properties or assets in connection
with any of the foregoing, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. In addition, EKCO shall, and shall
cause each affiliate, officer, director, representative and agent of EKCO to,
immediately cease any existing discussions or negotiations, or other activities
referred to in the immediately preceding sentence, with any person conducted
heretofore with respect to any of the foregoing matters referred to in the
immediately preceding sentence. Notwithstanding the foregoing, EKCO may, (i)
refer any party to this Section 5.2, (ii) directly or indirectly, furnish
information and access, in response to unsolicited requests therefor to any
corporation, partnership, person or other entity or group that has made a
Superior Proposal (as defined below) and to any investment banker, financial
advisor, attorney, accountant or other representative retained by such party,
pursuant to an appropriate confidentiality agreement and may participate in
discussions and negotiations concerning any such Superior Proposal if the Board
of Directors determines in its good faith judgment, after receiving and based
upon advice from outside legal counsel, that such action is required to prevent
the Board of Directors of EKCO from breaching its fiduciary duties to the
stockholders of EKCO under Delaware law and (iii) to the extent applicable,
comply with Rule 14e-2 or 14d-9 promulgated under the Exchange Act with regard
to an Acquisition Proposal, subject in the case of clauses (ii) and (iii) to any
rights of ACQUIROR to terminate this Agreement and receive payment of any fee
due under Article VII as a result thereof. EKCO shall promptly notify ACQUIROR
orally and in writing if any unsolicited request for information and access in
connection with a possible Acquisition Proposal involving such a party is made
and shall, in any such notice to ACQUIROR, indicate in reasonable detail the
identity of the offeror and the terms and conditions of any proposal or offer,
or any such inquiry or contact. "Superior Proposal" means any bona fide written
Acquisition Proposal made by a third party after the date hereof which, if
consummated, will result in a transaction that, taking into account all legal,
financial and regulatory
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aspects and consequences of the proposal and the person making such proposal,
including the relative expected consummation date and the risk of
non-consummation, is financially superior, is not subject to a financing
contingency and is otherwise as favorable in all material respects to EKCO's
stockholders as the Offer and the Merger. EKCO also agrees not to release any
third party from, waive any provisions of, or to fail to enforce any
confidentiality or standstill agreement to which EKCO is a party.
5.3. MEETINGS OF STOCKHOLDERS; PROXY STATEMENT.
(a) If required by applicable law in order to consummate the Merger,
EKCO shall take all necessary action to duly call, give notice of, convene and
hold an annual or special meeting of its stockholders as soon as practicable
after the consummation of the Offer for the purpose of considering and taking
action on this Agreement and the transactions contemplated hereby (the
"Stockholders' Meeting"). At the Stockholders' Meeting, ACQUIROR and Acquisition
Subsidiary shall cause all EKCO Shares then owned by them and their subsidiaries
to be voted in favor of the approval and adoption of this Agreement and the
transactions contemplated hereby.
(b) In the event a Stockholders' Meeting is called, EKCO will prepare
and file with the SEC a Proxy Statement for the solicitation of a vote of
holders of EKCO Shares approving the Merger, which shall include the
recommendation of the Board of Directors of EKCO that stockholders of EKCO vote
in favor of the approval and adoption of this Agreement.
(c) Subject to Section 5.3(d), if required by applicable law, as soon
as practicable following consummation of the Offer, EKCO shall file the Proxy
Statement with the SEC under the Exchange Act, and shall use its reasonable best
efforts to have the Proxy Statement cleared by the SEC. ACQUIROR, Acquisition
Subsidiary and EKCO shall cooperate with each other in the preparation of the
Proxy Statement, and EKCO shall notify ACQUIROR of the receipt of any comments
of the SEC with respect to the Proxy Statement and of any requests by the SEC
for any amendment or supplement thereto or for additional information and shall
provide to ACQUIROR promptly copies of all correspondence between EKCO or any
representative of EKCO and the SEC. EKCO shall give ACQUIROR and its counsel the
reasonable opportunity to review the Proxy Statement prior to its being filed
with the SEC and shall give ACQUIROR and its counsel the reasonable opportunity
to review all amendments and supplements to the Proxy Statement and all
responses to requests for additional information and replies to comments prior
to their being filed with, or sent to, the SEC. Each of EKCO, ACQUIROR and
Acquisition Subsidiary agrees to use its reasonable efforts, after consultation
with the other parties hereto, to respond promptly to all such comments of and
requests by the SEC and to cause the Proxy Statement and all required amendments
and supplements thereto to be mailed to the holders of EKCO Shares entitled to
vote at the Stockholders' Meeting at the earliest practicable time.
(d) Notwithstanding the foregoing, in the event that Acquisition
Subsidiary shall acquire at least 90% of the outstanding EKCO Shares, EKCO
agrees, at the request of Acquisition Subsidiary, subject to Article VI, to take
all necessary and appropriate action to cause the Merger to become effective as
soon as reasonably practicable after such acquisition, without a meeting of
EKCO's stockholders, in accordance with Section 253 of the DGCL.
5.4. ACCESS TO INFORMATION; CONFIDENTIALITY
(a) Subject to applicable law and the agreements set forth in Section
5.4(b), between the date of this Agreement and the Effective time, EKCO shall
and shall cause each of its subsidiaries and agents to (i) give ACQUIROR and its
representatives reasonable access, during regular business hours upon
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reasonable written notice, to all of the employees, properties, offices,
facilities, books, records, files, correspondence, audits and officers of EKCO
and the EKCO Subsidiaries, (ii) permit ACQUIROR and its representatives to make
such reasonable inspections of such employees, properties, offices, facilities,
books, records, files, correspondence, audits and (iii) cause its officers and
those of the EKCO Subsidiaries to furnish ACQUIROR with access to such financial
and operating data and other information with respect to the business and assets
of EKCO and the EKCO Subsidiaries as ACQUIROR may from time to time reasonably
request; provided, however, that such access does not unreasonably inhibit or
hinder the business or operations of EKCO or any EKCO Subsidiary. EKCO shall
furnish promptly to ACQUIROR and Acquisition Subsidiary a copy of each report,
schedule, registration statement and other document filed by it or its
subsidiaries during such period pursuant to the requirements of federal or state
securities laws.
(b) Any and all information obtained by ACQUIROR or Acquisition
Subsidiary shall be subject to the provisions of the confidentiality
agreement between ACQUIROR and EKCO dated May 3, 1999 (the "Confidentiality
Agreement"), which agreement remains in full force and effect and is hereby
ratified and affirmed by the parties hereto. No investigation pursuant to
this Section 5.4 or otherwise shall affect any representations or warranties
of the parties herein or the conditions to the obligations of the parties
hereto.
(c) Between the date of this Agreement and the Effective Time, EKCO
shall provide ACQUIROR promptly at the end of each month with such monthly
financial data as is customarily prepared for the executive officers of EKCO,
including an income statement and statement of cash flows for such month and a
balance sheet as of the end of such month.
5.5. HSR ACT AND FOREIGN COMPETITION LAWS. ACQUIROR and EKCO shall
promptly make all filings required by each of them under the HSR Act and any
applicable foreign competition laws with respect to the Offer, the Merger and
the transactions contemplated hereby, and shall cooperate with each other in
connection with determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, any Governmental
Entity and making all such filings and obtaining all such consents, approvals,
permits or authorizations. EKCO and ACQUIROR shall use their reasonable best
efforts to obtain all permits, authorizations, consents, expiration or
termination of waiting periods, and approvals from third parties and any
Governmental Entity necessary to consummate the Offer, the Merger and the
transactions contemplated hereby. For purposes of this Section 5.5, Section 5.9
and condition (a) set forth in ANNEX A, "reasonable best efforts" of ACQUIROR
shall not require ACQUIROR to agree to any prohibition, limitation, or other
requirement which would prohibit or materially limit the ownership or operation
by EKCO or any of the EKCO Subsidiaries, or by ACQUIROR, Acquisition Subsidiary
or any of ACQUIROR's subsidiaries of all or any material portion of the business
or assets of EKCO or any of the EKCO Subsidiaries or ACQUIROR or any of its
material subsidiaries, or compel Acquisition Subsidiary, ACQUIROR or any of
ACQUIROR's subsidiaries to dispose of or hold separate all or any material
portion of the business or assets of EKCO or any of the EKCO Subsidiaries or
ACQUIROR or any of its material subsidiaries. EKCO shall not agree to any such
prohibition, limitation, or other requirement without the prior written consent
of ACQUIROR.
5.6. ACCOUNTING METHODS. EKCO shall not change its methods of
accounting in effect at its most recent fiscal year end, except as required by
changes in generally accepted accounting principles as concurred by its
independent accountants.
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5.7. PUBLIC DISCLOSURES. ACQUIROR and EKCO will consult with each other
and mutually agree before issuing any press release or otherwise making any
public statement with respect to the Offer, the Merger and other transactions
contemplated by this Agreement, and shall not issue any such press release or
make any such public statement prior to such consultation and agreement except
as may be required by applicable law or requirements of any exchange upon which
the EKCO Shares or the shares of ACQUIROR are traded, in which case the party
proposing to issue such press release or make such public announcement shall use
its reasonable best efforts to consult in good faith with and obtain the
approval of the other party before issuing such press releases or making any
such public statements. The parties shall issue a joint press release, mutually
acceptable to ACQUIROR and EKCO, promptly upon execution and delivery of this
Agreement.
5.8. INDEMNIFICATION AND INSURANCE.
(a) Subject to the occurrence of the Effective Time, until the six
year anniversary date of the Effective Time, the ACQUIROR and the Surviving
Corporation agree that all rights to indemnification or exculpation now existing
in favor of the present and former officers, directors, employees and other
indemnifed parties (the "Indemnified Parties") as provided in the respective
charters or by-laws or otherwise in effect as of the date hereof shall survive
the Merger and shall continue in full force and effect, and ACQUIROR shall cause
the Surviving Corporation to, and the Surviving Corporation shall, keep in
effect all such indemnification and exculpation provisions to the fullest extent
permitted under applicable law, which provisions shall not be amended, repealed
or otherwise modified for such six-year period after the Effective Time, except
as required by applicable law or except to make changes permitted by applicable
law that would enlarge the exculpation or rights of indemnification thereunder.
To the maximum extent permitted by the DGCL, such indemnification shall be
mandatory rather than permissive and the Surviving Corporation shall advance
expenses as incurred to the fullest extent permitted under applicable law in
connection with such indemnification.
(b) For a period of six years after the Effective Time, the ACQUIROR
shall cause the Surviving Corporation and the Surviving Corporation shall cause
to be maintained in effect the current policies of directors' and officers'
liability insurance maintained by EKCO (or policies of at least the same
coverage and amounts containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events which occurred
before the Effective Time and covering parties who are covered by such current
insurance, provided, however, that in no event shall the Surviving Corporation
be required to expend in any one year an amount in excess of 200% of the annual
premium currently paid by EKCO for such insurance (in which case the Surviving
Corporation shall obtain the maximum amount of coverage that may be obtained for
such premium). EKCO represents and warrants that the current annual premium for
such insurance is $267,469.
(c) This Section 5.8 is intended to be for the benefit of, and shall
be enforceable by, the Indemnified Parties, their heirs and personal
representatives and shall be binding on ACQUIROR and Acquisition Subsidiary and
the Surviving Corporation and their respective successors and assigns.
(d) In the event ACQUIROR or the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger, or (ii) transfers or conveys all or substantially all
of its properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of ACQUIROR or the
Surviving Corporation, as the case may be, or at ACQUIROR's option, ACQUIROR,
shall assume the obligations set forth in this Section 5.8.
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5.9. REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions provided herein, each of the
parties hereto agrees to cooperate and use its reasonable best efforts to take,
or cause to be taken, all necessary or appropriate action, and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations or otherwise to consummate and make effective the Offer, the Merger
and all other transactions contemplated by this Agreement including, without
limitation, the execution of any additional instruments necessary to consummate
the transactions contemplated hereby and seeking to lift, rescind or reverse any
legal restraint imposed on the consummation of the transactions contemplated by
this Agreement. In case at any time after the Effective Time any further action
is necessary or desirable to carry out the purposes of this Agreement, the
proper officers and directors of each party hereto shall take all such necessary
action.
(b) At the request of ACQUIROR, EKCO shall, as soon as reasonably
practicable after such request, commence a debt tender offer for its 9 1/4%
Senior Notes due 2006 (the "Senior Notes") together with a solicitation of
consents to amend the Senior Notes Indenture, dated as of March 25, 1996 and
amended by a First Supplemental Indenture dated January 16, 1998, between EKCO
and State Street Bank and Trust Company (successor to Fleet National Bank of
Connecticut), as trustee (the "Senior Notes Indenture"; such amendment, the
"Senior Notes Indenture Amendment"; and such debt tender offer and consent
solicitation, collectively, the "Debt Offer"). The Debt Offer shall be on the
terms and conditions provided to EKCO by ACQUIROR. ACQUIROR shall be entitled to
be involved in and shall cooperate in a full and timely fashion with EKCO in
EKCO's preparation of the documents to be sent to the holders of the Senior
Notes in connection with the Debt Offer (together with any supplements or
amendments thereto, the "Debt Offer Documents"). EKCO shall waive any of the
conditions to the Debt Offer and make any other changes in the terms and
conditions of the Debt Offer as may be reasonably requested by ACQUIROR, and
EKCO shall not, without ACQUIROR's prior written consent, waive any condition to
the Debt Offer or make any changes to the terms and conditions of the Debt
Offer. ACQUIROR and EKCO each agrees promptly to correct any information
provided by it for use in the Debt Offer Documents that shall have become false
or misleading in any material respect, and EKCO further agrees to take all steps
necessary to cause the Debt Offer Documents as so corrected to be disseminated
to holders of Senior Notes. Provided the conditions of the Debt Offer are met
or, at the sole discretion of ACQUIROR, waived, EKCO shall accept for payment
and pay for the Senior Notes validly tendered and not withdrawn pursuant to the
Debt Offer simultaneously with the consummation of the Offer. At the request of
EKCO, ACQUIROR shall provide EKCO with prompt assistance in the preparation of
documents necessary to carrying out the Debt Offer. ACQUIROR shall pay all costs
and expenses, including but not limited to legal fees incurred by EKCO, incurred
in connection with the Debt Offer.
(c) EKCO agrees to use commercially reasonable best efforts to
provide, and use commercially reasonable best efforts to cause the EKCO
Subsidiaries and its and their respective officers, employees, representatives
and agents to provide, all necessary cooperation in connection with the
arrangement and closing of any financing arranged or approved by ACQUIROR or its
affiliates, to be consummated contemporaneous with or at or after consummation
of the Offer or the Effective Time in respect of the transactions contemplated
hereby, including without limitation, the negotiation and execution of loan
documents, the preparation of disclosure schedules, the preparation of offering
memoranda, private placement memoranda or other similar documents, participation
in meetings, due diligence sessions and road shows (consistent with such
individuals' responsibilities for the ongoing operations of EKCO), the execution
and delivery, with effectiveness no earlier than consummation of the Debt Offer,
of any pledge and security documents, other definitive financing documents, or
other
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requested certificates or documents as reasonably may be requested by ACQUIROR.
In addition, in connection with the obtaining of any such financing, EKCO agrees
to request opinions of EKCO's legal counsel and "comfort letters" of EKCO's
accountants reasonably required in connection with such financing and, at the
request of ACQUIROR, following the consummation of the Offer, to call for
prepayment or redemption, or to prepay, redeem and/or renegotiate, as the case
may be, any then existing indebtedness of EKCO to the extent financing is
available therefor.
(d) At or prior to consummation of the Offer, ACQUIROR will provide to
EKCO all necessary funds to purchase the Senior Notes pursuant to the Debt
Offer. For the avoidance of doubt, the Debt Offer will be conditional upon the
consummation of the Offer.
5.10. NOTICE OF SUBSEQUENT EVENTS. EKCO shall give prompt notice to
ACQUIROR or Acquisition Subsidiary, and ACQUIROR or Acquisition Subsidiary shall
give prompt notice to EKCO, as the case may be, of (i) the occurrence, or
non-occurrence, of any event the respective occurrence, or non-occurrence, of
which would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate and (ii) any failure of EKCO, ACQUIROR or
Acquisition Subsidiary, as the case may be, to comply or satisfy any covenant,
condition or agreement to be complied with under this Agreement; PROVIDED,
HOWEVER, that the delivery of any notice pursuant to this Section 5.11 shall not
relieve any party giving such notice of its obligation hereunder.
5.11. EMPLOYMENT; EMPLOYEE WELFARE.
(a) ACQUIROR will cause the Surviving Corporation to maintain for a
period of not less than one year following the Closing Date employee
compensation and benefit plans, programs, policies and fringe benefits
(including any post-employment benefits) as set forth in Section 3.14(a) of the
EKCO Disclosure Schedule, and excluding those relating to equity securities of
EKCO, that are no less favorable than those provided to such employees of EKCO
and EKCO Subsidiaries, as applicable, under the Plans as in effect immediately
prior to the Closing (the "Existing Plans"), subject to the right to amend or
terminate such Existing Plans in accordance with their terms, provided that
after any such amendment or termination such programs, policies and fringe
benefits continue to be, in the aggregate, substantially equivalent to the
Existing Plans.
(b) As of the Closing Date and for a period of not less than one year
thereafter, ACQUIROR will cause the Surviving Corporation to provide to all
employees of EKCO and EKCO Subsidiaries severance pay and benefits, to the
extent such pay and benefits are provided under the applicable severance plans,
programs, agreements and policies of EKCO and the EKCO Subsidiaries, as
applicable, as in effect immediately prior to the Closing and as are set forth
on Section 5.11(b) of the EKCO Disclosure Schedule (the "Existing Severance
Benefits") which are equivalent to such Existing Severance Benefits, subject to
the right to amend or terminate such Existing Severance Benefits in accordance
with their terms, provided that after any such amendment or termination such
severance pay and benefits continue to be substantially equivalent to the
Existing Severance Benefits. Further, ACQUIROR shall credit the prior service of
all employees of EKCO and EKCO Subsidiaries to EKCO and the EKCO Subsidiaries,
as applicable, for purposes of determining the eligibility, vesting or
qualification of such employees of EKCO and EKCO Subsidiaries under Existing
Plans, Existing Severance Benefits and any successor plans and benefit programs.
(c) From and after the Effective Time, ACQUIROR shall cause the
Surviving Corporation to assume and honor in accordance with their terms all
existing employment and severance agreements and arrangements set forth in
Section 5.11(c) of the EKCO Disclosure Schedule.
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(d) ACQUIROR shall reimburse (or cause the Surviving Corporation to
reimburse) any director, officer or employee (or former director, officer or
director) of EKCO or any of EKCO Subsidiaries for all costs and expenses,
including attorneys' fees, incurred by such person in successfully enforcing the
provisions of this Section 5.11.
5.12. GUARANTEE OF ACQUISITION SUBSIDIARY'S OBLIGATIONS. ACQUIROR hereby
unconditionally and irrevocably guarantees to EKCO the due and timely
performance and observance by Acquisition Subsidiary (and its affiliates,
pursuant to Section 1.1(d)(iv)) of all of its representations, warranties,
covenants, agreements and obligations under this Agreement.
5.13. NO AMENDMENT TO THE RIGHTS AGREEMENT. Subject to applicable law,
EKCO shall not amend, modify or waive any provision of the Rights Agreement, and
shall not take any action to redeem the Rights or render the Rights inapplicable
to any transaction other than the transactions to be effected pursuant to this
Agreement.
5.14. YEAR 2000 REMEDIATION PROGRAM.
(a) Promptly following the date hereof, EKCO shall retain Keane, Inc.
or another third party consultant acceptable to ACQUIROR to perform a Year 2000
Quality Assurance Review on EKCO and the EKCO Subsidiaries. EKCO shall, and
shall cause its subsidiaries, and employees and agents to cooperate in all
material respects with such consultant and provide such consultant with
reasonable access to its premises and personnel, and shall implement in a timely
manner all reasonable recommendations of such consultant, unless EKCO and
ACQUIROR agree otherwise.
(b) Promptly following the date of this Agreement, EKCO shall
implement a retention/stay bonus program for its Year 2000 implementation
personnel and selected critical system users as shall be reasonably directed by
ACQUIROR.
ARTICLE VI
CONDITIONS TO MERGER
6.1. MUTUAL CONDITIONS. The respective obligations of each party to
effect the Merger shall be subject to the satisfaction, at or prior to the
Effective Time, of the following conditions (any of which may be waived in
writing by ACQUIROR, Acquisition Subsidiary and EKCO):
(a) no Governmental Entity shall have issued an Order or injunction
which would prohibit or restrict consummation of the Merger; PROVIDED, HOWEVER,
that if the foregoing has occurred, each party shall use its reasonable best
efforts to lift, rescind, cause to expire, terminate or ameliorate the effects
of any such decree, Order or injunction;
(b) if required by applicable law, this Agreement and the Merger shall
have been approved and adopted by the requisite vote of the holders of EKCO
Shares; and
(c) Acquisition Subsidiary or its permitted assignee shall have
purchased all EKCO Shares validly tendered and not withdrawn pursuant to the
Offer; PROVIDED, HOWEVER, that this condition shall not be applicable to the
obligations of ACQUIROR or Acquisition Subsidiary if, in material breach of this
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Agreement or the terms of the Offer, Acquisition Subsidiary fails to purchase
any EKCO Shares validly tendered and not withdrawn pursuant to the Offer.
ARTICLE VII
TERMINATION
7.1. TERMINATION. This Agreement may be terminated and the Merger may
be abandoned at any time notwithstanding approval thereof by the holders of EKCO
Shares (except as otherwise set forth in this Section 7.1), but prior to the
Effective Time:
(a) by mutual written consent of the parties duly authorized by the
Boards of Directors of EKCO and ACQUIROR;
(b) by either ACQUIROR or EKCO if any Governmental Entity or court
shall have issued a final and non-appealable Order, or taken any other action,
in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the acceptance for payment of, or payment for, EKCO Shares
pursuant to the Offer or the Merger (which the party seeking to terminate this
Agreement shall have used its reasonable best efforts to have lifted, rescinded,
mitigated or reversed);
(c) by either ACQUIROR or EKCO if the Effective Time shall not have
occurred on or before 120th day following the date hereof; PROVIDED that the
right to terminate this Agreement under this Section 7.1(c) shall not be
available to any party whose failure to fulfill any covenant, agreement or
obligation under this Agreement has been the cause of or resulted in the failure
of the Effective Time to occur on or before such date; and provided, further,
that if the Offer or the Merger shall not have been consummated solely due to
the waiting period (or any extension thereof) or approvals under the HSR Act or
any applicable foreign competition laws not having expired or been terminated or
received, then such date shall be extended to the 180th day following the date
hereof;
(d) by ACQUIROR if, due to an occurrence or circumstance that would
result in a failure to satisfy any condition set forth in ANNEX A hereto,
Acquisition Subsidiary shall have, in accordance with the terms hereof
(including any requirement to extend the Offer for any such failures or
otherwise) (i) failed to commence the Offer as set forth in Section 1.1 of this
Agreement, (ii) terminated the Offer without having accepted any EKCO Shares for
payment thereunder, or (iii) failed to pay for the EKCO Shares validly tendered
pursuant to the Offer in accordance with the terms thereof, unless such
termination or failure to pay for EKCO Shares shall have been caused by or
resulted from the failure of ACQUIROR or Acquisition Subsidiary to perform in
any material respect any covenant or agreement of either of them contained in
this Agreement or the material breach by ACQUIROR or Acquisition Subsidiary of
any representation or warranty of either of them contained in this Agreement;
(e) by ACQUIROR (i) if, prior to the purchase of any EKCO Shares
validly tendered pursuant to the Offer, the Board of Directors of EKCO shall
have withdrawn, modified or amended in any manner adverse to ACQUIROR or
Acquisition Subsidiary its approval or recommendation of this Agreement, the
Offer or the Merger or shall have recommended another merger, consolidation or
business combination involving, or acquisition of, EKCO or its assets or another
tender offer for EKCO Shares or shall have failed to reconfirm its
recommendation of this Agreement, the Offer or the Merger if so requested by
ACQUIROR within 10 business days following such request or resolved to do any of
the foregoing; or
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(ii) if EKCO shall directly or indirectly through agents or
representatives continue discussions or negotiations with any third party
concerning any Acquisition Proposal or Superior Proposal for more than 15
business days after having first furnished information or commenced discussions
or negotiations with such third party (whichever occurred earlier) with respect
thereto; or
(iii) (A) if an Acquisition Proposal that is publicly disclosed
shall have been commenced, publicly proposed or communicated to EKCO which
contains a proposal as to price (without regard to the specificity of such price
proposal) and (B) EKCO shall not have rejected such Acquisition Proposal within
15 business days after the earlier of its receipt thereof, and the date its
existence first becomes publicly disclosed; or
(iv) if EKCO shall have amended, modified or waived any
provision of the Rights Agreement or shall have taken any other action to redeem
the Rights or render the Rights inapplicable to any transaction other than the
transactions to be effected pursuant to this Agreement and, as a result, a
person shall have acquired greater than 15% of the outstanding EKCO Common
Stock;
(f) by EKCO if, prior to the purchase of EKCO Shares pursuant to the
Offer, upon three business days prior notice to ACQUIROR in order to accept a
Superior Proposal; provided that, prior to terminating this Agreement, (A) EKCO
shall have fully complied with its obligations under Section 5.2, (B) such
notice shall specify all material terms, conditions and other information with
respect thereto, (C) prior to any such termination, EKCO shall, if requested by
ACQUIROR in connection with any revised proposal ACQUIROR might make, negotiate
in good faith for such three business day period with ACQUIROR, and such third
party proposal remains a Superior Proposal after taking into account any revised
proposal by ACQUIROR during such three business day period and (D) immediately
following such termination, EKCO enters into definitive and binding
documentation with respect to such Superior Proposal; and PROVIDED, FURTHER,
that it shall be a condition to termination pursuant to this Section 7.1(f) that
EKCO shall have made the payment of the fees and expenses to ACQUIROR required
by 7.2(b);
(g) by EKCO if, due to an occurrence or circumstance that would result
in a failure to satisfy any condition set forth in ANNEX A hereto, Acquisition
Subsidiary shall have (i) failed to commence the Offer as set forth in Section
1.1 of this Agreement, (ii) terminated the Offer without having accepted any
EKCO Shares for payment, or (iii) failed to pay for the EKCO Shares validly
tendered pursuant to the Offer in accordance with the terms thereof, unless such
termination or failure to pay for EKCO Shares shall have been caused by or
resulted from the failure of EKCO to perform in any material respect any
covenant or agreement of it contained in this Agreement or the failure of the
condition set forth in paragraph (d) of ANNEX A hereto; or
(h) by EKCO if any representation or warranty of ACQUIROR or
Acquisition Subsidiary in this Agreement shall not be true and correct in any
material respect on the date of this Agreement, or ACQUIROR or Acquisition
Subsidiary shall have failed to perform in any material respect any obligation
or to comply in any material respect with any agreement or covenant of ACQUIROR
or Acquisition Subsidiary to be performed or complied with by it under this
Agreement; provided that such breach or failure to perform (if curable) has not
been cured within thirty (30) calendar days after notice to ACQUIROR, and
provided further that EKCO is not in material breach of this Agreement.
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7.2. EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement pursuant to this
Article VII, this Agreement, except for the provisions of Section 5.4, Section
5.7, this Section 7.2 and Article VIII, shall forthwith become void and have no
further effect, without any liability on the part of any party or its
affiliates, directors, officers or stockholders. Nothing in this Section 7.2 or
in Section 8.4 shall relieve any party to this Agreement of liability for breach
of this Agreement on or prior to the date of termination.
(b) If (i) this Agreement is terminated (A) by EKCO pursuant to
Section 7.1(f) hereof or (B) by ACQUIROR pursuant to 7.l(e)(i), (ii), (iii) or
(iv) hereof;
(ii) (A) this Agreement is terminated pursuant to Section 7.1(c)
or 7.1(d) (other than in the event that ACQUIROR is in material breach of this
Agreement at the time of such termination), (B) after the execution and delivery
of this Agreement but prior to such termination either (I) EKCO (or its agents)
breaches its obligations under Section 5.2 or (II) a Third Party makes a
proposal either publicly or which becomes public prior to such termination with
respect to any Acquisition Proposal and (C) within nine months after such
termination, either (I) a Third Party Acquisition occurs or (II) EKCO enters
into an agreement with respect to a Third Party Acquisition which is later
consummated (PROVIDED that if clause (B) (I) above does not apply, the Third
Party Acquisition referred to in this clause (C) must be with the same person
(or an affiliate thereof) that made the Acquisition Proposal referred to in
clause (B)(II) above);
then EKCO shall pay to ACQUIROR, within one business day following the execution
and delivery of such agreement or such occurrence (which in the case of a
termination contemplated by Section 7.1(e) shall be the date of such
termination), as the case may be, or no later than concurrently with any
termination contemplated by Section 7.1(f) above, a fee, in cash and immediately
available funds, of $6 million (the "Termination Fee"); provided, however, that
EKCO in no event shall be obligated to pay more than one Termination Fee with
respect to all such agreements and occurrences and such termination.
In addition, EKCO shall from time to time after any termination in
connection with which a Termination Fee shall be or become payable, pay to
ACQUIROR, within one business day after its receipt of a written statement
therefor, an amount equal to the Expenses set forth in such statement, provided
that the "Expenses" (excluding Collection Expenses) shall not exceed $1 million.
In addition, EKCO shall pay from time to time within one business day after
receipt of a written statement therefor all out-of-pocket expenses actually
incurred by ACQUIROR in connection with any litigation or other proceedings to
collect the Termination Fee and/or Expenses ("Collection Expenses"), provided
that ACQUIROR shall have prevailed in such litigation or other proceedings.
"Expenses" means all reasonable out-of-pocket fees and expenses
actually incurred by ACQUIROR or Acquisition Subsidiary, whether before or after
the execution and delivery of this Agreement, in connection with the
transactions contemplated by this Agreement, including the Offer and the Merger,
including without limitation reasonable fees and expenses payable to all banks,
investment banking firms and other financial institutions, including any of the
foregoing acting as depositary or dealer-manager for the Offer, and their
respective agents and counsel, and all reasonable fees and expenses of counsel,
accountants, experts and consultants to ACQUIROR or Acquisition Subsidiary.
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"Third Party" means any person other than ACQUIROR, Acquisition
Subsidiary or any affiliate thereof.
"Third Party Acquisition" means the occurrence of any of the
following events: (i) the acquisition of EKCO by merger, tender offer, exchange
offer or otherwise by any Third Party; (ii) the acquisition by a Third Party of
50% or more of the assets of EKCO and the EKCO Subsidiaries, taken as a whole;
(iii) the acquisition by a Third Party of more than 50% of the outstanding EKCO
shares; (iv) the adoption by EKCO of a plan of liquidation or the declaration or
payment of an extraordinary dividend; or (v) the repurchase by EKCO of
outstanding EKCO shares in connection with which a Third Party becomes the owner
of 50% or more of the outstanding EKCO Shares.
(c) EKCO acknowledges that the provisions contained in this subsection
7.2(b) are an integral part of the transactions contemplated by this Agreement,
and that, without these provisions, ACQUIROR would not enter into this
Agreement.
(d) Subject to Section 7.2 (a), payment of the Termination Fee,
Expenses and Collection Expenses, if any, shall be ACQUIROR's and Acquisition
Subsidiary's exclusive remedy for any termination of this Agreement pursuant to
Section 7.1 and neither ACQUIROR nor Acquisition Subsidiary shall have any
further recourse against EKCO for, or as a result of, such termination.
7.3. PROCEDURE FOR TERMINATION. In the event of termination and
abandonment of the Offer and the Merger by the ACQUIROR or EKCO pursuant to this
Article VII, written notice thereof shall forthwith be given to the other.
ARTICLE VIII
MISCELLANEOUS
8.1. EXPENSES. Subject to Section 7.2, all costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expense, except that expenses incurred in
connection with printing and mailing the Proxy Statement shall be shared equally
by EKCO and ACQUIROR. ACQUIROR acknowledges and agrees that EKCO is obligated
and will become further obligated for fees and expenses (including fees and
expenses of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., its counsel,
KPMG Peat Marwick LLP, its independent accountants, and Lehman Brothers, its
financial advisor) incurred by it in connection with the Merger and the
transactions contemplated hereby. EKCO represents and warrants that the amount
of such fees will be no more than $4.0 million. It is understood and agreed that
certain of such fees and expenses may be paid by EKCO prior to the execution of
this Agreement, and ACQUIROR agrees to refrain from taking any action which
would prevent or delay the payment of reasonable fees and expenses by EKCO.
Further, ACQUIROR agrees to take, and cause Acquisition Subsidiary to take, all
action necessary to cause the Surviving Corporation to pay promptly any of the
foregoing reasonable fees and expenses incurred, but not paid, by EKCO prior to
the Effective Time.
8.2. AMENDMENT. This Agreement may be amended by the parties at any
time before or after any required approval of matters presented in connection
with the Merger by the holders of EKCO Shares; PROVIDED, HOWEVER, that after any
such approval, if required, there shall be made no amendment that pursuant to
Section 251(d) of the DGCL requires further approval by such stockholders
without the further
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approval of such stockholders. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties.
8.3. EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement, or (c) waive compliance with any of the
agreements or conditions contained in this Agreement. Any agreement on the part
of a 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 this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
8.4. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time or the termination
of this Agreement.
8.5. NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery
or by facsimile and overnight courier to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to ACQUIROR:
CCPC Acquisition Corp.
One Little Falls Centre
2711 Centerville Rd.
Suite 202
Wilmington, DE 19808
Attention: Phyllis R. Yeatman
Facsimile: 302-633-7808
with copies to:
Borden, Inc.
180 East Broad Street
Columbus, Ohio 43215
Attention: William F. Stoll, Jr., Esq.
Senior Vice President and General Counsel
Facsimile: 614-627-8374
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David J. Sorkin, Esq.
Facsimile: 212-455-2502
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If to EKCO:
EKCO Group, Inc.
98 Spit Brook Road, Suite 102
Nashua, NH 03062
Attention: Malcolm L. Sherman
Chairman and Chief Executive Officer
Facsimile: (603) 888-1427
with a copy to:
Mintz, Levin, Cohn, Ferris
Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02110
Attention: Peter S. Lawrence, Esq.
Facsimile: (617) 542-2241
All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications with the overnight courier.
8.6 GOVERNING LAW/CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAWS RULES OF THE STATE OF
DELAWARE OR ANY OTHER JURISDICTION THAT WOULD CALL FOR THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF DELAWARE. EACH PARTY HERETO
HEREBY IRREVOCABLY CONSENTS, FOR ITSELF AND ITS LEGAL REPRESENTATIVES,
SUCCESSORS AND ASSIGNS, TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE
OF DELAWARE AND OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE
FOR ALL PURPOSES IN CONNECTION WITH ANY ACTION OR PROCEEDING WHICH ARISES FROM
OR RELATES TO THIS AGREEMENT, AND HEREBY WAIVES ANY RIGHTS IT MAY HAVE TO
PERSONAL SERVICE OF SUMMONS, COMPLAINT, OR OTHER PROCESS IN CONNECTION
THEREWITH, AND AGREES THAT SERVICE MAY BE MADE ON SUCH PARTY AND SENT IN
ACCORDANCE WITH THE PROVISIONS OF SECTION 8.5 HEREOF.
8.7 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH
SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii)
EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS
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BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS OF THIS SECTION 8.7.
8.8 CERTAIN DEFINITIONS. As used in this Agreement:
(a) "GOVERNMENTAL ENTITY" shall mean any United States federal, state
or local or any non-United States governmental, administrative or regulatory
authority, commission, body, agency, court, tribunal, arbitrator or other
authority.
(b) "INCLUDING". The word "including", when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language (such as "without limitation", "but not limited to", or words of
similar import) is used with reference to the word "including" or the similar
items or matters, but rather shall be deemed to refer to all other items or
matters that could reasonably fall within the broadest possible scope of the
general statement, term or matter.
(c) "KNOWLEDGE". "To the knowledge", "to the best knowledge,
information and belief", or any similar phrase shall be deemed to refer to the
conscious awareness after reasonable inquiry of any of the Chairman of the Board
and Chief Executive Officer, the Chief Financial Officer of EKCO, the General
Counsel of EKCO or the officer of EKCO in charge of tax, environmental matters,
employee benefits or information technology of the fact referred to.
8.9 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
8.10 INTEGRATION OF SCHEDULES. The Disclosure Schedule attached to this
Agreement is an integral part of this Agreement as if fully set forth herein,
and all statements or other information appearing in any section of the
Disclosure Schedule shall be deemed disclosed for all sections of the Disclosure
Schedule of which the relevance is readily apparent and not only in connection
with the specific representation in which they are explicitly referenced.
8.11 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, together with the
Exhibits and Schedules hereto, (i) constitutes the entire agreement among the
parties with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, other than the
Confidentiality Agreement (which shall survive the execution and delivery of
this Agreement), among the parties or any of them with respect to the subject
matter hereof and (ii) shall not be assigned by operation of law or otherwise,
provided, that ACQUIROR may assign its rights and obligations or those of
Acquisition Subsidiary to any subsidiary, 80% or more of the capital stock of
which is directly or indirectly owned by ACQUIROR or Borden, Inc., a New Jersey
corporation, and provided further that each such assignee assumes such
obligations and provided further that in no event shall such assignment relieve
ACQUIROR or Acquisition Subsidiary, as the case may be, of its obligations
hereunder if such assignee does not perform such obligations.
8.12 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective successors
and assigns. Nothing in this Agreement, expressed or implied is intended to or
shall confer upon any other person any rights, benefit or remedies of any nature
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whatsoever under or by reason of this Agreement; provided, however, that the
provisions of Section 5.9 shall inure to the benefit of and be enforceable by
the Indemnified Parties.
8.13 ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties and other persons
entitled to enforce this Agreement pursuant to this Agreement shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any federal or state
court located in Delaware (as to which the parties hereby irrevocably agree to
submit to jurisdiction for the purposes of such action), this being in addition
to any other remedy to which they are entitled at law or in equity.
8.14 VALIDITY. If any provision of this Agreement, or the application
thereof to any person or circumstance, is held invalid or unenforceable, the
remainder of this Agreement, and the application of such provision to other
persons or circumstances, shall not be affected thereby, and to such end, the
provisions of this Agreement are agreed to be severable.
8.15 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument.
8.16 NO RULE OF CONSTRUCTION. The parties acknowledge that this
Agreement was initially prepared by EKCO, and that all parties have read and
negotiated the language used in this Agreement. The parties agree that, because
all parties participated in negotiating and drafting this Agreement, no rule of
construction shall apply to this Agreement which construes ambiguous language in
favor of or against any party by reason of that party's role in drafting this
Agreement.
8.17 PERFORMANCE BY ACQUISITION SUBSIDIARY. ACQUIROR hereby agrees to
cause Acquisition Subsidiary to comply with and perform its obligations
hereunder and to cause Acquisition Subsidiary to consummate the Offer, the
Merger and all other transaction as contemplated herein.
[Remainder of Page Intentionally Left Blank]
44
<PAGE>
IN WITNESS WHEREOF, ACQUIROR, Acquisition Subsidiary and EKCO have caused
this AGREEMENT AND PLAN OF MERGER to be executed by their respective duly
authorized officers, and have caused their respective corporate seals to be
hereunto affixed, all as of the day and year first above written.
EKCO GROUP, INC.
By: /S/ MALCOLM L. SHERMAN
----------------------------------------
Malcolm L. Sherman
Title Chairman and Chief Executive Officer
CCPC ACQUISITION CORP.
By: /S/ PHYLLIS R. YEATMAN
----------------------------------------
Phyllis R. Yeatman
Title President
EG TWO ACQUISITION CO.
By: /S/ THOMAS V. BARR
----------------------------------------
Thomas V. Barr
Title Vice President
45
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
CAPITALIZED TERMS USED HEREIN HAVE THE MEANINGS SET FORTH IN THE AGREEMENT AND
PLAN OF MERGER TO WHICH THIS ANNEX A IS ATTACHED.
Notwithstanding any other provision of the Offer, Acquisition Subsidiary
shall not be required to accept for payment or, subject to the applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, pay
for any EKCO Shares tendered pursuant to the Offer, and may terminate or amend
the Offer in a manner consistent with the terms of the Agreement and may
postpone the acceptance for payment of or the payment for any EKCO Shares
tendered in a manner consistent with the terms of the Agreement if (i)
immediately prior to the expiration of the Offer (as extended in accordance with
the Offer), the HSR/Foreign Antitrust Condition shall not have been satisfied,
(ii) immediately prior to the expiration of the Offer (as extended in accordance
with the Offer), the Minimum Condition shall not have been satisfied, or (iii)
at any time prior to the acceptance for payment of EKCO Shares, any of the
following conditions exist:
(a) there shall be any statute, rule or regulation, or any decree,
order or injunction, promulgated, enacted, entered or enforced by any
Governmental Entity which would (i) make the acquisition by Acquisition
Subsidiary of a material portion of the EKCO Shares illegal, or prohibit or
materially limit the ownership or operation by EKCO or any of the EKCO
Subsidiaries, or by ACQUIROR, Acquisition Subsidiary or any of ACQUIROR's
subsidiaries of all or any material portion of the business or assets of EKCO or
any of the EKCO Subsidiaries or ACQUIROR or any of its material subsidiaries, or
compelling Acquisition Subsidiary, ACQUIROR or any of ACQUIROR's subsidiaries to
dispose of or hold separate all or any material portion of the business or
assets of EKCO or any of the EKCO Subsidiaries or ACQUIROR or any of its
material subsidiaries, as a result of the transactions contemplated by the Offer
or this Agreement, or (ii) otherwise prohibit or restrict the making or
consummation of the Offer or the Merger (each a "Governmental Restriction");
PROVIDED, HOWEVER, that in order to invoke this condition, ACQUIROR and
Acquisition Subsidiary shall have used their reasonable best efforts to prevent
such Governmental Restriction or to lift, rescind, mitigate, reverse, cause to
expire, terminate or ameliorate the effects thereof;
(b) there shall be any action or proceeding brought or any imminent
action or proceeding meaningfully threatened by any Governmental Entity that
seeks an Order having any effect set forth in clause (a) above;
(c) the Board of Directors of EKCO shall have withdrawn, modified or
amended in a manner that is materially adverse to ACQUIROR or Acquisition
Subsidiary (including by way of any amendment to the Schedule14D-9) its
recommendation of the Offer, the Merger or this Agreement;
(d) EKCO shall have breached or failed to perform in any material
respect any of its material covenants or agreements (other than covenants or
agreements relating in any way to the Debt Offer) under the Agreement or EKCO
shall have willfully breached or willfully failed to perform in any material
respect any of the covenants or agreements relating in any way to the Debt
Offer;
(e) any of the representations and warranties of EKCO set forth in the
Agreement which are qualified as to Material Adverse Effect shall not be true
and correct when made and as of the expiration of the Offer, or any of the other
representations and warranties of EKCO set forth in the Agreement shall
46
<PAGE>
not be true and correct when made and as of the expiration of the Offer, which
failure would have a Material Adverse Effect (except in each case in the case of
representations and warranties of EKCO which address matters only as of a
particular date, which need only be true and correct as aforesaid as of such
date);
(f) this Agreement shall have been terminated in accordance with its
terms;
(g) ACQUIROR, Acquisition Subsidiary and EKCO shall have agreed in
writing that Acquisition Subsidiary shall terminate the Offer or postpone the
acceptance for payment of or the payment for EKCO Shares thereunder;
(h) there shall have occurred (i) any general suspension of, or
limitation on prices for trading in securities on the New York Stock Exchange,
American Stock Exchange, any national securities exchange or on the Nasdaq
National Market System for a period in excess of 24 hours (excluding any
suspension or limit resulting solely from physical damage or interference with
such exchanges not related to market conditions), (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, or (iii) a material adverse change in the general financial, bank
or capital markets, including, without limitation, a decline of a least 30% in
either the Dow Jones Average of Industrial Stocks or the Standard & Poor's 500
index from the date hereof; or
(i) a Distribution Date or a Stock Acquisition Date (as each such term
is defined in the Rights Agreement) shall have occurred pursuant to the Rights
Agreement;
which makes it inadvisable, as determined by Acquisition Subsidiary in good
faith, to proceed with the Offer or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of ACQUIROR and
Acquisition Subsidiary and may be asserted by ACQUIROR or Acquisition Subsidiary
regardless of the circumstances giving rise to any such condition or may be
waived by ACQUIROR or Acquisition Subsidiary in whole or in part at any time and
from time to time in their sole discretion. The failure by ACQUIROR or
Acquisition Subsidiary at any time to exercise any of the foregoing rights shall
not be deemed a waiver of any such right; the waiver of any such right with
respect to particular facts and circumstances shall not be deemed a waiver with
respect to any other facts and circumstances; and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
47
<PAGE>
ANNEX B
OPTION ELECTION
The undersigned holder of an option or options (the "Options") to
purchase [____________] shares (the "Option Shares") of common stock of EKCO
Group, Inc. ("EKCO"), par value $0.01 per share ("Common Stock"), hereby agrees
that, immediately prior to the consummation of the Offer, and contingent upon
the consummation of the Offer, each outstanding Option shall be deemed to be
fully exercisable (whether or not otherwise exercisable) and shall be cancelled
as of the date thereof, in exchange for a cash payment from Acquisition
Subsidiary equal to the aggregate amount that the undersigned would receive if
each of the Option Shares had been tendered to Acquisition Subsidiary pursuant
to the terms of the Offer, less the payment of the exercise price of each Option
Share and all withholding taxes attributable to such payment (the "Option
Payment").
The undersigned agrees that the exercise price (the "Exercise Price") of
each Option Share shall be deemed to be paid with the proceeds of an interest
free advance from EKCO (the "Advance"). The Advance shall be deemed to be repaid
in full on behalf of the undersigned by Acquisition Subsidiary from a portion of
the consideration due the undersigned pursuant to this Option Election, which
shall be paid as soon as practicable after the consummation of the Offer but in
no event more than 10 business days after the consummation of the Offer.
Simultaneously with such deemed repayment of the Advance, the undersigned shall
be entitled to receive from Acquisition Subsidiary a cash payment (the "Option
Payment") equal to the aggregate amount that the undersigned would receive if
each of the Option Shares had been tendered to Acquistion Subsidiary pursuant to
the terms of the Offer, less the demand repayment of the exercise price of each
Option Share and all withholding taxes attributable to such Option Payment.
The undersigned acknowledges that he or she has been advised that (i)
Options for which a valid Option Election has been executed and delivered to
EKCO that are not already vested will become vested immediately prior to the
expiration of the Offer (but contingent upon the purchase by Acquisition
Subsidiary of shares of Common Stock pursuant to the Offer), and (ii) upon the
receipt by the undersigned of the Option Payment pursuant to this Election, the
undersigned shall have no further rights under any Options. By signing this
Option Election, the undersigned is deemed to have agreed to the cancellation of
his or her Options. Pursuant to this Option Election, the undersigned shall have
no further rights under such Option.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to such terms in the Agreement and Plan of Merger, dated
as of August ___, 1999, by and among EKCO, INC., ACQUIROR and Acquisition
Subsidiary.
Print Name: _________________________
Date: __________________
48
<PAGE>
ANNEX C
RESTRICTED STOCK ELECTION
The undersigned holder of [_________] shares ("Restricted Shares") of
common stock of EKCO, Inc. ("EKCO"), par value $0.01 per share ("Common Stock"),
which were granted pursuant to the EKCO 1984 Restricted Stock Plan or the EKCO
1985 Restricted Stock Plan (the "Plans") and which shares are not fully vested
hereby agrees that, immediately prior to the purchase of shares of Common Stock
by Acquisition Subsidiary in its pending tender offer for any and all
outstanding shares of Common Stock (the "Offer"), and contingent upon such
purchase, the undersigned shall be deemed to have tendered each of the
Restricted Shares (regardless of the fact that the Restricted Shares were not
previously vested) to Acquisition Subsidiary pursuant to the Offer. As soon as
practicable after the consummation of the Offer but in no event more than 10
business days after the consummation of the Offer, the undersigned shall be
entitled to receive from Acquisition Subsidiary with respect to each Restricted
Share an amount equal to the Per Share Amount pursuant to the Offer.
The undersigned acknowledges that he or she has been advised that (i)
Restricted Shares for which a valid Restricted Stock Election has been executed
and delivered to EKCO will become vested immediately prior to expiration of the
Offer (but contingent upon the purchase by Acquisition Subsidiary of shares of
Common Stock pursuant to the Offer), (ii) that the Restricted Shares will be
deemed to be tendered in the Offer, and (iii) upon the purchase of Restricted
Shares pursuant to the Offer, the undersigned shall have no further rights under
the Restricted Shares.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to such terms in the Agreement and Plan of Merger, dated
as of August 4, 1999, by and among EKCO GROUP, INC., ACQUIROR and Acquisition
Subsidiary.
Print Name: _______________________
Date: _________________________
49
<PAGE>
ANNEX D
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
Agreement..............................................................Caption
Acquiring Person..........................................................3.23
Acquisition Proposal.......................................................5.2
Acquisition Subsidiary.................................................Caption
Acquiror...............................................................Caption
Advance................................................................Annex B
Blue Sky laws...........................................................3.5(b)
Certificate.............................................................2.6(c)
Certificate of Merger......................................................2.3
Claim...................................................................5.9(a)
Cleanup................................................................3.19(e)
Closing....................................................................2.2
Closing Date...............................................................2.2
Confidentiality Agreement...............................................5.4(b)
Debt Offer Documents....................................................5.9(b)
DGCL..................................................................Preamble
Dissenting Shares.......................................................2.5(d)
Distribution Date.........................................................3.23
EKCO...................................................................Caption
EKCO Balance Sheet......................................................3.6(b)
EKCO Common Stock.....................................................Preamble
EKCO Intellectual Property Rights......................................3.16(a)
EKCO Option................................................................1.4
EKCO Permits..............................................................3.15
EKCO Public Reports.....................................................3.6(a)
EKCO Shares...........................................................Preamble
EKCO Subsidiary............................................................3.3
EKCO Subsidiaries..........................................................3.3
EKCO Warrant............................................................2.5(f)
Effective Time .........................................................2.3
Environmental Laws.....................................................3.19(e)
ERISA..................................................................3.14(a)
ESOP....................................................................1.2(c)
ESOP Preferred Stock..................................................Preamble
Exchange Act..........................................................Preamble
Exchange Agent..........................................................2.6(a)
Exercise Price.........................................................Annex B
Existing Plans.........................................................5.11(a)
Existing Severance Benefits............................................5.11(b)
Expense Fee.............................................................7.2(c)
Governmental Entity.....................................................8.8(a)
Governmental Restriction............................................Annex A(a)
Including...............................................................8.8(b)
</TABLE>
50
<PAGE>
<TABLE>
<S> <C>
Initial Expiration Date.................................................1.1(d)
Junior Stock...............................................................3.2
Knowledge...............................................................8.8(c)
Laws................................................................3.5(a)(ii)
Leases....................................................................3.18
Lehman Brothers.......................................................Preamble
Material Adverse Effect.............................................3.1(b)(ii)
Material Contracts.........................................................3.9
Material IP Agreement..................................................3.16(a)
Merger................................................................Preamble
Merger Consideration....................................................2.5(c)
Minimum Condition.......................................................1.1(b)
NAME.......................................................................2.1
Offer.................................................................Preamble
Offer Documents.........................................................1.1(c)
Offer to Purchase.......................................................1.1(c)
Option Agreement........................................................2.6(c)
Option Election.........................................................1.3(a)
Options................................................................Annex B
Option Payment.........................................................Annex B
Option Plans........................................................2.5(e)(ii)
Option Shares..........................................................Annex B
Orders..............................................................3.5(a)(ii)
Other Contracts............................................................3.9
Payment Fund............................................................2.6(b)
Per Share Amount......................................................Preamble
Plan...................................................................3.14(a)
Plans..................................................................3.14(a)
Properties.............................................................3.19(c)
Proxy Statement...........................................................3.25
Regulated Materials....................................................3.19(e)
Restricted Shares......................................................Annex C
Restricted Stock...........................................................1.5
Restricted Stock Election..................................................1.5
Restricted Stock Plans.....................................................1.5
Rights................................................................Preamble
Rights Agreement......................................................Preamble
Schedule 13E-3..........................................................1.1(d)
Schedule 14D-1..........................................................1.1(c)
Schedule 14D-9..........................................................1.2(b)
SEC.....................................................................1.1(c)
Senior Notes............................................................5.9(b)
Senior Notes Identure...................................................5.9(b)
Senior Notes Indenture Amendment........................................5.9(b)
Shares Acquisition Date...................................................3.23
Significant Contracts......................................................3.9
Stockholders' Meeting...................................................5.3(a)
Stock Option Plans.........................................................1.4
Surviving Corporation.................................................Preamble
</TABLE>
51
<PAGE>
<TABLE>
<S> <C>
Superior Proposal..........................................................5.2
Systems....................................................................3.2
Taxes.....................................................................3.12
Tender Offer Acceptance Date............................................2.5(e)
Termination Fee.....................................................7.2(b)(ii)
Third Party.........................................................7.2(b)(ii)
Third Party Acquisition..........................................7.2(b)(ii)(a)
Third Party Intellectual Property Rights...............................3.16(a)
To the knowledge .......................................................8.8(c)
To the best knowledge, information and belief...........................8.8(c)
Year 2000 Compliant.......................................................3.20
15 Day Right............................................................1.1(b)
</TABLE>
<PAGE>
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
This Amendment No. 1 (the "Amendment") to the Agreement and Plan of
Merger (the "Agreement") by and among CCPC Acquisition Corp., a Delaware
corporation ("ACQUIROR"), EG Two Acquisition Co., a Delaware corporation
("Acquisition Subsidiary"), and ECKO Group, Inc., a Delaware corporation
("ECKO"), dated as of August 5, 1999, is made and entered into as of the 10th
day of August, 1999 by and among ACQUIROR, Acquisition Subsidiary, and ECKO.
Capitalized terms used but not defined herein shall have the respective meanings
ascribed to them in the Agreement.
WHEREAS, ACQUIROR, Acquisition Subsidiary and ECKO are parties to the
Agreement and wish to clarify and amend certain of the provisions of the
Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and in the Agreement, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. The last sentence of Section 1.3(a) of the Agreement is hereby
amended and restated to read as follows:
Notwithstanding the foregoing, following the election or appointment of
Acquisition Subsidiary's designees to the Board of Directors of EKCO pursuant to
this Section 1.3 and until the Effective Time, (i) Acquisition Subsidiary shall
only be entitled to designate up to that number of directors that is one less
than the total number of directors on the EKCO Board, regardless of the total
number of such directors, and the Board of Directors of EKCO shall have at least
one director who was a director on August 5, 1999 (provided that EKCO will cause
there to be at least three directors at all times prior to the Effective Time),
(ii) any amendment of this Agreement adverse to EKCO, its stockholders, holders
of options, holders of warrants, directors, officers or employees, any
termination of this Agreement by EKCO, any amendment of the indemnification or
exculpation provisions of the certificate of incorporation or by-laws of EKCO in
effect on August 5, 1999, any extension of time for the performance of
ACQUIROR's or Acquisition Subsidiary's obligations hereunder, any waiver of any
condition for the benefit of EKCO or any of the obligations or other acts of
ACQUIROR or Acquisition Subsidiary, or any waiver or exercise of EKCO's or its
stockholder's rights, remedies or benefits hereunder shall require the approval
(in addition to the approval of the Board of Directors as a whole) of a majority
of the directors, or of the director, of EKCO then in office who was or were
director(s) on August 5, 1999, and (iii) ACQUIROR will cause Acquisition
Subsidiary not to, and Acquisition Subsidiary will not take any action to cause
its designees to constitute a greater number of directors than provided in this
Agreement.
2. The third sentence of Section 5.5 of the Agreement is hereby amended
and restated as follows:
<PAGE>
For purposes of this Section 5.5, Section 5.9, Section 6.1(a), Section
7.1(b) and condition (a) set forth in ANNEX A, "reasonable best efforts" of
ACQUIROR shall not require ACQUIROR to agree to any prohibition, limitation, or
other requirement which would prohibit or materially limit the ownership or
operation by EKCO or any of the EKCO Subsidiaries, or by ACQUIROR, Acquisition
Subsidiary or any of ACQUIROR's subsidiaries of all or any material portion of
the business or assets of EKCO or any of the EKCO Subsidiaries or ACQUIROR or
any of its material subsidiaries, or compel Acquisition Subsidiary, ACQUIROR or
any of ACQUIROR's subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of EKCO or any of the EKCO
Subsidiaries or ACQUIROR or any of its material subsidiaries.
3. The first sentence of Section 5.8 of the Agreement is amended and
restated as follows:
Until the six year anniversary date of the Effective Time, the ACQUIROR
and Acquisition Subsidiary agree that all rights to indemnification or
exculpation now existing in favor of the present and former officers, directors,
employees and other indemnified parties (the "Indemnified Parties") of EKCO as
provided in EKCO's Certificate of Incorporation or by-laws or otherwise in
effect as of the date hereof shall survive the Merger and shall continue in full
force and effect, and ACQUIROR shall cause the Surviving Corporation to, and the
Surviving Corporation shall, keep in effect all such indemnification and
exculpation provisions to the fullest extent permitted under applicable law,
which provisions shall not be amended, repealed or otherwise modified for such
six-year period after the Effective Time, except as required by applicable law
or except to make changes permitted by applicable law that would enlarge the
exculpation or rights of indemnification thereunder.
4. Section 5.9(d) of the Agreement is amended and restated as follows:
At or prior to consummation of the Debt Offer, ACQUIROR will provide to
EKCO all necessary funds to purchase the Senior Notes pursuant to the Debt
Offer. For the avoidance of doubt, consummation of the Offer shall be a
condition to consummation of the Debt Offer.
5. Section 6.1(a) of the Agreement is hereby amended and restated as
follows:
no Governmental Entity shall have issued an Order or injunction or
shall have enacted or promulgated any statute, rule or regulation which would
prohibit or restrict the consummation of the Merger; PROVIDED, HOWEVER, that if
the foregoing has occurred, each party shall use its reasonable best efforts to
lift, rescind, cause to expire, terminate or ameliorate the effects of any such
Order or injunction or statute, rule or regulation;
6. Section 7.1(c) of the Agreement is hereby amended and restated as
follows:
(c) by either ACQUIROR or EKCO if the consummation of the
Offer shall not have occurred on or before 120th day following the date hereof;
PROVIDED that the right to terminate this Agreement under this Section 7.1(c)
shall not be available to any party whose
2
<PAGE>
failure to fulfill any covenant, agreement or obligation under this Agreement
has been the cause of or resulted in the failure of the consummation of the
Offer to occur on or before such date; and provided, further, that if the Offer
or the Merger shall not have been consummated solely due to the waiting period
(or any extension thereof) or approvals under the HSR Act or any applicable
foreign competition laws not having expired or been terminated or received, then
such date shall be extended to the 180th day following the date hereof;
7. Section 7.2(a) of the Agreement is hereby amended and restated as
follows:
In the event of termination of this Agreement pursuant to this Article
VII, this Agreement, except for the provisions of Section 5.4(b), Section 5.7,
this Section 7.2 and Article VIII, and, provided that the Offer shall have been
consummated prior to termination, Section 5.8 (which shall survive for a period
of six years from the date of termination) and Section 5.11 (which, as to
Sections 5.11(a) and 5.11(b), shall survive for one year after termination and,
as to Sections 5.11(c) and 5.11(d), shall survive termination), shall forthwith
become void and have no further effect, without liability on the part of any
party or its affiliates, directors, officers or stockholders. Nothing in this
Section 7.2 or Section 8.4 shall relieve any party to this Agreement of
liability for breach of this Agreement on or prior to the date of termination.
8. Section 8.4 of the Agreement is amended and restated as follows:
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective Time
or the termination of this Agreement; PROVIDED, HOWEVER, that this Section 8.4
shall in no way limit the obligations of the parties under any covenant or
agreement contained herein or therein that by its terms applies or is to be
performed in whole or in part after the Effective Time, including Article II,
and Sections 5.8, 5.11 and 5.12, which shall survive the Effective Time.
9. Section 8.12 of the Agreement is hereby amended deleting the term
"5.9" and inserting the term "5.8" in place thereof.
10. The last paragraph of the Agreement immediately preceding the
signature blocks thereof is hereby amended by deleting the clause ", and have
caused their respective corporate seals to be hereunto affixed," from such
paragraph.
11. Except as expressly modified hereby, the Agreement is hereby
ratified and confirmed and shall remain in full force and effect.
3
<PAGE>
IN WITNESS WHEREOF, ACQUIROR, Acquisition Subsidiary and EKCO have duly
executed this Amendment or caused this Amendment to be duly executed by their
respective duly authorized officers as of the day and year first written above.
CCPC ACQUISITION CORP.
By: /s/ Malcolm L. Sherman
-------------------------------------------
Malcolm L. Sherman
Title: Chairman and Chief Executive Officer
EG TWO ACQUISITION CO.
By: /s/ Phyllis R. Yeatman
-------------------------------------------
Phyllis R. Yeatman
Title: President
EKCO GROUP, INC.
By: /s/ Thomas V. Barr
-------------------------------------------
Thomas V. Barr
Title: Vice President
4
<PAGE>
BORDEN, INC.
180 East Broad Street
Columbus, Ohio 43215
Borden, Inc. a New Jersey corporation, hereby guarantees the obligations of CCPC
Acquisition Corp. and EG Two Acquisition Co. (and any of their permitted
assignees or transferees pursuant to Section 1.1(d)(v) of the Agreement (as
defined below), or any of their successors or other permitted assigns) under
Articles I and II of the attached Agreement and Plan of Merger, dated August 5,
1999, between CCPC Acquisition Corp., EG Two Acquisition Co. and EKCO Group,
Inc. (the "Agreement").
Dated as of August 5, 1999
Borden, Inc.
By:/s/ WILLIAM F. STOLL, JR.
------------------------------------------
Name: William F. Stoll, Jr.
Title: Senior Vice President
<PAGE>
Exhibit 4
[LETTERHEAD]
May 3, 1999
Mr. Robert Kidder
Chairman and Chief Executive Officer
Borden Incorporated
180 East Broad Street, 30th Floor
Columbus, OH 43215
Dear Sirs:
In connection with your consideration of a possible transaction or series
of related transactions with EKCO Group, Inc. and/or its subsidiaries or
affiliates (collectively, with such subsidiaries or affiliates, the "Company"),
the Company is prepared to make available to you certain information concerning
the business, financial condition, operations, prospects, assets and liabilities
of the Company. As a condition to such information being furnished to you and
your affiliates, directors, officers, employees, agents or advisors (including,
without limitation, attorneys, accountants, consultants, bankers and financial
advisors) (collectively, "Representatives"), you agree to treat any information
concerning the Company (whether prepared by the Company, its advisors or
otherwise and irrespective of the form of communication) which has been or will
be furnished or made available to you or to your Representatives by or on behalf
of the Company (herein collectively referred to as the "Evaluation Material") in
accordance with the provisions of this letter agreement, and to take or abstain
from taking certain other actions hereinafter set forth.
Without limiting the foregoing the term "Evaluation Material" shall be
deemed to include (i) all notes, analyses, compilations, studies,
interpretations or other documents or materials prepared by you or your
Representatives which contain, reflect or are based upon, in whole or in part,
the information furnished to you or your Representatives pursuant hereto and
(ii) any information relating to the Company furnished heretofore to you or any
of your Representatives. The Company reserves the right not to furnish any
Evaluation Material relating to the Company or the business, assets,
liabilities, results of operations, financial condition or prospects of the
Company. The term "Evaluation Material" does not include information which (i)
is or becomes generally available to the public other than as a result of a
disclosure by you or your Representatives, (ii) was within your possession prior
to its being furnished to you by or on behalf of the Company, provided that the
source of such information was not known by you or any of your Representatives,
after reasonable investigation, to be bound by a confidentiality agreement with
or other contractual, legal or fiduciary obligation of confidentiality to the
Company or any other party with respect to such information or (iii) becomes
available to you on a non-confidential basis from a source other than the
Company or any of its Representatives, provided that such source is
<PAGE>
not bound by a confidentiality agreement with or other contractual, legal or
fiduciary obligation of confidentiality to the Company or any other party
with respect to such information.
You hereby agree that you and your Representatives shall use the Evaluation
Material solely for the purpose of evaluating a possible transaction between the
Company and you, that the Evaluation Material will be kept confidential by you
and your Representatives and that you and your Representatives will not disclose
any of the Evaluation Material in any manner whatsoever; provided, however, that
(i) you may make any disclosure of such information to which the Company gives
its prior written consent and (ii) any of such information may be disclosed to
your Representatives who need to know such information for the sole purpose of
evaluating a possible transaction with the Company, who agree to keep such
information confidential in accordance with this letter agreement and who are
provided with a copy of this letter agreement and agree to be bound by the terms
hereof to the same extent as if they were parties hereto. In any event, you
shall be responsible for any breach of this letter agreement by any of your
Representatives and you agree, at your sole expense, to take all reasonable
measures (including but not limited to court proceedings) to restrain your
Representatives from prohibited or unauthorized disclosure or use of the
Evaluation Material.
In addition, you agree that, without the prior written consent of the
Company, you and your Representatives will not disclose to any other person the
fact that the Evaluation Material has been made available to you, that
discussions or negotiations are taking place concerning a possible transaction
involving the Company or any of the terms, conditions or other facts with
respect thereto (including the status thereof), unless in the written opinion of
your counsel such disclosure is required by law and then only with as much prior
written notice to the Company as is practical under the circumstances. Without
limiting the generality of the foregoing, you further agree that, without the
prior written consent of the Company, you will not, directly or indirectly,
enter into any agreement, arrangement or understanding, or any discussions which
might lead to such agreement, arrangement or understanding, with any other
person regarding a possible transaction involving the Company. The term "person"
as used in this letter agreement shall be broadly interpreted to include the
media and any corporation, partnership, group, individual or other entity.
You further agree that, without the prior consent of Lehman Brothers, all
communications regarding the proposed transaction, requests for additional
information, and discussions or questions regarding procedures, will be
submitted or directed only to Lehman Brothers and not to the Company or any of
its affiliates or any of their respective directors, officers or employees.
In the event that you or any of your Representatives are requested or
required (by deposition, interrogatories, requests for information or documents
in legal proceedings, subpoena, civil investigative demand or other similar
process) to disclose any of the Evaluation Material, you shall provide the
Company with prompt written notice of any such request or requirement so that
the Company may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this letter agreement. If, in the absence of a
protective order or other remedy or the receipt of a waiver by the Company, you
or any of your Representatives are nonetheless, in the written opinion of your
counsel, legally compelled to disclose Evaluation Material, you or your
Representative may, without liability hereunder, disclose only that portion of
the Evaluation Material which such counsel advises you is legally required to be
disclosed, provided that you exercise your reasonable best efforts to preserve
the
2
<PAGE>
confidentiality of the Evaluation Material, including, without limitation,
by cooperating with the Company to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Evaluation Material.
If you decide that you do not wish to proceed with a transaction with the
Company, you will promptly inform the Company of that decision. In that case, or
at any time upon the request of the Company for any reason or for no reason, you
will promptly deliver to the Company all Evaluation Material (and all copies
thereof) furnished to you or your Representatives by or on behalf of the Company
pursuant hereto. In the event of such a decision or request, all other
Evaluation Material prepared by you or your Representatives shall be destroyed
and no copy thereof shall be retained and you agree to certify in writing that
such destruction has occurred. Notwithstanding the return or destruction of the
Evaluation Material, you and your Representatives will continue to be bound by
your obligations of confidentiality and other obligations hereunder.
You understand and acknowledge that neither the Company nor any of its
Representatives (including without limitation Lehman Brothers Inc.) make any
representation or warranty, express or implied, as to the accuracy or
completeness of the Evaluation Material. You agree that neither the Company nor
any of its Representatives (including without limitation Lehman Brothers Inc.)
shall have any liability to you or to any of your Representatives relating to or
resulting from the use of the Evaluation Material. Only those representations or
warranties which are made in a final definitive agreement regarding the
transactions contemplated hereby, when, as and if executed, and subject to such
limitations and restrictions as may be specified therein, will have any legal
effect.
In consideration of the Evaluation Material being furnished to you, you
hereby agree that, for a period of 2 years from the date hereof, neither you nor
any of your affiliates will solicit to employ or employ any of the current
directors, officers or employees of the Company so long as they are directors of
or employed by the Company without obtaining the prior written consent of the
Company. The foregoing shall not apply to directors, officers or employees of
the Company who respond to solicitation made by general circulation media not
targeted at such person. Additionally, the foregoing shall not apply to
directors, officers or employees of the Company who respond to solicitation made
by executive search agencies not targeted at such person that are commenced no
earlier than one year of the date hereof.
In consideration of the Evaluation Material being furnished to you, you
hereby further agree that, without the prior written consent of the Board of
Directors of the Company, for a period of 24 months from the date of termination
of your discussions with the Company regarding a possible transaction, neither
you nor any of your affiliates (as such term is defined in Rule 12b-2 of the
Securities Exchange Act of 1934, as amended), acting alone or as part of a
group, will acquire or offer or agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities (or direct or indirect rights or
options to acquire any voting securities) of the Company, or otherwise seek to
influence or control, in any manner whatsoever, the management or policies of
the Company.
3
<PAGE>
You agree that unless and until a final definitive agreement regarding a
transaction between the Company and you has been executed and delivered, neither
the Company nor you will be under any legal obligation of any kind whatsoever
with respect to such a transaction by virtue of this letter agreement except for
the rights and obligations specifically agreed to herein. You further
acknowledge and agree that the Company reserves the right, in its sole
discretion, to reject any and all proposals made by you or any of your
Representatives with regard to a transaction between the Company and you, and to
terminate discussions and negotiations with you at any time.
The Company reserves the right to assign all of its rights, powers and
privileges under this letter agreement (including, without limitation, the right
to enforce all of the terms of this letter agreement) to any person who enters
into the transactions contemplated by this letter agreement.
It is understood and agreed that no failure or delay by the Company in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.
It is further understood and agreed that any breach of this letter
agreement by you or any of your Representatives would result in irreparable harm
to the Company, that money damages would not be a sufficient remedy for any such
breach of this letter agreement and that the Company shall be entitled to
equitable relief, including injunction and specific performance, as a remedy for
any such breach. You further agree to waive, and to use your best efforts to
cause your Representatives to waive, any requirement for the securing or posting
of any bond in connection with any such remedy. Such remedies shall not be
deemed to be the exclusive remedies for a breach by you of this letter agreement
but shall be in addition to all other remedies available at law or equity to the
Company.
The provisions hereof are severable and, in the event any provision hereof
is determined in any circumstances to be unlawful or unenforceable, such
determination shall not affect any provision hereof or this letter agreement as
a whole or the application of such provision in any other circumstances.
Each of the covenants and agreements of a party hereto set forth herein is
given or made in consideration of the covenants and agreements of the other
party hereto and for other good and valuable consideration the receipt and
sufficiency of which are hereby mutually acknowledged. Such covenants and
agreements shall survive the termination or other cessation of any discussions
or negotiations regarding a possible Transaction.
The agreements set forth in this letter agreement may be modified or waived
only by a separate writing signed by the Company and you or the receiving party
expressly modifying or waiving such agreements.
This letter agreement shall be governed by and construed in accordance with
the laws of the State of New York and may not be amended or terminated except
pursuant to a written agreement duly executed by you and the Company.
4
<PAGE>
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned, whereupon this letter agreement
shall become a binding agreement between you and the Company.
Very truly yours,
EKCO Group, Inc.
/s/ TORREY J. BROWDER
--------------------------------------------
Lehman Brothers Inc.
as financial advisor to, and on behalf of,
EKCO Group, Inc.
Accepted and agreed as of
the date first written above:
BORDEN, INC.
By: /s/ JOHN B. MULLER
----------------------------------------
Name: John B. Muller
Title: Principal and Vice President,
Corporate Strategy and Development
5
<PAGE>
EXHIBIT 5
<TABLE>
<S> <C> <C>
EKCO Group, Inc.
Phone: 603 888-1212
98 Spit Brook Road, Suite 102
[LOGO] Nashua, New Hampshire 03062-5738 Fax: 603 888-1427
</TABLE>
August 12, 1999
To the Shareholders of
Ekco Group, Inc.
We are pleased to inform you that on August 5, 1999, Ekco Group, Inc., a
Delaware corporation (the "Company"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") with CCPC Acquisition Corp., a Delaware
corporation, and its wholly owned subsidiary, EG Two Acquisition Corp., a
Delaware corporation (the "Purchaser"), both of which are affiliates of Borden,
Inc., a New Jersey corporation ("Borden"), pursuant to which the Purchaser has
today commenced a tender offer (the "Offer") to purchase all of the issued and
outstanding shares of the Company's common stock, par value $0.01 per share (and
the associated series A preferred share purchase rights), and the series B ESOP
convertible preferred stock, par value $.01 per share (together, the "EKCO
Shares") for $7.00 per EKCO Share, net to the seller in cash, without interest
thereon. Under the Merger Agreement, following the Offer, the Purchaser will be
merged with and into the Company (the "Merger"), and the Company will continue
as the surviving corporation.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, THE
OFFER AND THE MERGER AND HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR
TO AND IN THE BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS. THE BOARD
UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES IN THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission,
including, among other things, the opinion of Lehman Brothers, Inc., the
Company's financial advisor, that the cash consideration to be received by the
holders of EKCO Shares in the Offer and the Merger is fair from a financial
point of view to such holders.
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated August 11, 1999 of the Purchaser,
together with related materials, including a Letter of Transmittal to be used
for tendering your EKCO Shares. These documents set forth the terms and
conditions of the Offer and the Merger and provide instructions as to how to
tender your EKCO Shares. WE URGE YOU TO READ THE ENCLOSED MATERIALS CAREFULLY.
On behalf of the Board of Directors, I thank you for your past and
continuing support.
Sincerely,
/s/ Malcolm L. Sherman
Malcolm L. Sherman
Chairman and Chief Executive Officer.
<PAGE>
EXHIBIT 7
LEHMAN BROTHERS
August 4, 1999
Board of Directors
EKCO Group, Inc.
98 Spit Road, Suite 102
Nashua, New Hampshire 03062
Members of the Board:
We understand that EKCO Group, Inc. ("EKCO or the "Company), CCPC
Acquisition Corp. ("CCPC") and Eg Two Acquisition Co. ("Newco"), a newly formed
subsidiary of CCPC, are proposing to enter into an Agreement and Plan of Merger,
dated August 4, 1999, (the "Agreement"), pursuant to which Newco (or its
permitted designee) will commence a tender offer to purchase all the outstanding
shares of EKCO for $7.00 in cash per share and upon consummation of such tender
offer, Newco will be merged with and into EKCO and all the remaining shares
outstanding of EKCO will be converted into the right to receive $7.00 per share
in cash (the "Proposed Transaction"). The terms and conditions of the Proposed
Transaction are set forth in more detail in the Agreement.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company's stockholders of the consideration to be offered to such stockholders
in the Proposed Transaction. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, (2) publicly available
information concerning the Company that we believe to be relevant to our
analysis, including its Annual Report on Form 10-K for the fiscal year ended
January 3, 1999 and Quarterly Report on Form 10-Q for the quarter ended April 4,
1999 and its July 26, 1999 press release regarding its financial results for the
second quarter of 1999, (3) financial and operating information with respect to
the business, operations and prospects of EKCO furnished to us by EKCO, (4) a
trading history of the Company's common stock from July 30, 1997 to the present
and a comparison of that trading history with those of other companies that we
deemed relevant, (5) a comparison of the historical financial results and
present financial condition of EKCO with those of other companies that we deemed
relevant, (6) the results of our efforts to solicit indications of interest from
third parties with respect to a puchase of all or a portion of the Company's
business and (7) a comparison of the financial terms of the Proposed Transaction
with the financial terms of certain other transactions that we deemed relevant.
In addition, we have had discussions with the management of the Company
concerning its business, operations, assets, financial condition and prospects
and have undertaken such other studies, analyses and investigations as we deemed
appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without assuming
any responsibility for independent verification of such information and have
further relied upon the assurances of management of the Company that they are
not aware of any facts or circumstances that would make such information
inaccurate or misleading. With respect to the financial projections of EKCO,
upon advice of the Company we have assumed that such projections have been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the management of the Company as to the future financial
performance of EKCO and we have relied upon such projections in performing our
analysis. In arriving at our opinion, we have conducted only a
<PAGE>
limited physical inspection of the properties and facilities of the Company and
have not made or obtained any evaluations or appraisals of the assets or
liabilities of the Company. Our opinion necessarily is based upon market,
economic and other conditions as they exist on, and can be evaluated as of, the
date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the consideration to be
offered to the stockholders of the Company in the Proposed Transaction is fair
to such stockholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is contingent
upon the consummation of the Proposed Transaction. In addition, the Company has
agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company in the past and have received customary fees for such
services. In the ordinary course of our business, we may trade in the debt and
equity securities of the Company for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to
whether to accept the consideration to be offered to the stockholders in
connection with the Proposed Transaction.
Very truly yours,
/s/ Mark W. Filipski
LEHMAN BROTHERS
<PAGE>
EXHIBIT 14
SCHEDULE TO EKCO GROUP, INC.
FORM OF NON-QUALIFIED STOCK OPTION AND REPURCHASE AGREEMENT, AS AMENDED
The foregoing Form of Non-Qualified Stock Option and Repurchase Agreement,
as amended, is the form utilized by the Company for each of the following stock
option grants, including the December 14, 1998 grants which replaced and
repriced non-exercised stock options granted at exercise prices above $5.00 per
share, for each of the following present or former officers of the Company. Date
of grant, number of shares granted, exercise price and term of each option are
as noted below. An asterisk (*) in the Shares Granted column denotes the options
which were repriced.
<TABLE>
<CAPTION>
No. of Shares Shares
Name and Position Grant Date Granted Exercise Price Term
- ----------------- ---------- ------- -------------- ----
<S> <C> <C> <C> <C>
John Jay Althoff, Vice President, 12/14/98 7,089 $ 3.87500 10 yrs.
Secretary & General Counsel
Stuart B. Cohen, Former Vice President, 12/14/98 4,577* 3.87500 10 yrs., 1 mo.
Strategic Planning & Business 12/14/98 8,384* 3.87500 10 yrs., 1 mo.
Development 02/04/97 6,424 4.25000
Peter D. Conopask, Vice President, 02/16/99 10,000 3.53125 10 yrs.
Information Technology, and Chief
Information Officer
Donato A. DeNovellis, Executive Vice 12/14/98 11,553* 3.87500 10 yrs., 1 mo.
President, Finance & Administration 12/14/98 10,248* 3.87500 10 yrs., 1 mo.
& Chief Financial Officer 12/14/98 14,628* 3.87500 10 yrs., 1 mo.
12/14/98 16,041* 3.87500 10 yrs., 1 mo.
02/04/97 12,269 4.25000 10 yrs., 1 mo.
02/10/98 7,045* 3.87500 10 yrs.
12/14/98 9,880* 3.87500 10 yrs.
Brian R. McQuesten, Vice President & 01/18/90 8,500 2.56250 10 yrs., 1 mo.
Controller 12/14/98 3,658* 3.87500 10 yrs., 1 mo.
12/14/98 3,425* 3.87500 10 yrs., 1 mo.
12/14/98 4,355* 3.87500 10 yrs., 1 mo.
12/14/98 4,168* 3.87500 10 yrs., 1 mo.
12/14/98 5,392* 3.87500 10 yrs., 1 mo.
02/04/97 4,131 4.25000 10 yrs., 1 mo.
12/14/98 2,470* 3.87500 10 yrs.
Linda R. Millman, Associate General 12/14/98 1,958* 3.87500 10 yrs., 1 mo.
Counsel and Assistant Secretary
Malcolm L. Sherman, Chairman & 07/28/98 100,000 7.84380 10 yrs.
Chief Executive Officer
Robert Varakian, President, EKCO 12/14/87 18,023* 3.87500 10 yrs., 1 mo.
Housewares & B. VIA International 11/14/97 42,273* 3.87500 10 yrs.
Housewares, Inc.
Jeffrey A. Weinstein, Executive Vice 01/18/90 22,000 2.56250 10 yrs., 1 mo.
President and President & Managing 12/14/98 10,590* 3.87500 10 yrs., 1 mo.
Director of EKCO International, Inc. 12/14/98 20,552* 3.87500 10 yrs., 1 mo.
12/14/98 11,273* 3.87500 10 yrs., 1 mo.
12/14/98 9,831* 3.87500 10 yrs., 1 mo.
12/14/98 10,763* 3.87500 10 yrs., 1 mo.
02/04/97 8,246* 3.87500 10 yrs., 1 mo.
12/14/98 7,410* 3.87500 10 yrs.
</TABLE>
<PAGE>
Exhibit 26
EKCO GROUP, INC.
98 Spit Brook Road, Suite 102
Nashua, New Hampshire 03062-5738
August 3, 1999
Mr. J. Jay Althoff
21 Cavanaugh Road
Wellesley, MA 02481
Dear Jay:
On August 3, 1999, the Board of Directors of EKCO Group, Inc. (the "Company")
approved the recommendation of the Company's Compensation Committee to amend its
employment arrangement with you as originally set forth in that certain letter
dated September 16, 1997, a copy of which is attached hereto as Exhibit A (the
"Original Letter"), as amended by letter dated May 20, 1999 (the "First
Amendment"), a copy of which is attached hereto as Exhibit B, to provide for the
payment of two (2) years of Adjusted Cash Salary in the event of a Change of
Control and Constructive Termination. Thus, the first paragraph of the amendment
set forth in the First Amendment is amended as follows:
Following a Change of Control (as hereinafter defined) and
upon an event of Constructive Termination (as hereinafter defined) or
termination of your employment without good cause following a Change of
Control, you shall receive as severance within ten (10) days of such
event a lump-sum payment equal to two (2) times your Adjusted Cash
Salary (as hereinafter defined) in effect on the date of such
Constructive Termination. For the purposes hereof, the time when a
Constructive Termination occurs shall be the day any event occurs which
is included in the definition of Constructive Termination below.
This letter agreement shall be entitled the "Second Amendment."
Except as expressly provided for in this Second Amendment, the Original Letter
as amended by the First Amendment is hereby ratified and confirmed and shall
continue in full force and effect.
<PAGE>
Please acknowledge your acceptance of the foregoing by countersigning and
returning a duplicate original of this letter to Linda Millman, Associate
General Counsel of the Company, as soon as possible.
Very truly yours,
/s/ DONATO A. DENOVELLIS
---------------------------------------------
Donato A. DeNovellis
Executive Vice President, Finance and
Administration, and Chief Financial Officer
Acknowledged and Agreed:
/s/ J.JAY ALTHOLFF
- -------------------------------
J. Jay Althoff
Date: 8 August, 1999
-------------------
2
<PAGE>
[EKCO GROUP, INC. LETTERHEAD]
SEPTEMBER 16, 1997
Mr. Jay Althoff
312 Washington Street
Building 2 - Apt. 4
Wellesley Hills, MA 02181
Dear Jay:
It is with great pleasure that I extend an offer of employment to you as Vice
President/General Counsel of EKCO Group, Inc. reporting to me in Nashua, New
Hampshire. The specifics of our offer are as follows:
1. Your base salary will be $130,000, paid semi-monthly.
2. You will participate in the Incentive Program for EKCO Management with a
targeted bonus of twenty percent of base salary determined by company
performance and your personal performance against objectives. Your
participation will begin on the date you begin employment and your bonus
will be prorated for 1997.
3. You will participate in the EKCO Group, Inc. Stock Option Program, and
you will initially receive 15.000 stock options at the market price of
the stock the day you start employment. You will be eligible for
additional stock options, along with other executives of EKCO Group,
Inc., as the Board of Directors determines.
4. You will be provided an automobile allowance of $800 per month in
accordance with our policy.
5. You will participate in our benefits programs consisting of health,
life, and disability programs, as well as a 401K. You will be reimbursed
for the costs of continuing your current health benefits to bridge the
waiting period for existing conditions.
6. You will be eligible for four weeks vacation.
7. Following a Change of Control (as defined in the attached document) and
upon either an event of Constructive Termination (as defined in the
attached document) or termination of your employment without cause, you
shall receive severance equal to one year's base salary.
<PAGE>
Jay Althoff
Page 2
September 16, 1997
8. In the event that you are discharged for reasons other than cause during
the first two years of employment, you will receive six months
severance, after which you will receive one additional month for each
additional year of employment.
I look forward to your joining the EKCO Management Team and working with you.
Regards
/s/ Malcolm L. Sherman
MLS/Jam
Attachment
Accepted:
/s/ Jay Althoff
- -------------------------------------------
Jay Althoff
<PAGE>
ATTACHMENT 1
A "Change of Control" shall be deemed to have occurred (i) if any
"person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended), other than Ekco Group, Inc.
("Group") any employee stock plan of Group is or becomes the beneficial
owner, directly or indirectly, of securities of Group representing fifteen
percent (15%) or more of the outstanding Common Stock of Group, or (ii) ten
(10) days following the commencement of, or announcement of an intention to
make, a tender offer or exchange offer the consummation of which would result
in the beneficial ownership by any "person" of fifteen percent (15%) or more
of the outstanding Common Stock of Group, provided, however, that at the
conclusion of such ten (10) day period such person has not discontinued or
rescinded his intention to make such a tender or exchange offer or (iii) if
during any consecutive twelve (12) month period beginning on or after the
date hereof individuals who at the beginning of such period were directors of
Group cease, for any reason, to constitute at least a majority of the Board
of Directors of Group; or (iv) if a merger of, or consolidation involving,
Group in which Group's stock is converted into securities of another
corporation or into cash shall be consummated, or a plan of complete
liquidation of Group (whether or not in connection with a sale of all or
substantially all of Group's assets) shall be adopted and consummated, or
substantially all of Group's operating assets are sold (whether or not a plan
of liquidation shall be adopted or a liquidation occurs), excluding in each
case a transaction solely for the purpose of reincorporating Group in a
different jurisdiction or recapitalizing Group's stock.
As used herein, a "Constructive Termination" shall be deemed to have
occurred if and when (i) your base salary is decreased below the level in
effect on the date of your last salary adjustment, or the bonus percentage
applicable to your participation in any compensation bonus plan or
arrangement is reduced, without your consent, provided, however, that
nothing herein shall be construed to guarantee your bonus awards if
performance is below applicable targets, or (ii) the importance of your job
responsibilities is reduced without your consent, or (iii) a proposal is made
to relocate you to a location other than Nashua, New Hampshire or the greater
Boston, Massachusetts metropolitan area without your consent.
<PAGE>
Letterhead EKCO
May 20, 1999
Mr. J. Jay Althoff
21 Cavanagh Road
Wellesley, Massachusetts 02481
Dear Jay:
On February 10, 1999, the Board of Directors of ECKO Group, Inc. (the
"Company") approved the recommendation of the Company's Compensation Committee
to amend its employment arrangement with you as originally set forth in that
certain letter dated September 16, 1997, a copy of which is attached hereto as
Exhibit A (the "Original Letter"), to provide for immediate vesting of stock
options in the event of your death or total and permanent disability (as
defined) or in the event of a Change of Control (as defined) of the Company. The
obligations of the Company to you regarding the occurrence of a Change of
Control as set forth in the Original Letter are hereby amended and restated as
follows:
Following a Change of Control (as hereinafter defined) and
upon an event of Constructive Termination (as hereinafter defined) or
termination of your employment without good cause following a Change of
Control, you shall receive as severance within ten (10) days of such
event a lump-sum payment equal to your Adjusted Cash Salary (as
hereinafter defined) in effect on the date of such Constructive
Termination. For the purposes hereof, the time when a Constructive
Termination occurs shall be the day any event occurs which is included
in the definition of Constructive Termination below.
Immediately upon the occurrence of any of the Listed
Contingencies (as hereinafter defined), you (or your estate, as
appropriate) shall have the unconditional, unencumbered and free right,
title and interest in all shares of stock of the Company which were
granted, sold or optioned (subject, if your or your estate elect to
exercise unexercised rights, to your obligation to pay the option
exercise price or other purchase price to the extent theretofore not
paid) to you by the Company at any time prior to the date of such
Listed Contingency as if all restrictions imposed by the Company had
lapsed and all events necessary to vest in you (or your estate) such
rights, including the lapsing of time, had occurred, and the Company
shall take all such actions as may be necessary to release any then
existing restrictions imposed by the Company and waive any rights to
repurchase such shares. For the purposes of this Agreement, "Listed
Contingencies" shall be limited to the following events:
(1) The occurrence of a Change of Control while you are employed
by the Company, and without regard to whether or not your
employment by the Company is terminated, whether a
Constructive Termination occurs at such
<PAGE>
time or thereafter or the manner of any subsequent
termination of your employment; or
(2) Following a Change of Control and upon either an event of
Constructive Termination or termination by the Company of
your employment without good cause; or
(3) Termination of your employment as a result of your death; or
(4) Termination of your employment as a result of your permanent
and total disability, subject to following the provisions:
The determination that, by virtue of total and permanent
disability, you are unable to perform your duties hereunder
shall be made by a physician chosen by the Company and
reasonably satisfactory to you (or your legal
representative). The cost of such examination shall be borne
by the Company. Without limiting the generality of the
foregoing, unless otherwise agreed, you shall be
conclusively presumed to be permanently and totally disabled
hereunder if for reasons involving mental or physical
illness or physical injury you fail to perform such duties
for a period of one hundred eighty (180) days or more in any
twelve (12) month period. For the purposes of this
Subparagraph (4), the date of termination shall be the
earlier of the date of such physician's examination pursuant
to which such determination is made or the first business
day after which such 180-day period has expired.
This agreement is not intended nor shall it be deemed to be a
guarantee of employment with the Company or any affiliate.
As used herein, a "Change of Control" shall be deemed to have
occurred (i) if any "person" (as such term is used in Sections 13(d)
and 14(d)(2) of the Securities Exchange Act of 1934, as amended), other
than the Company or any employee stock plan of the Company, is or
becomes the beneficial owner, directly or indirectly, of securities of
the Company, representing fifteen percent (15%) or more of the
outstanding Common Stock of the Company, or (ii) ten (10) days
following the commencement of, or announcement of an intention to make,
a tender offer or exchange offer the consummation of which would result
in the beneficial ownership by any "person" of fifteen percent (15%) or
more of the Common Stock of the Company, provided, however, that at the
conclusion of such ten (10)) day period such person has not
discontinued or rescinded his intention to make such a tender or
exchange offer; or (iii) if during any consecutive twelve (12) month
period beginning on or after the date of this letter individuals who at
the beginning of such period were directors of the Company cease, for
any reason, to constitute at least a majority of the Board of Directors
of the Company; or (iv) if a merger of, or consolidation involving, the
Company in which the Company's stock is converted into securities of
another corporation or into cash shall be consummated, or a plan of
complete liquidation of the Company (whether or not in connection with
a sale of all or substantially all of the Company's assets) shall be
adopted and consummated, or substantially all of the Company's
operating assets are sold (whether or not a plan of liquidation shall
be adopted or a liquidation occurs), excluding in each case a
transaction solely for the purpose of
<PAGE>
reincorporating the Company in a different jurisdiction or
recapitalizing the Company's stock.
As used herein, a "Constructive Termination" shall be deemed
to have occurred if and when (i) your Adjusted Cash Salary is decreased
below the level in effect on the date of your last salary adjustment,
or the bonus percentage applicable to your participation in any
compensation bonus plan or arrangement is reduced, without your
consent, provided, however, that nothing herein shall be construed to
guarantee your bonus awards if performance is below applicable targets,
or (ii) the importance of your job responsibilities is reduced without
your consent, or (iii) a proposal is made to relocate you to a location
other than the Greater Boston, Massachusetts metropolitan area without
your consent.
As used herein, "Adjusted Cash Salary" shall be your annual
base salary as may be increased from time to time.
Except as expressly provided for in this letter, the Original Letter is
hereby ratified and confirmed and shall continue in full force and effect.
Please acknowledge your acceptance of the foregoing by countersigning
and returning a duplicate original of this letter to Linda Millman, Associate
General Counsel of the Company, as soon as possible.
Very truly yours,
/s/ DONATO A. DENOVELLIS
--------------------------------
Donato A. DeNovellis
Executive Vice President, Finance
and Administration, and Chief
Financial Officer
Acknowledged and Agreed:
/s/ J. JAY ALTHOFF
- ------------------------
J.Jay Althoff
Date: 5/20/99
- ------------------------
<PAGE>
RESOLUTIONS DATED MAY 25, 1995
REGARDING ECKO GROUP, INC. SEVERANCE POLICY
EXHIBIT 30
RESOLVED, that each exempt employee of Ekco Group, Inc. (the "Company") and its
subsidiaries whose employment is terminated, whose duties or responsibilities
are substantially diminished, or who is directed to relocate within 12 months
after a Change of Control, will receive, in addition to all other severance
benefits accorded to similarly situated employees, salary continuation benefits
for a period of months after such occurrence, determined by dividing his or her
then current yearly salary by $10,000 and rounded to the nearest whole number,
limited, however, to a total of twelve (12) months of salary continuation. As
used in this policy, a "Change of Control" shall be deemed to have occurred (i)
if any "person" (as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended), other than the Company or any
employee stock plan of the Company is or becomes the beneficial owner, directly
or indirectly, of securities of the Company representing fifteen percent (15%)
or more of the outstanding Common Stock of the Company; or (ii) ten (10) days
following the commencement of, or announcement of an intention to make, a tender
offer or exchange offer the consummation of which would result in the beneficial
ownership by an "person" of fifteen percent (15%) or more of the outstanding
Common Stock of the Company, provided however, that at the conclusion of such
ten (10) day period such person has not discontinued or rescinded his intention
to make such a tender or exchange offer, or (iii) if during any consecutive
twelve (12) month period beginning on or after November 6, 1991, individuals who
at the beginning of such period were directors of the Company cease, for any
reason, to constitute at least a majority of the Board of Directors of the
Company; or (iv) if a merger of or consolidation involving, the Company in which
the Company's stock is converted into securities of another corporation or into
cash shall be consummated, or a plan of complete liquidation of the Company
(whether or not in connection with a sale of all or substantially all of the
Company's operating assets) shall be adopted and consummated, or substantially
all of the Company's operating assets are sold (whether or not a plan of
liquidation shall be adopted or a liquidation occurs), excluding in each case a
transaction solely for the purpose of reincorporating the Company in a different
jurisdiction or recapitalizing the Company's stock; and
RESOLVED FURTHER, that this policy does not apply to any exempt employee of the
Company who is a party to a contractual commitment with the Company which
provides him or her with an amount equal to or greater than 12 months salary,
severance payment or salary continuation upon his or her termination in the
event of a Change of Control; and
RESOLVED FURTHER, that this policy may be rescinded at any time by the Company's
Board of Directors serving prior to a Change of Control.
