SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
[ ] Confidential, for Use of the Commission Only as permitted by Rule
14a-6(e)(2))
MascoTech, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common stock, par value $1.00 per share ("Common Stock"), of
MascoTech, Inc. ("MascoTech")
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(2) Aggregate number of securities to which transaction applies:
35,049,678 outstanding shares of Common Stock (including those
related to restricted stock awards) and 2,523,847 shares of common
stock subject to options or phantom stock awards (a)
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$16.90, the proposed per share cash payment to be made to security
holders of MascoTech in connection with the transactions described in
the proxy statement (a)
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(4) Proposed maximum aggregate value of transaction: $607,039,558
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(5) Total fee paid: $121,408
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(a) Pursuant to the recapitalization agreement dated August 1, 2000, Riverside
Company LLC will merge with and into MascoTech and Common Stock, with the
exceptions described below, will be converted into the right to receive
$16.90. All stockholders, including those retaining an interest in
MascoTech, will also have the right to receive additional cash amounts if
required by the recapitalization agreement. Since MascoTech is unable to
value this right, the filing fee is based only on the cash consideration
to be paid in the merger. As of August 23, 2000, there were 44,757,419
shares of Common Stock outstanding. Of that amount, (1) three stockholders
(each a "continuing stockholder") will retain an aggregate of 4,241,025
shares of Common Stock in the merger and one of those stockholders will
rollover another 2,136,100 shares of Common Stock and (2) 3,678,811 shares
of Common Stock subject to restricted stock awards will be canceled
immediately prior to the merger but holders of restricted stock awards
(other than a continuing stockholder) will receive cash merger
consideration in exchange for 10% of their shares (348,195 shares) of
restricted stock awards. A total of 9,707,741 shares (4,241,025 plus
2,136,100 plus 3,678,811 shares minus 348,195 shares) will not be acquired
in the transaction. The filing fee was determined by adding (x) the
product of (i) the number of shares of Common Stock that are proposed to
be acquired in the transactions calculated by subtracting 9,707,741 from
44,757,419 and (ii) the transaction consideration of $16.90 in cash per
share of Common Stock, plus (y) $14,700,000 payable to holders of stock
options granted by MascoTech to purchase shares of Common Stock in
exchange for the cancellation of such options and phantom stock awards
granted by MascoTech ((x) and (y) together, the "Merger Consideration").
The payment of the filing fee, calculated in accordance with Regulation
240.00-11 under the Securities Exchange Act of 1934, as amended, equals
one-fiftieth of one percent of the Merger Consideration.
[X] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:_______________________________________________
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:_________________________________________________________
(4) Date filed:___________________________________________________________
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[PRELIMINARY DRAFT DATED OCTOBER 6, 2000-SUBJECT TO COMPLETION]
MASCOTECH, INC.
21001 Van Born Road
Taylor, Michigan 48180
October , 2000
To the Stockholders of MascoTech, Inc.:
We invite you to attend a special meeting of stockholders of MascoTech,
Inc. which will be held on November , 2000 at 9:00 a.m. local time at our
principal executive offices located at 21001 Van Born Road, Taylor, Michigan
48180.
At the special meeting, you will be asked to consider and to vote on the
following proposals:
o approval and adoption of the agreement of merger and the merger of
MascoTech Harbor Inc., a wholly owned subsidiary of MascoTech, with
and into MascoTech. This merger would have the effect of repealing a
provision of MascoTech's certificate of incorporation that requires a
95% stockholder vote to approve business combinations involving
interested stockholders; and
o approval and adoption of the recapitalization agreement and the
merger of Riverside Company LLC with and into MascoTech. Each share
of common stock held by stockholders of MascoTech at the time of the
recapitalization merger will be entitled to receive in this merger
$16.90 in cash plus additional cash amounts from the net proceeds of
the disposition of stock of Saturn Electronics & Engineering Inc.
held by MascoTech as specified in the recapitalization agreement.
This merger will only be completed if the merger with MascoTech
Harbor is completed first.
Heartland Industrial Partners, L.P. currently controls Riverside.
Following the merger between Riverside and MascoTech, MascoTech will be
controlled by Heartland. Masco Corporation, Richard A. Manoogian, the Richard
and Jane Manoogian Foundation and other employees holding restricted stock
awards will retain an equity interest in MascoTech following the
recapitalization merger. The accompanying proxy statement contains detailed
information about the mergers. Copies of the agreement of merger and
recapitalization agreement specifying the terms of the mergers are included as
Annex A and Annex B to the attached proxy statement.
Your board of directors, after careful consideration and receipt of the
unanimous recommendation of a special committee of independent directors, has
determined that the agreement of merger, the recapitalization agreement and the
related mergers are advisable and in the best interests of, and that the merger
consideration is fair to, MascoTech's public stockholders. Your board of
directors has approved and recommends that you vote "FOR" the agreement of
merger, the recapitalization agreement and the related mergers.
Under the recapitalization agreement, the approvals of the agreement of
merger, the recapitalization agreement and the related mergers require the vote
of the holders of at least a majority of the MascoTech stock entitled to vote,
including, in the case of the recapitalization agreement and the related
merger, at least a majority of the MascoTech common stock not held by Masco
Corporation, Mr. Manoogian and the Richard and Jane Manoogian Foundation.
Your vote is very important. Whether or not you plan to attend the special
meeting in person and regardless of the number of shares you own, please
complete, sign, date and return the enclosed proxy promptly in the accompanying
prepaid envelope.
Sincerely,
Richard A. Manoogian
Chairman of the Board of Directors
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the recapitalization or the mergers,
passed upon the merits or fairness of the recapitalization or the mergers, or
passed upon the adequacy or accuracy of the disclosure in this document. Any
representation to the contrary is a criminal offense.
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This proxy statement dated October , 2000 and the accompanying proxy card are
first being mailed to stockholders on or about October , 2000.
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MASCOTECH, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
to be held on
November , 2000
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of MascoTech has
been called by the board of directors of MascoTech and will be held at our
principal executive offices.
Place: 21001 Van Born Road
Taylor, Michigan 48180
Date: November , 2000
Time: 9:00 a.m., local time
The purposes of the special meeting are:
1. To consider and to vote on the adoption and approval of the following:
o an agreement of merger and the related merger of MascoTech Harbor Inc., a
wholly owned subsidiary of MascoTech, with and into MascoTech. The purpose
of this merger is to cause MascoTech's certificate of incorporation to be
changed so that the provision requiring that the holders of at least 95%
of the common stock of MascoTech approve business combinations, including
mergers, involving persons owning 30% or more of MascoTech's voting stock
is repealed; and
o a recapitalization agreement and the related merger of Riverside Company
LLC, an affiliate of Heartland, with and into MascoTech. In this merger,
the stockholders of MascoTech common stock (other than holders who
properly demand appraisal rights or holders who have separately agreed to
retain a portion of their MascoTech common stock) will be entitled to
receive, for each share of common stock (other than shares subject to
restricted stock awards), merger consideration of $16.90 in cash plus
additional cash amounts from the net proceeds of the disposition of stock
of Saturn Electronics & Engineering Inc. held by MascoTech as specified in
the recapitalization agreement. This merger will be completed only if the
merger with MascoTech Harbor is completed first.
These transactions are more fully described in the attached proxy
statement, agreement of merger and the recapitalization agreement.
2. To transact such other business as may properly come before the special
meeting.
Masco Tech's board of directors has fixed October , 2000 as the record
date for the special meeting. Only stockholders of record at the close of
business on October , 2000 may vote at the special meeting.
Your board of directors, after careful consideration and receipt of the
unanimous recommendation of a special committee of independent directors, has
determined that the agreement of merger, the recapitalization agreement and the
related mergers are advisable and in the best interests of, and that the
consideration to be paid is fair to, MascoTech's stockholders (other than Masco
Corporation, Richard A. Manoogian and the Richard and Jane Manoogian
Foundation). Your board of directors has approved and recommends that you vote
"FOR" the agreement of merger and the recapitalization agreement and the
transactions contemplated by such agreements, including the mergers.
We urge you to read the attached proxy statement. If you are a stockholder
of record you should receive a proxy card with the attached proxy statement.
Whether or not you plan to attend the special meeting, you can be sure your
shares are represented at the special meeting by promptly submitting your proxy
by telephone or by internet or by completing, signing, dating and returning
your proxy card in the enclosed postage prepaid envelope. Prior to being voted,
your proxy may be withdrawn in the manner described in the attached proxy
statement.
By order of the Board of Directors
Eugene A. Gargaro, Jr.
Secretary
Taylor, Michigan
October , 2000
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TABLE OF CONTENTS
Page
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SUMMARY TERM SHEET..........................................................1
QUESTIONS AND ANSWERS ABOUT THE MERGERS.....................................9
WHO CAN HELP ANSWER YOUR QUESTIONS.........................................12
SPECIAL MEETING............................................................13
Time and Place; Proxy Solicitation......................................13
Purpose.................................................................13
Who Can Vote; Record Date...............................................13
Vote Required; Voting Procedures........................................13
How Affiliates, Directors and Executive Officers Intend to Vote.........13
Voting by Proxy.........................................................14
Other Business; Adjournments............................................14
SPECIAL FACTORS............................................................16
General.................................................................16
Background of the Mergers...............................................16
Recommendation of MascoTech's Special
Committee and Board of Directors.....................................23
MascoTech's Position Regarding the Fairness
of the Recapitalization Merger.......................................24
MascoTech's Purpose and Reasons for the Mergers.........................26
Heartland's Purpose and Reasons for the Mergers ........................28
Position of Riverside and Heartland.....................................28
The Continuing Stockholders' Purpose and Reasons for the Mergers........29
Position of the Continuing Stockholders.................................29
Opinion of Special Committee's Financial Advisor........................30
Opinion of MascoTech's Financial Advisor................................37
Amount and Source of Funds and Financing of
the Recapitalization Merger..........................................42
Certain Effects of the Mergers..........................................43
Plans for MascoTech After the Recapitalization Merger...................45
Conduct of the Business of MascoTech if the
Recapitalization Merger is Not Completed.............................45
Material Federal Income Tax Consequences................................45
Regulatory Matters......................................................47
Accounting Treatment of the Recapitalization Merger.....................48
Stockholder Litigation Challenging the Mergers..........................48
INTERESTS OF CERTAIN PERSONS IN THE MERGERS................................49
Board of Directors......................................................49
Saturn Stock Disposition................................................49
Exchange and Voting Agreement...........................................50
Masco Corporation.......................................................50
Stock Options...........................................................53
Severance Agreements....................................................53
Restricted Stock Awards.................................................54
Other Employee Benefits.................................................54
Indemnification and Insurance...........................................55
THE RECAPITALIZATION AGREEMENT.............................................56
The Recapitalization Merger.............................................56
Consideration in the Recapitalization Merger............................56
Appraisal or Dissenters' Rights.........................................57
Options and Restricted Stock Awards.....................................57
Exchange of Shares......................................................58
The Surviving Corporation...............................................58
Representations and Warranties of MascoTech.............................58
Principal Covenants.....................................................59
Principal Conditions to the Completion of the Recapitalization Merger...62
Termination; Termination Fee and Break-up Fee...........................64
OTHER AGREEMENTS...........................................................66
Exchange and Voting Agreement...........................................66
Stock Purchase Agreement................................................68
Agreement of Merger.....................................................69
SELECTED HISTORICAL FINANCIAL DATA.........................................70
Selected Historical Financial Data of MascoTech.........................70
No Pro Forma Financial Information......................................70
No Financial Information for Riverside..................................71
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION................72
INFORMATION RELATING TO MASCOTECH SECURITIES...............................73
Purchases by MascoTech..................................................73
Purchases by Masco Corporation..........................................74
Purchases by Richard A. Manoogian.......................................74
Purchases by the Foundation.............................................74
Purchases by Riverside and Heartland....................................75
Agreements Relating to MascoTech Securities.............................75
FINANCIAL PROJECTIONS......................................................76
FORWARD-LOOKING STATEMENTS.................................................78
EXPENSES...................................................................79
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS.............80
Five Percent Holders and Executive Officers
and Directors of MascoTech...........................................80
Executive Officers and Directors of Masco Corporation...................81
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DIRECTORS AND EXECUTIVE OFFICERS OF MASCOTECH..............................84
DIRECTORS AND EXECUTIVE OFFICERS OF MASCO CORPORATION......................86
DIRECTORS AND EXECUTIVE OFFICERS OF THE FOUNDATION.........................89
IDENTITIES AND BACKGROUNDS OF RIVERSIDE AND HEARTLAND......................90
Riverside Company LLC...................................................90
Heartland Industrial Partners, L.P......................................90
Heartland Industrial Associates L.L.C...................................90
General.................................................................91
Masco Capital Corporation; Advisory Committee...........................91
APPRAISAL OR DISSENTERS' RIGHTS............................................92
BUSINESS COMBINATIONS WITH INTERESTED PARTIES..............................95
State Anti-Takeover Laws................................................95
Fair Price Provision....................................................95
Stockholder Rights Plan.................................................95
INDEPENDENT ACCOUNTANTS....................................................98
FUTURE STOCKHOLDER PROPOSALS...............................................98
WHERE YOU CAN FIND MORE INFORMATION........................................98
LIST OF ANNEXES
Annex A Agreement of Merger
Annex B Recapitalization Agreement
Annex C Exchange and Voting Agreement
Annex D Stock Purchase Agreement
Annex E Opinion of McDonald Investments, Inc.
Annex F Opinion of Salomon Smith Barney Inc.
Annex G Section 262 of the Delaware General Corporation Law
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SUMMARY TERM SHEET
This summary contains selected information from this proxy statement. To
understand the mergers fully and to obtain a more complete description of the
legal terms of the mergers, you should carefully read this entire document,
including the Annexes, and the documents to which we refer you. See "Where You
Can Find More Information" on page 98.
The Parties
MASCOTECH, INC.
21001 Van Born Road
Taylor, Michigan 48180
Telephone: (313) 274-7405
MascoTech, a Delaware corporation, is a diversified industrial
manufacturing company that utilizes advanced metalworking capabilities to
supply metal formed components used in vehicle engine and drive train
applications, specialty fasteners, towing systems, packaging and sealing
products and other industrial products.
MascoTech Harbor Inc.
21001 Van Born Road
Taylor, Michigan 48180
Telephone: (313) 274-7405
MascoTech Harbor, a Delaware corporation, is a wholly owned subsidiary of
MascoTech. MascoTech is the sole stockholder of MascoTech Harbor. In this proxy
statement, we refer to the merger between MascoTech and MascoTech Harbor as the
"subsidiary merger."
RIVERSIDE COMPANY LLC
c/o Heartland Industrial Partners, L.P.
320 Park Avenue, 33rd Floor
New York, New York 10022
Telephone: (212) 981-5613
Riverside, a Delaware limited liability company, is a transitory merger
vehicle which was formed by Heartland for the sole purpose of facilitating the
acquisition of MascoTech. Heartland is currently the sole member of Riverside.
After investment by Heartland and other co-investors in Riverside, Heartland
will continue to control Riverside. In this proxy statement, we refer to the
merger between MascoTech and Riverside as the "recapitalization merger."
HEARTLAND INDUSTRIAL PARTNERS, L.P. 320 Park Avenue, 33rd Floor New York, New
York 10022 Telephone: (212) 981-5613
Heartland, a Delaware limited partnership, was formed in 1999. Heartland
is a private equity firm formed to focus on investments in industrial
companies.
MASCO CORPORATION
21001 Van Born Road
Taylor, Michigan 48180
Telephone: (313) 274-7400
Masco Corporation manufactures and sells home improvement and building
products, with emphasis on brand name products holding leadership positions in
their markets. Masco Corporation's principal product and service categories are
faucets, kitchen and bath cabinets, other kitchen and bath products,
architectural coatings, builders' hardware products and other specialty
products and services. Masco Corporation is among the largest manufacturers in
North America of brand name consumer products designed for the home improvement
and home building industries. Masco Corporation currently owns approximately
17.5% of the voting stock of MascoTech. Masco Corporation has informed
MascoTech that it will seek to divest a portion of its common stock as
permitted by the exchange and voting agreement prior to the recapitalization
merger. See "Other Agreements--Exchange and Voting Agreement--Transfer
Restrictions."
RICHARD A. MANOOGIAN AND
THE RICHARD AND JANE MANOOGIAN
FOUNDATION
c/o Masco Corporation
21001 Van Born Road
Taylor, Michigan 48180
Telephone: (313) 274-7400
Mr. Manoogian is the chairman of the board of directors of both Masco
Corporation and MascoTech. Mr. Manoogian is also the chief executive officer of
Masco Corporation. Mr. Manoogian and his
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affiliates, including the Richard and Jane Manoogian Foundation, a Michigan
non-profit corporation, currently hold approximately 2.2% of the voting stock
of Masco Corporation and approximately 13.6% of the voting stock (or 14.8%
assuming exercise of options or conversion of other securities) of MascoTech.
In this proxy statement, we refer to the Richard and Jane Manoogian Foundation
as the "Foundation."
The Mergers
We have attached the agreement of merger as Annex A, the recapitalization
agreement as Annex B and the exchange and voting agreement as Annex C to this
proxy statement. We encourage you to read the agreements because they are the
legal documents that govern the mergers.
The recapitalization agreement provides for two mergers to accomplish the
going private transaction in which Heartland will become the majority owner of
MascoTech. In the first merger, MascoTech Harbor will merge with and into
MascoTech, with MascoTech surviving the merger. The effect of that merger will
be to repeal of the provision of MascoTech's certificate of incorporation
requiring that holders of at least 95% of common stock of MascoTech approve
business combinations, including mergers, involving persons holding 30% or more
of MascoTech common stock. In order to avoid any doubt as to whether these
provisions would be applicable to the recapitalization merger, MascoTech has
agreed that the subsidiary merger will be a condition to, and must be
consummated prior to, the recapitalization merger. The only reason for the
subsidiary merger is to facilitate the transactions described in this proxy
statement, including the recapitalization merger.
The second merger will involve the merger of Riverside with and into
MascoTech, with MascoTech surviving the merger. Each share of MascoTech common
stock outstanding (other than restricted stock awards and those exchanged for
preferred stock as described below) will be converted into the right to receive
$16.90 in cash plus additional cash amounts from the net proceeds of the
disposition of Saturn stock as specified in the recapitalization agreement. As
of July 31, 2000, MascoTech held approximately 36.3% of the outstanding common
stock of Saturn.
Masco Corporation, Mr. Manoogian and the Foundation agreed in the exchange
and voting agreement to exchange some of their MascoTech common stock for class
A preferred stock prior to the recapitalization merger. Masco Corporation will
exchange additional common stock for MascoTech class B preferred stock at the
same time it exchanges common stock for class A preferred stock. In this proxy
statement, we refer to Masco Corporation (and transferees of Masco
Corporation's common stock, if any), Mr. Manoogian and the Foundation as the
"continuing stockholders."
In the recapitalization merger, shares of MascoTech class A preferred
stock will be converted into common stock of MascoTech and shares of class B
preferred stock will be converted into common stock and preferred stock of
MascoTech. Riverside membership interests will be converted into common stock
of MascoTech.
Going Private Transaction (see page 43)
The recapitalization merger is a "going private" transaction for
MascoTech. Thereafter, MascoTech will be controlled by Heartland, which
currently controls Riverside. As a result of the recapitalization merger,
Heartland, its co-investors, the continuing stockholders and employees holding
MascoTech restricted stock awards will own substantially all of the stock of
MascoTech. Other stockholders will no longer have any interest in MascoTech,
including its future earnings or growth. MascoTech's common stock will no
longer trade publicly or be listed on the New York Stock Exchange.
MascoTech's Recommendations to
Stockholders (see page 23)
MascoTech's board of directors believes that the terms of the agreement of
merger, the recapitalization agreement and the related mergers are advisable
and in your best interests and that the consideration in the recapitalization
merger is fair to MascoTech stockholders (other than the continuing
stockholders and their affiliates) and recommends that you vote "FOR" the
approval of the agreement of merger, the recapitalization agreement and the
related mergers. Due to their potential conflict of interest, two directors,
Mr. Manoogian and John A. Morgan, abstained from the vote on the
recapitalization agreement and the recapitalization merger. See page 23 for
more information.
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Position of Riverside, Heartland and the
Continuing Stockholders Regarding Fairness
(see page 29)
Although Heartland, Riverside and the continuing stockholders did not at
any time evaluate the fairness of the recapitalization merger to the
stockholders of MascoTech (other than the continuing stockholders), the rules
of the SEC require them to express a belief regarding the substantive and
procedural fairness of the recapitalization merger to MascoTech's public
stockholders. For this reason, Heartland, Riverside and the continuing
stockholders have observed that:
o the merger consideration represents a premium over the per share
closing price of MascoTech common stock prior to the announcement of
the recapitalization merger;
o a special independent committee of the board of directors was
appointed, retained legal and financial advisors and evaluated and
negotiated the transaction;
o the board of directors and the special committee received opinions
from financial advisors regarding the fairness, from a financial
point of view, of the merger consideration to the public stockholders
and each approved the recapitalization merger; and
o the recapitalization agreement requires the approval of the
recapitalization merger by a vote of holders of the majority of
MascoTech's common stock that are not continuing stockholders.
Based on these factors, Heartland, Riverside and the continuing
stockholders believe that the recapitalization merger is substantively and
procedurally fair to the holders of MascoTech common stock (other than the
continuing stockholders). This belief, however, should not be construed as a
recommendation to any stockholder as to how they should vote on the mergers.
Reasons for the Mergers (see page 26)
In reaching its conclusion to approve and recommend the recapitalization
agreement, the agreement of merger and the related mergers, the board of
directors considered, among other factors, the following:
o A special committee consisting of all the independent directors
determined that the terms of the agreement of merger, the
recapitalization agreement and the related mergers are advisable and
in your best interests and that the consideration in the
recapitalization merger is fair to MascoTech stockholders (other than
the continuing stockholders and their affiliates).
o The special committee unanimously recommended to the board of
directors that the agreement of merger, the recapitalization
agreement and the related mergers be approved.
o The factors described in substantive detail on pages 26 through 43.
Opinions of Financial Advisors (see page 30)
In connection with the recapitalization merger, each of the special
committee and the board of directors considered the opinion of its financial
advisor as to the fairness of the merger consideration from a financial point
of view.
The special committee received a written opinion from McDonald
Investments, Inc. as to the fairness, from a financial point of view, of the
merger consideration to the holders of MascoTech common stock (other than
Riverside, the continuing stockholders and their respective affiliates). The
full text of McDonald Investments' written opinion dated August 1, 2000 is
attached to this proxy statement as Annex E. McDonald Investments' opinion is
addressed to the special committee of the MascoTech board of directors and does
not constitute a recommendation to any stockholder with respect to any matter
relating to the proposed mergers.
The board of directors received a written opinion from Salomon Smith
Barney Inc. as to the fairness, from a financial point of view, of the merger
consideration to the holders of MascoTech common stock (other than Riverside,
the continuing stockholders and their respective affiliates). The full text of
Salomon Smith Barney's written opinion dated August 1, 2000 is attached to this
proxy statement as Annex F. Salomon Smith Barney's opinion is addressed to the
MascoTech board of directors
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and does not constitute a recommendation to any stockholder with respect to any
matter relating to the proposed mergers.
We encourage you to read these opinions carefully in their entirety for a
description of the assumptions made, matters considered and limitations on the
review undertaken.
What Stockholders Will Receive (see page 56)
As a result of the recapitalization merger, you (except holders who
properly demand appraisal rights or the continuing stockholders) will be
entitled to receive for each share of common stock (other than restricted stock
awards) $16.90 in cash plus additional cash amounts from the net proceeds of
the disposition of Saturn stock as specified in the recapitalization agreement.
Please read "The Recapitalization Agreement-- Consideration in the
Recapitalization Merger" for a full description. In this proxy statement, we
refer to the amounts in excess of $16.90 as "adjustments" and the total amount
to be received per share of common stock in the recapitalization merger,
including the adjustments, as "merger consideration." Although MascoTech has
not yet entered into a definitive agreement regarding the disposition of Saturn
stock, if any part of the disposition of the Saturn stock is completed by the
time the recapitalization merger is completed and a part of the net proceeds of
the disposition is required by the recapitalization agreement to be paid to
stockholders, you will be entitled to receive the adjustments at the time of
the recapitalization merger. If any part of the disposition of the Saturn stock
is completed after the recapitalization merger and the recapitalization
agreement requires a part of the net proceeds to be paid to stockholders, you
will be entitled to additional adjustments after the recapitalization merger.
The continuing stockholders will continue to hold equity of MascoTech
after the recapitalization merger. The continuing stockholders will own
MascoTech common stock and Masco Corporation will also own preferred stock
following the recapitalization merger. Prior to the recapitalization merger and
pursuant to the exchange and voting agreement, the continuing stockholders will
exchange some of their MascoTech common stock for class A preferred stock and
Masco Corporation will exchange additional common stock for MascoTech class B
preferred stock. The class A preferred stock will convert into common stock of
MascoTech and class B preferred stock will convert into common stock and
preferred stock of MascoTech in the recapitalization merger.
What Holders of Options Will Receive
(see page 57)
If you have been granted employee stock options which have an exercise
price below the merger consideration, your options will be canceled and you
will receive, for each share of MascoTech common stock subject to such options,
the difference between the merger consideration and the exercise price for that
share.
If you have been granted employee stock options which have an exercise
price above the merger consideration, those options will be canceled without
consideration except as described in "The Recapitalization Agreement--Options
and Restricted Stock Awards."
What Holders of Restricted Stock Awards Will
Receive (see page 57)
If you have been granted restricted stock awards, those restricted stock
awards will be canceled immediately prior to the recapitalization merger and
you will be issued new restricted stock awards for the same number of shares
under the canceled awards immediately after the recapitalization merger. You
will be entitled to receive cash equal to the merger consideration for 10% of
the new restricted stock awards and 15% of the shares granted under the new
restricted stock awards will vest upon issuance. The balance of grants under
the new restricted stock awards of MascoTech will vest ratably over three years
on each anniversary of the issuance. Vested restricted stock awards will still
be subject to transfer restrictions. Any common stock you own which is not a
restricted stock award will be treated in the same manner as MascoTech common
stock owned by stockholders other than the continuing stockholders.
Appraisal or Dissenters' Rights (see page 92)
Holders of MascoTech common stock who do not vote in favor of the
recapitalization merger have the right to a judicial appraisal of the fair
value of their MascoTech common stock in connection with that merger.
4
<PAGE>
Possible Adjustment to Merger Consideration
-- Saturn Stock (see page 56)
MascoTech currently has not entered into a definitive agreement to dispose
of its Saturn stock. Saturn announced on August 11, 2000 that it withdrew the
proposed initial public offering of its common stock. MascoTech intends to
continue its efforts to dispose of its Saturn stock prior to the
recapitalization merger. However, MascoTech may not be able to dispose of
Saturn stock prior to the recapitalization merger or thereafter. If a
disposition is made after the recapitalization merger, stockholders (including
holders of restricted stock awards and the continuing stockholders) and holders
of eligible options may be entitled to payments after the recapitalization
merger. According to the recapitalization agreement, an amount equal to the
proceeds from the disposition of Saturn stock in excess of $18 million and less
than or equal to $40 million, as well as 60% of any such proceeds in excess of
$56.7 million, will be paid to the stockholders (including the continuing
stockholders and holders of restricted stock awards) and option holders whose
options have exercise prices below the merger consideration (after giving
effect to all adjustments). The recapitalization agreement does not provide for
an expiration date of the right to receive adjustments from the sale of Saturn
stock in accordance with the terms of the recapitalization agreement.
Other Dispositions of Equity Investments
(see page 68)
MascoTech has entered into an agreement with Citicorp Venture Capital,
Ltd. to dispose of certain non-operating assets consisting of investments in
companies, including its 44% equity interest in MSX International, Inc. but not
its Saturn stock, for $125 million. MascoTech does not expect to consummate
this sale unless the recapitalization merger is completed substantially at the
same time. Closing of the sale of these assets is a condition to the
consummation of the recapitalization merger.
Stockholder Vote Required to Approve the
Mergers
Under the recapitalization agreement, approval and adoption of the
agreement of merger, the recapitalization agreement and the related mergers
require the vote of the holders of at least a majority of the MascoTech stock
entitled to vote, including, in the case of the recapitalization agreement and
the related recapitalization merger, at least a majority of the MascoTech
common stock not held by the continuing stockholders.
Stock Ownership of Management, Directors
and Other Affiliates
On October , 2000, the record date for MascoTech's special meeting, Masco
Corporation owned and was entitled to vote 7,824,690 shares of MascoTech common
stock, or approximately 17.5% of the MascoTech common stock outstanding on that
date. On the record date, directors and executive officers of MascoTech and
their associates and affiliates owned and were entitled to vote 7,385,044
shares of MascoTech common stock, or approximately 16.5% of the MascoTech
common stock outstanding on that date. Of such number, Mr. Manoogian and his
affiliates (including the Foundation) beneficially owned 6,098,336 shares of
MascoTech common stock, or approximately 13.6% of the MascoTech common stock
outstanding on that date.
Under the exchange and voting agreement, the continuing stockholders,
collectively holding 13,190,766 shares or approximately 29.5% of MascoTech
common stock, have agreed to vote all of their MascoTech common stock in favor
of the agreement of merger, the recapitalization agreement and the related
mergers and against any competing transaction. See "--Stockholder Vote Required
to Approve the Mergers" immediately above.
All of the directors and executive officers who own common stock have
indicated that they intend to vote in favor of the agreement of merger, the
recapitalization agreement and the related mergers.
5
<PAGE>
Capitalization Prior to and After the Recapitalization Merger
The following chart shows the stock ownership of MascoTech on October ,
2000 prior to the mergers:
<TABLE>
<S> <C> <C> <C>
Richard and Jane
Masco Richard Manoogian All Other
Corporation Manoogian Foundation Stockholders
| | | |
--------------------- -------------------- --------------------- ---------------------
17.5% of common stock 9.8% of common stock(a) 2.2% of common stock 70.5% of common stock(b)
-------------------------------------------------------------------------------------------
|
MascoTech, Inc.
</TABLE>
---------------
(a) Excludes common stock owned by affiliates of Mr. Manoogian. Includes
restricted stock awards.
(b) Includes restricted stock awards.
Neither Heartland nor Riverside will own any stock of MascoTech prior to
the recapitalization merger.
The following chart shows the continuing stockholders' stock ownership of
MascoTech immediately prior to the recapitalization merger and after giving
effect to the subsidiary merger and the exchange of common stock held by the
continuing stockholders for preferred stock:
<TABLE>
<S> <C> <C> <C>
Richard and Jane
Masco Richard Manoogian All Other
Corporation Manoogian Foundation Stockholders
| | | |
--------------------- -------------------- ------------------- ---------------------
12.0% of common stock 9.3% of common stock(a) 0.8% of common stock 77.9% of common stock(b)
69.8% class A preferred stock 14.6% of class A preferred stock 15.6% of class A preferred stock
100% of class B preferred stock
| | | |
------------------------------------------------------------------------------------------------------------------------------
|
MascoTech, Inc.
(the corporation
surviving the
subsidiary merger)
</TABLE>
---------------
(a) Excludes common stock owned by affiliates of Mr. Manoogian. Includes
restricted stock awards.
(b) Includes restricted stock awards.
6
<PAGE>
The following chart shows each filing party's stock ownership of MascoTech
immediately after the recapitalization merger:
<TABLE>
<S> <C> <C> <C>
Richard and Jane Hartland Industrial
Masco Richard Manoogian Partners, L.P. and
Corporation Manoogian Foundation its co-investors
and management(b)
| | | |
--------------------- -------------------- ------------------- ---------------------
8.8% of common stock 2.4% of common stock(a) 2.0% of common stock 86.8% of common stock(a)
100% of Series A
preferred stock
` | | | |
-------------------------------------------------------------------------------------------
|
MascoTech, Inc.
(the corporation
surviving the
recapitalization
merger)
---------
(a) Includes restricted stock awards.
(b) Riverside will not exist after the recapitalization merger.
</TABLE>
Tax Consequences (see page 45)
Generally, for United States federal income tax purposes, stockholders
will be taxed on any gain they recognize as a result of the recapitalization
merger.
Conditions to the Mergers (see page 62)
We will complete the mergers only if specific conditions are satisfied or,
in some cases, waived, including the following:
o required approval of the agreement of merger, the recapitalization
agreement and the related mergers by the stockholders of MascoTech;
o absence of any law or court order prohibiting the mergers;
o the completion of all required actions in connection with the mergers
by any governmental authority;
o performance, in all material respects, by the continuing stockholders
of their obligations under the exchange and voting agreement;
o availability of sufficient financing;
o receipt of an opinion regarding the solvency of MascoTech after the
recapitalization merger; and
o receipt by MascoTech of at least $125 million from dispositions of
its investments in companies (other than Saturn stock).
The party entitled to assert the condition may waive some of its
conditions to the merger, but not the first two listed above.
In addition, we will not complete the recapitalization merger if the
subsidiary merger is not approved and completed first.
Termination of the Recapitalization Agreement
(see page 64)
MascoTech and Riverside can jointly agree to terminate the
recapitalization agreement at any time before completing the mergers. In
addition, either MascoTech or Riverside can terminate the recapitalization
agreement if:
7
<PAGE>
o we do not complete the mergers by December 20, 2000; however, a party
in material breach of its obligations under the recapitalization
agreement cannot terminate the recapitalization agreement for this
reason;
o a law or final and non-appealable court order prohibits the
recapitalization merger;
o MascoTech stockholders do not give the required approvals;
o the other party breaches in a material respect any of its
representations or warranties or fails to comply in all material
respects with any of its obligations under the recapitalization
agreement, resulting in a failure to satisfy a condition to the
completion of the recapitalization merger by December 20, 2000; or
o MascoTech's board of directors or special committee withdraws or
modifies in a manner adverse to Riverside its recommendation of the
recapitalization agreement or the recapitalization merger to its
stockholders.
Break-up Fee (see page 64)
MascoTech must pay Riverside a break-up fee of $16 million in cash if:
o a third party publicly announces an acquisition proposal for
MascoTech, the recapitalization agreement is terminated because
MascoTech's board of directors or special committee has adversely
changed its recommendation of the recapitalization agreement or the
recapitalization merger or because the required approval of the
agreement of merger, recapitalization agreement or the mergers by the
stockholders are not obtained, and MascoTech enters into another
agreement or consummates another transaction related to an
acquisition proposal within six months of termination of the
recapitalization agreement; or
o a third party publicly announces an acquisition proposal for
MascoTech, the recapitalization agreement is terminated by either
party because the transactions have not been consummated by December
20, 2000 or by Riverside because MascoTech has breached any of its
obligations or representations and cannot cure the breach by December
20, 2000, and MascoTech enters into another agreement or consummates
another transaction with that third party related to an acquisition
proposal within six months of termination of the recapitalization
agreement.
Stockholder Litigation Challenging the
Mergers (see page 48)
Five purported stockholder class action lawsuits have been filed against
MascoTech, each of MascoTech's directors and Masco Corporation, in the Delaware
Court of Chancery on behalf of MascoTech's unaffiliated stockholders. The
lawsuits, although not identical, allege, among other things, that (1) the
directors breached their fiduciary duties to MascoTech's stockholders through
an unfair process of negotiating the recapitalization agreement and unfair and
inadequate consideration and (2) Heartland and the continuing stockholders
unfairly possessed non-public information when negotiating the recapitalization
agreement. The lawsuits further allege that these actions by MascoTech
prevented or could prevent the stockholders of MascoTech from realizing the
full and fair value of their stock. We believe that the allegations contained
in these complaints are without merit and intend to contest the actions
vigorously.
8
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGERS
Q: When and where is the special meeting?
A: The special meeting will take place at 9:00 a.m., local time, on
November , 2000 at MascoTech's principal executive offices located at 21001 Van
Born Road, Taylor, Michigan 48180.
Q: Who is entitled to vote?
A: Holders of record, including holders of restricted stock awards, of
MascoTech common stock as of the close of business on October , 2000 are
entitled to one vote per share of MascoTech common stock held.
Q: What will I receive in the mergers?
A: After the subsidiary merger, you will continue to hold the stock you
own immediately prior to that merger. In the recapitalization merger, holders
of common stock at the time of the recapitalization merger will be entitled to
receive in exchange for each share of MascoTech common stock (unless you are a
holder who has properly demanded appraisal rights) $16.90 in cash plus
additional cash amounts from the net proceeds of the disposition of Saturn
stock held by MascoTech as specified in the recapitalization agreement.
However, holders of options or of restricted stock awards will be treated
as described in "Summary Term Sheet -- What Holders of Options Will Receive"
and "Summary Term Sheet--What Holders of Restricted Stock Awards Will Receive."
Please see the description on page 57 for more information.
See "Summary Term Sheet -- What Stockholders Will Receive" and the
description beginning on page 56 for more information.
Q. When do you expect to complete the disposition of Saturn stock?
A: Unlike the sale of other non-operating assets to CVC, the sale of
Saturn stock is not a condition to the recapitalization merger. Currently,
MascoTech has not entered into a definitive agreement to dispose of its Saturn
stock. Although MascoTech's goal is to dispose of the Saturn stock as
expeditiously as possible, MascoTech does not know when and if it will be able
to do so.
Q. What is a dissenting holder?
A: Delaware law entitles stockholders who do not vote in favor of a merger
to demand a judicial appraisal of the fair value of their shares. If you do not
vote in favor of the recapitalization merger and if you follow the procedures
set forth beginning on page 92, you will be a dissenting holder.
Q: What vote is required for the approval of the mergers?
A: Stockholder votes on two proposals are required to approve the mergers.
The first proposal will involve the approval and adoption of the merger between
MascoTech Harbor, a wholly owned subsidiary of MascoTech, and MascoTech, the
effect of which is to repeal a provision of MascoTech's certificate of
incorporation. The vote of the holders of at least a majority of the MascoTech
stock entitled to vote is required to approve this proposal.
The second proposal will involve the approval of the recapitalization
agreement and the acquisition by Heartland of MascoTech through a merger. The
vote of the holders of at least a majority of the MascoTech common stock
entitled to vote, including a majority of the MascoTech common stock not held
by the continuing stockholders, is required to approve this proposal.
You may abstain from voting on either of these proposals; however, if you
mark your proxy "ABSTAIN" with respect to either of these proposals, you will
be in effect voting against that proposal. In addition, if you fail to send in
your proxy, this will have the same legal effect as a vote against the mergers.
Q: If my shares are held in "street name" by my broker, will my broker
vote my shares for me?
A: If you do not provide your broker with instructions on how to vote your
"street name" shares, your broker will not be able to vote them on the mergers.
This will have the effect of voting against the mergers. You should therefore
instruct your broker how to vote your shares, following the directions provided
by your broker. Please check the voting form used by your broker to see if you
can give your proxy to your broker by telephone or internet.
9
<PAGE>
Q: What will happen if the subsidiary merger is not approved at the
special meeting?
A: We will not consummate the recapitalization merger unless the
subsidiary merger has been approved and completed.
Q: What do I need to do now?
A: Just indicate on your proxy card how you want to vote, sign it and mail
it in the enclosed return envelope, or give your proxy by telephone or the
internet, as soon as possible, so that your shares may be represented at the
special meeting. If you sign and send in your proxy card and do not indicate
how you want to vote, MascoTech will count your proxy card as a vote in favor
of the proposals submitted at the special meeting. You may also attend the
special meeting and vote your shares in person. You can find further details on
how to vote by proxy on page 14.
Q: What do I do if I want to change my vote?
A: Just send in a later-dated, signed proxy card to Eugene A. Gargaro,
Jr., MascoTech's Secretary, at 21001 Van Born Road, Taylor, Michigan 48180, or
resubmit your proxy by telephone or the internet before the special meeting.
You can also attend the special meeting in person and vote. You can find
further details on how to revoke your proxy on page 14.
Q: Why is the board of directors recommending the mergers?
A: The special committee evaluated the fairness and advisability of the
recapitalization agreement and the mergers and unanimously recommended that
your board of directors approve the agreement of merger, the recapitalization
agreement and the related mergers. A more complete description of the factors
considered by the special committee can be found beginning on page 24.
Q: Why was the special committee formed?
A: Your board of directors formed the special committee of independent
directors who are not employees of MascoTech or employees or directors of Masco
Corporation or otherwise interested in these transactions to protect your
interests in evaluating and negotiating the recapitalization agreement. The
special committee is composed of independent directors Peter A. Dow, Roger T.
Fridholm, William K. Howenstein and Helmut F. Stern. The special committee
independently selected and retained legal and financial advisors to assist it.
You can find further details about the special committee beginning on page 16.
Q: Does Riverside have the financial resources to pay for MascoTech common
stock?
A: Riverside has obtained equity commitment letters from Heartland and
other investors committing them to provide $435 million and bank commitment
letters from The Chase Manhattan Bank and Chase Securities Inc. committing them
to provide MascoTech $1.475 billion, of which up to $1.12 billion is available
to finance the recapitalization. We believe that the funds from these equity
and debt commitments together with the proceeds from the sale of the
non-operating assets to CVC will be sufficient to finance the recapitalization
merger. The funding of these commitments are subject to customary conditions.
If the funds are not available from these sources, Riverside is obligated to
use commercially reasonable efforts to find other sources of financing to
consummate the recapitalization merger on terms reasonably acceptable to
Riverside. However, if the debt or equity commitments are not available and
alternative sources of funds are not available, we will not be able to complete
the recapitalization merger. For more information, please see page 42.
Q: Should I send in my stock certificates now?
A: No. If the mergers are completed, we will send stockholders written
instructions for exchanging their stock certificates.
Q: When do you expect to complete the mergers?
A: We are working to complete the mergers as soon as possible. We expect
to complete the subsidiary merger during a recess in the special meeting
following stockholder approval of that merger and to complete the
recapitalization merger shortly after stockholder approval of the
recapitalization merger.
10
<PAGE>
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the mergers, you should contact:
MASCOTECH, INC.
21001 Van Born Road
Taylor, Michigan 48180
Attention: Kenneth J. Zak
Phone Number: (800) 474-8324 (toll free)
If you would like additional copies of this
document, or if you have questions about the
mergers, you should contact:
MORROW & COMPANY, INC.
445 Park Avenue
New York, New York 10022
Attention:
Phone Number: (800) (toll-free)
If you would like to request documents from us, please do so by November ,
2000 to receive them before the special meeting. MascoTech will send the
documents by first-class mail within one business day of receiving your
request. MascoTech has not made any other provisions to grant unaffiliated
stockholders access to MascoTech's corporate files or to obtain counsel or
appraisal services at MascoTech's expense.
11
<PAGE>
SPECIAL MEETING
Time and Place; Proxy Solicitation
The solicitation of the enclosed proxy is made by the board of directors
of MascoTech for use at the special meeting of stockholders of MascoTech to be
held at its offices at 21001 Van Born Road, Taylor, Michigan 48180, on November
, 2000 at 9:00 a.m., and at any adjournment. This proxy statement and the
enclosed proxy are being mailed or given to stockholders on or about October ,
2000.
The expense of this solicitation will be borne by MascoTech. Solicitation
will be by mail, and executive officers and other employees of MascoTech may
solicit proxies, without extra compensation, personally and by telephone and
other means of communication. In addition, MascoTech has retained Morrow &
Company, Inc. to assist in the solicitation of proxies for a fee of $ , plus
expenses. MascoTech will also reimburse brokers and other persons holding
MascoTech common stock in their names or in the names of their nominees for
their reasonable expenses in forwarding proxies and proxy materials to
beneficial owners.
Purpose
At the special meeting, the stockholders of MascoTech will be asked to
consider and vote upon the approval and adoption of the agreement of merger,
the recapitalization agreement and the related mergers and any other business
as may properly come before the special meeting.
Who Can Vote; Record Date
Stockholders of record at the close of business on October , 2000 will be
entitled to vote at the special meeting. On that date, there were 44,757,419
shares of MascoTech common stock, par value $1.00 per share, outstanding and
entitled to vote and holders of record. Holders of record will be entitled to
one vote for every share of common stock they hold on the record date.
Vote Required; Voting Procedures
Quorum. The special meeting will be held if a quorum, consisting of a
majority of the outstanding shares of common stock, is represented in person or
by proxy. Broker non-votes and abstentions will be counted toward the
establishment of a quorum.
Vote Required. Approval and adoption of the agreement of merger, the
recapitalization agreement and the related mergers requires the affirmative
vote of the holders of at least a majority of the MascoTech stock entitled to
vote, including in the case of the recapitalization agreement and the related
recapitalization merger at least a majority of MascoTech common stock not held
by the continuing stockholders.
Broker Non-Votes. Under NYSE rules, if your broker holds shares in its
name, the broker can vote on some "routine" proposals when it has not received
your instructions. Under these rules, the broker cannot vote your shares on
non-routine matters, such as the merger proposals. Therefore, without your
instructions, your broker cannot vote your shares for the approval and adoption
of these proposals. This is a "broker non-vote." A broker non-vote or the
withholding of a proxy's authority will have the same legal effect as a vote
against the mergers.
Effect of Abstaining. You may abstain from voting on either of the
proposals required for approval of the mergers. If you mark your proxy
"ABSTAIN" with respect to either of these proposals, you will be in effect
voting against that proposal. In addition, if you fail to send in your proxy,
this, too, will have the same legal effect as a vote against the mergers.
How Affiliates, Directors and Executive Officers Intend to Vote. The
continuing stockholders hold in the aggregate approximately 29.5% of the stock
entitled to vote on the mergers and have agreed to vote their shares in favor
of the agreement of merger, the recapitalization agreement and the related
mergers. All directors and executive
12
<PAGE>
officers of each of MascoTech and Masco Corporation who hold stock entitled to
vote on the mergers have indicated to MascoTech that they intend to vote their
shares in favor of the agreement of merger, the recapitalization agreements and
the related mergers.
Voting by Proxy
Holders of record can ensure that their shares are voted at the special
meeting by submitting proxy instructions by telephone, by internet, or by
completing, signing, dating and delivering the enclosed proxy card in the
envelope provided. Submitting instructions by any of these methods will not
affect the right to attend the special meeting and vote. The telephone and
internet voting procedures are designed to authenticate stockholders'
identities, to allow stockholders to give their voting instructions and to
confirm that stockholders' instructions have been recorded properly and have
been authorized by the stockholder. Section 212(c)(2) of the Delaware General
Corporation Law authorizes the use of electronic transmission, such as
transmissions over the internet, to grant a proxy.
By telephone: Call toll-free 1-800- and follow the instructions. You will
need to give the personal identification number contained on your
proxy card.
By internet: Go to www. and follow the instructions.
You will need to give the personal identification number
contained on your proxy card.
In writing: Complete, sign, date and return your proxy card in the enclosed
envelope.
If you return a signed proxy card but do not provide voting instructions,
the persons named as proxies on the proxy card will vote "FOR" the approval and
adoption of the agreement of merger, the recapitalization agreement and the
related mergers.
Revoking Your Proxy. You may revoke your proxy at any time before it is
voted by:
o giving notice, in person or in writing, to the Secretary of
MascoTech;
o delivering to the Secretary of MascoTech, at 21001 Van Born Road,
Taylor, Michigan 48180, a duly executed proxy indicating a contrary
vote bearing a later date; or
o attending the special meeting and voting in person.
Voting in person. If you are a holder of record and you plan to attend the
special meeting and wish to vote in person, MascoTech will give you a ballot at
the special meeting. You should realize that attendance at the special meeting,
however, will not in and of itself constitute a revocation of your proxy. You
must deliver a written notice of revocation or subsequent proxy to the
Secretary of MascoTech at the address listed above at any time before the vote
is taken.
Assistance. If you need help in changing or revoking a proxy, please
contact Morrow & Company at the address or phone number provided in this
document under the caption "Who Can Help Answer Your Questions."
Do not send in any stock certificates with your proxy cards. MascoTech
will mail transmittal forms with instructions for the surrender of stock
certificates for MascoTech common stock to former MascoTech stockholders as
soon as practicable after the completion of the recapitalization merger.
Other Business; Adjournments
The board of directors is not aware of any other matters to be presented
at the special meeting of stockholders. If any other matters should properly
come before the special meeting, the persons named as proxies in the enclosed
proxy card will vote the proxies in accordance with their best judgment.
Adjournments may be made for the purpose of, among other things,
soliciting additional proxies. Any adjournment may be made from time to time by
approval of the holders of shares representing a majority of the votes
13
<PAGE>
present in person or by proxy at the special meeting, whether or not a quorum
exists, without further notice other than by an announcement at the meeting.
MascoTech will seek an adjournment of the special meeting after the approval of
the first proposal in order to complete the subsidiary merger prior to the vote
on the second proposal relating to the recapitalization agreement and the
recapitalization merger.
14
<PAGE>
SPECIAL FACTORS
General
At the MascoTech stockholders' special meeting, MascoTech will ask its
stockholders to vote upon:
o a proposal to approve and to adopt an agreement of merger and the
merger of MascoTech Harbor, a wholly owned subsidiary of MascoTech,
with and into MascoTech; and
o a proposal to approve and adopt the recapitalization agreement, dated
as of August 1, 2000, between Riverside and MascoTech and the merger
of Riverside with and into MascoTech.
We have attached a copy of the agreement of merger as Annex A and the
recapitalization agreement as Annex B to this document. We urge you to read the
agreement of merger and the recapitalization agreement in their entirety
because they are the legal documents governing the mergers.
Background of the Mergers
Masco Corporation undertook a major corporate restructuring during 1984
which involved the transfer of its Products for Industry businesses to
MascoTech. MascoTech became a separate public company in the middle of 1984
when Masco Corporation distributed common stock of MascoTech as a special
dividend to its stockholders. Following the public distribution, Masco
Corporation initially held approximately 50% of MascoTech's common stock but
has reduced its ownership of MascoTech's common stock over time. As of August
9, 2000, Masco Corporation held approximately 17.5% of the outstanding common
stock of MascoTech. As of August 9, 2000, Mr. Manoogian, the chairman of
MascoTech's board of directors and the chairman of the board of directors and
chief executive officer of Masco Corporation, together with the Foundation and
other affiliates of Mr. Manoogian, held approximately 13.6% of the outstanding
common stock of MascoTech.
MascoTech's board of directors has periodically evaluated the business and
operations of MascoTech as well as its strategic direction and the prospects
for MascoTech and its various businesses. MascoTech's board also has from time
to time discussed certain issues relating to MascoTech's limitations as a
public company with substantial exposure to the automotive supply industry. In
particular, the board of directors considered the adverse impact on MascoTech's
market valuation resulting from the cyclical nature of the business, the
increasing consolidation and globalization of the automotive supply industry,
trends favoring larger and better-capitalized companies in that industry as
well as MascoTech's relatively small size, its capital needs for growth
internally and through acquisitions, and its high leverage and limited trading
volume, institutional sponsorship and public float. The board of directors also
considered that the impact from the above factors on MascoTech's market
valuation adversely affected its ability to issue additional equity in order to
reduce its existing level of indebtedness or for acquisition purposes.
In February 1999, in connection with this review, MascoTech's board of
directors requested that Salomon Smith Barney assist it in reviewing strategic
alternatives to maximize stockholder value. During April and the first half of
May, Salomon Smith Barney conducted due diligence of MascoTech and met with the
management of MascoTech.
At a meeting of the board of directors on May 18, 1999, Salomon Smith
Barney reviewed with the board of directors and management various factors
which were affecting the market valuation of MascoTech's stock, including
certain industry-wide factors, such as the consolidation and globalization
trends in the automotive supply industry, the cyclicality of the automotive
supply industry and the increasing focus among MascoTech's customers on their
suppliers' ability to deliver entire systems instead of components. Also noted
as factors contributing to MascoTech's stock valuation were certain
company-specific factors, such as limited research attention from market
analysts, small market capitalization, a lack of consistent earnings
predictability and lower growth expectations relative to its peer group, as
well as MascoTech's highly leveraged capital structure and its complex
corporate structure, both in terms of significant shareholdings of MascoTech
common stock by its affiliates (including Masco
15
<PAGE>
Corporation) and in terms of a number of non-operational assets owned by
MascoTech, consisting of equity and other investments in a number of public and
private companies. Salomon Smith Barney also reviewed with the board of
directors and management several strategic alternatives, such as maintaining
the status quo and pursuing strategic acquisitions, sales, split-offs or
spin-offs of business units (and the possible adverse tax consequences thereof)
and other corporate reorganization transactions as well as the possible sale of
MascoTech.
After reviewing the alternatives discussed at its May 18, 1999 meeting and
conducting discussions with the management of MascoTech, on May 19, 1999, the
board of directors of MascoTech authorized Salomon Smith Barney to assist
MascoTech in pursuing strategic alternatives, including a potential sale of
MascoTech. The board of directors considered that the sale transaction was
likely to maximize the value of MascoTech's common stock and that other
alternatives were less likely to result in a long range enhancement of the
stockholder value which would be superior to the sale transaction. During June
and July 1999, Salomon Smith Barney conducted additional due diligence and
assisted management in the preparation of confidential offering materials
relating to the potential sale of MascoTech. In late July 1999, the board of
directors authorized solicitation of interest from parties which might be
interested in acquiring MascoTech. In accordance with these instructions,
representatives of MascoTech circulated confidential offering materials to
potential strategic and financial buyers. John A. Morgan, a managing director
of Morgan Lewis Githens & Ahn, Inc. and a director of MascoTech and Masco
Corporation, played a significant role in soliciting possible transactions and
in subsequent negotiations. MascoTech also engaged Davis Polk & Wardwell as its
legal advisor in connection with any potential transaction.
The search for a potential buyer resulted in no significant indications of
interest from any strategic buyer and two indications of interest from
financial buyers for the acquisition of MascoTech. However, one of the
potential financial buyers subsequently discontinued its discussions with
MascoTech due to its concerns about antitrust issues raised by a possible
acquisition of MascoTech. The other financial buyer which indicated significant
interest in pursuing an acquisition of MascoTech was Citicorp Venture Capital.
CVC delivered a preliminary indication of interest which valued MascoTech's
common stock at a price in excess of $20 per share, but its preliminary
indication of interest was conditioned on both Masco Corporation and Mr.
Manoogian agreeing to retain a significant equity interest in MascoTech, on
Masco Corporation's agreement to provide financial support to MascoTech after
the consummation of the acquisition, on a satisfactory due diligence
investigation of MascoTech, on consummation of transactions involving other
companies in which MascoTech owned interests and on other contingencies.
Representatives of MascoTech continued to contact strategic and financial
buyers identified as having a possible interest in acquiring MascoTech. All of
these contacts were made with a view to soliciting additional expressions of
interest in the acquisition of MascoTech. None of these contacts resulted in a
proposal to acquire MascoTech. From time to time, representatives of MascoTech
held discussions with some of the principals of Heartland who at the time were
in the process of forming Heartland and raising funds. While these discussions
were preliminary in nature, Heartland's principals indicated that after the
formation and initial fund-raising for Heartland was completed, they might be
interested in pursuing further discussions. In response, representatives of
MascoTech indicated that they were actively pursuing other strategic options
for MascoTech.
On December 6, 1999, at a meeting of the MascoTech board of directors, the
board of directors was updated on the discussions with CVC. In light of the
position taken by CVC regarding the participation in the transaction by Masco
Corporation and Mr. Manoogian, the board of directors of MascoTech established
a special committee of the board of directors which consisted solely of
directors who were not officers or employees of MascoTech or officers,
directors or employees of its affiliates, and who had no financial interest in
the proposed transaction different from MascoTech stockholders generally. The
special committee, consisting of Peter A. Dow, William K. Howenstein and Helmut
F. Stern, was given authority to further consider MascoTech's strategic
alternatives, evaluate any proposals from CVC or any other third party,
negotiate the terms of any proposed transaction if deemed advisable, advise the
board of directors whether or not to engage in any proposed transaction, retain
its own financial advisor and its own legal counsel to assist in these
functions and to report and to make recommendations to the board of directors
on all or any of these matters.
On December 7, 1999, the MascoTech board of directors reviewed with
MascoTech's management and financial advisors the process that had been
undertaken to consider strategic alternatives available to MascoTech, including
the process of soliciting interest from potential buyers. Following the board
meeting, the special committee held an organizational meeting. Peter A. Dow was
elected chairman of the special committee. The
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special committee engaged McDonald Investments to act as its financial advisor
and engaged Dykema Gossett PLLC to act as its legal counsel. Representatives of
Dykema Gossett advised the special committee regarding its role and duties.
Members of the special committee then reviewed the progress and status of the
consideration of strategic alternatives undertaken by the MascoTech board of
directors and determined that the special committee, with the assistance of the
special committee's legal and financial advisors, would evaluate and recommend
whether a sale of control of MascoTech should be considered at that time and
the process to be followed in that event, including how the special committee
would respond to, and deal with, any CVC proposals.
Thereafter, representatives of MascoTech and representatives of the
special committee of MascoTech conducted negotiations with representatives of
CVC regarding the terms of a possible transaction. Beginning in January 2000,
the special committee became concerned about the extent of CVC's commitment to
the transaction, the availability of financing for any CVC proposal, and the
possible price and other terms of any CVC proposal. The special committee was
especially concerned when, beginning in February 2000, CVC indicated that it
was not likely to pursue an all-cash transaction but was instead considering
transaction structures in which some or all of the public stockholders of
MascoTech would receive subordinated debt securities of MascoTech as part of
the consideration. While CVC proposed several alternative combinations of cash
and subordinated debt that it would consider offering in a transaction, none of
these alternatives were sufficiently developed in their specific terms
(including in particular the terms of the subordinated debt) or supported by
financing to permit the special committee to evaluate a specific proposal. The
lack of specific terms also prevented a formal valuation of the alternatives
suggested, however, McDonald Investments and the special committee believed
that such alternatives, to the extent they could be evaluated, indicated a
range of valuations for MascoTech of less than $20 per share. While the special
committee was prepared to evaluate and address any proposals, the special
committee indicated that it would need to receive specific terms of a proposal
including financing for such proposal in order to evaluate it. When no such
proposals were forthcoming from CVC, discussions between the parties regarding
any possible transaction with CVC terminated in April 2000.
From its formation until discussions with CVC terminated, the special
committee met a number of times to consider MascoTech's strategic alternatives
and to formulate its positions with respect to CVC's expression of interest.
Among the matters considered by the special committee were:
o McDonald Investments' reviews at meetings held on December 9 and
December 14, 1999 of the process to solicit interest in MascoTech
which appeared to have been diligent and thorough;
o A review at the December 14, 1999 meeting by members of MascoTech's
management concerning MascoTech's strategic plan in the event that
the special committee determined that a sale of control of MascoTech
would not be recommended;
o Advice by members of MascoTech's management at the December 14, 1999
meeting that a sale of MascoTech for a cash price representing a
premium over the market would be attractive when compared to other
strategic alternatives; and
o McDonald Investments' review, at the meeting held on January 12,
2000, of MascoTech's available strategic alternatives.
During the CVC discussions and thereafter, representatives of MascoTech
continued to seek alternative transactions and continued to contact potential
buyers. No material interest in acquiring MascoTech as a whole was expressed by
any of the parties contacted. An indication of interest was received from a
foreign industrial buyer but was limited to acquiring, or forming a joint
venture with, MascoTech's automotive supply business. Discussions with that
party continued from early April until early June but terminated after attempts
to structure a transaction that would allow for the acquisition of the
automotive supply business of MascoTech by such party, combined with a separate
sale or spin-off of the other businesses of MascoTech, proved unsuccessful,
insofar as the parties could not reach agreement regarding the valuation of
MascoTech's automotive supply business. In connection with these discussions as
well as after their termination, MascoTech and the special committee of
MascoTech again explored the possibility of a transaction (such as a spin-off)
that would present a superior value for the stockholders of MascoTech as well
as the possibility of not entering into a material transaction, but have
determined that the sale transaction continued to present the greater
likelihood of maximizing stockholder value.
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Heartland was formed in January 2000. Thereafter, the principals of
Heartland began investigating investment opportunities.
Concurrently with the efforts described above, representatives of
Heartland and MascoTech held preliminary discussions beginning in late April
concerning a possible acquisition of MascoTech by Heartland. These preliminary
discussions consisted primarily in the exchange of views regarding the possible
valuation for MascoTech, discussion of the potential financing sources and
strategies and the expression of the special committee's view that a potential
transaction should provide all-cash consideration to MascoTech's stockholders
and that all of MascoTech's stockholders (including Masco Corporation and Mr.
Manoogian) should receive the same treatment in any transaction that Heartland
might propose. Although, in light of the preliminary nature of these
discussions, representatives of the special committee of MascoTech did not
participate in them directly, representatives of Heartland were informed of the
requests previously made by the special committee in connection with the
previous discussions with CVC, such as the request for an all-cash transaction
for the stockholders of MascoTech, and were further informed that any proposal
that Heartland might make should take into account these requests. In
connection with these discussions, representatives of Heartland also conducted
a preliminary due diligence review of certain aspects of MascoTech's
operations.
In June 2000, representatives of MascoTech and representatives of
Heartland continued their discussions regarding the possibility of Heartland
making a proposal to MascoTech and the possible terms of the proposal which
might be considered by the special committee as warranting further discussion.
In particular, representatives of MascoTech and representatives of Heartland
discussed whether, under likely debt financing scenarios, stockholders of
MascoTech would receive at least $18.00 per share of MascoTech common stock in
cash. On June 19, 2000, representatives of Heartland indicated that they would
consider a transaction in which the public stockholders of MascoTech would
receive cash consideration of $17.40 per share of MascoTech common stock. This
proposal contained numerous assumptions and conditions. Among these conditions
were: a due diligence review of MascoTech's businesses, including review of its
operational performance and financial condition, review of MascoTech's assets
and liabilities and review of its environmental, employee and pension
liabilities; the availability to Heartland of the debt financing for the
transaction and terms of such financing; and the availability and terms of the
equity financing for the transaction by the co-investors to be identified by
Heartland. The proposal was also contingent on Masco Corporation and Mr.
Manoogian retaining significant amounts of common and preferred equity in
MascoTech, on Masco Corporation agreeing to extend its commitment to make a
subordinated loan to MascoTech for an extended period of time after the
consummation of the transaction, and on Masco Corporation agreeing to acquire
certain of MascoTech's non-operating assets for a minimum of $165 million in
cash.
On June 20, 2000, the special committee met with its financial and legal
advisors to review the terms of a possible transaction with Heartland. The
special committee noted that MascoTech's financial performance in May and June
was not meeting expectations and that it was likely that the forecast for the
balance of the year would be revised downward. McDonald Investments also
commented on the proposed terms and indicated that an all-cash offer in the
range indicated may be worthy of consideration from a financial point of view.
Thereafter, the special committee authorized further exploration of the
Heartland proposal. Promptly after receiving the instructions of the special
committee, representatives of MascoTech and its special committee commenced
negotiations with representatives of Heartland on the terms of a possible
transaction. Representatives of Heartland and its financing sources conducted
business and documentary due diligence involving a limited group of personnel
at MascoTech's principal executive offices. As part of these negotiations, on
June 22, 2000, Cahill Gordon & Reindel, legal counsel
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to Heartland, delivered first drafts of the recapitalization agreement and the
exchange and voting agreement to representatives of MascoTech, the special
committee and Masco Corporation.
Representatives of Heartland, MascoTech and MascoTech's special committee
continued discussions in late June and early July regarding various aspects of
the Heartland proposal. The principal areas of these discussions included forms
of the consideration to be received by the public stockholders of MascoTech and
by the continuing stockholders and the amount of such consideration, whether
the entity against which MascoTech would have recourse under the
recapitalization agreement would be funded prior to the signing of the
recapitalization agreement and the extent of such funding the scope of the
representations and warranties to be provided by MascoTech, the size of the
break-up fee and the conditions under which it would be payable by MascoTech
and the request of the special committee of MascoTech that the transaction be
subject to the approval of a majority of the stockholders other than the
continuing stockholders. In the course of these discussions, representatives of
Masco Corporation indicated that any proposal that would require Masco
Corporation to acquire the non-operating assets of MascoTech would be
unacceptable to Masco Corporation and representatives of Heartland indicated
that Heartland would not be interested in pursuing a transaction which would
result in Heartland acquiring these assets. As a result of these discussions,
MascoTech reviewed potential buyers for these assets. CVC was considered a
prime candidate to acquire these assets in a single transaction on an
appropriate timetable because CVC had considered the separate acquisition of
these assets as part of their earlier discussions, had already conducted due
diligence and CVC was a significant co-investor in three of these entities.
After representatives of MascoTech held discussions with representatives of
CVC, CVC expressed interest in the acquisition of the assets to be divested,
other than the stock of Saturn, one of the companies in which MascoTech has an
equity investment. CVC stated that in light of the pending initial public
offering of the Saturn stock, the acquisition of the Saturn stock was
inconsistent with CVC's investment strategies.
On July 6, 2000, the board of directors of Masco Corporation formed a
special committee to negotiate the terms of the potential MascoTech transaction
with Heartland on behalf of Masco Corporation. The special committee of Masco
Corporation engaged Merrill Lynch to act as its financial advisor and Honigman
Miller Schwartz and Cohn LLP to act as its legal counsel.
Representatives of Heartland, MascoTech, MascoTech's special committee and
Masco Corporation met in New York on July 6, 2000, to discuss the proposed
agreements. The issues discussed at the July 6 meeting included the disposition
of the non-operating assets and the effect of these dispositions on the price,
the conditions under which MascoTech could terminate the recapitalization
agreement, the size of any break-up fee and the circumstances under which it
would be payable, the financing of the Heartland proposal, the severance
arrangements for employees of MascoTech and other issues. Representatives of
Masco Corporation indicated that the financial and legal advisors of the
special committee of Masco Corporation would review and analyze the Heartland
proposal. Accordingly, it was determined that discussions as to certain terms
of the proposal, including the terms of the securities to be issued to Masco
Corporation and of the subordinated loan commitment requested by Heartland,
would be deferred.
On July 11, 2000, MascoTech's special committee met with its financial and
legal advisors. At the meeting, the special committee discussed developments in
the business of MascoTech and in the proposed transaction with Heartland,
including a report of the July 6 meeting. Mr. Manoogian was invited to the
meeting to explain the general terms of severance arrangements and plans under
consideration with respect to the employees of MascoTech, and Mr. Morgan was
invited to the meeting to report on discussions with CVC regarding the purchase
of the non-operating assets to be divested. The special committee also
considered the terms of the most recent drafts of the transaction documents,
including provisions relating to the subsidiary merger and the recapitalization
merger. In light of the number of uncertainties related to the transaction,
including uncertainties as to its financial terms and financing, uncertainties
relating to the disposition of the non-operating assets requested by Heartland
and uncertainty as to whether Heartland and Masco Corporation would be able to
reach a satisfactory resolution in their discussions, and giving due regard to
the factors discussed at the special committee meeting on June 20 and the risks
inherent in expanded due diligence, the special committee determined that the
negotiations with Heartland should proceed but that Heartland should not be
permitted to commence its due diligence at the business unit level or be
granted access to additional employees of MascoTech unless sufficient progress
was made on the open issues, including, in particular, issues related to the
commitments to be made by Masco Corporation and CVC.
Roger T. Fridholm, a member of the MascoTech board of directors, was
present by invitation at the July 11 meeting of the special committee. Mr.
Fridholm was not a member of the special committee at the time of its formation
due to his employment at that time with MSX International, Inc., an entity
principally owned by MascoTech and CVC. Since such employment terminated prior
to the July 11 meeting, the special committee determined that Mr. Fridholm
should thereafter attend subsequent meetings of the special committee.
Thereafter, representatives of MascoTech and MascoTech's special
committee, representatives of Masco Corporation and Masco Corporation's special
committee and representatives of Heartland conducted numerous
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negotiations regarding the terms of the proposed transaction. While substantial
progress was made during this period, a number of issues, including the
purchase price, termination provisions, provisions regarding the financing
obligations of Heartland and a break-up fee were not resolved. Representatives
of MascoTech and Heartland also discussed how the absence of the proceeds from
the disposition of the Saturn stock might affect the cash price to the
stockholders of MascoTech and various mechanisms through which the value of the
Saturn stock might be received by the stockholders of MascoTech.
During this period, representatives of Masco Corporation and Heartland
narrowed but did not completely resolve their differences regarding the terms
of the securities to be issued to Masco Corporation and of the subordinated
loan commitment from Masco Corporation requested by Heartland.
On July 22, 2000, the special committee of MascoTech held a meeting with
its financial and legal advisors to consider whether, in light of the progress
made in resolving the outstanding issues among various parties, Heartland
should be allowed to expand its due diligence of MascoTech to individual
business units and additional MascoTech employees. The special committee
determined that, even though some issues remained unresolved, sufficient
progress had been made to believe that a transaction with Heartland would be
possible and therefore agreed to permit commencement of the next phase of due
diligence for a limited period of time.
The special committee of MascoTech met on July 24, 2000, to further
discuss outstanding issues. Following an internal review of concerns regarding
the potential transaction with Heartland, representatives of Heartland joined
the meeting. The special committee discussed with representatives of Heartland
the valuation of Heartland's proposal under consideration by the special
committee, the status of Heartland's efforts to obtain debt and equity
financing commitments, and the special committee's concerns with respect to the
sale of the non-operating investments and the allocation of transaction risk
with respect to such sale.
Representatives of Heartland conducted due diligence on MascoTech's
business units during the week of July 24, 2000. During that week,
representatives of MascoTech and its special committee, representatives of
Masco Corporation and its special committee, representatives of Heartland and
representatives of CVC continued their respective negotiations. CVC agreed to
pay $125 million for MascoTech's non-operating assets to be divested, including
its 44% equity interest in MSX International but not its Saturn stock.
In late July, representatives of MascoTech also held negotiations with
representatives of Saturn and the underwriters of Saturn's proposed initial
public offering regarding the inclusion of a portion of MascoTech's holdings in
Saturn in the proposed initial public offering. MascoTech obtained their
agreement that approximately half of the Saturn stock held by MascoTech would
be included in the initial public offering of Saturn.
In light of the possibility that the disposition of all of the Saturn
stock might not be completed prior to the consummation of the Heartland
acquisition due to the fact that the sale of approximately one-half of the
Saturn stock was contingent on a successful initial public offering of Saturn
and no buyer had been identified for the other half, representatives of
MascoTech and the special committee explored various options relating to
maximizing the value of the Saturn stock to the MascoTech stockholders. These
options primarily included the distribution of the Saturn stock to an escrow
account or liquidating trust that would inure to the benefit of the MascoTech
stockholders; the sale of all or a portion of the Saturn stock in a private
transaction or transactions; and obtaining a standby commitment to purchase a
portion of the Saturn stock from Heartland or another party in order to
mitigate the risks of a failed Saturn initial public offering. Heartland
indicated that it would be prepared to pay to stockholders of MascoTech a
reduced amount in cash per share plus a portion of net proceeds from the
disposition of the Saturn stock and that it was prepared to discuss mechanisms
that would be satisfactory to the members of the special committee for
liquidating Saturn stock, which would result in the stockholders of MascoTech
being able to receive part of the proceeds of such liquidation.
On July 28, 2000, the special committee met with its financial and legal
advisors. At the invitation of the special committee, MascoTech's management
and financial advisors also attended part of the meeting. At the meeting, the
special committee considered:
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o a review of MascoTech's business and prospects, updating
managements's presentation to the special committee on December 14,
1999;
o a review by McDonald Investments of MascoTech's strategic
alternatives, including maintaining the business as a going concern
versus a break-up of the company. In reviewing these scenarios,
McDonald Investments outlined MascoTech's current research coverage,
dividend discount models for the business and potential after tax
proceeds realized from a break-up of the company. McDonald
Investments also participated in discussions concerning strategic
sales or mergers and a possible recapitalization of the company;
o a review by Salomon Smith Barney of the marketing efforts that had
been undertaken to identify parties interested in acquiring
MascoTech, including the marketing efforts that had occurred since
discussions with CVC had terminated. Specifically, Salomon Smith
Barney informed the special committee that of the nineteen potential
strategic and financial purchasers initially contacted, ten parties
requested and received a confidential memorandum regarding MascoTech
and its business, two parties submitted indications of interest in a
possible transaction with MascoTech and neither of these parties
proceeded toward final negotiations in respect of a transaction.
Salomon Smith Barney also informed the special committee that seven
potential strategic and financial purchasers were subsequently
recontacted, three of these parties requested and received a
confidential memorandum regarding MascoTech and its business, two
parties submitted indications of interest in a possible transaction
with MascoTech and only one party, Heartland, proceeded toward final
negotiations;
o a review by Richards, Layton & Finger and Dykema Gossett of the
special committee's fiduciary duties under Delaware law, provisions
of the recapitalization agreement and other matters related to the
transaction; and
o a review by Mr. Manoogian of proposed severance arrangements and
plans for MascoTech employees.
The special committee also discussed the negative results of the efforts
of representatives of MascoTech in soliciting interest from potential buyers,
the generally unfavorable conditions in the market for similarly situated
companies and the current status of the negotiations with Heartland.
Thereafter, members of the special committee contacted representatives of
Heartland to discuss unresolved issues. Instead of merger consideration of
$17.40 in cash to be paid to public stockholders of MascoTech, Heartland
proposed merger consideration consisting of $16.90 in cash and a portion of the
proceeds from the disposition of Saturn stock. The special committee noted that
in the event of a disposition of the Saturn stock for $40 million (the
approximate amount MascoTech would have received if one-half of MascoTech's
Saturn stock were sold in the proposed Saturn initial public offering at the
low end of the range of prices set forth in Saturn's registration statement),
the stockholders would receive $17.40 per share in cash. The special committee
determined, upon advice of its financial advisor, that taking the risk of the
disposition of MascoTech's investment in Saturn, if satisfactory mechanics and
logistics of liquidating such investment could be agreed upon, represented the
best opportunity to maximize the value of MascoTech's investment in Saturn for
the MascoTech stockholders. The parties also discussed the sale of MascoTech's
non-operating assets to CVC and Heartland's financing commitments.
On July 31, 2000, representatives of MascoTech and its special committee,
representatives of Masco Corporation and representatives of Heartland met in
New York to discuss all of the agreements. The principal outstanding issues
were substantially resolved by the end of the day, including the priorities of
Heartland and MascoTech's stockholders upon receipt of the proceeds of the
disposition of MascoTech's Saturn stock, the respective rights of Heartland and
of the Adjustment Committee concerning the dispositions of Saturn stock and the
terms of the agreements among Heartland and the continuing stockholders.
On August 1, 2000, the entire board of directors of MascoTech met.
Management of MascoTech reviewed the performance of MascoTech's businesses and
strategic alternatives, Richards, Layton & Finger and Davis Polk reviewed the
board's fiduciary duties, the terms of the transaction and the structure of the
transaction, Salomon Smith Barney reviewed the sales process and the fairness
of the merger consideration from a financial point of view, and McDonald
Investments reviewed the fairness of the merger consideration from a financial
point of view. Salomon Smith Barney rendered to the board of directors of
MascoTech its oral opinion (subsequently confirmed by delivery of a written
opinion dated August 1, 2000) to the effect that, as of that date and based on
and subject to the matters described in its opinion, the merger consideration
was fair, from a financial point of view, to the holders of MascoTech common
stock (other than Riverside, the continuing stockholders and their respective
affiliates). McDonald Investments also rendered to the special committee, its
oral opinion (subsequently confirmed by delivery of a written opinion dated
August 1, 2000) to the effect that, as of such date and based on and subject to
the matters described in its opinion, the merger consideration was fair from a
financial point of view to the holders of
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MascoTech common stock (other than Riverside, the continuing stockholders and
their respective affiliates). After extensive discussion and questioning of
MascoTech's management and advisors, the members of the board of directors who
were not members of the special committee, members of management and
MascoTech's financial and legal advisors were excused. The special committee
then unanimously determined that the agreement of merger, the recapitalization
agreement and the related mergers were advisable and in the best interests of
the stockholders of MascoTech (other than the continuing stockholders and their
affiliates) and that the consideration to be received in the recapitalization
merger by the stockholders (other than the continuing stockholders and their
affiliates) was fair. The special committee unanimously recommended to the
board of directors that it approve the agreement of merger, the
recapitalization agreement and the related mergers.
Thereafter, the board of directors of MascoTech considered the special
committee's recommendation and determined that the agreement of merger, the
recapitalization agreement and the related mergers were advisable and in the
best interests of the stockholders (other than the continuing stockholders and
their affiliates) of MascoTech and that the consideration to be received in the
recapitalization merger by the stockholders (other than the continuing
stockholders and their affiliates) was fair. The board of directors also
resolved that the agreement of merger, the recapitalization agreement and the
related mergers should be submitted to a stockholders' special meeting and
recommended that the stockholders approve these matters put before them for
consideration. Messrs. Manoogian and Morgan voted for the agreement of merger
and the related subsidiary merger but abstained from the vote on the
recapitalization agreement and the related recapitalization merger. Mr.
Manoogian abstained from the vote on the recapitalization agreement and the
recapitalization merger because Masco Corporation and Mr. Manoogian will have
continuing interest in MascoTech after the recapitalization merger. Mr. Morgan
abstained from the recapitalization merger vote because Masco Corporation will
have continuing interest in MascoTech after the recapitalization merger and Mr.
Morgan will be a beneficiary of the fee payable by MascoTech to Morgan Lewis
Githens & Ahn, Inc. in connection with the recapitalization merger.
Subsequent to the board meeting, the respective parties entered into the
various agreements described in this proxy statement. Immediately thereafter,
MascoTech issued a press release announcing the execution of the
recapitalization agreement.
Recommendation of MascoTech's Special Committee and Board of Directors
The special committee unanimously recommended that the board of directors
approve the agreement of merger, the recapitalization agreement and the related
mergers.
Subsequent to the unanimous recommendation of the special committee, the
board of directors of MascoTech has:
o determined that the agreement of merger, the recapitalization
agreement and the related mergers are advisable and in the best
interests of MascoTech's stockholders (other than the continuing
stockholders and their affiliates);
o determined that the merger consideration in the recapitalization
merger is fair to MascoTech's stockholders (other than to the
continuing stockholders and their affiliates);
o approved the agreement of merger, the recapitalization agreement and
authorized the related mergers; and
o recommended that stockholders vote "FOR" approval and adoption of the
agreement of merger, the recapitalization agreement and the
authorization of the related mergers.
Messrs. Manoogian and Morgan voted for the agreement of merger and the
related subsidiary merger but abstained from the vote on the recapitalization
agreement and the related recapitalization merger due to their potential
conflicts of interest.
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MascoTech's Position Regarding the Fairness of the Recapitalization Merger
The special committee and the board of directors believe that the
recapitalization merger is advisable and in the best interests of MascoTech's
stockholders (other than the continuing stockholders and their affiliates) and
that the consideration in the recapitalization merger is fair to MascoTech's
stockholders (other than the continuing stockholders and their affiliates). The
special committee unanimously recommended that MascoTech's board of directors
approve the recapitalization agreement, the agreement of merger and the related
mergers and that MascoTech's board of directors recommend the approval and
adoption of the agreement of merger, the recapitalization agreement and the
related mergers by the stockholders. In reaching these conclusions, the special
committee considered a number of factors listed below. The factors reviewed by
the special committee, in consultation with its legal and financial advisors,
and which supported the special committee's determination to recommend the
recapitalization merger included, among others, the following:
o the special committee's familiarity with MascoTech's business,
operations, properties, assets, financial condition, operating
results and prospects, including MascoTech's failure to meet
expectations of its financial performance in May and June of 2000 and
the effect such performance might have on the potential market
performance of MascoTech common stock on a stand-alone basis;
o the financial presentation of McDonald Investments on August 1, 2000
and the opinion of McDonald Investments that, as of that date, the
merger consideration was fair to the holders of MascoTech common
stock (other than the continuing stockholders and their affiliates)
from a financial point of view. We have described McDonald
Investments' opinion in detail under the heading "Special
Factors--Opinion of Special Committee's Financial Advisor;"
o the cash premium the merger consideration would represent compared to
the market prices and trading activity of MascoTech common stock
prior to the announcement of the recapitalization merger, and the
opportunity for MascoTech stockholders to receive a significant
premium over the market price for their MascoTech common stock in the
recapitalization merger;
o a review of the timing of, and possible strategic alternatives to,
the recapitalization merger, including continuing to operate
MascoTech as an independent publicly-held company or MascoTech
engaging in a restructuring or liquidation through the sale of all or
portions of its operating businesses, which review included:
(1) the reviews by Salomon Smith Barney on May 18, 1999, and by
McDonald Investments on January 12 and July 28, 2000, of various
strategic alternatives available to MascoTech; and
(2) the reviews by MascoTech management on December 14, 1999, July
28, 2000 and August 1, 2000 of MascoTech's strategic plan in the
event that MascoTech remained an independent publicly-held
company, and advice from MascoTech management that a sale of
MascoTech for a cash price representing a premium to market
would be attractive when compared to other strategic
alternatives. The special committee noted that alternatives to
operating MascoTech as an independent company or to liquidating
MascoTech would be more likely to maximize the value of
MascoTech for its stockholders and that MascoTech had pursued
some of these alternatives. See "Special Factors--Background of
the Mergers." Liquidation through a sale of all or portions of
its operating businesses was not considered a viable alternative
because liquidation could have adverse tax consequences to
MascoTech and could dilute MascoTech's earnings;
o the consideration to be received by the MascoTech stockholders (other
than the continuing stockholders) in the recapitalization merger will
consist entirely of cash;
o the various alternatives for, and terms of agreements relating to,
MascoTech's non-operating assets, including the possibility that the
disposition of the Saturn stock may not be completed at the same time
as
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the recapitalization merger and retention by the special committee of
the right under the recapitalization agreement to control the
disposition of the Saturn stock and the distribution of a portion of
such proceeds to MascoTech stockholders even after the consummation
of the recapitalization merger;
o the process to find a purchaser of MascoTech and advice from McDonald
Investments that the process appeared to have been diligent and
thorough, including the discussions with CVC and other parties
described in "Special Factors--Background of the Mergers;"
o the financial and other terms and conditions of the recapitalization
merger and the recapitalization agreement including, without
limitation, the terms of the recapitalization agreement which should
not unduly discourage third parties from making bona fide proposals
subsequent to the signing of the recapitalization agreement and, if
any of these proposals were made, MascoTech's special committee or
MascoTech's board of directors, in the exercise of their respective
fiduciary duties in accordance with the recapitalization agreement,
could authorize MascoTech to provide information to, engage in
negotiations with, and, subject to payment of the break-up fee, enter
into a transaction with, another party (as described under "The
Recapitalization Agreement--Principal Covenants--Covenants of
MascoTech"). The special committee concluded that the $16 million
break-up fee should not deter a third party from making an offer that
was more favorable to MascoTech's stockholders;
o the recapitalization merger requires the affirmative vote of the
holders of at least a majority of the outstanding shares of MascoTech
common stock not owned by the continuing stockholders;
o the terms of the debt and equity commitment letters provided or
obtained by Heartland in connection with the transactions
contemplated by the recapitalization agreement, the terms of which
had been reviewed and negotiated by MascoTech, the special committee
and their representatives and which the special committee considered
to be reasonable;
o Delaware law entitles MascoTech stockholders to appraisal rights if
the recapitalization merger is
completed; and
o the special committee's belief that, after the recapitalization
merger, MascoTech will be solvent, will not be left with unreasonably
small capital and will not have incurred debts beyond its reasonable
ability to pay them as they mature. The receipt of an opinion of an
independent financial advisor confirming this belief is a condition
to MascoTech's obligation to complete the recapitalization merger.
In addition to the foregoing positive factors which supported the special
committee's determination to recommend the recapitalization merger, the special
committee reviewed the following negative factors, which the special committee
viewed as insufficient to outweigh the positive factors:
o the special committee noted that during fiscal years ended December
31, 1998 and 1999, MascoTech's common stock had traded at prices
significantly higher than in the current fiscal year and at times in
excess of $16.90 (see "Comparative Per Share Market Price and
Dividend Information"). The special committee placed greater weight
on its comparison of the merger consideration to recent market prices
than to historical prices as circumstances of MascoTech and its
industry were changing (see "Special Factors--Background of the
Mergers");
o that, while the mergers are likely to be completed, conditions to
funding by the parties to the equity and debt commitments described
in this proxy statement may not be satisfied or waived and Riverside
may not have sufficient funds to consummate the recapitalization
merger, even if approved by stockholders (see "The Recapitalization
Agreement--Principal Conditions to Completion of the Recapitalization
Merger"); and
o the interests of certain directors and management of MascoTech as
described under the heading "Interests of Certain Persons in the
Mergers."
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In addition to the foregoing positive and negative factors which the
special committee's considered in its determination to recommend the
recapitalization merger, the special committee reviewed the following neutral
factors:
o the proposed terms of severance arrangements to be offered to
employees of MascoTech; and
o the consideration offered to the continuing stockholders in
connection with the recapitalization merger, and the ability of
continuing stockholders to participate in the future growth, if any,
of MascoTech;
In view of the number and wide variety of factors considered in connection
with its evaluation of the recapitalization merger, and the complexity of these
matters, the special committee did not find it practicable to, nor did it
attempt to, quantify, rank or otherwise assign relative weights to the specific
factors it considered. In addition, the special committee did not undertake to
make any specific determination to assign any particular weight to any factor,
but conducted an overall analysis of the factors described above. In
considering the factors described above, individual members of the special
committee may have given different weight to different factors. MascoTech's
special committee considered all these factors together and, on the whole,
considered them to be favorable to, and to support, its determination.
The special committee did not consider the prices paid by MascoTech, Mr.
Manoogian and the Foundation for past purchases of MascoTech common stock
because those purchases were made either at the then current market price or
exercise prices at which options were granted. The special committee concluded
that these prices would not provide useful comparison for the fairness of the
merger consideration as compared to the market price prior to the announcement
of the recapitalization merger and the other factors listed above.
The special committee did not consider the net book value of MascoTech
because the historic cost value of its assets would significantly undervalue
MascoTech's business. A description of the various financial analyses valuating
MascoTech's businesses considered by the special committee can be found in
"Special Factors--Opinion of Special Committee's Financial Advisor."
MascoTech's Purpose and Reasons for the Mergers
At its meeting on August 1, 2000, MascoTech's board of directors approved
and voted to enter into, and to recommend that MascoTech stockholders vote to
approve and adopt, the recapitalization agreement, the agreement of merger and
the related mergers.
In the course of reaching its decision to approve the recapitalization
agreement and the agreement of merger, MascoTech's board of directors consulted
with MascoTech's management, as well as its outside legal counsel and financial
advisor, and considered a number of factors, including the following:
o the recommendation of the special committee;
o the factors referred to above as having been taken into account (or
not considered) by the special committee; and
o the financial presentation of Salomon Smith Barney, including its
opinion dated August 1, 2000, as to the fairness, from a financial
point of view and as of the date of the opinion, of the merger
consideration to holders of MascoTech common stock (other than
Riverside, the continuing stockholders and their respective
affiliates). We have described Salomon Smith Barney's opinion in
detail under the heading "Special Factors--Opinion of MascoTech's
Financial Advisor."
The strategic alternatives reviewed by the board of directors with the
assistance of Salomon Smith Barney to and those reviewed by the special
committee with the assistance of McDonald Investments were not considered to be
as attractive to MascoTech's stockholders as a sale of MascoTech on the terms
offered by Heartland. If the mergers are not consummated, the board of
directors will consider which alternatives are in the best interests of
MascoTech and its stockholders at that time, including continuing to seek to
sell MascoTech and continuing to operate MascoTech as an independent entity.
Neither the board of directors nor the special committee had reached a
conclusion to sell MascoTech until the decision was made to approve the
recapitalization merger. Had the recapitalization merger not been approved, the
board of directors would have continued to consider which of the various
strategic alternatives available to MascoTech would be in the best interests of
MascoTech and its stockholders.
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<PAGE>
In view of the number and wide variety of factors considered in connection
with its evaluation of the recapitalization merger, and the complexity of these
matters, the board of directors did not find it practicable to, nor did it
attempt to, quantify, rank or otherwise assign relative weights to the specific
factors it considered. In addition, the board of directors did not undertake to
make any specific determination as to whether any particular factor was
favorable or unfavorable to its ultimate determination or to assign any
particular weight to any factor, but conducted an overall analysis of the
factors described above. In considering the factors described above, individual
members of the board of directors may have given different weight to different
factors. The board of directors considered all these factors together and, on
the whole, considered them to be favorable to, and to support, its
determination.
The board of directors believes that the recapitalization merger is
procedurally fair because, among other things:
o the special committee consisted entirely of non-management,
independent directors appointed by the board of directors to
represent solely the interests of MascoTech's stockholders (other
than the continuing stockholders or their affiliates);
o the special committee retained and was advised by its own independent
financial advisor to assist it in evaluating strategic alternatives,
including the recapitalization merger, and provide it with financial
advice;
o the special committee retained and was advised by its own independent
legal counsel;
o the special committee engaged in extensive negotiations and
deliberations in evaluating the recapitalization merger and the merger
consideration; and
o the recapitalization merger requires the affirmative vote of the
holders of at least a majority of the outstanding shares of MascoTech
common stock not owned by the continuing stockholders.
Heartland's Purpose and Reasons for the Mergers
As a result of the recapitalization merger, Heartland will acquire a
majority of MascoTech common stock and will control MascoTech. Heartland's
purpose for engaging in the recapitalization merger is to cause MascoTech,
together with other industrial companies to be acquired in the future by
Heartland and its affiliates, to form full service providers of engineered
metal products for automotive and industrial customers. Heartland's investment
in MascoTech is in furtherance of its investment strategy to buy, build and
grow industrial companies in sectors that are attractive for consolidation and
long_term growth. As a private company, MascoTech will have the resources and
flexibility to take advantage of growth opportunities and to focus on improving
its business without the constraints of being a public company and distractions
caused by the public market's present disfavor for many "small cap industrial"
companies, such as MascoTech. The recapitalization merger is structured as a
recapitalization for accounting purposes in order to, among other things,
facilitate financing for the recapitalization merger, maintain a portion of the
continuing stockholders' equity interest in MascoTech and preserve the
corporate identity of MascoTech. Heartland believes the recapitalization merger
represents an opportunity for holders of MascoTech common stock to receive a
cash premium for their shares over the market price at which the shares were
traded prior to the announcement of the recapitalization merger.
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Position of Riverside and Heartland
The rules of the SEC require Riverside and Heartland to express their
belief as to the fairness of the recapitalization merger to MascoTech
stockholders (other than the continuing stockholders and their affiliates).
Riverside and Heartland did not consider the fairness of the merger
consideration to MascoTech's stockholders. Although representatives of
Heartland negotiated the recapitalization merger with MascoTech's management,
board of directors and special committee with directly opposing interests to
Heartland's interests and Heartland did not at any time prior to the execution
of the recapitalization agreement evaluate the fairness of the recapitalization
merger to MascoTech's public stockholders, Riverside and Heartland believe that
the recapitalization merger is substantively and procedurally fair to
MascoTech's stockholders (other than the continuing stockholders and their
affiliates) on the basis of the factors described below.
Each of Riverside and Heartland believes that the transaction is
substantively and procedurally fair to MascoTech's stockholders (other than the
continuing stockholders and their affiliates) on the basis of its observations
that:
o The $16.90 per share consideration (before any adjustment to the
consideration for any sale of Saturn stock) being offered in the
recapitalization merger represents an approximately 32% premium over
the per share closing price of MascoTech common stock on August 1,
2000, the last full trading day prior to the public announcement of
the recapitalization merger.
o A special committee of independent directors was established. The
special committee retained its own financial and legal advisor and
conducted a vigorous process of evaluation and negotiation.
o The special committee unanimously recommended to the board of
directors that the recapitalization merger and recapitalization
agreement be approved and adopted. Both the special committee and
board of directors of MascoTech determined that the recapitalization
agreement and recapitalization merger are advisable and in the best
interests of MascoTech's public stockholders and that the merger
consideration is fair to MascoTech's stockholders.
o McDonald Investments, the financial advisor for the special
committee, delivered an opinion dated August 1, 2000, as to the
fairness from a financial point of view, as of the date of such
opinion, of the merger consideration to the holders of MascoTech
common stock (other than the continuing stockholders and their
affiliates).
o Salomon Smith Barney, the financial advisor for MascoTech, delivered
an opinion dated August 1, 2000 to the board of directors, as to the
fairness from a financial point of view, as of the date of such
opinion, of the merger consideration to the holders of MascoTech
common stock (other than the continuing stockholders and their
affiliates).
o The recapitalization agreement requires approval and adoption of the
recapitalization merger by the vote of the holders of at least a
majority of MascoTech's stock entitled to vote, including at least a
majority of MascoTech's common stock not held by the continuing
stockholders.
Neither Riverside nor Heartland considered any factors, other than as
stated above, regarding the fairness of the recapitalization merger to
MascoTech's public stockholders, as they believe the factors they considered
provided a reasonable basis to form their belief. This belief, however, should
not be construed as a recommendation to any stockholder as to how you should
vote on the mergers.
The Continuing Stockholders' Purpose and Reasons for the Mergers
The continuing stockholders' purpose for participating in the
recapitalization merger is to liquidate portion of their common stock at a
price that represents a cash premium over the market price at which the shares
traded prior to the announcement of the recapitalization merger and, to the
extent the continuing stockholders were required by Heartland to retain an
interest in MascoTech, to maximize the value of their remaining interests in
MascoTech and (with respect to Masco Corporation) to minimize its commitments
to MascoTech.
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Position of the Continuing Stockholders
In this proxy statement, we refer to Masco Corporation (and transferees of
Masco Corporation's common stock, if any), Mr. Manoogian and the Foundation as
the "continuing stockholders." The rules of the SEC require the continuing
stockholders to express their belief as to the fairness of the recapitalization
merger to MascoTech stockholders (other than the continuing stockholders and
their affiliates). The continuing stockholders did not consider the fairness of
the merger consideration to MascoTech's stockholders (other than the continuing
stockholders and their affiliates).
The continuing stockholders did not consider any factors, other than as
stated below, regarding the fairness of the recapitalization merger to
MascoTech's pubic stockholders, as they believe the factors they considered
provided a reasonable basis to form their belief. This belief, however, should
not be construed as a recommendation to any stockholder as to how they should
vote on the mergers.
The continuing stockholders believe that the transaction is substantively
and procedurally fair to MascoTech's stockholders (other than the continuing
stockholders and their affiliates) on the basis of their observations that:
o The $16.90 per share consideration (before any adjustment to the
consideration for any sale of Saturn stock) being offered in the
recapitalization merger represents an approximately 32% premium over
the per share closing price of MascoTech common stock on August 1,
2000, the last full trading day prior to the public announcement of
the recapitalization merger.
o A special committee of independent directors was established. The
special committee retained its own financial and legal advisor and
conducted a vigorous process of evaluation and negotiation.
o The special committee unanimously recommended to the board of
directors that the recapitalization merger and recapitalization
agreement be approved and adopted. Both the special committee and
board of directors of MascoTech determined that the recapitalization
agreement and recapitalization merger are advisable and in the best
interests of MascoTech's public stockholders and that the merger
consideration is fair to MascoTech's stockholders.
o McDonald Investments, the financial advisor for the special
committee, delivered an opinion dated August 1, 2000, as to the
fairness from a financial point of view, as of the date of such
opinion, of the merger consideration to the holders of MascoTech
common stock (other than the continuing stockholders and their
affiliates).
o Salomon Smith Barney, the financial advisor for MascoTech, delivered
an opinion dated August 1, 2000 to the board of directors, as to the
fairness from a financial point of view, as of the date of such
opinion, of the merger consideration to the holders of MascoTech
common stock (other than the continuing stockholders and their
affiliates).
o The recapitalization agreement requires approval and adoption of the
recapitalization merger by the vote of the holders of at least a
majority of MascoTech's stock entitled to vote, including at least a
majority of the MascoTech common stock not held by the continuing
stockholders.
Opinion of Special Committee's Financial Advisor
McDonald Investments was asked by the special committee to render an
opinion to the special committee as to the fairness, from a financial point of
view, to MascoTech's stockholders (other than Riverside, the continuing
stockholders and their respective affiliates) of the merger consideration. On
August 1, 2000, McDonald Investments delivered an oral opinion, subsequently
confirmed in writing, to the effect that, as of the date of its opinion, and
based upon and subject to the assumptions, limitations and qualifications
contained in its opinion, the merger consideration to be received in the
recapitalization merger was fair, from a financial point of view, to
MascoTech's stockholders (other than Riverside, the continuing stockholders and
their respective affiliates).
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The full text of the written opinion of McDonald Investments is attached
to this document as Annex E and incorporated into this proxy statement by
reference. We urge you to read that opinion carefully and in its entirety for
the assumptions made, procedures followed, other matters considered and limits
of the review undertaken in arriving at that opinion.
McDonald Investments was retained to serve as an advisor to the special
committee of the MascoTech board of directors and not as an advisor to or agent
of any stockholder of MascoTech. McDonald Investments' opinion was prepared for
the special committee and is directed only to the fairness, from a financial
point of view, of the merger consideration to MascoTech's stockholders (other
than Riverside, the continuing stockholders and their respective affiliates) in
the recapitalization merger and does not address the merits of the decision by
MascoTech to engage in the recapitalization merger or other business strategies
considered by MascoTech, nor does it address MascoTech's decision to proceed
with the recapitalization merger. McDonald Investments' opinion does not
constitute a recommendation to any MascoTech stockholder as to how that
stockholder should vote at the MascoTech special meeting of stockholders.
McDonald Investments did not recommend the amount of the merger
consideration to be paid in the recapitalization merger. The merger
consideration was determined in negotiations between MascoTech and Riverside,
in which McDonald Investments advised the special committee. No restrictions or
limitations were imposed by the special committee on McDonald Investments with
respect to the investigations made or the procedures followed by McDonald
Investments in rendering its opinion.
In rendering its opinion, McDonald Investments reviewed, among other
things:
o the recapitalization agreement, including the exhibits and schedules
to that agreement;
o MascoTech's Annual Reports on Form 10-K for the last three fiscal
years, its Quarterly Report on Form 10-Q for the quarter ended March
31, 2000 and other publicly available information about MascoTech;
o internal business and financial information, including projections,
furnished to McDonald Investments by MascoTech management;
o publicly available information concerning historical stock prices and
trading volumes for MascoTech's common stock;
o publicly available information for other companies that McDonald
Investments believed were comparable to MascoTech and the trading
markets for those other companies' securities; and
o publicly available information about the nature and terms of other
business combination transactions that McDonald Investments
considered relevant to its analysis of this recapitalization.
McDonald Investments also met with officers and employees of MascoTech to
discuss the company's businesses and prospects that McDonald Investments
believed were relevant.
You should note that in rendering its opinion, McDonald Investments relied
upon the accuracy and completeness of all of the financial and other
information provided to it or publicly available. McDonald Investments also
assumed and relied upon the representations and warranties of MascoTech and
Riverside contained in the recapitalization agreement. McDonald Investments was
not engaged to, and did not independently attempt to, verify any of that
information. McDonald Investments also relied upon the management of MascoTech
as to the reasonableness and achievability of the financial and operating
projections, and the assumptions for those projections provided to it, and
assumed that those projections reflect the best currently available estimates
and judgments of MascoTech's management. McDonald Investments was not engaged
to assess the reasonableness or achievability of those projections or the
assumptions underlying them and expresses no view on those matters. McDonald
Investments did not conduct a physical inspection or appraisal of any of the
assets, properties or facilities of MascoTech, nor was it furnished with any
evaluation or appraisal.
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McDonald Investments also assumed that the conditions to the
recapitalization merger as set forth in the recapitalization agreement,
including the disposition of equity investments (other than Saturn stock),
would be satisfied and that the recapitalization merger would be completed on a
timely basis in the manner contemplated by the recapitalization agreement.
McDonald Investments did not solicit, nor was it asked to solicit, third
party interest in a transaction involving MascoTech. McDonald Investments was
advised by representatives of MascoTech, however, and took into account for
purposes of its opinion, that, at MascoTech's direction, MascoTech's financial
advisor was requested to approach, and held discussions with, third parties to
solicit indications of interest for the possible acquisition of MascoTech.
McDonald Investments' opinion is based on economic and market conditions
and other circumstances existing on, and information made available as of, the
date of its opinion. McDonald Investments' opinion does not address any matters
after the date of its opinion. Although subsequent developments may affect its
opinion, McDonald Investments does not have the obligation to update, revise or
reaffirm its opinion.
The following is a brief summary of the analyses performed by McDonald
Investments to arrive at its opinion. This summary is not intended to be an
exhaustive description of the analyses performed by McDonald Investments but
includes all material factors considered by McDonald Investments in rendering
its opinion. McDonald Investments drew no specific conclusions from any of
these analyses, but subjectively factored its observations from these analyses
into its qualitative assessment of the relevant facts and circumstances.
Each analysis performed by McDonald Investments is a common methodology
utilized in determining valuations. Although other valuation techniques may
exist, McDonald Investments believes that the analyses described below, when
taken as a whole, provide the most appropriate analyses for McDonald
Investments to arrive at its opinion.
A copy of McDonald Investments' written presentation to the MascoTech
board of directors has been filed as an exhibit to the Rule 13e-3 Transaction
Statement on Schedule 13E-3 filed by MascoTech with the SEC and will be
available for inspection and copying at the principal executive offices of
MascoTech during regular business hours by any interested stockholder of
MascoTech or any representative of such stockholder who has been so designated
in writing and may be inspected and copied at the office of, and obtained by
mail from, the SEC. The SEC maintains an Internet world wide web site that
contains reports, proxy statements and other information about issuers,
including MascoTech, who file electronically with the SEC. The address of that
site is http://www.sec.gov. You can find a copy of the written presentation and
exhibits can be viewed on that site. If you would like to request any of these
documents, please see "Where You Can Find More Information."
Historical Stock Trading Analysis. McDonald Investments reviewed the
historical performance of MascoTech common stock based on an historical
analysis of closing prices and trading volumes for the prior one month, three
month, six month, twelve month, three year and five year periods. McDonald
Investments noted that the average closing price for MascoTech common stock
over these periods ranged from $11.22 to $16.98, with the lowest average
closing price being the one month average and the highest average closing price
being the three year average.
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The following chart summarizes these prices and volume of trading of
MascoTech common stock.
MascoTech, Inc.
Summary of Price and Volume - Five Years
Average Daily Close
Average Daily ------------------
Period Close Volume High Low
------ ------- ------- ------ ------
Latest Month................. $11.22 118,845 $11.75 $10.50
Last 3 Months................ 11.81 90,334 14.31 10.50
Last 6 Months................ 12.11 82,676 14.50 10.50
Last 12 Months............... 13.31 78,355 17.50 10.50
Last 3 Years................. 16.98 125,060 26.25 10.50
Last 5 Years................. 16.26 115,481 26.25 10.25
McDonald Investments also reviewed the distribution of the closing prices
of MascoTech common stock for the prior one year, three year and five year
periods. McDonald Investments noted that 96.2%, 71.1% and 43.4% of the trading
volume of MascoTech common stock during these respective periods occurred at or
below the purchase price of $16.90 per share of MascoTech common stock.
Premium Paid Analysis. Using publicly available information, McDonald
Investments reviewed several combination transactions completed since January
1, 1999, in the automotive and transportation equipment industry, ranging in
value from $250 million to $2.5 billion. These transactions were chosen based
on MascoTech's participation in the automotive and transportation equipment
industry, the comparable size of the transactions and the recent period in
which the transactions were completed.
Target Avquiror
------- ---------
Mark IV Industries, Inc. BC Partners
The Standard Products Company Cooper Tire & Rubber Company
Detroit Diesel Corporation DaimlerChrysler AG
Walbro Corporation TI Group PLC
Excel Industries, Inc. Dura Automotive Systems, Inc.
Adwest Western Automotive, Inc. Dura Automotive Systems, Inc.
For each of the target companies involved in the transactions, McDonald
Investments examined the closing stock price one day, one week and four weeks
prior to announcement of the transaction in order to calculate the premium paid
over the closing stock price at those points in time. McDonald Investments
determined that the median premium paid in those transactions amounted to
35.7%, 48.0% and 66.4% over the target's closing price for its common stock one
day, one week and four weeks, respectively, prior to the announcement of the
transaction. Assuming an announcement date of July 28, 2000, and a purchase
price of $16.90 per share for MascoTech's common stock, McDonald Investments
determined that MascoTech's stockholders would receive a 46.2%, 50.2% and 56.3%
premium over MascoTech's closing price for its common stock one day, one week
and four weeks, respectively, prior to announcement of the signing of the
recapitalization agreement.
Period Prior to Announcement Median Premium Paid
---------------------------- -------------------
One Day 35.7%
One Week 48.0%
Four Weeks 66.4%
Comparable Public Company Analysis. McDonald Investments reviewed and
compared the financial performance of MascoTech to the financial performance of
nine publicly traded companies that McDonald Investments considered to be
comparable to MascoTech. These companies are U.S. based automotive suppliers
with significant exposure to the original equipment manufacturer market, each
with an equity market capitalization of less than $1.1 billion. This group of
companies was chosen because of MascoTech's significant exposure to this
sector. The comparable companies included:
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<TABLE>
<S> <C> <C>
o ArvinMeritor, Inc. o Simpson Industries, Inc.
o BorgWarner Inc. o Intermet Corporation
o Modine Manufacturing Company o Hayes Lemmerz International, Inc.
o Tower Automotive, Inc. o Superior Industries International, Inc.
o American Axle & Manufacturing Holdings, Inc.
</TABLE>
McDonald Investments calculated the ratio of each comparable company's
enterprise value to that company's sales, EBIT, EBITDA and invested capital for
its latest twelve months. McDonald Investments then applied the median of each
of those ratios to MascoTech's sales, EBIT, EBITDA and invested capital for the
latest twelve months to calculate implied prices per share for MascoTech's
common stock. These calculations resulted in an implied price per share of
$7.99 for invested capital (implied prices per share for sales, EBIT and EBITDA
were not meaningful due to higher leverage at MascoTech and resulted in
implied prices per share ranging from ($3.98) to $1.98). In addition, McDonald
Investments calculated the ratio of stock prices of each comparable company to
that company's earnings per share for the latest twelve months and projected
earnings per share for calendar year 2000. McDonald Investments then applied
the median of that ratio to MascoTech's projected earnings per share for
calendar year 2000 to calculate the implied price per share for MascoTech's
common stock. These calculations resulted in an implied price per share of
$14.71. Based on these calculations, McDonald Investments determined an implied
average price per share of $11.35.
No company utilized in the comparable public company analysis is identical
to MascoTech. McDonald Investments made judgments and assumptions with regard
to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of either
MascoTech or Riverside. Mathematical analysis (such as determining the mean,
median or average) is not itself a meaningful method of using publicly traded
comparable company data.
Discounted Cash Flow/Economic Profit Analysis. McDonald Investments
analyzed various financial projections prepared by the management of MascoTech
for the years 2000 through 2004 and performed a discounted cash flow analysis
of MascoTech based on these projections. A discounted cash flow analysis is a
methodology used to derive a valuation of a corporate entity by discounting to
the present its future expected cash flows. The discounted cash flow analysis
was conducted by estimating MascoTech's weighted average cost of capital at
12.6%. McDonald Investments estimated MascoTech's weighted average cost of
capital by performing analyses consistent with the Capital Asset Pricing Model.
In its analyses McDonald Investments applied the median unlevered beta of 0.94
for the automotive comparable group (this group consists of those companies
specified in the Comparable Public Company Analysis) and a median target debt
to capital ratio of 30%. Using 12.6% as the estimate of cost of capital,
McDonald Investments calculated the present value of free cash flows for each
of the 2000 through 2004 years and the present value of the terminal value of
MascoTech (the calculated value of MascoTech at the end of the projection
period). McDonald Investments calculated the terminal value in year 2004 based
upon a perpetual growth rate of 1.0%. McDonald Investments then calculated the
enterprise value of MascoTech by adding together the present values of free
cash flows for each of 2000 through 2004 and the present value of the terminal
value of MascoTech. McDonald Investments then subtracted the net debt of
MascoTech and added the equity interests (other than Saturn stock) of
MascoTech's affiliates to be disposed of to arrive at MascoTech's equity value.
Through these calculations, McDonald Investments determined that the implied
value per share of MascoTech's common stock equaled $12.90.
McDonald Investments also conducted an economic profit analysis of
MascoTech. An economic profit analysis is a valuation methodology used to
derive a valuation of a corporate entity by discounting to the present its
future expected economic profit. McDonald Investments estimated MascoTech's
weighted average cost of capital at 12.6%. Using this estimate of cost of
capital, McDonald Investments calculated the present value of economic profit
for each of the years 2000 through 2004 and the present value of the terminal
value of MascoTech. McDonald Investments then calculated the enterprise value
of MascoTech (the sum of the present value of the company's economic profit,
the present value of the company's terminal value and capital). McDonald
Investments then subtracted MascoTech's net debt and added the equity interests
(other than Saturn stock) of MascoTech's affiliates
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<PAGE>
to be disposed of to arrive at MascoTech's equity value. Through these
calculations, McDonald Investments determined that the implied value per share
of MascoTech's common stock equaled $12.90.
Comparable Merger & Acquisition Analysis. Using all available information,
McDonald Investments reviewed transactions in the automotive and transportation
equipment industry completed since January 1, 1999 that had enterprise values
ranging from $250 million to $2.5 billion. These transactions were chosen based
on MascoTech's participation in the automotive and transportation equipment
industry, the comparable size of the transactions and the recent period in
which the transactions were completed.
<TABLE>
<S> <C>
Target Acquiror
------- ---------
United Technologies Corporation (UT Automotive Unit) Lear Corporation
Mark IV Industries, Inc. BC Partners
TRW Inc. (Lucas Diesel Systems) Delphi Automotive Systems Corporation
The Standard Products Company Cooper Tire & Rubber Company
Detroit Diesel Corporation DaimlerChrysler AG
Walbro Corporation TI Group PLC
Excel Industries, Inc. Dura Automotive Systems, Inc.
Adwest Western Automotive, Inc. Dura Automotive Systems, Inc.
Active Tool & Products Corporation Tower Automotive, Inc.
Eaton Corporation (Fluid Power Division) BorgWarner Inc.
Mark IV Industries, Inc. (Purolater Filter Unit) Arvin Industries, Inc.
Invensys Plc (Siebe Automotive) Cooper Tire & Rubber Company
</TABLE>
For each of the transactions that it reviewed, McDonald Investments
calculated the ratio of the enterprise value of the transaction to the target
company's latest twelve month sales, EBIT and EBITDA. McDonald Investments
applied the median of these transaction multiples to MascoTech's sales, EBIT
and EBITDA, which resulted in an implied price per share of MascoTech common
stock of $3.02 for sales, $23.35 for EBIT and $15.25 for EBITDA and an average
implied price per share of MascoTech common stock of $13.87.
Ratio of Enterprise Value to: Implied Price per Share
----------------------------- -----------------------
Sales $3.02
EBIT $23.35
EBITDA $15.25
Sum-of-the-Parts Analysis. McDonald Investments estimated the value of
MascoTech by calculating the implied value of its different business segments
and then added these values to arrive at a value for the consolidated entity.
To calculate the implied value of MascoTech's different business segments,
McDonald Investments utilized valuation techniques employed under comparable
public company analysis and discounted cash flow and economic profit analysis.
These valuation techniques required McDonald Investments to compare the
financial performance of each of MascoTech's business segments to the financial
performance of companies comparable to those segments and to estimate the
weighted average cost of capital for MascoTech's business segments by utilizing
analyses consistent with the Capital Asset Pricing Model. McDonald Investments
determined that the following companies were comparable to MascoTech's distinct
business segments and used these companies to calculate the value of each
segment.
<TABLE>
<S> <C>
Forming Segment Fastener Segment
--------------- ------------------
ArvinMeritor, Inc. SPS Technologies, Inc.
Borg Warner Inc. Barnes Group Inc.
Modine Manufacturing Company Penn Engineering & Manufacturing Corp.
Simpson Industries, Inc. The Fairchild Corporation
Intermet Corporation Transtechnology Corporation
Hayes Lemmerz International, Inc.
Tower Automotive, Inc.
American Axle & Manufacturing Holdings, Inc.
</TABLE>
33
<PAGE>
Superior Industries International, Inc.
Towing Segment Packaging Segment
-------------- --------------------
Miller Industries, Inc. Worthington Industries, Inc.
Lund International Holdings, Inc. AptarGroup, Inc.
Edelbrock Corporation Chicago Bridge & Iron Company N.V.
Chart Industries, Inc.
Specialty Segment
-----------------
Milacron Inc.
Kennametal Inc.
UNOVA, Inc.
Regal-Beloit Corporation
The L.S. Starrett Company
These calculations resulted in an average implied price per share of
MascoTech common stock of $9.38 and $15.94 under the comparable public company
analysis and discounted cash flow and economic profit analyses, respectively.
Leveraged Buyout Analysis. McDonald Investments performed a leveraged
buyout analysis of MascoTech as a means of establishing the value of MascoTech
assuming its sale to a typical financial buyer. A leveraged buyout involves the
acquisition or recapitalization of a company financed primarily by incurring
indebtedness that is serviced by the operating cash flow of the company after
the leveraged buyout. McDonald Investments analyzed a scenario, using both
management's projections and research estimates, whereby MascoTech's common
stock would be purchased by a financial buyer at a price resulting in a rate of
return of 30-35% for equity investors, 19-21% for subordinated debt investors
and 22-29% for preferred equity investors. The scenario assumed that senior
debt and total debt of the company would not exceed 3.75 times and 4.75 times
EBITDA, respectively. McDonald Investments determined these rates of return and
leverage multiples based on its experience with similar transactions. These
rates of return and leverage multiples were based on the maximum amount of
senior debt that McDonald Investments believed a company could then currently
borrow and the maximum amount of equity that McDonald Investments believed an
investor would invest based on required returns. This analysis implied an
equity price of $16.75 per share.
Conclusion. The summary set forth above describes the principal elements
of the presentation made by McDonald Investments to the special committee on
August 1, 2000. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of these methods to the particular circumstances
and, therefore, the opinion is not readily susceptible to summary description.
Each of the analyses conducted by McDonald Investments was carried out in order
to provide a different perspective on the recapitalization merger and add to
the total mix of information available. McDonald Investments did not form a
conclusion as to whether any individual analysis, considered in isolation,
supported or failed to support an opinion as to fairness from a financial point
of view. Rather, in reaching its conclusion, McDonald Investments considered
the results of the analyses in light of each other and ultimately reached its
opinion based upon the results of all analyses taken as a whole. Except as
indicated above, McDonald Investments did not place particular reliance or
weight on any individual analysis, but instead concluded that its analyses,
taken as a whole, support its determination. Accordingly, notwithstanding the
separate factors summarized above, McDonald Investments believes that its
analyses must be considered as a whole and that selecting portions of its
analysis and the factors considered by it, without considering all analyses and
factors, could create an incomplete or misleading view of the evaluation
process underlying its opinion. In performing its analyses, McDonald
Investments made numerous assumptions with respect to industry performance,
business and economic conditions and other matters. The analyses performed by
McDonald Investments are not necessarily indicative of actual value or future
results, which may be significantly more or less favorable than suggested by
the analyses.
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<PAGE>
Miscellaneous. Under the terms of the engagement letter dated December 28,
1999, the special committee of the board of directors of MascoTech agreed to
cause MascoTech to pay McDonald Investments an advisory fee of $400,000 and an
opinion fee of $600,000, which opinion fee was payable when McDonald
Investments delivered its fairness opinion to the special committee. The
special committee also agreed to cause MascoTech to reimburse McDonald
Investments up to $100,000 for reasonable and documented out-of-pocket
expenses, and to indemnify McDonald Investments and related persons against
liabilities in connection with its engagement, including liabilities under
federal securities laws. The terms of the fee arrangement with McDonald
Investments were negotiated at arm's-length between the special committee and
McDonald Investments.
In the ordinary course of business, McDonald Investments may actively
trade the securities of MascoTech for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position
in those securities.
McDonald Investments, as part of its investment banking services, is
regularly engaged in the valuation of businesses and securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed
and unlisted securities, private placements and valuations for corporate and
other purposes. The special committee selected McDonald Investments based on
its experience in transactions similar to the recapitalization merger and its
reputation in the brokerage and investment communities.
Opinion of MascoTech's Financial Advisor
MascoTech retained Salomon Smith Barney to act as its financial advisor in
connection with the proposed recapitalization merger. In connection with its
engagement, MascoTech requested that Salomon Smith Barney evaluate the
fairness, from a financial point of view, of the consideration to be received
in the recapitalization merger by holders of MascoTech common stock (other than
Riverside, the continuing stockholders and their respective affiliates). On
August 1, 2000, at a meeting of the board of directors held to evaluate the
proposed mergers, Salomon Smith Barney delivered to the board of directors an
oral opinion (confirmed by delivery of a written opinion dated August 1, 2000)
to the effect that, as of that date and based on and subject to the matters
described in its opinion, the merger consideration was fair, from a financial
point of view, to the holders of MascoTech common stock (other than Riverside,
the continuing stockholders and their respective affiliates).
In arriving at its opinion, Salomon Smith Barney:
o reviewed the recapitalization agreement and related documents;
o held discussions with senior officers, directors and other
representatives and advisors of MascoTech concerning the business,
operations and prospects of MascoTech;
o examined publicly available business and financial information
relating to MascoTech;
o examined financial forecasts and other information and data for
MascoTech which were provided to or otherwise discussed with Salomon
Smith Barney by the management of MascoTech;
o reviewed the financial terms of the recapitalization merger as
described in the recapitalization agreement in relation to, among
other things, current and historical market prices and trading
volumes of MascoTech common stock, the historical and projected
earnings and other operating data of MascoTech, and the financial
condition and capitalization of MascoTech;
o considered, to the extent publicly available, the financial terms of
other transactions recently effected which Salomon Smith Barney
considered relevant in evaluating the recapitalization merger;
o analyzed financial, stock market and other publicly available
information relating to the businesses of other companies whose
operations Salomon Smith Barney considered relevant in evaluating
those of MascoTech; and
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<PAGE>
o conducted other analyses and examinations and considered other
financial, economic and market criteria as Salomon Smith Barney
deemed appropriate in arriving at its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, on the accuracy and completeness of all financial and
other information and data that it reviewed or considered. The management of
MascoTech advised Salomon Smith Barney that the financial forecasts and other
information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of MascoTech as
to the future financial performance of MascoTech. Salomon Smith Barney also
assumed, with MascoTech's consent, that the equity investment dispositions
(excluding MascoTech's Saturn stock) which MascoTech will be required to
consummate as a condition to the recapitalization merger would be effected in
all material respects in accordance with the terms contemplated by the
recapitalization agreement and related documents. Salomon Smith Barney did not
make and was not provided with an independent evaluation or appraisal of the
assets or liabilities, contingent or otherwise, of MascoTech, and did not make
any physical inspection of the properties or assets of MascoTech.
In connection with its engagement, Salomon Smith Barney was requested to
approach, and held discussions with, third parties to solicit indications of
interest in the possible acquisition of MascoTech. Salomon Smith Barney
expressed no view as to, and its opinion does not address, the relative merits
of the recapitalization merger as compared to any alternative business
strategies that might exist for MascoTech or the effect of any other
transaction in which MascoTech might engage. Salomon Smith Barney's opinion was
necessarily based on information available, and financial, stock market and
other conditions and circumstances existing and disclosed, to Salomon Smith
Barney as of the date of its opinion. Although Salomon Smith Barney evaluated
the fairness of the merger consideration in the recapitalization merger from a
financial point of view, Salomon Smith Barney was not asked to and did not
recommend the specific consideration payable in the merger, which was
determined through negotiation between MascoTech and Riverside. MascoTech
imposed no limitations or other instructions on Salomon Smith Barney with
respect to the investigations made or procedures followed by Salomon Smith
Barney in rendering its opinion.
The full text of Salomon Smith Barney's written opinion dated August 1,
2000, which describes the assumptions made, matters considered and limitations
on the review undertaken, is attached to this proxy statement as Annex F and is
incorporated into this proxy statement by reference. Salomon Smith Barney's
opinion is addressed to the board of directors and relates only to the fairness
of the merger consideration from a financial point of view, does not relate to
any other aspect of the recapitalization merger or any related transaction and
does not constitute a recommendation to any stockholder with respect to any
matter relating to the proposed mergers.
In preparing its opinion, Salomon Smith Barney performed a variety of
financial and comparative analyses, including those described below. The
summary of these analyses is not a complete description of the analyses
underlying Salomon Smith Barney's opinion. The preparation of a fairness
opinion is a complex analytical process involving various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to summary description.
Accordingly, Salomon Smith Barney believes that its analyses must be considered
as a whole and that selecting portions of its analyses and factors, without
considering all analyses and factors, could create a misleading or incomplete
view of the processes underlying its analyses and opinion.
In its analyses, Salomon Smith Barney considered industry performance,
general business, economic, market and financial conditions and other matters
existing as of the date of its opinion, many of which are beyond the control of
MascoTech. No company, transaction or business used in those analyses as a
comparison is identical to MascoTech or the proposed recapitalization merger,
and an evaluation of those analyses is not entirely mathematical. Rather, the
analyses involve complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the companies, business segments or
transactions analyzed.
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<PAGE>
The estimates contained in Salomon Smith Barney's analyses and the
valuation ranges resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which
may be significantly more or less favorable than those suggested by its
analyses. In addition, analyses relating to the value of businesses or
securities do not necessarily purport to be appraisals or to reflect the prices
at which businesses or securities actually may be sold. Accordingly, Salomon
Smith Barney's analyses and estimates are inherently subject to substantial
uncertainty.
A copy of Salomon Smith Barney's written presentation to the board of
directors has been filed as an exhibit to the Rule 13e-3 Transaction Statement
on Schedule 13E-3 filed by MascoTech with the SEC and will be available for
inspection and copying at the principal executive offices of MascoTech during
regular business hours by any interested stockholder of MascoTech or any
representative of such stockholder who has been so designated in writing and
may be inspected and copied at the office of, and obtained by mail from, the
SEC. The SEC maintains an Internet world wide web site that contains reports,
proxy statements and other information about issuers, including MascoTech, who
file electronically with the SEC. The address of that site is
http://www.sec.gov. You can find a copy of the written presentation and
exhibits can be viewed on that site. If you would like to request any of these
documents, please see "Where You Can Find More Information."
Salomon Smith Barney's opinion and analyses were only one of many factors
considered by the board of directors in its evaluation of the recapitalization
merger and should not be viewed as determinative of the views of the board of
directors, special committee or management with respect to the recapitalization
merger or the merger consideration.
The following is a summary of the material financial analyses performed by
Salomon Smith Barney in connection with the rendering of its opinion dated
August 1, 2000. For purposes of the financial analyses and its opinion
described below, Salomon Smith Barney evaluated the merger consideration both
before and after taking into account the additional consideration potentially
payable to holders of MascoTech common stock in the recapitalization merger
from the disposition of MascoTech's Saturn stock. In its evaluation of the
Saturn stock, Salomon Smith Barney assumed all of MascoTech's Saturn stock was
sold at a price per share equal to the midpoint of the initial public offering
price set forth in Saturn's registration statement on Form S-1 filed with the
SEC on July 24, 2000. On August 11, 2000, Saturn announced that it had
withdrawn its proposed initial public offering.
Selected Companies Analysis.
Salomon Smith Barney performed a selected companies analysis in order to
derive an implied equity reference range for MascoTech by analyzing the market
values and trading multiples of other publicly traded companies in MascoTech's
industry. Using publicly available information, Salomon Smith Barney analyzed
the market values and trading multiples of selected publicly traded companies
in the automotive supplier industry, which is the principal industry in which
MascoTech operates, with particular focus on metal and related automotive
component manufacturing companies with annual revenue of $3.0 billion or less
and equity market capitalization of $1.0 billion or less. Based on these
characteristics, Salomon Smith Barney selected the following nine publicly
traded companies in the automotive supplier industry:
o Amcast Industrial Corporation
o American Axle & Manufacturing Holdings, Inc.
o BorgWarner Inc.
o Dura Automotive Systems, Inc.
o Hayes Lemmerz International, Inc.
o Intermet Corporation
o Simpson Industries, Inc.
o Superior Industries International, Inc.
o Tower Automotive, Inc.
All multiples were based on closing stock prices on July 28, 2000.
Estimated financial data for the selected companies were based on publicly
available research analysts' estimates and estimated financial data for
MascoTech were based on internal estimates of the management of MascoTech and
publicly available research analysts' estimates. Salomon Smith Barney compared
firm values of MascoTech and the selected companies as a multiple of latest 12
months earnings before interest, taxes, depreciation and amortization, commonly
referred to as EBITDA, and earnings before interest and taxes, commonly
referred to as EBIT. Salomon Smith Barney also compared
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<PAGE>
market values of MascoTech and the selected companies as a multiple of
estimated calendar years 2000 and 2001 earnings per share. Salomon Smith Barney
then applied a range of selected multiples derived from the selected companies
of latest 12 months EBITDA and EBIT and estimated calendar years 2000 and 2001
earnings per share to corresponding financial data of MascoTech in order to
derive an implied equity reference range for MascoTech. This analysis resulted
in an implied equity reference range for MascoTech of approximately $6.00 to
$12.00 per share, as compared to the merger consideration of $16.90 per share
before taking into account the disposition of MascoTech's Saturn stock and
approximately $18.10 per share after taking into account the disposition of
MascoTech's Saturn stock assuming that the price of the Saturn stock was
determined in the manner discussed above.
Selected Companies Plus Premium Analysis.
Salomon Smith Barney also performed a selected companies plus premium
analysis in order to derive an implied equity reference range for MascoTech
after applying a 30% to 40% change of control premium (which reflects the mean
and median premiums paid in 75 merger and acquisitions transactions effected
since January 1, 1999 with transaction values of between $1.5 billion and $2.5
billion based on the target company's closing stock price one day prior to
public announcement of the transaction) to the aggregate equity reference range
implied in the "Selected Companies Analysis" described above. This analysis
resulted in an implied equity reference range for MascoTech of approximately
$7.80 to $16.80 per share, as compared to the merger consideration of $16.90
per share before taking into account the disposition of MascoTech's Saturn
stock and approximately $18.10 per share after taking into account the
disposition of all of MascoTech's Saturn stock assuming that the price of the
Saturn stock was determined in the manner discussed above.
Precedent Transactions Analysis.
Salomon Smith Barney performed a precedent transactions analysis in order
to derive an implied equity reference range for MascoTech by analyzing the
prices paid or proposed to be paid in merger and acquisition transactions
involving other companies in MascoTech's industry. Using publicly available
information, Salomon Smith Barney reviewed the implied transaction value
multiples paid or proposed to be paid in selected merger and acquisition
transactions in the automotive supplier industry, which is the principal
industry in which MascoTech operates, with particular focus on transactions
effected since January 1, 1999 (excluding mergers of equals transactions)
involving metal and related automotive component manufacturing companies. Based
on these characteristics, Salomon Smith Barney selected the following 23
transactions in the automotive supplier industry:
<TABLE>
<S> <C> <C>
Acquiror Target
-------- ------
o Exide Corporation GNB Technologies, Inc.
o Tower Automotive, Inc. Dr. Meleghy GmgH & Co. KG
o Dana Corporation Invensys plc-- Australian axle & stamping division
o Management/Saw Mill Capital Fund II, L.P. Jason Inc.
o CVC Capital Partners Invensys plc-- automotive sealing systems division
o BC Partners Ltd. Mark IV Industries, Inc.
o The Carlyle Group Tritech Precision Inc.
o Trelleborg AB Invensys plc-- automotive anti-vibration business
o Management Transportation Technologies Industries, Inc.
o Delphi Automotive Systems Corporation TRW Inc.-- Lucas Diesel Systems business
o Aurora Capital Group Autocam Corporation
o BorgWarner Inc. Eaton Corporation-- fluid power division
o Cooper Tire & Rubber Company Standard Products Company
o Kelso & Company Citation Corporation
o Tower Automotive, Inc. Active Tool & Manufacturing Company, Inc.
o TI Group plc Walbro Corporation
o Carreras, Kestner & Co., L.L.C. Hilite Industries, Inc.
o Hidden Creek Industries Inc. J.L. French Automotive Castings, Inc.
</TABLE>
38
<PAGE>
<TABLE>
<S> <C> <C>
Acquiror Target
-------- ------
o Exide Corporation GNB Technologies, Inc.
o American Axle & Manufacturing Holdings, Inc. MSP Industries Corporation
o American Axle & Manufacturing Holdings, Inc. Colfor Manufacturing, Inc.
o Dura Automotive Systems, Inc. Adwest Automotive plc
o Dura Automotive Systems, Inc. Excel Industries, Inc.
o Meritor Automotive, Inc. Volvo Truck Corporation-- heavy truck axle
manufacturing division
</TABLE>
Salomon Smith Barney compared firm values in the selected transactions as
a multiple of latest 12 months EBITDA and EBIT. All multiples were based on
publicly available financial information for the selected transactions. Salomon
Smith Barney then applied a range of selected multiples derived from the
selected transactions of latest 12 months EBITDA and EBIT to corresponding
financial data for MascoTech in order to derive an implied equity reference
range for MascoTech. This analysis resulted in an implied equity reference
range for MascoTech of approximately $13.00 to $19.00 per share, as compared to
the merger consideration of $16.90 per share before taking into account the
disposition of MascoTech's Saturn stock and approximately $18.10 per share
after taking into account the disposition of MascoTech's Saturn stock assuming
that the price of the Saturn stock was determined in the manner discussed
above.
Discounted Cash Flow Analysis.
Salomon Smith Barney performed a discounted cash flow analysis of
MascoTech in order to derive an implied equity reference range for MascoTech if
it were to remain an independent company based on the present value of the
stand-alone, unlevered, after-tax free cash flows that MascoTech could generate
for the second half of fiscal year 2000 and for fiscal years 2001 through 2004,
based on internal estimates by MascoTech's management. The range of estimated
terminal values for MascoTech was calculated by applying terminal value
multiples of 4.0x to 5.0x to MascoTech's estimated calendar year 2004 EBITDA,
based generally on the latest 12 months EBITDA trading multiples of selected
companies in the automotive supplier industry. The present value of the cash
flows and terminal values were calculated using discount rates ranging from
9.0% to 10.0%, based generally on the weighted average cost of capital for
selected companies in the automotive supplier industry. This analysis resulted
in an implied equity reference range for MascoTech of approximately $15.50 to
$24.00 per share, as compared to the merger consideration of $16.90 per share
before taking into account the disposition of MascoTech's Saturn stock and
approximately $18.10 per share after taking into account the disposition of
all of MascoTech's Saturn stock assuming that the price of the Saturn stock was
determined in the manner discussed above.
Other Factors.
In rendering its opinion, Salomon Smith Barney also reviewed and
considered other factors, including:
o historical market prices and trading volumes of MascoTech common
stock and the relationship between movements in MascoTech common
stock, movements in an index comprised of the common stock of the
selected companies and movements in the S&P 500 Index;
o research analysts' reports for MascoTech; and
o a review of MascoTech's investments other than Saturn and the
proceeds to be received in connection with the disposition of those
investments to CVC.
Miscellaneous.
Under the terms of its engagement, MascoTech has agreed to pay Salomon
Smith Barney for its financial advisory services (including its services
regarding strategic alternatives considered by MascoTech) upon completion of
the recapitalization merger an aggregate fee of $8.0 million, of which $5.3
million is payable at closing.
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<PAGE>
MascoTech also has agreed to reimburse Salomon Smith Barney for reasonable
travel and other expenses incurred by Salomon Smith Barney in performing its
services, including reasonable fees and expenses of its legal counsel, and to
indemnify Salomon Smith Barney and related persons against liabilities,
including liabilities under the federal securities laws, arising out of its
engagement.
In the ordinary course of business, Salomon Smith Barney and its
affiliates may actively trade or hold the securities of MascoTech for their own
account or for the account of customers and, accordingly, may at any time hold
a long or short position in those securities. Salomon Smith Barney and its
affiliates have in the past provided investment banking services to MascoTech
unrelated to the proposed merger, for which services Salomon Smith Barney has
received compensation. In addition, Salomon Smith Barney and its affiliates,
including Citigroup Inc. and its affiliates, may maintain relationships with
MascoTech, Riverside and their respective affiliates. CVC is an affiliate of
Salomon Smith Barney. See "Special Factors--Background of the Mergers" and
"Other Agreements--Stock Purchase Agreement."
Salomon Smith Barney is an internationally recognized investment banking
firm and was selected by MascoTech based on its experience, expertise and
familiarity with MascoTech and its business. Salomon Smith Barney regularly
engages in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
Amount and Source of Funds and Financing of the Recapitalization Merger
MascoTech and Heartland estimate that the total amount of funds required
to purchase all of the outstanding common stock of MascoTech, excluding the
shares exchanged by the continuing stockholders and restricted stock awards
(which are to be exchanged for preferred stock, common stock and restricted
stock as provided for in the recapitalization agreement and the exchange and
voting agreement), is approximately $607.0 million. MascoTech and Heartland
estimate that the total amount of funds required to pay for the common stock,
to refinance MascoTech's existing debt that is required to be refinanced as a
result of the consummation of the recapitalization agreement and to pay all
related fees and expenses is $1.8 billion. The completion of the
recapitalization merger is conditioned on obtaining sufficient equity financing
from Heartland and the co-investors and debt financing from The Chase Manhattan
Bank, Chase Securities Inc. and a syndicate of other banks to finance the
recapitalization merger. Riverside has committed to use commercially reasonable
efforts to obtain financing sufficient to pay for the outstanding common stock
of MascoTech, refinance all of MascoTech's existing debt that is required to be
refinanced as a result of the recapitalization merger and to pay all related
fees and expenses. However, if such financing cannot be arranged from Chase and
alternative sources of financing are not available, the mergers will not be
consummated. MascoTech's 4 1/2 % convertible subordinated debentures due 2003
will not be refinanced as a part of the recapitalization merger. MascoTech's
obligations under the indenture for the debentures will be unaffected by the
recapitalization merger. Pursuant to the terms of the debentures, upon
consummation of the recapitalization merger, a holder of the debentures will no
longer have the right to convert its debentures into common stock of MascoTech
but instead will have the right to convert its debentures only into the merger
consideration, as if such holder converted its debentures immediately prior to
the recapitalization merger. The recapitalization merger will not be completed
if MascoTech does not receive $125 million (or $116 million under limited
circumstances) from the disposition of non-operating assets to CVC, or other
persons. The following table summarizes the source of and uses for funds and
financing in connection with the recapitalization merger:
<TABLE>
Sources Uses
------- ----
<S> <C> <C> <C>
($ in millions)
New senior credit facilities $1,000.7 Merger Consideration(1) $ 607.0
Assumed industrial revenue bonds 21.5 Existing debt and securitization refinanced(2) 994.5
4.5% convertible subordinated debt 305.0 4.5% convertible subordinated debt 305.0
Accounts receivable securitization(3) 120.0 Restricted stock awards 62.2
Equity investment sale 125.0 Assumed industrial revenue bonds 21.5
Unvested restricted stock awards 46.6 Fees & Expenses 78.9
Cash on hand and other (net) 0.1
Equity(4) 450.2
-------- --------
Total $2,069.1 Total $2,069.1
======== ========
</TABLE>
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-------------------
(1) Net of stock option proceeds of $25.5 million. Excludes common stock
and preferred stock retained by continuing stockholders. Excludes
payment of the additional merger consideration from the proceeds of
the sale of Saturn. The source of such payment would be the sale of
Saturn stock.
(2) Includes existing accounts receivable securitization which will be
refinanced.
(3) Off-balance sheet accounting treatment.
(4) Excludes common and preferred equity provided by the continuing
stockholders. Includes the vested portion of restricted stock awards.
Equity Commitments. Heartland and the co-investors delivered commitment
letters for equity investments of $435 million in the aggregate. Heartland's
commitment is subject only to the satisfaction of the conditions for
Riverside's benefit in the recapitalization agreement. The co-investors'
commitments are subject to the satisfaction of the conditions for Riverside's
benefit in the recapitalization agreement, Heartland making its equity
investment and absence of a materially adverse change in the expected sources
and uses of funds. These commitment letters also provide for indemnification by
Riverside for any damages related to the recapitalization agreement suffered by
co-investors.
Credit Financing. On August 1, 2000, Riverside received an executed
commitment letter from Chase under which Chase agreed to provide credit
facilities consisting of a $550 million tranche A senior secured term loan
facility, a $450 million tranche B senior secured term loan facility, a $300
million senior secured revolving credit facility and a $175 million receivables
purchase facility. Up to $1.12 billion of these facilities will be available to
finance the recapitalization merger, including refinancing of MascoTech's
existing debt and paying related fees and expenses. The remainder of the
facilities will be used for general corporate purposes following the
recapitalization merger.
o The tranche A loan and the revolving facility will each mature
six and a half years after the closing of the recapitalization
merger. The tranche B loan will mature eight years after the
closing of the recapitalization merger and the receivables
purchase facility will mature five years after the closing of
the recapitalization merger.
o Loans under the tranche A, tranche B and revolving facilities
will bear interest at the base rate or at adjusted LIBOR plus,
in each case, an applicable margin. Loans under the receivables
purchase facility will bear interest at the base rate or at
adjusted LIBOR plus, in each case, an applicable margin, or at
the commercial paper rate.
o Loans under these facilities will be secured by all assets of
MascoTech and, with limited exceptions, MascoTech's
subsidiaries.
Each of the Chase commitments is subject to customary conditions,
including the negotiation, execution and delivery of definitive documentation
with respect to each commitment. MascoTech expects that the final terms of
these facilities will be materially consistent with the terms set forth in the
commitment letter filed as exhibit (b)(1) to the Rule 13e-3 Transaction
Statement on Schedule 13E-3, which is incorporated by reference. Heartland does
not have any plans or arrangements to refinance or repay the credit facilities
to be entered into in connection with the recapitalization merger, other than
to make payments to the lenders at maturity and otherwise, in accordance with
the credit facilities' terms.
Certain Effects of the Mergers
Merger with MascoTech Harbor. The subsidiary merger will facilitate the
recapitalization merger by repealing a provision of MascoTech's certificate of
incorporation which requires a vote of the holders of 95% of the outstanding
common stock to approve business combinations, including mergers, involving
persons who own 30% or more of the outstanding voting stock of MascoTech. In
order to avoid doubt as to whether 95% approval would be required for the
recapitalization merger, MascoTech has undertaken to consummate the merger with
MascoTech
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Harbor prior to the recapitalization merger. MascoTech and Riverside will not
complete the recapitalization merger if the subsidiary merger is not completed
first. The only reason for the subsidiary merger is to repeal the provision in
MascoTech's certificate of incorporation, requiring a 95% vote to approve
business combinations including mergers, involving persons holding 30% or more
of MascoTech common stock in order to facilitate the transactions described in
this proxy statement, including the recapitalization merger.
Recapitalization Merger. The recapitalization merger will result in
Heartland, the co-investors, the continuing stockholders and employees holding
restricted stock awards owning substantially all of the shares of MascoTech
common stock. The recapitalization merger will also have the following effects:
1. No Participation in Future Growth. If the recapitalization merger is
completed, holders of MascoTech common stock (other than the continuing
stockholders and holders of the restricted stock awards) will not have the
opportunity to participate in the future earnings, profits and growth of
MascoTech and will not have the right to vote on corporate matters relating to
MascoTech. If the recapitalization merger is completed, Heartland and the
co-investors, which will invest in Riverside prior to the recapitalization
merger, will own 76% of the outstanding voting stock and will control the
business and operations of MascoTech.
Heartland, the co-investors, the continuing stockholders and employees
holding restricted stock awards who will retain equity interests in MascoTech
following the recapitalization merger will collectively own substantially all
of the interest in the net book value and net earnings of MascoTech and will
benefit from any future increase in the value of MascoTech. Similarly, they
will bear the risk of any decrease in the value of MascoTech after the
recapitalization merger and holders of MascoTech common stock (other than the
continuing stockholders and holders of the restricted stock awards) will not
face the risk of a decline in the value of MascoTech after the completion of
the recapitalization merger.
2. Reporting Requirements. After the recapitalization merger, MascoTech
expects to continue to have Exchange Act reporting requirements because of the
number of holders of MascoTech common stock after the recapitalization merger,
including the continuing stockholders and the holders of restricted stock
awards and because it has public convertible debt outstanding. If and when
MascoTech is eligible for termination of its reporting requirements under the
Exchange Act, it will likely seek their termination.
3. Delisting of the Shares of MascoTech Common Stock on the NYSE. The
shares of MascoTech common stock are currently listed on the NYSE. If the
recapitalization merger is completed, the number of shares of MascoTech common
stock that trade publicly will be reduced to zero and MascoTech common stock
will be delisted from the NYSE and will not be eligible for listing or trading
on any exchange.
4. Certificate of Incorporation and Bylaws. Immediately after the
subsidiary merger and prior to the recapitalization merger, the certificate of
incorporation of MascoTech in the form of Exhibit B to the agreement of merger
attached to this proxy statement as Annex A will be MascoTech's certificate of
incorporation. Immediately after the recapitalization merger, the certificate
of incorporation in the form of Exhibit E to the recapitalization agreement
attached to this proxy statement as Annex B will be MascoTech's certificate of
incorporation and MascoTech's bylaws will be amended as described in Exhibit F
to the recapitalization agreement attached to this proxy statement as Annex B.
5. Directors and Officers. The managers of Riverside immediately prior to
the recapitalization merger and two persons designated by the continuing
stockholders will be the initial directors of MascoTech after the
recapitalization merger. The officers of MascoTech immediately prior to the
recapitalization merger will be the officers of MascoTech after the
recapitalization merger except that Mr. Hennessey is expected to resign as
chief executive officer.
6. MascoTech's 4 1/2% convertible subordinated debentures due 2003. The 4
1/2% convertible subordinated debentures due 2003 will be unaffected by the
mergers. Pursuant to the terms of the debentures, upon consummation of the
recapitalization merger, a holder of the debentures will no longer have the
right to convert its debentures into common stock of MascoTech but instead will
have the right to convert its debentures only into the merger consideration, as
if such holder converted its debentures immediately prior to the
recapitalization merger.
Upon completion of the merger, the continuing stockholders will have the
following percentage interests in MascoTech's net book value (shareholders'
equity) and net income, which were approximately $336 million as of June 30,
2000 and approximately $52 million for the six months ended June 30, 2000,
respectively:
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Pre-Merger Post-Merger
---------- -----------
Masco Corporation.......................... 17.5% 8.8%
Richard A. Manoogian....................... 9.8% 2.4%
Richard and Jane Manoogian Foundation...... 2.2% 2.0%
Plans for MascoTech After the Recapitalization Merger
It is currently expected that the business and operations of MascoTech
will be conducted substantially as they are currently being conducted.
Heartland does not currently intend for MascoTech to dispose of any material
assets or engage in any other extraordinary transaction after the effective
time of the recapitalization merger. Heartland will from time to time evaluate
strategic acquisitions, dispositions, joint ventures or other similar
transactions. Recently, an affiliate of Heartland separately agreed to acquire
all of the outstanding stock of Simpson Industries, Inc. as part of Heartland's
strategy to assemble companies that can be full service providers of engineered
metal products for automotive and industrial customers. MascoTech is not a
party to the acquisition agreement and has no right to participate in the
Simpson acquisition. Upon completion of the MascoTech re-capitalization merger,
Heartland plans to consider a range of strategic relationships between Simpson
and MascoTech, including a possible business combination. In any event,
Heartland does not currently contemplate any material changes in the
composition of MascoTech's management or personnel, other than as described in
this proxy statement. Heartland is, however, continuing to evaluate MascoTech's
business, practices, operations, properties, corporate structure,
capitalization, management and personnel and will determine what changes, if
any, will be desirable.
Conduct of the Business of MascoTech if the Recapitalization Merger is
Not Completed
If the merger is not completed, MascoTech intends to continue to operate
its business substantially in the manner it is operated today. From time to
time, MascoTech will evaluate and review its business operations, properties,
dividend policy and capitalization, and make such changes as are deemed
appropriate, and continue to seek to identify strategic alternatives to
maximize stockholder value.
Material Federal Income Tax Consequences
The following discussion summarizes the material U.S. federal income tax
consequences of the recapitalization merger. This discussion is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
regulations promulgated under the Code, Internal Revenue Service rulings, and
judicial and administrative rulings in effect as of the date of this document,
all of which are subject to change, possibly with retroactive effect. This
discussion does not address all aspects of federal income taxation that may be
relevant to a stockholder in light of the stockholder's particular
circumstances or to those MascoTech stockholders subject to special rules, such
as stockholders who are not citizens or residents of the United States,
financial institutions or broker-dealers, tax-exempt organizations, insurance
companies, dealers in securities, foreign corporations, stockholders who
acquired their MascoTech common stock through the exercise of options or
similar derivative securities or otherwise as compensation or stockholders who
hold their MascoTech common stock as part of a straddle or conversion
transaction. This discussion assumes that MascoTech stockholders hold their
respective MascoTech shares as capital assets within the meaning of Section
1221 of the Code. This discussion also does not address the U.S. federal income
tax consequences to holders of restricted stock awards or options on MascoTech
common stock. No ruling from the Internal Revenue Service will be applied for
with respect to the federal income tax consequences discussed herein and
accordingly there can be no assurance that the Internal Revenue Service will
agree with the positions described in this proxy statement.
We intend this discussion to provide only a summary of the material
federal income tax consequences of the recapitalization merger. We do not
intend it to be a complete analysis or description of all potential federal
income tax consequences of the recapitalization merger. In addition, we do not
address tax consequences that may vary with, or are contingent upon, individual
circumstances. We also do not address any non-income tax or any foreign, state
or local tax consequences of the recapitalization merger. Accordingly, we
strongly urge you to consult your tax
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advisor to determine your particular U.S. federal, state, local or foreign
income or other tax consequences resulting from the recapitalization merger,
with respect to your individual circumstances.
Federal Income Tax Consequences to MascoTech Stockholders Other Than the
Continuing Stockholders
The disposition of MascoTech common stock pursuant to the recapitalization
merger will be a taxable transaction for U.S. federal income tax purposes. For
U.S. federal income tax purposes, a beneficial owner of shares of MascoTech
common stock will recognize capital gain or loss in an amount equal to the
difference between (i) the amount realized in the recapitalization merger and
(ii) such beneficial owner's adjusted tax basis in the shares of common stock
surrendered in the recapitalization merger. Under the Code, an owner's amount
realized equals the amount of cash received plus the fair market value of other
property received, which, in the event MascoTech does not receive all proceeds
from the disposition of Saturn stock at or before the completion of the
recapitalization merger, will include a beneficial owner's right to receive a
share of the net proceeds, received by MascoTech subsequent to the completion
of the recapitalization merger, from a disposition of Saturn stock. A
beneficial owner's adjusted tax basis in the shares of common stock generally
will equal the beneficial owner's purchase price for such shares of common
stock. Gain or loss must be determined separately for each block of common
stock (i.e., common stock acquired at the same cost in a single transaction)
surrendered in the recapitalization merger. The value of a right of a
beneficial owner to receive a share of the net proceeds from a disposition of
Saturn stock may depend, among other things, upon the expected proceeds of
disposition(s) of Saturn stock and the expected timing of such disposition(s).
Net capital gain recognized by non-corporate taxpayers from the sale of
property held more than one year will generally be taxed at a rate not to
exceed 20% for U.S. federal income tax purposes. Net capital gain from property
held for one year or less will be subject to tax at ordinary income tax rates.
In addition, capital gains recognized by a corporate taxpayer will be subject
to tax at the ordinary income tax rates applicable to corporations. In general,
capital losses are deductible only against capital gains and are not available
to offset ordinary income. However, individual taxpayers are allowed to offset
a limited amount of capital losses against ordinary income.
If a beneficial owner receives a payment with respect to a right to
receive a share of the net proceeds from a disposition of Saturn stock, if any,
more than six months after the recapitalization merger, the payment would be
considered a "deferred payment" under Section 483 of the Code, with the result
that a portion of the payment received by such beneficial owner would be
considered the payment of interest (which is taxable as ordinary income) for
U.S. federal income tax purposes in accordance with such beneficial owner's
regular method of accounting for U.S. federal income tax purposes. The
remaining proceeds would be considered a repayment of principal. If the total
amount of the payment(s) received by a beneficial owner, with respect to a
right to receive a share of the net proceeds from a disposition of Saturn
stock, that are treated as principal repayments differs from the value of such
right included in such beneficial owner's amount realized at the time of the
recapitalization merger, then any excess would be recognized as a capital gain
and any shortfall would be recognized as a capital loss.
Beneficial owners are urged to consult their own tax advisors as to the
application to their own particular circumstances of the rules relating to the
taxation of a right to receive a share of the net proceeds from a disposition
of Saturn stock, including the rules relating to deferred payments.
Payments in connection with the recapitalization merger may be subject to
"backup withholding" at a rate of 31%, unless a beneficial owner of common
stock:
o comes within certain exempt categories (generally including
corporations, financial institutions and certain foreign individuals)
under backup withholding rules; or
o provides the payor of such payments with the beneficial owner's
correct taxpayer identification number on Form W-9 and certifies
under penalty of perjury that such number is correct and that such
beneficial owner is not subject to backup withholding.
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Backup withholding is not an additional tax but merely an advance payment;
any amounts so withheld may be credited against the U.S. federal income tax
liability of the beneficial owner subject to the withholding and may be
refunded to the extent it results in an overpayment of tax. Each beneficial
owner of common stock should consult its own tax advisor as to its
qualification for exemption from backup withholding and the procedure for
obtaining this exemption.
Federal Income Tax Consequences to MascoTech . MascoTech will not
recognize any gain or loss for federal income tax purposes as a result of the
recapitalization merger. MascoTech will recognize gain or loss, as the case may
be, for federal income tax purposes as a result of the disposition of its
non-operating assets, including Saturn stock.
Federal Income Tax Consequences to Riverside and Heartland. Neither
Riverside nor Heartland will recognize any gain or loss for federal income tax
purposes as a result of the recapitalization merger.
Federal Income Tax Consequences to the Continuing Stockholders. With
respect to shares of MascoTech common stock that are converted into cash in the
recapitalization merger, Richard A. Manoogian and Masco Corporation expect to
have the same U.S. federal income tax consequences from the recapitalization
merger as the consequences for MascoTech stockholders that are not continuing
shareholders. See the information contained in the section of the Proxy
Statement entitled "Special Factors-Material Federal Income Tax Consequences."
Masco Corporation may also recognize a taxable gain on the shares of MascoTech
common stock for which it receives MascoTech preferred stock in the
recapitalization merger.
It is expected that Mr. Manoogian will be subject to ordinary income tax
on the spread (i.e., the difference between the transaction consideration and
the option exercise price) in connection with the cancellation of his options
to purchase MascoTech common stock for cash. It is expected that the conversion
of unvested restricted shares of MascoTech common stock held by Mr. Manoogian
into unvested restricted shares is not a tax event, but Mr. Manoogian will be
subject to income tax at the time such shares vest. It is expected that the
conversion of the restricted shares held by Mr. Manoogian into vested shares
will be a tax event.
Richard A. Manoogian and Masco Corporation will also retain some shares of
MascoTech common stock.
Richard and Jane Manoogian Foundation is a tax-exempt entity.
Regulatory Matters
Recapitalization Agreement. We do not believe any material regulatory
approvals are required to permit completion of the mergers from the U.S.
regulatory authorities, including the antitrust authorities.
Equity Investment Disposition -- U.S. Antitrust. Under the
Hart-Scott-Rodino Act and the related rules, the disposition of the equity
investments to CVC may not be completed until CVC and the subject companies
notify and furnish information to the Federal Trade Commission and the
Antitrust Division of the United States Department of Justice and specified
waiting period requirements have been satisfied. In connection with the
disposition of equity investments by MascoTech to CVC, on August 15, 2000, CVC
filed with the Federal Trade Commission and the Antitrust Division the required
notification and report forms under the Hart-Scott-Rodino Act. The applicable
waiting periods under the Hart-Scott-Rodino Act is scheduled to expire on
September 14, 2000.
Other Laws. MascoTech conducts operations in a number of other
jurisdictions where regulatory filings, notifications or approvals with
applicable commissions and other authorities may be required or advisable in
connection with completion of the recapitalization merger. MascoTech currently
is in the process of reviewing whether other filings or approvals may be
required or desirable in these other jurisdictions. We recognize that some of
these filings may not be completed before the closing, and that some of these
approvals, which are not required to be obtained prior to the closing, may also
not be obtained before the closing.
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Accounting Treatment of the Recapitalization Merger
The recapitalization merger is to be treated as a recapitalization under
generally accepted accounting principles. Accordingly, no adjustment of assets
or liabilities will occur and the payment for shares of common stock in the
recapitalization merger will be treated as a treasury stock transaction.
Stockholder Litigation Challenging the Mergers
On August 2, 2000, Caroline Weisz, James Safran, Crandon Capital Partners
LP and Michael Gilbert and on August 4, 2000, Michael Schieta each filed
purported stockholder class action lawsuits against MascoTech, each of
MascoTech's directors and Masco Corporation in the Delaware Court of Chancery
on behalf of MascoTech's unaffiliated stockholders. The lawsuits, while not
identical, allege, among other things, that (1) the directors breached their
fiduciary duties to MascoTech's stockholders through an unfair process of
negotiating the recapitalization agreement and unfair and inadequate
consideration and (2) Heartland and the continuing stockholders unfairly
possessed non-public information when negotiating the recapitalization
agreement. The lawsuits further allege that these actions by MascoTech
prevented or could prevent the stockholders of MascoTech from realizing the
full and fair value of their stock. The lawsuits seek certification as a class,
declaration that the defendants have breached their fiduciary duties,
injunctive relief and damages. We believe that the allegations contained in
these complaints are without merit and intend to contest the actions
vigorously.
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INTERESTS OF CERTAIN PERSONS IN THE MERGERS
In considering the recommendations of MascoTech's special committee and
the board of directors with respect to the agreement of merger, the
recapitalization agreement and the related mergers, MascoTech stockholders
should be aware that certain directors and members of management of MascoTech
and Masco Corporation have interests in the mergers that are different from, or
in addition to, their interests as MascoTech stockholders generally. The names
and titles of the individuals who are directors and/or executive officers of
MascoTech and who are known to have these additional interests are listed
below. MascoTech's special committee and the board of directors were aware of
these interests and considered them, among other matters, in approving the
mergers.
Board of Directors
Richard A. Manoogian. Mr. Manoogian is a member of the advisory board of
Heartland. See "Identities and Backgrounds of Riverside and Heartland--Masco
Capital Corporation; Advisory Committee." Mr. Manoogian is the chairman of the
boards of directors of MascoTech and Masco Corporation as well as the chief
executive officer of Masco Corporation. For three years after the
recapitalization merger, Mr. Manoogian will be a consultant to MascoTech to the
extent his services are requested by MascoTech. Mr. Manoogian and the
Foundation affiliated with him have entered into an exchange and voting
agreement with Riverside relating to their retention of equity interests in
MascoTech after the recapitalization merger. See "Other Agreements--Exchange
and Voting Agreement."
John A. Morgan. Mr. Morgan is a director of MascoTech and Masco
Corporation. On July 26, 2000, MascoTech entered into an agreement to pay
Morgan, Lewis, Githens & Ahn, Inc. a fee of $4 million upon completion of the
recapitalization merger for its services as financial advisor to MascoTech in
connection with the recapitalization merger and other related financial
advisory services. Mr. Morgan is a managing director of Morgan, Lewis, Githens
& Ahn, Inc.
Frank M. Hennessey. Mr. Hennessey is a director and the vice chairman of
the board of directors and also the chief executive officer of MascoTech. Mr.
Hennessey also receives from Masco Corporation an annual salary of $100,000
plus a bonus opportunity of up to $50,000 and participates in Masco Corporation
benefit and incentive arrangements. Mr. Hennessey expects to resign from his
positions with MascoTech while continuing in his employment with Masco
Corporation after the recapitalization merger.
Designation of Directors. Heartland and the co-investors will agree to
vote for the election of one designee of each of Masco Corporation and Mr.
Manoogian to the MascoTech board of directors following the recapitalization
merger. Mr. Manoogian is expected to be elected as a director of MascoTech
after the recapitalization merger.
Saturn Stock Disposition
MascoTech has created the adjustment committee, consisting of current
members of the special committee (Peter A. Dow, Roger T. Fridholm, William K.
Howenstein and Helmut F. Stern), which has control of the disposition of the
stock of Saturn as well as the distribution of the amounts to be paid out to
the stockholders (including holders of restricted stock awards and the
continuing stockholders) and holders of eligible options from the net proceeds
of the disposition of Saturn stock, in accordance with the terms of the
recapitalization agreement. As of July 31, 2000, MascoTech held approximately
36.3% of the outstanding Saturn common stock. Prior to the recapitalization
merger, MascoTech will transfer to a wholly owned subsidiary the Saturn stock
it has not sold. After the recapitalization merger, the members of the
adjustment committee will become directors of this subsidiary of MascoTech
which will hold all of the Saturn stock and each of them will be entitled to a
cash fee per meeting which will not exceed the amounts paid to them as members
of the MascoTech board. See "The Recapitalization Agreement--Consideration in
the Recapitalization Merger--Saturn Stock Disposition."
MascoTech will indemnify the members of the adjustment committee for a
period of six years after the consummation of the disposition of all Saturn
stock to the same extent described below. The indemnification and insurance
provided will be comparable to that described on page 55 below.
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William T. Anderson, an executive officer of MascoTech, is a director of
Saturn.
Exchange and Voting Agreement
Pursuant to the exchange and voting agreement and the recapitalization
merger, the continuing stockholders will retain some of their equity interests
in MascoTech, unlike the other stockholders of MascoTech other than holders of
restricted stock awards. Prior to the recapitalization merger, the continuing
stockholders will exchange a portion of their MascoTech common stock for
preferred stock of MascoTech. Mr. Manoogian and the Foundation will exchange
some of their common stock for class A preferred stock. Masco Corporation will
exchange some of its common stock for class A preferred stock and class B
preferred stock. In the recapitalization merger, the class A preferred stock
will be converted into MascoTech common stock and the class B preferred stock
will be converted into MascoTech common stock and preferred stock. After the
recapitalization merger, Mr. Manoogian and the Foundation will hold
approximately 4.4% of MascoTech common stock as a result of the conversion of
the class A preferred stock in the recapitalization merger into MascoTech
common stock and Masco Corporation will hold approximately 9.3% of MascoTech
common stock and all of the preferred stock of MascoTech with a liquidation
value of $36,100,100 as a result of the conversion of the class A preferred
stock and the class B preferred stock in the recapitalization merger.
The continuing stockholders have agreed to vote all the MascoTech common
stock they hold at the time of the special meeting in favor of the agreement of
merger, recapitalization agreement and each other action or agreement related
to the agreements. As of October , 2000, the continuing stockholders held
approximately 29.5% of the outstanding common stock of MascoTech. The
continuing stockholders have also agreed that they will not support any other
merger or acquisition proposal that would interfere with the mergers or
transactions related to the mergers.
The continuing stockholders entered into the exchange and voting agreement
as an inducement to Riverside to enter into the recapitalization agreement.
See "Other Agreements--Exchange and Voting Agreement."
Masco Corporation
MascoTech became a publicly owned company in July 1984 as part of a
restructuring of Masco Corporation. As of October , 2000 Masco Corporation held
approximately 17.5% of the outstanding common stock of MascoTech. See "The
Recapitalization Agreement--Consideration in the Recapitalization Merger" for a
description of the treatment of Masco Corporation's outstanding MascoTech
common stock in the recapitalization merger.
Heartland Investor. Masco Capital Corporation, a wholly owned subsidiary
of Masco Corporation, has committed to providing approximately 4.4% of all
equity committed to Heartland. See "Identities and Backgrounds of Riverside and
Heartland--Masco Capital Corporation; Advisory Committee."
Subordinated Loan Agreement. At or prior to the recapitalization merger,
MascoTech and Masco Corporation will terminate the Securities Purchase
Agreement (described below) and replace it with the Subordinated Loan
Agreement. The Subordinated Loan Agreement from and after the date of the
recapitalization merger provides that Masco Corporation will purchase from
MascoTech at MascoTech's option up to $100 million of subordinated debt
securities and, in connection therewith, MascoTech will pay an annual
commitment fee to Masco Corporation of 0.125% of the undrawn amount. This
commitment to purchase subordinated debt securities will extend from and after
the date of the recapitalization merger to October 31, 2003.
Corporate Services Agreement. Under a Corporate Services Agreement, Masco
Corporation provides MascoTech and its subsidiaries with office space for
executive offices, use of Masco Corporation's data processing equipment and
services, certain research and development services, corporate administrative
staff and other support services in return for MascoTech's payment of an annual
base service fee of .8 % of its consolidated annual net sales, subject to
adjustments. This agreement also provides for various license rights and
confidential treatment of information which may arise from Masco Corporation's
performance of research and development services on behalf
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of MascoTech. Approximately $6.4 million was paid by MascoTech to Masco
Corporation for 1999, in accordance with the terms of the agreement, which
renews automatically for one year periods, unless terminated by either party
upon at least 90 days' notice before any October 1 renewal date. In connection
with the recapitalization merger, MascoTech is required to amend this agreement
so that it terminates 18 months following the completion of the mergers.
Corporate Opportunities Agreement. MascoTech and Masco Corporation are
parties to a Corporate Opportunities Agreement which addresses potential
competition between the parties with respect to future business opportunities.
This agreement materially restricts the ability of either party to enter into
acquisitions, joint ventures or similar transactions involving businesses in
which the other party is engaged without the consent of the other party. It
renews automatically from year to year, unless terminated by either party at
least 90 days before any October 1 renewal date. In connection with the
recapitalization merger, MascoTech and Masco Corporation have agreed to amend
this agreement to reduce the scope of businesses that MascoTech is prohibited
from entering and so that it terminates upon the later of two years following
the completion of the recapitalization merger and six months following the
termination of the Corporate Services Agreement.
Stock Repurchase Agreement. Under a Stock Repurchase Agreement, Masco
Corporation has the right to sell to MascoTech, at a price based on fair market
value, shares of MascoTech common stock upon certain events that would result
in Masco Corporation's ownership of MascoTech common stock exceeding 49% of
MascoTech's then outstanding shares. Such events include repurchases of common
stock initiated by MascoTech or any of its subsidiaries and reacquisitions of
common stock through forfeitures of shares previously awarded by MascoTech
pursuant to employee stock incentive plans. In each case MascoTech has control
over the amount of its common stock it would ultimately acquire, including
shares subject to repurchase under the Stock Repurchase Agreement. Masco
Corporation's right expires 30 days from the date notice of an event is given
by MascoTech. MascoTech and Masco Corporation expect to terminate this
agreement at the same time the recapitalization merger is completed.
Stockholders and Registration Rights Agreement. Heartland, the
co-investors and the continuing stockholders will enter into a stockholders and
registration rights agreement containing terms relating to the relationships
among holders of MascoTech equity after the recapitalization merger, including
transfer restrictions and registration rights.
Right of First Refusal. In connection with MascoTech's 1996 purchase from
Masco Corporation of MascoTech common stock and warrants, Masco Corporation
granted MascoTech a right of first refusal, which expires September 30, 2000,
to purchase the remaining shares of MascoTech common stock held by Masco
Corporation. MascoTech does not intend to exercise this right of first refusal
prior to its expiration.
Assumption and Indemnification Agreement. Under an Assumption and
Indemnification Agreement, MascoTech assumed, and agreed to indemnify Masco
Corporation against, all of the liabilities and obligations of the businesses
transferred to it in Masco Corporation's 1984 restructuring, including claims
and litigation resulting from events or circumstances that occurred or existed
prior to the transfer, but excluding specified liabilities. In addition, Masco
Corporation agreed to indemnify a subsidiary of MascoTech against certain
liabilities of businesses acquired by such subsidiary from Masco Corporation in
1990. MascoTech and Masco Corporation expect that these agreements will remain
in place after the recapitalization merger.
Securities Purchase Agreement. Under a Securities Purchase Agreement,
MascoTech and Masco Corporation agreed that Masco Corporation will purchase
from MascoTech at MascoTech's option up to $200 million of subordinated
debentures and, in connection therewith, MascoTech pays an annual commitment
fee to Masco Corporation of 0.125% of the undrawn amount. This commitment
extends to March 31, 2002. As part of the 1996 transaction referred to above,
MascoTech has also agreed to file registration statements under the federal
securities laws to enable Masco Corporation from time to time to publicly
dispose of securities of MascoTech held by Masco Corporation. MascoTech is
required to terminate this agreement and to enter into a subordinated loan
agreement (described above) at the same time the recapitalization merger is
completed.
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Foreign Subsidiaries. MascoTech GmbH, a German subsidiary of MascoTech,
and Masco GmbH, a German subsidiary of Masco Corporation, have from time to
time advanced excess funds held in such foreign country to one another to be
used for working capital. The parties negotiated a fluctuating rate of interest
for these loans. The largest amount outstanding payable by MascoTech GmbH to
Masco GmbH during 1999 was approximately $772,000.
Products and Services. Sales of products and services and other
transactions occur from time to time between MascoTech and Masco Corporation.
As a result of such transactions in 1999, MascoTech paid approximately $50,000
to Masco Corporation and received approximately $9.9 million from Masco
Corporation. MascoTech also participates with Masco Corporation in a number of
national purchasing programs which enable both companies to obtain favorable
terms from certain of their service and product suppliers. Such transactions
and programs are expected to continue after the recapitalization merger.
Interlocking Directors. Ownership of securities and various other
relationships and incentive arrangements may result in conflicts of interest in
MascoTech's dealings with Masco Corporation and others. The Corporate
Opportunities Agreement with Masco Corporation and other aspects of the
relationship between the companies may affect their ability to make
acquisitions and develop new business under certain circumstances, although
MascoTech does not believe that it has experienced any such effect to date.
Three persons affiliated with Masco Corporation are currently members of
MascoTech's board of directors. Mr. Manoogian, MascoTech's chairman of the
board, is also the chairman of the board and chief executive officer of Masco
Corporation and a significant stockholder of both companies. Mr. Hennessey, a
director and vice chairman and chief executive officer of MascoTech, was
formerly executive vice president and is currently a part-time employee of
Masco Corporation. Mr. Morgan, who is a director of MascoTech, is also a
director of Masco Corporation. Because of these relationships, an independent
committee of MascoTech's board of directors reviews its significant
transactions with affiliated companies.
The following table sets forth the number of shares of Masco Corporation
common stock beneficially owned as of August 9, 2000 by each director and named
executive officer and by the directors and executive officers of MascoTech as a
group. Except as indicated below, each person exercises sole voting and
investment power with respect to the shares listed.
Shares of
Masco Corporation
Common Stock
Name Beneficially Owned(1)
---- ---------------------
William T. Anderson........................................ 2,000
Peter A. Dow............................................... 11,000
Roger T. Fridholm.......................................... 0
Lee M. Gardner............................................. 0
Frank M. Hennessey (2)..................................... 491,045
William K. Howenstein...................................... 0
David B. Liner (2)(3)...................................... 68,268
Richard A. Manoogian (2)(4)................................ 12,241,535
John A. Morgan (5)......................................... 19,740
Helmut F. Stern............................................ 0
Timothy Wadhams............................................ 18,000
All 13 Directors and executive officers of
MascoTech as a group (excluding subsidiary,
divisional and group executives)(2)(3)(4)(5)(6).......... 13,293,177
-------------------
(1) The only director or named executive officer of MascoTech who beneficially
owns 1% or more of Masco Corporation common stock is Mr. Manoogian, who
beneficially owns 2.7% of Masco Corporation common stock. Directors and
executive officers of MascoTech as a group beneficially own 2.9% of Masco
Corporation common stock.
(2) Includes unvested restricted stock award shares issued under Masco
Corporation's restricted stock incentive plan (176,236 shares for Mr.
Hennessey; 7,290 for Mr. Liner; 619,407 shares for Mr. Manoogian; and
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890,078 shares for all directors and executive officers of MascoTech as a
group) and shares which may be acquired before October 8, 2000 upon
exercise of Masco Corporation stock options (198,609 shares for Mr.
Hennessey; 49,280 shares for Mr. Liner; 2,399,842 shares for Mr.
Manoogian; and 2,762,253 shares for all directors and executive officers
of MascoTech as a group). Holders have voting but no investment power over
unvested restricted shares and exercise neither voting nor investment
power over unexercised option shares.
(3) Mr. Liner shares voting and investment power with respect to 11,698 shares.
(4) Includes 3,319,800 shares of Masco Corporation common stock owned by
charitable foundations for which Mr. Manoogian serves as director, of
which 3,123,400 shares are held by the Foundation. Shares beneficially
owned by Mr. Manoogian and by all directors and executive officers of
MascoTech as a group include in each case 1,429,000 shares of Masco
Corporation common stock owned by a trust for which Mr. Manoogian serves
as a trustee. The directors of the foundations and the trustees share
voting and investment power with respect to the Masco Corporation common
stock owned by the foundations and trusts, but Mr. Manoogian disclaims
beneficial ownership of such shares.
(5) Includes 2,776 unvested restricted stock award shares issued under Masco
Corporation's 1997 Non-Employee Directors Stock Plan and 9,600 shares
which may be acquired before October 8, 2000 upon exercise of stock
options issued under such Plan. Holders have voting but no investment
power over unvested restricted shares and exercise neither voting nor
investment power over unexercised option shares.
(6) Includes 26,802 shares of Masco Corporation common stock owned by a
charitable foundation for which one executive officer serves as a director
and 24,820 shares of Masco Corporation common stock held by trusts for
which such executive officer serves as trustee. The directors of the
foundation and the trustees share voting and investment power with respect
to the Masco Corporation common stock owned by the foundation and trusts,
but such executive officer disclaims beneficial ownership of such shares.
Mr. Manoogian may be deemed to be a controlling person of Masco
Corporation by reason of his significant ownership of Masco Corporation common
stock and his position as a director and chief executive officer of Masco
Corporation.
Stock Options
Pursuant to the recapitalization agreement, each outstanding employee
stock option, whether vested or not, will be canceled and holders of options
with an exercise price per share that is less than the merger consideration
received by the stockholders will receive an amount equal to the merger
consideration less the applicable exercise price and any applicable withholding
tax for each such share. Any option, whether vested or not, with an exercise
price that is equal to or more than the merger consideration will be canceled.
A holder of an option with an exercise price above the merger consideration at
the time of the recapitalization merger will, together with other holders of
eligible options, continue to have the opportunity to receive subsequent
adjustments to the merger consideration if, as a result of such adjustments,
the aggregate merger consideration exceeds the exercise price. In that case,
the holder of the option will receive the difference between the merger
consideration as adjusted and the exercise price for that share.
Severance Agreements
The following officers of MascoTech have entered into change of control
severance agreements with MascoTech: William T. Anderson (Vice President and
Controller), David B. Liner (Vice President and General Counsel), Leroy H. Runk
(Group President) and James F. Tompkins (Treasurer). In addition, the remaining
MascoTech officers will participate in the MascoTech retention plan described
below. The individual severance arrangements provide for the cash payment of
severance benefits equal to two years of base salary and target bonus and
benefits continuation in the event that the officer's employment is terminated
under specific circumstances within two years of a change in control.
Additionally, such agreements provide that, in the event the officer's
employment is terminated under certain circumstances within three years of a
change of control, any stock awards held by such officer shall continue to stay
outstanding and vest in accordance with their terms. The agreements "gross-up"
the officers to the extent any payments are subject to excise tax as a result
of being deemed "excess
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parachute payments." The recapitalization merger will constitute a change of
control under these severance arrangements.
Under the recapitalization agreement, MascoTech has formed an employee
retention committee consisting of Mr. Manoogian, Daniel P. Tredwell, a manager
of Riverside, and Timothy Wadhams, an executive officer of MascoTech, which
will determine and put in place an employee retention plan prior to the
completion of the recapitalization merger. The retention plan will generally
cover corporate headquarters personnel, general managers and certain employees
reporting directly to general managers. The plan will provide cash severance
benefits and benefits continuation to individuals if they are terminated
without cause or if they terminate their employment with good reason within two
years of a change of control and provide that stock based awards are not
forfeited by individuals if their employment is terminated under such
circumstances within three years of a change of control. The recapitalization
merger will constitute a change of control under the retention plan.
Restricted Stock Awards
All existing restricted stock awards will be canceled and replaced with
new restricted stock awards. The provisions of the new restricted stock awards
are as follows:
o 15% of the shares issued under new restricted stock awards will be
available free of restrictions (other than transfer restrictions) at
the time of the recapitalization merger;
o in lieu of 10% of the shares issued under the new restricted stock,
the participants will receive, at the time of the recapitalization
merger, cash per share equal to the merger consideration;
o the balance of the shares issued under the new restricted stock
awards will become free of restrictions (other than transfer
restrictions) ratably on each anniversary of the recapitalization
merger, and on each such date, the holder of a restricted stock award
may instead choose to receive cash in lieu of any share whose
restrictions lapse on that date in an amount equal to the cash
(including all adjustments) received by the holders of common stock
in the recapitalization merger plus 6% per year. MascoTech will be
entitled to defer this payment of cash if MascoTech is prohibited
from making such payment under its credit facilities. During any
deferral period, holders of new restricted stock awards will receive
the amount they were entitled to plus 12% per annum of the deferred
amount in lieu of 6% per annum.
The recapitalization agreement provides for a portion of the net proceeds
from disposition of Saturn stock to be paid to stockholders (including holders
of restricted stock awards and continuing stockholders) and holders of eligible
options. Holders of restricted stock awards will be entitled to receive such
adjustments paid to stockholders in the recapitalization merger. Immediately
after the recapitalization merger, the shares subject to restricted stock
awards will represent 8.2% of MascoTech common stock.
Other Employee Benefits
Riverside has agreed that for a period of two years following the
effective time of the recapitalization merger, MascoTech will continue to
provide compensation programs and plans, employee benefits and welfare plans,
programs, contracts, agreements and policies, fringe benefits and vacation
policies substantially equivalent to those in place at the time the
recapitalization agreement was signed. MascoTech is not obligated to keep in
place any individual program (other than the severance arrangements and
restricted stock award program).
See "The Recapitalization Agreement--Principal Covenants--Covenants of
Riverside--Employee Benefits after the Recapitalization Merger" for a
description of the benefits provided by the recapitalization agreement for
employees of MascoTech generally.
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Indemnification and Insurance
Under the recapitalization agreement, Riverside has agreed to cause
MascoTech and its successors and assigns to:
o for a period of six years after the recapitalization merger,
indemnify and hold harmless present and former directors and officers
of MascoTech and its subsidiaries for all acts or omissions occurring
prior to the recapitalization merger, including the transactions
contemplated by the recapitalization agreement, to the fullest extent
permitted by law or provided under MascoTech's certificate of
incorporation or bylaws as of the date of the recapitalization
agreement; and
o provide, for a period of six years after the recapitalization merger,
an insurance and indemnification policy that grants MascoTech's
officers and directors coverage no less favorable than MascoTech's
policy in effect on August 1, 2000, provided, however, that in no
event will MascoTech's annual premium payments for this coverage
exceed 225% of the annual premiums currently paid by MascoTech and
provided, further, that if the annual premiums for this coverage
exceed that amount, MascoTech will provide a policy providing the
best available coverage obtainable for premiums not exceeding that
amount.
If MascoTech were to merge or otherwise to dispose of all or substantially
all of its assets, the surviving corporation or transferee must assume this
obligation.
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THE RECAPITALIZATION AGREEMENT
The following is a summary of the material terms of the recapitalization
agreement. The following description may not contain all the information about
it that is important to you. We encourage you to read the recapitalization
agreement itself, which is attached as Annex B and incorporated by reference.
The Recapitalization Merger
The recapitalization agreement provides that as promptly as practicable
after all of the conditions to the recapitalization merger have been satisfied
or waived, Riverside will be merged with and into MascoTech, after which its
separate existence will cease and MascoTech will be the surviving corporation.
One of the conditions to the recapitalization merger is that the merger of
MascoTech with MascoTech Harbor be completed first. The subsidiary merger and
recapitalization merger will each become effective at the time the applicable
certificate of merger is filed with the secretary of state of Delaware, or at a
later time as specified in that certificate of merger.
Consideration in the Recapitalization Merger
Common Stock. At the effective time of the recapitalization merger, each
share of issued and outstanding MascoTech common stock will be converted into
the right to receive $16.90 in cash plus additional cash amounts from the net
proceeds of the disposition of Saturn stock as described in the next paragraph.
The recapitalization agreement also provides that the merger consideration will
be adjusted by a portion of the amounts received by MascoTech in the
disposition of non-operating assets other than Saturn stock in excess of $125
million in total. Because MascoTech has entered into an agreement to sell such
non-operating assets to CVC (other than Saturn stock) for $125 million,
MascoTech does not expect to make adjustments to the merger consideration from
the disposition of these non-operating assets. See "Other Agreements--Stock
Purchase Agreement." Each share of MascoTech common stock held by MascoTech as
treasury shares or by any subsidiary of MascoTech will be canceled and retired.
Saturn Stock Disposition. MascoTech currently has not entered into a
definitive agreement to dispose of any part of its stock in Saturn. Saturn
announced on August 11, 2000 that it has withdrawn the initial public offering
of its stock. MascoTech intends to continue to attempt to dispose of its Saturn
stock prior to the recapitalization merger. Although MascoTech's goal is to
dispose of the Saturn stock as expeditiously as possible, MascoTech does not
know when and if it will be able to do so. According to the recapitalization
agreement, an amount equal to the proceeds from the disposition of Saturn stock
in excess of $18 million and less than or equal to $40 million, as well as 60%
of any such proceeds in excess of $56.7 million, will be paid to the
stockholders (including the continuing stockholders and holders of restricted
stock awards) and option holders whose options have exercise prices below the
merger consideration (after giving effect to all adjustments). Stockholders
(including holders of restricted stock awards and the continuing stockholders)
and holders of eligible options will be entitled to further adjustments as
described above after the recapitalization merger from the disposition of the
Saturn stock. The recapitalization agreement does not provide for an expiration
date of the right to receive adjustments to the merger consideration from the
sale of Saturn stock. The recapitalization agreement provides for certain
measures designed to reduce the risk that Saturn stock will be affected by
MascoTech liabilities after the recapitalization merger and to provide for
control over the dispositions by the Adjustment Committee. Additional matters
are discussed above under the heading "Interests of Certain Persons in the
Mergers--Saturn Stock Disposition."
Agreement with CVC. The recapitalization agreement provides that net
proceeds in excess of $125 million (taking into account taxes, fees and
expenses) received by MascoTech in connection with the sale of non-operating
assets other than Saturn stock will be paid to stockholders (including the
holders of restricted stock awards and continuing stockholders) and holders of
eligible options. MascoTech's agreement with CVC provides for a purchase price
of $125 million (or $116 million in limited circumstances) for these assets and
thus, MascoTech does not expect to receive any proceeds in excess of $125
million. See "Other Agreements--Stock Purchase Agreement."
Preferred Stock. Prior to the recapitalization merger, the continuing
stockholders will exchange a portion of their common stock into MascoTech
preferred stock. The class A preferred stock will be held by the continuing
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stockholders and will be converted into common stock of MascoTech in the
recapitalization merger plus payment of any adjustments from the disposition of
Saturn stock. The class B preferred stock will be held by Masco Corporation and
will be converted into common stock and preferred stock of MascoTech in the
recapitalization merger plus payment of any adjustments from the disposition of
Saturn stock. The continuing stockholders will continue to own equity interests
in MascoTech after the recapitalization merger. See "Other Agreements--Exchange
and Voting Agreement." The continuing stockholders will receive the merger
consideration for the portion of their common stock that they do not exchange
for preferred stock prior to the recapitalization merger.
Appraisal or Dissenters' Rights
Stockholders who do not vote in favor of the recapitalization merger may
be entitled to appraisal or dissenters' rights. MascoTech has agreed to notify
Riverside of any demands of appraisals and to allow Riverside to conduct all
negotiations regarding demands of appraisals. These matters are further
discussed below under the heading "Appraisal or Dissenters' Rights."
Options and Restricted Stock Awards
Pursuant to the recapitalization agreement, each outstanding MascoTech
employee stock option, whether or not vested, will be canceled and holders of
options with an exercise price that is less than the merger consideration will
receive the merger consideration, which will be reduced by the exercise price
for the option. Each option whether vested or unvested that has an exercise
price equal to or greater than the merger consideration with all adjustments,
will be canceled. A holder of an option with an exercise price above the merger
consideration at the time of the recapitalization merger will, together with
other holders of eligible options, continue to have the opportunity to receive
merger consideration in the future, if for that option the merger consideration
exceeds the exercise price as a result of the adjustments to the merger
consideration. In that case, such holders will receive the difference between
the merger consideration as adjusted and the exercise price for that share.
All existing restricted stock will be canceled immediately prior to the
recapitalization merger and exchanged for new restricted stock awards of the
surviving company immediately following the recapitalization merger. The new
restricted stock awards will provide as follows:
o 15% of the shares issued under new restricted stock awards will be
available free of restrictions (other than transfer restrictions) at
the time of the recapitalization merger;
o in lieu of 10% of the shares issued under the new restricted stock
awards, the participants will receive, at the time of the
recapitalization merger, cash per share equal to the merger
consideration;
o the balance of the shares issued under the new restricted stock
awards will become free of restrictions (other than transfer
restrictions) ratably on each anniversary of the recapitalization
merger, and on each such date, the holder of a restricted stock award
may instead choose to receive cash in lieu of any share whose
restrictions lapse on that date in an amount equal to the cash
(including all adjustments) received by the holders of common stock
in the recapitalization merger plus 6% per year.
The recapitalization agreement provides for a portion of the net proceeds from
disposition of Saturn stock to be paid to stockholders (including holders of
restricted stock awards and continuing stockholders) and holders of eligible
options.
Exchange of Shares
Prior to the recapitalization merger, Riverside will appoint an exchange
agent for the payment of the merger consideration. All fees and expenses of the
exchange agent will be borne by MascoTech. Riverside and MascoTech will provide
the exchange agent (prior to or at the effective time) funds in an amount
sufficient to pay the merger consideration equal to the number of outstanding
shares not canceled pursuant to the recapitalization agreement or exchanged
pursuant to the exchange and voting agreement, multiplied by the merger
consideration.
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Following the recapitalization merger, the exchange agent will mail to
each holder of MascoTech common stock a letter of transmittal and instructions.
For a period of six months, holders may surrender their certificates and a duly
executed letter of transmittal to the exchange agent. Thereafter, holders may
surrender their certificates and a duly executed letter of transmittal to
MascoTech. In either case, upon surrender, the holders will receive the merger
consideration multiplied by the number of shares represented by the
certificate. Until surrendered, each certificate will only represent the right
to receive the merger consideration.
The merger consideration paid in the recapitalization merger will be paid
in full to the holder of shares without interest, and will be subject to
reduction only for any applicable United States federal or other withholding or
stock transfer taxes payable by such holder.
The Surviving Corporation
Immediately after the recapitalization merger, the certificate of
incorporation in the form of Exhibit E to the recapitalization agreement
attached to this proxy statement as Annex B will be MascoTech's certificate of
incorporation and the bylaw amendments in the form of Exhibit F to the
recapitalization agreement attached to this proxy statement as Annex B will
become effective, in each case immediately after the recapitalization merger.
Designees of Heartland and the co-investors and two persons designated by the
continuing stockholders will be the initial directors of MascoTech after the
recapitalization merger, with a majority of the board of directors designated
by Heartland. The officers of MascoTech immediately prior to the
recapitalization merger will be the officers of MascoTech after the
recapitalization merger except that Mr. Hennessey is expected to resign as
chief executive officer.
Representations and Warranties of MascoTech
MascoTech and Riverside make a number of reciprocal representations and
warranties as to, among other things, due incorporation and good standing,
corporate authority to enter into the contemplated transactions, information
supplied for use in this document, absence of conflicts, required consents,
filings with governmental entities and finders' fees. Representations and
warranties made solely by MascoTech relate to the following items:
capitalization, ownership of subsidiaries and equity investments, delivery of
and disclosure in required SEC filings, absence of certain changes, absence of
undisclosed material liabilities, compliance with laws and court orders,
absence of pending litigation, receipt of an opinion from a financial advisor,
timely filing of material tax returns, employee benefit plans, environmental
matters, inapplicability of state takeover statutes and rendering MascoTech
rights agreement inapplicable to the mergers.
Representations and warranties made solely by Riverside relate to receipt
of commitment letters and other financing matters and absence of appraisal
rights of Riverside's members.
Many of these representations and warranties will not be breached unless
the breach of the representation or warranty has a material adverse effect on
MascoTech. For purposes of the recapitalization agreement, material adverse
effect can be one of two things. The first is a material adverse effect on the
condition (financial or otherwise), business or results of operations of
MascoTech and its subsidiaries, taken as a whole, other than any material
adverse effects resulting or arising from:
o the recapitalization agreement or the transactions contemplated by
the recapitalization agreement or announcement of the execution of
the recapitalization agreement or those transactions;
o changes in circumstances or conditions affecting industrial
manufacturing companies in general that are not specifically related
to MascoTech and its subsidiaries;
o changes in general economic, regulatory or political conditions or in
financial markets in the U.S. or Europe; or
o changes in generally accepted accounting principles.
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A material adverse effect can also be an effect which is materially
adverse to the ability of MascoTech or Riverside to consummate the
recapitalization merger or the other transactions contemplated by the
recapitalization agreement, other than effects arising out of the matters
covered in the last three bullet points listed above.
The representations and warranties in the recapitalization agreement do
not survive the recapitalization merger.
Principal Covenants
Covenants of MascoTech
Interim Operations. MascoTech has agreed to, and to cause each of its
subsidiaries to, conduct its operations according to its ordinary and usual
course of business, consistent with past practice, and use all commercially
reasonable efforts to preserve intact current business organizations, to keep
available the services of current officers and employees, to preserve
relationships with customers, suppliers, licensors, licensees, advertisers,
distributors and others having business dealings with MascoTech or a subsidiary
and to preserve good will.
Subject to certain exceptions, MascoTech has agreed not to, and to cause
each of its subsidiaries not to, without the consent of Riverside:
o make capital expenditures that would exceed 110% of the amounts set
forth in the most recent version of the business plan provided to
Riverside;
o sell, lease, license or otherwise dispose of any significant
subsidiary or any material amount of assets, securities or property;
o amend its corporate charter/organizational documents, or alter its
corporate structure or its capitalization or the ownership of any
significant subsidiary;
o encumber capital stock of MascoTech or any subsidiary of MascoTech;
o make any material acquisitions of equity interest or assets;
o settle or compromise litigation;
o transfer any equity investments subject to the CVC stock purchase
agreement without putting the proceeds into an escrow account;
o take any action which would make any representation or warranty
inaccurate in any material respect or omit to take any action
necessary to prevent any representation or warranty from being
materially inaccurate; and
o take any action with respect to the rights agreement.
Access to Information. MascoTech has agreed that it and its subsidiaries
will give Riverside reasonable access to the books and records and other
information concerning the business of MascoTech and its subsidiaries.
Stockholder Meeting; Proxy Material. MascoTech has agreed to take all
commercially reasonable actions and do all things necessary or advisable under
the recapitalization agreement and applicable laws to hold a stockholders'
special meeting, to make the appropriate filings with the SEC, to mail the
proxy statements to the stockholders, to obtain the necessary stockholder
approvals, and to comply with all applicable legal requirements.
No Solicitation. MascoTech has agreed not to take the following actions
(other than in connection with the mergers):
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o seek, initiate, solicit or encourage any individual or entity to make
an acquisition proposal;
o engage in negotiations or discussions concerning an acquisition
proposal with any person or group;
o disclose any non-public information or give access to any of the
properties, employees, books or records of MascoTech or its
subsidiaries, in connection with any acquisition proposal; or
o approve or recommend or agree to approve or recommend any acquisition
proposal.
In response to an unsolicited acquisition proposal, the board of directors
may furnish information and participate in discussions if the board of
directors or the special committee in good faith determines after considering
advice of its outside counsel that not doing so would cause the board of
directors or special committee to be in breach of their fiduciary duties. Prior
to furnishing such information or participating in such discussions, MascoTech
and the party making such offer shall enter into a confidentiality agreement on
terms that are no less favorable to MascoTech than those applicable to
Heartland (other than standstill provisions) unless doing so would cause the
board of directors or special committee to be in breach of their fiduciary
duties. MascoTech must also notify Riverside of such discussions unless the
board of directors or the special committee in good faith determines after
considering the advice of its outside counsel that such disclosure would breach
the fiduciary duties of the board of directors or the special committee and
must inform Riverside of the identity of the entity making the acquisition
proposal and of the terms and conditions of the proposal.
The recapitalization agreement defines "acquisition proposal" as an offer
or proposal for a merger or other business combination involving MascoTech and
its subsidiaries for an acquisition or purchase of more than 30% of MascoTech's
voting securities or assets.
Please see "The Recapitalization Agreement--Termination" for information
on termination fees and break-up fees.
MascoTech Special Committee's and Board of Directors' Covenant to
Recommend. The special committee and the board of directors have agreed to
recommend the approval and adoption of the agreement of merger and the
recapitalization agreement to MascoTech's stockholders. Either the special
committee or the board of directors, however, can withdraw, or modify in a
manner adverse to Riverside, its recommendation if it determines in good faith
after consultation with its outside legal counsel that taking such action is
required in the exercise of its respective fiduciary duties to MascoTech's
stockholders.
State Takeover Laws. MascoTech will, upon the request of Riverside, take
all reasonable steps to assist in any challenge by Riverside to the validity or
applicability of any state takeover law to the mergers.
Reports. MascoTech has agreed to provide Riverside with internal financial
information.
Restricted Stock and Option Plans. MascoTech has agreed that it will take
any and all necessary action to ensure that the mergers will not constitute a
"change of control" under any option plan or restricted stock plan or option
agreement or award agreement, except with regard to options as described in the
recapitalization agreement. MascoTech agreed that the current awards of
restricted stock will be replaced with the new awards of restricted stock and
that certain options with an exercise price that is higher than the merger
consideration will be canceled.
Equity Investments. MascoTech has agreed to use commercially reasonable
efforts to dispose of its equity investments, other than Saturn stock, by the
completion of the recapitalization merger. MascoTech has also agreed not to
modify or terminate the stock purchase agreement with CVC with respect to the
disposition of the equity investments contemplated by the stock purchase
agreement.
Confidentiality Agreement. MascoTech has agreed to waive the application
of the standstill provisions of the confidentiality agreement to the
transactions contemplated by the exchange and voting agreement.
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<PAGE>
Preferred Stock. MascoTech has agreed to authorize and designate the
rights of the class A convertible preferred stock and class B convertible
preferred stock, which will be the preferred stock for which the continuing
stockholders will exchange some of their common stock prior to the
recapitalization merger.
Escrow. MascoTech agrees to put into an escrow account any proceeds
received by it in the disposition of Saturn stock that would be required to be
paid to stockholders (including holders of restricted stock awards and
continuing stockholders) or holders of eligible options by the recapitalization
agreement, subject to restrictions under its loan agreement.
Covenants of Riverside
Best Efforts. Riverside has agreed to use commercially reasonable efforts
to consummate the recapitalization merger on the terms and conditions in the
recapitalization agreement.
Director and Officer Liability. Riverside has agreed that the surviving
corporation will to the extent provided in the recapitalization agreement:
o indemnify and hold harmless the present and former officers and
directors of MascoTech and each of its subsidiaries for a period of
six years after the recapitalization merger for acts or omissions
occurring at or prior to the effective time of the merger; and
o provide officers' and directors' liability insurance coverage for a
period of six years after the effective time for acts or omissions
occurring prior to the recapitalization merger.
These matters are discussed in more detail above under the heading
"Interests of Certain Persons in the Mergers--Indemnification and Insurance."
Employee Benefits after the Recapitalization Merger. These matters are
discussed above under the heading "Interests of Certain Persons in the
Mergers--Severance Agreements" and "Interests of Certain Persons in the
Mergers--Other Employee Benefits."
Financing Arrangements. Riverside has agreed to use commercially
reasonable efforts to obtain financing sufficient to pay amounts required by
the recapitalization agreement for the common stock, to refinance the debt of
MascoTech, to pay other amounts required to complete the mergers and to pay all
related fees and expenses.
Covenants of MascoTech and Riverside
Commercially Reasonable Efforts. MascoTech and Riverside have agreed to
use commercially reasonable efforts to complete the mergers, including
cooperating with banks to obtain debt financing and making necessary
Hart-Scott-Rodino filings, if any.
Certain Filings. MascoTech and Riverside have agreed:
o subject to the fiduciary duties of the board of directors, to use
commercially reasonable efforts to consummate the recapitalization
merger, including cooperating with lenders and sources of debt
financing and to make filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, if necessary; and
o to cooperate with one another in connection with the preparation of
the MascoTech proxy statement and Schedule 13E-3, in making any other
filings, furnishing information required in connection with the
mergers or with the MascoTech proxy statement and seeking to obtain
any required actions, consents, approvals or waivers in a timely
manner.
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In addition, MascoTech has agreed to cooperate and utilize all reasonable
commercial efforts to obtain any and all necessary consents required to
consummate the disposition of equity investments pursuant to the equity
investments sale agreement.
Public Announcements. Riverside and MascoTech have agreed to consult with
each other before issuing any press release or making any public statement with
respect to the recapitalization agreement or the mergers.
Notices of Certain Events. Riverside and MascoTech have agreed to promptly
notify the other of:
o notices or other communication relating to the transactions;
o any litigation commenced or threatened against MascoTech or its
subsidiaries;
o the occurrence or non-occurrence of any fact or event which would
reasonably be likely to cause any representation or warranty to be
untrue or to cause any covenant, condition or agreement not to be
complied with or satisfied; or
o any failure of either party to comply with or satisfy any covenant,
condition or agreement.
Confidentiality. Prior to the effectiveness of the recapitalization merger
and after any termination of this agreement, each party has agreed to hold in
confidence all confidential documents and information concerning the other
party.
Saturn Stock Disposition. If all of MascoTech's Saturn stock is not
disposed of prior to the recapitalization merger, the Saturn stock then held by
MascoTech will be transferred to a subsidiary of MascoTech. That subsidiary
will be authorized to engage only in activities that relate to the disposition
of the Saturn stock. Its board of directors will consist of the members of the
special committee (or their designated successors) who will not be removable
except for cause, and the subsidiary's organization documents will contain
other provisions designed to reduce the risk of the proceeds of the Saturn
stock being encumbered by MascoTech's liabilities. The board of directors of
that subsidiary will have the sole authority to dispose of the Saturn stock for
cash consideration and make cash payments to the MascoTech stockholders
(including holders of restricted stock awards and the continuing stockholders)
and holders of eligible options in accordance with the recapitalization
agreement. See also "Interests of Certain Persons--Saturn Stock Disposition."
Principal Conditions to the Completion of the Recapitalization Merger
Mutual Closing Conditions. Each party's obligation to complete the
recapitalization merger is subject to the satisfaction of the following
conditions:
o approval by the MascoTech stockholders of the recapitalization
agreement, the recapitalization merger and agreement of merger and
the merger with MascoTech Harbor and the requisite filings with the
Secretary of State of the State of Delaware;
o expiration of the waiting period under the Hart-Scott-Rodino Act in
order to complete the stock purchase agreement with CVC;
o absence of legal prohibitions to or restraint upon the completion of
the mergers;
o completion of all requisite actions or filings with any governmental
authority;
o receipt of a solvency opinion addressed to the special committee, the
board of directors, Riverside, Heartland and its co-investors as to
the solvency of MascoTech after the effective date of the
recapitalization merger;
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o receipt by MascoTech of the proceeds of the disposition of the
non-operating assets (other than Saturn stock) equal to at least $125
million (or $116 million under limited circumstances);
o agreement on a severance plan by the employee retention committee;
o transfer of all Saturn stock held by MascoTech which has not been
disposed of into a subsidiary of MascoTech whose directors are the
members of the Adjustment Committee; and
o filings for all necessary licenses, permits, qualifications,
consents, waivers, approvals, authorizations or orders must have been
obtained and made by MascoTech, except where the failure to do so
would not be reasonably expected to have a material adverse effect.
Additional Closing Conditions for Riverside's Benefit. The obligations of
Riverside to complete the recapitalization merger are subject to the
satisfaction of the following additional conditions, among others:
o MascoTech's performance in all material respects of all of its
obligations under the recapitalization agreement;
o the representations and warranties of MascoTech must be true in all
material respects;
o the absence of any legal prohibition preventing the recapitalization
merger or restraining the effective operation of any material part of
the business of MascoTech and its subsidiaries after the effective
date of the recapitalization merger;
o completion of debt financings necessary to complete the
recapitalization merger;
o the corporate services agreement between MascoTech and Masco
Corporation shall have been modified to provide for its limited
continuation after the recapitalization merger;
o the amended and restated securities purchase agreement between
MascoTech and Masco Corporation shall have been terminated;
o MascoTech, along with its subsidiaries, shall have entered into a
subordinated loan agreement with Masco Corporation;
o MascoTech shall have obtained from the New Jersey Department of
Environmental Protection either a declaration of non-applicability of
the ISRA to the merger or approval of a negative declaration or other
action required to comply with ISRA;
o the performance by the continuing stockholders in all material
respects of their obligations under the exchange and voting
agreement; and
o the number of MascoTech stockholders demanding appraisal rights is
not more than 10% of the outstanding common stock.
Additional Closing Conditions for MascoTech's Benefit. MascoTech's
obligation to complete the recapitalization merger is subject to the
satisfaction of the following additional conditions:
o Riverside's performance in all material respects of all of its
obligations under the recapitalization agreement;
o Riverside's representations and warranties must be true in all
material respects; and
o the absence of any legal prohibition to or restraint upon the
completion of the recapitalization merger.
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Termination; Termination Fee and Break-up Fee
Termination. The recapitalization agreement may be terminated and the
recapitalization merger may be abandoned at any time prior to the effective
time of the recapitalization merger:
o by mutual written consent;
o by either party, if: (i) the recapitalization merger has not been
completed before December 20, 2000, but the recapitalization
agreement may not be terminated for this reason by a party whose
breach of any provision of the recapitalization agreement resulted in
the failure of the recapitalization merger to be completed by
December 20, 2000; (ii) the completion of the recapitalization merger
is legally prohibited by final and non-appealable order or by law;
(iii) the MascoTech stockholders fail to give the required approval
to the recapitalization agreement and the recapitalization merger; or
(iv) the special committee or the board of directors fails to make or
withdraws or adversely modifies its approval or recommendation of the
mergers;
o by Riverside, if MascoTech breaches or fails to perform any
representation, warranty, covenant or agreement and cannot cure it by
December 20, 2000; and
o by MascoTech, if Riverside breaches or fails to perform any
representation, warranty, covenant or agreement and cannot cure it by
December 20, 2000.
Termination Fee. MascoTech must reimburse Riverside for expenses and fees
(of not more than $2 million) if the recapitalization agreement is terminated
by either MascoTech or Riverside, and MascoTech has not complied with all of
its obligations or its representations or warranties are not true and Riverside
has complied with all of its obligations (including representations and
warranties being true). Expenses will not be reimbursed if MascoTech has
previously paid the break-up fee described below.
Break-up Fee. MascoTech must pay Riverside a break-up fee (referred to in
the recapitalization agreement as a "topping fee") of $16 million, minus any
previously reimbursed expenses, in each of the following circumstances:
o (1) a third party publicly announces an acquisition proposal for
MascoTech; (2) the recapitalization agreement is terminated because
MascoTech's board of directors or the special committee has adversely
changed its recommendation of the recapitalization agreement or the
related merger or because the necessary stockholders votes for the
recapitalization agreement or the mergers are not obtained; and (3)
MascoTech enters into another agreement or consummates another
transaction related to an acquisition proposal within six months of
termination of the recapitalization agreement; or
o (1) a third party publicly announces an acquisition proposal for
MascoTech; (2) the recapitalization agreement is terminated by either
party because the transactions have not been consummated by December
20, 2000, or by Riverside because MascoTech has breached any of its
obligations or representations and cannot cure the breach by December
20, 2000; and (3) MascoTech enters into another agreement or
consummates another transaction with that third party related to an
acquisition proposal within six months of termination.
Amendments; No Waivers. Any provision of the recapitalization agreement
may be amended or waived prior to the effective time of the recapitalization
merger if the amendment or waiver is in writing and is signed, in the case of
an amendment, by each party to the recapitalization agreement, or in the case
of a waiver, by each party against whom the waiver is to be effective, subject
to applicable law.
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OTHER AGREEMENTS
Exchange and Voting Agreement
The following is a summary of the material terms of the exchange and
voting agreement. The following description may not contain all the information
about it that is important to you. We encourage you to read the exchange and
voting agreement itself, which is attached as Annex C and incorporated by
reference.
General. As an inducement to Riverside to enter into the recapitalization
agreement, the continuing stockholders entered into an exchange and voting
agreement with Riverside dated as of August 1, 2000. As of the date of the
exchange and voting agreement, the continuing stockholders beneficially owned
approximately 29.5% of the outstanding MascoTech common stock.
Voting. Pursuant to the exchange and voting agreement, the continuing
stockholders have agreed, among other things, to vote all MascoTech common
stock owned or subsequently acquired by them to approve and adopt and approve
the agreement of merger, the recapitalization agreement and each other action
or agreement related to the recapitalization agreement. The continuing
stockholders have also agreed that they will not vote in favor of the approval
of any acquisition proposal, reorganization or similar transaction or any
transaction that would frustrate or delay the mergers. The continuing
stockholders have agreed not to grant any proxies or enter into any voting
trust or other agreement or arrangement with respect to the voting of any of
their MascoTech common stock.
Representations and Warranties. The parties each make customary
representations and warranties as to itself in this agreement as to, among
other things, authority, enforceability and absence of conflicts. Riverside
also makes a representation as to lack of business activities and each of the
continuing stockholders makes representations as to title to shares and
accredited investor status.
Exchange of Common Stock. Each of the continuing stockholders agreed to
exchange a portion of its common stock for class A preferred stock and Masco
Corporation agreed to exchange a portion of its common stock for class B
preferred stock. The following chart shows the number of shares of common stock
that the continuing stockholders are exchanging into preferred stock and the
number of shares for which they will receive merger consideration.
<TABLE>
Number of shares Number of shares Number of shares
Total Number of of common stock of common stock of common stock Number of shares
shares of common exchanged for exchanged for converted to cash owned after
stock held on class A preferred class B preferred in recapitalization recapitalization
Name August 9, 2000 stock stock merger merger
------------------ ---------------- ----------------- ----------------- ------------------- ----------------------
<S> <C> <C> <C> <C> <C>
Masco Corporation 7,824,690 2,958,595 2,136,100 2,729,995 3,143,137 shares of
common stock and
361,001 shares of
preferred stock
Mr. Manoogian* 4,173,716 621,170 none 3,552,546 621,170 shares of
common stock
Foundation 995,500 661,260 none 334,240 661,260 shares of
common stock
-------------------
</TABLE>
* Excludes shares subject to options and restricted stock awards.
Total number of shares outstanding after the recapitalization merger will
be approximately shares of common stock and 361,001 shares of preferred stock.
Each share of class A preferred stock will be converted into one share of
common stock of MascoTech in the recapitalization merger and each share of
class B preferred stock will be converted into 0.169 shares of series A
preferred stock of MascoTech with a liquidation preference of $100 per share
and 0.086392 shares of common stock of MascoTech in the recapitalization
merger.
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Transfer Restrictions. None of the continuing stockholders may transfer
their MascoTech common stock except that Masco Corporation may transfer common
stock if:
o the transferee is reasonably acceptable to Heartland;
o the transferee enters into and becomes subject to a stockholders and
registration rights agreement providing for restrictions on transfer
of stock of MascoTech and for registration of common stock of
MascoTech;
o the transfer does not, in the opinion of Heartland, jeopardize the
availability of recapitalization accounting treatment for the
recapitalization merger or violate any applicable securities laws;
o the transferee must acquire at least 10% of the shares owned by Masco
Corporation on August 1, 2000;
o the transferee must agree to become a party to the exchange and
voting agreement;
o all representations and warranties in the exchange and voting
agreement must be true and correct and all other provisions must have
been complied with as of the date of the transfer and throughout the
term of the exchange and voting agreement; and
o the transfer must not have an adverse effect on the availability of
financing or the ability of MascoTech and Riverside to complete the
recapitalization merger, provided that the transfer of not more than
30% of MascoTech common stock held by Masco Corporation shall not be
deemed to have such an adverse effect.
Appraisal Rights. The continuing stockholders have irrevocably waived
their rights to demand appraisal of their stock.
Other Covenants. The continuing stockholders and Riverside have also
agreed to the following:
o the continuing stockholders will enter into a stockholders and
registration rights agreement with MascoTech;
o Masco Corporation will enter into a subordinated loan agreement
with MascoTech as described under "Interests of Certain Person
in the Mergers--Masco Corporation;"
o the amended and restated securities purchase agreement between
Masco Corporation and MascoTech and the registration agreement
between Masco Corporation and MascoTech will each be terminated;
o the corporate services agreement between Masco Corporation and
MascoTech and the corporate opportunities agreement between
Masco Corporation and MascoTech will each be modified as
described under "Interests of Certain Person in the
Mergers--Masco Corporation;"
o Riverside will not conduct any business activities and will not
incur any liabilities prior to the completion of the
recapitalization merger;
o for three years following the recapitalization merger and so
long as Mr. Manoogian owns unvested restricted stock awards, Mr.
Manoogian will provide consulting services to MascoTech and will
not engage in activities that substantially compete with
MascoTech; if Mr. Manoogian fails to comply with this covenant,
he will forfeit his unvested restricted stock awards; and
o Mr. Manoogian will elect not to receive cash upon vesting of his
restricted stock.
Termination. The exchange and voting agreement terminates upon the
termination of the recapitalization agreement or the effective date of the
recapitalization merger. In addition, the exchange and voting agreement will
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terminate as to the continuing stockholders if the recapitalization agreement
is amended without their consent to reduce the merger consideration or the
consideration for options or restricted stock awards.
Stock Purchase Agreement
In connection with the recapitalization agreement, MascoTech and CVC
entered into a stock purchase agreement dated as of August 1, 2000. The
following is a summary of the material terms of the stock purchase agreement.
The following description may not contain all the information about it that is
important to you. We encourage you to read the stock purchase agreement itself,
which is attached as Annex D and incorporated by reference.
Purchase and Sale. At or immediately prior to the completion of the
recapitalization merger, MascoTech will sell or cause to be sold certain of its
non-operating investments and CVC will pay MascoTech a total of $125 million
for all those investments. Some of the investments are subject to a right of
first refusal or require a third party consent. The purchase price for the
investments is subject to reduction if certain rights of first refusal are
exercised or if certain third party consents are not obtained. The parties have
identified these investments and are obligated to purchase and sell all
investments that may be transferred at the time of the recapitalization merger,
even if some other investments are not transferable at that time. CVC has
agreed to buy those investments when and if they become transferable. This
obligation terminates six months after the initial closing.
Conditions to Closing. The parties have agreed to the following reciprocal
conditions to closing:
o the representations and warranties given by the other party must be
true in all material respects as of the closing date;
o the other party must have performed in all material respects all
covenants and agreements in the stock purchase agreement;
o absence of legal prohibition or restraint upon the completion of the
transactions contemplated in the stock purchase agreement; and
o expiration of the waiting period under the Hart-Scott-Rodino Act.
MascoTech's obligation to close is also subject to the following
conditions:
o all conditions to the recapitalization must have been satisfied or
waived, other than those conditions related to the sale and purchase
contemplated by the stock purchase agreement; and
o CVC must have delivered the purchase price.
MascoTech may waive all of its closing conditions (with the exception of
the condition relating to the expiration of the Hart-Scott-Rodino filing
period), but only with the consent of Riverside. MascoTech has also agreed in
the recapitalization agreement not to amend, modify or terminate this stock
purchase agreement without the consent of Riverside.
Representations and Warranties. The stock purchase agreement contains
reciprocal representations and warranties relating to due authorization,
consents and absence of conflicts. MascoTech also represents and warrants that
it has title to the investments. CVC also makes representations and warranties
that it has sufficient financing to make the purchase and that it is an
accredited investor, is a sophisticated investor, may not be able to resell the
securities without complying with securities laws and that it has no intention
to distribute the securities purchased pursuant to the stock purchase
agreement.
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Hart-Scott-Rodino Act. CVC filed applications required under the
Hart-Scott-Rodino Act on August 15, 2000 and MascoTech has agreed to cooperate
and to cause the companies whose securities are being sold to cooperate with
CVC in making the required filings.
Termination. MascoTech may terminate the stock purchase agreement if the
recapitalization agreement is terminated. Otherwise, the stock purchase
agreement may only be terminated by mutual consent.
Agreement of Merger
In connection with the recapitalization agreement, MascoTech and its
wholly owned subsidiary, MascoTech Harbor, will enter into an agreement of
merger. The following is a summary of the material terms of the agreement of
merger. The following description may not contain all the information about it
that is important to you. We encourage you to read the agreement of merger
itself, which is attached as Annex A and incorporated by reference.
General. Before the recapitalization merger is approved and after the
approval by the stockholders of the merger with MascoTech Harbor, MascoTech
Harbor will merge with and into MascoTech:
o MascoTech will be the surviving corporation, and
o as a result of the subsidiary merger, the MascoTech certificate of
incorporation will no longer contain the provision requiring the
holders of at least 95% of the MascoTech common stock to approve
certain transactions involving persons owning 30% or more of
MascoTech's voting stock.
The merger with MascoTech Harbor will be effective as of the date the
certificate of merger is filed with the secretary of state of Delaware or at a
later time as specified in the certificate of merger.
Effect of the Subsidiary Merger on the Capital Stock of MascoTech. Each
issued and outstanding share of MascoTech stock at the time of the subsidiary
merger will remain outstanding. Each share of MascoTech Harbor stock that is
issued and outstanding before the subsidiary merger will not be converted or
exchanged, but will cease to be outstanding without any consideration being
paid for such shares.
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SELECTED HISTORICAL FINANCIAL DATA
Selected Historical Financial Data of MascoTech
The following selected historical financial data for each of the years
ended December 31, 1999 through 1995 has been derived from MascoTech's audited
consolidated financial statements. The following selected historical financial
data for the six month periods ended June 30, 2000 and 1999 has been derived
from MascoTech's quarterly filings on Form 10-Q. Interim unaudited data for the
six-month periods ended June 30, 2000 and 1999 reflect, in the opinion of
management, all adjustments, which are normal and recurring in nature,
necessary for a fair presentation of such data. This information is only a
summary and you should read it together with MascoTech's historical financial
statements and related notes contained in the annual reports and other
information that MascoTech has filed with the SEC and which is incorporated by
reference. See "Where You Can Find More Information" on page 98.
<TABLE>
For the
Six Months Ended
June 20, For the Years Ended December 31,
----------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996(1) 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
(unaudited)
(in thousands of dollars, except for per share data and ratios)
Statement of Operations Data
Net Sales......................... $ 901,710 $ 885,170 $1,679,690 $1,635,500 $ 922,130 $1,281,220 $1,678,210
Operating Profit.................. $ 120,320 $ 126,350 $ 215,430 $ 206,810 $ 101,710 $ 69,330 $ 108,810
Net Income........................ $ 52,000 $ 49,970 $ 92,430 $ 97,470 $ 115,240 $ 51,620 $ 59,190
Earnings attributable to common
stock.......................... $ 52,000 $ 49,970 $ 92,430 $ 97,470 $ 109,000 $ 38,660 $ 46,230
Earnings per share
Basic.......................... $ 1.27 $ 1.21 $ 2.25 $ 2.23 $ 2.70 $ 0.77 $ 0.85
Diluted........................ $ 1.02 $ 0.98 $ 1.84 $ 1.83 $ 2.12 $ 0.72 $ 0.81
Dividends declared per share...... $ 0.16 $ 0.14 $ 0.30 $ 0.20 $ 0.28 $ 0.18 $ 0.11
Balance Sheet Data (at end of the
period)
Working capital................ $ 195,090 $ 236,900 $ 241,720 $ 251,320 $ 151,680 $ 235,520 $ 279,490
Total assets................... $2,087,420 $2,034,250 $2,101,270 $2,090,540 $1,144,680 $1,202,840 $1,421,720
Long-term debt................. $1,283,780 $1,314,070 $1,372,890 $1,388,240 $ 592,000 $ 752,400 $ 701,910
Shareholders' equity........... $ 335,730 $ 263,600 $ 300,380 $ 253,880 $ 210,660 $ 138,820 $ 398,130
Other data
Book value per common share(2). $ 7.50 $ 5.89 $ 6.73 $ 5.55 $ 4.46 $ 2.89 $ 6.00
Ratio of earnings to fixed
charges ...................... 2.6x 2.9x 2.5x 2.5x 4.6x 2.2x 2.2x
Ratio of earnings to combined
fixed charges and preferred
stock dividends............. 2.6x 2.9x 2.5x 2.5x 3.7x 1.4x 1.6x
</TABLE>
-------------------
(1) Includes the cumulative effect of accounting change net of income taxes of
$11.7 million or $0.22 per common share.
(2) For 1996 and 1995, assumes conversion of MascoTech's Dividend Enhanced
Convertible Preferred Stock into 10.8 million shares of common stock.
No Pro Forma Financial Information
We have not provided any pro forma data giving effect to the proposed
recapitalization merger. We do not believe such information is material to you
in evaluating the merger proposals since:
o the proposed merger consideration is all cash; and
o if the proposed recapitalization merger is completed, MascoTech
common stock would cease to be publicly traded.
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No Financial Information for Riverside
We have not provided any separate financial information for Riverside
since it is a transitory merger vehicle formed in connection with the proposed
recapitalization merger and has no independent operations.
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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
MascoTech common stock is listed on the NYSE. MascoTech's ticker symbol is
"MSX." The following table shows the high and low sale prices for MascoTech
common stock for each quarterly period for the two most recent fiscal years and
for the current fiscal year to date, in each case as reported on the
Consolidated Tape, and the cash dividends declared per share for each such
period. These prices do not include adjustments for commissions or brokerage
fees.
MascoTech
Common stock
---------------------
Market Price Cash
--------------------- Dividends
High Low Declared
-------- -------- --------
1998
First Quarter............................. $ 23.25 $ 17.69 --
Second Quarter............................ 26.44 22.31 $ 0.06
Third Quarter............................. 24.13 16.25 0.07
Fourth Quarter............................ 18.75 15.25 0.07
1999
First Quarter............................. $ 17.00 14.00 $ 0.07
Second Quarter............................ 17.75 15.13 0.07
Third Quarter............................. 17.69 15.56 0.08
Fourth Quarter............................ 17.06 10.63 0.08
2000
First Quarter............................. $ 14.56 $ 11.38 $ 0.08
Second Quarter............................ 14.44 10.81 0.08
Third Quarter through August 22, 2000..... 16.63 10.50 0.08
On August 1, 2000, the last full trading day prior to the public
announcement of the proposed mergers, the closing price for MascoTech common
stock was $11.50. On October , 2000, the most recent practicable date prior to
the printing of this document, the closing price per MascoTech common stock was
$ . You should obtain current market price quotations for MascoTech common
stock in connection with the voting of your common stock.
The recapitalization agreement permits MascoTech to pay to holders of
common stock, prior to the effective time of the recapitalization merger,
regular quarterly cash dividends not in excess of $0.08 per share per quarter.
After the recapitalization merger, MascoTech does not expect to pay dividends
on its common stock.
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INFORMATION RELATING TO MASCOTECH SECURITIES
Purchases by MascoTech
Transactions since July 1, 1998. MascoTech has a stock repurchase program
through which it makes purchases on the open market for purposes of issuing
stock upon exercise of options or for the restricted stock award program. In
addition, MascoTech has retired some of the stock it has purchased in the last
two years and in the last two quarters of 1998, MascoTech purchased some of its
own stock in connection with the acquisition of TriMas. During fiscal year
2000, MascoTech has repurchased 462,000 shares of its common stock at an
aggregate cost of $5,083,975, and during fiscal year 1999 MascoTech repurchased
1,619,800 shares at an aggregate cost of $24,684,270. During the last two
quarters of 1998, MascoTech repurchased 3,954,300 shares at an aggregate cost
of $70,457,945. The cost of the common stock purchased presented here includes
all commissions and brokerage fees. The table below sets forth the purchases by
MascoTech of its common stock since July 1, 1998, including (1) the quarter in
which MascoTech purchased these shares; (2) the number of shares MascoTech
purchased, (3) the range of purchase prices per share for each quarterly period
(if applicable) and (4) the average purchase price per share for each quarterly
period (if applicable):
Average
Number Range of Purchase
Purchase Quarter of Shares Purchase Price Price
---------------- --------- -------------- ---------
1998
Third Quarter 2,191,700 $16.57-$22.41 $19.248
Fourth Quarter 1,762,600 $15.32-$18.07 $16.040
1999
First Quarter 1,203,200 $14.32-$16.32 $15.349
Second Quarter 296,600 $15.32-$16.82 $15.936
Third Quarter 0 -- --
Fourth Quarter 120,000 $11.32-$12.98 $12.384
2000
First Quarter 72,700 $11.57-$13.07 $12.344
Second Quarter 364,300 $11.07-$12.57 $11.424
Third Quarter 25,000 $10.82 $10.820
Transactions since June 24, 2000. Set forth in the table below are
purchases of MascoTech common stock by MascoTech during the past 60 days. These
purchases were made by MascoTech as part of its stock repurchase program
through which it makes purchases on the open market for purposes of issuing
stock upon exercise of options or for the restricted stock award program.
Number
Date of the of Shares Where and How the Purchase Was
Purchase Purchased Price Per Share Effected
------------- --------- --------------- -------------------------------
July 11, 2000 6,000 $10.82 Open market purchase on NYSE
July 12, 2000 19,000 $10.82 Open market purchase on NYSE
70
<PAGE>
Purchases by Masco Corporation
Masco Corporation has not purchased any shares of MascoTech common stock.
Purchases by Richard A. Manoogian
During fiscal year 2000, Mr. Manoogian purchased 80,000 shares of
MascoTech common stock upon exercise of options at an aggregate cost of
$490,000, and during fiscal year 1999, Mr. Manoogian purchased 80,000 shares
upon exercise of options at an aggregate cost of $490,000. During the last two
quarters of 1998, Mr. Manoogian purchased 1,000,000 shares upon exercise of
options at an aggregate cost of $10,250,000. Mr. Manoogian paid no commissions
or brokerage fees in the acquisition of the common stock. During fiscal year
2000, MascoTech granted Mr. Manoogian 7,500 shares of common stock under
restricted stock awards and during fiscal year 1999, MascoTech granted Mr.
Manoogian 79,300 shares of common stock under restricted stock awards. During
fiscal year 1999, MascoTech granted Mr. Manoogian options exercisable into
60,000 shares at an exercise price of $14 per share. The table below sets forth
the acquisition by Mr. Manoogian of MascoTech securities since July 1, 1998,
including (1) the quarter in which Mr. Manoogian purchased these shares; (2)
the number of securities Mr. Manoogian acquired, (3) the range of purchase
prices per share for each quarterly period (if applicable) and (4) the average
purchase price per share for each quarterly period (if applicable):
<TABLE>
Number
of Shares
subject to Number
Restricted of Shares
Stock subject to Range of Average
Awards Options Number of Purchase Purchase
Purchase Quarter Granted Granted Shares Prices Price
---------------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1998
Third Quarter 0 0 1,000,000 $10.25 $10.25
Fourth Quarter 0 0 0 -- --
1999
First Quarter 79,300 60,000 0 -- --
Second Quarter 0 0 0 -- --
Third Quarter 0 0 0 -- --
Fourth Quarter 0 0 80,000 $6.125 $ 6.125
2000
First Quarter 7,500 0 80,000 $6.125 $ 6.125
Second Quarter 0 0 0 -- --
Third Quarter 0 0 0 -- --
</TABLE>
Purchases by the Foundation
During fiscal year 2000, the Foundation did not purchase any shares of
MascoTech common stock, and during fiscal year 1999, the Foundation purchased
144,500 shares at an aggregate cost of $2,274,506.67. During the last two
quarters of 1998, the Foundation purchased 301,000 shares at an aggregate cost
of $5,481,526. The cost of the common stock purchased presented here includes
all commissions and brokerage fees. The table below sets forth the purchases by
the Foundation of MascoTech common stock since July 1, 1998, including (1) the
quarter in which the Foundation purchased these shares; (2) the number of
shares the Foundation purchased, (3) the range of purchase prices per share for
each quarterly period (if applicable) and (4) the average purchase price per
share for each quarterly period:
71
<PAGE>
Average
Number of Range of Purchase
Purchase Quarter Shares Purchase Price Price
---------------- --------- --------------- -------
1998
Third Quarter 166,000 $16.690-$23.206 $19.666
Fourth Quarter 135,000 $15.604-$16.967 $16.422
1999
First Quarter 144,500 $14.623-$16.604 $15.741
Second Quarter 0 - -
Third Quarter 0 - -
Fourth Quarter 0 - -
2000
First Quarter 0 - -
Second Quarter 0 - -
Third Quarter through August 23, 2000 0 - -
Purchases by Riverside and Heartland
Neither Riverside nor Heartland has purchased any shares of MascoTech
common stock.
Agreements Relating to MascoTech Securities
Restricted Stock Awards. MascoTech has committed to issue restricted stock
awards for approximately 16,000 shares of MascoTech common stock to employees
of the MascoTech Forming Technologies - Burns Molloy division, pending approval
of the MascoTech board of directors in September 2000.
Pledges of MascoTech Common Stock. The Richard A. Manoogian Trust has
granted a pledge or security interest to Michigan National Bank in 2,420,076
shares of MascoTech common stock under a business loan agreement dated August
4, 1998 and related security or pledge agreements.
The Richard A. Manoogian Trust and Richard A. Manoogian, individually,
have granted a pledge or security interest to Comerica Bank in 1,747,948 shares
of MascoTech common stock under an amended and restated letter agreement dated
March 15, 1993 and related security or pledge agreements.
MascoTech 401(k) Plans. MascoTech maintains 401(k) plans pursuant to which
its employees have the ability to invest in MascoTech common stock.
72
<PAGE>
FINANCIAL PROJECTIONS
MascoTech does not as a matter of course make public forecasts as to
future revenues, earnings or other financial information. MascoTech did,
however, prepare certain projections which it provided to Heartland and
financial advisors of MascoTech and the special committee in connection with
the mergers. The projections set forth below are included in this proxy
statement solely because such information was provided to Heartland.
The projections set forth below were not prepared by MascoTech with a view
to public disclosure or compliance with published guidelines of the SEC or the
American Institute of Certified Public Accountants regarding prospective
financial information. In addition, the projections were not prepared with the
assistance of or reviewed, compiled or examined by, independent accountants.
The projections reflect numerous assumptions, all made by MascoTech's
management, with respect to industry performance, general business, economic,
market and financial conditions and other matters, all of which are difficult
to predict and many of which are beyond MascoTech's control. Accordingly, there
can be no assurance that the assumptions made in preparing the projections set
forth below will prove accurate, and actual results may be materially greater
or less than those contained in the projections set forth below. See
"Forward-Looking Statements" on page 78 of this proxy statement.
In light of the uncertainties inherent in forward looking information of
any kind, MascoTech cautions against undue reliance on such information.
MascoTech does not intend to update or revise such projections to reflect
circumstances existing after the date they were prepared or to reflect the
occurrence of future events, unless required by law.
Fiscal Years ended December 31,
---------------------------------------------------
2004 2003 2002 2001 2000
-------- -------- -------- -------- --------
(in millions of dollars)
Net Sales....................$2,443.0 $2,276.0 $2,116.5 $1,934.6 $1,759.7
Earnings Before Interest,
Taxes, Depreciation and
Amortization..............$ 489.9 $ 456.3 $ 419.1 $ 376.6 $ 320.8
Net Income...................$ 225.7 $ 190.3 $ 164.2 $ 133.9 $ 93.0
The projections summarized above excluded certain expenses which in
MascoTech's opinion did not reflect a "normalized" level of operations.
Specifically, the year 2000 projections exclude projected operating losses at a
start-up connecting rod facility and projected closure costs for a plant closed
in the first half of 2000. These items have not been and would not be excluded
in historical financial statements prepared in accordance with generally
accepted accounting principles.
In preparing the above five-year financial projections, MascoTech made a
number of assumptions about its markets, their growth rates and other factors
that may affect the accuracy of these financial projections.
The projected increase in sales assumes moderate economic growth over the
next five years, with generally flat North American automotive production and
recovery of certain European currencies, versus the U.S. dollar, to approximate
1999 currency levels. The projected sales increases includes: projected
benefits from recent investments for new technology and in support of new
product programs including capacity expansion for European forging operations,
new connecting rod facilities, state-of-the-art automated shaft manufacturing
capabilities, and residential insulation facing; the projected improvement in
market conditions for end markets served by large diameter fasteners,
compressed gas cylinders and industrial gaskets; market expansion and
cross-selling opportunities for our industrial closures; and continued
projected growth for our towing systems business driven by new product
introductions, including accessories, and enhanced business unit coordination
resulting in expanded customer relationships.
73
<PAGE>
Earnings before interest, taxes, depreciation and amortization (EBITDA)
was projected to increase due to increased operating earnings resulting from
the increased sales discussed above, as well as margin improvement. Margin
improvement was projected to result from the resolution of new business launch
and other operational issues at various businesses. In addition, a portion of
the projected margin improvement was related to anticipated improved industry
conditions in markets served by the large diameter fasteners, compressed gas
cylinders and industrial gaskets businesses, resulting in better cost
absorption. Operating performance for towing systems was projected to improve
from continued rationalization of distribution, manufacturing and business
processes. Recent investments for new technology and capacity expansion and
modernization were projected to result in margin improvement in a number of
businesses. In addition, corporate general and administrative costs were not
projected to increase as rapidly as sales, resulting in margin improvement.
Net income was projected to increase because of the increases in operating
income described above. In addition, other expense was projected to decrease as
a result of increased equity income from affiliate investments and
significantly lower interest expense. The lower interest expense is projected
both due to the impact of lower debt due to cash flow being utilized to repay
debt, and in 2004, because of the projected conversion into equity of the
convertible debt outstanding in late 2003.
At Heartland's request, we reviewed our forecast for the year 2000 in July
2000, to reflect then current actual and forecasted performance. As a result of
this review it was determined that markets for certain products had not
improved as projected and that certain operational issues, principally related
to new product or process launches, had not progressed as projected.
Notwithstanding these issues, it was determined that projected revenues
substantially approximated the amount indicated above for 2000 and that by
further excluding full year launch cost and expenses (in addition to the
start-up costs and plant closure costs mentioned above) to better normalize
operational performance, it was determined that EBITDA and net income
substantially approximated the above amounts.
The projections set forth above should be read together with the "Selected
Historical Financial Data" included in this proxy statement and MascoTech's
historical financial statements and other financial information and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" as set forth in MascoTech's Annual Report on Form 10-K for the year
ended December 31, 1999 and MascoTech's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 2000 and June 30, 2000, each of which is incorporated
by reference into this proxy statement. For purposes of incorporation of those
filings into this proxy statement, any references in those documents to "safe
harbor" protection for forward-looking statements are not applicable to this
proxy statement.
74
<PAGE>
FORWARD-LOOKING STATEMENTS
We are including the following discussion to inform you generally of some
of the risks and uncertainties that can affect MascoTech.
From time to time, MascoTech's management or persons acting on MascoTech's
behalf make forward-looking statements to inform existing and potential
security holders about MascoTech. These statements may include projections and
estimates concerning the timing and success of specific projects and
MascoTech's future income or capital spending. Forward-looking statements are
generally accompanied by words such as "estimate," "project," "predict,"
"believe," "expect," "anticipate," "plan," "goal" or other words that convey
the uncertainty of future events or outcomes. In addition, sometimes we will
specifically describe a statement as being a forward-looking statement and
refer to this section. These statements by their nature are subject to risks,
uncertainties and assumptions and will be influenced by various factors. Should
any of the assumptions underlying a forward-looking statement prove incorrect,
actual results could vary materially.
Except for the historical information contained in this proxy statement,
the matters discussed in this proxy statement are forward-looking statements
that are subject to risks, uncertainties and assumptions. Actual results could
differ materially based on numerous factors.
75
<PAGE>
EXPENSES
MascoTech estimates that fees and expenses incurred in connection with the
mergers, consisting primarily of SEC filing fees, fees and expenses of
investment bankers, attorneys and accountants, financial printing and other
related charges, and fees and expenses related to debt financing, will be
approximately $78.9 million. Estimated fees and expenses to be incurred by
MascoTech in connection with the mergers are as follows:
(in millions)
Filing Fees........................................................... $
Financial Advisors' Fees and Expenses
(estimated total for board of directors and the
special committee).................................................
Financial Advisors' Fees and Expenses
(estimated total for Riverside)....................................
Debt Financing Expenses...............................................
Legal Fees and Expenses (estimated total for board of
directors and the special committee)...............................
Accounting Fees and Expenses..........................................
Exchange Agent Fees...................................................
Printing and Mailing Costs............................................
Miscellaneous.........................................................
-------
Total.............................................................. $ 78.9
=======
76
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
Five Percent Holders and Executive Officers and Directors of MascoTech
Set forth below is information concerning beneficial ownership of MascoTech
common stock as of August 9, 2000 by (i) all persons known by MascoTech to be
the beneficial owners of five percent or more of MascoTech common stock, (ii)
each director of MascoTech, (iii) each executive officer of MascoTech and (iv)
all directors and executive officers of MascoTech as a group. Except as
indicated below, each person exercises sole voting and investment power with
respect to the shares listed.
<TABLE>
Shares of Percentage of
MascoTech MascoTech
Common Stock Common Stock
Name Beneficially Owned Beneficially Owned
---- ------------------ -------------------
<S> <C> <C>
William T. Anderson (1)..................................... 87,640 *
Peter A. Dow (2)(3)......................................... 55,732 *
Roger T. Fridholm (2)(4).................................... 20,840 *
Lee M. Gardner (1).......................................... 516,901 1.1%
Eugene A. Gargaro, Jr. (1)(5)(6)(7)......................... 2,114,065 4.7%
Frank M. Hennessey (1)(8)................................... 581,777 1.3%
William K. Howenstein (2)................................... 16,100 *
David B. Liner (1)(9)....................................... 33,384 *
Richard A. Manoogian (1)(5)(6)(10).......................... 6,697,529 14.8%
John A. Morgan (2).......................................... 35,790 *
Helmut F. Stern (2)......................................... 13,220 *
James F. Tompkins (1)....................................... 64,415 *
Timothy Wadhams (1)(11)..................................... 379,408 *
All 13 Directors and executive officers of MascoTech
as a group (excluding subsidiary, divisional and group
executives) (1)(2)(3)(4)(5)(6)(8)(9)(10)(11)............. 8,625,848 18.6%
Cramer Rosenthal McGlynn, LLC
707 Westchester Avenue
White Plains, New York 10604 (12)....................... 2,498,377 5.6%
Masco Corporation
21001 Van Born Road
Taylor, Michigan 48180.................................. 7,824,690 17.5%
</TABLE>
-------------------
* Less than 1%.
(1) Includes unvested restricted stock award shares held under MascoTech's
restricted stock incentive plans (46,750 shares for Mr. Anderson, 105,480
shares for Mr. Gardner, 22,614 shares for Mr. Gargaro, 241,390 shares for
Mr. Hennessey, 22,730 shares for Mr. Liner, 196,860 shares for Mr.
Manoogian, 31,920 shares for Mr. Tompkins, 90,890 shares for Mr. Wadhams
and 758,634 shares for all directors and executive officers as a group)
and shares which may be acquired before October 8, 2000 upon exercise of
stock options (16,000 shares for Mr. Anderson, 338,061 shares for Mr.
Gardner, 10,000 shares for Mr. Gargaro, 70,000 shares for Mr. Hennessey,
265,000 shares for Mr. Manoogian, 8,000 shares for Mr. Tompkins, 155,769
shares for Mr. Wadhams and 862,830 shares for all directors and executive
officers as a group). Holders have sole voting but no investment power
over unvested restricted shares and exercise neither voting nor investment
power over unexercised option shares.
(2) Includes unvested restricted stock award shares held under MascoTech's
1997 Non-Employee Directors Stock Plan (2,316 shares for each of Messrs.
Dow, Fridholm and Morgan; 2,150 shares for Mr. Howenstein; 2,664 shares
for Mr. Stern and 11,762 shares for all directors and executive officers
as a group) and shares which may be acquired before October 8, 2000 upon
exercise of stock options under such Plan (6,000 for Messrs. Dow,
77
<PAGE>
Fridholm, Howenstein and Morgan and 3,000 for Mr. Stern; and 27,000 for
all directors and executive officers of MascoTech as a group). Holders
have sole voting but no investment power over unvested restricted shares
and have neither voting nor investment power over unexercised option
shares.
(3) Includes 2,750 shares owned by Mr. Dow's wife, as to which shares
Mr. Dow disclaims beneficial ownership.
(4) Includes 250 shares owned by a relative of Mr. Fridholm, but does not
include 4,100 shares owned by Mr. Fridholm's wife. Mr. Fridholm disclaims
beneficial ownership of these shares.
(5) Includes 995,500 shares owned by the Richard and Jane Manoogian
Foundation, for which Messrs. Gargaro and Manoogian serve as directors,
and 109,677 shares which could be acquired upon conversion of convertible
securities owned by such Foundation. The directors of the Foundation share
voting and investment power with respect to the securities owned by the
Foundation, but Messrs. Gargaro and Manoogian disclaim beneficial
ownership of such securities.
(6) Includes 661,260 shares owned by a charitable foundation, for which
Messrs. Gargaro and Manoogian serve as directors, and 224,516 shares which
could be acquired upon conversion of convertible securities owned by such
foundation. The directors of the foundation share voting and investment
power with respect to the securities owned by the foundation, but Messrs.
Gargaro and Manoogian disclaim beneficial ownership of such securities.
(7) Includes 2,000 shares held by a charitable foundation for which Mr.
Gargaro serves as a director, 27,000 shares held by trusts for which he
serves as a trustee and 4,354 shares which could be acquired upon
conversion of convertible debt securities owned by such trusts. Mr.
Gargaro, in his capacity as director of the foundation and as trustee of
the trusts, shares voting and investment power with respect to the
securities owned by such entities, but he disclaims beneficial ownership
of such securities.
(8) Includes 9,677 shares which could be acquired upon conversion of
convertible securities owned by Mr. Hennessey.
(9) Mr. Liner shares voting and investment power with respect to 10,654 shares.
(10) Includes 20,000 shares owned by a charitable foundation for which Mr.
Manoogian serves as director, and 51,000 shares held by trusts of which
Mr. Manoogian serves as trustee. The directors of the charitable
foundation and trustees of the trusts share voting and investment power
with respect to the securities owned by the foundation and the trusts, but
Mr. Manoogian disclaims beneficial ownership of such securities.
(11) Includes 1,500 shares owned by a relative of Mr. Wadhams and 5,400 shares
owned by Mr. Wadham's wife, as to all of which beneficial ownership is
disclaimed.
(12) Based on a Schedule 13G dated January 31, 2000 and filed with the SEC, at
December 31, 1999 Cramer Rosenthal McGlynn, LLC beneficially owned
2,498,377 shares of common stock and shares voting and investment power
over these shares.
Masco Corporation and Mr. Manoogian may each be deemed a controlling
person of MascoTech by reason of their respective significant ownership of
common stock and, in the case of Mr. Manoogian, his positions as a director and
chairman of the board of MascoTech, as more fully described under "Interests of
Certain Persons in the Mergers."
Executive Officers and Directors of Masco Corporation
Set forth below is information concerning beneficial ownership of
MascoTech common stock as of August 8, 2000 by each director and executive
officer of Masco Corporation. Except as indicated below, each person exercises
sole voting and investment power with respect to the shares listed.
78
<PAGE>
<TABLE>
Shares of Percentage of
MascoTech MascoTech
Common Stock Common Stock
Name Beneficially Owned Beneficially Owned
---- ------------------ -------------------
<S> <C> <C>
Lillian Bauder.............................................. 0 *
Thomas G. Denomme........................................... 0 *
David A. Doran (1).......................................... 35,370 *
Daniel R. Foley (2)......................................... 18,900 *
Eugene A. Gargaro, Jr. (2)(3)(4)(5)(6)...................... 2,114,065 4.7%
Joseph L. Hudson, Jr........................................ 0 *
Verne G. Istock............................................. 0 *
Raymond F. Kennedy.......................................... 15,000 *
Mary Ann Krey (7)........................................... 3,000 *
John R. Leekley (8)......................................... 26,800 *
Wayne B. Lyon (5)(9)........................................ 62,159 *
Richard A. Manoogian (2)(3)(4)(10).......................... 6,697,529 14.8%
John A. Morgan (11)......................................... 35,790 *
Richard G. Mosteller........................................ 0 *
Robert B. Rosowski.......................................... 18,600 *
Arman Simone (12)........................................... 20,000 *
Peter W. Stroh.............................................. 0 *
</TABLE>
-------------------
* Less than 1%.
(1) Includes 170 shares owned by Mr. Doran's wife, as to which shares Mr.
Doran disclaims beneficial ownership.
(2) Includes unvested restricted shares issued under the MascoTech's
restricted stock incentive plans (8,700 shares for Mr. Foley, 22,614
shares for Mr. Gargaro and 196,860 shares for Mr. Manoogian) and shares of
MascoTech common stock which may be acquired before October 8, 2000 upon
exercise of stock options (10,000 shares for Mr. Gargaro and 265,000
shares for Mr. Manoogian). Holders have voting but no investment power
over unvested restricted shares and exercise neither voting nor investment
power over unexercised option shares.
(3) Includes 995,500 shares owned by the Richard and Jane Manoogian
Foundation, for which Messrs. Gargaro and Manoogian serve as directors,
and 109,677 shares which could be acquired upon conversion of convertible
securities owned by such Foundation. The directors of the Foundation share
voting and investment power with respect to the securities owned by the
Foundation, but Messrs. Gargaro and Manoogian disclaim beneficial
ownership of such securities.
(4) Includes 661,260 shares owned by a charitable foundation, for which
Messrs. Gargaro and Manoogian serve as directors, and 224,516 shares which
could be acquired upon conversion of convertible securities owned by such
foundation. The directors of the foundation share voting and investment
power with respect to the securities owned by the foundation, but Messrs.
Gargaro and Manoogian disclaim beneficial ownership of such securities.
(5) Includes 2,000 shares held by a charitable foundation for which Messrs.
Gargaro and Lyon serve as directors. The directors of the foundation share
voting and investment power with respect to the securities owned by such
foundation, but Messrs. Gargaro and Lyon disclaim beneficial ownership of
such securities.
(6) Includes 27,000 shares owned by trusts for which Mr. Gargaro serves as a
trustee and 4,354 shares which could be acquired upon conversion of
convertible debt securities owned by such trusts. Mr. Gargaro, in his
capacity as a trustee of the trusts, shares voting and investment power
with respect to the securities owned by such trusts, but he disclaims
beneficial ownership of such securities.
(7) Includes 3,000 shares owned by Ms. Krey's husband, as to which shares Ms.
Krey disclaims beneficial ownership.
79
<PAGE>
(8) Includes 6,800 shares held by a trust for which Mr. Leekley serves as a
trustee. Mr. Leekley, in his capacity as a trustee, shares voting and
investment power with respect to the securities owned by the trust, but he
disclaims beneficial ownership.
(9) Includes 24,159 shares which may be acquired upon conversion of
convertible securities, of which 386 shares are issuable upon conversion
of convertible securities owned by trusts for which Mr. Lyon serves as a
trustee. Mr. Lyon, in his capacity as a trustee, shares voting and
investment power with respect to the securities owned by the trusts, but
he disclaims beneficial ownership.
(10) Includes 20,000 shares owned by a charitable foundation for which Mr.
Manoogian serves as a director and 51,000 shares held by trusts of which
Mr. Manoogian serves as trustee. The directors of the foundation share
voting and investment power with respect to the MascoTech securities owned
by such foundation, but Mr. Manoogian disclaims beneficial ownership of
such securities.
(11) Includes for Mr. Morgan 2,316 unvested restricted stock award shares of
MascoTech common stock issued under the MascoTech 1997 Non-Employee
Directors Stock Plan and 6,000 shares of MascoTech common stock which may
be acquired upon exercise of stock options issued under such plan. Holders
have voting but no investment power over unvested restricted shares and
exercise neither voting nor investment power over unexercised option
shares.
(12) Includes 10,000 shares owned by a charitable organization for which Mr.
Simone serves as a director. The directors of the charitable organization
share voting and investment power with respect to the MascoTech securities
owned by such entity, but Mr. Simone disclaims beneficial ownership of
such securities.
80
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF MASCOTECH
The following persons are the executive officers and/or directors of
MascoTech as of the date of this proxy statement. None of these persons nor
MascoTech has been convicted in a criminal proceeding during the past five
years (excluding traffic violations or similar misdemeanors), nor has any of
these persons been a party to any judicial or administrative proceeding during
the past five years that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws or a finding of any violation of
federal or state securities laws. Unless otherwise specified, each of the
directors and executive officers of MascoTech is a citizen of the United States
of America, and has his principal business address at 21001 Van Born Road,
Taylor, Michigan 48180. (Telephone: (313) 274-7405).*
<TABLE>
Name and Address and Citizenship, if applicable Principal Occupation During Last Five Years
----------------------------------------------- -------------------------------------------
<S> <C>
William T. Anderson................................. Vice President - Controller of MascoTech since
September 1998. Previously was Vice President of
Operational Accounting from December 1990 until
September 1998.
*Peter A. Dow....................................... Private Investor since February 1995. Retired as Vice
Chairman, Chief Operating Officer and Chairman of the
Executive Committee of Campbell-Ewald, 30400 Van
Dyke, Warren, MI 48093, an advertising and marketing
communications company in February 1995.
*Roger T. Fridholm.................................. President of St. Clair Group, Inc., 15840 Lakeview Court,
Grosse Pointe, MI 48230, since 1991. President of IPG
Services Corporation since 1996, and President of Ad
Hoc, Inc. since 1997, both of which are staffing service
companies located at 900 Wilshire Drive, Troy, MI
48084. Also served as President - Business, Technology
and Staffing Services Group of MSX International, Inc.,
275 Rex Blvd., Auburn Hills, MI 48326, an affiliate of
MascoTech which provides technology based consulting
services, from May 1998 through June 2000.
Lee M. Gardner...................................... President and Chief Operating Officer of MascoTech
since October 1992.
Eugene A. Gargaro, Jr............................... Secretary of MascoTech since January 1984 and Vice
President and the Secretary of Masco Corporation since
October 1993.
*Frank M. Hennessey................................. Vice Chairman and Chief Executive Officer of
MascoTech since February 1998. Previously served as
Masco Corporation's Executive Vice President from
September 1995. Chairman of EMCO Limited, a
plumbing products distributor located at 620 Richmond
Street, London, Ontario, Canada N6A 5J9 since
September 1995 and President and Chief Executive
Officer from December 1990 until 1997.
--------
* Directors of MascoTech are indicated with an asterisk.
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<PAGE>
*William K. Howenstein.............................. Retired in June 1998 as President of TMX Division of
Thyssen, Inc., N.A., 400 Renaissance Center-Suite 1700,
Detroit, MI 48243, a materials management and logistic
services company, and has been a consultant since June
1998. Previously held various positions at Copper and
Brass Sales, Inc., 400 Renaissance Center-Suite 1700,
Detroit, MI 48243, including Chairman and Chief
Executive Officer, from June 1970 until its acquisition in
March 1997 by Thyssen, Inc., N.A.
David B. Liner...................................... Vice President and General Counsel of MascoTech since
September 1998. Joined MascoTech in February 1997 as
Vice President and Corporate Counsel. Previously employed by
Masco Corporation as Associate Corporate Counsel from
December 1987.
*Richard A. Manoogian............................... Chairman of the Board of MascoTech since May 1984
and Chairman of the Board and Chief Executive Officer
of Masco Corporation, a manufacturer of home
improvement and building products since July 1985.
Served as Chief Executive Officer of MascoTech from its
formation in May 1984 until January 1998. Also served
as Chairman of the Board of TriMas Corporation, 315
East Eisenhower Parkway, Ann Arbor, MI 48108, a
diversified manufacturer of industrial products from
February 1989 until it was acquired by MascoTech in
January 1998.
*John A. Morgan..................................... Managing Director of Morgan Lewis Githens & Ahn,
Morgan Lewis Githens & Ahn, Inc. Inc., an investment banking firm since August 1982.
767 Fifth Avenue, 8th Floor
New York, New York 10153
*Helmut F. Stern.................................... President of Arcanum Corporation, a private research and
Arcanum Corporation development company since October 1968.
P.O. Box 1584
Ann Arbor, Michigan 48106
James F. Tompkins................................... Treasurer of MascoTech since May 1998. Assistant
Treasurer from August 1988 to May 1998.
Timothy Wadhams..................................... Executive Vice President, Finance and Administration,
and Chief Financial Officer of MascoTech since
September 1998. Previously served as MascoTech's
Senior Vice President and Chief Financial Officer from
February 1998 until September 1998 and as Vice
President - Controller and Treasurer from June 1990 until
February 1998.
</TABLE>
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DIRECTORS AND EXECUTIVE OFFICERS OF MASCO CORPORATION
The following persons are the executive officers and/or directors of Masco
Corporation as of the date of this proxy statement. None of these persons nor
Masco Corporation has been convicted in a criminal proceeding during the past
five years (excluding traffic violations or similar misdemeanors), nor has any
of these persons been a party to any judicial or administrative proceeding
during the past five years that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws or a finding of any violation of
federal or state securities laws. Unless otherwise specified, each of the
directors and executive officers of Masco Corporation is a citizen of the
United States of America, and has his or her principal business address at
21001 Van Born Road, Taylor, Michigan 48180. (Telephone: (313) 274-7400).*
<TABLE>
Name and Address and Citizenship, if applicable Principal Occupation During Last Five Years
----------------------------------------------- -------------------------------------------
<S> <C>
Dr. Lillian Bauder...................................... Vice President - Corporate Affairs of Masco
Corporation since October 1996. From
February 1983 to October 1996, served as
President and Chief Executive Officer of
Cranbrook Educational Community, a school
and museum complex, 380 Lone Pine Road, P.O.
Box 801, Bloomfield Hills, MI 48303.
*Thomas G. Denomme...................................... Retired in December 1997 as Vice Chairman and
Chief Administrative Officer of Chrysler
Corporation, an automobile manufacturer,
1000 Chrysler Drive, Auburn Hills, MI, a
position he assumed in April 1981.
David A. Doran.......................................... Vice President - Taxes of Masco Corporation since
September 1984.
Daniel R. Foley......................................... Vice President - Human Resources of Masco
Corporation since January 1996. Previously employed
by MascoTech as Vice President - Human Resources
from February 1994 to December 1995.
Eugene A. Gargaro, Jr................................... Vice President and Secretary of Masco Corporation
since October 1993 and Secretary of MascoTech since
January 1984.
*Joseph L. Hudson, Jr................................... Trustee of the Hudson-Webber Foundation, a
Hudson-Webber Foundation philanthropic organization, since December 1996, and
333 West Fort Street, Suite 1310 served as its Chairman from July 1976 until December
Detroit, Michigan 48226 1996.
</TABLE>
--------
* Directors of Masco Corporation are indicated by an asterisk.
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<TABLE>
Name and Address and Citizenship, if applicable Principal Occupation During Last Five Years
----------------------------------------------- -------------------------------------------
<S> <C>
*Verne G. Istock........................................ President of Bank One N.A. from October 1999 until
Bank One Corporation September 2000 and Chairman and Chief Executive
One First National Plaza Officer of Bank One, Michigan from October 1999
Chicago, Illinois 60670 until September 2000. Previously Chairman and Chief
Executive Officer of NBD BanCorp, One First
National Plaza, Chicago, IL 60670, from
January 1994 until the merger of NBD and
First Chicago Corporation in December 1995,
when named President and Chief Executive
Officer of First Chicago NBD Corporation,
then elected Chairman in May 1996. From the
merger of First Chicago NBD Corporation and
Banc One Corporation in October 1998 until
October 1999, served as Chairman of the
Board of Bank One
Corporation.
*Raymond F. Kennedy..................................... President and Chief Operating Officer since August
1996. Previously, served as President - Building
Products from September 1989 to March 1995, then
Executive Vice President of Masco Corporation from
March 1995 until August 1996.
*Mary Ann Krey.......................................... Chairman and Chief Executive Officer of Krey
Krey Distributing Company Distributing Company, beverage distribution firm
150 Turner Blvd. since December 1987.
St. Peters, Missouri 63376
John R. Leekley......................................... Senior Vice President and General Counsel of Masco
Corporation since August 1996. Previously served as
Vice President and General Counsel of Masco Corporation
from July 1988.
*Wayne B. Lyon.......................................... Chairman of LifeStyle Furnishings International Ltd.
LifeStyle Furnishings since February 2000. Also served as its President and
International Ltd. Chief Executive Officer from August 1996 until
4000 LifeStyle Court February 2000. Previously employed by Masco
High Point, North Carolina 27265 Corporation as President and Chief Operating Officer
from May 1995 until August 1996.
*Richard A. Manoogian................................... Chairman of the Board and Chief Executive Officer of
Masco Corporation since July 1985 and Chairman of
the Board of MascoTech since May 1984. Served as
MascoTech's Chief Executive Officer from its
formation in May 1984 until January 1998. Also
served as Chairman of the Board of TriMas
Corporation, a diversified manufacturer of industrial
products located at 315 East Eisenhower Parkway,
Ann Arbor, MI 48108 from February 1989 until it was
acquired by MascoTech, Inc. in January 1998.
*John A. Morgan......................................... Managing Director of Morgan Lewis Githens & Ahn,
Morgan Lewis Githens & Ahn, Inc. Inc., an investment banking firm since August 1982.
767 Fifth Avenue, 8th Floor
New York, New York 10153
Richard G. Mosteller.................................... Senior Vice President--Finance of Masco
Corporation since July 1985.
</TABLE>
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<PAGE>
<TABLE>
Name and Address and Citizenship, if applicable Principal Occupation During Last Five Years
----------------------------------------------- -------------------------------------------
<S> <C>
Robert B. Rosowski...................................... Vice President--Controller since July 1985 and,
since October 1996, Treasurer of Masco Corporation.
*Arman Simone........................................... President of Simone Corporation, Christ Hospital,
Jersey City, NJ, commercial builders and developers
from December 1952 until his retirement in June 1978.
Currently involved in various philanthropic endeavors
focusing on children, education and alternative
medicine.
*Peter W. Stroh......................................... Director of the Stroh Companies since January 1998.
Director of The Stroh Brewery Company from January
1998 until it was sold in April 1998, The Stroh
Companies, 100 River Place, Detroit, MI 48207-4291.
Retired in December 1997 as Chairman of the Board
and Chief Executive Officer of The Stroh Companies,
Inc. and as Chairman of The Stroh Brewery Company,
positions he assumed in May 1995.
</TABLE>
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<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE FOUNDATION
Messrs. Manoogian (president and treasurer) and Gargaro (secretary) and
Jane Manoogian (vice president) are all the executive officers of the
Foundation and each of them is a director of the Foundation as of the date of
this proxy statement. None of these persons has been convicted in a criminal
proceeding during the past five years (excluding traffic violations or similar
misdemeanors), nor has any of these persons been a party to any judicial or
administrative proceeding during the past five years that resulted in a
judgment, decree or final order enjoining the person from future violations of,
or prohibiting activities subject to, federal or state securities laws or a
finding of any violation of federal or state securities laws. Each of the
directors and executive officers of the Foundation is a citizen of the United
States of America, and has his or her principal business address at 21001 Van
Born Road, Taylor, Michigan 48180. (Telephone: (313) 274-7400). Messrs.
Manoogian and Gargaro's beneficial ownership of stock of MascoTech and a
description of their experiences can be found in the sections entitled
"Security Ownership of Management and Certain Beneficial Owners" and "Directors
and Executive Officers of Masco Corporation." Ms. Manoogian does not
beneficially own shares of common stock of MascoTech other than 995,500 shares
owned by the Foundation and Ms. Manoogian disclaims beneficial ownership of
such shares. Ms. Manoogian has been the vice president and director of the
Foundation for the last five years.
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IDENTITIES AND BACKGROUNDS OF RIVERSIDE AND HEARTLAND
Riverside Company LLC
Riverside is a Delaware limited liability company organized at the
direction of Heartland, its sole member, for the purpose of facilitating the
recapitalization. Prior to the effective time of the recapitalization merger,
Heartland and the co-investors will invest in Riverside for purposes of
consummating the recapitalization merger. After Heartland's and the co-equity
investors' investments in Riverside, Heartland will continue to control
Riverside.
Riverside is a transitory merger vehicle which was formed solely to
facilitate the recapitalization merger and will cease to exist at the time of
the recapitalization merger. Accordingly, it does not have and is not expected
to have business activities, assets or liabilities, other than those arising
under the recapitalization agreement. Its business address is 320 Park Avenue,
33rd Floor, New York, New York 10022 and the telephone number is (212)
981-5613.
Set forth below is the name of each manager of Riverside, the present
principal occupation and employment of each such manager and a brief
description of his principal occupation and business experience during at least
the last five years. Each manager of Riverside has been a manager of Riverside
since it was formed in July 2000. Each person listed below is a citizen of the
United States. The business address for Messrs. Stockman, Tredwell and Lewis is
320 Park Avenue, 33rd Floor, New York, New York 10022 and the telephone number
at that address is (212) 981-5613.
David Stockman. Mr. Stockman is the founder and a senior managing director
of Heartland. Prior to Heartland, Mr. Stockman was a senior managing director
of The Blackstone Group L.P. and had been with Blackstone since 1988.
Daniel P. Tredwell. Mr. Tredwell has been a senior managing director of
Heartland since its inception. Prior to Heartland, Mr. Tredwell was a managing
director at Chase Securities Inc. since 1987.
Perry J. Lewis. Mr. Lewis has been a partner of Heartland since February
2000. Before joining Heartland, Mr. Lewis was a partner at Morgan Lewis Githens
& Ahn since its inception in 1980. Prior to founding Morgan Lewis Githens &
Ahn, Mr. Lewis was senior vice president and manager of Smith Barney Harris
Upham & Co., where he worked for 13 years.
Heartland Industrial Partners, L.P.
Heartland is a Delaware limited partnership established in January 2000.
The general partner of Heartland is Heartland Industrial Associates L.L.C. The
management, operation and policy of Heartland is vested exclusively in
Heartland Industrial Associates L.L.C., as general partner. Heartland is a
private equity firm formed to focus on investments in industrial companies. Its
business address is 320 Park Avenue, 33rd Floor, New York, New York 10022 and
the telephone number is (212) 981-5613.
Heartland Industrial Associates L.L.C.
Heartland Industrial Associates L.L.C. is a Delaware limited liability
company. Heartland Industrial Associates L.L.C. was formed in December 1999 to
serve as the general partner of Heartland and to focus, through its affiliates,
on investments in industrial companies. The sole member of Heartland Industrial
Associates L.L.C. is David Stockman. Heartland Industrial Associates L.L.C. is
managed by its sole member and there are no managers of Heartland Industrial
Associates L.L.C. Its business address is 320 Park Avenue, 33rd Floor, New
York, New York 10022 and its telephone number is (212) 981-5613.
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<PAGE>
General
None of Riverside, Heartland, Heartland Industrial Associates L.L.C. or
Messrs. Stockman, Tredwell or Lewis beneficially own any securities of
MascoTech or has engaged in any transaction involving any securities of
MascoTech, other than as contemplated by the recapitalization agreement. None
of Riverside, Heartland, Heartland Industrial Associates L.L.C. or Messrs.
Stockman, Tredwell or Lewis has been a party to any judicial or administrative
proceeding or a finding of any violation of federal or state securities laws
that resulted in a judgment, decree or final determination enjoining it or him
from future violations of, or prohibiting activities subject to, federal or
state securities laws or has been convicted in a criminal proceeding.
Masco Capital Corporation; Advisory Committee
Masco Capital Corporation, a subsidiary of Masco Corporation, is a limited
partner of Heartland and it, as well as all other limited partners, is required
to pay its share of a quarterly management fee to Heartland Industrial
Associates L.L.C., as general partner of Heartland. In addition, Mr. Manoogian
is a member of the advisory board of Heartland, which was established to
consult with the general partner of Heartland on various matters, including
those related to investments, general market trends, specific transactions and
management assessment. The advisory board is an informal advisory board which
does not have the authority to take material binding action with respect to
Heartland. Since Heartland's formation, the advisory board has not had any
meetings or been presented with any matters for consideration.
88
<PAGE>
APPRAISAL OR DISSENTERS' RIGHTS
Under Section 262 ("Section 262") of the Delaware General Corporation Law
(the "DGCL"), if you do not vote your outstanding shares of MascoTech common
stock in favor of adoption of the recapitalization agreement, you will be
entitled to dissent and elect to have the "fair value" of your shares,
exclusive of any element of value arising from the accomplishment or
expectation of the recapitalization merger, together with a fair rate of
interest, if any, judicially determined by the Delaware Court of Chancery and
paid to you in cash.
You will not have any appraisal rights under Section 262 with respect to
the merger with MascoTech Harbor because MascoTech common stock is traded on
the NYSE and you will continue to own the same stock of MascoTech, the
surviving corporation, following the merger with MascoTech Harbor.
The following discussion is not a complete statement of the law pertaining
to appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262, a copy of which is provided as Annex G to this proxy
statement. All references in Section 262 and in this summary to a "stockholder"
are to the record holder of the shares of MascoTech common stock as to which
appraisal rights are asserted. If you have a beneficial interest in shares of
common stock held of record in the name of another person, such as a broker or
nominee, you must act promptly to cause the record holder to follow the steps
summarized below properly and in a timely manner to perfect your appraisal
rights.
Under Section 262, where a merger agreement (such as the recapitalization
agreement) is to be submitted for adoption at a meeting of stockholders, as in
the case of the special meeting of MascoTech stockholders described in this
proxy statement, the corporation, not less than 20 days prior to the meeting,
must notify each person who was a stockholder on the record date and who is
entitled to appraisal rights that appraisal rights are available and include in
the notice a copy of Section 262. This proxy statement is that notice to you,
and a copy of Section 262 is attached to this proxy statement as Annex G If you
wish to exercise your appraisal rights or wish to preserve the right to do so,
you should review carefully Section 262 and seek advice of legal counsel, since
failure to comply fully with the procedures of Section 262 will result in the
loss of appraisal rights.
If you wish to exercise the right to dissent from the recapitalization
merger and demand appraisal under Section 262, you must satisfy each of the
following conditions:
o You must deliver to us written demand for appraisal of your shares of
MascoTech common stock before the vote on adoption of the
recapitalization agreement at the special meeting, which demand will
be sufficient if it reasonably informs us of your identity and that
you intend to demand the appraisal of your shares;
o You must not vote your shares in favor of adoption of the
recapitalization agreement. Because a proxy that does not contain
voting instructions will, unless revoked, be voted in favor of the
recapitalization agreement, if you vote by proxy and wish to exercise
appraisal rights, you must vote against adoption of the
recapitalization agreement or abstain from voting on adoption of the
recapitalization agreement; and
o You must continuously hold your shares from the date of making your
written demand through the completion of the recapitalization merger.
If you are the record holder of shares of common stock on the date
the written demand for appraisal is made but thereafter transfer
these shares prior to the completion of the recapitalization merger,
you will lose any right to appraisal in respect of the shares.
Your failure to vote against the adoption of the recapitalization
agreement will not constitute a waiver of your appraisal rights.
Neither voting in person or by proxy against, abstaining from voting on or
failing to vote on the proposal to adopt the recapitalization agreement will
constitute a written demand for appraisal within the meaning of Section 262.
The written demand for appraisal must be in addition to and separate from any
such proxy or vote.
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<PAGE>
Only a holder of record of shares of MascoTech common stock issued and
outstanding immediately prior to the completion of the recapitalization merger
is entitled to assert appraisal rights for the shares of common stock
registered in that holder's name. A demand for appraisal should be executed by
or on behalf of the stockholder of record, fully and correctly, as that
stockholder's name appears on the stock certificates, should specify the
stockholder's name and mailing address, the number of shares of common stock
owned and that the stockholder intends thereby to demand appraisal of the
stockholder's shares of MascoTech common stock.
If your shares of MascoTech common stock are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of a
written demand should be made in that capacity. If your shares of MascoTech
common stock are owned of record by more than one person as in a joint tenancy
or tenancy in common, the demand should be executed by or on behalf of all
owners. An authorized agent, including one or more joint owners, may execute a
demand for appraisal on behalf of a stockholder; however, the agent must
identify the record owner or owners and expressly disclose the fact that, in
executing the demand, the agent is acting as agent for the owner or owners.
A record holder such as a broker who holds shares of MascoTech common
stock as nominee for several beneficial owners may exercise appraisal rights
with respect to the shares of MascoTech common stock held for one or more
beneficial owners while not exercising those rights with respect to the shares
of MascoTech common stock held for one or more other beneficial owners; in that
case, the written demand should set forth the number of shares of MascoTech
common stock as to which appraisal is sought, and where no number of shares is
expressly mentioned, the demand will be presumed to cover all shares of
MascoTech common stock held in the name of the record owner. If you hold your
shares of MascoTech common stock in brokerage accounts or other nominee forms
and wish to exercise appraisal rights, you are urged to consult with your
broker to determine the appropriate procedures for the making of a demand for
appraisal by the nominee.
A stockholder who elects to exercise appraisal rights under Section 262
should mail or deliver, before the vote on adoption of the recapitalization
agreement at the special meeting, a written demand to MascoTech, Inc., 21001
Van Born Road, Taylor, Michigan 48180; Attention: Secretary.
Within ten days after the completion of the recapitalization merger, the
surviving corporation must send a notice as to the effectiveness of the
recapitalization merger to each former MascoTech stockholder who has made a
written demand for appraisal in accordance with Section 262 and who has not
voted in favor of adoption of the recapitalization agreement. Within 120 days
after the completion of the recapitalization merger, but not thereafter, either
MascoTech or any holder of dissenting shares of MascoTech common stock who has
complied with the requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of all
shares of MascoTech common stock held by dissenting stockholders. MascoTech is
under no obligation to and has no present intent to file a petition for
appraisal, and you should not assume that MascoTech will file a petition or
that MascoTech will initiate any negotiations with respect to the fair value of
the shares. Accordingly, if you desire to have your shares appraised, you
should initiate any petitions necessary for the perfection of your appraisal
rights within the time periods and in the manner prescribed in Section 262.
Within 120 days after the completion of the recapitalization merger, any
stockholder who has complied with the provisions of Section 262 to that point
in time will be entitled to receive from MascoTech, upon written request, a
statement setting forth the aggregate number of shares of MascoTech common
stock not voted in favor of adoption of the recapitalization agreement and with
respect to which demands for appraisal have been received and the aggregate
number of holders of the shares. MascoTech must mail this statement to the
stockholder within 10 days of receipt of a request or within 10 days after
expiration of the period for delivery of demands for appraisal under Section
262, whichever is later.
A stockholder timely filing a petition for appraisal with the Delaware
Court of Chancery must deliver a copy to MascoTech, which will then be
obligated within 20 days to provide the Delaware Court of Chancery with a duly
verified list containing the names and addresses of all stockholders who have
demanded appraisal of their shares of MascoTech common stock. After notice to
the stockholders, the Delaware Court of Chancery is empowered to conduct a
hearing on the petition to determine which stockholders are entitled to
appraisal rights. The Delaware
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Court of Chancery may require stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to submit their
certificates to the Register in Chancery for notation thereon of the pendency
of the appraisal proceedings, and if any stockholder fails to comply with the
requirement, the Delaware Court of Chancery may dismiss the proceedings as to
that stockholder.
After determining the stockholders entitled to an appraisal, the Delaware
Court of Chancery will appraise the "fair value" of their shares, exclusive of
any element of value arising from the accomplishment or expectation of the
recapitalization merger, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. The costs of the action
may be determined by the Delaware Court of Chancery and taxed upon the parties
as the Delaware Court of Chancery deems equitable. Upon application of a holder
of dissenting shares of MascoTech common stock, the Delaware Court of Chancery
may also order that all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding, including without
limitation, reasonable attorneys' fees and the fees and expenses of experts, be
charged pro rata against the value of all of the shares of MascoTech common
stock entitled to appraisal.
If you consider seeking appraisal, you should be aware that the fair value
of your shares as determined under Section 262 could be more than, the same as
or less than the merger consideration you would receive under the MascoTech
recapitalization agreement if you did not seek appraisal of your shares. You
should also be aware that investment banking opinions are not opinions as to
fair value under Section 262.
In determining fair value and, if applicable, a fair rate of interest, the
Delaware Court of Chancery is to take into account all relevant factors. In
Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered, and that "fair price obviously requires
consideration of all relevant factors involving the value of a company." The
Delaware Supreme Court stated that, in making this determination of fair value,
the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts that could be
ascertained as of the date of the merger that throw any light on future
prospects of the merged corporation. In Weinberger, the Delaware Supreme Court
further stated that "elements of future value, including the nature of the
enterprise, which are known or susceptible of proof as of the date of the
merger and not the product of speculation, may be considered." Section 262
provides that fair value is to be "exclusive of any element of value arising
from the accomplishment or expectation of the merger."
Any stockholder who has duly demanded appraisal in compliance with Section
262 will not, after the completion of the recapitalization merger, be entitled
to vote the shares subject to this demand for any purpose or to receive payment
of dividends or other distributions on those shares (except dividends or other
distributions payable to holders of record of shares as of a record date prior
to the completion of the recapitalization merger).
If any stockholder who demands appraisal of shares of MascoTech common
stock under Section 262 fails to perfect, or effectively withdraws or loses,
the right to appraisal, the stockholder's shares of MascoTech common stock will
be converted into the right to receive the merger consideration in cash in
accordance with the MascoTech recapitalization agreement, without interest. A
stockholder will fail to perfect, or effectively lose or withdraw, the right to
appraisal if no petition for appraisal is filed within 120 calendar days after
the completion of the recapitalization merger. A stockholder may withdraw a
demand for appraisal by delivering to MascoTech a written withdrawal of the
demand for appraisal and acceptance of the merger consideration, except that
any such attempt to withdraw made more than 60 calendar days after the
completion of the recapitalization merger will require the written approval of
MascoTech. Once a petition for appraisal has been filed, the appraisal
proceeding may not be dismissed as to any stockholder, absent approval of the
Delaware Court of Chancery.
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BUSINESS COMBINATIONS WITH INTERESTED PARTIES
State Anti-Takeover Laws
There are provisions of Delaware law that may be deemed to have an
anti-takeover effect. These provisions are designed to protect stockholders
against coercive, unfair or inadequate tender offers and other abusive tactics
and to encourage any person contemplating a business combination with MascoTech
to negotiate with the board of directors for the fair and equitable treatment
of all stockholders.
Under Delaware law, no Delaware corporation shall engage in a "business
combination" with an "interested stockholder" for a period of three years
following the date that the stockholder became an interested stockholder,
except in certain circumstances. "Business combination" includes a merger,
consolidation, asset sale or other transaction resulting in a financial benefit
to the interested stockholder. "Interested stockholder" is a person who,
together with affiliates and associates, owns, or within three years, did own
15% or more of the corporation's voting stock. This prohibition does not apply
if:
o prior to the time that the stockholder became an interested
stockholder, the board of directors of the corporation approved
either the business combination or the transaction resulting in the
stockholder's becoming an interested stockholder,
o upon consummation of the transaction resulting in the stockholder's
becoming an interested stockholder, the stockholder owns at least 85%
of the outstanding voting stock of the corporation, excluding voting
stock owned by directors who are also officers and certain employee
stock plans, or
o at or subsequent to the time that the stockholder became an
interested stockholder, the business combination is approved by the
board and authorized at an annual or special meeting of stockholders,
and not by written consent, by the affirmative vote of at least
two-thirds of the outstanding voting stock that the interested
stockholder does not own.
A Delaware corporation may elect not to be governed by these restrictions.
MascoTech has not so elected, but the MascoTech board has taken the necessary
action to make the above restrictions on business combinations inapplicable to
the mergers and the related transactions.
Fair Price Provision
MascoTech's certificate of incorporation provides that any "business
combination" with any "interested stockholder" requires, in addition to any
vote required by law, the affirmative vote of at least 95% of the outstanding
shares of voting stock, voting together as a single class, unless certain fair
price criteria and disclosure obligations are satisfied.
"Business combination" to which the MascoTech fair price provision applies
generally includes a merger, significant asset sales, significant stock
issuances and certain other significant transactions. The fair price provision
defines "interested stockholder" generally to mean a 30% stockholder of
MascoTech.
The effect of the subsidiary merger will be the repeal of this provision
of MascoTech's certificate of incorporation.
Stockholder Rights Plan
Under Delaware law, every corporation may create and issue rights
entitling the holders of the rights to purchase from the corporation shares of
its capital stock of any class or classes, subject to any provisions in its
certificate of incorporation. The price and terms of the shares must be stated
in the certificate of incorporation or in a resolution adopted by the board of
directors for the creation or issuance of the rights.
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MascoTech has entered into a stockholder rights agreement. In connection
with the execution of the recapitalization agreement, the MascoTech board of
directors amended the MascoTech rights agreement to make the rights
inapplicable to the transactions contemplated by the recapitalization agreement
and to cause the rights agreement to terminate immediately prior to the
recapitalization merger. As with most stockholder rights agreements, the terms
of MascoTech's rights agreement are complex and not easily summarized,
particularly as they relate to the acquisition of MascoTech common stock and to
exercisability. We have discussed the significant provisions of the stockholder
rights plan below which is incorporated by reference into this proxy statement
in its entirety.
MascoTech's stockholder rights plan provides that each stockholder has one
right for each share of common stock held. Each right entitles the registered
holder to purchase from MascoTech one one-thousandth of a share of MascoTech's
Series A Participating Cumulative Preferred Stock, par value $1.00 per share,
at a purchase price of $60. The rights are subject to adjustment to prevent
dilution of the interests represented by each right. The description and terms
of the rights are set forth in the Rights Agreement dated as of February 20,
1998 by and between MascoTech and The Bank of New York, as rights agent, as
amended by Amendment No. 1 to Rights Agreement dated as of September 22, 1998
and by Amendment No. 2 to Rights Agreement dated as of August 1, 2000.
The MascoTech rights are attached to all MascoTech common stock
certificates currently outstanding, and no separate certificates representing
them have been distributed. The rights will separate from the MascoTech common
stock, and be represented by separate certificates, upon the earlier of:
o 10 business days following the date of any public announcement that a
person or group of affiliated or associated persons, but excluding
particular persons and entities, has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding
MascoTech common stock, or
o 10 business days following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially
owning 15% or more of the outstanding MascoTech common stock.
Until the MascoTech rights separate from the MascoTech common stock to
which they are attached, or an earlier date on which these rights are redeemed,
exchanged or expire:
o the rights will be evidenced by the common stock certificates and
will be transferred only with them,
o all new common stock certificates issued after February 27, 1998 and
before the earlier of the separation of the rights or February 27,
2008 will contain a notation incorporating the terms of the rights
agreement by reference, and
o the surrender for transfer of any certificates for common stock
outstanding will also constitute the transfer of the rights
associated with the common stock represented by the certificates.
As soon as practicable after the date when the rights separate from the
common stock, right certificates will be mailed to holders of record of common
stock as of the close of business on that date and, after that time, the
separate right certificates alone will represent the rights. Only common stock
issued prior to the date when the rights separate from the common stock will be
issued with rights. The MascoTech rights are not exercisable until their
separation from the MascoTech common stock and will expire at the close of
business on February 17, 2008 unless the MascoTech board redeems them earlier,
as described below.
If a third party acquires 15% of more of the MascoTech common stock, as
described above, triggering a separation of the MascoTech rights from the
MascoTech common stock, each holder of a MascoTech right will thereafter have
the right to receive, upon exercise and payment of the exercise price,
MascoTech common stock or, in some circumstances, cash, property or other
securities of MascoTech, having a value equal to two times the exercise price.
Alternatively, if the MascoTech rights separate from the common stock and
become exercisable, MascoTech may provide that each right shall be exchanged
for one share of MascoTech common stock without other
93
<PAGE>
payment of the exercise price, provided that the MascoTech board of directors
may not effect the exchange at any time after any person, other than MascoTech
or specified other related parties, together with all affiliates and associates
of this person, beneficially owns 50% or more of the MascoTech common stock
then outstanding.
If, at any time after a third party acquires, or obtains the right to
acquire beneficial ownership of, 15% or more of the outstanding MascoTech
common stock, as described above,
o MascoTech is acquired in a merger, statutory stock exchange, or other
business combination in which MascoTech is not the surviving
corporation,
o an acquiring firm merges into MascoTech, or
o 50% or more of MascoTech's assets or earning power is sold or
transferred,
each holder of a MascoTech right, except as set forth below, shall thereafter
have the right to receive, upon exercise and payment of the exercise price,
common stock of the acquirer having a value equal to twice the exercise price.
Any rights that are or were owned by an acquirer of beneficial ownership
of more that 15% or more of the outstanding MascoTech common stock will be null
and void.
At any time prior to the earlier of 10 business days following the date
upon which a third party acquires, or obtains the right to acquire beneficial
ownership of, 15% of the outstanding MascoTech common stock, or February 27,
2008, the MascoTech board of directors may redeem the rights in whole, but not
in part, at a redemption price of $.01 per right. Immediately upon the
MascoTech board of directors' ordering the redemption of the rights, the rights
will terminate and the holders of the rights will be entitled to receive only
this redemption price.
The MascoTech board of directors may amend any provision of the rights
agreement without approval of the holders of the rights prior to 10 business
days following the date upon which a third party acquires, or obtains the right
to acquire beneficial ownership of, 15% of the outstanding MascoTech common
stock. After this date, the board may not amend the rights agreement in any
manner that would adversely affect the interests of the holders of the rights
(with the exclusion of the third party).
Until a right is exercised, a holder of rights will have no rights as
MascoTech stockholder, including the right to vote and to receive dividends,
beyond its rights as an existing stockholder.
The MascoTech rights may have anti-takeover effects. The rights will cause
substantial dilution to a person or group that attempts to acquire more than
15% of the outstanding MascoTech common stock without conditioning the offer on
a substantial number of rights being acquired. Accordingly, the existence of
the rights may deter acquirers from making takeover proposals or tender offers.
The rights are not intended to prevent a takeover, but are designed to enhance
the ability of MascoTech's board of directors to negotiate with an acquirer on
behalf of all the stockholders. The rights should also not interfere with any
merger or other business combination approved by the MascoTech board of
directors and the MascoTech stockholders because the board of directors may
redeem the rights.
94
<PAGE>
INDEPENDENT ACCOUNTANTS
The consolidated financial statements of MascoTech are incorporated in
this document by reference to MascoTech's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 and have been audited by
PricewaterhouseCoopers LLP, independent accountants, as indicated in their
report incorporated by reference in this document. A representative of
PricewaterhouseCoopers LLP will be at the special meeting to answer questions
from stockholders and will have the opportunity to make a statement.
FUTURE STOCKHOLDER PROPOSALS
MascoTech will only hold an annual meeting in the year 2001 if the
recapitalization merger has not already been completed. If such annual meeting
is held, stockholder proposals intended to be presented at the 2001 annual
meeting of stockholders of MascoTech must be received by the Chairman or the
Secretary of MascoTech at its principal executive offices: 21001 Van Born Road,
Taylor, Michigan 48180, not later than December 20, 2000 for inclusion in the
proxy materials for that meeting.
MascoTech will have the right to exercise discretionary voting authority
on any matter presented at the 2001 Annual Meeting that has not been presented
to MascoTech in writing by December 20, 2000.
WHERE YOU CAN FIND MORE INFORMATION
MascoTech and Masco Corporation file annual, quarterly and special
reports, proxy statements and other information with the SEC. You may read and
copy any reports, statements or other information that MascoTech or Masco
Corporation files at the SEC's public reference rooms in Washington, D.C., New
York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms.
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. The SEC also maintains an Internet world wide
web site that contains reports, proxy statements and other information about
issuers, including MascoTech, who file electronically with the SEC. The address
of that site is http://www.sec.gov. You can also inspect reports, proxy
statements and other information about MascoTech at the offices of the NYSE, 20
Broad Street, New York, New York 10005.
MascoTech, the continuing stockholders, Heartland and Riverside have filed
with the SEC a Rule 13e-3 Transaction Statement on Schedule 13E-3 with respect
to the recapitalization merger. As permitted by the SEC, this proxy statement
omits certain information contained in the Schedule 13E-3. The Schedule 13E-3,
including any amendments and exhibits filed or incorporated by reference as a
part thereof, is available for inspection or copying as set forth above.
The SEC allows us to "incorporate by reference" information into this
proxy statement. This means that we can disclose important information to you
by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this document,
except for any information superseded by information in this document. This
proxy statement incorporates by reference the documents set forth below that we
have previously filed with the SEC. For purposes of incorporation of these
filings into this proxy statement, any references in those documents to "safe
harbor" protection for forward-looking statements are not applicable to this
proxy statement. These documents contain important information about MascoTech
and its financial performance.
95
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<TABLE>
MascoTech's SEC Filings
(File No. 1-12068) Description of Period
-------------------------- -----------------------------------------------------------
<S> <C>
Annual Report on Form 10-K Fiscal year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000 and June 30, 2000
Current Report on Form 8-K Filed on August 7, 2000
Registration Statement on Filed on February 23, 1998 as amended on December 4, 1998
Forms 8-A and 8-A/A and on September 25, 2000
</TABLE>
We are also incorporating by reference additional documents that MascoTech
files with the SEC between the date of this proxy statement and the date of the
special meeting. For purposes of incorporation of these additional filings into
this proxy statement, any references in those documents to "safe harbor"
protection for forward-looking statements are not applicable to this proxy
statement.
Heartland has supplied all information contained or incorporated by
reference in this proxy statement relating to Heartland or Riverside, Masco
Corporation has supplied all information relating to Masco Corporation, Mr.
Manoogian has supplied all information relating to Mr. Manoogian or the
Foundation and MascoTech has supplied all information relating to MascoTech.
You may already have been sent some of the documents incorporated by
reference, but you can obtain any of them from us or the SEC. Documents
incorporated by reference are available from us without charge, excluding all
exhibits, unless we have specifically incorporated by reference an exhibit in
this proxy statement. Stockholders may obtain these documents incorporated by
reference by requesting them in writing or by telephone from MascoTech at the
following address:
MascoTech, Inc.
21001 Van Born Road
Taylor, Michigan 48180
Tel: (313) 274-7405
If you would like to request documents from us, please do so by November ,
2000 to receive them before the special meeting. MascoTech will send the
documents by first-class mail within one business day of receiving your
request. MascoTech has not made any other provisions to grant unaffiliated
stockholders access to MascoTech's corporate files or to obtain counsel or
appraisal services at MascoTech's expense.
You should rely only on the information contained or incorporated by
reference in this proxy statement to vote on the agreement of merger, the
recapitalization agreement and the related mergers. We have not authorized
anyone to provide you with information that is different from what is contained
in this document. This proxy statement is dated October , 2000. You should not
assume that the information in it is accurate as of any date other than that
date, and its mailing to stockholders shall not create any implication to the
contrary.
96
<PAGE>
ANNEX A
AGREEMENT OF MERGER
This Agreement of Merger (the "Agreement") is made and entered into as of
the 1st day of August 2000 between MascoTech Harbor Inc., a Delaware
corporation ("Company Sub"), and MascoTech, Inc., a Delaware corporation
("Surviving Corporation"). Company Sub and Surviving Corporation are
hereinafter collectively referred to as the "Constituent Entities."
The Constituent Entities hereby agree as follows:
1. The Merger.
(a) Merger of Company Sub With and Into Surviving Corporation.
(i) Agreement to Acquire Company Sub. Subject to the terms of this
Agreement, Company Sub shall be merged with and into Surviving Corporation (the
"Merger").
(ii) Effective Time of the Merger. The Merger shall become effective as of
the time (the "Effective Time") of filing of the Certificate of Merger
(attached hereto as Exhibit A) with the Secretary of State of the State of
Delaware pursuant to Section 251 of the Delaware General Corporation Law (the
"DGCL")
(iii) Surviving Corporation. At the Effective Time of the Merger, Company
Sub shall be merged into Surviving Corporation and the separate existence of
Company Sub shall thereupon cease. Surviving Corporation shall be the
corporation which survives the Merger.
(b) Effect of the Merger; Additional Actions.
(i) Effects. The Merger shall have the effects set forth in the DGCL.
(ii) Additional Actions. If, at any time after the Effective Time of the
Merger, Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable (i) to vest, perfect or confirm of record or otherwise
in Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of either Constituent Entity acquired or to be
acquired by Surviving Corporation as a result of, or in connection with, the
Merger or (ii) to otherwise carry out the purposes of this Agreement, each
Constituent Entity and its officers and directors shall be deemed to have
granted to Surviving Corporation an irrevocable power of attorney to execute
and deliver all such deeds, bills of sale, assignments and assurances and to
take and do all such other actions and things as may be necessary or desirable
to vest, perfect
<PAGE>
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in Surviving Corporation and otherwise to carry out the
purposes of this Agreement; and the officers and directors of Surviving
Corporation are fully authorized in the name of each Constituent Entity or
otherwise to take any and all such actions.
2. The Constituent Entities.
(a) Organization of Company Sub.
(i) Incorporation. Company Sub was established as a corporation under the
laws of the State of Delaware on August 1, 2000.
(ii) Authorized Stock. Company Sub is authorized to issue an aggregate of
shares of Common Stock, $1.00 par value per share ("Company Sub Stock").
(iii) Outstanding Stock. On the date hereof, an aggregate of 1,000 shares
of Company Sub Stock are outstanding. All of such shares are owned by Surviving
Corporation.
(b) Organization of Surviving Corporation.
(i) Incorporation. Surviving Corporation was incorporated under the laws
of the State of Delaware on March 15, 1984.
(ii) Authorized Stock. Surviving Corporation is authorized to issue an
aggregate of 250,000,000 shares of Common Stock, $1.00 par value ("Surviving
Corporation Stock"), and an aggregate of 25,000,000 shares of Preferred Stock,
$1.00 par value ("Surviving Corporation Preferred Stock").
(c) Surviving Corporation Stockholder Approval. Consummation of the Merger
requires the approval of stockholders of Surviving Corporation under the DGCL.
3. Certificate of Incorporation, By-Laws and Directors and Officers of
Surviving Corporation.
(a) Surviving Corporation's Certificate of Incorporation. In accordance
with Section 251(e) of the DGCL, annexed hereto as Exhibit B and made a part
hereof is a copy of the Certificate of Incorporation of Surviving Corporation
as the same shall be changed in the Merger and in force and effect from and
after the Effective Time.
(b) By-Laws of Surviving Corporation. The By-Laws of Surviving Corporation
in effect immediately prior to the Effective Time of the Merger shall be the
By-Laws of Surviving Corporation immediately after the Effective Time of the
Merger unless and until amended or repealed as provided by law.
<PAGE>
(c) Officers and Directors of Surviving Corporation. The directors of
Surviving Corporation immediately prior to the Effective Time of the Merger
shall be the directors of Surviving Corporation immediately after the Effective
Time of the Merger, and the officers of Surviving Corporation immediately prior
to the Effective Time of the Merger shall be the officers of Surviving
Corporation immediately after the Effective Time of the Merger, in each case
until their successors shall have been elected and qualified or until otherwise
provided by law.
4. Effect of the Merger on the Capital Stock of the Constituent Entities.
(a) Effect on Capital Stock. As of the Effective Time of the Merger, by
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock of either of the Constituent Entities:
(i) Capital Stock of Surviving Corporation. Each issued and outstanding
share of Surviving Corporation Stock shall, at the Effective Time of the
Merger, remain one share of Surviving Corporation.
(ii) Capital Stock of Company Sub. Each issued and outstanding share of
Company Sub Stock prior to the Merger shall not be converted or exchanged in
any manner, but each share of Company Sub Stock which is issued and outstanding
as of the Effective Time of the Merger shall cease to be outstanding without
any consideration in respect therefor.
5. Termination.
(a) Termination by Mutual Agreement. Notwithstanding the approval of this
Agreement by the Board of Directors of Surviving Corporation, this Agreement
may be terminated at any time prior to the Effective Time of the Merger by
mutual agreement of the Boards of Directors of Surviving Corporation and
Company Sub.
(b) Effect of Termination. In the event of the termination of this
Agreement, this Agreement shall become void and there shall be no liability on
the part of either Company Sub or Surviving Corporation or their respective
officers or directors.
6. General Provisions.
(a) Amendment. This Agreement may be amended by the parties hereto any
time before or after approval hereof by the Board of Directors and stockholders
of Company Sub and the Board of Directors of Surviving Corporation but, after
such approval, no amendment shall be made which by law requires the further
approval of stockholders without
<PAGE>
obtaining such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(c) Governing Law. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of Delaware,
without giving effect to its principles governing conflicts of laws.
(d) Entire Agreement. This Agreement constitutes the entire agreement
among such parties pertaining to the subject matter hereof and all negotiations
and drafts of the parties with regard to the transactions contemplated herein,
and any and all written or oral agreements existing between the parties hereto
regarding such transactions are expressly canceled.
[Signature Page Follows]
<PAGE>
MASCOTECH, INC.
By:
-------------------------------
Name:
Title:
MASCOTECH HARBOR INC.
By:
-------------------------------
Name:
Title:
<PAGE>
Exhibit A
CERTIFICATE OF MERGER
OF
MASCOTECH HARBOR INC
a Delaware corporation
WITH AND INTO
MASCOTECH, INC.
a Delaware corporation
---------
Pursuant to Section 251 of the General Corporation Law of
the State of Delaware
---------
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the constituent
corporations of the merger is as follows:
NAME STATE OF INCORPORATION
MascoTech Harbor Inc. Delaware
MascoTech, Inc. Delaware
SECOND: That an Agreement of Merger between the parties to the merger has
been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with the requirements of section 251 of
the General Corporation Law of the State of Delaware.
THIRD: That the name of the surviving corporation of the merger is
MascoTech, Inc.
FOURTH: That the Restated Certificate of Incorporation of the surviving
corporation shall be changed in its entirety as set forth in Exhibit A to this
certificate of merger.
<PAGE>
FIFTH: That the executed Agreement of Merger is on file at the principal
place of business of the surviving corporation, the address of which is 21001
Van Born Road, Taylor, Michigan 48180.
SIXTH: That a copy of the Agreement of Merger will be furnished by the
surviving corporation, on request and without cost, to any stockholder of any
constituent corporation.
Dated: ________________, 2000
MASCOTECH, INC.
By:
------------------------------
Name:
Title:
<PAGE>
Exhibit B
RESTATED CERTIFICATE OF INCORPORATION
OF
MASCOTECH, INC.
* * * * *
MASCOTECH, INC., a corporation organized and existing under the laws of
the State of Delaware (the "Company"), hereby certifies as follows:
FIRST: The name of the Company is MASCOTECH, INC., and the date of filing
its original Certificate of Incorporation with the Secretary of State was March
15, 1984.
SECOND: The text of the Certificate of Incorporation of the Surviving
Corporation is hereby restated in full:
1. The name of the corporation is:
MASCOTECH, INC.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle 19801. The name of its registered agent at such address is The
Corporation Trust Company.
3. The nature of the business or purpose to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
4. The total number of shares of stock the corporation shall have
authority to issue is two hundred seventy-five million (275,000,000) shares.
Two hundred fifty million (250,000,000) of such shares shall consist of
common shares, par value one dollar ($1.00) per share, and twenty-five million
(25,000,000) of such shares shall consist of preferred shares, par value one
dollar ($1.00) per share. The designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions thereof are as
follows:
A. Each share of common stock shall be equal in all respects to all
other shares of such stock, and each share of outstanding common stock is
entitled to one vote.
B. Each share of preferred stock shall have or not have voting rights
as determined by the Board of Directors prior to issuance.
<PAGE>
Dividends on all outstanding shares of preferred stock must be
declared and paid, or set aside for payment, before any dividends can be
declared and paid, or set aside for payment, on the shares of common stock
with respect to the same dividend period.
In the event of any liquidation, dissolution or winding up of the
affairs of the Company, whether voluntary or involuntary, the holders of
the preferred stock shall be entitled, before any assets of the Company
shall be distributed among or paid over to the holders of the common
stock, to an amount per share to be determined before issuance by the
Board of Directors, together with a sum of money equivalent to the amount
of any dividends declared thereon and remaining unpaid at the date of such
liquidation, dissolution or winding up of the Company. After the making of
such payments to the holders of the preferred stock, the remaining assets
of the Company shall be distributed among the holders of the common stock
alone, according to the number of shares held by each. If, upon such
liquidation, dissolution or winding up, the assets of the Company
distributable as aforesaid among the holders of the preferred stock shall
be insufficient to permit the payment to them of said amount, the entire
assets shall be distributed ratably among the holders of the preferred
stock.
The Board of Directors shall have authority to divide the shares of
preferred stock into series and fix, from time to time before issuance,
the number of shares to be included in any series and the designation,
relative rights, preferences and limitations of all shares of such series.
The authority of the Board of Directors with respect to each series shall
include the determination of any or all of the following, and the shares
of each series may vary from the shares of any other in the following
respects: (a) the number of shares constituting such series and the
designation thereof to distinguish the shares of such series from the
shares of all other series; (b) the rate of dividend, cumulative or
noncumulative, and the extent of further participation in dividend
distribution, if any; (c) the prices at which issued (at not less than
par) and the terms and conditions upon which the shares may be redeemable
by the Company; (d) sinking fund provisions for the redemption or purchase
of shares; (e) the voting rights; and (f) the terms and conditions upon
which the shares are convertible into other classes of stock of the
Company, if such shares are to be convertible.
C. Terms of Class A Convertible Preferred Stock.
1. DESIGNATION. Seven million (7,000,000) shares of Preferred
Stock, par value one dollar ($1.00) per share, shall be designated
"Class A Convertible Preferred Stock.". The Class A Convertible
Preferred Stock shall have the following rights, terms and privileges
set forth in subsections (2) through (5) below.
<PAGE>
2. DIVIDENDS ON CLASS A CONVERTIBLE PREFERRED STOCK. The holders
of Class A Convertible Preferred Stock shall be entitled to receive,
when and as declared on Class A Convertible Preferred Stock by the
Board of Directors of the Company from funds legally available
therefor, cash dividends equal to the amount paid as a dividend to
holders of common stock of the Company, per annum on each outstanding
share of Class A Convertible Preferred Stock. Such dividends shall be
payable only when, as and if declared by the Board of Directors of
the Company. No dividends may be paid or declared on or with respect
to any other series of preferred stock or on or with respect to the
Company's common stock prior to the declaration and payment of a
dividend on or with respect to the Class A Convertible Preferred
Stock; provided, however, that dividends may be paid or declared on
or with respect to the Class B Convertible Preferred Stock. Dividends
shall be non-cumulative.
3. LIQUIDATION RIGHTS. (a) Treatment at Liquidation, Dissolution
or Winding Up. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the
holders of Class A Convertible Preferred Stock shall be entitled to
receive $1.00 per share per each share of Class A Convertible Stock,
plus an amount equal to all accrued but unpaid dividends on Class A
Convertible Preferred Stock, if any, to the date fixed for the
payment in liquidation, dissolution or winding up, before any
distribution shall be made to the holders of any other junior
securities, including common stock. If the assets of the Company are
insufficient to permit the payment of the full preferential amounts
payable to the holders of Class A Convertible Preferred Stock and
Class B Convertible Preferred Stock, then the assets available for
the distribution to holders of Class A Convertible Preferred Stock
and Class B Convertible Preferred Stock shall be distributed ratably
to the holders of Class A Convertible Preferred Stock and Class B
Convertible Preferred Stock in proportion to the full preferential
amounts payable on their respective shares of Class A Convertible
Preferred Stock and Class B Convertible Preferred Stock upon
liquidation, dissolution or winding up of the Company. After payment
of the aforesaid full liquidation preference to holders of Class A
Convertible Preferred Stock and Class B Convertible Preferred Stock,
the holder of each outstanding share of other capital stock of the
Company shall be entitled to receive any remaining assets of the
Company available for distribution to stockholders of the Company
pursuant to its terms.
(b) Treatment of Merger, Consolidation and Sales of Assets. A
consolidation or merger of the Company, or a sale of all or
substantially all of the assets of the Company shall not be deemed a
liquidation, dissolution or winding up of the Company within the
meaning of this Section 3.
<PAGE>
(c) Distributions Other Than Cash. Whenever the distribution
provided for in this Section 3, or any portion thereof, shall be
payable in property other than cash, the value of such distribution
shall be the fair market value of such property as determined in good
faith by the Board of Directors of the Company.
4. VOTING RIGHTS. (a) General. Each holder of a share of Class A
Convertible Preferred Stock shall be entitled to one vote for such
share of Class A Convertible Preferred Stock. The holders of Class A
Convertible Preferred Stock shall vote together with the holders of
Class B Convertible Preferred Stock and common stock as a single
class.
(b) Designated Voting Rights. So long as any shares of the Class
A Convertible Preferred Stock are outstanding, the Company shall not,
without the affirmative, vote or consent of holders holding a
majority of all of the outstanding shares of Class A Convertible
Preferred Stock, voting or consenting, as the case may be, as one
class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting, (i) authorize any
class of stock that is senior to the Class A Convertible Preferred
(provided, however, that the authorization and issuance of the Series
A Convertible Preferred Stock contemplated by the Recapitalization
Agreement (as defined below) shall be permitted); (ii) authorize any
class of stock that is pari passu to the Class A Convertible
Preferred Stock (provided, however, that the authorization and
issuance of the Class B Convertible Preferred Stock shall be
permitted); or (iii) amend this Certificate of Incorporation so as to
affect the specified rights, preferences, privileges or voting rights
of the Class A Convertible Preferred Stock or to authorize the
issuance of any additional shares of Class A Convertible Preferred
Stock.
5. CONVERSION. (a) The Class A Convertible Preferred Stock will
be convertible at the option of the holder, into shares of common
stock at any time, unless previously redeemed or repurchased, at a
conversion rate of one share of common stock per one share of Class A
Convertible Preferred Stock.
(b) The right of conversion attaching to shares of the Class A
Convertible Preferred Stock may be exercised by the holder thereof by
delivering the Class A Convertible Preferred Stock to be converted to
the Company or a designated agent of the Company, accompanied by a
duly signed and completed notice of conversion, if requested by the
Company, in form reasonably satisfactory to the Company. The
conversion date will be the date on which the Class A Convertible
Preferred Stock and the duly signed and completed notice of
<PAGE>
conversion, if any, are so delivered. As promptly as practicable on
or after the conversion date, the Company will issue and deliver or
will cause to be delivered a certificate or certificates for the
number of full shares of common stock issuable upon conversion. Such
certificate or certificates will be delivered by the Company or its
designated agent to the appropriate holder by mailing certificates
evidencing the additional shares to the holders at their respective
addresses set forth in the register of holders maintained by the
Company or its designated agent. All shares of common stock issuable
upon conversion of the Class A Convertible Preferred Stock will be
fully paid and nonassessable and will rank pari passu with the other
shares of common stock outstanding from time to time. No payment or
adjustment will be made for dividends or distributions with respect
to shares of common stock issued upon conversion of Class A
Convertible Preferred Stock. Holders of common stock issued upon
conversion will not be entitled to receive any dividends payable to
holders of common stock as of any record time before the close of
business on the conversion date.
(c) In the event the transactions contemplated by the
Recapitalization Agreement (the "Recapitalization Agreement") dated
August 1, 2000 between the Company and Riverside Company LLC are not
consummated, the Company shall, at its option, promptly exchange the
Class A Convertible Preferred Stock for an equal number of shares of
the Company's common stock. Shares of Class A Convertible Preferred
Stock which have been issued and exchanged shall be canceled and
retired and shall not be reissued as shares of Class A Convertible
Preferred Stock and, following any required filing with the Delaware
Secretary of State, such shares shall resume the status of authorized
but unissued shares of preferred stock.
D. Terms of Class B Convertible Preferred Stock.
1. DESIGNATION. Three million five hundred thousand (3,500,000)
shares of preferred stock, par value one dollar ($1.00) per share,
shall be designated "Class B Convertible Preferred Stock." The Class
B Convertible Preferred Stock shall have the following rights, terms
and privileges set forth in subsections (2) through (5) below.
2. DIVIDENDS ON CLASS B CONVERTIBLE PREFERRED STOCK. The holders
of Class B Convertible Preferred Stock shall be entitled to receive,
when and as declared on Class B Convertible Preferred Stock by the
Board of Directors of the Company from funds legally available
therefor, cash dividends equal to the amount paid as a dividend to
holders of common stock of the Company, per annum on each outstanding
share of Class B Convertible Preferred Stock. Such dividends shall be
<PAGE>
payable only when, as and if declared by the Board of Directors of
the Company. No dividends may be paid or declared on or with respect
to any other series of preferred stock or on or with respect to the
Company's common stock prior to the declaration and payment of a
dividend on or with respect to the Class B Convertible Preferred
Stock; provided, however, that dividends may be paid or declared on
or with respect to the Class A Convertible Preferred Stock. Dividends
shall be non-cumulative.
3. LIQUIDATION RIGHTS. (a) Treatment at Liquidation, Dissolution
or Winding Up. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the
holders of Class B Convertible Preferred Stock shall be entitled to
receive $1.00 per share per each share of Class B Convertible Stock,
plus an amount equal to all accrued but unpaid dividends on Class B
Convertible Preferred Stock, if any, to the date fixed for the
payment in liquidation, dissolution or winding up, before any
distribution shall be made to the holders of any other junior
securities, including common stock. If the assets of the Company are
insufficient to permit the payment of the full preferential amounts
payable to the holders of Class B Convertible Preferred Stock and
Class A Convertible Preferred Stock, then the assets available for
the distribution to holders of Class B Convertible Preferred Stock
and Class A Convertible Preferred Stock shall be distributed ratably
to the holders of Class B Convertible Preferred Stock and Class A
Convertible Preferred Stock in proportion to the full preferential
amounts payable on their respective shares of Class B Convertible
Preferred Stock and Class A Convertible Preferred Stock upon
liquidation, dissolution or winding up of the Corporation. After
payment of the aforesaid full liquidation preference to holders of
Class B Convertible Preferred Stock and Class A Convertible Preferred
Stock, the holder of each outstanding share of other capital stock of
the Company shall be entitled to receive any remaining assets of the
Company available for distribution to stockholders of the Company
pursuant to its terms.
(b) Treatment of Merger, Consolidation and Sales of Assets. A
consolidation or merger of the Company, or a sale of all or
substantially all of the assets of the Company shall not be deemed a
liquidation, dissolution or winding up of the Company within the
meaning of this Section 3.
(c) Distributions Other Than Cash. Whenever the distribution
provided for in this Section 3, or any portion thereof, shall be
payable in property other than cash, the value of such distribution
shall be the fair market value of such property as determined in good
faith by the Board of Directors of the Company.
<PAGE>
4. VOTING RIGHTS. (a) General. Each holder of a share of Class B
Convertible Preferred Stock shall be entitled to one vote for such
share of Class B Convertible Preferred Stock. The holders of Class B
Convertible Preferred Stock shall vote together with the holders of
Class A Convertible Preferred Stock and common stock as a single
class.
(b) Designated Voting Rights. So long as any shares of the Class
B Convertible Preferred Stock are outstanding, the Company shall not,
without the affirmative, vote or consent of holders holding a
majority of all of the outstanding shares of Class B Convertible
Preferred Stock, voting or consenting, as the case may be, as one
class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting, (i) authorize any
class of stock that is senior to the Class B Convertible Preferred
(provided, however, that the authorization and issuance of the Series
A Preferred Stock contemplated by the Recapitalization Agreement
shall be permitted); (ii) authorize any class of stock that is pari
passu to the Class B Convertible Preferred Stock (provided, however,
that the authorization and issuance of the Class A Convertible
Preferred Stock shall be permitted); or (iii) amend this Certificate
of Incorporation so as to affect the specified rights, preferences,
privileges or voting rights of the Class B Convertible Preferred
Stock or to authorize the issuance of any additional shares of Class
B Convertible Preferred Stock.
5. CONVERSION. (a) The Class B Convertible Preferred Stock will
be convertible at the option of the holder, into shares of common
stock at any time, unless previously redeemed or repurchased, at a
conversion rate of one share of common stock per one share of Class B
Convertible Preferred Stock.
(b) The right of conversion attaching to shares of the Class B
Convertible Preferred Stock may be exercised by the holder thereof by
delivering the Class B Convertible Preferred Stock to be converted to
the Company or a designated agent of the Company, accompanied by a
duly signed and completed notice of conversion, if requested by the
Company, in form reasonably satisfactory to the Company. The
conversion date will be the date on which the Class B Convertible
Preferred Stock and the duly signed and completed notice of
conversion, if any, are so delivered. As promptly as practicable on
or after the conversion date, the Company will issue and deliver or
will cause to be delivered a certificate or certificates for the
number of full shares of Common Stock issuable upon conversion. Such
certificate or certificates will be delivered by the Company or its
designated agent to the appropriate holder by mailing certificates
evidencing the additional shares to the holders at their respective
<PAGE>
addresses set forth in the register of holders maintained by the
Company or its designated agent. All shares of common stock issuable
upon conversion of the Class B Convertible Preferred Stock will be
fully paid and nonassessable and will rank pari passu with the other
shares of common stock outstanding from time to time. No payment or
adjustment will be made for dividends or distributions with respect
to shares of common stock issued upon conversion of Class B
Convertible Preferred Stock. Holders of common stock issued upon
conversion will not be entitled to receive any dividends payable to
holders of common stock as of any record time before the close of
business on the conversion date.
(c) In the event the transactions contemplated by the
Recapitalization Agreement are not consummated, the Company shall, at
its option, promptly exchange the Class B Convertible Preferred Stock
for an equal number of shares of the Company's common stock. Shares
of Class B Convertible Preferred Stock which have been issued and
exchanged shall be canceled and retired and shall not be reissued as
shares of Class B Convertible Preferred Stock and, following any
required filing with the Delaware Secretary of State, such shares
shall resume the status of authorized but unissued shares of
preferred stock.
E. No holder of any class of stock issued by this Company shall be
entitled to pre-emptive rights.
F. The number of authorized shares of each class of stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
stock of the Company entitled to vote, voting together as a single class.
<PAGE>
5. (a) The business and affairs of the Company shall be managed by or
under the direction of a Board of Directors consisting of not less than five
nor more than twelve directors, the exact number of directors to be determined
from time to time by resolution adopted by affirmative vote of a majority of
the entire Board of Directors. The directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall consist,
as nearly as may be possible, of one-third of the total number of directors
constituting the entire Board of Directors. At the 1988 Annual Meeting of
stockholders, Class I directors shall be elected for a one-year term, Class II
directors for a two-year term and Class III directors for a three-year term. At
each succeeding Annual Meeting of stockholders beginning in 1989, successors to
the class of directors whose term expires at that annual meeting shall be
elected for a three-year term. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, and any
additional director of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with
the remaining term of that class, but in no case will a decrease in the number
of directors shorten the term of any incumbent director. A director shall hold
office until the annual meeting for the year in which his term expires and
until his successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement or removal from office. Except as
otherwise required by law, any vacancy on the Board of Directors that results
from an increase in the number of directors shall be filled only by a majority
of the Board of Directors then in office, provided that a quorum is present,
and any other vacancy occurring in the Board of Directors shall be filled only
by a majority of the directors then in office, even if less than a quorum, or
by a sole remaining director. Any director elected to fill a vacancy not
resulting from an increase in the number of directors shall serve for the
remaining term of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one or more
classes or series of preferred stock or any other class of stock issued by the
Company shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders, the election, term
of office, filling of vacancies and other features of such directorships shall
be governed by the terms of the Certificate of Designation with respect to such
stock, such directors so elected shall not be divided into classes pursuant to
this Article 5, and the number of such directors shall not be counted in
determining the maximum number of directors permitted under the foregoing
provisions of this Article 5, in each case unless expressly provided by such
terms.
(b) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote in the election of directors.
Any stockholder entitled to vote in the election of directors, however, may
nominate one or more persons for election as director only if written notice of
such stockholder's intent to make such nomination or nominations has been given
either by personal delivery or by United States mail, postage prepaid, to the
Secretary of the Company not later than (i) with respect to an election to be
<PAGE>
held at an Annual Meeting of stockholders, 45 days in advance of the date on
which the Company's proxy statement was released to stockholders in connection
with the previous year's Annual Meeting of stockholders and (ii) with respect
to an election to be held at a special meeting of stockholders for the election
of directors, the close of business on the seventh day following the day on
which notice of such meeting is first given to stockholders. Each such notice
shall include: (A) the name and address of the stockholder who intends to make
the nomination or nominations and of the person or persons to be nominated; (B)
a representation that the stockholder is a holder of record of stock of the
Company entitled to vote at such meeting and intends to appear in person or by
proxy at the meeting to nominate the person or persons specified in the notice;
(C) a description of all arrangements or understandings between such
stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations is or are to
be made by the stockholder; (D) such other information regarding each nominee
proposed by such stockholder as would have been required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission if the nominee had been nominated by the Board of
Directors; and (E) the written consent of each nominee to serve as a director
of the Company if elected. The chairman of any meeting of stockholders may
refuse to acknowledge the nomination of any person if not made in compliance
with the foregoing procedure.
(c) Notwithstanding any other provision of this Certificate of
Incorporation or the by-laws (and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of Incorporation or the
by-laws), and in addition to any affirmative vote required by law, the
affirmative vote of the holders of at least 80% of the voting power of the
outstanding capital stock of the Company entitled to vote, voting together as a
single class, shall be required to amend, adopt in this Certificate of
Incorporation or in the by-laws any provision inconsistent with, or repeal this
Article 5.
<PAGE>
6. Any action required or permitted to be taken by the stockholders of the
Company must be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by any such holders.
Except as otherwise required by law, special meetings of stockholders Company
may be called only by the Chairman of the Board, the President or a majority of
the Board of Directors, subject to the rights of holders of any one or more
classes or series of preferred stock or any other class of stock issued by the
Company which shall have the right, voting separately by class or series, to
elect directors. Notwithstanding any other provision of this Certificate of
Incorporation or the by-laws (and notwithstanding that a lesser percentage may
be specified by law, this Certificate of Incorporation or the by-laws), and in
addition to any affirmative vote required by law, the affirmative vote of the
holders of at least 80% of the voting power of the outstanding capital stock of
the Company entitled to vote, voting together as single class, shall be
required to amend, adopt in this Certificate of Incorporation or in the by-laws
any provision inconsistent with, or repeal this Article 6.
7. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized: To make, alter or
repeal the by-laws of the Company. To authorize and cause to be executed
mortgages and liens upon the real and personal property of the Company. To set
apart out of any of the funds of the Company available for dividends a reserve
or reserves for any proper purpose and to abolish any such reserve in the
manner in which it was created. When and as authorized by the affirmative vote
of the holders of a majority of the stock issued and outstanding having voting
power given at a stockholders' meeting duly called for that purpose, to sell,
lease or exchange all of the property and assets of the Company, including its
good will and its corporate franchises, upon such terms and conditions and for
such consideration, which may be in whole or in part shares of stock in, and/or
other securities of, any other corporation or corporations, as its Board of
Directors shall deem expedient and for the best interests of the Company.
8. The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
<PAGE>
9. Whenever a compromise or arrangement is proposed between the Company
and its creditors or any class of them and/or between the Company and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the Company
or of any creditor or stockholder thereof, or on the application of any
receiver or receivers appointed for the Company under the provisions of Section
279 of Title 8 of the Delaware Code, order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of the
Company, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Company, as the case may be, agree to any compromise or
arrangement and to any reorganization of the Company as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of the Company, as the case may
be, and also on the Company.
10. Meetings of stockholders may be held outside the State of Delaware, if
the by-laws so provide. The books of the Company may be kept (subject to any
provision contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of
Directors or in the by-laws of the Company. Elections of Directors need not be
by ballot unless the by-laws of the Company shall so provide.
11. The Company reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
12. A director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty
as a director, except for liability (a) for any breach of the director's duty
of loyalty to the Company or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the Delaware General Corporation Law, or (d) for
any transaction from which the director derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to authorize the
further limitation or elimination of the liability of directors, then the
liability of a director of the Company, in addition to the limitation on
liability provided herein, shall be limited to the fullest extent permitted by
the Delaware General Corporation Law, as amended. Any repeal or modification of
this Article 12 shall not increase the liability of any director of the Company
for any act or occurrence taking place prior to such repeal or modification, or
otherwise adversely affect any right or protection of a director of the Company
existing at the time of such repeal or modification.
<PAGE>
13. A. Each person who was or is made a party or is threatened to be made
a party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such person is or was a director, officer or employee of the Company, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer or employee or in any other capacity while serving as a
director, officer, or employee, shall be indemnified and held harmless by the
Company to the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the Company to
provide broader indemnification rights than such law permitted the Company to
provide prior to such amendment), against all expense, liability and loss
(including, without limitation attorneys' fees, judgments, fines and amounts
paid in settlement) reasonably incurred or suffered by such person in
connection therewith, and such indemnification shall continue as to a person
who has ceased to be a director, officer or employee and shall inure to the
benefit of such person's heirs, executors and administrators. The Company shall
indemnify a director, officer or employee in connection with an action, suit or
proceeding (other than an action, suit or proceeding to enforce indemnification
rights provided for herein or elsewhere) initiated by such director, officer or
employee only if such action, suit or proceeding was authorized by the Board of
Directors. The right to indemnification conferred in this Paragraph A shall be
a contract right and shall include the right to be paid by the Company the
expenses incurred in defending any action, suit or proceeding in advance of its
final disposition; provided, however, that, if the Delaware General Corporation
Law requires, the payment of such expenses incurred by a director or officer in
such person's capacity as a director or officer (and not in any other capacity
in which service was or is rendered by such person) in advance of the final
disposition of an action, suit or proceeding shall be made only upon delivery
to the Company of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined by final
judicial decision from which there is no further right to appeal that such
director or officer is not entitled to be indemnified for such expenses under
this Article 13 or otherwise.
B. The Company may, to the extent authorized from time to time by the
Board of Directors, provide indemnification and the advancement of expenses, to
any agent of the Company and to any person who is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, to such extent
and to such effect as the Board of Directors shall determine to be appropriate
and permitted by applicable law, as the same exists or may hereafter be
amended.
C. The rights to indemnification and to the advancement of expenses
conferred in this Article 13 shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation or by-laws of the Company, agreement, vote of
stockholders or disinterested directors or otherwise.
<PAGE>
ANNEX B
RECAPITALIZATION AGREEMENT
dated as of
August 1, 2000
between
MASCOTECH, INC.
and
RIVERSIDE COMPANY LLC
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions...................................................2
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger...................................................11
SECTION 2.02. Effective Time...............................................11
SECTION 2.03. Effect of the Merger.........................................11
SECTION 2.04. Effect on Securities, Etc....................................11
SECTION 2.05. Dissenting Shares............................................13
SECTION 2.06. Treatment of Options and Restricted Stock....................14
SECTION 2.07. Surrender of Shares..........................................17
SECTION 2.08. Lost, Stolen or Destroyed Certificates.......................19
SECTION 2.09. Further Action...............................................19
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Certificate of Incorporation; By-Laws........................20
SECTION 3.02. Directors and Officers.......................................20
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power................................20
SECTION 4.02. Corporate Authorization......................................21
SECTION 4.03. Governmental Authorization...................................22
SECTION 4.04. Non-contravention............................................22
SECTION 4.05. Capitalization...............................................22
SECTION 4.06. Subsidiaries; Equity Investments.............................23
SECTION 4.07. SEC Filings..................................................24
SECTION 4.08. Financial Statements.........................................24
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SECTION 4.09. Disclosure Documents.........................................25
SECTION 4.10. Absence of Certain Changes...................................25
SECTION 4.11. No Undisclosed Material Liabilities..........................26
SECTION 4.12. Compliance with Laws and Court Orders........................27
SECTION 4.13. Litigation...................................................27
SECTION 4.14. Finders' Fees................................................27
SECTION 4.15. Opinion of Financial Advisor.................................27
SECTION 4.16. Taxes........................................................28
SECTION 4.17. Employee Benefit Plans.......................................29
SECTION 4.18. Environmental Matters........................................31
SECTION 4.19. Antitakeover Statutes and Rights Agreement;
Company/Subsidiary Merger....................................31
SECTION 4.20. Disclaimer of Other Representations and Warranties...........31
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MERGER SUBSIDIARY
SECTION 5.01. Existence and Power..........................................32
SECTION 5.02. Authorization................................................32
SECTION 5.03. Governmental Authorization...................................32
SECTION 5.04. Non-contravention............................................32
SECTION 5.05. Disclosure Documents.........................................33
SECTION 5.06. Finders' Fees................................................33
SECTION 5.07. Financing....................................................33
SECTION 5.08. Member Appraisal Rights......................................34
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.01. Conduct of the Company.......................................34
SECTION 6.02. Access to Information........................................36
SECTION 6.03. Stockholder Meeting; Proxy Material..........................37
SECTION 6.04. No Solicitation..............................................37
SECTION 6.05. State Takeover Laws..........................................38
SECTION 6.06. Reports......................................................38
SECTION 6.07. Plans........................................................39
SECTION 6.08. Equity Investments...........................................39
SECTION 6.09. Confidentiality Agreement....................................39
SECTION 6.10. Issuance of Class A Preferred Stock and Class B Preferred
Stock........................................................39
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<PAGE>
Page
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SECTION 6.11. Saturn Escrow................................................40
ARTICLE 7
COVENANTS OF MERGER SUBSIDIARY
SECTION 7.01. Obligations of Merger Subsidiary.............................40
SECTION 7.02. Voting of Shares.............................................40
SECTION 7.03. Director and Officer Liability...............................40
SECTION 7.04. Employee Benefits After the Merger...........................41
SECTION 7.05. Financing Arrangements.......................................42
ARTICLE 8
COVENANTS OF MERGER SUBSIDIARY AND THE COMPANY
SECTION 8.01. Commercially Reasonable Efforts..............................43
SECTION 8.02. Certain Filings..............................................43
SECTION 8.03. Public Announcements.........................................44
SECTION 8.04. Notices of Certain Events....................................44
SECTION 8.05. Confidentiality..............................................45
SECTION 8.06. Saturn Sales.................................................45
ARTICLE 9
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to Obligations of Each Party......................46
SECTION 9.02. Conditions to the Obligations of Merger Subsidiary...........47
SECTION 9.03. Conditions to the Obligations of the Company.................49
ARTICLE 10
TERMINATION
SECTION 10.01. Termination..................................................50
SECTION 10.02. Effect of Termination........................................51
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices......................................................51
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<PAGE>
Page
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SECTION 11.02. Survival of Representations and Warranties...................52
SECTION 11.03. Amendments; No Waivers.......................................53
SECTION 11.04. Expenses; Topping Fee........................................53
SECTION 11.05. Successors and Assigns.......................................54
SECTION 11.06. Governing Law................................................54
SECTION 11.07. Jurisdiction.................................................54
SECTION 11.08. Waiver of Jury Trial.........................................55
SECTION 11.09. Counterparts; Effectiveness..................................55
SECTION 11.10. Entire Agreement.............................................55
SECTION 11.11. Captions.....................................................55
SECTION 11.12. Severability.................................................55
SECTION 11.13. Specific Performance.........................................55
EXHIBITS
Exhibit A - Exchange and Voting Agreement
Exhibit B - Form of Company/Subsidiary Merger Agreement
Exhibit C - Equity Investments Sale Agreement
Exhibit D - Form of Certificate of Merger
Exhibit E - Form of Certificate of Incorporation of Surviving Corporation
Exhibit F - Form of Amended By-laws
Exhibit G - Form of Certificate of Designation of Class A Preferred Stock
Exhibit H - Form of Certificate of Designation of Class B Preferred Stock
Exhibit I - Form of Subordinated Loan Agreement
SCHEDULES
Schedule A - Equity Investments
Schedule B - Knowledge of Officers
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<PAGE>
RECAPITALIZATION AGREEMENT
RECAPITALIZATION AGREEMENT dated as of August 1, 2000 between MascoTech,
Inc., a Delaware corporation (the "Company"), and Riverside Company LLC, a
Delaware limited liability company ("Merger Subsidiary").
W I T N E S S E T H :
WHEREAS, the managers and members of Merger Subsidiary seek to acquire a
controlling interest in the Company through a transaction to be accounted for
as a recapitalization under generally accepted accounting principles; and
WHEREAS, a Special Committee (as defined herein) of the board of directors
of the Company (the "Board of Directors") has (i) approved the Company/
Subsidiary Merger (as defined herein) and the Merger (as defined herein), (ii)
has recommended the approval of the Company/Subsidiary Merger and the Merger by
the Board of Directors, (iii) has determined that the Company/Subsidiary Merger
and the Merger are advisable to and in the best interests of the holders of the
Company's capital stock (the "Company Stockholders"), other than the Continuing
Shareholders (as defined herein), (iv) has determined that the Merger
Consideration (as defined herein) is fair to the Company Stockholders, other
than the Continuing Shareholders, and (v) has approved and recommended the
approval of the Company/Subsidiary Merger Agreement and this Agreement to the
Board of Directors; and
WHEREAS, the Board of Directors, subsequent to the recommendation of the
Special Committee, has approved the Company/Subsidiary Merger, the
Company/Subsidiary Merger Agreement, the Merger and this Agreement and
determined that it is advisable and in the best interests of the Company
Stockholders, other than the Continuing Shareholders, for the Company to
consummate the Company/Subsidiary Merger and the Merger and the other
transactions contemplated by this Agreement (collectively, the "Transactions"),
upon the terms and subject to the conditions set forth herein; and
WHEREAS, as an inducement to the parties to enter into this Agreement, the
Continuing Shareholders have entered into an Exchange and Voting Agreement in
substantially the form attached hereto as Exhibit A (the "Exchange and Voting
Agreement"), whereby they have agreed to exchange certain Shares (as defined
herein) owned by them for (x) newly issued shares of Class A Preferred Stock,
par value $1.00 per share and liquidation preference $10.00 per share, of the
Company ("Class A Preferred Stock") and (y) in the case of the Company
Shareholder (as defined herein), newly issued shares of Class B Preferred
Stock, par value $1.00 per share and liquidation preference $10.00 per share,
of the Company ("Class B Preferred Stock") prior to the Merger and they have
agreed to vote their Shares, Class A Preferred Stock and Class B Preferred
Stock in favor of the Transactions; and
<PAGE>
WHEREAS, the recapitalization will involve a merger (the "Merger") in
which Merger Subsidiary will merge with and into the Company, with the shares
of the Company being converted into the right to receive the Merger
Consideration, subject to certain exceptions described in this Agreement; and
WHEREAS, the managers of Merger Subsidiary have approved this Agreement
and the Merger in accordance with the applicable provisions of the Limited
Liability Company Act of the State of Delaware (the "DLLCA") and upon the terms
and subject to the conditions set forth herein; and
WHEREAS, the Board of Directors has approved this Agreement and the
Exchange and Voting Agreement such that the transactions contemplated by this
Agreement and the Exchange and Voting Agreement are not subject to the
restrictions on "business combinations" contained in Section 203 of the General
Corporation Law of the State of Delaware (the "DGCL").
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
herein made, and in consideration of the representations, warranties and
covenants herein contained, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"Acquisition Proposal" means any offer or proposal for, or any indication
of interest in, (i) any acquisition or purchase of 30% or more of the
consolidated assets of the Company and its Subsidiaries, (ii) any acquisition
or purchase of an equity interest in the Company representing in excess of 30%
of the power to vote for the election of a majority of the directors of the
Company, or any tender offer or exchange offer for equity securities of the
Company as a result of which the offeror would hold such an equity interest in
the Company or (iii) any merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation, dissolution or similar
transaction involving the Company, or any of its Subsidiaries whose assets,
individually or in the aggregate, constitute more than 30% of the consolidated
assets of the Company and its Subsidiaries, in each case other than the
transactions contemplated by this Agreement.
-2-
<PAGE>
"Adjustment Amount" means an amount equal to the sum of:
(i) an amount equal to the portion of proceeds (as defined herein)
realized from all transfers, sales or dispositions (including as a result
of any merger, consolidation, liquidation or winding-up of Saturn) of all
or any part of the Saturn Equity Investment (the "Saturn Sales") that
exceed $18 million and are less than or equal to $40 million (the "Initial
Adjustment Amount");
(ii) an amount equal to 60% of the portion of proceeds realized from
Saturn Sales that exceeds $56.7 million;
(iii) an amount equal to 60% of the portion of proceeds realized from
the sales of Equity Investments that exceeds $125 million; and
(iv) an amount equal to 60% of any interest actually earned on
proceeds referred to in clauses (i), (ii) and (iii) of this definition
prior to payment of the Merger Consideration Adjustments and the Option
Consideration Adjustments (clauses (ii), (iii) and (iv), the "Subsequent
Adjustment Amount").
As used in this definition, proceeds means the cash proceeds after deducting
all applicable out-of-pocket costs and expenses (including, without limitation,
underwriting discounts, commissions and fees and financial advisory fees, but
excluding taxes) directly incurred by the Company or the Surviving Corporation
in connection with such transfers, sales or dispositions.
"Adjustment Committee" shall mean Peter Dow, Roger Fridholm, William
Howenstein and Helmet Stern, each of whom is a member of the Special Committee
as of the date hereof, or any successors designated by the majority of the
remaining members of such committee.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
"Antitrust Laws" means the Sherman Act, as amended, the Clayton Act, as
amended, the HSR Act, the Federal Trade Commission Act, as amended, and all
other federal, state and foreign statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade or lessening of competition through
merger or acquisition.
"Benefit Plan" means any Plan, other than a Multiemployer Plan, existing
at the Effective Time established or to which contributions have at any time
been made by the Company or any Subsidiary thereof, or any predecessor of the
Company or any Subsidiary thereof, or with respect to which the Company or any
Subsidiary is a party, under which any
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employee, former employee or director of the Company or any Subsidiary thereof,
or any beneficiary thereof, is covered, is eligible for coverage or has benefit
rights in respect of service to the Company or any Subsidiary thereof and any
other Plan with respect to which the Company or any Subsidiary currently has
liability.
"Business Day" means a day other than Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $1.00 per share, of the
Company.
"Company Balance Sheet" means the consolidated balance sheet of the
Company as of December 31, 1999 and the footnotes thereto set forth in the
Company 10-K.
"Company Balance Sheet Date" means December 31, 1999.
"Company Shareholder" means Masco Corporation, a Delaware corporation,
provided that such definition and any other definition in this Agreement
utilizing such definition shall be amended, to the extent and in the manner
such definition is amended pursuant to any amendment to the Exchange and Voting
Agreement as a result of one or more Transfers in accordance with Section 2.2
of the Exchange and Voting Agreement.
"Company Shareholder Exchange Shares" has the meaning specified in the
Exchange and Voting Agreement.
"Company Subsidiary" means MascoTech Harbor, Inc., a Delaware corporation
and a wholly owned subsidiary of the Company.
"Company/Subsidiary Merger" means the merger in accordance with the
Company/Subsidiary Merger Agreement in which the Company Subsidiary will merge
with and into the Company, with the Company being the surviving corporation.
"Company/Subsidiary Merger Agreement" means the merger agreement in the
form attached hereto as Exhibit B, between the Company and the Company
Subsidiary, including all exhibits, pursuant to which the Company/Subsidiary
Merger is to be consummated.
"Company 10-K" means the Company's annual report on Form 10-K for the
fiscal year ended December 31, 1999.
"Continuing Shareholder Exchange Shares" has the meaning specified in the
Exchange and Voting Agreement.
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"Continuing Shareholders" means, collectively, Company Shareholder, IS and
FS.
"Corporate Services Agreement" means the Corporate Services Agreement
between the Company and the Original Company Shareholder dated as of January 1,
1987, as amended by Amendment No. 1 dated as of October 31, 1996 and related
letter agreements dated January 22, 1998 and June 17, 1998.
"Credit Agreement" means the Credit Agreement dated as of January 16, 1998
among the Company, MascoTech Acquisition, Inc., the banks party thereto from
time to time, the First National Bank of Chicago, as Administrative Agent and
Bank of America NT&SA and Nations Bank N.A., as Syndication Agents, as amended
to the date hereof.
"Employee Retention Committee" means Richard A. Manoogian, Timothy Wadhams
and Daniel P. Tredwell and any successor thereto appointed by a designee of
Richard A. Manoogian, in the case of Richard A. Manoogian's resignation from
such committee, Richard A. Manoogian, in the case of Timothy Wadhams'
resignation from such committee, or appointed by a designee of Daniel P.
Tredwell, in the case of Daniel P. Tredwell's resignation from such committee,
serving as the committee appointed hereby to determine employee matters as soon
as practicable after the date hereof, but no later than the Effective Time.
"Environmental Laws" means the common law and any federal, state, local or
foreign law, treaty, judicial decision, regulation, rule, judgment, order,
decree, injunction, permit or governmental restriction or requirement, in each
case as currently in effect, relating to pollution or protection of the
environment (including, without limitation, ambient air, indoor air, surface
water, groundwater, land surface, subsurface strata, and natural resources).
"Environmental Permits" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities relating to or required by Environmental Laws and affecting, or
relating to, the business of the Company or any Subsidiary as currently
conducted.
"Equity Investments" means the equity investments of the Company and its
subsidiaries listed on Schedule A hereto.
"Equity Investments Sale" means the sale of the Equity Investments by the
Company as contemplated by the Equity Investments Sale Agreement.
"Equity Investments Sale Agreement" means the agreement between the
Company and Citicorp Venture Capital, Ltd. dated as of the date hereof and in
the form attached hereto as Exhibit C pursuant to which the Equity Investments
Sale will be consummated.
"ERISA" means the Employee Retirement Income Security Act of 1974.
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"ERISA Affiliate" of any entity means any other Person that, together with
such Person, would be treated as a single employer under Section 414 of the
Code.
"Exchange Date" has the meaning specified in the Exchange and Voting
Agreement.
"Exchanged Preferred Stock" shall mean the Class A Preferred Stock and the
Class B Preferred Stock.
"Facilities" means the "Facilities" as defined in the Commitment Letter or
any replacement, refinancing, extension, amendment or restatement of the
Facilities.
"FS" means the Richard and Jane Manoogian Foundation.
"Governmental Authority" means any federal, state or local government or
any court, administrative agency or commission or other governmental or
regulatory agency, authority or official, whether domestic, foreign or
supranational.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"IS" means Richard Manoogian.
"knowledge" of the Company or the "Company's knowledge" means the actual
knowledge of the senior officers of the Company listed on Schedule B attached
hereto.
"Lien" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
property or asset.
"Material Adverse Effect" means either (i) a material adverse effect on
the condition (financial or otherwise), business or results of operations of
the Company and its Subsidiaries, taken as a whole, or (ii) an effect which is
materially adverse to the ability of the Company or Merger Subsidiary to
consummate the Transactions; provided that with respect to subclause (i) of
this definition, any such effect resulting or arising from (w) this Agreement
or the transactions contemplated hereby or the announcement hereof, (x) changes
in circumstances or conditions affecting industrial manufacturing companies in
general, and not specifically relating to the Company and its Subsidiaries, (y)
changes in general economic, regulatory or political conditions or in financial
markets in the United States or Europe or (z) changes in generally accepted
accounting principles shall not be considered a Material Adverse Effect, and
with respect to subclause (ii) of this definition, any such effect resulting or
arising from subclause (x), (y) or (z) above, shall not be considered a
Material Adverse Effect.
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"Material Subsidiary" means, with respect to any Person, a Subsidiary that
would constitute a "significant subsidiary" of such Person within the meaning
of Rule 1-02 of Regulation S-X under the 1934 Act.
"Multiemployer Plan" means a multiemployer plan within the meaning of
Section 4001(a)(3) of ERISA with respect to which the Company has an obligation
to contribute or has or could have withdrawal liability under Section 4201 of
ERISA.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"Option Plans" means, collectively, the 1991 Long Term Stock Incentive
Plan, the 1984 Restricted Stock Incentive Plan, the 1984 Stock Option Plan and
the 1997 Non-Employee Directors Stock Plan.
"Original Company Shareholder" means Masco Corporation, without giving
effect to any Transfer pursuant to Section 2.2 of the Exchange and Voting
Agreement or any amendment to the Exchange and Voting Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation established pursuant
to Section 4002 of ERISA, or any successor thereto.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
Governmental Authority.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation, other employee benefit, employment, consulting or change of control
agreement, plan, practice, policy or arrangement of any kind, whether written
or oral, or whether for the benefit of a single individual or more than one
individual, including, without limitation, any "employee benefit plan" within
the meaning of Section 3(3) of ERISA (whether or not subject thereto).
"Restricted Stock Permitted Transferee" means, with respect to any holder
of Restricted Stock, the spouse or any lineal descendant (including by adoption
and stepchildren) of such holder of Restricted Stock, any trust of which such
holder of Restricted Stock is the trustee and which is established solely for
the benefit of any of the foregoing individuals, any private charitable
foundations of any such holder of Restricted Stock and such other Persons as
may be approved from time to time by authority of the board of directors of the
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Surviving Corporation; provided that, following an underwritten public offering
of Common Stock of the Surviving Corporation as a result of which 15% or more
of the outstanding Common Stock of the Surviving Corporation is registered
under the 1933 Act, any Person shall be a Restricted Stock Permitted
Transferee.
"Restricted Stock Plans" means any Plan of the Company that allows the
award of restricted shares.
"Rights" means the rights granted under the Rights Agreement.
"Rights Agreement" means the Rights Agreement between the Company and the
Bank of New York dated February 20, 1998, as amended as of September 22, 1998.
"Saturn" means Saturn Electronics and Engineering, Inc. and any successor
thereto.
"Saturn Equity Investment" means the equity interests of Saturn
beneficially owned by the Company and/or its Subsidiaries and listed on
Schedule 4.06(c) on the date hereof and any additional securities issued or
received as a distribution to holders of such securities in respect thereof or
in exchange therefor.
"SEC" means the Securities and Exchange Commission.
"Shares" means shares of Common Stock.
"Special Committee" means the Special Committee of the Board of Directors
formed to, among other things, evaluate the Transactions.
"Sponsor" means Heartland Industrial Partners, L.P., a Delaware limited
partnership.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association, limited liability company or other organization,
whether incorporated or unincorporated, of which the securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions with respect
to such corporation, partnership, association, limited liability company or
other organization are at any time directly or indirectly owned or controlled
by such Person or by any one or more of its Subsidiaries, or by such Person and
one or more of its Subsidiaries.
"Surviving Corporation Common Shares" means the common stock, par value
$1.00 per share, of the Surviving Corporation.
"Third Party" means any Person as defined in Section 13(d) of the 1934
Act, other than Merger Subsidiary or Sponsor or any of Sponsor's Affiliates.
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"Topping Fee" means a fee of $16.0 million, less any amount of expense
reimbursement paid by the Company pursuant to Section 11.04(b), payable by wire
transfer in same day funds to a bank account designated by Merger Subsidiary.
Any reference in this Agreement to a statute shall be to such statute, as
amended from time to time, and to the rules and regulations promulgated
thereunder.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Accrual Amount.................................... 2.06
Bank.............................................. 5.07
Base Merger Consideration......................... 2.04
Board of Directors................................ Recitals
Cash Out Amount................................... 2.06
Cash Out Options.................................. 2.06
Cash Out New Restricted Stock..................... 2.06
Certificate of Merger............................. 2.02
Class A Base Merger Consideration................. 2.04
Class A Exchanged Shares.......................... 2.04
Class A Merger Consideration...................... 2.04
Class A Merger Consideration Adjustment........... 2.04
Class A Preferred Stock........................... Recitals
Class B Exchanged Shares.......................... 2.04
Class B Base Merger Consideration................. 2.04
Class B Merger Consideration...................... 2.04
Class B Merger Consideration Adjustment........... 2.04
Class B Preferred Stock........................... Recitals
Commitment Letter................................. 5.07
Company........................................... Recitals
Company Proxy Statement........................... 4.09
Company Representatives........................... 6.02
Company SEC Documents............................. 4.07
Company Securities................................ 4.05
Company Stockholder Meeting....................... 6.03
Company Stockholders.............................. Recitals
Company Subsidiary Securities..................... 4.06
Company/Subsidiary Certificate of Merger.......... 4.19
Confidentiality Agreement......................... 6.02
Debentures........................................ 4.05
Denominator....................................... 2.04
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Term Section
DGCL.............................................. Recitals
DLLCA............................................. Recitals
Dissenting Shares................................. 2.05
DOJ............................................... 8.01
Effective Time.................................... 2.02
Effective Time Merger Consideration............... 2.07
Effective Time Option Consideration............... 2.06
End Date.......................................... 10.01
Equity Commitment Letters......................... 5.07
Equity Investors.................................. 5.07
Exchange Agent.................................... 2.07
Exchange and Voting Agreement..................... Recitals
Exchanged Preferred Stock......................... 2.04
Exchanged Share................................... 2.04
Financing Agreements.............................. 7.05
Foreign Plan...................................... 4.17
FTC............................................... 8.01
GAAP.............................................. 4.08
Indemnified Person................................ 7.03
Initial Adjustment Amount......................... 1.01
Initial Denominator............................... 2.04
IRS............................................... 4.16
Merger............................................ Recitals
Merger Consideration.............................. 2.04
Merger Consideration Adjustment................... 2.04
Merger Subsidiary................................. Recitals
Merger Subsidiary Common Shares................... 2.04
Merger Subsidiary Representatives................. 6.02
New Awards........................................ 2.06
New Restricted Stock.............................. 2.06
Option............................................ 2.06
Option Consideration.............................. 2.06
Option Consideration Adjustment................... 2.06
Preferred Stock................................... 4.05
Required Amount................................... 5.07
Restricted Stock.................................. 2.06
Restrictions...................................... 2.06
Saturn Sales...................................... 1.01
Saturn Subsidiary................................. 9.01
Schedule 13E-3.................................... 4.09
Series A Preferred Stock.......................... 2.04
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Term Section
Surviving Corporation............................. 2.01
Tax Return........................................ 4.16
Taxes............................................. 4.16
Taxing Authority.................................. 4.16
Transactions...................................... Recitals
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger. At the Effective Time, and subject to and upon
the terms and conditions of this Agreement, the DGCL and the DLLCA, Merger
Subsidiary shall be merged with and into the Company, the separate existence of
Merger Subsidiary shall cease, and the Company shall continue as the surviving
corporation (hereinafter sometimes referred to as the "Surviving Corporation").
SECTION 2.02. Effective Time. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 10.01, as promptly as practicable (and in any event within
two Business Days) after the satisfaction or waiver of the conditions set forth
in Article 9 hereof, the parties hereto shall cause the Merger to be
consummated by filing a certificate of merger as contemplated by the DGCL and
the DLLCA (the "Certificate of Merger") in the form of Exhibit D attached
hereto, together with any required related certificates, with the Secretary of
State of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the DGCL and the DLLCA. The Merger
shall become effective at the time of such filing or at such later time, which
will be as soon as reasonably practicable, specified in the Certificate of
Merger (the "Effective Time"). Prior to such filing, a closing shall be held at
such time as may be agreed upon by Merger Subsidiary and the Company, at the
offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York 10005,
unless another place is agreed to in writing by the parties hereto, for the
purpose of confirming the satisfaction or waiver, as the case may be, of the
conditions set forth in Article 9 hereof.
SECTION 2.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger
and the applicable provisions of the DGCL and the DLLCA.
SECTION 2.04. Effect on Securities, Etc.
(a) Capital Stock of Merger Subsidiary. At the Effective Time, each
membership interest of Merger Subsidiary ("Merger Subsidiary Common Shares")
issued and
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outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and non-assessable Surviving Corporation Common
Share.
(b) Cancellation of Treasury Stock. Each Share that is owned by the
Company shall automatically be canceled and retired and shall cease to exist,
and no cash or other consideration shall be delivered or deliverable in
exchange therefor.
(c) Conversion of Shares. Each Share issued and outstanding immediately
prior to the Effective Time (other than (x) Shares constituting Restricted
Stock, which shall be treated as provided in Section 2.06(b), (y) Dissenting
Shares and (z) Shares owned by any Subsidiary of the Company) (each of such
Shares, other than Shares referred to in clauses (x), (y) and (z), an
"Exchanged Share") shall, by virtue of the Merger, be converted into the right
to receive from the Surviving Corporation after the Merger cash in an amount
equal to (i) $16.90 (the "Base Merger Consideration") and (ii) all Merger
Consideration Adjustments (as defined herein) with respect to each Exchanged
Share (clauses (i) and (ii) together, the "Merger Consideration"). Each such
Exchanged Share shall no longer be outstanding, shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate formerly
representing any such Exchanged Shares shall, to the extent such certificate
formerly represented such Exchanged Shares, cease to have any rights with
respect thereto, except the right to receive the Merger Consideration
applicable thereto, upon surrender of such certificate in accordance with
Section 2.07 hereof.
(d) Conversion of Class A Preferred Stock. Each share of Class A Preferred
Stock issued and outstanding immediately prior to the Effective Time (the
"Class A Exchanged Shares") shall, by virtue of the Merger, be converted into
(i) one Surviving Corporation Common Share (the "Class A Base Merger
Consideration") and (ii) the right to receive all Merger Consideration
Adjustments with respect to each Class A Exchanged Share (the "Class A Merger
Consideration Adjustment") (clauses (i) and (ii) together, the "Class A Merger
Consideration"). Each such Class A Exchanged Share shall no longer be
outstanding, shall automatically be canceled and retired and shall cease to
exist, and each such holder of a certificate formerly representing any such
Class A Exchanged Shares shall, to the extent such certificate formerly
represented such Class A Exchanged Shares, cease to have any rights with
respect thereto, except the right to receive the Class A Merger Consideration
applicable thereto, upon surrender of such certificate in accordance with
Section 2.07 hereof.
(e) Conversion of Class B Preferred Stock. Each share of Class B Preferred
Stock issued and outstanding immediately prior to the Effective Time (the
"Class B Exchanged Shares," and, together with the Class A Exchange Shares, the
"Exchanged Preferred Stock") shall, by virtue of the Merger, be converted into
(i) 0.169 of a fully paid and nonassessable share of Series A Preferred Stock,
par value $1.00 per share and liquidation preference $100 per share, of the
Surviving Corporation (the "Series A Preferred Stock"), having the terms set
forth in the certificate of incorporation of the Surviving Corporation set
forth in Exhibit E attached hereto, (ii) 0.086392 of a fully paid and
nonassessable
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Surviving Corporation Common Share (clauses (i) and (ii) together, the "Class B
Base Merger Consideration") and (iii) the right to receive all Merger
Consideration Adjustments with respect to each Class B Exchanged Share (the
"Class B Merger Consideration Adjustment") (clauses (i), (ii) and (iii)
together, the "Class B Merger Consideration"). Each such Class B Exchanged
Share shall no longer be outstanding, shall automatically be canceled and
retired and shall cease to exist, and each holder of a certificate that
formerly represented any such Class B Exchanged Shares shall, to the extent
such certificate formerly represented such Class B Exchanged Shares, cease to
have any rights with respect thereto, except the right to receive the Class B
Merger Consideration applicable thereto, upon surrender of such certificate in
accordance with Section 2.07 hereof.
(f) Calculation and Payment of Merger Consideration Adjustment; Escrow. A
"Merger Consideration Adjustment" means an amount per Share, Class A Exchanged
Share and Class B Exchanged Share, as the case may be, calculated by adding (1)
all unpaid Initial Adjustment Amounts divided by the number equal to the number
outstanding immediately prior to the Effective Time (but after the Exchange
Date and before the cancellation of the Restricted Stock under Section 2.06),
of (i) Exchanged Shares, (ii) Class A Exchanged Shares and Class B Exchanged
Shares, (iii) Shares subject to Cash Out Options, (iv) Shares subject to
Options with an exercise price below the Merger Consideration (after giving
effect to Adjustment Amounts previously paid or being paid to such Option
holder at the time of the calculation) and (v) 10% of the Shares of New
Restricted Stock ( as defined herein) (clauses (i), (ii), (iii), (iv) and (v)
together, the "Initial Denominator") and (2) all unpaid Subsequent Adjustment
Amounts divided by the Denominator (as defined herein). "Denominator" shall
mean a number equal to sum of (i) the Initial Denominator and (ii) 90% of the
Shares of the Restricted Stock outstanding immediately prior to the Effective
Time and before the cancellation of the Restricted Stock under Section 2.06(b).
To the extent any part of the Merger Consideration Adjustment is received prior
to the Effective Time, that part of the Merger Consideration Adjustment shall
be paid with the Base Merger Consideration, Class A Base Merger Consideration
and Class B Base Merger Consideration, as the case may be, in accordance with
Section 2.07. To the extent any part of the Adjustment Amount is received after
the Effective Time, that part of the Merger Consideration Adjustments shall be
paid by the Surviving Corporation at the 30th day after the earlier of (i)
receipt by the Surviving Corporation of proceeds representing Adjustment
Amounts aggregating $5.0 million in excess of previously paid Adjustment
Amounts and (ii) the date upon which all amounts which could represent an
Adjustment Amount are received by the Company or the Surviving Corporation, as
the case may be. Payment of Merger Consideration Adjustments shall be without
interest thereon.
SECTION 2.05. Dissenting Shares. (a) Notwithstanding any provision of this
Agreement to the contrary, any Shares or Exchanged Preferred Stock issued and
outstanding immediately prior to the Effective Time, and held by a holder who
has the right to demand payment for and any appraisal of such shares in
accordance with Section 262 of the DGCL (or any successor provision), who
perfects his demand for the appraisal of the fair value of his Shares or
Exchanged Preferred Stock in accordance with the DGCL and, as of the
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Effective Time, has neither effectively withdrawn nor lost his right to make
such demand (such Shares or Exchanged Preferred Stock, the "Dissenting
Shares"), shall not be converted into or represent a right to receive the
consideration for his Shares or Exchanged Preferred Stock specified in Section
2.04, but the holder thereof shall be entitled to only such rights as are
granted by the DGCL.
(b) Notwithstanding the provisions of Section 2.05(a), if any holder of
Dissenting Shares effectively withdraws or loses (through failure to perfect or
otherwise) his right to make such demand, then as of the Effective Time or the
occurrence of such event, whichever occurs later, such dissenting holder's
Shares or Exchanged Preferred Stock shall thereafter represent only the right
to receive the consideration for Shares or Exchanged Preferred Stock specified
in Section 2.04, without interest thereon, upon surrender of the certificates
representing such Shares or Exchanged Preferred Stock.
(c) The Company shall give Merger Subsidiary, prior to the Effective Time,
and the Surviving Corporation, after the Effective Time, (i) prompt notice of
any written demands for appraisal of the fair value of any Shares or Exchanged
Preferred Stock, withdrawals of such demands and any other instruments served
pursuant to the DGCL received by the Company after the date hereof and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal or the payment of the fair cash value of any such Shares or
Exchanged Preferred Stock under the DGCL. The Company shall not voluntarily
make any payment with respect to any demands for appraisal or the payment of
the fair cash value of any Shares or Exchanged Preferred Stock and shall not,
except with the prior written consent of Merger Subsidiary, settle or offer to
settle any such demands.
SECTION 2.06. Treatment of Options and Restricted Stock. (a) At or
immediately prior to the Effective Time, each outstanding stock option (each,
an "Option") to purchase Shares granted under any of the Option Plans, whether
or not vested, shall be canceled and holders of such Options with an exercise
price below the Effective Time Option Consideration (as defined herein) (the
"Cash Out Options") shall receive from the Surviving Corporation (subject to
any applicable withholding taxes) an amount equal to the Base Merger
Consideration plus any Option Consideration Adjustments (as defined herein)
received prior to the Effective Time ("Effective Time Option Consideration") in
respect of the number of Shares subject to such Options; provided that the
Effective Time Option Consideration for each Share shall be reduced by the
exercise price for such Option; provided, further that, notwithstanding any
action taken pursuant to Section 6.07(a) hereof, for purposes of this
Agreement, each Option will be considered vested upon the occurrence of the
Merger without regard to the applicable Option Plan or option agreement or any
performance-based criteria. Each Option whether vested or unvested that has an
exercise price equal to or greater than the Effective Time Option Consideration
shall be canceled as of the Effective Time without consideration; provided that
holders of such Options at the Effective Time shall retain the right to receive
any Option Consideration Adjustments following the Effective Time only on the
terms and to the extent provided in this Section 2.06. Holders of Cash Out
Options shall be entitled
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to receive in respect of the number of Shares subject to such Cash Out Options,
Option Consideration Adjustments received after the Effective Time. Holders of
Options with an exercise price below the Effective Time Consideration (after
giving effect to all Option Consideration Adjustments previously paid or being
paid at the time of calculation) shall be entitled to receive Option
Consideration Adjustments in respect of the number of Shares subject to such
Option. "Option Consideration" means the Effective Time Option Consideration
plus all Option Consideration Adjustments previously paid or being paid at the
time of calculation. The "Option Consideration Adjustment" means an amount per
Share underlying Cash Out Options and Options with an exercise price below the
Option Consideration calculated by dividing all unpaid Initial Adjustment
Amounts by the Initial Denominator and all unpaid Subsequent Adjustment Amounts
by the Denominator. With respect to Options that have an exercise price above
the Effective Time Option Consideration and below the Option Consideration, the
portion of the Option Consideration Adjustments that shall be paid to such
holder in respect of the number of Shares underlying such Options shall equal
the difference between (x) the Effective Time Option Consideration plus all
Option Consideration Adjustments previously paid or being paid at the time of
the calculation and (y) the exercise price of such Option. Thereafter, for
purposes of future Option Consideration Adjustments, such holder in respect of
the number of Shares underlying such Options shall receive such Option
Consideration Adjustments as if they were holders of Cash Out Options. To the
extent any part of the Adjustment Amount that represents an Option
Consideration Adjustment is received prior to the Effective Time, that part of
the Option Consideration Adjustment shall be paid in accordance with the first
sentence of this Section 2.06(a). To the extent any part of the Adjustment
Amount that represents an Option Consideration Adjustment is received after the
Effective Time, that part of Option Consideration Adjustments shall be paid by
the Surviving Corporation at the 30th day after the earlier of (i) receipt by
the Surviving Corporation of proceeds representing Adjustment Amounts
aggregating $5.0 million in excess of previously paid Adjustment Amounts and
(ii) the date upon which all amounts which could represent Adjustment Amounts
are received by the Surviving Corporation or the Company, as the case may be.
Payment of Option Consideration Adjustments shall be without interest thereon.
(b) Notwithstanding any provision of this Agreement to the contrary, none
of the restrictions relating to any restricted stock awards ("Restricted
Stock") granted under any Restricted Stock Plan of the Company shall terminate,
be removed or modified as a result of the Transactions. Immediately prior to
the Merger, the Committee(s) administering the Restricted Stock Plans will (i)
cancel all Restricted Stock awards that are then subject to any restrictions
under the terms of the applicable award, and (ii) make new awards ("New
Awards") under the applicable Restricted Stock Plan to each participant whose
awards were canceled under the preceding subclause (i) as to the same number of
shares of common stock as the canceled award and with such New Award taking
effect immediately following the Merger and relating to Surviving Corporation
Common Shares (the "New Restricted Stock") rather than Shares, provided that
such New Awards will provide, except as set forth on the disclosure schedule,
as follows: (1) 15% of each participant's New Restricted Stock will be
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available upon the effectiveness of the New Award to the participant free of
restrictions under the Restricted Stock Plans (other than a prohibition on
transfer of such New Restricted Stock to persons other than Restricted Stock
Permitted Transferees and securities law restrictions on transferability
(collectively, the "Restrictions")), and, in lieu of 10% of an additional
amount of New Restricted Stock ("Cash Out New Restricted Stock") the
participants will receive cash (valuing a Share of the New Restricted Stock for
these purposes at the Base Merger Consideration plus any Merger Consideration
Adjustment determined with reference to Initial Adjustment Amounts received
prior to the Effective Time (the "Cash Out Amount"), subject to applicable
withholding taxes, (2) the balance of each participant's New Restricted Stock
will become free of restrictions under the Restricted Stock Plans (other than
the Restrictions) ratably on each anniversary of the Merger, commencing on the
first anniversary of the Merger through the third anniversary of the Merger,
provided that upon the termination of such Restrictions as contemplated under
this clause (2), such participant shall be entitled to elect, at his or her
option, to receive, in lieu of any share of New Restricted Stock, an amount in
cash equal to the sum of (i) the Cash Out Amount, (ii) any Merger Consideration
Adjustments determined with respect to Initial Adjustment Amounts received
subsequent to the Effective Time and prior to the applicable anniversary date,
and (iii) an amount (the "Accrual Amount") equal to 6% per annum of the Cash
Out Amount from the date of the Merger through the applicable anniversary date
and of any such Merger Consideration Adjustments from the date of the payment
to holders of the Shares through the applicable anniversary date, subject to
the balance of this Section 2.06(b); provided, further, that the New Restricted
Stock awards will allow the Surviving Corporation to defer the payment of such
cash if the Surviving Corporation is prevented under the Facilities from making
such payments due to a default, or an event which with notice or lapse of time
or both, would constitute a default (without giving effect to any grace period)
under the Facilities. In the event the Surviving Corporation defers such
payment, the Surviving Corporation will make such payment as soon as
practicable after the Surviving Corporation is no longer in default and any
event that would constitute a default has been cured or waived. For any such
deferral period in respect of a Share of New Restricted Stock, the Accrual
Amount in respect of such Share shall be calculated based upon 12% per annum of
the deferred amount for the period of deferral. Each individual entitled to
shares of Cash Out New Restricted Stock shall be entitled to receive with
respect to each share of Cash Out New Restricted Stock from the Surviving
Corporation amounts equal to all Merger Consideration Adjustments per Share
determined with respect to all Initial Adjustment Amounts received after the
Effective Time, payable at the same time such amounts are paid to holders of
Shares. The Surviving Corporation shall pay with respect to each share of New
Restricted Stock which is free of restriction upon the effectiveness of the New
Award pursuant to clause (ii)(1) of this paragraph, amounts equal to (1) any
Merger Consideration Adjustment determined with reference to Initial Adjustment
Amounts received by the Company prior to the Effective Time, which amount shall
be payable immediately prior to the Merger, and (2) any Merger Consideration
Adjustments determined with reference to Initial Adjustment Amounts received by
the Surviving Corporation and paid to a holder of a Share, which shall be
payable at the same time as paid to holders of Shares. The Surviving
Corporation
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shall pay with respect to each share of New Restricted Stock which becomes free
of restrictions on the first, second or third anniversary of the Effective Time
and with respect to which the holder does not elect to receive cash pursuant to
clause (ii)(2) of this paragraph, amounts equal to any Merger Consideration
Adjustments determined with reference to Initial Adjustment Amounts received
after the Effective Time, which shall be payable upon the later of (x) the
first, second or third anniversary, as the case may be, on which the
restrictions lapse and the holder does not elect to receive cash, and (y) the
time such Merger Adjustment Amounts are paid to holders of Shares. Each holder
of the New Restricted Stock also shall be entitled to receive with respect to
each share of New Restricted Stock (whether or not Cash Out New Restricted
Stock) all Merger Consideration Adjustments determined with respect to the
Subsequent Adjustment Amounts (whether received prior to or after the Effective
Time), payable at the time such amounts are paid to holders of Shares.
SECTION 2.07. Surrender of Shares. (a) Prior to the Effective Time, Merger
Subsidiary shall appoint a bank or trust company which is reasonably
satisfactory to the Company to act as the exchange agent (the "Exchange Agent")
for the payment of the Base Merger Consideration and any Merger Consideration
Adjustment available at the Effective Time (the "Effective Time Merger
Consideration") with respect to Shares and the Class A Merger Consideration
Adjustment and the Class B Merger Consideration Adjustment available at the
Effective Time. All of the fees and expenses of the Exchange Agent shall be
borne by the Surviving Corporation. The Surviving Corporation will serve in the
capacity of exchange agent with respect to the Class A Base Merger
Consideration and Class B Base Merger Consideration and will, at the Effective
Time, upon receipt of the stock certificates for Class A Exchanged Shares and
Class B Exchanged Shares duly endorsed and in form for transfer with
accompanying stock powers duly executed in blank, exchange such stock
certificates for new stock certificates, shares of the Class A Merger
Consideration and Class B Merger Consideration, respectively, in accordance
with Section 2.04(d) and (e). After the Effective Time, the Surviving
Corporation shall be responsible for all Merger Consideration Adjustments,
Class A Merger Consideration Adjustments and Class B Merger Consideration
Adjustments in accordance with Section 2.04.
(b) At or prior to the Effective Time, there will be deposited with the
Exchange Agent cash in an amount equal to the aggregate Effective Time Merger
Consideration (in an amount equal to the number of Exchanged Shares multiplied
by the Effective Time Merger Consideration), the Class A Merger Consideration
Adjustments available at the Effective Time and the Class B Merger
Consideration Adjustment available at the Effective Time in immediately
available funds. The Exchange Agent shall invest the funds as directed by the
Surviving Corporation on a daily basis. Any interest and other income resulting
from such investments shall be paid to the Surviving Corporation.
(c) Promptly following the Effective Time, the Surviving Corporation shall
instruct the Exchange Agent to mail, no later than three Business Days after
the Effective Time, to each holder of record of a certificate representing
Exchanged Shares converted upon the
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Merger pursuant to this Agreement (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
certificates shall pass, only upon delivery of the certificates to the Exchange
Agent and shall be in such form and have such other provisions as Merger
Subsidiary or the Surviving Corporation may reasonably specify) and (ii)
instructions for use in effecting the surrender of the certificates. The
Exchange Agent shall accept such certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose to effect an
orderly exchange thereof in accordance with normal exchange practices. Each
holder of a certificate or certificates representing Exchanged Shares converted
upon the Merger pursuant to this Agreement may thereafter surrender such
certificate or certificates to the Exchange Agent, as agent for such holder, to
effect the surrender of such certificate or certificates on such holder's
behalf for a period ending six months after the Effective Time. Upon the due
surrender of certificates representing Exchanged Shares, the Surviving
Corporation shall cause the Exchange Agent to pay the holder of such
certificates in exchange therefor the Effective Time Merger Consideration
multiplied by the number of Exchanged Shares represented by such certificate
that have been so converted. Until so surrendered, each such certificate shall
represent solely the right to receive the Merger Consideration. With respect to
Class A Merger Consideration Adjustments to be paid to Class A Exchanged Shares
and Class B Merger Consideration Adjustments to be paid to Class B Exchanged
Shares, in each case, to be paid at the Effective Time, the Exchange Agent
shall not require surrender of certificates pursuant to this Section 2.07 but
rather, shall be directed by the Company, by written instructions as to the
recipients of such funds and directions for payment.
(d) If any payment or issuance in respect of Shares, Class A Preferred
Stock or Class B Preferred Stock under this Section 2.07 is to be made to a
Person other than the Person in whose name a surrendered certificate is
registered, it shall be a condition to such payment or issuance that the
certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the Person requesting such payment or
issuance shall have paid any transfer and other taxes required by reason of
such payment or issuance in a name other than that of the registered holder of
the certificate or instrument surrendered or shall have established to the
satisfaction of the Surviving Corporation or the Exchange Agent that such tax
either has been paid or is not payable.
(e) At and after the Effective Time, no further transfer of Shares or
Exchanged Preferred Stock which have been converted pursuant to Section 2.04 of
this Agreement shall be made, other than transfers of such securities that have
occurred prior to the Effective Time. In the event that, after the Effective
Time, certificates representing Shares or Exchanged Preferred Stock which have
been converted pursuant to Section 2.04 of this Agreement are presented to the
Surviving Corporation, they shall be canceled and exchanged in the manner
contemplated by Section 2.04 and as provided in this Section 2.07.
(f) The Merger Consideration paid in the Merger shall be paid in full to
the holder of Shares without interest thereon, and shall be subject to
reduction only for any
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applicable United States federal or other withholding or stock transfer taxes
payable by such holder.
(g) Promptly following the date which is six months after the Effective
Time, the Exchange Agent shall deliver to the Surviving Corporation all cash,
certificates and other documents in its possession relating to the
Transactions, and the Exchange Agent's duties shall terminate. Thereafter, each
holder of a certificate representing Shares may surrender such certificate to
the Surviving Corporation and (subject to any applicable abandoned property,
escheat or similar law) receive in consideration therefor the consideration due
to such holder pursuant to Section 2.04 of this Agreement, without any interest
thereon.
(h) None of Merger Subsidiary, the Surviving Corporation or the Exchange
Agent shall be liable to any holder of Shares or Exchanged Preferred Stock for
any cash or securities delivered to a public official pursuant to any abandoned
property, escheat or similar law, rule, regulation, statute, order, judgment or
decree.
SECTION 2.08. Lost, Stolen or Destroyed Certificates. In the event any
certificates representing Exchanged Shares or Exchanged Preferred Stock shall
have been lost, stolen or destroyed, the Exchange Agent or the Surviving
Corporation, as applicable, shall deliver the Effective Time Merger
Consideration, Class A Merger Consideration or Class B Merger Consideration
pursuant to Section 2.04 hereof, in exchange for such lost, stolen or destroyed
certificates upon the making of an affidavit of that fact by the holder
thereof; provided, however, that the Surviving Corporation may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates to deliver an indemnity
against any claim that may be made against the Surviving Corporation or the
Exchange Agent with respect to the certificates alleged to have been lost,
stolen or destroyed.
SECTION 2.09. Further Action. If, at any time after the Effective Time,
any further action is necessary or desirable to carry out the purposes of this
Agreement and to put the Surviving Corporation in possession of all assets and
property of every description and every interest, wherever located, and the
rights, privileges, immunities, powers, franchises and authority, of a public
as well as of a private nature, of the Company and Merger Subsidiary, the
officers and directors of the Surviving Corporation are fully authorized in the
name of their respective corporations immediately prior to the Effective Time
or otherwise to take, and will take, all such lawful and necessary action.
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ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Certificate of Incorporation; By-Laws.
(a) Certificate of Incorporation. The certificate of incorporation of the
Company, as changed and as set forth on Exhibit E hereto, shall from and after
the Effective Time be the certificate of incorporation of the Surviving
Corporation until thereafter amended as provided by the DGCL and such
certificate of incorporation.
(b) By-laws. The by-laws of the Company, as changed and as set forth on
Exhibit F hereto, shall be the by-laws of the Surviving Corporation until
thereafter amended as provided in its certificate of incorporation and by the
DGCL.
SECTION 3.02. Directors and Officers. (a) The board of managers of Merger
Subsidiary immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation and the Board of Directors will approve,
prior to the Merger, the managers of Merger Subsidiary as the directors of the
Surviving Corporation, each to hold office in accordance with the certificate
of incorporation and by-laws of the Surviving Corporation.
(b) The officers of the Company immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed or until their
earlier resignation, removal from office or death.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Merger Subsidiary that, except as
set forth in the disclosure schedule delivered by the Company to Merger
Subsidiary immediately prior to execution of this Agreement:
SECTION 4.01. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations, permits,
consents and approvals the absence of which would not be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect. The Company
is duly qualified to do business as a foreign corporation and is in good
standing in
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each jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified would not be reasonably expected
to have, individually or in the aggregate, a Material Adverse Effect. The
Company has heretofore delivered to Merger Subsidiary true and complete copies
of the certificate of incorporation and by-laws of the Company as currently in
effect.
SECTION 4.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the Transactions are within the Company's corporate powers and,
except for the required approval of the Company Stockholders in connection with
the consummation of the Company/Subsidiary Merger and the Merger, have been
duly authorized by all necessary corporate action on the part of the Company.
The affirmative vote of the holders of a majority of the Company's outstanding
capital stock entitled to vote for directors (voting as a class) is the only
vote of the holders of the Company's capital stock necessary in connection with
the consummation of the Company/Subsidiary Merger. The affirmative vote of the
holders of a majority of the Company's outstanding capital stock entitled to
vote for directors (voting as one class) and the affirmative vote of the
holders of a majority of outstanding capital stock entitled to vote for
directors (other than the Continuing Shareholders) are the only votes of the
holders of any of the Company's capital stock necessary by law or contract in
connection with the consummation of the Merger. This Agreement and the Equity
Investments Sale Agreement constitute valid and binding agreements of the
Company.
(b) At a meeting duly called and held, the Board of Directors, subsequent
to the unanimous recommendation of the Special Committee, (i) unanimously
approved the Company/Subsidiary Merger and the Company/Subsidiary Merger
Agreement, determined that it is advisable and in the best interests of Company
Stockholders (other than the Continuing Shareholders) to consummate the
Company/Subsidiary Merger, and resolved to recommend approval of the
Company/Subsidiary Merger and the Company/Subsidiary Merger Agreement by
Company Stockholders, and (ii) approved the Merger and this Agreement,
determined that it is advisable and in the best interests of Company
Stockholders (other than Continuing Shareholders) to consummate the Merger and
the other Transactions, and (iii) resolved to recommend approval of the
Company/Subsidiary Merger, the Company/Subsidiary Merger Agreement, the Merger
and this Agreement by Company Stockholders.
(c) At a meeting duly called and held, the Special Committee has (i)
unanimously resolved to recommend that the Board of Directors approve and
declare advisable the Company/Subsidiary Merger and the Company/Subsidiary
Merger Agreement, (ii) determined that this Agreement and the Transactions are
advisable and fair to and in the best interests of the Company Stockholders
(other than Merger Subsidiary and its Affiliates, Company Shareholder and its
Subsidiaries, IS and FS) and (iii) resolved (subject to Section 6.04 hereof) to
recommend that the Board of Directors approve and declare advisable this
Agreement and the Transactions.
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SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by the Company of the Company/Subsidiary Merger Agreement, this
Agreement and the consummation by the Company of the Transactions require no
action by or in respect of, or filing with, or notification or reporting to,
any Governmental Authority, other than (i) the filing of a certificate of
merger with respect to the Company/Subsidiary Merger and the Merger with the
Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which Company is qualified to do business, (ii)
compliance with any applicable requirements of the HSR Act and of the Antitrust
Laws of the foreign jurisdictions set forth on Schedule 4.03, (iii) compliance
with any applicable requirements of the 1933 Act, 1934 Act and any other
applicable securities laws, whether state or foreign, and (iv) any actions or
filings the absence of which would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
SECTION 4.04. Non-contravention. The execution, delivery and performance
by the Company of the Company/Subsidiary Merger Agreement, this Agreement and
the consummation of the Transactions do not and will not (i) contravene,
conflict with, or result in any violation or breach of any provision of the
certificate of incorporation or by-laws of the Company, (ii) assuming
compliance with the matters referred to in Section 4.03 hereof, contravene,
conflict with or result in a violation or breach of any provision of any
applicable law, statute, ordinance, rule, regulation, judgment, injunction,
order, or decree, (iii) require any consent or other action by any Person
under, constitute a default under, or cause or permit the termination,
cancellation, acceleration or other change of any right or obligation or the
loss of any benefit to which the Company or any of its Subsidiaries is entitled
under any provision of any agreement or other instrument binding upon the
Company or any of its Subsidiaries or any license, franchise, permit,
certificate, approval or other similar authorization affecting, or relating in
any way to, the assets or business of the Company and its Subsidiaries or under
any agreement or instrument relating to any of the Equity Investments or (iv)
result in the creation or imposition of any Lien on any asset of the Company or
any of its Subsidiaries, except for such contraventions, conflicts and
violations referred to in clause (ii) and for such failures to obtain any such
consent or other action, defaults, terminations, cancellations, accelerations,
changes, losses or Liens referred to in clauses (iii) and (iv) that would not
be reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect.
SECTION 4.05. Capitalization. (a) The authorized capital stock of the
Company consists of 250,000,000 Shares and 25,000,000 shares, par value $1.00
per share, of preferred stock (the "Preferred Stock"). As of the close of
business on July 31, 2000, (i) 44,740,401 Shares were issued and outstanding,
(ii) no shares of Preferred Stock were issued or outstanding and (iii) no
Shares were held by the Company in its treasury. All outstanding Shares have
been duly authorized and validly issued and are fully paid and nonassessable.
(b) As of the close of business on July 31, 2000, 250,000 shares of
Preferred Stock have been designated as Series A Preferred and are reserved for
issuance pursuant to the Rights (as defined in the Rights Agreement) issued
under the Rights Agreement.
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(c) As of the close of business on July 31, 2000, 9,838,710 Shares were
issuable upon conversion of the Company's 4.5% Convertible Subordinated
Debentures due 2003 (the "Debentures") at a conversion price of $31.00 per
Share.
(d) As of the close of business on July 31, 2000:
(i) 3,770,198 Shares were reserved for issuance pursuant to options
granted under the Option Plans which options are outstanding on the date
hereof and, of such options, 1,612,078 are vested and exercisable as of
the date hereof without regard to any "change of control" trigger in an
Option Plan or option agreement governing such Options,
(ii) 3,678,811 shares of Restricted Stock were the subject of awards
under the Restricted Stock Plans and will remain subject to restrictions
until the End Date (as defined herein) (disregarding matters contemplated
by Section 2.06 hereof and the effect of the Transactions) under the
Restricted Stock Plans or an award agreement governing them, and
(iii) 224,826 shares of phantom stock were the subject of awards
under the Company's Phantom Stock Plans, which awards are outstanding on
the date hereof.
(e) Except as set forth in this Section 4.05 or as contemplated by Section
2.06(b), 6.10 or 9.01(g), there are no outstanding (i) shares of capital stock
or voting securities of the Company, (ii) securities of the Company convertible
into or exchangeable for shares of capital stock or voting securities of the
Company, (iii) options or other rights to acquire from the Company, or other
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company or (iv) stock appreciation, phantom stock or similar
rights with respect to the Company (the items in clauses (i), (ii), (iii) and
(iv) being referred to collectively as the "Company Securities"). Except with
respect to the Debentures, there are no outstanding obligations of the Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any of
the Company Securities.
SECTION 4.06. Subsidiaries; Equity Investments. (a) Each Subsidiary of the
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
corporate powers and all governmental licenses, authorizations, permits,
consents and approvals required to carry on its business as now conducted,
except for those licenses, authorizations, permits, consents and approvals the
absence of which would not be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect. Each such Subsidiary is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where such qualification is necessary, except for those
jurisdictions where the failure to be so qualified would not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect.
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(b) All of the outstanding capital stock of, or other voting securities or
ownership interests in, each Subsidiary of the Company is owned by the Company,
directly or indirectly, free and clear of any Lien and free of any other
limitation or restriction (including any restriction on the right to vote, sell
or otherwise dispose of such capital stock or other voting securities or
ownership interests). All of the outstanding shares of capital stock of each
subsidiary of the Company have been validly issued and are fully paid and
non-assessable. There are no outstanding (i) securities of the Company or any
of its Subsidiaries convertible into or exchangeable for shares of capital
stock or other voting securities or ownership interests in any Subsidiary or
the Company or (ii) options or other rights to acquire from the Company or any
of its Subsidiaries, or other obligation of the Company or any of its
Subsidiaries to issue, any capital stock or other voting securities or
ownership interests in, or any securities convertible into or exchangeable for
any capital stock or other voting securities or ownership interests in, any
Subsidiary of the Company (the items in clauses (i) and (ii) being referred to
collectively as the "Company Subsidiary Securities"). There are no outstanding
obligations of the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any of the Company Subsidiary Securities.
(c) Schedule 4.06(c) lists (x) any equity interest in any subsidiary of
the Company or any other corporation, partnership, joint venture or other
business association or entity owned directly or indirectly by the Company and
having a fair market value or book value in excess of $1.0 million and (y) the
Company's reasonably approximate tax basis in each Equity Investment.
SECTION 4.07. SEC Filings. (a) The Company has delivered to Merger
Subsidiary (i) the Company's annual reports on Form 10-K for its fiscal years
ended December 31, 1999, 1998 and 1997, (ii) its quarterly report on Form 10-Q
for its fiscal quarter ending March 31, 2000, (iii) its proxy statements
relating to meetings of the Company Stockholders held since December 31, 1999
and (iv) all of its other reports, statements, schedules and registration
statements filed with the SEC since December 31, 1999 (the documents referred
to in this Section 4.07(a), collectively, the "Company SEC Documents").
(b) As of its filing date, each Company SEC Document complied as to form
in all material respects with the applicable requirements of the 1934 Act.
(c) As of its filing date, each Company SEC Document did not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 4.08. Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in the Company SEC Documents fairly present, in conformity
with generally accepted accounting principles ("GAAP") applied on a consistent
basis (except as may be indicated in the
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notes thereto), the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods then ended (subject to
normal year-end adjustments and the absence of notes in the case of any
unaudited interim financial statements).
SECTION 4.09. Disclosure Documents. (i) The proxy statement of the Company
to be filed with the SEC in connection with the Merger (the "Company Proxy
Statement") and any amendments or supplements thereto and (ii) the statement on
Schedule 13E-3 to be filed by the Company concurrently with the filing of the
Company Proxy Statement (such statement, as amended or supplemented, is
referred to herein as the "Schedule 13E-3") and any amendments or supplements
thereto will each, when filed, comply as to form in all material respects with
the applicable requirements of the 1934 Act. At the time the Company Proxy
Statement or any amendment or supplement thereto is first mailed to Company
Stockholders, and at the time such stockholders vote on the adoption of the
Company/Subsidiary Merger Agreement and this Agreement, the Company Proxy
Statement, as supplemented or amended, if applicable, will not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The Schedule 13E-3
will 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 the light of the circumstances under which they were
made, not misleading. The representations and warranties contained in this
Section 4.09 will not apply to statements or omissions included in the Company
Proxy Statement or the Schedule 13E-3 based upon information furnished to the
Company by or on behalf of Merger Subsidiary for use therein.
SECTION 4.10. Absence of Certain Changes. Since the Company Balance Sheet
Date, the business of the Company and its Subsidiaries has been conducted in
the ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of circumstances or
facts that has or could be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the
Company (other than quarterly cash dividends on the Shares not in excess
of $.08 per share per quarter and having customary record and payment
dates), or any repurchase, redemption or other acquisition by the Company
or any of its Subsidiaries of any outstanding shares of capital stock or
other securities of, or other ownership interests in, the Company or any
of its Subsidiaries (other than ordinary course open market purchases made
in connection with the Company's stock incentive plan);
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(c) any amendment of any material term of any outstanding security of
the Company or any of its Material Subsidiaries;
(d) any incurrence, assumption or guarantee by the Company or any of
its Subsidiaries of any indebtedness in excess of $5.0 million,
individually or in the aggregate, other than (i) under the Credit
Agreement in the ordinary course of business consistent with past
practices to fund general corporate purposes, (ii) between the Company and
its Subsidiaries or between two or more of the Company's Subsidiaries or
(iii) trade payables in the ordinary course of business;
(e) any creation or other incurrence by the Company or any of its
Subsidiaries of any Lien on any asset that is material to the Company and
its Subsidiaries, taken as a whole, other than in the ordinary course of
business consistent with past practices;
(f) any making of any material loan, advance or capital contribution
to or investment in any Person other than loans, advances or capital
contributions to or investments in its wholly-owned Subsidiaries or by its
wholly-owned Subsidiaries to or in the Company or other Subsidiaries of
the Company;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company or
any of its Subsidiaries that has or could be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect;
(h) any change in any method of accounting, method of tax accounting
or accounting principles or practice by the Company or any of its
Subsidiaries, except for any such change required by reason of a
concurrent change in GAAP, Regulation S-X under the 1934 Act or other
applicable law or regulation; or
(i) except for the severance plans established pursuant to an
agreement by the majority of the members of the Employee Retention
Committee and except as required by law, any adoption or amendment in any
respect of any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, pension, retirement,
employment or other employee benefit agreement, trust, plan or other
arrangement for the benefit or welfare of any director or elected officer
of the Company or increase in any manner of the compensation or fringe
benefits of any director or elected officer of the Company or payment of
any benefit not required by any existing agreement or placement of any
assets in any trust for the benefit of any director or elected officer of
the Company not required by any existing agreement.
SECTION 4.11. No Undisclosed Material Liabilities. There are no
liabilities or obligations of the Company or any of its Subsidiaries of any
kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, other than:
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(a) liabilities or obligations disclosed or provided for in the
Company Balance Sheet or in the notes thereto or in any of the Company SEC
Documents filed prior to the date hereof;
(b) liabilities or obligations incurred in the ordinary course of
business consistent with past practice since the Company Balance Sheet
Date;
(c) liabilities or obligations under this Agreement; and
(d) liabilities or obligations that would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on
the Company.
SECTION 4.12. Compliance with Laws and Court Orders. The Company and each
of its Subsidiaries are, and since January 1, 1999 have been, in compliance
with any applicable law, statute, ordinance, rule, regulation, judgment,
injunction, order or decree, except for failures to comply or violations that
have not and would not be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 4.13. Litigation. There is no action, suit, investigation or
proceeding pending against, or, to the knowledge of the Company, threatened
against, the Company or any of its Subsidiaries or any of their respective
properties before any court or arbitrator, or before or by any Governmental
Authority, that would reasonably be expected to have, individually or in the
aggregate, together with all other such actions, suits, investigations or
proceedings, a Material Adverse Effect.
SECTION 4.14. Finders' Fees. Except for Salomon Smith Barney Inc.,
McDonald Investments, Inc. and Morgan Lewis Githens & Ahn, copies of whose
engagement agreements have been provided to Merger Subsidiary, there is no
investment banker, broker, finder or other intermediary that has been retained
by or is authorized to act on behalf of the Company or any of its Subsidiaries
who might be entitled to any fee or commission from the Company or any of its
Affiliates in connection with the Transactions.
SECTION 4.15. Opinion of Financial Advisor. (a) The Board of Directors has
received the opinion of the financial advisor to the Company to the effect
that, as of the date of this Agreement, the Merger Consideration is fair, from
a financial point of view, to the holders of Shares (other than Merger
Subsidiary and its Affiliates and the Continuing Shareholders and their
respective Affiliates).
(b) The Special Committee has received the opinion of the financial
advisor to the Special Committee to the effect that, as of the date of this
Agreement, the Merger Consideration is fair, from a financial point of view, to
the holders of Shares (other than Merger Subsidiary and its Affiliates and the
Continuing Shareholders and their Affiliates).
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SECTION 4.16. Taxes. (a) The Company and each of its Subsidiaries has
timely filed (or has had timely filed on its behalf), taking into account any
extension of time within which to file, all material Tax Returns required to be
filed by it and all such material Tax Returns are true and complete in all
material respects.
(b) The Company and each of its Subsidiaries has paid (or has had paid on
its behalf), or, where payment is not yet due, has established (or has had
established on its behalf) or will establish or cause to be established in
accordance with GAAP on or before the Effective Time an adequate accrual for
the payment of, all taxes shown on such Tax Returns.
(c) There are no material Liens or encumbrances for Taxes on any of the
assets of the Company or any of its Subsidiaries.
(d) No material federal, state, local or foreign audits or administrative
proceedings are pending or, to the Company's knowledge, threatened, with regard
to any Taxes or any Tax Return of the Company or its Subsidiaries.
(e) Except for the severance, Option Plans, Supplemental Executive
Retirement and Disability Plan and stay bonus plans described in Section
7.04(b) no amount that could be received (whether in cash or property or the
vesting of property) as a result of any of the Transactions by any employee,
officer or director of the Company or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance or termination
agreement, other compensation arrangement or Benefit Plan currently in effect
could be characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code).
"Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, goods and services, service use, license, value added,
capital, net worth, payroll, profits, withholding, franchise, transfer and
recording taxes, fees and charges, and any other taxes, assessments or similar
charges imposed by the Internal Revenue Service ("IRS") or any taxing authority
(whether domestic or foreign including any state, county, local or foreign
government or any subdivision or taxing agency thereof (including a United
States possession)) (a "Taxing Authority"), whether computed on a separate,
consolidated, unitary, combined or any other basis; and such term shall include
any interest whether paid or received, fines, penalties or additional amounts
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments. "Tax Return" shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any taxing authority or jurisdiction (foreign or domestic) with respect to
Taxes, including information returns, any documents with respect to or
accompanying payments of estimated Taxes, or with respect to or accompanying
requests for the extension of time in which to file any such report, return,
document, declaration or other information.
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SECTION 4.17. Employee Benefit Plans. (a) Schedule 4.17 lists (i) those
Benefit Plans that are "employee welfare benefit plans" within the meaning of
Section 3(1) of ERISA the liabilities of which would reasonably be expected to
have a Material Adverse Effect on the Company, (ii) all Benefit Plans that are
"employee pension benefit plans" within the meaning of Section 3(2) of ERISA,
and (iii) all Multiemployer Plans. Between the date hereof and 10 days prior to
the Company's Stockholder's Meeting, the Company will use its reasonable best
efforts to revise Schedule 4.17 to list all Benefit Plans and Multiemployer
Plans. Copies of all written Benefit Plans, summary plan descriptions, trust
agreements, actuarial valuation reports and the most recent annual return and
IRS determination letters have been, or will have been, at least 10 days prior
to the Company's Stockholders Meeting, made available to Merger Subsidiary.
(b) Except as would not be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect:
(i) each Benefit Plan has at all times been maintained and
administered in all respects in accordance with its terms and with the
requirements of all applicable law, including ERISA and the Code. Each
Benefit Plan intended to qualify under Section 401(a) of the Code has been
determined by the IRS to be qualified under Section 401(a) of the Code,
and the Company knows of no fact or circumstance giving rise to a material
likelihood that the plan would not be treated as so qualified by the IRS;
(ii) all required contributions to any Benefit Plans and
Multiemployer Plans that are "defined benefit pension plans" required to
be made by the Company or any Subsidiary in accordance Section 302 of
ERISA or Section 412 of the Code, have been timely made; there has been no
application for or waiver of the minimum funding standards imposed by
Section 412 of the Code with respect to any Benefit Plan; and no Benefit
Plan has incurred any "accumulated funding deficiency" within the meaning
of Section 302 of ERISA or Section 412 of the Code;
(iii) no "reportable event" (within the meaning of Section 4043 of
ERISA) has occurred with respect to any Benefit Plan or any Plan
maintained by an ERISA Affiliate since the effective date of said Section
4043;
(iv) no liability has been incurred or is expected to be incurred by
the Company or any Subsidiary thereof under Title IV of ERISA with respect
to any Benefit Plan or Multiemployer Plan, or with respect to any other
Plan presently or heretofore maintained or contributed to during the 5
year period prior to the Effective Time by any ERISA Affiliate;
(v) with respect to each Multiemployer Plan, (i) no withdrawal
liability (within the meaning of Section 4201(b) of ERISA) has been
incurred by the Company or any ERISA Affiliate, and the Company has no
reason to believe that any such
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withdrawal liability will be incurred, (ii) no such Multiemployer Plan is
in "reorganization" (within the meaning of Section 4241 of ERISA), (iii)
no notice has been received that increased contributions may be required
to avoid a reduction in plan benefits or the imposition of an excise tax,
or that such Multiemployer Plan is or may become "insolvent" (within the
meaning of Section 4241 of ERISA), (iv) to the knowledge of the Company or
any Subsidiary thereof, no proceedings have been instituted by the PBGC
against such Multiemployer Plan, (v) neither the Company nor any
Subsidiary thereof has sold assets in a transaction intended to satisfy
the requirements of Section 4204 of ERISA, and (vi) if the Company or any
ERISA Affiliate were to have a complete or partial withdrawal under
Section 4203 of ERISA as of the Effective Time, no withdrawal liability
would exist on the part of the Company or any ERISA Affiliate;
(vi) neither the Company nor any ERISA Affiliate has incurred any
liability for any tax imposed under Sections 4971 through 4980E of the
Code or civil liability under Section 502(i) or (l) of ERISA;
(vii) no Tax has been incurred under Section 511 of the Code with
respect to any Benefit Plan (or trust or other funding vehicle pursuant
thereto);
(viii) there is no commitment or agreement that would prevent the
termination or modification as to employees or former employees of the
Company of any Benefit Plan under which obligations to provide
post-retirement welfare benefits arise other than with respect to benefits
the liabilities of which are disclosed in the audited financial statements
of the Company in accordance with FAS 106; and
(ix) no action (excluding claims for benefits incurred in the
ordinary course of Plan activities) has been brought or, to the knowledge
of the Company, threatened against or with respect to any Benefit Plan and
there are no facts or circumstances known to the Company or any Subsidiary
thereof that could reasonably be expected to give rise to any such action.
(c) Except as would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect, (i) all contributions required to
be made by the Company or any Subsidiary with respect to a Foreign Plan have
been timely made, (ii) each Foreign Plan has been maintained in substantial
compliance with its terms and with the requirements of any and all applicable
laws and has been maintained, where required, in good standing with the
applicable Governmental Authority, and (iii) neither the Company nor any
Subsidiary has incurred any obligation in connection with the termination or
withdrawal from any Foreign Plan. To the knowledge of the Company, each of the
Foreign Plans that is a defined benefit plan has plan assets with aggregate
fair market value that is greater than such plan's liabilities, as determined
in accordance with applicable laws using reasonable actuarial assumptions. For
purposes hereof, the term "Foreign Plan" shall mean any plan, program, policy,
arrangement or agreement maintained or contributed to by, or entered into with,
the
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Company or any Subsidiary with respect to employees (or former employees)
employed outside the United States.
SECTION 4.18. Environmental Matters. Except as disclosed in the Company
SEC Documents filed prior to the date hereof and except as would not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect:
(i) no notice, notification, demand, request for information,
citation, summons or order has been received, no complaint has been filed,
no penalty has been assessed, and no investigation, action, claim, suit,
proceeding or review is pending or, to the knowledge of the Company, is
threatened by any governmental entity or other Person, nor is the Company
subject to any judgment, decree, or agreement, relating to or arising out
of any Environmental Law; and
(ii) the Company is in compliance with, and has no liability under,
all Environmental Laws and all Environmental Permits.
SECTION 4.19. Antitakeover Statutes and Rights Agreement;
Company/Subsidiary Merger. (a) The Company has taken all action necessary to
exempt the Merger, this Agreement, the Exchange and Voting Agreement and the
Transactions from the restrictions on "business combinations" contained in
Section 203 of the DGCL, and, accordingly, neither the restrictions of such
Section nor any other antitakeover or similar statute or regulation applies or
purports to apply to any such Transactions.
(b) The Company has taken all action necessary to render the Rights issued
pursuant to the terms of the Rights Agreement inapplicable to the Merger, this
Agreement, and the Transactions. The Rights Agreement has been amended such
that it will expire and all Rights will be canceled immediately prior to the
Effective Time and the Rights Agreement will have no force or effect on or
after the Effective Time.
(c) The Company/Subsidiary Merger will be effective upon the affirmative
vote of the majority of the outstanding Shares and Exchanged Preferred Stock
held by the Company Stockholders (voting as one class) and the filing of the
certificate of merger (in the form attached as Exhibit B to the
Company/Subsidiary Merger Agreement) (the "Company/Subsidiary Certificate of
Merger") with the Secretary of State of the State of Delaware.
SECTION 4.20. Disclaimer of Other Representations and Warranties. The
Company does not make, and has not made, any representations or warranties in
connection with the Merger other than those expressly set forth herein. It is
understood that any data, any financial information or any memoranda or
offering materials or presentations (including but not limited to the
Confidential Information Memorandum dated August, 1999) are not and shall not
be deemed to be or to include representations or warranties of the Company.
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Except as expressly set forth herein, no Person has been authorized by the
Company to make any representation or warranty relating to the Company or any
Subsidiary thereof or their respective businesses, or otherwise in connection
with the Merger and, if made, such representation or warranty may not be relied
upon as having been authorized by the Company.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MERGER SUBSIDIARY
Merger Subsidiary represents and warrants to the Company that:
SECTION 5.01. Existence and Power. Merger Subsidiary is a limited
liability company duly formed, validly existing and in good standing under the
laws of Delaware and has all limited liability company powers and all
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted. Merger Subsidiary was formed solely
for the purpose of engaging in the Transactions. Since the date of its
formation, Merger Subsidiary has not engaged in any activities other than in
connection with or as contemplated by this Agreement. Merger Subsidiary has no
Subsidiaries.
SECTION 5.02. Authorization. The execution, delivery and performance by
Merger Subsidiary of this Agreement and the consummation by Merger Subsidiary
of the Transactions are within the limited liability company powers of Merger
Subsidiary and have been duly authorized by all necessary limited liability
company action. This Agreement constitutes a valid and binding agreement of
Merger Subsidiary.
SECTION 5.03. Governmental Authorization. The execution, delivery and
performance by Merger Subsidiary of this Agreement and the consummation by
Merger Subsidiary of the Transactions require no action by or in respect of, or
filing with, or notification or reporting to, any Governmental Authority other
than (i) the filing of a certificate of merger with respect to the Merger with
the Delaware Secretary of State and appropriate documents with the relevant
authorities of other states in which Merger Subsidiary is qualified to do
business, (ii) compliance with any applicable requirements of the Antitrust
Laws of the foreign jurisdictions set forth on Schedule 5.03 hereof, (iii)
compliance with any applicable requirements of the 1933 Act, the 1934 Act and
any other securities laws, whether state or foreign, and (iv) any actions or
filings the absence of which would not be reasonably expected to materially
impair the ability of Merger Subsidiary to consummate the Transactions.
SECTION 5.04. Non-contravention. The execution, delivery and performance
by Merger Subsidiary of this Agreement and the consummation by Merger
Subsidiary of the Transactions do not and will not (i) contravene, conflict
with, or result in any violation or breach of any provision of any limited
liability company agreement or organizational
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document of Merger Subsidiary, (ii) assuming compliance with the matters
referred to in Section 5.03 hereof, contravene, conflict with or result in a
violation or breach of any provision of any law, rule, regulation, judgment,
injunction, order or decree, (iii) require any consent or other action by any
Person under, constitute a default under, or cause or permit the termination,
cancellation, acceleration or other change of any right or obligation or the
loss of any benefit to which Merger Subsidiary is entitled under any provision
of any agreement or other instrument binding upon Merger Subsidiary or any
license, franchise, permit, certificate, approval or other similar
authorization affecting, or relating in any way to, the assets or business of
Merger Subsidiary or (iv) result in the creation or imposition of any Lien on
any asset of Merger Subsidiary, except for such contraventions, conflicts and
violations referred to in clause (ii) and for such failures to obtain any such
consent or other action, defaults, terminations, cancellations, accelerations,
changes, losses or Liens referred to in clauses (iii) and (iv) that would not
be reasonably expected to materially impair the ability of Merger Subsidiary to
consummate the Transactions.
SECTION 5.05. Disclosure Documents. None of the information provided by
Merger Subsidiary for inclusion (i) in the Company Proxy Statement or any
amendment or supplement thereto, at the time the Company Proxy Statement or any
amendment or supplement thereto is first mailed to the Company Stockholders and
at the time the Company Stockholders vote on adoption of the Company/Subsidiary
Merger Agreement and this Agreement or (ii) in the Schedule 13E-3 will contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 5.06. Finders' Fees. Except for Chase Securities Inc., Credit
Suisse First Boston Corporation and Donaldson, Lufkin & Jenrette Securities
Corporation, whose fees will be paid by the Surviving Corporation only if the
Transactions are consummated, there is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Merger Subsidiary who might be entitled to any fee or commission from the
Company or any of its Affiliates upon consummation of the Transactions.
SECTION 5.07. Financing. (a) Merger Subsidiary has received and furnished
copies to the Company of (i) a commitment letter to provide financing to the
Company or a Subsidiary of the Company (including the Summary of Terms and
Conditions annexed thereto, the "Commitment Letter") with The Chase Manhattan
Bank (the "Bank") dated as of July 31, 2000, and (ii) the Exchange and Voting
Agreement. The funds which Bank has agreed, subject to the terms and conditions
of the Commitment Letter, to provide will be sufficient, when taken together
with other funds available to Merger Subsidiary and assuming compliance by the
Company Shareholder, IS and FS with the Exchange and Voting Agreement, to
enable it to provide to the Exchange Agent the aggregate Merger Consideration
and other amounts owing as a result of the Transactions, to refinance
substantially all of the existing debt of the Company and its Subsidiaries, to
the extent contemplated by the Transactions
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as contemplated by the Commitment Letter, and to pay all related fees and
expenses (collectively, the "Required Amount").
(b) As of the date hereof (i) the Commitment Letter has not been withdrawn
and is in full force and effect and (ii) Merger Subsidiary has no reason to
believe that any of the conditions set forth in the Commitment Letter will not
be satisfied.
(c) Merger Subsidiary has received and furnished a copy to the Company of
the equity commitment letters (the "Equity Commitment Letters") addressed to
Merger Subsidiary from Sponsor and each of the other equity investors in Merger
Subsidiary (the "Equity Investors"), each dated as of July 31, 2000 pursuant to
which the Equity Investors have committed to make available to Merger
Subsidiary certain funds, subject to the terms and conditions contained
therein, for the purpose of consummating the Transactions. As of the date
hereof, (i) no Equity Commitment Letter has been withdrawn and each Equity
Commitment Letter is in full force and effect and (ii) Merger Subsidiary has no
reason to believe that any of the conditions set forth in any Equity Commitment
Letter will not be satisfied.
(d) Immediately after the consummation of the Transactions, the Surviving
Corporation (i) will not be insolvent, (ii) will not be left with unreasonably
small capital, and (iii) will not have debts beyond its ability to pay such
debts as they mature.
SECTION 5.08. Member Appraisal Rights. The members of the Merger
Subsidiary are not entitled by law or by contract to receive appraisal rights
as a result of the Merger.
ARTICLE 6
COVENANTS OF THE COMPANY
The Company agrees that, except as set forth in the disclosure schedule
delivered by the Company to Merger Subsidiary immediately prior to the
execution of this Agreement:
SECTION 6.01. Conduct of the Company. Except as contemplated by this
Agreement or as expressly agreed to in writing by Merger Subsidiary, during the
period from the date of this Agreement to the Effective Time, the Company
shall, and shall cause each of its Subsidiaries to, conduct its operations
according to its ordinary and usual course of business and consistent with past
practice and use all commercially reasonable efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, advertisers, distributors and others having
business dealings with them and to preserve goodwill. Without limiting the
generality of the foregoing, and except as (x) otherwise expressly
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provided in this Agreement or (y) required by law, prior to the Effective Time,
the Company shall not, and shall cause its Subsidiaries not to, without the
consent of Merger Subsidiary:
(a) expend funds for capital expenditures that in the aggregate would
cause total capital expenditures for the period from January 1, 2000 to
the Effective Time to exceed 110% of the amounts set forth in the most
recent version of the business plan previously provided to Merger
Subsidiary;
(b) sell, lease, license or otherwise dispose of any Material
Subsidiary or any material amount of assets, securities or property of the
Company and its Subsidiaries, taken as a whole, except (i) pursuant to
existing contracts or commitments and (ii) other dispositions pursuant to
the Company's disposition program set forth on Schedule 6.01(b) or
otherwise in the ordinary course consistent with past practice;
(c) amend its certificate of incorporation, by-laws or equivalent
organizational documents or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate
structure or ownership of any Material Subsidiary of the Company; or
split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock;
(d) except for issuances (i) upon exercise of presently outstanding
awards under any Plan, (ii) upon conversion of the Debentures outstanding
on the date hereof, or (iii) as previously disclosed in writing to Merger
Subsidiary or its affiliates, authorize for issuance, issue, deliver, sell
or agree or commit to issue, sell or deliver (whether through the issuance
or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise), pledge or otherwise encumber any shares of its
capital stock or the capital stock of any of its Subsidiaries, any other
voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities or any other securities or equity equivalents
(including without limitation stock appreciation rights);
(e) make or agree to make any acquisition of equity interest (whether
through a purchase of stock, establishment of a joint venture or
otherwise) or assets which is material to the Company and its
Subsidiaries, taken as a whole, except for (i) purchases of inventory and
supplies in the ordinary course of business, (ii) pursuant to purchase
orders entered into in the ordinary course of business or (iii)
acquisitions disclosed on Schedule 6.01(e) on terms agreed to with Merger
Subsidiary;
(f) settle or compromise (i) any shareholder derivative suits arising
out of the Transactions or (ii) any other material litigation (whether or
not commenced prior to the date of this Agreement) set forth on Schedule
6.01(f) or settle, pay or compromise any claims not required to be paid,
other than, in each case, in consultation and
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cooperation with Merger Subsidiary and, with respect to any such
settlement, with the prior written consent of Merger Subsidiary;
(g) directly or indirectly, sell, convey, transfer or otherwise
dispose (collectively, a "Transfer") of any of the Equity Investments or
amend or modify the Equity Investments Sale Agreement or enter into any
agreement to do any of the foregoing other than pursuant to the Equity
Investments Sale Agreement; provided that the Company shall be permitted
to Transfer an Equity Investment other than pursuant to the Equity
Investments Sale Agreement so long as the Company has deposited the funds
received from such Transfer in an escrow account to fund the Transactions,
on reasonably acceptable terms, and otherwise complied with Section
9.02(d); provided, however, that in the event such escrow arrangement
would cause the Company to be in default under the Credit Agreement, the
Company shall take all action to comply with the Credit Agreement
(including using the proceeds of any such sale to repay outstanding
borrowings under the Credit Agreement) and, if permitted under the Credit
Agreement, make borrowings as soon as practicable thereafter under the
Credit Agreement in the amount of such proceeds for deposit in an escrow
account to fund the Transactions on reasonably satisfactory terms and
otherwise in compliance with Section 9.02(d);
(h) (i) take any action that would make any representation and
warranty of the Company hereunder inaccurate in any material respect at,
or as of any time prior to, the Effective Time or (ii) omit to take any
action necessary to prevent any such representation or warranty from being
materially inaccurate in any respect at any such time;
(i) waive or amend any provision of the Rights Agreement or otherwise
take any action with respect to the Rights Agreement; or
(j) authorize, or commit or agree to take, any of the foregoing
actions.
SECTION 6.02. Access to Information. From the date of this Agreement until
the Effective Time, the Company shall, and shall cause its Subsidiaries, and
each of their respective officers, directors, employees, counsel, advisors and
representatives (collectively, the "Company Representatives") to, give Merger
Subsidiary and its members, managers, employees, counsel, advisors,
representatives (collectively, the "Merger Subsidiary Representatives") and
representatives of financing sources identified by Merger Subsidiary reasonable
access, upon reasonable notice and during normal business hours, to the offices
and other facilities and to the books and records of the Company and its
Subsidiaries and will cause the Company Representatives and the Company's
Subsidiaries to furnish Merger Subsidiary and the Merger Subsidiary
Representatives and representatives of financing sources identified by Merger
Subsidiary with such financial and operating data and such other information
with respect to the business and operations of the Company and its Subsidiaries
as Merger Subsidiary and representatives of financing sources identified by
Merger Subsidiary may from time to
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time reasonably request. Merger Subsidiary agrees that any information
furnished pursuant to this Section 6.02 shall be subject to the provisions of
the letter agreement dated April 27, 2000 between Sponsor and the Company (the
"Confidentiality Agreement").
SECTION 6.03. Stockholder Meeting; Proxy Material. The Company shall cause
a meeting of the Company Stockholders (the "Company Stockholder Meeting") to be
duly called and held as soon as reasonably practicable for the purpose of
voting on the adoption of the Company/Subsidiary Merger Agreement and the
Company/Subsidiary Merger and the adoption of this Agreement and the Merger.
Subject to Section 6.04 hereof, the Board of Directors and the Special
Committee shall recommend adoption of the Company/Subsidiary Merger Agreement
and the Company/Subsidiary Merger and shall recommend adoption of this
Agreement and the Merger by the Company Stockholders. In connection with such
meeting, the Company will (i) promptly prepare and file with the SEC, use all
commercially reasonable efforts to have cleared by the SEC and thereafter mail
to the Company Stockholders as promptly as practicable the Company Proxy
Statement and all other proxy materials for such meeting, (ii) subject to
Section 6.04, use all commercially reasonable efforts to obtain the necessary
approvals by the Company Stockholders of the Company/Subsidiary Merger
Agreement, the Company/Subsidiary Merger, this Agreement and the Transactions
and (iii) otherwise comply with all legal requirements applicable to such
meeting.
SECTION 6.04. No Solicitation. (a) The Company agrees that it will not,
directly or indirectly through any officer, subsidiary, affiliate, director,
employee, stockholder, representative, agent or other person, (i) seek,
initiate, solicit or encourage any Person to make an Acquisition Proposal, (ii)
engage in negotiations or discussions concerning an Acquisition Proposal with
any person or group, (iii) disclose any non-public information relating to the
Company or give access to the properties, employees, books or records of the
Company or any of its subsidiaries to any person or group in connection with
any Acquisition Proposal or (iv) approve or recommend or agree to approve or
recommend any Acquisition Proposal; provided that nothing herein shall prevent
the Board of Directors from (a) furnishing information to any person that has
made an Acquisition Proposal not solicited in violation of this paragraph or
(b) subject to the other provisions of this paragraph, entering into or
participating in discussions or negotiations concerning an Acquisition Proposal
not solicited in violation of this paragraph so long as, in any case, (x) the
Board of Directors or the Special Committee shall have concluded in good faith,
after receiving and considering the advice of its outside legal counsel, that
failing to participate in such discussions or negotiations or furnishing such
information would cause the Board of Directors or the Special Committee to be
in breach of its respective fiduciary responsibilities to the Company
Stockholders under applicable law, and (y) prior to participating in such
discussions or negotiations or furnishing any such information, the Company and
the party making such offer agrees to a confidentiality agreement on terms that
are, in the aggregate, no less favorable to the Company than those of the
Confidentiality Agreement to which Sponsor is a party (other than the
standstill provisions thereof) and Merger Subsidiary is given concurrent or
advance written notice thereof unless the Board of Directors or the Special
Committee shall have concluded in good faith, after receiving and
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considering the advice of its outside counsel, that doing so would cause it to
be in breach of its respective fiduciary responsibilities to the Company
Stockholders under applicable law. The Board of Directors or the Special
Committee may (x) fail to make, withdraw, or modify in a manner adverse to
Merger Subsidiary its recommendation to its stockholders referred to in Section
6.03 hereof, (y) take and disclose to the Company Stockholders a position
contemplated by Rule 14e-2 under the 1934 Act or otherwise complying with its
disclosure obligations and/or (z) take any non-appealable, final action ordered
to be taken by the Company by any court of competent jurisdiction, but in each
case only if the Board of Directors or the Special Committee determines, in
good faith after consultation with outside legal counsel to the Company, that
such action is required in the exercise of its respective fiduciary duties
under applicable law.
(b) The Company shall notify Merger Subsidiary in writing no later than
the end of the next business day after receipt thereof of the receipt of any
Acquisition Proposal (including a copy thereof if in writing), the terms and
conditions of such Acquisition Proposal and the identity of the person making
it. The Company also shall promptly notify Merger Subsidiary no later than the
end of the next Business Day of any change to or modification of such
Acquisition Proposal.
(c) The Company shall, and shall cause its Subsidiaries and the advisors,
employees and other agents of the Company and any of its Subsidiaries to, cease
immediately and cause to be terminated any and all existing activities,
discussions or negotiations, if any, with any Third Party conducted prior to
the date hereof with respect to any Acquisition Proposal and shall use
commercially reasonable efforts to cause any such Party (or its agents or
advisors) in possession of confidential information about the Company that was
furnished by or on behalf of the Company to return or destroy all such
information.
SECTION 6.05. State Takeover Laws. The Company shall, upon the request of
Merger Subsidiary, take all reasonable steps to assist in any challenge by
Merger Subsidiary to the validity or applicability to the Transactions,
including the Merger, of any state takeover law.
SECTION 6.06. Reports. During the period from the date of this Agreement
to the Effective Time, the Company shall provide Merger Subsidiary with monthly
financial statements in the existing reporting format (balance sheet, cash flow
statement, income statement and, if available, notes thereto), broken out by
operating unit (except as to the cash flow statement, which shall be a
consolidated statement), no later than the fifteenth Business Day following the
end of each calendar month following the date of this Agreement; provided that
for calendar months that are also the end of a calendar quarter, the Company
may provide such financial information to Merger Subsidiary on the same date
such information is publicly released in accordance with the past practice of
the Company.
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SECTION 6.07. Plans. (a) The Company covenants and agrees that it will
take any and all necessary action including, without limitation, actions
contemplated by Section 3.02 hereof to ensure that the Transactions will not
constitute a "change of control" under any Option Plan or Restricted Stock Plan
or option agreement or award agreement, except, in the case of the Options, to
the extent contemplated by Section 2.06 hereof.
(b) The Company covenants and agrees that the Committees administering the
Restricted Stock Plans will take any and all necessary action to ensure that
awards of Restricted Stock are replaced with the New Awards, and any necessary
adjustments or actions in respect of the Restricted Stock Plans or reasonably
requested by Merger Subsidiary are made to provide for the treatment of
Restricted Stock required by Section 2.06 hereof.
(c) The Company covenants and agrees that it will take all necessary
action to ensure that the Options that are not Cash Out Options will be
canceled in accordance with Section 2.06(a).
SECTION 6.08. Equity Investments. Except as set forth in Section 6.01(g),
the Company covenants and agrees that it will use commercially reasonable
efforts to cause the Equity Investments to be sold on or prior to the Effective
Time pursuant to the terms and conditions set forth in the Equity Investments
Sale Agreement, as in effect on the date hereof. The Company shall not amend,
modify or terminate the Equity Investments Sale Agreement without the prior
written consent of Merger Subsidiary.
SECTION 6.09. Confidentiality Agreement. The Company agrees to waive the
application of the standstill provisions of the Confidentiality Agreement to
the transactions contemplated by the Exchange and Voting Agreement.
SECTION 6.10. Issuance of Class A Preferred Stock and Class B Preferred
Stock. Promptly after the date hereof, the Company shall file with the
Secretary of State of the State of Delaware a certificate of designation having
the terms set forth as Exhibit G attached hereto establishing and designating
4,250,000 shares of Class A Preferred Stock and a certificate of designation
establishing and designating 2,150,000 shares of Class B Preferred Stock. Upon
the surrender of each Continuing Shareholder Exchange Share on the Exchange
Date in accordance with the Exchange and Voting Agreement, the Company shall
promptly on such date issue one share of Class A Preferred Stock, without
additional consideration therefor to the holder thereof, and such shares of
Class A Preferred Stock shall be validly issued, fully paid and nonassessable.
Upon the surrender of each Company Shareholder Exchange Share on the Exchange
Date in accordance with the Exchange and Voting Agreement, the Company shall
promptly on such date issue one share of Class B Preferred Stock to the holder
thereof, and such shares of Class B Preferred Stock shall be validly issued,
fully paid and nonassessable. The Shares so exchanged for Class A Preferred
Stock or Class B Preferred Stock shall be treasury shares.
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SECTION 6.11. Saturn Escrow. In the event the Company Transfers the Saturn
Equity Investment prior to Closing, the Company shall, in accordance with
2.04(f) and 2.06(a), deposit an amount equal to the proceeds from such sale in
an escrow arrangement on terms reasonably satisfactory to Merger Subsidiary;
provided, however, in the event such escrow arrangement would cause the Company
to be in default under the Credit Agreement, the Company shall take all action
to comply with the Credit Agreement (including using the proceeds of any such
sale to repay outstanding borrowings under the Credit Agreement) and, if
permitted under the Credit Agreement, make borrowings as soon as practicable
thereafter under the Credit Agreement in the amount of such proceeds for
deposit in such an escrow account.
ARTICLE 7
COVENANTS OF MERGER SUBSIDIARY
Merger Subsidiary agrees that:
SECTION 7.01. Obligations of Merger Subsidiary. Merger Subsidiary
covenants and agrees that it will use commercially reasonable efforts to
consummate the Merger on the terms and conditions set forth in this Agreement.
SECTION 7.02. Voting of Shares. Merger Subsidiary agrees to vote all
Shares beneficially owned by it in favor of adoption of the Company/Subsidiary
Merger Agreement and this Agreement at the Company Stockholder Meeting.
SECTION 7.03. Director and Officer Liability. The Surviving Corporation
hereby agrees to do the following:
(a) For six years after the Effective Time, the Surviving Corporation
shall indemnify and hold harmless the present and former officers and
directors of the Company and each of its Subsidiaries (each an
"Indemnified Person") in respect of acts or omissions occurring at or
prior to the Effective Time to the fullest extent permitted by the DGCL or
any other applicable laws or provided under the Company's certificate of
incorporation and by-laws in effect on the date hereof, provided that such
indemnification shall be subject to any limitation imposed from time to
time under applicable law.
(b) For six years after the Effective Time, the Surviving Corporation
shall provide officers' and directors' liability insurance in respect of
acts or omissions occurring prior to the Effective Time covering each such
Indemnified Person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage
and amount no less favorable than those of such policy in effect on the
date hereof; provided that the Surviving Corporation shall not be
obligated to make
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annual premium payments for such insurance to the extent such annual
premiums exceed 225% of the annual premiums paid as of the date hereof the
by Company for such insurance and provided, further, that if the premiums
with respect to such insurance exceed 225% of the annual premiums paid as
of the date hereof by the Company for such insurance, the Surviving
Corporation shall be obligated to obtain such insurance with the maximum
coverage as can be obtained at an annual premium equal to 225% of the
annual premiums paid by the Company as of the date hereof.
(c) If the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger, or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, to the
extent necessary, proper provision shall be made so that the successors
and assigns of Merger Subsidiary or the Surviving Corporation, as the case
may be, shall assume the obligations set forth in this Section 7.03.
(d) The rights of each Indemnified Person under this Section 7.03
shall be in addition to any rights such Person may have under the
certificate of incorporation or by-laws of the Company or any of its
Subsidiaries, or under the DGCL or any other applicable laws or under any
agreement of any Indemnified Person with the Company or any of its
Subsidiaries. These rights shall survive consummation of the Merger and
are intended to benefit, and shall be enforceable by, each Indemnified
Person.
SECTION 7.04. Employee Benefits After the Merger. (a) Merger Subsidiary
agrees that for a period of two years following the Effective Time, the
Surviving Corporation shall provide (i) compensation programs and plans, and
(ii) employee benefit and welfare plans, programs, contracts, agreements and
policies, fringe benefits and vacation policies, substantially equivalent to
the ones which are currently provided by the Company; provided that
notwithstanding anything in this Agreement to the contrary the Surviving
Corporation shall not be required to maintain any individual plan or program,
other than those contemplated by Section 2.06 and Section 9.01(g); provided,
that this provision shall terminate with respect to the participation in any
plans or programs by employees of any business transferred to any third party
after the Effective Time; and provided, further, that the Surviving Corporation
may offer all employees of the Surviving Corporation employee benefits under
"Wellness First" or "Choices" or substantially similar plans, notwithstanding
the fact that some employees may not be covered by such plan at the Effective
Time.
(b) Notwithstanding the foregoing, nothing in this Section 7.04 shall
preclude Surviving Corporation from seeking to (i) modify any employment
agreement with the consent of the affected employee or employees or (ii) modify
any Plan to the extent such modification is permitted by the terms of such Plan
and is consistent with Section 7.04(a).
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(c) Notwithstanding Section 7.04(a), employment of any of the employees by
the Surviving Corporation will be "at will" and may be terminated by the
Surviving Corporation at any time for any reason (subject to any legally
binding agreement other than this Agreement, or any applicable laws or
collective bargaining agreement, or any other arrangement or commitment). No
provision of this Section 7.04 shall confer any third party beneficiary rights
or benefits to any employee of the Surviving Corporation under this Agreement.
SECTION 7.05. Financing Arrangements. (a) Merger Subsidiary shall use its
commercially reasonable efforts to obtain financing in an amount at least equal
to the Required Amount, including by executing definitive agreements for the
Facilities on or prior to the Effective Time. The Commitment Letter and the
definitive agreements for the Facilities (along with any other document
pursuant to which Merger Subsidiary intends to obtain financing of all or a
portion of the Required Amount) are referred to herein collectively as the
"Financing Agreements." The Company will be afforded a reasonable opportunity
to review and comment on the representations and warranties contained in the
Financing Agreements and no such representation or warranty, insofar as it
relates to facts and circumstances relating to the Company and its
Subsidiaries, shall be included therein that the Company shall have advised
Merger Subsidiary is incorrect or inaccurate. Merger Subsidiary shall use
commercially reasonable efforts to ensure that the representations and
warranties contained in the Financing Agreements shall be consistent with the
Commitment Letter.
(b) Without limiting the generality of the foregoing, in the event that at
any time funds are not or have not been made available under the Financing
Agreements so as to enable Merger Subsidiary to proceed with the Merger in a
timely manner, Merger Subsidiary shall (i) use its commercially reasonable
efforts to obtain alternative funding in an amount at least equal to the
Required Amount on terms and conditions comparable to those provided in such
Financing Agreements or otherwise on terms reasonably acceptable to Merger
Subsidiary and (ii) shall continue to use its commercially reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement; provided, however,
nothing contained herein shall require Merger Subsidiary to obtain equity
financing in excess of the amount of equity financing contemplated in the
Commitment Letter.
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ARTICLE 8
COVENANTS OF MERGER SUBSIDIARY AND THE COMPANY
The parties hereto agree that:
SECTION 8.01. Commercially Reasonable Efforts. (a) Subject to the terms
and conditions of this Agreement and to the fiduciary duties of the Board of
Directors and the Special Committee under applicable law (as determined by such
directors in good faith), the Company and Merger Subsidiary will use
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the Transactions, including, to
assist Merger Subsidiary and cooperate with Merger Subsidiary and the Bank and
other lenders in order for Merger Subsidiary to establish its contemplated debt
financing arrangements. In furtherance and not in limitation of the foregoing,
the Company agrees to make, if required, an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the Equity
Sale Investments Agreement as promptly as practicable and in any event within
15 Business Days of the date hereof and to supply as promptly as practicable
any additional information and documentary material that may be requested
pursuant to the HSR Act and to take all other actions necessary to cause the
expiration or termination of the applicable waiting periods under the HSR Act
as soon as practicable.
(b) In connection with the efforts referenced in Section 8.01(a) to obtain
all requisite approvals and authorizations for the Transactions under any other
Antitrust Law, each of Merger Subsidiary and the Company shall use all
commercially reasonable efforts to (i) cooperate in all respects with each
other in connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a private
party, (ii) keep the other party informed in all material respects of any
material communication received by such party from, or given by such party to,
the Federal Trade Commission (the "FTC"), the Antitrust Division of the
Department of Justice (the "DOJ") or any other Governmental Authority and of
any material communication received or given in connection with any proceeding
by a private party, in each case regarding any of the Transactions and (iii)
permit the other party to review any material communication given by it to, and
consult with each other in advance of any meeting or conference with, the FTC,
the DOJ or any such other Governmental Authority or, in connection with any
proceeding by a private party, with any other Person.
SECTION 8.02. Certain Filings. The Company and Merger Subsidiary shall
cooperate with one another (i) in connection with the preparation of the
Company Proxy Statement and the Schedule 13E-3, (ii) in determining whether any
action by or in respect of, or filing with, any Governmental Authority is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with
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the consummation of the Transactions, and (iii) in taking such actions or
making any such filings, furnishing information required in connection
therewith or with the Company Proxy Statement and seeking timely to obtain any
such actions, consents, approvals or waivers. In addition, the Company will
cooperate and utilize all reasonable commercial efforts to obtain any and all
necessary consents required to consummate the sale of equity investments
pursuant to the Equity Investments Sale Agreement.
SECTION 8.03. Public Announcements. Merger Subsidiary and the Company will
consult with each other before issuing any press release or making any public
statement with respect to this Agreement or the Transactions and, except as may
be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation.
SECTION 8.04. Notices of Certain Events. Each of the Company and Merger
Subsidiary shall promptly notify the other of:
(a) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
Transactions;
(b) any notice or other communication from any Governmental Authority
in connection with the Transactions;
(c) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or
involving or otherwise affecting the Company or any of its Subsidiaries
that, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Section 4.12 or 4.13 hereof, or that
relate to the consummation of the Transactions;
(d) the occurrence or non-occurrence of any fact or event which would
be reasonably likely:
(i) to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any
time from the date hereof to the Effective Time, or
(ii) to cause any covenant, condition or agreement under this
Agreement not to be complied with or satisfied; and
(e) any failure of the Company or Merger Subsidiary, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that no
such notification shall affect the representations or warranties of any
party or the conditions to the obligations of any party hereunder.
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SECTION 8.05. Confidentiality. Prior to the Effective Time and after any
termination of this Agreement, each of Merger Subsidiary and the Company will
hold, and will use all commercially reasonable efforts to cause its officers,
directors, employees, accountants, counsel, consultants, advisors and agents to
hold, in confidence, all confidential documents and information concerning the
other party furnished to it or its Affiliates in connection with the
Transactions in accordance with the terms of the Confidentiality Agreement.
SECTION 8.06. Saturn Sales. (a) The Company hereby appoints the Adjustment
Committee (in their capacity as directors of the Saturn Subsidiary) the
Adjustment Committee and authorizes them to be in sole control in accordance
with the terms of this Agreement of the Saturn Sales, the Merger Consideration
Adjustment and the Option Consideration Adjustment to the extent the Saturn
Sales are not consummated prior to the Effective Time, including, without
limitation, to take any and all necessary, advisable or desirable action that
they deem appropriate in their sole discretion to direct the Saturn Sales and
administer the Merger Consideration Adjustment and the Option Consideration
Adjustment. Notwithstanding the foregoing, the consideration for the Saturn
Sales shall only be cash. Any proceeds that, in accordance with this Agreement,
constitute an Adjustment Amount shall be deposited in an escrow account on
terms satisfactory to the Adjustment Committee, pending payment of the Merger
Consideration Adjustment and the Option Consideration Adjustment with reference
thereto pursuant to the terms of this Agreement.
(b) The Surviving Corporation agrees to indemnify the Adjustment Committee
to the extent provided in Section 8.06(c) for a period of six years from the
date of the consummation of all Saturn Sales. For a period of six years from
the consummation of the Saturn Sales in full, the Surviving Corporation agrees
to provide officers and directors' liability insurance to the Adjustment
Committee comparable to that provided in Section 7.03(b). After the Effective
Time, each member of the Adjustment Committee shall be entitled to a fee, in
cash, per meeting (whether in person or via telephone conference), in an amount
equal to the amount payable prior to the Effective Time to members of the
Special Committee per meeting. Such fee will be payable upon consummation of
the Saturn Sales in full.
(c) So long as the Saturn Sales have not been consummated in full, the
Saturn Subsidiary shall have (x) the Adjustment Committee appointed as its
board of directors, (y) a certificate of incorporation and/or bylaws that
provide: (i) that the corporation only has the power and authority to own the
Saturn Equity Investment and to conduct the Saturn Sales and shall have no
authority to conduct business, other than to consummate the Saturn Sales in
accordance with the terms of this Agreement, and other business activities
ancillary to the ownership, voting and disposition of the Saturn Equity
Investment and contain such restrictions, which shall include, without
limitation, a prohibition on the incurrence of indebtedness and any other
obligations that are not related to its corporate purpose, (ii) that the
members of the board of directors may not be removed except for cause, (iii)
that the Saturn Subsidiary and its board of directors be indemnified by such
subsidiary and the Surviving Corporation and exculpated by such subsidiary in
its certificate of incorporation to the maximum extent permitted
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by law, except in each case, for action or inaction by such member of the board
of directors determined by a final judgment by a court of law to have been
taken with willful misconduct or gross negligence and, in the case of
indemnification, met any applicable standard of conduct required by law and
(iv) the stockholder of such subsidiary be unable to cause such subsidiary to
be in any type of bankruptcy or other similar proceeding.
(d) The Company or the Surviving Corporation, as the case may be, shall
have no further responsibility with respect to proceeds of Equity Investment
Sales or are Saturn Sales, upon payment of all Merger Consideration Adjustments
and Option Consideration Adjustments required to be paid pursuant to the terms
of this Agreement.
ARTICLE 9
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to Obligations of Each Party. The obligations of
the Company and Merger Subsidiary to consummate the Merger are subject to the
satisfaction of the following conditions:
(a) (i) the Company/Subsidiary Merger Agreement and the
Company/Subsidiary Merger shall have been approved by the holders of a
majority of the Company's outstanding capital stock entitled to vote for
directors (voting as a class) in accordance with the DGCL and the
Company/Subsidiary Certificate of Merger shall have been filed with the
Secretary of State of the State of Delaware in accordance with the DGCL,
in each case prior to the approvals contemplated by Section 9.01(a)(ii),
and (ii) this Agreement and the Merger shall have been approved by the
holders of (x) a majority of the Company's outstanding capital stock
entitled to vote for directors (voting as a class) in accordance with the
DGCL and (y) the majority of the Company's outstanding capital stock
entitled to vote for directors (other than the Continuing Shareholders) at
the Company Stockholder Meeting;
(b) any applicable waiting period under the HSR Act relating to the
sale of the Equity Investments pursuant to the Equity Investments Sale
Agreement shall have expired or been terminated;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger;
(d) all actions by or in respect of, or filings with, any
Governmental Authority required to permit the consummation of the Merger,
shall have been taken, made or obtained;
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(e) receipt of a solvency opinion addressed to each of the Special
Committee, the Board of Directors, Merger Subsidiary, the Sponsor and each
of the Equity Investors, as to the solvency of the Surviving Corporation
after giving effect to the Transactions;
(f) (i) the Equity Investments shall have been purchased pursuant to
the terms and conditions of the Equity Investments Sale Agreement (without
waiver, consent or amendment not previously approved by Merger Subsidiary
in writing) and the Company shall have received no less than $125.0
million in cash (or, no less than $116.0 million in cash to the extent a
right of first refusal process has not been completed prior to the
Effective Time with respect to certain Equity Investments (but not by
virtue of a refusal to consent to any such sale)) from such sale less any
amounts placed in escrow or used to pay outstanding borrowings under the
Credit Agreement pursuant to Section 6.01(g) and (ii) any amounts placed
in escrow pursuant to Section 6.01(g) shall have been released from
escrow;
(g) the Employee Retention Committee will address various matters
related to the Company's employees pursuant to an agreement of the
majority of the members of such committee on terms consistent with
Schedule 9.01(g);
(h) all licenses, permits, qualifications, consents, waivers,
approvals, authorizations or orders shall have been obtained and made by
the Company, except where the failure to receive such licenses, permits,
qualifications, consents, waivers, approvals, authorizations or orders,
individually or in the aggregate with all other such failures, would not
be reasonably expected to have a Material Adverse Effect (either before or
after giving effect to the Transactions); and
(i) unless the Saturn Sales have been consummated in full prior to
the Effective Time, the Company shall have transferred the Saturn Equity
Investment to a newly-formed wholly owned subsidiary (the "Saturn
Subsidiary") of the Company; provided, that the obligation of the Company
to pay any Merger Consideration Adjustment and the Option Consideration
Adjustment shall continue to be the obligation of the Company or the
Surviving Corporation, as the case may be, and shall not be shifted to
Saturn Subsidiary.
SECTION 9.02. Conditions to the Obligations of Merger Subsidiary. The
obligations of Merger Subsidiary to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) (i) the Company shall have performed in all material respects all
of its obligations hereunder required to be performed by it at or prior to
the Effective Time, (ii) the representations and warranties of the Company
contained in this Agreement and in any certificate or other writing
delivered by the Company pursuant hereto that
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are qualified by materiality or Material Adverse Effect shall be true, and
all other such representations and warranties of the Company shall be true
in all material respects, in each case at and as of the Effective Time as
if made at and as of such time and (iii) Merger Subsidiary shall have
received a certificate signed by a duly authorized officer of the Company
to the foregoing effect;
(b) no court, arbitrator or Governmental Authority, shall have issued
any order, and there shall not be any statute, rule or regulation,
restraining or prohibiting the consummation of the Merger or the effective
operation of any material portion of the business of Surviving Corporation
and its Subsidiaries after the Effective Time;
(c) the financing contemplated by the Commitment Letter to be
provided by the Bank shall have been completed on substantially the terms
and conditions identified in such Commitment Letter or on such other terms
and conditions or involving such other financing sources, as are
acceptable to Merger Subsidiary and the Company and are not materially
more onerous; provided, however, that this condition shall be deemed
satisfied if the failure of this condition is due to a willful breach by
Merger Subsidiary of any covenant or willful failure to perform any
agreement or a willful breach by Merger Subsidiary of any representation
or warranty contained in any of the Financing Agreements with the Bank;
(d) the Corporate Services Agreement shall have been modified by an
amendment, in form reasonably satisfactory to the Original Company
Shareholder and Merger Subsidiary, to provide for transitional services by
the Original Company Shareholder to the Surviving Corporation identical to
those services provided under the Corporate Services Agreement on the date
hereof and on the same terms as in effect on the date hereof; provided
such transitional services need not be provided beyond 18 months after the
Effective Time and legal services which may be provided under such
agreement need not be provided beyond 6 months after the Effective Time;
(e) Merger Subsidiary shall have received copies of the resolutions
of the Board of Directors of the Company dated prior to the Effective Time
approving the directors of Merger Subsidiary as the directors of the
Surviving Corporation and Merger Subsidiary shall be satisfied that the
Transactions will not constitute a "change of control" under any
Restricted Stock Plan; Merger Subsidiary shall have received copies of the
resolutions of the Committees administering the Option Plan and Restricted
Stock Plans approving the matters contemplated by Section 2.06 hereof and
shall have received copies of the New Awards;
(f) the Amended and Restated Securities Purchase Agreement dated as
of November 23, 1993 as amended on October 1, 1996 between the Company and
the Original Company Shareholder shall have been terminated. The Company
and the
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Company Subsidiaries shall have entered into the Subordinated Loan
Agreement in the form attached hereto as Exhibit I;
(g) the Company shall have obtained from the New Jersey Department of
Environmental Protection either (i) a declaration of non-applicability of
the ISRA to the Merger or any other transactions contemplated thereby, or
(ii) approval of a negative declaration or other action required to comply
with ISRA, in each case, which is not in excess of $2.0 million;
(h) each of the Company Shareholder, IS and FS shall have performed
in all material respects all of its obligations required to be performed
by it at or prior to the Effective Time and the representations and
warranties of each of Company Shareholder, IS and FS contained in the
Exchange and Voting Agreement shall be true as if made at the Effective
Time;
(i) the Class A Preferred Stock and Class B Preferred Stock shall
have been issued prior to the Effective Time to the Continuing
Shareholders in accordance with the terms of this Agreement and the
Exchange and Voting Agreement; and
(j) stockholders of the Company representing not more than 10% of the
Shares shall have demanded appraisal rights pursuant to Section 262 of the
DGCL.
SECTION 9.03. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction of the following further conditions:
(a) (i) Merger Subsidiary shall have performed in all material
respects all of its obligations hereunder required to be performed by it
at or prior to the Effective Time, (ii) the representations and warranties
of Merger Subsidiary contained in this Agreement and in any certificate or
other writing delivered by Merger Subsidiary pursuant hereto that are
qualified by materiality or Material Adverse Effect shall be true, and all
other such representations or warranties of Merger Subsidiary shall be
true in all material respects, in each case at and as of the Effective
Time as if made at and as of such time and (iii) the Company shall have
received a certificate signed by a duly authorized manager of Merger
Subsidiary to the foregoing effect; and
(b) no court, arbitrator or governmental body, agency or official,
domestic or foreign, shall have issued any order, and there shall not be
any statute, rule or regulation, restraining or prohibiting the
consummation of the Merger.
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ARTICLE 10
TERMINATION
SECTION 10.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the Company Stockholders):
(a) by mutual written agreement of the Company and Merger Subsidiary;
(b) by either the Company or Merger Subsidiary, if:
(i) the Merger has not been consummated on or before December
20, 2000 (the "End Date"), provided that the right to terminate this
Agreement pursuant to this Section 10.01(b)(i) shall not be available
to any party whose breach of any provision of this Agreement results
in the failure of the Merger to be consummated by such time;
(ii) there shall be any law or regulation that makes
consummation of the Merger illegal or otherwise prohibited or any
judgment, injunction, order or decree of any Governmental Authority
having competent jurisdiction enjoining Company or Merger Subsidiary
from consummating the Merger is entered and such judgment,
injunction, order or decree shall have become final and
nonappealable;
(iii) the Company/Subsidiary Merger Agreement, the
Company/Subsidiary Merger, this Agreement and the Merger shall not
have been adopted in accordance with this Agreement, the DGCL and the
DLLCA by the Company Stockholders at the Company Stockholder Meeting
(or any adjournment thereof); or
(iv) as permitted by Section 6.04 hereof, the Special Committee
or Board of Directors shall have failed to make or withdrawn, or
modified in a manner adverse to Merger Subsidiary, its approval or
recommendation of this Agreement or the Merger;
(c) by Merger Subsidiary, if a breach of or failure to perform any
representation, warranty, covenant or agreement set forth in this
Agreement shall have occurred that would cause the condition set forth in
Section 9.02(a) hereof not to be satisfied, and such condition is
incapable of being satisfied by the End Date; or
(d) by the Company, if a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of the Merger
Subsidiary or Merger
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<PAGE>
Subsidiary set forth in this Agreement shall have occurred that would
cause the condition set forth in Section 9.03(a) hereof not to be
satisfied, and such condition is incapable of being satisfied by the End
Date.
The party desiring to terminate this Agreement pursuant to this Section
10.01 (other than pursuant to Section 10.01(a)) shall give notice of such
termination to the other party.
SECTION 10.02. Effect of Termination. If this Agreement is terminated
pursuant to Section 10.01 hereof, this Agreement shall become void and of no
effect without liability of any party (or any stockholder, member, manager,
director, officer, employee, agent, consultant or representative of such party)
to the other party hereto. The provisions of Sections 8.05, 11.04, 11.06, 11.07
and 11.08 shall survive any termination hereof pursuant to Section 10.01.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile transmission) and
shall be given,
if to Merger Subsidiary, to:
Heartland Industrial Partners, L.P.
320 Park Avenue, 33rd Floor
New York, New York 10022
Fax: (212) 981-3535
Attn: David A. Stockman
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Fax: (212) 269-5420
Attn: W. Leslie Duffy, Esq.
Jonathan A. Schaffzin, Esq.
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<PAGE>
if to the Company, to:
MascoTech, Inc.
21001 Van Born Road
Taylor, Michigan 48180
Fax: (313) 792-6135
Attn: Chairman of Board
General Counsel
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Fax: (212) 450-4800
Attn: Leonard Kreynin, Esq.
and to:
The Special Committee of the Company
c/o Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243-1668
Fax: (313) 568-6545
Attn: Fredrick Miller, Esq.
with a copy to:
Dykema Gossett PLLC
400 Renaissance Center
Detroit, Michigan 48243-1668
Fax: (313) 568-6545
Attn: Fredrick Miller, Esq.
or such other address or facsimile number as such party may hereafter specify
for the purpose by notice to the other parties hereto. All such notices,
requests and other communications shall be deemed received on the date of
receipt by the recipient thereof if received prior to 5:00 p.m., and such day
is a Business Day, in the place of receipt. Otherwise, any such notice, request
or communication shall be deemed not to have been received until the next
succeeding Business Day in the place of receipt.
SECTION 11.02. Survival of Representations and Warranties. The
representations and warranties and agreements contained herein and in any
certificate or other writing
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<PAGE>
delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement, except for the agreements set forth in Sections
2.04(c) and (f), 2.06, 7.03, 7.04, 8.05, 8.06, 10.02, 11.04, 11.06, 11.07 and
11.08.
SECTION 11.03. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived prior to the Effective Time if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment,
by each party to this Agreement or, in the case of a waiver, by each party
against whom the waiver is to be effective, provided that, after the adoption
of this Agreement by the Company Stockholders and without their further
approval, no such amendment or waiver shall reduce the amount or change the
kind of consideration to be received in exchange for any shares of capital
stock of the Company or change the certificate of incorporation of the
Surviving Corporation.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 11.04. Expenses; Topping Fee. (a) Except as otherwise provided in
this Section, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
(b) If (x) this Agreement is terminated by the Company or Merger
Subsidiary, (y) the conditions set forth in Section 9.02(a)(i) would not be
satisfied at the date of termination and the condition set forth in Section
9.03(a)(i) would be satisfied at the date of termination, and (z) the Company
has not previously paid to Merger Subsidiary the Topping Fee in accordance with
Section 11.04(c), the Company shall promptly reimburse Merger Subsidiary for
all reasonable and documented out-of-pocket expenses and fees (including,
without limitation, expenses payable to all banks, investment banking firms and
other financial institutions (which shall include, without limitation, fees and
expenses of such banks', firms' and institutions' legal counsel), and all
reasonable fees and expenses of counsel, accountants, financial printers,
experts and consultants to Merger Subsidiary and its affiliates), whether
incurred prior to, on or after the date hereof, in connection with the
Transactions and the other matters contemplated by this Agreement, and the
financing thereof; provided, however, that the reimbursement for costs and
expenses provided in this Section 11.04(b) shall not exceed $2.0 million.
(c) (i) If (x) any Third Party shall have made, proposed, communicated or
disclosed an Acquisition Proposal in a manner which is or otherwise becomes
public prior to the termination of this Agreement, (y) this Agreement is
terminated by either Merger Subsidiary or the Company pursuant to Section
10.01(b)(iii) or Section 10.01(b)(iv) and (z) within six months of such
termination the Company or any of its Subsidiaries shall have entered into a
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<PAGE>
definitive agreement with respect to an Acquisition Proposal or consummated an
Acquisition Proposal, the Company shall promptly pay Merger Subsidiary the
Topping Fee immediately prior to the earlier of (a) the execution of a
definitive agreement with respect to such Acquisition Proposal or (b) the
consummation of the Acquisition Proposal.
(ii) If (x) any Third Party shall have made, proposed, communicated or
disclosed an Acquisition Proposal in a manner which is or otherwise becomes
public prior to the termination of this Agreement, (y) this Agreement is
terminated pursuant to Section 10.01(b)(i) or Section 10.01(c) and (z) within
six months of such termination, the Company or any of its Subsidiaries shall
have entered into a definitive agreement with respect to an Acquisition
Proposal with such Third Party or consummated an Acquisition Proposal with such
Third Party, the Company shall promptly pay Merger Subsidiary the Topping Fee
immediately prior to the earlier of (a) the execution of a definitive agreement
with respect to such Acquisition Proposal or (b) the consummation of such
Acquisition Proposal.
SECTION 11.05. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of each other party hereto, except that Merger Subsidiary
may transfer or assign, in whole or from time to time in part, to one or more
of their Affiliates, the right to enter into the transactions contemplated by
this Agreement, but any such transfer or assignment will not relieve Merger
Subsidiary of its obligations hereunder.
SECTION 11.06. Governing Law. The validity, construction and effect of
this Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Delaware, without giving effect to the principles
of conflicts of law of such state.
SECTION 11.07. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the Transactions shall be brought in any
federal court located in the State of Delaware or any Delaware state court, and
each of the parties hereby consents to the jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by law, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding brought in any such court has been brought in an inconvenient
form. Process in any such suit, action or proceeding may be served on any party
anywhere in the world, whether within or without the jurisdiction of any such
court. Without limiting the foregoing, each party agrees that service of
process on such party as provided in Section 11.01 hereof shall be deemed
effective service of process on such party.
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<PAGE>
SECTION 11.08. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS.
SECTION 11.09. Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
Except as provided in Section 7.03 and with respect to the indemnification and
compensation to be provided to the Adjustment Committee pursuant to Section
8.06 and Section 9.01(i), no provision of this Agreement is intended to confer
any rights, benefits, remedies, obligations or liabilities hereunder upon any
Person other than the parties hereto and their respective successors and
assigns.
SECTION 11.10. Entire Agreement. This Agreement and the Confidentiality
Agreement constitute the entire agreement between the parties with respect to
the subject matter of this Agreement and supersede agreements and
understandings, both oral and written, between the parties with respect to the
subject matter of this Agreement. Exhibits referred to herein are incorporated
by reference herein and shall constitute a part of this Agreement.
SECTION 11.11. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
SECTION 11.12. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
Upon such a determination, the parties shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner so that the Transactions be consummated as
originally contemplated to the fullest extent possible.
SECTION 11.13. Specific Performance. The parties hereto agree that
irreparable damage would occur if any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
or to enforce specifically the performance of the terms and provisions hereof
in any federal court located in the State of Delaware or any Delaware state
court, in addition to any other remedy to which they are entitled at law or in
equity.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
MASCOTECH, INC.
By: /s/ Timothy Wadhams
-------------------------------
Name: Timothy Wadhams
Title: Executive Vice president-
Finance and Administration
RIVERSIDE COMPANY LLC
By: /s/ Daniel P. Tredwell
-------------------------------
Name: Daniel P. Tredwell
Title: Vice President & Secretary
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<PAGE>
EXHIBIT E
CERTIFICATE OF INCORPORATION
OF
MASCOTECH, INC.
* * * * *
1. The name of the corporation is:
MascoTech, Inc.
2. The address of its registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle 19801. The name of its registered agent at such address is
The Corporation Trust Company.
3. The nature of the business or purpose to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
now or hereafter be organized under the General Corporation Law of the State of
Delaware (the "Delaware General Corporation Law").
4. The total number of shares of stock the corporation shall have
authority to issue is two hundred seventy-five million (275,000,000) shares. Two
hundred fifty million (250,000,000) of such shares shall consist of common
shares, par value one dollar ($1.00) per share, and twenty-five million
(25,000,000) of such shares shall consist of preferred shares, par value one
dollar ($1.00) per share. The designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions thereof are as
follows:
A. Each share of common stock shall be equal in all respects to
all other shares of such stock, and each share of outstanding common
stock is entitled to one vote.
B. Each share of preferred stock shall have or not have voting
rights as determined by the Board of Directors prior to issuance.
The Board of Directors shall have authority to divide the shares
of preferred stock into series and fix, from time to time before
issuance, the number of shares to be included in any series and the
designation, relative participating, optional or other rights, powers,
preferences, qualifications, restrictions and limitations of all shares
of such series. The authority of the Board of Directors with respect to
each series shall include, without limitation, the determination of any
or all of the following, and the shares of each series may vary from the
shares of any other in the following respects:
<PAGE>
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(a) the number of shares constituting such series and the designation
thereof to distinguish the shares of such series from the shares of any
other series; (b) the rate of dividend, cumulative or noncumulative, and
the extent of further participation in dividend distribution, if any; (c)
the terms and conditions upon which the shares may be redeemable by the
Company; (d) sinking fund provisions for the redemption or purchase of
shares, if any; (e) the voting rights; and (f) the terms and conditions
upon which the shares are convertible into other classes of stock of the
Company, if such shares are to be convertible.
C. Terms of Series A Preferred Stock.
(1) DESIGNATION. Three hundred seventy thousand (370,000) shares
of Preferred Stock, par value one dollar ($1.00) per share, shall be
designated "Series A Preferred Stock." The Series A Preferred Stock shall
have the following rights, terms and privileges set forth in subsections
(2) through (10) below.
(2) DIVIDENDS ON SERIES A PREFERRED STOCK. (a) The holders of the
Series A Preferred Stock shall be entitled to receive, when, as and if
declared by the Company's Board of Directors, out of the funds of the
Company legally available therefor pursuant to the Delaware General
Corporation Law (the "Legally Available Funds"), cumulative dividends on
each share of Series A Preferred Stock for each Quarterly Dividend Period
(as hereinafter defined) equal to the Liquidation Preference (as
hereinafter defined) of each such share multiplied by a rate (with
respect to the Series A Preferred Stock, the "Quarterly Dividend Rate")
equal to (1) 13% per annum for periods ending on or prior to December 31,
2005 and (2) 15% per annum for periods thereafter, plus, in either case,
2% per annum for any period for which there are any accrued and unpaid
dividends. Such dividends shall be cumulative from the date of original
issue of such shares. Accrued and unpaid dividends on the Series A
Preferred Stock shall accrue additional dividends in respect thereof
(with respect to the Series A Preferred Stock, the "Additional
Dividends"), compounded quarterly, at the Quarterly Dividend Rate then
applicable to the Series A Preferred Stock. Each such dividend shall be
paid to the holders of record of shares of Series A Preferred Stock as
they appear on the stock register of the Company on such record date as
shall be fixed by the Board of Directors of the Company or a duly
authorized committee thereof, which date shall be not more than 30 days
nor less than 10 days preceding the dividend payment date relating
thereto.
(b) If dividends (including Additional Dividends) are not paid in
full or declared in full and sums are not set apart for the payment
thereof upon the Series A Preferred Stock and any other Parity Securities
(as hereinafter defined), all dividends declared upon shares of Series A
Preferred Stock and any other Parity Securities shall be declared pro rata
so that in all cases the amount of dividends declared per share on the
<PAGE>
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Series A Preferred Stock and such other Parity Security shall bear to each
other the same ratio that accumulated dividends per share, including
dividends accrued or in arrears, if any, on the shares of Series A
Preferred Stock and such other Parity Security shall bear to each other;
provided that no dividends shall be declared on any Parity Security if the
Series A Preferred Stock is in arrearage unless the number of Quarterly
Dividend Periods for which the Series A Preferred Stock is in arrears does
not exceed the number of quarterly periods for which such Parity Security
is in arrearage immediately prior to the making of the such pro rata
dividends.
(c) Dividends (including Additional Dividends) payable on the
Series A Preferred Stock for any period less than a full Quarterly
Dividend Period shall be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed in the period for
which payable.
(d) "Quarterly Dividend Period" means, with respect to the Series
A Preferred Stock, the period from January 1 through the next March 31,
from April 1 through the next June 30, from July 1 through the next
September 30, or from October 1 through the next December 31, as the case
may be; provided that the first Quarterly Dividend Period shall mean the
period commencing the day shares of Series A Preferred Stock are
originally issued and ending on March 31, 2001.
(e) "Business Day" means, with respect to the Series A Preferred
Stock, any day other than a Saturday, a Sunday or any day on which banking
institutions in the State of New York or the New York Stock Exchange is
closed.
(3) REDEMPTION OF SERIES A PREFERRED STOCK.
(a) Mandatory Redemption. The Company shall redeem, out of Legally
Available Funds, on December 31, 2012 all then outstanding shares of
Series A Preferred Stock at a redemption price of 100% of the Liquidation
Preference (as hereinafter defined). Immediately prior to authorizing or
making any such redemption with respect to the Series A Preferred Stock,
the Company, by resolution of its Board of Directors shall, to the extent
of any Legally Available Funds, declare a dividend on the Series A
Preferred Stock payable on the redemption date in an amount equal to any
accrued and unpaid dividends (including Additional Dividends) on the
Series A Preferred Stock as of such date and, if the Company does not have
sufficient Legally Available Funds to declare and pay all dividends
(including Additional Dividends) accrued at the time of such redemption,
any remaining accrued and unpaid dividends (including Additional
Dividends) shall be added to the redemption price. If the Company shall
fail to discharge its obligation to redeem all of the outstanding shares
of Series A Preferred Stock required to be redeemed pursuant to this
subsection (3) (the "Series A Mandatory Redemption Obligation"), the
Series A Mandatory Redemption Obligation shall be dis-
<PAGE>
-4-
charged as soon as the Company is able to discharge such Series A
Mandatory Redemption Obligation and the Voting Period set forth in
subsection (7) will apply in accordance with its terms, without otherwise
affecting the Company's obligations hereunder.
(b) Optional Redemption. The Series A Preferred Stock shall be
redeemable, in whole or in part, out of Legally Available Funds, at the
option of the Company by resolution of its Board of Directors, at a
redemption price of 101% of the Liquidation Preference (as hereinafter
defined) at any time after December 31, 2005, upon giving notice as
provided in paragraph (c) below; provided that, notwithstanding the
foregoing, the Company may exercise the foregoing redemption right on or
prior to December 31, 2005 using the net proceeds from any issuance of
shares of capital stock of the Company. Immediately prior to authorizing
or making any such redemption with respect to the Series A Preferred
Stock, the Company by resolution of its Board of Directors shall, to the
extent of any Legally Available Funds, declare a dividend on the Series A
Preferred Stock payable on the redemption date in an amount equal to any
accrued and unpaid dividends (including Additional Dividends) on the
Series A Preferred Stock as of such date and if the Company does not have
sufficient Legally Available Funds to declare and pay all dividends
(including Additional Dividends) accrued at the time of such redemption,
any remaining accrued and unpaid dividends (including Additional
Dividends) shall be added to the redemption price. Notwithstanding the
provisions of this paragraph (b) or of subsection (9), unless the full
cumulative dividends (including Additional Dividends) on all outstanding
shares of Series A Preferred Stock shall have been paid or
contemporaneously are declared and paid for all past dividend periods,
none of the shares of Series A Preferred Stock shall be redeemed unless
all outstanding shares of Series A Preferred Stock are simultaneously
redeemed.
(c) Notice of Redemption. At least 30 days but not more than 60
days prior to the date fixed for the redemption of shares of the Series A
Preferred Stock pursuant to paragraph (a) or (b) above, a written notice
shall be mailed to each holder of record of shares of Series A Preferred
Stock to be redeemed in a postage prepaid envelope addressed to such
holder at his post office address as shown on the records of the Company,
notifying such holder of the election of the Company to redeem such
shares, stating the date fixed for redemption thereof (hereinafter
referred to as the redemption date) and calling upon such holder to
surrender to the Company on the redemption date at the place designated in
such notice his certificate or certificates representing the number of
shares specified in such notice of redemption. On or after the redemption
date each holder of shares of Series A Preferred Stock to be redeemed
shall present and surrender his certificate or certificates for such
shares to the Company at the place designated in such notice and thereupon
the redemption price of such shares shall be paid to or on the order of
the person whose name appears on such certificate or certificates as the
owner
<PAGE>
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thereof and each surrendered certificate shall be canceled. In case less
than all the shares represented by such certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and
after the redemption date (unless default shall be made by the Company in
payment of the redemption price) all dividends on the shares of Series A
Preferred Stock designated for redemption in such notice shall cease to
accrue and all rights of the holders thereof as stockholders of the
Company, except the right to receive the redemption price thereof
(including an amount equal to all accrued and unpaid dividends up to the
redemption date) upon the surrender of certificates representing the
same, shall cease and terminate and such shares shall not thereafter be
transferred (except with the consent of the Company) on the books of the
Company and such shares shall not be deemed to be outstanding for any
purpose whatsoever. At its election, the Company prior to the redemption
date may deposit the redemption price (including an amount equal to all
accrued and unpaid dividends up to the redemption date) of the shares of
Series A Preferred Stock so called for redemption in trust for the
holders thereof with a bank or trust company in the Borough of Manhattan,
City and State of New York, in which case such notice to holders of the
Series A Preferred Stock to be redeemed shall state the date of such
deposit, shall specify the office of such bank or trust company as the
place of payment of the redemption price and shall call upon such holders
to surrender the certificates representing such shares at such price on
or after the date fixed in such redemption notice (which shall not be
later than the redemption date) against payment of the redemption price
(including all accrued and unpaid dividends up to the redemption date).
From and after the making of such deposit, the shares of Series A
Preferred Stock so designated for redemption shall not be deemed to be
outstanding for any purpose whatsoever and the rights of the holders of
such shares shall be limited to the right to receive the redemption price
of such shares (including all accrued and unpaid dividends up to the
redemption date), without interest, upon surrender of the certificates
representing the same to the Company at said office of such bank or trust
company. Any interest accrued on such funds shall be paid to the Company
from time to time. Any moneys so deposited which shall remain unclaimed
by the holders of such Series A Preferred Stock at the end of six months
after the redemption date shall be returned by such bank or trust company
to the Company, after which the holders of the Series A Preferred Stock
shall have no further interest in such moneys, except as unsecured
claimants of the Company.
(d) Reissuances. Shares of Series A Preferred Stock which have
been issued and reacquired in any manner, including shares purchased or
redeemed or exchanged, shall be cancelled and retired and shall not be
reissued as shares of Series A Preferred Stock and, following any required
filing with the Delaware Secretary of State, such shares shall resume the
status of authorized but unissued shares of preferred stock.
<PAGE>
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(e) Selection of Shares to be Redeemed. If less than all of the
shares of Series A Preferred Stock are to be redeemed, the Board of
Directors of the Company shall allocate the total liquidation preference
to be redeemed pro rata.
(4) CHANGE IN CONTROL. (a) If a Change in Control (as hereinafter
defined) shall occur at any time, then each holder of Series A Preferred
Stock shall have the right to require that the Company purchase such
holder's Series A Preferred Stock, in whole or in part, out of Legally
Available Funds at a cash purchase price (a "Change in Control Payment")
in an amount equal to 101% of the Liquidation Preference, plus accrued
and unpaid dividends, if any, to the date of purchase, pursuant to the
offer described below (the "Change in Control Offer") and the other
procedures set forth herein.
(b) Within the time period specified in subsection (4)(d) below,
the Company will mail a notice to each holder of Series A Preferred Stock,
with the following information: (i) a Change in Control Offer is being
made pursuant to this subsection (4) and that all Series A Preferred Stock
properly tendered pursuant to such Change in Control Offer will be
accepted for payment; (ii) the purchase price and the purchase date, which
will be no earlier than 30 days nor later than 60 days from the date such
notice is mailed, except as may be otherwise required by applicable law
(the "Change in Control Payment Date"); (iii) any Series A Preferred Stock
not properly tendered will remain outstanding and continue to accrue
dividends; (iv) unless the Company defaults in making the Change in
Control Payment, all Series A Preferred Stock accepted for payment
pursuant to the Change in Control Offer will cease to accumulate dividends
on the Change in Control Payment Date; (v) holders of Series A Preferred
Stock electing to have any shares of Series A Preferred Stock purchased
pursuant to a Change in Control Offer will be required to surrender such
shares, properly endorsed for transfer, to the transfer agent for the
Series A Preferred Stock at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change in
Control Payment Date; (vi) holders of Series A Preferred Stock will be
entitled to withdraw their tendered shares of Series A Preferred Stock and
their election to require the Company to purchase such shares, provided
that the transfer agent receives, not later than the close of business on
the last day of the offer period, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder of Series A
Preferred Stock, the number of shares of Series A Preferred Stock tendered
for purchase, and a statement that such holder is withdrawing his tendered
shares of Series A Preferred Stock and his election to have such shares of
Series A Preferred Stock purchased; and (vii) that holders whose shares of
Series A Preferred Stock are being purchased only in part will be issued
new shares of Series A Preferred Stock equal in number to the unpurchased
portion of the shares of Series A Preferred Stock surrendered.
<PAGE>
-7-
(c) On the Change in Control Payment Date, the Company shall, to
the extent permitted by law, (i) accept for payment all shares of Series A
Preferred Stock properly tendered pursuant to the Change in Control Offer,
(ii) deposit with the transfer agent for the Series A Preferred Stock an
amount in cash equal to the aggregate Change in Control Payment in respect
of all shares of Series A Preferred Stock so tendered and (iii) deliver,
or cause to be delivered, to such transfer agent for cancellation the
shares of Series A Preferred Stock so accepted. The Company shall promptly
mail, or cause to be mailed, to each holder of Series A Preferred Stock
the Change in Control Payment for such Series A Preferred Stock, and new
shares of Series A Preferred Stock equal in aggregate liquidation
preference to any unpurchased portion of Series A Preferred Stock
surrendered, if any. The Company shall publicly announce the results of
the Change in Control Offer on or as soon as practicable after the Change
in Control Payment Date. The Company may act as transfer agent for the
Series A Preferred Stock.
(d) The Company shall mail the notice referred to in subsection
(4)(b) above not later than 60 days after learning of a Change in Control
specified in clause (e)(1) or (2) below or not more than 60 days after an
occurrence specified in clause (e)(3) or (4) (except to the extent the
occurrence referred to in clause (e)(4) would otherwise have occurred
under clause (e)(1) or (2) below) (such 60th day being the "Notice Trigger
Date"). Prior to making a Change in Control Offer, but in any event not
later than the Notice Trigger Date, the Company covenants to (i) repay in
full all indebtedness under agreements containing change of control puts
or defaults (and terminate all commitments thereunder) or offer to repay
in full all such indebtedness (and terminate all commitments) and to repay
the indebtedness owed to (and terminate the commitments of) each creditor
which has accepted such offer or (ii) obtain the requisite consents in
respect of such indebtedness to permit the purchase of the Series A
Preferred Stock. The Company will first comply with the covenant in the
preceding sentence before it will be required to repurchase Series A
Preferred Stock pursuant to the provisions described below; provided that
the Company's failure to comply with the covenant described in the
preceding sentence shall give rise to a Voting Period under subsection (7)
below, without otherwise affecting the Company's obligations hereunder.
(e) The occurrence of any of the following events will constitute
a "Change in Control":
(1) if Heartland Industrial Partners, L.P. and its Affiliates
(collectively "Heartland") (i) cease to directly or indirectly
beneficially own 40% or more of the number of shares of common
stock of the Company received by them in the merger (appropriately
adjusted for stock splits, combinations, subdivisions, stock
dividends and similar events) provided for under the
Recapitalization Agreement dated as of August 1, 2000 between the
Company and
<PAGE>
-8-
Riverside Company LLC (the "Recapitalization Agreement") (after
taking account of any commitments or agreements in principle
existing prior to such merger for Heartland to sell some of its
shares of common stock of the Company following such merger) or
(ii) do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the
Board of Directors of the Company or (iii) cease to, directly or
indirectly, beneficially own 30% or more of the outstanding shares
of the Company's common stock, provided that this clause (iii)
shall only be operative as long as Masco Corporation or its
controlled affiliates own a majority of the then outstanding
shares of Series A Preferred Stock in order to amend (in its sole
discretion) this Certificate of Incorporation; provided that the
foregoing subclause (ii) and (iii) will not be operative after any
underwritten public offering of common stock of the Company;
(2) any person or group within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934 (the "1934 Act")
other than Heartland (an "other entity") shall attain beneficial
ownership, within the meaning of Rule 13d-3 adopted under the 1934
Act, of capital stock representing a majority of the voting power
for the election of the Directors of the Company;
(3) the Company, directly or indirectly, consolidates or
merges with any other entity or sells or leases it properties and
assets substantially as an entirety to any other entity, provided
that this clause shall not apply to a transaction if, immediately
following such transaction, no person or group, within the meaning
of Section 13(d)(3) of the 1934 Act, other than Heartland,
beneficially owns capital stock representing a majority of the
voting power for the election of Directors of the Company; and
(4) any event constituting a "change of control" in the
Company's Senior Credit Facilities. As used herein, "Senior Credit
Facilities" means the Credit Agreement, to be dated as of the date
of the Merger (as defined under the Recapitalization Agreement
dated August 1, 2000 between the Company and Riverside Company
LLC), among The Chase Manhattan Bank, Chase Securities Inc., the
Company and certain of its subsidiaries and the other lenders and
financial institutions party thereto from time to time, as the
same may be amended, modified, waived, refinanced or replaced from
time to time (whether under a new credit agreement or otherwise).
(5) QUALIFYING EQUITY. In the event of an Equity Offering
Triggering Event (as hereinafter defined), each holder of Series A
Preferred Stock shall have the right to require that the Company purchase
each such holder's Series A Preferred Stock, in whole or in part, out of
Legally Available Funds at a cash purchase price (a
<PAGE>
-9-
"Qualifying Equity Payment") in an amount equal to 101% of the Series A
Liquidation Preference, plus accumulated and unpaid dividends, if any, to
the date of purchase, but only to the extent of the Excess Proceeds (as
hereinafter defined) received by the Company in the case of an Equity
Offering Triggering Event referred to in clause (x) of the definition
thereof or out of the net proceeds received by the Company from any
Subsequent Offering (the "Subsequent Offering Proceeds"), in the case of
an Equity Offering Triggering Event referred to in clause (y) of the
definition thereof, pursuant to the offer described below (the
"Qualifying Equity Proceeds Offer") and the other procedures set forth
herein. As used herein, "Equity Offering Triggering Event" means either
(x) one or more underwritten public offerings of common stock of the
Company for gross proceeds to the Company of $200.0 million or more and
to the extent that there are net proceeds to the Company in excess of
amounts required to finance any proposed or contemplated Acquisition (as
hereinafter defined) as determined in good faith by the Board of
Directors (such determination of the Board of Directors of the Company
shall be conclusive), whether or not publicly announced, or refinance,
refund or replace any debt or preferred stock, incurred, issued or
assumed in connection with any Acquisition ("Excess Proceeds") (the first
or more recent of such offerings being referred to as a "Qualifying
Equity Offering") or (y) the occurrence of (i) an underwritten initial
public offering of common stock of the Company and (ii) the occurrence of
any subsequent underwritten primary public offering of common stock of
the Company (a "Subsequent Offering"), provided that the aggregate
proceeds to the Company from such offerings under this clause (y) is
$400.0 million or more (the "Gross Proceeds Condition") (such Subsequent
Offering is also referred to as a "Qualifying Equity Offering" to the
extent the Gross Proceeds Condition is satisfied). Once a Qualifying
Equity Proceeds Offer is made with respect to any and all outstanding
shares of Series A Preferred Stock, no further Qualifying Equity Proceeds
Offer need be made.
Within 30 days following any Qualifying Equity Offering, the
Company will mail a notice to each holder of Series A Preferred Stock to
the extent of the Excess Proceeds or Subsequent Offering Proceeds, as the
case may be,, with the following information: (i) A Qualifying Equity
Proceeds Offer is being made pursuant to this subsection (5), and that
all Series A Preferred Stock properly tendered pursuant to such
Qualifying Equity Proceeds Offer will be accepted for payment on a pro
rata basis (or as nearly a pro rata basis as practicable) to the extent
of the Excess Proceeds or Subsequent Offering Proceeds, as the case may
be; (ii) the purchase price and the purchase date, which will be no
earlier than 30 days nor later than 60 days from the date such notice is
mailed, except as may be otherwise required by applicable law (the
"Qualifying Equity Payment Date"); (iii) any Series A Preferred Stock not
properly tendered will remain outstanding and continue to accumulate
dividends; (iv) unless the Company defaults in the payment of the
Qualifying Equity Payment, all Series A Preferred
<PAGE>
-10-
Stock accepted for payment pursuant to the Qualifying Equity Proceeds
Offer will cease to accumulate dividends on the Qualifying Equity Payment
Date; (v) holders of Series A Preferred Stock electing to have any shares
of Series A Preferred Stock purchased pursuant to a Qualifying Equity
Proceeds Offer will be required to surrender such shares, properly
endorsed for transfer, to the transfer agent for the Series A Preferred
Stock at the address specified in the notice prior to the close of
business on the third Business Day preceding the Qualifying Equity
Payment Date; (vi) holders of Series A Preferred Stock will be entitled
to withdraw their tendered shares of Series A Preferred Stock and their
election to require the Company to purchase such shares; provided that
the transfer agent receives, not later than the close of business on the
last day of the offer period, a telegram, telex, facsimile transmission
or letter setting forth the name of the holder of the Series A Preferred
Stock, the aggregate liquidation preference of Series A Preferred Stock
tendered for purchase, and a statement that such holder is withdrawing
his tendered shares of Series A Preferred Stock and his election to have
such shares of Series A Preferred Stock purchased; and (vii) that holders
whose shares of Series A Preferred Stock are being purchased only in part
will be issued new shares of Series A Preferred Stock equal in number to
the unpurchased portion of the shares of Series A Preferred Stock
surrendered, which unpurchased portion must be in whole shares.
On the Qualifying Equity Payment Date, the Company shall, to the
extent permitted by law, (i) accept for payment all shares of Series A
Preferred Stock properly tendered pursuant to the Qualifying Equity
Proceeds Offer on a pro rata basis (or as nearly a pro rata basis as
practicable) to the extent of any Excess Proceeds or Subsequent Offering
Proceeds, as the case may be, (ii) deposit with the transfer agent for
the Series A Preferred Stock an amount in cash equal to the aggregate
Qualifying Equity Payment in respect of all shares of Series A Preferred
Stock so tendered and (iii) deliver, or cause to be delivered, to such
transfer agent for cancellation the shares of Series A Preferred Stock so
accepted. The Company shall promptly mail, or cause to be mailed, to each
holder of Series A Preferred Stock the Qualifying Equity Payment for such
Series A Preferred Stock, and new shares of Series A Preferred Stock
equal in number to any unpurchased portion of Series A Preferred Stock
surrendered, if any. The Company shall publicly announce the results of
the Qualifying Equity Offer on or as soon as practicable after the
Qualifying Equity Payment Date. The Company may act as transfer agent for
the Series A Preferred Stock.
(6) PRIORITY OF SERIES A PREFERRED STOCK IN EVENT OF LIQUIDATION
OR DISSOLUTION. In the event of any liquidation, dissolution, or winding
up of the affairs of the Company, whether voluntary or otherwise, after
payment or provision for payment of the debts and other liabilities of
the Company, the holders of the Series A Preferred Stock shall be
entitled to receive, out of the remaining
<PAGE>
-11-
net assets of the Company, the amount of one hundred dollars
($100.00) in cash for each share of Series A Preferred Stock (the
"Liquidation Preference"), plus an amount equal to all dividends
(including Additional Dividends) accrued and unpaid on each such share up
to the date fixed for distribution, before any distribution shall be made
to the holders of the Common Stock of the Company or any other stock
ranking (as to any such distribution) junior to the Series A Preferred
Stock. In the event of any involuntary or voluntary liquidation,
dissolution or winding up of the affairs of the Company, the Company by
resolution of its Board of Directors shall, to the extent of any Legally
Available Funds, declare a dividend on the Series A Preferred Stock
payable before any distribution is made to any holder of any series of
preferred stock or common stock or any other stock of the Company ranking
junior to the Series A Preferred Stock as to liquidation, dissolution or
winding up, in an amount equal to any accrued and unpaid dividends
(including Additional Dividends) on the Series A Preferred Stock as of
such date and if the Company does not have sufficient Legally Available
Funds to declare and pay all dividends (including Additional Dividends)
accrued at the time of such liquidation, any remaining accrued and unpaid
dividends (including Additional Dividends) shall be added to the price to
be received by the holders of the Series A Preferred Stock for such
Series A Preferred Stock. If, upon any liquidation, dissolution or
winding up of the Company, the assets distributable among the holders of
any Parity Securities shall be insufficient to permit the payment in full
to the holders of all such series of Preferred Stock of all preferential
amounts payable to all such holders, then subject to Section 2(b), the
entire assets of the Company thus distributable shall be distributed
ratably among the holders of all Parity Securities in proportion to the
respective amounts that would be payable per share if such assets were
sufficient to permit payment in full. Except as otherwise provided in
this subsection (6), holders of Series A Preferred Stock shall not be
entitled to any distribution in the event of liquidation, dissolution or
winding up of the affairs of the Company.
For the purposes of this subsection (6), neither the voluntary
sale, lease, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all the
property or assets of the Company, nor the consolidation or merger of the
Company with one or more other corporations, shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary, unless
such voluntary sale, lease, conveyance, exchange or transfer shall be in
connection with a plan of liquidation, dissolution or winding up of the
Company.
(7) VOTING RIGHTS. (a) The holders of the Series A Preferred Stock
shall not, except as required by law or as otherwise set forth herein,
have any right or power to vote on any question or in any proceeding or
to be represented at, or to receive notice of, any meeting of the
Company's stockholders. On any matters on which
<PAGE>
-12-
the holders of the Series A Preferred Stock shall be entitled to vote,
they shall be entitled to one vote for each share held.
(b) In case at any time (i) the equivalent of six or more full
quarterly dividends on the Series A Preferred Stock out of any eight
consecutive Quarterly Dividend Periods shall be in arrears or (ii) the
Company shall have failed to make a mandatory redemption of shares of
Series A Preferred Stock as set forth in subsection (3)(a), or (iii) the
Company shall have failed to comply with the provisions in subsection (4)
or (5) in any material respect, then during the period (the "Voting
Period") commencing with such time and ending with the time when (i) all
arrears in dividends on the Series A Preferred Stock shall have been paid
or (ii) the Company shall have redeemed all shares of the Series A
Preferred Stock as set forth in subsection (3)(a), or (iii) the Company
shall have purchased any shares of Series A Preferred Stock validly
tendered for purchase under the provisions of subsection (4) or (5), in
each case as applicable, the remedy for such matters, without otherwise
affecting the Company's obligations, shall be that the number of members
of the Board of Directors shall automatically be increased by one and the
holders of a majority of the outstanding shares of Series A Preferred
Stock represented in person or by proxy at any meeting of the stockholders
of the Company held for the election of directors during the Voting Period
shall be entitled, as a class, to the exclusion of the holders of all
other classes or series of capital stock of the Company, to elect one
director of the Company to fill the directorship so created. The remaining
directors shall be elected by the other class or classes of stock entitled
to vote therefor, at each meeting of stockholders held for the purpose of
electing directors.
(c) At any time when the voting rights set forth in subsection
(7)(b) with respect to the election of directors shall have vested in the
holders of Series A Preferred Stock and if such right shall not already
have been initially exercised, a proper officer of the Company shall, upon
the written request of any holder of record of Series A Preferred Stock
then outstanding, addressed to the Secretary of the Company, call a
special meeting of holders of Series A Preferred Stock. Such meeting shall
be held at the earliest practicable date upon the notice required for
annual meetings of stockholders at the place for holding annual meetings
of stockholders of the Company or, if none, at a place designated by the
Secretary of the Company. If such meeting shall not be called by the
proper officers of the Company within 30 days after the personal service
of such written request upon the Secretary of the Company, or within 30
days after mailing the same within the United States, by registered mail,
addressed to the Secretary of the Company at its principal office (such
mailing to be evidenced by the registry receipt issued by the postal
authorities), then the holders of record of 25% of the shares of Series A
Preferred Stock then outstanding may designate in writing a holder of
Series A Preferred Stock to call such meeting at the expense of the
Company, and such meeting may be called by such person so designated upon
the notice required for annual meet-
<PAGE>
-13-
ings of stockholders and shall be held at the same place as is elsewhere
provided in this subsection (7)(c). Any holder of Series A Preferred Stock
which would be entitled to vote at such meeting shall have access to the
stock ledger books of the Company for the purpose of causing a meeting of
the stockholders to be called pursuant to the provisions of this
subsection (7)(c). Notwithstanding the other provisions of this subsection
(7)(c), however, no such special meeting shall be called during a period
within 60 days immediately preceding the date fixed for the next annual
meeting of stockholders.
(d) At any meeting held for the purpose of electing directors at
which the holders of Series A Preferred Stock shall have the right to
elect directors as provided herein, the presence in person or by proxy of
the holders of at least one-third of the then outstanding shares of Series
A Preferred Stock shall be required and be sufficient to constitute a
quorum of such class for the election of directors by such class. At any
such meeting or adjournment thereof (i) the absence of a quorum of the
holders of Series A Preferred Stock shall not prevent the election of
directors other than those to be elected by the holders of stock of such
class and the absence of a quorum or quorums of the holders of capital
stock entitled to elect such other directors shall not prevent the
election of directors to be elected by the holders of Series A Preferred
Stock and (ii) in the absence of a quorum of the holders of any class of
stock entitled to vote for the election of directors, a majority of the
holders present in person or by proxy of such class shall have the power
to adjourn the meeting for the election of directors which the holders of
such class are entitled to elect, from time to time without notice (except
as required by law) other than announcement at the meeting, until a quorum
shall be present.
(e) Any director who shall have been elected by holders of Series
A Preferred Stock may be removed at any time during a Voting Period,
either for or without cause, by and only by the affirmative vote of the
holders of record of a majority of the outstanding shares of Series A
Preferred Stock given at a special meeting of such stockholders called for
such purpose, and any vacancy thereby created may be filled during such
Voting Period by the holders of Series A Preferred Stock present in person
or represented by proxy at such meeting. Any director elected by holders
of Series A Preferred Stock who dies, resigns or otherwise ceases to be a
director shall be replaced by the affirmative vote of the holders of
record of a majority of the outstanding shares of Series A Preferred Stock
at a special meeting of stockholders called for that purpose. At the end
of the Voting Period, the holders of Series A Preferred Stock shall be
automatically divested of all voting power vested in them under this
subsection 7(e) but subject always to the subsequent vesting hereunder of
voting power in the holders of Series A Preferred Stock if any subsequent
event would again trigger a new Voting Period under subsection 7(b). The
term of all directors elected pursuant to the provisions of this
subsection 7(e) shall in all events expire at the end of the Voting Period
and
<PAGE>
-14-
upon such expiration the number of directors constituting the Board of
Directors shall, without further action, be reduced by one director,
subject always to the increase of the number of directors pursuant to
subsection 7(b) hereof in case of the future right of the holders of
Series A Preferred Stock to elect directors as provided herein.
(8) CONVERSION OF SERIES A PREFERRED STOCK. The Series A Preferred
Stock shall not be convertible.
(9) LIMITATIONS. Except as expressly permitted by this subsection
(9), the Company shall not and shall not permit any of its Subsidiaries
to (1) declare, pay or set apart for payment any dividend or make any
distribution on, or directly or indirectly purchase, redeem or discharge
any mandatory redemption, sinking fund or other similar obligation in
respect of any other stock of the Company ranking on a parity with the
Series A Preferred Stock as to dividends or liquidation rights
(collectively, "Parity Securities"), or in respect of any warrants,
rights or options exercisable for or convertible into any such Parity
Securities or (2) declare, pay or set apart for payment any dividend or
make any distributions on, or, directly or indirectly, purchase, redeem
or satisfy any such mandatory redemption, sinking fund or other similar
obligation in respect of any stock of the Company ranking junior to the
Series A Preferred Stock as to dividends or liquidation rights
(collectively, "Junior Securities"), or in respect of any warrants,
rights or options exercisable for or convertible into any Junior
Securities; provided, however, that (1) with respect to dividends and
distributions, payments may be made or amounts set aside for payment of
dividends on Parity Securities if either (x) it is made in accordance
with subsection (2)(b) hereof or (y) prior to or concurrently with such
payment or setting apart for payment, all accrued and unpaid dividends on
shares of the Series A Preferred Stock not paid on the dates provided for
in subsection (2) hereof (including Additional Dividends) shall have been
or shall be paid and no Voting Period shall be in effect; (2) with
respect to any purchase, redemption or retirement of Parity Securities,
shares of Series A Preferred Stock shall be redeemed so that the number
of shares of Series A Preferred Stock and Parity Securities so purchased
or redeemed shall bear to each other the same ratio that the Liquidation
Preference and the liquidation preference of such Parity Securities shall
bear to each other; (3) dividends and distributions may be made or set
aside for payment in respect of any Junior Securities if (A) the Company
is not in arrears in the payment of dividends with respect to the Series
A Preferred Stock, (B) no Voting Period is in effect and (C) the
aggregate amount of such dividends and distributions made or set aside
for payment after the original issuance of the Series A Preferred Stock
does not exceed the aggregate net cash proceeds received and the fair
market value (as determined in good faith by the Board of Directors of
the Company) of property received after the issuance date of the Series A
Preferred Stock by the Company from the issuance or sale of Junior Stock
or warrants, options or rights to purchase Junior Stock or from capital
contribu-
<PAGE>
-15-
tions in respect of Junior Stock, provided that the requirements of this
clause (C) need only be met for so long as $10,000,000 or more in
aggregate Liquidation Preference of Series A Preferred Stock is
outstanding (unless the outstanding amount has been reduced to less than
$10,000,000 by reason of an optional redemption under subsection (3)(b)).
Notwithstanding the foregoing, the need to comply with the foregoing
clause (C) will terminate in the event that, on or prior to the Trigger
Date, the Company or a third party shall have offered to purchase (a
"Terminating Tender") all then outstanding shares of Series A Preferred
Stock at a price equal to the liquidation preference thereof, together
with accrued and unpaid dividends thereon, and purchases any shares of
Series A Preferred Stock validly tendered in the Terminating Tender,
whether or not all holders shall so tender their shares for purchase. A
Terminating Tender shall remain open for a minimum of 20 business days.
In addition, notwithstanding the foregoing, the Company will be permitted
to (1) pay dividends and distributions in respect of capital stock in the
form of Junior Stock and dividends and distributions in respect of Parity
Stock in the form of Parity Stock; (2) pay dividends or make other
distributions in respect of any capital stock if at the time of
declaration of such dividend or distribution the Company could have made
such payment in compliance with this subsection (9); (3) exchange or
replace Junior Stock with other Junior Stock or Parity Stock with Parity
Stock or Junior Stock; (4) make payments to redeem, repurchase or acquire
for value Junior Stock or Parity Stock or options in respect thereof, in
each case in connection with any repurchase, cash settlement, put or call
provisions under employee stock option, management subscription, retained
share or stock purchase agreements or other agreements to compensate
employees, including in respect of restricted stock awards, as
contemplated by the Recapitalization Agreement; and (5) redeem, purchase
or acquire Junior Stock upon a change in control or an equity issuance
following or at the time of satisfaction or waiver of the provisions
contained in subsection (4) or (5) and in any indebtedness of the
Surviving Company.
(a) So long as any shares of the Series A Preferred Stock are
outstanding and unless the vote or consent of the holders of a greater
number of shares shall then be required by law, except as otherwise
provided in this Certificate of Incorporation, the Company shall not amend
this Certificate of Incorporation without the approval, by vote or written
consent, by the holders of at least a majority of the then outstanding
shares of the Series A Preferred Stock if such amendment would amend any
of the rights, preferences, privileges of or limitations provided for
herein for the benefit of any shares of Series A Preferred Stock so as to
affect such holders adversely. Without limiting the generality of the
preceding sentence, the Company will not amend this Certificate of
Incorporation without the approval by the holders of at least a majority
of the then outstanding shares of Series A Preferred Stock if such
amendment would:
<PAGE>
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(i) change the relative seniority rights of the holders of
Series A Preferred Stock as to the payment of dividends in
relation to the holders of any other capital stock of the Company,
or create any other class or series of capital stock entitled to
(a) seniority as to liquidation preferences or dividend,
repurchase or redemption rights, or (b) parity as to liquidation
preferences or dividend, repurchase or redemption rights, in each
case in relation to the holders of the Series A Preferred Stock;
(ii) reduce the amount payable to the holders of Series A
Preferred Stock upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company, or change the relative
seniority of the liquidation preference of the holders of Series A
Preferred Stock to the rights upon liquidation of the holders of
other capital stock of the Company, or change the dividend or
redemption rights of the holders of Series A Preferred Stock;
(iii) cancel or modify the rights of the holders of the
Series A Preferred Stock provided for in this subsection (9) or in
subsection (3) through (7);
(iv) increase or decrease (other than by redemption or
purchase and any subsequent filing in connection therewith) the
authorized number of shares of Series A Preferred Stock; or
(v) subject to the following paragraph, allow for the
issuance of a Parity Security.
Notwithstanding the foregoing provisions, the designation or
authorization of any Parity Security shall be permitted without a
separate class vote of the Series A Preferred Stock for the authorization
of such equity security, if such equity security is issued in connection
with (1) an investment by the Company or any Subsidiary of the Company in
any other person pursuant to which such person shall become a Subsidiary
of the Company or any Subsidiary of the Company, or shall be merged with
or into the Company or any Subsidiary of the Company, or (2) the
acquisition by the Company or any Subsidiary of the Company of the assets
of any person which constitute all or substantially all of the assets of
such person or comprises any division or line of business of such person
or any other properties or assets of such person acquired outside of the
ordinary course of business (either of subclauses (1) and (2) an
"Acquisition"); provided that, in each case, such issuance is to a person
or persons having a direct or indirect beneficial interest in the person
or assets so acquired by the Company or any Subsidiary of the Company;
and provided, further, that the Company shall not issue any Parity
Security if the Company is in arrears in the payment of dividends with
respect to the Series A Preferred Stock.
<PAGE>
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(b) So long as any shares of the Series A Preferred Stock are
outstanding the Company shall not allow any Subsidiary of the Company to
issue any preferred stock (other than to Company or a Subsidiary of the
Company). Notwithstanding the foregoing, a Subsidiary of the Company will
be permitted to issue preferred stock in connection with an Acquisition so
long as such issuance is to a person having a direct or indirect
beneficial interest in the person or assets so acquired by the Company or
any Subsidiary of the Company if such preferred stock is issued solely by
the acquired entity or solely by a Subsidiary of the Company substantially
all of whose assets are then comprised of the assets so acquired.
(c) So long as any shares of the Series A Preferred Stock are
outstanding and unless the vote or consent of the holders of a greater
number of shares shall then be required by law, the consent of the holders
of a majority of all of the outstanding shares of Series A Preferred Stock
(given in person or by proxy, either by written consent pursuant to the
Delaware General Corporation Law or by a vote at a special meeting of
stockholders called for such purpose or at any annual meeting of
stockholders, with the holders of Series A Preferred Stock voting as a
class and with each share of Series A Preferred Stock having one vote)
shall be required prior to the sale, lease or conveyance of all or
substantially all of the Company's assets or the merger or consolidation
of the Company with or into any other entity if as a result of such
transaction the Series A Preferred Stock would be cashed out for less than
100% (or, if the transaction would constitute a Change in Control, 101%)
of its Liquidation Preference plus any accrued and unpaid dividends
(including Additional Dividends), or as a result of which the Series A
Preferred Stock would continue in existence (either as stock in the
Company or in the surviving company in a merger or in any parent company
of the Company or such surviving corporation) but with an adverse
alteration in its specified designations, rights, preferences or
privileges.
(d) Nothing herein contained shall be construed so as to require a
class vote or the consent of the holders of the outstanding shares of
Series A Preferred Stock (i) in connection with any increase in the total
number of authorized shares of Common Stock, or (ii) in connection with
the authorization or increase of any class or series of Junior Securities.
The limitations stated above shall not apply if, at or prior to
the time when the distribution, payment, purchase, redemption, discharge,
conversion, exchange, amendment, alteration, repeal, issuance, sale,
lease, conveyance, merger or consolidation is to occur, as the case may
be, provision is made for the redemption or reacquisition of all shares
of Series A Preferred Stock at the time outstanding. Nothing herein
contained shall in any way limit the right and power, subject to the
limitations set forth herein, of the Company to issue the presently
authorized but unissued shares of its
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capital stock, or bonds, notes, mortgages, debentures, and other
obligations, and to incur indebtedness to banks and to other lenders.
(10) RANKING OF SERIES A PREFERRED STOCK. With regard to rights to
receive dividends, mandatory redemption payments and distributions upon
liquidation, dissolution or winding up of the Company, the Series A
Preferred Stock shall rank prior to all other capital stock, of the
Company outstanding at the time of issuance of the Series A Preferred
Stock. As contemplated by subsection (9), Series A Preferred Stock shall
be subject to the creation of Junior Securities and, pursuant to the
voting requirements of subsection (9), Parity Securities and Senior
Securities.
D. Except as set forth in any contractual agreements between the
Company and a shareholder of the Company, no holder of any class of stock
issued by this Company shall be entitled to pre-emptive rights.
E. The number of authorized shares of each class of stock may be
increased or decreased by the affirmative vote of the holders of a
majority of the stock of the Company entitled to vote, voting together as
a single class.
5. (a) The business and affairs of the Company shall be managed by
or under the direction of a Board of Directors, the exact number of directors to
be determined from time to time by resolution adopted by affirmative vote of a
majority of the entire Board of Directors. A director shall hold office until
the annual meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to prior death,
resignation, retirement or removal from office. Except as otherwise required by
law, any vacancy on the Board of Directors that results from an increase in the
number of directors shall be filled only by a majority of the Board of Directors
then in office, provided that any other vacancy occurring in the Board of
Directors shall be filled only by a majority of the directors then in office,
even if less than a quorum is present, or by a sole remaining director. Any
director elected to fill a vacancy not resulting from an increase in the number
of directors shall serve for the remaining term of his predecessor.
Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of preferred stock or any other class of stock issued by
the Company shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of such preferred stock with respect to such stock and
such directors so elected shall not be divided into classes pursuant to this
Article 5.
(b) Nominations for the election of directors may be made by the
Board of Directors or by any stockholder entitled to vote in the election of
directors.
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6. Except as otherwise required by law, special meetings of
stockholders of the Company may be called at any time for any purpose or
purposes by the Board of Directors or by the President, and shall be called by
the President or Secretary upon the request of a majority of the Directors or
upon the written request of the holders of at least a majority of all
outstanding shares entitled to vote on the action proposed to be taken. Special
meetings shall be held at such place within or without the State of Delaware and
at such hour as may be designated in the notice of such meeting and the business
transacted shall be confined to the object stated in the notice of the meeting.
7. In furtherance and not in limitation of the powers conferred by
the Delaware General Corporation Law, the Board of Directors is expressly
authorized: To make, alter or repeal the by-laws of the Company; To authorize
and cause to be executed mortgages and liens upon the real and personal property
of the Company; To set apart out of any of the funds of the Company available
for dividends a reserve or reserves for any proper purpose and to abolish any
such reserve in the manner in which it was created.
8. Whenever a compromise or arrangement is proposed between the
Company and its creditors or any class of them and/or between the Company and
its stockholders or any class of them, any court of equitable jurisdiction
within the State of Delaware may, on the application in a summary way of the
Company or of any creditor or stockholder thereof, or on the application of any
receiver or receivers appointed for the Company under the provisions of Section
291 of Title 8 of the Delaware General Corporation Law or on application of
trustees in dissolution or of any receiver or receivers appointed for the
Company under the provisions of 279 of Title 8 of the Delaware General
Corporation Law, order a meeting of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of the Company, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Company, as the case
may be, agree to any compromise or arrangement and to any reorganization of the
Company as consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders, of
the Company, as the case may be, and also on the Company.
9. Meetings of stockholders may be held within or without the
State of Delaware, as the bylaws may provide. The books of the Company may be
kept (subject to any provision contained in the Delaware General Corporation
Law) outside the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the bylaws of the Company.
Elections of Directors need not be by ballot unless the bylaws of the Company
shall so provide.
<PAGE>
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10. The Company reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by the Delaware General Corporation Law, and
all rights and powers conferred upon stockholders, directors and officers, if
any, herein are granted subject to this reservation.
11. A director of the Company shall not be personally liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty by such director as a director, except for liability (a) for any breach of
the director's duty of loyalty to the Company or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) under Section 174 of the Delaware General
Corporation law, or (d) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law hereafter is
amended to authorize the further limitation or elimination of the personal
liability of directors, then the liability of a director of the Company, in
addition to the limitation on liability provided herein, shall be eliminated or
limited to the fullest extent permitted by the Delaware General Corporation Law,
as so amended. Any repeal or modification of this Article 11 shall not increase
the liability of any director of the Company for any act or occurrence taking
place prior to such repeal or modification, or otherwise adversely affect any
right or protection of a director of the Company existing at the time of such
repeal or modification.
12. A. Each person who was or is a party or is threatened to be
made a party to, or is otherwise involved in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was a director or
officer of the Company, or is or was serving at the request of the Company as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer or employee or in any other capacity
while serving as a director, officer, or employee, shall be indemnified and held
harmless by the Company to the fullest extent permitted by the Delaware General
Corporation Law, as the same exists or may hereafter be amended against all
expense, liability and loss (including, without limitation, attorneys' fees,
judgments, fines and amounts paid in settlement) reasonably incurred or suffered
by such person in connection therewith, and such indemnification shall continue
as to a person who has ceased to be a director, officer or employee and shall
inure to the benefit of such person's heirs, executors and administrators. The
Company shall indemnify a director, officer or employee in connection with an
action, suit or proceeding (other than an action, suit or proceeding to enforce
indemnification rights provided for herein or elsewhere) initiated by such
Director, officer or employee only if such action, suit or proceeding was
authorized by the Board of Directors. The right to indemnification conferred in
this Paragraph A shall be a contract right and shall include the right to be
paid by the Company the expenses incurred in defending any action, suit or
proceeding in advance of its final disposition; provided, however, that, if the
Delaware General Corporation Law requires, the payment of such expenses incurred
by a di-
<PAGE>
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rector or officer in such person's capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such person) in
advance of the final disposition of an action, suit or proceeding, such payment
of expenses shall be made only upon delivery to the Company of an undertaking,
by or on behalf of such director or officer, to repay all amounts so advanced if
it shall ultimately be determined by final judicial decision from which there is
no further right to appeal that such director or officer is not entitled to be
indemnified for such expenses under this Article 12 or otherwise.
B. The Company may, to the extent authorized from time to time by
the Board of Directors, provide indemnification and the advancement of expenses,
to any agent of the Company and to any person who is or was serving at the
request of the Company as an employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, to such extent and to
such effect as the Board of Directors shall determine to be appropriate and
permitted by applicable law, as the saw exists or may hereafter be amended.
C. The rights to indemnification and to the advancement of
expenses conferred in this Article 12 shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
this Certificate of Incorporation or bylaws of the Company, agreement, vote of
stockholders or disinterested directors or otherwise.
D. Neither the amendment nor repeal of this Article 12, nor the
adoption of any provision of this Certificate of Incorporation or the bylaws of
the Company, nor, to the fullest extent permitted by applicable law, any
modification of law, shall eliminate or reduce the effect of this Article 12 in
respect to any acts or omissions occurring prior to such amendment or repeal or
such adoption of an inconsistent provision.
13. The Company shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another Company, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the Company would have the power to indemnify him against such
liability under the provisions of the Delaware General Corporation Law.
<PAGE>
EXHIBIT F
Amendments to By-laws of
Tailor
FIRST, Section 1.02 of Article I is amended by deleting such Section in
its entirety and replacing it with the following:
Special Meetings. Except as otherwise required by law, special
meetings of stockholders of the Corporation may be called at any time for
any purpose or purposes by the Board of Directors or by the President, and
shall be called by the President or Secretary upon the request of a
majority of the Directors or upon the written request of the holders of at
least a majority of all outstanding shares entitled to vote on the action
proposed to be taken. Special meetings shall be held at such place within
or without the State of Delaware and at such hour as may be designated in
the notice of such meeting and the business transacted shall be confined
to the object stated in the notice of the meeting.
SECOND, Section 2.01 of Article II is amended by deleting
such Section in its entirety and replacing it with the following:
Qualifications and Number; Term; Vacancies. A Director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. The number constituting the entire Board shall be at least one, the
exact number of Directors to be determined from time to time by resolution
adopted by affirmative vote of a majority of the entire Board of Directors.
Directors shall be nominated and serve for such terms, and vacancies shall be
filled, as provided in the Certificate of Incorporation. Directors may be
removed only for cause.
THIRD, Clause (2) of Section 6.01 of Article IV is amended by
deleting such Clause in its entirety and replacing it with the following:
by the affirmative vote of the holders of at least a majority of the
stock of the Corporation generally entitled to vote, voting together as a single
class.
Dated as of _______________, 2000.
<PAGE>
ANNEX C
EXCHANGE AND VOTING AGREEMENT
AGREEMENT dated as of August 1, 2000, among Riverside Company LLC, a
Delaware limited liability company ("Merger Subsidiary"), Masco Corporation, a
Delaware corporation (the "Company Shareholder"), Richard and Jane Manoogian
Foundation ("FS"), a Michigan Non-Profit Corporation, and Richard A. Manoogian
("IS" and, together with the Company Shareholder and FS, the "Shareholders").
BACKGROUND
1. Immediately after the execution and delivery of this Agreement, Merger
Subsidiary, a limited liability company formed by Sponsor and certain equity
investors (collectively, "Sponsor Group"), and MascoTech, Inc., a Delaware
corporation (the "Company"), are entering into a Recapitalization Agreement
(the "Recapitalization Agreement"). Capitalized terms used but not defined
herein will have the meanings assigned to them in the Recapitalization
Agreement. The Recapitalization Agreement provides, among other things, for the
merger of Merger Subsidiary with and into the Company, with the Shares being
converted into the right to receive the Merger Consideration, the Class A
Exchanged Shares being converted into the right to receive the Class A Merger
Consideration and the Class B Exchanged Shares of the Company being converted
into the right to receive the Class B Merger Consideration and the Merger
Subsidiary Common Shares being converted into the right to receive the
Surviving Corporation Common Shares.
2. Immediately prior to the Effective Time of the Merger, the Sponsor
Group will subscribe for Merger Subsidiary Common Shares at a price of $16.90
per share pursuant to the Subscription Agreement.
3. As of the date hereof, each Shareholder owns the number of
shares of common stock, par value $1.00 per share, of the Company (the "Company
Common Stock") specified opposite its name under the column "Owned Shares" on
Schedule A. All of such shares, together with any shares of Company Common
Stock acquired of record or beneficially owned by such Shareholders in any
capacity after the date hereof and prior to the Effective Time of the Merger,
whether upon exercise of options, conversion of convertible securities,
purchase, exchange or otherwise, will be referred to herein as "Owned Shares".
For purposes of this Agreement, after the Exchange Date (as defined herein),
all references herein to "Owned Shares" shall refer to Post-Exchange Owned
Shares (as defined herein). Each Shareholder is hereby agreeing, among other
things, as follows: (i) each Continuing Shareholder will exchange prior to the
Merger the Shares specified opposite its name under the column "Continuing
Shareholder Exchange Shares" on Schedule A hereto (the "Continuing Shareholder
Exchange Shares") for Class A Preferred Stock and receive the Class A Merger
<PAGE>
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Consideration in exchange therefor at the Effective Time and (ii) the Company
Shareholder will exchange prior to the Merger the Shares specified opposite its
name under the column "Company Shareholder Exchange Shares" on Schedule A
hereto (the "Company Shareholder Exchange Shares") for Class B Preferred Stock
and receive the Class B Merger Consideration in exchange therefor at the
Effective Time. It is understood that, following consummation of the Merger,
references to "Company Common Stock" will mean the shares of Common Stock, par
value $1.00 per share, of the Surviving Corporation.
ARTICLE 1
REPRESENTATIONS AND WARRANTIES
1.1 Representations and Warranties of the Shareholders. Each Shareholder,
severally and not jointly, represents and warrants to Merger Subsidiary as
follows:
(a) Authority; Enforceability. Such Shareholder has the legal capacity (in
the case of Shareholders that are natural persons) and all requisite power and
authority to enter into this Agreement, to perform its obligations hereunder
and to consummate the transactions contemplated hereby. This Agreement has been
duly authorized (in the case of Shareholders that are not natural persons),
executed and delivered by such Shareholder and constitutes a valid and binding
obligation of such Shareholder enforceable against it in accordance with its
terms.
(b) No Conflicts. Except for filings required under the applicable
requirements of the 1934 Act, (A) no filing with, and no permit, authorization,
consent or approval of, any Governmental Authority or any other person is
necessary for the execution of this Agreement by such Shareholder and the
consummation by it of the transactions contemplated hereby and (B) the
execution and delivery of this Agreement by such Shareholder, the consummation
of the transactions contemplated hereby and compliance with the terms hereof by
such Shareholder will not conflict with, or result in any violation of, or
default (with or without notice or lapse of time or both) under any provision
of, the certificate of incorporation, by-laws or analogous documents of such
Shareholder (if the Shareholder is not a natural person) or any other agreement
to which such Shareholder is a party, including any voting agreement,
shareholders agreement, voting trust, trust agreement, pledge agreement, loan
or credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license, or violate any judgment,
order, notice, decree, statute, law, ordinance, rule or regulation applicable
to such Shareholder or to its property or assets, except, in each case for such
consents required under, and such defaults in respect of, the agreements and
arrangements set forth on Schedule 1.1(c) attached hereto.
<PAGE>
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(c) Ownership, Etc. of Shares. As of the date hereof, such Shareholder is
the beneficial owner of the number of shares of Company Common Stock set forth
opposite such Shareholder's name under the column "Owned Shares" on Schedule A.
As of the Exchange Date, such Shareholder will be the beneficial owner of the
number of shares of Company Common Stock, Class A Preferred Stock and Class B
Preferred Stock set forth opposite such Shareholder's name under the column
"Post-Exchange Owned Shares" on Schedule A (the "Post-Exchange Owned Shares").
In the case of IS, the amounts include Company Common Stock which (A)
constitutes Restricted Stock or (B) is subject to Options (collectively,
"Excluded Owned Shares"). None of the Excluded Owned Shares constitutes
Continuing Shareholder Exchange Shares. Each such Shareholder has good and
marketable title to its Owned Shares, free and clear of any encumbrances,
agreements, adverse claims, liens or other arrangements with respect to the
ownership of or the right to dispose of its Owned Shares, except pursuant to
the terms of this Agreement and except for those encumbrances, agreements,
adverse claims, liens or other arrangements in effect on the date hereof and
listed on Schedule 1.1(c) attached hereto. On the date hereof, the Owned Shares
constitute all of the outstanding shares of Company Common Stock owned of
record or beneficially by such Shareholder, except in the case of IS, for any
Shares it may own beneficially by virtue of being a director or trustee of FS.
Such Shareholder has sole power of disposition with respect to all of its Owned
Shares (other than the Excluded Owned Shares) and sole voting power with
respect to the matters set forth in Section 3.1 and sole power to demand
dissenter's or appraisal rights, in each case with respect to all of its Owned
Shares (other than the Excluded Owned Shares), with no restrictions on such
rights, subject to applicable federal securities laws and the terms of this
Agreement. None of such Owned Shares is subject to any voting trust,
stockholders agreement or other agreement, arrangement or restriction with
respect to the voting or transfer of any of the Owned Shares, except as
contemplated by this Agreement, the Recapitalization Agreement, the Stock
Purchase Agreement dated as of October 15, 1996 between the Company Shareholder
and the Company (the "Stock Purchase Agreement"), the Option Plans and
Restricted Stock Plans and the agreements and arrangements in effect on the
date hereof and listed on Schedule 1.1(c).
(d) Access to Information, Etc. Such Shareholder is an "accredited
investor" within the meaning of Regulation D promulgated under the 1934 Act. It
has been provided with a copy of the Recapitalization Agreement and has had an
opportunity to review it. It has been supplied with, or otherwise has had
access to, adequate information and the opportunity to ask questions in order
to make its own independent decision to exchange its Continuing Shareholder
Exchange Shares for the Class A Preferred Stock and receive in the Merger the
Class A Merger Consideration and, in the case of the Company Shareholder, to
exchange its Company Shareholder Exchange Shares for the Class B Preferred
Stock and receive in the Merger the Class B Merger Consideration, or have such
<PAGE>
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Shares converted into the right to receive the Merger Consideration in the
Merger as provided in the Recapitalization Agreement. It understands that the
Surviving Corporation Common Shares and, in the case of the Company
Shareholder, the Surviving Corporation Common Shares and the shares of Series A
Preferred Stock that it will receive in the Merger will not have been
registered under the 1933 Act and that the certificates for such shares will
bear an appropriate legend to such effect. It further understands that the
Surviving Corporation Common Shares and, in the case of the Company
Shareholder, the shares of Series A Preferred Stock that it will receive in the
Merger will bear an appropriate legend with respect to the stockholders
agreement referred to in Section 6.1 below.
1.2 Representations and Warranties of Merger Subsidiary. Merger Subsidiary
represents and warrants to each Shareholder as follows:
(a) Authority. It is duly formed, validly existing and in good standing
under the laws of Delaware. It has all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by it and
constitutes its valid and binding obligation, enforceable against it in
accordance with its terms.
(b) No Conflicts; Enforceability. Except for filings required under the
applicable requirements of the 1934 Act, (A) no filing with, and no permit,
authorization, consent or approval of, any Governmental Authority or any other
person is necessary for the execution of this Agreement by Merger Subsidiary
and the consummation by it of the transactions contemplated hereby, and (B) the
execution and delivery of this Agreement by Merger Subsidiary, the consummation
by it of the transactions contemplated hereby and its compliance with the terms
hereof will not conflict with, or result in any violation of, or default (with
or without notice or lapse of time or both) under any provision of, any limited
liability company agreement, or any other agreement to which it is a party,
including any voting agreement, stockholders agreement, voting trust, trust
agreement, pledge agreement, loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license, or violate any judgment, order, notice, decree, statute, law,
ordinance, rule or regulation applicable to Merger Subsidiary or to its
property or assets.
(c) No Business Activities by Merger Subsidiary. Merger Subsidiary was
formed on July 24, 2000 solely for purposes of effecting the transactions
described in this Agreement and the Recapitalization Agreement. Merger
Subsidiary has conducted no business activities, and has incurred no
liabilities, since such formation.
<PAGE>
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ARTICLE 2
TRANSFER RESTRICTIONS
2.1 Transfer Restrictions. Subject to the provisions of Section 2.2, each
Shareholder hereby agrees during the term of this Agreement not to (i) directly
or indirectly sell, transfer, pledge, encumber, assign or otherwise dispose of
(including by gift) (collectively, "Transfer"), or enter into any contract,
option or other arrangement or understanding (including any profit sharing
arrangement) with respect to the Transfer of, any of its Owned Shares to any
person other than pursuant to the terms of the Recapitalization Agreement or
this Agreement, (ii) enter into any voting arrangement or understanding other
than under this Agreement, whether by proxy, voting agreement or otherwise,
with respect to any of its Owned Shares, or (iii) take any action that would
make any of its representations or warranties contained herein untrue or
incorrect or have the effect of preventing or impeding such Shareholder from
performing any of its obligations under this Agreement.
2.2 Company Shareholder Exception. Notwithstanding Section 2.1, during the
term of this Agreement, the Company Shareholder may, at its option, Transfer
Shares to one or more transferees (each a "Transferee"); provided that (i) such
Transferee shall be reasonably acceptable to Sponsor, in its sole discretion,
(ii) on or prior to the Effective Time, such Transferee shall enter into and be
subject to the stockholders and registration rights agreement referred to in
Section 4.3 with respect to its Surviving Corporation Common Shares, with
modifications to reflect the extent of the Transferee's investment that are
acceptable to Sponsor, (iii) the Transfer shall not, in the good faith judgment
of Sponsor, based upon advice of its counsel and advisors, jeopardize in any
respect the availability of recapitalization accounting treatment for the
Transactions or violate in any manner applicable securities laws, (iv) the
Transferee shall acquire not less than 10% of the Company Shareholder's Shares
owned on the date hereof, (v) the Transferee shall agree, on or prior to the
date of the Transfer, to be subject to this Agreement and become a party to
this Agreement by amendment in form and substance satisfactory to Sponsor,
which amendment shall specify, among other things, whether the Transferee is
acquiring the Company Shareholder's Continuing Shareholder Exchange Shares or
Company Shareholder Exchange Shares, (vi) all representations and warranties in
this Agreement shall be true and correct and all covenants and all other
provisions of this Agreement shall be complied with as of the date of the
Transfer through the term of this Agreement and (vii) the Transfer shall not
have an adverse effect, in Sponsor's reasonable judgment, on the availability
of financing or the ability of the Company and Merger Subsidiary to complete
the Transactions; provided, a Transfer of not more than 30% of the Company
Shareholder's Shares shall not be deemed to have such an adverse effect.
<PAGE>
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ARTICLE 3
SUPPORT OF TRANSACTIONS
3.1 Voting of Total Shares. Under the terms of this Agreement, at any
Company Shareholders' Meeting or at any adjournment thereof or in any other
circumstances upon which any shareholders' vote, consent or other approval is
sought, each of the Shareholders will attend such meeting, in person or by
proxy, and will vote all of its Owned Shares, or otherwise provide requisite
written consent (i) in favor of the Transactions and the adoption and the
approval of the Recapitalization Agreement and the Transactions, (ii) against
any action or agreement that would result in a breach in any material respect
of any covenant, representation or warranty or any other obligation or
agreement of the Company under the Recapitalization Agreement, and (iii)
against any action or agreement that would impede, interfere with, delay or
postpone or that would reasonably be expected to discourage the Transactions,
including, but not limited to, any action referred to in Section 6.01 of the
Recapitalization Agreement.
3.2 No Other Proxies. Each Shareholder will not, unless and until this
Agreement terminates in accordance with Section 3.3 or Section 5.2 hereof,
grant (other than through a proxy solicited by the Board of Directors of the
Company through which the Shareholder will provide voting instructions
consistent with the requirements of Section 3.1 hereof) any proxy or power of
attorney with respect to any of its Owned Shares, deposit any of its Owned
Shares into a voting trust or enter into any agreement (other than this
Agreement), arrangement or understanding with any person, directly or
indirectly, to vote, grant any proxy or give instructions with respect to the
voting of any of its Owned Shares. Each Shareholder further agrees not to
commit or agree to take any action inconsistent with any of the matters covered
in this Article 3.
3.3 Termination. Notwithstanding anything herein to the contrary, at the
sole option of Merger Subsidiary, exercisable at any time, this Article 3 will
automatically terminate and the Shareholders will be free to vote their shares
of Company Common Stock, Class A Preferred Stock or Class B Preferred Stock as
they see fit and take any other any action otherwise prohibited by this Article
3.
ARTICLE 4
COVENANTS
4.1 Exchange of Certain Shares Prior to the Merger. No later than 1
Business Day prior to the scheduled Effective Time and otherwise at such time
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as the Company, Merger Subsidiary and the Shareholders shall agree (such time
and date, the "Exchange Date"), (i) each Continuing Shareholder shall exchange
each of its Continuing Shareholder Exchange Shares for one share of Class A
Preferred Stock and (ii) the Company Shareholder shall exchange each of its
Company Shareholder Exchange Shares for one share of Class B Preferred Stock.
4.2 Appraisal Rights. Each Shareholder hereby irrevocably waives any
rights of appraisal with respect to any of its Owned Shares in connection with
the Merger or rights to dissent from the Merger that such Shareholder may
otherwise have, with respect to the Merger, under the DGCL.
4.3 Stockholders and Registration Rights Agreement. Each
Shareholder agrees that, on or prior to the Effective Time, it will enter into
a stockholders and registration rights agreement with Sponsor or its designees
relating to the Surviving Corporation Common Shares with the terms set forth on
Exhibit A hereto, with such changes as may be reasonably agreed to by the
Shareholders and Sponsor, in a form reasonably satisfactory to such
Shareholders and Sponsor prior to or at the Effective Time.
4.4 Subordinated Notes. The Original Company Shareholder agrees that it
will enter into the Subordinated Loan Agreement in the form annexed hereto as
Exhibit B.
4.5 Termination of Registration Agreement. Merger Subsidiary and the
Original Company Shareholder agree that, upon the Effective Time, the Amended
and Restated Securities Purchase Agreement, dated as of November 23, 1993 and
as further amended, between the Original Company Shareholder and the Company
and the Registration Agreement dated as of March 31, 1993 between the Original
Company Shareholder and the Company will be terminated in its entirety.
4.6 Modification of Corporate Services Agreement and Corporate
Opportunities Agreement. The Original Company Shareholder agrees that, on or
prior to the Effective Time, it will modify the Corporate Services Agreement by
an amendment, to the effect set forth in the Recapitalization Agreement. On or
prior to the Effective Time, the Corporate Opportunities Agreement dated as of
May 1, 1984 between the Company and the Original Company Shareholder will be
modified to apply only to the Original Company Shareholder's home improvement
or building products or services businesses and for a period not to exceed the
later of two years after the Effective Time or six months after corporate
services are no longer required under the Corporate Services Agreement, as
amended at the Effective Time.
4.7 No Conduct of Business Activities by Merger Subsidiary. Merger
Subsidiary agrees that it will not conduct any business activities, and will
<PAGE>
-8-
not incur any liabilities, from the date of this Agreement through the time at
which Merger Subsidiary merges with and into the Company. Without limiting the
generality of the foregoing, Merger Subsidiary shall be in existence solely to
effect the transactions described in this Agreement and the Recapitalization
Agreement.
4.8 IS Covenants. (a) IS hereby covenants and agrees with Merger
Subsidiary and the Surviving Corporation that for a period of three years after
the Effective Time so long as IS owns unvested New Restricted Stock, IS (i)
will provide, subject to his other commitments and activities, at times
reasonable and convenient to IS, consulting services to the Surviving
Corporation, upon request from the Surviving Corporation and (ii) will not
personally engage in activities that compete to a substantial extent with any
material lines of business from time to time of the Surviving Corporation. IS
hereby covenants and agrees with Merger Subsidiary and the Surviving
Corporation that failure by IS to comply with the immediately preceding
sentence will result in the forfeiture of IS' unvested New Restricted Stock.
(b) In addition IS hereby covenants and agrees with Merger Subsidiary and
the Surviving Corporation that he will not elect to receive cash upon the
vesting of his New Restricted Stock as provided by Section 2.06 of the
Recapitalization Agreement.
(c) IS hereby covenants and agrees with Merger Subsidiary and the
Surviving Corporation, that he will take all such action with respect to the
liens and other arrangements listed on Schedule 1.1(c) as may be necessary in
order to consummate the transactions in accordance with the Recapitalization
Agreement and this Agreement.
4.9 Further Assurances. Each of the parties hereto agrees that it will,
from time to time, execute and deliver, or cause to be executed and delivered,
such additional or further consents, documents and other instruments as any of
the other parties to this Agreement may reasonably request for the purpose of
effectively carrying out the transactions contemplated by this Agreement.
ARTICLE 5
MISCELLANEOUS
5.1 Assignment. Except as expressly provided in Section 2.2, neither this
Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any of the parties hereto without the prior written consent of the
other parties hereto. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties hereto
and their respective successors and permitted assigns.
<PAGE>
-9-
5.2 Termination. This Agreement will terminate, and no party hereto shall
have any rights or obligations hereunder, upon the first to occur of (a) the
Effective Time of the Merger or (b) the termination of the Recapitalization
Agreement in accordance with its terms. Furthermore, this Agreement will
terminate as to the Shareholders if the Recapitalization Agreement is amended
without their consent to reduce the Merger Consideration, Class A Merger
Consideration or Class B Consideration or otherwise reduce the consideration
payable to holders of any Options or Restricted Stock.
5.3 Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, including any written or oral
agreement or understanding, among or between the parties with respect to the
subject matter hereof.
5.4 Amendments. This Agreement may not be amended or compliance with any
provision hereof waived, except by an instrument in writing signed by each of
the parties hereto whose rights or obligations are affected by such amendment
or waiver. Without limiting the generality of the foregoing, this Agreement may
be amended to add to or subtract from the list of Shareholders and/or to modify
the treatment of Shareholders' holdings as set forth on Schedule A, and such
amendment need only be executed by Merger Subsidiary and those Shareholders who
are being added to or subtracted from the list of Shareholders or the treatment
of whose holdings is being modified as set forth on Schedule A.
5.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at the following addresses (or at such other address
to a party as shall be specified by like notice):
if to Merger Subsidiary:
c/o Heartland Industrial Partners, L.P.
320 Park Avenue, 33rd Floor
New York, New York 10022
Attention: David A. Stockman
Facsimile: (212) 981-3535
<PAGE>
-10-
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: W. Leslie Duffy, Esq.
Jonathan A. Schaffzin, Esq.
Facsimile: (212) 269-5420
if to the Company:
MascoTech, Inc.
21001 Van Born Road
Taylor, Michigan 48180
Attention: Chairman of the Board
General Counsel
Facsimile: (313) 792-6134
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, NY 10017
Attention: Leonard Kreynin, Esq.
Facsimile: (212) 450-4800
if to the Company Shareholder:
Masco Corporation
21001 Van Born Road
Taylor, Michigan 48140
Attention: Chairman of the Board and
General Counsel
Facsimile: (313) 792-4107
<PAGE>
-11-
with a copy to:
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
Attention: Alan Stuart Schwartz, Esq.
Facsimile: (313) 465-7575
if to IS:
Richard A. Manoogian
c/o Masco Corporation
21001 Van Born Road
Taylor, Michigan 48140
Attention: Richard A. Manoogian
Facsimile: (313) 792-6134
with a copy to:
Bodman Longley & Dahling LLP
100 Renaissance Center
Detroit, Michigan 48243
Attention: David M. Hempstead, Esq.
Facsimile: (313) 393-7579
if to FS:
Richard and Jane Manoogian Foundation
c/o Masco Corporation
21001 Van Born Road
Taylor, Michigan 48140
Attention: Richard A. Manoogian
Facsimile: (313) 792-6134
<PAGE>
-12-
with a copy to:
Eugene A. Gargaro, Jr., Esq.
c/o Masco Corp.
21001 Van Born Road
Taylor, Michigan 48140
Facsimile: (313) 792-6289
5.6 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. 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. Wherever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation".
5.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement.
5.8 Governing Law. The validity, construction and effect of this Agreement
shall be governed by and construed enforced in accordance with the laws of the
State of Delaware, without giving effect to the principles of conflicts of law
of such state.
5.9 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that, in addition to any other remedy to which it may be
entitled, at law or in equity, the parties shall be entitled to the remedy of
specific performance of the covenants and agreements contained herein and
injunctive and other equitable relief.
5.10 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto. Except as provided in the preceding
sentence, nothing in this Agreement, express or implied, is intended to or
shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
5.11 Descriptive Headings. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
<PAGE>
-13-
5.12 Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or unenforceable
in any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
5.13 Definitions; Construction. For purposes of this Agreement:
(a) "Beneficially own" or "beneficial ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including pursuant
to any agreement (other than by virtue of this Agreement), arrangement or
understanding, whether or not in writing. Without duplicative counting of the
same securities by the same holder, securities beneficially owned by a Person
shall include securities Beneficially Owned by all other Persons with whom such
Person would constitute a "group" as described in Section 13(d)(3) of the
Exchange Act.
(b) "Person" shall mean an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(c) In the event of a stock dividend or distribution, or any change in the
Company Common Stock by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term
"Shares" shall be deemed to refer to and include the Shares as well as all such
stock dividends and distributions and any shares into which or for which any or
all of the Shares may be changed or exchanged.
5.14 Shareholder Capacity. Notwithstanding anything herein to the
contrary, no person executing this Agreement who is, or becomes during the term
hereof, a director of the Company makes any agreement or understanding herein
in his capacity as such a director, and the agreements set forth herein shall
in no way restrict any director in the exercise of his fiduciary duties as a
director of the Company. Each Shareholder has executed this Agreement solely in
his capacity as the record or beneficial holder of such Shareholder's Owned
Shares.
5.15 Third-Party Beneficiary. The Company is an express third-party
beneficiary of the representations and covenants contained in Articles 1 and 4
hereof and Sponsor is an express third-party beneficiary of Section 2.2.
[Signature Pages Follow]
<PAGE>
-14-
IN WITNESS WHEREOF, each of Merger Subsidiary and the Shareholders listed
below have caused this Agreement to be duly executed, as of the date first
written above.
RIVERSIDE COMPANY LLC
By:
---------------------------------
Name:
Title:
MASCO CORPORATION
By:
---------------------------------
Name:
Title:
RICHARD A. MANOOGIAN
By:
---------------------------------
RICHARD AND JANE MANOOGIAN FOUNDATION
By:
---------------------------------
Name:
Title:
<PAGE>
-15-
SCHEDULE A
<TABLE>
Continuing Company
Shareholder Shareholder Post-Exchange
Owned Exchange Exchange Pre-Merger
Shares Shares Shares Owned Shares
------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
IS 196,860 Restricted 621,170 -- 3,552,546 Common
Stock* Stock**
640,000 Options* 621,170 Class A
4,173,716 Common Preferred Stock
Stock
Company Shareholder 7,824,690 2,958,595 2,136,100 2,729,995 Common
Stock
2,958,595 Class A
Preferred Stock
2,136,100 Class B
Preferred Stock
FS 995,500 661,260 -- 334,240 Common
Stock
661,260 Class A
Preferred Stock
</TABLE>
---------------------------
* Represents Excluded Owned Shares.
** Excludes Options and Restricted Stock. IS will be treated as provided
in the Recapitalization Agreement, subject to Section 4.8 hereof, with
respect to his Restricted Stock.
<PAGE>
SCHEDULE 1.1(C)
Title to Owned Shares
1. Richard A. Manoogian Trust has granted a pledge or security interest to
Michigan National Bank, a national banking association, in 2,420,706 shares of
MascoTech, Inc. common stock, par value $1.00 per share, under the Business
Loan Agreement dated August 4, 1998 (effective as of July 1, 1998) between
Richard A. Manoogian Trust and Michigan National Bank and under related
security or pledge agreements.
2. Richard A. Manoogian Trust and Richard A. Manoogian, individually, have
granted a pledge or security interest to Comerica Bank, a Michigan Banking
corporation, in 1,747,948 shares of MascoTech, Inc. common stock, par value
$1.00 per share, under the Amended and Restricted Letter Agreement dated March
15, 1993, as amended, among Richard A. Manoogian Trust, Richard A. Manoogian,
as an individual, and Comerica Bank, and under related security or pledge
agreements.
<PAGE>
ANNEX D
================================================================================
STOCK PURCHASE AGREEMENT
by and between
MASCOTECH, INC.,
the Seller,
and
CITICORP VENTURE CAPITAL, LTD.,
the Purchaser,
dated as of August 1, 2000
===============================================================================
<PAGE>
TABLE OF CONTENTS
----------------------
PAGE
----
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions...................................................1
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares...............................2
SECTION 2.02. Purchase Price................................................2
SECTION 2.03. Closing.......................................................3
SECTION 2.04. Deliveries at the Closing.....................................3
ARTICLE 3
CONDITIONS TO OBLIGATION TO CLOSE
SECTION 3.01. Conditions to Obligation of the Purchaser.....................3
SECTION 3.02. Conditions to Obligation of the Seller........................4
SECTION 3.03. Failure to Satisfy Certain Conditions.........................5
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
SECTION 4.01. Due Authorization.............................................6
SECTION 4.02. Title.........................................................6
SECTION 4.03. No Consents...................................................6
SECTION 4.04. No Conflict, Breach, Etc......................................7
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 5.01. Due Authorization.............................................8
SECTION 5.02. No Consents...................................................8
SECTION 5.03. No Conflict, Breach, Etc......................................8
SECTION 5.04. Purchase Entirely for Own Account.............................9
SECTION 5.05. Restricted Securities.........................................9
SECTION 5.06. Legends.......................................................9
SECTION 5.07. Accredited Investor; Knowledge...............................10
<PAGE>
PAGE
----
SECTION 5.08. Financing....................................................10
ARTICLE 6
COVENANTS AND AGREEMENTS
SECTION 6.01. Disclosure; Publicity........................................10
SECTION 6.02. Seller Agreements............................................10
SECTION 6.03. Further Assurances...........................................10
SECTION 6.04. Certain Filings..............................................11
SECTION 6.05. Representations and Covenants................................12
SECTION 6.06. Notice.......................................................12
SECTION 6.07. American Commercial Plastics.................................12
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. Termination..................................................12
SECTION 7.02. Amendments; Waivers..........................................13
SECTION 7.03. Successors and Assigns.......................................13
SECTION 7.04. Notices......................................................13
SECTION 7.05. Expenses.....................................................14
SECTION 7.06. Governing Law................................................15
SECTION 7.07. Waiver of Jury Trial.........................................15
SECTION 7.08. Severability; Interpretation.................................15
SECTION 7.09. Headings.....................................................15
SECTION 7.10. Entire Agreement.............................................15
SECTION 7.11. Counterparts.................................................15
SECTION 7.12. Third-party Beneficiaries....................................16
SECTION 7.13. Specific Performance.........................................16
Attachment A -- Form of FIRPTA Certificate
Schedule 2.01 -- Shares to be Purchased
Schedule 2.02 -- Shares Subject to Right of First Refusal or Consent
Schedule 4.02 -- Seller Agreements
Schedule 4.03 -- Consents of Seller
Schedule 4.04 -- Conflicts of Seller
Schedule 5.02 -- Consents of Purchaser
ii
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of August 1, 2000,
by and between MASCOTECH, INC., a Delaware corporation (the "Seller"), and
CITICORP VENTURE CAPITAL, LTD., a New York corporation (the "Purchaser").
WHEREAS, the Seller or a wholly-owned subsidiary of Seller owns all
shares, equity interests, membership interests, interests in equity and notes
listed on Schedule 2.01 hereto (collectively, the "Shares") of the Persons (as
defined herein) listed on Schedule 2.01 hereto (each, a "Company" and,
collectively, the "Companies") and the Purchaser desires to purchase from the
Seller or a wholly- owned subsidiary of Seller and the Seller desires to sell,
and to cause its wholly- owned subsidiaries to sell, to the Purchaser the
Shares, upon the terms and subject to the conditions set forth herein; and
WHEREAS, the transfer of certain of the Shares will require the consent
and/or waiver of certain Persons with respect to provisions in existing
agreements, including those related to right of first refusal and right of
first offer provisions, and the Seller has undertaken to obtain such consents
and/or waivers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
contained herein, the Purchaser and the Seller hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. The following terms as used herein have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with such
Person.
For the purposes of this definition, "control" (including, with its
correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether through the ownership of securities, by
contract or otherwise. For purposes of Section 7.03 of this Agreement, to the
extent permitted by the Seller Agreements, as applicable, "Affiliates" of the
Purchaser shall be deemed to include any employees, officers or directors of
the Purchaser or
<PAGE>
any of the Companies and each of their respective Affiliates and any entity in
which the Purchaser or any of its Affiliates, together with any employees,
officers or directors of any of the Purchaser, such Affiliates or such
entities, owns 40% or more of the outstanding voting securities and of which no
other Persons own 40% or more of the outstanding voting securities.
"Person" means an individual, corporation, partnership, limited liability
company, association, trust or other entity or organization.
"Recapitalization Agreement" means the Recapitalization Agreement dated as
of August 1, 2000, between MascoTech, Inc., a Delaware corporation, and
Riverside Company LLC, a limited liability company organized under the laws of
Delaware ( "Merger Subsidiary").
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and subject
to the conditions of this Agreement, at the Closing the Seller shall sell,
transfer, convey, assign and deliver to the Purchaser and the Purchaser shall
purchase from the Seller the Shares listed on Schedule 2.01.
SECTION 2.02. Purchase Price. (a) The Purchaser shall pay to the Seller at
the Closing $125 million for the Shares (the "Purchase Price"), as adjusted as
provided in Section 2.02(b), by wire transfer of immediately available funds to
an account of the Seller designated in writing by the Seller prior to the
Closing Date.
(b) Adjustment to Purchase Price. In the event Persons have either
exercised rights of first refusal or failed to consent to the transfer of any
Shares and the rights related thereto under the Seller Agreements (as defined
herein) of the Companies set forth in Schedule 2.02, the Purchase Price shall
be reduced by the value of Shares in respect of which such right of first
refusal has been exercised or such Shares have been purchased or in respect of
which such consent has not been given (x) in the case of any Shares for which a
right of first refusal has been exercised, on a dollar-for-dollar basis equal
to the value of consideration received or to be received by the Seller from a
Person exercising its right of first refusal for such Shares and (y) in the
case of any Shares for which consent has not been given, at such value as is
determined by the Purchaser in the notice given pursuant to Section 6.06.
2
<PAGE>
SECTION 2.03. Closing. Upon the terms and subject to the conditions set
forth in this Agreement, the sale and purchase of the Shares contemplated by
this Agreement shall take place at a closing (the "Closing") to be held
immediately prior to or simultaneously with the closing of the merger (the
"Recapitalization") of Merger Subsidiary with and into Seller under the
Recapitalization Agreement at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005, or at such other place or time as the
Purchaser and the Seller may mutually agree. The date upon which the Closing
occurs is herein referred to as the "Closing Date."
SECTION 2.04. Deliveries at the Closing. Subject to Section 3.03, at the
Closing, (i) the Seller shall deliver to the Purchaser the certificate referred
to in Section 3.01 below and a FIRPTA Certificate in the form of Attachment A
hereto, (ii) the Purchaser shall deliver to the Seller the certificate referred
to in Section 3.02 below, (iii) the Seller shall deliver to the Purchaser stock
certificates representing the Shares which are certificated, registered in its
name or the name of its wholly-owned subsidiary, as appropriate, duly endorsed
in blank or accompanied by duly executed assignment documents, together with an
assignment (to the extent permitted) of all Seller's rights under the Seller
Agreements and if Shares are uncertificated, shall deliver documents necessary
to effect the transfer of such uncertificated Shares, in each case only with
respect to Shares actually purchased by Purchaser, and (iv) the Purchaser shall
deliver to the Seller the Purchase Price in accordance with Section 2.02 above.
ARTICLE 3
CONDITIONS TO OBLIGATION TO CLOSE
SECTION 3.01. Conditions to Obligation of the Purchaser. Subject to
Section 3.03, the obligation of the Purchaser to consummate the transactions to
be performed by it in connection with the Closing is subject to satisfaction of
the following conditions:
(a) the representations and warranties set forth in Article 4 below shall
be true and correct in all material respects at and as of the Closing Date;
(b) the Seller shall have performed in all material respects all covenants
and agreements contained in this Agreement that are required to be performed by
Seller on or before the Closing;
3
<PAGE>
(c) there shall not be any injunction, judgment, order or decree in effect
preventing the consummation of any of the transactions contemplated by this
Agreement;
(d) the Seller shall have delivered to the Purchaser a certificate to the
effect that each of the conditions specified above in Sections 3.01(a), 3.01(b)
and 3.01(c) (as it relates to the Seller) is satisfied in all material
respects;
(e) any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), relating to the
transactions contemplated hereby shall have expired or been terminated and all
other governmental approvals filed pursuant to Section 6.04 necessary to be
obtained prior to Closing shall have been obtained.
The Purchaser may waive the conditions specified in this Section 3.01(a)
through 3.01(d) if it executes a writing so stating at or prior to the Closing;
provided, however, that Purchaser shall not be deemed to have waived any such
conditions to the extent that Section 3.03 is applicable as to any of the
Shares.
SECTION 3.02. Conditions to Obligation of the Seller. The obligation of
the Seller to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(a) the representations and warranties set forth in Article 5 below shall
be true and correct in all material respects at and as of the Closing Date;
(b) the Purchaser shall have performed in all material respects all
covenants and agreements contained in this Agreement that are required to be
performed by Purchaser on or before the Closing;
(c) there shall not be any injunction, judgment, order or decree in effect
preventing the consummation of any of the transactions contemplated by this
Agreement;
(d) the Purchaser shall have delivered to the Seller a certificate to the
effect that each of the conditions specified above in Sections 3.02(a), 3.02(b)
and 3.02(c) (as it relates to the Purchaser) is satisfied in all material
respects;
(e) all conditions to the Recapitalization shall have been satisfied or
waived in accordance with the terms of the Recapitalization Agreement, other
than conditions to the extent related to the sale and purchase of the Shares as
contemplated by this Agreement;
4
<PAGE>
(f) Purchaser shall have delivered to Seller the Purchase Price in
accordance with Section 2.02; and
(g) any applicable waiting period under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated and all
other governmental approvals filed pursuant to Section 6.04 necessary to be
obtained prior to Closing shall have been obtained.
The Seller may waive the conditions specified in this Section 3.02(a)
through 3.02(f) if it executes a writing so stating at or prior to the Closing
and has received a written consent to such waiver from Merger Subsidiary.
SECTION 3.03. Failure to Satisfy Certain Conditions. Notwithstanding the
provisions of Section 3.01 hereof, in the event any of the conditions set forth
in Section 3.01 are not satisfied or waived such that the Shares (or any part
thereof) set forth on Schedule 2.02 may not be transferred to the Purchaser on
the Closing in accordance with this Agreement, the Purchaser shall nonetheless
be obligated to pay on the Closing Date the Purchase Price less the value of
the Shares which may not be transferred to the Purchaser. The Seller or the
Merger Subsidiary, as applicable, shall be obligated to sell and the Purchaser
shall be obligated to purchase all Shares not purchased at the Closing within 2
business days after such Shares become transferable to the Purchaser for the
price determined as specified in Section 2.02(b) at a place and time mutually
acceptable to the Seller and the Purchaser; provided, however, that the
Seller's and the Purchaser's obligation shall terminate if any such sale and
purchase is not consummated by the first day of the seventh month immediately
following the Closing. At the closing of any such sale, each of the Seller and
the Purchaser shall deliver the documents required under Section 2.04 and such
closing shall be conditioned on fulfillment of the conditions specified in
Sections 3.01 and 3.02 with respect to the Shares to be transferred.
Notwithstanding the foregoing, if any Person exercises its right of first
refusal for any Shares pursuant to a Seller Agreement or refuses to consent to
such transfer in accordance with the Seller Agreements, all rights and
obligations of the Seller and the Purchaser contained in this Agreement with
respect to such Shares shall terminate immediately upon the purchase by such
Person of the Shares with respect to which it has exercised its right of first
refusal or upon the exercise of such right to refuse consent to the transfer of
such Shares and the rights related thereto under the Seller Agreements.
Notwithstanding the foregoing, in the case of the Shares comprised of shares of
common stock of Tower Automotive, Inc., if such Shares cannot be transferred
together with an assignment of the rights under the Seller Agreement related
thereto, they shall be deemed transferable under this Section 3.03 if and only
to the extent they have been registered for re-sale by the Purchaser under the
Securities Act.
5
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser that:
SECTION 4.01. Due Authorization. The Seller is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization and has all requisite power and authority to own its properties
and conduct its business as now being conducted. The Seller has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly and validly
authorized, executed and delivered by the Seller and constitutes a valid and
binding obligation of the Seller, enforceable against the Seller in accordance
with its terms, except that the enforcement hereof may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
SECTION 4.02. Title. The Seller or a wholly-owned subsidiary of the Seller
is the record and beneficial owner of the Shares as listed on Schedule 2.01 and
each such Person has, and at the Closing will have, the absolute right, power
and capacity to sell, assign, transfer and deliver the Shares to the Purchaser
free and clear of any liens, charges, encumbrances or restrictions (other than
restrictions on transfer imposed by the Securities Act and applicable state
securities or "Blue Sky" laws and other than restrictions (the "Other
Restrictions") existing by virtue of the agreements set forth on Schedule 4.02
hereto (the "Seller Agreements")), and, upon delivery and payment for the
Shares in accordance with the terms of this Agreement, the Purchaser will
acquire valid and marketable title to the Shares, free and clear of all liens,
charges, encumbrances or restrictions (other than those created by the
Purchaser, those existing by virtue of the Other Restrictions and restrictions
on transfer imposed by the Securities Act and applicable state securities or
"Blue Sky" laws). All the Shares (other than the Shares of Companies listed
under headings (a), (b), and (c) of Schedule 2.01) were duly authorized and
validly issued, are outstanding and fully paid and non-assessable and were
issued free and clear of any pre-emptive rights. Other than this Agreement, the
agreement referred to in Section 6.07, all agreements pursuant to which the
Shares were acquired, and the Recapitalization Agreement, the Seller Agreements
constitute the sole and exclusive agreements to which the Seller or any of its
wholly-owned subsidiaries which are transferring Shares are party to with
respect to the Shares.
SECTION 4.03. No Consents. No consent, approval, authorization or order
of, or filing or registration with, any court or governmental agency or body or
6
<PAGE>
third party is required for the execution of this Agreement by the Seller, the
sale by the Seller or its wholly-owned subsidiaries of the Shares to the
Purchaser or the consummation by the Seller of the other transactions
contemplated hereby, except as are listed on Schedule 4.03 hereto, as may be
required under applicable state securities or "Blue Sky" laws and as may be
required under the HSR Act or by any other governmental authorities in
connection with the purchase of the Shares by the Purchaser.
SECTION 4.04. No Conflict, Breach, Etc. The execution, delivery and
performance by the Seller of this Agreement and the consummation by the Seller
and its wholly-owned subsidiaries transferring the Shares of the transactions
contemplated hereby (including, without limitation, the sale of the Shares to
the Purchaser) will not conflict with or constitute or result in a breach of or
a default under (or an event that with notice or passage of time or both would
constitute or result in a breach of or a default under) or violation of or
result in any Person having the right to terminate, modify or accelerate any of
(i) the terms or provisions of any indenture, mortgage, deed of trust, loan
agreement (other than the loan agreements, listed on Schedule 4.04, each of
which will be terminated upon the consummation of the Recapitalization), note,
lease, license, stockholders agreement, or other agreement, instrument or
contract to which the Seller, any wholly-owned subsidiary which is transferring
the Shares or, to the knowledge of the Seller, any Company (other than
Companies listed under headings (a), (b) and (c) of Schedule 2.01) is a party
or by which any such Person is bound or to which any of such Person's
properties or assets is subject, (ii) the certificate of incorporation or
bylaws of the Seller or any wholly-owned subsidiary which is transferring the
Shares or, to the knowledge of the Seller, any Company (other than Companies
listed under headings (a), (b) and (c) of Schedule 2.01), or (iii) (assuming
compliance with all applicable state securities or "Blue Sky" laws and the HSR
Act and assuming the accuracy of the representations and warranties of the
Purchaser in Article 5 below) any statute, judgment, decree, order, rule or
regulation applicable to the Seller or any wholly-owned subsidiary which is
transferring the Shares or, to the knowledge of the Seller, any Company (other
than Companies listed under headings (a), (b) and (c) of Schedule 2.01) or any
of their respective properties or assets, except, in the case of clause (i),
for consents or waivers required under the Seller Agreements which consents or
waivers Seller will use reasonable best efforts to obtain prior to the Closing.
Neither the Seller nor any of its wholly-owned subsidiaries has any obligation
to purchase any additional Shares of Series A Redeemable Preferred Stock of
Qualitor, Inc. and none of the shares of Common Stock of, or any of the
Warrants for shares of Common Stock, of Qualitor, Inc. owned by the Seller or
any of its wholly-owned subsidiaries are subject to an option or right of
redemption in favor of Qualitor, Inc.
7
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Seller that:
SECTION 5.01. Due Authorization. The Purchaser is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization and has all requisite corporate power and authority to own its
properties and conduct its business as now being conducted. The Purchaser has
all requisite power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement has been duly and validly
authorized, executed and delivered by the Purchaser and constitutes a valid and
binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms, except that the enforcement hereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
SECTION 5.02. No Consents. No consent, approval, authorization or order
of, or filing or registration with, any court or governmental agency or body,
or third party is required for the execution of this Agreement by the
Purchaser, the purchase of the Shares by the Purchaser or the consummation by
the Purchaser of the other transactions contemplated hereby, except as are
listed on Schedule 5.02 hereto, as may be required under applicable state
securities or "Blue Sky" laws and as may be required under the HSR Act or by
other governmental authorities in connection with the purchase of the Shares by
the Purchaser.
SECTION 5.03. No Conflict, Breach, Etc. The execution, delivery and
performance by the Purchaser of this Agreement and the consummation by the
Purchaser of the transactions contemplated hereby (including, without
limitation, the purchase of the Shares by the Purchaser) will not conflict with
or constitute or result in a breach of or a default under (or an event that
with notice or passage of time or both would constitute or result in a breach
of or a default under) or violation of any of (i) the terms or provisions of
any indenture, mortgage, deed of trust, loan agreement, note, lease, license,
stockholders agreement or other agreement, instrument or contract to which the
Purchaser is a party or by which Purchaser is bound or to which any of
Purchaser's properties or assets is subject, (ii) the certificate of
incorporation or bylaws of the Purchaser, or (iii) (assuming compliance with
all applicable state securities or "Blue Sky" laws and the HSR Act) any
statute, judgment, decree, order, rule or regulation applicable to the
Purchaser or any of its properties or assets except, in the case of clause (i),
for consents or waivers required under the Seller Agreements relating to MSX
8
<PAGE>
International, Inc. which consents or waivers Purchaser will use reasonable best
efforts to obtain prior to Closing.
SECTION 5.04. Purchase Entirely for Own Account. The Shares to be acquired
by the Purchaser will be acquired for investment for the Purchaser's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof. The Purchaser has no present intention of
selling, granting any participation in or otherwise distributing the Shares.
The Purchaser does not presently have any contract, undertaking, agreement or
arrangement with any Person to sell, transfer or grant participations to such
Person or to any third Person, with respect to any of the Shares.
SECTION 5.05. Restricted Securities. The Purchaser understands that the
transfer of the Shares by the Seller or a transferring subsidiary has not been
registered under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act") or any other
applicable securities laws. The sale of the Shares hereunder is being
consummated in reliance on an exemption from the registration provisions of the
Securities Act which depends upon, among other things, the Purchaser's
representations as expressed in Sections 5.04 and 5.07. The Purchaser
understands that it must hold the Shares indefinitely unless the sale of the
Shares is registered under the Securities Act and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available and that any such sale is subject to the Seller
Agreements, as applicable. The Purchaser acknowledges that the Companies have
no obligation to register or qualify the Shares for resale, other than as
provided in the Seller Agreements. The Purchaser further acknowledges that
there is no assurance that any exemption from registration or qualification
will be available for resales of the Shares and that, even if available, it may
be conditioned on various requirements including, but not limited to, the time
and manner of sale, the holding period for the Shares, agreements then in
effect with the Companies and/or other stockholders of the Companies with
respect to the Shares and on requirements relating to each of the Companies
which are outside of the Purchaser's control, and which the Companies are under
no obligation and may not be able to satisfy.
SECTION 5.06. Legends. The Purchaser understands that each of the Shares
will bear, so long as appropriate, those legends required by the Seller
Agreements, the Securities Act and other applicable state securities laws. The
Purchaser acknowledges that each of the Companies shall be entitled to make a
notation on its records and give instructions to any transfer agent of the
Shares in order to implement the restrictions on transfer set forth in the
Seller Agreements or required by law.
9
<PAGE>
SECTION 5.07. Accredited Investor; Knowledge. The Purchaser is an
accredited investor as defined in Rule 501 of Regulation D promulgated under
the Securities Act. The Purchaser was not organized solely for the purpose of
acquiring the Shares and has such knowledge, sophistication and business
experience so as to be capable of evaluating the merits and risks of an
investment in the Shares. The Purchaser has sufficient experience in
investments and knowledge about the Companies' respective management,
businesses, operations and financial affairs and about the Shares so as to be
capable of evaluating the merits and risks of its investment in the Shares. The
Purchaser represents that it is able to bear the economic risk of its
investment in the Shares indefinitely, including a possible total loss of
investment.
SECTION 5.08. Financing. Purchaser has, or will have prior to the Closing,
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to make payment of the Purchase Price as required
hereunder and all related fees and expenses.
ARTICLE 6
COVENANTS AND AGREEMENTS
SECTION 6.01. Disclosure; Publicity. Neither party hereto shall, and each
party hereto shall cause its representatives and agents not to, make any public
announcement, statement or press release with respect to this Agreement or the
transactions contemplated hereby or otherwise disclose to any Person (other
than its respective officers, directors, employees, agents, investors,
financial representatives and attorneys, in each case on a need to know basis)
the existence, terms, conditions, content or effect of this Agreement, in each
case, without the prior consent of the other party unless disclosure is
required by applicable law or governmental regulation, or by order of a court
of competent jurisdiction.
SECTION 6.02. Seller Agreements. Seller agrees that it shall promptly
deliver notices to the extent permitted by the Seller Agreements and take all
other action required under the Seller Agreements in order to consummate the
sale of the Shares to the Purchaser and to use reasonable best efforts to
obtain a waiver or an exercise of the other parties' rights of first refusal
under the Seller Agreements on or prior to the Closing Date.
SECTION 6.03. Further Assurances. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use its reasonable best
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary or desirable under applicable legal requirements, to
consummate
10
<PAGE>
and make effective the transactions contemplated by this Agreement, including,
without limitation, obtaining the consents listed on Schedules 4.02 and 5.02
hereto and the assignments of the Seller Agreements; provided, however, that
neither the Seller nor the Purchaser shall be required to compensate any third
party to obtain any such consent or approval (other than customary filing
fees). If at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, the parties hereto shall
use their reasonable best efforts to take or cause to be taken all such
necessary or desirable action and execute, and deliver and file, or cause to be
executed, delivered and filed, all necessary or desirable documentation.
SECTION 6.04. Certain Filings. Purchaser agrees to use reasonable best
efforts to file within 10 Business Days after the date hereof a Notification
and Report Form for Certain Mergers and Acquisitions ("HSR Notification Form")
with the Federal Trade Commission ("FTC") and the Department of Justice ("DOJ")
in connection with the acquisition of the Shares other than those listed on
Schedule 2.02 and of MSX International, Inc., as appropriate. Seller and
Purchaser shall cooperate with one another in taking any actions or making any
filings required by the HSR Act and seeking timely to, and shall use their
reasonable best efforts to, obtain early termination or expiration of the
applicable waiting period. Seller and Purchaser each agree to use their
reasonable best efforts to promptly identify any other governmental filings or
actions with respect to any other governmental authority necessary to
consummate the transactions contemplated by this Agreement and to make such
filings or take such actions within 10 Business Days of such identification and
to obtain early termination or expiration of any applicable waiting period or
early or expedited approval, as applicable. Seller shall use its commercially
reasonable efforts to cause each Company to cooperate with the Purchaser and
the Seller in their making, and to take all actions and to make, all filings
required by the HSR Act or any other governmental authority necessary to
consummate the transactions contemplated by this Agreement and to obtain early
termination or expiration of any applicable waiting period or early or
expedited approval, as applicable, of any such filings. Notwithstanding the
foregoing, with respect to the Shares comprised of MSX International, Inc. and
those listed on Schedule 2.02, neither the Purchaser nor the Seller shall have
any obligation to make or to cause to be made any filings required under this
Section 6.04 until, in the case of MSX International, Inc., in the case of any
filing required by the HSR Act, 10 Business Days after the date of the
Purchaser's notice given pursuant to Section 6.06 hereof, and in the case of
all other filings, as otherwise specified herein and, in the case of the Shares
listed on Schedule 2.02, in the case of any filing required by the HSR Act, 10
Business Days after the applicable Person's consent to the transfer of such
Shares and the rights related thereto under the Seller Agreements or the
applicable Person's failure to purchase Shares with respect to which it has
exercised a right of first
11
<PAGE>
refusal, as appropriate, and in the case of all other filings, as otherwise
specified herein. Notwithstanding the foregoing, within 10 Business Days after
a written request (which request will not be prior to the delivery of the
notice under Section 6.06) by Seller, Purchaser agrees to make a filing on HSR
Notification Form with the FTC and the DOJ with respect to the Shares listed on
Schedule 2.02 specified in such written request and Seller agrees to reimburse
Purchaser for any filing fees paid by Purchaser with respect to such HSR
Notification Form filed upon the request of Seller in the event Purchaser is
not able to purchase the Shares which are the subject of such HSR Notification
Form filed upon the request of Seller. "Business Day" means a day that is not a
Saturday, Sunday or other day on which banks are required or authorized by law
to be closed in the City of New York.
SECTION 6.05. Representations and Covenants. Prior to Closing, each of the
Seller and the Purchaser will not engage in any practice, take any action, fail
to take any action or enter into any transaction which would cause any
representation or warranty made by it in this Agreement to be untrue in any
material respect or result in the breach of any material covenant made by it in
this Agreement.
SECTION 6.06. Notice. No later than the close of business on the tenth
Business Days after the date hereof, the Purchaser shall provide the Seller
with a notice containing a good faith bona fide offer indicating the terms and
the price at which Purchaser will offer to purchase the Shares listed on
Schedule 2.02.
SECTION 6.07. American Commercial Plastics. Seller agrees to pay over to
Purchaser all payments received by Seller pursuant to Section 3.00 of the Stock
Purchase Agreement, dated as of March 23, 1999, among MascoTech, Inc.,
MascoTech Coatings, Inc. and American Commercial Plastics, Inc. no later than
30 days after receipt thereof.
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. Termination. Seller may terminate this Agreement and Seller
may abandon the transactions contemplated hereby in the event the
Recapitalization Agreement is terminated for any reason in accordance with its
terms by giving Purchaser written notice of termination which shall be
effective immediately. Otherwise this Agreement may be terminated only with the
prior written consent of Seller and Purchaser.
12
<PAGE>
SECTION 7.02. Amendments; Waivers. The provisions of this Agreement may be
modified or amended, and waivers and consents to the performance and observance
of the terms hereof may be given, only by written instrument executed and
delivered by each of the parties hereto in the event of an amendment and by the
party against whom the waiver is to be effective in the event of a waiver. The
failure at any time to require performance of any provision hereof shall in no
way affect the full right to require such performance at any time thereafter
(unless performance thereof has been waived in accordance with the terms hereof
for all purposes and at all times by the party to whom the benefit of such
performance is to be rendered). The waiver by any party to this Agreement of a
breach of any provision hereof shall not be taken or held to be a waiver of any
succeeding breach of such provision or any other provision or as a waiver of
the provision itself.
SECTION 7.03. Successors and Assigns. None of the rights or obligations
under this Agreement shall be assignable without the written consent of the
other party except that (i) Purchaser may transfer or assign, in whole or from
time to time in part, to one or more of its Affiliates, the right to purchase
all or a portion of the Shares, but no such transfer or assignment will relieve
Purchaser of its obligations hereunder and (ii) Seller may transfer or assign
this Agreement together with the Shares (in whole or in part) to an Affiliate
or to Masco Corporation, a Delaware corporation, as long as Purchaser's rights
hereunder are not adversely affected. This Agreement and all covenants and
agreements contained in this Agreement by or on behalf of the parties hereto
shall bind, and inure to the benefit of, the respective successors and
permitted assigns of the parties hereto.
SECTION 7.04. Notices. All notices or other communications required or
permitted to be given hereunder shall be in writing and shall be delivered by
hand or sent, by registered, certified or express mail, reputable overnight
courier service or facsimile and shall be deemed given when so delivered by
hand or if mailed, three days after mailing (one business day in the case of
express mail or overnight courier service) or if sent by facsimile, upon
receipt of written confirmation, as follows:
if to Seller, to:
MascoTech, Inc.
21001 Van Born Road
Taylor, Michigan 48180
Attention: President
Fax: (313) 792-6157
13
<PAGE>
with a copy to:
MascoTech, Inc.
21001 Van Born Road
Taylor, Michigan 48180
Attention: General Counsel
Fax: (313) 792-6940
and
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Leonard Kreynin
Fax: (212) 450-4800
and
Dykema Gossett PLLC
400 Renaissance Center
Detroit, MI 48243
Attention: Fredrick M. Miller
Fax: (313) 568-6832
if to Purchaser, to:
Citicorp Venture Capital, Ltd.
399 Park Avenue
14th Floor
New York, New York 10043
Attention: Michael A. Delaney
Fax: (212) 793-2425
with a copy to:
Morgan Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178-0060
Attention: Robert G. Robison
Fax: (212) 309-6273
SECTION 7.05. Expenses. Except as specified in Sections 6.04 and 6.07,
each party hereto will bear its own costs, fees and expenses incurred in
connection
14
<PAGE>
with the transactions contemplated hereby, including, without limitation, legal
and accounting fees and expenses.
SECTION 7.06. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
SECTION 7.07. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 7.08. Severability; Interpretation. If any provision in this
Agreement is deemed to be or becomes invalid, illegal, void or unenforceable
under any law that is applicable hereto, (i) such provision will be deemed
amended to conform to applicable laws so as to be valid and enforceable or, if
it cannot be so amended without materially altering the intention of the
parties hereto, it will be deleted, with effect from the date of such agreement
or such earlier date as the parties hereto may agree and (ii) the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not be impaired or affected in any way.
SECTION 7.09. Headings. Section headings herein are for convenience only
and shall not affect the construction hereof.
SECTION 7.10. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto relating to the subject matter hereof and
supersedes any and all prior oral or written agreements, representations or
warranties, contracts, understandings, correspondence, conversations and
memoranda, whether written or oral, between the parties hereto, or between or
among any agents, representatives, Affiliates, predecessors in interest or
successors in interest, with respect to the subject matter hereof.
SECTION 7.11. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other party.
15
<PAGE>
SECTION 7.12. Third-party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and is not intended to confer any benefit
upon any other person or entity or infringe upon any rights or remedies.
SECTION 7.13. Specific Performance. Each party shall be entitled to
enforce all of their rights contained herein specifically (without posting a
bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement as of the date first above written.
MASCOTECH, INC.
By:
---------------------------------
Name:
Title:
CITICORP VENTURE CAPITAL, LTD.
By:
---------------------------------
Name:
Title:
17
<PAGE>
ATTACHMENT A
CERTIFICATION OF NON-FOREIGN STATUS FOR ENTITIES
(As contemplated by Treasury Regulation
Section 1.1445-2(b))
Section 1445 of the Internal Revenue Code of 1986, as amended, provides
that a buyer of a U.S. real property interest must withhold tax if the seller
is a foreign person. To inform the buyer that withholding of tax is not
required upon the disposition of a U.S. real property interest (if shares of
[target] are found to constitute such an interest) by
, the undersigned hereby certifies on behalf of such entity:
(name of entity)
1._________________ is not a foreign corporation, foreign partnership,
(name of entity)
foreign trust, or foreign estate (as those terms are defined in the Internal
Revenue Code and Income Tax Regulations);
2._________________'s U.S. employer identification number is
(name of entity)
_________________; and
(EIC)
3._________________'s office address within the United States is
(name of entity)
-----------------------------------------
(street)
-----------------------------------------
(city, state, zip code)
_________________ understands that this certification must be disclosed to
(name)
the Internal Revenue Service by the buyer and that any false statement I have
made here could be punished by fine, imprisonment, or both.
<PAGE>
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct,
and complete and I further declare that I have
authority to sign this document on behalf of _______________________________.
(name of entity)
-----------------------------------
Name of Entity
-----------------------------------
Signature
-----------------------------------
Title
Date: _______________
2
<PAGE>
SCHEDULE 2.01
<TABLE>
Company Shares to be Purchased
------- ----------------------
<S> <C>
(a) Titan International, Inc. 3,315,852 shares of Common Stock
(b) Delco Remy International, Inc. 3,025,391 shares of Common Stock
(c) MSX International, Inc. 43,752 shares of Class A Common Stock
180,000 shares of Series A Preferred
Stock
(d) Advanced Accessories Systems, LLC 1,500 Member Units
(formerly known as AAS Holdings, LLC)
(e) Tower Automotive, Inc. 400,000 shares of Common Stock
(f) Innovative Coating Technologies, Inc. Senior Subordinated Note of American
(formerly known as MascoTech Coatings, Commercial Plastics, Inc. aggregating
Inc.) $6.4 million (including deferred
interest)
27.20 shares of Common Stock
(g) Qualitor, Inc. 890,000 shares of Series A Redeemable
Preferred Stock
300,000 shares of Common Stock
Warrant No. 2 to purchase 107,143 shares
of Common Stock
Warrant No. 3 to purchase 65,839 shares
of Common Stock
Warrant No. 4 to purchase 25,643 shares
of Common Stock
</TABLE>
<PAGE>
SCHEDULE 2.02
<TABLE>
Company Shares to be Purchased
------- ----------------------
<S> <C>
Advanced Accessories Systems, LLC (formerly 1,500 Member Units
known as AAS Holdings, LLC)
Innovative Coating Technologies, Inc. (formerly 27.20 shares of Common Stock
known as MascoTech Coatings, Inc.)
Qualitor, Inc. 300,000 shares of Common Stock
Warrant No. 2 to purchase 107,143
shares of Common Stock
Warrant No. 3 to purchase 65,839
shares of Common Stock
Warrant No. 4 to purchase 25,643
shares of Common Stock
</TABLE>
<PAGE>
SCHEDULE 4.02
SELLER AGREEMENTS
Amended and Restated Members' Agreement dated as of September 30, 1999 among
Advanced Accessory Systems, LLC (F/K/A AAS Holdings, LLC) and the members
thereof
Third Amended and Restated Operating Agreement dated as of September 30, 1999
of Advanced Accessory Systems, LLC (F/K/A AAS Holdings, LLC), and the members
thereof
Shareholders Agreement dated March 23, 1999 by and among MascoTech, Inc.,
American Commercial Plastics, Inc., and Innovative Coating Technologies, Inc.
Letter Agreement dated March 23, 1999 by and among American Commercial
Holdings, Inc., American Commercial Plastics, Inc., MascoTech Coating
Technologies, Inc. and MascoTech, Inc. regarding Registration Rights Agreement
Amended and Restated Securities Purchase and Holders Agreement, dated
December 22, 1997, by and among Delco Remy International, Inc., Citicorp
Venture Capital, Ltd., MascoTech Automotive Systems Group, Inc., and the other
individuals named therein
Registration Rights Agreement for Common Stock dated July 29, 1994 by and
among DR International, Inc., a Delaware corporation, Citicorp Venture Capital
Ltd., World Equity Partners, L.P., MascoTech Automotive Systems Group, Inc.,
Harold K. Sperlich, James R. Gerrity and the Management Investors named
therein
Stockholders' Agreement dated as of January 3, 1997 (as amended) by and among
MSX International, Inc., MascoTech, Inc., Citicorp Venture Capital, Ltd., and
other individuals named therein
Registration Rights Agreement dated as of January 3, 1997 by and among MSX
International, Inc., MascoTech, Inc., Citicorp Venture Capital, Ltd., and other
individuals named therein
Stockholders Agreement dated as of April 30, 1999 by and among Qualitor, Inc.,
Wind Point Partners III, L.P., Wind Point Executive Advisor Partners, L.P.,
Ralph E. Reins, First Union Capital Partners, Inc., and MascoTech, Inc.
<PAGE>
Registration Rights Agreement dated as of April 30, 1999 by and among Qualitor
Inc., Wind Point Partners III, L.P., Wind Point Executive Advisor Partners,
L.P., First Union Capital Partners, Inc.., and MascoTech, Inc.
Warrant Purchase Agreement dated as of April 30, 1999, by and between
Qualitor, Inc. and MascoTech, Inc.
Warrant No. 2 dated as of April 30, 1999 issued by Qualitor, Inc. to MascoTech,
Inc. to purchase 107,143 shares of Common Stock
Warrant No. 3 dated as of April 30, 1999 issued by Qualitor, Inc. to MascoTech,
Inc. to purchase 65,839 shares of Common Stock
Warrant No. 4 dated as of April 30, 1999 issued by Qualitor, Inc. to MascoTech,
Inc. to purchase 25,643 shares of Common Stock
Registration Rights and Voting Agreement dated as of May 31, 1996 between
Tower Automotive, Inc., and MascoTech, Inc.
Senior Subordinated Note dated March 23, 1999 for $6 million issued by
American Commercial Plastics, Inc. to MascoTech, Inc.
Guaranty of MascoTech Coatings, Inc.
Guaranty of George S. Hofmeister
General Security Agreement dated as of March 23, 1999 by and among
MascoTech, Inc., American Commercial Plastics, Inc. and MascoTech Coatings,
Inc.
Mortgage dated March 24, 1999 by MascoTech Coatings, Inc. in favor of
MascoTech, Inc.
Assignment of Rents, Issues, Profits and Leases by MascoTech Coatings, Inc. in
favor of MascoTech, Inc.
Subordination Agreement dated March 23, 1999 by MascoTech, Inc., MascoTech
Coatings, Inc. and National Bank of Canada
<PAGE>
SCHEDULE 4.03
CONSENTS OF SELLER
Filings under HSR Act
The parties agree that to the extent any consent listed in this Schedule
relates to any Shares not purchased in accordance with Section 3.03, the
failure to obtain such consent shall not constitute a breach of the
representations and warranties set forth in Section 4.03 with respect to such
Shares (the "Unpurchased Shares") at the Closing of any other Shares which does
not include such Unpurchased Shares.
Amended and Restated Members' Agreement dated as of September 30, 1999 among
Advanced Accessory Systems, LLC (F/K/A AAS Holdings, LLC) and the members
thereof
Third Amended and Restated Operating Agreement dated as of September 30, 1999
of Advanced Accessory Systems, LLC (F/K/A AAS Holdings, LLC) and the members
thereof
Shareholders Agreement dated March 23, 1999 by and among MascoTech, Inc.,
American Commercial Plastics, Inc., and Innovative Coating Technologies, Inc.
Stockholders Agreement dated as of January 3, 1997 (as amended) by and among
MSX International, Inc., MascoTech, Inc., Citicorp Venture Capital, Ltd., and
other individuals named therein
Stockholders Agreement dated as of April 30, 1999 by and among Qualitor, Inc.,
Wind Point Partners III, L.P., Wind Point Executive Advisor Partners, L.P.,
Ralph E. Reins, First Union Capital Partners, Inc., and MascoTech, Inc.
Registration Rights and Voting Agreement dated as of May 31, 1996, between
Tower Automotive, Inc. and MascoTech, Inc.
Additional filings as are identified in Section 6.04
<PAGE>
SCHEDULE 4.04
CONFLICTS OF SELLER
Loan Agreements
$1,300,000,000 Credit Agreement dated as of January 16, 1998 among
MascoTech, Inc., MascoTech Acquisition, Inc., the banks party thereto from time
to time, The First National Bank of Chicago, as Administrative Agent, Bank of
America NT&SA and NationsBank N.A., as Syndication Agents and Amendment
No. 1 thereto dated as of February 10, 1998
<PAGE>
SCHEDULE 5.02
CONSENTS OF PURCHASER
Stockholders' Agreement dated as of January 3, 1997 (as amended) by and among
MSX International, Inc., MascoTech, Inc., Citicorp Venture Capital, Ltd. and
other individuals named therein
Filings under HSR Act
The parties agree that to the extent any consent listed in this Schedule
relates to any Shares not purchased in accordance with Section 3.03, the
failure to obtain such consent shall not constitute a breach of the
representations and warranties set forth in Section 5.02 with respect to any
Unpurchased Shares at the closing of any other Shares which does not include
such Unpurchased Shares
Additional filings as are identified as provided in Section 6.04
<PAGE>
ANNEX E
August 1, 2000
PRIVATE AND CONFIDENTIAL
Special Committee of the
Board of Directors
MascoTech, Inc.
21001 Van Born Road
Taylor, MI 48180
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the outstanding shares of common stock, par value
$1.00 per share (the "Shares"), of MascoTech, Inc. (the "Company") (other than
Riverside Company LLC ("Riverside"), the Continuing Shareholders and their
respective Affiliates (as each such term is defined in the Recapitalization
Agreement, dated as of August 1, 2000 (the "Agreement"), by and among the
Company and Riverside) of the $16.90 per Share in cash, subject to upward
adjustment based on the proceeds realized from the sales of certain equity
investments of the Company and/or its subsidiaries as specified in the
Agreement (the "Merger Consideration"), to be received by such holders pursuant
to the terms of the Agreement.
McDonald Investments Inc., as part of its investment banking business, is
customarily engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
In connection with this opinion, we have reviewed and analyzed, among
other things, the following: (i) the Agreement, including the exhibits and
schedules thereto; (ii) certain publicly available information concerning the
Company, including its Annual Reports on Form 10-K for each of the years ended
December 31, 1997, 1998 and 1999 and its Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000; (iii) certain other internal information,
primarily financial in nature, including projections, concerning the business
and operations of the Company furnished to us by the Company for purposes of
our analysis; (iv) certain publicly available information concerning the
trading of, and the trading markets for, the Shares; (v) certain publicly
available information with respect to certain other companies that we believe
to be comparable to the Company and the trading markets for certain of such
other companies' securities; and (vi) certain publicly available information
concerning the nature and terms of certain other transactions that we consider
relevant to our inquiry. We have also met with certain officers and employees
of the Company to discuss the business and prospects of the Company, and
considered such other matters as we believed relevant to our inquiry.
<PAGE>
We have not solicited, nor were we asked to solicit, third party interest
in a transaction involving the Company. We have been advised by representatives
of the Company, however, and have taken into account for purposes of our
opinion, that, at the Company's direction, the Company's financial advisor was
requested to approach, and held discussions with, third parties to solicit
indications of interest for the possible acquisition of the Company.
In our review and analysis and in arriving at our opinion, we have relied
upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available and have assumed and relied
upon the representations and warranties of the Company and Riverside contained
in the Agreement. We have not been engaged to, and have not independently
attempted to, verify such information. We have also assumed with your consent
that the Equity Investment Sales (as defined in the Agreement) that the Company
will be required to consummate as a condition to the Merger (as defined in the
Agreement) will be effected in all material respects in accordance with the
terms contemplated by the Agreement and certain related documents. We have also
relied upon the management of the Company as to the reasonableness and
achievability of the financial and operating projections (and the assumptions
thereof) provided to us and, with your consent, we have assumed that such
projections reflect the best currently available estimates and judgments of the
Company's management. We have not been engaged to assess the reasonableness or
achievability of such projections or the assumptions on which they were based
and express no view as to such projections or assumptions. In addition, we have
not conducted a physical inspection or appraisal of the assets, properties or
facilities of the Company nor have we been furnished with any such evaluation
or appraisal.
This opinion is based on economic and market conditions and other
circumstances existing on, and information made available as of, the date
hereof and does not address any matters subsequent to such date. In addition,
our opinion is, in any event, limited to the fairness, as of the date hereof,
from a financial point of view, to the holders of Shares (other than Riverside,
the Continuing Shareholders and their respective Affiliates) of the Merger
Consideration and does not address the Company's underlying business decision
to effect the transactions contemplated by the Agreement or any other terms
thereof. It should be understood that, although subsequent developments may
affect this opinion, we do not have an obligation to update, revise or reaffirm
this opinion.
We are familiar with the Company, having acted as financial advisor to the
Special Committee of the Board of Directors of the Company in connection with,
and having participated in certain of the negotiations leading to, the
Agreement and will receive from the
<PAGE>
Company a fee for our services, as well as the Company's agreement to indemnify
us under certain circumstances. We will also receive a fee for rendering this
opinion.
In the ordinary course of our business, we may actively trade securities
of the Company for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
This opinion is directed to the Special Committee of the Board of
Directors of the Company and does not constitute a recommendation as to how any
holder of Shares should vote with respect to such transactions.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that, as of the date hereof, the
Merger Consideration to be received in the transaction is fair, from a
financial point of view, to the holders of Shares (other than Riverside, the
Continuing Shareholders and their respective Affiliates).
Very truly yours,
/s/McDonald Investments Inc.
McDONALD INVESTMENTS INC.
<PAGE>
ANNEX F
[LETTERHEAD OF SALOMON SMITH BARNEY INC.]
August 1, 2000
The Board of Directors
MascoTech, Inc.
21001 Van Born Road
Taylor, Michigan 48180
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the common stock of MascoTech, Inc. ("MascoTech"),
other than Riverside Company LLC ("Merger Sub"), the Continuing Shareholders
(defined below) and their respective affiliates, of the Merger Consideration
(defined below) to be received by such holders pursuant to the terms and
subject to the conditions set forth in the Recapitalization Agreement, dated as
of August 1, 2000 (the "Recapitalization Agreement"), between MascoTech and
Merger Sub. As more fully described in the Recapitalization Agreement, (i)
Merger Sub will be merged with and into MascoTech (the "Merger") and (ii) each
outstanding share of the common stock, par value $1.00 per share, of MascoTech
("MascoTech Common Stock"), other than shares of MascoTech Common Stock held by
certain affiliates of MascoTech (the "Continuing Shareholders"), will be
converted into the right to receive $16.90 in cash, subject to upward
adjustment based on the proceeds realized from sales of the equity interests
beneficially owned by MascoTech and/or its subsidiaries in Saturn and sales of
certain other equity investments of MascoTech and its subsidiaries (such other
equity investment sales, the "Non-Saturn Equity Investment Sales"), as
specified in the Recapitalization Agreement (the "Merger Consideration"). The
Recapitalization Agreement further provides that, in connection with the
transactions contemplated by the Merger, the Continuing Shareholders will have
the right to exchange a portion of their shares of MascoTech Common Stock for
newly issued securities of the surviving corporation in the Merger.
In arriving at our opinion, we reviewed the Recapitalization Agreement and
certain related documents, and held discussions with certain senior officers,
directors and other representatives and advisors of MascoTech concerning the
business, operations and prospects of MascoTech. We examined certain publicly
available business and financial information relating to MascoTech as well as
certain financial forecasts and other information and data for MascoTech which
were provided to or otherwise discussed with us by the management of MascoTech.
We reviewed the financial terms of the Merger as set forth in the
Recapitalization Agreement in relation to, among other things: current and
historical market prices and trading volumes of MascoTech Common Stock; the
historical and projected earnings and other operating data of MascoTech; and
the financial condition and capitalization of MascoTech. We considered, to the
extent publicly available, the financial terms of certain other similar
transactions recently effected which we considered relevant in evaluating the
Merger and analyzed certain financial, stock market and other publicly
available information relating to the businesses of other companies whose
operations we considered relevant in evaluating those of MascoTech. In
connection with our engagement, we were requested to approach, and we held
discussions with, third parties to solicit indications of interest in the
possible acquisition of MascoTech. In addition to the foregoing, we conducted
such other analyses and examinations and considered such other information and
financial, economic and market criteria as we deemed appropriate in arriving at
our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with us,
we have been advised by the management of MascoTech that such forecasts and
other information and data were reasonably prepared on bases reflecting the
best currently available estimates and
<PAGE>
The Board of Directors
MascoTech, Inc.
August 1, 2000
Page 2
judgments of the management of MascoTech as to the future financial performance
of MascoTech. We also have assumed, with your consent, that the Non-Saturn
Equity Investment Sales which MascoTech will be required to consummate as a
condition to the Merger will be effected in all material respects in accordance
with the terms contemplated by the Recapitalization Agreement and certain
related documents. We have not made or been provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of MascoTech nor have we made any physical inspection of the properties or
assets of MascoTech. We express no view as to, and our opinion does not
address, the relative merits of the Merger as compared to any alternative
business strategies that might exist for MascoTech or the effect of any other
transaction in which MascoTech might engage. Our opinion is necessarily based
upon information available to us, and financial, stock market and other
conditions and circumstances existing and disclosed to us, as of the date
hereof.
Salomon Smith Barney Inc. has acted as financial advisor to MascoTech in
connection with the proposed Merger and will receive a fee for such services, a
significant portion of which is contingent upon the consummation of the Merger.
We also will receive a fee upon delivery of this opinion. We have in the past
provided investment banking services to MascoTech unrelated to the proposed
Merger, for which services we have received compensation. In the ordinary
course of our business, we and our affiliates may actively trade or hold the
securities of MascoTech for our own account or for the account of our customers
and, accordingly, may at any time hold a long or short position in such
securities. In addition, we and our affiliates (including Citigroup Inc. and
its affiliates) may maintain relationships with affiliates of Merger Sub and
MascoTech and its affiliates.
Our advisory services and the opinion expressed herein are provided for
the information of the Board of Directors of MascoTech in its evaluation of the
proposed Merger, and our opinion is not intended to be and does not constitute
a recommendation to any stockholder as to how such stockholder should vote on
any matters relating to the proposed Merger.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Merger Consideration is
fair, from a financial point of view, to the holders of MascoTech Common Stock
(other than Merger Sub, the Continuing Shareholders and their respective
affiliates).
Very truly yours,
/s/ SALOMON SMITH BARNEY INC.
SALOMON SMITH BARNEY INC.
<PAGE>
ANNEX G
SECTION 262 OF THE DELAWARE GENERAL CORPORATION
LAW
SECTION 262--Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and
the words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions
thereof, solely of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to sec.
251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or sec.
264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
<PAGE>
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights
are available pursuant to subsections (b) or (c) hereof that appraisal
rights are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of such stockholder's
shares shall deliver to the corporation, before the taking of the vote on
the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days
after the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228 or
sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before
the effective date of the merger or consolidation notifying each of the
holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the merger
or consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need
<PAGE>
only be sent to each stockholder who is entitled to appraisal rights and
who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining
the stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided, that if the
notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder
who has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any stockholder
shall have the right to withdraw such stockholder's demand for appraisal
and to accept the terms offered upon the merger or consolidation. Within
120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and
(d) hereof, upon written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the consolidation a
statement setting forth the aggregate number of shares not voted in favor
of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within
10 days after such stockholder's written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting corporation,
which shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the surviving or resulting corporation. If
the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register
in Chancery, if so ordered by the Court, shall give notice of the time and
place fixed for the hearing of such petition by registered or certified
mail to the surviving or resulting corporation and to the stockholders
shown on the list at the addresses therein stated. Such notice shall also
be given by 1 or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The
forms of the notices by mail and by publication shall be approved by the
Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented
by certificates to submit their certificates of stock to the Register in
Chancery for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such direction,
the Court may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In determining
such fair value, the Court shall take into account all relevant factors.
In determining the fair rate of interest, the Court may consider all
relevant factors, including the rate of interest which the surviving or
resulting corporation would have had to pay to borrow money during the
pendency of the proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the appraisal
proceeding, the Court may, in its discretion, permit discovery or other
pretrial proceedings and may proceed to trial upon the appraisal prior to
the final determination of the stockholder entitled to an appraisal. Any
stockholder whose
3
<PAGE>
name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted such
stockholder's certificates of stock to the Register in Chancery, if such
is required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under
this section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple
or compound, as the Court may direct. Payment shall be so made to each
such stockholder, in the case of holders of uncertificated stock
forthwith, and the case of holders of shares represented by certificates
upon the surrender to the corporation of the certificates representing
such stock. The Court's decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances.
Upon application of a stockholder, the Court may order all or a portion of
the expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the value
of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose
or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record
at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal
shall be filed within the time provided in subsection (e) of this section,
or if such stockholder shall deliver to the surviving or resulting
corporation a written withdrawal of such stockholder's demand for an
appraisal and an acceptance of the merger or consolidation, either within
60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an
appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of
authorized and unissued shares of the surviving or resulting corporation.
(Last amended by Ch. 339, L.'98, eff. 7-1-98).
4
<PAGE>
[Form of Proxy]
Proxy for Special Meeting of Stockholders to be held on , 2000
MASCOTECH, INC.
Proxy Solicited on Behalf of the Board of Directors
The undersigned, hereby revoking any Proxy heretofore given, appoints
RICHARD A. MANOOGIAN and EUGENE A. GARGARO, JR. and each of them attorneys and
proxies for the undersigned, each with full power of substitution, to vote the
shares of MascoTech, Inc. common stock, par value $1.00 per share, registered in
the name of the undersigned to the same extent the undersigned would be entitled
to vote if then personally present at the special meeting of stockholders of
MascoTech, Inc. to be held at the offices of MascoTech, Inc. at 21001 Van Born
Road, Taylor, Michigan, 48180, on , , 2000, at
9:00 a.m. and at any adjournment thereof.
The undersigned hereby acknowledges receipt of the accompanying notice of
special meeting of stockholders and proxy statement.
(Continued and to be dated and signed on the reverse side.)
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THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" PROPOSALS 1 AND 2.
This Proxy when executed will be voted in the manner directed herein. If no
direction is made, this Proxy will be voted FOR Proposals 1 and 2. Discretionary
authority is hereby conferred as to all other matters that may come before the
special meeting.
1. To approve and adopt an agreement of merger and the related merger of
MascoTech Harbor Inc., a wholly owned subsidiary of MascoTech, with and
into MascoTech. In this merger MascoTech's certificate of incorporation
will be changed so that the provision requiring that the holders of at
least 95% of the common stock of MascoTech approve business combinations,
including mergers, involving persons owning 30% or more of MascoTech's
voting stock is repealed.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To approve and adopt a recapitalization agreement and the related merger of
Riverside Company LLC, an affiliate of Heartland, with and into MascoTech.
In this merger, the stockholders of MascoTech common stock (other than
holders who properly demand appraisal rights or holders who have separately
agreed to retain a portion of their MascoTech common stock) will be
entitled to receive, for each share of common stock (other than shares
subject to restricted stock awards), merger consideration of $16.90 in cash
plus additional cash amounts from the net proceeds of the disposition of
stock of Saturn Electronics & Engineering Inc. held by MascoTech as
specified in the recapitalization agreement. This merger will be completed
only if the merger with MascoTech Harbor is completed first.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
PLEASE CHECK THIS BOX IF YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON. [ ]
Please sign exactly as name appears at
left. Executors, administrators,
trustees, attorneys-in-fact et al.
should so indicate when signing. If the
signature is for a corporation, please
sign the full corporate name by an
authorized officer. If the signature is
for a partnership, please sign the full
partnership name by an authorized
person. If you are acting as
attorney-in- fact please so indicate. If
shares are registered in more than one
name, all holders must sign.
Date: _______________________ , 2000
_______________________________________
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SIGNATURE(S)
_______________________________________
Capacity (Title or Authority, e.g.,
President, Partner, Executor, Trustee,
Attorney-in-Fact)
VOTES MUST BE INDICATED (X) IN BLACK OR
BLUE INK.
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VOTING INSTRUCTIONS FOR ALL STOCKHOLDERS
There are three convenient ways to vote your proxy.
o VOTE BY TELEPHONE: Use any touch-tone telephone to vote your proxy. Call
1- , 7 days a week, 24 hours a day. Have your proxy card in
hand when you call. You will be prompted to enter your control number,
located in the box below, and then follow the simple directions, OR
o VOTE BY INTERNET: Use the internet to vote your proxy. Log on to the
website http:// . Have your proxy card in hand when you access the
website. You will be prompted to enter your control number, located in the
box below, to create an electronic proxy, OR
o VOTE BY MAIL: Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided.
The telephone and internet voting procedures are designed to authenticate
stockholders' identities, to allow stockholders to give their voting
instructions and to confirm that stockholders' instructions have been recorded
properly and have been authorized by the stockholder. Section 212(c)(2) of the
Delaware General Corporation Law authorizes the use of electronic transmission,
such as transmissions over the internet, to grant a proxy.
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| Control Number For Telephone/Internet Voting |
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