<PAGE> 1
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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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-11(c) or Rule 14a-12
</TABLE>
EASCO, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NOT APPLICABLE)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] 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: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
[EASCO, INC. LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Easco, Inc., a Delaware corporation
(the "Company"), will be held at The Hilton Garden Inn, 610 Tollview Drive,
South Holland, Illinois, on May 8, 1998, at 10:00 a.m., local time, for the
following purposes:
1. To elect three directors to hold office for a term of three years;
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the Company for 1998; and
3. To transact such other business as may properly be presented at the
meeting.
A proxy statement with respect to the annual meeting accompanies and forms
a part of this Notice. A form of proxy and the annual report of the Company for
the fiscal year ended December 31, 1997 also accompany this proxy statement.
By order of the Board of Directors.
TERRY D. SMITH
Executive Vice President and Chief
Financial Officer, Secretary and
Treasurer
706 South State Street
Girard, Ohio 44420
March 31, 1998
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN, AND DATE YOUR PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT
YOU INTEND TO ATTEND THE MEETING.
<PAGE> 3
[EASCO, INC. LOGO]
706 SOUTH STATE STREET
GIRARD, OHIO 44420
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of the
Company for use at the Annual Meeting of Stockholders of the Company to be held
on May 8, 1998, and any adjournments thereof. This proxy statement and
accompanying proxy are first being sent to stockholders on or about March 31,
1998.
Shares represented by an effective proxy given by a stockholder will be
voted as directed by the stockholder. If a properly signed proxy form is
returned to the Company and is not marked, it will be voted in accordance with
the recommendation of the Board of Directors on all proposals. A stockholder
giving a proxy may revoke it at any time prior to the voting of the proxy by
giving written notice to the Secretary of the Company, by executing a later
dated proxy or by attending the meeting and voting in person.
The Company's common stock, $.01 par value per share (the "Common Stock"),
is the only issued and outstanding class of stock. Only stockholders of record
at the close of business on March 23, 1998 are entitled to notice of and to vote
at the meeting. At the close of business on March 23, 1998, the Company had
10,456,672 shares of Common Stock outstanding and entitled to vote. Each share
of Common Stock of the Company is entitled to one vote. A list of stockholders
entitled to vote at the meeting will be kept at the Easco, Inc. corporate
headquarters for a period of 10 days prior to the meeting.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Board of Directors of the Company consists of three classes, as nearly
equal in number as possible. One of the three classes, comprising approximately
one-third of the directors, is elected each year to succeed the directors whose
terms are expiring. The number of directors of the Company, as determined by the
Board under Article X of the Company's Amended and Restated Certificate of
Incorporation, is currently eight, three of whom serve in Class III. Shares may
not be voted for a greater number of nominees than the three nominees for Class
III director listed below. Directors hold office until the annual meeting for
the year in which their terms expire and until their successors are elected and
qualified unless, prior to that time, they have resigned, retired, or otherwise
left office.
The nominees for whom the enclosed proxy is intended to be voted are set
forth below. The Company does not expect any of these nominees to be unavailable
for election, but if such a situation should arise, the proxy will be voted in
accordance with the best judgment of the proxyholder unless a stockholder has
directed otherwise. Under Delaware law and the Company's bylaws, directors are
elected by a plurality of the votes cast by holders of the shares of Common
Stock present in person or represented by proxy at the meeting and entitled to
vote for the election of directors. Shares represented at the meeting in person
or by proxy but withheld or otherwise not cast for the election of directors
will have no effect on the outcome of the election.
<PAGE> 4
NOMINEES FOR ELECTION AS CLASS III DIRECTORS --
TERM EXPIRES AT 2001 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
AGE AS OF
NAME 3/23/98 BUSINESS EXPERIENCE AND OTHER INFORMATION
---- --------- -----------------------------------------
<S> <C> <C>
Samuel H. Smith, Jr. 67 Mr. Smith is Chairman of the Board and Chief Executive
Officer of Classic Plastic Machinery Company and Classic
Plastic Sales Company, positions he has held since 1990
and 1994, respectively. Prior to that he was Vice
President for Planning and Acquisitions for the Van Dorn
Company, a packaging and plastics machinery company, from
1988 until 1990. Mr. Smith has been a member and director
of American Industrial Partner's ("AIP") executive officer
association since 1990. He has been a director of the
Company since 1993.
Robert Cizik 66 Mr. Cizik is Chairman of the Board of the Company and has
held that position and served on the Board since January
1997. He served as Chairman and Chief Executive Officer of
Cooper Industries, Inc., a diversified international
manufacturing company, from 1975 to 1996. Mr. Cizik joined
American Industrial Partners Corporation as a director in
1996. Mr. Cizik is Non-Executive Chairman of the Board of
Stanadyne Automotive Corporation and a director of Air
Products and Chemicals, Inc., Harris Corporation and
Temple-Inland, Inc.
Gene E. Little 54 Mr. Little was named Senior Vice President-Finance of The
Timken Company ("Timken"), a manufacturer of highly
engineered bearings and alloy steel, in 1998. He was Vice
President -- Finance of Timken from 1992 to 1997 and he
has been Treasurer of Timken since 1990. Mr. Little is a
trustee of Aultman Hospital and the Northeastern Ohio
Universities College of Medicine Education Foundation. He
has been a director of the Company since 1995.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE
FOR DIRECTOR NAMED ABOVE.
CLASS II DIRECTORS CONTINUING IN OFFICE --
TERM EXPIRES AT 2000 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
AGE AS OF
NAME 3/23/98 BUSINESS EXPERIENCE AND OTHER INFORMATION
---- --------- -----------------------------------------
<S> <C> <C>
Norman E. Wells, Jr. 49 Mr. Wells joined the Company in November 1996 as President
and Chief Executive Officer of Easco, Inc. and Easco
Corporation ("Easco"), a subsidiary of the Company. Before
joining the Company, Mr. Wells served as President and
Chief Executive Officer of CasTech Aluminum Group, Inc.
("CasTech"), a producer of continuous cast aluminum sheet
metal, from March 1993 to November 1996. Prior thereto,
Mr. Wells held other executive positions at CasTech, and
he has held a variety of positions in the aluminum
industry since 1975. He has been a director of the Company
since February 1997.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
AGE AS OF
NAME 3/23/98 BUSINESS EXPERIENCE AND OTHER INFORMATION
---- --------- -----------------------------------------
<S> <C> <C>
Raymond E. Ross 60 Mr. Ross was President and Chief Operating Officer and a
member of the Board of Directors of Cincinnati Milacron,
Inc. ("CMI") from 1980 until his retirement in December
1997. Prior thereto, Mr. Ross held various executive and
managerial positions with CMI. Mr. Ross is a director of
Hydac U.S.A. and serves on the Board of Advisors,
Engineering College, University of Cincinnati, and the
Board of Trustees, Greater Cincinnati United Way/Community
Chest. He has been a director of the Company since January
1998.
</TABLE>
CLASS I DIRECTORS CONTINUING IN OFFICE --
TERM EXPIRES AT 1999 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
AGE AS OF
NAME 3/23/98 BUSINESS EXPERIENCE AND OTHER INFORMATION
---- --------- -----------------------------------------
<S> <C> <C>
Theodore C. Rogers 63 Mr. Rogers co-founded AIP and has been a director and
officer of the firm since 1989. He is also a general
partner of AIP, L.P., the general partner of American
Industrial Partners Capital Fund, L.P. ("AIP-CF"). From
1980 to 1987, he served as Chairman, President and Chief
Executive Officer of NL Industries, Inc., a petroleum
service and chemical company. Mr. Rogers is a director of
Sweetheart Holdings Inc., Bucyrus International, Inc.,
Stanadyne Automotive Corp., RBX Corporation and Derby
International. He has been a director of the Company since
1992.
Robert J. Klein 33 Mr. Klein is a principal of AIP. He has been employed by
AIP since 1992. From 1991 to 1992, he was an associate at
The First Boston Corporation and prior thereto was an
associate with Acadia Partners, L.P. Mr. Klein is a
director of RBX Corporation. He has been a director of the
Company since 1993.
Lawrence W. Ward, Jr. 45 Mr. Ward is a principal of AIP. He has been employed by
AIP since 1992. From 1989 to 1992, he was Vice President
and Chief Financial Officer of Plantronics, Inc., a
telecommunications equipment company. Mr. Ward is a
director of RBX Corporation, Stanadyne Automotive
Corporation and Bucyrus International, Inc. He has been a
director of the Company since 1993.
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
There were five meetings of the Company's Board of Directors during the
year ended December 31, 1997. During 1997, all incumbent directors attended at
least 75% of the meetings of the Board of Directors and the committees thereof
on which they served, except for Mr. Ward.
The Board of Directors has two standing committees: the Compensation
Committee and the Audit Committee. The Board of Directors does not have a
nominating committee. The functions normally performed by a nominating committee
are performed by the Board of Directors.
The duties of the Audit Committee are to oversee actions taken by the
Company's independent auditors, recommend the engagement of independent auditors
and review the Company's internal audits. The members of the Audit Committee are
Messrs. Little (Chairman), Smith, Rogers, and Cizik. The Audit Committee met
twice during 1997.
The duties of the Compensation Committee are to review and recommend to the
Board of Directors the compensation to be paid to the executive officers of the
Company and make awards under the Stock Option Plan.
3
<PAGE> 6
The members of the Compensation Committee are Messrs. Klein (Chairman) and Ward.
The Compensation Committee met once during 1997.
COMPENSATION OF DIRECTORS
Except for Messrs. Wells, Smith, Little and Ross, the directors of the
Company are officers, employees or affiliates of AIP (or an affiliate of AIP),
to which Easco pays fees for advisory and management services, and they do not
receive any direct compensation from the Company. See "Executive
Compensation -- Compensation Committee Interlocks and Insider Participation."
Messrs. Smith, Little and Ross each receive an annual directors' fee of $18,000
plus a $500 fee for each meeting attended. Mr. Little receives a $1,000 annual
fee for serving as Chairman of the Audit Committee. Mr. Cizik receives $100,000
per year from Easco for his services as Chairman of the Board of Easco.
EXECUTIVE COMPENSATION
SUMMARY
The following table provides certain summary information concerning
compensation paid or accrued by Easco to or on behalf of Easco's Chief Executive
Officer and each of Easco's four other most highly compensated executive
officers (collectively, the "Named Officers") for the years ended December 31,
1997, 1996 and 1995.
In November, 1996, the Company realigned its executive management group,
resulting in Norman E. Wells, Jr. joining the Company as its new President and
Chief Executive Officer. The realignment was largely completed by the end of
1996. Mr. Wells was joined by Terry D. Smith, the Company's new Executive Vice
President, Chief Financial Officer, Secretary and Treasurer; Joseph M. Byers,
Vice President of Sales and Marketing; James R. McKeithan, Vice President of
Operations; and Lawrence J. Sax, Vice President of Raw Materials.
4
<PAGE> 7
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------- -------------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
COMPENSATION STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2) AWARDS($)(3) OPTIONS/SARS(#) ($)(#)(4)
--------------------------- ---- --------- ----------- ------------ ------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Norman E. Wells, Jr., 1997 290,000 61,625 -- -- -- 9,839
President and Chief 1996 28,628 597,500 574,000 420,000 300,000 322
Executive Officer of 1995 -- -- -- -- -- --
Easco, Inc. and Easco(5)
Terry D. Smith, 1997 160,000 84,000 -- -- -- 4,735
Executive Vice President, 1996 15,795 100,000 71,750 -- 87,500 100
Chief Financial Officer, 1995 -- -- -- -- -- --
Secretary and Treasurer of
Easco, Inc. and Easco (5)
Lawrence J. Sax, 1997 158,000 83,575 -- -- -- 7,866
Vice President of Raw 1996 -- 100,000 90,500 -- 87,500 --
Materials of Easco (6) 1995 -- -- -- -- -- --
James R. McKeithan, 1997 137,500 99,219 -- -- -- 4,343
Vice President of 1996 -- 100,000 71,750 -- 87,500 --
Operations of Easco (5) 1995 -- -- -- -- -- --
Joseph M. Byers 1997 138,900 79,516 -- -- -- 5,487
Vice President of Sales 1996 13,712 100,000 71,750 -- 87,500 243
and Marketing of Easco (5) 1995 -- -- -- -- -- --
</TABLE>
- ---------------
(1) Represents (i) a performance bonus in 1997 and a cash signing bonus in 1996
for Mr. Wells and (ii) a performance bonus of $34,000, $33,575, $29,219 and
$29,516, respectively, for Messrs. Smith, Sax, McKeithan and Byers in 1997
and the vesting and payment of a cash signing bonus installment of $50,000
for Messrs. Smith, Sax and Byers, respectively, and $75,000 for Mr.
McKeithan in 1997. The bonus amounts in 1996 for Messrs. Smith, Sax,
McKeithan and Byers represent cash signing bonuses. As a condition to
receiving their signing bonuses, each of Messrs. Wells, Sax, Smith,
McKeithan and Byers was required to enter into a definitive employment
agreement with Easco, which occurred on December 20, 1996 for Messrs. Wells,
Smith, McKeithan and Byers and December 30, 1996 for Mr. Sax. Each
executive, including Mr. Wells, would be required to return to the Company
all or a portion of such signing bonuses if their employment is terminated
prior to the second anniversary of the payment thereof except under limited
circumstances. See "Employment Agreements."
(2) Represents (i) in the case of Mr. Wells, 100,000 shares of Common Stock
granted by the Board in 1996 and (ii) in the case of each of Messrs. Sax,
Smith, McKeithan and Byers, 12,500 shares of Common Stock granted by the
Board in 1996. The fair market value of each share of Common Stock granted
to Messrs. Wells, Smith, McKeithan and Byers was $5.75 ($7.25 in the case of
Mr. Sax) on the effective date of the grant. As a condition to receiving
shares of Common Stock, Messrs. Wells, Sax, Smith, McKeithan and Byers were
required to enter into definitive employment agreements with the Company.
(3) Represents 70,000 shares of Common Stock which Mr. Wells elected to receive
in lieu of cash as part of his signing bonus in 1996 and which had a value
of $927,500 as of December 31, 1997. Mr. Wells would be required to return
these shares to the Company if his employment is terminated prior to the
second anniversary of his commencement of employment except under limited
circumstances. See "Employment Agreements." Mr. Wells will be entitled to
receive any dividends paid on such shares.
(4) Includes (i) contributions of $3,346, $1,846, $1,603, $1,337 and $1,375 for
the account of Messrs. Wells, Smith, Byers, Sax and McKeithan, respectively,
under the Company's Thrift Plan, pursuant to which Easco matched employee
contributions of the first 1% of eligible compensation and one-half of the
next 2% of such compensation and (ii) premiums of $6,493 and $322 for Mr.
Wells for 1997 and 1996, respectively, premiums of $2,889 and $100 for Mr.
Smith for 1997 and 1996, respectively, premiums of $3,884 and $243 for Mr.
Byers for 1997 and 1996, respectively, premiums of $2,968 for Mr. McKeithan
for 1997 and premiums of $6,529 for Mr. Sax for 1997 for Company-provided
life insurance benefits.
(5) The Named Officer has been employed by the Company in the indicated office
since November 1996.
(6) Mr. Sax has served as Vice President of Raw Materials of Easco since
December 1996.
OPTION GRANTS IN 1997
No stock options were granted to the Named Officers during 1997.
5
<PAGE> 8
FISCAL YEAR-END OPTION VALUES
The table below sets forth certain information for the fiscal year ended
December 31, 1997 concerning the exercise of options to purchase shares of
Common Stock by each of the Named Officers and the value of unexercised options
held by each of the Named Officers as of December 31, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#)(2) AT FY-END($)(3)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Norman E. Wells, Jr......... 0 0 100,000 200,000 875,000 1,750,000
Terry D. Smith (4).......... 0 0 12,500 75,000 109,375 593,751
Joseph M. Byers (4)......... 0 0 12,500 75,000 109,375 593,751
Lawrence J. Sax (4)......... 0 0 12,500 75,000 109,375 518,750
Jim McKeithan (4)........... 0 0 12,500 75,000 109,375 593,751
</TABLE>
- ---------------
(1) The Stock Option Plan does not provide for grants of SARs, and the Company
has not granted any SARs outside the Stock Option Plan.
(2) Except as described in footnote (4), options become exercisable in three
equal annual installments, with accelerated vesting in the event of certain
changes in control of the Company.
(3) Represents the difference between (i) $13.25, the closing price of the
Common Stock on The Nasdaq Stock Market on December 31, 1997, as reported by
IDD Information Services TradeLine and (ii) the applicable option exercise
prices.
(4) Includes 50,000 options that become exercisable on November 26, 2003 subject
to continued employment, but which provide for accelerated vesting
exercisable in annual cumulative installments of 33 1/3% on January 1 of
1998, 1999 and 2000, provided that the Company's performance satisfies
certain specified criteria relating to increases in earnings before
interest, taxes, depreciation and amortization. The Company achieved the
performance criteria for 1997 resulting in the accelerated vesting of
33 1/3% of such options on January 1, 1998. Vesting may be accelerated as a
result of certain changes in control of the Company.
SALARIED EMPLOYEE PENSION PLAN
The Pension Plan table set forth below shows total estimated annual
benefits payable upon retirement, computed on the basis of normal form of
retirement (five-year certain and continuous life annuity), to persons covered
under Easco's noncontributory defined benefit pension plan for eligible salaried
employees (the "Pension Plan") and supplemental executive retirement plan (the
"Supplemental Executive Retirement Plan") following various years of service
upon normal retirement at age 65.
6
<PAGE> 9
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE AT RETIREMENT
COVERED -----------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
150,000 33,416 44,554 55,693 66,832 66,832
200,000 45,311 60,414 75,518 90,622 90,622
250,000 57,206 76,274 95,343 114,412 114,412
300,000 69,101 92,134 115,168 138,202 138,202
350,000 80,996 107,994 134,993 161,992 161,992
400,000 92,891 123,854 154,818 185,782 185,782
450,000 104,786 139,714 174,643 209,572 209,572
500,000 116,681 155,574 194,468 233,362 233,362
600,000 140,471 187,294 234,118 280,942 280,942
700,000 164,261 219,014 273,768 328,522 328,522
</TABLE>
Benefits under the Pension Plan are based upon a percentage of average
monthly compensation during the 36 continuous months which produced the highest
compensation during the five years immediately prior to retirement. For purposes
of the Pension Plan, compensation consists of all salaries and wages, including
commissions and annual bonuses, which generally correspond to the annual salary
and bonus amounts reported in the Summary Compensation Table set forth above
under "Executive Compensation -- Summary." Covered compensation for the Named
Officers will be based upon their salaries and annual bonuses as described under
"Employment Agreements" described below. Benefits under the Pension Plan may be
paid (i) in a straight-life annuity over the life of the employee; (ii) in joint
and survivor annuities for the employee and spouse; or (iii) in ten-year
continuous and certain payments over the life of the employee and/or the
employee's spouse.
Annual benefits under the Pension Plan are subject to certain limitations
imposed by the Internal Revenue Code of 1986, as amended (the "Code"), but are
not reduced for Social Security benefits paid to participants. The Supplemental
Executive Retirement Plan provides to certain officers subject to these
limitations unfunded supplemental pension benefits equal to the difference
between the Internal Revenue Code limits and the benefits which otherwise would
be payable under the Pension Plan.
Each of Messrs. Wells, Sax, Smith, McKeithan and Byers has one credited
year of service at March 23, 1998.
EMPLOYMENT AGREEMENTS
Messrs. Wells, Smith, Sax, McKeithan and Byers serve in their respective
capacities pursuant to employment agreements. The term of each agreement is
indefinite until terminated by either Easco or the executive. Each agreement
provides for an annual base salary, an annual performance bonus (up to specified
percentages of salary determined on the basis of the Company's performance),
such health, dental, life and disability insurance coverage as the Company
provides to its senior executive employees generally, and severance benefits
comprised of continued salary and health benefits until the earlier of the
second anniversary (in the event of termination within six months following a
Hostile Sale (as defined in the agreement) of the Company or Easco) or the first
anniversary of termination without cause or until the executive commences other
employment. The agreements provide for signing bonuses payable in part (in full
for Mr. Wells) at signing with the balance in two installments payable on the
first and second anniversaries of the Agreements (see summary compensation
table), provided however, that each executive will be required to return all
cash and stock comprising the signing bonus component (or installment received
thereof in the case of Messrs. Smith, Sax, McKeithan and Byers) of their
agreement to the Company if their employment is terminated (other than
termination without cause, death or disability or resignation with "good
reason") prior to the second anniversary of their receipt of the applicable
installment.
7
<PAGE> 10
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The two-member Compensation Committee is comprised of non-employee
directors, Robert J. Klein and Lawrence W. Ward, Jr. Messrs. Klein and Ward are
employees of AIP. Pursuant to a services agreement (the "Services Agreement"),
American Industrial Partners Management Company, Inc. ("AIPM") provides general
management, financial and other advisory services to Easco. Under the Services
Agreement, Easco reimburses AIPM for its out-of-pocket expenses and pays AIPM a
management fee, which for 1997 was $900,000. The Services Agreement was amended
upon completion of the Company's initial public offering to expire at the end of
a five-year term, with automatic one-year renewals thereafter unless terminated
by either party upon 90 days prior written notice. In addition, on the third and
on the fourth anniversary of the amendment, the Company may reduce AIPM's fee
under the Services Agreement to reflect the reduced levels of advisory activity
that would be expected to accompany a significant reduction in ownership. Fees
may be reduced by 50% if AIP-CF owns less than 10% and greater than or equal to
5% of the outstanding Common Stock, and the Company may terminate the Services
Agreement on either such date if AIP-CF then owns less than 5% of the
outstanding Common Stock.
EXECUTIVE COMPENSATION REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
Overview and Philosophy
The Compensation Committee (the "Committee") of the Board of Directors of
the Company reviews and approves base salary, annual bonus compensation, and
stock option grants and other incentive compensation for all corporate officers,
with the objective of attracting and retaining individuals of the necessary
quality and stature to operate the business. The Committee is comprised of
non-employee directors who are affiliated with AIP, but who have no
"interlocking" relationships with other companies as defined in the applicable
rules of the Securities and Exchange Commission. In determining each component
of compensation, the Committee considers all elements of an executive's total
compensation package. The Committee regularly consults with the Company's
Chairman of the Board (who is not an officer of the Company) regarding executive
compensation matters.
The Committee's compensation policies reflect the Company's commitment to
the concept of pay for performance. Executive officers are rewarded for their
contribution to the enhancement of shareholder value and the attainment of
corporate goals through the award of stock options and cash bonus incentives. As
such, the Company believes that its compensation policies place greater emphasis
on annual and long-term performance incentives.
Base Salary
The initial base salary levels for the Company's executive officers were
established as part of their employment agreements. These salaries are reviewed
every eighteen months. In reviewing the base salaries the Committee considers
the responsibility of the individual's position, the individual's overall job
performance and the base salaries of similar positions in comparable companies.
Individual performance is measured against the achievement of interim goals and
long-term strategic objectives. The factors are considered subjectively in the
aggregate and neither of these factors is accorded a specific weight.
Cash Bonus Plan
The Company has a Cash Incentive Bonus Plan applicable to key executives
including Mr. Wells. Under the plan, 100% of the Cash Incentive Bonus is based
upon achieving an EBITDA target. The Committee has established, and the Board
has approved, EBITDA targets for 1997 through 2000. The Committee believes that
these multi-year targets provide a better incentive for managers to focus on
steady, long-term growth. Annual performance bonuses will equal 100% of salary
upon the Company's achievement of each year's target EBITDA. Minimum EBITDA
targets for each year have also been established below which no bonuses will be
paid. The maximum bonus for which Mr. Wells is eligible equals 200% of salary
based on achieving a High EBITDA target (as defined in the Cash Incentive Bonus
Plan). Other key executives are eligible for bonuses equal to 150% of salary
upon achievement of High EBITDA targets. Linear interpolation (calculated to the
nearest full percentage point) will be used for EBITDA results falling between
the EBITDA targets. The Committee or the Board may
8
<PAGE> 11
make equitable adjustments to the EBITDA targets to reflect future acquisitions
or divestitures or non-recurring or extraordinary items. Bonus payments in 1997
were made according to the provisions of the Cash Incentive Bonus Plan.
In February 1998, the Committee made, and the Board approved, an equitable
adjustment to the EBITDA targets for 1998 through 2000 to reflect the January
1998 sale of the vinyl extrusions business.
Stock Options
The Stock Option Plan provides equity-based incentives to officers and key
employees of the Company and its subsidiaries. The Committee is authorized to
select from among the eligible employees the individuals to whom options are to
be granted and to determine the number of shares to be subject thereto and the
terms and conditions thereof, consistent with the Stock Option Plan. Options
representing an aggregate of 225,000 shares also were granted outside the Stock
Option Plan in 1996 at an exercise price of $3.00 per share as part of the
initial inducement package for the new management team. A majority of the stock
options granted to each executive (other than Mr. Wells) vests after seven years
(subject to continued employment) with an opportunity for accelerated vesting in
years one through three if specified performance objectives based on increasing
levels of EBITDA are satisfied. In February 1998, the Committee made, and the
Board approved, an equitable adjustment to the EBITDA targets for 1998 through
2000 to reflect the January 1998 sale of the vinyl extrusions business.
The Committee believes that the significant proportion of equity-based
compensation used to recruit and compensate executives meaningfully aligns the
interests of management with those of the stockholders and focuses the attention
of management on the long-term success of the Company. A significant portion of
the executives' compensation is at risk, based on the financial performance of
the Company, and most importantly, the value of the Company's Common Stock in
the marketplace.
Chief Executive Officer Compensation
During 1997, Mr. Wells' base salary of $290,000 was set according to his
employment agreement dated December 20, 1996. Mr. Wells was awarded a bonus of
$61,625 during 1997 based on the EBITDA of the Company as defined in the Cash
Incentive Bonus Program. The Committee believes that Mr. Wells has made a
substantial contribution to the improved performance of Company and the
enhancement of shareholder value in 1997 through his managerial efforts.
Executive Compensation Deduction Limitations
Section 162(m) of the Internal Revenue Code limits to $1 million in a
taxable year the deduction publicly held companies may claim for compensation
paid to certain executive officers, unless certain requirements are met. The
Company considers the impact of Section 162(m) on compensation decisions. No
executive officer exceeded the $1 million limitation in 1997 and the Committee
has determined that in future periods no executive officer currently is likely
to exceed the limitation. Pursuant to Mr. Wells' employment agreement, Mr. Wells
is prohibited from exercising certain stock options in any period in which such
exercise would cause the Company to lose a tax deduction under Section 162(m).
Robert J. Klein
Lawrence W. Ward, Jr.
OWNERSHIP OF THE COMPANY'S COMMON STOCK
The following table sets forth information with respect to the number of
shares of Common Stock beneficially owned by (i) each director of the Company as
of March 14, 1998, (ii) each of the Named Officers as of March 14, 1998, (iii)
all directors and executive officers of the Company as a group as of March 14,
1998 and (iv) each stockholder known by the Company to be a beneficial owner of
more than 5% of any class of the Company's voting securities as of December 31,
1997. The Company believes that, except as otherwise noted,
9
<PAGE> 12
each individual named has sole investment and voting power with respect to the
shares of Common Stock indicated as beneficially owned by such individual.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED
-------------------------------
PERCENT OF
OUTSTANDING
NAME AND ADDRESSES OF BENEFICIAL OWNER(1) NUMBER OF SHARES SHARES
----------------------------------------- ---------------- -----------
<S> <C> <C>
American Industrial Partners Capital Fund, L.P.............. 4,239,470 40.5%
One Maritime Plaza
Suite 2525
San Francisco, CA 94111
W. Richard Bingham(2)....................................... 4,239,470 40.5%
Wellington Management Company(3)............................ 1,030,400 9.9%
75 State Street
Boston, MA 02109
Mellon Bank, N.A., Trustee for First Plaza(4)
Group Trust............................................... 978,674 9.4%
One Mellon Bank Center
Pittsburgh, PA 15258
Dimensional Fund Advisors Inc.(5)........................... 539,400 5.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Joseph M. Byers(6).......................................... 41,667 *
Robert Cizik(7)............................................. 13,500 *
Robert J. Klein............................................. 2,300 *
Gene E. Little.............................................. 2,500 *
James R. McKeithan(6)....................................... 41,667 *
Theodore C. Rogers(2)....................................... 4,239,470 40.5%
Lawrence J. Sax(6).......................................... 41,667 *
Samuel H. Smith, Jr......................................... 1,000 *
Terry D. Smith(6)........................................... 41,667 *
Lawrence W. Ward, Jr........................................ 5,000 *
Norman E. Wells, Jr.(6)..................................... 274,000 2.6%
Directors and executive officers as a group (11 persons).... 4,704,438 45.0%
</TABLE>
- ---------------
* Less than one percent
(1) Easco Corporation, a wholly-owned subsidiary of the Company, owns 2,005,222
shares of the Common Stock, which shares are accounted for as treasury
stock.
(2) All of such shares are held of record by AIP-CF. Messrs. Bingham and Rogers
are general partners of AIP-L.P., the general partner of AIP-CF, and may be
deemed to share investment and voting power with respect to the securities
owned by AIP-CF. Messrs. Bingham and Rogers disclaim beneficial ownership of
these shares. The business address of Mr. Bingham is One Maritime Plaza,
Suite 2525, San Francisco, CA 94111, and the business address of Mr. Rogers
is 551 Fifth Avenue, Suite 3800, New York, NY 10176.
(3) Based solely on the report of Wellington Management Company ("Wellington")
on Schedule 13-G received by the Company. Includes (i) 368,400 shares as to
which Wellington has shared voting power and (ii) 1,030,400 shares as to
which Wellington has shared investment power.
(4) Mellon Bank, N.A., acts as the trustee (the "Trustee") for First Plaza Group
Trust ("First Plaza"), a trust under and for the benefit of certain employee
benefit plans of General Motors Corporation ("GM") and its subsidiaries.
These shares may be deemed to be owned beneficially by General Motors
Investment Management Corporation ("GMIMCo"), a wholly-owned subsidiary of
GM. GMIMCo's principal business is providing investment advice and
investment management services with respect to the assets of certain
employee benefit plans of GM and its subsidiaries and with
10
<PAGE> 13
respect to the assets of certain direct and indirect subsidiaries of GM and
associated entities. GMIMCo is serving as First Plaza's investment manager
with respect to these shares, and in that capacity, it has sole voting power
to direct the Trustee as to the voting and disposition of these shares.
Because of the Trustee's limited role, beneficial ownership of the shares by
the Trustee is disclaimed.
(5) Based solely on the report of Dimensional Fund Advisors Inc. ("Dimensional")
on Schedule 13-G received by the Company. Dimensional, a registered
investment advisor, is deemed to have beneficial ownership of 539,400 shares
of Easco, Inc. stock as of December 31, 1997, all of which shares are held
in portfolios of DFA Investment Dimensions Group, Inc., a registered
open-end investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified benefit plans,
all of which Dimensional serves as investment manager. Dimensional advised
the Company that it disclaims beneficial ownership of all such shares.
(6) Includes presently exercisable options under the Company's stock option
plan. See fiscal year-end option values above.
(7) Mr. Cizik is a director of American Industrial Partners Corporation, an
indirect affiliate of AIP-CF, but does not share investment or voting
discretion with regard to the securities held by AIP-CF.
11
<PAGE> 14
COMPARISON OF CUMULATIVE TOTAL RETURN
The following chart compares the Company's cumulative total stockholder
return on its Common Stock from April 13, 1995, to December 31, 1997 with the
cumulative total return of the Standard & Poor's 500 Index and an index of
comparable companies. These comparisons assume the investment of $100 on April
13, 1995 (the date of the Company's initial public offering of Common Stock) and
the reinvestment of dividends. The total stockholder return shown on the graph
below is not necessarily indicative of future performance.
<TABLE>
<CAPTION>
Comparable
Measurement Period S&P 500 Companies
(Fiscal Year Covered) Index Index (a) Easco, Inc.
<S> <C> <C> <C>
April 1995 100.00 100.00 100.00
December 1995 123.17 125.26 061.75
December 1996 151.46 163.15 054.46
December 1997 201.86 198.60 095.73
</TABLE>
- ---------------
(a) As of December 1995, comparable companies index, weighted on the basis of
market capitalization, includes: Amcast Industrial Corp., CasTech Aluminum
Group, Inc., International Aluminum Corp., Mueller Industries, Inc., Quanex
Corp., Tredegar Industries Inc. and Wolverine Tube, Inc. CasTech Aluminum
Group, Inc. was acquired by Commonwealth Aluminum in October 1996 and its
shares are no longer traded on any stock exchange. Accordingly, CasTech
Aluminum Group, Inc. is not included in the Comparable Companies Index at
December 1997 and 1996.
PROPOSAL 2 -- APPOINTMENT OF INDEPENDENT AUDITORS
Subject to stockholder ratification, the Board of Directors has selected
Deloitte & Touche LLP to audit the accounts of the Company for the year 1998.
Representatives of Deloitte & Touche LLP will be present at the annual meeting
and will be given the opportunity to make a statement if they desire to do so.
They will also be available to respond to appropriate questions.
If stockholders do not ratify the appointment of Deloitte & Touche LLP,
other certified public accountants will be considered by the Board of Directors.
The affirmative vote of a majority of the votes cast at the meeting is necessary
for the ratification of the selection of auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR
1998.
12
<PAGE> 15
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and certain stockholders to file with the Commission an
initial statement of beneficial ownership and certain statements of changes in
beneficial ownership of equity securities of the Company. Based solely on its
review of such forms received by it, the Company is unaware of any instances of
noncompliance, or late compliance, with such filing requirements during the
fiscal year ended December 31, 1997 by its officers, directors or stockholders
except Mr. Cizik, who filed a late Form 3.
PROXY SOLICITATION EXPENSE
The expense of the proxy solicitation will be paid by the Company. In
addition to the solicitation of proxies by use of the mails, solicitation may
also be made by telephone, telegram or personal interview by directors, officers
and regular employees of the Company, none of whom will receive additional
compensation for any such solicitation. The Company will, upon request,
reimburse brokers, banks and similar organizations for out-of-pocket and
reasonable clerical expenses incurred in forwarding proxy material to their
principals.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders must be received in writing by the Secretary of
the Company prior to November 27, 1998 in order to be considered for inclusion
in the Company's proxy statement and form of proxy relating to the Annual
Meeting of Stockholders to be held in 1999.
OTHER MATTERS
The Board of Directors knows of no matters to be presented at the annual
meeting other than those set forth in the Notice of Annual Meeting of
Stockholders. However, if any other matters do come before the meeting, it is
intended that the holders of the proxies will vote thereon in their discretion.
By order of the Board of Directors.
TERRY D. SMITH
Executive Vice President, Chief
Financial Officer, Secretary and
Treasurer
706 South State Street
Girard, Ohio 44420
Each stockholder, whether or not he or she expects to be present in person at
the annual meeting, is requested to SIGN, DATE AND RETURN THE ENCLOSED PROXY in
the accompanying envelope as promptly as possible. A stockholder may revoke his
or her proxy at any time prior to voting.
13
<PAGE> 16
<TABLE>
<S> <C> <C>
EASCO, INC. EASCO, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF 706 SOUTH STATE STREET
P EASCO, INC. FOR THE ANNUAL MEETING GIRARD, OHIO 44420
OF STOCKHOLDERS ON MAY 8, 1998 (330) 545-4311
R
The undersigned hereby appoints Robert Cizik, Norman E. Wells, Jr. and Gene E. Little and each of them, proxies,
O with the powers the undersigned would possess if personally present, and with full power of substitution, to vote all
shares of common stock of Easco, Inc. that the undersigned is entitled to vote at the Annual Meeting of Stockholders
X to be held at the Hilton Garden Inn, 610 Tollview Dr., South Holland, IL at 10:00 am, local time, on May 8, 1998, and
at any adjournment thereof, upon all subjects that may properly come before the meeting, including the matters
Y described in the proxy statement furnished herewith, subject to any direction indicated on the other side of this card.
Dated: __________________________________________ , 1998
Signed: ________________________________________________
________________________________________________________
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. JOINT OWNERS
SHOULD EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES. SEE REVERSE SIDE. YOU NEED NOT MARK ANY
BOXES IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXYHOLDERS NAMED ABOVE
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD. PLEASE MARK, SIGN AND DATE THIS PROXY CARD AND MAIL IT
IN THE ENVELOPE PROVIDED.
(Over)
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DETACH CARD
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
<S> <C>
/ X / PLEASE MARK
EACH VOTE
LIKE THIS
</TABLE>
<TABLE>
THIS PROXY WHEN PROPERLY SIGNED WILL BE VOTED IN THE MANNER DIRECTED HEREIN. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" THE ELECTION OF DIRECTORS AND "FOR" PROPOSAL 2.
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD
ALL FOR ALL FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS: SAMUEL H. SMITH, JR. / / / / 2. Ratification of / / / / / /
ROBERT CIZIK independent
GENE E. LITTLE auditors.
FOR, EXCEPT VOTE WITHHELD FROM THE FOLLOWING NOMINEE:
-----------------------------------------------------
COMMENTS/ADDRESS CHANGE
Please mark this box if you have / /
written comments/address change
on the reverse side.
Signature(s) ________________________________________________________________________________ Date ___________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. The signer hereby revokes all proxies heretofore
given by the signer to vote at said meeting or any adjournments thereof.
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DETACH CARD
</TABLE>
