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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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ENVIRONMENT ONE CORPORATION
(Name of Subject Company)
ENVIRONMENT ONE CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class of Securities)
294 056 106
(CUSIP Number of Class of Securities)
STEPHEN V. ARDIA
PRESIDENT, CEO AND CHAIRMAN OF THE BOARD
2773 BALLTOWN ROAD
NISKAYUNA, NEW YORK 12309-1090
(315) 346-6161
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of Person(s) Filing Statement)
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Copy to:
GEORGE J. GETMAN, ESQ.
BOND, SCHOENECK & KING, LLP
ONE LINCOLN CENTER
SYRACUSE, NEW YORK 13202-1355
(315) 422-0121
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Environment One Corporation, a New York
corporation (the "Company"), and the address of the principal offices of the
Company is 2773 Balltown Road, Niskayuna, New York 12309-1090. The title of the
class of equity securities to which this statement relates is the Common Stock,
par value $.10 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER
This statement relates to the tender offer by EOC Acquisition Corporation, a
New York corporation (the "Purchaser"), a wholly owned subsidiary of Precision
Castparts Corp., an Oregon corporation ("PCC"), disclosed in a Tender Offer
Statement on Schedule 14D-1, dated March 3, 1998 (the "Schedule 14D-1"), to
purchase all outstanding Shares at $15.25 per Share net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase dated March 3, 1998 (the "Offer to Purchase") and the
related Letter of Transmittal (which, together with the Offer to Purchase and
any amendments or supplements thereto, collectively constitute the "Offer").
The Offer is being made by the Purchaser pursuant to an Agreement and Plan
of Merger dated as of February 24, 1998 (the "Merger Agreement"), among the
Company, the Purchaser and PCC. The Merger Agreement has been filed with the
Securities and Exchange Commission as Exhibit 1 to this Schedule 14D-9.
As set forth in the Schedule 14D-1, the address of the principal executive
office of the Purchaser is c/o Precision Castparts Corp., 4650 SW Macadam
Avenue, Suite 440, Portland, Oregon 97201.
ITEM 3. IDENTITY AND BACKGROUND
a. The name and address of the Company, which is the person filing this
statement, is set forth above under Item 1.
b. Except as set forth in this Item 3(b), to the knowledge of the Company,
there are no material contracts, agreements, arrangements or understandings and
no known actual or potential conflicts of interest between the Company or its
affiliates and PCC or the Purchaser or their respective executive officers,
directors or affiliates.
ARRANGEMENTS WITH THE PURCHASER, PCC OR THEIR AFFILIATES.
MERGER AGREEMENT.
THE OFFER. The Merger Agreement provides that PCC will cause the Purchaser
to commence, and the Purchaser will commence, the Offer to purchase all of the
Shares for $15.25 per Share. The Merger Agreement specifies certain conditions
for the Offer, including, among other things, the Minimum Condition (as defined
below). Pursuant to the Merger Agreement, the Purchaser expressly reserves the
right to change or waive any such condition, to increase the Offer Price, and to
make any other changes in the terms and conditions of the Offer; provided
however, that without the prior written consent of the Company, the Purchaser
will not (i) decrease the Offer Price, (ii) change the Minimum Condition, (iii)
decrease the number of Shares sought pursuant to the Offer, (iv) impose
conditions in addition to the Offer Conditions (as defined below) or (v)
otherwise amend the Offer in any manner adverse to the Company's stockholders.
Notwithstanding the foregoing, the Purchaser may, without the Company's consent
(x) extend the Offer, if at the original Expiration Date (as defined in the
Offer) the Minimum Condition or any of the Offer Conditions have not been
satisfied or waived; (y) extend the Offer for any period required by any rule,
regulation, interpretation or position of the SEC; or (z) extend the Offer for
no more than ten (10) business days beyond the original Expiration Date in the
event that the Offer Conditions have been satisfied but less than ninety percent
(90%) of the Shares have been tendered pursuant to the Offer.
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THE MERGER. The Merger Agreement provides that, on the terms and subject to
the conditions set forth in the Merger Agreement and in accordance with the
relevant provisions of the New York Business Corporation Law ("NYBCL"), as soon
as practicable following the satisfaction or waiver, if permissible, of the
conditions described below under "Conditions to the Merger," the Purchaser will
be merged with and into the Company (the "Merger") with the Company as the
surviving corporation in the Merger (the "Surviving Corporation"). The Merger
will become effective at the time of filing of a certificate of merger, as
required by the NYBCL (the "Effective Time"). At the Effective Time, each Share
issued and outstanding immediately prior to the Effective Time (other than
Shares owned by PCC, by the Purchaser or by any other direct or indirect
subsidiary of PCC or of the Company, or held in the treasury of the Company, all
of which will be canceled without any conversion thereof and no payment or
distribution will be made with respect thereto) will be canceled and converted
automatically into the right to receive an amount equal to the Offer Price in
cash (the "Merger Consideration") net to the holder, without any interest
thereon.
STOCKHOLDERS MEETING. The Merger Agreement provides that the Company will,
if required by applicable law, call and hold a special meeting of its
stockholders as soon as practicable following the consummation of the Offer for
the purpose of approving the Merger and will prepare and file with the SEC under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") a proxy
statement with respect to the meeting of stockholders described above (the
"Proxy Statement"). The Company has agreed in the Merger Agreement to use its
best efforts to respond to any comments of the SEC or its staff and to cause the
Proxy Statement to be mailed to the Company's stockholders as promptly as
practicable after responding to all such comments to the satisfaction of the
staff, and to keep PCC informed of all its correspondence with the SEC with
respect to the Proxy Statement. Pursuant to the Merger Agreement, the Company,
through its Board of Directors, will recommend in the Proxy Statement that the
Merger Agreement be approved.
Notwithstanding any other provision in the Agreement, if PCC, the Purchaser,
or any affiliate of either of them beneficially owns at least 90% of the
outstanding Shares, the parties shall take all necessary and appropriate action
to cause the Merger to become effective as soon as practicable after the
Expiration Date, but in no event later than ten business days thereafter,
without a meeting of the stockholders of the Company in accordance with Section
905 of the NYBCL.
STOCK OPTIONS AND WARRANTS. The Merger Agreement provides that the Company
will use its best efforts to enter into an agreement with each holder of an
employee or director stock option or warrant to purchase Shares (in each case,
an "Option" or "Warrant") that provides that, immediately after the date on
which the Purchaser will have accepted for payment all Shares validly tendered
and not withdrawn prior to the Expiration Date with respect to the Offer (the
"Tender Offer Acceptance Date"), each Option or Warrant that is then
outstanding, whether or not then exercisable or vested, will be canceled by the
Company, and each holder of a canceled Option will be entitled to receive from
the Purchaser, at the same time as payment for Shares is made by the Purchaser
in connection with the Offer, in consideration for the cancellation of such
Option or Warrant, an amount in cash equal to the product of (i) the number of
Shares previously subject to such Option or Warrant, whether or not then
exercisable or vested, and (ii) the excess, if any, of the Offer Price over the
exercise price per Share previously applicable to such Option or Warrant,
reduced by any applicable withholding. Alternatively, the Company may advance
funds to one or more Option holders to permit such holders to exercise their
Options (whether or not then exercisable or vested) and tender the Shares so
acquired in the Offer.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains
representations and warranties by the Company, relating to, among other things,
(i) the organization of the Company and other corporate matters, (ii) the
capital structure of the Company, (iii) the authorization, execution, delivery
and consummation of the transactions contemplated by the Merger Agreement, (iv)
consents and approvals, (v) documents filed by the Company with the SEC and the
accuracy of the information contained therein,
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(vi) the accuracy of the information contained in documents filed with the SEC
in connection with the Offer and the Merger, (vii) litigation, (viii)
environmental matters, (ix) absence of material changes, and (x) taxes.
In addition, the Merger Agreement contains representations and warranties by
PCC, relating to, among other things, the organization and ownership of PCC and
the Purchaser, their authority to enter into the Merger Agreement and their
financial capability to purchase the Shares pursuant to the Offer.
CONDUCT OF BUSINESS PENDING THE MERGER. In the Merger Agreement, the
Company has agreed that, prior to the Effective Time, except as otherwise
provided in the Merger Agreement or with the prior written consent of PCC, the
Company (a) will use its best efforts to (i) keep the business and organization
of the Company intact, and (ii) carry on the business of the Company in its
usual manner; (b) will not declare, pay, or set aside for payment any dividend
or other distribution of money or property in respect of its capital stock; (c)
will not issue any shares of its capital stock, or issue or sell any securities
convertible into, or exchangeable for, or options, warrants to purchase, or
rights to subscribe to, any shares of its capital stock or subdivide or in any
way reclassify any shares of its capital stock, or repurchase, reacquire,
cancel, or redeem any such shares; (d) will use its best efforts to ensure that
(A) it preserves and maintains in the ordinary course of business its assets,
property and rights and that it will not encumber any of its material assets
other than in connection with certain existing credit arrangements, (B) it will
pay all debts when due in the usual course of business, (C) it will comply in
all material respects with all applicable laws, and (D) it will maintain its
insurance; (e) will not incur additional debt, incur or increase any obligation
or liability, except in the ordinary and usual course of its business; and (f)
will not make any payment to discharge or satisfy any lien or encumbrance or pay
any obligation or liability (fixed or contingent) other than current liabilities
or payments under its revolving credit facility made in the ordinary course of
business and consistent with past practices.
The Company has further agreed that, until the Effective Time, it will not,
without the prior consent of PCC: (a) acquire any assets other than in the
ordinary and usual course of its business and consistent with past practices;
(b) purchase or otherwise acquire, or agree to purchase or otherwise acquire,
any debt or equity securities of any person other than equity securities issued
by a money market fund registered as an investment company under the Investment
Company Act of 1940; (c) enter into any transaction or contract or make any
commitment to do the same, except in the ordinary and usual course of business
and not requiring the payment in any case of an amount in excess of $50,000
annually; (d) increase the wages, salaries, compensation, pension, or other
benefits payable, or to become payable by it, to any of its officers, employees,
or agents, including without limitation any bonus payments or severance or
termination pay, other than increases in wages and salaries required by
employment arrangements existing on the execution date of the Merger Agreement
or except as expressly contemplated by or otherwise in the ordinary and usual
course of its business; (e) implement or agree to any implementation of or
amendment or supplement to any employee profit sharing, stock option, stock
purchase, pension, bonus, commission, incentive, retirement, medical
reimbursement, life insurance, deferred compensation, severance pay or any other
employee benefit plan or arrangement; or (f) change its accounting methods,
policies or practices. In addition, the Company (a) will, when the consent of
any third party to the transactions contemplated by the Merger Agreement is
required under the terms of any contract to which it is a party or by which it
is bound, use its best efforts to obtain such consent; (b) will maintain its
books and records in accordance with past practice and in accordance with
generally accepted accounting principles; (c) will pay and discharge all taxes,
assessments, governmental charges and levies imposed upon it, its income or
profits, or upon any property belonging to it, and in all cases before the date
on which penalties attach thereto; (d) will not amend its Certificate of
Incorporation or Bylaws; and (e) will not transafer any shares of treasury stock
or authorized and unissued stock to its Deferred Compensation Plan Trust on
account of bonus amounts deferred under its Deferred Compensation Plan relating
to calendar year 1998.
PROHIBITION ON SOLICITATION. Pursuant to the Merger Agreement, the Company
has agreed that the Company and its officers, directors, employees,
representatives and agents will cease any discussions or
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negotiations with any parties with respect to any Takeover Proposal (as defined
below); and, unless the Merger Agreement has been terminated in accordance with
its terms and so long as neither PCC nor the Purchaser is in material violation
of the Merger Agreement, the Company will not authorize or permit any officer,
director or employee of, or any investment banker, financial advisor, attorney,
accountant or other representative retained by the Company or any of its
subsidiaries to (a) solicit, initiate, encourage or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal or (b) participate in
any discussions or negotiate regarding any Takeover Proposal.
The Merger Agreement provides that, notwithstanding the foregoing, if at any
time prior to the Effective Time, the Board of Directors of the Company
determines in good faith, after consultation with counsel, that it is necessary
to do so in order to comply with its fiduciary duties to the Company's
stockholders under applicable law, the Company may, in response to an
unsolicited Takeover Proposal, (a) furnish information with respect to the
Company to any person pursuant to a confidentiality agreement in substantially
the same form as that entered into between the Company and PCC, and (b)
participate in negotiations regarding such Takeover Proposal.
The Merger Agreement provides further that, unless the Merger Agreement has
been terminated in accordance with its terms and so long as neither PCC nor the
Purchaser is in material violation of the Merger Agreement, neither the Board of
Directors of the Company nor any committee thereof will (a) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to PCC, the approval or
recommendation by such Board of Directors or such committee of the Offer, the
Merger Agreement or the Merger, (b) approve or recommend, or propose to approve
or recommend, any Takeover Proposal or (c) cause the Company to enter into any
agreement with respect to any Takeover Proposal.
Notwithstanding the foregoing, in the event that prior to the Effective Time
the Board of Directors of the Company determines in good faith, after
consultation with counsel, that it is necessary to do so in order to comply with
its fiduciary duties to the Company's stockholders under applicable law, the
Merger Agreement provides that the Board of Directors of the Company may
withdraw or modify its approval or recommendation of the Offer, the Merger
Agreement and the Merger, approve or recommend a Superior Proposal (as defined
below), or cause the Company to enter into an agreement with respect to a
Superior Proposal, but in each case only at a time that is after the second
business day following PCC's receipt of written notice advising PCC that the
Board of Directors of the Company has received a Superior Proposal, specifying
the material terms and conditions of such Superior Proposal and identifying the
person making such Superior Proposal, and that the Company has elected to
terminate the Agreement pursuant to the termination provisions described below.
Pursuant to the Merger Agreement, and in addition to the obligations of the
Company described above, the Company has agreed that (a) it will advise PCC
within 48 hours after receiving any request for information or any Takeover
Proposal, or any inquiry with respect to or which could lead to any Takeover
Proposal, the material terms and conditions of such request, Takeover Proposal
or inquiry and the identity of the person making such request, Takeover Proposal
or inquiry; and (b) it will keep PCC fully informed of the status and details
(including amendments or proposed amendments) of any such request, Takeover
Proposal or inquiry.
The Merger Agreement does not prohibit the Company from making any
disclosure to the Company's stockholders if, in the opinion of the Board of
Directors of the Company, after consultation with counsel, failure to disclose
would be inconsistent with its fiduciary duties to the Company's stockholders
under applicable law, except that neither the Company nor its Board of Directors
nor any committee thereof may (other than as described above) withdraw or
modify, or propose to withdraw or modify, its position with respect to the Offer
or the Merger or approve or recommend, or propose to approve or recommend, a
Takeover Proposal.
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The term "Takeover Proposal" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of a
substantial amount of assets of the Company or of over 20% of any class of
equity securities of the Company, or any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company, any merger, consolidation, business
combination, sale of substantially all the assets, recapitalization,
liquidation, dissolution (other than the transactions contemplated by the Merger
Agreement), or any other transactions the consummation of which could reasonably
be expected to impede, interfere with, prevent or materially delay the Offer or
the Merger or which would reasonably be expected to dilute materially the
benefits to PCC of the transactions contemplated by the Merger Agreement. The
term "Superior Proposal" means any bona fide Takeover Proposal to acquire,
directly or indirectly, for consideration consisting of cash and/or securities,
more than 50% of the shares of Common Stock of the Company then outstanding or
all or substantially all the assets of the Company and otherwise on terms which
the Board of Directors of the Company determines in its good faith judgment
(after consultation with The Nassau Group, Inc. or another financial advisor of
nationally recognized reputation) to be more favorable to the Company's
stockholders than the Offer and the Merger.
ACCESS. Pursuant to the Merger Agreement, from the date of the Merger
Agreement to the closing date for the Merger, the Company will provide, and
cause each subsidiary to provide, to PCC and its authorized agents, access to
their respective physical assets, facilities, financial information, production
records, contracts and other corporate records and documents during normal
working hours, and PCC will be allowed to meet with their respective management
personnel, employees, and any outside consultants, including auditors and
accountants, investment and other bankers, tax and financial advisors, and
environmental consultants.
DIRECTORS. The Merger Agreement provides that, upon the Purchaser's
acceptance for payment and payment for Shares pursuant to the Offer, the
Purchaser will be entitled to designate a number of directors (rounded up to the
nearest whole number) on the Company's Board of Directors that is equal to the
product of the total number of directors on the Company's Board multiplied by
the percentage that the aggregate number of Shares beneficially owned by
Purchaser and its affiliates bears to the number of Shares outstanding. The
Company will promptly, at the request of PCC, either increase the size of the
Company's Board of Directors and/or obtain the resignations of such number of
its current directors as is necessary to enable the Purchaser's designees to be
elected to the Company's Board of Directors as provided above.
CONDITIONS TO THE OFFER. Notwithstanding any other provision of the Offer,
the Purchaser shall not be required to accept for payment or pay for any
tendered Shares unless (i) Shares that constitute at least two thirds of the
then outstanding Shares (on a fully diluted basis) have been validly tendered
and not withdrawn (the "Minimum Condition"); and (ii) any applicable waiting
period under the Hart Scott Rodino Antitrust Improvements Act ("HSR Act") shall
have expired or been terminated. In addition, the Purchaser may terminate or
amend the Offer and postpone the acceptance for payment of and payment for
Shares tendered if, at any time on or after the date of the Merger Agreement and
prior to the acceptance for payment of Shares, any of the following conditions
(the "Offer Conditions") shall exist:
(a) there shall have been issued and shall remain in effect any injunction,
order or decree by any court or governmental, administrative or
regulatory authority or agency, domestic or foreign, which (i) restrains
or prohibits the making of the Offer or the consummation of the Merger,
(ii) prohibits or limits ownership or operation by the Company, PCC or
the Purchaser of all or any material portion of the business or assets of
the Company, or PCC and its subsidiaries, taken as a whole, or compels
the Company, PCC or any of its subsidiaries to dispose of or hold
separate all or any material portion of the business or assets of the
Company, or PCC and its subsidiaries, taken as a whole, in each case as a
result of the Offer or the Merger; (iii) imposes material limitations on
the ability of PCC or the Purchaser to exercise effectively full rights
of ownership
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of any Shares, including, without limitation, the right to vote any
Shares acquired by the Purchaser pursuant to the Offer, or otherwise on
all matters properly presented to the Company's stockholders, including,
without limitation, the approval and adoption of the Merger Agreement and
the Merger; or (iv) requires divestiture by PCC or the Purchaser of any
material portion of the Shares;
(b) there shall have been any action taken, or any statute, rule,
regulation, order or injunction enacted, entered, enforced, promulgated,
amended, issued or deemed applicable to (i) PCC, the Company or any
subsidiary or affiliate of PCC, or (ii) the Offer or the Merger, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign (other than, in the
case of both (i) and (ii), the application of the waiting period
provisions of the HSR Act to the Offer or the Merger), which results in
any of the consequences referred to in clauses (i) through (iv) of
paragraph (a) above;
(c) there shall have occurred and be continuing (i) a 25 percent or greater
decline in the Dow Jones Average of Industrial Stocks and the Standard &
Poor's 500 Index since the date of the Merger Agreement, (ii) any general
suspension of trading in, or limitation on prices for, securities on the
New York Stock Exchange or in the over-the-counter market, (iii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iv) any limitation (whether or
not mandatory) by any governmental authority on the general extension of
credit by banks or other financial institutions, or (v) in the case of
any of the foregoing existing at the time of the commencement of the
Offer, in the reasonable judgment of PCC, a material worsening thereof;
(d) the Company's Board of Directors or any committee thereof shall have
withdrawn or modified in a manner adverse to PCC or the Purchaser its
approval or recommendation of the Offer, the Merger or the Merger
Agreement or shall have approved or recommended another merger,
consolidation, business combination with, or acquisition of the Company
or all or substantially all its assets or another tender offer or
exchange offer for Shares, or shall have resolved to do any of the
foregoing;
(e) the Company shall have failed to perform in any material respect any of
its material covenants in the Merger Agreement, where such failure either
individually or in the aggregate would have a Combined Material Adverse
Effect (as defined below);
(f) the representations and warranties of the Company shall fail to be true
and correct in all material respects on and as of the date made or,
except as otherwise expressly contemplated, on and as of any subsequent
date as if made at and as of such subsequent date, which failure either
individually or in the aggregate would have a Combined Material Adverse
Effect;
(g) the Merger Agreement shall have been terminated in accordance with its
terms;
(h) the Purchaser and the Company shall have agreed that the Purchaser shall
terminate the Offer or postpone the acceptance for payment of or payment
for Shares thereunder; or
(i) since December 31, 1997, except as (i) expressly contemplated by the
Merger Agreement, (ii) disclosed in any of the Company's periodic reports
to the SEC filed since such date and prior to the date of the Merger
Agreement, or (iii) set forth in the Merger Agreement, there shall have
occurred any event having, individually or in the aggregate, a change or
effect that is materially adverse to the business, operations,
properties, financial condition, assets or liabilities (including,
without limitation, contingent liabilities) of the Company.
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The Merger Agreement provides that the foregoing conditions are for the sole
benefit of the Purchaser and PCC and may be asserted by the Purchaser or PCC
regardless of the circumstances giving rise to any such condition or may be
waived by the Purchaser or PCC in whole or in part at any time and from time to
time in its sole discretion. The failure by the Purchaser or PCC at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and other
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances; and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
A "Combined Material Adverse Effect," as used above, means any individual or
combination of events, changes or effects that are materially adverse to the
condition (financial or otherwise), properties, assets, liabilities, businesses,
operations or results of operations of a party in excess of $500,000.
CONDITIONS TO THE MERGER. The respective obligations of each party to the
Merger Agreement to effect the Merger shall be subject to the satisfaction,
prior to the closing of the transactions contemplated by the Merger Agreement,
of the following conditions: (a) all required authorizations, consents, and
approvals of all governmental agencies and authorities shall have been obtained
and the waiting period under the HSR Act will have expired or been terminated
early; (b) if necessary under applicable law, the Merger shall have been
approved by at least 66 2/3 percent of the Shares of the Company; (c) no law,
statute, rule, regulation, decree, order, injunction or ruling by any
governmental entity shall remain in effect and prohibit, restrain, enjoin or
restrict the consummation of the Merger; (d) no action, suit or other proceeding
shall be pending against any party to prohibit, restrain, enjoin, restrict or
otherwise prevent the consummation of the Offer or the Merger; and (e) the
Purchaser shall have previously accepted for payment and paid for all Shares
validly tendered and not withdrawn pursuant to the Offer.
TERMINATION. The Merger Agreement may be terminated at any time prior to
the closing date of the Merger (a) by mutual consent of PCC, Purchaser and the
Company; (b) by either PCC or the Company if (A) any governmental entity has
promulgated or issued a law, statute, rule, regulation, decree, order,
injunction, or ruling or taken any other action prohibiting, restraining,
enjoining, restricting or otherwise prohibiting the Offer or the Merger that has
become final and nonappealable, or if clearance under the HSR Act is not
received within 60 days of the filing of the premerger notification and report
form, or (B) the Offer is terminated or expires in accordance with its terms as
the result of failure of any of the Offer Conditions without Purchaser having
purchased any Shares pursuant to the Offer, except that this right to terminate
is not available to any party whose failure to perform any of its covenants or
agreements under the Merger Agreement results in the failure of any condition;
(c) by PCC, if not then in default, upon written notice to the Company if (A)
the Company breaches in any material respect any of its representations or
warranties or defaults in the observance or performance of any of its covenants
or agreements except for breaches or defaults which, individually or in the
aggregate, would not have a Combined Material Adverse Effect or materially
impair the ability of the parties to consummate the transactions contemplated by
the Merger Agreement, or (B) the Board of Directors of the Company or any
committee thereof has withdrawn or modified in a manner adverse to PCC or
Purchaser its approval or recommendation of the Offer or the Merger Agreement or
approved or recommended any Takeover Proposal, or (C) the Company has entered
into a definitive agreement with respect to any Superior Proposal; or (d) by the
Company, if not then in default, upon written notice to PCC if (A) PCC breaches
in any material respect any of its representations or warranties or defaults in
the observance or performance of any of its covenants or agreements, except for
breaches or defaults which, individually or in the aggregate, would not have a
Combined Material Adverse Effect or materially impair the ability of the parties
to consummate the transactions contemplated by the Merger Agreement, or (B) if
the Company determines after consultation with its counsel that it is necessary
to terminate the Merger or the Merger Agreement in order for its directors to
comply with their fiduciary duties under applicable law.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall forthwith become void and there shall be no liability on the
part of any party thereto except as described under "Fees
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and Expenses" below; provided, however, that nothing in the Merger Agreement
will relieve any party from liability for any breach thereof before termination.
FEES AND EXPENSES. The Merger Agreement provides that, except as provided
in the following paragraph, all fees and expenses incurred in connection with
the Offer, the Merger, the Merger Agreement and the transactions contemplated
thereby will be paid by the party incurring such fees or expenses, whether or
not the Offer or the Merger is consummated.
Under the Merger Agreement the Company will pay, or cause to be paid, to PCC
the sum of $2,000,000 upon demand if the Offer is not consummated due to the
Company's termination of the Merger Agreement in breach of the Merger Agreement.
Alternatively, if the Company determines in good faith, after consultation with
counsel, that it is necessary to terminate the Agreement in order for its
directors to comply with their fiduciary duties to the Company's stockholders
under applicable law, the Company will pay, or cause to be paid, to PCC the sum
of $3,000,000 (the "Termination Fee") upon demand if the Company (i) agrees to a
Superior Proposal within one year of the date of termination of the Agreement,
or (ii) within 270 days after termination of the Merger Agreement the Company
agrees to a Takeover Proposal. In addition, the Merger Agreement provides that
PCC will pay, or cause to be paid, to the Company the sum of $2,000,000 upon
demand if the Offer is not consummated due to PCC's termination of the Merger
Agreement in breach of the Merger Agreement.
STANDSTILL. The Merger Agreement provides that in the event that PCC does
not purchase Shares pursuant to the Offer, other than in circumstances involving
breach by the Company of the Merger Agreement, PCC and its affiliates shall not
directly or indirectly, for a period of 18 months from the date of the Merger
Agreement, unless the Company's Board of Directors approves such action, (i)
acquire or offer to acquire, seek, propose or agree to acquire, by means of a
purchase, agreement, business combination or in any other manner, beneficial
ownership of any securities or assets of the Company, including rights or
options to acquire such ownership, (ii) seek or propose to influence, change or
control the management or Board of Directors of the Company, or (iii) make any
public disclosure or announcement or submit a proposal for a transaction not in
the ordinary course of business, or take any action which could require the
other party to make any public disclosure, with respect to the matters set forth
in the Merger Agreement or in any way participate directly or indirectly in any
solicitation of proxies to vote, or influence any person or entity with respect
to the voting of, any voting securities of the Company. However, the foregoing
restrictions will not apply in the event that the Company receives a Takeover
Proposal from a party that is not affiliated with PCC.
AMENDMENT. The Merger Agreement may not be amended except by written
agreement of the parties thereto.
The foregoing summary of the Merger Agreement is qualified in its entirety
by the text of the Merger Agreement, a copy of which has been filed with the
Securities and Exchange Commission as Exhibit 1 to this Schedule 14D-9.
STOCKHOLDER AGREEMENT.
The members of the Company's Board of Directors (including Stephen V.
Ardia), as well as David M. Doin, George A. Earle III, George A. Vorsheim, Jr.,
Mark E. Alexander, Brian Buchinski, Kathleen A. Parry and Philip W. Welsh
(collectively, the "Selling Stockholders") are each parties to a Stockholder
Agreement dated February 24, 1998 with PCC and the Purchaser. The Stockholder
Agreement provides that each Selling Stockholder will tender his or her Shares
into the Offer so long as the per Share amount is not less than $15.25 in cash
(net to the seller). Additionally, each Selling Stockholder has agreed to sell,
and the Purchaser has agreed to purchase, their Shares at a price per share
equal to $15.25, or such higher price per share as may be offered by the
Purchaser in the Offer, provided that such obligations to purchase and sell are
both subject to (i) the Purchaser having accepted Shares for payment under the
Offer and the
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<PAGE>
Minimum Condition having been satisfied, and (ii) the expiration or termination
of any applicable waiting period under the HSR Act. Each Selling Stockholder has
also agreed not to transfer or agree to transfer their Shares, grant a proxy for
their Shares or enter into a voting agreement respecting them, or take any other
action that would in any way restrict, limit or interfere with the performance
of their obligations under the Stockholder Agreement or the transactions
contemplated thereby. The Stockholder Agreement terminates upon the earlier of
(i) the Merger Agreement being terminated by the Company, PCC or the Purchaser,
(ii) the purchase and sale of the Shares of the Selling Stockholders as
described above, or (iii) May 30, 1998. The foregoing summary of the Stockholder
Agreement is qualified in its entirety by the text of the Stockholder Agreement,
a copy of which has been filed with the Securities and Exchange Commission as
Exhibit 2 to this Schedule 14D-9.
CONFIDENTIALITY AGREEMENT.
On November 25, 1997, PCC entered into a Confidentiality Agreement, pursuant
to which PCC agreed to treat all information supplied by the Company or its
representatives as confidential and to use such information solely in connection
with the evaluation of a possible transaction with the Company. PCC further
agreed that, in the event that the transactions contemplated by the Merger
Agreement are not consummated, it will (i) return to the Company all information
furnished by the Company or its representatives, and (ii) refrain, for a period
of two years from the date of the Confidentiality Agreement, from soliciting or
hiring any employees of the Company while they are still employed by the
Company. The foregoing summary of the Confidentiality Agreement is qualified in
its entirety by the text of the Confidentiality Agreement, a copy of which has
been filed with the Securities and Exchange Commission as Exhibit 3 to this
Schedule 14D-9.
ARRANGEMENTS WITH EXECUTIVE OFFICERS, DIRECTORS OR AFFILIATES OF THE COMPANY.
EMPLOYMENT AGREEMENT AND CHANGE OF CONTROL AGREEMENT WITH MR. ARDIA
Pursuant to the Merger Agreement, the Company has entered into an Employment
Agreement with Stephen V. Ardia, providing for Mr. Ardia to serve as the
Company's President for a term of one year beginning on the date that the Offer
is consummated, after which his employment may be continued on an at-will basis
by mutual agreement of the parties. The agreement provides that Mr. Ardia will
be paid a base salary at the annual rate of $150,000 (which is consistent with
his current salary arrangements). He will be entitled to participate in the
Company's bonus plan through December 31, 1998, and in a similar bonus plan
during the three month period January 1, 1999 through March 28, 1999. Mr. Ardia
will also be entitled to participate in PCC's stock option and stock purchase
programs, in accordance with the terms of those programs. Mr. Ardia may
terminate the agreement upon thirty days' written notice to the Company any time
after the first three months of its effectiveness.
The Company also has a Change in Control Agreement with Mr. Ardia dated
January 5, 1998, providing for a payment to Mr. Ardia upon the occurrence of a
"Change of Control" (as defined in the agreement) equal to (i) the amount of his
annual base salary in effect on the date of the Change of Control, and (ii) an
amount equal to the sum of (A) the bonus payable to Mr. Ardia for the year
during which the Change of Control occurs, prorated through the date of the
Change of Control, plus (b) the average annual bonus paid to Mr. Ardia for the
two complete fiscal years that precede the fiscal year during which the Change
of Control occurs. In addition, the Company shall waive for twelve months
following his termination any required premium payment due from Mr. Ardia to
allow him to continue his coverage under the Company's group health plan. A
"Change of Control," as defined in the agreement, would occur upon the
Purchaser's acceptance for payment and payment for Shares pursuant to the Offer.
The foregoing summary of the Employment and Change of Control Agreements is
qualified in its entirety by the text of the Employment and Change of Control
Agreements, copies of which have been
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<PAGE>
filed with the Securities and Exchange Commission as Exhibits 4 and 5,
respectively, to this Schedule 14D-9.
EMPLOYMENT AGREEMENTS WITH MESSRS. ALEXANDER, DOIN, BUCHINSKI, EARLE,
VORSHEIM AND WELSH AND MS. PARRY
Pursuant to the Merger Agreement, the Company has also entered into
Employment Agreements with Philip W. Welsh to serve as Vice President of
Finance; Mark Alexander to serve as Vice President of Marketing; David Doin to
serve as Vice President, General Manager; Brian Buchinski to serve as Director
of Manufacturing; George Vorsheim to serve as Director of Communication; George
Earle to serve as Director of Engineering and Kathleen Parry to serve as
National Sales Manager; each for two-year terms beginning on the date that the
Offer is consummated. These agreements provide for an annual salary of $80,000,
$95,000, $90,000, $75,000, $70,000, $80,000, and $80,000 for Mr. Welsh, Mr.
Alexander, Mr. Doin, Mr. Buchinski, Mr. Vorsheim, Mr. Earle and Ms. Parry,
respectively (which are consistent with their current salary arrangements). Each
of the foregoing employees will be entitled to participate in the Company's
bonus plan through December 31, 1998, and in a similar bonus program for the
three month period January 1, 1999 through March 28, 1999. Thereafter, any bonus
program provided will be consistent with bonus programs provided by PCC to
similarly situated employees. These employees will also be entitled to
participate in PCC's stock option and stock purchase programs, in accordance
with the terms of those programs.
The agreements, which may be terminated by either party upon thirty days'
written notice, provide for a severance benefit equal to the following: (i) if
the employee is terminated before the first anniversary of the effective date of
the agreement, the remaining balance of the employee's base salary for the
portion of year from the date of termination until the first anniversary of the
effective date, plus 100% of any calendar year 1998 bonus to which the employee
would have been entitled had he or she remained employed by the Company through
December 31, 1998, plus the Severance Payment (as defined below); or (ii) if the
employee is terminated after the first anniversary of the effective date of the
agreement and prior to the second anniversary of the effective date, ten months'
pay at the employee's then current salary level (the "Severance Payment"). In
addition, the Company shall waive for the remainder of the unexpired term of the
agreement any required premium payment due from the employee to allow the
employee to continue his or her coverage under the Company's group health plan.
The employee is ineligible for the payments described in this paragraph if he or
she voluntarily resigns or withdraws from employment, is terminated for "cause"
(as defined in the agreement), terminates employment as a result of the
expiration of the term of the agreement, breaches certain confidentiality or
non-competition provisions in the agreement, or accepts reasonably comparable
employment with an affiliate of PCC.
The foregoing summary of the Employment Agreements is qualified in its
entirety by the text of the Employment Agreements, a copy of the form of which
has been filed with the Securities and Exchange Commission as Exhibit 6 to this
Schedule 14D-9.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
A. RECOMMENDATION OF THE BOARD OF DIRECTORS.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY TENDER THEIR SHARES PURSUANT TO THE OFFER.
B. BACKGROUND; REASONS FOR THE RECOMMENDATION.
In late 1997, in view of increasing consolidation in the Company's market
sectors, the emergence of competitors with greater financial resources, combined
marketing and distribution networks and additional products and services, and
the recent growth in the Company's revenues and earnings, the Board of
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Directors began considering several alternatives for the Company's future. These
alternatives included (i) staying on its current course and executing the
strategic plan that was in place, (ii) identifying acquisition targets and
implementing an acquisition-oriented growth strategy, and (iii) identifying
potential strategic partners which would merge with or acquire the Company.
In keeping with that approach, in September 1997 the Company engaged The
Nassau Group, Inc. ("Nassau"), an investment banking firm that specializes in
the water and wastewater industry, to assist in its consideration of these
alternatives. In September 1997, Nassau made a presentation to the Board
concerning the valuations of publicly traded enterprises in the pump and valve
industry as well as the more general environmental water and wastewater
treatment industry. Nassau also addressed a variety of strategic options
available to the Company, including the possibility of growth through
acquisitions as well as exit options, such as a sale to domestic or foreign
acquirors. At the same time, the management team made a preliminary
recommendation to the Board that given the dynamic changes occurring among its
own competitors and peers, the Company might best be able to exploit the
opportunities it faced by merging with a strategic player in the industry. The
player would most likely be larger and would also allow the Company to execute
its own niche-oriented strategic plan and provide a challenging and rewarding
growth environment for the Company's employees.
While the Board continued to have confidence in the Company's business
prospects as an independent entity, it determined that the stock market
environment and changes in the competitive landscape made it appropriate to
examine the viability of a merger or sale of the Company at this juncture.
Although the Board did not determine to sell the Company at that point, it
authorized management to have Nassau determine the level of interest among a
defined group of well-financed, potential strategic acquirors.
In October 1997, Nassau prepared a confidential package of descriptive
material on the Company with the cooperation of the Company's senior management
in order to be able to solicit expressions of interest and to respond to
unsolicited inquiries. Between October 1997 and January 1998, Nassau held
discussions with approximately 20 parties, domestic and foreign, with a
strategic interest in the Company. These discussions, conducted under the terms
of confidentiality agreements between the Company and the potential acquirors,
involved the parties' assessment of the Company's business, as well as terms of
potential indications of interest.
In December 1997, Nassau reported to the Board that there were fewer than
five parties which had expressed interest in pursuing an acquisition of the
Company at terms which the Board would find attractive. After consideration, the
Board instructed Nassau and senior management to move forward and negotiate with
one of the prospects, PCC, the best possible transaction.
On December 10, 1997, PCC submitted a preliminary indication of interest.
PCC was invited to attend a management presentation on December 22, 1997, which
it did. PCC subsequently submitted a draft letter of intent to acquire the
Company, which included a proposal that the purchase price be paid in a
combination of $12.50 per Share cash at closing and a contingent payment right
of up to an additional $3.00 per Share in 1999 if the Company achieved certain
revenue and earnings objectives in 1998.
The Company's Board of Directors met in January 1998, and approved the offer
on a preliminary basis, subject to certain clarifications. The Company's legal
and financial advisors contacted PCC to clarify and negotiate certain details of
the contingent payment and other terms and conditions contained in the letter of
intent. On January 21, 1998, the Company and PCC, with the support of their
respective Boards of Directors, executed an exclusive, non-binding letter of
intent and PCC began its due diligence immediately.
After execution and delivery of the letter of intent, PCC entered into a
formal due diligence period during which it received access to the Company's
records and documents and received additional management presentations. After
several weeks of negotiations and due diligence, the Company informed PCC that
it preferred an all-cash transaction, and would be willing to accept a price of
$15.25 per Share in
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<PAGE>
cash at closing. On February 16, 1998, PCC informed the Company that its Board
of Directors had approved the revised terms of the transaction.
On February 24, 1998, Miller, Johnson and Kuehn, Inc. ("MJK") presented a
written opinion to the Company's Board that the proposed transaction was fair to
the Environment One Corporation shareholders from a financial point of view. On
that same day, the Board of Directors held a meeting to discuss the proposed
Offer and Merger, the Merger Agreement, and related matters. After hearing
presentations by the Company's legal and financial advisors, the Board of
Directors considered and discussed the proposed transaction. The Board of
Directors then proceeded to unanimously approve the Offer, the Merger and the
Merger Agreement. The Company executed the Merger Agreement after the close of
business on February 24, 1998.
On February 25, 1998, the Company issued a press release announcing the
execution and delivery of the Merger Agreement.
On March 3, 1998, the Purchaser commenced the Offer.
In reaching its conclusion and recommendation described above, the Board of
Directors considered a number of factors, including the following:
(a) The advantages in a competitive environment of strategically aligning
with a large, well-capitalized company such as PCC.
(b) The projected financial condition, results of operations, prospects and
strategic objectives of the Company, as well as the risks involved in
achieving those prospects and objectives taking into account economic and
market conditions.
(c) The belief of the Board that, in view of the number of parties canvased
by management and Nassau and the number of parties who received
information with respect to the Company, it was unlikely that any
otherwise desirable party potentially interested in submitting a proposal
to acquire the Company had not been afforded the opportunity to do so.
(d) The likelihood that the Merger would be consummated, including a
consideration of the conditions to the Offer and the fact that the Offer
and the Merger are not subject to a financing contingency.
(e) The financial and other terms and conditions of the Merger Agreement.
(f) The written opinion delivered to the Board by MJK stating that the cash
consideration to be received by stockholders pursuant to the Offer and
the Merger is fair to such holders from a financial point of view. A copy
of the written opinion, which sets forth the assumptions made, procedures
followed, and other matters considered and limits of the review by MJK,
is attached hereto as Annex II. STOCKHOLDERS ARE URGED TO READ SUCH
OPINION IN ITS ENTIRETY.
(g) The fact that the consideration to be received by the stockholders
pursuant to the Offer represents a premium over the then current
prevailing market price for the Company's common stock.
(h) The fact that the structure of the acquisition of the Company by PCC
involves a cash tender offer for all shares to be commenced within five
business days of the public announcement of the acquisition, to be
followed promptly by a merger for the same consideration, thereby
enabling stockholders to obtain cash for their shares at the earliest
possible time.
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(i) The fact that, if required by the fiduciary duties of the Board under
New York law, the Company may approve or recommend a tender offer
competing with the PCC offer or terminate the Merger Agreement and enter
into a definitive acquisition agreement with another party for a
transaction which is financially superior, subject to payment of the
applicable termination fee specified in the Merger Agreement.
(j) The fact that PCC had completed its due diligence investigation and that
the Merger Agreement is not subject to termination as a result of such
due diligence.
(k) The presentations of Nassau to the Board as to various financial and
other matters deemed relevant to the Board's consideration.
The Board of Directors' approval and recommendation was based on the
totality of the information considered by it. The Board of Directors did not
assign relative weights to the factors considered by it or determine that any
one factor was of primary importance.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Nassau has been retained by the Board of Directors to act as a financial
advisor to the Company with respect to the Offer and the Merger. Pursuant to an
engagement letter with Nassau, the Company (i) has paid Nassau a monthly cash
retainer of $5,000 beginning on September 15, 1997 and continuing on the 15th
day of each succeeding month during the period of Nassau's engagement; (ii) has
issued to Nassau a warrant to purchase 10,000 Shares exercisable within three
years of September 22, 1997, the date of the engagement letter, at an exercise
price equal to the closing price of a Share on September 22, 1997 ($9.125); and
(iii) will pay a transaction fee to Nassau in the amount of 1.1% of the
aggregate consideration in a transaction resulting in a sale of the Company
(approximately $804,000 based upon the $15.25 per Share Offer Price and the
existence of certain long-term indebtedness of the Company) less 50% of the
total cash retainer previously paid (the "Transaction Fee"). The Transaction Fee
is contingent upon closing of such a transaction. The Company has also agreed to
indemnify Nassau and certain related parties against certain liabilities,
including liabilities under the federal securities laws.
MJK was retained by the Board of Directors to render an opinion as to the
fairness, from a financial point of view, to the stockholders of the Company of
the consideration to be paid in the Offer and the Merger. Pursuant to an
engagement letter with MJK, the Company paid MJK a $10,000 cash retainer fee
upon execution of the engagement letter, and an additional $15,000 at the time
MJK rendered its opinion. In addition, the Company has agreed to reimburse MJK
for its reasonable out-of-pocket expenses; provided, however, that MJK must
obtain the prior approval of the Company to any such expenses if the aggregate
of such expenses exceeds $5,000. The Company has also agreed to indemnify MJK
and certain related parties against certain liabilities, including liabilities
under the federal securities laws.
Neither the Company nor any person acting on its behalf has employed,
retained, or compensated any person to make solicitations or recommendations to
the Company's stockholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
a. Neither the Company nor, to the knowledge of the Company any of its
executive officers, directors, or affiliates, has effected any transaction in
the Company's securities in the past 60 days.
b. To the knowledge of the Company, all of its executive officers,
directors or affiliates who are also stockholders presently intend to tender
their Shares in the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
a. Except as set forth in this statement, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i) an
extraordinary transaction, such as a merger or
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reorganization involving the Company, (ii) a purchase, sale or transfer of a
material amount of assets by the Company, (iii) a tender offer for or other
acquisition of securities by or of the Company, or (iv) any material change in
the present capitalization or dividend policy of the Company.
b. Except as described in this transaction, there are no transactions,
resolutions of the Board of Directors, agreements in principle or signed
contracts in response to the Offer that relate to or would result in one or more
of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached hereto as Annex I is being furnished in
connection with the contemplated designation by PCC, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board of Directors other
than at a meeting of the Company's stockholders following the purchase by the
Purchaser of Shares pursuant to the Offer.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The following Exhibits are filed herewith:
<TABLE>
<S> <C>
Exhibit 1......... Agreement and Plan of Merger dated as of February 24, 1998 among
PCC, Purchaser and the Company
Exhibit 2......... Stockholder Agreement
Exhibit 3......... Confidentiality Agreement
Exhibit 4......... Employment Agreement with Mr. Ardia
Exhibit 5......... Change in Control Agreement with Mr. Ardia
Exhibit 6......... Form of Employment Agreements with Messrs. Alexander, Doin,
Buchinski, Earle, Vorsheim and Welsh and Ms. Parry
Exhibit 7......... Press Release issued by the Company on February 25, 1998
Exhibit 8......... Form of Letter to Stockholders dated March 3, 1998
</TABLE>
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<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 3, 1998 ENVIRONMENT ONE CORPORATION
By: /s/ STEPHEN V. ARDIA
----------------------------------
Stephen V. Ardia
CHAIRMAN OF THE BOARD,
PRESIDENT AND CEO
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<PAGE>
ANNEX I
ENVIRONMENT ONE CORPORATION
2773 BALLTOWN ROAD
NISKAYUNA, N.Y. 12309-1090
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND RULE 14(F)-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED
NOT TO SEND THE COMPANY A PROXY.
This Information Statement is being furnished to holders of shares of the
common stock, par value $.10 per share (the "Shares"), of Environment One
Corporation, a New York corporation (the "Company"), in connection with the
designation by EOC Acquisition Corporation (the "Purchaser"), a New York
corporation and a wholly owned subsidiary of Precision Castparts Corp. ("PCC"),
an Oregon corporation, of persons (the "PCC Designees") to the Board of
Directors of the Company. Such designation is to be made pursuant to an
Agreement and Plan of Merger dated as of February 24, 1998 (the "Merger
Agreement") among the Company, PCC and the Purchaser.
Pursuant to the Merger Agreement, among other things, the Purchaser
commenced a tender offer on March 3, 1998 to purchase all of the issued and
outstanding Shares at a price of $15.25 per Share, net to the seller in cash, as
described in the Purchaser's Offer to Purchase dated March 3, 1998 and the
related Letter of Transmittal (which Offer to Purchase and related Letter of
Transmittal together constitute the "Offer"). The Offer is scheduled to expire
at 12:00 midnight, eastern time, on Monday, March 30, 1998, unless extended. The
Offer is subject to, among other things, the condition that a number of shares
representing not less than 66 2/3 percent of all outstanding Shares on a fully
diluted basis be validly tendered prior to the expiration of the Offer and not
withdrawn (the "Minimum Condition"). The Merger Agreement also provides for the
merger of the Purchaser with and in to the Company (the "Merger") as soon as
practicable after the consummation of the Offer. Following the consummation of
the Merger (the "Effective Time"), the Company will be the surviving corporation
and a wholly owned subsidiary of PCC. In the Merger, each Share issued and
outstanding immediately prior to the Effective Time (other than Shares held by
PCC, the Purchaser or in the treasury of the Company, all of which will be
canceled) will be converted into the right to receive cash in the amount of
$15.25.
The Merger Agreement provides that promptly upon the Purchaser's
consummation of the Offer, the Purchaser shall be entitled to designate that
number (rounded upward to the next greatest whole number) of directors of the
Company that is equal to the product of the total number of directors on the
Board multiplied by the percentage that the number of Shares then beneficially
owned by the Purchaser and its affiliates bears to the total number of Shares
outstanding. Such actions may require the Company to increase the size of the
Board and/or to secure the resignation of one or more current directors.
The terms of the Merger Agreement, a summary of the events leading up to the
Offer and the execution of the Merger Agreement and other information concerning
the Offer and the Merger are contained in the Offer to Purchase and in the
Solicitation/Recommendation Statement on Schedule 14D-9 of the Company (the
"Schedule 14D-9") with respect to the Offer, copies of which are being delivered
to stockholders of the Company contemporaneously herewith. Certain other
documents (including the Merger Agreement) have been filed with the Securities
and Exchange Commission (the "SEC") as
I-1
<PAGE>
Exhibits to the Tender Offer Statement on Schedule 14D-1 of the Purchaser and
PCC (the "Schedule 14D-1") and to the Schedule 14D-9. The Schedule 14D-1 and the
Schedule 14D-9, and the respective exhibits thereto, may be examined at, and
copies thereof may be obtained from, the regional offices and public reference
facilities maintained by the SEC (except that the exhibits thereto cannot be
obtained from the regional offices of the SEC) in the manner set forth in
Sections 7 and 8 of the Offer to Purchase.
No action is required by the stockholders of the Company in connection with
the election or appointment of the PCC Designees to the Board. However, Section
14(f) of the Securities Exchange Act of 1934, as amended, requires the mailing
to the Company's stockholders of the information set forth in this Information
Statement prior to a change in a majority of the Company's directors otherwise
than at a meeting of the Company's stockholders.
The information contained in this Information Statement concerning PCC, the
Purchaser and the PCC Designees has been furnished to the Company by such
persons, and the Company assumes no responsibility for the accuracy or
completeness of such information. The Schedule 14D-1 indicates that the
principal executive offices of the Purchaser and PCC are located at 4650 SW
Macadam Avenue, Suite 440, Portland, Oregon 97201.
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share is entitled to one vote on matters submitted to a vote
of the Company's stockholders. As of March 3, 1998, there were 4,295,827 Shares
issued and outstanding, and 426,422 Shares subject to outstanding options and
warrants.
THE PCC DESIGNEES
PCC has informed the Company that each of the PCC Designees listed below has
consented to act as a director of the Company. It is expected that the PCC
Designees may assume office at any time following the consummation of the Offer,
which cannot be earlier than March 30, 1998, and that, upon assuming office, the
PCC Designees will thereafter constitute at least 66 2/3 percent of the total
number of directors on the Board.
Biographical information concerning each of the PCC Designees is presented
below.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS
OR BUSINESS ADDRESS HELD DURING PAST FIVE YEARS
- ------------------------------------ ----------------------------------------------------------------------------
<S> <C>
William C. McCormick Chairman of PCC since October 1994; Chief Executive Officer of PCC since
EOC Acquisition Corporation August 1991; from 1985-97, President of PCC
4650 SW Macadam, Suite 440
Portland, OR 97201
William D. Larsson Vice President and Chief Financial Officer of PCC; Vice President of the
EOC Acquisition Corporation Purchaser
4650 SW Macadam, Suite 440
Portland, OR 97201
Steven C. Riedel President and Chief Operating Officer of PCC since May, 1997; formerly Vice
EOC Acquisition Corporation President and General Manger of the Latin America operations of GE
4650 SW Macadam, Suite 440 Appliances, a division of General Electric Company
Portland, OR 97201
David W. Norris President of PCC Flow Technologies, Inc.; Chief Executive Officer of the
EOC Acquisition Corporation Purchaser
4650 SW Macadam, Suite 440
Portland, OR 97201
</TABLE>
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<PAGE>
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth, as of March 3, 1998, the ownership of the
Company's common stock by any person who is known by the Company to be the
beneficial owner of more than five percent of the common stock, and by all
current directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL
OF BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
- ----------------------------------------------------- ---------------------- -----------------
<S> <C> <C>
Angelo Dounoucos .................................... 243,528(a) 5.60%
720 St. Davids Lane
Schenectady, NY 12309
Robert and Ardis James Foundation ................... 486,317(b) 11.31%
80 Ludlow Drive
Chappaqua, NY 10514
Cenith Partners L.P. ................................ 401,510(c) 9.35%
One Financial Center
Boston, MA 02110
All directors and executive officers as a group...... 1,395,859(d) 30.42%
</TABLE>
- ------------------------
(a) Includes 56,000 shares issuable upon exercise of stock options that are
exercisable within 60 days of March 3, 1998, 60,000 shares held jointly with
his wife and 7,300 shares held in his wife's IRA.
(b) Includes 3,381 shares held by Robert G. James, 43,400 shares held in
custodian accounts for his children, and 3,636 shares issuable upon exercise
of currently exercisable stock options held by Robert G. James.
(c) Includes 5,000 shares held by Stephen G. Rabinovitz, sole general partner of
Cenith Partners L.P.
(d) Includes 292,831 shares issuable upon exercise of stock options that are
exercisable within 60 days of March 3, 1998, and 728,200 shares for which
certain directors and executive officers are beneficial owners, but not the
sole beneficial owners, as set forth in note (b) on page I-4.
THE CURRENT BOARD OF DIRECTORS
The Company's Board of Directors is currently fixed at seven members, all of
whom are outside, non-employee directors except for Mr. Ardia. The Corporation's
Certificate of Incorporation divides the Board of Directors into three classes.
The members of each class of directors serve for staggered three year terms. The
following table sets forth information regarding each of the Company's current
directors.
<TABLE>
<CAPTION>
PERCENTAGE
COMMON STOCK OWNED OF
CURRENT PRINCIPAL DIRECTOR BENEFICIALLY AS OF OUTSTANDING
NAME AND AGE OCCUPATION SINCE MARCH 3, 1998(A)(C) SHARES
- ----------------------------- -------------------------------- ----------- --------------------- ------------
<S> <C> <C> <C> <C>
TERMS EXPIRING AT ANNUAL MEETING IN 2000
Walter W. Aker Former Corporate Secretary Dec 1968 189,377(b) 4.40%
Age 79 E/One Corporation
Lars G. Grenback President of Svensk May 1993 161,883(b) 3.77%
Age 54 Kommunalteknik AB
TERMS EXPIRING AT ANNUAL MEETING IN 1999:
John L. Allen Managing Partner May 1993 7,683 0.18%
Age 54 Heidrick & Struggles
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
COMMON STOCK OWNED OF
CURRENT PRINCIPAL DIRECTOR BENEFICIALLY AS OF OUTSTANDING
NAME AND AGE OCCUPATION SINCE MARCH 3, 1998(A)(C) SHARES
- ----------------------------- -------------------------------- ----------- --------------------- ------------
<S> <C> <C> <C> <C>
Stephen V. Ardia Chairman of the Board, May 1995 190,201(b) 4.29%
Age 56 President and CEO
E/One Company
Robert G. James Vice Chairman of Enterprise May 1984 486,317(b) 11.31%
Age 73 Asset Management, Inc.
TERMS EXPIRING AT ANNUAL MEETING IN 1998:
Angelo Dounoucos Former President and Chief May 1988 243,528(b) 5.60%
Age 65 Executive Officer
E/One Company (Retired
9/1/96)
Rolf E. Soderstrom Management Consultant May 1991 16,683(b) 0.39%
Age 65
</TABLE>
- ------------------------
(a) Includes all shares for which the named individual possessed sole or shared
voting or investment power, even if beneficial ownership has been disclaimed
as to any of these shares by the named individual.
(b) The listed amounts include shares as to which certain directors are
beneficial owners but not the sole beneficial owner as follows: Mr. Aker's
wife holds 15,000 shares; Mr. Ardia's wife holds 2,600 shares in an IRA; Mr.
Dounoucos's wife holds 7,300 shares in an IRA, and 60,000 shares jointly
with Mr. Dounoucos; Mr. Grenback is President of Svensk Kommunalteknik AB,
which holds 153,000 shares, and Mr. Grenback's wife holds 1,000 shares;
435,900 shares are held by the Robert and Ardis James Foundation and 43,400
shares are held in custodian accounts for Mr. James' children; and Mr.
Soderstrom holds 10,000 shares jointly with his wife.
(c) Includes the following shares which the individuals have the right to
acquire, within 60 days of the record date, through exercise of stock
options issued by the Company: Mr. Aker--3,636 shares, Mr. Allen--3,636
shares, Mr. Ardia--137,501 shares, Mr. Dounoucos--56,000 shares, Mr.
Grenback--3,636 shares, Mr. James--3,636 shares, Mr. Soderstrom--3,636
shares. These shares are included in the total number of shares outstanding
for the purpose of calculating the percentage ownership of each of the
foregoing individuals and of the group as a whole, but in calculating the
percentage of each individual, the number of outstanding shares does not
include options of other individuals listed in the table.
WALTER W. AKER, one of the original founders, has served as a Director since
1968 and as Vice President and Director of the Company from 1968 to 1975 and
1982 to 1993. He was Corporate Secretary from 1976 to 1993.
JOHN L. ALLEN is the Managing Partner for the Financial Services Practice,
North America for Heidrick & Struggles, Inc., a global executive search firm. He
is located in the New York City office and is also a Director of the firm. Prior
to his joining the firm in 1991, he had 24 years in banking including nearly
thirteen as a Chief Executive Officer of Amoskeag Bank Shares, Inc. and Key Bank
of Southeastern New York. He has a bachelor of science degree in business
administration from Rochester Institute of Technology, a master of public
administration from the Graduate School of Public Affairs, State University of
New York at Albany, and is a graduate of the Harvard Business School Program for
Management Development.
STEPHEN V. ARDIA received a master of business of administration degree from
Rutgers University and a bachelor of science degree from the U.S. Merchant
Marine Academy. After working with Goulds Pumps
I-4
<PAGE>
Inc. since 1965 he became their President in 1985. He retired in 1994, joining
Environment One Company as Chairman of the Board in May 1995, and being elected
President and CEO in September 1996. He presently serves as a member of the
Board of Directors of MaxTec Holdings of Dallas, Texas.
ANGELO DOUNOUCOS, one of the original founders, was Vice President and a
Director of Environment One Company from 1969 until 1976, when he resigned and
rejoined the Company in 1986 after eight years as a Project Marketing Manager at
the General Electric Company Research and Development Center. He returned to
Environment One as Vice President of Marketing and was elected President in 1989
and Chief Executive Officer in 1990. Mr. Dounoucos retired as President and
Chief Executive Officer in September 1996.
LARS G. GRENBACK received his bachelor of economics and business
administration degree from Uppsala University, Sweden in 1969 and his university
certificate in marketing, advertising and public relations in 1970. Since 1975,
he has been working with the Low Pressure Sewer System in the Scandinavian
countries, from 1980 as President of Svensk Kommunalteknik AB.
ROBERT G. JAMES received his bachelor of science degree from Northwestern
University, his masters degree in 1948 and his Ph.D. in Economics from the
Harvard Graduate School of Arts and Science in 1952. He was a Vice President of
Mobil Oil Company. He is the Vice Chairman of Enterprise Asset Management, Inc.
He is also a Certified Public Accountant.
ROLF E. SODERSTROM received his bachelor of science degree in electrical
engineering from Tufts University and his masters of science degree in
engineering management from Northeastern University. He has 35 years of line
management experience as Vice President of Motorola, Executive Vice President of
Codex Company and Assistant General Manager of the Systems Division of the
Foxboro Company. Mr. Soderstrom is President of the TCS Group, a management
consulting firm; Director of AG-BAG International Limited, a farm equipment
supplier; a Managing Director of The Nassau Group, a private investment banking
company; and a Director of Walpole Massachusetts Cooperative Bank.
BOARD COMMITTEES, COMPENSATION AND MEETINGS
The Board of Directors held six meetings during the year ended December 31,
1997. During this period, each Director attended at least 75% of the aggregate
of the total number of meetings of the Board and meetings of Board committees on
which he served. Among its standing committees, the Board has an Audit
Committee, Executive Committee, and Human Resource Committee. The Board does not
have a Nominating Committee.
The Audit Committee meets once a year and serves as the Board's direct
liaison with the Company's independent public auditors, reviewing and discussing
the auditors' annual internal control recommendations and making such other
inquiries and recommendations as it deems necessary. The Audit Committee
consists of Walter W. Aker, Stephen V. Ardia and Angelo Dounoucos.
The Executive Committee currently consists of John L. Allen, Stephen V.
Ardia, Angelo Dounoucos, and Robert G. James. The Executive Committee meets on
call and has authority to act on most matters during the intervals between Board
Meetings. The Executive Committee met four times during the 1997 fiscal year.
The Human Resource Committee met once during the 1997 fiscal year. The Human
Resource Committee reviews and makes recommendations to the Board regarding
compensation matters, adjustments in compensation for officers and employees,
and employee benefit matters. Currently, the Human Resource Committee consists
of John L. Allen, Stephen V. Ardia, Robert G. James, and Rolf E. Soderstrom.
As compensation for attendance at Board and Committee meetings, directors
who are not employees of the Company receive a stock grant on September 1st of
each year for a number of shares having an
I-5
<PAGE>
aggregate value of $10,000, based upon the fair market value of the Company's
common stock at the close of business on the date of grant. In addition,
non-employee directors receive a grant of stock options on the third Tuesday of
each December. Each such grant to a director relates to a total number of shares
of the Company's common stock having an aggregate fair market value, at the
close of business on the date of grant, equal to $10,000. The exercise price of
these options is fixed at the fair market value of the Company's common stock at
the close of business on the date of grant. The Board of Directors believes that
this equity-based system of compensation is beneficial in that it more closely
aligns the long-term interests of directors with those of the Company's
shareholders.
As a general rule, directors who are officers or employees of the Company
receive no compensation for attendance at Board or Committee meetings. The
Company does have a Letter of Understanding with Mr. Ardia dated May 22, 1995,
providing for Mr. Ardia to serve as Chairman of the Board. Pursuant to this
Letter of Understanding, Mr. Ardia received a grant of 10,000 shares of common
stock in 1997 having an aggregate market value (on the date of grant) of
$70,000. In addition, during 1997 Mr. Ardia received an option to purchase
25,000 shares of common stock at an exercise price of $7.00 per share, the
market value on the date of grant.
I-6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning compensation paid by
the Company to (i) all persons who served as chief executive officer of the
Company during 1997, and (ii) the other most highly compensated executive
officers whose annual salary and bonus during 1997 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
AWARDS
-------------------- OTHER ANNUAL OPTIONS/ ALL OTHER
NAME AND SALARY BONUS COMPENSATION SARS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($) (1)
- ----------------------------------------------- --------- --------- --------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen V. Ardia .............................. 1997 150,000 224,148 70,000 25,000 45,906
Chairman of the 1996 46,222 113,816 47,500 23,182 21,474
Board, President & 1995 0 0 45,000 101,818 0
CEO since 9/1/96
Mark E. Alexander ............................. 1997 91,250 81,817 6,000 16,758
Vice-President -- Marketing 1996 79,232 37,575 4,000 7,172
1995 60,000 35,906 6,000 16,000
David M. Doin ................................. 1997 79,100 59,103 5,000 12,107
Vice President -- Sales 1996 76,400 28,985 2,000 5,535
1995 76,400 20,000 5,000 0
George A. Earle ............................... 1997 77,851 48,030 4,000 9,534
Director of Engineering 1996 71,400 27,091 2,500 5,169
1995 71,400 10,685 6,000
Philip W. Welsh ............................... 1997 77,750 58,091 6,000 11,897
Vice President -- Finance, Chief Financial 1996 71,000 26,936 4,000 5,141
Officer, Treasurer 1995 69,769 3,610 6,000
</TABLE>
- ------------------------
(1) For 1997, represents the Corporation's matching contribution under the
Deferred Compensation Plan for Certain Executive Employees of
Environment/One Corporation.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides further information on grants of stock options
pursuant to the Company's Amended and Restated Stock Option Plan and 1996
Incentive Compensation Plan in fiscal year 1997, with respect to each of the
named executive officers in the Summary Compensation Table.
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE
- --------------------------------------------------------- ------------- --------------------- ------------- -----------
<S> <C> <C> <C> <C>
S. Ardia................................................. 25,000 30% $ 7.00 5/15/2007
M. Alexander............................................. 6,000 7% $ 6.50 3/20/2007
D. Doin.................................................. 5,000 6% $ 6.50 3/20/2007
G. Earle................................................. 4,000 5% $ 6.50 3/20/2007
P. Welsh................................................. 6,000 7% $ 6.50 3/20/2007
</TABLE>
I-7
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUE
The following table provides information for the named executive officers
with respect to (i) stock options exercised in fiscal year 1997, (ii) the number
of stock options held at the end of fiscal year 1997, and (iii) the value of
in-the-money stock options at the end of fiscal year 1997.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS AT
SHARES OPTIONS AT 12/31/97 12/31/97
ACQUIRED ON VALUE -------------------------- -----------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE
- ---------------------------------------- ----------------- ----------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
S. Ardia................................ -- -- 137,501 12,499 $ 939,549
M. Alexander............................ -- -- 12,200 15,800 93,421
D. Doin................................. -- -- 18,750 13,000 153,257
G. Earle................................ -- -- 15,100 11,400 122,275
P. Welsh................................ -- -- 11,000 15,000 83,571
<CAPTION>
NAME UNEXERCISABLE
- ---------------------------------------- -------------
<S> <C>
S. Ardia................................ $ 43,747
M. Alexander............................ 92,309
D. Doin................................. 78,467
G. Earle................................ 67,725
P. Welsh................................ 85,909
</TABLE>
EMPLOYMENT AGREEMENT AND CHANGE OF CONTROL AGREEMENT WITH MR. ARDIA
Pursuant to the Merger Agreement, the Company has entered into an Employment
Agreement with Mr. Ardia, providing for Mr. Ardia to serve as the Company's
President for a term of one year beginning on the date that the Offer is
consummated, after which his employment may be continued on an at-will basis by
mutual agreement of the parties. The agreement provides that Mr. Ardia will be
paid a base salary at the annual rate of $150,000 (which is consistent with his
current salary arrangements). He will be entitled to participate in the
Company's bonus plan through December 31, 1998, and in a similar bonus plan
during the three month period January 1, 1999 through March 28, 1999. Mr. Ardia
will also be entitled to participate in PCC's stock option and stock purchase
programs, in accordance with the terms of those programs. Mr. Ardia may
terminate the agreement upon thirty days' written notice to the Company any time
after the first three months of its effectiveness.
The Company also has a Change in Control Agreement with Mr. Ardia dated
January 5, 1998, providing for a payment to Mr. Ardia upon the occurrence of a
"Change of Control" (as defined in the agreement) equal to (i) the amount of his
annual base salary in effect on the date of the Change of Control, and (ii) an
amount equal to the sum of (A) the bonus payable to Mr. Ardia for the year
during which the Change of Control occurs, prorated through the date of the
Change of Control, plus (b) the average annual bonus paid to Mr. Ardia for the
two complete fiscal years that precede the fiscal year during which the Change
of Control occurs. In addition, the Company shall waive for twelve months
following his termination any required premium payment due from Mr. Ardia to
allow him to continue his coverage under the Company's group health plan. A
"Change of Control," as defined in the agreement, would occur upon the
Purchaser's acceptance for payment and payment for Shares pursuant to the Offer.
EMPLOYMENT AGREEMENTS WITH MESSRS. ALEXANDER, DOIN, EARLE AND WELSH
Pursuant to the Merger Agreement, the Company has also entered into
Employment Agreements with Mr. Alexander to serve as Vice President of
Marketing; Mr. Doin to serve as Vice President, General Manager; Mr. Earle to
serve as Director of Engineering; and Mr. Welsh to serve as Vice President of
Finance. These agreements provide for an annual salary of $95,000 for Mr.
Alexander, $90,000 for Mr. Doin, $80,000 for Mr. Earle, and $80,000 for Mr.
Welsh, respectively (which are consistent with their current salary
arrangements). Each of the foregoing employees will be entitled to participate
in the Company's bonus plan through December 31, 1998, and in a similar bonus
program for the three month period January 1, 1999 through March 28, 1999.
Thereafter, any bonus program provided will be consistent with bonus programs
provided by PCC to similarly situated employees. These employees will also be
entitled to participate in PCC's stock option and stock purchase programs, in
accordance with the terms of those programs.
I-8
<PAGE>
The agreements, which may be terminated by either party upon thirty days'
written notice, provide for a severance benefit equal to the following: (i) if
the employee is terminated before the first anniversary of the effective date of
the agreement, the remaining balance of the employee's base salary for the
portion of year from the date of termination until the first anniversary of the
effective date, plus 100% of any calendar year 1998 bonus to which the employee
would have been entitled had he or she remained employed by the Company through
December 31, 1998, plus the Severance Payment (as defined below); or (ii) if the
employee is terminated after the first anniversary of the effective date of the
agreement and prior to the second anniversary of the effective date, ten months'
pay at the employee's then current salary level (the "Severance Payment"). In
addition, the Company shall waive for the remainder of the unexpired term of the
agreement any required premium payment due from the employee to allow the
employee to continue his or her coverage under the Company's group health plan.
The employee is ineligible for the payments described in this paragraph if he or
she voluntarily resigns or withdraws from employment, is terminated for "cause"
(as defined in the agreement), terminates employment as a result of the
expiration of the term of the agreement, breaches certain confidentiality or
non-competition provisions in the agreement, or accepts reasonably comparable
employment with an affiliate of PCC.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Rolf E. Soderstom, who is a member of the Company's Board of Directors, is
also a managing director of The Nassau Group, Inc. ("Nassau"), an investment
banking firm. Nassau has been retained by the Board of Directors to act as a
financial advisor to the Company with respect to the Offer and the Merger.
Pursuant to an engagement letter with Nassau, the Company (i) has paid Nassau a
monthly cash retainer of $5,000 beginning on September 15, 1997 and continuing
on the 15th day of each succeeding month during the period of Nassau's
engagement; (ii) has issued to Nassau a warrant to purchase 10,000 Shares
exercisable within three years of September 22, 1997, the date of the engagement
letter, at an exercise price equal to the closing price of a Share on September
22, 1997 ($9.125); and (iii) will pay a transaction fee to Nassau in the amount
of 1.1% of the aggregate consideration in a transaction resulting in a sale of
the Company (approximately $804,000 based upon the $15.25 per Share Offer Price
and the existence of certain long-term indebtedness of the Company) less 50% of
the total cash retainer previously paid (the "Transaction Fee"). The Transaction
Fee is contingent upon closing of such a transaction. The Company has also
agreed to indemnify Nassau and certain related parties against certain
liabilities, including liabilities under the federal securities laws.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and holders of more than 10% of the Company's common stock
(collectively, "Reporting Persons") to file with the SEC initial reports of
ownership and reports of changes in ownership of the Company's common stock.
Such persons are required by regulations of the SEC to furnish the Company with
copies of all such filings. Based on its review of the copies of such filings
received by it with respect to the fiscal year ended December 31, 1997, the
Company believes that all Reporting Persons complied with all Section 16(a)
filing requirements in the fiscal year ended December 31, 1997, except for the
following: Mr. Dounoucos filed a late Form 5 with respect to one transaction and
failed to include on his Form 5 an additional transaction, each of which
occurred in 1997 under stock-based compensation plans maintained by the Company
for non-employee directors; Mr. Grenback did not file a required Form 4 with
respect to three transactions occurring in 1997; and each of Messrs. Allen,
Aker, Grenback, James and Soderstrom failed to file a Form 5 with respect to two
transactions under stock-based compensation plans maintained by the Company for
non-employee directors.
I-9
<PAGE>
ANNEX II
MILLER, JOHNSON & KUEHN, INCORPORATED
INVESTMENT SECURITIES
February 23, 1998
Board of Directors
Environment One Corporation
2773 Balltown Road
Niskayuna, NY 12309-1090
Members of the Board,
You have requested our opinion as to whether the consideration to be
received by the shareholders of the Company pursuant to the acquisition (the
"Transaction") of all the issued and outstanding shares of capital stock of
Environment One Corp. (the "Company") on a fully diluted basis ("Common Stock")
by Precision Castpart Corp. (the "Acquiror") is fair, from a financial point of
view.
We are not opining as to any other transactions or contractual arrangements
previously entered into, or to be entered into (whether or not in connection
with the Transaction) between the Company, or its Board of Directors or
management, on the one hand, and the Acquiror (or any of its affiliates) or any
other person, on the other, including without limitation, any agreements entered
into and the payments made in connection therewith. Additionally, our opinion
relates solely to whether the consideration is fair, from a financial point of
view, to the shareholders of the Company and we have not been requested to opine
to, and this opinion does not in any manner address, the Company's underlying
decision to proceed with or effect the Transaction.
We understand that (i) the purchase price per share to be paid by the
Acquiror for the Common Stock will be $15.25 in cash; (ii) the aggregate
consideration to be received by the shareholders of the Company in connection
with the Transaction is $72,014,297, and; (iii) the Acquiror will attempt to
purchase the Common Stock from the shareholders of the Company after announcing
a tender offer to the shareholders for the consideration mentioned in (i) above.
As a customary part of our investment banking business, we are engaged in
the valuation of businesses and their securities in connection with mergers and
acquisitions, underwriting and secondary distributions of securities, private
placements, and valuations for estate, corporate and other purposes. For our
services in rendering this opinion, the Company will pay us a fee and indemnify
us against certain liabilities. We have never managed a public offering of stock
for either the Company or the Acquiror, have not acted as a financial advisor in
the Transaction for either the Company or the Acquiror, do not provide research
coverage on the Company or the Acquiror and, in the ordinary course of our
business, do not make a market in the stock of either the Company or the
Acquiror.
In arriving at our opinion, we have undertaken such review, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
As the Transaction is to provide the shareholders of the Company with cash and
not securities of any kind from the Acquiror, we have limited our evaluation to
a review of the business and financial condition of the Company. Among other
things, we have reviewed, but have not limited our review to: (i) the Letter of
Intent, dated January 21, 1998, signed by both the Company and the Acquiror;
(ii) a draft of the Agreement and Plan of Merger dated February 22, 1998,
between the Acquiror and the Company, which we assume will conform in all
substantive respects to the definitive executed agreement; (iii) the Descriptive
Memorandum dated November 1997 provided by The
II-1
<PAGE>
Nassau Group, Inc. (the "Memorandum") and; (iv) the Project Pump Status Report,
dated December 16, 1997, provided by The Nassau Group, Inc. In addition we have
(i) conducted interviews with management of the Company; (ii) toured its
facilities; (iii) reviewed and discussed with Company management the three year
financial projections included in the Memorandum, which, on our request, has
been augmented by the Company to include a balance sheet and statement of cash
flows; (iv) reviewed financial and other publicly available information with
respect to the Company including annual reports, Forms 10-KSB and 10-QSB and
proxy statements; (v) consulted government and industry economic statistics that
could have a direct bearing on the company; and (vi) examined securities data on
comparable mergers and acquisitions of similar public companies, to the extent
available.
In conducting our analysis and arriving at the opinion contained herein, (i)
we have relied upon and assumed the accuracy and completeness of the financial
and other information (including the financial statements and projections of the
Company) provided to us and prepared by The Nassau Group, Inc. and the Company's
senior management and their representations relating thereto, and we have not
independently verified any such information or representations; (ii) with
respect to the Company's projections, budgets and current estimates, we have
assumed based upon representations of the Company's senior management that they
have been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the Company's senior management as to the expected
future performance of the Company; (iii) we have relied upon and assumed the
accuracy and completeness of the information provided by, and the
representations of, the Company's senior management in respect of which our
understandings set forth on this opinion are based (including, without
limitation, the representations of the Company's senior management that the
final terms and conditions of the operative documents referred to in the
preceding paragraph will, in all material respects, reflect the terms and
conditions set forth in the drafts of such documents that were provided to us);
(iv) we do not assume any responsibility for the information or current
estimates provided to us and we have further relied upon the assurance of the
Company's senior management that they are unaware of any facts that would make
the information provided to us incomplete or misleading; (v) we have not
performed or obtained any independent appraisals or valuations of specific
assets of the Company and we express no opinion as to its liquidation value;
(vi) our analysis is necessarily based on economic, monetary, market and other
conditions existing and which can be evaluated as of the date of our opinion;
however such conditions are subject to rapid and unpredictable change; and (vii)
we have not been authorized by the Company or the Board to solicit, nor have we
solicited, offers for transactions alternative to the Transaction, nor have we
been asked to advise the Company or the Board as to financial alternatives to
the Transaction.
Finally, in rendering our opinion, we have considered the current price per
share of the Company's Common Stock and current market conditions. We have also
examined the trading volume and liquidity of the Company's Common Stock and its
current price per share in historical context of the last four years.
This opinion in intended solely for the benefit and use of the Board as one
element in its consideration of the proposed Transaction. This opinion is not to
be used for any other purpose or reproduced, disseminated, quoted or referred to
at any time, in whole or in part, in any manner, or for any purpose, without our
prior written consent.
Based upon and subject to the foregoing, and upon such other factors as we
consider relevant, it is our opinion that the consideration to be received by
the shareholders of the Company pursuant to the Transaction is fair, from a
financial point of view, to the shareholders of the Company.
Very truly yours,
Miller, Johnson & Kuehn, Inc.
II-2
<PAGE>
AGREEMENT AND PLAN OF MERGER
AMONG
PRECISION CASTPARTS CORP.,
ENVIRONMENT ONE CORPORATION,
AND
EOC ACQUISITION CORPORATION
February 24, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
THE OFFER............................................................... 2
1.1 THE OFFER......................................................... 2
1.2 ACTIONS BY E/ONE.................................................. 3
1.3 DESIGNATION OF DIRECTORS OF E/ONE FOLLOWING COMPLETION OF OFFER... 4
ARTICLE 2
THE MERGER.............................................................. 5
2.1 THE MERGER........................................................ 5
2.2 STOCKHOLDERS' MEETING; PROXY STATEMENT............................ 5
2.3 MERGER WITHOUT STOCKHOLDERS' MEETING.............................. 6
2.4 EFFECTIVE TIME.................................................... 6
2.5 EFFECT OF MERGER.................................................. 6
2.6 ARTICLES OF INCORPORATION AND BYLAWS.............................. 6
2.7 DIRECTORS AND OFFICERS............................................ 7
2.8 CLOSING........................................................... 7
ARTICLE 3
MERGER CONSIDERATION.................................................... 7
3.1 EFFECT OF MERGER ON CAPITAL STOCK OF CONSTITUENT CORPORATIONS..... 7
3.1.1 CONVERSION OF E/ONE SHARES.................................. 7
3.1.2 CANCELLATION OF TREASURY STOCK AND SHARES OWNED BY
PCC PARTIES................................................. 7
3.1.3 CAPITAL STOCK OF SUB........................................ 7
3.1.4 WITHHOLDING TAX............................................. 7
3.1.5 SHARES OF DISSENTING STOCKHOLDERS........................... 8
3.2 EXCHANGE OF CERTIFICATES.......................................... 8
3.2.1 PAYING AGENT................................................ 8
3.2.2 EXCHANGE PROCEDURE.......................................... 8
3.2.3 NO FURTHER OWNERSHIP RIGHTS IN E/ONE COMMON STOCK........... 9
3.2.4 NO LIABILITY................................................ 9
3.2.5 LOST, STOLEN, OR DESTROYED CERTIFICATES..................... 9
3.3 E/ONE STOCK OPTIONS AND WARRANT................................... 9
</TABLE>
II
<PAGE>
<TABLE>
<S> <C>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF E/ONE.............................. 10
4.1 CORPORATE EXISTENCE AND AUTHORITY.............................. 10
4.2 NO ADVERSE CONSEQUENCES........................................ 11
4.3 CAPITALIZATION................................................. 11
4.4 SUBSIDIARIES AND JOINT VENTURES................................ 12
4.5 SEC REPORTS AND FINANCIAL STATEMENTS........................... 12
4.6 INFORMATION SUPPLIED........................................... 12
4.7 LEGAL PROCEEDINGS.............................................. 13
4.8 CONTRACTS AND ARRANGEMENTS..................................... 13
4.9 REAL PROPERTY; MATERIAL ASSETS................................. 13
4.10 LEASES......................................................... 14
4.11 STATUS OF CONTRACTS AND LEASES................................. 14
4.12 COMPLIANCE WITH LAWS........................................... 15
4.13 ENVIRONMENTAL MATTERS.......................................... 15
4.13.1 DEFINITIONS............................................ 15
4.13.2 COMPLIANCE............................................. 15
4.13.3 HAZARDOUS SUBSTANCES................................... 15
4.13.4 UNDERGROUND STORAGE TANKS.............................. 16
4.13.5 ENVIRONMENTAL RECORDS.................................. 16
4.14 TAX MATTERS.................................................... 16
4.14.1 RETURNS................................................ 16
4.14.2 TAXES PAID OR RESERVED................................. 17
4.14.3 LOSS CARRYFORWARDS; INVESTMENT TAX CREDIT CARRYFORWARDS 17
4.14.4 DEFINITION............................................. 17
4.14.5 MISCELLANEOUS.......................................... 17
4.14.6 TAX SHARING AGREEMENTS................................. 17
4.15 EMPLOYEES AND LABOR RELATIONS MATTERS.......................... 17
4.16 EMPLOYEE BENEFITS.............................................. 19
4.17 ABSENCE OF CERTAIN CHANGES OR EVENTS........................... 20
4.18 UNDISCLOSED LIABILITIES........................................ 21
4.19 INSURANCE...................................................... 21
4.20 INTELLECTUAL PROPERTY.......................................... 21
4.21 GUARANTIES; POWERS OF ATTORNEY................................. 22
4.22 BROKERS........................................................ 22
4.23 DEFERRED COMPENSATION OBLIGATIONS.............................. 22
4.24 PRODUCT WARRANTIES............................................. 22
4.25 DISTRIBUTORS AND SUPPLIERS..................................... 23
4.26 DISTRIBUTORS................................................... 23
4.27 RECORDS........................................................ 23
4.28 AGREEMENTS WITH SERVICE PROVIDERS.............................. 23
4.29 EMPLOYMENT AGREEMENTS.......................................... 23
</TABLE>
III
<PAGE>
<TABLE>
<S> <C>
4.30 DISCLOSURE..................................................... 23
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PCC................................ 23
5.1 CORPORATE EXISTENCE AND AUTHORITY.............................. 23
5.2 CORPORATE EXISTENCE AND AUTHORITY OF SUB....................... 24
5.3 NO ADVERSE CONSEQUENCES........................................ 24
5.4 LEGAL PROCEEDINGS.............................................. 25
5.5 OFFER DOCUMENTS; PROXY STATEMENT............................... 25
5.6 FINANCING...................................................... 25
ARTICLE 6
COVENANTS............................................................ 25
6.1 CONTINUATION OF BUSINESS....................................... 25
6.2 NO SOLICITATION................................................ 28
6.3 ACCESS......................................................... 30
6.4 HART SCOTT RODINO.............................................. 30
6.5 OTHER GOVERNMENT CONSENTS...................................... 30
6.6 BEST EFFORTS; NO INCONSISTENT ACTION........................... 30
6.7 CHANGED CIRCUMSTANCES.......................................... 31
6.8 FEES AND EXPENSES.............................................. 31
6.9 PRESS RELEASES................................................. 31
ARTICLE 7
CONDITIONS TO THE PARTIES' OBLIGATIONS
TO CONSUMMATE THE MERGER............................................. 31
7.1 GOVERNMENTAL AUTHORIZATIONS.................................... 31
7.2 E/ONE STOCKHOLDER APPROVAL..................................... 31
7.3 NO PROHIBITIONS................................................ 32
7.4 NO SUITS....................................................... 32
7.5 OFFER.......................................................... 32
ARTICLE 8
TERMINATION.......................................................... 32
8.1 TERMINATION BY PCC AND/OR E/ONE................................ 32
8.1.1 MUTUAL CONSENT........................................... 32
8.1.2 INJUNCTION OR RESTRAINT.................................. 32
8.1.3 FAILURE OF OFFER......................................... 32
8.2 TERMINATION BY PCC............................................. 32
</TABLE>
IV
<PAGE>
<TABLE>
<S> <C>
8.2.1 BREACH BY E/ONE.......................................... 32
8.2.2 WITHDRAWAL OF E/ONE BOARD APPROVAL....................... 33
8.3 TERMINATION BY E/ONE........................................... 33
8.3.1 BREACH BY PCC OR SUB..................................... 33
8.3.2 LEGAL REQUIREMENTS OF DIRECTORS.......................... 33
8.4 PROCEDURE; EFFECT OF TERMINATION............................... 33
8.5 BREAK-UP FEES.................................................. 33
8.5.1 WRONGFUL TERMINATION BY PCC.............................. 33
8.5.2 WRONGFUL TERMINATION BY E/ONE............................ 34
8.5.3 TAKEOVER PROPOSAL........................................ 34
8.5.4 FAILURE OF CONDITION..................................... 34
8.5.5 FEE DUE; EXCLUSIVE REMEDY................................ 34
ARTICLE 9
GENERAL PROVISIONS................................................... 34
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS......... 34
9.2 FURTHER ACTION................................................. 34
9.3 ENTIRE AGREEMENT............................................... 34
9.4 ASSIGNMENT..................................................... 34
9.5 BINDING EFFECT; NO THIRD PARTY BENEFIT......................... 35
9.6 WAIVER......................................................... 35
9.7 GOVERNING LAW.................................................. 35
9.8 SEVERABILITY................................................... 35
9.9 TIME OF ESSENCE................................................ 35
9.10 COUNTERPARTS................................................... 35
9.11 AMENDMENTS..................................................... 35
9.12 AUTHORITY...................................................... 36
9.13 STANDSTILL..................................................... 36
9.14 NOTICES........................................................ 36
ARTICLE 10
DEFINITIONS...........................................................38
</TABLE>
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER made as of February 24, 1998 (the
Agreement) is among Precision Castparts Corp., an Oregon corporation (PCC),
Environment One Corporation, a New York corporation (E/One), and EOC
Acquisition Corporation, a New York corporation and a direct or indirect
subsidiary of PCC (Sub).
RECITALS
A. The Boards of Directors of PCC, Sub, and E/One have determined
that it is advisable and in the best interests of their respective
corporations and stockholders for PCC to acquire E/One on the terms and
conditions set forth in this Agreement.
B. In furtherance of such the acquisition is proposed that (i) Sub
conduct a cash tender offer pursuant to the terms and conditions of this
Agreement for all of the outstanding shares of Common Stock, $.10 par value
per share, of E/One (each, a Share, and collectively, the Shares) (such cash
tender offer, as described in more detail in Article 1 below, the Offer) for
$15.25 per Share net to the seller in cash, without interest thereon, and
(ii) that upon consummation of the Offer, Sub merge with and into E/One
pursuant to the applicable provisions of the New York Business Corporation
Law (the NYBCL) and the terms and conditions of this Agreement (such merger,
as described in more detail in Article 2 below, the Merger), pursuant to
which E/One would be the surviving corporation and a wholly-owned subsidiary
of PCC.
C. The boards of directors of PCC and Sub have each approved the
making of the Offer and the transactions relating thereto.
D. The board of directors of E/One (the E/One Board) has approved
the making of the Offer and resolved, subject to the terms and conditions
contained herein, to recommend that holders of Shares tender their Shares
pursuant to the Offer.
E. The boards of directors of PCC, Sub and E/One have each approved
the merger (the Merger) of Sub with and into E/One in accordance with
applicable New York law following the consummation of the Offer and upon the
terms and subject to the conditions set forth herein.
F. Walter W. Aker, John L. Allen, Stephen V. Ardia, Angello
Dounoucos, Lars G. Grenback, Robert G. James, Rolf E. Soderstrom, Mark E.
Alexander, David M. Doin, Brian Buchinski, George A. Earle III, Kathleen A.
Parry, George A. Vorsheim Jr. and Philip W. Welsh, stockholders of E/One,
have agreed to tender all of their E/One Common Stock pursuant to the Offer.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained in this Agreement,
the parties agree as follows:
ARTICLE 1
THE OFFER
1.1 THE OFFER.
1.1.1 Provided that this Agreement has not been terminated in
accordance with Article 8 and provided that none of the conditions and events
set forth in ANNEX A to this Agreement (the Offer Conditions) have occurred
(unless such event shall have been waived by Sub), as promptly as practicable
but in no event later than five (5) business days after the public
announcement of Sub's intention to commence the Offer, PCC shall cause Sub to
commence (within the meaning of Rule 14d-2(a) under the Securities Exchange
Act of 1934, as amended (the Exchange Act)) a cash tender offer to purchase
all of the Shares for $15.25 per Share, net to the seller in cash (the Offer
Price). The terms of the Offer will provide that, subject to Sub's right to
extend the Offer pursuant to Section 1.1.2 below, the Offer will expire on
the date that is twenty (20) business days from the date the Offer is
commenced (such date, or the date through which the Offer may be extended
pursuant to Section 1.1.2 below, the Expiration Date).
1.1.2 Sub reserves the right in its sole discretion to change or
waive any condition, to increase the Offer Price, and to make any other
changes in the terms and conditions of the Offer; PROVIDED, HOWEVER, that Sub
may not without the prior written consent of E/One, (i) decrease the Offer
Price, (ii) change or waive the Minimum Condition, (iii) decrease the number
of Shares sought pursuant to the Offer, (iv) impose conditions in addition to
the Offer Conditions or (v) otherwise amend the Offer in any manner adverse
to E/One's stockholders. Notwithstanding the foregoing, Sub may, without
E/One's consent (x) extend the Offer, if at such original Expiration Date the
Minimum Condition (as defined below) or any of the Offer Conditions have not
been satisfied or waived; (y) extend the Offer for any period required by any
rule, regulation, interpretation or position of the Securities and Exchange
Commission (the SEC); or (z) extend the Offer for no more than ten (10)
business days beyond the original Expiration Date contemplated by
Section 1.1.1 in the event that the Offer Conditions have been satisfied but
less than ninety percent (90%) of the Shares have been tendered pursuant to
the Offer.
1.1.3 On the date the Offer is commenced, Sub will file with the
SEC a Tender Offer Statement on Schedule 14D-1 (together with all amendments
and supplements thereto, the Schedule 14D-1) with respect to the Offer.
The Schedule 14D-1 will contain as an exhibit or incorporate by reference the
Offer to Purchase (or portions thereof) and form of the related letter
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of transmittal and summary advertisement to be used in connection with the
Offer (the Schedule 14D-1 and such other documents, together with any
supplements thereto or amendments thereof, being referred to herein
collectively as the Offer Documents). E/One will provide to Sub in writing
all information regarding E/One necessary for the preparation of the Offer
Documents, and E/One and its counsel will be given a reasonable opportunity
to review and comment on the Offer Documents before they are filed with the
SEC and distributed to E/One's stockholders. Sub will provide to E/One and
its counsel any comments that Sub receives (directly or through its counsel)
from the SEC or its staff with respect to the Offer Documents promptly after
receiving such comments. Sub and E/One will each promptly correct any
information provided by it for use in the Offer Documents if and to the
extent that it has become false or misleading in any material respect, and
Sub will promptly amend and supplement the Offer Documents if and to the
extent that they have become false or misleading in any material respect and
will promptly cause the Offer Documents as so amended and supplemented to be
filed with the SEC and to be disseminated to E/One's stockholders, in each
case as and to the extent required by applicable federal securities laws.
1.1.4 The obligation of Sub to accept for payment and pay for
Shares tendered pursuant to the Offer shall be subject only to (i) the
condition (the Minimum Condition) that at least the number of Shares that
constitute two-thirds of the then outstanding Shares on a fully diluted basis
(including, without limitation, all Shares issuable upon the conversion of
any convertible securities or upon the exercise of any options, warrants or
rights, whether or not vested or exercisable) shall have been validly
tendered and not withdrawn prior to the expiration of the Offer and (ii) the
satisfaction or waiver of the other conditions set forth in Annex A (the
Offer Conditions). Subject only to the Minimum Condition and the Offer
Conditions, in accordance with the terms of the Offer, Sub will, and PCC will
cause Sub to, accept for payment all Shares validly tendered and not
withdrawn (the Tendered Shares) as soon as legally permissible after
commencement of the Offer, and pay for all Tendered Shares as promptly as
practicable thereafter. PCC shall provide or cause to be provided to Sub on
a timely basis the funds necessary to accept for payment, and pay for, any
Shares that Sub becomes obligated to accept for payment, and pay for,
pursuant to the Offer.
1.2 ACTIONS BY E/ONE.
1.2.1 E/One hereby approves of and consents to the Offer and
represents and warrants that the E/One Board, at a meeting duly called and
held on February 24, 1998 unanimously has (i) determined that this Agreement
and the transactions contemplated hereby, including the Offer, are fair to
and in the best interests of E/One's stockholders, (ii) approved this
Agreement and the transactions contemplated hereby, including the Offer, and
(iii) resolved to recommend that the stockholders of E/One accept the Offer,
tender their Shares to Sub and, if required by applicable law, approve the
transactions contemplated hereby. E/One has been advised by each of its
directors that each such person intends to tender all Shares, if any, that he
or she owns pursuant to the Offer. E/One further represents and warrants
that Miller, Johnson & Kuehn, Inc. has delivered to the E/One Board its
written opinion dated February 24, 1998 to
3
<PAGE>
the effect that, as of the date of such opinion, the amount of the Offer
Price and the Merger Consideration (as defined in Section 3.1.1 below) are
fair to E/One's stockholders from a financial point of view. Miller, Johnson
& Kuehn, Inc. has agreed to permit the inclusion of its fairness opinion or
references thereto in the Offer Documents and the Schedule 14D-9 referred to
below and the Proxy Statement referred to in Section 2.2.1 (subject to its
review and approval of the description of the fairness opinion), and E/One
consents to the inclusion in the Offer Documents of the recommendations of
the E/One Board described in this Section 1.2.
1.2.2 As soon as practicable following commencement of the Offer,
E/One will file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 pertaining to the Offer (together with any amendments or
supplements thereto, the Schedule 14D-9) containing the E/One Board's
recommendation described in Section 1.2.1 and will promptly disseminate the
Schedule 14D-9 to E/One's stockholders to the extent required by Rule 14d-9
promulgated under the Securities Exchange Act of 1934, as amended (the
Exchange Act) and any other applicable federal securities law. Sub and its
counsel will be given a reasonable opportunity to review and comment on the
Schedule 14D-9 before it is filed with the SEC and disseminated to E/One's
stockholders. E/One will provide to PCC and Sub and their counsel any
comments that E/One receives (directly or through its counsel) from the SEC
or its staff with respect to the Schedule 14D-9 promptly after receiving such
comments. E/One, PCC and Sub agree to correct promptly any information
provided by any of them for use in the Schedule 14D-9 that shall have become
false or misleading, and E/One further agrees to take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC and
disseminated to holders of Shares. In each case, PCC and Sub and their
counsel shall be given an opportunity to review and comment on the Schedule
14D-9 and any amendments thereto prior to the filing thereof with the SEC.
1.2.3 E/One will promptly furnish Sub with mailing labels,
security position listings and any available listing or computer files
containing the names and addresses of the record holders of the Shares as of
a recent date and furnish Sub with such additional information and assistance
(including, without limitation, updated lists of stockholders, mailing labels
and lists of securities positions) as Sub or its agents may reasonably
request for the purpose of communicating the Offer to the record and
beneficial holders of Shares. Subject to the requirements of applicable law,
and except for such steps as are necessary to disseminate the Offer Documents
and any other documents necessary to consummate the Merger, PCC and Sub and
their agents will hold in confidence the information contained in any such
labels, listings, and files, will use such information only in connection
with the Offer and the Merger, and if this Agreement is terminated, will upon
E/One's request deliver and will use their best efforts to cause their agents
to deliver to E/One all copies of and any extracts or summaries from such
information then in their possession and control.
1.3 DESIGNATION OF DIRECTORS OF E/ONE FOLLOWING COMPLETION OF OFFER.
1.3.1 Promptly upon Sub's consummation of the Offer, Sub will be
entitled, subject to compliance with Section 14(f) of the Exchange Act, to
designate that number (rounded
4
<PAGE>
up to the next greatest whole number) of directors on the E/One Board that is
equal to the product of the total number of directors on the E/One Board
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Sub or any affiliate of Sub bears to the number of Shares
outstanding. E/One will cause (i) each committee of the E/One Board,
(ii) the board of directors of each subsidiary of E/One, and (iii) each
committee of such board to include persons designated by Sub constituting the
same percentage of each such committee or board as Sub's designees are of the
E/One Board. E/One will, upon request by Sub, promptly increase the size of
the E/One Board or exercise its best efforts to secure the resignations of
such number of directors as is necessary to enable Sub designees to be
elected to the E/One Board and to cause Sub's designees to be so elected.
1.3.2 Subject to applicable law, E/One will promptly take all
action necessary pursuant to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder in order to fulfill its obligations under this
Section 1.3 and will include in the Schedule 14D-9 disseminated to
stockholders promptly after the commencement of the Offer (or an amendment
thereof or an information statement pursuant to Rule 14f-1 if Sub has not
theretofore designated directors) such information with respect to E/One and
its officers and directors as is required under Section 14(f) and Rule 14f-1
in order to fulfill its obligations under this Section 1.3. PCC and Sub will
supply to E/One and be solely responsible for any information with respect to
itself and its nominees, officers, directors and affiliates required by
Section 14(f) and Rule 14f-1.
ARTICLE 2
THE MERGER
2.1 THE MERGER. Pursuant to the NYBCL, and subject to and in
accordance with the terms and conditions of this Agreement, Sub will be
merged with and into E/One at the Effective Time, as defined in Section 2.4.
2.2 STOCKHOLDERS' MEETING; PROXY STATEMENT.
2.2.1 If required by applicable law in order to consummate the
Merger, E/One will, in accordance with New York law and E/One's Articles of
Incorporation and Bylaws, call and hold a special meeting of its stockholders
(the Stockholders' Meeting) as soon as practicable following the date on
which the Offer is consummated for the purpose of approving the Merger.
Subject to Section 6.2.2, the E/One Board will recommend to its stockholders
that the Merger be approved, and E/One will use its best efforts to solicit
from its stockholders proxies in favor of the approval of the Merger
(Stockholder Approval), and will take all other action necessary or
advisable to secure the vote or consent of stockholders required by New York
law to obtain such consents.
2.2.2 E/One will, as soon as practicable following the
consummation of the Offer, prepare and file a preliminary Proxy Statement to
solicit Stockholder Approval (the Proxy
5
<PAGE>
Statement) with the SEC and will use its best efforts to respond to any
comments of the SEC or its staff and to cause the Proxy Statement, as
finalized, to be mailed to E/One's stockholders as promptly as practicable
after responding to all such comments to the satisfaction of the staff. Sub
and PCC will provide to E/One in writing all information regarding Sub and
PCC necessary for the preparation of the Proxy Statement. E/One will notify
PCC promptly of the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff for amendments or supplements to the
Proxy Statement or for additional information and will supply PCC with copies
of all correspondence between E/One or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time before the Stockholders' Meeting
there occurs any event that should be set forth in an amendment or supplement
to the Proxy Statement, E/One will promptly prepare and mail to its
stockholders such an amendment or supplement. E/One will not mail any Proxy
Statement, or any amendment or supplement thereto, to which PCC reasonably
objects. The Proxy Statement will include the E/One Board's recommendation
that E/One's stockholders grant proxies to approve the Merger; provided,
however, that such recommendation may be withdrawn, modified, or amended if
and to the extent the E/One Board determines, in good faith after
consultation with outside legal counsel, that a failure to do so would be
contrary to its fiduciary obligations.
2.3 MERGER WITHOUT STOCKHOLDERS' MEETING. Notwithstanding any other
provision in this Agreement, if PCC, Sub, or any affiliate of either of them
beneficially owns at least 90% of the outstanding Shares, the parties agree
to take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the Expiration Date, but in no event
later than ten business days thereafter, without a meeting of stockholders of
E/One in accordance with Section 905 of the NYBCL.
2.4 EFFECTIVE TIME. As soon as practicable after satisfaction or
waiver of all of the conditions to the Merger set forth in Article 7 of this
Agreement, a Certificate of Merger or Consolidation prepared in accordance
with Section 901 and 904 of the NYBCL and any other applicable provisions of
the NYBCL (the Certificate of Merger) will be executed and filed with the
Secretary of State of the State of New York. The Merger will be effective on
the date and at the time (the Effective Time) when the Certificate of
Merger has been accepted for filing by the Secretary of State of the State of
New York. The day during which the Effective Time occurs is referred to
herein as the Effective Date.
2.5 EFFECT OF MERGER. At the Effective Time, Sub will be merged with
and into E/One in the manner and with the effect provided by the NYBCL, the
separate corporate existence of Sub will cease and thereupon Sub and E/One
will be a single corporation (the Surviving Corporation) and will continue
to be governed by the laws of the State of New York.
2.6 ARTICLES OF INCORPORATION AND BYLAWS. The Articles of
Incorporation and Bylaws of E/One as in effect at the Effective Time will be
the Articles of Incorporation and Bylaws of the Surviving Corporation, until
each has been duly amended in accordance with the terms thereof and of the
NYBCL.
6
<PAGE>
2.7 DIRECTORS AND OFFICERS. The directors of Sub at the Effective
Time will be the directors of the Surviving Corporation, until their
respective successors have been duly elected or appointed and qualified. The
officers of Sub at the Effective Time will be the officers of the Surviving
Corporation and will hold office from the Effective Time in accordance with
the Bylaws of the Surviving Corporation.
2.8 CLOSING. Unless this Agreement has been terminated and the
transactions contemplated by it have been abandoned pursuant to Article 8,
the closing of the Merger (the Closing) will take place at the offices of
Stoel Rives LLP, 900 SW Fifth Avenue, Suite 2300, Portland, Oregon 97204, at
10:00 a.m. on the date when the last of the conditions set forth in Article 7
hereof (other than conditions that by their terms are to occur at Closing)
will have been fulfilled or waived or on such other date as PCC and E/One may
agree (the Closing Date).
ARTICLE 3
MERGER CONSIDERATION
3.1 EFFECT OF MERGER ON CAPITAL STOCK OF CONSTITUENT CORPORATIONS.
As of the Effective Time, by virtue of the Merger and without any action on
the part of the holder of any Shares or any shares of capital stock of Sub:
3.1.1 CONVERSION OF E/ONE SHARES. Subject to Section 3.1.5, each
Share issued and outstanding immediately prior to the Effective Time (other
than Shares to be canceled in accordance with Section 3.1.2) will be
converted into the right to receive from the surviving corporation a cash
payment in the amount of $15.25 (the Merger Consideration). As of the
Effective Time, all the Shares will no longer be outstanding and will
automatically be canceled and retired and will cease to exist, and each
holder of a certificate representing any such Shares will cease to have any
rights with respect thereto, except the right to receive the Merger
Consideration, without interest.
3.1.2 CANCELLATION OF TREASURY STOCK AND SHARES OWNED BY PCC
PARTIES. Each Share that is held in the treasury of E/One and any Shares
owned by PCC or Sub immediately before the conversion pursuant to
Section 3.1.1 will automatically be canceled and retired and will cease to
exist, and no consideration will be delivered in exchange therefor.
3.1.3 CAPITAL STOCK OF SUB. Each issued and outstanding share of
capital stock of Sub will be converted into and become one fully paid and
nonassessable share of E/One Common Stock.
3.1.4 WITHHOLDING TAX. The right of any stockholder to receive
the Merger Consideration will be subject to and reduced by the amount of any
required tax withholding obligation.
7
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3.1.5 SHARES OF DISSENTING STOCKHOLDERS. Notwithstanding anything
in this Agreement to the contrary, if any shareholder of E/One who has not
voted such Shares in favor of or consented to the Merger and who is entitled
to dissent from the Merger and require appraisal for his or her Shares under
the NYBCL (a Dissenting Stockholder) and complies with all the provisions
of Section 910 of the NYBCL concerning the right of holders of Shares to
dissent from the Merger and require appraisal of their Shares (Dissenting
Shares) will not be converted as described in Section 3.1.1 but will become
the right to receive such consideration as may be determined to be due to
such Dissenting Stockholder pursuant to the laws of the State of New York.
If, after the Effective Time, such Dissenting Stockholder (if any) withdraws
his or her demand for appraisal or fails to perfect or otherwise loses his or
her right of appraisal, in any case pursuant to NYBCL, his or her Shares will
be deemed to be converted as of the Effective Time into the right to receive
the Merger Consideration. E/One will give PCC and Sub (i) prompt notice of
any demands for appraisal of Shares received by E/One and (ii) the
opportunity to participate in and direct all negotiations and proceedings
with respect to any such demands. E/One will not, without the prior written
consent of PCC, make any payment with respect to, or settle, offer to settle,
or otherwise negotiate, any such demands.
3.2 EXCHANGE OF CERTIFICATES.
3.2.1 PAYING AGENT. Before the Effective Time, PCC and E/One
will designate a mutually acceptable bank or trust company to act as paying
agent in the Merger (the Paying Agent). From time to time on, before or
after the Effective Time, PCC will make available, or cause the Surviving
Corporation to make available, to the Paying Agent funds in amounts and at
the times necessary for the payment of the Merger Consideration upon
surrender of certificates representing Shares outstanding immediately prior
to the Effective Time (other than Shares owned by Sub) as part of the Merger
pursuant to Section 3.1.1, it being understood that any and all interest
earned on funds made available to the Paying Agent pursuant to this Agreement
will be turned over to PCC.
3.2.2 EXCHANGE PROCEDURE. As soon as reasonably practicable
after the Effective Time, the Paying Agent will mail to each holder of record
of a certificate or certificates that immediately before the Effective Time
represented Shares (the Certificates), (i) a notice (advising the holders
that the Merger has become effective) and a letter of transmittal in
customary and appropriate form (which will specify that delivery will be
effected, and risk of loss and title to the Certificates will pass, only upon
proper delivery of the Certificates to the Paying Agent) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent or to such other agent or agents as may be
appointed by PCC or Sub, together with such letter of transmittal, properly
completed and duly executed, and such other customary documents as may
reasonably be required by the Paying Agent, the holder of such Certificate
will be entitled to receive in exchange therefor the amount of cash into
which the Shares theretofore represented by such Certificate have been
converted pursuant to Section 3.1, and the Certificate so surrendered will be
canceled. In the event of a transfer of ownership of Shares that is not
registered in the transfer
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records of E/One, payment may be made to a Person (as defined in Section 3.2.4
below) other than the Person in whose name the Certificate so
surrendered is registered, if such Certificate is properly endorsed or
otherwise is in proper form for transfer and the Person requesting such
payment pays any transfer or other taxes required by reason of the payment to
a Person other than the registered holder of such Certificate or establishes
to the satisfaction of the Surviving Corporation that such tax has been paid
or is not applicable. Until surrendered as contemplated by this
Section 3.2.2, each Certificate will be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration, without interest, into which the Shares theretofore
represented by such Certificate will have been converted pursuant to
Section 3.1.1. No interest will be paid or will accrue on the cash payable
upon the surrender of any Certificate.
3.2.3 NO FURTHER OWNERSHIP RIGHTS IN E/ONE COMMON STOCK. All
cash paid upon the surrender of Certificates in accordance with the terms of
Sections 3.1 will be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares theretofore represented by such Certificates.
At the Effective Time, the stock transfer books of E/One will be closed, and
there will be no further registration of transfers on the stock transfer
books of the Surviving Corporation of the Shares that were outstanding
immediately before the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Paying Agent
for any reason, they will be canceled and exchanged as provided in
Section 3.1.
3.2.4 NO LIABILITY. None of PCC, Sub, E/One, or the Paying Agent
will be liable to any Person in respect of any cash or security delivered to
a public official pursuant to any applicable abandoned property, escheat, or
similar law. As used in this Agreement, the term Person means any
individual, corporation, general partnership, limited partnership, limited
liability company, joint venture, trust, cooperative or other association,
Governmental Entity (as defined in Section 4.2(b) below), or any other
organization.
3.2.5 LOST, STOLEN, OR DESTROYED CERTIFICATES. In the event that
any Certificate has been lost, stolen, or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen, or destroyed, E/One will issue in exchange for such lost, stolen, or
destroyed Certificate, the Merger Consideration deliverable in respect
thereof as determined in accordance with this Agreement; PROVIDED, HOWEVER,
that E/One may, in its sole discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen, or destroyed
Certificate to give E/One a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against E/One with respect to
the certificate alleged to have been lost, stolen, or destroyed.
3.3 E/ONE STOCK OPTIONS AND WARRANT. E/One shall use its best
efforts to enter into an agreement with each holder of stock options, vested
and unvested, outstanding under E/One's 1996 Incentive Compensation Plan,
1996 Incentive Compensation Plan for Non-Employee Directors, and 1972 Stock
Option Plan (the Plans) and the outstanding warrants to purchase E/One
common stock, which agreement provides that, immediately after the date on
which Sub
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shall have accepted for payment all Shares validly tendered and not withdrawn
prior to the expiration date with respect to the Offer (the Tender Offer
Acceptance Date), each option or warrant that is then outstanding, whether or
not then exercisable or vested, shall be canceled by E/One, and each holder
of a canceled option or warrant shall be entitled to receive from Sub at the
same time as payment for Shares is made by Sub in connection with the Offer,
in consideration for the cancellation of such option or warrant, an amount in
cash equal to the product of (i) the number of Shares previously subject to
such option or warrant, and (ii) the excess, if any, of the Offer Price over
the exercise price per Share previously subject to such option or warrant,
reduced by any applicable withholding. Any options or warrants outstanding
at the Effective Time shall be canceled.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF E/ONE
In this Agreement, the term Material Adverse Effect used in
connection with a party means any event, change or effect that is materially
adverse to the condition (financial or otherwise), properties, assets,
liabilities, businesses, operations or results of operations of such party in
excess of $50,000. Combined Material Adverse Effect means any individual
or combination of events, changes or effects that are materially adverse to
the condition (financial or otherwise), properties, assets, liabilities,
businesses, operations or results of operations of such party in excess of
$500,000. Material Adverse Change means any change that has resulted, will
result or is likely to result in a Material Adverse Effect. The term
Disclosure Schedule means the document delivered by E/One to PCC on the
date hereof that sets forth certain exceptions to the representations and
warranties contained in this Agreement under captions referencing each and
every Section to which such exceptions apply, provided that information
appropriately and expressly disclosed or qualified with respect to one
representation or warranty in the Disclosure Schedule shall be deemed to have
been disclosed or qualified with respect to any other applicable
representation or warranty to the extent that the disclosure contains a clear
statement of the relevant fact or facts so as to provide reasonable notice of
the applicability of the disclosure to the unreferenced representation or
warranty.
E/One hereby represents and warrants to PCC and Sub as follows, except
as set forth in the Disclosure Schedule:
4.1 CORPORATE EXISTENCE AND AUTHORITY. E/One is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of New York. E/One has the full corporate power and authority to enter into
this Agreement and carry out its terms, subject to the conditions set forth
in the Agreement. The Board of Directors of E/One has, by resolutions duly
adopted, authorized and approved the Merger, which resolutions have not been
rescinded or otherwise modified and remain in full force and effect. Except
for the approval of its stockholders, E/One has taken all corporate action
necessary to authorize the execution, delivery, and performance of this
Agreement. This Agreement has been duly and validly executed and delivered
by E/One and is binding upon and enforceable against E/One in accordance with
its terms, and the Articles of Merger, when executed and
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delivered by E/One, will constitute the valid and binding obligation of E/One.
4.2 NO ADVERSE CONSEQUENCES. Neither the execution and delivery of
this Agreement by E/One nor the consummation of the transactions contemplated
by this Agreement will:
(a) violate or conflict with any provision of the charter or
bylaws of E/One;
(b) violate any law, judgment, order, injunction, decree,
rule, regulation, or ruling of any court, legislature, administrative
agency or commission or other governmental or other regulatory authority
or agency (a Governmental Entity) applicable to E/One, except as such
would not have a Material Adverse Effect, individually or in the
aggregate;
(c) either alone, or with the giving of notice or the
passage of time or both, conflict with, constitute grounds for termination
or acceleration of, result in the breach of the terms, conditions, or
provisions of, result in the loss of any benefit to E/One under, or
constitute a default under any agreement, instrument, license, or permit
to which E/One is a party or by which E/One is bound, or result in the
creation or imposition of any lien, charge or encumbrance on any of the
assets of E/One except as such would not have a Material Adverse Effect,
individually or in the aggregate; or
(d) require any notices to or consent of any third party,
including without limitation any Governmental Entity, other than under the
HSR Act (as hereinafter defined).
4.3 CAPITALIZATION. E/One has authorized capital stock consisting of
6,000,000 shares of E/One Common Stock, of which 4,295,827 shares were
outstanding on February 24, 1998 and 20,386 shares are in treasury. Options
to purchase 416,422 shares were outstanding on February 24, 1998 under grants
made pursuant to the 1996 Incentive Compensation Plan, 1996 Incentive
Compensation Plan for Nonemployee Directors, and 1972 Stock Option Plan.
Warrants to purchase 10,000 shares were outstanding on February 24, 1998.
All of the outstanding shares of capital stock of E/One have been duly
authorized and are validly issued, fully paid, and nonassessable, and no
shares were issued in violation of preemptive or similar rights of any
stockholder or in violation of any applicable securities laws. Except as set
forth above, there are no shares of capital stock of E/One authorized,
issued, or outstanding, and, except as set forth above, there are no
preemptive rights or any outstanding subscriptions, options, warrants,
rights, convertible securities, or other agreements or commitments of E/One
of any character relating to the issued or unissued capital stock or other
securities of E/One. There are no outstanding obligations of E/One to
repurchase, redeem, or otherwise acquire any of the Shares.
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4.4 SUBSIDIARIES AND JOINT VENTURES. Except as disclosed on the
Disclosure Schedule, E/One has no subsidiaries and owns no stock or other
interest in any other corporation or in any partnership or limited liability
company, or other venture or entity. Each subsidiary of E/One is duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation or formation.
4.5 SEC REPORTS AND FINANCIAL STATEMENTS. E/One has filed with the
SEC, and has made available to PCC true and complete copies of, all forms,
reports, schedules, statements, and other documents required to be filed by
it since December 31, 1994 under the Securities Exchange Act of 1934, as
amended (the Exchange Act) or the Securities Act of 1933, as amended (the
Securities Act) (each of such forms, reports, schedules, statements, and
other documents, to the extent filed and publicly available before the date
of this Agreement, other than preliminary filings, is referred to as an
E/One SEC Document). Each E/One SEC Document, at the time filed, (a) did
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be,
and the applicable rules and regulations of the SEC thereunder. The
financial statements of all E/One Entities included in the E/One SEC
Documents comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the
SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-Q of the SEC) and
fairly present (subject, in the case of the unaudited statements, to normal,
recurring audit adjustments) the consolidated financial position of E/One and
its consolidated subsidiaries as of and at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
4.6 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by E/One specifically for inclusion or incorporation by reference in
(i) the Offer Documents; (ii) the Schedule 14D-9; (iii) the information to be
filed by E/One in connection with the Offer pursuant to Rule 14f-1
promulgated under the Exchange Act (the Information Statement); or (iv) the
Proxy Statement will, in the case of the Offer Documents, the Schedule 14D-9,
and the Information Statement, at the respective times the Offer Documents,
the Schedule 14D-9, and the Information Statement are filed with the SEC or
first published, sent, or given to E/One's stockholders, or, in the case of
the Proxy Statement, at the time the Proxy Statement is first mailed to
E/One's stockholders or at the time of the Stockholders' Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation or warranty is made by E/One with
respect to statements made or incorporated by reference therein based on
information supplied by PCC or Sub in writing specifically for inclusion or
incorporation by reference therein. The Schedule 14D-9, the Information
Statement, and the Proxy Statement will comply as to form in
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all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder.
4.7 LEGAL PROCEEDINGS. Except as disclosed in an E/One SEC Document
or in the Disclosure Schedule, there is neither pending nor, to the best
knowledge of E/One, threatened by or against E/One any legal action, claim,
arbitration, investigation, or administrative proceeding before any
Governmental Entity that could (i) have a Material Adverse Effect on the
parties following the Closing; or (ii) enjoin or restrict the right or
ability of E/One to perform its obligations under this Agreement and, to the
best knowledge of E/One, there is no basis for any such claim, litigation,
proceeding, or investigation.
4.8 CONTRACTS AND ARRANGEMENTS. The Disclosure Schedule contains a
complete and accurate list of all agreements of the following types,
organized by type of agreement, to which E/One is a party or by which it is
bound and which are material to E/One (the Contracts):
(a) any mortgage, note, or other instrument or agreement
relating to the borrowing of money or the incurrence of indebtedness by
E/One or any guaranty of any obligation for the borrowing of money;
(b) contracts, agreements, purchase orders, or
acknowledgment forms for the purchase, sale, lease or other disposition of
E/One's equipment, products, materials, or capital assets, or for the
performance of services which exceed $100,000 individually or on an annual
commitment basis;
(c) contracts or agreements for the joint performance of
work or services and all other joint venture agreements;
(d) contracts or agreements with agents, brokers,
consignees, sales representatives, or distributors relating to the sale of
E/One's products or services;
(e) contracts or agreements relating to the employment or
compensation of E/One's officers, directors, or employees, including
without limitation any collective bargaining agreements, other than
disclosed in the Disclosure Schedule in response to Section 4.16 ;
(f) any other contract, instrument, agreement, or obligation
not described in any other section of this Agreement to which E/One is a
party or by which it is bound and which contains material unfulfilled
obligations of E/One.
4.9 REAL PROPERTY; MATERIAL ASSETS. The Disclosure Schedule contains
a list of (i) all real property owned by E/One and (ii) all other assets
owned by E/One having an original cost of more than $100,000 (together, the
Material Properties and Assets). Except as set forth in the Disclosure
Schedule, E/One has good and marketable title to all of its respective
Material
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Properties and Assets subject to no encumbrance, lien, charge, or other
restriction (including, without limitation, any restriction on transfer) of
any kind or character and there is no condition, restriction, or reservation
affecting the title to or utility of any of the Material Properties and
Assets, other than (i) such imperfections or irregularities of title,
encumbrances, claims, liens, charges or other conditions, restrictions or
reservations as do not materially affect the use of the properties or assets
subject thereto or affected thereby or otherwise materially impair business
operations at such properties, (ii) statutory liens securing payments
(including taxes) not yet due and (iii) such imperfections or irregularities
of title, encumbrances, claims, liens, charges or other conditions,
restrictions or reservations as do not have a Material Adverse Effect on
E/One.
4.10 LEASES. The Disclosure Schedule contains a list of all material
leases with terms in excess of one year to which E/One is a party (the
Leases). Except as does not have a Material Adverse Effect, E/One enjoys
undisturbed possession to each leasehold interest it holds under the Leases.
4.11 STATUS OF CONTRACTS AND LEASES.
(a) Each of the Contracts and Leases is valid, binding, and
enforceable by E/One in accordance with its terms and is in full force and
effect, except as enforceability may be limited or affected by applicable
bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the rights of creditors and except as
enforceability may be limited by principles of equity governing specific
performance, injunctive relief or other equitable remedies. There is no
existing default or violation by E/One under any Contract or Lease and no
event has occurred which (whether with or without notice, lapse of time,
or both) would constitute a default of E/One under any Contract or Lease,
except for such defaults as would not have a Material Adverse Effect.
(b) E/One is not aware of any default by any other party to
any Contract or Lease or of any event which (whether with or without
notice, lapse of time, or both) would constitute a default by any other
party with respect to obligations of that party under any Contract or
Lease, except for such defaults as would not have a Material Adverse
Effect.
(c) Except as set forth in the Disclosure Schedule, E/One is
not a party to, nor is it bound by, any Contract (other than the
Distributor Agreements referred to in Section 4.26) that:
(i) to E/One's knowledge will result in any material
loss to it upon the performance thereof, including any material
liability for penalties or damages, whether liquidated, direct,
indirect, incidental or consequential, or
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(ii) is not terminable by E/One with 90 days or fewer
notice and which termination will not cause a Material Adverse Effect
(other than the Distributor Agreements referred to in Section 4.26).
4.12 COMPLIANCE WITH LAWS. Except for those whose absence, either
individually or in the aggregate, would not have a Material Adverse Effect,
and, with the passage of time will not have a Material Adverse Effect, E/One
possesses all governmental and other licenses, certificates, consents,
permits, and other authorizations of Governmental Entities (collectively,
Licenses) legally required to carry on its business as now conducted. No
material violation exists in respect of, and no proceeding is pending or to
E/One's knowledge threatened to revoke or limit, any such License. Except as
disclosed in the E/One SEC Documents, the businesses of E/One are not being
conducted in violation of any laws, rules, regulations, ordinances, codes,
judgments, orders, writs, or decrees applicable to its business where such
violation would have a Material Adverse Effect. Except as set forth on the
Disclosure Schedule or disclosed in the E/One SEC Documents, there have been
no violations of such laws, rules, regulations, ordinances, codes, judgments,
orders, writs, and decrees since December 31, 1992 where such violation,
either individually or in the aggregate, would have a Material Adverse Effect.
4.13 ENVIRONMENTAL MATTERS.
4.13.1 DEFINITIONS. As used in this Agreement, Environmental
Law means any federal, state, or local statute, regulation, or ordinance
pertaining to the protection of human health or the environment and any
applicable orders, judgments, decrees, permits, licenses, or other
authorizations or mandates under such laws. Hazardous Substance means any
hazardous, toxic, radioactive, or infectious substance, material, or waste as
defined, listed, or regulated under any Environmental Law, and includes
without limitation petroleum oil and its fractions. Contamination means
the existence (actual or reasonably suspected) in the environment of a
Hazardous Substance, if the existence or suspected existence of such
Hazardous Substance requires any investigatory, remedial, removal, or other
response action under any Environmental Law, if such response action legally
could be required by any Governmental Entity under prevailing Environmental
Laws.
4.13.2 COMPLIANCE. Except as disclosed in the Disclosure
Schedule, the businesses and the assets of E/One are in material compliance
with all Environmental Laws and those entities have all permits required
under Environmental Laws in connection with the construction, ownership or
operation of those assets and the businesses. E/One is not aware of and has
not received notice of any past, present or anticipated future events,
conditions, activities, investigation, studies, plans or proposals that
(a) would interfere with or prevent compliance by E/One with any
Environmental Law, or (b) may give rise to any common law or other liability,
or otherwise form the basis of a claim, action, suit, proceeding, hearing or
investigation, involving E/One and related in any way to Hazardous Substances
or Environmental Laws.
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4.13.3 HAZARDOUS SUBSTANCES. Except as disclosed in the
Disclosure Schedule, on Hazardous Substance has been disposed of, spilled,
leaked or otherwise released on, in, under or from, or otherwise come to be
located in the soil or water (including surface and ground water) on or
under, any real property owned, leased or occupied by E/One now or in the
past. Except as disclosed on the Disclosure Schedule, none of the assets of
E/One have incorporated into them any asbestos, urea formaldehyde foam
insulation, polychlorinated biphenyls (in electrical equipment or otherwise),
lead-based paint or any other Hazardous Substance which is prohibited,
restricted or regulated when present in buildings, structures, fixtures or
equipment. Except as disclosed on the Disclosure Schedule, all wastes
generated in connection with the businesses of E/One are and have been
transported to and disposed of at an authorized waste disposal facility in
compliance with all Environmental Laws. Except as disclosed on the
Disclosure Schedule, E/One is not liable under any Environmental Law for
investigation, remedial, removal or other response costs, natural resources
damages or other damages or for any other claims (including administrative
orders) arising out of the release or threatened release of, or exposure to,
any Hazardous Substance and no basis exists for any such liability. E/One
has not entered any contract pursuant to which it has assumed the liability
of any other person or entity, or agreed to indemnify any other person or
entity for any liability, under any Environmental Law or arising out of the
release or threatened release of, or exposure to, any Hazardous Substance.
4.13.4 UNDERGROUND STORAGE TANKS. Except as disclosed on the
Disclosure Schedule, to the knowledge of E/One there are no underground
storage tanks on any real property owned, leased or occupied by E/One now or
in the past (whether or not regulated and whether or not out of service,
closed or decommissioned).
4.13.5 ENVIRONMENTAL RECORDS. Except as disclosed in the
Disclosure Schedule, E/One has disclosed and made available to PCC true,
complete and correct copies of any reports, studies, analysis, tests,
monitoring, correspondence with governmental agencies or other documents in
the possession of or initiated by E/One or otherwise known to E/One and
pertaining to Hazardous Substances, the existence of Contamination, to
compliance with Environmental Laws, or to any other environmental concern
relating to the assets or the business of E/One.
4.14 TAX MATTERS.
4.14.1 RETURNS. E/One has filed on a timely basis all federal,
state, foreign, and other returns, reports, forms, declarations, and
information returns required to be filed by it with respect to Taxes (as
defined below) that relate to the business, results of operations, financial
condition, properties, or assets of E/One (collectively, the E/One Returns),
all E/One Returns filed are complete and accurate, and E/One has paid on a
timely basis all Taxes. Except as detailed on the Disclosure Schedule, E/One
is not part of, nor has been part of, an affiliated group of corporations
that files or has the privilege of filing consolidated tax returns pursuant
to Section 1501 of the Internal Revenue Code of 1986, as amended (the Code)
or any similar provisions of state, local, or foreign law, and E/One is not a
party to, nor has been a party to, any tax-sharing or tax-allocation
agreement. Except as set forth on the Disclosure Schedule, E/One
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has not received any notice of audit and neither E/One nor any director,
officer or employee responsible for tax matters of E/One has knowledge of any
intention of any authority to assess additional Taxes against E/One or of any
dispute with any authority with respect to such Taxes. There are no
outstanding agreements or waivers extending the applicable statutory periods
of limitation for such Taxes for any period. E/One has provided PCC with
complete and accurate copies of E/One Returns for each of E/One's fiscal
years 1994 through 1996 and the Forms 1139 related to any loss or credit
carryback claim for those years.
4.14.2 TAXES PAID OR RESERVED. The reserves for taxes reflected
in the current balance sheet most recently filed as part of an E/One SEC
Document are adequate for payment of Taxes in respect of periods ending on
the date thereof. All reserves for Taxes have been determined in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved and with prior periods. All Taxes that E/One has been
required to collect or withhold have been collected or withheld and, to the
extent required, have been paid to the proper taxing authority. E/One has
not elected to be treated as a consenting corporation pursuant to Section
341(f) of the Code.
4.14.3 LOSS CARRYFORWARDS; INVESTMENT TAX CREDIT CARRYFORWARDS.
The Disclosure Schedule contains a complete and accurate list of net
operating loss (NOL) carryforwards and investment tax credit carryforwards
available to E/One or one or more other E/One Entities for federal income tax
purposes that originated in taxable years 1990 through 1997.
4.14.4 DEFINITION. As used in this Agreement, the term Taxes
means all federal, state, local, or foreign taxes, charges, fees, levies, or
other assessments, including without limitation all net income, gross income,
gross receipts, premium, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, estimated
severance, stamp, occupation, property, or other taxes, fees, assessments, or
charges of any kind whatsoever, together with any interest and any penalties
(including penalties for failure to file in accordance with applicable
information reporting requirements), and additions to tax.
4.14.5 MISCELLANEOUS. E/One has not filed a consent under IRC
Section 341(f) concerning collapsible corporations. E/One has not made any
payments, is not obligated to make any payments, nor is a party to any
agreement that in certain circumstances could obligate it to make any
payments that will not be deductible under IRC Section 280G. E/One has not
been a United States real property holding corporation within the meaning of
IRC Section 897(c)(2) during the applicable period specified in IRC Section
897(c)(1)(A)(ii). E/One has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial understatement
of federal income tax within the meaning of IRC Section 6662. E/One shall
deliver to PCC all necessary certificates and documents confirming that no
withholding under IRC Section 1445 is required in connection with payment of
the purchase price.
4.14.6 TAX SHARING AGREEMENTS. E/One is not a party to a Tax
allocation or sharing agreement.
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4.15 EMPLOYEES AND LABOR RELATIONS MATTERS. Except as set forth on
the Disclosure Schedule or as provided in this Agreement:
(a) No E/One key employee or executive has communicated to
E/One any plans to terminate employment with E/One.
(b) E/One has complied in all material respects with all
labor and employment laws, including provisions thereof relating to wages,
hours, equal opportunity, collective bargaining, and the payment of social
security and other taxes, except where the failure to comply would not
have a Material Adverse Effect;
(c) There is no unfair labor practice charge, complaint,
representation petition, or other action against E/One pending or to
E/One's best knowledge threatened before the National Labor Relations
Board or any other Governmental Entity and E/One is not subject to any
order to bargain by the National Labor Relations Board;
(d) There is no labor strike, request for representation,
slowdown, or work stoppage actually occurring, pending, or to E/One's
best knowledge threatened against E/One;
(e) To E/One's knowledge no questions concerning
representation have been raised or are threatened with respect to
employees of E/One;
(f) No grievance that might have a Material Adverse Effect
on E/One and no arbitration proceeding arising out of or under any
collective bargaining agreement is pending and to E/One's best knowledge
no basis exists for any such grievance or arbitration proceeding; and
(g) To E/One's knowledge no employee of E/One is subject to
any Noncompetition, nondisclosure, confidentiality, employment,
consulting, or similar agreements with Persons other than E/One relating
to the present business activities of E/One.
(h) All employees of E/One are at will employees, and
E/One is not a party or otherwise subject to any collective bargaining or
other agreement governing the wages, hours or terms of employment of its
employees. E/One has no written severance pay plan, policy, practice or
agreement with any of its employees, except for the Change of Control
Agreements identified in the Disclosure Schedule.
(i) E/One has not experienced any primary work stoppage or
other organized work stoppage involving its employees in the past two
years.
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(j) There are no pending claims, and to E/One's best
knowledge, no threatened claims by or on behalf of any of the employees of
E/One under any federal, state or local labor or employment laws or
regulations.
4.16 EMPLOYEE BENEFITS. The Disclosure Schedule lists all pension,
retirement, profit sharing, deferred compensation, bonus, commission,
incentive, life insurance, health and disability insurance, hospitalization,
and all other employee benefit plans or arrangements (including, without
limitation, any contracts or agreements with trustees, insurance companies or
others relating to any such employee benefit plans or arrangements)
established, maintained, or contributed to by E/One that are currently in
effect or that have been terminated within the past twelve months, and
complete and accurate copies of all those plans or arrangements have been
provided to PCC. The employee pension and employee welfare benefit plans
(within the meaning of Sections 3(1) and 3(2) of the Employee Retirement
Income Security Act of 1974, as amended (ERISA)) established and maintained
by E/One that are subject to ERISA are listed separately as ERISA Plans on
the Disclosure Schedule (the ERISA Plans). The ERISA Plans comply in all
material respects with the applicable requirements of ERISA and any other
applicable laws and regulations. With respect to ERISA Plans intended to
qualify under Section 401(a) of the Code, E/One has received from the
Internal Revenue Service (IRS) a favorable determination for each of the
ERISA Plans that each of the ERISA Plans is qualified. There has been no
event subsequent to that determination of which E/One has received notice
from IRS or has otherwise become aware that has adversely affected the tax
qualified status of the ERISA Plans or the exemption of the related trusts.
As to any such ERISA Plan that has been terminated, any legally-required
notices to employees and to the Pension Benefit Guaranty Corporation (if
applicable) have been provided as required, all other legally-required
actions have been taken to accomplish the termination, and a favorable IRS
determination letter has been requested with respect to such termination. In
response to any such request for a determination letter on plan termination,
a favorable letter has been received from the IRS or, if the requested
favorable letter has not yet been received, there has been no event or
absence of a necessary action that would prevent the issuance of a favorable
determination letter on the termination in due course. No accumulated
funding deficiency as defined in Section 302(a)(2) of ERISA or Section
412(a) of the Code exists, with respect to any of the ERISA Plans. Neither
E/One nor a controlled group of corporations of which E/One is a member have
any actual or potential withdrawal liability, as defined in Section 4201
and related provisions of ERISA. To the knowledge of E/One, none of the
ERISA Plans, its related trusts or any trustee, investment manager or
administrator thereof has engaged in a nonexempt prohibited transaction, as
such term is defined in Section 406 of ERISA and Section 4975 of the Code.
There are not and have not been any excess deferrals or excess
contributions as defined in Code Sections 401(k)(8)(B) and 402(g)(2)(a)
under any ERISA Plan that have not been corrected. Each ERISA Plan is, and to
the knowledge of E/One has been, operated and administered in all material
respects in conformance with the requirements of all applicable laws and
regulations, whether or not the ERISA Plan documents have been amended to
reflect such requirements. Except as set forth in the Disclosure Schedule,
E/One has no obligation of any kind (whether under the terms of the ERISA
Plans or under any understanding with employees) to make payments under, or
to pay contributions to, any plan, agreement, or
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other arrangement for deferred compensation of employees, whether or not tax
qualified, including, without limitation, a single employer tax qualified
plan, a tax qualified plan of a controlled group of corporations, a
multi-employer pension plan, a nonqualified deferred compensation plan or an
individual employment or compensation agreement, or any commitment to provide
medical benefits to retirees.
4.17 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Disclosure Schedule, since December 31, 1997, there has not been:
(a) Any event, occurrence, development, or state of
circumstances or facts which could reasonably be expected to result in a
Material Adverse Effect on the business, results of operations, financial
position, assets, or properties of E/One;
(b) Any damage, destruction, or casualty loss, whether
insured against or not, to the assets or properties of E/One that would
result in a Material Adverse Effect;
(c) Except as permitted by Section 6.1(k), any increase in
the rate or terms of compensation payable or to become payable by E/One to
its directors, officers, or key employees; any increase in the rate or
terms of any bonus, insurance, pension, or other employee benefit plan,
payment, or arrangement made to, for or with any such directors, officers,
or key employees; any special bonus or remuneration paid; or any written
employment or change of control contract executed or amended;
(d) Any amendment to E/One's Articles of Incorporation or
Bylaws or any entry into any material agreement, commitment, or
transaction (including, without limitation, any borrowing, capital
expenditure or capital financing or any amendment, modification, or
termination of any existing agreement, commitment, or transaction) by
E/One, except agreements, commitments, or transactions in the ordinary
course of business and consistent with past practices or as expressly
contemplated in this Agreement;
(e) Any direct or indirect declaration, setting aside, or
payment of any dividend or other distribution (whether in cash, stock,
property, or any combination thereof) in respect of the common stock of
E/One, or any direct or indirect repurchase, redemption, or other
acquisition by E/One of any shares of its stock;
(f) Any issuance or sale of any stock of E/One (other than
issuances pursuant to the exercise of options or warrants outstanding on
February 24, 1998) or any issuance or granting of any option, warrant, or
right to purchase any stock of E/One (other than options and warrants
granted on or before December 31, 1997) or any commitment to do any of
the foregoing;
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(g) Any conduct of business that is outside the ordinary
course of business or not substantially in the manner that E/One has
previously conducted its business;
(h) Any material purchase or other acquisition of property
by E/One, any sale, lease, or other disposition of property by E/One, or
any expenditure by E/One, except in the ordinary course of business;
(i) Any incurrence of any noncontract liability which,
either singly or in the aggregate is material to the business, results of
operations, financial condition, or prospects of E/One; or
(j) Any encumbrance or consent to encumbrance of any
material property or assets of E/One except in the ordinary course of
business and except for the types of encumbrances listed in Section 4.9.
4.18 UNDISCLOSED LIABILITIES. Except for liabilities or obligations
described in the E/One SEC Documents or the Disclosure Schedule, or
liabilities or obligations that would not in the aggregate have a Combined
Material Adverse Effect, neither E/One nor any of the property of E/One is
subject to any material liability or obligation, whether absolute,
contingent, known, or unknown, that was not included or adequately reserved
against in the financial statements contained in the E/One SEC Documents.
4.19 INSURANCE. E/One is now maintaining with financially responsible
insurance companies, the policies of insurance (Policies) on its products,
tangible assets and its business as are listed in the Disclosure Schedule,
and all such Policies are currently in full force and effect. To E/One's
knowledge, there are no disputes with insurers under the Policies, and all
premiums due and payable thereto have been paid. To E/One's knowledge, (i)
there are no pending or threatened cancellations or nonrenewals with respect
to any of the Policies, and E/One is in compliance with all material
conditions contained in its Policies, and (ii) there are no pending or
threatened claims against the Company related to product liability.
4.20 INTELLECTUAL PROPERTY.
(a) The term Intellectual Property Assets means
collectively:
(i) all registered and unregistered trademarks,
service marks, and applications (collectively, Marks);
(ii) all patents and patent applications (collectively,
Patents);
(iii) all copyrights in both published works and
unpublished works that are material to E/One's businesses
(collectively, Copyrights);
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(iv) all trade secrets; and
(v) all trade names, technology, know-how, processes
and related applications used in the conduct of the businesses of
E/One. The Disclosure Schedule contains a list and summary
description of all Marks, Patents and Copyrights.
(b) E/One owns, has the right to use, sell, license, dispose
of, and to bring actions for the misappropriation of all of Intellectual
Property Assets, material to the conduct of its business without any
conflict with or infringement of the rights of others, free and clear of
all liens, charges, encumbrances, or other restrictions of any kind.
(c) The Disclosure Schedule contains a list of all material
agreements, licenses, permits and other instruments relating to the
Intellectual Property Assets material to the conduct of its business to
which E/One is a party, together with a brief description of the
Intellectual Property Asset.
(d) To E/One's knowledge, no Intellectual Property Asset
material to the conduct of business of E/One is infringed or has been
challenged.
(e) There is no action, suit, proceeding, judgment, order,
or writ pending or to E/One's knowledge, threatened against E/One
contesting the validity, ownership, or right to use, sell, license,
dispose of, or to bring actions for the misappropriation of the
Intellectual Property Assets material to the conduct of its business.
4.21 GUARANTIES; POWERS OF ATTORNEY. Except as set forth in the
Disclosure Schedule, E/One is not a guarantor or otherwise liable for any
liability or material obligation (including without limitation any
indebtedness) of any other Person. To E/One's knowledge, there are no
outstanding powers of attorney executed on behalf of E/One other than with
respect to SEC filings or to KPMG Peat Marwick with respect to tax filings.
4.22 BROKERS. No broker, investment banker, financial advisor, or
other Person, other than The Nassau Group, Inc. and Miller, Johnson & Kuehn,
Inc., the fees and expenses of which will be paid by E/One, is entitled to
any broker's, finder's, financial advisor's, or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of E/One. E/One has provided
PCC true and correct copies of all agreements between E/One and The Nassau
Group, Inc.
4.23 DEFERRED COMPENSATION OBLIGATIONS. E/One has deposited in a
rabbi trust a number of Shares of its Common Stock that equals or exceeds the
number of Shares credited to participants' accounts under Section 3.4 of
E/One's Deferred Compensation Plan for certain executive employees (Deferred
Compensation Plan).
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4.24 PRODUCT WARRANTIES. The reserves for warranty claims on the
Company's financial statements for the period ended September 30, 1997 filed
in an E/One SEC Document are consistent with E/One's prior practices and such
reserve is adequate to cover all warranty claims made or to be made against
any products of E/One sold prior to the date thereof based on past warranty
claim experience.
4.25 Distributors and Suppliers. The Disclosure Schedule lists the 10
largest distributors and the 10 largest suppliers of E/One for the year ended
December 31, 1997, and sets forth opposite the name of each such distributor
or supplier the approximate amount of gross sales or purchases by E/One
attributable to such distributor or supplier for such period. No distributor
or supplier listed in the Disclosure Schedule has informed E/One that it will
stop its business with E/One.
4.26 DISTRIBUTORS. The Disclosure Schedule lists (a) all former
distributors of E/One having a written contract that have been terminated
since January 1, 1996; and (b) all pending litigation and pending material
disputes between E/One and any of its past or present distributors, including
any claims initiated by any distributor against E/One. Each distributor of
E/One may be terminated without penalty or other liability other than the
repurchase of inventory upon at 60 days' prior written notice (subject to the
initial term requirement), except as otherwise provided by distributor
protection laws in some states or countries.
4.27 RECORDS. The books of account of E/One are complete and accurate
in all material respects, and there have been no transactions involving the
business of E/One which properly should have been set forth therein and which
have not been accurately so set forth. Complete and accurate copies of such
books and records have been made available to PCC.
4.28 AGREEMENTS WITH SERVICE PROVIDERS. E/One has received and
delivered to PCC true and current copies of binding agreements with The
Nassau Group, Inc. and Miller, Johnson & Kuehn, Inc. relating to all services
rendered by such firms to E/One in connection with the transaction
contemplated by this Merger Agreement.
4.29 EMPLOYMENT AGREEMENTS. The Company has entered into Employment
Agreements with Stephen V. Ardia, Mark E. Alexander, David M. Doin,
Brian Buchinski, George A. Earle III, Kathleen A. Parry, George A. Vorsheim
Jr., and Philip W. Welsh on terms approved by PCC.
4.30 DISCLOSURE. None of representations and warranties made by E/One
in this Agreement contains any untrue statement of a material fact or omits a
material fact necessary to make each statement contained therein not
misleading. To E/One's best knowledge, neither E/One nor any responsible
officer or director of E/One has intentionally concealed any fact known by
such Person to have a Material Adverse Effect.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PCC
PCC represents and warrants to E/One as follows:
5.1 CORPORATE EXISTENCE AND AUTHORITY. PCC is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Oregon. PCC has the full corporate power and authority to enter into this
Agreement and carry out its terms. PCC has taken all corporate action
necessary to authorize the execution, delivery, and performance of this
Agreement. This Agreement has been duly and validly executed and delivered
by PCC and is binding upon and enforceable against PCC in accordance with its
terms.
5.2 CORPORATE EXISTENCE AND AUTHORITY OF SUB. Sub is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of New York. Sub has the full corporate power and authority to enter
into this Agreement and carry out its terms. Sub has taken all corporate
action necessary to authorize the execution, delivery, and performance of
this Agreement (other than with respect to the Merger, the filing and
recordation of appropriate merger documents as required by New York law).
This Agreement has been duly and validly executed and delivered by Sub and is
binding upon and enforceable against Sub in accordance with its terms. All
of the issued and outstanding voting capital stock of Sub is owned by PCC.
5.3 NO ADVERSE CONSEQUENCES. Neither the execution and delivery of
this Agreement by PCC or Sub nor the consummation of the Transactions will:
(a) violate or conflict with any provision of the charter or
bylaws of PCC or Sub;
(b) violate any law, judgment, order, injunction, decree,
rule, regulation, or ruling of any court, legislature, administrative
agency or commission or other governmental or other regulatory authority
or agency (a Governmental Entity) applicable to PCC or Sub, except as
such would not individually or in the aggregate prevent PCC or Sub from
performing their respective obligations under this Agreement and
consummating the Transactions;
(c) either alone or with the giving of notice or the passage
of time or both, conflict with, constitute grounds for termination or
acceleration of, result in the breach of the terms, conditions, or
provisions of, result in the loss of any benefit to PCC or Sub under,
or constitute a default under any agreement, instrument, license, or
permit to which PCC or Sub is a party or by which PCC or Sub is bound,
or result in the creation or imposition of any lien, charge or encumbrance
on any of the assets of PCC or Sub except as such would not have a
Material Adverse Effect, individually or in the aggregate; or
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(d) require any notices to or consent of any third party,
including without limitation any Governmental Entity other than under the
HSR Act, except where the failure to obtain such consents, approvals or
authorizations would not prevent or delay consummation of the Offer or the
Merger or otherwise prevent PCC or Sub from performing its obligations
under this Agreement.
5.4 LEGAL PROCEEDINGS. There is neither pending nor, to the best
knowledge of PCC or Sub, threatened by or against PCC or Sub any legal
action, claim, arbitration, investigation, or administrative proceeding
before any Governmental Entity that could enjoin or restrict the right or
ability of PCC or Sub to perform its obligations under this Agreement and, to
the best knowledge of PCC or Sub, there is no basis for any such claim,
litigation, proceeding, or investigation.
5.5 OFFER DOCUMENTS; PROXY STATEMENT. The Offer Documents will not
at the time the Offer Documents are filed with the SEC or are first
published, sent or given to stockholders of E/One, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not misleading. The information supplied by PCC for inclusion in the
proxy statement to be sent to the stockholders of E/One in connection with
the Stockholders Meeting (as defined below) such proxy statement, as amended
and supplemented, being referred to herein as the Proxy Statement and
Schedule 14D-9 will not, on the date the Proxy Statement or Schedule 14D-9
(or any amendment or supplement thereto) is first mailed to stockholders of
E/One, at the time of the Stockholders Meeting, contain any statement which,
at such time and in light of the circumstances under which it is made, is
false or misleading with respect to any material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Stockholders Meeting which shall have become false or
misleading; PROVIDED, HOWEVER, ,that PCC and Sub makes no representation or
warranty with respect to information supplied by E/One for inclusion in any
of the foregoing documents or the Offer Documents. The Offer Documents shall
comply in all material respects as to form with the requirements of the
Exchange Act and the rules and regulations thereunder.
5.6 FINANCING. PCC has under existing financing arrangements, and
will make available to Sub, sufficient funds to permit Sub to acquire all of
the outstanding Shares in the Offer and the Merger.
ARTICLE 6
COVENANTS
6.1 CONTINUATION OF BUSINESS. From and after the execution date of
this Agreement until Closing, E/One covenants and agrees to use its best
efforts to: (i) keep the business and
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organization of E/One intact until the Closing; and (ii) carry on the
business of E/One in its usual and ordinary course of business and in a
manner consistent with past practice until Closing. Without limiting the
generality of the foregoing, except as expressly provided to the contrary in
this Agreement or with the prior written consent of PCC, until the Closing,
E/One agrees that:
(a) E/One will not declare, pay, or set aside for payment
any dividend or other distribution of money or property in respect of its
capital stock;
(b) E/One will not issue any shares of its capital stock
(except upon the valid exercise of currently outstanding Options under the
1996 Incentive Compensation Plan, 1996 Incentive Compensation Plan for
Nonemployee Directors, or 1972 Stock Option Plan, or currently outstanding
warrants), or issue or sell any securities convertible into, or
exchangeable for, or options, warrants to purchase, or rights to subscribe
to, any shares of its capital stock or subdivide or in any way reclassify
any shares of its capital stock, or repurchase, reacquire, cancel, or
redeem any such shares;
(c) E/One will use its best efforts to ensure that (i) the
assets, property and rights now owned by E/One will be used, preserved,
and maintained, as far as practicable, in the ordinary course of business,
to the same extent and in the same condition as said assets, property, and
rights are on the date of this Agreement, and no unusual or novel methods
of manufacture, purchase, sale, management, or operation of said
properties or business or accumulation, disposition, or valuation of
inventory will be made or instituted; (ii) E/One will not encumber any of
its material assets other than in connection with E/One's existing credit
arrangements with Fleet Bank of New York or make any material commitments
relating to such assets, property, or business, except in the ordinary
course of its business. E/One will use its commercially reasonable best
efforts to ensure that E/One will pay all debts when due in the usual
course of business;
(d) E/One will use its best efforts to ensure that it will
comply in all material respects with all statutes, laws, ordinances,
rules, and regulations applicable to it in the ordinary course of
business;
(e) E/One will use its best efforts to ensure that it will
keep or cause to be kept the Policies (or substantial equivalents) in such
amounts duly in force until the Closing Date and will give PCC notice of
any material change in the Policies;
(f) E/One will not incur additional debt (including without
limitation obligations under leases for real or personal property whether
or not required to be capitalized under generally accepted accounting
principles), incur or increase any obligation or liability (fixed,
contingent, or other, including without limitation liabilities as a
guarantor or otherwise with respect to obligations of others) except in
the ordinary and usual course of its business and consistent with past
practices, forgive or release any
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material debt or claim, give any waiver of any right of material value,
or voluntarily suffer any extraordinary loss;
(g) E/One will not make any payment to discharge or satisfy
any lien or encumbrance or pay any obligation or liability (fixed or
contingent) other than (i) current liabilities (including the current
portion of any long-term liabilities) included in the financial statements
contained in the E/One SEC Documents and (ii) current liabilities incurred
or maturing in the ordinary course of business since the date of the
current balance sheet most recently filed as part of a E/One SEC Document
or (iii) payments under its revolving credit facility with Fleet Bank of
New York made in the ordinary course of business and consistent with past
practices;
(h) E/One will not acquire any assets other than assets
acquired in the ordinary and usual course of its business and consistent
with past practices;
(i) E/One will not purchase or otherwise acquire, or agree
to purchase or otherwise acquire, any debt or equity securities of any
Person other than equity securities issued by a money market fund
registered as an investment company under the Investment Company Act of
1940;
(j) E/One will not enter into any transaction or contract or
make any commitment to do the same, except in the ordinary and usual
course of business and not requiring the payment in any case of an amount
in excess of $50,000 annually;
(k) E/One will not increase the wages, salaries,
compensation, pension, or other benefits payable, or to become payable by
it, to any of its officers, employees, or agents, including without
limitation any bonus payments or severance or termination pay, other than
increases in wages and salaries required by employment arrangements
existing on the execution date of this Agreement or otherwise in the
ordinary and usual course of its business, including changes consistent
with E/One's normal performance review process for salary increases in
April 1998;
(l) E/One will not implement or agree to any implementation
of, or amendment or supplement to, any employee profit sharing, stock
option, stock purchase, pension, bonus, commission, incentive, retirement,
medical reimbursement, life insurance, deferred compensation, severance
pay, or any other employee benefit plan or arrangement (except for an
amendment to the Deferred Compensation Plan approved by PCC);
(m) E/One will not change its accounting methods, policies
or practices and will maintain its books and records in accordance with
GAAP;
(n) When the consent of any third party to the transactions
contemplated by this Agreement is required under the terms of any Contract
to which E/One is a party
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or by which it is bound, E/One will use its best efforts to obtain such
consent on terms and conditions not materially less favorable than those
in effect on the execution date of this Agreement;
(o) E/One will not transfer any shares of treasury stock or
authorized and unissued stock to E/One's Deferred Compensation Plan trust
on account of bonus amounts deferred under the Deferred Compensation Plan
relating to calendar year 1997.
(p) E/One will pay and discharge all taxes, assessments,
governmental charges, and levies imposed upon it, its income or
profits, or upon any property belonging to it, in all cases before the
date on which penalties attach thereto; and
(q) E/One will not amend its Articles of Incorporation or
Bylaws.
6.2 NO SOLICITATION.
6.2.1 E/One and its officers, directors, employees,
representatives, and agents will immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to a Takeover
Proposal (as defined below). Unless this Agreement has been terminated in
accordance with its terms, and provided that neither PCC nor Sub is in
material violation of this Agreement, E/One will not authorize or permit any
of its officers, directors, or employees or any investment banker, financial
advisor, attorney, accountant, or other representative retained by it to
(i) solicit, initiate, or encourage (including by way of furnishing
non-public information about E/One), or take any other action to facilitate,
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal or (ii) participate
in any discussions or negotiations regarding any Takeover Proposal; PROVIDED,
HOWEVER, that, if at any time before the Effective Time, the Board of
Directors of E/One determines in good faith, after consultation with counsel,
that it is necessary to do so in order to comply with its fiduciary duties to
E/One's stockholders under applicable law, E/One may, in response to an
unsolicited Takeover Proposal, and subject to compliance with Section 6.2.3,
(x) furnish information with respect to E/One to any Person pursuant to a
confidentiality agreement in substantially the same form entered into between
E/One and PCC and (y) participate in discussions and negotiations regarding
such Takeover Proposal. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding sentence by
any director or executive officer of E/One or any investment banker,
financial advisor, attorney, accountant, or other representative of E/One
will be deemed to be a breach of this Section 6.2.1 by E/One. For purposes
of this Agreement, Takeover Proposal means any inquiry, proposal, or offer
from any Person relating to any direct or indirect acquisition or purchase of
a substantial amount of assets of E/One or of over 20 percent of any class of
equity securities of E/One, any tender offer or exchange offer that if
consummated would result in any Person beneficially owning 20 percent or more
of any class of equity securities of E/One, any merger, consolidation,
business combination, sale of substantially all the assets, recapitalization,
liquidation, dissolution or similar transaction involving E/One, other than
the transactions
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contemplated by this Agreement, or any other transaction the consummation of
which could reasonably be expected to impede, interfere with, prevent, or
materially delay the Offer or the Merger or that could reasonably be expected
to dilute materially the benefits to PCC of the transactions contemplated by
this Agreement.
6.2.2 Except as set forth in this Section 6.2.2, and unless this
Agreement has been terminated in accordance with its terms, and provided that
neither PCC nor Sub is in material violation of this Agreement, neither the
Board of Directors of E/One nor any committee thereof will (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to PCC, the
approval or recommendation by such Board of Directors or such committee of
this Agreement, the Offer or the Merger; (ii) approve or recommend, or
propose to approve or recommend, any Takeover Proposal; or (iii) cause E/One
to enter into any agreement with respect to any Takeover Proposal.
Notwithstanding the foregoing, in the event that before the Effective Time
the Board of Directors of E/One determines in good faith, after consultation
with counsel, that it is necessary to do so in order to comply with its
fiduciary duties to E/One's stockholders under applicable law, the Board of
Directors of E/One may withdraw or modify its approval or recommendation of
this Agreement, the Offer or the Merger, approve or recommend a Superior
Proposal (as defined below), or cause E/One to enter into an agreement with
respect to a Superior Proposal, but in each case only at a time that is after
the second business day following PCC's receipt of written notice (a Notice
of Superior Proposal) advising PCC that the Board of Directors of E/One has
received a Superior Proposal, specifying the material terms and conditions of
such Superior Proposal and identifying the Person making such Superior
Proposal and that E/One has elected to terminate this Agreement pursuant to
Section 6.2.2 of this Agreement. In addition, if E/One therefter proposes to
enter into an agreement with respect to any Takeover Proposal, it will within
10 days after agreeing to the Takeover Proposal, pay, or cause to be paid, to
PCC the Termination Fee (as such terms are defined in this Agreement)
pursuant to and to the extent required in Section 8.5.3 of this Agreement.
For purposes of this Agreement, a Superior Proposal means any bona fide
Takeover Proposal to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50 percent of the shares of
E/One Common Stock then outstanding or all or substantially all the assets of
E/One and otherwise on terms which the Board of Directors of E/One determines
in its good faith judgment (after consultation with The Nassau Group, Inc. or
another financial advisor of nationally recognized reputation) to be more
favorable to E/One's stockholders than the Offer and the Merger.
6.2.3 In addition to the obligations of E/One set forth in
Sections 6.2.1 and 6.2.2, E/One will within 48 hours but before responding to
the request for information or Takeover Proposal, advise PCC orally and in
writing of any request for information or of any Takeover Proposal, or any
inquiry with respect to or that could lead to any Takeover Proposal, the
material terms and conditions of such request, Takeover Proposal, or inquiry
and the identity of the Person making such request, Takeover Proposal, or
inquiry. E/One will keep PCC fully informed of the status and details
(including amendments or proposed amendments) of any such request, Takeover
Proposal or inquiry, subject to any requirements necessary to comply with its
fiduciary duties to E/One Stockholders under applicable law.
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6.2.4 Nothing contained in Section 6.2 will prohibit E/One from
making any disclosure to E/One's stockholders if, in the opinion of the Board
of Directors of E/One, after consultation with counsel, failure so to
disclose would be inconsistent with its fiduciary duties to E/One's
stockholders under applicable law; PROVIDED, HOWEVER, neither E/One nor its
Board of Directors nor any committee thereof will (except as permitted by
Section 6.2.2), withdraw or modify, or propose to withdraw or modify, its
position with respect to the Offer or the Merger or approve or recommend, or
propose to approve or recommend, a Takeover Proposal.
6.3 ACCESS. For the period up to and including the Closing Date,
E/One will provide, and cause each E/One Entity other than E/One to provide,
to PCC and its authorized agents reasonable access to all of each E/One
Entity's physical assets, facilities, financial information, production
records, contracts and other corporate records and documents as PCC deems
reasonably necessary, provided that such activities do not unreasonably
interfere with or hinder the business or operation of E/One. PCC will have
reasonable access during normal working hours to all E/One Entity's premises,
properties, and facilities and will be allowed to meet with each E/One
Entity's management personnel, employees, and any outside consultants of the
E/One Entities, including without limitation auditors and accountants,
investment and other bankers, tax and financial advisors, and environmental
consultants. In addition, E/One will exercise its best efforts to make
available to PCC any items and materials reasonably requested by PCC.
However, no investigation by PCC or any of its authorized representatives
before or after the date of this Agreement will effect any representation,
warranty, or closing condition of any party to this Agreement.
6.4 HART SCOTT RODINO. Each of E/One and PCC will within five days
after executing this Agreement prepare and file with the Federal Trade
Commission (the FTC) and the Department of Justice (the DOJ) the
premerger notification form required under the Hart Scott Rodino Antitrust
Improvements Act (the HSR Act) and a request for early termination of the
waiting period. The parties will further (i) discuss with each other any
comments the reviewing party may have; (ii) cooperate with each other in
connection with such filings, which cooperation will include, but not be
limited to, furnishing the other with such information or documents as may be
reasonably required in connection with such filings; (iii) promptly file
after any request by the FTC or the DOJ any appropriate information or
documents so requested by the FTC or the DOJ; and (iv) notify each other of
any other communications with the FTC or the DOJ that relate to the
transactions contemplated by this Agreement and, to the extent appropriate,
permit the other to participate in any conferences with the FTC or the DOJ.
The parties will use best efforts to accelerate and obtain HSR Act clearance.
Each of E/One and PCC will pay its own expenses in connection with the
preparation of the premerger notification form.
6.5 OTHER GOVERNMENT CONSENTS. Promptly following the execution of
this Agreement, the parties will proceed to prepare and file with the
appropriate Governmental Entities any requests for approval or waiver (in
addition to those specifically described above), if any, that are required
from Governmental Entities in connection with the transactions contemplated
by this Agreement, and the parties will diligently and expeditiously
prosecute and cooperate fully in the
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<PAGE>
prosecution of such requests for approval or waiver and all proceedings
necessary to secure such approvals and waivers.
6.6 BEST EFFORTS; NO INCONSISTENT ACTION. Subject to the terms and
conditions hereof, and to the fiduciary duties of the E/One Board under
applicable law as advised by counsel, each party will use its best efforts to
effect the transactions contemplated by this Agreement and to fulfill the
conditions to the obligations of the opposing parties set forth in Article 7
of this Agreement. No party will take any action inconsistent with its
obligations under this Agreement or that could hinder or delay the
consummation of the transactions contemplated by this Agreement without legal
authority or basis, except that nothing in this Section 6.6 will limit the
rights of the parties under Article 7 of this Agreement.
6.7 CHANGED CIRCUMSTANCES. Each of E/One and PCC will notify the
other party promptly of any fact or occurrence between the date of this
Agreement and the Closing Date of which it becomes aware which makes any of
its representations contained in this Agreement untrue or causes any breach
of its obligations under this Agreement.
6.8 FEES AND EXPENSES.
All fees and expenses incurred in connection with the Offer and
Merger, this Agreement, and the transactions contemplated by this Agreement
will be paid by the party incurring such fees or expenses, whether or not the
Offer or the Merger is consummated.
6.9 PRESS RELEASES. No press releases or other public announcements
or disclosure of information to any third party concerning the transactions
contemplated by this Agreement may be made by any of the parties without the
prior written consent of each of the other parties, which consent will not be
unreasonably withheld; PROVIDED, HOWEVER, that nothing in this provision will
prevent a party from making such releases or announcements as are necessary
for a party to satisfy its legal obligations or the requirements of the New
York Stock Exchange or NASDAQ NMS, but in any such case the affected party
will promptly notify the other parties.
ARTICLE 7
CONDITIONS TO THE PARTIES' OBLIGATIONS
TO CONSUMMATE THE MERGER
The obligations of each party to consummate the Merger are subject to
the following conditions, any of which may be waived by PCC, Sub and E/One:
7.1 GOVERNMENTAL AUTHORIZATIONS. Each of the parties will have
obtained all authorizations, consents, and approvals of all governmental
agencies and authorities required to be obtained in order to permit
consummation of the transactions contemplated by this Agreement,
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in a form satisfactory to each of E/One, Sub, and PCC in its reasonable
discretion, and the waiting period under the HSR Act will have expired or
been terminated early.
7.2 E/ONE STOCKHOLDER APPROVAL. If necessary to approve the Merger
under applicable law, the Agreement and the Merger shall have been duly
adopted and approved, at a duly called and held Stockholders' Meeting, acting
in accordance with applicable provisions of NYBCL including but not limited
to Section 903 and the Articles of Incorporation and Bylaws of E/One, by a
vote of the holders of at least 66 2/3 percent of the issued and outstanding
Shares of E/One Common Stock (Stockholder Approval).
7.3 NO PROHIBITIONS. There has not been promulgated or issued a law,
statute, rule, regulation, decree, order, injunction or ruling by any
Governmental Entity that remains in effect and prohibits, restrains, enjoins
or restricts the consummation of the Merger.
7.4 NO SUITS. No action, suit or other proceeding is pending against
any party to this Agreement to prohibit, restrain, enjoin, restrict or
otherwise prevent the consummation of the transactions contemplated by this
Agreement.
7.5 OFFER. Sub or its permitted assignee shall have purchased all
Shares validly tendered and not withdrawn pursuant to the Offer; PROVIDED,
HOWEVER, that neither PCC nor Sub shall be entitled to assert the failure of
this condition if, in breach of this Agreement or the terms of the Offer, Sub
fails to purchase any Shares validly tendered and not withdrawn pursuant to
the Offer.
ARTICLE 8
TERMINATION
8.1 TERMINATION BY PCC AND/OR E/ONE. This Agreement may be
terminated without further liability at any time before the Closing Date:
8.1.1 MUTUAL CONSENT. By mutual consent of PCC, Sub, and E/One; or
8.1.2 INJUNCTION OR RESTRAINT. By either PCC or E/One, if any
Governmental Entity has promulgated or issued a law, statute, rule,
regulation, decree, order, injunction, or ruling or taken any other action
prohibiting, restraining, enjoining, restricting or otherwise prohibiting the
Offer or the Merger, that has become final and nonappealable, or if clearance
under the HSR Act is not received within sixty (60) days after the filing of
the premerger notification and report form.
8.1.3 FAILURE OF OFFER. By PCC or E/One if the Offer is
terminated or expires in accordance with its terms as the result of the
failure of any of the Offer Conditions without Sub having purchased any
Shares pursuant to the Offer; PROVIDED, HOWEVER, that the right to terminate
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under this Section 8.1.3 is not available to any party whose failure to
perform any of its covenants or agreements under this Agreement results in
the failure of any condition.
8.2 TERMINATION BY PCC. PCC, if not then in default, may terminate
this Agreement at any time before the Closing Date upon written notice to
E/One of the occurrence of any of the following:
8.2.1 BREACH BY E/ONE. A breach by E/One of one or more of its
representations or warranties or a default in the observance or performance
of one or more of its covenants or agreements under this Agreement, which
breach or default is not cured within ten (10) days after E/One has notice
thereof, except for breaches and defaults which, individually or in the
aggregate, would not have a Combined Material Adverse Effect or materially
impair the ability of the parties to consummate the transactions contemplated
by the Agreement.
8.2.2 WITHDRAWAL OF E/ONE BOARD APPROVAL. If (i) the Board of
Directors of E/One or any committee thereof has withdrawn or modified in a
manner adverse to PCC or Sub its approval or recommendation of the Offer or
this Agreement, or approved or recommended any Takeover Proposal, or (ii)
E/One has entered into a definitive agreement with respect to any Superior
Proposal in accordance with Section 6.2.2 of this Agreement.
8.3 TERMINATION BY E/ONE. E/One, if not then in default, may
terminate this Agreement at any time before the Closing Date upon written
notice to PCC of the occurrence of any of the following:
8.3.1 BREACH BY PCC OR SUB. A breach by PCC or Sub of one or
more of its representations or warranties or a default in the observance or
performance of one or more of its covenants or agreements under this
Agreement, which breach or default is not cured within ten (10) days after
PCC and Sub have notice thereof, except for breaches and defaults which,
individually or in the aggregate, would not have a Combined Material Adverse
Effect or materially impair the ability of the parties to consummate the
transactions contemplated by the Agreement.
8.3.2 LEGAL REQUIREMENTS OF DIRECTORS. If E/One determines in
accordance with Section 6.2.2 after consultation with legal counsel that it
is necessary to terminate the Merger or the Agreement in order for its
directors to comply with their fiduciary duties under applicable law PROVIDED
it has complied with the notice provisions and other requirements set forth
in Section 6.22 of this Agreement, including the notice provisions and
payment provisions thereof.
8.4 PROCEDURE; EFFECT OF TERMINATION. If either PCC or E/One elects
to terminate this Agreement pursuant to this Article 8, the terminating party
will promptly give written notice thereof to the other party. In the event
of termination pursuant to this Article 8, the parties will be released from
all liabilities and obligations under this Agreement, other than the
obligations under Section 6.8 and Section 8.5 and except that nothing herein
shall relieve any party from
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<PAGE>
liability for damages to the extent arising from a breach of this Agreement
before termination. The Confidentiality Agreement dated November 25, 1997
between E/One and PCC (the Confidentiality Agreement) is and will remain
until the Effective Time in full force and effect and will survive any
termination of this Agreement.
8.5 BREAK-UP FEES.
8.5.1 WRONGFUL TERMINATION BY PCC. In the event that the Offer
is not consummated due to PCC's termination of this Agreement in breach of
this Agreement, then PCC shall pay, or cause to be paid, to E/One an amount
equal to Two Million Dollars ($2.0 million) in cash.
8.5.2 WRONGFUL TERMINATION BY E/ONE. In the event that the Offer
is not consummated due to E/One's termination of this Agreement in breach of
this Agreement, then E/One shall pay, or cause to be paid, to PCC an amount
equal to Two Million Dollars ($2.0 million) in cash.
8.5.3 TAKEOVER PROPOSAL. In the event that E/One determines
after consultation with legal counsel that it is necessary to terminate the
Agreement in order for its directors to comply with their fiduciary duties
under applicable Legal Requirements (such Legal Requirements shall be
defined as any applicable state law in effect) pursuant to Section 6.2.2 and
8.3.2 of this Agreement and E/One agrees to a Takeover Proposal within 270
days of the date of termination of this Agreement, or agrees to a Superior
Proposal within one year of the date of termination of this Agreement, then
E/One shall pay or cause to be paid to PCC an amount equal to Three Million
Dollars ($3.0 million) in cash (the Termination Fee).
8.5.4 FAILURE OF CONDITION. Neither PCC nor E/One shall be
treated as terminating this Agreement in breach of this Agreement if the
terminating party determines in good faith that a condition of its
obligations under this Agreement has not been met, and such failed condition
is not within the terminating party's control.
8.5.5 FEE DUE; EXCLUSIVE REMEDY. Any break-up fee pursuant to this
Section 8.5 is due and payable within 10 days of the date of termination.
Receipt of the break-up fee is the exclusive remedy of the recipient.
ARTICLE 9
GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
Agreements in Article 2 and Article 9 shall survive the Effective Time. The
remainder of the representations, warranties, and agreement in this Agreement
or in any instrument delivered pursuant to this Agreement will not survive
the Effective Time, and shall terminate at the Effective Time or upon
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<PAGE>
termination of this Agreement pursuant to Section 8.1. This Section 9.1 will
not limit any covenant or agreement of the parties that by its terms provides
for performance after the Effective Time of the Merger.
9.2 FURTHER ACTION. E/One, Sub, and PCC will execute any documents
and take any additional action reasonably required to fully implement this
Agreement.
9.3 ENTIRE AGREEMENT. This Agreement and the Confidentiality
Agreement contain the entire agreement and understanding among E/One, Sub,
and PCC regarding the subject matter hereof and thereof and supersede and
replace all prior or contemporaneous negotiations, representations, or
agreements, written or oral.
9.4 ASSIGNMENT. This Agreement may not be assigned by any party by
operation of law or otherwise without the prior written consent of each of
E/One and PCC, except that PCC and Sub may assign all or any of their rights
and obligations to any wholly-owned subsidiary of PCC; PROVIDED, HOWEVER,
that no such assignment shall relieve the assigning party of its obligations
hereunder if the assignee does not perform the obligations.
9.5 BINDING EFFECT; NO THIRD PARTY BENEFIT. This Agreement will
inure to the benefit of and be binding upon each of the parties and their
respective successors and assigns, subject to the restrictions on assignment
contained in Section 9.4. Nothing express or implied in this Agreement is
intended or will be construed to confer upon or give to any Person other than
the parties to this Agreement any rights or remedies under or by reason of
this Agreement or any transaction contemplated by it.
9.6 WAIVER. Failure of any party at any time to require performance
of any provision of this Agreement will not limit such party's right to
enforce such provision, nor will any waiver of any breach of any provision of
this Agreement constitute a waiver of any succeeding breach of such provision
or a waiver of such provision itself. Any waiver of any provision of this
Agreement will be effective only if set forth in writing and signed by the
party to be bound.
9.7 GOVERNING LAW. This Agreement will be governed and construed in
accordance with the laws of the State of New York.
9.8 SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any Person or circumstance is to any extent held to be
invalid or unenforceable, the remainder of this Agreement and the application
of such term or provision to Persons or circumstances other than those as to
which it is held invalid or unenforceable will not be affected thereby, and
each term or provision of this Agreement will be valid and enforceable to the
fullest extent permitted by law.
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<PAGE>
9.9 TIME OF ESSENCE. E/One, Sub, and PCC hereby acknowledge and
agree that time is strictly of the essence with respect to each and every
term, condition, obligation, and provision of this Agreement.
9.10 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which will be deemed an original, but all of which taken together
will constitute one and the same instrument, binding on the parties. If this
Agreement is executed in counterparts, each party will transmit by facsimile
a copy of the signed counterpart upon execution and will cause an executed
original counterpart to be transmitted by courier service to the other
parties.
9.11 AMENDMENTS. This Agreement may not be modified or amended except
by the written agreement of E/One, Sub, and PCC. This Agreement may not be
terminated other than pursuant to Article 8 except by the written agreement
of E/One, Sub, and PCC. A party may waive one or more of its rights under
this Agreement only in a written instrument signed by the party.
9.12 AUTHORITY. The person executing this Agreement on behalf of each
party warrants that she/he has the authority to execute this Agreement and to
so bind that party as provided in this Agreement.
9.13 STANDSTILL. In the event that PCC does not make the Offer
pursuant to this Agreement or if the Offer is not successful other than in
circumstances involving breach by E/One of this Agreement, PCC and its
affiliates shall not directly or indirectly, for a period of eighteen (18)
months from the date of this Agreement, unless the E/One's Board of Directors
approves such action in writing in advance, (i) acquire or offer to acquire,
seek, propose or agree to acquire, by means of a purchase, agreement,
business combination or in any other matter, beneficial ownership of any
securities or assets of E/One, including rights or options to acquire such
ownership, (ii) seek or propose to influence, change or control the
management or Board of Directors of E/One, or (iii) make any public
disclosure or announcement or submit a proposal for a transaction not in the
ordinary course of business, or take any action which could require the other
party to make any public disclosure, with respect to the matters set forth in
this Letter or in any way participate directly or indirectly in any
solicitation of proxies (as such term is defined in Rule 14a-1 under the
Exchange Act) to vote, or influence any person or entity with respect to the
voting of, any voting securities of E/One, provided that this Section shall
not apply in the event that E/One receives a Takeover Proposal from a party
that is not affiliated with PCC.
9.14 NOTICES. All notices or other communications required or
permitted under this Agreement must be in writing and must be personally
delivered, sent by registered or certified mail, postage prepaid, return
receipt requested, or sent by facsimile. Any notice, if mailed, will be
deemed given when received; any notice, if transmitted by facsimile, will be
deemed given when transmitted and electronically confirmed. Notices will be
given to the following Persons:
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<PAGE>
To PCC: Precision Castparts Corp.
4650 SW Macadam Avenue, Suite 440
Portland, OR 97201-4254
Attention: William D. Larsson
Telephone: (503) 417-4810
Facsimile No.: (503) 417-4817
With a copy to: Stoel Rives LLP
900 SW Fifth Avenue, Suite 2300
Portland, OR 97204
Attention: Ruth A. Beyer
Telephone: (503) 294-9332
Facsimile No.: (503) 220-2480
To E/One: Environment One Corporation
2773 Balltown Road
Niskayuna, NY 12309-1090
Attention: Stephen V. Ardia
Telephone: (518) 346-6188
Facsimile No.: (518) 346-6815
With a copy to: Bond, Shoeneck & King
One Lincoln Center
Syracuse, NY 13202
Attention: George J. Getman
Telephone: (315) 422-0121
Facsimile No.: (315) 422-3598
37
<PAGE>
ARTICLE 10
DEFINITIONS
The following terms are defined in this Agreement in the sections
identified below:
<TABLE>
<CAPTION>
Term Definition Section
---- ------------------
<S> <C> <C>
Agreement Preamble
Certificate of Merger 2.4
Certificates 3.2.2
Closing and Closing Date 2.8
Code 4.14.1
Confidentiality Agreement 8.4
Contamination 4.13.1
Contracts 4.8
Copyrights 4.20
Deferred Compensation Plan 4.23
Disclosure Schedule Introduction to Article 4
Dissenting Shareholders 3.1.5
DOJ 6.4
E/One Preamble
E/One Board Recitals
E/One Returns 4.14.1
E/One SEC Document 4.5
E/One Stock Plans 4.3
Effective Time 2.4
Environmental Law 4.13.1
ERISA 4.16
ERISA Plans 4.16
Exchange Act 1.1.1, 1.2.2, 4.5
Expiration Date 1.1.1
FTC 6.4
Governmental Entity 4.2, 5.3
Hazardous Substance 4.13.1
HSR Act 6.4
Information Statement 4.6
Intellectual Property Assets 4.20
IRS 4.16
Leases 4.10
Legal Requirements 8.5.3
Licenses 4.12
Marks 4.20
38
<PAGE>
<CAPTION>
Term Definition Section
---- ------------------
<S> <C> <C>
Material Adverse Change Introduction to Article 4
Material Adverse Effect Introduction to Article 4
Material Properties and Assets 4.9
Merger Recitals
Merger Consideration 3.1.1
Minimum Condition 1.1.4
NOL 4.14.3
NYBCL Recitals
Notice of Superior Proposal 6.2.2
Offer Recitals
Offer Conditions 1.1.1, 1.1.4
Offer Documents 1.1.3
Offer Price 1.1.1
Patents 4.20
Paying Agent 3.2.1
Person 3.2.4
Plans 3.3
Policies 4.19
PCC Preamble
PCC Parties Preamble
Proxy Statement 2.2.2
Schedule 14D-1 1.1.3
Schedule 14D-9 1.2.2
SEC 4.5
Securities Act 4.5
Share, Shares Recitals
Stockholder Approval 2.2.1, 7.2
Stockholders' Meeting 2.2.1
Sub Preamble
Superior Proposal 6.2.2
Surviving Corporation 2.5
Taxes 4.14.4
Takeover Proposal 6.2.1
Tender Offer Acceptance Date 3.3
Tendered Shares 1.1.4
Termination Fee 8.5.3
</TABLE>
39
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement, effective
the day and year first written above.
PRECISION CASTPARTS CORP. ENVIRONMENT ONE CORPORATION
By: By:
------------------------------ ---------------------------------
(Signature) (Signature)
Name: Name:
Title: Title:
EOC ACQUISITION CORPORATION
By:
------------------------------
(Signature)
Name:
Title:
40
<PAGE>
ANNEX A
OFFER CONDITIONS
1. DEFINED TERMS. Unless otherwise defined in this Annex A,
capitalized terms that appear in this Annex A to the Agreement and Plan of
Merger among Precision Castparts Corp., Environment One Corporation and EOC
Acquisition Corporation have the meanings assigned in the Agreement.
2. OFFER CONDITIONS. Notwithstanding any other provision of the
Offer, Sub shall not be required to accept for payment or pay for any Shares
tendered pursuant to the Offer unless (i) the Minimum Condition shall have
been satisfied and (ii) any applicable waiting period under the HSR Act shall
have expired or been terminated. Furthermore, Sub may terminate or amend the
Offer and may postpone the acceptance for payment of and payment for Shares
tendered, if at any time on or after the date of this Agreement, and prior to
the acceptance for payment of Shares, any of the following conditions shall
exist:
(a) there shall have been issued and shall remain in effect any
injunction, order or decree by any court or governmental, administrative or
regulatory authority or agency, domestic or foreign, which (i) restrains or
prohibits the making of the Offer or the consummation of the Merger, (ii)
prohibits or limits ownership or operation by E/One, PCC or Sub of all or any
material portion of the business or assets of E/One, or PCC and its
subsidiaries, taken as a whole, or compels E/One, PCC or any of its
subsidiaries to dispose of or hold separate all or any material portion of
the business or assets of E/One or PCC and its subsidiaries, taken as a
whole, in each case as a result of the Offer or the Merger; (iii) imposes
material limitations on the ability of PCC or Sub to exercise effectively
full rights of ownership of any Shares, including, without limitation, the
right to vote any Shares acquired by Sub pursuant to the Offer, or otherwise
on all matters properly presented to E/One's stockholders, including, without
limitation, the approval and adoption of this Agreement and the Offer and the
Merger; or (iv) requires divestiture by PCC or Sub of any material portion of
the Shares;
(b) there shall have been any action taken, or any statute,
rule, regulation order or injunction enacted, entered, enforced, promulgated,
amended, issued or deemed applicable to (i) PCC, E/One or any subsidiary or
affiliate of PCC or (ii) any action, by any legislative body, court,
government or governmental, administrative or regulatory authority or agency,
domestic or foreign (other than, in the case of both (i) and (ii), the
application of the waiting period provisions of the HSR Act to the Offer or
the Merger), which results in any of the consequences referred to in clauses
(i) through (iv) of paragraph (a) above;
(c) there shall have occurred and be continuing (i) a 25
percent or greater decline in the Dow Jones Average of Industrial Stocks and
the Standard and Poor's 500 Index, measured from the date of the Agreement,
(ii) any general suspension of trading in, or limitation on prices for,
securities on the New York Stock Exchange or in the over-the-counter market,
(iii)
ANNEX A - Page 1
<PAGE>
a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iv) any limitation (whether or not
mandatory) by any governmental authority on the general extension of credit
by banks or other financial institutions, or (v) in the case of any of the
foregoing existing at the time of the commencement of the Offer, in the
reasonable judgment of PCC, a material worsening thereof;
(d) the E/One Board of Directors or any committee thereof shall
have withdrawn or modified in a manner adverse to PCC or Sub its approval or
recommendation of the Offer, the Merger or the Agreement or shall have
approved or recommended another merger, consolidation, business combination
with, or acquisition of E/One or all or substantially all its assets or
another tender offer or exchange offer for Shares, or shall have resolved to
do any of the foregoing;
(e) E/One shall have failed to perform any of its covenants in
this Agreement, which failure either individually or in the aggregate would
have a Combined Material Adverse Effect;
(f) the representations and warranties of E/One shall fail to
be true and correct in all material respects on and as of the date made or,
except as otherwise expressly contemplated hereby, on and as of any
subsequent date as if made at and as of such subsequent date, which failure
either individually or in the aggregate would have a Combined Material
Adverse Effect;
(g) this Agreement shall have been terminated in accordance with
its terms;
(h) Sub and E/One shall have agreed that Sub shall terminate
the Offer or postpone the acceptance for payment of or payment for Shares
thereunder; or
(i) since December 31, 1997, except as (i) expressly
contemplated by the Agreement, (ii) disclosed any E/One SEC Report filed
since such date and prior to the date of the Agreement or (iii) set forth in
the Disclosure Schedule to the Agreement, there shall have occurred any event
having, individually or in the aggregate, a change or effect that is
materially adverse to the business, operations, properties, financial
condition, assets or liabilities (including, without limitation, contingent
liabilities) of E/One.
The foregoing conditions are for the sole benefit of Sub and PCC and
may be asserted by Sub or PCC regardless of the circumstances giving rise to
any such condition or may be waived by Sub or PCC in whole or in part at any
time and from time to time in its sole discretion. The failure by PCC or Sub
at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right; the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances; and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to
time.
ANNEX A - Page 2
<PAGE>
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT dated as of February 24, 1998 among PRECISION
CASTPARTS CORP., an Oregon corporation ("PCC"), EOC ACQUISITION CORPORATION, a
New York corporation and a direct or indirect wholly owned subsidiary of PCC
("Sub"), and the other parties identified on SCHEDULE A hereto (each, a
"Stockholder").
WHEREAS, each Stockholder desires that Environment One Corporation, a New
York corporation (the "Company"), PCC and Sub enter into an Agreement and Plan
of Merger dated as of the date hereof (as the same may be amended or
supplemented, the "Merger Agreement") with respect to the merger of Sub with and
into the Company (the "Merger"); and
WHEREAS, each Stockholder is executing this Agreement as an inducement to
PCC and Sub to enter into and execute the Merger Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by PCC and
Sub of the Merger Agreement and the mutual covenants, conditions and agreements
contained herein and therein, the parties agree as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES. Each Stockholder severally,
and not jointly, represents and warrants to PCC and Sub as follows:
(a) Such Stockholder is the record or beneficial owner of, or has the
power to dispose, the number of shares of Common Stock of the Company (the
"Company Common Stock"), and holds options for shares of Company Common Stock,
each as set forth opposite such Stockholder's name in SCHEDULE A hereto (as may
be adjusted from time to time pursuant to Section 4, such Stockholder's
"Shares"). Except for such Stockholder's Shares, such Stockholder is not the
record or beneficial owner of any shares of Company Common Stock. Any of such
Shares which are described on SCHEDULE A as option shares shall be deemed
"Option Shares" for the purposes of this Agreement. All other shares shall be
deemed "Owned Shares." Any Option Shares which are exercised prior to the
termination of this Agreement shall be deemed to be "Owned Shares."
(b) This Agreement has been executed and delivered by such Stockholder and
constitutes the legal, valid and binding obligation of such Stockholder,
enforceable against such Stockholder in accordance with its terms, except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors' rights
generally, and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies. To the best of
Stockholder's knowledge, neither the execution and delivery of this Agreement
nor the consummation by such Stockholder of the transactions contemplated hereby
will result in a
<PAGE>
violation of, or a default under, or conflict with, any contract, trust,
commitment, agreement, understanding, arrangement or restriction of any kind to
which such Stockholder is a party or bound or to which such Stockholder's Shares
are subject.
(c) Such Stockholder's Owned Shares and the certificates representing such
Owned Shares are now and at all times during the term hereof will be held by
such Stockholder, or by a nominee or custodian for the benefit of such
Stockholder, free and clear of all liens, claims, security interests, proxies,
voting trusts or agreements, understandings or arrangements or any other
encumbrances whatsoever, except for any such encumbrances arising hereunder.
(d) Such Stockholder understands and acknowledges that PCC is entering
into, and causing Sub to enter into, the Merger Agreement in reliance upon such
Stockholder's execution and delivery of this Agreement.
SECTION 2. PURCHASE AND SALE OF SHARES. So long as the Offer Price in the
Offer for all Shares is not less than $15.25 in cash (net to the seller), each
Stockholder hereby severally agrees that he will tender or cause to be tendered
his Shares into the Offer prior to the expiration of the Offer and that he will
not withdraw any Shares so tendered (it being understood that the obligation
contained in this sentence is unconditional). In addition, each Stockholder
hereby severally agrees to sell to Sub, and Sub hereby agrees to purchase, all
such Stockholder's Owned Shares at a price per Share equal to the Offer Price,
provided that such obligations to purchase and sell are both subject to (i) Sub
having accepted Shares for payment under the Offer and the Minimum Condition (as
defined in the Merger Agreement) having been satisfied, and (ii) the expiration
or termination of any applicable waiting period under the HSR Act.
SECTION 3. COVENANTS. Each Stockholder severally, and not jointly, agrees
with, and covenants to, PCC and Sub as follows: such Stockholder shall not,
except as contemplated by the terms of this Agreement, during the term of this
Agreement, (i) transfer (which term shall include, without limitation, for the
purposes of this Agreement, any sale, gift, pledge or other disposition), or
consent to any transfer of, any or all of such Stockholder's Shares or any
interest therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares or any
interest therein, (iii) grant any proxy, power-of-attorney or other
authorization or consent in or with respect to such Shares other than in
connection with a meeting to approve the Merger or the annual meeting of
Stockholders of the Company, (iv) deposit such Shares into a voting trust or
enter into a voting agreement or arrangement with respect to such Shares, or (v)
take any other action that would in any way restrict, limit or interfere with
the performance of its obligations hereunder or the transactions contemplated
hereby; provided that each Stockholder shall be entitled to transfer all or any
portion of such Shareholder's Shares to any person or entity which agrees in
writing to be bound by the provisions of this Agreement.
2
<PAGE>
SECTION 4. CERTAIN EVENTS. Each Stockholder agrees that this Agreement
and the obligations hereunder shall attach to such Stockholder's Shares and
shall be binding upon any person or entity to which legal or beneficial
ownership of such Shares shall pass, whether by operation of law or otherwise,
including without limitation such Stockholder's heirs, guardians, administrators
or successors. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure of the
Company affecting the Company Common Stock, or the acquisition of additional
shares of Company Common Stock or other securities or rights of the Company by
any Stockholder, the number of Owned Shares and Option Shares listed on SCHEDULE
A beside the name of such Stockholder shall be adjusted appropriately and this
Agreement and the obligations hereunder shall attach to any additional shares of
Company Common Stock or other securities or rights of the Company issued to or
acquired by such Stockholder.
SECTION 5. TRANSFER. Each Stockholder agrees with and covenants to PCC
that such Stockholder shall not request that the Company register the transfer
(booked as entry or otherwise) of any certificated or uncertificated interest
representing any of the securities of the Company, unless such transfer is made
in compliance with this Agreement.
SECTION 6. VOIDABILITY. If prior to the execution hereof, the Board of
Directors of the Company shall not have duly and validly authorized and approved
by all necessary corporate action the acquisition of Company Common Stock by PCC
and Sub and other transactions contemplated by this Agreement and the Merger
Agreement, so that by the execution and delivery hereof PCC or Sub would become,
or could reasonably be expected to become, an "interested stockholder" with whom
the Company would be prevented for any period pursuant to Section 912 of the
NYBCL from engaging in any "business combination" (as such terms are defined in
Section 912 of the NYBCL), then this Agreement shall be void and unenforceable
until such time as such authorization and approval shall have been duly and
validly obtained.
SECTION 7. STOCKHOLDER CAPACITY. No person executing this Agreement who
is a director or officer of the Company makes any agreement or understanding
herein in his capacity as such director or officer. Each Stockholder signs
solely in his capacity as the record holder and beneficial owner of such
Stockholder's Shares and nothing herein shall limit or affect any actions taken
by a Stockholder in his capacity as an officer or director for the Company to
the extent specifically permitted by the Merger Agreement, including the
fiduciary duties of officers and directors in accordance with New York law.
SECTION 8. FURTHER ASSURANCES. Each Stockholder shall, upon request of
PCC or Sub, execute and deliver any additional documents and take such further
actions as may reasonably be deemed by PCC or Sub to be necessary or desirable
to carry out the provisions hereof.
SECTION 9. TERMINATION. This Agreement, and all rights and obligations of
the parties hereunder, shall terminate upon the earlier of (a) the date upon
which the Merger
3
<PAGE>
Agreement is terminated by the Company, PCC or Sub for any reason in accordance
with its terms, (b) the date that PCC or Sub shall have purchased and paid for
the Shares of each Stockholder pursuant to Section 2, or (c) May 30, 1998.
SECTION 10. MISCELLANEOUS.
(a) Capitalized terms used and not otherwise defined in this Agreement
shall have the respective meanings assigned to such terms in the Merger
Agreement.
(b) All notices, requests, claims, demands and other communications under
this Agreement shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of delivery) to the
parties at the following addresses (or such other address for a party as shall
be specified by like notice): (i) if to PCC or Sub, to the address set forth in
Section 9.13 of the Merger Agreement, and (ii) if to a Stockholder, to the
address set forth on SCHEDULE A hereto, or such other address as may be
specified in writing by such Stockholder.
(c) The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
(d) This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement, and shall become effective
(even without the signature of any other Stockholder) as to any Stockholder when
one or more counterparts have been signed by each of PCC, Sub and such
Stockholder and delivered to PCC, Sub and such Stockholder.
(e) This Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement, and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(f) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, regardless of the laws that might otherwise
govern under applicable principles of conflicts or laws thereof.
(g) Neither this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in party, by operation of
law or otherwise, by any of the parties without the prior written consent of the
other parties, except by laws of descent. Any assignment in violation of the
foregoing shall be void.
(h) If any term, provision, covenant or restriction herein, or the
application thereof to any circumstance, shall, to any event, be held by a court
of competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions, covenants and restrictions herein and the application
thereof to any other circumstances, shall remain in full
4
<PAGE>
force and effect, shall not in any way be affected, impaired or invalidated, and
shall be enforced to the fullest extent permitted by law.
(i) Each Stockholder agrees that irreparable damage would occur and that
PCC and Sub would not have any adequate remedy at law in the event that any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that PCC
and Sub shall be entitled to an injunction or injunctions to prevent breaches by
any Stockholder of this Agreement and to enforce specifically the terms and
provisions of this Agreement.
(j) No amendment, modification or waiver in respect of this Agreement
shall be effective against any party unless it shall be in writing and signed by
such party.
IN WITNESS WHEREOF, PCC, Sub and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
PRECISION CASTPARTS CORP.
By: /S/ WILLIAM E. LARSSON
-------------------------------------
Name: William E. Larsson
Title: Vice President & Chief Financial
Officer
EOC ACQUISITION CORPORATION
By: /S/ WILLIAM E. LARSSON
-------------------------------------
Name: William E. Larsson
Title: Vice President
5
<PAGE>
STOCKHOLDERS
/S/ WALTER W. AKER /S/ JOHN L. ALLEN
- ----------------------------------- -----------------------------------
Walter W. Aker John L. Allen
/S/ STEPHEN V. ARDIA /S/ ANGELLO DOUNOUCOS
- ----------------------------------- -----------------------------------
Stephen V. Ardia Angello Dounoucos
/S/ LARS G. GRENBACK /S/ ROBERT G. JAMES
- ----------------------------------- -----------------------------------
Lars G. Grenback Robert G. James
/S/ ROLF E. SODERSTROM /S/ MARK E. ALEXANDER
- ----------------------------------- -----------------------------------
Rolf E. Soderstrom Mark E. Alexander
/S/ DAVID M. DOIN /S/ BRIAN BUCHINSKI
- ----------------------------------- -----------------------------------
David M. Doin Brian Buchinski
/S/ GEORGE A. EARLE III /S/ KATHLEEN A. PARRY
- ----------------------------------- -----------------------------------
George A. Earle III Kathleen A. Parry
/S/ GEORGE A. VORSHEIM JR. /S/ PHILIP W. WELSH
- ----------------------------------- -----------------------------------
George A. Vorsheim Jr. Philip W. Welsh
6
<PAGE>
November 25, 1997
Mr. William C. McCormick
Chairman & CEO
Precision Castparts Corporation
4650 SW Macadam Avenue
Suite 440
Portland, Oregon 97201-4254
Re: Confidentiality Agreement
-------------------------
Dear Bill:
You have expressed interest in a possible transaction (the
"Transaction") involving Environment One Corporation (the "Company") and have
requested certain information concerning the Company. As a condition of
furnishing you with such information, including, without limitation, certain
non-public confidential information and proprietary business practices and
concepts concerning the Company's business, properties, finances, affairs and
technology, whether or not such information is in writing or given orally,
the Company is requiring that you agree, as set forth below, to treat
confidentially such information, any other information that the Company, The
Nassau Group, Inc. or the Company's affiliates, advisors, representatives,
employees or agents (together with The Nassau Group, Inc. the "Company
Parties") furnish to you and any notes, analyses, compilations, studies,
interpretations, or other documents prepared by you or your representatives
(as defined below) that contain or are based upon such information
(collectively, the "Evaluation Material")
For purposes of this letter agreement, any Evaluation Material
furnished to you by an officer or employee, or an agent or advisor to the
Company, regardless of the date furnished and regardless of the capacity in
which such officer, employee, agent or advisor purports to be acting, shall
be deemed Evaluation Material furnished by or on behalf of the Company. You
agree, on your behalf and on behalf of your Representatives, (i) that the
Evaluation Material will be used only in connection with, and to assist in
your evaluation of, the Transaction, (ii) that all Evaluation Material will
be kept strictly confidential by you and your Representatives, and (iii) that
all information furnished by the Company or the Company Parties pursuant to
this Agreement will remain the exclusive property of the Company and that you
and your Representatives will hold all of such information in confidence for
the exclusive benefit of the Company (except that such information may be
used by you for the purposes contemplated herein). You specifically agree
that Evaluation Material shall not be used, directly or indirectly to compete
with or emulate the Company's business. You agree to transmit the Evaluation
Material only to those of your directors, officers, employees, affiliates,
agents, attorneys, accountants, advisors, financing sources or partners, and
others ("Representatives") who need to know such information for the purpose
of assisting you in your evaluation of the Transaction and who shall (i) be
advised by you of this Agreement and (ii) agree to be bound by the provisions
of this Agreement. You and your Representatives shall not, except as
described in the previous sentence or as hereinafter provided, disclose
Evaluation Material or any of the terms, conditions, or other facts with
respect to the possible Transaction to others without the prior written
consent of the Company. Without limiting the foregoing, you and your
Representatives agree to keep even existence of discussions between you and
the Company strictly confidential. You shall be responsible for any such
breach of this Agreement by you and/or any of your Representatives.
- 1 -
<PAGE>
Mr. William C. McCormick
Precision Castparts Corporation
November 25, 1997
If you conduct any portion of your investigation on premises made
available by the Company, you shall not remove Evaluation Material made
available by the Company from those premises without the Company's consent. If
you determine that you do not wish to proceed with a Transaction, you will so
notify the Company immediately.
You further agree that any and all requests for Evaluation Material,
other communications regarding the possible Transaction, and requests for
additional information shall be made only to individuals designated to you in
writing by the Company and that, without the Company's prior written consent,
you will not initiate any contacts of any kind with the staff or employees of
the Company. Upon the Company's request, you will promptly identify in writing
each person or other entity to whom any part of the Evaluation Material is
disclosed.
The Company and the Company Parties make no representation or
warranty, expressed or implied, as to the accuracy or completeness of any or all
of the Evaluation Material. The Company shall have no obligation to update any
Evaluation Material. The Company and Company Parties will have no liability for
actions taken by you or your Representatives in reliance on any information
provided by the Company or the Company Parties with respect to a possible
Transaction. Unless and until a definitive Transaction agreement between the
Company and you is executed and delivered, the Company will not have any legal
obligation of any kind by virtue of this Agreement or any other written or oral
expression with respect to the possible transaction.
It is agreed that we may elect at any time to terminate further
access to, and your review of, the Evaluation Material and that as soon as
practicable after such termination, you will, upon the Company's request,
return all Evaluation Material, but that such termination will not affect or
eliminate your obligations and those of your Representatives by reason of
this Agreement. It is further agreed that we shall not be obligated pursuant
to this Agreement to disclose any particular confidential information or
Evaluation Material.
In the event that you or any of your Representatives are required
(by oral questions, interrogatories, requests for information or document
subpoena, or similar legal process) to disclose any of the Evaluation
Material, you will provide the Company with prompt notice of such request(s)
so that the Company may seek an appropriate protective order or other
appropriate remedy and/or waive your compliance with the provisions of this
Agreement. If in the absence of a protective order or other remedy or the
receipt of a waiver by the Company, you or your Representatives are
nonetheless, in the written opinion of counsel, legally compelled to disclose
Evaluation Material to any tribunal or else stand liable for contempt or
suffer other censure or penalty, you or your Representatives may, without
liability hereunder, disclose to such tribunal only that portion of the
Evaluation Material which such counsel advises you is legally required to be
disclosed, provided that you exercise your best efforts to preserve the
confidentiality of the Evaluation Material, including, without limitation, by
cooperating with the Company to attain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Evaluation Material by such tribunal; provided, however, that after any such
disclosure such disclosed information shall remain confidential and subject
to the terms of the Agreement.
In the event that the Transaction is not effected after you have
been furnished with Evaluation Material, you will promptly upon the request
of the Company (i) deliver to the Company all documents and other tangible
media that contain or reflect information furnished by the Company or the
- 2 -
<PAGE>
Mr. William C. McCormick
Precision Castparts Corporation
November 25, 1997
Company Parties (including all copies, reproductions, digests, abstracts,
analyses and notes) and that are in your or your Representatives' possession or
control and (ii) destroy all documents and other tangible media that contain or
reflect the Evaluation Material (including all copies, reproductions, digests,
abstracts, analyses and notes) in your possession or control, or your
Representatives' possessions or control, in each instance without retaining a
copy of any Evaluation Material (whether returned or destroyed pursuant to
clauses (i) or (ii) above), and will destroy any and all related computer
entries of any such Evaluation Material, without retaining a copy thereof.
You further agree for a period of two years from the date hereof, that
you or your affiliates shall not solicit or hire any of the employees of the
Company who are employees of the Company during the period of your investigation
of the Company while they are still employed by the Company. Nothing in this
Agreement shall be construed as a grant by the Company of any right, title or
interest in the Evaluation Material except the right to use such Evaluation
Material for the purpose and to the extent set forth in this Agreement.
The term Evaluation Material shall not include information that you
demonstrate by clear and convincing evidence has (i) become or has been
generally available to the public other than as a result of disclosure by
you, your Representatives, or other improper means, (ii) was known by you, or
was acquired by you without any known breach of a confidentiality obligation
prior to its disclosure to you by the Company or its representatives, as
evidenced by documentation or other physical evidence predating the date of
this Agreement or (iii) has become available to you on a non-confidential
basis from a source other than the Company or its representatives, provided,
however, that such source was otherwise legally entitled to make such
disclosure to you and you notify the Company of such acquisition within ten
(10) days after the acquisition or, if the acquisition precedes disclosure by
the Company, promptly upon such disclosure.
You understand that a breach by you of this Agreement would cause
substantial and irreparable damage to the Company and that money would be an
inadequate remedy therefor. Accordingly, you acknowledge and agree that the
Company shall be entitled to any other available remedies to an injunction,
specific performance and/or equitable relief as a remedy for such breach.
Each party represents and warrants to the other that (a) it has
duly authorized, executed and delivered this Agreement, and (b) it has not
entered and will not enter into any agreement inconsistent herewith. This
Agreement (a) shall be governed by and construed in accordance with the laws
of New York State, (b) shall be binding upon such parties, successors,
assigns, legal representatives and (c) may not be amended, supplemented,
terminated, or any provision herein waived except by written agreement of
both parties hereto. The parties hereto agree that any dispute thereunder
shall be submitted exclusively to the federal or appropriate New York State
court having jurisdiction located in Schenectady County, New York, and the
parties consent to the venue and jurisdiction of such courts. This Agreement
represents the entire understanding between the parties with respect to the
subject matter hereof. No contemporaneous or prior written or oral agreement
shall be construed to alter, repeal or modify this Agreement and no consent
to or waiver of any breach of or default under any provision of this
Agreement shall be construed as a consent to or waiver of any other such
breach or default. This Agreement may be executed in two or more
counterparts, all of which together shall constitute a single instrument. In
making proof of this Agreement, it shall not be necessary to produce or
account for more than one fully executed counterpart.
- 3 -
<PAGE>
Mr. William C. McCormick
Precision Castparts Corporation
November 25, 1997
If you agree to the terms and conditions set forth in this letter
Agreement, please execute the duplicate copy of this letter in the space
provided below and return it to my attention.
Very truly yours,
THE NASSAU GROUP, INC.
/s/ J. Francis Lavelle
----------------------
Mr. J. Francis Lavelle
Managing Director
The undersigned agrees to be bound by the terms and conditions of this
letter.
Confirmed and agreed to as of this date:
PRECISION CASTPARTS CORPORATION
By: /s/ William C. McCormick
-------------------------
Mr. William C. McCormick, 11/25/97
Chairman & CEO
Confirmed and accepted:
THE COMPANY
By: /s/ Stephen V. Ardia
-------------------------
Chairman, President and
Chief Executive Officer
- 4 -
<PAGE>
February 24, 1998
Mr. Stephen V. Ardia
c/o Environment One Corporation
2773 Balltown Road
Niskayuna, NY 12309-1090
RE: EMPLOYMENT AGREEMENT
Dear Steve:
This Employment Agreement (this "Agreement") sets forth our agreement
concerning the terms of your employment by Environment One Corporation ("E/One"
or the "Company") following its acquisition by Precision Castparts Corp. ("PCC")
pursuant to an Agreement and Plan of Merger dated February 24, 1998 (the "Merger
Agreement"), to become effective on the Tender Offer Acceptance Date as defined
in the Merger Agreement (the "Effective Date").
1. EMPLOYMENT OFFER.
1.1 EMPLOYMENT.
(a) You will hold the position of CEO/President of E/One beginning on
the Effective Date and perform those duties as are generally associated with
such a position. You will report to the President of PCC Flow Technologies,
Inc., and to the Board of Directors of E/One. You also agree to perform such
acts and duties as the President of PCC Flow Technologies, Inc. or the Board of
Directors of E/One may reasonably direct, to comply with all reasonable
applicable policies and procedures of E/One and, as reasonably applicable, its
parent and affiliates, and to devote such time, energy and skill to your
assignment as the President of PCC Flow Technologies, Inc. considers reasonably
necessary for the performance of your duties, provided that you will not be
required to relocate from the Albany, New York area.
(b) Your employment with E/One will continue under this Agreement
through the date that is one (1) year from the Effective Date, unless earlier
terminated by you or E/One as expressly provided in paragraph 2.1, below. Your
employment may continue beyond the one (1) year term of this Agreement, on an
at-will basis, by mutual
<PAGE>
Mr. Stephen V. Ardia
February 24, 1998
Page 2
agreement of you and E/One. Your last day of employment with E/One is referred
to herein as your Separation Date.
1.2 SALARY.
During the term of this Agreement, you will be paid a base salary at
annual rate of $150,000, payable in installments on regular Company paydays,
subject to any salary increases approved by the Board of Directors of E/One and
the President of PCC Flow Technologies, Inc. consistent with the Company's
practice of considering salary increases in April of each year.
1.3 BENEFITS.
In addition to your base compensation, you will be entitled to
participate through December 31, 1998 in the E/One bonus plan as in effect
immediately prior to the Effective Date. For the three-month period January 1,
1999 through March 28, 1999 you will be entitled to participate in a bonus
program similar to the E/One bonus program in effect for calendar year 1998,
except that bonus targets will be determined by the Company's Board of Directors
in its sole discretion and will be keyed to 1999 objectives established by the
Company's Board of Directors. You will also continue to receive the same or
comparable non-bonus employee benefits as provided by E/One to you during your
employment immediately prior to the Effective Date, provided that (i) the E/One
stock option plans will be eliminated, and (ii) the E/One Deferred Compensation
Plan will be amended to eliminate the E/One stock investment provisions and to
provide for alternate investment options. Amounts received under the bonus plan
in respect of calendar year 1998 will be eligible for deferral under the E/One
Deferred Compensation Plan, but no other future deferrals will be permitted
under that plan. You will also be eligible to participate in PCC's stock option
and stock purchase programs in accordance with the terms of those programs.
2. TERMINATION OF AGREEMENT.
2.1 TERMINATION. The term of this Agreement shall be as stated in
subparagraph 1.1(b) (the "natural expiration date"), unless terminated earlier
as follows:
(a) This Agreement may be terminated by you for any reason upon 30
days' written notice to E/One after the date that is three months after the
Effective Date.
<PAGE>
Mr. Stephen V. Ardia
February 24, 1998
Page 3
(b) This Agreement shall automatically terminate in the event of your
death or disability prior to the natural expiration date. For purposes of this
Agreement, "disability" shall mean inability to perform all or substantially all
of your responsibilities for a period of more than six (6) months.
2.2 Upon termination under Paragraph 2.1, you shall be entitled to receive
your base salary through the date of termination, payment for unused vacation
accrued through the date of termination, and no other compensation.
3. CONFIDENTIALITY, NON-SOLICITATION AND NON-COMPETITION.
3.1 PRESERVATION AND NON-USE OF CONFIDENTIAL INFORMATION. You acknowledge
that you have a fiduciary duty as an officer and employee of the Company not to
discuss Confidential Information obtained during your employment with the
Company. For purposes of this Agreement, "Confidential Information" means any
and all confidential or proprietary information concerning the Company or its
affiliates, joint venturers or other related entities (the "E/One Group"), the
disclosure of which could disadvantage the E/One Group. Confidential
Information includes trade secrets as defined under the Uniform Trade Secrets
Act.
You agree not to use Confidential Information, during the term of this
Agreement or after its termination, for any personal or business purpose, either
for your own benefit or that of any other person, corporation, government or
other entity.
You also agree that you will not disclose or disseminate any Confidential
Information, directly or indirectly, at any time during the term of this
Agreement or after its termination, to any person, agency, or court unless
compelled to do so pursuant to legal process (E.G., a summons or subpoena) or
otherwise required by law and then only after providing the Company with prior
notice and a copy of the legal process.
3.2 NON-SOLICITATION AND NON-COMPETITION. You agree that you will not,
without the express written consent of the Board, for a period of one (1) year
following your Separation Date directly or indirectly (by yourself or in
conjunction with any other person, company or organization), solicit or divert
any employee, customer or vendor of the Company or any of its affiliates, joint
venturers or other related entities. You further agree that you will not,
without the express written consent of the Board of Directors, for a period of
one (1) year following your Separation Date, directly or indirectly, accept
<PAGE>
Mr. Stephen V. Ardia
February 24, 1998
Page 4
employment with any person or entity involved in, or enter into any business
relationship that involves, the business of manufacturing or selling low
pressure sewage systems or grinder pumps (including, but not limited to, as a
consultant, vendor, partner, officer or director). The foregoing shall not
preclude your employment by a distributor of the Company's products in the case
of your voluntary termination of employment with the Company. You specifically
acknowledge and agree that the terms of this provision are reasonable in every
respect and, in particular, because of the competitive and specialized nature of
the Company's business, that it is reasonable not to include any geographic
limitation in this provision.
4. RETURN OF PROPERTY.
On or before your Separation Date, except as agreed to by the Company, you
will return all property belonging to E/One, including, but not limited to, all
documents, business machines, computers, computer hardware and software
programs, computer data, telephones (cellular, mobile or otherwise), pagers,
keys, card keys, credit cards and other Company-owned property.
5. ASSISTANCE IN DEFENSE OF LITIGATION OR CLAIMS.
In the event E/One requests assistance during the period of one (1) year
following your Separation Date, you agree to provide reasonable assistance in
defense of ongoing or future litigation or claims about which you have knowledge
without additional compensation. Thereafter, you agree to provide reasonable
assistance and will be paid for your assistance at an hourly rate equal to your
hourly equivalent rate of pay as of your Separation Date (for up to seven (7)
hours in one day) or per diem rate equal to eight (8) times your hourly
equivalent rate of pay as of your Separation Date (for more than seven (7) hours
in one day). You will be reimbursed for any reasonable expenses incidental to
this assistance approved in advance by the Company. The Company will reasonably
accommodate your scheduling needs.
6. RIGHT TO CONSULT WITH ATTORNEY.
You have the right to consult with an attorney or financial advisor at your
own expense regarding this Agreement.
<PAGE>
Mr. Stephen V. Ardia
February 24, 1998
Page 5
7. DISPUTE RESOLUTION.
You agree that any dispute (1) concerning the interpretation or
construction of this Agreement, (2) arising from your employment with or
termination of employment from E/One, (3) relating to any compensation or
benefits you may claim, or (4) relating in any way to any claim by you for
reinstatement or reemployment by E/One after execution of this Agreement shall
be submitted to final and binding confidential arbitration. Except as
specifically provided herein, the arbitration shall be governed by the rules of
the American Arbitration Association or such other rules as agreed to by the
parties with such arbitration to occur in Albany, New York. Each party shall be
responsible for its or his own costs and attorneys' fees relating to mediation
and arbitration. Both parties agree that the procedures outlined in this
paragraph are the exclusive methods of dispute resolution.
8. ENTIRE AGREEMENT.
This Agreement contains the entire agreement between you and E/One
concerning the subject matters discussed herein. Any modification of this
Agreement shall be effective only if in writing and signed by each party or its
duly authorized representative. This Agreement supersedes all prior employment
agreements between you and E/One or any corporation affiliated with or related
to E/One. The terms of this Agreement are contractual and not mere recitals.
If for any reason any provision of this Agreement shall be held invalid in whole
or in part, such invalidity shall not affect the remainder of this Agreement.
This Agreement shall be construed in accordance with the laws of the state
of New York (without regard to the conflicts of laws provisions thereof).
<PAGE>
Mr. Stephen V. Ardia
February 24, 1998
Page 6
In order to reflect your voluntary acceptance and agreement with these
terms, please sign and return the enclosed copy of this letter.
Sincerely,
Environment One Corporation
By:
---------------------------
Name:
---------------------
Title:
--------------------
ACKNOWLEDGMENT AND AGREEMENT:
I have read this Employment Agreement and voluntarily enter into this Employment
Agreement after careful consideration and the opportunity to review it with
financial or legal counsel of my choice.
Date
- ----------------------------------- -----------------------------
Stephen V. Ardia
<PAGE>
EXHIBIT 5
CHANGE OF CONTROL AGREEMENT
This AGREEMENT is made as of January 5, 1998, by and between ENVIRONMENT
ONE CORPORATION, with offices located in Niskayuna, New York ("Corporation"),
and STEPHEN V. ARDIA, an individual employed by the Corporation ("Employee").
WITNESSETH:
WHEREAS, the Corporation's Board of Directors (the "Board") has authorized
the Corporation to enter into severance agreements with certain key employees of
the Corporation to encourage the continued dedication of the employee to the
Corporation and to promote the stability of Corporation management by providing
certain protections for the employee in the event a change of control of the
Corporation occurs; and
WHEREAS, should the Corporation receive any proposal from a third person
concerning any possible business combination with, or acquisition of equity
securities of, the Corporation, the Board believes it imperative that the
Corporation be able to rely upon the Employee to continue in his position, and
that the Corporation be able to receive and rely upon his advice, if it requests
it, as to the best interests of the Corporation and its shareholders without
concern that the Employee might be distracted by the personal uncertainties and
risks created by such a proposal; and
WHEREAS, should the Corporation receive any such proposals, in addition to
the Employee's regular duties, he may be called upon to assist in the assessment
of such proposals, to advise management and the Board as to whether such
proposals would be in the best interests of the Corporation and its
shareholders, and to take such other actions as the Board might determine to be
appropriate; and
WHEREAS, the Board also desires to encourage the continued dedication of
the Employee to the Corporation and to promote the stability of the
Corporation's management by providing certain protections for the Employee in
the event that a change of control occurs with respect to the Corporation;
NOW, THEREFORE, to assure the Corporation will have the continued
dedication of the Employee and the availability of his advice and counsel
notwithstanding the possibility, threat or occurrence of a bid to take over
control of the Corporation, and to induce the Employee to remain in the employ
of the Corporation, and for other good and valuable consideration, the
Corporation and the Employee agree as follows:
<PAGE>
1. SERVICES DURING CERTAIN EVENTS. In the event a "person" or "group"
(as such quoted terms are defined in Section 4(a)(ii) below) begins a tender or
exchange offer, circulates a proxy to shareholders, or takes other steps seeking
to effect a Change of Control (as defined in Section 4(a) below), the Employee
agrees that he will not voluntarily leave the employ of the Corporation and will
render the services contemplated in the recitals to this Agreement consistent
with his then current employment terms until the such person or group has
abandoned or terminated efforts to effect a Change of Control or until three (3)
months after a Change of Control has occurred, provided no adverse changes occur
in the Employee's authority, duties, or compensation.
2. CHANGE OF CONTROL PAYMENT.
(a) In the event a Change of Control (defined in Section 4(a) below)
occurs during the Employee's employment with the Corporation, the Corporation
shall be obligated, subject to the limitation contained in Section 2(b) below,
to pay the Employee, as compensation for services rendered to the Corporation,
an amount equal to: (i) the amount of the Employee's annual base salary in
effect on the date the Change of Control occurs, and (ii) an amount equal to the
sum of (A) the bonus payable to the Employee for the year during which the
Change of Control occurs, prorated through the date the Change of Control
occurs, plus (B) the average annual bonus paid to the Employee for the two
complete fiscal years that precede the fiscal year during which the Change of
Control occurs. In addition, the Corporation shall waive for 12 months
following the Employee's termination of employment (whenever such termination
shall occur) any required premium payment due from the Employee to allow the
Employee to continue the Employee's coverage under the Corporation's group
health plan pursuant to Public Law 99-272, Title X (i.e., "COBRA"). The
Employee shall not be entitled to the foregoing change of control benefits if
the Employee is terminated for Cause (as defined in Section 4(b)) prior to the
Change of Control. Amounts payable by the Corporation pursuant to this Section
2(a) shall be paid to the Employee in substantially equal installments (subject
to any applicable payroll or other taxes required to be withheld), over a one
year period, without interest, with the first such payment made not later than
30 days after the date the Change of Control occurs and with succeeding
installments paid in accordance with the Corporation's regular payroll cycles
for executive employees. In the event the Employee dies prior to the payment of
all amounts due pursuant to this Section 2(a), remaining unpaid installments
shall be paid to his estate. Notwithstanding the foregoing, at the sole
election of the Corporation, the entire amount payable to the Employee pursuant
to this Section 2(a) may be paid in a lump sum, not later than the 30th day
following the date the Change of Control occurs.
(b) Notwithstanding anything in this Agreement to the contrary, in
the event that the amount payable to the Employee pursuant to Section 2(a)
above, when added to all other amounts paid or to be paid to, and the value of
all property received or to be received by the Employee in anticipation of or
following a Change of Control, whether paid or received pursuant to this
Agreement or otherwise (such other amounts and property being referred to herein
as "Other Change of Control Payments"), would constitute an excess parachute
payment within the meaning of Section 280G of the Internal Revenue Code of 1986,
as
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<PAGE>
amended (or any successor or renumbered section), then the amount payable
pursuant to Section 2(a) of this Agreement shall be reduced to the maximum
amount which, when added to such Other Change of Control Payments, does not
constitute an excess parachute payment.
3. OTHER EMPLOYMENT. The Employee shall not be obligated to seek other
employment in mitigation of the amounts payable or arrangements made under any
provision of this Agreement, nor shall any payments under this Agreement be
reduced on account of any compensation, benefits or service credits for benefits
from any employment that the Employee may obtain following his termination of
employment with the Corporation.
4. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following respective meanings:
(a) A "CHANGE OF CONTROL" shall be deemed to have taken place if
either:
(i) as the result of, or in connection with, any tender
or exchange offer, consolidation, merger or other business
combination, sale of assets or contested election or any
combination of the foregoing transactions (a "transaction"), the
persons who were directors of the Corporation before the
Transaction shall cease for any reason to constitute a majority
of the Board of Directors of the Corporation or any successor to
the Corporation; or
(ii) any "person" (as that term is used Section 13(d) and
14(d)(2) of the Securities and Exchange Act of 1934 (the
"Exchange Act") as in effect on the date hereof), including a
"group" as defined in Section 13(d)(3) of the Exchange Act,
becomes the beneficial owner, directly or indirectly, of shares
of the Corporation having more than 20% of the total number of
votes that may be cast for the election of directors of the
Corporation; or
(iii) the Corporation is merged or consolidated with
another corporation and as a result of the merger or
consolidation less than 20% of the outstanding voting securities
of the surviving or resulting corporation shall then be owned in
the aggregate by the former stockholders of the Corporation,
other than affiliates within the meaning of the Exchange Act or
any party to the merger or consolidation; or
(iv) a tender offer or exchange offer is made and
consummated for the ownership of securities of the Corporation
representing more than 20% of the combined voting power of the
Corporation's then outstanding voting securities; or
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<PAGE>
(v) the Corporation transfers substantially all of its
assets to another corporation which is not a direct or indirect
wholly-owned subsidiary of the Corporation.
(b) "CAUSE" shall mean (i) conduct involving fraud, misappropriation
or intentional material damage to the property or business of the Corporation,
or commission of a felony, (ii) failure or breach to perform Employee's
designated duties consistent with his position with the Corporation after
receiving written notice from the Corporation specifying the nature of the
alleged failure or breach and failing to correct the failure or breach within 15
days of such notice, or (iii) Employee's intentional violation of the
Corporation's written policies, Employee's fiduciary duties, or any law or
regulation which results in material damage or cost to the Corporation.
5. TRADE SECRETS. It is recognized that the Corporation has acquired and
developed and will continue to acquire and develop techniques, plans, processes,
computer programs, and lists of customers and their particular requirements
which may pertain to Corporation related services and equipment, and related
trade secrets, know-how, research and development, which are proprietary and
confidential in nature and are and will continue to be of unique value to the
Corporation and its business (all hereinafter referred to as "Confidential
Information"). All Confidential Information known or in the possession of the
Employee shall be kept and maintained by him as confidential and proprietary to
the Corporation. The Employee shall not disclose any Confidential Information
at any time directly or indirectly, in any manner to any person or firm, except
to other employees of the Corporation on a "need to know" basis. Upon
termination of his employment for any reason, the Employee shall without demand
therefore deliver to the Corporation all Confidential Information in his
possession. The obligations of this Section shall survive the termination of
this Agreement indefinitely.
6. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the Employee and his estate, and the Corporation and any successors
of the Corporation, but neither this Agreement nor any rights arising hereunder
may be assigned or pledged by the Employee.
7. MISCELLANEOUS. This Agreement represents the entire agreement between
the parties with respect to the subject matter of this Agreement and
specifically supersedes any and all oral or written agreements on its subject
matter previously agreed to by the parties.
8. SEVERABILITY. Any provision in this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
only to the extent of such prohibition or unenforceability without invalidating
or affecting the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not be invalidated or rendered
unenforceable such provision in any other jurisdiction.
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<PAGE>
9. CONTROLLING LAW. This Agreement shall in all respects be governed by,
and construed in accordance with, the laws of the State of New York.
10. TERM OF AGREEMENT.
(a) INITIAL TERM AND RENEWAL. The initial term of this Agreement
shall commence as of January 5, 1998, and shall continue through December 31,
1998, unless earlier terminated as provided herein. Thereafter, this Agreement
shall be renewed for additional one year periods, unless either party gives
written notice of non-renewal of this Agreement to the other party at least
thirty (30) days prior to the expiration of the initial term or any renewal
term; provided, however, that in no case shall this Agreement terminate:
(i) within 12 months after the occurrence of a Change of Control, or (ii) during
any period of time when the Corporation has knowledge that any person or group
(such terms are defined in Section 4(a)(ii) above) has taken steps reasonably
calculated to effect a Change of Control until, in the opinion of the Board,
such person or group has abandoned or terminated his or its efforts to effect a
Change of Control. Any determination by the Board that such person or group has
abandoned or terminated his or its efforts to effect a Change of Control shall
be conclusive and binding as the Employee.
(b) EMPLOYMENT "AT WILL". Notwithstanding any provisions of this
Agreement, this Agreement shall not confer upon the Employee the right to be
retained in the service of the Corporation nor limit the right of the
Corporation to discharge or otherwise deal with the Employee. Accordingly, the
Employee or the Corporation may terminate the Employee's employment with the
Corporation at any time with or without cause, subject to the provisions of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
specified in the first paragraph of this Agreement.
ENVIRONMENT ONE CORPORATION
By:
----------------------------------------
John L. Allen, Chair
Human Resource Committee
EMPLOYEE:
-------------------------------------------
Stephen V. Ardia
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<PAGE>
February 27, 1998
[NAME]
c/o Environment One Corporation
2773 Balltown Road
Niskayuna, Ny 12309-1090
RE: EMPLOYMENT AGREEMENT
Dear [FIRST NAME]:
This Employment Agreement (this "Agreement") sets forth our agreement
concerning the terms of your employment by Environment One Corporation ("E/One"
or the "Company") following its acquisition by Precision Castparts Corp. ("PCC")
pursuant to an Agreement and Plan of Merger dated February 24, 1998 (the "Merger
Agreement") to become effective on the Tender Offer Acceptance Date as defined
in the Merger Agreement (the "Effective Date").
1. EMPLOYMENT OFFER.
1.1 EMPLOYMENT.
(a) You will assume the position of [INSERT TITLE] at E/One beginning
on the Effective Date and perform those duties as are generally associated with
such a position. You also agree to perform such acts and duties as the President
of the Company may reasonably direct, to comply with all reasonable applicable
policies and procedures of E/One and, as reasonably applicable, its parent and
affiliates, and to devote such time, energy and skill to your assignment as the
President and the Board of Directors of the Company considers reasonably
necessary for the performance of your duties, provided that you will not be
required to relocate from the Albany, New York area without your consent during
the term of this Agreement.
(b) Your employment with E/One will continue under this Agreement
from the Effective Date through the second anniversary of the Effective Date,
unless earlier terminated by you or E/One as expressly provided in paragraph
2.1, below. Your last day of employment with E/One is referred to herein as your
Separation Date.
<PAGE>
[NAME]
February 27, 1998
Page 2
1.2 SALARY.
During the term of this Agreement, you will be paid a base salary at
an annual rate of $_____________, payable in installments on regular Company
paydays. Base salary increases during the first year of employment shall be
approved by the Company and the President of PCC Flow Technologies, Inc. in a
manner consistent with the Company's practice of considering salary increases in
April of each year. Thereafter, base salary increases shall be set annually by
the Company, as approved by the Board of Directors.
1.3 BENEFITS.
In addition to your base compensation, you will be entitled to
participate through December 31, 1998 in the E/One bonus plan as in effect
immediately prior to the Effective Date. For the three-month period January 1,
1999 through March 28, 1999 you will be entitled to participate in a bonus
program similar to the E/One bonus program in effect for calendar year 1998,
except that bonus targets will be determined by the Company's Board of Directors
in its sole discretion and will be keyed to 1999 objectives established by the
Company's Board of Directors. Thereafter, any bonus program provided will be
consistent with the bonus programs provided by PCC Flow Technologies to the
executives of its operating companies subject to approval by PCC. You will also
continue to receive the same or comparable non-bonus employee benefits as
provided by E/One during your employment immediately prior to the Effective
Date, provided that (i) the E/One stock option plans will be eliminated, and
(ii) the E/One Deferred Compensation Plan will be amended to eliminate the E/One
stock investment provisions and to provide for alternate investment options.
Amounts received under the bonus plan in respect of calendar year 1998 will be
eligible for deferral under the E/One Deferred Compensation Plan, but no other
future deferrals will be permitted under that plan. You will also be eligible
to participate in PCC's stock option and stock purchase programs in accordance
with the terms of those programs.
2. TERMINATION OF AGREEMENT.
2.1 TERMINATION. The term of this Agreement shall be as stated in
subparagraph 1.1(b) (the "natural expiration date"), unless terminated earlier
as follows:
<PAGE>
[NAME]
February 27, 1998
Page 3
(a) This Agreement may be terminated by you for any reason upon 30
days' written notice to E/One.
(b) This Agreement may be terminated by E/One with or without cause
upon 30 days' written notice to you, subject only to the obligation of E/One,
(i) if you are teminated by E/One for reasons other than that specified in
paragraph 2.2 at any time before the first anniversary of the Effective Date, to
pay as a severance payment the remaining balance of your base salary for the
portion of the year from the Separation Date until the first anniversary date of
the Effective Date, plus 100 percent of any calendar year 1998 bonus to which
you would have been entitled had you remained employed by E/One through December
31, 1998, plus the Severance Payment (as defined below), or (ii) if you are
terminated for reasons other than those specified in paragraph 2.2 at any time
after the first anniversary of the Effective Date and prior to the second
anniversary of the Effective Date, to pay severance pay equal to ten month's pay
at the then current salary level (the "Severance Payment"). In addition, if you
are terminated by E/One for reasons other than specified in paragraph 2.2, E/One
shall waive for the remainder of the unexpired term of this Agreement any
required premium payment due from you to allow you to continue your coverage and
E/One's group health plan pursuant to Public Law 99-272, Title 10 (i.e,
"COBRA"), provided that this benefit shall terminate in any case upon the
earlier of 18 months after the Separation Date or upon your employment by a
successor employer. Subject to 2.1(e) below, any severance payment payable
under this paragraph 2.1(b) shall be paid in a lump sum within ten (10) days
following the Separation Date, and shall be subject to applicable withholding,
except that any amounts relating to the 1998 bonus shall be paid at the same
time that 1998 bonuses are paid to continuing employees.
(c) This Agreement shall automatically terminate in the event of your
death or disability prior to the natural expiration date. For purposes of this
Agreement, "disability" shall mean inability to perform all or substantially all
of your responsibilities for a period of more than six (6) months.
(d) Your employment shall not be deemed terminated under this
Agreement if you are assigned additional or different titles, and/or tasks and
responsibilities from those then-currently held or assigned with E/One, provided
that any such changes leave you with responsibilities consistent with your area
of professional expertise and your compensation is not decreased.
<PAGE>
[NAME]
February 27, 1998
Page 4
(e) Payment of the severance pay under paragraph 2.1(b) is subject to
your execution of a Release of Claims in a form provided by the Company
releasing any claims related to termination of your employment and rights to
payment under this Agreement.
2.2 INELIGIBILITY FOR SEVERANCE PAY OR ADDITIONAL COMPENSATION. With
respect to subparagraph 2.1, you will not be eligible for severance pay under
this Agreement and your compensation and benefits will end on your Separation
Date if:
(a) if you voluntarily resign or retire from your employment at any
time and for any reason;
(b) if your employment terminates due to the natural expiration of
this Agreement;
(c) if E/One terminates your employment at any time for cause (as
defined in paragraph 2.3, below) or your employment terminates due to death or
disability (as defined in paragraph 2.1(c));
(d) if you breach the terms of paragraph 3;
(e) if you are offered and accept reasonably comparable employment
with any business entity related to or affiliated with PCC; or
(f) you fail or refuse to sign the Release of Claims form described
in paragraph 2.1(e).
2.3 DEFINITION OF CAUSE. For purposes of this Agreement, "cause" for
termination shall be defined as termination of your employment with E/One for
(i) willful and continuous failure by you, in the judgment of the Company, to
substantially perform your reasonably assigned duties, responsibilities and
objectives with E/One, after a written demand for substantial performance is
made by the Company which identifies the manner in which you have not
substantially performed your duties or responsibilities or met your objectives,
as applicable and failure to correct such performance within 30 days following
the notice; (ii) commission by you of any act of fraud or dishonesty or any
felonious act; (iii) commission by you of any act of willful misconduct that, in
the judgment of the
<PAGE>
[NAME]
February 27, 1998
Page 5
Company, materially and adversely affects the financial condition of the
Company; or (iv) breach of any material provision of this Agreement.
3. CONFIDENTIALITY, NON-SOLICITATION AND NON-COMPETITION.
3.1 PRESERVATION AND NON-USE OF CONFIDENTIAL INFORMATION. You acknowledge
that you have a fiduciary duty as an officer and employee of the Company not to
discuss Confidential Information obtained during your employment with the
Company. For purposes of this Agreement, "Confidential Information" means any
and all confidential or proprietary information concerning the Company or its
affiliates, joint venturers or other related entities (the "E/One Group"), the
disclosure of which could disadvantage the E/One Group. Confidential
Information includes trade secrets as defined under the Uniform Trade Secrets
Act.
You agree not to use Confidential Information, during the term of this
Agreement or after its termination, for any personal or business purpose, either
for your own benefit or that of any other person, corporation, government or
other entity.
You also agree that you will not disclose or disseminate any Confidential
Information, directly or indirectly, at any time during the term of this
Agreement or after its termination, to any person, agency, or court unless
compelled to do so pursuant to legal process (E.G., a summons or subpoena) or
otherwise required by law and then only after providing the Company with prior
notice and a copy of the legal process.
3.2 NON-SOLICITATION AND NON-COMPETITION. You agree that you will not,
without the express written consent of the Board, for a period of one (1) year
following your Separation Date, directly or indirectly (by yourself or in
conjunction with any other person, company or organization), solicit or divert
any employee, customer or vendor of the Company or any of its affiliates, joint
venturers or other related entities. You further agree that you will not,
without the express written consent of the Board, for a period of one (1) year
following your Separation Date, directly or indirectly, accept employment with
any person or entity involved in, or enter into any business relationship that
involves, the business of manufacturing or selling low pressure sewage systems
or grinder pumps (including, but not limited to, as a consultant, vendor,
partner, officer or director). The foregoing shall not preclude your employment
by a distributor of the Company's products in the case of your voluntary
termination of employment with the Company. You
<PAGE>
[NAME]
February 27, 1998
Page 6
specifically acknowledge and agree that the terms of this provision are
reasonable in every respect and, in particular, because of the competitive and
specialized nature of the Company's business, that it is reasonable not to
include any geographic limitation in this provision.
4. RETURN OF PROPERTY.
On or before your Separation Date, except as agreed to by the Company, you
will return all property belonging to E/One, including, but not limited to, all
documents, business machines, computers, computer hardware and software
programs, computer data, telephones (cellular, mobile or otherwise), pagers,
keys, card keys, credit cards and other Company-owned property.
5. ASSISTANCE IN DEFENSE OF LITIGATION OR CLAIMS.
In the event E/One requests assistance during the one year period following
your Separation Date, you agree to provide reasonable assistance in defense of
ongoing or future litigation or claims about which you have knowledge without
additional compensation. Thereafter, you agree to provide reasonable assistance
and will be paid for your assistance at an hourly rate equal to your hourly
equivalent rate of pay as of your Separation Date (for up to seven (7) hours in
one day) or per diem rate equal to eight (8) times your hourly equivalent rate
of pay as of your Separation Date (for more than seven (7) hours in one day).
You will be reimbursed for any reasonable expenses incidental to this assistance
approved in advance by the Company. The Company will reasonably accommodate
your scheduling needs.
6. RIGHT TO CONSULT WITH ATTORNEY.
You have the right to consult with an attorney or financial advisor at your
own expense regarding this Agreement.
7. DISPUTE RESOLUTION.
You agree that any dispute (1) concerning the interpretation or
construction of this Agreement, (2) arising from your employment with or
termination of employment from E/One, (3) relating to any compensation or
benefits you may claim, or (4) relating in any
<PAGE>
[NAME]
February 27, 1998
Page 7
way to any claim by you for reinstatement or reemployment by E/One after
execution of this Agreement shall be submitted to final and binding confidential
arbitration. Except as specifically provided herein, the arbitration shall be
governed by the rules of the American Arbitration Association or such other
rules as agreed to by the parties with such arbitration to occur in Albany, New
York. Each party shall be responsible for its or his own costs and attorneys'
fees relating to arbitration. Both parties agree that the procedures outlined
in this paragraph are the exclusive methods of dispute resolution.
8. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
you and E/One concerning the subject matters discussed herein and supersedes any
other discussions, agreements, representations or warranties of any kind,
including but not limited to the Change of Control Agreement between you and
E/One dated January 5, 1998. Any modification of this Agreement shall be
effective only if in writing and signed by each party or its duly authorized
representative. This Agreement supersedes all prior employment agreements
between you and E/One or any corporation affiliated with or related to E/One.
The terms of this Agreement are contractual and not mere recitals. If for any
reason any provision of this Agreement shall be held invalid in whole or in
part, such invalidity shall not affect the remainder of this Agreement.
This Agreement shall be construed in accordance with the laws of the state
of New York (without regard to the conflicts of laws provisions thereof).
In order to reflect your voluntary acceptance and agreement with these
terms, please sign and return the enclosed copy of this letter.
Sincerely,
Environment One Corporation
By:
-----------------------------
Name:
------------------------
Title:
-----------------------
<PAGE>
[NAME]
February 27, 1998
Page 8
ACKNOWLEDGMENT AND AGREEMENT:
I have read this Employment Agreement and voluntarily enter into this Employment
Agreement after careful consideration and the opportunity to review it with
financial or legal counsel of my choice.
- ----------------------------------- -------------------------------
Date
<PAGE>
EXHIBIT 7
NEWS RELEASE
ENVIRONMENT ONE CORP AND PRECISION CASTPARTS CORP SIGN
ACQUISITION AGREEMENT VALUED AT $72 MILLION
Niskayuna, New York - 25 February, 1998 - Environment One Corporation
(NASDAQ:EONE) and Precision Castparts Corp. (NYSE:PCP) have signed a definitive
agreement providing for the acquisition by Precision Castparts (PCC) of all
shares (approximately 4.72 million fully diluted) of Environment One at $15.25
in cash. The total equity value of the transaction is $72 million.
Stephen V. Ardia, chairman and chief executive officer of Environment One said,
"E/One is excited to be able to combine its business with the PCC Flow
Technologies unit. The acquisition recognizes the progress E/One has made in
the marketplace and represents a full and fair valuation for our shareholders,
while providing an enhanced growth platform for our customers, distributors and
associates. In addition we are most pleased with the matching of value systems.
The success of the company has been a result of our team of associates who are
committed to growth supported by a system of shared rewards. We firmly believe
that together we will continue to do great things."
William C. McCormick, chairman and chief executive officer of Precision
Castparts Corp. said "the combination of E/One's strengths with our existing
businesses will result in an even stronger competitor in markets such as
municipal sewer systems, residential building, land development, and single-
family dwellings."
"The adventuresome three-decade pilgrimage of E/One's independence has ended,
now it's time to get on with the next phase of the enterprise and build an even
more challenging and rewarding future for our customers, associates, and other
stakeholders. We are absolutely convinced that E/One's outstanding products and
distribution will prosper with the encouragement and enthusiastic support from
PCC," according to Mr. Ardia.
The Nassau Group advised Environment One's Board of Directors in the transaction
and Miller, Johnson & Kuehn, acting as financial advisor, rendered its opinion
to the Board that the consideration to be paid and the tender offer is fair to
the stockholders to Environment One from a financial point of view. As recently
as January 1, 1995 and 1997, E/One had a total equity value of approximately $9
million and $24 million, respectively. On December 31, 1997 equity value had
risen to approximately $50 million on a fully diluted basis. This transaction
at $72 million dollars represents a 45% premium over the December 31, 1997
valuation and a 17% premium over Tuesday, February 24, 1998 closing stock price.
Environment One Corporation is a market leading environment-oriented product and
service
<PAGE>
company operating in two business segment:
- Sewer Systems, specializes in highly engineered equipment for Low
Pressure Sewer Systems, a.k.a. E/One Sewers
- Detection Systems, specializes in instrumentation used for the detection
of sub-microscopic particles and gas in the electric power industry.
Approximately ninety percent of 1997's $24.3 million of revenue was derived from
the Sewer Systems business.
Precision Castparts Corp., based in Portland, Oregon, is an international
producer of large structural metal castings and other manufacturing
components. The company's castings are sold for industrial gas turbine,
automotive, medical, and other commercial applications. Environment One will
become part of PCC's subsidiary, PCC Flow Technologies, a consortium of
companies managing fluid with industrial pumps, valves, and measurement
instruments. Subsidiary PCC Specialty Products makes industrial metal
working tools and machines for industrial and automotive manufacturers.
Subsidiary PCC Electronics makes metal matrix composite parts for electronics
and industrial manufacturing components. PCC's revenues were $972.8 million for
the fiscal year ending March 31, 1997, and for the first nine months of fiscal
1998 sales totaled $961.5 million.
###
Media Contact: George Vorsheim 518-346-6161, X3021
Financial Contact: Philip Welsh 518-346-6161, X3082
<PAGE>
[ENVIRONMENT ONE LOGO]
March 3, 1998
Dear Shareholder:
On behalf of the Board of Directors, I am pleased to inform you that on
February 24, 1998, Environment One Corporation ("E/ONE") entered into an
Agreement and Plan of Merger with Precision Castparts Corp. ("PCC") and one of
its subsidiaries, EOC Acquisition Corporation ("Purchaser"), which provides for
the acquisition of all E/ONE common stock at a price of $15.25 per share in
cash. Under the terms of the Agreement, Purchaser has commenced a cash tender
offer for all outstanding shares of E/ ONE common stock at $15.25 per share (the
"Offer"). Subject to successful completion of the Offer, and satisfaction of
certain conditions in the Agreement, Purchaser will be merged into E/ONE and all
shares not purchased in the Offer (other than shares held by PCC or Purchaser,
or any of their respective subsidiaries, or shares held in the treasury of
E/ONE) will be converted into the right to receive $15.25 per share in cash in
the merger.
THE BOARD OF DIRECTORS OF E/ONE HAS UNANIMOUSLY APPROVED THE OFFER AND
DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF E/ONE SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT ALL E/ONE SHAREHOLDERS TENDER THEIR SHARES PURSUANT
TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the enclosed Schedule 14D-9
that is being filed today with the Securities and Exchange Commission, including
the written opinion of Miller, Johnson & Kuehn, Inc. to E/ONE that the
consideration of $15.25 per share in cash to be received by shareholders
pursuant to the Offer and the merger is fair to shareholders from a financial
point of view. The Schedule 14D-9 contains other important information relating
to the Offer, and you are encouraged to read the Schedule 14D-9 carefully.
In addition to the enclosed Schedule 14D-9, also enclosed is the Offer to
Purchase dated March 3, 1998, together with related materials, including a
Letter of Transmittal, to be used for tendering your shares in the Offer. These
documents state the terms and conditions of the Offer and provide instructions
on how to tender your shares. We urge you to read these documents carefully.
Questions or requests for assistance may be directed to Morrow & Co., Inc., the
Purchaser's information agent, at (212) 754-8000 or (800) 566-9061.
The management and directors of E/ONE thank you for the support you have
given the Company over the years.
On behalf of the Board of Directors,
/s/ Stephen V. Ardia
Stephen V. Ardia
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
