SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant |_|
Filed by a Party other than the Registrant |X|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
THE EASTERN COMPANY
(Name of Registrant as Specified in Its Charter)
MMI INVESTMENTS, L.L.C.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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1997 ANNUAL MEETING OF STOCKHOLDERS
OF
THE EASTERN COMPANY
----------
PROXY STATEMENT
OF
MMI INVESTMENTS, L.L.C.
RR 1, Box 167D, Wing Road
Millbrook, New York 12545
----------
This Proxy Statement and the accompanying letter to stockholders and
BLUE proxy card are furnished in connection with the solicitation of proxies by
MMI Investments, L.L.C. ("MMI"), to be used at the 1997 Annual Meeting of
Stockholders of The Eastern Company ("Eastern") to be held at a.m. on , 1997 in
the [PLACE] and at any adjournments or postponements thereof (the "Annual
Meeting").
At the Annual Meeting, three Directors of Eastern will be elected for a
three-year term expiring at the 2000 Annual Meeting of Stockholders. MMI is
soliciting your proxy in support of the election of MMI's three nominees for
Directors of Eastern named below (the "MMI Nominees").
ALL MMI NOMINEES ARE COMMITTED TO MAXIMIZING EASTERN
STOCKHOLDER VALUE THROUGH THE SOLICITATION OF OFFERS, BY
AN INDEPENDENT INVESTMENT BANK, FOR THE SALE OF EASTERN AT
AN ATTRACTIVE PRICE, OR IF NO ATTRACTIVE OFFERS ARE RECEIVED,
TO PROPOSE OTHER STRATEGIES TO ENHANCE STOCKHOLDER VALUE.
The record date for determining stockholders entitled to notice of and
to vote at the Annual Meeting is February 28, 1997 (the "Record Date").
Stockholders of record at the close of business on the Record Date will be
entitled to one vote at the Annual Meeting for each share of Eastern common
stock, no par value (the "Shares") held on the Record Date. As set forth in the
preliminary proxy statement of Eastern filed with the Securities and Ex change
Commission on _________, 1997 (the "Eastern Proxy Statement"), as of the close
of business on the Record Date, there were Shares issued and outstanding.
This Proxy Statement and the accompanying letter to stockholders and
BLUE proxy card are first being furnished to Eastern stockholders on or about
________, 1997. The prin cipal executive offices of Eastern are located at 112
Bridge Street, Naugatuck, Connecticut 06770.
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IMPORTANT
At the Annual Meeting, MMI seeks to elect the three MMI Nominees as
Directors of Eastern.
The election of the three MMI Nominees requires the affirmative vote of a
plurality of the votes cast on the matter, assuming a quorum is present or
otherwise represented at the Annual Meeting. Consequently, only Shares that are
voted in favor of a particular nominee will be counted toward such nominee's
attaining a plurality of votes. Shares present at the meeting that are not voted
for a particular nominee (including broker non-votes) and Shares present by
proxy where the stockholder properly withheld authority to vote for such nominee
will not be counted toward such nominee's attainment of a plurality.
MMI URGES YOU TO SIGN, DATE AND MAIL THE ENCLOSED BLUE PROXY VOTING "FOR"
ELECTION OF THE MMI NOMINEES.
A VOTE FOR THE MMI NOMINEES WILL PROVIDE YOU -- THE TRUE OWNERS OF EASTERN
- -- WITH REPRESENTATIVES ON THE EASTERN BOARD WHO ARE COMMITTED TO MAXIMIZING
STOCKHOLDER VALUE.
MMI URGES YOU NOT TO SIGN ANY PROXY CARD SENT TO YOU BY EASTERN. IF YOU
HAVE ALREADY DONE SO, YOU MAY CHANGE YOUR VOTE FOR THE ELECTION OF THE MMI
NOMINEES BY SIGNING, DATING AND MAILING THE ENCLOSED BLUE PROXY, WHICH MUST BE
DATED AFTER ANY PROXY YOU MAY HAVE SUBMITTED TO EASTERN, TO MMI, C/O D.F. KING &
CO., INC. ("D.F. KING"), 77 WATER STREET, NEW YORK, NY 10005, OR TO THE
SECRETARY OF EASTERN, OR BY VOTING IN PERSON AT THE ANNUAL MEETING. SEE "PROXY
PROCEDURES" BELOW.
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THE MMI NOMINEES ARE COMMITTED TO
MAXIMIZING STOCKHOLDER VALUE
All MMI Nominees listed under "Election of Directors" below are
committed to en hancing stockholder value through the solicitation of offers by
an independent investment bank for the sale of Eastern at an attractive price,
or in the absence of a receipt of an at tractive offer, the implementation of
other strategies aimed at enhancing stockholders' re turns. If elected, the
qualified and experienced MMI Nominees will, subject to their fiduci ary duties,
seek to cause the Eastern Board of Directors (the "Eastern Board") to retain an
independent investment bank to seek proposals for the sale of Eastern. The MMI
Nominees would, subject to their fiduciary duties, support a sale proposal
recommended by such an independent investment bank whether or not the proposal
came from MMI.
MMI is taking this action because the incumbent Eastern Board has
consistently demonstrated their lack of interest in seeking ways to enhance
stockholder value. Rather, their focus appears to be on maximizing management
compensation and entrenching them selves as evidenced by the recent amendment to
Eastern's By-laws which restricted the stockholders' ability to amend the
By-laws. As indicated under "Background of MMI's In vestment in Eastern and Its
Merger Proposal" below, the Eastern Directors summarily re jected MMI's cash
merger proposal, a proposal which at the time represented a 30% premium over
Eastern's average closing stock price for the prior thirty trading days, without
even ac cepting MMI's invitation to negotiate for a higher merger price. You
should also know that, despite their rhetoric to the contrary, the Eastern Board
and Eastern's management have failed to propose any viable alternative plans or
strategies to enhance stockholder value. Because of Eastern's past record of
poor performance and dim prospects for the future as clearly evidenced by its
dismal financial results in 1996 (income from continuing opera tions plummeted
68%), MMI has decided to offer Eastern stockholders an alternative in an effort
to maximize value for all Eastern shareholders.
CURRENT MANAGEMENT AND BOARD OF DIRECTORS
It is MMI's belief, based on the factors discussed below, that while
the Eastern Board and Eastern's management has failed to adequately protect the
interests of Eastern's stockholders, they have more than adequately protected
their own interests, and appear likely to continue to do so in the future.
MMI's conclusion is based upon its review of management's performance
since 1990 as well as management's arbitrary refusal to even discuss MMI's $15
per share Merger Proposal, particularly in light of MMI's indication that it was
prepared to raise the price if discussions and due diligence with management
disclosed values not reflected in Eastern's publicly available information. See
"Background of MMI's Investment in Eastern and Its Merger Proposal". While
refusing even to entertain the sale of Eastern at any price, management
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has offered no alternative route to maximizing stockholder value. We believe
that now is the time for stockholders -- the true owners of Eastern -- to be
heard.
As a major stockholder of Eastern -- MMI owns 178,400 shares, or 6.6%,
of East ern common stock outstanding -- MMI believes that the Eastern Board has
not been re sponsive to maximizing stockholder value but rather has become
instrumental in protecting management's and the Directors' own remuneration.
Their cumulative compensation from 1990 to 1995 (excluding fringe benefits)
equaled 59.4% of dividend distributions by East ern for the same period while
stockholder value has remained stagnant (from 1990 to 1996, the total return on
the Dow Jones Industrial Average and on an investment in Short Term U.S.
Treasury Notes (1-3 years) was 189% and 47%, respectively, while the total
return on Eastern Common Stock, which is comprised of stock appreciation plus
dividends for this period, was only 38%).
TAKE A CLOSE LOOK AT EASTERN'S RECORD OF FAILURE.
MMI believes that Eastern's management has failed to maximize the
potential return on stockholders' equity due to a lack of foresight and
planning. Further, man agement's interests have become divorced from Eastern's
stockholders' interests. Con sider the following:
o Under Eastern's current management, Eastern's income from
continuing operations has declined 27% from approximately $3.7
million in 1990 to approximately $2.7 million in 1995. Continuing
this pattern of dismal results, management just announced that
1996 income from continuing operations decreased by a staggering
68%.
o Not only have we, the stockholders, been hurt, but employees of
Eastern have also been hit hard. The total number of employees of
Eastern has declined from 656 in December 1989 to 489 in December
1995. According to the testimony of Stedman G. Sweet, the current
CEO and President, in its home state of Connecticut, Eastern's
number of employees has dropped from just under 300 to just over
50 within the last five years -- a drop of some 83%.
o Management's failure to align their interests with the interests
of all Eastern stockholders has worked to the benefit of
management -- not Eastern's stockholders.
Eastern's management has failed to execute its stated strategy of
making strategic acquisitions. Compare what they tell you with their
actual record of failure:
- Eastern's 1992 annual report stated, "We are optimistic that
conditions exist to continue to increase shareholder value . . .
through internal growth and
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acquisition."
- In Eastern's 1993 annual report, Eastern's management stated, "We
are positioned to increase shareholder value by investing in and
upgrading our equipment as well as through acquisitions . . ."
- The 1994 annual report reads, "We continue our acquisition search
for businesses or product lines that would complement our focus
on mechanical security products."
- In 1995, the company's annual report asserted, "We have increased
our efforts in search of strategic acquisitions to our group of
companies." Eastern's current management has claimed for years
that it is pursuing strategic acquisitions, yet no purchase has
come to fruition.
- While Eastern wants you to believe that its plan is to grow
through acquisitions, it is clear to us that Eastern's so-called
plans are nothing more than empty promises and self-serving
rhetoric.
Eastern's management has consistently failed to respond to the decline
of East ern's financial situation despite its rhetoric to the contrary.
- The 1987 annual report stated, "We remain optimistic about
Eastern for both the short and long term."
- In 1988, the annual report stated, "The company has the financial
health and position in its selected markets to continue to make
gains for its shareholders."
- The 1989 annual report presents a stark indication of Eastern
management's lack of perception when it asserts, "Incoming orders
and backlogs have declined since mid-year. It appears, however,
that they have bottomed out and we are optimistic for the current
year."
- Eastern's management makes yet another unfulfilled promise in the
1990 annual report, which states, "We will continue to focus on
achieving longer term results for our shareholders and have
restructuring programs now in place to do so."
- In 1991, Eastern's current management claimed, "Incoming orders
appear to be firming up and we continue to be optimistic about
further increasing shareholder value."
- In 1994, the annual report stated, "We expect growth in sales and
earnings for 1995."
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- In the 1995 annual report, Eastern's management stated, "As more
projects become tooled, we anticipate a recovery in the 2nd
quarter [of 1996]."
- In July 1996, in a letter to Eastern's stockholders attempting to
explain the Eastern Board's rejection of the Merger Proposal, Mr.
Sweet stated, "Your directors concluded that the [MMI] proposal
was not in the best interests of The Eastern Company, its
shareholders, its employers, its customers, its creditors, its
suppliers or the communities in which it has facilities. . . . As
we have informed Millbrook, we have no interest in abandoning our
carefully conceived strategic plan to build shareholder value
over the long term. We have worked hard to build a strong
financial position from which to build long- term value for the
shareholders."
Despite this list of constant predictions for a financial recovery,
Eastern's man agement has been unable to reinforce its claims with tangible
results. In our view, Eastern's rhetoric is nothing more than an effort to
disguise its long-term record of failure and to justify management's excessive
compensation - all to the detriment of Eastern's stockholders. The only recent
demonstrable action taken by the Eastern Board has been an attempt to
disenfranchise you, the owners of Eastern, by amending Eastern's By-laws to
require a larger stockholder vote to amend the By-laws.
LOOK AT HOW EASTERN'S STOCKHOLDERS HAVE FARED
As a result of Eastern's management failure to perform, consider how
Eastern's stockholders have fared:
- The total return on investment in Eastern from the end of fiscal
year 1989 until the end of June 1996, the month before MMI's
merger proposal was delivered, was approximately 23%, a mere
3.5% average return per annum. To put this anemic record into
perspective, an investment in Short Term U.S. Treasury Notes
(1-3 years), one of the safest investments available,
would have generated total returns of approximately 55% over
the same period!
- During that same time period, an investment in the Dow Jones
Industrial Average would have provided a 149% return and an
investment in the Standard & Poor's 500 Index would have
provided a 129% return.
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EASTERN'S RECORD OF FAILURE
- The graph below sets forth Eastern's cumulative Total
Shareholder Return ("TSR") based upon an initial $100
investment made on December 31, 1990 (i.e. stock
appreciation plus dividends during the past six years)
compared to the Wilshire 5000 Index, the S&P Manufacturing
Diversified Index, the Dow Jones Industrial Average and an
investment in Short Term U.S. Treasury Notes (1-3 years).
The results are startling! A $100 investment in Eastern
provided to you the lowest return of ANY investment,
including Short Term Treasury Notes-- the investment in Eastern
would be worth $138 while an investment in Short Term Treasury
Notes would be worth $147, a 6% difference! A similar investment
in the Standard & Poor's Manufacturing Diversified Index would
be worth $313, a 56% difference!
[Graph showing cumulative total return based on reinvestment of
$100 from December 1990 to December 1996 -- Comparison between
Eastern Common Stock, Wilshire 5000 Index, Standard & Poor's
Manufacturing Diversified Index, Dow Jones Industrial Average and
Short Term Treasury Notes]
- Despite poor returns to its stockholders, Eastern's
management has been well compensated. From 1990 to 1995,
Eastern's management received cumulative compensation
(including directors' fees) in excess of $4.3 million, not
including any fringe benefits (which typically would add a
further 20-30% to the total compensation package). During
this same period, stockholders received dividends amounting
to approximately $7.3 million. In other words, Eastern's
management received as compensation over 59% of the total
dividends that Eastern's stockholders received from 1990 to
1995. You be the judge.
IT'S TIME FOR A CHANGE
Eastern's stockholders deserve a Board of Directors that will maximize
stock holder value and a management team committed to that goal rather than to
protecting its own interests, including their fat paychecks, and its
entrenchment. Eastern's stock holders need MMI's nominees to be elected to the
Board of Directors to put pressure on the Board to implement MMI's plan to
maximize stockholder value. If, like us, you believe that you should have the
opportunity to decide the future of your company, MMI
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urges you to vote your BLUE proxy card FOR all of the MMI Nominees. The MMI
Nominees would urge the Eastern Board to effect a sale of Eastern to any party,
including MMI, provided an independent investment bank advised the Eastern Board
of the fairness to the Eastern stockholders of such a proposal.
We urge you to support the MMI Nominees who are committed to maximizing
shareholder value by signing, dating and promptly mailing your BLUE proxy card.
Your vote is important, so please act today.
ELECTION OF DIRECTIORS
According to publicly available information, Eastern currently has 9
Directors, di vided into three classes having staggered terms of three years
each. The terms of the three incumbent Directors, Ole K. Imset, Stedman G.
Sweet, and Donald S. Tuttle III, will ex pire at the Annual Meeting.
MMI proposes that the Eastern stockholders elect the MMI Nominees as
the Direc tors of Eastern at the Annual Meeting. The three MMI Nominees are
listed below and have furnished the following information concerning their
principal occupations or employment and certain other matters. Each MMI Nominee,
if elected, would hold office until the 2000 Annual Meeting of Stockholders and
until a successor has been elected and qualified or un til his earlier death,
resignation or removal. Although MMI has no reason to believe that any of the
MMI Nominees will be unable to serve as directors, if any one or more of the MMI
Nominees shall not be available for election, the persons named on the BLUE
proxy card have agreed to vote for the election of such other nominees as may be
proposed by MMI. You are urged to carefully consider their qualifications and
abilities to represent your interests.
MMI NOMINEES FOR DIRECTORS:
Principal Occupation and Business
Experience During Last Five
Name, Age and Principal Business Address Years; Current Directorships
- ---------------------------------------- ----------------------------
John S. Dyson........................... Mr. Dyson is Chairman of
RR1 Millbrook Capital Management
Box 167D Inc., the Manager of MMI
Wing Road Investments, L.L.C., and its
Millbrook, New York 12545 predecessors since 1981. He is
also a director of Millbrook
Capital Management Inc. From 1994
to 1996, Mr. Dyson served as
Deputy Mayor for Finance and
Economic Development for the City
of New York and currently serves
as Chairman of the Mayor's
Council of Economic Advisors. Mr.
Dyson was Vice Chairman of
Dyson-Kissner-Moran Corporation
where he
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Principal Occupation and Business
Experience During Last Five
Name, Age and Principal Business Address Years; Current Directorships
- ---------------------------------------- ----------------------------
worked from 1970 to 1975 at which
time he was appointed to the
position of Commissioner of the
New York State Department of
Agriculture. From 1976 to 1979 he
served as Commissioner of the New
York State Department of
Commerce. From 1979 to 1985, Mr.
Dyson was Chairman of the New
York State Power Authority. Mr.
Dyson serves as Trustee of
Cornell University, Morgan
Library, Middlesex School and
Historic Hudson Valley, and as a
director of the New York
Metropolitan Transit Authority.
AGE: 53
Clay B. Lifflander...................... From October 1995 to present, Mr.
RR1 Lifflander has been President and
Box 167D a director of Millbrook Capital
Wing Road Management Inc., the Manager of
Millbrook, New York 12545 MMI. From March 1994 to September
1995, Mr. Lifflander was
President of the New York City
Economic Development Corporation
and Chairman of the New York City
Industrial Development Agency.
Previously, Mr. Lifflander was a
Managing Director in the Mergers
and Acquisitions Group at Smith
Barney, Inc., where he worked
from 1984 to 1994. Mr. Lifflander
is a director of the United
Nations Development Corporation,
as well as of several companies
affiliated with Millbrook Capital
Management Inc. AGE: 34
George M. Scherer ...................... From 1982 to present, Mr. Scherer
37 Milford Street has been President and a director
Binghamton, New York 13902 of B.W. Elliott Manufacturing
Co., Inc., a corporation
engaged primarily in the business
of designing and manufacturing
flexible shaft products for the
industrial, aerospace and
commercial markets, and in which
Mr. Dyson indirectly holds a
major investment. From 1993 to
present, Mr. Scherer has been a
Director of the Binghamton Mets
Baseball Club. AGE: 42
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Election of the MMI Nominees as the Directors of Eastern requires the
affirmative vote of a plurality of the votes cast on the matter at the Annual
Meeting, assuming a quo rum is present or otherwise represented at the Annual
Meeting. Consequently, only Shares that are voted in favor of a particular
nominee will be counted toward such nominee's at taining a plurality of votes.
Shares present at the meeting that are not voted for a particular nominee
(including broker non-votes) and Shares present by proxy where the stockholder
properly withheld authority to vote for such nominee will not be counted toward
such nominee's attainment of a plurality.
The accompanying BLUE proxy card will be voted at the Annual Meeting in
accor dance with your instructions on such card. You may vote FOR the election
of the MMI Nominees as the Directors of Eastern or withhold authority to vote
for the election of the MMI Nominees by marking the proper box on the BLUE proxy
card. You may also with hold your vote from any of the MMI Nominees by writing
the name of such nominee in the space provided on the BLUE proxy card. If no
marking is made, you will be deemed to have given a direction to vote the Shares
represented by the BLUE proxy card FOR the election of all of the MMI Nominees
provided that you have signed and dated the proxy card.
MMI BELIEVES THAT IT IS IN YOUR BEST INTEREST TO ELECT THE MMI NOMINEES
AT THE ANNUAL MEETING, AND STRONGLY RECOMMENDS A VOTE FOR THE ELECTION OF THE
MMI NOMINEES. YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN.
PLEASE ACT TODAY BY SIGNING, DATING AND MAILING YOUR BLUE PROXY CARD.
OTHER MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
The description of matters to be presented to a shareholder vote at the
1997 Annual Meeting of Eastern is hereby incorporated by reference from
Eastern's proxy statement with respect to such meeting. You may vote for each of
the items being presented to share
holders at Eastern's 1997 Annual Meeting on the BLUE proxy card delivered
herewith. The following are MMI's recommendations on each of the items being
presented for a vote at Eastern's 1997 Annual Meeting:
[INCLUDE ANY OTHER PROPOSALS]
- - Stockholder Proposal - MMI recommends that shareholders vote for the
stockholder proposal by Mr. Ernst Ohnell for Eastern to retain an
independent investment banking
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firm to seek proposals for the sale of Eastern to maximize shareholder
value. Unmarked blue proxies will be treated as a vote "for" Mr. Ohnell's
proposal.
- - Ratification of Appointment of Independent Auditors - MMI makes no
recommendation regarding this matter. Unmarked blue proxies will be treated
as a vote to "abstain" with re gard to this proposal.
- - Other Proposals - Except as set forth above, MMI is not aware of any
proposals to be brought before the Annual Meeting. Should other proposals
be brought before the Annual Meeting, the persons named on the BLUE proxy
card will abstain from voting on such proposals unless such proposals
adversely affect the interests of MMI as determined by MMI in its sole
discretion, in which event such persons will vote on such proposals at
their discretion.
[Voting Procedures [CONFORM TO EASTERN'S PROXY STATEMENT]
With respect to the appointment of Ernst & Young LLP and other matters
that may be submitted to the stockholders for a vote, the affirmative vote of
the holders of at least a majority of the Shares present in person or
represented by proxy at the Annual Meeting for a particular matter is required
to become effective. With respect to abstentions, the Shares are considered
present at the Annual Meeting for the particular matter, but since they are not
affirmative votes for the matter, they will have the same effect as votes
against the matter. With respect to broker non-votes, the Shares are not
considered present at the An nual Meeting for the particular matter as to which
the broker withheld authority. Conse quently, broker non-votes are not counted
in respect of the matter, but they do have the practical effect of reducing the
number of affirmative votes required to achieve a majority for such matter by
reducing the total number of Shares from which the majority is calcu lated.]
PROXY PROCEDURES
In order for your views on the above-described proposals to be
represented at the Annual Meeting, please sign, date and mail the enclosed BLUE
proxy card and re turn it to MMI, c/o D.F. King & Co., Inc., 77 Water Street,
New York, NY 10005, in the enclosed envelope in time to be voted at the Annual
Meeting. Execution of the BLUE proxy card will not affect your right to attend
the Annual Meeting and to vote in person. Any proxy may be revoked at any time
prior to the Annual Meeting by delivering a written notice of revocation or a
later dated proxy for the Annual Meeting to MMI or to the Secretary of Eastern,
or by voting in person at the particular meeting. REMEMBER, ONLY YOUR LATEST
DATED PROXY FOR THE ANNUAL MEETING WILL COUNT. YOUR VOTE IS IMPORTANT - PLEASE
ACT TODAY.
Only holders of record as of the close of business on the Record Date
will be enti tled to vote. If you were a stockholder of record on the Record
Date, you will retain your voting rights for the Annual Meeting even if you sell
such Shares after the Record Date. Accord-
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ingly, it is important that you vote the Shares held by you on the Record Date,
or grant a proxy to vote such Shares on the BLUE proxy card, even if you sell
such Shares after the Record Date.
Important Instructions For "Street Name" Stockholders
If any of your Shares are held in the name of a brokerage firm, bank,
bank nominee or other institution on the Record Date, only it can vote such
Shares and only upon receipt of your specific instructions. Accordingly, please
contact the person responsible for your account and instruct that person to
execute on your behalf the BLUE proxy card. You should also sign, date and mail
your proxy when you receive it from your broker or banker. Please do so for each
account you maintain to ensure that all your shares are voted.
BACKGROUND OF MMI'S INVESTMENT IN
EASTERN AND ITS MERGER PROPOSAL
MMI acquired Shares of Eastern because MMI believed that trading prices
of the Shares do not adequately reflect the potential value of Eastern's
underlying business and assets. MMI initially intended to work with management
to effectuate value enhancement strategies for all stockholders. However, after
meeting with management and studying Eastern's operations and industry, MMI
determined that the best means to maximize value for all stockholder was to
effect a sale of Eastern.
On July 16, 1996, Millbrook Capital Management Inc. ("Millbrook"), a
corporation that is primarily engaged in the business of managing investments in
publicly traded securi ties as well as in private companies, and the Manager of
MMI, sent a cash merger proposal to the Chairman of Eastern to have one of
Millbrook's portfolio companies, B.W. Elliott Manufacturing Co., Inc.
("Elliott"), acquire all outstanding Shares of Eastern for $15 per Share in cash
(the "Merger Proposal"). At the time of the Merger Proposal, the cash of fered
represented a 30% premium over Eastern's average closing stock price for the
prior thirty trading days. The Merger Proposal also indicated that the merger
price would be subject to increase if Eastern could demonstrate additional value
not reflected in its then current stock price. The Merger Proposal is subject,
among other things, to the approval of Eastern's Board of Directors, a majority
of Eastern's public shareholders indicating support for the transaction and
other customary conditions for transactions of this nature.
Messrs. Dyson, Lifflander and Ohnell, individually, and MMI, Millbrook and
El liott have executed agreements with respect to the joint filing of Schedules
13D and amendments thereto which have been filed with the Securities and
Exchange Commission with respect to the investment of certain of them in common
stock of Eastern. In addition, on July 16, 1996, Millbrook and Mr. Ohnell
executed a letter agreement (the "Letter Agreement") in which they agreed to
cooperate with respect to the Merger Proposal and to indemnify each other for
certain liabilities arising from certain actions or statements made in
connection with the Merger Proposal. In the Letter Agreement, Mr. Ohnell agreed
not to acquire, sell or grant a proxy
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with respect to Shares of Eastern without notifying Mill brook, and he further
agreed to vote Shares of Eastern that he controls in favor of the Merger
Proposal. Millbrook agreed in the Letter Agreement to permit Mr. Ohnell to par
ticipate in the proposed acquisition of Eastern and to permit Mr. Ohnell to
agree to be a director of the entity that was to acquire Eastern.
Additionally on July 16, 1996, the proxy given to Mr. Lifflander by Mr.
Dyson to vote the shares of capital stock of Millbrook that Mr. Dyson owns was
revoked.
On July 18, 1996, and July 24, 1996, Millbrook sent additional
correspondence to the Chairman of Eastern, expressing concern over the
Chairman's unfair characterization of the Merger Proposal to the press and
clarifying the financeability of the Merger Proposal.
On July 25, 1996, in a letter to its stockholders, Eastern stated,
"Your directors concluded that the proposal was not in the best interests of The
Eastern Company, its shareholders, its employers, its customers, its creditors,
its suppliers or the communities in which it has facilities. . . ." On July 29,
1996, the Eastern Board amended Eastern's By laws to increase the vote required
for stockholders to amend the By-laws from 50% to 75%.
In order to be able to communicate directly with fellow stockholders,
on July 25, 1996 and August 12, 1996, Millbrook, on behalf of MMI, sent written
demands for a list of Eastern's stockholders to Eastern, which Eastern rejected.
On August 22, 1996, MMI, the Ohnell Investors and two other
stockholders issued a written request for a special meeting of stockholders to
the President of Eastern. On September 6, 1996, Eastern rejected the request for
a special meeting of stockholders and filed an lawsuit requesting a temporary
and permanent injunction and declaratory relief against MMI calling for a
special meeting of stockholders. At a hearing on September 9, 1996, the Superior
Court consolidated MMI's action filed August 15, 1996 requesting the stockholder
list and Eastern's action filed September 6, 1996 requesting an injunction
against having to call a special meeting of stockholders.
On September 20, 1996, Millbrook sent a letter to Eastern's
stockholders updating them with respect to the status of the Merger Proposal,
noting the Eastern Board's resis tance and describing the litigation that was
pending.
A trial was held October 2 through October 4, 1996. In December, the
Superior Court ruled that Eastern was required to provide MMI with a
stockholders list and MMI was enjoined from calling a special meeting pursuant
to the request dated September 25, 1996.
On November 20, 1996, Mr. Ohnell sent to the Secretary of Eastern
notice that he intends to present at Eastern's 1997 Annual Meeting a stockholder
proposal requesting the Eastern Board to authorize the immediate retention of an
investment banking firm to seek proposals for the sale of Eastern to maximize
stockholder value.
<PAGE>
-14-
On January 22, 1997, Eastern finally sent MMI a copy of its
stockholders list, which failed to include a list of non-objecting beneficial
owners (the "NOBO List"). The NOBO List is essential to effectively communicate
with fellow stockholders who hold stock in "street name" and Eastern still
refuses to provide MMI with the list. Ask yourself why.
On February 5, 1997, MMI notified Eastern of its intent to nominate
three individu als to fill the three vacancies on the Eastern Board that will
arise due to their term expira tions as of the 1997 Annual Meeting.
SOLICITATION OF PROXIES
Proxies may be solicited by mail, advertisement, telephone, telecopier
or other electronic means and in person. Solicitations may be made by officers,
investor relations personnel and other employees of MMI, none of whom will
receive additional compensa tion for such solicitations. MMI has requested
banks, brokerage houses and other custodi ans, nominees and fiduciaries to
forward all of its solicitation materials to the beneficial owners of the Shares
they hold of record. MMI will reimburse these record holders for customary
clerical and mailing expenses incurred by them in forwarding these materials to
their customers.
MMI has retained D.F. King for solicitation and advisory services in
connection with the solicitation for proxies at an estimated fee of $30,000,
together with reimburse ment for its reasonable out-of-pocket expenses. MMI has
also agreed to indemnify D.F. King against certain liabilities and expenses,
including liabilities and expenses under the federal securities laws. D.F. King
will solicit by mail, telephone, and in person proxies for the Annual Meeting
from individuals, brokers, banks, bank nominees and other institutional holders.
It is anticipated that D.F. King will employ approximately fifty (50) persons to
solicit stockholders for the Annual Meeting.
MMI or Millbrook will pay all costs associated with the solicitation of
proxies on behalf of MMI.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
The date on which stockholders must provide notice to Eastern to have
proposals in cluded in Eastern's proxy statement for Eastern's 1998 Annual
Meeting of shareholders is hereby incorporated by reference from Eastern's proxy
statement with respect to the 1997 Annual Meeting.
OTHER INFORMATION
Certain information about MMI, Millbrook and Mr. Ernst Ohnell who, in
each case, may also assist the Agent in soliciting proxies is set forth in the
attached Schedule I. Schedule II sets forth certain information relating to
Shares beneficially owned by MMI, Millbrook and Mr. Dyson. Certain information
regarding Shares held by Eastern's Direc tors, nominees,
<PAGE>
-15-
management and 5% stockholders is contained in the Eastern Proxy State ment and
is incorporated herein by reference.
MMI assumes no responsibility for the accuracy or completeness of any
information contained herein which is based on, or incorporated by reference to,
the Eastern Proxy Statement.
PLEASE INDICATE YOUR SUPPORT OF THE MMI NOMINEES BY SIGNING, DATING AND
MAILING PROMPTLY THE ENCLOSED BLUE PROXY TO MMI, C/O D.F. KING & CO., INC., 77
WATER STREET, NEW YORK, NY 10005, IN THE ENCLOSED ENVELOPE. NO POSTAGE IS
NECESSARY IF MAILED IN THE UNITED STATES.
MMI INVESTMENTS, L.L.C.
March __, 1997
<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE MMI NOMINEES, MMI,
MILLBROOK AND MR. ERNST OHNELL
.Participants in the solicitation with respect to the slate of
directors nominated hereby, who are collectively referred to as the
"Participants", are the following:
A. John S. Dyson. Age: 53
Business Address: RR 1, Box 167D, Wing Road, Millbrook,
New York 12545
Principal Occupation or Employment: Chairman and a director of
Millbrook Capital Management Inc.
Number of Shares of Common Stock of The Eastern Company beneficially
owned as of the date of this notice: 178,400
B. Clay B. Lifflander
Age: 34
Business Address: RR I, Box 167D, Wing Road, Millbrook, New York 12545
Principal Occupation or Employment: President and a director of
Millbrook Capital Management Inc.
Number of Shares of Common Stock of The Eastern Company beneficially
owned as of the date of this notice: None.1
C. George M. Scherer
Age: 42
Business Address: 37 Milford Street, Binghamton, New York 13902
- ----------
1 However, Mr. Lifflander serves as President and a director of Millbrook
Capital Management Inc., the Manager of MMI Investments, L.L.C., which is
the beneficial and record owner of shares of common stock of The Eastern
Company. Mr. Lif flander is also a member of MMI Investments, L.L.C. On
July 16, 1996, Mr. Lif flander surrendered the proxy given to him by Mr.
Dyson to vote the shares of capi tal stock of Millbrook Capital Management
Inc. that Mr. Dyson owns.
S-I-1
<PAGE>
Principal Occupation or Employment: President and a director of B. W.
Elliott Manufacturing Company Inc.
Number of shares of Common Stock of The Eastern Company beneficially
owned as of the date of this notice: None.
Other information about nominee: See attached Exhibit C.
D. MMI Investments, L.L.C., a Delaware
limited liability company
Business Address: RR 1, Box 167D, Wing Road, Millbrook, New York 12545
Principal Business: Investing in securities
Number of Shares of Common Stock of The Eastern Company beneficially
owned as of the date of this notice: 178,400, of which 1,000 shares are held of
record.
Associates: Millbrook Capital Management Inc. is the Manager of MMI
Investments, L.L.C., and it beneficially owns the 178,400 shares of common stock
of The Eastern Com pany owned by MMI Investments, L.L.C.
E. Millbrook Capital Management Inc., a
New York corporation
Business Address: RR 1, Box 167D, Wing Road, Millbrook, New York 12545
Principal Business: Managing investments in publicly traded securities
and in pri vate companies
Number of Shares of Common Stock of The Eastern Company beneficially
owned as of the date of this notice: 178,400
Names and Addresses of, and Number of Shares of Common Stock of The
Eastern Company beneficially owned as of the date of this notice by, Associates:
John Dyson - Chairman, sole stockholder and a director of Millbrook
Capital Man agement Inc., RR1, Box 167D, Wing Road, Millbrook, New York 12545.
Mr. Dyson beneficially owns the 178,400 shares of common stock of The Eastern
Company owned by MMI Investments, L.L.C.
S-I-2
<PAGE>
Clay Lifflander - President and a director of Millbrook Capital
Management Inc., RR 1, Box 167D, Wing Road, Millbrook, New York, 12545. Mr.
Lifflander beneficially owns no shares of The Eastern Company.2
Alan Rivera - Chief Financial Officer and a director of Millbrook
Capital Manage ment Inc., RR 1, Box 167D, Wing Road, Millbrook, New York, 12545.
Mr. Rivera benefi cially owns no shares of The Eastern Company.
David Bova - Vice President and a director of Millbrook Capital
Management Inc., RR 1, Box 167D, Wing Road, Millbrook, New York, 12545. Mr. Bova
beneficially owns no shares of The Eastern Company.
F. Ernst Ohnell
Business Address: 2 Greenwich Plaza, Suite 100, Greenwich,
Connecticut, 06830
Principal Occupation: Chief Executive Officer of Ohnell Capital
Corporation, which is in the business of merchant banking.
Number of Shares of Common Stock of The Eastern Company beneficially
owned as of the date of this notice: 89,800, which includes 52,050 shares held
directly and of record by Mr. Ohnell, as well as 9,300 shares owned by the
Ohnell Family Foundation of which Mr. Ohnell is trustee and 25,450 shares and
3,000 shares owned by his emancipated adult children and his wife, respectively,
with respect to which Mr. Ohnell holds an irrevocable proxy.
- --------
2 However, Mr. Lifflander serves as President and a director of Millbrook
Capital Management Inc., the Manager of MMI Investments, L.L.C., which is
the beneficial and record owner of shares of common stock of The Eastern
Company. Mr. Lif flander is also a member of MMI Investments, L.L.C. On
July 16, 1996, Mr. Lif flander surrendered the proxy given to him by Mr.
Dyson to vote the shares of capital stock of Millbrook Capital Management
Inc. that Mr. Dyson owns.
S-I-3
<PAGE>
SCHEDULE II
SHARES BENEFICIALLY OWNED BY MMI, MILLBROOK AND MR. DYSON
Schedule of Transactions
Purchases of Common Stock of The Eastern Company
by MMI Investments, L.L.C.
Date Shares Price Per Share
- ---- ------ ---------------
02/05/96 17,300 12.25
02/09/96 7,000 12.50
02/12/96 700 12.50
02/14/96 14,200 12.19
02/20/96 4,400 12.00
02/27/96 400 12.00
02/29/96 3,000 12.00
03/04/96 2,000 11.88
03/05/96 10,500 12.00
03/05/96 1,000 11.88
03/07/96 2,000 12.00
03/07/96 3,600 12.13
03/11/96 200 12.00
03/13/96 44,600 12.25
03/22/96 800 11.95
03/25/96 600 12.00
03/26/96 300 12.00
03/27/96 600 12.00
03/28/96 700 12.00
03/29/96 1,000 12.00
04/02/96 1,100 11.88
04/04/96 9,900 12.00
04/09/96 4,100 11.88
04/10/96 1,900 11.75
04/29/96 10,400 11.50
04/30/96 500 11.63
05/01/96 500 11.88
05/02/96 6,100 11.88
05/03/96 6,000 12.39
05/06/96 7,500 12.48
07/08/96 500 11.75
07/16/96 1,000 11.75
07/16/96 10,000 13.88
07/18/96 2,000 13.31
S-II-1
<PAGE>
Date Shares Price Per Share
- ---- ------ ---------------
08/15/96 1,000 12.75
09/10/96 1,000 13.38
In connection with the above-referenced transactions, MMI used approxi
mately $1.4 million of margin loans to finance these purchases. These margin
loans were with brokers under customary terms and conditions.
S-II-2
<PAGE>
IMPORTANT
Your vote is important. No matter how many Shares you own, please
support MMI in its efforts to maximize the value of all Eastern shares by voting
your proxy FOR the election of the MMI Nominees. Please take these easy steps:
SIGN the enclosed BLUE proxy card.
DATE the enclosed BLUE proxy card.
MAIL the enclosed BLUE proxy card TODAY.
Remember, if you have already submitted a proxy to Eastern for the
Annual Meet ing, you may change your vote to a vote FOR the election of the MMI
Nominees at any time by signing, dating and mailing the enclosed BLUE proxy card
for the Annual Meeting, which must be dated after any proxy you may have
submitted to Eastern. Only your latest dated proxy for the Annual Meeting will
count at such meeting.
Important Instructions for "Street Name" Shareholders
If any of your Shares are held in the name of a brokerage firm, bank,
bank nominee or other institution, only it can vote such Shares and only upon
receipt of your specific in structions. Accordingly, please contact the person
responsible for your account and instruct that person to execute the BLUE proxy
card. You should also sign, date and mail your proxy when you receive it from
your broker or banker. Please do so for each account you maintain to ensure that
all your shares are voted.
If you have any questions or require any assistance, please contact
D.F. King & Co., Inc. at the address set forth below.
D.F. KING & CO., INC.
77 WATER STREET
NEW YORK, NEW YORK 10005
1-800-859-8511
Call toll-free
S-II-3
<PAGE>
THE EASTERN COMPANY
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY MMI INVESTMENTS, L.L.C. ("MMI")
The undersigned stockholder of The Eastern Company hereby appoints
each of [NAMES], and each of them with full power of substitution, for and in
the name of the undersigned, to repre sent and to vote, as designated below, all
shares of common stock of The Eastern Company that the undersigned is entitled
to vote if personally present at the 1997 Annual Meeting of Stockholders of The
Eastern Company to be held on April __, 1997, and at any adjournment or
postponement thereof. The undersigned hereby revokes any pre vious proxies with
respect to the matters covered by this Proxy.
MMI RECOMMENDS A VOTE FOR PROPOSAL 1.
(Please mark each proposal with an "X" in the appropriate box)
1. ELECTION OF CLASS [ ] DIRECTORS:
Election of John S. Dyson, Clay B. Lifflander and George M. Scherer as Class [ ]
Directors whose terms expire in 2000.
/ /FOR all nominees except as / / WITHHOLD AUTHORITY for all nominees
marked below
(INSTRUCTION: To withhold authority to vote for one or more nominees, mark FOR
above and print the name(s) of the person(s) with respect to whom you wish to
withhold authority to vote in the space provided below.)
- --------------------------------------------------------------------------------
MMI MAKES NO RECOMMENDATION REGARDING PROPOSAL 2.
2. RATIFICATION OF THE APPOINTMENT OF INDEPENDENT AUDITORS.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
-2-
MMI RECOMMENDS A VOTE FOR PROPOSAL 3.
3. APPROVAL OF THE STOCKHOLDER PROPOSAL MADE BY MR. ERNST OHNELL FOR
THE EASTERN COMPANY TO RETAIN AN INDEPENDENT INVESTMENT BANKING FIRM TO SEEK
PROPOSALS FOR THE SALE OF THE EASTERN COMPANY TO MAXIMIZE SHAREHOLDER VALUE.
/ / FOR / / AGAINST / / ABSTAIN
[OTHER PROPOSALS]
[#]. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURMENT
THEREOF, IF SUCH OTHER BUSINESS ADVERSELY AFFECTS THE INTERESTS OF MMI.
PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY IN THE
ENCLOSED ENVELOPE PROVIDED.
This Proxy, when properly executed, will be voted in the manner marked
herein by the undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE DEEMED TO BE A DIRECTION TO VOTE "FOR" PROPOSALS 1 AND 3, AND TO ABSTAIN FROM
VOTING ON PROPOSALS 2, [ ].
Please date and sign this proxy
exactly as your name appears
hereon.
_________________________________
(Signature)
_________________________________
(Signature, if held jointly)
_________________________________
(Title)
DATED:______________________,1997
When shares are held by joint tenants,
both should sign. When signing as
attorney-in-fact, executor, administra-
tor, trustee, guardian, corporate
officer or partner, please give full
title as such. If a corporation, please
sign in corpo-
<PAGE>
-3-
rate name by President or other author
ized officer. If a partnership, please
sign in partnership name by authorized
person.
<PAGE>
MMI LETTERHEAD
You Deserve a Chance
To Maximize the Value of
Your Eastern Company Shares
March ____, 1997
Dear Fellow Stockholder:
We are writing to ask your support to elect our three nominees to The
Eastern Company's nine person Board of Directors. MMI Investments is one of
Eastern's largest stock holders, owning 178,400 shares or approximately 6.6% of
Eastern's outstanding common stock. MMI strongly believes that our interests are
identical to yours - to maximize the value of our mutual investment in Eastern.
Our program is simple, straightforward and of obvious benefit to all
Eastern Company stockholders:
MMI NOMINEES ARE COMMITTED TO MAXIMIZING
EASTERN STOCKHOLDER VALUE THROUGH THE
SOLICITATION OF OFFERS, BY AN INDEPENDENT
INVESTMENT BANK, FOR THE SALE OF EASTERN AT
AN ATTRACTIVE PRICE.
MMI is taking this action because Eastern's incumbent Board of
Directors has consis tently demonstrated their lack of interest in enhancing
stockholder value. Instead, their focus appears to be on maximizing management
compensation and entrenching themselves. We urge you not to support these
stewards of poor performance and caution you not to sign any proxy card Eastern
may sent to you. They no longer deserve your trust. To support our nominees --
qualified individuals committed to maximizing the value of your Eastern shares
- -- please sign, date and mail your MMI BLUE proxy card.
<PAGE>
-2-
TAKE A CLOSE LOOK AT EASTERN'S RECORD OF FAILURE
Only a few months ago, we wrote to you and told you about our proposal
to acquire Eastern for cash at what would have been a 30% premium to market.(1)
We also told you that your Board of Directors rejected that proposal and refused
to engage with us in any constructive dialogue despite our expressed
willingness to increase our offer. In light of Eastern's continuing record of
failure, you should ask yourself if your Board's actions were in your own best
interests. Since our letter to you, we have received many expressions of support
and we are appreciative. Sadly, however, nothing at Eastern has changed.
MMI believes that Eastern's financial performance paints a dismal
record of failure and that management has failed to maximize the potential
return on stockholders' equity due to a lack of foresight and planning. Further,
management's interests have become divorced from stockholders' interests.
Consider the following:
- - Under current management, Eastern's income from continuing
operations has declined 27% from approximately $3.7 million in 1990 to
approximately $2.7 million in 1995. During this same time period sales have
been virtually stagnant.
- - Eastern's record of failure continued unabated in 1996 despite our nation's
strong economy. While many public companies enjoyed record years, Eastern's
sales decreased marginally (-2.5%), while income from continuing operations
plummeted a staggering 68%.
- - Not only have stockholders been hurt by Eastern's poor performance, but
employees of Eastern have also suffered. The total number of Eastern
employees has declined from 656 in December 1989 to 489 in December 1995.
According to Stedman G. Sweet, CEO and President, Eastern's employees in
its home state of Connecticut has decreased from just under 300 to just
over 50 within the last five years - a drop of some 83%.
- - Eastern's financial performance has suffered, in our view, due to
management's failure to execute its stated strategy of making strategic
acquisitions. Year after year management tells you of their strategy to
grow the Company through strategic acquisitions. Yet, Eastern's Board and
management have failed to successfully execute this strategy.
Notwithstanding their constant predictions for a financial recovery,
Eastern's management has consistently failed to respond to Eastern's declining
financial perform ance and has been unable to reinforce its claims with tangible
results. In our view, East ern's rhetoric is nothing more than an effort to
disguise its long-term record of failure and justify management's excessive
compensation - all to the detriment of Eastern's stockholders.
- ----------
1 Based on Eastern's average closing stock price for the prior thirty trading
days.
<PAGE>
-3-
STOCKHOLDER AND MANAGEMENT INTERESTS DIVORCED
Despite poor results and an anemic stock price, Eastern's management
has hardly suffered. From 1990 to 1995, Eastern's top three officers
received cumulative compensation of approximately $4.3 million, not
including any fringe benefits (which are believed to be substantial).
During this same period, Eastern stockholders received dividends amounting
to approximately $7.3 million. In other words, Eastern's management
received as compensation more than 59% of the total dividends that
Eastern's stockholders received from 1990 to 1995.
EASTERN'S STOCKHOLDERS HAVE SUFFERED
The total return on investment in Eastern from the end of fiscal
year 1989 until the end of June 1996, the month before MMI delivered its
acquisition proposal, was approximately 23%, a mere 3.5% average return
per annum. To put this anemic record into perspective, an investment in
Short Term U.S. Treasury Notes, one of the safest investments
available, would have generated total returns of approximately
55% over this same period. A picture best tells the story - consider
how you have fared:
EASTERN'S RECORD OF FAILURE
The graph below sets forth Eastern's cumulative Total Shareholder
Return ("TSR") based upon an initial $100 investment made on December 31,
1990 (i.e. stock appreciation plus dividends during the past six years)
compared to the Wilshire 5000 Index, the S&P Manufacturing Diversified
Index, the Dow Jones Industrial Average and an investment in Short Term
U.S. Treasury Notes (1-3 years). The results are startling! A $100
investment in Eastern provided to you the lowest return of ANY investment,
including Short Term Treasury Notes-- the investment in Eastern would be
worth $138 while an investment in Short Term Treasury Notes would be worth
$147, a 6% difference! A similar investment in the Standard & poor's
Manufacturing Diversified Index would be worth $313, a 56% difference!
[Graph showing cumulative total return based on reinvestment of $100 from
December 1990 to December 1996 - Comparison between Eastern Common Stock,
Wilshire 5000 Index, Standard & Poor's Manufacturing Diversified Index, Dow
Jones Industrial Average and Short Term Treasury Notes]
- Standard & Poor's Manufacturing Diversified Index + 213%
- Dow Jones Industrial Average + 189%
- Wilshire 5000 Index + 169%
- Short Term U.S. Treasury Notes + 47%
- Eastern Common Stock + 38%
Eastern's stockholders deserve a Board of Directors that will maximize
stockholder value and a management team committed to that goal rather than to
protecting its own interests, including their fat paychecks, and its
entrenchment. We urge you to support the MMI Nominees who are committed to
maximizing stockholder value by signing, dating and promptly mailing your BLUE
proxy card. Your vote is important, so please act today.
<PAGE>
-4-
MMI NOMINEES ARE COMMITTED TO
MAXIMIZING STOCKHOLDER VALUE
All MMI Nominees are committed to enhancing stockholder value through
the solicitation of offers by an independent investment bank for the sale of
Eastern at an attractive price, or in the absence of a receipt of an attractive
offer, the implementation of other strategies aimed at enhancing stockholders'
returns. All three nominees have many years of experience and expertise in
business decision making, acquisitions, and management. The diversity they offer
is necessary to be able to evaluate all possible options for Eastern. We are
willing and able to lead Eastern forward (that is, after all, the job of the
Board!) If elected, the MMI Nominees will, subject to their fiduciary duties,
seek to cause the Eastern Board of Directors to retain an independent investment
bank to seek proposals for the sale of Eastern and support a sale proposal
recommended by such an independent investment bank whether or not the proposal
came from MMI. To make it happen though, we need your help.
<PAGE>
-5-
YOUR VOTE IS IMPORTANT
We urge you to send a strong and clear message to your Board of
Directors that you want them to actively pursue the sale of Eastern to maximize
the value of your investment. You may expect Eastern will try to convince you
that better days are ahead and that they have a plan to increase value.
Remember, you've heard that tune before. Don't be fooled - they are just trying
to maintain their positions and excessive management compensation and all at a
steep cost to you. Don't forget, it's your Company, not theirs. Vote for the
qualified MMI nominees and for the stockholder proposal encouraging the sale of
Eastern. Support the maximization of your investment by signing, dating, and
mailing your BLUE proxy to day.
You, the true owners of Eastern, will make this important decision.
Please act in your own best interest. The current Board had its chance, now it
is your turn.
We thank you for your support.
Sincerely,
/s/ /s/ /s/
John S. Dyson Clay B. Lifflander George M. Scherer
