<PAGE> 1
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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
MASCOTECH, INC.
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(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(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
------------------------------------------------------------------
(5) Total fee paid: $121,408
----------------------------------------
(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
<PAGE> 2
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.
--------------------------------------------------------------------------------
[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing party:
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(4) Date filed:
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<PAGE> 3
MASCOTECH, INC.
21001 Van Born Road
Taylor, Michigan 48180
October 26, 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 28, 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:
- 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
- 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,
/s/ Richard A. Manoogian
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 26, 2000 and the accompanying proxy card
are first being mailed to stockholders on or about October 27, 2000.
<PAGE> 4
MASCOTECH, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
to be held on
November 28, 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.
<TABLE>
<S> <C>
Place: 21001 Van Born Road
Taylor, Michigan 48180
Date: November 28, 2000
Time: 9:00 a.m., local time
</TABLE>
The purposes of the special meeting are:
1. To consider and to vote on the adoption and approval of the following:
- 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
- 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 20, 2000 as the record
date for the special meeting. Only stockholders of record at the close of
business on October 20, 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
/s/ Eugene A. Gargaro Jr.
EUGENE A. GARGARO, JR.
SECRETARY
Taylor, Michigan
October 26, 2000
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY TERM SHEET................... 1
QUESTIONS AND ANSWERS ABOUT THE
MERGERS............................ 10
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...................... 15
General............................ 15
Background of the Mergers.......... 15
Recommendation of MascoTech's
Special Committee and Board of
Directors....................... 23
MascoTech's Position Regarding the
Fairness of the Recapitalization
Merger.......................... 23
MascoTech's Purpose and Reasons for
the Mergers..................... 26
Heartland's Purpose and Reasons for
the Mergers..................... 27
Position of Riverside and
Heartland....................... 27
The Continuing Stockholders'
Purpose and Reasons for the
Mergers......................... 28
Position of the Continuing
Stockholders.................... 28
Opinion of Special Committee's
Financial Advisor............... 29
Opinion of MascoTech's Financial
Advisor......................... 37
Amount and Source of Funds and
Financing of the
Recapitalization Merger......... 42
Certain Effects of the Mergers..... 44
Subsequent Developments............ 45
Plans for MascoTech After the
Recapitalization Merger......... 46
Conduct of the Business of
MascoTech if the
Recapitalization Merger is Not
Completed....................... 46
Material Federal Income Tax
Consequences.................... 46
Regulatory Matters................. 49
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Accounting Treatment of the
Recapitalization Merger......... 49
Stockholder Litigation Challenging
the Mergers..................... 49
INTERESTS OF CERTAIN PERSONS IN THE
MERGERS............................ 51
Board of Directors and Executive
Officers........................ 51
Saturn Stock Disposition........... 52
Exchange and Voting Agreement...... 52
Masco Corporation.................. 53
Stock Options...................... 56
Severance Agreements............... 56
Restricted Stock Awards............ 57
Other Employee Benefits............ 57
Indemnification and Insurance...... 57
THE RECAPITALIZATION AGREEMENT....... 58
The Recapitalization Merger........ 58
Consideration in the
Recapitalization Merger......... 58
Appraisal or Dissenters' Rights.... 59
Options and Restricted Stock
Awards.......................... 59
Exchange of Shares................. 60
The Surviving Corporation.......... 60
Representations and Warranties of
MascoTech....................... 60
Principal Covenants................ 61
Principal Conditions to the
Completion of the
Recapitalization Merger......... 64
Termination; Termination Fee and
Break-up Fee.................... 66
OTHER AGREEMENTS..................... 67
Exchange and Voting Agreement...... 67
Stock Purchase Agreement........... 69
Agreement of Merger................ 70
SELECTED HISTORICAL FINANCIAL DATA... 71
Selected Historical Financial Data
of MascoTech.................... 71
No Pro Forma Financial
Information..................... 71
No Financial Information for
Riverside....................... 72
COMPARATIVE PER SHARE MARKET PRICE
AND DIVIDEND INFORMATION........... 73
INFORMATION RELATING TO MASCOTECH
SECURITIES......................... 74
Purchases by MascoTech............. 74
Purchases by Masco Corporation..... 74
Purchases by Richard A.
Manoogian....................... 74
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Purchases by the Foundation........ 75
Purchases by Riverside and
Heartland....................... 75
Agreements Relating to MascoTech
Securities...................... 76
Agreement Relating to Masco
Corporation Securities.......... 76
FINANCIAL PROJECTIONS................ 77
FORWARD-LOOKING
STATEMENTS......................... 79
EXPENSES............................. 80
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS.......... 81
Five Percent Holders and Executive
Officers and Directors of
MascoTech....................... 81
Executive Officers and Directors of
Masco Corporation............... 83
DIRECTORS AND EXECUTIVE OFFICERS OF
MASCOTECH.......................... 85
DIRECTORS AND EXECUTIVE OFFICERS OF
MASCO CORPORATION.................. 87
DIRECTORS AND EXECUTIVE OFFICERS OF
THE
FOUNDATION......................... 89
IDENTITIES AND BACKGROUNDS OF
RIVERSIDE AND
HEARTLAND.......................... 90
Riverside Company LLC.............. 90
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Heartland Industrial Partners,
L.P. ........................... 90
Heartland Industrial Associates
L.L.C. ......................... 90
General............................ 90
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.............. 97
FUTURE STOCKHOLDER PROPOSALS......... 97
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
</TABLE>
ii
<PAGE> 7
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 2000. 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.
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<PAGE> 8
Mr. Manoogian and his 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 amended, as Annex B and the exchange and voting agreement, as
amended, 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, as amended as of October 23, 2000, 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 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, as amended as of October 23, 2000, 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.
In this proxy statement, we refer to the recapitalization agreement dated
as of August 1, 2000, as amended as of October 23, 2000, as the
"recapitalization agreement," and to the exchange and voting agreement dated as
of August 1, 2000, as amended as of October 23, 2000, as the "exchange and
voting agreement."
GOING PRIVATE TRANSACTION (SEE PAGE 44)
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
2
<PAGE> 9
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.
POSITION OF RIVERSIDE, HEARTLAND AND THE CONTINUING STOCKHOLDERS REGARDING
FAIRNESS
(SEE PAGE 27)
The rules of the SEC require Heartland, Riverside and the continuing
stockholders 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:
- the merger consideration represents a premium over the per share closing
price of MascoTech common stock prior to the announcement of the
recapitalization merger;
- a special independent committee of the board of directors was appointed,
retained legal and financial advisors and evaluated and negotiated the
transaction;
- 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
- 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:
- 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).
- The special committee unanimously recommended to the board of directors
that the agreement of merger, the recapitalization agreement and the
related mergers be approved.
- The factors described in substantive detail on pages 26 through 44.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGE 29)
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
3
<PAGE> 10
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 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 58)
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 59)
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 59)
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
January 14, 2002, January 14, 2003 and January 14, 2004. 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.
4
<PAGE> 11
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.
POSSIBLE ADJUSTMENT TO MERGER CONSIDERATION -- SATURN STOCK (SEE PAGE 58)
According to the information made publicly available by Saturn in
connection with its proposed initial public offering of common stock, Saturn is
a provider of value-added electronics manufacturing services to original
equipment manufacturers and their suppliers. Saturn provides these services to
customers primarily in the automotive, computer and military end markets.
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, any such proceeds in excess of $55.7 million and less than or equal
to $56.7 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 and therefore there
is no expiration date with respect to such payment. No assurances can be given
as to the amount of the payments, if any, to the stockholders and optionholders
to be made as a result of the disposition of Saturn stock.
OTHER DISPOSITIONS OF EQUITY INVESTMENTS
(SEE PAGE 69)
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, subject to reductions if other parties to
the agreements relating to these investments exercise their rights of first
refusal or refuse to consent to the transfer of such investments. 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 20, 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 7,391,894 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.
5
<PAGE> 12
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.
CAPITALIZATION PRIOR TO AND AFTER THE RECAPITALIZATION MERGER
The following chart shows the stock ownership of MascoTech prior to the
mergers:
<TABLE>
<S> <C> <C> <C>
Richard A. Richard and Jane All Other
Masco Corporation Manoogian Manoogian Stockholders
Foundation
17.5% of 9.8% of 2.2% of 70.5% of
common stock common stock(a) common stock 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.
6
<PAGE> 13
The following chart shows the 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 A. Richard and Jane All Other
Masco Corporation Manoogian Manoogian Stockholders
Foundation
12.0% of common stock
69.8% of Class A 9.3% of common stock(a) 0.8% of common stock
preferred stock 14.6% of class A 15.6% of class A 77.9% of common stock(b)
100% of Class B preferred stock preferred stock
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.
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 Heartland Industrial
Masco Corporation Richard A. Manoogian Partners, L.P. and
Manoogian Foundation its co-investors
and management(b)
9.3% of common stock
100% of Series A 2.4% of common stock(a) 2.0% of common stock 86.3% of common stock(a)
preferred stock
MascoTech, Inc.
(the corporation
surviving the recapi-
talization merger)
</TABLE>
-------------------------
(a) Includes restricted stock awards.
(b) Riverside will not exist after the recapitalization merger.
7
<PAGE> 14
TAX CONSEQUENCES (SEE PAGE 46)
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 64)
We will complete the mergers only if specific conditions are satisfied or,
in some cases, waived, including the following:
- required approval of the agreement of merger, the recapitalization
agreement and the related mergers by the stockholders of MascoTech;
- absence of any law or court order prohibiting the mergers;
- the completion of all required actions in connection with the mergers by
any governmental authority;
- performance, in all material respects, by the continuing stockholders of
their obligations under the exchange and voting agreement;
- availability of sufficient financing;
- receipt of an opinion regarding the solvency of MascoTech after the
recapitalization merger; and
- receipt by MascoTech of at least $123.8 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 66)
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:
- 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;
- a law or final and non-appealable court order prohibits the
recapitalization merger;
- MascoTech stockholders do not give the required approvals;
- 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
- 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 66)
MascoTech must pay Riverside a break-up fee of $16 million in cash if:
- 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
8
<PAGE> 15
- 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 49)
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. In connection with a proposed settlement, (a) MascoTech
and Riverside agreed to amend the recapitalization agreement to provide, among
other things, that any proceeds of the disposition of the Saturn stock exceeding
$55.7 million and equal to or less than $56.7 million will be distributed to the
MascoTech stockholders (in lieu of Heartland effectively retaining any such
proceeds), (b) the special committee agreed that, as the members of the
adjustment committee after the recapitalization merger, they will continue to
have fiduciary duties as directors of the Delaware corporation to the
stockholders of MascoTech entitled to receive any proceeds of the sale of the
Saturn stock, (c) the special committee agreed that the plaintiffs' counsel will
from time to time receive reports from the advisors to the adjustment committee
regarding such sale and (d) MascoTech agreed to provide plaintiffs' counsel with
an opportunity to review and comment upon the disclosure to be provided to
MascoTech stockholders in this proxy statement.
9
<PAGE> 16
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 28, 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 20, 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. No assurances
can be given as to the amount of the payments, if any, to the stockholders and
optionholders to be made as a result of the disposition of Saturn stock.
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 59 for more information.
See "Summary Term Sheet -- What Stockholders Will Receive" and the
description beginning on page 58 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.
10
<PAGE> 17
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 23.
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 15.
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 and the balance of which is available for the
working capital needs of MascoTech after the consummation of the
recapitalization merger. 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.
11
<PAGE> 18
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
Phone Number: (800) 566-9061 (toll-free)
If you would like to request documents from us, please do so by November
14, 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.
12
<PAGE> 19
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 28,
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 27, 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 $7,500, 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 20, 2000 will be
entitled to vote at the special meeting. On that date, there were 44,736,601
shares of MascoTech common stock, par value $1.00 per share, outstanding and
entitled to vote and 3,598 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.
13
<PAGE> 20
All directors and executive 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.
<TABLE>
<S> <C>
-----------------------------------------------------------------------------
By telephone: Call toll-free 1-800-479-4522 and follow the instructions.
You will need to give the personal identification number
contained on your proxy card.
-----------------------------------------------------------------------------
By internet: Go to http://proxy.shareholder.com/msx/ 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.
-----------------------------------------------------------------------------
</TABLE>
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:
- giving notice, in person or in writing, to the Secretary of MascoTech;
- 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
- 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 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> 21
SPECIAL FACTORS
GENERAL
At the MascoTech stockholders' special meeting, MascoTech will ask its
stockholders to vote upon:
- 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
- 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 amended, 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 October 20, 2000, Masco Corporation
held approximately 17.5% of the outstanding common stock of MascoTech. As of
October 20, 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 Corporation) and in terms of a number of non-operational assets owned by
MascoTech, consisting of equity and other
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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
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.
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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 special committee engaged
McDonald Investments to act as its financial advisor. 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. The special committee also 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 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:
- 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;
- 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;
- 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
- 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,
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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 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 determined that the sale transaction
continued to present the greater likelihood of maximizing stockholder value.
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
these discussions directly, representatives of Heartland were informed of the
requests previously made by the special committee in connection with the prior
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 might 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
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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 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, consisting of minority investments in a variety of public
and private companies, would be unacceptable to Masco Corporation.
Representatives of Heartland indicated that Heartland would not be interested in
pursuing a transaction which would result in Heartland acquiring these assets
because Heartland was not interested in holding non-controlling positions in
these public and private companies and financing its acquisition of such
positions. 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 its earlier discussions with
MascoTech, 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
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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 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
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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:
- a review of MascoTech's business and prospects, updating managements's
presentation to the special committee on December 14, 1999;
- 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;
- 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;
- 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
- 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.
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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 & Wardwell
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 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
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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.
In October the parties to the recapitalization agreement and the exchange
and voting agreement entered into the amendments described in "Special
Factors -- Subsequent Developments."
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:
- 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);
- determined that the merger consideration in the recapitalization merger
is fair to MascoTech's stockholders (other than to the continuing
stockholders and their affiliates);
- approved the agreement of merger, the recapitalization agreement and
authorized the related mergers; and
- 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.
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:
- 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;
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- 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;"
- 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;
- 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;
- the consideration to be received by the MascoTech stockholders (other
than the continuing stockholders) in the recapitalization merger will
consist entirely of cash;
- 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
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;
- 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;"
- 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;
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- 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;
- 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;
- Delaware law entitles MascoTech stockholders to appraisal rights if the
recapitalization merger is completed; and
- 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:
- 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");
- 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
- the interests of certain directors and management of MascoTech as
described under the heading "Interests of Certain Persons in the
Mergers."
In addition to the foregoing positive and negative factors which the
special committee considered in its determination to recommend the
recapitalization merger, the special committee reviewed the following neutral
factors:
- the proposed terms of severance arrangements to be offered to employees
of MascoTech; and
- 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
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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:
- the recommendation of the special committee;
- each of the factors referred to above as having been taken into account
(or not considered) by the special committee; and
- 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." In light of Salomon
Smith Barney's opinion that the merger consideration was fair, from the
financial point of view, both before and after the Saturn stock
disposition was taken into account, subsequent withdrawal of Saturn's
proposed initial public offering did not affect the weight attached by
the board of directors to the financial presentation of Salomon Smith
Barney, including its opinion.
The strategic alternatives reviewed by the board of directors with the
assistance of Salomon Smith Barney 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. The board of directors
approved the recapitalization merger after reviewing various strategic
alternatives and, 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.
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.
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The board of directors believes that the recapitalization merger is
procedurally fair because, among other things:
- 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);
- 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;
- the special committee retained and was advised by its own independent
legal counsel;
- the special committee engaged in extensive negotiations and deliberations
in evaluating the recapitalization merger and the merger consideration;
and
- 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.
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).
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) exclusively on the basis of its
observations that:
- 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.
- 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.
- 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
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merger are advisable and in the best interests of MascoTech's public
stockholders and that the merger consideration is fair to MascoTech's
stockholders.
- McDonald Investments, the financial advisor for the special committee,
delivered an opinion dated August 1, 2000 to the board of directors, as
to the fairness from a financial point of view and 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).
- 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).
- 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.
This belief, however, should not be construed as a recommendation to any
stockholder as to how you should vote on the mergers. 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. Specifically, neither Riverside nor Heartland independently
considered with respect to such fairness:
- historical market prices of MascoTech's common stock;
- net book value, going concern value or liquidation value of MascoTech;
- purchase prices paid by MascoTech or by the continuing stockholders for
past purchases of MascoTech common stock; or
- firm offers for any merger or acquisition of MascoTech made by any
unaffiliated person.
Heartland and Riverside have no reason to disagree with the special
committee's considerations of these factors, or conclusions regarding some of
these factors and, as a result, Heartland and Riverside adopt the special
committee's analyses and conclusions with respect to each of the factors listed
in the immediately preceding paragraph.
THE CONTINUING STOCKHOLDERS' PURPOSE AND REASONS FOR THE MERGERS
The continuing stockholders' purpose for participating in the
recapitalization merger is to liquidate a 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.
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 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 they should
vote on the mergers.
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Each of the continuing stockholders believes that the transaction is
substantively and procedurally fair to MascoTech's stockholders (other than the
continuing stockholders and their affiliates) exclusively on the basis of its
observations that:
- 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.
- 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.
- 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.
- 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).
- 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).
- 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.
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 have not 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. Specifically, none of the continuing stockholders
independently considered with respect to such fairness:
- historical market prices of MascoTech's common stock;
- net book value, going concern value or liquidation value of MascoTech;
- purchase prices paid by MascoTech or by the continuing stockholders for
past purchases of MascoTech common stock; or
- firm offers for any merger or acquisition of MascoTech made by any
unaffiliated person.
The continuing stockholders have no reason to disagree with the special
committee's considerations of these factors, or conclusions regarding some of
these factors and, as a result, the continuing stockholders adopt the special
committee's analyses and conclusions with respect to each of the factors listed
in the immediately preceding paragraph.
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
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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).
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:
- the recapitalization agreement, including the exhibits and schedules to
that agreement;
- 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;
- internal business and financial information, including projections,
furnished to McDonald Investments by MascoTech management;
- publicly available information concerning historical stock prices and
trading volumes for MascoTech's common stock;
- publicly available information for other companies that McDonald
Investments believed were comparable to MascoTech and the trading markets
for those other companies' securities; and
- 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
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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.
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
<TABLE>
<CAPTION>
AVERAGE DAILY CLOSE
AVERAGE DAILY ----------------
PERIOD CLOSE VOLUME HIGH LOW
------ ------- ------- ---- ---
<S> <C> <C> <C> <C>
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
</TABLE>
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.
<TABLE>
<CAPTION>
TRADING VOLUME AT OR TRADING DAYS AT OR
PRIOR PERIOD BELOW $16.90 CONSIDERATION BELOW $16.90 CONSIDERATION
------------ -------------------------- --------------------------
<S> <C> <C>
One Year 96.2% 95.7%
Three Year 71.1% 75.3%
Five Year 43.4% 62.2%
</TABLE>
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.
<TABLE>
<CAPTION>
TARGET ACQUIROR
------ --------
<S> <C>
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,
Adwest Western Automotive, Inc. Inc.
Dura Automotive Systems,
Inc.
</TABLE>
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 median
premium paid over the target's closing stock price at those points in time.
<TABLE>
<CAPTION>
PERIOD PRIOR TO ANNOUNCEMENT MEDIAN PREMIUM PAID
---------------------------- -------------------
<S> <C>
One Day 35.7%
One Week 48.0%
Four Weeks 66.4%
</TABLE>
In addition, McDonald Investments calculated the premium of the $16.90
consideration that MascoTech's stockholders would receive to the closing prices
for MascoTech's common stock for the periods one day, one week and four weeks
prior to an assumed announcement date of July 28, 2000.
<TABLE>
<CAPTION>
PERIOD PRIOR TO ANNOUNCEMENT PREMIUM PAID
---------------------------- ------------
<S> <C>
One Day 46.2%
One Week 50.2%
Four Weeks 56.3%
</TABLE>
32
<PAGE> 39
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:
<TABLE>
<S> <C>
- ArvinMeritor, Inc. - Simpson Industries, Inc.
- BorgWarner Inc. - Intermet Corporation
- Modine Manufacturing Company - Hayes Lemmerz International, Inc.
- Tower Automotive, Inc. - Superior Industries International, Inc.
- 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. The following table sets forth the results of these analyses:
<TABLE>
<CAPTION>
MEDIAN IMPLIED IMPLIED
COMPARABLE ENTERPRISE PRICE PER
COMPARABLE PUBLIC COMPANIES MULTIPLE VALUE SHARE
--------------------------- ---------- ---------- ---------
<S> <C> <C> <C>
Multiple of Sales........................................... 0.6x $1,025.2 NM
Multiple of EBIT............................................ 5.5x 1,210.4 NM
Multiple of EBITDA.......................................... 4.0x 1,209.6 NM
Multiple of Invested Capital................................ 0.9x 1,589.3 $ 7.99
Multiple of 2000 Projected EPS.............................. 5.7x 1,905.8 14.71
AVERAGE..................................................... $1,388.1 $11.35
</TABLE>
-------------------------
NM=Not Meaningful
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
33
<PAGE> 40
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 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>
<CAPTION>
TARGET ACQUIROR
------ --------
<S> <C>
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 average implied price per share of MascoTech common
stock of $13.87.
<TABLE>
<CAPTION>
MEDIAN IMPLIED IMPLIED
TRANSACTION ENTERPRISE PRICE PER
COMPARABLE M&A TRANSACTION MULTIPLE VALUE SHARE
-------------------------- ----------- ---------- ---------
<S> <C> <C> <C>
Multiple of Sales............................... 0.8x $1,354.6 $ 3.02
Multiple of EBIT................................ 10.4x 2,312.8 23.35
Multiple of EBITDA.............................. 6.4x 1,931.1 15.25
AVERAGE......................................... $1,866.2 $13.87
</TABLE>
34
<PAGE> 41
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.
FORMING SEGMENT
ArvinMeritor, Inc.
Borg Warner Inc.
Modine Manufacturing Company
Simpson Industries, Inc.
Intermet Corporation
Hayes Lemmerz International, Inc.
Tower Automotive, Inc.
American Axle & Manufacturing Holdings, Inc.
Superior Industries International, Inc.
TOWING SEGMENT
Miller Industries, Inc.
Lund International Holdings, Inc.
Edelbrock Corporation
SPECIALTY SEGMENT
Milacron Inc.
Kennametal Inc.
UNOVA, Inc.
Regal-Beloit Corporation
The L.S. Starrett Company
FASTENER SEGMENT
SPS Technologies, Inc.
Barnes Group Inc.
Penn Engineering & Manufacturing Corp.
The Fairchild Corporation
Transtechnology Corporation
PACKAGING SEGMENT
Worthington Industries, Inc.
AptarGroup, Inc.
Chicago Bridge & Iron Company N.V.
Chart Industries, Inc.
These calculations resulted in an average implied price per share of
MascoTech common stock of $7.98 and $15.94 under the comparable public company
analysis and discounted cash flow and economic profit analyses, respectively.
<TABLE>
<CAPTION>
IMPLIED
ENTERPRISE IMPLIED
COMPARABLE PUBLIC COMPANIES VALUE PRICE PER SHARE
--------------------------- ---------- ---------------
<S> <C> <C>
Multiple of Sales.................................... $1,178.1 NM
Multiple of EBIT..................................... 1,565.2 $ 7.49
Multiple of EBITDA................................... 1,499.0 6.08
Multiple of Invested Capital......................... 1,700.8 10.36
AVERAGE.............................................. $1,485.8 $ 7.98
</TABLE>
-------------------------
NM = Not Meaningful
35
<PAGE> 42
<TABLE>
<CAPTION>
IMPLIED
ENTERPRISE IMPLIED
DISCOUNTED CASH FLOW/ECONOMIC PROFIT VALUE PRICE PER SHARE
------------------------------------ ---------- ---------------
<S> <C> <C>
Base Case............................................ $1,961.2 $15.89
Sensitivity Analysis -- High......................... 2,056.1 17.90
Sensitivity Analysis -- Low.......................... 1,874.2 14.04
AVERAGE.............................................. $1,963.8 $15.94
</TABLE>
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.
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.
36
<PAGE> 43
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:
- reviewed the recapitalization agreement and related documents;
- held discussions with senior officers, directors and other
representatives and advisors of MascoTech concerning the business,
operations and prospects of MascoTech;
- examined publicly available business and financial information relating
to MascoTech;
- 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;
- 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;
- 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;
- 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
- 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
37
<PAGE> 44
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.
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
38
<PAGE> 45
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:
- Amcast Industrial Corporation
- American Axle & Manufacturing Holdings, Inc.
- BorgWarner Inc.
- Dura Automotive Systems, Inc.
- Hayes Lemmerz International, Inc.
- Intermet Corporation
- Simpson Industries, Inc.
- Superior Industries International, Inc.
- 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 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 the following implied
per share equity reference range for MascoTech, as compared to the merger
consideration before taking into account the disposition of MascoTech's Saturn
stock and the
39
<PAGE> 46
approximate merger consideration 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:
<TABLE>
<CAPTION>
PER SHARE APPROXIMATE PER SHARE
IMPLIED PER SHARE MERGER CONSIDERATION MERGER CONSIDERATION
EQUITY REFERENCE RANGE BEFORE SATURN STOCK DISPOSITION AFTER SATURN STOCK DISPOSITION
---------------------- ------------------------------- ------------------------------
<S> <C> <C>
$6.00 to $12.00 $16.90 $18.10
</TABLE>
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 the following implied per share equity reference range for
MascoTech, as compared to the merger consideration before taking into account
the disposition of MascoTech's Saturn stock and the approximate merger
consideration 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:
<TABLE>
<CAPTION>
PER SHARE APPROXIMATE PER SHARE
IMPLIED PER SHARE MERGER CONSIDERATION MERGER CONSIDERATION
EQUITY REFERENCE RANGE BEFORE SATURN STOCK DISPOSITION AFTER SATURN STOCK DISPOSITION
---------------------- ------------------------------- ------------------------------
<S> <C> <C>
$7.80 to $16.80 $16.90 $18.10
</TABLE>
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>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
- Exide Corporation GNB Technologies, Inc.
- Tower Automotive, Inc. Dr. Meleghy GmgH & Co. KG
- Dana Corporation Invensys plc-- Australian axle & stamping
division
- Management/Saw Mill Capital Fund II, L.P. Jason Inc.
- CVC Capital Partners Invensys plc-- automotive sealing systems
division
- BC Partners Ltd. Mark IV Industries, Inc.
- Exide Corporation GNB Technologies, Inc.
- The Carlyle Group Tritech Precision Inc.
- Trelleborg AB Invensys plc-- automotive anti-vibration
business
- Management Transportation Technologies Industries, Inc.
- Delphi Automotive Systems Corporation TRW Inc.-- Lucas Diesel Systems business
- Aurora Capital Group Autocam Corporation
</TABLE>
40
<PAGE> 47
<TABLE>
<CAPTION>
ACQUIROR TARGET
-------- ------
<S> <C>
- BorgWarner Inc. Eaton Corporation -- fluid power division
- Cooper Tire & Rubber Company Standard Products Company
- Kelso & Company Citation Corporation
- Tower Automotive, Inc. Active Tool & Manufacturing Company, Inc.
- TI Group plc Walbro Corporation
- Carreras, Kestner & Co., L.L.C. Hilite Industries, Inc.
- Hidden Creek Industries Inc. J.L. French Automotive Castings, Inc.
- American Axle & Manufacturing Holdings, MSP Industries Corporation
Inc.
- American Axle & Manufacturing Holdings, Colfor Manufacturing, Inc.
Inc.
- Dura Automotive Systems, Inc. Adwest Automotive plc
- Dura Automotive Systems, Inc. Excel Industries, Inc.
- 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 the following implied per share
equity reference range for MascoTech, as compared to the merger consideration
before taking into account the disposition of MascoTech's Saturn stock and the
approximate merger consideration 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:
<TABLE>
<CAPTION>
PER SHARE APPROXIMATE PER SHARE
IMPLIED PER SHARE MERGER CONSIDERATION MERGER CONSIDERATION
EQUITY REFERENCE RANGE BEFORE SATURN STOCK DISPOSITION AFTER SATURN STOCK DISPOSITION
---------------------- ------------------------------- ------------------------------
<S> <C> <C>
$13.00 to $19.00 $16.90 $18.10
</TABLE>
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 the following implied
per share equity reference range for MascoTech, as compared to the merger
consideration before taking into account the disposition of MascoTech's Saturn
stock and the approximate merger consideration 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:
<TABLE>
<CAPTION>
PER SHARE APPROXIMATE PER SHARE
IMPLIED PER SHARE MERGER CONSIDERATION MERGER CONSIDERATION
EQUITY REFERENCE RANGE BEFORE SATURN STOCK DISPOSITION AFTER SATURN STOCK DISPOSITION
---------------------- ------------------------------- ------------------------------
<S> <C> <C>
$15.50 to $24.00 $16.90 $18.10
</TABLE>
41
<PAGE> 48
Other Factors.
In rendering its opinion, Salomon Smith Barney also reviewed and considered
other factors, including:
- 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;
- research analysts' reports for MascoTech; and
- 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. 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,
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<PAGE> 49
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 $123.8 million from the disposition of
non-operating assets to CVC, or other persons. The following table summarizes
the estimated sources of and uses for funds and financing in connection with the
recapitalization merger:
<TABLE>
<CAPTION>
SOURCES USES
------- ----
($ IN MILLIONS)
<S> <C> <C> <C>
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 1/2% convertible subordinated
debt............................. 305.0 4 1/2% convertible subordinated
debt............................... 305.0
Accounts receivable
securitization(3)................ 120.0 Restricted stock awards............ 62.2
Equity investment sale............. 123.8 Assumed industrial revenue bonds... 21.5
Unvested restricted stock awards... 46.6 Fees & expenses.................... 78.9
Cash on hand and other (net)....... 1.3
Equity(4).......................... 450.2
-------- --------
TOTAL.............................. $2,069.1 TOTAL.............................. $2,069.1
-------- --------
</TABLE>
-------------------------
(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.
- 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.
- 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
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<PAGE> 50
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.
- 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 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
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<PAGE> 51
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 and Heartland
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:
<TABLE>
<CAPTION>
NET BOOK VALUE NET INCOME FOR THE SIX MONTHS
PERCENTAGE INTEREST JUNE 30, 2000* ENDED JUNE 30, 2000*
------------------------- ------------------------- -----------------------------
PRE-MERGER POST-MERGER PRE-MERGER POST-MERGER PRE-MERGER POST-MERGER
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Heartland
(Riverside)**.......... -- 77.5% -- $260.4 -- $40.3
Masco Corporation........ 17.5% 8.8% $58.8 29.6 $9.1 4.6
Richard A. Manoogian..... 9.8% 2.4% 32.9 8.1 $5.1 1.2
Richard and Jane
Manoogian Foundation... 2.2% 2.0% 7.4 6.7 $1.1 1.0
</TABLE>
-------------------------
* In millions after multiplying pre-merger and post-merger percentages by the
respective net book value at June 30, 2000 or net income for the six months
ended June 30, 2000.
** Riverside will cease to exist upon the consummation of the recapitalization
merger.
SUBSEQUENT DEVELOPMENTS
In October 2000, MascoTech determined that it was unlikely to obtain $125
million in proceeds from the sale of its non-operating investments (other than
the Saturn stock) as a result of refusal to consent to transfer of one of such
investments by one of the parties to the agreements relating to such investment.
MascoTech entered into discussions with Heartland with respect to a possibility
that $125 million in proceeds will not be obtained and, as a result, one of the
closing conditions to the recapitalization merger will not be satisfied.
MascoTech also entered into discussions with the plaintiffs' counsel in the
stockholder litigation challenging the mergers regarding possible settlement of
that litigation. As a result of these discussions, on October 23, 2000, the
parties amended the recapitalization agreement to provide that any proceeds of
the Saturn sale in excess of $55.7 million and less than or equal to $56.7
million will be paid to MascoTech stockholders and optionholders (instead of
Heartland effectively retaining these proceeds, as previously provided by the
recapitalization agreement) with the result that an additional $1 million might
45
<PAGE> 52
be so paid to the MascoTech stockholders and that the condition to the
completion of the recapitalization merger relating to the sale of the
non-operating investments (other than Saturn stock) will be reduced to require
receipt of $123.8 million instead of $125 million. MascoTech and Heartland
further agreed that MascoTech will not be permitted to declare cash dividends
(previously MascoTech was permitted by the recapitalization agreement to declare
and pay a regular cash dividend not in excess of $0.08 per share). At the same
time the parties to the exchange and voting agreement entered into an amendment
relating to the exchange of their common stock for the preferred stock and the
composition of the MascoTech board after the recapitalization merger.
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 recapitalization merger, Heartland
plans to consider a range of strategic relationships between Simpson and
MascoTech, including a possible business combination.
Heartland currently intends to appoint Thomas Stallkamp, J. Michael Losh,
David I. Margolis, Timothy D. Leuliette and Cynthia L. Hess to the board of
directors of MascoTech after the recapitalization merger. Richard Manoogian and
Lee Gardner will also serve on the board of directors of MascoTech after the
recapitalization merger.
Heartland intends to manage MascoTech as two independent businesses after
the recapitalization merger, each of which will report separately to the board
of directors. One business group, the metal forming platform, will include
MascoTech's steel forging, powdered metals and fasteners operations. The other
business group, the Diversified Industrial Group, will include MascoTech's other
businesses, which make towing and related accessory products, gaskets and
sealants and other specialized industrial products. Lee Gardner will become the
president and chief executive officer of the Diversified Industrial Group. In
addition, Heartland will form a committee, to be chaired by Mr. Leuliette, to
search for a new chief executive officer of MascoTech. Mr. Manoogian will also
serve on the committee. Mr. Leuliette will serve as interim chief executive
officer of MascoTech and the metal forming platform until a new chief executive
officer is appointed.
Heartland does not currently contemplate any other 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
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<PAGE> 53
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 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
47
<PAGE> 54
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:
- comes within certain exempt categories (generally including corporations,
financial institutions and certain foreign individuals) under backup
withholding rules; or
- 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.
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.
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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. Early terminations of the applicable
waiting periods under the Hart-Scott-Rodino Act were granted on August 30, 2000
and September 28, 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.
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. On October 22, 2000, the parties to these lawsuits reached an agreement
in principle concerning the terms of a proposed settlement of these lawsuits,
subject to certain conditions. In connection with a proposed settlement, (a)
MascoTech and Riverside agreed to amend the recapitalization agreement to
provide, among other things, that any proceeds of the disposition of the Saturn
stock exceeding $55.7 million and equal to or less than $56.7 million will be
distributed to the MascoTech stockholders (in lieu of Heartland effectively
retaining any such proceeds), (b) the special committee agreed that, as members
of the adjustment committee after the recapitalization merger, they will
continue to have fiduciary duties as directors of the Delaware corporation to
the stockholders of MascoTech entitled to receive any proceeds of the sale of
the Saturn stock, (c) the special committee agreed that the plaintiffs' counsel
will from time to time receive reports from the advisors to the adjustment
committee regarding such sale and (d) MascoTech agreed to provide plaintiffs'
counsel with an opportunity to review and comment upon the disclosure to be
provided to MascoTech stockholders in this proxy statement. The proposed
settlement is subject to a number of conditions, including confirmatory
discovery by plaintiffs'
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counsel, approval of the proposed settlement by the Delaware Court of Chancery
and consummation of the recapitalization merger. If the proposed settlement is
approved by the Court of Chancery and the other conditions are satisfied, the
Court of Chancery will certify a non-opt out class of MascoTech stockholders,
all of these lawsuits will be dismissed with prejudice and MascoTech, the
MascoTech directors, Masco Corporation and their respective officers, directors,
employees and agents will receive a release for all claims that were or could
have been asserted in these lawsuits.
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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 AND EXECUTIVE OFFICERS
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.
Prior to the consummation of the recapitalization merger MascoTech expects
to enter into an agreement with Frank M. Hennessey, MascoTech's Vice Chairman
and Chief Executive Officer, to serve as a consultant to MascoTech through
December 31, 2003 for an annual payment of $500,000. Such payments would also be
in consideration of Mr. Hennessey's agreement not to engage in certain
activities that would compete with MascoTech.
Lee M. Gardner. Prior to the consummation of the recapitalization merger
MascoTech expects to enter into an employment/consulting agreement with Lee M.
Gardner, MascoTech's President and Chief Operating Officer, to serve at his
current rate of base pay plus a bonus which would equal at least 50% of his base
pay. The agreement would be terminable by either party generally on 60 days
notice. At such time as Mr. Gardner ceases his employment, he would be paid a
stay bonus of $1,500,000 upon his execution of a release in favor of MascoTech
and he would continue for three years to be available as a consultant to
MascoTech for an aggregate of $1,725,000 payable over three years which would
accelerate and become payable on a present value basis upon a subsequent change
in control. Such payments would also be in consideration of Mr. Gardner's
agreeing not to engage in certain activities that would compete with MascoTech.
Mr. Gardner would be entitled to continuation of health benefits under certain
circumstances, and his supplemental executive retirement benefits would also be
increased.
Timothy Wadhams. Prior to the consummation of the recapitalization merger
MascoTech expects to enter into an employment/consulting agreement with Timothy
Wadhams, MascoTech's Executive Vice President -- Finance and Administration, to
serve at his current rate of base pay plus a bonus which would equal at least
50% of his base pay. The agreement would be terminable by either party generally
on
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60 days notice. At such time as Mr. Wadhams ceases his employment, he would be
paid a stay bonus of $1,200,000 upon his execution of a release in favor of
MascoTech and he would continue for three years to be available as a consultant
to MascoTech for an aggregate of $1,150,000 payable over three years which would
accelerate and become payable on a present value basis upon a subsequent change
in control. Such payments would also be in consideration of Mr. Wadhams's
agreeing not to engage in certain activities that would compete with MascoTech.
Mr. Wadhams would be entitled to continuation of health benefits under certain
circumstances, and his supplemental executive retirement benefits would also be
increased.
The agreements with Messrs. Hennessey, Gardner and Wadhams have not been
finalized but MascoTech expects that the agreements will not contain any terms
materially inconsistent with the terms described above.
Designation of Directors. Heartland and the co-investors will agree to vote
for the election of one designee of Masco Corporation 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 57 below.
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
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action or agreement related to the agreements. As of October 20, 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 20, 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 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
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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.
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.
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
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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 October 13, 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.
<TABLE>
<CAPTION>
SHARES OF
MASCO CORPORATION
COMMON STOCK
NAME BENEFICIALLY OWNED(1)
---- ---------------------
<S> <C>
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)............................... 13,305,177
</TABLE>
-------------------------
(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 3.0% 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
890,078 shares for all directors and executive officers of MascoTech as a
group) and shares which may be acquired before December 13, 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 2,774,253 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 December 13, 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.
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(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 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.
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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:
- 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;
- 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;
- the balance of the shares issued under the new restricted stock awards
will become free of restrictions (other than transfer restrictions)
ratably on January 14, 2002, January 14, 2003 and January 14, 2004, 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.
INDEMNIFICATION AND INSURANCE
Under the recapitalization agreement, Riverside has agreed to cause
MascoTech and its successors and assigns to:
- 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
- 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 amended, 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, subject
to reductions relating to the restrictions on transfer and rights of first
refusal relating to such non-operating assets, MascoTech does not expect to make
adjustments to the merger consideration from the disposition of these
non-operating assets. See "Subsequent Developments" and "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. According to the information made publicly
available by Saturn in connection with the proposed initial public offering its
common stock, Saturn is a provider of value-added electronics manufacturing
services to original equipment manufacturers and their suppliers. Saturn
provides these services to customers primarily in the automotive, computer and
military end markets. 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. No assurances can be given as to the amount of the
payments, if any, to the stockholders and optionholders to be made as a result
of the disposition of Saturn stock. 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, any such proceeds in
excess of $55.7 million and less than or equal to $56.7 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
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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 for these assets and thus, MascoTech does not expect to receive
any proceeds in excess of $125 million. See "Subsequent Developments" and "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
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:
- 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;
- 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;
- the balance of the shares issued under the new restricted stock awards
will become free of restrictions (other than transfer restrictions)
ratably on January 14, 2002, January 14, 2003 and January 14, 2004, 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
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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.
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.
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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:
- the recapitalization agreement or the transactions contemplated by the
recapitalization agreement or announcement of the execution of the
recapitalization agreement or those transactions;
- changes in circumstances or conditions affecting industrial manufacturing
companies in general that are not specifically related to MascoTech and
its subsidiaries;
- changes in general economic, regulatory or political conditions or in
financial markets in the U.S. or Europe; or
- changes in generally accepted accounting principles.
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:
- make capital expenditures that would exceed 110% of the amounts set forth
in the most recent version of the business plan provided to Riverside;
- sell, lease, license or otherwise dispose of any significant subsidiary
or any material amount of assets, securities or property;
- amend its corporate charter/organizational documents, or alter its
corporate structure or its capitalization or the ownership of any
significant subsidiary;
- encumber capital stock of MascoTech or any subsidiary of MascoTech;
- make any material acquisitions of equity interest or assets;
- settle or compromise litigation;
- transfer any equity investments subject to the CVC stock purchase
agreement without putting the proceeds into an escrow account;
- 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
- take any action with respect to the rights agreement.
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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):
- seek, initiate, solicit or encourage any individual or entity to make an
acquisition proposal;
- engage in negotiations or discussions concerning an acquisition proposal
with any person or group;
- 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
- 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
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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.
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:
- 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
- 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:
- 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
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- 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.
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:
- notices or other communication relating to the transactions;
- any litigation commenced or threatened against MascoTech or its
subsidiaries;
- 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
- 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:
- 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;
- expiration of the waiting period under the Hart-Scott-Rodino Act in order
to complete the stock purchase agreement with CVC;
- absence of legal prohibitions to or restraint upon the completion of the
mergers;
- completion of all requisite actions or filings with any governmental
authority;
- 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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- receipt by MascoTech of the proceeds of the disposition of the
non-operating assets (other than Saturn stock) equal to at least $123.8
million;
- agreement on a severance plan by the employee retention committee;
- 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
- 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:
- MascoTech's performance in all material respects of all of its
obligations under the recapitalization agreement;
- the representations and warranties of MascoTech must be true in all
material respects;
- 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;
- completion of debt financings necessary to complete the recapitalization
merger;
- the corporate services agreement between MascoTech and Masco Corporation
shall have been modified to provide for its limited continuation after
the recapitalization merger;
- the amended and restated securities purchase agreement between MascoTech
and Masco Corporation shall have been terminated;
- MascoTech, along with its subsidiaries, shall have entered into a
subordinated loan agreement with Masco Corporation;
- 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;
- the performance by the continuing stockholders in all material respects
of their obligations under the exchange and voting agreement; and
- 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:
- Riverside's performance in all material respects of all of its
obligations under the recapitalization agreement;
- Riverside's representations and warranties must be true in all material
respects; and
- 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:
- by mutual written consent;
- 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;
- by Riverside, if MascoTech breaches or fails to perform any
representation, warranty, covenant or agreement and cannot cure it by
December 20, 2000; and
- 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:
- (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
- (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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<PAGE> 73
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 amended, 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>
<CAPTION>
TOTAL
NUMBER OF NUMBER OF NUMBER OF
SHARES OF SHARES OF SHARES OF NUMBER OF
COMMON COMMON COMMON SHARES OF
STOCK STOCK STOCK COMMON STOCK
HELD ON EXCHANGED FOR EXCHANGED CONVERTED TO NUMBER OF SHARES
OCTOBER 13, CLASS A FOR CLASS B CASH IN OWNED AFTER
NAME 2000 PREFERRED PREFERRED RECAPITALIZATION RECAPITALIZATION
---- ----------- ------------- ----------- ---------------- ----------------
<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 33,829,729 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
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<PAGE> 74
with a liquidation preference of $100 per share and 0.086392 shares of common
stock of MascoTech in the recapitalization merger.
Transfer Restrictions. None of the continuing stockholders may transfer
their MascoTech common stock except that Masco Corporation may transfer common
stock if:
- the transferee is reasonably acceptable to Heartland;
- 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;
- 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;
- the transferee must acquire at least 10% of the shares owned by Masco
Corporation on August 1, 2000;
- the transferee must agree to become a party to the exchange and voting
agreement;
- 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
- 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:
- the continuing stockholders will enter into a stockholders and
registration rights agreement with MascoTech;
- Masco Corporation will enter into a subordinated loan agreement with
MascoTech as described under "Interests of Certain Person in the
Mergers -- Masco Corporation;"
- 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;
- 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;"
- Riverside will not conduct any business activities and will not incur any
liabilities prior to the completion of the recapitalization merger;
- 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
- 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
terminate as to the continuing stockholders if the recapitalization agreement is
amended
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<PAGE> 75
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:
- the representations and warranties given by the other party must be true
in all material respects as of the closing date;
- the other party must have performed in all material respects all
covenants and agreements in the stock purchase agreement;
- absence of legal prohibition or restraint upon the completion of the
transactions contemplated in the stock purchase agreement; and
- expiration of the waiting period under the Hart-Scott-Rodino Act.
MascoTech's obligation to close is also subject to the following
conditions:
- 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
- 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.
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. Early terminations of the applicable waiting
periods under the Hart-Scott-Rodino Act were granted on August 30, 2000 and
September 28, 2000.
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<PAGE> 76
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:
- MascoTech will be the surviving corporation, and
- 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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<PAGE> 77
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>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, FOR THE YEARS ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996(1) 1995
---- ---- ---- ---- ---- ------- ----
(UNAUDITED)
(IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
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:
- the proposed merger consideration is all cash; and
- if the proposed recapitalization merger is completed, MascoTech common
stock would cease to be publicly traded.
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<PAGE> 78
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.
72
<PAGE> 79
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.
<TABLE>
<CAPTION>
MASCOTECH
COMMON STOCK
----------------
MARKET PRICE
---------------- CASH DIVIDENDS
HIGH LOW DECLARED
---- --- --------------
<S> <C> <C> <C>
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............................................. 16.63 10.50 0.08
Fourth Quarter through October 24, 2000................... 16.56 15.19 --
</TABLE>
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 24, 2000, the most recent practicable date prior to
the printing of this document, the closing price per MascoTech common stock was
$15.50. 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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<PAGE> 80
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):
<TABLE>
<CAPTION>
NUMBER OF RANGE OF AVERAGE
PURCHASER QUARTER SHARES PURCHASE PRICES PURCHASE PRICE
----------------- --------- --------------- --------------
<S> <C> <C> <C>
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
Fourth Quarter through October 23, 2000............. 0 -- --
</TABLE>
Transactions since August 1, 2000. There have been no purchases of
MascoTech common stock by MascoTech since August 1, 2000.
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,
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<PAGE> 81
(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>
<CAPTION>
NUMBER OF
SHARES SUBJECT TO NUMBER OF
RESTRICTED STOCK SHARES SUBJECT TO NUMBER OF RANGE OF AVERAGE
PURCHASE QUARTER AWARDS GRANTED OPTIONS GRANTED SHARES PURCHASE PRICES PURCHASE 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 -- --
Fourth Quarter through
October 23, 2000........ 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:
<TABLE>
<CAPTION>
NUMBER OF RANGE OF PURCHASE AVERAGE
PURCHASER QUARTER SHARES PRICES PURCHASE PRICE
----------------- --------- ----------------- --------------
<S> <C> <C> <C>
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...................................... 0 -- --
Fourth Quarter through October 23, 2000............ 0 -- --
</TABLE>
PURCHASES BY RIVERSIDE AND HEARTLAND
Neither Riverside nor Heartland has purchased any shares of MascoTech
common stock.
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<PAGE> 82
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.
AGREEMENT RELATING TO MASCO CORPORATION SECURITIES
In July 2000, Masco Corporation implemented an Executive Stock Purchase
Program pursuant to which Messrs. Manoogian, Hennessey and Gargaro, among other
participants, purchased stock of Masco Corporation at its fair market value.
Messrs. Manoogian, Hennessey and Gargaro purchased the stock with proceeds from
bank loans guaranteed by Masco Corporation totaling $26 million in the case of
Mr. Manoogian, $750,000 in the case of Mr. Hennessey and $2.7 million in the
case of Mr. Gargaro. Messrs. Manoogian, Hennessey and Gargaro have obligations
to repay Masco Corporation for any amounts paid by Masco Corporation under the
guarantee.
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<PAGE> 83
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 79 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.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
--------------------------------------------------------
ITEM 2004 2003 2002 2001 2000
---- ---- ---- ---- ---- ----
(IN MILLIONS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
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
</TABLE>
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.
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
77
<PAGE> 84
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.
78
<PAGE> 85
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.
79
<PAGE> 86
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:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Filing Fees................................................. $ 121.4
Financial Advisors' Fees and Expenses (estimated total for
board of directors and the special committee)............. 13,100.0
Financial Advisors' Fees and Expenses (estimated total for
Riverside)................................................ 14,000.0
Debt Financing Expenses..................................... 35,500.0
Legal Fees and Expenses (estimated total for board of
directors and the special committee)...................... 1,730.0
Legal Fees and Expenses (estimated total for Riverside)..... 1,500.0
Accounting Fees and Expenses................................ 100.0
Exchange Agent Fees......................................... 30.0
Printing and Mailing Costs.................................. 65.1
Miscellaneous............................................... 12,753.5
---------
Total..................................................... $78,900.0
=========
</TABLE>
80
<PAGE> 87
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 October 13, 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>
<CAPTION>
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).................................... 24,940 *
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)(7)(8)(9)(10)(11)........... 8,629,948 18.8%
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 December 13, 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 December 13, 2000 upon
exercise of stock
81
<PAGE> 88
options under such Plan (6,000 for Messrs. Dow, 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 and 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. Wadhams'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."
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<PAGE> 89
EXECUTIVE OFFICERS AND DIRECTORS OF MASCO CORPORATION
Set forth below is information concerning beneficial ownership of MascoTech
common stock as of October 13, 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.
<TABLE>
<CAPTION>
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 December 13, 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.
83
<PAGE> 90
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.
(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 before December 13, 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.
(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.
84
<PAGE> 91
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>
<CAPTION>
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., a private investment
St. Clair Group, Inc and management services company, since January 1991.
15840 Lakeview Court President of IPG Services Corporation since November 1995,
Grosse Pointe, Michigan 48230 and President of Ad Hoc, Inc. since August 1996, 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
until February 1998. 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 of EMCO Limited from
December 1990 until May 1997.
*William K. Howenstein................. Retired in June 1998 as President of TMX Division of
Thyssen, Inc., N.A., 400 Renaissance Center -- Suite 1700,
Detroit, Michigan 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.
</TABLE>
85
<PAGE> 92
<TABLE>
<CAPTION>
NAME AND ADDRESS
AND CITIZENSHIP, IF APPLICABLE PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
------------------------------ -------------------------------------------
<S> <C>
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, Michigan 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, Inc., an
Morgan Lewis Githens & Ahn, Inc. 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>
-------------------------
* Directors of MascoTech are indicated with an asterisk.
86
<PAGE> 93
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>
<CAPTION>
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, Michigan 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, Michigan 48326, 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 1979 until December
Detroit, Michigan 48226 1996.
*Verne G. Istock.............................. Retired in September 2000 as President of Bank One
Bank One Corporation N.A. and Chairman and Chief Executive Officer of Bank
One First National Plaza One, Michigan. Previously Chairman and Chief
Chicago, Illinois 60670 Executive Officer of NBD BanCorp, One First National
Plaza, Chicago, Illinois 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. From October 1999 through September
2000, served as President of Bank One N.A. and
Chairman and Chief Executive Officer of Bank One,
Michigan, 611 Woodward Avenue, Detroit, Michigan
48226.
</TABLE>
87
<PAGE> 94
<TABLE>
<CAPTION>
NAME AND ADDRESS AND CITIZENSHIP, IF APPLICABLE PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
----------------------------------------------- -------------------------------------------
<S> <C>
*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, a 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 May 1988.
*Wayne B. Lyon................................ Chairman of LifeStyle Furnishings International Ltd.,
LifeStyle Furnishings a manufacturer of home furnishings, since February
International Ltd. 2000. Also served as its President and Chief
4000 LifeStyle Court Executive Officer from August 1996 until February
High Point, North Carolina 27265 2000. Previously employed by Masco Corporation as
President and Chief Operating Officer from May 1985
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 Chief
Executive Officer of MascoTech 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.
Robert B. Rosowski............................ Vice President -- Controller since July 1985 and,
since October 1996, Treasurer of Masco Corporation.
*Arman Simone................................. Retired in June 1978 as President of Simone
Corporation, Christ Hospital, 176 Palisades Avenue,
Jersey City, New Jersey 07302, commercial builders
and developers. Currently involved in various
philanthropic endeavors focusing on children,
education and alternative medicine.
*Peter W. Stroh............................... Retired in December 1997 as Chairman of the Board and
Chief Executive Officer of The Stroh Companies, Inc.,
100 River Place, Detroit, Michigan 48207-4291, and as
Chairman of The Stroh Brewery Company, positions he
assumed in May 1995.
</TABLE>
-------------------------
* Directors of Masco Corporation are indicated by an asterisk.
88
<PAGE> 95
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.
GENERAL
None of Riverside, Heartland, Heartland Industrial Associates L.L.C. or
Messrs. Stockman, Tredwell or Lewis beneficially owns 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,
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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.
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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:
- 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;
- 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
- 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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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
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Delaware Court of Chancery is empowered to conduct a hearing on the petition to
determine which stockholders are entitled to appraisal rights. The Delaware
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:
- 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,
- 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
- 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.
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
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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:
- 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
- 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:
- the rights will be evidenced by the common stock certificates and will be
transferred only with them,
- 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
- 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% or 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 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.
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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,
- MascoTech is acquired in a merger, statutory stock exchange, or other
business combination in which MascoTech is not the surviving corporation,
- an acquiring firm merges into MascoTech, or
- 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 than 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.
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
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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.
<TABLE>
<CAPTION>
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 Forms 8-A and 8-A/A Filed on February 23, 1998 as amended on
December 4, 1998 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
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<PAGE> 105
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
14, 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 26, 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.
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<PAGE> 106
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 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.
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(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.
(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
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further approval of stockholders without 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]
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MASCOTECH, INC.
By:
--------------------------------------
Name:
Title:
MASCOTECH HARBOR INC.
By:
--------------------------------------
Name:
Title:
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<PAGE> 110
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:
<TABLE>
<CAPTION>
NAME STATE OF INCORPORATION
---- ----------------------
<S> <C>
MascoTech Harbor Inc. Delaware
MascoTech, Inc. Delaware
</TABLE>
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.
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:
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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:
7. The name of the corporation is:
MASCOTECH, INC.
8. 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.
9. 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.
10. 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.
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,
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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.
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.
(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
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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 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.
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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 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.
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
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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 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.
11. (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
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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
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
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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.
12. 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.
13. 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.
14. The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
15. 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.
16. 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.
17. 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.
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18. 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.
19. 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.
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ANNEX B
RECAPITALIZATION AGREEMENT
DATED AS OF
AUGUST 1, 2000
BETWEEN
MASCOTECH, INC.
AND
RIVERSIDE COMPANY LLC
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TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions................................................. B-6
ARTICLE 2
THE MERGER
SECTION 2.01. The Merger.................................................. B-12
SECTION 2.02. Effective Time.............................................. B-12
SECTION 2.03. Effect of the Merger........................................ B-12
SECTION 2.04. Effect on Securities, Etc................................... B-12
SECTION 2.05. Dissenting Shares........................................... B-13
SECTION 2.06. Treatment of Options and Restricted Stock................... B-14
SECTION 2.07. Surrender of Shares......................................... B-16
SECTION 2.08. Lost, Stolen or Destroyed Certificates...................... B-17
SECTION 2.09. Further Action.............................................. B-17
ARTICLE 3
THE SURVIVING CORPORATION
SECTION 3.01. Certificate of Incorporation; By-Laws....................... B-18
SECTION 3.02. Directors and Officers...................................... B-18
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power............................... B-18
SECTION 4.02. Corporate Authorization..................................... B-18
SECTION 4.03. Governmental Authorization.................................. B-19
SECTION 4.04. Non-contravention........................................... B-19
SECTION 4.05. Capitalization.............................................. B-19
SECTION 4.06. Subsidiaries; Equity Investments............................ B-20
SECTION 4.07. SEC Filings................................................. B-21
SECTION 4.08. Financial Statements........................................ B-21
SECTION 4.09. Disclosure Documents........................................ B-21
SECTION 4.10. Absence of Certain Changes.................................. B-21
SECTION 4.11. No Undisclosed Material Liabilities......................... B-22
SECTION 4.12. Compliance with Laws and Court Orders....................... B-23
SECTION 4.13. Litigation.................................................. B-23
SECTION 4.14. Finders' Fees............................................... B-23
SECTION 4.15. Opinion of Financial Advisor................................ B-23
SECTION 4.16. Taxes....................................................... B-23
SECTION 4.17. Employee Benefit Plans...................................... B-24
SECTION 4.18. Environmental Matters....................................... B-25
Antitakeover Statutes and Rights Agreement; B-25
SECTION 4.19. Company/Subsidiary Merger.................................
SECTION 4.20. Disclaimer of Other Representations and Warranties.......... B-26
</TABLE>
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<TABLE>
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF MERGER SUBSIDIARY
SECTION 5.01. Existence and Power......................................... B-26
SECTION 5.02. Authorization............................................... B-26
SECTION 5.03. Governmental Authorization.................................. B-26
SECTION 5.04. Non-contravention........................................... B-26
SECTION 5.05. Disclosure Documents........................................ B-27
SECTION 5.06. Finders' Fees............................................... B-27
SECTION 5.07. Financing................................................... B-27
SECTION 5.08. Member Appraisal Rights..................................... B-28
ARTICLE 6
COVENANTS OF THE COMPANY
SECTION 6.01. Conduct of the Company...................................... B-28
SECTION 6.02. Access to Information....................................... B-29
SECTION 6.03. Stockholder Meeting; Proxy Material......................... B-29
SECTION 6.04. No Solicitation............................................. B-30
SECTION 6.05. State Takeover Laws......................................... B-30
SECTION 6.06. Reports..................................................... B-30
SECTION 6.07. Plans....................................................... B-31
SECTION 6.08. Equity Investments.......................................... B-31
SECTION 6.09. Confidentiality Agreement................................... B-31
Issuance of Class A Preferred Stock and Class B Preferred B-31
SECTION 6.10. Stock.....................................................
SECTION 6.11. Saturn Escrow............................................... B-31
ARTICLE 7
COVENANTS OF MERGER SUBSIDIARY
SECTION 7.01. Obligations of Merger Subsidiary............................ B-32
SECTION 7.02. Voting of Shares............................................ B-32
SECTION 7.03. Director and Officer Liability.............................. B-32
SECTION 7.04. Employee Benefits After the Merger.......................... B-32
SECTION 7.05. Financing Arrangements...................................... B-33
ARTICLE 8
COVENANTS OF MERGER SUBSIDIARY AND THE COMPANY
SECTION 8.01. Commercially Reasonable Efforts............................. B-33
SECTION 8.02. Certain Filings............................................. B-34
SECTION 8.03. Public Announcements........................................ B-34
SECTION 8.04. Notices of Certain Events................................... B-34
SECTION 8.05. Confidentiality............................................. B-35
SECTION 8.06. Saturn Sales................................................ B-35
ARTICLE 9
CONDITIONS TO THE MERGER
SECTION 9.01. Conditions to Obligations of Each Party..................... B-36
SECTION 9.02. Conditions to the Obligations of Merger Subsidiary.......... B-37
SECTION 9.03. Conditions to the Obligations of the Company................ B-38
</TABLE>
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<TABLE>
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ARTICLE 10
TERMINATION
SECTION 10.01. Termination................................................. B-38
SECTION 10.02. Effect of Termination....................................... B-39
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices..................................................... B-39
SECTION 11.02. Survival of Representations and Warranties.................. B-40
SECTION 11.03. Amendments; No Waivers...................................... B-40
SECTION 11.04. Expenses; Topping Fee....................................... B-40
SECTION 11.05. Successors and Assigns...................................... B-41
SECTION 11.06. Governing Law............................................... B-41
SECTION 11.07. Jurisdiction................................................ B-41
SECTION 11.08. Waiver of Jury Trial........................................ B-41
SECTION 11.09. Counterparts; Effectiveness................................. B-41
SECTION 11.10. Entire Agreement............................................ B-42
SECTION 11.11. Captions.................................................... B-42
SECTION 11.12. Severability................................................ B-42
SECTION 11.13. Specific Performance........................................ B-42
</TABLE>
<TABLE>
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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
</TABLE>
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<PAGE> 123
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").
WITNESSETH:
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
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").
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<PAGE> 124
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.
"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 the portion of the proceeds realized from
Saturn Sales in excess of $55.7 million and less than or equal to $56.7
million;
(iii) an amount equal to 60% of the portion of proceeds from Saturn
Sales that exceeds $56.7 million;
(iv) an amount equal to 60% of the portion of proceeds realized from
the sales of Equity Investments that exceeds $125 million; and
(v) an amount equal to 60% of any interest actually earned on proceeds
referred to in clauses (i), (ii), (iii) and (iv) of this definition prior
to payment of the Merger Consideration Adjustments and the Option
Consideration Adjustments (clauses (ii), (iii), (iv) and (v), 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
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<PAGE> 125
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
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.
"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
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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.
"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
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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.
"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
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.
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"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.
"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:
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
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
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
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
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
Surviving Corporation....................................... 2.01
Tax Return.................................................. 4.16
Taxes....................................................... 4.16
Taxing Authority............................................ 4.16
Transactions................................................ Recitals
</TABLE>
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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 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
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(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
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 Effective
Time, has neither effectively withdrawn nor lost his right to make such
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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, on January 3, 2001 (or as soon as practicable
thereafter), 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 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
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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 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 January 14, 2002, 2003 and 2004 (or if such date is not a Business
Day, on the next succeeding Business Day), 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 vesting 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 vesting date and of any such Merger Consideration Adjustments from
the date of the payment to holders of the Shares through the applicable vesting
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
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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
shall pay with respect to each share of New Restricted Stock which becomes free
of restrictions on January 14, 2002, January 14, 2003 and January 14, 2004 (or
if such date is not a Business Day, on the next succeeding Business Day) 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) January
14, 2002, January 14, 2003 and January 14, 2004, as the case may be (or if such
date is not a Business Day, on the next succeeding Business Day), 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 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
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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 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 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.
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(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.
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.
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(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.
(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.
(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
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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 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;
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(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 declared prior to August
1, 2000 and 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);
(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:
(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.
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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).
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,
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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.
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 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
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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 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.
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(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. 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 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
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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 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.
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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 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,
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in each case, in consultation and 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 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.
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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 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
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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.
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.
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.
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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 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
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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).
(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.
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
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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 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
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(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.
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 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.
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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;
(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 $123.8 million
in cash 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.
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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 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 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;
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(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.
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
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(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 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.
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.
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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 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.
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(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
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.
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.
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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.
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 and
Secretary
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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: (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
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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
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 discharged 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.
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(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 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
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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.
(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.
(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
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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 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,
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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 "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
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,
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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 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),
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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 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
meetings 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
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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 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
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(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 contributions 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:
(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;
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(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.
(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
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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 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.
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.
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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.
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,
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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, 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.
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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.
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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 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
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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.
(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
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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 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.
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
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"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.
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. Immediately prior to
the Effective Time (such time and date, the "Exchange Date"), (i) each
Continuing Shareholder shall exchange each of its
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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 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.
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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.
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
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
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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
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
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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.
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
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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]
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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: /s/ DANIEL P. TREDWELL
------------------------------------
Name: Daniel P. Tredwell
Title: Vice President and
Secretary
MASCO CORPORATION
By: /s/ JOHN R. LEEKLEY
------------------------------------
Name: John R. Leekley
Title: Senior Vice President and
General Counsel
RICHARD A. MANOOGIAN
By: /s/ RICHARD A. MANOOGIAN
------------------------------------
RICHARD AND JANE MANOOGIAN
FOUNDATION
By: /s/ RICHARD A. MANOOGIAN
------------------------------------
Name: Richard A. Manoogian
Title: President
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SCHEDULE A
<TABLE>
<CAPTION>
CONTINUING COMPANY
SHAREHOLDER SHAREHOLDER POST-EXCHANGE
OWNED EXCHANGE EXCHANGE PRE-MERGER
SHARES SHARES SHARES OWNED SHARES
------ ----------- ----------- -------------
<S> <C> <C> <C> <C>
IS........................... 196,860 621,170 -- 3,552,546 Common
Restricted Stock**
Stock* 621,170 Class A
640,000 Options* Preferred Stock
4,173,716 Common
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.
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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.
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<PAGE> 188
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
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
D-1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions................................... D-4
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares............... D-4
SECTION 2.02. Purchase Price................................ D-4
SECTION 2.03. Closing....................................... D-5
SECTION 2.04. Deliveries at the Closing..................... D-5
ARTICLE 3
CONDITIONS TO OBLIGATION TO CLOSE
SECTION 3.01. Conditions to Obligation of the Purchaser..... D-5
SECTION 3.02. Conditions to Obligation of the Seller........ D-6
SECTION 3.03. Failure to Satisfy Certain Conditions......... D-6
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SELLER
SECTION 4.01. Due Authorization............................. D-7
SECTION 4.02. Title......................................... D-7
SECTION 4.03. No Consents................................... D-7
SECTION 4.04. No Conflict, Breach, Etc...................... D-7
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 5.01. Due Authorization............................. D-8
SECTION 5.02. No Consents................................... D-8
SECTION 5.03. No Conflict, Breach, Etc...................... D-8
SECTION 5.04. Purchase Entirely for Own Account............. D-9
SECTION 5.05. Restricted Securities......................... D-9
SECTION 5.06. Legends....................................... D-9
SECTION 5.07. Accredited Investor; Knowledge................ D-9
SECTION 5.08. Financing..................................... D-9
ARTICLE 6
COVENANTS AND AGREEMENTS
SECTION 6.01. Disclosure; Publicity......................... D-9
SECTION 6.02. Seller Agreements............................. D-10
SECTION 6.03. Further Assurances............................ D-10
SECTION 6.04. Certain Filings............................... D-10
SECTION 6.05. Representations and Covenants................. D-11
SECTION 6.06. Notice........................................ D-11
SECTION 6.07. American Commercial Plastics.................. D-11
</TABLE>
D-2
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 7
MISCELLANEOUS
SECTION 7.01. Termination................................... D-11
SECTION 7.02. Amendments; Waivers........................... D-11
SECTION 7.03. Successors and Assigns........................ D-11
SECTION 7.04. Notices....................................... D-11
SECTION 7.05. Expenses...................................... D-12
SECTION 7.06. Governing Law................................. D-12
SECTION 7.07. Waiver of Jury Trial.......................... D-13
SECTION 7.08. Severability; Interpretation.................. D-13
SECTION 7.09. Headings...................................... D-13
SECTION 7.10. Entire Agreement.............................. D-13
SECTION 7.11. Counterparts.................................. D-13
SECTION 7.12. Third-party Beneficiaries..................... D-13
SECTION 7.13. Specific Performance.......................... D-13
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
</TABLE>
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<PAGE> 191
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 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
D-4
<PAGE> 192
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.
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;
(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.
D-5
<PAGE> 193
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;
(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
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<PAGE> 194
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.
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
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),
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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.
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
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required under the Seller Agreements relating to MSX 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.
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
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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 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 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
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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.
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
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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
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
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.
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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.
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.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement as of the date first above written.
MASCOTECH, INC.
By: /s/ DAVID B. LINER
------------------------------------
Name: David B. Liner
Title: Vice President and General
Counsel
CITICORP VENTURE CAPITAL, LTD.
By: /s/ MICHAEL A. DELANEY
------------------------------------
Name: Michael A. Delaney
Title: Managing Director
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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.
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: ____________
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SCHEDULE 2.01
<TABLE>
<CAPTION>
COMPANY SHARES TO BE PURCHASED
------- ----------------------
<S> <C> <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
(formerly known as AAS Holdings, LLC)...................... 1,500 Member Units
(e) Tower Automotive, Inc. .................................... 400,000 shares of Common Stock
(f) Innovative Coating Technologies, Inc.
(formerly known as MascoTech Coatings, Inc.)............... Senior Subordinated Note of American
Commercial Plastics, Inc.
aggregating $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>
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SCHEDULE 2.02
<TABLE>
<CAPTION>
COMPANY SHARES TO BE PURCHASED
------- ----------------------
<S> <C>
Advanced Accessories Systems, LLC
(formerly known as AAS Holdings, LLC)............ 1,500 Member Units
Innovative Coating Technologies, Inc.
(formerly known as MascoTech Coatings, Inc.)..... 27.20 shares of Common Stock
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>
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<PAGE> 204
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.
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
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<PAGE> 205
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
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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
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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
D-20
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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
D-21
<PAGE> 209
ANNEX E
[MCDONALD INVESTMENTS
LOGO]
August 1, 2000
McDonald Investments
Inc.,
A KeyCorp Company
800 Superior Avenue
Cleveland, Ohio
44114-2603
Tel: 216 443-2300
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.
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.
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<PAGE> 210
Special Committee of the
Board of Directors
August 1, 2000
Page 2
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 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 transactions 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 INVETMENTS INC.
McDONALD INVESTMENTS INC.
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<PAGE> 211
ANNEX F
[LETTERHEAD OF SALOMON SMITH BARNEY]
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 possible upward adjustment based on the
proceeds realized from sales of the equity interests beneficially owned by
MascoTech and/or its subsidiaries in Saturn Electronics and Engineering, Inc.
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
SALOMON SMITH BARNEY INC. 388 Greenwich Street, New York, NY 10013
<PAGE> 212
The Board of Directors
MascoTech, Inc.
August 1, 2000
Page 2
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 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. SIGNATURE
SALOMON SMITH BARNEY INC.
F-2
<PAGE> 213
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
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.
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<PAGE> 214
(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 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
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<PAGE> 215
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 name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has
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<PAGE> 216
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).
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<PAGE> 217
[Form of Proxy]
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER 28, 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 Tuesday, November 28, 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.)
<PAGE> 218
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, Inc. with
and into MascoTech, Inc. In this merger MascoTech, Inc.'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, Inc. approve
business combinations, including mergers, involving persons owning 30% or
more of MascoTech, Inc.'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 Industrial Partners, LP.,
with and into MascoTech Inc. In this merger, the stockholders of MascoTech
Inc. common stock (other than holders who properly demand appraisal rights
or holders who have separately agreed to retain a portion of their
MascoTech Inc. 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 Inc. as specified in the recapitalization agreement.
This merger will be completed only if the merger with MascoTech Harbor Inc.
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)
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Capacity (Title or Authority, e.g.,
President, Partner, Executor, Trustee,
Attorney-in-Fact)
VOTES MUST BE INDICATED (X) IN BLACK OR BLUE INK.
<PAGE> 219
VOTING INSTRUCTIONS FOR ALL STOCKHOLDERS
There are three convenient ways to vote your proxy.
- VOTE BY TELEPHONE: Use any touch-tone telephone to vote your proxy. Call
1-800-479-4522, 7 days a week, 24 hours a day prior to 5:00 p.m. on
Monday, November 27, 2000. 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
- VOTE BY INTERNET: Use the internet to vote your proxy prior to 5:00 p.m. on
Monday, November 27, 2000. Log on to the website
http://proxy.shareholder.com/msx/. 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
- VOTE BY MAIL: Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided. Please vote your proxy so that it
is received prior to the special meeting on November 28, 2000.
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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