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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
(Rule 14D-101)
Solicitation/Recommendation Statement Under Section 14(d)(4)
of the Securities Exchange Act of 1934
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BENJAMIN MOORE & CO.
(Name of Subject Company)
BENJAMIN MOORE & CO.
(Name of Person(s) Filing Statement)
Common Stock, Par Value $3.33 1/3 Per Share
(Title of Class of Securities)
615649100
(CUSIP Number of Class of Securities)
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Donald E. Devine II
Vice President--Finance--Chief Financial Officer
Benjamin Moore & Co.
51 Chestnut Ridge Road
Montvale, New Jersey 07645
Telephone: (201) 573-9600
(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:
John J. Madden, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022-6069
(212) 848-4000
[_]Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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TABLE OF CONTENTS
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Page
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Item 1. Subject Company Information.................................... 1
Item 2. Identity and Background of Filing Person....................... 1
Item 3. Past Contacts, Transactions, Negotiations and Agreements....... 1
Item 4. The Solicitation or Recommendation............................. 18
Item 5. Person/Assets, Retained, Employed, Compensated or Used......... 22
Item 6. Interest in Securities of the Subject Company.................. 22
Item 7. Purposes of the Transaction and Plans or Proposals............. 22
Item 8. Additional Information......................................... 23
Item 9. Exhibits....................................................... 25
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Item 1. Subject Company Information.
The name of the subject company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") relates is Benjamin Moore &
Co., a New Jersey corporation (the "Company"). The address of the principal
executive offices of the Company is 51 Chestnut Ridge Road, Montvale, New
Jersey 07645. The telephone number of the principal executive offices of the
Company is (201) 573-9600.
The title of the class of equity securities to which this statement relates
is the common stock, par value $3.33 1/3 per share, of the Company (the
"Shares"). As of November 8, 2000, there were 26,469,381 Shares issued and
outstanding and 13,023,555 Shares held in the treasury of the Company.
Item 2. Identity and Background of Filing Person.
The name, address and telephone number of the Company, which is the person
filing the Schedule 14D-9, are set forth in Item 1 above.
This Schedule 14D-9 relates to the tender offer by B Acquisition, Inc., a
New Jersey corporation ("Purchaser") and a wholly owned subsidiary of
Berkshire Hathaway Inc., a Delaware corporation ("Parent"), disclosed in a
Tender Offer Statement on Schedule TO (the "Schedule TO"), dated November 17,
2000, to purchase all outstanding Shares at a purchase price of $37.82 per
Share, net to the seller in cash (the "Offer Price"), without interest, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated November 17, 2000 (the "Offer to Purchase"), and in the related Letter
of Transmittal (which together with the Offer to Purchase and any amendments
and supplements thereto collectively constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of November 8, 2000 (as such agreement may be amended and supplemented from
time to time, the "Merger Agreement"), by and among Parent, Purchaser and the
Company. The Merger Agreement provides, among other things, that as promptly
as practicable after the satisfaction or waiver of the conditions set forth in
the Merger Agreement and in accordance with the relevant provisions of the New
Jersey Business Corporation Act, as amended (the "NJBCA"), Purchaser will be
merged with and into the Company (the "Merger"). As a result of the Merger,
the Company will continue as the surviving corporation (the "Surviving
Corporation") and will become a wholly owned subsidiary of Parent. A copy of
the Merger Agreement is filed herewith as Exhibit 2 and is incorporated herein
by reference.
Concurrently with the execution and delivery of the Merger Agreement and as
a condition to Parent's and Purchaser's willingness to enter into the Merger
Agreement, Parent and Purchaser have entered into a Shareholders Agreement,
dated as of November 8, 2000 (the "Shareholders Agreement"), with all of the
Company's directors and with many of the trusts for which they serve as
trustee (the "Shareholders"), pursuant to which the Shareholders have, among
other things, (1) agreed to tender all Shares owned by the Shareholders
pursuant to the Offer, (2) granted to Parent and Purchaser an option,
exercisable under certain limited circumstances, to purchase all of the Shares
owned by the Shareholders at the price per Share paid in the Offer, and (3)
agreed to vote all Shares beneficially owned by the Shareholders in favor of
the Merger and the Merger Agreement and against any Acquisition Proposal or
Superior Proposal (as defined in The Merger Agreement--No Solicitation of
Transactions), in each case subject to and on the conditions set forth
therein.
As set forth in the Schedule TO, the address of the principal executive
offices of Parent is 1440 Kiewit Plaza, Omaha, Nebraska 68131. The telephone
number of the principal executive offices of Parent is (402) 346-1400. As set
forth in the Schedule TO, the address of the principal executive offices of
Purchaser is 1440 Kiewit Plaza, Omaha, Nebraska 68131. The telephone number of
the principal executive offices of Purchaser is (402) 346-1400.
Item 3. Past Contacts, Transactions, Negotiations and Agreements.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates with certain of its directors and executive officers
are, except as noted below, described in the Information Statement
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pursuant to Rule 14f-1 of the Securities Exchange Act of 1934 (the
"Information Statement") that is attached as Annex I hereto and incorporated
herein by reference. Except as described or referred to herein and in the
Information Statement, to the knowledge of the Company, as of the date hereof,
there are no material agreements, arrangements or understandings and no actual
or potential conflicts of interest between the Company or its affiliates and
(1) the Company's executive officers, directors or affiliates, or (2) Parent
or Purchaser, or their respective executive officers, directors or affiliates.
In considering the recommendation of the Company's Board of Directors (the
"Board") set forth in Item 4 below, the Company's shareholders should be aware
that certain members of the Company's management and certain members of the
Board have interests in the Offer and the Merger, which are described herein
and in the Information Statement and which may present them with certain
conflicts of interest. The Board was aware of these potential conflicts of
interest and considered them along with the other factors described in Item 4
below.
The Merger Agreement
The following is a summary of certain provisions of the Merger Agreement.
This summary is qualified in its entirety by reference to the Merger
Agreement, which is incorporated herein by reference, and a copy of which is
filed herewith as Exhibit 2. The Merger Agreement may be examined and copies
may be obtained at the place set forth in Item 1 above. Defined terms used
herein and not defined herein shall have the respective meanings assigned to
those terms 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 seven
business days after the initial public announcement of the execution of the
Merger Agreement. The obligation of Purchaser to accept for payment, and to
pay for, Shares tendered pursuant to the Offer is subject to the satisfaction
of the Minimum Condition (as defined below under the heading "Conditions to
the Offer") and certain other conditions that are described below under the
heading "Conditions to the Offer". Subject to the terms and conditions of the
Merger Agreement, Purchaser expressly reserves the right to waive any
condition to the Offer, to increase the price per Share payable in the Offer,
and to make any other changes in the terms and conditions of the Offer;
provided, however, Purchaser may not (1) waive the Minimum Condition (except
under circumstances whereby the "Option" (as defined below under the heading
"The Shareholders Agreement--the Option") is or, upon the expiration of the
Offer, will be, exercisable in accordance with its terms, provided that such
Option is exercised by Parent or Purchaser as soon as practicable after it
becomes so exercisable and, upon any such exercise, the Minimum Condition will
be satisfied), (2) decrease the price per Share payable in the Offer, (3)
reduce the maximum number of Shares to be purchased in the Offer, (4) impose
conditions to the Offer in addition to those set forth below under the heading
"Conditions to the Offer", (5) except as described below, extend the Offer,
(6) change the form of consideration payable in the Offer, or (7) make any
other change in the terms or conditions of the Offer that is otherwise adverse
to the Company or the holders of Shares.
The Merger Agreement also provides that Purchaser may, without the consent
of the Company, (1) extend the Offer for up to 30 business days beyond the
scheduled expiration date, which will be 20 business days following the
commencement of the Offer, if, at the scheduled expiration date of the Offer,
any of the conditions to Purchaser's obligation to accept for payment, and to
pay for, the Shares, will not be satisfied or, to the extent permitted by the
Merger Agreement, waived, (2) extend the Offer for any period required by any
rule, regulation or interpretation of the Securities and Exchange Commission
(the "SEC"), or the staff thereof, that is applicable to the Offer, or (3)
extend the Offer for an aggregate period of not more than five business days
beyond the latest applicable date that would otherwise be permitted under
clause (1) or (2) of this paragraph, if, as of such date, all of the
conditions to Purchaser's obligations to accept for payment, and to pay for,
the Shares are satisfied or waived, but the number of Shares validly tendered
and not withdrawn pursuant to the Offer equals 75% or more, but less than 90%,
of the outstanding Shares on a fully diluted basis so long as the Purchaser
irrevocably waives the satisfaction of any of the conditions to the Offer that
are described below under the heading "Conditions to the Offer" (other than
the Minimum Condition and the condition set forth in clause 3(a) under
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the heading "Conditions to the Offer") that subsequently may not be satisfied
during any such extension of the Offer. The Purchaser must extend the Offer if
(x) the sole condition remaining unsatisfied is the expiration or termination
of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") or (y) the conditions set
forth in clause 3(c) or 3(d) under the heading "Conditions to the Offer" are
not satisfied, so long as the breach can be cured and the Company is
vigorously attempting to cure such breach.
Subject to the terms and conditions of the Offer, Purchaser shall, and
Parent shall cause Purchaser to, pay, as promptly as practicable after the
expiration of the Offer, for all Shares validly tendered and not withdrawn.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with NJBCA, Purchaser will be
merged with and into the Company. As a result of the Merger, the separate
corporate existence of Purchaser will cease and the Company will continue as
the Surviving Corporation and will become a wholly owned subsidiary of Parent.
At the effective time of the Merger (the "Effective Time"), each Share issued
and outstanding immediately prior to the Effective Time (other than any Shares
held in the treasury of the Company or owned by Purchaser, Parent or any
direct or indirect wholly owned subsidiary of Parent or the Company) will be
cancelled and converted automatically into the right to receive the Offer
Price in cash (the "Merger Consideration"). Pursuant to the Merger Agreement,
each share of common stock, no par value per share, of Purchaser issued and
outstanding immediately prior to the Effective Time will be converted into and
exchanged for one share of common stock, no par value per share, of the
Surviving Corporation.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of the Company immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement provides that, at the Effective Time, the Restated
Certificate of Incorporation of the Company, as amended (the "Certificate of
Incorporation"), will be the Certificate of Incorporation of the Surviving
Corporation. The Merger Agreement also provides that the By-laws of Purchaser,
as in effect immediately prior to the Effective Time, will be the By-laws of
the Surviving Corporation.
Shareholders' Meeting. Pursuant to the Merger Agreement, the Company, acting
through the Board, shall, if required by applicable law to consummate the
Merger, duly call, give notice of, convene and hold a special meeting of its
shareholders as soon as practicable following the date on which Purchaser
completes the purchase of Shares pursuant to the Offer for the purpose of
considering and taking action upon the Merger Agreement (the "Shareholders'
Meeting"). If Purchaser acquires at least two-thirds of the outstanding
Shares, Purchaser will have sufficient voting power to approve the Merger,
even if no other shareholder votes in favor of the Merger.
Proxy Statement. The Merger Agreement provides that the Company shall, if
required by applicable law to consummate the Merger, prepare and file with the
SEC a preliminary proxy or information statement (the "Proxy Statement")
relating to the Merger Agreement and the Merger and shall use all reasonable
efforts to cause a definitive Proxy Statement to be mailed to its shareholders
at the earliest practicable time following the consummation of the Offer. The
Company, subject to its fiduciary duties under applicable law, has agreed to
include in the Proxy Statement the recommendation of the Board that
shareholders of the Company vote in favor of the approval and adoption of the
Merger Agreement and the Merger. Parent and Purchaser and any of their
respective subsidiaries have agreed to cause to be voted all Shares owned by
them in favor of the Merger Agreement and the Merger. The Merger Agreement
provides that, in the event Purchaser shall acquire at least 90% of the
outstanding Shares, Parent, Purchaser and the Company will take all necessary
and appropriate action to cause the Merger to be effective, as soon as
practicable after such acquisition, without the Shareholders' Meeting.
Conduct of Business by the Company Pending the Merger. Pursuant to the
Merger Agreement, the Company has covenanted and agreed that, except as
otherwise contemplated therein or as required by applicable law, between the
date of the Merger Agreement and the Effective Time, unless Parent otherwise
agrees in writing, the Company will and will cause its subsidiaries (the
"Subsidiaries" and, individually, a "Subsidiary") to
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conduct its business in the usual, regular and ordinary course consistent with
past practice; and the Company will use, and will cause its Subsidiaries to
use, all reasonable efforts to preserve substantially intact the business
organization of the Company and the Subsidiaries and to preserve the current
relationships of the Company and the Subsidiaries with customers, suppliers
and other persons with whom the Company or any Subsidiary has significant
business relations. The Merger Agreement provides that without limiting the
generality of these previous covenants, and except as expressly contemplated
therein or as required by applicable law, neither the Company nor any
Subsidiary will, between the date of the Merger Agreement and the Effective
Time, directly or indirectly do, or propose to do, any of the following,
without the prior written consent of Parent, which consent will not be
unreasonably withheld or delayed: (1) amend or otherwise change its
Certificate of Incorporation or By-laws or equivalent organizational
documents; (2) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (a) any
shares of capital stock of any class of the Company or any Subsidiary, or any
options, warrants, convertible securities or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest, of
the Company or any Subsidiary (except for the issuance of Shares issuable
pursuant to Company stock options outstanding on the date of the Merger
Agreement) or (b) any assets of the Company or any Subsidiary for
consideration in excess of $10 million in the aggregate, except in the
ordinary course of business and in a manner consistent with past practices;
(3) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock (other than dividends from any Subsidiary to the Company),
except for (a) the year 2000 fourth quarter extra cash dividend on the Shares
in an amount not to exceed 12 cents per Share and (b) regular cash dividends
on the Shares declared and paid quarterly in amounts not to exceed 21 cents
per Share and at times consistent with past practices; (4) reclassify,
combine, split, subdivide or redeem, purchase or otherwise acquire, directly
or indirectly, any of its capital stock; (5) (a) acquire any corporation,
partnership, other business organization or any division thereof or any
material amount of assets, other than acquisitions of materials, equipment,
supplies or services in the ordinary course consistent with past practice, (b)
except for borrowings under existing credit facilities, incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans or advances (other than loans
between the Company and its Subsidiaries) or capital contributions or
investments in any person other than the Company or its Subsidiaries for an
amount in excess of $10 million in the aggregate, (c) authorize capital
expenditures which are, in the aggregate, in excess of $10 million for the
Company and the Subsidiaries taken as a whole, provided such expenditures are
in the ordinary course of business or in connection with the restructuring of
manufacturing and distribution facilities of the Company disclosed in the SEC
reports filed by the Company prior to the date of the Merger Agreement or (d)
enter into or amend any contract, agreement, commitment or arrangement with
respect to any of the matters set forth in this clause (5); (6) increase the
compensation payable or to become payable to its directors, officers or
employees, except for increases (a) in accordance with past practices in
salaries or wages of employees of the Company or any Subsidiary who are not
directors or officers of the Company or (b) pursuant to employment, severance
or other agreements with directors, officers or employees in effect as of the
date of the Merger Agreement, or grant any severance or termination pay to, or
enter into any employment or severance agreement with, any director, officer
or, other than in accordance with past practices, other employee of the
Company or of any Subsidiary or establish, adopt, enter into or amend (other
than any amendments which are required by law) any collective bargaining,
bonus, profit-sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance, change of control, health, welfare or other plan, agreement, trust,
fund, policy or arrangement for the benefit of any director, officer or
employee; (7) other than as required by GAAP to be implemented following the
date of the Merger Agreement, make any material change to its accounting
policies or procedures; (8) take any action that would, or is reasonably
likely to, result in (a) any of the representations and warranties of the
Company in the Merger Agreement becoming untrue or (b) any of the conditions
to the Merger described under the heading "Conditions to the Merger" not being
satisfied; (9) except in the usual, regular, and ordinary course of business
and consistent with past practice, make any tax election or settle or
compromise any federal, state, local or foreign income tax liability; (10)
except as set forth below under the heading "No Solicitation of Transactions",
waive or fail to enforce any provision of any confidentiality or standstill
agreement to which the Company is a party; or (11) make any commitment to take
any of actions prohibited in this paragraph.
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Company Board Representation. The Merger Agreement provides that, promptly
after (1) the purchase of and payment for any Shares by Purchaser or any of
its affiliates pursuant to the Offer as a result of which Purchaser and its
affiliates own at least two-thirds of the Shares outstanding on a fully
diluted basis on the date of purchase, and (2) compliance with Section 14(f)
of the Exchange Act and Rule 14f-1 promulgated thereunder, whichever occurs
later, and from time to time thereafter, Purchaser will be entitled to
designate up to such number of directors, rounded up to the next whole number,
on the Board as will give Purchaser representation on the Board equal to the
product of the total number of directors on the Board (giving effect to the
directors elected pursuant to this sentence), multiplied by the percentage
that the aggregate number of Shares beneficially owned by Purchaser or any
affiliate of Purchaser following such purchase bears to the total number of
Shares then outstanding, and the Company will, at such time, promptly take all
actions necessary to cause Purchaser's designees to be elected as directors of
the Company, including increasing the size of the Board or securing the
resignations of incumbent directors, or both. Notwithstanding the foregoing,
in the event that Purchaser's designees are to be appointed or elected to the
Board, until the Effective Time, the Board shall have at least two directors
who are directors on the date of the Merger Agreement.
The Merger Agreement provides that following the election or appointment of
Purchaser's designees in accordance with the Merger Agreement and prior to the
Effective Time, any amendment of the Merger Agreement or the Certificate of
Incorporation or By-laws of the Company, any termination of the Merger
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of Parent or Purchaser or
waiver of any of the Company's rights thereunder, will require the concurrence
of a majority of those directors of the Company then in office who were not
designated by Purchaser.
Access to Information; Confidentiality. Pursuant to the Merger Agreement,
until the Effective Time, the Company agreed to, and agreed to cause the
Subsidiaries and the officers, directors, employees, auditors and agents of
the Company and the Subsidiaries to, afford the officers, employees and agents
of Parent and Purchaser reasonable access at all reasonable times and upon
reasonable notice to the officers, employees, agents, properties, offices,
plants and other facilities, books and records of the Company and each
Subsidiary, and to furnish Parent and Purchaser such financial, operating and
other data and information as Parent or Purchaser, through its officers,
employees or agents, may reasonably request, except if such disclosure would
violate the terms of any applicable laws or governmental regulations or if
such information is about a third party and such disclosure would violate any
confidentiality agreement or provision in effect on the date of the Merger
Agreement to which the Company or any Subsidiary is a party. Parent and
Purchaser have agreed that such information shall be subject to the terms of
the Confidentiality Agreement outlined below.
No Solicitation of Transactions. Upon the execution of the Merger Agreement,
the Company has agreed to immediately cease any discussions or negotiations
with any third parties that may be ongoing with respect to an Acquisition
Proposal (as defined below). The Company has agreed that it will not, and it
will not permit any of its Subsidiaries, and it will not authorize or permit
any of its officers, directors, employees, or any affiliate, investment
banker, financial advisor, attorney, accountant or other advisor or
representative retained by it or any of its Subsidiaries, to directly or
indirectly, solicit, initiate or knowingly encourage any inquiries relating
to, or the submission of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal or participate in discussions or
negotiations regarding any Acquisition Proposal, or, in connection with any
Acquisition Proposal, furnish to any person any information or data with
respect to or access to the properties of the Company or any of its
Subsidiaries, or take any other action to facilitate the making of any
proposal that constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal. "Acquisition Proposal" means (1) any proposal or offer
from any person relating to any direct or indirect acquisition or purchase of
(a) 15% or more of the assets of the Company or (b) over 15% of any class of
equity securities of the Company; (2) any tender offer or exchange offer as
defined pursuant to the Exchange Act that, if consummated, would result in any
person beneficially owning 15% or more of any class of equity securities of
the Company; or (3) any merger, consolidation, business combination, share
exchange, sale of all or a substantial part of the assets, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any
of its Subsidiaries, other than the transactions contemplated by the Merger
Agreement.
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If, however, after the execution of the Merger Agreement and prior to the
purchase of Shares pursuant to the Offer, the Board receives an unsolicited
Acquisition Proposal that constitutes, or in the good faith judgment of the
Board would reasonably be expected to lead to, a Superior Proposal (as defined
below) and the Company is not in material breach of any of its obligations
under this "No Solicitations of Transactions" covenant, the Company may
furnish information with respect to the Company and its Subsidiaries pursuant
to a customary confidentiality agreement and participate in discussions or
negotiations regarding such Acquisition Proposal subject to certain notice
requirements to Parent. Prior to taking any such action, however, the Board
must determine in good faith, after consultation with its financial advisor
and outside counsel, that the failure to take such actions would be
inconsistent with its fiduciary duties to the Company's shareholders under
applicable law. A material violation of the restrictions set forth in the
second sentence of the preceding paragraph by any officer of the Company or
any Subsidiary or any affiliate, director or investment banker, attorney or
other advisor or representative of the Company or any Subsidiary is deemed a
breach by the Company except where such violation is not related to a Superior
Proposal which the Company engages in discussions or enters into any agreement
with respect thereto. "Superior Proposal" means (1) a bona fide written
proposal or offer from any person for a direct or indirect acquisition or
purchase of (a) 50% or more of the assets of the Company or (b) over 50% of
any class of equity securities of the Company; (2) any tender offer or
exchange offer that, if consummated, would result in any person beneficially
owning 50% or more of any class of equity securities of the Company; or (3)
any merger, consolidation, business combination, share exchange, sale of all
or a substantial part of the assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company, other than the
transactions contemplated by the Merger Agreement, (a) which, if consummated,
would result in a transaction that is more favorable to the Company's
shareholders than the Offer and the Merger (taking into account all relevant
factors, including the likelihood of such offer resulting in a consummated
transaction) and (b) for which there is no financing contingency and the third
party has demonstrated that financing is reasonably likely to be obtained, in
each case as determined by the Board in its good faith judgment (after
consultation with its financial advisor and outside counsel).
The Company has also agreed that neither the Board nor any committee of the
Board shall (1) withdraw or modify, or propose publicly to withdraw or modify,
in a manner adverse to Parent or Purchaser, the approval, determination of
advisability or recommendation by the Board or any such committee of the
Offer, the Merger or the Merger Agreement unless the Board has determined in
good faith, after consultation with its financial advisor and outside counsel,
that the Offer, the Merger or the Merger Agreement is no longer in the best
interests of the Company's shareholders and that such withdrawal or
modification is, therefore, required in order to satisfy its fiduciary duties
to the Company's shareholders under applicable law and the Company is not in
material breach of any of its obligations under this "No Solicitation of
Transactions" covenant, (2) approve or recommend, or propose publicly to
approve or recommend, any Acquisition Proposal or (3) cause the Company to
enter into any agreement with respect to any Acquisition Proposal.
Notwithstanding the foregoing, in the event that the Board determines (after
consultation with its outside counsel), prior to the purchase of Shares
pursuant to the Offer, that the failure to take such action would be
inconsistent with its fiduciary duties to the Company's shareholders under
applicable law and the Company is not in material breach of any of its
obligations under this "No Solicitation of Transactions" covenant, the Board
may, in response to a Superior Proposal that was unsolicited and made after
the date of the Merger Agreement, take any of the actions described in clause
(2) or (3) of this paragraph if the Board provides the Parent with three
business days' prior written notice of its intention to take such actions,
including the identity of the person making such Acquisition Proposal and
attaching the most current version of such Acquisition Proposal or any draft
of an acquisition agreement, if applicable.
The Merger Agreement provides that the Company shall promptly advise Parent
orally and in writing of, and periodically update Parent with respect to, any
Acquisition Proposal or any request for confidential information, the material
terms and conditions of such request or the Acquisition Proposal and the
identity of the soliciting party.
Employee Stock Options and Other Employee Benefits. The Merger Agreement
also provides that the Company will take all necessary action to ensure that
each outstanding Company Stock Option, whether or not exercisable and whether
or not vested, under any of the Company's 1998 Stock Incentive Plan, 1993
Stock
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Option Plan or any stock option agreement or employment agreement (the
"Company Stock Option Plans") will be cancelled by the Company immediately
prior to the Effective Time and, in exchange therefor, each holder of such
Company Stock Option shall be entitled to receive an amount in cash in respect
thereof equal to the product of (i) the excess, if any, of the Merger
Consideration over the per share exercise price thereof and (ii) the number of
shares subject thereto (such payment to be net of applicable withholding
taxes).
The Company also agreed to take all actions necessary to pass-through tender
rights with respect to the Shares held on behalf of the participants in the
Employee Stock Purchase Plan ("ESPP") and to tender those shares for which
instructions are received in accordance with those instructions. The Company
will receive the proceeds on behalf of the ESPP participants and will remit
those proceeds to the participants after withholding the balance of all
outstanding amounts due under any promissory notes thereunder from the
proceeds received in respect of such Shares.
From and after the Effective Time, Parent agreed to honor, and cause the
Surviving Corporation and its Subsidiaries to honor in accordance with their
terms, all contracts, agreements, arrangements, policies, plans and
commitments of the Company and its Subsidiaries as in effect immediately prior
to the Effective Time that are applicable to any current or former employees
or directors of the Company or any of its Subsidiaries. Parent also agreed
that, for a period of two years immediately following the Effective Time, it
will, or will cause the Surviving Corporation and its Subsidiaries to, provide
employee benefit and compensation plans, programs, contracts and arrangements
for the benefit of current or former employees of the Company and its
Subsidiaries which, in the aggregate, will provide benefits and compensation
that provide substantially comparable benefit levels and aggregate
compensation value to those provided to such employees as a group under the
employee benefit and compensation plans, programs, contracts and arrangements
of the Company and its Subsidiaries as in effect immediately prior to the
Effective Time; provided, however, that Parent will not have any obligation to
continue the stock option, stock purchase or other plans involving the
potential issuance of securities of the Surviving Corporation or Parent but
shall provide alternative benefits with substantially comparable value. In
addition, employees of the Company and its Subsidiaries shall receive credit
for purposes of eligibility to participate and vesting (but not for benefit
accruals) under any employee benefit plan, program or arrangement established
or maintained by the Surviving Corporation or any of its Subsidiaries for
service accrued or deemed accrued prior to the Effective Time with the Company
or any of its Subsidiaries; provided, however, that such crediting of service
shall not operate to duplicate any benefit or the funding of any such benefit.
Directors' and Officers' Indemnification and Insurance. The Merger Agreement
provides that from and after the Effective Time, Parent will cause the
Surviving Corporation as its sole shareholder to exculpate and indemnify,
defend, protect and hold harmless any person who is, has previously been or
who becomes prior to the Effective Time, an officer, director, employee or
agent (collectively, the "Indemnified Parties") of the Company against all
losses, claims, damages, liabilities, costs and expenses (including attorneys'
fees and expenses), judgments, fines, losses, and amounts paid in settlement
in connection with any actual or threatened action, suit, claim, proceeding or
investigation (each, a "Claim") to the extent based on, or arising out of, (1)
the fact that such person is or was a director, officer, employee or agent of
the Company or any of its Subsidiaries or is or was serving at the request of
the Company or any of its Subsidiaries as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or (2) the Merger Agreement, or any of the transactions
contemplated under the Merger Agreement, in each case to the extent that any
such Claim pertains to any matter or fact arising, existing, or occurring
prior to or at the Effective Time, regardless of whether such Claim is
asserted or claimed prior to, at or after the Effective Time, to the full
extent permitted under applicable law or the Company's Certificate of
Incorporation, By-laws or indemnification agreements in effect at the date of
the Merger Agreement; provided, however, that the Surviving Corporation will
not be required to indemnify an Indemnified Party with respect to any amounts
paid in settlement of any Claims without the written consent of Surviving
Corporation, which consent will not be unreasonably withheld or delayed. In
the event any Indemnified Party becomes involved in any capacity in any Claim
of the type described above, then from and after the Effective Time, Parent
will cause the Surviving Corporation to periodically advance to such
Indemnified Party its legal and other expenses, subject to the Indemnified
Party's undertaking to reimburse
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the amounts so advanced in the event of a final non-appealable determination
by a court of competent jurisdiction that the Indemnified Party is not
entitled thereto.
Under the Merger Agreement, all rights to indemnification and all
limitations of liability existing in favor of the Indemnified Party as
provided under applicable law or the Company's Certificate of Incorporation,
by-laws or indemnification agreements in effect at the date of the Merger
Agreement will survive the Merger and will continue in full force and effect
for a period of six years from the Effective Time, provided that if any Claim
or Claims are asserted or made within this six-year period, all
indemnification rights with respect thereto will continue until disposition of
any and all such Claims; provided, however, that any determination required to
be made with respect to whether an Indemnified Party's conduct complies with
applicable law or the Company's organizational documents will be made by
independent legal counsel selected by the Indemnified Party and reasonably
acceptable to Parent.
The Merger Agreement also provides that for a period of six years after the
Effective Time, Parent will cause the Surviving Corporation as its sole
shareholder to maintain in effect the current (or substantially similar)
policies of directors' and officers' liability insurance maintained by the
Company with respect to claims arising from or related to facts or events that
occurred at or before the Effective Time, subject to a 200% maximum premium.
Further Action; Consents; Filings. The Merger Agreement provides that each
of the parties thereto will use its reasonable best efforts and cooperate
fully with one another (1) to take or do, or cause to be taken or done, all
appropriate action, all things necessary, proper or advisable under applicable
law or otherwise to consummate and make effective the transactions
contemplated by the Merger Agreement as promptly as possible, (2) to make all
necessary filings, and thereafter make any other required submissions, with
respect to the Merger Agreement and the related transactions required under
applicable law and (3) to obtain all required authorizations, consents, orders
and approvals of all governmental authorities necessary in connection with the
execution and delivery and performance of the Merger Agreement. Each of the
Company and Parent has agreed to use its reasonable best efforts to contest
and resist any action, including legislative, administrative or judicial
action, and to have vacated, lifted, reversed or overturned any governmental
order that is in effect and that restricts, prevents or prohibits the
consummation of any of the transactions contemplated by the Merger Agreement.
Minority Shares of Benjamin Moore & Co. Limited. Under the Merger Agreement,
as soon as practicable after, but in no event later than ten business days
after the Effective Time, Parent or its affiliate(s) (including the Surviving
Corporation) will offer to acquire, through a merger, tender offer or other
transaction ("Minority Purchase Transaction"), all outstanding shares of
Benjamin Moore & Co., Limited, a Canadian corporation (the "Canadian Sub"),
not owned by the Surviving Corporation ("Minority Shares") for cash in an
amount per share equal to CDN$93.55 ("Canadian Per Share Price"). In addition,
simultaneously with the consummation of the Minority Purchase Transaction,
Parent agreed to cause Surviving Corporation to take all necessary action to
ensure that each outstanding stock option (a "Canadian Sub Stock Option"),
whether or not exercisable and whether or not vested, under the Canadian Sub's
Stock Option Plan, any stock option agreement or employment agreement, will be
canceled by the Surviving Corporation simultaneously with the consummation of
the Minority Purchase Transaction, such that each holder of a canceled
Canadian Sub Stock Option will be entitled to receive at the time of such
consummation or as soon as practicable thereafter from the Canadian Sub in
consideration for the cancellation of such Canadian Sub Stock Option a cash
amount equal to the product of (1) the number of shares of Canadian Sub
previously subject to such Canadian Sub Stock Option and (2) the excess, if
any, of the Canadian Per Share Price over the exercise price per share of the
Canadian Sub previously subject to such Canadian Sub Stock Option.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to absence of conflict, absence of certain
changes or events concerning the Company's business, compliance with law,
corporate authority, litigation, employee benefit plans, labor matters, real
property and leases, intellectual property, environmental matters and taxes.
8
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Conditions to the Offer. The Offer is conditioned upon, among other things,
there having been validly tendered and not withdrawn prior to the expiration
of the Offer at least the number of Shares that when added to the Shares
already owned by Parent, Purchaser or any subsidiary of Parent, if any, shall
constitute two-thirds of the then outstanding Shares on a fully diluted basis
(on a "fully diluted basis" meaning the number of Shares outstanding, together
with the Shares which the Company may be required to issue pursuant to options
or obligations outstanding at that date and which do not terminate upon
consummation of the Offer under any employee stock or similar benefit plans or
otherwise, whether or not vested or then exercisable) (the "Minimum
Condition").
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act, pay
for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any Shares tendered pursuant
to the Offer, and may extend, terminate or amend the Offer, if (1) immediately
prior to the expiration of the Offer, the Minimum Condition shall not have
been satisfied, (2) any applicable waiting period under the HSR Act or the
Canadian Competition Act shall not have expired or been terminated prior to
the expiration of the Offer, or (3) at any time on or after the date of this
Agreement and prior to the expiration of the Offer, any of the following
conditions shall exist:
(a) (i) there shall have been any statute, rule, regulation, judgment,
order or injunction entered, passed, promulgated, enforced, enacted or
issued, or applicable to the Offer by any Governmental Authority of
competent jurisdiction that (A) makes illegal, prohibits or materially
limits the ownership or operation by Parent, Purchaser or the Company of
all or a material portion of the business or assets of the Company and the
Subsidiaries, taken as a whole, as a result of the transactions
contemplated thereby; or (B) imposes limitations on the ability of Parent
or Purchaser to exercise effectively full rights of ownership of any
Shares, including, without limitation, the right to vote any Shares
acquired by Purchaser pursuant to the Offer on all matters properly
presented to the Company's shareholders, including, without limitation, the
approval of the Merger Agreement and the transactions contemplated thereby;
or (C) prohibits or makes illegal the acceptance for payment, payment for,
or purchase of Shares by Parent or Purchaser or the consummation of the
Offer or the Merger; or (D) otherwise renders Parent or Purchaser unable to
accept for payment, pay for, or to purchase some or all of the Shares; or
(ii) there shall have been any action or proceeding instituted by any
Governmental Authority and such action or proceeding is pending before a
Governmental Authority of competent jurisdiction that (A) seeks to make
illegal, prohibit or materially limit the ownership or operation by Parent
or Purchaser of all or a material portion of the business or assets of the
Company and the Subsidiaries, taken as a whole; or (B) seeks to impose
limitations on the ability of Parent or Purchaser to exercise effectively
full rights of ownership of any Shares, including, without limitation, the
right to vote any Shares acquired by Purchaser pursuant to the Offer on all
matters properly presented to the Company's shareholders, including,
without limitation, the approval of the Merger Agreement and the
transactions contemplated thereby; or (C) seeks to prohibit or make illegal
the acceptance for payment, payment for, or purchase of Shares by Parent or
Purchaser or the consummation of the Offer or the Merger; or (D) is
reasonably likely to result in a material delay in or seeks to restrict the
ability of Parent or Purchaser, or render Parent or Purchaser unable to
accept for payment, pay for, or to purchase some or all of the Shares;
(b) a Material Adverse Effect shall have occurred and be continuing;
(c) any representation or warranty of the Company in the Merger Agreement
that is qualified by a reference to Material Adverse Effect shall not be
true and correct or any such representation or warranty that is not so
qualified shall not be true and correct in all material respects, in each
case as if such representation or warranty was made as of such time on or
after the date of this Agreement (except for representations and warranties
made as of a specific date which shall be true and correct as of such
date);
(d) the Company shall have failed in any material respect to perform, or
to comply with, any material agreement or covenant of the Company to be
performed or complied with by it under the Merger Agreement (including,
without limitation, its agreements or covenants under the "No Solicitation
of Transactions" covenant);
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(e) the Merger Agreement shall have been terminated in accordance with
its terms; or
(f) Purchaser and the Company shall have agreed that Purchaser shall
terminate the Offer or postpone the acceptance for payment of or payment
for Shares thereunder.
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may be asserted or waived by either of them, in whole or in part, at any
time and from time to time, in the sole discretion of Parent or Purchaser.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (1) the Merger
Agreement and the transactions contemplated thereby will have been approved by
the affirmative vote of the shareholders of the Company to the extent required
by New Jersey Law and the Certificate of Incorporation; (2) any waiting period
(and any extension thereof) applicable to the consummation of the Merger under
the HSR Act and the Canadian Competition Act will have expired or been
terminated; (3) no governmental authority of competent jurisdiction will have
enacted, issued, promulgated, enforced or entered any law or injunction
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Merger illegal or otherwise prohibiting, precluding,
restraining or enjoining consummation of the transactions contemplated by the
Merger Agreement; and (4) Purchaser or its permitted assignee will have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer,
provided that this condition will not be applicable to the obligations of
Parent or Purchaser if, in breach of the Merger Agreement, Purchaser fails to
purchase any Shares validly tendered and not withdrawn pursuant to the Offer.
In addition, under the Merger Agreement, the obligations of Parent and
Purchaser to effect the Merger are also subject to the satisfaction of the
further condition (which may be waived in whole or in part by Parent) that the
Company will have performed in all material respects all material obligations
required to be performed by it under the Merger Agreement on or before the
earlier of (1) such time as Parent's or Purchaser's designees shall constitute
at least a majority of the Board pursuant to the Merger Agreement and (2) the
closing held pursuant to the Merger Agreement; provided, however, that Parent
or Purchaser will waive this condition if Parent or Purchaser does not
designate their nominees as directors on the Board promptly after the purchase
of and payment for any Shares by Purchaser pursuant to the Merger Agreement.
Termination. The Merger Agreement provides that it may be terminated and the
Merger and the other transactions contemplated thereby may be abandoned at any
time prior to the Effective Time, notwithstanding any requisite approval and
adoption of the Merger Agreement and the transactions contemplated thereby by
the shareholders of the Company: (1) by mutual written consent of each of
Parent, Purchaser and the Company; (2) by either Parent or the Company if (a)
the Offer has not been consummated on or prior to March 7, 2001 (the "Outside
Date"), provided that (i) the right to terminate the Merger Agreement will not
be available to any party whose failure to perform or fulfill any obligation
under the Merger Agreement has been the cause of, or resulted in, the failure
to complete the Offer on or prior to such date, (ii) the passage of such
period will be tolled for any part thereof during which any party is subject
to a nonfinal injunction, order, decree, ruling or other action restraining,
enjoining or otherwise prohibiting the consummation of the Offer and (iii) the
Outside Date will be extended day-by-day for each day tolled and in no event
will the Outside Date be extended past May 7, 2001; (b) any governmental
authority or court of competent jurisdiction has enacted, issued, promulgated,
enforced or entered any injunction, order, decree or ruling which is then in
effect and has the effect of making consummation of the Merger illegal or
otherwise prohibiting consummation of the Merger, and such injunction, order,
decree or ruling has become final and non-appealable, provided that the party
seeking to terminate the Merger Agreement has used its reasonable best efforts
to remove or lift such injunction, order, decree or ruling; (c) the Offer has
expired, terminated or been withdrawn pursuant to its terms without any Shares
being purchased therein, provided that the right to terminate the Merger
Agreement pursuant to this clause will not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the
cause of, or resulted in, the failure of Parent or Purchaser to purchase
Shares in the Offer; (3) by Parent if (a) due to an occurrence or circumstance
that, if occurring after the commencement of the Offer, would result in a
failure to satisfy any condition set forth in "Conditions to the Offer",
Parent and Purchaser have failed to commence the Offer on or
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<PAGE>
prior to the seventh business day after the public announcement of the
execution of the Merger Agreement, provided that Parent may not terminate the
Merger Agreement pursuant to this clause if Parent or Purchaser is in material
breach of the Merger Agreement; (b) the Company, the Board or any committee
thereof, prior to the purchase of the Shares pursuant to the Offer, has (i)
(A) withdrawn, modified or changed, or proposed publicly to withdraw, modify
or change, its approval or recommendation of the Offer, the Merger Agreement
or the Merger in a manner adverse to Parent, (B) failed to reconfirm its
recommendation within four business days after a written request to do so, or
(C) approved or recommended, or proposed publicly to approve or recommend, to
the shareholders of the Company an Acquisition Proposal, or (ii) the Board or
any committee thereof has resolved to take any of the actions set out in
clause (A), (B) or (C) listed above; or (4) by the Company if (a) Purchaser
has failed to commence the Offer within seven business days after the public
announcement of the execution of the Merger Agreement, provided that the
Company may not terminate the Merger Agreement pursuant to this clause if it
is in material breach of the Merger Agreement or (b) the Company concurrently
enters into a definitive agreement providing for a Superior Proposal, provided
that (i) prior thereto or simultaneously therewith, the Company has paid the
termination fee specified under the heading "Fees and Expenses" and (ii) the
Company has complied with certain of its obligations under the "No
Solicitation of Transactions" covenant.
In the event of the termination of the Merger Agreement, the Merger
Agreement provides that (1) written notice of such termination be given to the
other party or parties specifying the provision of the Merger Agreement
pursuant to which such termination is made and (2) the Merger Agreement will
forthwith become void and there shall be no liability thereunder on the part
of any party thereto except under the provisions of the Merger Agreement
related to fees and expenses described in the following paragraph and under
certain other provisions of the Merger Agreement which survive termination,
provided that nothing in the Merger Agreement will relieve any party from
liability for any breach of the Merger Agreement.
Fees and Expenses. In the event that the Merger Agreement is terminated by
the Company pursuant to the provision described in clause 4(b) under the
heading "Termination", the Company will pay Parent a fee of $25 million (the
"Fee"), payable in immediately available funds, prior to or simultaneously
with the entering into of a definitive agreement specified in such clause. In
the event that (1) (a) (i) the Merger Agreement is terminated pursuant to the
provision described in clause 3(b) under the heading "Termination", (ii) the
Merger Agreement is terminated by the Company pursuant to the provision
described in clause 2(a) under the heading "Termination" or (iii) the Offer
has remained open for at least 20 business days and the Minimum Condition has
not been satisfied and the Merger Agreement is therefore terminated by Parent
pursuant to the provision described in clause 2(c) under the heading
"Termination", (b) at the time of such termination (i) a third party has
publicly made an Acquisition Proposal and such Acquisition Proposal has not
been withdrawn or (ii) a bona fide Acquisition Proposal has been made to the
Company, and (c) on the date of such termination, Parent is not in material
breach of the Merger Agreement and the Minimum Condition has not been
satisfied and (2) a definitive agreement is entered into providing for an
Acquisition Proposal within one year of the date of such termination pursuant
to clause (1) of this sentence, then the Company will pay Parent promptly, but
in no event later than three business days after the entering into of such
agreement referred to in clause (2) of this sentence, the Fee, payable in
immediately available funds. In the event that the Company fails to pay the
Fee when due, the Company will reimburse Parent and the Purchaser for the
costs and expenses actually incurred or accrued by Parent and Purchaser in
connection with the collection of the Fee, together with interest on such
unpaid Fee. Except as set forth in this paragraph, all costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such expenses,
whether or not any transaction is consummated.
The Shareholders Agreement
The following is a summary of certain provisions of the Shareholders
Agreement. This summary is qualified in its entirety by reference to the
Shareholders Agreement, which is incorporated herein by reference, and a copy
of which is filed herewith as Exhibit 3. The Shareholders Agreement may be
examined and copies may be obtained at the place set forth in Item 1 above.
Defined terms used herein
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<PAGE>
and not defined herein shall have the respective meanings assigned to those
terms in the Shareholders Agreement.
Tendering of Shares. The Shareholders Agreement provides that promptly
following the commencement of the Offer, each Shareholder will tender, or
cause to be tendered, in the Offer all of his, her or its respective Shares
pursuant to the terms of the Offer.
Irrevocable Proxy. The Shareholders Agreement provides that from the date
thereof until the termination of the Shareholder's Agreement as provided for
therein, each Shareholder will vote, or direct to vote, such Shareholder's
Shares at every meeting of the shareholders of the Company however called (or
pursuant to any written consent, certificate or other document relating to the
Company that the law of the State of New Jersey may permit or require): (1) in
favor of the approval and adoption of the Merger Agreement and approval of the
Merger and all other transactions contemplated by the Merger Agreement and the
Shareholders Agreement; (2) against any action, agreement, transaction (other
than the Merger Agreement or the transactions contemplated thereby) or
proposal that (a) would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Company under the Merger
Agreement, (b) is reasonably likely to result in any of the conditions to the
Company's obligations under the Merger Agreement not being fulfilled, (c)
would result in any change in the directors of the Company, other than those
changes contemplated by the Merger Agreement, (d) would result in any change
in the present capitalization of the Company or any amendment to the Company's
corporate structure or business or (e) would result in any other action that
could reasonably be expected to impede, interfere with, delay, postpone or
affect in a materially adverse manner the transactions contemplated by the
Shareholders Agreement or the Merger Agreement or the likelihood of such
transactions being consummated; and (3) in favor of any other matter necessary
to the consummation of the transactions contemplated by the Merger Agreement
or the Shareholders Agreement and considered and voted upon by the
shareholders of the Company.
Pursuant to the Shareholders Agreement, each Shareholder revoked all prior
proxies or powers of attorney with respect to any of his, her or its Shares
and constitutes and appoints Parent and Purchaser, or any nominee(s)
designated by Parent and Purchaser, with full power of substitution and
resubstitution at any time during the term of the Shareholders Agreement, as
his, her or its true and lawful attorney and proxy ("Proxy"), for and in his,
her or its name, place, and stead to demand that the Company call a special
shareholders meeting for the purpose of considering any matter referred to in
the preceeding paragraph and to vote such Shareholder's Shares. Further, each
Shareholder agreed to execute any and all documents and instruments necessary
or appropriate to effectuate the intent of the section of the Shareholders
Agreement granting Parent and Purchaser the Proxy. The Proxy is irrevocable
and coupled with an interest.
No Solicitation of Transactions. Pursuant to the Shareholders Agreement,
each Shareholder agreed that during the term thereof, the Shareholder will
not, nor will it authorize any of its agents or representatives to, directly
or indirectly, solicit, initiate or knowingly encourage any inquiries relating
to, or the submission of, any Acquisition Proposal (as defined in The Merger
Agreement--No Solicitation of Transactions). Each Shareholder further agrees
that it will not, nor will it authorize any of its agents or representatives
to, during the term of the Shareholders Agreement, participate in any
discussions or negotiations (except with Parent or Purchaser) regarding, or
furnish to any person any information with respect to (except to Parent or
Purchaser), or take any action to facilitate the making of any proposal that
constitutes, or may reasonably be expected to lead to, an Acquisition
Proposal. Upon the execution of the Shareholders Agreement, each Shareholder
agreed to immediately cease any discussions or negotiations of such
Shareholder and his, her or its representatives or agents with any person
(other than Parent or Purchaser or their affiliates or representatives) with
respect to any of the foregoing. Each Shareholder agreed to notify Parent and
Purchaser promptly of (1) any such proposal or offer, or any inquiry, or
contact, (2) the material terms and conditions of such proposal, offer,
inquiry, or contact, (3) the identity of the person making such proposal, and
(4) any changes to such proposal.
The Option. Pursuant to the Shareholders Agreement, for the duration of the
term thereof, each Shareholder granted to Parent and Purchaser an irrevocable
option (the "Option") to purchase such
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<PAGE>
Shareholder's Shares at a price per Share equal in cash to $37.82 or any
higher price paid or to be paid by Parent or Purchaser pursuant to the Offer
or the Merger (the "Option Consideration"). The Option (1) will become
exercisable for all Shares subject thereto on the expiration date of the Offer
or, if later, the date on which (a) all waiting periods under the HSR Act or
other applicable law have expired or been waived and (b) there is no
preliminary or final injunction or other order issued by any governmental
authority prohibiting the exercise of the Option pursuant to the Shareholders
Agreement, if, but only if, (A) the number of Shares tendered in the Offer,
when added to the number of Shares not tendered, if any, that are subject to
the Option, will satisfy the Minimum Condition, and (B) Purchaser has accepted
for payment all Shares tendered and not withdrawn in the Offer, and (2) will
remain exercisable for a period of 15 days after the first date on which the
Option becomes exercisable pursuant to clause (1) of this sentence.
If the Option does not become exercisable due to (1) the termination or
withdrawal of the Offer prior to the expiration date of the Offer, or (2) the
failure of Purchaser to accept for payment all Shares tendered and not
withdrawn in the Offer, it will be deemed to have expired. In the event that
Parent or Purchaser wishes to exercise the Option, Parent or Purchaser, prior
to the expiration thereof, will send written notice to each Shareholder whose
Shares are subject to the Option, identifying the place for the closing of the
purchase of such Shares at least two business days prior to such closing.
Representations and Warranties. The Shareholders Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Shareholders as to absence of conflict, title to
shares, valid issuance and brokers.
No Disposition or Encumbrance of Shares. Pursuant to the Shareholders
Agreement, each Shareholder, severally and not jointly, agreed that, during
the term thereof, he, she or it will not, directly or indirectly, (1) sell,
assign, transfer, pledge, encumber or otherwise dispose of any of his, her or
its Shares, (b) deposit any of such Shares into a voting trust or enter into a
voting agreement or arrangement or grant any proxy or power of attorney other
than pursuant to the Shareholders Agreement, (3) enter into any contract,
option or other arrangement or undertaking with respect to the direct or
indirect sale, assignment, transfer or other disposition of any Shares (except
to Parent or Purchaser), or (4) take any action that would make any
representation or warranty of the Shareholder untrue or incorrect in any
material respect or have the effect of preventing or disabling the Shareholder
from performing his, her or its obligations under the Shareholders Agreement;
provided, however, that the Shareholder may transfer all or any of his, her or
its Shares for estate planning purposes to any person; provided, further, that
the obligations under the Shareholders Agreement will attach to such Shares
upon such transfer, and the transferee will be bound by such obligations.
Other Action. The Shareholders Agreement provides that each of the parties
to the Shareholders Agreement agrees to use all reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws to
consummate and make effective the transactions among the parties thereto
contemplated thereunder.
Termination. The Shareholders Agreement will terminate upon the earliest to
occur of (1) the closing of the exercise of the Option or the expiration of
the Option Period, if the Option is not exercised, (2) the termination of the
Offer, (3) the termination of the Merger Agreement and (4) the Effective Time.
Confidentiality Agreement
The following is a summary of certain provisions of the Confidentiality
Agreement, dated October 24, 2000, between the Company and Parent (the
"Confidentiality Agreement"). This summary is qualified in its entirety by
reference to the Confidentiality Agreement, which is incorporated herein by
reference, and a copy of which is filed herewith as Exhibit 4. The
Confidentiality Agreement may be examined and copies may be obtained at the
place set forth in Item 1 above.
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On October 24, 2000, the Company and Parent executed the Confidentiality
Agreement. Pursuant to the terms of the Confidentiality Agreement, the Company
agreed to provide to Parent certain non-public information concerning the
Company (the "Evaluation Material").
Under the terms of the Confidentiality Agreement, and as a condition to
furnish the Evaluation Material to Parent, Parent agreed: (1) the Evaluation
Material will be used solely for the purpose of evaluating a possible
transaction between the Company and Parent, or the consummation of a
transaction between the Company and Parent in a manner that the Company has
approved, and that such information will be kept confidential by Parent and
its representatives (which include attorneys, accountants, consultants,
bankers, financial advisors and any other representatives of Parent), except
to the extent that disclosure of such information (a) has been consented to in
writing by the Company, (b) is required by law or other applicable judicial or
governmental order or (c) is made to the representatives of Parent who need to
know such information for the purpose of evaluating, documenting or
consummating any possible transaction between the Company and Parent. Parent
will be responsible for any breach of the Confidentiality Agreement by it or
any of its representatives and agreed, at its sole expense, to take all
reasonable measures to restrain its representatives from prohibited or
unauthorized disclosure or use of the Evaluation Material. Without the prior
written consent of the Company, Parent agreed not to, and agreed to direct its
representatives not to, disclose to any person (1) that the Evaluation
Material has been made available to Parent or its representatives, (2) that
discussions or negotiations are taking place concerning a possible transaction
between the Company and Parent or (3) any terms, conditions or other facts
with respect to any such possible transaction, including the status thereof.
Pursuant to the terms of the Confidentiality Agreement, for a period of
three years from the date of the Confidentiality Agreement, Parent agreed not
to, without the prior written consent of the Company, (1) directly or
indirectly solicit any of the current employees of the Company or its
Subsidiaries for employment or employ anyone to whom Parent had been
introduced as a result of Parent's consideration of a transaction with the
Company; (2) acquire or offer to acquire, any voting securities or assets of
the Company or any of its Subsidiaries, (3) propose to enter into, directly or
indirectly, any merger or business combination involving the Company or any of
its Subsidiaries, (4) otherwise seek to influence or control, in any manner
whatsoever, the management or policies of the Company, (5) make any public
announcement with respect to, or submit a proposal for, or offer of any
extraordinary transaction involving the Company or any of its securities or
assets, or (6) assist, advise or encourage any other person in doing any of
items (2) to (5) listed above. Parent agreed that all Evaluation Material
disclosed by the Company will remain the property of the Company. Parent also
agreed that within five days after being so requested by the Company, Parent
will return or destroy all documents furnished to Parent or its
representatives by the Company, and, except to the extent Parent is advised in
writing by counsel that such destruction is prohibited by law, Parent will
also destroy all written material prepared by Parent or its representatives
based upon any Evaluation Material. The Confidentiality Agreement shall remain
in effect for three years commencing October 24, 2000.
Arrangements with Executive Officers, Directors or Affiliates of the Company
Share Ownership. If the directors and executive officers of the Company who
own Shares tender their Shares in the Offer or their Shares are acquired in
the Merger, they will receive the Offer Price for their Shares on the same
terms as the other public shareholders. As of November 8, 2000, the directors
and executive officers of the Company beneficially owned in the aggregate
6,582,388 Shares and, if they tender all of their Shares in the Offer or their
Shares are acquired in the Merger, they will receive a payment for their
Shares in the aggregate amount of $248,945,914.
Senior Executive Severance Plan. In 1996, the Company adopted the Senior
Executive Severance Protection Plan (the "Senior Severance Plan"), in which
the following ten designated executives and one retired executive participate
as of November 8, 2000: Richard Roob, Chairman of the Board; Yvan Dupuy, Chief
Executive Officer and President; Charles C. Vail, Senior Vice President and
Chief Administrative Officer; Donald E. Devine II, Vice President and Chief
Financial Officer; Brian Palardy, President, Benjamin Moore & Co. Limited;
Michael Bonner, Vice President, Technology; Bruce Zeh, Vice President, Sales;
Ellen Singer, Vice
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President, Marketing; Michael Kolind, National Sales Manager; Denis Abrams,
Vice President, Operations; and Ward C. Belcher, Retired Vice President,
Operations. Under the Senior Severance Plan, a covered executive will be
entitled to specified severance benefits if he or she is terminated within two
years after a change in control by the Company other than for "cause" (as
defined in the Senior Severance Plan) or by the executive for "good reason"
(as defined in the Senior Severance Plan but generally including an adverse
change in the executive's status, title, position or responsibilities, a
reduction in salary or certain benefits or a relocation of the Company's
offices more than 25 miles.) The severance benefits include a lump sum payment
equal to three times the executive's base salary, a pro rata annual bonus for
the year in which the termination occurs and the continuation of certain
health and welfare benefits for three years following termination. In the
event of a dispute under the Senior Severance Plan, the participants will be
entitled to be reimbursed for any legal fees incurred in connection with
enforcing their rights under the Plan. The Senior Severance Plan was amended
in 1999 to provide that a gross-up payment will be made if the participant's
severance benefits are subjected to the golden parachute excise tax imposed
under Section 4999 of the Internal Revenue Code. However, where a severance
payment reduction of less than $25,000 would eliminate the excise tax on
change in control related payments to the participant, the severance benefits
will be reduced so that no excise tax will be imposed. The foregoing is a
summary of the Senior Severance Plan and is qualified in its entirety by
reference to the complete text of the plan, which is filed as Exhibit 5 hereto
and is incorporated herein by reference.
Key Employee Severance Plan. In 1996, the Company also adopted the Key
Employee Severance Protection Plan (the "Key Severance Plan"), which covers
all non-union employees of the Company other than those who participate in the
Senior Severance Plan. Under the Key Severance Plan, employees who are
terminated within two years after a change in control by the Company other
than for "cause" (as defined in the Key Severance Plan) or who resign for
"good reason" (as defined in the Key Severance Plan but generally including a
reduction in salary by at least 5%, a material reduction in bonus
opportunities or a relocation of the Company's offices more than 25 miles)
will be entitled to severance benefits. The severance benefits include a lump
sum payment of three weeks' base salary for each year of service for employees
at salary grade 17 or higher (with a minimum payment of 15 weeks' base salary
and a maximum payment of 75 weeks' base salary) and two weeks' salary for each
year of service for those at salary grade 16 or lower (with a minimum payment
of 12 weeks' base salary and a maximum of 52 weeks' base salary), a pro rata
annual bonus for the year in which the termination occurs and the continuation
of certain health and welfare benefits for the same period as the amount of
the severance. The Key Severance Plan contains the same golden parachute
excise tax provisions as the Senior Severance Plan. The foregoing is a summary
of the Key Severance Plan and is qualified in its entirety by reference to the
complete text of the plan, which is filed as Exhibit 6 hereto and is
incorporated herein by reference.
Consulting Agreement with Richard Roob. On November 8, 2000, the Board
approved the Company entering into a Consulting Agreement with Richard Roob in
connection with his resignation as the Chairman of the Board, to be effective
as of the Effective Time. The consulting agreement has a one-year term.
Pursuant to the consulting agreement, Mr. Roob will perform consulting
services on a part-time basis at the request of Yvan Dupuy, President and
Chief Executive Officer of the Company, at times that are mutually convenient
to them. The agreement does not contemplate that Mr. Roob will be required to
perform more than twenty-five hours of service per month.
Mr. Roob will receive an annual consulting fee of $100,000, payable in equal
monthly installments, an additional year of service credit under the Company's
qualified and non-qualified retirement plans, and all other benefits that he
is entitled to under all other plans of the Company, including the Senior
Severance Plan. The agreement provides for customary non-competition, non-
solicitation and confidentiality covenants, as well as a golden parachute
excise tax gross up. In the event of a dispute under the agreement, Mr. Roob
will be entitled to be reimbursed for any legal fees incurred in connection
with enforcing the agreement. The foregoing is a summary of the consulting
agreement with Richard Roob and is qualified in its entirety by reference to
the complete text of the agreement, which is filed as Exhibit 7 hereto and is
incorporated herein by reference.
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<PAGE>
Early Retirement Agreement with Ward C. Belcher. On December 7, 1999, the
Company entered into an early retirement agreement with Mr. Ward C. Belcher,
who retired effective December 31, 1999. Under this agreement, the Company
continues to pay Mr. Ward C. Belcher his base salary at an annual rate of
$216,500 through November 30, 2001. His benefits under the Company's welfare
benefit plans continue through that date or until he obtains subsequent
employment, if earlier. He also accrues benefits under the Company's
Supplemental Executive Retirement Income Benefit Plan (the "SERP") until he
reaches age 55 on November 19, 2001. Mr. Belcher will continue to be eligible
for 60% of his targeted award under the Company's Long-Term Cash Incentive
Program. In addition, all options that were previously granted to Mr. Belcher
became vested and exercisable on December 31, 1999 under his early retirement
agreement.
In the event a change in control occurs before December 1, 2001, pursuant to
Mr. Belcher's early retirement agreement, he will be entitled to receive a
lump sum payment of $649,500, less the amount of base salary previously paid
to him under the agreement since his retirement. Furthermore, he will no
longer accrue benefits under the SERP as of the date of the change in control,
but will be paid out his benefit on that date in accordance with the terms of
the SERP. The foregoing is a summary of the early retirement agreement with
Ward C. Belcher and is qualified in its entirety by reference to the complete
text of the agreement, which is filed as Exhibit 8 hereto and is incorporated
herein by reference.
Agreement with Charles C. Vail. The Company entered into a letter agreement
with Mr. Vail on May 10, 2000, pursuant to which he agreed to forego his
opportunity to accept the Company's then-pending early retirement window. In
consideration of that, the Company agreed to provide him with five additional
years of age and service credit under the SERP if he retired or died prior to
July 1, 2003. The Company also agreed to fund the "rabbi trust" in connection
with the SERP for that increased amount within 90 days of Mr. Vail's
retirement or death. Furthermore, the Company agreed to provide Mr. Vail with
retiree medical and life insurance benefits in accordance with the Company's
retiree welfare benefit plans. The foregoing is a summary of the agreement
with Charles C. Vail and is qualified in its entirety by reference to the
complete text of the agreement, which is filed as Exhibit 9 hereto and is
incorporated herein by reference.
Severance Letter Agreements. On November 2, 2000, the Company entered into
letter agreements with each of Jan Bottcher, JoAnn Glaccum, Edward Klein,
Allen Hagstrand and James Megin, who are five executives who participate in
the Key Severance Plan. These agreements provide that in the event that any of
these individuals is terminated by the Company without cause and other than on
account of death or disability, or resigns for good reason (as defined in the
Key Severance Plan) at any time, they will receive severance in an amount
equal to twelve months' base salary (eighteen months in the case of Mr.
Megin). The aggregate amount of the payments to be made under these
agreements, assuming all of the subject employees terminated under qualifying
circumstances would be approximately $887,000. Also, if any of these persons'
employment terminates within two years after a change in control they will
receive the cash severance payments above in lieu of the cash severance
payable to them under Section 4.2(c) of the Key Severance Plan, but they will
receive the other benefits and perquisites provided for under the Key
Severance Plan. The foregoing is a summary of these letter agreements and is
qualified in its entirety by reference to the complete text of the agreements,
a form of which is filed as Exhibit 10 hereto and is incorporated herein by
reference.
Stock Option Plans. The 1993 Stock Option Plan of the Company was approved
by the shareholders on April 15, 1993 and the 1998 Stock Incentive Plan was
approved by the shareholders on April 16, 1998 (collectively, the "Option
Plans"). The Option Plans are currently administered by the eligible members
of the Compensation Committee of the Board, which determines the employees who
are eligible to receive options and the terms thereof (including the exercise
price and vesting terms). In accordance with the provisions of the 1998 Stock
Incentive Plan, stock options covering 3,000 shares are granted each year to
each non-employee director. The terms of each outstanding option are governed
by an option agreement.
The foregoing is a summary of the Option Terms and is qualified in its
entirety by the text of the 1993 Stock Option Plan and the 1998 Stock
Incentive Plan, each of which is filed as Exhibits 11 and 12 hereto,
respectively. On a change in control of the Company, all options outstanding
under the 1998 Stock Incentive
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<PAGE>
Plan become immediately and fully exercisable. Options granted under the 1993
Stock Option Plan are fully vested and exercisable. Pursuant to the Merger
Agreement, each option holder will receive at the Effective Time an amount in
cash in respect of each of his or her options equal to the difference between
the Offer Price and the option exercise price.
As of November 8, 2000, an aggregate of 1,288,906 options were granted under
the Option Plans and the directors and executive officers of the Company held
options to acquire an aggregate of 732,600 Shares, with exercise prices
ranging from $24.42 to $30.16.
Supplemental Executive Retirement Income Benefit Plan. In 1996, the Company
established a non-qualified Supplemental Executive Retirement Income Benefit
Plan ("SERP") that is designed to equalize benefits for certain senior
executives. The Compensation Committee has been authorized to select the
participants in this plan. Messrs. Roob, Dupuy, Abrams and Vail are
participants and Mr. Ward C. Belcher will remain a participant until November
19, 2001.
The SERP is funded by a "rabbi trust" that becomes fully funded in the event
of a change in control. Upon a participant's termination of employment
following a change in control, his benefits under the SERP will become fully
vested and the actuarial equivalent of the benefit will be paid within 30 days
in a lump sum. The foregoing is a summary of the SERP and is qualified in its
entirety by reference to the complete text of the plan, which is filed as
Exhibit 13 hereto and is incorporated herein by reference.
Promissory Notes. The following officers and directors of the Company were
indebted to the Company in amounts greater than $60,000 as of November 8, 2000
under full recourse promissory notes without stated interest delivered in
partial payment for the purchase of Shares under the Employees' Stock Purchase
Plan. One of the promissory notes bears interest at the rate of 5.5 percent
per annum and it was given for the purchase of shares under the 1993 Stock
Option Plan by Mr. Dupuy. In addition, Mr. Dupuy was also indebted to Benjamin
Moore & Co. under a full recourse promissory note without stated interest
given in connection with the purchase of common shares of Benjamin Moore &
Co., Limited on February 13, 1992. The amounts outstanding under such notes
for such persons at November 8, 2000 were as follows:
<TABLE>
<CAPTION>
With Interest Without Interest
------------- ----------------
<S> <C> <C>
Denis S. Abrams............................... $ -0- $304,066
Ward C. Belcher............................... 219,972 -0-
Michael A. Bonner............................. -0- 114,630
Donald E. Devine II........................... -0- 166,543
Yvan Dupuy.................................... 63,027 160,730
James E. Henderson............................ -0- 100,986
Ellen L. Singer............................... -0- 96,438
Charles C. Vail............................... -0- 206,209
Bruce E. Zeh.................................. -0- 92,992
</TABLE>
The foregoing amounts represent the aggregate principal balances outstanding
under the promissory notes. The purchases of the Shares generally occurred on
(a) January 1, 1991, (b) May 27, 1994 and (c) May 8, 1998, at the then current
fair value as determined in accordance with the terms of the Employees' Stock
Purchase Plan. As noted above, Mr. Dupuy also exercised an option under the
1993 Stock Option Plan and purchased Common Shares of Benjamin Moore & Co.,
Limited. Mr. Ward C. Belcher exercised an option under the 1993 Stock Option
Plan on July 1, 2000. All of the promissory notes are secured by the shares to
which they relate. On and after January 1, 1991, all purchases under the
Employees' Stock Purchase Plan under full recourse promissory notes have been
made without stated interest on the notes. All of these promissory notes will
be satisfied at the Effective Time from the amounts payable to the borrowers
in respect of the Shares.
Long-Term Cash Incentive Program. The Company adopted the Long Term
Incentive Compensation Program in 1998. Awards made in respect of the January
1998 through December 2001 performance period are
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dependent upon achievement of cumulative sales and net profit goals over that
four-year period. Upon a change in control, bonuses payable under the program
will vest and become payable immediately preceding the scheduled date of the
change in control. Bonuses will be paid out based on the Company's actual
performance during the abbreviated performance period and the plan will be
terminated. As of November 8, 2000, there were 55 participants in the program.
The approximate aggregate amount that is payable to all participants in this
program is $4.63 million.
Annual Incentive Plan. An annual incentive program was adopted by the
Company effective January 1, 1993 that is intended to create a positive link
between annual performance and annual incentive compensation. All of the
Company's non-union employees, other than sales representatives, wage and hour
and retail employees, participate in the plan. The program has two broad
components: a general individual incentive portion and a management incentive
plan. Amounts that would ordinarily be payable under the annual incentive plan
in respect of performance in the year 2000 will be paid out on or as soon as
practicable after December 15, 2000. The aggregate amount that is payable
under the plan in respect of the year 2000 is approximately $4.8 million.
Interests of Certain Directors. The Company sponsors the Directors Deferred
Compensation Plan, pursuant to which a non-employee director may elect, prior
to the commencement of the next calendar year, to have all or a portion of his
or her retainer fee and all or a portion of his or her meeting fees credited
to a deferred compensation account. This account, which is carried in the form
of stock equivalent units of the Company's Shares and dividends credited
thereon, is paid out in a lump sum cash payment on or before the last day of
the calendar month following the calendar month upon which he or she ceases to
be a director of the Company. As of November 8, 2000, there were an aggregate
of 5,173.667 share equivalent units credited to the accounts of three non-
employee directors in the following proportions: John C. Moore: 954.411 units,
Frederick J. Costello: 1,305.677 units and Robert H. Mundheim: 2,913.579
units, having an aggregate value of approximately $196,000.
At the Board meeting held on November 8, 2000, the Board determined to pay
Mr. Mundheim $600,000, payable upon the consummation of the Offer, for
introducing the Company to Parent and for his efforts leading up to and in
effecting the transaction with Parent.
Item 4. The Solicitation or Recommendation.
Recommendation of the Board of Directors of the Company
The Board has unanimously determined that the Merger Agreement and the
transactions contemplated by the Merger Agreement, including the Offer and the
Merger, are fair to, and in the best interests of, the holders of Shares, has
unanimously approved the Merger Agreement and the transactions contemplated
thereby, and has unanimously recommended that the holders of Shares accept the
Offer, approve the Merger Agreement and the transactions contemplated thereby
and tender their Shares pursuant to the Offer.
Background
In light of, among other factors, the increasing consolidation which has
taken place in the coatings industry in the past several years, the Company
has from time to time during the past 18 months considered the strategic
alternatives available to it, including possible business combination
transactions with third parties as well as pursuing a growth strategy through
acquisitions. During the Fall of 1999, the Company explored the possibility of
engaging in a business combination transaction and, in that connection,
engaged in preliminary discussions with certain parties with respect thereto,
including the possible sale of the Company. While the Company received
preliminary indications of interest from certain parties with whom it had such
preliminary discussions, the Board determined not to pursue any such
transactions at that time.
In mid-July 2000, Mr. Mundheim, a director of the Company, contacted Warren
Buffett, Chief Executive Officer of Parent, on behalf of the Company, to
ascertain whether Parent would be interested in meeting with
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<PAGE>
representatives of the Company to discuss a possible business combination
transaction. Mr. Buffett indicated to Mr. Mundheim that he would be interested
in such a meeting. In early August 2000, Mr. Mundheim sent to Mr. Buffett, at
his request, certain publicly available information regarding the Company and
its business. On August 24, 2000, Richard Roob, Chairman of the Board of the
Company, Yvan Dupuy, President and Chief Executive Officer of the Company, and
Mr. Mundheim met with Mr. Buffett and Charles Munger, a director of Parent. At
that meeting, Mr. Buffett indicated that Parent would be interested in
considering a possible acquisition of the Company at an aggregate price of one
billion dollars in cash. Messrs. Roob and Dupuy advised Messrs. Buffett and
Munger that they would consider Parent's interest in a possible acquisition of
the Company and discuss it with the Board.
During the period from August 24 to September 27, 2000, the Company's senior
management engaged in internal discussions with respect to the possible
acquisition of the Company by Parent and other strategic alternatives.
At a meeting held on September 27, 2000, Mr. Roob and Mr. Dupuy reported to
the Board their meeting on August 24 with Mr. Buffett and Mr. Munger and the
Board discussed the possible sale of the Company to Parent on the basis of the
proposed transaction discussed at the August 24 meeting as well as other
strategic alternatives. In light of the significance of such a transaction to
the Company, the Board determined to reflect on the proposition and convene
again on October 10, 2000, to determine whether or not such a transaction
should be pursued. After such Board meeting, Mr. Mundheim contacted Mr.
Buffett to inform him of the action taken by the Board at such meeting.
On October 9, 2000, Mr. Dupuy contacted the party that had, in the Fall of
1999, expressed a preliminary interest in the possible acquisition of the
Company in an all cash transaction to determine whether that party would be
interested in pursuing such a transaction. The party indicated that it was not
interested in such a transaction.
At a meeting held on October 10, 2000, the Board discussed the possible
transaction with Parent and decided to authorize the Company's senior
management to engage in discussions and negotiations with Parent and its
representatives with a view to determining whether a transaction on terms
acceptable to the Company could be achieved. At that meeting, the Board also
authorized the Company to retain J.P. Morgan Securities Inc. ("J.P. Morgan")
as financial advisor to provide the Board with its opinion as to whether the
financial terms of the proposed transaction with Parent were fair to the
Company's shareholders. After such Board meeting, Mr. Mundheim called Mr.
Buffett to inform him of the action taken by the Board at such meeting.
On October 13, 2000, the Company retained J.P. Morgan to render a fairness
opinion in connection with the proposed transaction with Parent.
On October 23, 2000, representatives of Shearman & Sterling, the Company's
outside legal counsel, met with a representative of Munger, Tolles & Olson,
Parent's outside legal counsel, to discuss the terms of the proposed
transaction with Parent. On October 24, 2000, Parent and the Company entered
into the Confidentiality Agreement. On the same day, Shearman & Sterling
provided a draft of the Merger Agreement to Munger, Tolles & Olson.
Subsequently thereafter, due to the requirement by Parent that certain
shareholders of the Company support the proposed transaction, on October 31,
2000, Shearman & Sterling provided a draft of the Shareholders Agreement to
Munger, Tolles & Olson. During the period from October 30, 2000 through
November 8, 2000, representatives of Parent and the Company and their
respective legal advisers negotiated the terms of the Merger Agreement and the
Shareholders Agreement.
On November 8, 2000, the Board met to consider and review the terms of the
proposed Merger Agreement, and, following J.P. Morgan's oral delivery of its
opinion and after careful consideration, approved the Merger Agreement and the
transactions contemplated thereby and unanimously recommended that the holders
of Shares accept the Offer and tender their Shares pursuant thereto.
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<PAGE>
Following the Board meeting on November 8, 2000, Parent, Purchaser and the
Company finalized and executed the Merger Agreement, and Parent, Purchaser and
all of the Company's directors and many of the trusts for which they serve as
trustees finalized and executed the Shareholders Agreement, as contemplated by
the Merger Agreement. Later that afternoon, Parent and the Company issued a
joint press release announcing the execution of the Merger Agreement and the
Shareholders Agreement.
On November 17, 2000, in accordance with the Merger Agreement, Parent and
Purchaser commenced the Offer.
Factors Considered
In approving the Merger Agreement and the other transactions contemplated
thereby and recommending that all holders of Shares accept the Offer, approve
the Merger Agreement and the transactions contemplated thereby and tender
their Shares pursuant to the Offer, the Board considered a number of factors,
including, but not limited to, the following:
1. The Terms and Conditions of the Offer. The Board considered the terms
and conditions of the Offer, the Merger and the Merger Agreement, including
(a) the price to be paid in the Offer and the Merger, (b) that the Offer
and the Merger provide for a prompt cash tender offer for all Shares to be
followed by a merger for the same consideration, thereby enabling the
Company's shareholders, at the earliest possible time, to obtain the
benefits of the transaction in exchange for their Shares, (c) that the
obligations of Parent to consummate the transaction would not be
conditioned upon the results of a due diligence review, (d) the limited
ability of Parent or Purchaser to terminate the Offer or the Merger
Agreement and (e) the other provisions of the Merger Agreement, including
the respective representations, warranties and covenants of the parties.
2. Company Operating and Financial Condition. The Board considered the
current and historical financial condition and results of operations of the
Company, the prospects and strategic objectives of the Company, the risks
involved in achieving those prospects and objectives, the current and
expected conditions in the industry in which the Company's business
operates and the current regional, national and international economic
climate (including the recent decline of stock prices on the global
markets, particularly the stock prices of companies in the coatings
industry). The Board believes that the relatively low market value accorded
to the Shares has limited, and could continue to limit in the future, the
Company's access to the required capital and the Company's ability to use
its Shares as acquisition currency. Although the Board believes that the
Company would have been likely to achieve significant gains in its
operating results in the next few years, the Board recognized that there
were risks that such gains would not be achieved and, even if achieved,
would not be reflected in a sufficiently high stock price to allow the
Company to achieve its strategic goals.
3. Transaction Financial Terms/Premium to Market Price. The Board
considered that the $37.82 Offer Price represents an (i) approximately 48%
premium over the $25.50 closing price of the Shares on the over-the-counter
bulletin board ("OTCBB") on November 7, 2000 (the last trading day prior to
the Board meeting at which the Board approved the Merger Agreement), (ii)
approximately 87% premium over the $20.21 five-day average closing price of
the Shares on the OTCBB (excluding November 7, 2000), (iii) approximately
88% premium over the $20.12 30-day average closing price of the Shares on
the OTCBB (excluding November 7, 2000) and (iv) approximately 38% premium
over the $27.74 last twelve months average closing price of the Shares on
the OTCBB (excluding November 7, 2000). The Board concluded that the $37.82
Offer Price fully reflects the Company's prospects for growth and improved
performance. The Board also considered the form of consideration to be paid
to holders of Shares in the Offer and the Merger, and the certainty of
value of such cash consideration compared to continued investment in the
Shares. The Board was aware that the consideration received by holders of
Shares in the Offer and Merger would be taxable to such holders for federal
income tax purposes.
4. J.P. Morgan Fairness Opinion. The Board considered presentations from
J.P. Morgan and the opinion of J.P. Morgan, dated November 8, 2000, that as
of that date, the consideration proposed to be paid
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to holders of Shares pursuant to the Offer and the Merger was fair to such
holders from a financial point of view. The full text of the written
opinion rendered by J.P. Morgan to the Board, setting forth the procedures
followed, assumptions made, matters considered and limitations of the
review undertaken by J.P. Morgan in arriving at its opinion, is attached
hereto as Exhibit 14 and incorporated herein by reference. Shareholders are
urged to read this opinion in its entirety. The Board was aware that J.P.
Morgan became entitled to certain fees described in Item 5 upon the
delivery of its opinion.
5. Timing of Completion. The Board considered the anticipated timing of
consummation of the transactions contemplated by the Merger Agreement,
including the structure of the transactions as a tender offer for all of
the Shares, which should allow holders of Shares to receive the transaction
consideration earlier than in an alternative form of transaction, followed
by the Merger in which non-tendering holders of Shares will receive the
same consideration to be given to the holders of Shares who tender their
Shares in the Offer.
6. Limited Conditions to Consummation. The Board considered that Parent's
obligation to consummate the Offer and the Merger is subject to a limited
number of conditions. In particular, the Merger Agreement contains no
financing condition and a representation of Parent that it will have
sufficient funds available to it for Purchaser to consummate the Offer and
the Merger, which the Board viewed as having particular significance in
light of currently unsettled conditions in debt financing markets. The
Board also considered the relative likelihood of obtaining required
regulatory approvals for this transaction and the terms of the Merger
Agreement regarding the obligations of both companies to pursue such
approvals.
7. Financial Resources and Reputation of Management of Acquiror. The
Board considered the business reputations of Mr. Buffett and Mr. Munger and
the substantial, liquid financial resources of Parent, which the Board
believed supported its conclusion that an acquisition transaction with
Parent could be effectuated relatively quickly and in an orderly manner.
8. Alternative Transactions. The Board considered that under the terms of
the Merger Agreement, while the Company is prohibited from soliciting
acquisition proposals from third parties, the Company may engage in
discussions or negotiations with, and may furnish non-public information
to, a third party that makes an unsolicited acquisition proposal if, among
other things, the Board determines in good faith that such acquisition
proposal would, if consummated, be more favorable to the Company's
shareholders than the Offer and the Merger. The Board considered that the
terms of the Merger Agreement permit the Company to terminate the Merger
Agreement to enter into such a superior transaction involving the Company
if the Company pays Parent a $25 million termination fee. The Board
considered that these provisions of the Merger Agreement could have the
effect of deterring third parties who might be interested in exploring an
acquisition of the Company. In this regard, the Board recognized that the
provisions of the Merger Agreement relating to termination fees and non-
solicitation of acquisition proposals were insisted upon by Parent as a
condition to entering into the Merger Agreement.
9. Potential Conflicts of Interest. The Board considered the interests of
certain directors and executive officers in the Offer and the Merger (see
Item 3).
10. Employee Benefits. The Board considered that, pursuant to the Merger
Agreement, Parent has agreed that, for a two-year period following the
Effective Time, Parent will provide, or cause the Surviving Corporation and
its subsidiaries to provide, those persons who, immediately prior to the
Effective Time, were current and former employees of the Company or its
Subsidiaries and who continue in such employment following the Effective
Time with benefits and compensation that are substantially comparable, in
the aggregate, to the compensation and benefits provided to such employees
as a group immediately prior to the Effective Time.
In light of the above factors, the Board unanimously 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's shareholders. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT THE
COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO
THE OFFER.
21
<PAGE>
The foregoing discussion of the information and factors considered by the
Board is not intended to be exhaustive but addresses all of the material
information and factors considered by the Board in its consideration of the
Offer and the Merger. In view of the variety of factors and the amount of
information considered, the Board did not find it practicable to provide
specific assessments of, quantify or otherwise assign any relative weights to
the specific factors considered in determining to recommend that shareholders
accept the Offer. Such determination was made after consideration of all the
factors taken as a whole. In addition, individual members of the Board may
have given differing weights to different factors.
Intention to Tender
To the Company's knowledge after reasonable inquiry, all of the Company's
executive officers, directors and affiliates currently intend to either (1)
tender all of the Shares held of record or beneficially by them pursuant to
the Offer, or (2) vote all of the Shares held of record or beneficially by
them for the approval and adoption of the Merger Agreement. The foregoing does
not include any Shares over which, or with respect to which, any such
executive officer, director or affiliate acts in a fiduciary or representative
capacity or is subject to the instructions of a third party with respect to
such tender. However, as described above under the heading "The Shareholders
Agreement," the Shareholders Agreement requires all of the directors to tender
all Shares held by such directors and many of the trusts for which such
directors serve as trustees.
Item 5. Person/Assets, Retained, Employed, Compensated or Used.
J.P. Morgan was retained pursuant to the terms of a letter agreement dated
as of October 13, 2000 (the "J.P. Morgan Letter Agreement"), to render a
fairness opinion with respect to the Offer and the Merger. Pursuant to the
J.P. Morgan Letter Agreement, the Company has agreed to pay J.P. Morgan a fee
of $500,000 for the delivery of J.P. Morgan's opinion with respect to the
consideration proposed to be paid to the holders of Shares pursuant to the
Offer and the Merger. The Company has agreed to indemnify J.P. Morgan, its
directors, officers, agents and employees and each person, if any, controlling
J.P. Morgan against certain liabilities and expenses, including certain
liabilities under the federal securities laws, arising out of J.P. Morgan's
engagement.
Except as described above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any person to make
solicitations or recommendations to shareholders on its behalf concerning the
Offer or the Merger.
Item 6. Interest in Securities of the Subject Company.
Except as noted below, no transactions in Shares have been effected during
the past 60 days by the Company or any subsidiary of the Company or, to the
best of the Company's knowledge, by any executive officer, director or
affiliate of the Company.
Charles C. Vail. On November 1, 2000, Charles C. Vail, a senior vice
president and director of the Company transferred, by way of gift, 150 Shares
to each of his two daughters and 50 Shares to his son.
Charles H. Bergmann, Jr. On November 8, 2000, Charles H. Bergmann, Jr., a
director of the Company, transferred ten Shares by way of gift to various
relatives.
Deferred Savings and Investment Plan. On September 14, 2000, the Company
purchased 24,246 treasury shares from the Benjamin Moore & Co. Deferred
Savings and Investment Plan, with which the ESOP was merged in 1999, at the
market value of $28.02 on that date.
Item 7. Purposes of the Transaction and Plans or Proposals.
(a) Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by the Company in response to the Offer that relate
to a tender offer or other acquisition of the Company's securities by the
Company, any subsidiary of the Company or any other person.
22
<PAGE>
(b) Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by the Company in response to the Offer which
relate to, or would result in, (1) an extraordinary transaction, such as a
merger, reorganization or liquidation, involving the Company or any subsidiary
of the Company, (2) a purchase, sale or transfer of a material amount of
assets by the Company or any subsidiary of the Company, or (3) any material
change in the present dividend rate or policy, or indebtedness or
capitalization of the Company.
(c) Except as indicated in Items 3 and 4 above, there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer that relate to or would result in one or more of the matters
referred to in this Item 7.
Item 8. Additional Information.
Antitakeover Provisions
Sections 14A:10A-4 and -5 of the NJBCA restricts the ability of certain
persons to acquire control of a New Jersey corporation. In general, a New
Jersey corporation with its principal executive offices or significant
operations in New Jersey may not engage in a business combination with an
interested stockholder for a period of five years following the interested
stockholder's becoming such. An "interested stockholder" is any person (other
than the resident domestic corporation or its subsidiary) that (1) is the
beneficial owner directly or indirectly, of 10% or more of the voting power of
the outstanding voting stock of the resident domestic corporation, or (2) is
an affiliate or associate of that resident domestic corporation who, at any
time within the five year period immediately prior to the date in question,
was a beneficial owner, directly or indirectly, of 10% or more of the voting
power of the outstanding stock of the resident domestic corporation. Such a
business combination would be permitted where it is approved by the board of
directors prior to the stock acquisition. Covered business combinations
include certain mergers, dispositions of assets or shares and
recapitalizations.
In addition, New Jersey corporations may not engage in a business
combination at any time with any interested stockholder other than (1) a
business combination approved by the board of directors of such corporation
prior to the stock acquisition, (2) a business combination approved by the
affirmative vote of the holders of two-thirds of the voting stock not
beneficially owned by such interested stockholder at a meeting for such
purpose, or (3) a business combination in which the interested stockholder
pays a formula price designed to ensure that all other stockholders receive at
least the highest price per share paid by such interested stockholder.
A New Jersey corporation may not opt out of the foregoing provisions.
However, the Board has taken the necessary action to make the foregoing
provisions inapplicable to the Merger and the related transactions.
Antitrust--United States
Under the HSR Act, and the rules that have been promulgated thereunder by
the Federal Trade Commission ("FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the Antitrust
Division of the United States Department of Justice (the "Antitrust Division")
and the FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares by Purchaser pursuant to the Offer is subject to such
requirements.
Pursuant to the HSR Act, the Company will, and expects that Parent will,
file a Premerger Notification and Report Form in connection with the purchase
of Shares pursuant to the Offer with the Antitrust Division and the FTC on or
about November 17, 2000. Under the provisions of the HSR Act applicable to the
Offer, the purchase of Shares under the Offer may not be consummated until the
expiration of a 15-calendar day waiting period following the filing by Parent,
unless such waiting period is earlier terminated by the FTC and the Antitrust
Division. Such waiting period may be extended by a request from the FTC or the
Antitrust Division for additional information or documentary material prior to
the expiration of the waiting period. Pursuant to the HSR Act, Parent and the
Company have requested early termination of the waiting period applicable to
the Offer. There can be no assurance, however, that the 15-day HSR Act waiting
period will be terminated early. If either the
23
<PAGE>
FTC or the Antitrust Division were to request additional information or
documentary material from Parent with respect to the Offer, the waiting period
with respect to the Offer would expire at 11:59 p.m., New York City time, on
the tenth calendar day after the date of substantial compliance with such
request. Thereafter, the waiting period could be extended only by court order.
If the acquisition of Shares is delayed pursuant to a request by the FTC or
the Antitrust Division for additional information or documentary material
pursuant to the HSR Act, the Offer must be extended (if the sole condition
remaining unsatisfied is the expiration or termination of the applicable
waiting period under the HSR Act) and, in any event, the purchase of and
payment for Shares will be deferred until ten days after the request is
substantially complied with, unless the waiting period is sooner terminated by
the FTC and the Antitrust Division. Only one extension of such waiting period
pursuant to a request for additional information is authorized by the HSR Act
and the rules promulgated thereunder, except by court order. Any such
extension of the waiting period will not give rise to any withdrawal rights
not otherwise provided for by applicable law. It is a condition to the Offer
that the HSR Act waiting period applicable to the Offer expires or is
terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the consummation
of any such transactions, the Antitrust Division or the FTC could,
notwithstanding termination of the waiting period, take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Shares pursuant to the Offer or
seeking divestiture of Shares so acquired or divestiture of substantial assets
of Parent or the Company or any of their respective subsidiaries. State
attorneys general may also bring legal actions under the antitrust laws, and
private parties may bring such actions under certain circumstances.
While the Company does not believe that the acquisition of Shares by
Purchaser will violate the antitrust laws, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made, or if such a
challenge is made, what the result will be.
Non-U.S. Regulatory Approvals
Under the Competition Act (Canada), R.S. 1985, c.C-34, as amended (the
"Canadian Competition Act"), parties to a merger are required to pre-notify
the Commissioner of Competition (the "Commissioner"), who is responsible for
the administration and enforcement of the Canadian Competition Act, and
provide detailed information with respect to the proposed merger, where two
thresholds related to the size of the parties to the transaction and to the
size of the transaction are met or exceeded.
Parent, Purchaser and the Company have determined that the two thresholds
set forth in the Canadian Competition Act have been met and thus pre-
notification is required to the Commissioner. Accordingly, two Short Form
Information forms for Notifiable Transactions will be filed by
Purchaser/Parent and the Company with the Commissioner on or about November
17, 2000, or as soon thereafter as practicable.
As provided for under the Canadian Competition Act, when a Short Form is
used, the parties to a merger may not complete the transaction before the
expiration of a waiting period of 14 calendar days following the filing of the
required information with the Commissioner. During such waiting period, the
Commissioner may request that the parties provide additional information
and/or complete a Long Form Information form. Where a Long Form is requested,
the waiting period of 42 calendar days does not begin until the Long Form is
filed with the Commissioner.
Parent, Purchaser and the Company intend to complete the transaction only
upon the expiration of the relevant waiting period or after they have received
a "no action" letter from the Commissioner indicating that he will not make an
application to the Competition Tribunal in respect of the transaction.
Purchaser is not required to accept for payment Shares tendered pursuant to
the Offer unless and until the waiting period requirements imposed by the
Canadian Competition Act with respect to the Offer have been satisfied.
24
<PAGE>
The Commissioner has the authority to challenge a merger regardless of its
size and regardless of whether the parties are required to pre-notify the
Commissioner of the transaction. Such challenges must be made on the basis
that the transaction is likely to result in a "substantial lessening or
prevention of competition" in a market.
Section 14(f) Information Statement
The Information Statement attached as Annex I hereto is being furnished in
connection with the possible designation by Purchaser, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board other than at a
meeting of the Company's shareholders.
Going Private Transactions
The SEC has adopted Rule 13e-3 under the Exchange Act, which is applicable
to certain "going private" transactions, and which may under certain
circumstances be applicable to the Merger or another business combination
following the purchase of Shares pursuant to the Offer in which Purchaser
seeks to acquire the remaining Shares not held by it. The Company understands
that Purchaser believes that Rule 13e-3 will not be applicable to the Merger.
Rule 13e-3 requires, among other things, that certain financial information
concerning the Company and certain information relating to the fairness of the
proposed transaction and the consideration offered to minority shareholders in
such transaction be filed with the SEC and disclosed to shareholders prior to
consummation of the transaction.
Appraisal Rights
No appraisal rights are available to the holders of the Shares in connection
with the Offer and the Merger. Under Section 14A:11-1 of the NJBCA, because
shareholders of the Company will receive cash for their Shares, they are not
entitled to any appraisal or dissenters' rights.
Item 9. Exhibits.
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1. Letter to shareholders from Richard Roob and Yvan Dupuy dated November
17, 2000.*
2. Agreement and Plan of Merger, dated November 8, 2000, by and among
Parent, Purchaser and the Company.(1)
3. Shareholders Agreement, dated November 8, 2000, among Parent,
Purchaser and certain shareholders of the Company signatories
thereto.(1)
4. Confidentiality Agreement, dated October 24, 2000, between the Company
and Parent.
5. Benjamin Moore & Co. Senior Executive Severance Protection Plan.
6. Benjamin Moore & Co. Key Employee Severance Protection Plan.
7. Consulting Agreement with Richard Roob, dated November 8, 2000.
8. Early Retirement Agreement with Ward C. Belcher, dated December 7,
1999.
9. Letter Agreement with Charles C. Vail, dated May 10, 2000.
10. Form of Severance Letter Agreement with Jan Bottcher, JoAnn Glaccum,
Edward Klein, Allen Hagstrand and James Megin.
11. Benjamin Moore & Co. Stock Option Plan, adopted by shareholders on
April 15, 1993.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
12. Benjamin Moore & Co. 1998 Stock Incentive Plan, adopted by
shareholders on April 16, 1998.
13. Benjamin Moore & Co. Supplemental Executive Retirement Income Benefit
Plan.
14. Opinion of J.P. Morgan dated as of November 8, 2000.*
15. Joint Press Release issued by Parent and the Company on November 8,
2000.(2)
</TABLE>
--------
(1) Incorporated by reference to the Form 8-K filed by the Company on November
9, 2000.
(2) Incorporated by reference to the Company's Schedule 14D-9, filed November
8, 2000.
* Included in the copy of the Schedule 14D-9 mailed to the Company's
shareholders.
26
<PAGE>
SIGNATURE
After due 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.
/s/ Yvan Dupuy
By: _________________________________
Name:Yvan Dupuy
Title:President and Chief
Executive Officer
Dated: November 17, 2000
<PAGE>
Annex I
BENJAMIN MOORE & CO.
51 Chestnut Ridge Road
Montvale, New Jersey 07645
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
GENERAL
This information statement (the "Information Statement") is being mailed on
or about November 17, 2000 as part of the Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to holders of record of
shares of common stock, par value $3.33 1/3 per share (the "Shares"), of
Benjamin Moore & Co. (the "Company"). You are receiving this Information
Statement in connection with the possible election of persons designated by B
Acquisition, Inc., a New Jersey corporation ("Purchaser") and a wholly owned
subsidiary of Berkshire Hathaway Inc., a Delaware corporation ("Parent"), to
two-thirds of the seats on the Board of Directors of the Company (the "Board")
other than at a meeting of the shareholders of the Company. Such election
would occur pursuant to the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of November 8, 2000, by and among the Company, Parent
and Purchaser. The Merger Agreement is more fully described under Item 3 of
the Schedule 14D-9, of which this Annex I is a part. Capitalized terms used
and not defined in this Annex I have the meanings assigned to them in the
Schedule 14D-9.
Pursuant to the Merger Agreement, (i) Purchaser will commence a cash tender
offer (the "Offer") for all Shares of the Company at a price of $37.82 per
Share, net to the seller in cash, without interest, and (ii) Purchaser will be
merged with and into the Company (the "Merger"). As a result of the Offer and
the Merger, the Company will become a wholly owned subsidiary of Parent.
The Merger Agreement provides that, promptly after the purchase of two-
thirds of the outstanding Shares pursuant to the Offer, Purchaser shall be
entitled to designate such number of directors to the Board (the "Purchaser
Designees") as will give Purchaser representation proportional to its
ownership interest. The Merger Agreement requires the Company to take such
action as Purchaser may request to cause the Purchaser Designees to be elected
to the Board under the circumstances described therein.
If the Merger Agreement is terminated or if Purchaser does not accept Shares
tendered for payment, then Purchaser will not have any right to designate
directors for election to the Board.
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.
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by Parent. The Company assumes
no responsibility for the accuracy or completeness of such information.
The Purchaser Designees
The Merger Agreement provides that, promptly after the purchase by Purchaser
or its affiliates of, and payment for, a number of Shares that satisfies the
Minimum Condition, Purchaser shall be entitled to designate the number of
directors, rounded up to the next whole number, on the Board that equals the
product of the total number of directors on the Board (giving effect to the
election of any additional directors pursuant to this sentence), and the
percentage that the aggregate number of Shares beneficially owned by Purchaser
or any affiliate of Purchaser following such purchase bears to the total
number of Shares then outstanding, and the
A-1
<PAGE>
Company will promptly take all actions necessary to cause Purchaser's
designees to be elected or appointed to the Board, including increasing the
size of the Board or securing the resignations of incumbent directors, or
both.
Notwithstanding the foregoing, in the event that Purchaser's designees are
to be appointed or elected to the Board, until the Effective Time, such board
of directors shall have at least two directors who are directors on the date
of the Merger Agreement ("Continuing Directors").
The Company's obligations to appoint Purchaser's designees to the Board
shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company has agreed to promptly take all such
actions, as Section 14(f) and Rule 14f-1 require, in order to fulfill its
obligations under the Merger Agreement to cause the Purchaser Designees to be
elected to the Board. Parent and Purchaser have supplied to the Company in
writing information with respect to itself and its nominees, officers,
directors and affiliates required by Section 14(f) and Rule 14f-1.
The Merger Agreement provides that, following the election or appointment of
Purchaser's designees, in accordance with the terms of the Merger Agreement
and prior to the Effective Time, the approval of a majority of those directors
of the Company then in office who were not designated by Purchaser shall be
required to authorize any amendment of the Merger Agreement, any termination
of the Merger Agreement by the Company, any amendment of the Restated
Certificate of Incorporation of the Company (the "Certificate of
Incorporation") or By-laws of the Company (the "By-laws"), any extension by
the Company of the time for performance of any of the obligations or other
acts of Parent or Purchaser or waiver of any of the Company's rights or
remedies in the Merger Agreement.
Pursuant to the provisions of the Merger Agreement described in the Schedule
14D-9, Purchaser may designate from among the persons identified below the
Purchaser Designees. It is expected that the Purchaser Designees will assume
office promptly upon the payment by Purchaser, pursuant to the Offer, for a
number of Shares that satisfies the Minimum Condition, which the Company
expects will be promptly thereafter, and that they will thereafter constitute
at least two-thirds of the Board. Purchaser has informed the Company that each
of the Purchaser Designees has consented to act as a director, if so
designated.
Set forth in the table below are the name, principal occupation or
employment and five year employment history and address for each of the
persons who may be designated by Purchaser as the Purchaser Designees. Unless
otherwise specified, each person listed below is a citizen of the United
States and has his or her principal business address at 1440 Kiewit Plaza,
Omaha, Nebraska 68131.
<TABLE>
<CAPTION>
Present Principal Occupation or Employment, Material
Positions Held
Name During Past Five Years, and Business Address
---- ----------------------------------------------------
<C> <S>
Warren E. Buffett.. Mr. Buffett has been Chairman and Chief Executive Officer
of Parent since 1970. He is also a director of The Coca-
Cola Company, The Gillette Company and The Washington Post
Company.
Charles T. Munger.. Mr. Munger has been a director and Vice Chairman of
Parent's Board of Directors since 1978. He is Chairman of
the Board of Directors and Chief Executive Officer of
Wesco Financial Corporation, Chairman of the Board of
Directors of Daily Journal Corporation and a director of
Costco Wholesale Corporation. His business address is 355
S. Grand Avenue, 34th Floor, Los Angeles, California
90071.
Howard G. Buffett.. Mr. Buffett is Chairman of the Board of Directors of The
GSI Group, a company primarily engaged in the manufacture
of agricultural equipment. From 1992 until June 5, 1995,
Mr. Buffett had been Vice President, Assistant to the
Chairman and a Director of Archer Daniels Midland Company,
a company engaged principally in the business of
processing and merchandising agricultural commodities. He
is also a director of Coca-Cola Enterprises, Inc., Lindsay
Manufacturing Co. and Mond Industries Inc. His business
address is 1004 East Illinois Street, Assumption, Illinois
62510.
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Present Principal Occupation or Employment, Material
Positions Held
Name During Past Five Years, and Business Address
---- ----------------------------------------------------
<C> <S>
Susan T. Buffett... Mrs. Buffett has been a director of Berkshire since 1991.
Mrs. Buffett has not been employed in the past five years.
Malcolm G. Chace... In 1996, Mr. Chace was named Chairman of the Board of
Directors of BankRI, a community bank located in the state
of Rhode Island. Prior to 1996, Mr. Chace had been a
private investor. Mr. Chace's business address is One
Providence Washington Plaza, Providence, Rhode Island
02903.
Marc D. Hamburg.... Mr. Hamburg has been the Vice President and Treasurer of
Parent for more than the past five years.
Ronald L. Olson.... Mr. Olson has, for more than the past five years, been a
partner in the law firm of Munger, Tolles & Olson LLP. He
is also a director of Edison International, Western Asset
Trust, Inc. and Pacific American Income Shares Inc. His
business address is 355 S. Grand Avenue, 35th Floor, Los
Angeles, California 90071.
Walter Scott, Jr... Mr. Scott has been Chairman of the Board of Level 3
Communications, Inc., a communications and information
services company, since 1979. Level 3 Communications was
formerly known as Peter Kiewit Sons', Inc., for which,
until the spin-off of its construction operations in March
1998, Mr. Scott also served as Chief Executive Officer.
Mr. Scott is also a director of Burlington Resources,
Inc., ConAgra, Inc., Valmont Industries, Inc.,
Commonwealth Telephone Enterprises, Inc. and RCN
Corporation.
</TABLE>
CERTAIN INFORMATION CONCERNING THE COMPANY
The Shares constitute the only class of voting securities of the Company.
The holders of the common stock are entitled to one vote per Share. As of
November 8, 2000, there were 26,469,381 Shares issued and outstanding and
13,023,555 Shares held in the treasury of the Company.
Principal Shareholders
Set forth below is certain information, as of November 8, 2000 (or in the
case of interests under the employees' stock ownership portion of the
Company's Deferred Savings and Investment Plan (the "ESOP"), the most recent
allocation date which is October 31, 2000), with respect to certain persons,
including each person who, to the knowledge of the Company, may be deemed to
own beneficially (within the meaning of the applicable rules and regulations
of the Securities and Exchange Commission) more than five percent of the
shares. In reviewing the following table, it should be noted that, as set
forth in the notes thereto, a substantial number of the shares are held in
trusts, the trustees of which are more than one of the persons named below;
accordingly, the number of shares set forth opposite the name of each such
person (and the corresponding percentage ownership represented thereby)
refers, in several instances, to the same shares.
A-3
<PAGE>
The shares shown include stock options issued under the Stock Option Plans
of the Company, which are exercisable on or within 60 days after November 8,
2000. The stock options permit the purchase of a total of 3,000 shares, 55,500
shares, 73,500 shares and 39,750 shares by Messrs. Belcher, Jr., Dupuy, Roob
and Vail, respectively, each of whom is a Director of the Company. Such shares
were also considered to be outstanding for the purpose of calculating
percentage ownership for each person.
<TABLE>
<CAPTION>
Shares Owned Approximate
Beneficially Percentage of
as of Outstanding
Name and Address November 8, 2000 Shares
---------------- ---------------- -------------
<S> <C> <C>
Benjamin M. Belcher, Jr........................ 2,719,008(1) 10.3
51 Chestnut Ridge Road
Montvale, New Jersey 07645
Yvan Dupuy..................................... 1,184,212(2) 4.5
51 Chestnut Ridge Road
Montvale, New Jersey 07645
Richard Roob................................... 1,561,617(3) 5.9
51 Chestnut Ridge Road
Montvale, New Jersey 07645
Charles C. Vail................................ 1,544,822(4) 5.8
51 Chestnut Ridge Road
Montvale, New Jersey 07645
Benjamin Moore & Co. Employees' Stock Ownership 1,100,992(5) 4.2
Plan Trust.....................................
51 Chestnut Ridge Road
Montvale, New Jersey 07645
</TABLE>
--------
(1) Includes 2,399,691 shares held by trusts of which Mr. Belcher, Jr. is a
co-trustee. The other co-trustees of said trusts are as follows: (a)
trusts holding a total of 48,000 of such shares--individuals having no
affiliation with the Company; (b) trusts holding 1,226,669 of such
shares--Mr. Vail and an individual having no affiliation with the Company;
and (c) a trust holding 24,000 of such shares--Mrs. Sara B. Wardell, a
Director of the Company. In each case, the co-trustees are empowered to
make all decisions in respect of the shares, including the voting and
disposition thereof. Also, Mr. Belcher, Jr. is one of three trustees of
the ESOP. Mr. Belcher, Jr. has an interest under the ESOP in 7,710 shares.
The other trustees are Mr. Yvan Dupuy and Mr. Richard Roob, each of whom
is a Director of the Company. Mr. Belcher, Jr.'s wife owns 8,472 shares
which are not counted above, and in which he disclaims any beneficial
interest.
(2) Mr. Dupuy is one of three trustees of the ESOP. Mr. Dupuy has an interest
under the ESOP in 4,214 shares. The other trustees are Mr. Benjamin M.
Belcher, Jr. and Mr. Richard Roob, each of whom is a Director of the
Company.
(3) Includes 1,211,347 shares held by trusts of which Mr. Roob is a co-
trustee. The other co-trustees of said trusts are as follows: (a) a trust
holding 57,600 of such shares--Mrs. Wardell and Mr. Vail; (b) a trust
holding 24,177 of such shares--an individual having no affiliation with
the Company and a retiree of the Company; and (c) a trust holding 28,578
of such shares--an individual having no affiliation with the Company. In
each case, the trustees are empowered to make all decisions in respect of
the shares, including the voting and disposition thereof. Also, Mr. Roob
is one of three trustees of the ESOP. Mr. Roob has an interest under the
ESOP in 10,439 shares. The other trustees are Mr. Benjamin M. Belcher, Jr.
and Mr. Yvan Dupuy, each of whom is a Director of the Company. Mr. Roob's
wife owns 70,000 shares which are not counted above, and in which he
disclaims any beneficial interest.
(4) Includes 1,485,599 shares held by trusts of which Mr. Vail is a co-
trustee. The other co-trustees of said trusts are as follows: (a) trusts
holding 1,226,699 of such shares--Mr. Belcher, Jr. and an individual
having no affiliation with the Company; (b) a trust holding 57,600 of such
shares--Mr. Roob and Mrs. Wardell; (c) a
A-4
<PAGE>
trust holding 72,000 of such shares--Mrs. Wardell; (d) a trust holding
100,800 of such shares--an individual having no affiliation with the
Company; (e) a trust holding 24,000 of such shares--an individual having no
affiliation with the Company; and (f) a trust holding 4,500 of such
shares--an individual having no affiliation with the Company and a retiree
of the Company. The co-trustees are empowered to make all decisions in
respect of the shares, including the voting and disposition thereof. Also
includes 3,423 shares in which Mr. Vail has an interest under the ESOP. Mr.
Vail's wife owns 600 shares which are not counted above, and in which he
disclaims any beneficial interest.
(5) The ESOP (described hereafter) owns these shares and the three trustees
are Mr. Benjamin M. Belcher, Jr., Mr. Yvan Dupuy and Mr. Richard Roob.
Current Directors and Executive Officers
The following table and the paragraphs that follow it present certain
information concerning the current directors and executive officers of the
Company. Pursuant to the Company's Certificate of Incorporation and Bylaws,
the Board of Directors is divided into three classes. Each year, the directors
in one class are elected to serve terms of three years. The officers are
appointed by the Board. Messrs. B.M. Belcher and W.C. Belcher are brothers and
Mrs. Wardell is their sister.
<TABLE>
<CAPTION>
Shares of Common
Stock
Beneficially
Positions and Offices with the Owned as of Percent
Name Company Age November 8, 2000 of Class
---- ------------------------------ --- ---------------- --------
<S> <C> <C> <C> <C>
Richard Roob(1)(4)...... Chairman of the Board of 68 1,561,617(6) 5.9
Directors; Director
Yvan Dupuy(1)(4)........ Chief Executive Officer and 48 1,184,212(7) 4.5
President: Director
Ward C. Belcher......... Director 53 755,377(8) 2.9
Benjamin M. Belcher, Director 65 2,719,008(9) 10.3
Jr.(1)(5)...............
Charles H. Bergmann, Director 56 314,850(10) 1.2
Jr.(2)(3)...............
Frederick J. Director 63 7,500(11) *
Costello(1)(2)(3).......
Gerald W. Moore Director 67 225,390(12) *
(1)(2)(3)(4)............
John C. Moore, Director 55 1,047,442(13) 4.0
Jr.(2)(5)...............
Robert H. Mundheim(4)... Director 67 11,500(14) *
Elizabeth H. Ruml....... Director 47 1,500 *
Sara B. Wardell(4)...... Director 57 695,246(15) 2.6
Charles C. Vail(1)(5)... Senior Vice President; 57 1,544,822(16) 5.8
Director
Executive Officers who
are not directors
Denis S. Abrams......... Vice President--Operations 52 35,737(17) *
Michael A. Bonner....... Vice President--Technology 51 32,111(18) *
Donald E. Devine II..... Vice President--Finance and 42 18,171(19) *
Chief Financial Officer
JoAnn Glaccum........... General Counsel 45 6,335(20) *
James E. Henderson...... Treasurer 48 15,817(21) *
John T. Rafferty........ Secretary 68 30,619(22) *
Ellen Singer............ Vice President--Marketing 44 19,160(23) *
Bruce E. Zeh............ Vice President--Sales 49 15,546(24) *
</TABLE>
A-5
<PAGE>
--------
* Less than 1%.
(1) Member of the Executive and Finance Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Member of the Governance Committee.
(5) Member of the Retirement Income Plan Investment Committee.
(6) Includes 1,211,347 shares held by trusts of which Mr. Roob is a co-
trustee. The other co-trustees of said trusts are as follows: (a) a trust
holding 57,600 of such shares--Mrs. Wardell and Mr. Vail; (b) a trust
holding 24,177 of such shares--an individual having no affiliation with
the Company and a retiree of the Company; and (c) a trust holding 28,578
of such shares--an individual having no affiliation with the Company. In
each case, the trustees are empowered to make all decisions in respect of
the shares, including the voting and disposition thereof. Also, Mr. Roob
is one of three trustees of the ESOP. Mr. Roob has an interest under the
ESOP in 10,439 shares. The other trustees are Mr. Benjamin M. Belcher,
Jr. and Mr. Yvan Dupuy, each of whom is a Director of the Company. Mr.
Roob's wife owns 70,000 shares which are not counted above, and in which
he disclaims any beneficial interest. Includes 73,500 shares issued under
the stock option plans of the Company, which are exercisable on or within
60 days after November 8, 2000.
(7) Mr. Dupuy is one of three trustees of the ESOP. Mr. Dupuy has an interest
under the ESOP in 4,214 shares. The other trustees are Mr. Benjamin M.
Belcher, Jr. and Mr. Richard Roob, each of whom is a Director of the
Company. Includes 55,500 shares issued under the stock option plans of
the Company, which are exercisable on or within 60 days after November 8,
2000.
(8) Includes 109,446 shares of the Company's Common Stock held by trusts of
which Mr. Ward C. Belcher is a co-trustee. The co-trustees are empowered
to make all decisions in respect of the shares, including the voting and
disposition thereof. Also includes 5,485 shares in which Mr. Belcher has
an interest under the Company's ESOP. Mr. Belcher is Custodian of 89,922
of such shares held under the Uniform Gifts to Minors Act and is a joint
tenant with his wife of 12,672 of such shares. Mrs. Ward C. Belcher owns
17,940 shares of the Company's Common Stock of which 12,768 shares are
held as Custodian under the Uniform Gifts to Minors Act. Mr. Belcher
disclaims any beneficial interest in such shares which are not counted
above. Includes 15,000 shares issued under the stock option plans of the
Company, which are exercisable on or within 60 days after November 8,
2000.
(9) Includes 2,399,691 shares held by trusts of which Mr. Belcher, Jr. is a
co-trustee. The other co-trustees of said trusts are as follows: (a)
trusts holding a total of 48,000 of such shares--individuals having no
affiliation with the Company; (b) trusts holding 1,226,699 of such
shares--Mr. Vail and an individual having no affiliation with the Company;
and (c) a trust holding 24,000 of such shares--Mrs. Sara B. Wardell, a
Director of the Company. In each case, the co-trustees are empowered to
make all decisions in respect of the shares, including the voting and
disposition thereof. Also, Mr. Belcher, Jr. is one of three trustees of
the ESOP. Mr. Belcher, Jr. has an interest under the ESOP in 7,710 shares.
The other trustees are Mr. Yvan Dupuy and Mr. Richard Roob, each of whom
is a Director of the Company. Mr. Belcher, Jr.'s wife owns 8,472 shares
which are not counted above, and in which he disclaims any beneficial
interest. Includes 3,000 shares issued under the stock option plans of the
Company, which are exercisable on or within 60 days after November 8,
2000.
(10) Includes 282,678 shares owned by Bergmann Enterprises Limited Partnership
of which Mr. Bergmann, Jr. is the managing general partner. Also includes
12,528 shares held by a trust of which Mr. Bergmann, Jr. is a co-trustee
with Mrs. Charles H. Bergmann, Jr. and a trust holding 11,916 shares held
by a trust of which Mr. Bergmann, Jr. is a co-trustee with his son. Mrs.
Bergmann, Jr. is a trustee with their son of a trust holding 24,192
shares which are not counted above, and in which Mr. Bergmann, Jr.
disclaims any beneficial interest. Includes 6,000 shares issued under the
stock option plans of the Company, which are exercisable on or within 60
days after November 8, 2000.
(11) Includes 6,000 shares issued under the stock option plans of the Company,
which are exercisable on or within 60 days after November 8, 2000.
(12) Includes 148,248 shares held by a trust of which Mr. Gerald W. Moore is
the sole trustee. The trustee is empowered to make all decisions in
respect of the shares, including the voting and disposition thereof.
A-6
<PAGE>
Includes 6,000 shares issued under the stock option plans of the Company,
which are exercisable on or within 60 days after November 8, 2000.
(13) Includes 1,039,824 shares held by a trust of which Mr. John C. Moore, Jr.
is a co-trustee with his uncle and two cousins. The co-trustees are
empowered to make all decisions in respect of the shares, including the
voting and disposition thereof. Includes 6,000 shares issued under the
stock option plans of the Company, which are exercisable on or within 60
days after November 8, 2000.
(14) Includes 6,000 shares issued under the stock option plans of the Company,
which are exercisable on or within 60 days after November 8, 2000.
(15) Includes 176,927 shares held by trusts of which Mrs. Wardell is a co-
trustee. The other co-trustees of said trusts are as follows: (a) a trust
holding 57,600 of such shares--Mr. Roob and Mr. Vail; (b) a trust holding
72,000 of such shares--Mr. Vail; (c) a trust holding 24,000 of such
shares--Mr. Belcher, Jr.; (d) a trust holding 23,127 of such shares--a
bank; and (e) a trust holding 200 of such shares--an individual having no
affiliation with the Company. Mrs. Wardell's adult daughter owns 82,083
shares which are not counted above, and in which she disclaims any
beneficial interest. Mrs. Wardell's husband owns 400 shares which are not
counted above, and in which she disclaims any beneficial interest.
Includes 6,000 shares issued under the stock option plans of the Company,
which are exercisable on or within 60 days after November 8, 2000.
(16) Includes 1,485,599 shares held by trusts of which Mr. Vail is a co-
trustee. The other co-trustees of said trusts are as follows: (a) trusts
holding 1,226,699 of such shares--Mr. Belcher, Jr. and an individual
having no affiliation with the Company; (b) a trust holding 57,600 of
such shares--Mr. Roob and Mrs. Wardell; (c) a trust holding 72,000 of
such shares--Mrs. Wardell; (d) a trust holding 100,800 of such shares--an
individual having no affiliation with the Company; (e) a trust holding
24,000 of such shares--an individual having no affiliation with the
Company; and (f) a trust holding 4,500 of such shares--an individual
having no affiliation with the Company and a retiree of the Company. The
co-trustees are empowered to make all decisions in respect of the shares,
including the voting and disposition thereof. Also includes 3,423 shares
in which Mr. Vail has an interest under the ESOP. Mr. Vail's wife owns
600 shares which are not counted above, and in which he disclaims any
beneficial interest. Includes 39,750 shares issued under the stock option
plans of the Company, which are exercisable on or within 60 days after
November 8, 2000.
(17) Includes 18,875 shares issued under the stock option plans of the
Company, which are exercisable on or within 60 days after November 8,
2000. Also includes 362 shares in which Mr. Abrams has an interest under
the ESOP.
(18) Includes 15,375 shares issued under the stock option plans of the
Company, which are exercisable on or within 60 days after November 8,
2000. Also includes 3,836 shares in which Mr. Bonner has an interest
under the ESOP.
(19) Includes 10,500 shares issued under the stock option plans of the
Company, which are exercisable on or within 60 days after November 8,
2000. Also includes 171 shares in which Mr. Devine has an interest under
the ESOP.
(20) Includes 5,475 shares issued under the stock option plans of the Company,
which are exercisable on or within 60 days after November 8, 2000. Also
includes 860 shares in which Ms. Glaccum has an interest under the ESOP.
(21) Includes 7,800 shares issued under the stock option plans of the Company,
which are exercisable on or within 60 days after November 8, 2000. Also
includes 2,777 shares in which Mr. Henderson has an interest under the
ESOP.
(22) Includes 14,250 shares issued under the stock option plans of the
Company, which are exercisable on or within 60 days after November 8,
2000. Also includes 1,819 shares in which Mr. Rafferty has an interest
under the ESOP.
(23) Includes 13,875 shares issued under the stock option plans of the
Company, which are exercisable on or within 60 days after November 8,
2000. Also includes 785 shares in which Ms. Singer has an interest under
the ESOP.
(24) Includes 10,875 shares issued under the stock option plans of the
Company, which are exercisable on or within 60 days after November 8,
2000. Also includes 171 shares in which Mr. Zeh has an interest under the
ESOP.
A-7
<PAGE>
Richard Roob has been the Chairman of the Board of Directors since 1984 and
was the Chief Executive Officer of the Company from 1996 until April 2000. He
has been a director of the Company since 1979.
Yvan Dupuy has been the Chief Executive Officer of the Company since April
2000, and was the President and Chief Operating Officer since 1996. Prior to
that time, he was the Senior Vice President of the Company from 1995 to 1996
and the Vice President of Sales and Marketing of the Company from 1988 to
1995. Mr. Dupuy has been a member of the Board since 1990.
Charles C. Vail has been the Senior Vice President of the Company since
April 1997 and a Vice President of the Company since 1988. Mr. Vail has been a
member of the Board since 1986.
Benjamin M. Belcher, Jr. retired as Executive Vice President of the Company,
in which position he served from 1991 to 1998. He has been a member of the
Board since 1975.
Ward C. Belcher retired as the Vice President--Operations of the Company
effective as of December 31, 1999, in which position he served from 1989. He
been a member of the Board since 1988.
Charles H. Bergmann, Jr. is the Managing Partner of Bergmann Enterprises
Ltd. Partnership, an investment partnership and a consultant to Wealth
Management, LLS, personal financial advisors in Appleton, Wisconsin. He was
the Director of Communications for the Alto Dairy Cooperative, a dairy
products manufacturer in Wapun, Wisconsin from 1989 to 1999. Mr. Bergmann has
been a member of the Board since 1996.
Frederick J. Costello is a retired executive from the Union Carbide
Corporation, a chemicals corporation. He served as the President of the
Solvents and Coatings Materials Division of Union Carbide Corporation from
1989 until he retired in 1993. He has been a member of the Board since 1997.
Gerald W. Moore is a retired business executive and has been a private
investor from 1989 to the present. He has been a member of the Board since
1994.
John C. Moore, Jr. retired in 1999 from Electronic Data Systems, where he
provided management consulting and technology planning from 1985 until 1999.
Mr. Moore has been as a member of the Board since 1994.
Robert H. Mundheim has been of counsel to Shearman & Sterling, a law firm,
since 1999. Prior to that, he served as the Senior Vice President and General
Counsel of Salomon Smith Barney Holdings, Inc. from December 1997 through
December 1998. Prior to that, he was the Executive Vice President and General
Counsel of Salomon Inc., a predecessor of Salomon Smith Barney Holdings, Inc.
from 1992 to 1997. Mr. Mundheim has been a member of the Board since 1997.
Sara B. Wardell was the Managing Director of the Scoville Memorial Library
in Salisbury, Ct. from 1978 to 1993 and since then has been a library
consultant. She has been a member of the Board since 1987.
All of the executive officers of the Company, except for Ms. Singer, Messrs.
Devine and Zeh and Dr. Abrams have, during a period in excess of the past five
years, been actively engaged in the business and affairs of the Company in
various senior management capacities.
Dr. Abrams was elected Vice President--Operations in November 1999 and had
been promoted to Director of Operations in September 1999. From 1997 through
1999, Dr. Abrams was Director of Manufacturing after having been named
Director of Planning in March 1997 and, from 1995 to 1997, he was a consultant
for Technical Coatings. He joined the Company in 1995 from Gilman Brothers
Paint Co., of which he was an owner.
Mr. Devine joined the Company in November 1998 as Vice President--Finance
and Chief Financial Officer. Prior to his joining the Company, he was Vice
President of Finance and Chief Financial Officer of the Dannon Company since
1992.
A-8
<PAGE>
Ms. Singer was elected Vice President--Marketing in February 1998 and had
been the Director of Marketing of the Company since January 1997 and the
Corporate Marketing Manager from 1995 until 1996. Prior thereto, she was
Business Director of Nabisco Foods Group from 1987 until 1995.
Mr. Zeh joined the Company in June 1998. Prior to his joining the Company,
he was formerly employed by ICI Paints as Vice President and General Manager
of ICI Paints Canada, Inc. from 1995 through 1998. Prior to that he was a Vice
President at Devoe.
Mr. Henderson has been Treasurer of the Company since November 1996. He
joined the Company in 1975.
Mr. Rafferty was Associate General Counsel of the Company from 1988 until
1989; General Counsel and Assistant Secretary from 1989 until 1991 and
Secretary and General Counsel from 1991 until April 27, 2000. Since April 27,
2000 to date, he has been Secretary and Counsel.
Ms. Glaccum was elected as General Counsel of the Company in April 2000 and
had been the General Counsel--Commercial Affairs since April 1998, the
Assistant General Counsel from 1996 to 1998 and the Corporate Attorney from
1993 to 1996. Prior thereto, she was general counsel to Meehan--Tooker Inc., a
commercial printing company from 1989 to 1993.
Committees of the Board of Directors
The Company has an Executive and Finance Committee, an Audit Committee, a
Compensation Committee, a Governance Committee and a Retirement Income Plan
Investment Committee, and, in 1999, the Company had a Stock Option Committee.
The Executive and Finance Committee may exercise all powers of the Board with
certain exceptions as required by law. The Audit Committee functions include
recommending to the Board the engagement of the independent public accountants
for the Company, reviewing with the independent public accountants the plan
and results of the audit engagement, considering the effect of any non-audit
services upon the independence of the accountants, approving the fees for
audit and non-audit services, and reviewing with the independent public
accountants certain internal accounting controls. The Compensation Committee
is responsible for the approval of the Company's performance bonus plan and
for compensation arrangements for each executive officer named in the Summary
Compensation Table appearing below and the Compensation Committee reviews and
approves performance goals for senior executives. The Governance Committee,
among other things, evaluates and recommends candidates for election to the
Board and assesses the performance of directors. The Stock Option Committee
administers the Company's Stock Option Plans. The Retirement Income Plan
Investment Committee oversees the management of the Company's pension plan
invested assets.
During 1999, there were five meetings of the Board, three meetings of the
Audit Committee, four meetings of the Executive and Finance Committee, seven
meetings of the Compensation Committee, four meetings of the Governance
Committee, three meetings of the Stock Option Committee and three meetings of
the Retirement Income Plan Investment Committee. Each Director of the Company
attended at least 75% of the meetings of the Board and the Committee or
Committees of which such person was a member.
Director Compensation
Fees. Directors of the Company ("Directors") who are employees of the
Company receive no fees for their services as Directors. Directors who are not
employees of the Company receive an annual retainer of $24,000 plus $2,000 for
each meeting of the Board and $1,000 for each Board Committee meeting
attended. In addition, the Chairperson of each Board Committee is paid a
$5,000 annual retainer and each Committee member is paid a $3,000 annual
retainer. Expenses for attending meetings are also reimbursed.
Options. In accordance with the provisions of the 1998 Stock Incentive Plan,
stock options covering 3,000 shares are granted each year to each non-employee
Director under the provisions of such Plan.
A-9
<PAGE>
Common Stock Equivalents. The Company has a Directors Deferred Compensation
Plan. Pursuant to such Plan a non-employee Director may elect, prior to the
commencement of the next calendar year, to have all or a portion of his or her
retainer fee and all or a portion of his or her meeting fees credited to a
deferred compensation account. This account, which is carried in the form of
stock equivalent units of the Company's Common Stock and dividends credited
thereon, is paid out in a lump sum cash payment on or before the last day of
the calendar month following the calendar month upon which he or she ceases to
be a Director of the Company.
Executive Compensation
The following table sets forth information for each of the last three fiscal
years concerning the compensation earned by the Company's Chief Executive
Officer and each of the other four most highly compensated executive employees
of the Company during 1999 who were executive officers of the Company as of
the end of such fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------------
Securities
Other Annual Underlying All Other
Name and Principal Salary Bonus Compensation Options Compensation
Position Year ($)(1) ($)(2) ($)(3) (#)(4) ($)(5)
------------------ ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Richard Roob............ 1999 660,000 467,708 2,582 54,000 2,298
Chairman of the Board of 1998 633,000 296,781 3,730 60,000 2,173
Directors
and Chief Executive
Officer 1997 609,500 160,000 4,782 0 2,239
Yvan Dupuy.............. 1999 422,506 252,925 14,247 54,000 2,298
President and 1998 378,000 160,503 12,579 60,000 2,173
Chief Operating Officer 1997 349,992 101,750 5,818 0 2,239
Charles C. Vail......... 1999 254,262 108,173 18,862 27,000 2,298
Senior Vice President 1998 245,634 61,999 16,766 30,000 2,173
1997 235,624 42,398 10,680 0 2,239
Donald E. Devine II(6).. 1999 240,001 110,521 7,863 42,000 2,298
Vice President--Finance 1998 35,701 0 0 0 100,000
and
Chief Financial Officer
Ward C. Belcher(7)...... 1999 216,500 73,695 9,171 0 2,298
Vice President 1998 213,750 53,972 8,437 15,000 2,173
Operations
1997 211,000 34,637 4,782 0 2,239
</TABLE>
--------
(1) Salary includes amounts deferred pursuant to salary reduction elections
made under the Company's Deferred Savings and Investment Plan (a "401(k)
Plan") which did not have a Company matching contribution in the years
shown.
(2) See the discussion below under the caption "Annual Incentives".
(3) Includes only imputed income pursuant to the Internal Revenue Code of 1986
with respect to promissory notes without stated interest delivered in
partial payment for the purchase of Common Stock under the Employees'
Stock Purchase Plan. See the caption "Promissory Notes" below.
(4) Adjusted for the July 1, 1999, 3-for-1 stock split. For additional
information on the options granted in 1999, see the caption "Option Grants
in 1999" below.
(5) All Other Compensation includes the fair market value of shares allocated
in respect of the indicated years under the Company's ESOP. The 1998
amount for Mr. Devine is a signing bonus.
(6) Mr. Devine commenced employment with the Company in November 1998.
(7) Mr. Belcher retired as an employee with the Company effective as of
December 31, 1999. For information on his early retirement agreement with
the Company, see the Section of this Information Statement captioned "--
Early Retirement Agreement".
A-10
<PAGE>
Early Retirement Agreement
The Company entered into an early retirement agreement with Mr. Ward C.
Belcher who retired effective December 31, 1999. Under this agreement the
Company will continue to pay Mr. Ward C. Belcher his base salary at an annual
rate of $216,500 through November 30, 2001. His benefits under the Company's
welfare benefit plans will continue through that date or until he obtains
subsequent employment, if earlier. He will also accrue benefits under the
Company's Supplemental Executive Retirement Income Benefit Plan until November
19, 2001, at which time he will attain the age of 55. Mr. Belcher will
continue to be eligible for 60% of his targeted award under the Company's
Long-Term Compensation Program. In addition, options that were granted in 1998
to Mr. Belcher became vested and exercisable on December 31, 1999 under his
early retirement agreement.
In the event a Change in Control (as defined in the Senior Executive
Severance Protection Plan) occurs before December 1, 2001, pursuant to Mr.
Belcher's early retirement agreement, Mr. Belcher will be entitled to receive
a lump sum payment equal to $649,500 less the amount of base salary paid to
him since his retirement. See the Section of the Schedule 14D-9 titled "Past
Contacts, Transactions, Negotiations and Agreements--Arrangements with
Executive Officers, Directors or Affiliates of the Company--Early Retirement
Agreement with Ward C. Belcher", which section and the exhibit referenced
therein is incorporated herein by reference.
Revised Retirement Income Plan and Excess Benefit Plan
The following table shows, as of December 31, 1999, estimated annual
benefits payable upon retirement at age 65 under the Company's Revised
Retirement Income Plan (the "Retirement Plan") assuming that an employee would
be entitled to receive benefits under the Retirement Plan provisions which
would yield the largest benefit.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF CREDITED SERVICE
Highest Average ----------------------------------------------------------
salary Over 10 20 30 35 40 45
3 Consecutive Years years Years Years Years Years Years
------------------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
$200,000 28,134 56,268 84,402 98,468 113,468 128,468
250,000 35,634 71,268 106,902 124,718 143,468 162,218
300,000 43,134 86,268 129,402 150,968 173,468 195,968
350,000 50,634 101,268 151,902 177,218 203,468 229,718
400,000 58,134 116,268 174,402 203,468 233,468 263,468
450,000 65,634 131,268 196,902 229,718 263,468 297,218
500,000 73,134 146,268 219,402 255,968 293,468 330,968
550,000 80,634 161,268 241,902 282,218 323,468 364,718
600,000 88,134 176,268 264,402 308,468 353,468 398,468
650,000 95,634 191,268 286,902 334,718 383,468 432,218
700,000 103,134 206,268 309,402 360,968 413,468 465,968
</TABLE>
The maximum number of years of credited service under the Retirement Plan is
capped at 35 years except for employees hired prior to January 1, 1970.
Under the Company's Retirement Plan, which is a non-contributory, qualified,
defined benefit plan, the Company makes actuarially determined annual
contributions on behalf of most of its United States employees who have
completed at least one year of service with the Company. As of December 31,
1999, Messrs. Roob, Dupuy, Vail, Devine and W. C. Belcher had respectively 23,
23, 16, 1 and 28 years credited service under the Plan. The compensation
covered by the Retirement Plan is that described under the "Salary" column of
the Summary Compensation Table. Benefits shown in the Pension Plan Table are
computed on the basis of a straight life annuity and are not subject to offset
for Social Security. To the extent that an employee's retirement benefit as
computed in accordance with the Plan exceeds maximum amounts permitted under
the Internal Revenue Code of 1986, the difference will be paid by the Company
under the Company's unfunded Excess Benefit Plan approved by the Board which
provides a compensating non-qualified annual retirement supplement.
A-11
<PAGE>
Supplemental Executive Retirement Plan
In 1996 the Company established a non-qualified Supplemental Executive
Retirement Income Benefit Plan. This Plan is designed to equalize benefits for
certain senior executives. The Compensation Committee has been authorized to
select the participants in this Plan. Messrs. Roob, Dupuy, Abrams and Vail are
participants and Mr. Ward C. Belcher is a participant from December 31, 1999
until November 19, 2001.
The following table shows, as of December 31, 1999, estimated annual
benefits payable upon retirement at age 65 under the Supplemental Executive
Retirement Income Benefit Plan.
SUPPLEMENTAL EXECUTIVE RETIREMENT INCOME BENEFIT PLAN TABLE
<TABLE>
<CAPTION>
Years Of Credited Service
Highest Average ------------------------------------------------------------------------------
Salary Over 15 20 25
3 Consecutive Years Years Years Years
------------------- ----- ------- -------
<S> <C> <C> <C>
$200,000 90,000 100,000 107,500
250,000 112,500 125,000 134,375
300,000 135,000 150,000 161,250
350,000 157,500 175,000 188,125
400,000 180,000 200,000 215,000
450,000 202,500 225,000 241,875
500,000 225,000 250,000 268,750
550,000 247,500 275,000 295,625
600,000 270,000 300,000 322,800
650,000 292,500 325,000 349,375
700,000 315,000 350,000 376,250
</TABLE>
The maximum number of years of credited service under the Supplemental
Executive Retirement Income Benefit Plan is 25 years. As of December 31, 1999,
Messrs. Roob, Dupuy and Vail had respectively 23, 23 and 16 years of credited
service. The compensation covered by this Plan is that described under the
"Salary" column of the Summary Compensation Table. Benefits shown in the
Supplemental Executive Retirement Income Benefit Plan Table are computed on
the basis of a straight life annuity and are subject to offset by the
participant's benefits under the Retirement Plan and the Excess Benefit Plan
and the participant's primary Social Security benefit. Upon a participant's
termination of employment following a change in control the benefit under this
Plan will become fully vested and the actuarial equivalent of the benefit will
be paid within 30 days in a lump sum.
A-12
<PAGE>
Promissory Notes
The following officers and Directors of the Company were indebted to the
Company in amounts greater than $60,000 since January 1, 1999 under full
recourse promissory notes without stated interest delivered in partial payment
for the purchase of Common Stock of the Company under the Employees' Stock
Purchase Plan. One of the promissory notes bears interest at the rate of 5.5
percent per annum and it was given for the purchase of shares under the 1993
Stock Option Plan by Mr. Dupuy. In addition, Mr. Dupuy was also indebted to
Benjamin Moore & Co. under a full recourse promissory note without stated
interest given in connection with the purchase of Common Shares of Benjamin
Moore & Co., Limited on February 13, 1992. The highest amounts outstanding
under such notes for such persons since January 1, 1999 and the amounts
outstanding at March 3, 2000 were as follows:
<TABLE>
<CAPTION>
Since January 1,
1999 At March 3, 2000
----------------- -----------------
With Without With Without
Interest Interest Interest Interest
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Denis S. Abrams.......................... $ -0- $373,148 $ -0- $329,339
Ward C. Belcher.......................... -0- 116,400 -0- 104,431
Michael A. Bonner........................ -0- 159,564 -0- 129,132
Donald E. Devine II...................... -0- 194,266 -0- 177,930
Yvan Dupuy............................... 73,260 236,242 64,074 193,808
James E. Henderson....................... -0- 123,447 -0- 108,855
John T. Rafferty......................... -0- 73,802 -0- 40,905
Ellen L. Singer.......................... -0- 116,400 -0- 103,382
Charles C. Vail.......................... -0- 264,462 -0- 227,032
Maurice C. Workman....................... -0- 109,707 -0- 70,975
Bruce E. Zeh............................. -0- 117,369 -0- 99,706
</TABLE>
The foregoing amounts represent the aggregate principal balances outstanding
under the promissory notes. The purchase of the Company's Common Stock
generally occurred on (a) January 1, 1991, (b) May 27, 1994 and (c) May 8,
1998, at the then current fair value as determined in accordance with the
terms of the Employees' Stock Purchase Plan. As noted above, Mr. Dupuy also
exercised an option under the 1993 Stock Option Plan and purchased Common
Shares of Benjamin Moore & Co., Limited. All of the promissory notes are
secured by the shares to which they relate. On and after January 1, 1991, all
purchases under the Employees' Stock Purchase Plan under full recourse
promissory notes have been made without stated interest on the notes. For
information on the amounts outstanding under the promissory notes as of
November 8, 2000, see the Section of the Schedule 14D-9 titled "Past Contacts,
Transactions, Negotiations and Agreements--Arrangements with Executive
Officers, Directors or Affiliates of the Company--Promissory Notes", which
section is incorporated herein by reference.
Compensation Committee Interlocks and Insider Participation
The following persons, who are non-employee Directors, serve as members of
the Compensation Committee, which establishes the compensation of the
Company's senior executives named in the Summary Compensation Table above:
Charles H. Bergmann, Jr., Frederick J. Costello, Gerald W. Moore and Robert H.
Mundheim. This Committee was originally named the Compensation and Stock
Option Plan Committee and the name was changed to the Compensation Committee
in September 1999; however, the members of this Committee were the same from
1999 to date. None of the named members of this Committee has been at any time
an officer or employee of the Company or any of its subsidiaries. Shearman &
Sterling, a law firm, performed legal services for the Company in 1999 and in
2000. Mr. Robert H. Mundheim currently is of counsel to Shearman & Sterling.
A-13
<PAGE>
Report on Executive Compensation
The executive compensation program of the Company is administered by the
Compensation Committee of the Board of Directors. For fiscal year 1999, this
Committee consisted of Charles H. Bergmann, Jr., Frederick J. Costello, Gerald
W. Moore and Robert H. Mundheim.
All compensation decisions of the Compensation Committee, including those
for the Chief Executive Officer, take into account individual services
rendered, level and scope of responsibility, experience, an evaluation of
overall Company performance, the need for motivation and retention of
executives of outstanding abilities, internal equity, and the requirement to
be competitive. Additional consideration is given to the compensation
structures of corporations in the same or similar lines of business as the
Company as well as a number of those in other lines of business. Survey data
is used to assist in this evaluation. Within this framework and with input
from management, the Compensation Committee makes a subjective judgment about
the salary of the Chief Executive Officer and the other senior executives of
the Company.
Base Salary. The Company has a philosophy of providing a level of base
compensation or salary that allows the Company to attract, retain and reward
the talent needed to maintain its leading position in the coatings business.
The Company carefully reviews the performance of employees in determining
annual compensation increases. This performance evaluation is made by the
various levels of management. All compensation increases for the five senior
executives of the Company appearing in the Summary Compensation Table are
reviewed and approved by the Compensation Committee.
Annual Incentives. An annual incentive program was adopted by the Company
effective January 1, 1993. It is intended to create a positive link between
annual performance and annual incentive compensation. The program has two
broad components: a general individual incentive portion and a management
incentive plan. Incentive payments under the individual incentive portion of
this program for 1999 were made to those employees who were not participants
in the management incentive award program or the sales representative
incentive program. For 1999 the incentive payment threshold was the
achievement of a specified level of increase in net income and revenues of the
Company. The Compensation Committee reviewed and approved incentive
opportunities for 1999 corresponding with the performance required to achieve
increasing levels of net income and revenues under the Company's annual and
strategic plan. Target incentive opportunities were established under the
individual incentive portion of this program as an increasing percentage of
base salary directly related to the level of increase of net income and
revenues. This opportunity was designed to foster a team based approach to
collaborative working decisions and individual as well as Company achievement.
Individual awards were made according to each employee's performance against
set goals.
The Compensation Committee decided that under the 1999 management incentive
award program incentive payments should be made for overall financial and
operating performance throughout the year. The amount of the payment under the
management incentive award program for each executive officer of the Company
named in the Summary Compensation Table was determined by the provisions of
the annual incentive program and was approved by the Compensation Committee.
Since an increase in net income and revenues was used to determine the amount
of the annual incentive, the program was positively correlated with the
performance of the Company. The incentive payment to the Chief Executive
Officer, Richard Roob, in 1999 reflects the fact that the actual financial
results of the Company were significantly higher in 1999 than 1998.
In addition, in recognition of the Company's outstanding performance in
1999, a special bonus amounting to the equivalent of two weeks' base salary
was paid at the end of January 2000 to all active, regular full-time and
regular part-time employees, including all of the Company's executive
officers, who had been with the Company for over one year and who were
employed as of December 31, 1999.
Long Term Incentives. The Company's long-term incentive philosophy is that
long-term incentives should be related to increases in long-term shareholder
value so as to create a common interest among the Company, employees and
shareholders. To further this objective the Company provides a three component
opportunity of
A-14
<PAGE>
long-term incentives for many employees. The first is the opportunity to
purchase Common Stock through the Employees' Stock Purchase Plan. This Plan is
generally available to employees who have more than five years of service with
the Company. The second opportunity is through the ESOP. In 1999, all
employees of the Company with one year of service participated in this Plan.
Lastly, the Compensation Committee in 1998 approved the establishment of a
long-term compensation program for senior leadership and key management
employees.
Stock Purchases. An Employees' Stock Purchase Plan, which is administered by
the Executive and Finance Committee of the Board of Directors, was approved by
the shareholders of the Company on April 20, 1978. This was a continuation of
the original plan established in 1937. It permits the purchase of shares of
Common Stock at fair value. It is believed that stock ownership aligns the
interests of employees and shareholders of the Company. For a summary of the
indebtedness to the Company under this Plan of officers and Directors of the
Company, see the discussion above under the heading "Promissory Notes".
Employees' Stock Ownership Plan. The Company has maintained an Employees'
Stock Ownership Plan (the "ESOP") which is a tax-qualified plan covering
substantially all of its United States employees. Under the terms of this
Plan, the Board of Directors of the Company is authorized to make
contributions from time to time out of the profits or retained earnings of the
Company to the Plan Trust fund; such contributions to be in an amount and in
the form of cash or shares of Common Stock as determined by the Board of
Directors in its sole discretion. Contributions, which are deductible expenses
for income tax purposes, are allocated annually to the participants in the
Plan in the ratio that the eligible compensation of each bears to the
aggregate eligible compensation of all such participants. In 1999 the Company
contributed to the Plan Trust fund an amount necessary to complete the loan
payment due on a loan made on June 30, 1989, which was used to purchase shares
for the ESOP. Effective December 31, 1999, the Company merged the ESOP into
its Deferred Savings and Investment Plan described below.
Deferred Savings and Investment Plan. This plan, which is a tax-qualified
401(k) plan covering substantially all of the Company's United States
employees, allows employees to elect to defer up to 12% of their compensation,
subject to the annual Internal Revenue Service limits on employee salary
reduction deferrals. Participants may choose among several investment funds
for their elective deferrals. Effective January 1, 2000, the Company will
provide for a matching contribution in the form of Common Stock equal to 50%
of the elective deferrals up to 4% of the participant's compensation for any
participant employed on December 31 of a year starting December 31, 2000. The
Company will also contribute an amount equal to 1% of compensation for 2000.
These matching contributions are designed to replace contributions previously
made to the ESOP. The ESOP was merged with the Deferred Savings and Investment
Plan as of December 31, 1999. As a result, the Deferred Savings and Investment
Plan will be comprised of both a 401(k) portion and an ESOP portion.
Long-Term Compensation Program for Senior Leadership Group and Key
Management. This program is a multiyear incentive program adopted in 1998 by
the former Compensation and Stock Option Plan Committee that targets the
achievement of four-year sales and net profit goals. The principal incentive
feature is the award of stock options by the Stock Option Committee to
approximately 45 senior managers, including the executive officers named in
the Summary Compensation Table. There is also a cash bonus feature which calls
for a cash payment to senior executives based upon cumulative sales and
earnings over the four-year period 1998 through 2001. It is designed to
facilitate part of the cash requirements needed by option holders to exercise
their options.
The Compensation Committee believes stock options, which are granted by the
Stock Option Committee, encourage and reward efforts that result in corporate
financial success over the long term as measured by stock price appreciation.
Employees receiving grants benefit if shareholders benefit through
appreciation in the post-grant value of the shares of Common Stock. The 1993
Stock Option Plan of the Company was approved by the shareholders on April 15,
1993 and the 1998 Stock Incentive Plan was approved by the shareholders on
April 16, 1998. Future grants may only be made under the 1998 Stock Incentive
Plan.
A-15
<PAGE>
Policy Regarding Section 162(m) of the Internal Revenue Code. Section 162(m)
of the Internal Revenue Code generally limits the corporate deduction for
compensation paid to an employee who on the last day of fiscal years beginning
on or after January 1, 1994 is either the chief executive officer or among the
four most highly compensated officers other than the chief executive officer
to $1 million, except for qualified performance-based compensation. Options
that have been granted under the Company's Stock Option Plans are designed to
qualify as performance-based compensation under regulations issued by the
Internal Revenue Service. The Compensation Committee as a general rule intends
to take such action as it deems appropriate to preserve the tax deductibility
of compensation paid by the Company to the extent practicable and so long as
this objective is consistent with providing fair, competitive and rewarding
compensation consistent with performance. In the case of Mr. Roob it was the
Compensation Committee's judgment that, notwithstanding the limitation of
Section 162(m), his compensation was appropriate to his level of
responsibility within the Company, the Company's financial performance in 1999
and Mr. Roob's leadership.
Compensation Committee
Charles H. Bergmann, Jr. Frederick J. Costello Gerald W. Moore
Robert H. Mundheim
Option Grants in 1999
The following table shows all individual grants of stock options under the
Company's 1998 Stock Incentive Plan to the named executive officers of the
Company during calendar year 1999, which was the Company's fiscal year. The
Company has not granted any stock appreciation rights ("SARs"). These option
grants were made by the Stock Option Committee.
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Number of Percent of Rates of Stock
Securities Total Options Price Appreciation
Underlying Granted to Exercise or for Option Term (3)
Options Employees In Base Price Expiration -------------------
Name Granted(#)(1) Fiscal Year ($/SH)(2) Date 5% 10%
---- ------------- ------------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard Roob............ 54,000 14.5 28.00 3/5/2009 $952,560 $2,404,080
Yvan Dupuy.............. 54,000 14.5 28.00 3/5/2009 952,560 2,404,080
Charles C. Vail......... 27,000 7.3 28.00 3/5/2009 476,280 1,202,040
Donald E. Devine II..... 15,000 4.0 27.86 1/25/2009 263,277 664,461
27,000 7.3 28.00 3/5/2009 476,280 1,202,040
Ward C. Belcher......... 0 0 0 0 0 0
</TABLE>
--------
(1) The options were granted on March 5, 1999 (except for the 15,000 share
option grant to Mr. Devine which was made on January 25, 1999) and become
exercisable in four equal installments on each of the first, second, third
and fourth anniversaries of the date of the grant. In the event of a
change in control of the Company, all options outstanding as of such date
shall become immediately and fully exercisable. The number of shares
reflect the July 1, 1999, 3-for-1 stock split.
(2) The option exercise or base price per share is the fair value of a share
of Common Stock based on the valuation determined by Management Planning,
Inc., 101 Poor Farm Road, Princeton, New Jersey 08540, an independent
consulting firm retained since April 1988 to calculate the current fair
value of the Common Stock on a weekly basis.
(3) As required by the rules of the Securities and Exchange Commission,
potential values stated are based on the hypothetical assumption that the
Company's Common Stock will appreciate in value from the date of grant to
the end of the option term (ten years from the date of grant) at
annualized rates of 5% and 10% (total appreciation of 63% and 159%),
respectively. They are not intended to forecast future appreciation, if
any, in the price of the Company's Common Stock. The total of all stock
options granted to employees, including executive officers, during 1999
covering 372,300 shares was less than 1.4% of total shares outstanding at
December 31, 1999. For this reason, the potential realizable value of such
options for all optionees under the prescribed assumptions is less than
1.4% of the potential realizable value of all shareholders for the same
period under the same assumptions.
A-16
<PAGE>
Long-Term Incentive Plan--Awards in Last Fiscal Year
There were no cash awards under the Company's Long-Term Compensation Program
in calendar year 1999, the last fiscal year. Awards made in 1998 are dependent
upon achievement of sales and net profit goals over the four-year period from
1998 through 2001.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The following table provides information concerning option exercises in the
last fiscal year, which is calendar year 1999 and the value of unexercised
options held by the executive officers named in the Summary Compensation Table
at the end of the last fiscal year. The Company has not granted any SARs.
<TABLE>
<CAPTION>
Number of Securities
Number Underlying Unexercised Value of Unexercised in
of Shares Year Options At Fiscal the Money Options at
Acquired on (#) Realized Year End (#) Fiscal Year End ($)(2)
Name Exercise ($)(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Richard Roob............ 0 0 45,000/99,000 141,900/79,380
Yvan Dupuy.............. 6,000 12,000 27,000/99,000 65,400/79,380
Charles C. Vail......... 0 0 25,500/49,500 83,700/39,690
Donald E. Devine II..... 0 0 0/42,000 0/30,240
Ward C. Belcher......... 0 0 33,000/0 90,900/0
</TABLE>
--------
(1) The figures presented in this column have been calculated based upon the
difference between the fair value of a share of Common Stock as determined
by Management Planning, Inc. on the date of exercise and its exercise
price.
(2) Values stated are based on the difference between the option exercise or
base price per share and the fair value of a share of Common Stock on
December 31, 1999 of $28.67 per share, as determined by Management
Planning, Inc., multiplied by the number of in-the-money options
outstanding. Such price as of March 3, 2000 was also $28.67 per share.
Severance Arrangements. The Company has adopted a Senior Executive Severance
Protection Plan (the "Severance Plan") covering designated employees of the
Company (including each of the executive officers appearing in the Summary
Compensation Table). Under the Severance Plan, a covered executive will be
entitled to specified severance benefits if he or she is terminated within two
years after a Change in Control (as defined in the Severance Plan) by the
Company other than for Cause (as defined in the Severance Plan) or by the
executive for Good Reason (as defined in the Severance Plan but generally
including an adverse change in the executive's position, a reduction in salary
or certain benefits or a relocation of the Company's offices more than 25
miles.) The severance benefits include a lump sum equal to three times the
executive's base salary, a pro-rata annual bonus for the year in which the
termination occurs and the continuation of certain health and welfare benefits
for three years following termination. The Severance Plan was amended in 1999
to provide that additional payments will be made to terminated participants
following a Change in Control of the Company if the participant's severance
benefits are subjected to adverse excise tax under Section 4999 of the
Internal Revenue Code of 1986. However, where a severance payment reduction of
less than $25,000 would eliminate the excise tax on Change in Control related
payments to the participant, the severance benefits would be reduced so that
there would be no excise tax payment.
A-17
<PAGE>
Performance Graph
The following line graph compares the Company's cumulative total shareholder
return on its Common Stock with the cumulative total return of (i) the Standard
& Poor's 500 Stock Index which is a broad based widely used index useful for
comparison purposes and (ii) a Peer Group of five publicly traded companies in
the coatings business. The companies in the Peer Group are Lilly Industries,
Inc., Pratt & Lambert United, Inc. through 1995 since it was acquired by The
Sherwin-Williams Company in January 1996, RPM, Inc., The Sherwin-Williams
Company and The Valspar Corporation. All returns assume that $100 was invested
on December 31, 1994 and that all dividends were reinvested, and all returns
are weighted on the basis of market capitalization at the beginning of each
year of measurement. The stock prices for the Common Stock of Benjamin Moore &
Co. are the fair values as determined by Management Planning, Inc.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and Directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership with the Securities and Exchange Commission. Executive officers,
Directors and greater than ten-percent shareholders are required by Securities
and Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based on review of the copies of such forms furnished to the Company, the
Company believes that during the year 1999 all Section 16(a) filing
requirements applicable to its executive officers, Directors and greater than
ten-percent beneficial owners were met except that Mrs. Sara B. Wardell did not
file a timely Form 4 reporting a total of 600 shares of Common Stock purchased
by her husband.
A-18
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1. Letter to shareholders from Richard Roob and Yvan Dupuy dated November
17, 2000.*
2. Agreement and Plan of Merger, dated November 8, 2000, by and among
Parent, Purchaser and the Company.(1)
3. Shareholders Agreement, dated November 8, 2000, among Parent,
Purchaser and certain shareholders of the Company signatories
thereto.(1)
4. Confidentiality Agreement, dated October 24, 2000, between the Company
and Parent.
5. Benjamin Moore & Co. Senior Executive Severance Protection Plan.
6. Benjamin Moore & Co. Key Employee Severance Protection Plan.
7. Consulting Agreement with Richard Roob, dated November 8, 2000.
8. Early Retirement Agreement with Ward C. Belcher, dated December 7,
1999.
9. Letter Agreement with Charles C. Vail, dated May 10, 2000.
10. Form of Severance Letter Agreement with Jan Bottcher, JoAnn Glaccum,
Edward Klein, Allen Hagstrand and James Megin.
11. Benjamin Moore & Co. Stock Option Plan, adopted by shareholders on
April 15, 1993.
12. Benjamin Moore & Co. 1998 Stock Incentive Plan, adopted by
shareholders on April 16, 1998.
13. Benjamin Moore & Co. Supplemental Executive Retirement Income Benefit
Plan.
14. Opinion of J.P. Morgan dated as of November 8, 2000.*
15. Joint Press Release issued by Parent and the Company on November 8,
2000.(2)
</TABLE>
--------
(1) Incorporated by reference to the Form 8-K filed by the Company on November
9, 2000.
(2) Incorporated by reference to the Company's Schedule 14D-9, filed November
8, 2000.
* Included in the copy of the Schedule 14D-9 mailed to the Company's
shareholders.
